DIFFERENTIAL RATES.
While shrinking from advocating equal mileage rates, many persons
take up an intermediate position. They object to rates being much
out of proportion to distance; they do so although the traffic may
not be carried over the same parts or sections of a railway. The
rates to which objection is taken are of several kinds:--Special
rates for export traffic; special rates for import traffic; transit
or through rates; special rates generally--special rates for long
distance as distinguished from short distance or intermediate
traffic.
Such differential rates exist--and the circumstance is not
unimportant--in all countries in which railways have been developed;
and it will be found that, here as elsewhere, they have been
adopted, not solely or even chiefly with a view to benefit railway
companies, but mainly to meet the not unreasonable demands of
traders and consumers.
The following are a few instances of special import and export rates
charged by the railway companies in this country, viz.:--
-----------+-------------+-----------------------+----------+----------
| | | Import |
| | | and | Local
From | To | Article. | Export | Rates
| | | Rates | per Ton.
| | |per Ton. |
-----------+-------------+-----------------------+----------+----------
Manchester | London | Cotton Goods in Bales | 25/- | 40/-
| | | C. & D. | C. & D.
” | Southampton | ” ” | 25/- | 45/-
| | | C. & D. | C. & D.
| | | |
Birmingham | London | Hardware | 25/- | 27/6
| | | C. & D. | C. & D.
” | ” | Bedsteads | 22/6 | 28/4
| | | C. & D. | C. & D.
| | | |
London | Plymouth | Newspapers and | 24/2 | 37/6
| | Periodicals | C. & D. | C. & D.
| | | |
Leeds | Hull | Woolen and Worsted | 12/6 | 16/8
| | Goods | C. & D. | C. & D.
| | | |
Manchester | ” | Bale goods | 17/6 | 31/8
| | | C. & D. | C. & D.
| | | |
Liverpool | ” | Salt Provisions | 12/6 | 20/-
| | |Carted in | Hull.
” | London | Fresh Meat | 25/- a | 50/- a
| | | C. & D. | C. & D.
| | | 30/- b | 55/- b
| | | C. & D. | C. & D.
Bristol | ” | American Provisions | 20/- | 27/6 X
| | | C. & D. | C. & D.
” | ” | Fresh Meat | 20/- a |
| | | C. & D. | } 40/-
| | | 25/- b | } C. & D.
| | | C. & D. | }
| | | |
Hull | ” | Meat and other | 25/- | 40/-
| | Imported Goods | C. & D. | C. & D.
-----------+-------------+-----------------------+----------+---------
a. Exclusive of hampers.
b. Inclusive of hampers.
X Bacon in 1 ton lots 22/6 per ton C. & D.
Butter and Lard in 4 ton lots 22/6 per ton C. & D.
C. & D. In other words, collected and delivered.
In the interest of shippers transit rates have been adopted; and
as an illustration, may be mentioned the rate for tea from China,
Japan, and India, brought by water to London, and despatched to
Liverpool by rail for shipment to America or elsewhere, viz.:--
--------+------------+------------------------+----------+----------
| | | Export | Local
From | To | Article. | Rates | Rates
| | | per Ton. | per Ton.
--------+------------+------------------------+----------+----------
London | Liverpool | Tea from China, India, | 25/- | 37/6
| | Japan, under Bond | C. & D. | C. & D.
| | | |
” | Birmingham | Tea | -- | 34/2
| | | | C. & D.
” | Manchester | ” | -- | 40/0
| | | | C. & D.
--------+------------+------------------------+----------+----------
In the abolition of these rates the home trader or consumer can have
no direct interest; although the transit rate is lower than that for
home traffic, it cannot in any way prejudice the English trader.
If the special rate were withdrawn he would be no better off; the
traffic would simply go to its destination by water.
To reduced export rates the objections are few. They are generally
admitted to be useful; and at a time when on all hands it is
urged to be necessary to extend our trade abroad, they could not
be abolished without causing serious loss and loud complaints.
