=Conclusion.= Page 62.
Interested parties not prejudiced--Staff now employed in services
to be discarded will be required for increased traffic--Facility of
transport will increase trade, and open new markets, not only here
but abroad--Foreign countries would adopt reform as they did Postal
system--Advantages of inter-communication with Foreign Nations.
ROYAL RAILWAYS
with Uniform Rates.
INTRODUCTION.
=The Royal Mail!= What scenes and memories are conjured up by these
words! In the olden days, the Royal Mail coaches--in these modern days,
the well-known scarlet Mail carts and motor vans arriving at all the
larger railway stations from which the mail trains, always the fastest,
convey the mails to every quarter of the United Kingdom, and over the
whole world.
It is now a commonplace to post in the nearest pillar-box a batch of
letters, some to addresses in the same town, others to provincial
towns and villages, to Scotland, Ireland and far distant Colonies,
each of them being conveyed to their destination, near or far, for
the modest sum of one penny, by the speediest mode of locomotion
that steam and electricity can provide. In order that travellers may
have the advantage of that speed and regularity which is a feature
of the Royal Mail, passengers and goods have always been carried by
the Mail--formerly by the coach, now by the train. But whereas the
mails are carried at the same price for any distance, the charges for
passengers, and for goods which exceed the regulation size and weight
permitted for the “Parcels Post,” vary according to the distance
travelled, and as to goods also according to their nature or quality,
with the result that for the greater part of our population long
journeys are luxuries which can only be undertaken in cases of life
and death, and not always then; the rates for carriage of goods by
fast train are mostly prohibitive, and even by goods train for long
distances are so great as to seriously restrict the traffic.
If mail trains can carry mails, with parcels up to 7 lbs. in weight at
the same price for any distance, why cannot all trains carry passengers
and goods of any size and weight at the same price for any distance?
The answer is that they can, and it is the object of this pamphlet to
prove not only that it is possible financially, but that, with the
small uniform fares and rates indicated on the title page, sufficient
revenue can be obtained to pay working expenses, and provide the sum
required to purchase the whole of the existing railway undertakings at
their full market price, or such a price as willing vendors would be
ready to accept.
This, then, is “=A Business Proposition=” for all concerned; in other
words, the magnificent net-work of railways in the United Kingdom, with
all that is included in their undertakings, may be acquired by the
nation at such a price as will make it worth the while of the present
Companies and their shareholders to sell, and as the result to give the
nation the benefit of speedy and efficient transport at the nominal
fares and rates mentioned. It will, indeed, be a “Revolution,” but one
of the most beneficial that can befall a nation.
The Royal Mail is an institution of which the nation is justly proud.
How much more will it be so of an institution which will include the
Royal Mail, namely, =Royal Railways=.
CHAPTER I.
THE SCHEME.
This is the scheme proposed:--
The whole of the existing undertakings of all the Railway Companies in
the United Kingdom of Great Britain and Ireland will be acquired by
purchase on some such terms as are set out at the end of this pamphlet
and vested in the Government. The whole system will be amalgamated
with the General Post Office and form one of the Departments of State,
of which the Postmaster-General for the time being will be the head,
and probably adopt the style of “Minister of Transport,” who will be a
Member of the Cabinet. =It will be expressly enacted that any profit
made by the combined services shall be used only for increasing their
efficiency, for payment of purchase money, or in reduction of fares
and rates charged for the services, and in no case for general revenue
of the country. There shall also be no prohibition of competition by
private enterprise.=[1]
All passenger trains will be regarded as consisting of two kinds,
namely:--
(1) =Main Line Trains=, by which will be meant express trains
running on the Main trunk lines between, and only stopping at,
important towns.
A ticket for =one shilling= will entitle the holder to enter any Main
Line train at any station, and to travel in it to any other station at
which it stops, and a ticket for =five shillings= will entitle him to
travel first class in such trains.
(2) =Local Trains=, by which will be meant all trains,
other than Main Line trains as defined above, including all
Metropolitan, Suburban and Branch Line trains throughout the
Kingdom, as well as trains on Main lines which stop at all
stations.
A ticket for =one penny= will entitle the holder to enter any Local
train at any station, and to travel in it to any other station at which
it stops, and a ticket for =sixpence= will entitle him to travel first
class in such train if that accommodation is provided.
=Steamers= which form part of the railway undertakings will also be
regarded as of two kinds, according to whether they form part of a
Main Line, _e.g._, the Irish Packets or the Cross Channel steamers, in
which case admission to them will be 1s. or 5s., according to class, or
simply as part of a Branch line, _e.g._, the Isle of Wight steamers, to
which admission would be 1d. or 6d. according to class.
In the case of Main Line trains and steamers, additional fixed charges
(the same for any distance) will be made for the use of refreshment
cars, sleeping cars, State cabins, reserved seats and any other special
services.
In the case of Local trains, and possibly Main Line trains, =Season
Tickets= may be issued, in each case available for any Main Line train
or Local train as the case may be. For Local trains the following rates
are suggested, viz.:--
3rd class 1s. per week, 4s. per month, £2 per annum.
1st class 2s. 6d. ” 10s. ” £5 ” ”
=Passenger Tickets= will not be issued to or from any particular
stations, but like postage stamps will vary only according to the fares
and special charges for the time being in force. The four denominations
of 5s., 1s., 6d. and 1d. will, of course, be required, and 4s. and 5d.
tickets could also be issued to make up the first class fares with the
1s. and 1d. tickets.
