# A History of Inland Transport and Communication in England/Chapter 21

CHAPTER XXI
RAILWAYS AND THE STATE
From the earliest moment of there being any prospect of railways, operated by locomotives in place of animal power, coming into general use, the attitude of the State towards their promoters was one less of sympathy than of distrust; and this distrust was directly due to the experience the country had already had of the waterway interests, whose merciless exactions and huge dividends had led to the fear that if the railway companies, in turn, were to get a monopoly of the transport facilities of the country, they might follow in the footsteps of the inland navigation companies unless they were restrained either by law or by the enforcement of the principle of competition.
Public sentiment, which Parliament is assumed to represent, and of which our legislation is supposed to be the outcome, was divided between, on the one hand, the landed gentry, the canal proprietors (each alike hostile to the railways until they found they had more to hope for from exploiting them), and the inevitable opponents of innovations of any kind; and, on the other hand, the traders, by whom the railways were being cordially welcomed, not only because of the greater and better transport facilities they offered, but also because they presented an alternative to the canals, the earlier enthusiasm for which had been greatly moderated by the prospect of an improved means of transport.
Without adopting wholeheartedly the views of either of these two opposing parties, Parliament regarded the position with much concern lest there might be a renewal, in another form, of what we have seen to be the grasping tendencies of monopolistic canal companies; and the distrust inspired, under these particular circumstances, and from the very outset, towards railway companies which were preparing to create a revolution in the transport conditions of the ​country—a revolution the State was not itself disposed to effect or to finance—was powerfully to influence much of the subsequent railway legislation, if, indeed, it has even to-day entirely disappeared.
At first it was assumed that competition in rail transport would be assured, and the dangers in question proportionately reduced, by different carriers using their own locomotives, coaches and carriages on the railway lines, which alone, it was thought, would be owned by the railway companies constructing them. In some of the earlier railway Acts there was even a provision that the railway companies could lease their tolls, as turnpike trustees were doing. But the apparent safeguard in the form of competition between rival carriers disappeared when it was found (1) that, although a railway company was required to allow a trader's own horse or locomotive to use the line, it was under no obligation to afford him access to stations and watering-places, or to provide him with any other facilities, however indispensable these might be to the carrier's business; (2) that the tolls charged by the railway companies were heavier than the carriers could afford to pay; (3) that the entire operation of a line of railway worked by locomotives must necessarily be under the control of the owning and responsible company; and (4) that railway companies would have to become carriers of goods as well as owners of rails.
A Parliamentary Committee which sat in 1840, and of which Sir Robert Peel was a member, had reported in the strongest terms that the form of competition originally designed was both impracticable and undesirable, and that monopoly upon the same line, at all events as regarded passengers, must be looked upon as inevitable. "Your Committee," said the report, "deems it indispensable both for the safety and convenience of the public, that as far as locomotive powers are concerned, the rivalry of competing parties on the same line should be prohibited"; though, as some check to the consequent monopoly of the railway companies, they suggested that the Board of Trade should act as a supervising authority, with power to hear complaints, consider bye-laws, etc.
A witness for the Grand Junction Railway Company, who gave evidence before this Committee, said that any person ​might run his own engine on the Grand Junction, and in one instance this was done by a trader who had a locomotive on the company's line for drawing his own coal; but the witness apprehended the greatest possible inconvenience from any general resort to such powers. On the Liverpool and Manchester, also, anyone might run his own engines on the line; but, the witness added, "no one does."
The Royal Commission of 1865 summed up the position thus:—"No sooner were railways worked on a large scale with locomotive power than it was found impracticable for the general public to use the line with carriages and engines, and railway companies were compelled to embark in the business of common carriers on their own line, and conduct the whole operations."
When, in these circumstances, it was made certain that any idea of competition between carriers using a railway company's lines in the same manner as an ordinary highway would have to be abandoned, it became the established policy of the State to promote competition between the railway companies themselves by encouraging the construction of competitive lines or otherwise, thus still protecting, as was thought, the interests of railway users, and checking any monopolistic tendencies on the part of the railway companies. The futility, however, of seeking to compel railway companies to compete with one another had already been pointed out by Mr James Morrison, whose speech on the subject in the House of Commons on May 17, 1836, confirms, also, the theory I have suggested as to the attitude adopted towards the railway companies being traceable to fears engendered by the undue prosperity of the canal and navigation companies.
If, argued Morrison, after one company had spent a large sum on a line to Liverpool, another company were encouraged to spend as much again, with a view to providing a competition which would keep down the charges, the two would inevitably arrive at some understanding by which the original charges would be confirmed; and the Legislature, he contended—though the Legislature never acted on his contention—was "bound to prevent, as far as it could, the unnecessary waste of capital" on the building of unnecessary lines to promote a competition he held to be futile. The safeguarding of the public interests could, he thought, be effected in another way. ​"The history of the existing canals, waterworks, etc., afforded," he went on, "abundant evidence of the evils" of allowing too much freedom in the matter of rates; and he quoted the high prices at which the shares of the Loughborough Canal and the Trent and Mersey Canal were then still being sold, adding: "The possession of the best, or, it may be, the only practicable line, and the vast capital required for the formation of new canals, have enabled the associations in question, unchecked by competition, to maintain rates of charges which have realised enormous profits for a long series of years."
The remedy he recommended in preference to competition was that when Parliament established companies for the formation of canals or railroads it should invariably reserve to itself the power to make such periodical revisions of the rates and charges as it might deem expedient, examining into the whole management and affairs of each company, and fixing the rates and charges for another term; the period he favoured being one of twenty years.
There was no suggestion, at this time, that the railway companies had abused their powers. The only suggestion—and expectation—was that because the canal companies had abused theirs, the railway companies might, and doubtless would, do the same, unless they were prevented; and it will ​be found that this was mainly the position throughout the whole of the subsequent controversies.
Morrison's proposal was approved in the House of Commons, and on May 17 he brought in a Bill for giving effect to it in regard to all new railways, to be sanctioned in that or any subsequent Session. But the prospect of a Parliamentary limitation of the profits a railway might earn had a most depressing effect on the railway interests, and on July 11 Sir Robert Peel urged that the question should be decided without further delay inasmuch as "this branch of commercial enterprise was injured and almost paralysed." On the following day the Bill was brought up again, and it was then defeated.
In the same Session (1836) the Duke of Wellington moved, and carried, in the House of Lords a general clause, to be inserted in all railway Acts, the effect of which would have been to give to Parliament the power of dealing as it might think fit with any railway company during the next year. John Herapath thereupon inserted in the current issue of his "Railway Magazine" a letter addressed to the Duke of Wellington, in the course of which he said:—
"No person can doubt your Grace's intentions are honourable to all parties. Fearful of the consequences of overgrown monopolies, you are anxious to put some salutary restrictions to those bodies riding, as you apprehend, rough-shod over the public; and you are anxious to do this before they become too powerful to be ruled. Every honest and right-minded man must be satisfied that such are needful; nor is there a company got up on honourable principles that would object to any reasonable measure, in which a due regard is paid to their own interests, and a proper consideration is had to all the circumstances of their situation and risk. But in common fairness these must be taken into account."
Defending the railways, and keenly criticising the attitude of the State towards them, Herapath further said:—
"No man knows better than yourself that these works, if they are at all likely to be beneficial to the nation—which everyone in his sober senses admits—will form a great and brilliant era in its prosperity. Nay, my Lord Duke, permit me to ask you if they have not been a Godsend towards the preservation of this country, by giving a new impetus to ​industry and trade, and saving us from that anarchy and confusion to which distress was fast hurrying a large proportion of our population? With all these advantages staring us in the face, what have the Government done to promote railways? Have they done a single thing? I am not conscious of one. Have they removed a single impediment? Not to my knowledge; but they have raised several. Have they contributed a single farthing? Rather, I believe, by the intolerable and vexatious oppositions permitted in passing the bills, have been the cause of spending many hundred thousands, which, like another national debt, will prey to the end of time on the vitals of public industry."