It is important to enable a colliery owner to export coal, or a
manufacturer without a port in the vicinity of his works, to export
his wares on such terms that he will not be at a heavy disadvantage
or be driven out of the field. Special lower rates enable the
manufacturers of exported goods, such as manufactured cottons from
Manchester, and hardware from Birmingham, to send them to London,
and to avail themselves of lines of steamers sailing from several
ports. But for such facilities exporters would be confined to one,
and that the nearest, port, and they would lose the benefit of the
competition in facilities and sea freights. The railway company
which happened to own the route to the nearest port would possess a
monopoly of the traffic, and might charge their full rates instead
of the present reduced rates.
Nor is the practice recently introduced in the interest of railway
companies. In the Act authorising the very first railway on which
steam was used, the Stockton and Darlington, the principle is
recognised. The tolls upon the coal shipped on board any vessel
for export were fixed at one halfpenny per ton per mile, while
the toll on all other coal was 4d. per ton per mile. Each of the
special export rates has been made, it may be truly said, at the
instance of some manufacturer or shipper who would be injured by
their withdrawal. In granting such terms, railway companies have
endeavoured to satisfy the urgent demands of customers. And if the
rate to one intermediate place is fair and reasonable in itself,
is it any substantial grievance that it is higher than the rate on
goods for shipment?[15]
[15] The rate for the carriage of flour from Minneapolis for
consumption at Milwaukee or Chicago is one-third higher than the
rate for flour for shipment.
Special import rates have been much more attacked; but when the
principle is fairly carried out, they are no less defensible than
export rates. Most of the objections to them come, it will be found,
from persons who believe that they have a vested interest in certain
produce and trades; often they are assailed by the very persons who
are the defenders of reduced export rates. The majority of special
import rates naturally arise out of sea competition. The existence
of the import rates for fresh meat and provisions from Liverpool and
Bristol to London, which have been especially condemned, is due,
not, as is assumed, to the arbitrary action of companies, but to the
demands and necessities of traders. Those who are interested in the
trade of Liverpool, the great seat of the American trade, and in the
steamers sailing between America and Liverpool, desire to compete
with the direct sea communication with London, or with other ports
near to it. In like manner the shipping companies and others who
are interested in the trade of Southampton claim special rates and
facilities in favour of that port. Naturally they wish that a part
of the traffic should go _viâ_ Southampton; and a compliance with
their wish benefits the public.
Special import rates are not charged on foreign goods merely because
they are foreign; the chief, though not the only, explanation of
their existence, is the desire of steamboat companies and merchants
that a part of the goods consumed in other places may be carried
through the port in which they are interested, instead of the goods
being all sent through ports nearer to or direct to the ultimate
destination. The railways have, in fact, complied with urgent local
demands.
Some rates for import traffic are less than for the same description
of goods going in the opposite direction. Such cases are probably
rare, and the circumstances of all of them are not fully known. The
following, however, was the origin of one of them: The millers in
the Eastern counties found that their trade suffered by reason of
the competition of millers situated on the Thames, who were able to
obtain by water foreign grain at low rates. The former urged upon
the railway companies the necessity of granting them reduced rates
from London for foreign grain to mix with English wheat, and thus
enable them to produce better and stronger flour than that produced
by home grown wheat alone. The millers pointed out that by so doing
the local industries in which the companies and the districts
have an interest would be benefited, and that there would be an
increased trade in foreign grain down from London and in flour up to
it. Admitting the force of these arguments, the railway companies
put in force lower rates. Here, as elsewhere, we find a collision
of interests, and conflicting demands. These rates have recently
been altered with the view of partially removing the grounds of
complaint in this case; it remains, however, an apt illustration of
the difficulties encountered in framing rates. Reduced rates are
complained of by one portion of the public; and yet, if they were
cancelled, other sections would consider themselves aggrieved. Such
are the difficulties with which railway companies have to contend;
bound to serve and accommodate classes at variance with each
other; subject to criticism and complaint if they do not satisfy
contradictory demands.
There has been much hostile comment on the conveyance at reduced
rates of foreign produce and merchandise from the Continent, through
English ports to places of consumption. The French traffic from
Cherbourg or Havre carried _viâ_ Weymouth or Southampton, and from
Boulogne or Calais, _viâ_ Dover or Folkestone, and the Dutch and
Belgian traffic from Rotterdam or Antwerp, _viâ_ Harwich, have been
especially the subject of unfriendly remark. But the explanation
of such rates is simple; they are due to no designs against the
English factor. French traffic carried _viâ_ Cherbourg may be sent
direct by sea to London. In order that it may be conveyed over a
portion of their systems, the London and South Western Company run
steamers between that port and Southampton; and until recently the
Great Western Company had a line of steamers between Cherbourg and
Weymouth. In order to compete with the sea communication, the South
Western and Great Western Companies necessarily fixed their rates
with reference to the sea freights from Cherbourg and other ports.
