The combined result of (1) a vast increase in industrial production; (2)
the decline in river, canal and road transport; and (3) the various
conditions which checked competition on and between the railways was to
increase greatly the need for transportation facilities, and to make
traders and the public in general more and more dependent on the one means
of consignment and locomotion thus so rapidly becoming paramount. Coupled
with the many technical details which, as pioneers of the railway system,
the English companies had to work out for themselves, and, also, with the
questions arising as to the future relations between the railways and the
State, there were the further problems as to (a) the means to be adopted to
ensure that the rates and charges were reasonable, and not likely to become
unjust or oppressive, and (b) the bases on which the rates and charges
should themselves be fixed in order to secure due regard for the public
interests, to guarantee the operation of the railways on commercial lines,
and to ensure for the railway investors a reasonable return on their
investments.
The earliest railway rates of all were simply a toll (as on a turnpike
road) at the rate of so much per mile, or so much per ton per mile, for the
use of the rails, with an extra charge if the railway owners supplied the
waggons. This was the practice in vogue down to the Surrey Rail-way period,
the tolls for such use of road being fixed by Parliament because of the
railway lines being a monopoly.
The next development came when the Stockton and Darlington Railway Company
obtained powers to supply haulage by steam power or steam-engine, and were
authorised by Parliament to charge a "locomotive toll," in addition to the
road toll, when the trader made use of the company's engines.
There was a further development when the railway {336}companies undertook
the functions of carriers, provided waggons, carriages and staff, and were
authorised to make a charge for the "conveyance" of goods.
Parliament did not, at first, specify the amounts of the locomotive and
conveyance tolls, but simply required that they should be "reasonable," the
expectation at that time being that these tolls would be kept to reasonable
limits by the competition of the outside carriers. When it was found that
the outside carriers would not run their own locomotives on the railway,
and that the railways would do their own carrying, the amounts which could
be levied as locomotive and conveyance tolls were specified in the special
Acts of the companies concerned.
At one time, therefore, the railway companies were authorised by their Acts
to impose three separate charges, (1) road tolls, (2) locomotive tolls, and
(3) conveyance tolls; but in 1845 a "maximum rates clause" was introduced
which grouped these different tolls into a total charge something less than
the aggregate of the three.
In proportion as the railway companies themselves performed the duties of
carriers, instead of leaving this branch of the transport business to the
outside carrying firms, it became necessary for them to provide goods
depôts and warehouses, and to have a staff available for a variety of
services--loading and unloading, covering and uncovering, etc.--which were
necessary in the handling of the traffic. The companies then claimed that
for these "station terminals" and "terminal services" they were entitled to
make charges in addition to the maximum rates, whereas it was contended on
the part of the traders that these services were included in the maximum
rates, and that the companies had no right to charge for them separately.
After prolonged controversy and much litigation, the dispute was eventually
decided in favour of the companies; but Parliament required them to
distinguish the charges for conveyance, terminals, and collection and
delivery, and, finally, by the Charges Acts of 1891 and 1892, fixed the
amounts of the maximum station and service terminals that each company
might demand.
In the meantime much trouble had also arisen as the result of the haphazard
fashion in which the railways of the country had been called into being.
{337}The original classification of goods for transport was of the most
primitive kind. In the canal companies Acts the authorised tolls and
charges were generally specified in respect to only about a dozen different
articles. The early railway Acts followed the canal precedent in so far
that each of them contained a classification of the goods expected to go by
rail, the main difference being that the list given in the railway Acts
generally comprised from forty to sixty articles, divided into five or six
groups.
As the railways extended, and began to deal with the great bulk of the
commerce of the country, these original lists were found to be hopelessly
crude and inadequate, and one of the duties undertaken by the Railway
Clearing House, first set up in 1847 and incorporated by an Act of 1850,
was the preparation of what became known as the Clearing House
classification--a work required in the interests equally of the railways
and of the traders. At the outset the Clearing House classification
comprised about 300 articles. By 1852 the number had increased to 700, and
in 1864 it had further expanded to 1300.
The Royal Commission of 1865 recommended that the new and improved
classification thus compiled and put into operation by the companies
themselves should be the basis of the classification imposed by the special
railway Acts. The Committee pointed out that the rates authorised by
Parliament were no longer necessarily an indication of the charges actually
made in practice since these charges depended, not on the classifications
in the companies' Acts, but on the Clearing House classification, by reason
of which they were often lower than the statutory maxima. The Committee
regarded the classification of the private Acts as defective and
inharmonious, and they advised that the Clearing House classification
should be enacted by some general Act which might be adopted in the private
Acts by reference. The Joint Select Committee of 1872 also advised the
adoption of a uniform classification; but it was not until the passing of
the Railway and Canal Traffic Act of 1888 that the recommendation was
carried out.
This Act of 1888 was, in part, the outcome of reasonable dissatisfaction
among the traders.
In the absence, from the outset, of any real and effective system for the
organisation of railways in accordance with {338}well-defined general
principles, based on the needs of the country as a whole, great uncertainty
existed as to the rates and charges to be paid. There were then no fewer
than 900 Acts of Parliament which dealt with the charging powers of 976
past or present railway companies, while the only uniform classification
was that of the Railway Clearing House, which had almost entirely
superseded the primitive classification in the railway companies' Acts but
had not yet received legal sanction.