The Duke's proposed clause was dropped, and was heard of no more; but Herapath's prediction as to the equivalent of "another national debt" being imposed on public industry was to be verified by the course of subsequent events still more than by any avoidable expenditure then already incurred.
If, again, as Herapath said, the Government had done nothing to promote railways, they had not been backward in seeking advantage from them in the interests both of the Exchequer and of the Post Office.
Within two years of the opening of the Liverpool and Manchester line, a tax of one-eighth of a penny per mile for every passenger conveyed on the railway was imposed, and the directors of the Liverpool and Manchester, then struggling into existence, announced that, in consequence of the tax, they would be obliged to charge the public higher fares. By 1840 the Exchequer receipts from the tax amounted to £112,000. Two years later, following on a great public agitation, Peel substituted for the mileage tax a tax of five per cent on receipts from passenger traffic, and in 1844 the tax (which had been especially oppressive on the poorer class of travellers) was abolished in the case of third-class passengers carried at fares not exceeding a penny a mile in "Parliamentary trains," stopping at every station.
The local authorities, with Parliamentary sanction, also subjected the railways to a degree of taxation against which ​Mr G. C. Glynn, chairman of the London and Birmingham Railway, in a speech (at a meeting of his company) quoted by Francis, protested in the following terms: "Then comes the last item of local taxes and parochial rates; these, gentlemen, we do take exception to.... The county assessors and the parties to whom appeal from them is made seem actuated by one principle, namely, to extract every farthing they can from the railway property. We ask no boon, we ask for no favour from Government on this subject; but we do ask for justice."
The railways had to submit to the taxation, but they won the day as against certain excessive and, as they considered, intolerable demands made upon them by or on behalf of the Post Office.
In 1838, based on the recommendations of a Select Committee of the House of Commons on the transmission of mails by railway, the Government introduced a Bill which, in effect, placed the entire railway system of the country, then and for all future time, at the command and under the supreme control of the Postmaster-General. That functionary was empowered by the Bill to call upon the railway companies to provide him with—at their own cost—special or ordinary trains for carrying the mails at any hour of the day or night, proceeding at such speed, and calling or not calling at such places, as he might direct, the companies giving security to the Queen by bond for duly complying with all Post Office orders, and being made liable to a penalty of £20 in respect to every railway officer, servant or agent, who might disobey any Post Office order. If the Post Office wished to use its own engines and conveyances it was to be at liberty to do so without paying any rates or tolls whatever; and it was, also, to be free to clear away any obstructions to its engines, and use any of the railway company's appliances it wanted. The railway companies were, in return, to be assured a "fair remuneration" for (in effect) the wear and tear of the rails; but, lest this payment might be too much for the Post Office, the Postmaster-General was further authorised to recoup himself by carrying, not simply the mails, but passengers, in the trains he might think fit to command or to run, thus competing on the railway lines with the companies whose property he was virtually to annex.
​The companies declared they were willing to render every reasonable facility to the Post Office; but they protested most vigorously against what they called "the absurd and tyrannical clauses" of the Bill.
These were, nevertheless, defended in the Commons on behalf of the Government, the Attorney-General saying "he had no doubt if the prerogative of the Crown were put in force, the Post Office and the troops and stores might be transmitted along the railroads without the payment of any tolls whatever; though he thought the companies should have a fair remuneration for the accommodation given."
Sir James Graham, on the other hand, wanted to know what were the Queen's rights on the Paddington Canal. He understood that troops were frequently moved from Paddington to Liverpool by canal, but were always paid for as passengers. Lord Sandon, too, declared that the question was whether the public interest conferred a right upon the Post Office to take possession of railroads, and make use of them without the slightest remuneration whatever. That the railways should be subject to control he readily admitted; but there was a wide difference between justifiable control and absolute sway, between fair remuneration and robbery, for such it would be to use the property of these companies without paying for it.
The companies, according to a statement in the "Railway Magazine" for August, 1838, where a summary of the debate will be found, had been "prepared not merely to petition but to act"—whatever this may mean. The Government, however, adopted a more conciliatory attitude towards them by either withdrawing or amending the clauses which had evoked these protests, and an amicable settlement of the future relations between the railways and the Post Office was then effected.
The rejection of Morrison's Bill and the withdrawal of the Duke of Wellington's motion, following on their adverse criticism by the railway interests, had committed the Government still more to their policy of stimulating competition between the railway companies themselves, thus, they considered, diminishing the risk of seeing any of them become too prosperous a monopoly. It was in full accord with this policy that encouragement was given to the creation of ​many small, independent, and more or less competing lines, and that no attempt was made to encourage the provision, either by individual companies or by groups of companies, of "trunk lines" of the type which Thomas Gray and others had been urging on the country with so much though with such futile persistence.
The advent of the new means of transport was, in fact, marked by the complete absence of any centralised effort with a view to securing the network of a railway system, so planned or so co-ordinated as to make the best possible provision for the country as a whole, and especially for the rapidly increasing necessities of trade, commerce and industry. The failure to act on these lines was, however, only in accordance with the previous policy, or no-policy, which had successively left the improvement of rivers, the making of roads, the construction of canals and the provision of turnpikes either to private benevolence or to private enterprise, influenced mainly by considerations of local or personal interests.
Much had certainly been done in these various directions by those to whom the State had thus relegated the carrying out of public works which in most other countries—as regards main routes, at least—are regarded as a matter of national obligation. But, apart from any question of providing State funds, the lack even of intelligent direction and efficient supervision by a central power, qualified to advise or to organise private effort, had led both to a prodigious waste of money and to results either unsatisfactory in themselves or in no way commensurate with the expenditure incurred. The same conditions now were to lead, in regard to the railways, to a further waste of money, to disastrous speculation, to infinite confusion, to the piling up of a huge railway debt, and to the provision of innumerable small lines which were to remain more or less independent and disconnected fragments of a railway system until the more enterprising companies began, on their own initiative, to amalgamate them into through routes of traffic.
The general position at the period here in question was well stated by G. R. Porter in his "Progress of the Nation" ​(1846), where he wrote, on the subject of railway development:—
"The laissez faire system which is pursued in this country to such an extent that it has become an axiom with the Government to undertake nothing and to interfere with nothing which can be accomplished by individual enterprise, or by the associated means of private parties has been pregnant with great loss and inconvenience to the country in carrying forward the railway system. Perhaps there never was an occasion in which the Government could with equal propriety have interfered to reconcile the conflicting interests involved, and to prevent public injury arising from the false steps so likely to be made at first in bringing about a total revolution in the internal communication of the country. It is not meant by these remarks to infer that Government should have taken into its own hands the construction of all or any of the railroads called for by the wants of the community; but only to suggest the propriety and advantage that must have resulted from a preliminary inquiry, made by competent and uninterested professional men with a view to ascertain the comparative advantages and facilities offered by different lines for the accomplishment of the object in view. If this course had been adopted before any of the numerous projects were brought forward for the construction of lines of railway between all imaginable places, and if it had been laid down as a rule by the legislature that no such projected line could be sanctioned or even entertained by Parliament which was not in accordance with the reports and recommendations of the Government engineers, the saving of money would have been immense. The expensive contests between rival companies in which large capitals had been so needlessly sunk would then have been wholly avoided; and it might further have followed from this cause that, a kind of public sanction having been given to particular lines and localities, much of that personal opposition which has thrown difficulties in the way of works of great and acknowledged utility would never have been brought forward."