These tickets will be sold not only at every railway station, but also
at every Post Office and in automatic machines. Every railway station
will be, or will contain, a Post Office, with all postal, telegraphic
and telephonic facilities, and every Post Office will sell not only
passenger tickets but also railway stamps for parcels, goods and live
stock.
=Goods traffic= will also consist of two services only, namely:--
(1) =Fast Service=, corresponding with the present service “per
passenger train,” the charge for which will be an average of
=ten shillings per ton for any distance=.
(2) =Slow Service=, corresponding with the present service “per
goods train,” the charge for which will be an average of =one
shilling and sixpence per ton for any distance=.
For both these services stamps will be issued of various denominations,
and applied in manner now in use for the Parcels Post, with any
necessary modification; for instance, the stamps might be affixed to
consignment notes in the case of goods in bulk, or other suitable
arrangements might be made for large quantities of goods.
For the _slow_ goods traffic a regular service of goods trains will
be organised so that at every town or village in the United Kingdom
served by rail there may be at least one delivery and one collection
daily, more populous places, of course, having more frequent services.
For the _fast_ goods traffic a similar regular service will be
organised, and in cases where the traffic will warrant it special fast
goods trains will be run; otherwise the goods will be carried by the
passenger trains.
In course of time provision should be made for all trunk lines to have
at least two double lines of rails, upon one of which fast trains
for passengers and goods will run at uniform speeds, and at regular
intervals, and upon the other the local trains and slow goods trains,
also at uniform speed and at regular intervals.
The present complicated system of differential rates, which vary not
only according to distance but also according to the nature, quality
and value of goods, and involving different rates, amounting in number
literally to millions, would be swept away, the only variations in
rates being in respect of such obvious matters as weight, size, whether
carried in bulk or in packages, in open trucks or closed, whether
requiring special care or labour in packing or otherwise. The average
rates proposed would, it is believed, admit of a uniform rate for any
distance for minerals and other goods carried in bulk in open trucks,
of no more than the lowest rate now in force, by charging higher rates
for goods requiring closed trucks and more labour in handling, still
higher rates for goods of abnormal size or weight, and higher rates
still for single small parcels, on account of greater proportionate
expense of handling. For the small single parcels the rate might be
for slow service as much as 6d. for any weight up to 1cwt. (equal to
10s. per ton), and for fast service say 1s., or possibly more, for any
weight up to 1cwt., the weight being graduated downwards for parcels
of greater weight as are the rates now in force for letter and parcels
post. The goods traffic would be in effect an extension of the present
parcels post, the present rates for which would probably be capable of
very substantial reduction.
These figures are put forward by way of suggestion only, and the
question of terminal charges and fees for loading and unloading may
have to be taken into account. Numerous details must necessarily be
gone into in fixing an average uniform rate, and it is very likely
that considerable modifications may be found necessary. Any such
modifications, however, must be based upon the three rules set out on
page 30 in order that the scheme may effect its object.
FOOTNOTES
[1] For reasons of these modifications of the present practice in
National and Municipal Trading see Chapter IV., pp. 33-41.
CHAPTER II.
ADVANTAGES OF THE SCHEME.
If this scheme is practicable financially (and one object of this
pamphlet is to prove that this is so), then it seems almost superfluous
to point out the great advantages of its adoption.
It has been well said that “=transport is the life-blood of a nation=.”
If circulation is impeded or restricted the whole country must suffer,
and, conversely, if all obstructions and restrictions are removed the
whole country must benefit. This scheme will, in effect, remove the
principal obstruction to free circulation of passengers and goods,
namely, expense. Cheapness of transport is “twice blessed; it blesseth
him that gives and him that takes”--in other words, it enables the
producer, whether agriculturist, manufacturer or merchant, to increase
his market for goods, and enables the consumer who requires those goods
to purchase at a lower price. It is common knowledge that agriculture
in particular in this country is hampered and restricted by heavy
charges for freight.[2] Under our present system the carriage of
goods from abroad to London is cheaper than from the Midlands, and
the foreigner has a great preference (so far as freight is concerned)
over our own farmers. Fruit and fish is often thrown away on account
of the cost of carriage being more than the value of the goods. On the
other hand, the price of food and every commodity has been gradually
increasing. With the removal of this obstruction of expense of carriage
there must be an increase in the supply of goods, and increased supply
means lower prices.
As to passenger traffic, traders will appreciate the great benefit of
nominal fares for themselves and their commercial travellers. So also
will the greater part of the population, namely, those of very moderate
means who are now prevented, solely on account of expense, from
travelling any considerable distance, either on business or pleasure,
or from visiting friends and relatives.
These are some of the general advantages attending cheapness of
transport, but it may be as well to point out in detail some of the
very substantial economies and other special advantages to be obtained
by adopting the proposed scheme.
1. ECONOMICAL ADVANTAGES.
A few examples of the waste attending the present system, both of money
and time will illustrate some of these advantages.
=In the Strand, London=, within a few yards of each other, are the
following premises:--
No. 168, Strand.--The Strand Station of the Piccadilly and
Finsbury Park Tube Railway.
No. 170, Strand.--Great Western Railway Receiving Office.
No. 173-4, Strand.--East Strand Post Office.
No. 179, Strand.--Great Northern Railway Receiving Office.
No. 4, Norfolk Street, Strand, almost adjoining No. 179,
Strand.--Inland Revenue Office.
No. 183, Strand.--Midland Railway and London and North Western
Railway Receiving Office.