A recommendation to the effect "that one uniform classification be adopted
over the whole railway system" had been made by a House of Commons Select
Committee in 1882. They considered that the adoption of this course was
necessary in view of the imperfection and want of uniformity in the special
Act classifications and charges, in which they had failed to discover any
general principle. "In some cases," they said, "reference must be had to
more than fifty Acts to determine the various rates the company is
authorised to charge."
The position in regard to a new and uniform classification thus so
persistently recommended was, however, complicated by the fact that the
adoption thereof would involve new maximum rates, since the rates charged
for the commodities carried naturally depended on the particular "class" to
which those commodities had been allotted. Hence when, by the Railway and
Canal Traffic Act of 1888, provision was at last made for a revised and
uniform classification, each railway company was further required to submit
to the Board of Trade, within a period of six months, revised schedules of
maximum rates, with a view to these ultimately--after approval by
Parliament--taking the place of the schedules in the existing special Acts.
The new scales were, also, to include fixed maxima for "station terminals"
and "service terminals," the controversy in regard to which, as already
spoken of, was thus to be definitely settled.
The railway companies complied with these requirements, the revised
classification and schedules of maximum rates being sent in by March, 1889,
to the Board of Trade, which appointed two special Commissioners, Lord
Balfour of Burleigh and Mr (afterwards Sir) Courtenay Boyle, to hold an
inquiry into them on its behalf. The traders were invited to {339}send in
any criticisms they might wish to offer to the companies' proposals, and by
June 3rd no fewer than 4000 objections had been received from over 1500
individuals or trading associations.
By this time the formidable nature of the work that had been undertaken
began to be more fully appreciated. Not only were there the 900 Railway
Acts dealing with rates and charges, but there were about 18,000 railway
stations and some 40,000 pairs of stations between which business was
actually transacted in regard to one or more of the 2500 articles that, by
this time, were included in the Clearing House classification. As for the
rates in force, we have the statement of Sir Henry Oakley that on the Great
Northern Railway alone they numbered 13,000,000, while Sir Richard Moon
estimated that on the London and North-Western Railway the total at this
period was no fewer than 20,000,000.
The task thus imposed by Parliament on the Board of Trade in the revision
of rates whose total number seemed almost as countless as the stars
themselves was, indeed, of stupendous magnitude, apart altogether from the
very heavy labours devolving upon each individual company in the
preparation of schedules for its own particular lines. The task itself was,
however, rendered still more difficult by the fact that, as pointed out by
Mr Temple Franks--[53]
"No principles of revision had been laid down for guidance. The
Commissioners were not told to regard either the existing statutory maxima
or the actual rates then charged. Amendments to this effect had been
rejected in Parliament. The Commissioners, therefore, held that the
Legislature contemplated a departure from existing maxima, and that it is
equitable 'to make a reduction in their present powers and fix rates based
to a great extent on existing rates, but with a reasonable margin of profit
for possible changes of circumstances injuriously affecting the cost of or
return from the carriage of merchandise by railway.' In determining,
however, the principles upon which the future maxima were to be governed,
they refused to accept the proposition that they shall cover _all_ existing
rates and non-competitive charges."
{340}With regard to a uniform classification, the Commissioners recommended
the adoption, with certain slight changes, of the existing Clearing House
classification.
There is no need to record here, in detail, the exhaustive nature of the
inquiries, protests, rejoinders, discussions and controversies to which the
preparation of the new schedules led. Suffice it to say that these and the
revised classification were eventually embodied in a series of Railway
Rates and Charges Orders Confirmation Acts which, as applying to the
different companies, either individually or in groups, were passed in the
Sessions of 1891 and 1892, and came into operation on January 1, 1893.
Under these Acts the scales of charges are divided into six parts, viz.:
(1) goods and minerals, (2) animals, (3) carriages, (4) exceptional, (5)
perishable commodities by passenger train, and (6) small parcels by
merchandise train. Each rate is made up of two parts--conveyance and
terminals. The conveyance scales for all companies are as near alike as
circumstances will allow, and the maximum terminals (station terminal at
each end and service terminals in respect to loading, unloading, covering
and uncovering) are common to all the Confirmation Acts.
Sir Henry Oakley, who was at this time acting as secretary of the Railway
Companies' Association, declared concerning the new conditions thus brought
about in regard to the bases of railway rates and charges that "practically
they amounted to a revolution." The maximum powers were reduced almost
universally; the classifications of the companies' own Acts were abolished,
and a new and uniform one substituted; various new scales were introduced;
the obligation was now for the first time thrown upon the companies of
carrying perishables by passenger train; and a new system of calculating
rates was established. "It was not," said Sir Henry, "so much per mile for
any distance beyond six miles, as it was in the original Acts, but for the
first twenty miles a certain rate, for the next thirty miles a certain less
rate, and for the next fifty miles a still further reduction, the effect
being that, by that mode of calculating, the longer the distance the goods
were carried the less the average rate per mile that was to be charged."