In making these remarks, Porter was only giving expression to views entertained in various influential quarters, and to a certain extent he did but anticipate, or re-echo, according to the precise date at which his observations had been ​written, certain views and proposals put forward by the Select Committee of 1844, of which Mr Gladstone (then President of the Board of Trade) was chairman. In the Fifth Report of this Committee it is said:—
"The Committee entertain very strongly the opinion that in the future proceedings of Parliament railway schemes ought not to be regarded as merely projects of local improvement, but that each new line should be viewed as a member of a great system of communication, binding together the various districts of the country with a closeness and intimacy of relation in many respects heretofore unknown."
So long, the Report continued, as railways were considered to be of problematical benefit, and were in general subject to extensive opposition on the part of the owners and occupiers of land, and of the inhabitants of the districts they traversed, there might have been reasons for ensuring a very full, and, in some points of view, a disproportionately full, representation to local interests; but "The considerations which tend to attach to railways a national rather than a local character gain weight from year to year as those undertakings are progressively consolidated among themselves, as the points of contact between them are multiplied, and as those that were first isolated in comparison are thus brought into relation with gradually extending ranges of space, traffic and population."
The Select Committee went on to give their reasons for considering that the ordinary machinery of Private Bill Committees, with their separate and unconnected proceedings, and an individual existence commencing and ending with each particular Bill, was inadequate and unsatisfactory; and they especially pointed to the fact that hitherto it had not been customary to examine railway Bills "systematically and at large with reference to public interests." There were various questions which could not be thoroughly sifted under the mode of procedure then in vogue, and the Committee recommended that, with a view to assisting the judgment of the Houses of the Legislature, all future railway Bills should, previously to coming before Parliament, be submitted to the Board of Trade for their report thereon. They further said—and these observations have a special significance in view of events that were to follow:—
​"The Committee entertain the opinion that the announcement of an intention on the part of Parliament to sift with care the particulars of railway schemes, to associate them with the public interest (in the cases of all future schemes and of all subsisting companies which may voluntarily accede to such an arrangement) ... will produce very beneficial effects in deterring parties from the attempt to entrap the public by dishonest projects, in securing railway projects against the shocks to which in periods of great commercial excitement it must otherwise be liable from such causes," etc.
Praiseworthy as was the design thus put forward by Mr Gladstone's Committee, it failed to bring about the results anticipated.
In accordance with the recommendations made, a special department of the Board of Trade, under the direction of Lord Dalhousie, was created, in August, 1844, to inquire into and report to Parliament on all new railway schemes and Bills, with a view to guiding the Private Bill Committees of both Houses. The special department was more especially to report as to the positive and comparative advantages to the public of any Bills proposed for the construction of competing lines.
A great deal was hoped for from this new arrangement, and the decisions of the department as to which of the schemes then being promoted they would recommend for first consideration by Parliament were keenly awaited.
The expansion of the railway system had, by this time, proceeded so far that by the end of 1843 Parliament had authorised the construction of 2390 miles of railway, of which 2036 miles were then open for traffic. The capital of these lines was £82,800,000, and of this amount about £66,000,000 had been raised. A good deal of wild speculation in 1836-7 had been followed by a reaction, and the railway market was still depressed in 1843; but in 1844 interest in railway enterprise was greatly stimulated by the announcement that the Liverpool and Manchester, the Grand Junction, the London and Birmingham and the York and Midland were paying dividends of from ten to twelve per cent each, and that the Stockton and Darlington was paying fifteen per cent. The shares in existing companies rose in value, a number of new companies were formed, and companies already operating ​projected branches in defence of their own interests against threatened competition. It was at this juncture that Mr Gladstone's Committee presented its Report and that, following thereon, the special department of the Board of Trade was called upon to undertake its responsible duties.
On November 28, 1844, the department intimated that the points it would particularly inquire into in regard to railway Bills then before it were (1) ability and bona fide intentions of the promoters to prosecute their application to Parliament in the following Session; (2) national advantages to be gained; (3) local advantages; (4) engineering conditions; and (5) cost of construction, prospective traffic and working expenses. On the last day of the year the department announced which Bills they proposed to recommend, and subsequently they issued reports giving their reasons. Strong protests were raised by the disappointed projectors, and on the opening of the Session of 1845 Sir Robert Peel announced that the Government intended to leave railway Bills, as before, to the judgment of the Private Bill Committees.
This meant the virtual setting aside of the newly-formed department, though its actual existence was not terminated until the following August. It meant—since each Private Bill Committee would deal only with the merits of a particular scheme—the definite abandonment of any opportunity for securing, through an authority dealing with railway projects as a whole, the realisation of the ideal of Mr Gladstone's Committee that "each new line should be viewed as a member of a great system of communication, binding together the various districts of the country with a closeness and intimacy of relation" previously unknown. It meant, also, the adoption of a policy of free trade in railways, without protection for established interests, and to any and every honest promoter or dishonest speculator who had a scheme to propose it gave, in effect, carte blanche to bring it forward.
Much disappointment was felt at this collapse of Mr Gladstone's apparently well-devised scheme, and the policy adopted in regard to it was keenly criticised. Francis quotes, for instance, the following passages from "Railway Legislation," the authorship of which, however, I have been unable to trace:—
"Swayed by motives which it is difficult to fathom, the ​two Houses, with singular unanimity, agreed ... to give unrestricted scope to competition.... Little regard was paid to the claims and interests of existing railway companies, still less to the interests of the unfortunate persons who were induced to embark in the new projects for no better reason than that they had been sanctioned by Parliament.... The opportunity of confining the exceptional gauge within its original territory was also for ever thrown away. By an inconceivable want of statesmanlike views and foresight, no effort was made to connect the isolated railways which then existed by new links into one great and combined system in the form in which they would be most subservient to the wants of the community and to the great ends of domestic government and national defence. Further, the sudden change from the one extreme of determined rejection or dilatory acquiescence to the opposite extreme of unlimited concession gave a powerful stimulus to the spirit of speculation, and turned nearly the whole nation into gamblers."
Francis himself says of the position thus brought about:—
"All hope of applying great general principles passed away. Every chance of directing the course of railways to form a national system of communication was lost.... The legislative body—to appropriate the idea of Mr Morrison—committed the mistake of converting the Kingdom into a great stock exchange, and of stimulating the various members of the railway system to a deep and deadly struggle, destructive of order and fruitful of vice."
This may seem to be unduly strong language; but what actually and immediately followed on the course of events here in question was—the Railway Mania of 1845-6.
By the summer of 1845 the country had gone railway mad. In the Session of 1843 the number of railway Acts passed had been twenty-four, showing no more than a normal development of the railway system in meeting the legitimate needs of the country. In the Session of 1844 the number increased to thirty-seven. In the Session of 1845 there were no fewer than 248 railway Bills. In the next Session Bills were deposited with the Board of Trade for the construction of 815 new lines of railway, with a length of 20,687 miles, and capital powers to the extent of £350,000,000. Of these 815 Bills many were abortive for technical reasons, or ​because the necessary deposit was not paid; but over 700 of them reached the Private Bill Office.
How every class of society joined in the scramble for shares; how extravagant prices were given for the scrip of lines which, when completed, could not for years have covered their working expenses; how half-pay officers, ticket-porters and men, even, in receipt of parish relief put down their names on the "subscription" lists for thousands of pounds' worth of shares, on their being paid a fee—sometimes as low as five shillings—for so doing; how "frenzy seized the whole nation"; how "there was scarcely a family in England which was not directly or indirectly interested in the fortunes of the rail"; and how the inevitable collapse reached every hearth and saddened every heart in the Metropolis, bringing many families both there and elsewhere to ruin, will be found recorded in detail by John Francis, in his "History of the English Railway," and need not be enlarged upon here.
