The Sun.
London, England, 1861-01-24 00:00:00

RAILWAY CAPITAL.

Fifty millions. of money or so are bespoken this
year for new railway lines, branches, extensions,
and other supplements to the existing system;
so that the aggregate of rain 'ay capital, already
about as large as that of Consols, will be increased
by an addition nearly twice as great as was made
to the National Debt in the last WV-
To be sure,
the cases are not exactly parallel. ~~'e may hope
at any rate,
that the forthcoming investments will,.
be more productive than war loans a ekt2 military
estimates ; but if the new shareholders eve ever to
get their due, there must be a radical reform the
conduct of railway enterprises from first to -last.
We have thrown away,—as far, that is, a s pecunbt,,v
profits are concerned,—one of the finest opportuni-
ties ever placed within a people's reach. Now that
railways have been 20 years in operation, and we
can take a survey of their returns, we discover that
the most sanguine visions of the original projectors
have been exceeded by the realities of the experi-
ment. Nobody ever ventured to predict or antici-
pate such an incredible growth of traffic as has
actually occurred. No prospectus ever made au
approximation to the revenues actually realized.
Unhappily, the other side of the account proved
equally expansive. The traffic surpassed all cal-
culation, but so did the charges, and the end has
been that the income derived by the shareholders
is deplorably small. It was reckoned that railways,
with a given amount of traffic, would pay 10 per
cent. The assumed traffic has been quadrupled,
and the interest paid on capital is about 3‘,.1•
They certainly manage these things baler in
France—better everywhere, in fact, than in practi-
cal, business-like England. We publshed the (OW
day a few statistics of the leading French lines,
showing that three of them actually paid between
10 and 20 per cent. each; two others 74-; and one,
the lowest on the list. between 5 and 6. As
a natural consequence, the shares were at a
high premium, some having doubled in value, and
the lowest quotation being at par. If we compare
these figures with those of our best English lines,
the contrast will be startling. Five per cent. with
us is a high dividend; 4 quite a respectable re-
turn, while the average percentage is about 31, or
as nearly as possible that of Consols for the last
eight years. Every country is ahead of us in
these statistics. The average receipts of original
shareholders in Franca, not merely on thlifC4 we
have quoted, but throughout the empire, were by
the last returns over 61. In Belgium they were
nearly 52 ; in the States of the Germanic Confe-
deration much about the same. Austria and Prussia
showed still better management, for the former
country produced 64 and the latter almost 74. A
good deal of this difference is attributable, of
course, to the different habits of the several coun-
tries. We quite understand that Englishmen
would not be content either with the speed or the
accommodation provided by Continental managers,
and when we read that the working c.xpenses on
a German line average about £B9B a miles: while
those of an English:line with coke 40 per c... 7",
cheaper exceed £1,500, we know to some extent
how the contrast has arisen. The real truth of the
case, however, lies deeper still.
What renders English lines comparatively nnee-
munerative is the unnatural magnitude of their
canital accounts. The receipts would suffice to pro-
vide
i a magnificent rate of interest on all the capital
legitimately expended ; that is to say, on all the
money fairly consumed in the construction and
establishment of the line. Unhappily, this is little
more than half the total. Interest has to be found
out of the traffic returns on a sum of about
£300,000,000, whereas less than £160,000,000 of
that amount represents original capital, or money
originally raised upon ordinary shares for the
accomplishment of the undertaking. In point of
fact, that £160,000,000 expresses the amount of
money which railways were expected to cost
when nothing beyond the natural charges were
taken into the account. That is the extent of
capital for I:sl,:ich interest would be demanded if
nothing had been sqi:andered in litiga.thionth
, c om-
de.
petition. and strife. It is eSsy
to e
films
inanage
eu,
ductiou. If things had W,llB -
.
yanies would
the capital accounts of railway el- -e, and the
p
have been about half what they a- F. of the
dividends just about double. Fifty
pert cene'un.
ive the
aggregate investment is unproductive,
remainder has to yield interest
'
I
Railway finance very touch resembles Imperial
for the whom
Just like that
finance, and Mr. Gladstone's work is
of a railway manager. He wants tn economise, and
sets to work with his budget, bin' the old scores
created by old extravagatce are so heavy, the dead-
weight so enormous, and the margin for parings
comparatively so narrow that the task is a desperate