Within a very short time, however, of the new rates coming into force,
there were louder and more vehement protests {341}than ever on the part of
the traders. The advantages of a uniform classification were fully
realised, and the traders naturally did not object to the fact that (as
stated in evidence by Sir Henry Oakley, in 1893), from thirty to forty per
cent of the existing rates had been lowered. But they did object most
strongly when they found that certain of the rates had been increased.
It was explained by some of the railway companies that, owing to the vast
number of the rates involved, and to the short time between the passing of
their Rates and Charges Orders Confirmation Act and the 1st of January,
1893, when such Act came in force (the period in question being in some
instances not more than about four months), it had been impossible for them
to complete the revision of their rate-books by the date mentioned. The
class rates were ready, and what had happened was that these had been
temporarily substituted for the special rates when time had not allowed of
the latter being duly revised.
On the other hand it was alleged against the companies that, apart from any
question of shortness of time for their revisions, they had sought to adopt
a policy of recoupment, specially low non-competitive rates having been
raised to the new maxima with a view to counterbalancing the decreases.
While the plea of the companies in respect to shortness of time was
abundantly warranted, the counter-allegation of the traders would appear to
have been not without foundation, in view of the fact that the setting of
increases against the decreases was defended by the companies on the ground
that, being corporations based and operated on commercial principles, they
were bound to see that their revenue did not suffer, while, it was further
pleaded, they were still charging no more than the rates which, having been
expressly sanctioned by Parliament, were, presumably, reasonable. They gave
the assurance, however, that the rates were still undergoing revision, and
that the increases made were not necessarily final. They further undertook
that no increases should be made which would interfere with trade or
agriculture, or diminish traffic, and that, unless under exceptional
circumstances, there should be no increases at all which exceeded by five
per cent the rates in force in 1892.
{342}The undertaking thus given failed to satisfy the Select Committee
appointed in 1893 to inquire into these further grievances. The Committee,
in their report, expressed the opinion that the course taken by the
companies had been "mainly actuated by their determination to recoup
themselves to the fullest extent by raising the rates of articles where the
maximum rates were above the actual rates." They were of opinion that the
rates not reduced by the new maxima should have been left untouched; and
they affirmed that "the margin between the old actual rates and the present
Parliamentary maxima was not given by Parliament in order that immediate
advantage should be taken of it, or that the policy of recoupment should be
carried on, but only to meet certain contingencies, such as rises in prices
and wages," etc. They also recommended that further steps should be taken
to protect traders from any unreasonable raising of rates within the
maxima, the Railway and Canal Commission being empowered to deal with such
questions as they arose.
The outcome of all this controversy was the passing by Parliament, in the
following Session, of the Railway and Canal Traffic Act, 1894, which
introduced an entirely new principle in railway operation.
Turnpike trustees had always had full power to reduce and subsequently to
advance their tolls, at their own discretion, provided they never sought to
exceed the maxima imposed under their special Acts; and down to this time
it had been assumed that railway companies had similar powers in regard to
maxima which Parliament had already expressly sanctioned in the Act or Acts
of each individual company. There was--and still is--no question (except in
cases of "undue preference" or "through rates") as to the right of a
company to _reduce_ a rate, or to transfer a commodity to a lower class,
thus effecting the same object; and there was, down to 1894, equally
thought to be no question as to their right to increase a rate within the
same limitations as those applying to turnpike trustees.
What the Act of 1894 did was to restrict the powers of railway companies to
increase their rates even within the range of their statutory maxima. It
enacted that in the event of complaints being made of any increase of
rates, direct or indirect, since December, 1892 (and under the Act of 1888
{343}a railway company had already been required to give public notice of
any increase in tolls, rates or charges it proposed to make), "it shall lie
on the railway company to prove that the increase is reasonable"; and for
this purpose it is not to be "sufficient to show that the charge is within
any limit fixed by an Act of Parliament or by any Provisional Order
confirmed by Act of Parliament." Complaint is first to be made to the Board
of Trade, and, if agreement between the trader and the railway company
should not follow thereon, the trader has the right of appeal to the
Railway Commissioners, to whom jurisdiction to hear and determine such
complaint is given. "So that," as Butterworth remarks in his "Maximum
Railway Rates," "the legislation of 1888-1894 presents this remarkable
result--that Parliament in 1892, after probably the most protracted inquiry
ever held in connection with proposed legislation, decided that certain
amounts were to be the charges which railway companies should for the
future be entitled to make, and in 1894 apparently accepted the suggestion
that many of the charges, sanctioned after so much deliberation, were
unreasonable, and enacted that to entitle a company to demand them it
should not be sufficient to show" that the charge was within the limit
which Parliament itself had previously fixed.
Whether traders have really gained any balance of advantage from this
further outcome of legislative policy in the assumed protection of their
interests, as against the railway companies, is open to question. On the
one hand they have a guarantee against increases that offer even the
slightest suggestion of unreasonableness. On the other hand the Act has
destroyed the element of elasticity in rate-making, inasmuch as railway
managers must needs show extreme caution in granting reduced or
"experimental" rates--in the interests of growing industries--when, if the
experiment should fail, and the expected traffic not be forthcoming, the
company must go through the formality of advertising the "increase"
involved in putting the rate back to its former level, and must, also, run
the risk of having to "justify" such increase before the Board of Trade or
the Railway and Canal Commission. "I know of my own knowledge and my own
experience," Sir George Gibb once told a Departmental Committee of the
Board of Trade, "that the effect of these sections has been to {344}prevent
many reductions of rates that would have been tried experimentally."