The distance between Southampton and London is 76 miles, while the
distance between Weymouth and London is 159 miles. Of course the
Great Western Company charged the same rates by the longer as the
South Western Company charged by the shorter railway route. Hence
the complaint that French goods were being carried cheaper from
Cherbourg to London than from places in Dorsetshire, past which,
when carried by the Great Western Company, they were conveyed. The
obvious answer was, that if the Great Western Company did not carry
at all, the traffic would be sent _viâ_ Southampton, and that if
the London and South Western Company ceased to carry, it would be
sent to London direct by sea. In fact, the Great Western Company
have recently given up the steamboat service, and ceased to carry
_viâ_ Weymouth; the grounds of complaint made in the name of the
Dorsetshire farmers have thereby been removed. But the competition,
such as it is, of French with English produce, continues all the
same, only all the traffic is carried, not through Dorsetshire,
but by other routes. Indeed, immediately after the service _viâ_
Weymouth was withdrawn a new service was established between
Paimboeuf and Newhaven; and by this route a portion of the traffic
previously sent _viâ_ Weymouth is now carried.
Irish produce from Waterford is carried to London by various routes:
direct to the latter by sea; by sea to Bristol, and thence by
rail, 119 miles to London; by sea to Milford, and thence by rail,
282 miles; and by sea to Liverpool, and thence by rail 201 miles.
The rates _viâ_ Bristol are, and must be, fixed with reference to
those charged by sea, and those _viâ_ Milford and _viâ_ Liverpool,
must be the same, or nearly so, as those charged _viâ_ Bristol.
Yet, according to the views of some persons, this competition is
unfair to intermediate towns between Milford and London, and between
Liverpool and London, between which intermediate places and London
the rates are higher, or higher in proportion, than those charged
between London and Waterford. There are complaints as to this
disparity, although the competition, if any exists, would continue,
even if no Irish traffic were carried _viâ_ Milford at all.
Similar observations apply to traffic between Dublin and Liverpool.
Between these cities there is daily steam communication; so that
goods carried by sea to Holyhead, and thence by rail, may be
conveyed throughout at lower rates than those charged for traffic
for places intermediate between Liverpool and Holyhead. Indeed, sea
competition influences the rates for traffic between Dublin and
Manchester. Traffic is carried by sea, _viâ_ Liverpool, and thence
by rail (31 miles) to Manchester, while the distance by rail from
the latter place to Holyhead is 122 miles. Consequently the rates
between Manchester and Dublin, _viâ_ Holyhead, are less than to some
intermediate places.[16]
[16] In the evidence given before the Select Committee in 1881,
the rates for foreign hops from Boulogne to London were compared
with the rates charged for home grown hops from the Ashford and
Canterbury districts to London. The former were complained of as
being an undue preference in favour of foreign produce. No doubt
there was a considerable difference. The rate from Boulogne to
London was 17s. 6d., and that from Ashford to London, 38s. It was,
however, shewn that the rate of 17s. 6d. per ton for foreign hops
from Boulogne to London was a station to station rate, while the
rate of 38s. per ton from Ashford to London included delivery and
all station services, and that owing to the difference in the mode
of packing the hops, 73 per cent. more foreign hops than English
hops could be loaded in a truck. The railway companies concerned
urged that the home producer was not prejudiced by the transit rate
complained of. While it enabled the railway companies to obtain the
conveyance of a portion of the foreign hops, an increase of the rate
from Boulogne would not be of any benefit to the English grower. The
foreign hops would still find their way to London direct by sea. The
rate of 17s. 6d. per ton from Boulogne to London was cancelled in
deference to the complaints. What is the result? The foreign hops
are imported as before; but they are now carried by the General
Steam Navigation Company. The railway companies have to some extent
suffered; the English producer has gained nothing.
