OTHER OBJECTIONS.

1. With traders.2. With railway servants.3. With the general public, especially on such matters as officialism and inefficiency, owing to want of competition, bad administration, and interference with private enterprise.

1. With traders.

2. With railway servants.

3. With the general public, especially on such matters as officialism and inefficiency, owing to want of competition, bad administration, and interference with private enterprise.

The first of the two objections referred to is that the Government would be in the great difficulty of having to meet the conflicting interests of traders and merchants on the one hand, and the general public on the other, with continual disputes as to the claims of various parties, and possible attempts to bring influence to bear on the Government and Members of Parliament. This objection was raised by the Prime Minister recently in reply to a deputation supporting railway nationalisation. The difficulty has been found in countries where railways are State owned, and would, I admit, be a most serious objection, if, after nationalisation, the railways should be worked on the same principle as now, namely, with the object of making the most profit possible, and charging according to “what the traffic will bear.”

The objection, however, disappears if the proposed rules are adhered to, especially when, as in the proposed scheme, fares and rates are fixed irrespective of distance, locality, class of traders or goods, and in which, therefore, no question of preference or, indeed, of any conflicting interests can arise.

As to the second heading, affecting the relationship of the State with the railway servants. It is suggested that the railway servants (who would, on nationalisation, become Civil servants) could use their voting powers to exact undue privileges for themselves which they cannot now obtain, and that serious abuses might arise owing to the great political power exercised by a large increase in the number of voters who are also Civil servants.

This does not appear to me so formidable an objection as the first, but it is quite possible that a large united body of Civil servants might have power to so influence the Government as to extract higher wages or less hours, if they discovered that by their exertions a very large profit was derived by the railway system.

Some writers have gone so far as to suggest that all persons employed by Government should be disfranchised. Others suggest that special representatives of Government officials should be returned to Parliament. Others that all such officials should take the same oath of allegiance as soldiers, and, in short, become subject to military discipline. In two articles appearing recently in the “Westminster Gazette,” under the title of “Unrest in the Railway World, by an Expert,”[14]it is suggested that “unless some discipline of the military kind were introduced” (in the event of nationalisation), “there would be no available methods of dealing with a national strike of railwaymen, other than to concede to their demands.” The question of “Strikes” has already been dealt with above (page 36). As to the political difficulty, although it is true that the number of Civil servants would be greatly increased (and it has been estimated that thetotal number of postal and railway servants who would have the vote might be as many as 600,000), it must be remembered, as pointed out by Mr. Emil Davies, that this number is spread over the whole Country, and the percentages in each district, compared to the whole number of voters, would not be a large one, except in railway centres like Crewe, where they already have a preponderance of votes. In any case, the same considerations which, as above mentioned, would be likely to prevent strikes, would operate equally in the region of politics if the four rules mentioned are adhered to, especially under the proposed scheme, carried on with the primary object of the public benefit. Exactly the same conditions would obtain as with the Post Office now.

Other grounds of objection to State ownership are:—

1. The fear of inefficiency owing to lack of competition.2. The fear of difficulty in obtaining redress for loss or injury from a Government Department.3. The fear of officialism.

1. The fear of inefficiency owing to lack of competition.

2. The fear of difficulty in obtaining redress for loss or injury from a Government Department.

3. The fear of officialism.

As to competition, it is now generally admitted that there is no effective competition on railways.[15]In most parts of the country there never has been any competition, as one company only is available. In others, where more than one company operates, working arrangements have been made not only as to the fares and rates but also as to time of trains, thus precluding any effective competition. In the very nature of things no competition can be effective in a system of railway transit.

As to the questions ofofficialismanddifficulties of obtaining redress, can anyone suggest that these are less in the case of private companies, responsible to no one but themselves, than in the case of a Government Department with a Cabinet Minister at the head who is responsible to Parliament? A vote of censure is one of the most powerful weapons in Constitutional countries against any serious abuse in a Government Department.

Mr. Edwin A. Pratt, in his book before referred to, cannot but admit the cogency of the argument in favour of the amalgamation and unification of the railways, but urges that this should be accomplished by the amalgamation of the whole of the existing railways intoa Trust or Traffic Board. The answer to this is that when once constituted, even though appointed by Parliament, such a Boardis responsible to no one but itself, and, however eminent may be the directors or managers, the want of ultimate responsibility inevitably and unconsciously leads to abuses.Can any instance be adduced of the successful working of any such large Trust or Board?On the other hand, instancesare well known to the contrary. One of these was the notorious Metropolitan Board of Works. And is it certain that the Metropolitan Water Board and the Port of London Authority, both of which are constituted on similar lines, will answer all the expectations which were formed of them?