When we pass on to consider the principles on which railway rates and
charges are based we are met with so many complexities in the solution of
transport problems, and with such direct conflict of interests on the part
of different groups of traders, that we can in no way be surprised at the
controversies and the grievances, real or imaginary, to which the subject
has given rise from time to time.
The original idea that railway rates and charges should be fixed on a
mileage basis, on the same principle as tolls on turnpike roads and canals,
was soon found to be impracticable, and successive Parliamentary Committees
have demonstrated its futility; though its advocacy, in one form or
another, has not even yet been discarded by those who think that railway
rates for any given commodity should be so much per ton per mile for all
traders alike, irrespective of distance and all other considerations.
One effect of such a principle of rate-fixing as this would have been to
exclude the long-distance trader from any particular market, and to confer
an undue advantage on the trader in the immediate neighbourhood, or at a
short distance therefrom, who would thus have gained a monopoly of the
market, to the disadvantage of other traders and of the local community.
Nor would such a system of rate-making have answered for the railway
companies themselves, since the discouragement of long-distance traffic
would have restricted the area of business, and limited their sources of
revenue.
Another once much-favoured theory is that the railways should charge so
much for cost of service, plus a reasonable profit for themselves.
Here, in the first place, there is the impossibility of deciding what is
the cost of the service rendered in regard to each commodity and each
consignment thereof that is carried. No basis exists on which the most
expert of railway men could decide the respective costs of transport for
each and every article in a train-load of miscellaneous goods, nor could
any one apportion the exact amount that each should bear in regard to
interest on capital outlay and other standing charges which must needs be
covered as well as the proportionate cost of actual operation.
{345}Then we have the fact that, even if these figures could be arrived at,
many of the commodities carried would be unable to pay the rates fixed
thereon. This would especially apply to coal, iron-stone, manure and other
things either of low value or of considerable weight or bulk. Whatever may
be the real cost of carrying them, commodities of this kind cannot pay more
than a certain rate. If that rate is exceeded either they will be sent in
proportionately smaller quantities or they will not be sent by rail at all.
We arrive, in this way, by the logic of actual facts, at the fundamental
principle, adopted by railway companies, of charging "what the traffic will
bear"; and by this is meant "charging no more than," rather than "charging
as much as," the traffic will bear. Findlay, in his book on "The Working
and Management of an English Railway" (fourth edition, 1891) says of the
practice based on this principle:--
"The rates are governed by the nature and extent of the traffic, the
pressure of competition, either by water, by a rival route, or by other
land carriage; but, above all, the companies have regard to the commercial
value of the commodity, and the rate it will bear, so as to admit of its
being produced and sold in a competing market with a fair margin of profit.
The companies each do their best to meet the circumstances of the trade, to
develop the resources of their own particular district, and to encourage
the competition of markets, primarily, no doubt, in their own interest, but
nevertheless greatly to the advantage of the community."
The application of the principle is worked out by the division into various
classes of all minerals and merchandise carried on the railway. The classes
are known respectively as A, B, C, 1, 2, 3, 4, 5, the rates charged being
lowest for commodities in Class A and highest for those in Class 5. The
type of article included in each class may be indicated by the following
examples:--
Class A (applicable to consignments of four tons and upwards).--Coal, coke,
gravel, iron-stone, limestone, stable manure, sand.
Class B (applicable to consignments of four tons and upwards).--Bricks,
concrete, various articles of iron and steel, granite (in blocks), lime (in
bulk), salt (in bulk), common slates.
{346}Class C.--Parsnips, pitwood (for mining purposes), potatoes (in bulk
or in sacks), salt (packed), soda, straw (hydraulic or steam-packed), waste
paper (for paper-making).
Class 1.--Cardboard, cotton (unmanufactured), onions, printing paper,
finished wrought iron in shafts (for driving mill wheels), soap, sugar (in
bags, cases or sacks), tallow, vinegar (in casks).
Class 2.--Bacons and hams (cured and packed), celery, coffee, copper,
earthenware (in casks or crates), crucibles (plumbago or clay), oranges,
ropes, raw wool or yarn.
Class 3.--Baths, calicoes, carpeting, china (in hampers), combs, cotton and
linen goods (in bales, boxes, etc.), cutlery, groceries, hardware, lead
pencils, tea, wheelbarrows.
Class 4.--Light drapery (various), footballs, garden arches, grates, ovens
or stoves, haberdashery, hats (soft felt), lamps, umbrellas.
Class 5.--Amber, engravings, feathers, cut flowers, hothouse fruit, furs,
dead horses, lace, looking-glasses and mirrors, musical instruments,
picture frames, silk.
These examples indicate the gradual rise in value in the articles included
in the several classes, though, assuming that the traffic will bear the
rate, other considerations as well as value will apply, among these being
liability to damage during transit, weight in proportion to bulk, and
nature of packing or cost of handling.