Within sight, at the other end of Norfolk Street, is the Temple Station
District Railway, and at 6, Catherine Street, about the same distance
from the other side of the Strand, is a Labour Exchange.
It is assumed that the rents of shops in the Strand would average
about £500 per annum. Under the proposed scheme, the whole of the
business transacted at the above eight premises could, with greater
convenience, be carried on at the two railway stations, possibly with
some extensions, but with a saving not only of rent but also of rates,
taxes and other outgoings.
=At Bexhill-on-Sea=, with a population of only about 15,500, there
are two large railway stations, one belonging to the South Eastern &
Chatham Railway Company, the other to the London, Brighton & South
Coast Railway Company, and situate about a mile apart. Half a mile
from each is the Head Post Office, within a few doors from one of
the stations is a branch Post Office, and within a small radius are
Government offices for Inland Revenue and other purposes.
Letters posted at a pillar box outside the station are collected
there, taken to the Head Post Office for sorting, then returned with
others to the railway for the Mail train leaving the same station. The
majority of the passengers are for London, and go by the two different
routes, but the fares are identical, and the time occupied is about the
same, no advantage being gained by the public through the so-called
competition.
If both stations were amalgamated one staff only would be required,
there would be ample room on the premises to accommodate the Head Post
Office with sorting rooms, etc. (the branch office now near the station
would not be required), and there would be plenty of room also for the
Government Offices. In addition to the saving of expense, there would
also be the great convenience and saving of time in the transport of,
and dealing with, mails, passengers and goods.
These two examples with many others have come under my personal
observation, and they may be multiplied ten thousand times throughout
the United Kingdom. Where is there a railway station, whether a great
London terminus, or small provincial station, where postal facilities
are available; while just outside rents are paid, in some cases very
heavy ones, for other premises, to and from which the mails have to be
conveyed?
Other examples of waste under the present system, although not so
apparent to the public, are well-known to the railway expert, and
involve much greater expenditure of time and money.
I refer in particular to the =waste of rolling stock=, especially of
goods wagons, occasioned by the multiplicity of goods stations, the
transfer of rolling stock to and from the lines of different railway
companies, the shunting of trains, and the large number of road vans
used by the various companies. In London alone there are 74 goods
stations, used for goods only, and 700 goods trains per day travel
between these 74 stations, doing nothing but transferring goods from
one of these stations to another! Goods consigned to one warehouse in
London from places on, say, seven different railway companies’ lines
are sent by seven different vans, one belonging to each company. Under
my proposed scheme one or two central goods stations of large area
would not only suffice, but would provide a far more efficient and
speedy transport service, and yet with the nominal rates referred to.
Under the present system goods trains, having been unloaded, must be
returned in order to clear the line, so that it is not uncommon to
find goods trains belonging to the various companies returning empty
for long distances on each line, on the G. W. R. as far as Bristol, on
the S. W. R. to Basingstoke, on the G. C. R. to Banbury, and so on.
It has been estimated that of the 1,400,000 goods wagons now on the
railways of the United Kingdom, no more than 3 per cent. are actually
in effective use at one time, the remaining 97 per cent. being either
stationary or running empty![3] One reason for this, no doubt, is the
use of merely hand labour for loading and unloading.
With a view to avoiding this waste the New Transport Company, Limited
was registered in 1908, for the purpose of introducing new and
ingenious machinery, invented by Mr. A. W. Gattie and Mr. A. G. Seaman,
for handling goods, including the adoption of movable “containers” on
trucks and wagons, and a scheme for a “Goods Clearing House” occupying
a site of about 30 acres, in Clerkenwell, to be connected by rail with
all the lines coming to London.
It is, of course, necessary, in order to carry so important a scheme
into effect to negotiate with all the various railway companies
interested, as well as to obtain an Act of Parliament. Besides this,
a large amount of capital is required for the acquisition of the
site, the construction of the connecting lines, installation of the
machinery, etc.
Notwithstanding the large cost, estimated by Mr. Edgar Harper, F.S.S.,
late Statistical Officer of the London County Council, at £14,000,000,
he shows that such a system would more than pay for itself in a year by
the economies in transport which it would effect directly or indirectly.
No estimate, however, is given, nor probably can be given by anyone, of
the time that will be occupied in carrying such a scheme into effect,
so long as this present system of numerous companies and conflicting
interests continues. Five years have already gone by since the Company
was registered.
If, however, the scheme of nationalisation and amalgamation with the
Post Office be adopted, there should be no difficulty in providing as
part of such scheme for the system and machinery of the New Transport
Company already referred to, not only in London but in every other
traffic centre. It might also be possible to avoid the expense of
acquiring a new site for a “Goods Clearing House” by utilising some
portion of the large area occupied by the three large termini and
approaches thereto of King’s Cross, St. Pancras and Euston.
There will then be no conflicting interests, no multiplicity of
companies, and no difficulty in raising the necessary capital for
establishing the system, and what is still more important, no
difficulty, as will be shown hereafter under the heading of “Finance,”
in producing the necessary revenue to repay the capital and interest,
by reason of the progressively increasing traffic which will result
from the adoption of the small uniform average rates advocated.
The following, then, are some of the very substantial economies which
will be effected by my scheme:--
=I. Expenditure which would be entirely abolished=:--
(_a_) The Railway Clearing House, the sole object of which
is to apportion receipts and payments between the various
companies, about 217 in number, and requiring for its work a
large and expensive staff, not only of clerks, but also of
inspectors at every junction, and a large establishment at
Seymour Street, Euston.