There are, of course, difficulties inherent in the administration of a great Government Department, but, as already hinted, various remedies may be suggested for many of these difficulties. For instance, there might be electeda Railway Councilor Standing Committee in Parliament, consisting of representatives of several large districts of the United Kingdom, and of which the “Minister of Transport” would be, ex-officio, the President. In the first instance possibly some of the present directors of railway companies, many of whom are already in Parliament, could be members of this Council. Any proposals for improvements, extensions or alterations in the services of the railway or Post Office would be submitted to and decided upon by this Council or Committee, subject to an appeal to Parliament on questions of principle or finance. This would be one means of obviating an objection found in some countries where the railways are owned by the State, namely, the continual trivial complaints made in Parliament about the railways.

A further suggestion is that aspecial Railway Courtshould be established in London with branches in every important centre, and presided over by competent arbitrators to determine and adjudicate upon claims against the Department for personal injuries to passengers and servants, or for loss of or damage to goods, or by reason of delay, any one accident, involving a large number of claims, being dealt with by the same Court instead of being, as now, the subject of innumerable actions at law in the ordinary Courts. This Railway Court might also be useful in settling disputes between the Government and the men.

Apart from the objection to State ownership there are no doubt many who are now deriving income from railways who will fear that their interests may be prejudiced by the proposed change. Fortunatelythere can be but very few who will be thus prejudiced. As to the existing staffs, such as booking clerks and the Railway Clearing House staff, whose services would no longer be required in those particular departments, there ought to be more than sufficient vacancies for these in other but more necessary branches of the railway service, especially in view of the increased traffic which is sure to arise.

Many traderswho may at first sight consider that their profits would suffer if the scheme is adoptedwill findon further considerationthat the benefitsthey will have by the proposed schemewill be greaterthan any loss they could possibly sustain. To take one instance.Newspaper proprietorsmay consider that uponrailways being nationalised they would lose the benefit of the extensive and remunerative advertisements they now receive from competing railway companies. So far from there being any loss, there will be profits, partly by the official announcements which the Department will cause to be inserted in all newspapers of time tables, rates, etc., but even more so by the enormous saving in the carriage of paper and of the newspapers, in travelling expenses of special correspondents and others, and by the additional profits arising from increased circulation which is sure to follow upon the increased facility and cheapness of distribution.

Mr. W. M. Acworth, the well-known railway expert, to whom I submitted a rough draft of this pamphlet, was kind enough, while refraining from any detailed criticism, to call my attention to what he considered a difficulty in my proposals. He says:

“The fundamental objection to a scheme of average fares and rates is that people whose fares and goods rates are ‘averaged up’ will, so far as possible, cease to use the trains; those whose fares and rates are ‘averaged down’ will increase enormously, with a corresponding increase in working expenses. Have you appreciated that under your scheme a passenger from London to Glasgow would, in fact, in most cases pay, not 1s., but 3d. or 4d., by taking local tickets from London to Birmingham, Birmingham to Crewe, etc?”

And he instances the Hungarian zone system, which has completely broken down, as a case in point.

My answer to this is, first, that according to my scheme there is no “averaging up;” the flat fares are all “averaged down” to the minimum. Secondly, while welcoming the admission that the effect of “averaging down” is to increase the traffic “enormously,” I am sure that Mr. Acworth himself does not mean that the working expenses will increase in anything like the same proportion. He has himself pointed out in an article on railways[16]that the train cost of carrying 200 passengers and 10 passengers is practically the same. Further reasons for this fact are given under the heading of “Working Expenses” in this pamphlet. Thirdly, while admitting that under my scheme a passenger might, by taking three local trains which stop at all stations travel from London to Glasgow for 3d., I can hardly imagine that any but the smallest percentage of travellers would endeavour to save 9d. by taking a journey in which they would spend sixteen hours and have two changes at least, instead of travelling the same distance by one train, in eight hours, for 1s. As to the zone system, the whole advantage of the flat rate or uniform fare is lost by the difficulty of passing from one zone to the other.

FOOTNOTES[6]“On Municipal and National Trading” by The Rt. Hon. Lord Avebury. Published by Macmillan & Co., 1907. Price 2/6.[7]“The Case Against Railway Nationalisation” by Edwin A. Pratt. Published by Collins, 1913. Price 1/-.[8]“On Municipal and National Trading,” pp. 56-92.[9]While this pamphlet has been in the Press, there has been a strike of the Leeds Municipal workers, and the threat of a strike in the Post Office. It will be interesting to see whether the considerations above mentioned under existing conditions will be borne out, and still more if when the causes are ascertained, it can be proved that had the principles here advocated been carried out in practice, there would have been no strike, nor any threat of one.[10]On Municipal and National Trading, p. 109.[11]Ibid, Chapter VII.[12]On Municipal and National Trading, p. 107.[13]“On Municipal and National Trading,” page 10.[14]“Westminster Gazette” of December 2nd, 1913.[15]See “The Railways of Great Britain” by Lord Monkswell. (Smith, Elder & Co., 1913. Price 6/-). A most interesting book, published since this pamphlet was written.—Lord Monkswell is not an advocate of nationalisation, but apparently has an open mind.—He admits that England is now only served by five groups of railways, and that there is no effective competition.[16]In Palgrave’s “Encyclopædia of Political Economy,” Vol. III. (1899), Article on Railways, signed W.M.A.