In referring to the events of this period, the Report of the Joint Committee on the Amalgamation of Railway Companies, 1872, admits that "One effect of the favour shown by Parliament to competing schemes was to encourage a large number of speculative enterprises." Leaving aside the enterprises, of whatever type, that did not survive the passage through Parliament, I compile, from figures given in Clifford's "History of Private Bill Legislation," the following table showing new lines of railway actually sanctioned by Parliament during the Sessions 1845-7:—
| Year. | Number. | Miles. | Capital. |
| 1845 | 118 | 2700 | £56,000,000 |
| 1846 | 270 | 4538 | £132,000,000 |
| 1847 | 190 | 1354 | £39,460,000 |
| Totals | 578 | 8592 | £227,460,000 |
These figures indicate sufficiently the magnitude of the schemes in respect to which, during so short a period as three years, Parliament assumed the responsibility of giving its express sanction and approval.
The period of speculation was followed by the inevitable reaction, and in 1850 it was found necessary to pass an Act ​"to facilitate the abandonment of railways and the dissolution of railway companies." Of the 8592 miles of railway sanctioned in the three Sessions, 1845-7, no fewer than 1560 miles were (as shown by the Report of the Royal Commission on Railways, 1867), abandoned by the promoters under the authority of the Act; while a further 2000 miles of railway, requiring 40 millions of capital, are said by the Report of the 1853 Committee to have been abandoned without the consent of Parliament.
To the extent indicated by these abandonments the railway situation was certainly relieved. But the mania and the resultant panic had serious consequences in regard not alone to investors in the schemes that failed but also to the companies that survived.
Apart from projects designed to open up entirely new districts—many of them of a perfectly genuine and desirable character—there were others directly devised to compete with existing lines and capture some of the remunerative traffic these were then handling; and it was, as I have shown, quite in accordance with the accepted principle of State railway-policy that such competition should be encouraged, in preference to any "districting" of the country among particular companies or to the creation or co-ordination of an organised system of railways on the lines proposed by Mr Gladstone's Committee.
The existing companies, finding that the territory already "allotted" to them (as they considered) was being invaded, or was in danger of being invaded, felt themselves forced, for the purposes of self-defence, to enter on a number of protective schemes which might not, at the time, otherwise have been warranted. Clifford says on this point in his "History of Private Bill Legislation": "As the Government took no steps to prevent the promotion of competitive railways, tending to diminish the profits of existing companies, the latter sought to protect themselves as they best could, and justified their many unprofitable extensions and amalgamations as measures forced upon them by the leave-alone policy of the Government."
Confirmation of this statement will be found in a speech delivered on February 23, 1848, by Mr C. Russell, M.P., chairman of the Great Western Railway Company, at the ​sixth half-yearly meeting, at Paddington, of the South Wales Railway Company (of which he was also chairman), and reported in "The Times" of the following day. Referring to a pamphlet which had been issued attacking the policy of the Great Western Railway Company, Mr Russell said:—
"If their engagements were extensive, and he did not deny that they were so, they had been entered in only as a matter of necessity. They all arose out of the mania of 1845-46, and even in the pamphlet in question it had been admitted that the Great Western was not one of those companies which at that time had promoted any of the many schemes which were afloat. He, as far as he was concerned, had not only not promoted these projects, but had taken every means in his power to check them. In January, 1846, in his place in Parliament he had predicted the results if some steps were not at once adopted to put a curb upon reckless speculation; but most unfortunately for all parties that was not the view which was taken by the House of Commons. Mr Hudson and other gentlemen maintained that the course he recommended would be an unfair interference with private enterprise, and the consequence was that schemes involving altogether the sum of £125,000,000 passed through the Legislature in that year. The Great Western had remonstrated with the President and the Vice-President of the Board of Trade, and, left to their own resources, they had been compelled, in self-defence, to look after their own interests by getting hold of all the rival or contemplated rival schemes."
In some instances the existing companies guaranteed interest to the shareholders of branches and extensions which were feared as rivals. F. S. Williams, in "Our Iron Roads," says of such lines as these that while many of them were accepted as feeders they "proved for a time to be only suckers."
The effects of the mania on the finances of existing railway companies was further shown by the fact that, in order to pay their contractors, some of the companies were obliged during the crisis to raise money at from ten to thirty, and, in some instances it is said, even at fifty per cent discount. Then, also, the shares in ten leading companies suffered between 1845 and 1847 a depreciation in value estimated at ​£18,000,000. The following are typical examples of the falls experienced:—
| COMPANY. | SHARES. | JULY,1845. | APRIL 4,1848. | DECLINE. |
| London and Birmingham | 100 | 243 | 126 | 117 |
| Great Western | 080(paid) | 205 | 088 | 117 |
| Midland | 100 | 187 | 095 | 092 |
| London and Brighton | 050 | 076 | 0028½ | 0047½ |
While the general situation in the railway world had been thus developing, there was a revival, in 1846, of the idea that the work of Private Bill Committees in respect to railway schemes should be supplemented by some other form of inquiry into their merits.
Writing on this subject in the issue of his "Railway Magazine" for July, 1837, John Herapath had said:—
"It has long been anxiously expected that Parliament would take some steps to relieve itself from the onerous duties of investigating and deciding on railway matters. Probably no tribunals can be less fitted for inquiries of this kind than Parliamentary Committees, of which the House of Commons has lately given a demonstrative proof in the case of the Brighton line. After Committees of the two Houses had sat nearly the whole of last session, and a Committee of the Commons for thirty-five days of the present; after the Committee's reports had been made on each of the lines and near 300,000l. of the subscribers' money had been wasted, the House of Commons stamped its own opinion of all those labours by giving them the 'go-by,' and referring the whole four lines to the judgment of a military engineer."
As for the element of uncertainty in the decisions of Parliamentary Committees, F. S. Williams is responsible for the statement that six railway Bills rejected by Commons Committees in 1844 were passed on precisely the same evidence in 1845; that of eighteen Bills rejected in 1845 seven were passed unaltered in 1846; and that of six Bills thrown out by Committees of the House of Lords in 1845 four were adopted by other Committees in 1846.
The failure, however, of the special department of the Board of Trade, created on the recommendation of Mr ​Gladstone's Committee to meet the requirements of the situation, was complete. In giving evidence before the Select Committee of 1881, the secretary of the Board of Trade, Mr T. Farrer (afterwards Lord Farrer), referring to the work of Lord Dalhousie's department, said the reports made "were very able, but they were thrown over immediately they got to the House." When, he declared, the Board of Trade had taken all the means in their power to make a full report, "it was treated as waste paper. The Board might just as well have made no report at all." On the other hand, he admitted that the reports had not been of much actual value, the Board of Trade having no power to call the parties before them and take evidence.
Apart from a feeling of jealousy entertained by members in general and Private Bill Committees in particular towards any curtailment of their powers, privileges and functions by departmental officials, experience had shown that the Private Bill Committees, after examining witnesses, getting expert testimony and hearing counsel, were better able to ascertain the facts of particular schemes than the special department, while the latter had lost credit, also, on account of its recommendations in regard to amalgamations.