(_b_) The separate Boards of Directors, officers, and clerical
staff of all the separate companies.
(_c_) The legal and parliamentary expenses incurred in disputes
between the various companies, and in opposing rival companies’
new lines.
(_d_) Advertisements by rival companies of their own routes.
=II. Expenditure and waste which would be diminished=:--
=1. By reason of unification of systems.=
(_a_) Competing receiving offices and their staffs would be
reduced to one in each locality.
(_b_) Rolling stock, which is now often idle because owned
by different companies, could be used solely according to
the requirements of the traffic.
(_c_) Competing trains now running on different lines at
the same time between London and other large towns could be
run at different times with largely increased numbers of
passengers at same cost.
(_d_) Adjoining stations belonging to competing companies
would be amalgamated.
=2. By reason of the adoption of uniform rates and fares.=
(_a_) The abolition of the elaborate book-keeping and
staffs needful for the present complicated system of
passengers’ fares and goods rates, especially the latter,
with the waste not only of expense but also of time.
(_b_) The saving of the expense of printing and advertising
various priced tickets and fare tables, also of the large
staff of booking clerks, inspectors and others.
(_c_) The saving of the legal expenses now incurred by the
Railway and Canal Commission Court in appeals and disputes
between the companies and traders as to rates, etc.
=3. By reason of the amalgamation of railways with the Post Office.=
(_a_) The rent and expenses of numerous Post Offices in
the neighbourhood of railway stations would be saved, all
stations being used for postal purposes.
(_b_) All postal sorting and other offices could be situate
on railway premises in or near the stations, and besides
thus saving the rent would be in closer touch with the
railway.
(_c_) The whole of the railway tracks would be available
without rent for laying of telegraph and telephone wires,
either over or underground.
(_d_) Surplus land of the railways, in particular where
adjoining to stations, would be available for other
Government purposes, such as Inland Revenue Offices, Labour
Exchanges, Military, Naval or Civil Service purposes,
Police Stations, Fire Stations, County Courts, Police
Courts, Land Courts, as well as Courts for dealing with
questions arising out of the railways themselves.
2. GENERAL ADVANTAGES.
Unification enables each part of the country to have as good a
service of trains as every other part, notwithstanding differences of
population and resources. The Companies now operating on the South
Coast cannot provide so good a service as the Northern Companies owing
to the lack of the great mining and industrial centres which are served
by the latter.
One of the most conspicuous examples of this is =Ireland=. A Royal
Commission was sitting for many years on the question of Irish
railways, and ultimately reported in favour of State acquisition. Even
this, it is clear, would not entirely solve the difficulty, which
arises from the natural causes of being an island with (compared to the
rest of Great Britain) a small population, mostly agricultural. If,
however, the Irish railways were amalgamated with all the others of
the United Kingdom under the proposed scheme the problem is solved. In
the estimate given in considering the finance of the scheme the Irish
railways are included.
The conversion of the railway system into Government property will,
apart from the question of economy already referred to, provide a most
important advantage to the State. For example, the War Office can make
use of the railway system, not only for the purposes of transport, but
for the erection on surplus land throughout the country of barracks,
stores, and other buildings, for wireless telegraph stations and for
aviation purposes. The Admiralty will have the use of the great docks
and wharves now owned by railways. The Civil Service will also find
ample space for additional office accommodation, often in the most
convenient spots both in town and country.
Still more important even than these advantages is the fact that by the
removal of all money restrictions from transport, not only an immediate
but a =progressive increase of traffic= will result. That this will be
so is shown hereafter when considering the question of the finance of
the scheme, but it is referred to here as one of the most important
advantages of the scheme, apart from the benefits to the nation already
referred to of free circulation of passengers and goods.
In the first place, the increase of traffic will require in all
probability the whole of the staff now employed, who would otherwise
be thrown out of employment by reason of the economies referred to
above. It will be noticed that in the estimates given under the
heading of “Finance of the Scheme” no decrease, but on the contrary,
a slight increase has been estimated for in the working expenses,
notwithstanding the enormous saving to be anticipated by the abolition
and reduction of wasteful expenditure under the present system. My
reason for so doing is partly to err on the side of caution in the
estimates, but also to provide for the probability of having to retain
the whole of the existing staff, and possibly increasing their wages
and reducing their hours of labour. Most of the economies referred to
must necessarily be effected gradually; for instance, the clerical
staffs of the various railway companies and of the Railway Clearing
House would be required for some considerable time in the process
of winding-up, and by the time this is finished the traffic will
have still further increased and their work will then be required in
the more necessary departments of, say, the Goods Clearing Houses
throughout the country.
Secondly, the progressive increase of traffic will produce a
corresponding increase of revenue which will be available for
extensions and additions, for electrification of lines, and other
improvements in means of transport, and ultimately even in still
further reduction in charges, but last and by no means least in the
adoption of appliances and inventions for the safety of life and limb
both of passengers and railway servants.
Unlike the present companies, the Government will have no difficulty
in raising the capital required for any such purposes, and in relying
upon the inevitable increase of traffic, as now is the case of the Post
Office, for repayment.
Take the case of automatic couplings. These were invented 40 years
ago[4] and their adoption has been urged on the companies ever since,
not only on the merciful ground of saving life and limb, but also on
the financial ground of saving waste of time in shunting; but the
initial expense of fitting these to every truck and carriage has been
too much for the directors of the Companies to risk.