[6]“On Municipal and National Trading” by The Rt. Hon. Lord Avebury. Published by Macmillan & Co., 1907. Price 2/6.

[7]“The Case Against Railway Nationalisation” by Edwin A. Pratt. Published by Collins, 1913. Price 1/-.

[8]“On Municipal and National Trading,” pp. 56-92.

[9]While this pamphlet has been in the Press, there has been a strike of the Leeds Municipal workers, and the threat of a strike in the Post Office. It will be interesting to see whether the considerations above mentioned under existing conditions will be borne out, and still more if when the causes are ascertained, it can be proved that had the principles here advocated been carried out in practice, there would have been no strike, nor any threat of one.

[10]On Municipal and National Trading, p. 109.

[11]Ibid, Chapter VII.

[12]On Municipal and National Trading, p. 107.

[13]“On Municipal and National Trading,” page 10.

[14]“Westminster Gazette” of December 2nd, 1913.

[15]See “The Railways of Great Britain” by Lord Monkswell. (Smith, Elder & Co., 1913. Price 6/-). A most interesting book, published since this pamphlet was written.—Lord Monkswell is not an advocate of nationalisation, but apparently has an open mind.—He admits that England is now only served by five groups of railways, and that there is no effective competition.

[16]In Palgrave’s “Encyclopædia of Political Economy,” Vol. III. (1899), Article on Railways, signed W.M.A.

The final and most important criticism of the scheme will be on the matter of finance.

The question is, can a sufficient revenue be obtained from the small uniform fares and rates proposed, after providing for working expenses, to pay not only interest on the purchase money but the purchase money itself?

It is a curious coincidence that in the year 1838, before Penny Postage was instituted, the average amount received for every chargeable letter was 7d. and a fraction—the actual average railway fare now paid by every passenger (excluding season tickets).

The number of letters carried during the first complete year after the uniform rate of 1d. was adopted was more than doubled. Notwithstanding this the deficiency in net revenue was about £2,000,000, and the deficiency was made good out of general revenue, this being well worth while owing to the great benefit to the nation of Penny Postage.

In the case of railways, however, the amount involved is so large that no Government could be expected to give any consideration to a proposal which would involve making good so large a deficiency as would be occasioned by the reduction to a flat rate of 1d. As will be gathered from the remarks made when dealing with the principles of the scheme, this difficulty is now overcome by dividing the traffic on railways, both of passengers and goods, into two kinds of service, namely, Fast and Slow. It will be found that by this meansno greater percentages of increase of traffic will be required to produce the same gross revenue as at present than 15 per cent. of passenger traffic and 10 per cent. of goods traffic. It will also be shown that if the increase of traffic should not exceed this estimate the additional working expenses will be so small that they would be more than met by the economies effected by unification. If these propositions prove to be true, then there will be no deficiency to be provided for.

It is necessary in order to prove this to set out the figures of the present receipts and expenses, and an estimate of the same under the proposed new scheme.

The following are in round sums the average figures for the two years 1911 and 1912, based on the Railway Returns published by the Board of Trade annually under the Regulations of Railways Act, 1871:—

The average fare for every journey is therefore 6½d.

In other words, if every passenger paid for every single journey, long or short, the sum of 6½d., then the gross receipts from passengers would be about the same amount as is now received.

Total tonnage of goodsper goods train:

The total receipts for the two kinds of merchandise togethershow an average of 2s. 4d. per ton.

Note that the total tonnage of minerals carried is about four times that of general merchandise.

The total tonnage may be less than the above, owing to overlapping of the various companies, but for the purpose of my estimates I am taking these official figures.

There is, of course, no official return as to the proportions of Main line and Local passenger traffic, but it is clear that the percentage of small fares must be very great. Assume that this is over 80 per cent., then there would be in round figures about 300,000,000 (that is under 20 per cent.) of Main line passenger journeys, and assuming that the number of first class passengers will be only 10 per cent. (the above average percentage of first and second class passengers), then the revenue from the existing number of passengers under the new scheme would be as follows:—

as against the present total of £45,000,000, or a deficiency of about £16,000,000 per annum, assuming there should be no increase in the existing traffic. This seems an appalling deficiency, but “Wait and See!”