It is further to be remembered that although a good deal of raw material is
carried in the lowest classes at rates which might work out at less than
"cost" price, when every item in respect to "cost of service" and interest
on capital expenditure had been allowed for, the commodities in question
may reappear in various successive forms as part-manufactured or,
eventually, as manufactured, articles, paying a successively higher rate,
in accordance with their progressively greater value, on the occasion of
each further transportation. Even when these results do not follow, the
commodities carried at these low rates may help to develop the resources,
or to expand the population, of a particular district, and thus serve to
create traffic in other directions.
While, also, the rates for the low-value articles may not cover every item
in the so-called cost of service, they do contribute to the revenue an
amount which might otherwise {347}have to be made good by the fixing of
higher rates on goods in other classes. Traders dealing in commodities of
the latter type do not themselves lose by the fact that minerals, raw
materials, or other things are carried at rates which, although
exceptionally low, are the most they can be expected to pay. No injustice
is done to them because the other classes of traders concerned get lower
rates than they do themselves. They may even gain--directly, because they
are saved from having to cover a larger proportion of the total railway
expenditure; and indirectly, because the help given to those other lines of
business may either bring trade to them or else keep down the cost of
production in regard to manufactured articles they deal in or which they
themselves require.
The principle of charging "what the traffic will bear" does more than
govern the rates as applying to visible traffic. It embraces the further
principle of what Hadley, in his "Railroad Transportation," calls "the
system of making rates to develop business."
An immediate result of its application, not alone in England but in various
Continental countries, was to bring about a substantial reduction in rates,
so that, as Hadley further says, between 1850 and 1880 railway rates were
reduced, on an average, to about one-half of their former figures. It may
be assumed, also, that these former figures were themselves a substantial
reduction on the rates once charged under the toll system in force among
the "get-rich-quick" canal companies.
There was thus a gain to the traders as regards both an increase in
facilities and a reduction in the cost at which those facilities could be
obtained, as compared with previous conditions. The principle in question
necessarily involved discrimination between trades; but it became one of
the objects of the Legislature to prevent discrimination between individual
traders in the same line of business as carried on in the same town or
centre.
The general position has been further influenced by the existence of an
ever-active sea competition, which is said to affect probably three-fifths
of the railway stations in the United Kingdom. The rates for traffic
between Newcastle and London, or any other two ports, will necessarily be
influenced, if not controlled, by the possibility of the commodities going
by a coasting vessel if the railway company {348}should try to get more
than, in these particular circumstances, such traffic will bear. The amount
of the railway rate in such a case as this will, in fact, be determined far
more by the element of sea competition than by any question as to either
presumptive cost of service or actual mileage.
It may well happen that between two other points, in regard to which there
is no sea competition, the rates are higher than between two where there is
sea competition, although the distance is the same. Here we have the
elements of one of those "anomalies" which have often been urged as a
reason for equal mileage rates. The inequality in the rates is, however,
directly due to the inequality in the conditions. It is not a case of
making the no-sea-competition places pay a rate in itself unreasonable; it
is simply a case of charging the sea-competition places no more than they
would be likely to pay. There may be an apparent inconsistency; but an
increase in the rates where the sea competition exists would not
necessarily be of advantage to the trader in the district where there is no
such competition, though it might lead to the traffic going by sea, and
involve the railway company in a loss of revenue which would not improve
their position in giving the best possible terms to the inland trader. Nor
could any claim by the latter to be put on the same footing as the trader
on the coast, who has the alternative of sea-transport open to him,
necessarily be made good. Discrimination of places, in addition to the
discrimination of trades, there certainly may be; but it is a
discrimination due essentially to geography and economic laws.
Other apparent anomalies arise from the fact that where two or more railway
companies have lines running to the same destination, the rates charged by
each and all of them are, by arrangement between the companies concerned,
generally governed by the shortest distance. Here, again, the idea of equal
mileage rates is found impracticable. If the rates charged by each of the
companies were arbitrarily fixed at so much per ton per mile, the line with
the shortest route would naturally get all the traffic. When all charge the
same between the same points all of them benefit, and the traders have the
advantage of several routes instead of only one; though there is still the
"anomaly" that the trader whose consignment is carried twenty miles, and
the trader whose {349}goods are conveyed thirty miles or more to the same
destination both pay the same rate.
How the general principle of a sliding scale, under which the charge per
ton per mile decreases with distance over twenty miles, works out in
practice may be shown by taking the case of merchandise in Class 5, the
rate for which would be 4.30d. per ton per mile for a distance of up to
twenty miles. For the next thirty miles the rate would be 3.70d. per ton
per mile, for the next fifty miles 3.25d., and for the remainder of the
distance 2.50d. If, however, the consignment travels over the lines of two
or more companies on a through rate, the application of the scale begins
over again in respect to the territory of each company concerned. The
greatest degree of relative advantage is thus gained by the trader whose
consignments travel throughout on the lines of one and the same company.
In any case, however, the effect of the principle is that traders in, say,
Cornwall or Scotland are enabled to compete far more effectively on the
London market with other traders who are located much nearer to London and
thus pay less for rail transport, yet, it may be, do not have the same
advantages in respect to economical production as the trader at the greater
distance. The "tapering" railway rate--in addition to giving the companies
a greater volume of long-distance traffic, and bringing greater prosperity
to the long-distance places--thus helps to establish equality in the
general conditions in regard to a particular market, whereas the equal
mileage rate would keep the distant trader to markets within a
circumscribed area, and shut him out from others at which he might
otherwise hope to get a far better sale.