Many inventions for automatic signalling, instantaneous brakes, and
other life-saving appliances have been from time to time submitted to
railway companies, but the initial expense of installation throughout
the many miles of railway of each company has been so great that one
hardly wonders at the hesitation of directors in laying out money
belonging to the shareholders, especially when, notwithstanding a small
normal increase of traffic, the working expenses have increased to a
greater degree.
FOOTNOTES
[2] See “The Rural Problem,” by H. D. Harben (Constable & Co., 1913,
2s. 6d.). Mr. Balfour Browne, K.C., also, in addressing the London
Chamber of Commerce, February, 1897, said, “I am not exaggerating when
I say that the Agricultural question … is nothing else but a question
of Railway Rates.”
[3] Lecture by A. W. Gattie, at London School of Economics, 11th March,
1913.
[4] “Mammon’s Victims,” by T. A. Brocklebank, published by C. W.
Daniel, 1911--Price 6d.
CHAPTER III.
THE PRINCIPLES UPON WHICH THE SCHEME IS BASED.
At first sight it seems preposterous that the fare =from London to
Glasgow should be only one shilling=, the same as from London to
Brighton, or that the fare of one penny from Mansion House to Victoria
should be the same as from Victoria to Croydon. To a railway expert it
will doubtless appear still more preposterous that the rate for a ton
of iron-ore should be the same as for a ton of manufactured iron, and
that the rate for general merchandise should be as low as 1s. 6d. per
ton for any distance; and yet it is now considered a matter of course
that the rate of 1d. for 4 ozs. for a letter from London to Londonderry
should be the same as from one part of London to another, or 3d. for 1
lb. should be the rate by parcel post for any distance great or small,
and irrespective of what the contents of the parcel may be.
The system of charging for transport =according to distance=, which is
still in force throughout the civilised world, except in the Postal
Service, appears to me to be =founded on a wrong principle=. It has
no doubt been adopted on the assumption that the greater the cost of
production the greater should be the charge, and, therefore, that as it
costs more to build 100 miles of railway than one mile, and takes more
coal or electric current to haul a train for 100 miles than for one
mile, it is necessary to charge more for the longer distance. Even the
Post Office still clings to the same idea, in charging higher rates for
the telephone trunk service according to distance, although the charges
for telegrams are the same for any distance! It is significant that
whereas the net profits from railways remain more or less stationary,
that of the Post Office with uniform rates continually increases, and
that the telephone system with charges according to distance is so far
the least satisfactory branch of the Post Office.
It is no doubt a general rule that the price of an article depends upon
the cost of production, but when dealing with transport the analogy
fails. In the case of a national system of railways the provision of
a regular service of trains to and from all parts of the country is
a necessity. Such a service requires that trains must run at stated
intervals advertised beforehand from one terminus to another, say from
A to Z, with various stopping places between those points, which may
be represented by other letters of the alphabet. The cost of running
each train will be the same, whether it contains 20 passengers or 200,
whether some or all of the passengers alight from or board the train at
any intermediate station or at either terminus. Therefore, the actual
cost of carrying a passenger from A to Z is not, in fact, more than
from A to B, or from M to Z.
The same consideration applies to goods with even greater force. With
goods the cost of handling them has to be considered, as well as the
cost of haulage. If goods are sent from A to B only they must be
handled twice, and this is no more than if they are sent from A to Z,
assuming there is no need for change of trucks.
In the case of goods under the present system there is a further
principle acted upon, which is still more obviously a wrong one,
_viz._, what is known as charging =according to “what the traffic
will bear.”= This term is well known to all railway experts, and is a
convenient way of explaining the reasons governing the various rates
under the present system. For instance, if too high a rate is charged
for goods of comparatively small value, traders prefer to send by
the cheaper modes, namely, by sea or by road, and in many cases it
would not be worth while to send at all, whereas in the case of an
article like silk or bullion of considerable value the extra cost of
carriage even at a high rate would not add appreciably to the price.
Therefore, the railway companies are compelled to make lower charges
for low-priced goods, otherwise they would lose the traffic altogether.
Accordingly there are such anomalies as a higher rate for the carriage
of manufactured iron than of iron-ore for the same distance, although
the cost of trucks, of haulage, and of handling may be identical.
Again, the rate for carriage of meat from the Midlands to London is
greater than that from Liverpool to London, partly on account of the
competition of the sea, and partly on account of the large consignments
of foreign meat. Again, the rate for the carriage of bricks from
one part of London to another is greater than from Peterborough to
London, because Peterborough is in a brick-producing district. These
inconsistencies and anomalies are intensified by the necessity of the
goods having to be carried over the lines of several different railway
companies, all of whom must receive some profit out of the carriage of
the goods, in addition to the actual cost.
It is quite clear that the actual cost of haulage for the same distance
of say a ton of coal is no more than that of a ton of bricks or of
manufactured iron, or of sand, or of a pantechnicon full of furniture,
all of which can be carried in open trucks, yet the rates for all these
various goods, even for the same distance, differ widely from each
other under the present system, and differ again not only according to
distance but actually according to the different towns between which
the service is rendered. Many examples of the present anomalies are
strikingly shown by Mr. Emil Davies in his book, “The Case for Railway
Nationalisation,”[5] which should be read by all interested in the
subject.