Tea imported into London may be carried by sea direct to Newcastle
or Liverpool. Iron manufactured at Middlesboro’ or in South
Wales can be conveyed by water at low freights to London. So,
too, tin-plates may be conveyed by water from Glamorganshire to
Liverpool. If the importer or the manufacturer, therefore, desires
to send, or the companies desire to carry, any of those goods by
railway, special rates yielding only a small profit to the companies
must be quoted; otherwise the whole, or nearly the whole of such
articles, would be sent by sea. Such reduced rates are complained of
because of their being less in gross or per mile than those for the
same or similar articles carried for the like or less distances. But
grocers or consumers of tea, iron merchants or blacksmiths in inland
towns, or manufacturers whose works are near the port of shipment
would derive no advantage from all these goods being carried by sea
at the same or even lower rates than those now charged by railway.
The influence of the sea, “the great free trader” as it has been
called, is vast and far reaching. England and Scotland being an
island, there is all round the coast direct competition with the
sea. It exists for instance between London and Yarmouth, Hull,
Newcastle-on-Tyne, Leith, Aberdeen on the eastern coast; and between
London, Southampton and Plymouth, and the west coast ports, that is,
Bristol, the South Wales ports, Liverpool and Glasgow.
If railways in England did not compete with transport by the
sea they would in many cases be of comparatively little use to
manufacturers and merchants. Only by such competition do they fully
minister to the requirements of the trade of the country. If all
the intermediate rates were to be brought down to the level of
those charged between port and port what would be the result? The
companies would have to raise their port to port rates. The public
would lose the benefit of rail carriage for goods sent between port
and port, and the companies the profit they might have derived from
such goods. Who would be the gainer?[17]
[17] Lines of steamers carrying Belgian, Dutch, German, and French
goods and produce, run between Antwerp, Rotterdam, Amsterdam,
Boulogne, Havre and London. In competition with them the Great
Eastern, South Eastern, and London Chatham and Dover Companies carry
_viâ_ Harwich, Folkestone and Dover respectively, at such rates as
they can obtain in competition with those charged by steamer direct.
It has been a subject of complaint that these goods are conveyed at
lower rates than similar merchandise from places in Essex or Kent,
past which they are carried by rail. No doubt the regular and quick
services provided by the railway companies are of great advantage
to the senders and consumers. But so far as London is concerned,
a great part, if not the whole of the goods, not requiring quick
transit could be sent by sea direct, if the Harwich, Dover, and
other services were discontinued.
There are import rates to towns in the interior to which there is no
direct sea competition. If such rates are not based on the rates to
places to which there is such competition, _plus_ the local rates,
they may be open to question to an extent not applicable to the
rates to and from ports.
Many apparent anomalies in railway rates arise from competition of
the railways with the sea: others are the results of comparisons of
the rates charged by railway companies, which must carry, if they
are to carry the traffic at all, at the same rates as a company
having a shorter route. Inasmuch as competition between railway
companies is carried on extensively, many such disparities exist.
The apparent anomaly in tin plates being carried from South Wales
to Liverpool _viâ_ Stockport, near Manchester, at lower rates than
to Manchester, was referred to by Mr. Johnson Ferguson in the
debate on the second reading of the Railway and Canal Traffic Bill.
This arises from the Midland Railway Company competing with two
shorter routes between these places, and from the rates by those
routes being so fixed as to meet the competition by sea; the former
company’s longer route is through Stockport (not Manchester), to
which latter place of course there is no export trade, and at which
there is no sea competition. This anomaly would be entirely removed
by the Midland Company ceasing to compete for the Liverpool traffic;
but the consumers of tin plates in Manchester would not in any
respect be benefited by the change. The distance by the shortest
railway route between London and Bristol is about 119 miles. There
are two other railway routes, the shorter of which is 161 miles;
there is also direct transport by sea; and by all of these routes
there is competition for the conveyance of merchandise traffic. To
suit the requirements of the trade between these ports, as well as
to contend with competition by water, special rates are charged.
Withdraw them, and either the interchange would not take place or
the goods would have to be sent by sea. Of course the other railway
companies carrying between the two places charge the same rates as
those in force by the shortest railway route, otherwise they would
obtain no share of the traffic; and these rates are necessarily less
for the throughout distance than those charged for like descriptions
of goods to some of the intermediate towns on the longer route.