It is quite clear that there would be a very large increase of traffic, more particularly of the long distance or Main line passengers, as under the existing system the fares for short distances up to 12 or even 20 miles are sufficiently low to remove practically all restrictions. In the case of long distances, however, there is this double restriction for passengers—namely, the time occupied and the high price of the fares. If the latter restriction is removed a very large increase of traffic is sure to result, not only for purposes of pleasure but also for business and trade purposes. The Local traffic will also increase partly by reason of the increased number of long distance passengers requiring the use of the Local lines (both suburban and small branch lines), and partly by the reduction to 1d. of many of the present suburban fares. In order, however, to be on the safe side in the estimate, I propose to take no account of any increase in Local passengers and to reckon only the increase required in the number of Main line passenger journeys. It will then be found that 250,000,000 more Main line passengers will provide for the above large yearly deficiency, as follows:—

This will bring the gross receipts from passengers to £46,750,000, withan increase of about 15 per cent. onlyon the present total number of passengers carried, and £1,750,000 more revenue.

The criticism may be made, however, that this number is nearly double the existing number of long distance passengers. Will such an increase be realised?

From a consideration of the following reasons it is submitted that not only will it be so, but that in point of fact a much larger increase may reasonably be anticipated.

1. No account as to passenger traffic has been taken of the normal increase in the number of passengers which has continued to increase regularly with the increase of population.2. Under the proposed scheme the uniform fares are foras far as the train travels only, so that a journey say from London to Londonderry will involve at least three 1s. tickets, one to Holyhead, a second from Holyhead to Dublin, and a third from Dublin to Londonderry, whereas under the present system one through ticket would be purchased and would appear in the official returns as one journey only.3. In practice nearly every single journey undertaken meansa return journey home, so that an increase of 250,000,000 more passenger journeys does not involve a greater increase in the movement of the population than is represented by, say, 150,000,000 passengers.4. If the number of passengers carried by the railways is compared with the population it may be noted that the total number of passengers carried last year in the Tube and Suburban Railways of London, with a population of between six and seven millions, was about 500,000,000 in addition to about the same number carried by omnibuses, and a further similar number by tramways. A similar proportion of railway passengers to the population of the United Kingdom of nearly 50 millions would be over 4,000,000,000 per annum, so that an actual total of 1,850,000,000 would undoubtedly be much less than may reasonably be anticipated.5. It is not only the increased number of people who would travel to and from all parts of the country who now cannot or will not do so on account of the expense, but also the increase in the number of journeys undertaken by existing travellers. Parents living in remote parts of the country whose children work in large towns and who, on account of high fares, cannot visit each other, business men and commercial travellers who will multiply their long distance journeys for business purposes if they can do for 2s. what now costs 10 or 20 times as much, are a few among many classes who will swell the number. It will be remembered that by far the greater proportion of the population are those in receipt of an income of less than £3 per week to whom any fares of 10s. or over are prohibitive except in extreme cases.

1. No account as to passenger traffic has been taken of the normal increase in the number of passengers which has continued to increase regularly with the increase of population.

2. Under the proposed scheme the uniform fares are foras far as the train travels only, so that a journey say from London to Londonderry will involve at least three 1s. tickets, one to Holyhead, a second from Holyhead to Dublin, and a third from Dublin to Londonderry, whereas under the present system one through ticket would be purchased and would appear in the official returns as one journey only.

3. In practice nearly every single journey undertaken meansa return journey home, so that an increase of 250,000,000 more passenger journeys does not involve a greater increase in the movement of the population than is represented by, say, 150,000,000 passengers.

4. If the number of passengers carried by the railways is compared with the population it may be noted that the total number of passengers carried last year in the Tube and Suburban Railways of London, with a population of between six and seven millions, was about 500,000,000 in addition to about the same number carried by omnibuses, and a further similar number by tramways. A similar proportion of railway passengers to the population of the United Kingdom of nearly 50 millions would be over 4,000,000,000 per annum, so that an actual total of 1,850,000,000 would undoubtedly be much less than may reasonably be anticipated.

5. It is not only the increased number of people who would travel to and from all parts of the country who now cannot or will not do so on account of the expense, but also the increase in the number of journeys undertaken by existing travellers. Parents living in remote parts of the country whose children work in large towns and who, on account of high fares, cannot visit each other, business men and commercial travellers who will multiply their long distance journeys for business purposes if they can do for 2s. what now costs 10 or 20 times as much, are a few among many classes who will swell the number. It will be remembered that by far the greater proportion of the population are those in receipt of an income of less than £3 per week to whom any fares of 10s. or over are prohibitive except in extreme cases.

Let me give one very homely illustration which has come under my notice. A domestic servant in London had a serious illness, necessitating an operation at one of the hospitals. Her parents lived in humble circumstances in a Cornish village. The mother came to London and had to pay £2 for a return ticket. Her daughter had to remain about two months in the hospital while the mother had to return home without being able to afford the luxury of another return journey to London. But during the whole of that time trains were going to and from the same place every day and night with plenty of room for the old lady, who could, of course, have been carried any number of times without any appreciable cost to the company.