In the United States the effect of this "tapering" rate, when applied to
large volumes of traffic carried for distances of 1000 or 2000 miles or
even more, is to give a very low average rate per ton per mile, and
especially so when such average is worked out for the whole of the goods
and mineral traffic in the country. The United States average is, in fact,
for these reasons, much lower than the corresponding average for this
country, where both the average haul and the average weight per consignment
are considerably less. Then, also, as the charges for terminals remain the
same, whatever the length of haul, they make a material difference in the
rate per ton per mile for a haul of five, ten or twenty miles while
{350}assuming infinitesimal proportions per ton per mile when spread over a
haul of a thousand miles.
There is thus no real basis for the comparison formerly so often made
between average cost of transport per ton per mile in the United States and
the United Kingdom respectively. The only fair method of comparison is to
discard averages altogether, and contrast charges for actual consignments
of equal weight carried equal distances in the two countries; and
comparisons made on this basis will be found to favour the British lines
rather than the American.
In some instances group rates are in operation for a series of producing
centres or for a series of ports, the rates being common to all the places
or ports included in the group. This arrangement is of advantage to the
general body of the traders concerned, since it puts them all on a footing
of equality, without reference to differences in distance; and it is, also,
of benefit to the railway companies since it simplifies the clerical work
and helps further to avoid unremunerative competition.
Another important feature in connection with railway rates is the
distinction between "class" rates, which represent the authorised maxima
given in the railway companies' scales for the various classes already
mentioned, and "special" or "exceptional" rates, in which the companies
concerned have made reductions below their maximum powers, whether for the
encouragement of traffic or because of such reductions being warranted by
the volume or other conditions of the traffic already carried. In "The
Fixing of Rates and Fares," by H. Marriott (1910), it is stated that
"probably about seventy per cent of the traffic between stations in the
North of England is conveyed at 'exceptional rates,' much below the
statutory authority."
In my book on "Railways and their Rates" I have already given, as follows,
the general principles on which these special or exceptional rates are
fixed:--
(a) Volume and regularity of traffic between the points concerned.
(b) Weight per truck or by train which can be maintained by such regular
traffic.
(c) General earning power of the traffic.
(d) Liability or non-liability to damage.
{351}(e) Competition, direct or indirect, by water, by road or by other
means.
(f) Special requirements of shipping traffic to or from ports.
(g) The creation of traffic by enabling new or increased business to be
done.
(h) A general consideration of what the traffic will bear.
The following examples illustrate the actual difference between the class
rates and the special rates at which the traffic is actually carried:--
CLASS RATE. SPECIAL RATE.
MILES. COMMODITY. per ton. per ton.
s. d. s. d.
17 Soap 8 9 (a) 7 11 (a)
107 " 21 9 (a) 17 6 (a)
154 " 28 2 (a) 22 9 (a)
46 Undressed leather 17 6 (a) 15 0 (a)
179 Cotton and linen goods 45 7 (a) 40 0 (a)
54 Common window glass 21 9 (a) 15 10 (a)
207 " " " 43 4 (a) 30 5 (a)
20 Iron in Class C 5 3 (b)(c) 3 8 (b)(d)
51 Grain 9 5 (b)(c) 7 6 (b)(d)
150 Common bricks 11 0 (b)(d) 10 5 (b)(d)
Notes: (a) Collection and delivery.
(b) Station to station.
(c) 2-ton lots.
(d) 4-ton lots.
Yet another characteristic of English railway rates is their division into
"company's risk" rates and "owner's risk" rates, the latter being a lower
scale on which consignments are carried provided the trader signs either a
general indemnity for the whole of his traffic or a separate owner's risk
consignment note on the occasion of each despatch relieving the railway
from "all liability for loss, damage, misdelivery, delay or detention,
except upon proof that such loss, damage, misdelivery, delay or detention
arose from wilful misconduct on the part of the company's servants."
The difficulty of proving such "wilful misconduct" in case of damage or
loss has long been a grievance with traders consigning under "owner's risk"
rates, and vigorous efforts have been made by them, or on their behalf,
from time to time to obtain a modification of these conditions.
The railway point of view in regard to this vexed question was thus
expressed by Mr F. Potter, in an address on "The {352}Government in
Relation to the Railways of the Country," given to the Great Western
Railway (London) Lecture and Debating Society on February 11, 1909:--
"Traders are apt to conveniently overlook the fact that owner's risk rates
did not precede the ordinary rates, but that they have depended from the
latter, and proposals have actually been made that the order of things
should be reversed, and the owner's risk rates made the base rates, the
company's risk rates being arrived at by the addition of some percentage.
Traders well know the value of the insurance which the difference between
the two classes of rates represents to them, and, indeed, base their
practice in making use of either rate upon this knowledge. If the trader is
prepared to be his own insurer, that is, when there is a sufficiently wide
margin between the two rates, he takes the owner's risk rate; but if he
considers his goods are too valuable for him to accept the risk himself, he
makes the company do so by sending his freight at the ordinary rates."