The first scheme of this kind on which it was asked to report was one for an amalgamation between the Liverpool and Manchester Railway, the Grand Junction Railway (from Liverpool to Birmingham) and the North Union (from Warrington to Preston). The Bill was opposed by public bodies and traders in the leading towns of Lancashire, and Lord Dalhousie's report favoured the opposition; but the Select Committee on the Bill nevertheless assented to an amalgamation which was, in effect, to lead to the creation of the London and North-Western system of to-day. The department also reported unsuccessfully in 1845 against the amalgamation of the Chester and Birkenhead with the Chester and Holyhead Railway—two other lines which were first united to each other and then to the London and North-Western. It further reported against various proposed amalgamations and arrangements in the Midland Counties; so that, as the Report of the Select Committee of 1872 points out, the department would have objected strongly to such combinations as the present London and North-Western Railway, the ​Great Western, the North-Eastern, the Midland, the Great Northern and the Great Eastern.
These considerations should be borne in mind by those who might otherwise be disposed to criticise the attitude adopted by the Government of 1845 towards the special department here in question.
The one experiment had been a failure—with, as we have seen, deplorable consequences for the country and serious prejudice to bona fide railways; but Committees of both Houses, appointed in 1846, were now to recommend another. They advised the creation of a Board of Commissioners of Railways who were to discharge the dual functions of (1) seeing that the railway companies did not contravene the provisions of their special Acts or of any general Statutes; and (2) report to Parliament, if so directed, upon any pending railway Bills.
An Act to this effect was passed in 1846; but in the following Session there was introduced a Bill which proposed greatly to increase the powers of the Board of Commissioners. Clifford says, concerning this Bill, that it made the Commissioners, in effect, arbiters of all railway legislation. Promoters were not even to survey an intended line until the Commissioners gave permission. When the survey was made one of their officers was to report upon the project. With them plans and sections were to be deposited; they were to examine into compliance with Standing Orders and report to Parliament upon engineering merits and proposed rates. Considerable authority was also vested in them over existing railways. They were to report annually to Parliament upon tolls, fares and charges, and upon the regularity or irregularity of trains; and they might call for returns as to traffic and many other details of management, inspect the books and documents of railway companies, and settle disputes between companies having termini or portions of line in common.
"Parliament," Clifford further tells us, "was again jealous of this proposed interference with legislation." The railway companies also protested, and the measure was received with such general disfavour that it was withdrawn before it reached a second reading. As for the Board of Commissioners, instead of getting more authority it got less. Part of its functions were re-united to those of the Board of Trade in 1848, and the ​remainder followed in 1851, whereupon the new authority ceased to exist.
Once more, therefore, railway Bills were left to be dealt with on their individual merits by Private Bill Committees operating on lines to which, not simply John Herapath, but Mr Gladstone's own Committee, had taken exception; and once more was a set-back given to the aspiration for the establishment of some central authority which could organise, co-ordinate or otherwise consolidate the still rapidly increasing railways on the basis of a national system of rail communication. The difficulty might, perhaps, have been met by the creation of a Minister of Communications, who would have held a position somewhat similar to that of the Minister of Public Works in Prussia or in France, and have discharged a useful function as director-in-chief, or, at least, as adviser-in-chief, in regard alike to railways, roads, rivers and canals. Such a Minister, being a member of the Government, might have acted or recommended without wounding the susceptibilities of Private Bill Committees or of individual members; he might have organised or been the means of organising an efficient system of railways at an earlier date and at far less cost; and he might have saved both the country from its enormous losses on the wild-cat projects of unscrupulous schemers during the mania period and bona fide companies from much of the excessive capitalization into which they were driven.
Whether or not the problems of the situation could have been solved in this manner, the fact remains that it was the railway companies themselves who—in spite of the established policy of the State, directed to the maintenance of railway competition, and in spite of the disapproval of amalgamations by one Parliament Committee after another—brought about the conveniences of through travel or through transit. It was they themselves who, by amalgamation or otherwise, instigated the creation of the "great" companies which both ensured these conveniences and effected a complete transformation in the general railway position, to the great advantage of everyone concerned.
​Before, however, reaching this stage in their development, the railways had had some other struggles with the Government on questions of State policy arising out of those aforesaid feelings of suspicion and distrust, and due to the same fear as before that the companies would be sure to abuse their position unless they were restrained from so doing.
Following on the recommendations of the Committee of 1840, and with a view to safeguarding the public interests in regard alike to safety and to reasonable treatment, some important statutory powers had already been conferred on the Board of Trade. Under the Regulation of Railways Act, 1840, notice was to be given to the Board of Trade of the opening of all new lines of railway; such lines were to be inspected by Board of Trade inspectors; various returns in respect of traffic, tolls, rates and accidents were to be made to that body, to which, also, all existing bye-laws affecting the public were to be submitted for confirmation. In 1842 a further Act gave the Board power to delay the opening of any new line until they were satisfied that all the necessary works had been effectively constructed. Mr Glyn, chairman of the London and Birmingham Railway, said of this measure: "It is a Bill which I do not hesitate to say is, on the whole, calculated to do the interests of railways very considerable service."
But the attitude of the companies was no longer favourable when Mr Gladstone's Committee of 1844 proposed to confer on the Board of Trade some drastic powers for the periodical revision of railway rates, and likewise sought to lay down the terms on which the State might acquire all future lines of railway. The proposals in question were incorporated in a Bill which was brought in by Mr Gladstone; but the measure met with strenuous opposition from the railway interests, and the modifications introduced before it became law were of such a nature that the Act has never been put into operation.
In regard to the revision of rates, the Act laid down that if, after the lapse of twenty-one years (not fifteen, as proposed in Mr Gladstone's first Bill), any railway sanctioned after the passing of the Act had paid ten per cent for three years, the Treasury (not the Board of Trade) might reduce the rates, guaranteeing, however, a ten per cent dividend to ​the company, while the revised rates and the guarantee were to continue for another twenty-one years. Needless to say, railway companies in general do not pay ten per cent dividends, though in 1844 ten per cent was regarded as quite a reasonable dividend for a railway, in view of what the canal companies had been paying; while no such guarantee as that suggested is ever likely to be made by the Treasury. Provisions authorising the Board of Trade to make deductions from the guaranteed income as penalties for what they might regard as mismanagement, and prohibiting a company from increasing its capital pending a revision of rates, without the sanction of the Board of Trade, were so vigorously opposed that they were abandoned.
The clauses of the Act relating to State purchase were to apply only to new lines of railway, the 2320 miles of railway sanctioned prior to the Session of 1844—and including many of the chief links in the great trunk lines of to-day—being expressly excluded. As regarded railways sanctioned in the Session of 1844, or subsequently thereto, it was enacted that after the lapse of fifteen years the Treasury might acquire them for twenty-five years' purchase of the average annual profits for the preceding three years; but if those profits were less than ten per cent, the amount was to be settled by arbitration. It was further enacted that no railway less than five miles in length should be bought; that no branch should be acquired without purchase of the entire railway; that the policy of revision or purchase was not to be prejudiced by the Act; that "public resources" were not to be employed to sustain undue competition with independent companies; and, finally, that no revision of rates or State purchase of lines should take place at all without an Act of Parliament authorising the guarantee or the purchase, and determining how either was to be done.
To argue, as many advocates of the nationalisation of railways habitually do, that the basis for State purchase has already been established by the Act of 1844 is to set up a theory which is obviously inconsistent with the real facts of the situation.
Commenting on this Act of 1844 the Joint Committee on the Amalgamation of Railway Companies (1872) say in their report:—
​"It would be impossible to deal with railways made since 1844 without dealing with railways made before that time, since both form part of the same systems.
"As regards the revision of rates, no Government would undertake to try experiments in reducing rates on an independent company whose income they must guarantee; and efficient or economical administration could scarcely be expected from a railway company whose rates were cut down and whose dividend at ten per cent was guaranteed by Government.