Now, suppose the uniform fare of 1s. each way had come into operation, she or some other member of the family would, no doubt, have come up at least once a week, and instead of one return ticket which cost £2, and would be included in the Board of Trade returns as two passenger journeys, the family would have only paid 16s. for the eight double journeys, the extra cost to the Government would be nil and the increase in the number of passenger journeys would be 14.

It is not unusual to see long distance trains arrive in London with not more than 15 or 20 passengers.

For the purposes of the estimates of goods traffic there must be added to existing total receipts from goods train traffic the amount included in the official returns under the head of “passenger traffic” of £10,000,000 received for mails, luggage, and other goods carried by passenger trains, making the total revenue for goods at present of £74,000,000. There is no official Return as to the tonnage of goods carried by passenger trains, but assuming that the present average rate for goods carried by passenger trains is £2 per ton, this would represent a further tonnage, irrespective of passengers’ luggage, of 20,000,000 tons.

The figures under the new scheme, if there should be no increase in the tonnage carried, and assuming that goods by fast service should be no more than the amount now estimated per passenger train, would thus be as follows:—

Following the analogy of the passenger traffic, I will only estimate for an increased traffic by fast trains, and for this purpose there will be required:—

48,000,000 tons, which at 10s. equals £24,000,000, and will bring the total to £800,000 more than the present total receipts from goods, by both passenger and goods trains.

This increased tonnage it will be seen isan increase of under 10 per cent.on the present total of 550,000,000 tons. It is probable that with a reduction of freight per fast train to the uniform rate of 10s. per ton, a considerable proportion of existing goods train traffic would be transferred to fast trains, so that the same figure might be arrived at with much less increase in tonnage. This fact may also be taken into account when adjusting any mistake in the official figures of the total tonnage carried.

As in the case of passenger traffic, this percentage is surely not only a reasonable estimate, but one which may reasonably be anticipated, and, further, the increase will be progressive.

The following among other reasons may be adduced:—

1. Theexample of the Post Officeis the best precedent that can be given of the result of the adoption of a minimum uniform rate. In the year before the introduction of Penny Post the number of letters per head of population was only three. This number is now 72, irrespective of postcards and parcels, and it is still increasing. The number of letters carried in 1838 was 70,000,000. In the first complete year after the Penny Post was established this number was doubled. In 1863 it had multiplied by eight times, and since then it has been doubled in about every period of 20 years.2. The large amount ofgoods sent now by road, especially in recent years by motors and steam tractors on account not only of the heavy railway rates but also the cost of loading and unloading, would with uniform rates be sent by rail. In this connection it may be mentioned that a very considerable increase of carriage by trolley trucks of loaded carts and pantechnicons, or of the “containers” advocated by the New Transport Company, Limited, thus avoiding both shunting and the double expense of packing and unpacking, may reasonably be anticipated.3. A still greater increase in fast train traffic may be expected inperishable articles, such as fruit, fish, milk and dairy produce. The so-called reduced rates now in force for instance for carriage of fresh fruit vary from 1s. 6d. per cwt. (equals £1 10s. per ton),from Hampshire to London up to as much as 8s. per cwt. (equals £8 per ton), from Hampshire to Scotland, these rates being “reduced” on account of the large amount of fruit (strawberries), requiring in the season special trains carrying nothing but fruit. The rates for the same goods from other parts where the quantity is not so considerable are in some cases more than double, so that the farmers cannot afford to send the goods. The rates for fish are similar, and the same considerations apply, so that very little is consigned to town except from fishing centres like Grimsby where large quantities are available.4.With a regular servicefrom every station, village stations as well as the large towns, andsimilar to the present postal service, in fact forming an extension to all goods of the present Parcels Post service, no one can doubt that the total increase will be considerably more than the 10 per cent. estimated for.

2. The large amount ofgoods sent now by road, especially in recent years by motors and steam tractors on account not only of the heavy railway rates but also the cost of loading and unloading, would with uniform rates be sent by rail. In this connection it may be mentioned that a very considerable increase of carriage by trolley trucks of loaded carts and pantechnicons, or of the “containers” advocated by the New Transport Company, Limited, thus avoiding both shunting and the double expense of packing and unpacking, may reasonably be anticipated.

3. A still greater increase in fast train traffic may be expected inperishable articles, such as fruit, fish, milk and dairy produce. The so-called reduced rates now in force for instance for carriage of fresh fruit vary from 1s. 6d. per cwt. (equals £1 10s. per ton),from Hampshire to London up to as much as 8s. per cwt. (equals £8 per ton), from Hampshire to Scotland, these rates being “reduced” on account of the large amount of fruit (strawberries), requiring in the season special trains carrying nothing but fruit. The rates for the same goods from other parts where the quantity is not so considerable are in some cases more than double, so that the farmers cannot afford to send the goods. The rates for fish are similar, and the same considerations apply, so that very little is consigned to town except from fishing centres like Grimsby where large quantities are available.