Now assume that the whole of the various existing railways are
amalgamated; that Main line trains both for goods and passengers run
at regular intervals to and from the principal towns; that Local
trains run from station to station and on branch lines also at regular
intervals, connecting at junctions with Main line trains; that just as
there are now regular times for delivery and collections of letters
and parcels by post, varying in number according to the population of
each locality, so there are regular collections and deliveries of goods
to and from every town and village in the United Kingdom; and that a
uniform rate, no more than, or even less than, the smallest rate now
charged, is all that has to be paid. It is true that with such a system
at many of the smaller places the actual expense of collection and
delivery may, indeed, be “more than the traffic would bear,” certainly
much more than the Directors of a railway company would feel warranted
in risking under the present system with their necessarily limited
area, but when these smaller places are part of such a system as is
here described, extending to every town in the United Kingdom, then the
whole becomes self-supporting, and there is no advantage in charging,
either according to distance, or according to “what the traffic will
bear.”
Every little village Post Office in the United Kingdom is an
object-lesson to us. Here we have all the resources of civilisation,
letter and parcel post, telegraph, telephone, savings bank, money
orders, all provided at exactly the same rate as in the largest Cities
of the Empire. Although the actual expense of each village Post Office
taken by itself is out of all proportion to the population of the
district, the combination of all of them in one national unified system
enables these remote villages to benefit, not only with no financial
loss to the nation, but actually with a handsome net profit which has
actually contributed to the general revenue of the nation. This was not
contemplated when the Penny Post was established, and is a practice
which, in my view, is a great mistake, as explained in Chapter IV.
The same principle has been applied to the ordinary roads of the
country, which are now open free of charge to the whole population,
although many of this generation can still remember the restrictions of
the old toll-gates.
It is only applying the same principle to the nation which applies
to the human body. “The body is not one member, but many.… Whether
one member suffers, all the members suffer with it, or one member be
honoured, all the members rejoice with it.”
If from any cause, such as a flood or other physical disturbance
a small industrial or agricultural district were cut off from all
communication with the rest of the Country, it is not only that
district but also the whole of the Country which suffers loss, namely,
the loss of trade with that district. And if by reason of high rates
the remote towns, villages, and districts, as well as those nearer
to great centres, are prevented from obtaining an outlet for their
produce, the whole Country suffers. The converse is equally true:
as soon as free circulation of passengers and goods is provided,
the prosperity of the whole Country as well as of each district is
increased.
This, then, is the principle upon which the scheme of uniform fares
and rates is founded, as opposed to the existing system of charging
according to distance and according to “what the traffic will bear.”
There remains, however, to be considered the principle upon which the
particular uniform fares and rates mentioned on the title page have
been suggested for the proposed scheme. These have not been selected
at haphazard, but in accordance with three rules which, I believe, are
founded upon a sound principle, namely:--
=(1) That any flat rate to be successful must not exceed the
minimum rate in force prior to the adoption of the scheme=;
=(2) That there should result from the change a sufficient
increase of traffic to produce at least the same net revenue as
before=;
=(3) That in a system of transport the fares and rates should
vary, not according to distance travelled, but according to
speed of service.=
In accordance with these rules I take =for Passenger Traffic= first
the present minimum railway fare now charged, that is, 1d. for short
distances of one mile or under. If the flat rate were fixed at say
2d., or, indeed, any sum over 1d., passengers who now pay that sum
would have to pay at least double the existing fare; this would, of
course, render the whole scheme impracticable. On the other hand, under
a flat rate of 1d. throughout the whole country the receipts would
not be sufficient to produce the present revenue unless and until the
number of passengers carried should increase by as much as six or seven
times. That this is so is clear when it is remembered that the =present
average railway fare for the whole of the United Kingdom= (allowing
for season ticket holders), =is 6½d.= In other words, if all the
passengers now travelling would pay 6½d. for every journey, both for
short ones, as from Mansion House to Charing Cross, and long ones, as
from London to Londonderry, then the same gross revenue from passengers
would be obtained as now; or, on the other hand, if a flat rate of 1d.
any distance were fixed, and the number of passenger journeys were
increased by six-and-a-half times as a result of this great reduction,
then, again, the same gross revenue would be obtained. The first of
these alternatives is, of course, impracticable, and the second one is
certainly not likely to be attained for some time to come, and even
then account would have to be taken of the additional working expenses
occasioned by so large an increase of traffic. It is on account of
these difficulties that any system of uniform fares has hitherto been
regarded as impracticable.
The solution of this problem was suggested to me by the practice of
the Post Office of charging 3d. for express delivery, and 6d. for a
telegram. Here we have the third rule before referred to of charging
according to speed of service. Applying this to railways, and again
searching for the lowest fares now charged for fast Main line trains,
it will be observed that these are the regular cheap excursion fares of
2s. 6d. from London to Brighton or Southend and back, which amounts to
1s. 3d. each way. It is true that these are exceptionally cheap fares.
Return tickets only are issued at this price, available by certain
trains only, but on the principle already laid down that the flat
rate must not exceed the lowest, this forms the basis of the proposed
uniform fare of 1s. for Main line trains. Although this uniform fare
is so exceptionally low, it is still nearly double the present average
fare, and it is precisely on the Main line trains that increase of
traffic (now restricted by expense) is sure to take place. These facts
(as will appear in the chapter, “Finance of the Scheme”) enable me to
estimate the increase of passenger traffic required to make up the
present gross revenue at only 15 per cent. of the present number of
passengers carried.
=For goods traffic= the uniform rates suggested have been ascertained
in accordance with the same rules. It is more difficult to ascertain
the present minimum owing to the enormous complication of goods rates.