To take one more illustration: steamboats ply between Liverpool
and Bristol. Goods carried by railway between these two places by
one or other of the three available routes must pass through some
one of the following places:--Birmingham, Worcester, Hereford,
Shrewsbury, Chester or Warrington. The local rates to all these
intermediate towns may appear disproportionate to those charged
between the extreme points. But is there any real injustice done?
Is it disadvantageous to the public that railway companies should
compete with sea carriage between different ports in the Kingdom?
Should not railway companies be allowed to accept in respect of
traffic so carried, which would otherwise be wholly lost to them,
a less percentage of profit without being compelled to reduce
all their rates to intermediate inland places to the same or
proportionately less amounts? What injustice is done to those whoso
goods are carried to and from intermediate inland places by the fact
that their rates are higher, or higher in proportion, than the
competitive rates, provided the rates to intermediate places are in
themselves fair and within the Company’s legal maximum?
A third source of complaint of disproportionate rates arises from
the competition between ports. Assume, for instance, port A to be
51 miles, port B 72 miles, and port C a greater distance from D,
one of the great seats of manufacture and commerce. The merchants
and shipowners at C and B desire to compete with A, and they induce
the railway company to carry from all three at the same rates. The
result is that the rates are lower for the throughout distance
than to and from some of the intermediate places. The grounds of
grievance would be removed by the railway company ceasing to carry
from C and B at the same rates as from A. But the importation
of foreign goods would continue; the only difference being that
they would be carried through one port instead of two or more.
And here a curious fact may be noted. If, in the case supposed,
the railways between A and D, B and D, and C and D belonged to
separate companies, in all probability no complaint would be
made of the rates from A, B, and C to D being the same. On the
contrary, competition being always desired by the public, it would
be considered in that case advantageous and in the interest of the
public. But because the lines between B and D and C and D belong
to the same company as that between A and D complaints are made on
account of the rates being equal. What is hailed in the one case as
a benefit is decried in the other as mischievous and unjust.[18]
[18] Many of the rates from Hull are affected by inland water
competition, or by those charged from Liverpool. On the other hand,
the rates from Hull govern those from Grimsby (as a competing port),
Harwich, West Hartlepool, Newcastle, Sunderland and Shields. In
fact, a large portion of the anomalies in railway rates arise from
the competition between ports. Although improvements in detail as
to such rates, no doubt, are possible, the interests of some ports
would be seriously affected by any change in the principle on which
railway rates are fixed.
The chief explanation of differential rates have been mentioned;
another cause less important is in operation. In carriage by
road, cost may be roughly measured by distance, though even as to
the expenses of cartage that is subject to exceptions. But this
test--admitted to be practically useless as regards freight by
sea--does not hold good of railway transport. Of the various kinds
of outlay on the part of a railway company, a large portion remains
fixed, whether the distance run by a train is ten miles or one
hundred. Such, for example, are the cost of terminal accommodation,
and the services of loading and unloading, and clerical work. Such,
too, speaking broadly, are the interest on cost of construction,
repairs of bridges and earthworks, the permanent staff of employés,
and of signalling. Another kind of expenditure increases directly
with the mileage run; for example, the provision of, and wear
and tear of locomotives, rolling stock and permanent way, and
liability for loss of or damage to goods in transit. Certain
kinds of expenditure increase with the distance run, but not in
the same ratio. Obviously wages, cost of locomotive power, and
cost of haulage generally are not four times as much in the case
of a train which has run a hundred miles as in one which has run
twenty-five. With the progress of railways, with improved economy in
the use of machinery, and in other ways, this tendency--recognised
to some extent by the Legislature in the rates for short distance
traffic--in expenditure not to increase in the same proportion as
mileage distance, becomes an important element. The result of all
this is to make mileage less a criterion of cost, and tends to place
large towns at a greater distance at an advantage as compared with
intermediate towns, and to give rise to differential rates.[19] It
is also obvious that from many intermediate towns the quantities
forwarded are not so large and regular as from terminal towns, and
that from the former there is not a constant traffic to and fro.