4.With a regular servicefrom every station, village stations as well as the large towns, andsimilar to the present postal service, in fact forming an extension to all goods of the present Parcels Post service, no one can doubt that the total increase will be considerably more than the 10 per cent. estimated for.

Most critics will contend that the increased traffic will lead to an enormous increase of working expenses.

In the first place allowance must be made for the several economies in management occasioned by the amalgamation of the whole railway systems in one and with the Post Office as already mentioned, and of which the following is a brief list, viz.:—

Abolition of,

(a) The Clearing House,(b) Separate boards of directors and clerical staffs,(c) Legal and Parliamentary expenses,(d) Advertisements,(e) Book-keeping, printing and booking clerks now required for differential fares and rates.

(a) The Clearing House,

(b) Separate boards of directors and clerical staffs,

(d) Advertisements,

(e) Book-keeping, printing and booking clerks now required for differential fares and rates.

Economies by avoiding,

(a) Competing Receiving Offices, Post Offices or stations in same localities,(b) Competing trains,(c) The waste of rolling stock now occasioned by the ownership of different companies, instead of being used according to the requirements of traffic.

(a) Competing Receiving Offices, Post Offices or stations in same localities,

(b) Competing trains,

(c) The waste of rolling stock now occasioned by the ownership of different companies, instead of being used according to the requirements of traffic.

The latter has already been referred to in Chapter II. A further proof of a practical nature was given by Mr. Oliver Bury, the retiring General Manager of the Great Northern Railway in 1912, who then said that after the working arrangement with the Great Central Railway had been entered into, although there had been an increase of 4,000,000 tons of merchandise carried, this additional traffic had actually been worked with a decrease in the goods train mileage of 1,000,000.

Apart from all these economies,the working expenses cannot increase proportionately with the increase of traffic. Most of the long distance passenger trains now running, except on special occasions or holiday time, could easilyhold twice the number of passengers with but little, if any, appreciable increase in the cost of haulage. It must be remembered that a sufficiently powerful locomotive and sufficient coal must be provided for every passenger train, on the assumption that it will be full, whether it leaves with a full complement of passengers or not. Therefore, even though the number of passengers now carried were to be doubled in the case of all Main line trains very little increase in the working expenses would result, certainly not so much as the saving effected by the various economies mentioned. So far as goods traffic is concerned, an increase of 10 per cent. only, as estimated in the tonnage would certainly not cause any great increase in the expenditure. If, on the other hand, the increase of traffic should be very much more than the percentages mentioned (as may very likely be the case), then the revenue derived will be more than sufficient to provide whatever additional working expenses there may be. The expenses of the important items (which constitute probably 50 per cent. of working expenses) of permanent ways, stations, signal boxes, and general establishment charges would not be seriously affected by increase of traffic, only the rolling stock, coal, and part of the staff.

In addition to these economies, and others set out more fully in Chapter II., there will also be great economy in the working expenses of the Post Office itself, including the telegraph and telephone services. The actual effect of the amalgamation of the two services of railways and Post Office on the total working expenses of the combined services cannot be estimated with any degree of accuracy, but there can be no doubt that it will result in large economies. The working expenses of both, must, of course, be lumped together. No advantage can possibly be gained by attempting to separate the expenses of various branches of one State Department. This has actually been attempted in the case of the telegraph service, one of the numerous branches of the Post Office. It has been continually asserted that this service has been, and is being, carried on at a loss, especially since the introduction of the sixpenny rate. This assertion has always been an enigma to me, for how any proper apportionment of the working expenses of over 20,000 Post Offices throughout the United Kingdom can be made, in order to ascertain what proportion is to be attributed to the telegraph service alone, passes comprehension!

That this impossible task has been attempted, and apparently carried out to the satisfaction of some persons in authority, does not prove that the alleged loss has actually been made, but only that a large amount of time and expense has been lost in elaborate and costly calculations, which can be of no possible advantage to the service or the Country! It is to be hoped that this attempt will not be continued with the telephone service.

If, and when, the scheme proposed in this pamphlet for combining railways with the General Post Office is carried into effect, I trust that no such expensive and useless task will be attempted as to endeavour to ascertain what proportions respectively of the expenses of running the Royal Railways are to be attributed to carrying His Majesty’s Mails on the one hand, or His Majesty’s subjects and their goods on the other!

It is quite evident that on the two services being combined a portion of the present working expenses of the Post Office, namely, those which now consist of amounts paid to the Railway Companies for carriage of mails, for rents of telegraph and telephone wires, and other services rendered, will be swallowed up in the general working expenses, just as the gross receipts of the Post Office will swell the total revenue of the combined services.

For the purposes, however, of ascertaining what increase of traffic will be required to produce (a) the same net revenue as under the present system of railways, and (b) a sufficient revenue to purchase the present system, I have taken no account of the decrease of Postal expenses nor of the normal increase of the Postal Revenue. I also am assuming that notwithstanding all the economies referred to, the working expenses of railways will remain the same, or even increase, owing to higher prices of goods and materials and higher wages, to the round sum of £85,000,000.