Under the present system, goods are divided into eight different
classes according to the rate charged, and a maximum rate is fixed by
law for each class. In the lowest of these classes the rates vary from
one penny and a fraction up to 4d. per ton per mile for any distance
up to 20 miles, and smaller proportionate rates for distances over 20
miles. But although these are the greatest amounts that the companies
may charge for this class of goods, they do make special rates of
considerably lower amounts for special kinds of goods. It is estimated
that five-sevenths of all the goods carried are charged according to
special rates not included in the eight classes mentioned.
The Board of Trade returns give the totals of two classes of goods
only, namely, “minerals,” of which 410 million tons are carried, and
“general merchandise,” of which only 116 million tons are carried.
These returns are possibly misleading as, although derived from returns
made by the several companies themselves, it may be that those returns
include the same goods sent over different lines.
For the purposes of my estimates, however, I have assumed that the
Board of Trade returns are correct, and if they are so, the average
charge for “minerals” is now about 1s. 6d. per ton, and for “general
merchandise” about 6s. per ton. Taking the two classes of goods traffic
together, as representing what under my scheme will be the “slow goods
traffic,” =the average is only 2s. 4d. per ton=.
The average rate of 1s. 6d. per ton has been suggested for the slow
service because it is believed that this average will allow of a rate
for all goods in open trucks as small as the lowest rate now charged
for minerals for short distances, the average being maintained by
higher rates chargeable for other kinds of goods as already described.
If the actual tonnage of goods carried is really less than that
mentioned in the official returns (it cannot be more), it may be found
necessary to fix a somewhat higher uniform rate, and the estimates may
be affected to a certain degree. The figures, especially those relating
to goods traffic, are put forward by way of suggestion only, and there
should be no difficulty in ascertaining a uniform rate in accordance
with the rules already stated.
It is believed that any difficulty in this respect will be solved by
the large accession of traffic by Fast service, which, as with Main
line passengers, is sure to follow the adoption of the scheme.
The average rate for “fast” service has been obtained by ascertaining
the lowest rate now charged for goods carried “per passenger train.”
This appears to be the rate for returned empties for any distance up
to 25 miles, namely, 6d. per cwt. (equals 10s. per ton). There is
also a charge of £1 for a load not exceeding 2 1/2 tons on carriage
trucks attached to a passenger train for a distance of 40 miles, and
thereafter at 6d. a mile. It is evident that an average of 10s. per ton
would allow of a still smaller rate than that amount for goods carried
in bulk and in large consignments.
FOOTNOTES
[5] “The Case for Railway Nationalisation” by Emil Davies, published by
Collins, 1913--Price 1s.
CHAPTER IV.
OBJECTIONS TO THE SCHEME.
I now propose to consider objections which may be raised to the
proposed scheme.
I anticipate opposition from those who object to all forms of =State
Ownership= or State Management.
The late Lord Avebury was one of the most prominent opponents of
nationalisation, and his views are set out in his book “On Municipal
and National Trading.”[6]
Mr. Edwin A. Pratt has written several books on the subject and has
recently collected all the arguments up to date against State Ownership
in his book, “The Case against Railway Nationalisation,”[7] In this
book examples are given of the experience of foreign countries and the
Colonies where railways have been taken over by the State.
Other writers who have advocated the retention of our present system,
and are quoted with approval by Lord Avebury, are the following:--
Messrs. G. Foxwell and T. C. Farrer (now Lord Farrer), in
“Express Trains, English and Foreign.” (1889);
Mr. W. M. Acworth, in “The Railways and the Traders”;
Mr. H. R. Meyer, in “Government Regulation of Railway Rates,”
and in “Railway Rates”;
and Lord Farrer and Mr. Giffin, in “The State in its Relation
to Trade.”
On the other side, the following, among other advocates of railway
nationalisation have shown the great advantages to be anticipated by
such a measure, and have given very cogent answers to the objections of
the opponents, namely:--
Mr. William Cunningham, “Railway Nationalisation.” (Published
by himself at Dunfermline, 1906, 2s. 6d.);
Mr. Clement Edwards, M.P., “Railway Nationalisation.” (Methuen
& Co., 1907, 2s. 6d.);
and Mr. Emil Davies in several books, including his latest,
already referred to, “The Case for Railway Nationalisation.”
(Collins, 1913, 1s.)
But in all these books, and in other books and articles, both for and
against nationalisation, it has been assumed that if, and when, the
railways are acquired by the State, the same system will obtain as now,
and as obtains in the case of all the foreign countries and colonies
referred to, namely, =to charge according to distance and according to
“what the traffic will bear,” and with the primary object of making the
most profit=.
With very great deference to all these distinguished writers, it
appears to me that they have one and all overlooked the fundamental
principles which should be acted upon by a State or a Municipality
first in deciding whether or not to acquire a monopoly, and secondly,
in the administration of it when acquired. These principles depend upon
=the fundamental difference between the objects in view, and actuating
a Company or individual on the one hand and a Nation or Municipality
on the other in acquiring a monopoly=. In the former case the =sole
object= is that of =pecuniary gain or profit=; in the latter the =sole
object= is, or ought to be, the =benefit of the community=. It may
be said that these are not respectively the sole objects, but only
the =primary objects=. My reply is that in the case of the company it
is the duty of the directors, as trustees for the shareholders, to
so carry on the business in question as to produce the most profit,
irrespective of any benefit to the community, or, indeed, to any
persons other than the shareholders. Railway companies, it is true,
provide the benefit of transport, and various advantages held out by
the companies as inducements to use their particular lines, but these
are, of course, solely offered with the view of increasing the profits.