"Whatever value there may be in the notice given to the companies by this Act of their liability to compulsory purchase by the State, over and above the general right of expropriation possessed by the latter in such cases, its terms do not appear suited to the present condition of railway property or likely to be adopted by Parliament in case of any intention at any future time on the part of Parliament to purchase the railways."
The proposals contained in the Bill, and modified into the Act of 1844, were, of course, simply a further development of the then established policy of the State in taking precautions against the evils that might result from railway monopoly.
A greater degree of apparent success was, at first, to attend those further precautionary measures which took the form of encouraging the construction of competing lines, leading both to new and to existing companies invading the so-called "territory" of other companies, as distinct from the provision of lines in districts which had no railways at all.
There was at this time much discussion as to the rights of established companies.
When the proposal for the appointment of the Committee of 1840 was under discussion in the House of Commons, Sir Robert Peel had contended that a material distinction was to be drawn between new companies approaching Parliament for the first time and companies which, relying on the faith of Parliament, had invested their capital in the construction of railways. "Parliament, it was true, might repent of the indiscretion and levity with which it had granted those powers ... but he would advise Parliament to be very cautious how it interfered with the profits or management of companies which had been called into existence by the ​authority, and had invested their money on the faith, of Parliament." Mr Gladstone's Committee of 1844 also declared that they had been "governed throughout their consideration of the subject by the strongest conviction that no step should be taken by Parliament which would either induce so much as a reasonable suspicion of its good faith with regard to the integrity of privileges already granted, and not shown to have been abused, or which would prospectively discourage the disposition now so actively in operation to extend the railway system by the formation of new lines."
On the other hand, there was that ever-present and ever-active dread of what might happen if the railway companies did become grasping and merciless monopolists. There was, also, the fact that while there would be direct competition between two railways having the same terminal points, each line might further serve a more or less considerable and important intermediate stretch of country which otherwise would be left without railway accommodation at all.
For one or other of these reasons competing lines continued to be sanctioned, notwithstanding Special Committees' recommendations and railway companies' protests. One such protest, giving a specific example of the tendencies of the day, was made in a memorial to the Board of Trade, dated June 26, 1857, and headed, "Proposed Remedies for Railway Grievances." The memorial, signed by Sir John Hall, Bart., and six others, and addressed to Lord Stanley of Alderley, president, and Mr Robert Lowe, vice-president, of the Board of Trade, had been drawn up at the request of those two gentlemen as a more detailed statement of facts to which their attention had already been called. Five specific grievances were dealt with, and the first of these was "The Tendency of Parliament to concede competing or otherwise unnecessary lines." Under this head the memorialists state:—
"It is not our desire that the railway system should be legislatively restricted within its present limits, or that existing shareholders should by any process whatever be nominally or practically gifted with a monopoly of the means of railway transit. We should submit to the introduction of new lines of railway wherever called for by absolute public necessity.... In such cases, however, we consider that the Legislature would only be doing justice to its previous enactments in ​giving former applicants time to complete their engagements so that they might be able, at the proper time, to exhibit their ability and their willingness to consider the wants of the public as well as their proper remuneration."
The memorialists mention the fact that in 1853 several new lines were sanctioned, the period fixed for their completion being 1858, and they proceed:—
"Already, however, before these lines are opened, others are promoted in competition with them—promoted, not by a complaining locality, but in some cases by existing companies, in others by persons whose only apparent object is to sell the schemes to advantage when Parliament has sanctioned their construction. In such instances as these we humbly submit that the Legislature should not permit the introduction of new lines until it has seen whether or not the company in possession can fulfil its engagements, and whether, also, such company should not be permitted an opportunity of electing to extend its undertaking, or to leave further effort to the discretion of the Legislature."
Whilst the State was thus maintaining its own policy of competition, the railway companies were equally persistent in keeping to their policy of amalgamation; so that, as the Joint Committee of 1872 remarked, "A new line was sure sooner or later to join the combination of existing railways, and to make common cause with them."
Practical railway experience was showing that the ordinary ideas of competition, as regarded commercial undertakings in general, did not and could not be made to apply to railways beyond a certain point. The capital sunk alike in obtaining a railway Act, in acquiring and adapting land, with provision of embankments, cuttings, viaducts, bridges, tunnels, etc., for the railway lines, and in supplying the various necessary appurtenances, railway stations, and so on, was irredeemable, since, in the case of failure of the line, due to competition or otherwise, the capital invested could not be realised again, the land, rails, buildings, etc., on which it had been spent being of little or no value for other than railway purposes. There could thus be no transfer of capital from one undertaking to another, as in ordinary commercial affairs.
In addition to this it might be that interest would have to be paid on two lots of railway capital in a district where the ​traffic was sufficient to allow of the financial obligations of only a single company being efficiently met, any success achieved by the new company depending (until the available traffic increased) on its power to divert business and profits from the other company.
Hence it might well occur that "the best laid schemes" of Parliament and Parliamentary Committees, in approving competitive lines, resulted only in the companies concerned coming to, at least, a friendly understanding; and it might even be that the public did not eventually benefit at all, because, as the Joint Committee of 1872 say, "The necessity of carrying interest on the additional capital required for the new line tends sometimes, in the end, to raise rather than to reduce the rates."
Economic considerations, again, apart altogether from those monopolistic tendencies on the fear of which the policy of the State had been founded, were quite sufficient to account for the absorption of one company by another, and especially of small companies by larger ones, not so much to avoid competition as to ensure the provision of through routes operated under one and the same management, involving less outlay on working expenses, and providing greater advantages to the public than if the same length of line belonged to a number of different companies.
The lines between London and Liverpool, for example, were originally divided between three companies, and the same was the case with the lines between Bristol and Leeds. In some instances the companies were not on good terms with one another, and they ran their trains to suit their own convenience. Even when they were on good terms, they might not have any interests in common, apart from (at one time) offering as few comforts and conveniences as possible to the third-class traveller, and compelling him at least to complete his journey by going first class, if he wished to get to his destination the same night.
As early as 1847 attempts had been made by some of the companies to overcome the glaring defects of the original system of railway construction by establishing the Railway Clearing House, with a view to facilitating through traffic and allowing of a better adjustment of accounts when passengers or goods were carried over various lines in return for a ​single payment. The companies persevered, however, in their further policy of amalgamation and consolidation, and in 1853 the number and magnitude of schemes with these objects in view created such alarm on the part both of politicians and of traders that a further Select Committee—known as Mr. Cardwell's Committee—was appointed.
The members of this Committee pointed out in their report that the whole tendency of the companies was towards union and extension, that competition ended in combination, and that the companies were able in great measure to attain these ends by agreements with one another without the authority of Parliament. The economy and the convenience resulting from amalgamation were admitted by the report; but, though still no proof was offered, or suggestion made, that the companies were actually abusing the greater powers they had thus secured, there was an obvious under-current of alarm in the minds of the Committee as to the many undesirable things which large concerns might do.
The Committee were opposed to any "districting" of the country between different companies, and they recommended that, while working agreements might be allowed, amalgamations between large companies should not. As an example of the combinations they deprecated, I might mention that they pointed with evident feelings of much concern to the fact that if the amalgamation schemes then being proposed by the London and North-Western Railway Company were conceded, they would involve the union under one control of a capital of £60,000,000, a revenue of £4,000,000, and 1200 miles of railway, with the further result of "rendering impossible the existence of independent rival trunk lines." One wonders what the members of this Committee would have said had they been told that by the end of 1910 (as shown by the Board of Trade "Railway Returns") the London and North-Western would control a total authorised capital of (in round figures) £134,000,000, have gross receipts in a single year amounting to £15,962,000, and be operating 1966 route miles of line, equivalent to 5490 miles of single track (including sidings), besides being only one of half a dozen great trunk lines.