It will thus be apparent that ample margin has been allowed for any increase in working expenses that is likely to take place, and that allowance has been made for the whole of the existing staffs to be retained, whether now employed in services which may then be discarded or not.

P.S.—While revising the final proofs of this pamphlet during the Christmas Holidays, I have noticed in the “Daily Telegraph,” of 24th December, 1913, a long letter signed “G.P.O.,” referring to an article in the same well-known newspaper of the previous day. The letter is printed in prominent type under the following heading:—

“Prehistoric Methods of Post Office Finance—Telegraph Service ‘Loss.’”

The correspondent, who evidently has expert knowledge of the subject, refers to the “alleged great loss” of the telegraph service as “a polite fiction.”

His letter completely confirms the views expressed above as to the folly of attempting to apportion expenses of one branch of the service, and he places the cost of the accounts at “hundreds of thousands of pounds a year!”

If the railway system be purchased by the nation it will be in contemplation asa business propositionto repay the capital expended in the purchase, and this means, therefore, that if this scheme is a practicable onethe shareholders and stockholders of the present companies will be able to receive back their capital, although, under existing conditions, this appears absolutely hopeless. It is therefore now proposed to consider upon what terms the railways can be purchased and how the purchase money can be provided.

1. By the Railway Act of 1844 the Government is empowered to purchase every railway company formed after that date. The price fixed is the equivalent of 25 years’ purchase of the average annual divisible profits for three years before such purchase, subject to the proviso that any company whose divisible profits are less than 10 per cent. on its capital is at liberty to have the terms of purchase fixed by arbitration. At the date of this Act most of the Trunk lines, to the extent of about 2,300 miles had already been constructed and are not therefore subject to the provisions of this Act, but as the total length of lines open in 1911 was 23,417 miles, it will be observed that the Act applies to 90 per cent. of the whole railway system.

Notwithstanding this, there are undoubted difficulties in estimating the actual purchase price, having regard to the fact that the majority of the smaller companies, including the modern Tube Railways with their large prospective profits, and probably the whole of the Irish railways, pay less than 10 per cent. and would, therefore, be entitled to arbitration.

There is, however, another precedent, viz., (2) The Indian State Railways, which have been actually purchased by the Government from the private companies by whom they were owned.

The dates and terms of purchase of these railways are included in an official return of railways acquired by the Government. This return was issued by the Board of Trade in 1908, pursuant to an order of the House of Commons.[17]In India the railwayundertakings of 16 separate companies were acquired by the State between the years 1868 and 1906. Of these companies six were purchased at a price mutually agreed upon between the Government and the companies, these being small companies, and the purchase moneys varying from £30,000 to £300,000. Three companies were acquired at a purchase price equal to the share capital. The remaining seven companies were purchased for a sum equal to the value of the shares calculated at the mean market price during the three years preceding the date on which notice of purchase was given. In addition to payment of the purchase price the Government assumed the liabilities of the company in respect of debentures and debenture stock. Four of these companies (the larger ones) were, under an option reserved by the contracts, paid by annuities spread over 73 or 74 years. One of these, the East Indian Company, was purchased in 1879 at the price, calculated on the above basis, of £32,750,000, payable by an annuity of £1,473,750 for the term of 73 years from 1880. This amounts exactly to 4¼ per cent. on the purchase money, and will cease to be payable after the year 1953.

In addition to this annuity, interest is paid on the debentures and loans amounting altogether to about £16,500,000, the interest whereon is about £500,000 or a little over 3 per cent.

If the Act of 1844 were now applicable to the whole of the companies in the United Kingdom, and if we assume that by the time when the option to purchase is exercised the net profits of £48,000,000 in 1911 shall have risen to £50,000,000, the purchase money would be 25 times that sum, viz., £1,250,000,000.

This sum is really slightly more than the total paid-up capital of the railways after allowing for “watered” stock.

The following were the figures in 1911:—

There is included in this total, stock to the nominal value of £198,000,000, or approximately 15 per cent., which represents nominal additions made on consolidations and divisions of stock, and commonly known as “watered” stock.

It will be noticed that the present net revenue of £48,000,000 only represents an average of about 3½ per cent. on this total paid-up capital. The total paid-up capital in the returns recently published for 1912 is £1,334,963,518.

The Railway Nationalisation Society has prepared heads of a Bill in Parliament, providing that the price to be paid for the whole of the railways shall be calculated on the basis of theAct of 1844. No doubt this would be opposed by holders of railway stocks and shares, having regard to the fact that the result might be in effect to merely return the capital, no account being taken of profits. If the purchase of the railways is to be considered as “a business proposition” it will be necessary to look fairly at both sides of the question, and endeavour if possible to arrange terms which will not prove an injustice to the present owners, and at the same time will be such as can be provided for out of the ordinary revenue of the railways without financial loss to the nation.