In the controversies which have arisen on this question of owner's risk
frequent reference has been made to the fact that in Germany there is only
one kind of rate, and that under it the State railways do, nominally,
assume the risk. I have, however, already shown in my pamphlets on "German
_versus_ British Railways" and "German Railways and Traders" that unless
the consignments forwarded on the German State railways are packed so
securely that it is practically impossible for them to come to any harm,
they are accepted by the railway officials only after the trader has signed
a form of indemnity declaring that the goods are either "unpacked" or
"insufficiently packed," thus absolving the State railways of the
responsibility they are supposed to accept.
Complaints respecting "preferential rates" have been an especially fertile
source of controversy and litigation. The phrase as here used is somewhat
misleading. The real ground of complaint is against, not simply
"preference," but "_undue_ preference."
If a lower rate is given for a 2-ton or a 5-ton than for a 2-cwt. or a
5-cwt. consignment, the trader in the former case gets a distinct advantage
over the trader in the latter case, just in the same way as the wholesale
man buys a large quantity of goods at a lower price than that asked for
from {353}the purchaser of only a very small quantity. Here, in each
instance, we have "preference" strictly in accord with commercial
principles.
The question really at issue turns upon the consideration whether there is
undue or unfair preference. It is thus dealt with in a proviso to
sub-section 2, section 27 of the Railway and Canal Traffic Act of 1888:--
"Provided that no railway company shall make, nor shall the Court, or the
Commissioners, sanction any difference in the tolls, rates or charges made
for, or any difference in the treatment of home and foreign merchandise, in
respect of the same or similar circumstances."
The position is thus controlled by the words "same or similar
circumstances." In what is known as the "Southampton case," decided by the
Railway and Canal Commission in 1895, the fact that foreign produce was
being carried at lower rates by the London and South-Western Railway
Company from Southampton to London than were being charged for English
produce was not disputed; but it was successfully argued (1) that lower
rates might reasonably be granted for train-loads of produce capable of
being loaded into the waggons at the docks and carried through, under the
best transport conditions, direct to London than for small consignments,
picked up at wayside stations, and loaded and carried under far less
favourable traffic conditions; (2) that there was no real detriment to
local producers, since the towns concerned were importing more than they
were sending away; and (3) that in no respect were the circumstances "the
same or similar." There was, said Sir Frederick Peel, one of the
Commissioners, "no concurrence between the two classes of traffic, and the
greater economy of transport in the dock traffic justified the lower rate."
The principle here involved disposes of, probably, most of the complaints
which have been made from time to time on the subject of undue preference;
but as these complaints were especially rife in 1904, a Departmental
Committee, presided over by Lord Jersey, was appointed by the Board of
Trade to inquire whether or not the railway companies were according
preferential treatment to foreign and colonial farm, dairy and
market-garden produce from ports to urban centres as compared with home
produce. The Committee declared {354}in their report "that the evidence
tendered has failed to show that the railway companies are giving undue
preferential treatment to foreign and colonial produce as compared with
home produce contrary to the intention and effect of existing legislation."
They found that some of the traders who complained had compared rates which
did not include terminal services with rates that did; had quite wrongly
divided what were, in effect, "through" rates, first subtracting the full
charge of the shipping company and then assuming that the remainder could
be compared with the rate from the first; or had omitted to take into
account differences in regard to bulk of consignments, packing, etc.
In effect, no British railway rate may give a preference to foreign as
distinct from British produce so far as quantities, conditions and
circumstances are the same. The rates are to be available for like
consignments whatever the source of their origin. Where the home producer
has been unable to provide the same quantities, under the same conditions
and circumstances as the foreigner, he has equally been unable to avail
himself of a rate open to all the world. He has had the disadvantage of the
retail trader as compared with the wholesale trader. The principle involved
is practically the same as that in operation on Continental State railways,
where the traders who can provide the biggest loads get the advantage of
the most favourable rates. On the Belgian State railways, for instance,
there are special rates for 50, for 100 and even for 300-ton consignments
which can obviously be taken advantage of by only a limited number of
traders. But while the retail man cannot expect to get the same terms as
the wholesale man, there is no adequate reason why the wholesale man should
be kept to the same level as the retail man, and be refused the lower rates
for his consignments to which he is entitled on account of their greater
bulk or better loading. The question is certainly complicated by the fact
that the wholesale man here in question is generally a foreigner; but the
railway companies could not be required to discriminate against him, and to
penalise him on account of his nationality. The matters at issue must needs
be looked at from the point of view of a business proposition rather than
from that of expecting the railway companies to usurp the functions of the
State in carrying out a policy of Protection.
{355}Of late years far less has been heard, in the agricultural world, at
least, of these allegations of undue preference. The whole position has
been changed through the praiseworthy efforts of the Agricultural
Organisation Society in spreading among the agricultural community a
practical appreciation of the advantages of combination, as adopted by
their foreign competitors, included in such advantages being the lower
rates which the railways already offer for grouped or other large
consignments. The excellent work carried on by the society is calculated to
confer, in many different directions, much more benefit on market
gardeners, dairy farmers and agriculturists in general than would be gained
by them simply from seeking to persuade, or even to force, the railway
companies to carry at wholly unremunerative rates the small consignments of
non-associated producers, forwarded under the least favourable conditions
in respect to economical transport.