A much more practical result of the deliberations of this Committee was seen in certain provisions of the Railway and Canal Traffic Act, 1854, which laid down that every ​railway company should afford proper facilities for receiving and forwarding traffic; that no undue or unreasonable preferences should be given; and that where the systems were continuous the companies should afford due and reasonable facilities for the interchange of traffic, without undue preference or obstruction. In this way it was sought to bring about greater co-ordination between the numerous small lines, and secure a better provision for through traffic. The Act is well described by the Select Committee of 1872 as "a measure valuable in fact and most important in its scope and intention." It may have been further anticipated that companies which, as the result of the Act, secured running powers or free interchange of traffic over the lines of other companies—and especially as regards lines having access to London—would be less ready to agree to absorption by them; but if this expectation were, indeed, entertained, it was not realised.
The companies, in fact, continued to develop their commercial undertakings in accordance with what they regarded as commercial principles, and the Joint Committee on the Amalgamation of Railway Companies, 1872, taking a much broader view of the situation than previous Committees had done, pointed out how small had been the effect of the policy sought to be enforced against the railways, since the combinations which had enabled the great trunk lines to attain to the position they occupied at that date had been effected "contemporaneously with reports against large combinations," those reports having had "little influence upon the action of Private Bill Committees," and not staying "the progress of the companies in their course of union and amalgamation." The Committee further said, on the subject of "districting":—
"Among the various suggestions which naturally occur when dealing with the question of amalgamation, one of the most obvious and most important is to the effect that for the future some endeavour should be made to compel railways in amalgamating to follow certain fixed lines or principles.... If at an earlier period in railway history such an attempt had been successfully made, there is no doubt that it might have provided us with a railway system, if not more efficient, at any rate far less costly than that which we now possess. But considering the policy, or want of policy, which has hitherto ​been pursued, and the interests which have grown up under it, the difficulties of laying down any fixed policy for the future are very formidable."
The words in this extract which I have put in italics, representing, as they do, the views of a Joint Committee of the House of Lords and of the House of Commons, justify, I would suggest, much of the criticism in which I have here ventured to indulge.
Among the conclusions at which the Committee arrived were the following:—
"Past amalgamations have not brought with them the evils which were anticipated."
"Competition between railways exists only to a limited extent, and cannot be maintained by legislation."
"Combination between railway companies is increasing and is likely to increase, whether by amalgamation or otherwise."
"It is impossible to lay down any general rules determining the limits or the character of future amalgamations."
In support of their views in regard to the first of these conclusions, the Committee pointed especially to the North-Eastern and the Great Eastern Railway Companies, each of which had so far pursued a policy of amalgamation that the report speaks of the former as "pervading and possessing one of the wealthiest and most important districts of the Kingdom," and of the latter as having "almost exclusive possession of the principal centres to which it extends."
The Committee did not suggest that either of these companies had abused its powers, or taken undue advantage of such "monopoly" as it had secured in the districts concerned. In fact, of the North-Eastern Railway they said:— "That railway, or system of railways, is composed of thirty-seven lines, several of which formerly competed with each other. Before their amalgamation they had, generally speaking, high rates and fares and low dividends. The system is now the most complete monopoly in the United Kingdom ... and it has the lowest fares and the highest dividends of any English railway." As for the Great Eastern, instead of abusing their "almost exclusive possession" of the Eastern Counties, everyone knows that the Company have won for themselves the credit of pioneering the movement for offering ​exceptionally low rates and other special facilities for the transport of agricultural produce, and, also, of having done more, perhaps, than any other single railway company to enable working men to live in healthy suburbs around London.
The whole position in regard to the prospective abuse of a so-called monopoly due to railway amalgamations is, in fact, much misunderstood.
A railway company which controls, or practically controls, the traffic in a certain section of the country is especially interested in developing that traffic because it will enjoy all the advantages thereof, without having to share them with a rival. For this reason, instead of restricting facilities, such a company seeks to increase them; instead of imposing extortionate fares and rates it aims, not merely at immediate profits on the transport of particular commodities, but at encouraging such a development of the district in general as will ensure its prosperity, increase its population, expand its trade, and create more traffic of all kinds in a not far distant future.
It was precisely this idea that led the Great Eastern Railway Company to set the example it did in seeking to develop the interests of its agricultural districts. The more these interests expanded, and the more profitable the agricultural industry became to the people living in those districts, the greater would be the demand for household supplies, for furniture, for pianos, for building materials, and for countless other commodities, most of which would bring additional traffic to the line apart from the greater amount of agricultural produce carried, and apart, also, from the further inevitable increase in passenger traffic.
Cornwall, again, might be regarded as the "monopoly" of the Great Western Railway; but what person would suggest that the Great Western have not sufficiently boomed "the Cornish Riviera"?
Nor is there necessarily a "monopoly" simply because a particular district is served by a single railway. If the Great Eastern did not take people to East-coast resorts at reasonable rates, or if the Great Western charged excessive fares for the journey to Cornwall, holiday-makers would, in each case, go elsewhere. If either company, or any other company, sought to get too much for carrying milk to London, milk ​would be obtained by the metropolitan dealers from other districts, instead; and so on with most other commodities.
Indirect competition, on sound economic lines, may, therefore, still exist even when a railway company is, after many amalgamations, in the possession of an apparent monopoly. The law of supply and demand will still regulate both prices and charges. When, on the other hand, an attempt is made to enforce an artificial and non-economic competition by Act of Parliament, the inevitable result is that the companies concerned find it to their advantage to combine, or to agree, rather than to compete in rates and fares under conditions that would not only be mutually disadvantageous, but confer no lasting benefit on the public they seek to serve.
How the ultimate result of railway policy, as here described, has been to bring about the creation of great systems out of small ones may be seen from the following typical examples, showing in each case the number of lesser companies absorbed, leased or worked as the result of amalgamations, of leases in perpetuity, or otherwise; though the figures do not include railways which have been vested in two or more companies jointly:—
| NAME OF COMPANY. | LENGTH OF LINE. Miles. | COMPANIES AMALGAMATED OR LINES LEASED. |
| Great Central | 0753 | 15 |
| Great Eastern | 1133 | 26 |
| Great Northern | 0856 | 22 |
| Great Western | 2993 | 1150 |
| Lancashire and Yorkshire | 0589 | 14 |
| London and North-Western | 1966 | 59 |
| London and South-Western | 0964 | 40 |
| London, Brighton and South Coast | 0454 | 19 |
| Midland | 1531 | 35 |
| North-Eastern | 1728 | 41 |
| South-Eastern and Chatham | 0629 | 29 |
| Caledonian | 1074 | 41 |
| North British | 1363 | 45 |
| Great Northern of Ireland | 0560 | 14 |
| Great Southern and Western (Ireland) | 1121 | 19 |
​The process of amalgamation has been carried even further than these figures suggest, some of the companies absorbed into the great systems having themselves previously amalgamated a number of still smaller companies. The North-Eastern, for example, came into existence in 1854, through a combination of three companies—the York, Newcastle and Berwick, the Leeds Northern, and the York and North Midland—which three companies then represented between them what had originally been fifteen separate undertakings. Since 1854 the North-Eastern Company have purchased or amalgamated thirty-eight other companies, one of which, the Stockton and Darlington (absorbed in 1863), was already an amalgamation of eleven companies.