It must be remembered that shareholders or their predecessors invested their money with the reasonable and proper expectation of having an adequate return for it. No doubt they put down their capital with the primary, possibly the sole, object of benefiting themselves, but the fact remains that their capital has been the means of providing the splendid net-work of British Railways now available for the nation to purchase.

On the other hand, railway stock and shareholders must recognise that their position under the present system is by no means an enviable one. Many of them have for years been in receipt of no dividend whatever. In no case has there been any attempt at repayment of capital moneys, nor does there seem any prospect of it. The average net annual receipts now earned by the whole of the companies is only a fraction over 3½ per cent., and this percentage (which is less than before the year 1870) has for the last few years been practically stationary. The working expenses have been increasing to such an extent by reason of the increase of wages and price of materials that last year the companies decided on an all-round increase in fares and rates. According to the latest returns this has already been to a large extent counteracted by a decrease in traffic.

If, therefore, an offer were made by the Government to purchase the whole of the railways upon similar terms to those on which the East Indian Railway was acquired, namely for a sum equal to the mean market price of the shares during the three years preceding the year in which the Act to acquire the railways is introduced, it is submitted that there could be no effective opposition to the proposal. In effect this would mean a purchase at a price which is the value the public to-day put upon each line of railway. The only practical difficulty of this proposal will be to ascertain the market value of the shares of some of the smaller companies, many of which are held by the larger companies.

In order, however, to avoid under-estimating the amount required, I suggest for the purposes of my argument that the Government and the companies mutually agree on a total sum of £1,350,000,000 as the purchase price of all the undertakings ofthe companies, subject to the existing liabilities for loans and debenture stock, now amounting to £357,500,000, which would be assumed by the Government. This would make a total in round figures of £1,700,000,000, or nearly £400,000,000 more than the total of the ordinary preference and guaranteed stock. Surely this would be an outside figure. Indeed, it might be suggested that the nation would be paying an excessive amount.

Mr. E. A. Pratt gives various estimates of what the purchase price would probably be.[18]These vary from £1,052,000,000 up to £1,769,847,000, an estimate of “The Railway News,” confirmed by the “Financier and Bullionist,” of September 7th, 1912. “The Financial News” in 1912 suggested £1,941,865,000 in 2½ per cent. Stock in order to yield the present annual income of £48,546,000.

Taking the precedent of the East Indian Railway as a mode of payment and without making any allowance for better terms of interest which the Imperial Government might well obtain, it will be seen that the annual amount required to provide a purchase money of £1,350,000,000 and meet the above liabilities would be as follows:—

Annuities at the rate of:—

According to the estimates set out in Chapter V. (if no further increase of traffic is secured than is required for producing the present revenue), there would be available toward this annual sum required for purchase the following:—

This annual amount could be provided by the following further increase in passenger and goods traffic respectively, viz.:—

In these estimates no account has been taken of the increased revenue of the Post Office, nor the increase in Local passengers and slow goods traffic respectively, which is sure to be realised, and the receipts for which would probably cover any increase in working expenditure. It will be noticed that if the above increase should be obtained the total estimated increase of passengers over the present totals would be as follows:—

It is, of course, not essential to the success of the scheme that the whole of the increase here estimated should be obtained in the first year after nationalisation has been carried out, although it is considered that even in that short period, according to all precedents, so small a percentage of profits may fairly be anticipated. It would probably be necessary for the Government to raise a temporary loan for initiating the scheme, but in any case it appears essential that the purchase of the whole of the existing undertakings of the United Kingdom should be completed asat one and the same date.

Other advocates of railway nationalisation suggest that the purchase should be carried out gradually, and this course has been followed by other nations. It is, however, of the very essence of the scheme here proposed that every part of the country shall have the benefit of the uniform fares and rates, and this would be impracticable unless the whole system be taken over by the Government at one time.

The proposal that the price should be fixed by taking the mean price of stocks for the three years preceding the year in which the Act should be passed, is in order to avoid the market changes which might be caused by anticipation of purchase by the State. It is suggested that whatever price is taken as the basis of the purchase money, such price should include everything, so that the whole undertaking would be taken over without the necessity for any valuation of stock and plant, a prolific cause of so much trouble and expense, as in the case of the purchase of the National Telephone Company.

It may be said that the figures of the railway systems are so vast that it would be impracticable to cope with them in one transaction. Enormous as the figures must necessarily be, the principle is exactly the same as in other financial transactions. Just as the Government acquired the undertaking of the National Telephone Company by purchase, which took effect on one day, so can this much larger transaction, or series of transactions, be carried out. It is assumed that the existing shares and stocks of railway companies would be converted into Government Stock, all necessary apportionments being made up to a date to be named in the Act of Parliament authorising the acquisition of the railways. Upon such date the completion of the whole transaction will be deemed to be effected.

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