As regards the machinery provided by Parliament for dealing with traders'
grievances, there is, in the first place, the Railway and Canal Commission,
which, taking the place of the earlier Railway Commissioners, was made a
permanent body under the Act of 1888. The Court consists of two
Commissioners appointed by the Board of Trade, and three _ex-officio_
members, chosen from the judges of the High Court, and nominated by the
Lord Chancellor, the Lord President of the Court of Session and the Lord
Chancellor of Ireland for England, Scotland and Ireland respectively;
though in practice only one of the three takes part in the proceedings in
connection with any case brought before the Court. The jurisdiction of the
Commissioners includes powers to enforce obligations under special Acts,
and to deal with questions of traffic facilities, private sidings, undue
preference, through rates, etc.
Whether or not procedure before this body is too costly for other than
wealthy litigants to take advantage of is a question which need not be
discussed here; but traders have the further advantage of what is known as
the Conciliation Clause of the Act of 1888, which provides that "(1)
Whenever any person receiving, or sending, or desiring to send goods by any
railway is of opinion that the railway company is charging him an unfair or
an unreasonable rate of charge, or is in any other respect treating him in
an oppressive or {356}unreasonable manner, such person may complain to the
Board of Trade. (2) The Board of Trade, if they think that there is
reasonable ground for complaint, may thereupon call upon the railway
company for an explanation, and endeavour to settle amicably the
differences between the complainant and the railway company." A resort to
this expedient by aggrieved parties involves the payment of no fees or
costs.
The eleventh report by the Board of Trade of their proceedings under the
Conciliation Clause shows that during 1908 and 1909 the number of
complaints made to them was 280--a total insignificant in comparison with
the many millions of separate transactions in which the traders and the
railway companies must have been concerned during the two years in
question. The 280 complaints are classified as follows: Rates unreasonable
or excessive in themselves, 39; undue preference, 65; rates unreasonably
increased, 22; classification, 30; delay in transit, 27; owner's risk, 17;
rebates, 23, through rates, 15; miscellaneous, 42. Settlement or partial
settlement was effected in 91 cases; in 62 the complaints were not
proceeded with; in 122 an amicable settlement could not be arrived at; and
in five the proceedings had not been completed. "In certain of the cases,"
the report further states, "in which an amicable settlement was not
reached, it seemed clear to the Board of Trade that the complainants had no
real ground for complaint."
Boyle and Waghorn are of opinion that in matters more or less personal to
the applicant, or of comparatively minor importance, the procedure under
this Conciliation Clause has saved much litigation; though when questions
of general principles are at issue the Board of Trade, as a rule, prefer to
remit the determination of them to the Railway Commission. They further
say: "The principal cause of the comparative absence of litigation lies in
the fact that a law of railway traffic is being gradually evolved,
reasonably considerate of the rights of both parties, and adapted to the
actual circumstances of the traffic. In the early days of railways this was
very far from being the case." ("The Law Relating to Railway and Canal
Traffic.")
Much of the adverse criticism of railway rates and charges which has been
indulged in of late years, without even any resort to an inexpensive
complaint to the Board of Trade, {357}has been due to comparisons with
railway conditions in other countries.
At one time the comparison specially favoured was between English and
American railway rates; and this was persisted in until it was conclusively
shown that there was, and could be, no basis of comparison between huge
consignments, carried long distances, on comparatively inexpensive lines,
and small average consignments, carried short distances, on the most costly
railway system in the world. The element of "the same or similar
circumstances" was obviously lacking.
Comparisons were then made with railway conditions in Continental
countries, and various tables of comparative rates were published from time
to time, in support of railway nationalisation theories or otherwise. But
many of these comparisons have been wholly untrustworthy because, once
more, they have not compared traffic carried under the same or similar
circumstances. Exceptional rates granted, say, by the Prussian Government
in the special interests of their commercial policy, but (1) applying to
large consignments sent to a port for shipment, the rates being
substantially higher when the commodities do not go further than the port,
(2) granted in competition with routes passing through adjoining countries,
and (3) being simply haulage rates, which include no additional services
whatever, have been compared with English "domestic" rates for smaller
quantities of traffic, or, it may be, with "paper" rates for traffic that
is practically non-existent, and, therefore, has not called for special
rates, while the English rates may also include a variety of supplementary
services by the railway company (loading, unloading, collection, delivery,
warehousing, etc.), which the Continental trader would either have to
perform himself or pay for as extras.
The comparisons may thus be wholly misleading; but, assuming that complete
equality of conditions could be assured, or allowed for, and assuming that
the Continental rates were then found to be lower than the really
corresponding English ones, it would still be necessary to remember that in
this country there have been, from the earliest period of railway
development, many circumstances and conditions, due to State policy or to
other causes, which have tended to swell {358}to abnormal proportions the
capital expenditure that the revenue based on rates and charges must needs
cover if any reasonable return at all is to be made to the investors. There
would, in fact, be no cause for surprise if rates and charges on British
railways could be proved to be higher than those in force on the Continent,
where the conditions attendant on railway construction and operation have
differed so materially from our own. The wonder is, rather, in view of all
that I have said as to the past history of our railway system, that British
railway rates and charges should, generally speaking, be as low as they
are.
{359}CHAPTER XXVI