That the conveniences of travel and the advantages to traders have been greatly enhanced by the substitution of these few great companies for a large number of small ones is beyond question, and actual experience has shown that the fears of grave evils resulting from prospective abuses of the railway "monopoly" brought about by amalgamations such as these have been mainly imaginary, notwithstanding the fact that they have formed the basis of so much of the policy of the State in its dealings with the railways.
There are still various small and even diminutive companies which have escaped the fate of being swallowed up by their big neighbours. One of the smallest engaged in a general traffic—as distinct from dock or mineral lines—is the Easingwold railway, Yorkshire, which connects with the ​North-Eastern at Alne, but still maintains an independent existence. According to the Board of Trade Returns for 1910 the Easingwold Railway consists of two miles of line, or three miles if we include sidings, and it owns one locomotive, two carriages for the conveyance of passengers and one goods waggon. It carried in 1910 a total of 33,888 passengers, 5547 tons of minerals and 11,214 tons of general merchandise. Its total gross receipts from all sources of traffic for the year amounted to £2358, and the net receipts, after allowing for working expenses, were £936. The authorised capital of the company is £18,000, of which £16,000 has been paid up.
Small as this line is, it serves a useful purpose; but the policy of amalgamation, followed up by leading companies with such pertinacity, and in spite of so much distrust and opposition, has, happily, saved the railway system of the country from remaining split up among an endless number of companies of the Easingwold type—even though they might have had more than three miles of railway and a single locomotive each.
Other developments of State policy towards the railways have applied to ensuring both perfection of construction and safety in operation.
In the former respect the English lines have been built with a solidity and a completeness not to be surpassed by the railways of any other country in the world. Even in sparsely populated districts where, under similar circumstances, the American or the Prussian railway engineer would lay down only such a line as would be adequate to the actual or prospective traffic, would give the passengers no platform, would provide little more than a shed for a railway station, and would expect the public to be content with a level crossing and look out for the trains, a British railway company is obliged to respect State requirements by laying down a line equal to the traffic of a busy urban centre, give the passengers such platforms as will enable them to enter or leave the trains without the slightest inconvenience, erect well-built and more or less commodious station buildings, and, it may be, arrange for bridges, viaducts or underground passages such as in other countries would be found only in centres having a substantial amount of traffic.
Apart, in fact, from any question as to expenditure on ​Parliamentary proceedings and on the acquiring of land, the cost simply of building the railway itself has, generally speaking, been far greater in this country than, under corresponding geographical and traffic conditions, has been the case elsewhere. Judging from the example of the Prussian State Railway administration it is extremely doubtful if, had the British railway system been constructed, owned and operated by the State, instead of being left to private enterprise, any responsible Chancellor of the Exchequer would have authorised so great a degree of expenditure, in the interests of an absolute perfection of construction under all possible conditions, as that which has been forced upon commercial companies dependent for their capital on the money they could raise from investors.
Less scope for criticism is offered by the provision of the most complete of safety appliances in regard to signalling and other phases of railway operation. The desirability of reducing the risk of railway accidents to an absolute minimum is beyond the range of all possible dispute. Yet, as a matter of detail, the substantial cost of ensuring this all-important element of safety, no less than the exceptionally heavy outlay on the lines themselves, has helped still further to increase that capital expenditure a return on which is only to be secured by the investors from the revenue the companies can get from the railway users.
When we look for the ultimate and combined results of the various conditions touched upon in this and the preceding chapter—excessive cost of land, abnormal expenditure on Parliamentary proceedings and various aspects of State policy and control—we find them in the fact that, whether or not the British railways are really the best in the world, they have certainly been the most costly.
Comparisons with other countries may be misleading unless we remember that published statistics as to the cost of construction of the world's railways apply to route mileage—or, otherwise, "length of line"—and that the English lines have a large proportion of double, treble and other multiple track, while in more sparsely populated countries the railways, except in and around the large towns, consist to a far larger extent of single track. The actual position is not, therefore, quite so bad as the comparative figures appear to show. But, even allowing for these considerations, the following table—which ​I compile from data published in the "Bulletin of the International Railway Congress Association" for February, 1911—may be regarded as conveying the moral of the story I have here been seeking to tell:—
CONSTRUCTION COST OF THE RAILWAYS OF DIFFERENT COUNTRIES. :
| COUNTRY. | SYSTEM. | YEAR. | MILES. | CONSTRUCTION TOTAL. | CAPITAL PER MILE. |
| Great Britain and Ireland | Entire | 1905 | 22,843 | £ 1,272,600,000 | £00 55,712 |
| Germany | " | 1908 | 35,639 | 813,300,000 | 22,821 |
| France | Main lines | 1906 | 24,701 | 706,700,000 | 28,611 |
| Belgium | State lines | 1907 | 2,523 | 93,600,000 | 37,088 |
| Netherlands | Entire | 1897 | 1,653 | 28,700,000 | 17,350 |
| Denmark | State | 1909 | 1,218 | 13,250,000 | 10,884 |
| United States of America | — | 1908 | 233,632 | 3,521,200,000 | 15,071 |
| Canada | — | 1907 | 22,447 | 269,850,000 | 12,022 |
* ↑ See page 237.
* ↑ In the Taff Vale Railway Act of 1836 (the same year as that in which Morrison made his proposals) the company were prohibited from paying a dividend of more than seven per cent when the full tolls were charged, or of more than nine per cent after the tolls had been reduced by twenty-five per cent; and the shareholders were required, at any meeting at which these maximum dividends were declared, to make such reasonable reductions in the amount of the rates to be paid during the following year as would, in their opinion, reduce the profits to the seven or nine per cent level. It was further provided that, for the purpose of "better ascertaining the amount of the clear profits upon the said railway," the company should submit their accounts to the Justices in Quarter Sessions, who were to make such reductions in the rates to be collected during the year next ensuing as would, in their judgment, reduce the profits to the prescribed minima. Mr A. Beasley, general manager of the Taff Vale Railway, who gives this information in an article on "How Parliament Harassed Early Railways," published in "The Railway Magazine" for November, 1908, adds: "The gentlemen of Quarter Sessions were never called upon to undertake this formidable task as the clauses were repealed by the Company's Act of 1840."
* ↑ Under the Cheap Trains Act of 1883 the duty was remitted in the case of all fares not exceeding the rate of one penny a mile, and was reduced to two per cent on fares exceeding that rate for conveyance between urban stations within one urban district.
* ↑ Professor Hadley states, in "Railroad Transportation," that in 1844 the average length of English railroads was fifteen miles.
* ↑ The present Railway and Canal Commission, which, however, has no functions in regard to advising on railway Bills, was created in 1873 for a period of years, and was made permanent in 1888.
* ↑ The figures in this column are taken from the Board of Trade Railway Returns for 1910.
* ↑ When giving evidence before the Departmental Committee on Railway Agreements and Amalgamations, on June 21, 1910, Mr A. Beasley, general manager of the Taff Vale Railway Company, called attention to the fact that in "Bradshaw's Railway Manual" for 1909 there was published a special index of all the railways of which notices had appeared in that publication during sixty years (practically covering the whole position), the total of such railways, including light railways, being 1129. Of this number 86 were recorded as having been abandoned, closed or wound up, leaving a balance of 1043. In "Bradshaw's Railway Guide" for March, 1910, only 110 railways—including light railways, railways operated by joint committees, as well as railways in the Isle of Man, the Isle of Wight, and Jersey—were given as being in actual operation. "That shows," continued Mr Beasley, "that there must have been 933 railways, all separately authorised, most of them separately constructed, and many of them, for a time, separately worked, which have been purchased, amalgamated, leased or otherwise absorbed or taken over by other undertakings."