[19] See as to this Dr. Otto Michaelis’s _Differenzialtarife
der Eisenbahnen_, in which the natural and necessary rise of
differential rates in Germany is explained.
The urgent demands of traders and producers have created
differential rates; the interests of the public and consumers have
maintained them; interests, it may be added, which have been little
heard in any of the inquiries which have taken place, but which, if
any change were meditated, would probably be found to have more at
stake than the railway companies. They would ask,--Why should such
special rates be withdrawn? They would be losers by the change. The
railway companies also would be losers. So too would the public
interested, especially as regards perishable goods, in the more
rapid and regular conveyance of merchandise than is possible by
water. Who would be the gainer? Not, certainly, the home producer,
who would find foreign goods brought direct to London by sea; not
the consumer, who wishes cheap goods rapidly conveyed, and to whom
it is immaterial how they reach him. The fact is that differential
rates have arisen in no small degree out of the same causes as have
necessitated a classification of goods. Goods of small intrinsic
value will not be conveyed at all unless at low rates; only on
special terms can such goods produced at a great distance be brought
to market.
Sometimes it is urged as an objection to differential rates, that by
reason of them companies sustain, on long distance traffic, a loss
which is made up by charges on short distance traffic. Repeated, as
if it were an axiom, this statement is generally erroneous; though
producing, no doubt, a lower percentage of profits than the latter,
the former yields some profit, unless where undue competition
operates.
To carry traffic at a rate yielding a small profit, is better for
a railway company than to have its permanent way for many hours
unused, and its plant not fully employed. It may be expedient to
accept traffic producing only a small percentage of profit, if it
can be got on no better terms; such traffic will at least help to
defray the fixed charges, which must be incurred whether it is
carried or not. But is a company bound to do all its business on
such terms, or would it be desirable that it should do so? Can the
senders of other traffic paying only reasonable rates, yielding the
company what would otherwise be admitted to be only a fair profit,
justly object? and if a company be deprived of this long distance
traffic, will it not be forced to raise rates on other traffic in
order to maintain its revenue?[20]
[20] NOTE.--See Extract from Sir T. Farrer’s Evidence at page 66.
But, it is also objected, differential rates deprive the inhabitants
of certain towns of the natural advantages of their geographical
position. This argument would be more persuasive than it is if it
were not generally expressed in the very language of Protectionists,
if it were not so often a claim of an exclusive right to supply
certain markets, and a scarcely concealed dislike to the intrusion
of competition. Even supposing that low rates, which enable the
produce of remote parts of England and Scotland to be conveyed
throughout the length and breadth of the land may interfere with
the trade of manufacturers nearer London and other great towns; so
may the making of a railway. Places which have one, or districts
which are left without any, may be injured by railway communication
elsewhere being opened. The existence of any such right as is
claimed is questionable. Preserving the natural advantages of one
town means preventing the removal of the natural disadvantages of
others. In truth, the abolition of differential rates would deprive
many places of their natural advantages. That Liverpool is on the
sea, and that Birmingham is not, that there is sea communication
from the former to London, are circumstances which railways did
not create, and to which they must accommodate themselves. Railway
Companies are not answerable for the fact that certain kinds of
traffic come from a point having the advantage of a sea route; that
there is competition at one place and not at another; and that goods
may be conveyed from New York to London all the way by sea, or
partly by sea and partly by land.
If the rates for all traffic between intermediate places were
either made the same as or less than those to terminal points,
companies would be compelled to consider whether raising the export
and import rates, or reducing those on local traffic, would result
in the least loss. If the former course were adopted, as, in the
majority of cases it would be, the facilities which manufacturers
and merchants now enjoy would be withdrawn; it would be to their
interest to ship at the nearest port. The railways would suffer some
loss. The inhabitants of intermediate places and the port towns
would derive no advantage except the removal of what generally is
merely a sentimental grievance. What would a London draper gain
if the Manchester and London Shipping rate were withdrawn, and if
manufacturers shipped all their goods in Liverpool instead of a
portion of them being shipped from London? What would it avail an
Essex farmer if Dutch and Belgian produce were sent direct from
Rotterdam and Antwerp to London, instead of through Harwich? Would
farmers in the South of England be any better off if French eggs and
butter were sent by sea to London instead of through Southampton or
Newhaven?