Other advantages for the comfort, safety and benefit of the public
are provided under compulsion from the Government, as a condition
of the grant of privileges and compulsory powers conferred upon the
companies, without which the railways could not have been made. I refer
to such matters as rules and regulations for the safety and benefit of
the public; workmen’s trains; maximum fares and rates allowed to be
charged; provision for at least one train a day at all stations, etc.
Conversely, in the case of a Nation or Municipality taking over a
monopoly, it is the duty of the Government Department or Town Council
to so carry on the business as to render the most efficient service,
at the lowest cost consistent with efficiency, with paying for the
cost of acquisition and with paying the working expenses. Advocates
of nationalisation urge that profits should be applied in reduction
of taxation, and suggest that this is in itself one of the benefits
to be derived therefrom. Opponents always assume that national and
municipal trading must be carried on with a view to profit, and some
even ridicule the idea that any trading concern can be successfully
carried on unless with this view and with a resulting profit.
Acrimonious discussions have taken place as to whether profits which
have been claimed by advocates of municipal trading to have been made
by tramways, gas, water and electricity works, are only paper profits
as alleged by the opponents. In Lord Avebury’s book already referred
to,[8] one whole chapter, headed “Loss and Profit,” treats of the
question whether municipal enterprises have been profitable or not,
and he adduces many examples to prove that in most cases the alleged
profits are imaginary.
It has, in fact, been the practice universally to apply profits made
out of municipal trading in this Country in reduction of rates, and
in foreign Countries, where railways are owned by the State, their
revenues are made use of either as general revenue or, as in Prussia,
for social or educational purposes, which would otherwise be provided
for by direct taxation. The only instance of national trading in
this Country is the General Post Office, and I think it is correct
to say that the original intention when Penny Post was established
was to so carry it on that working expenses only should be covered
by the revenue. In practice, the gross revenue is entered with other
items of revenue in the National Accounts, and the gross expenditure
with other items of general and non-productive expenditure, with the
result that the net profits of the Post Office, in effect, become a
source of general revenue, and are therefore applied in reduction of
general taxation. Until recent years this net profit has not been
considerable, but last year it was as much as £5,000,000. Having regard
to the continual and progressive increase in postal business, and the
acquisition of the whole telephone system, there is every prospect of
still further increase in net profits. What will be the result of a
continuance of this practice of applying net profits of Municipal and
National trading towards reduction of rates and taxes? It has not, so
far, had any very serious result, simply on account of the fact that
such net profits have not yet been of a very startling amount. But if
these profits should increase, will not the result be the very evils
which are the natural consequence of a private monopoly?
Once the principle is admitted that profits from such trading shall go
in relief of taxation, the service will, and must, be worked more or
less with the primary object of making as much profit as possible, with
the inevitable result that the service in question will be starved for
the sake of the profits. This has actually happened in the case of the
Prussian State Railways, the one State Railway which has so far made
the greatest net profit.
In addition to this difficulty there are others inherent in State or
Municipal trading, if the principle of making profits be admitted, and
if profits are actually made. In such a case the Chancellor of the
Exchequer will be expected to budget for further profits, the general
public will expect improvements in the service, traders will expect
that the charges to them should be reduced, and the workers will expect
that their wages should be increased.
This view is not a new one. It has been advocated in respect of the
Post Office for many years by such well-known postal reformers as Lord
Eversley (formerly Mr. Shaw Lefevre), and Sir Henniker Heaton, Bart.
The latter, I believe, has several times moved resolutions in the House
of Commons for the express purpose of having the postal profit applied
to the use of the Post Office itself, instead of to general revenue.
It is well known that “=strikes=” are more likely to arise in a period
of trade prosperity. It is the natural result of the workers seeing
large profits made out of their industry, if they should have no
benefit, by increase of wages, by sharing in such profits or otherwise.
It makes but little difference to the workers that those profits go to
ratepayers, instead of to shareholders, more especially as they usually
inhabit houses let on weekly inclusive rentals, and are exempt from
income-tax, so that they do not directly pay either rates or taxes. If,
on the other hand, the profits are devoted to improving the efficiency
of the service or cheapening the charges, then, not only are there no
profits to excite the cupidity of various sections of the community,
but the workers do, in fact, benefit by themselves and their families,
as well as the whole of the public for whom the services are worked. No
strike is ever successful which does not gain general public support,
and even under existing conditions there is much less likelihood of
strikes in the case of Civil Servants or postal or municipal employees,
partly on account of the better wages paid, the certainty of continuing
in employment except for misconduct, and the prospects of a pension,
but still more on account of the practical certainty that public
support would not be given to a strike which interferes with one of the
most important of the public services.[9]
Another evil of ignoring the difference in principle of a public
monopoly and a private monopoly has been the practice of applying to
public monopolies the practice which all private monopolies endeavour
to achieve (and properly so as their sole object is profit), namely,
to put down all possible competition. If the principle I advocate,
namely, that the =sole object of a public monopoly is the benefit of
the community=, then if some improvement in the service, the subject of
such monopoly, shall be invented, which is proved to be practicable,
the public should have the benefit of such improvement, and, =instead
of a prohibition of such private enterprise every encouragement should
be given= to it.
In our Navy, when new inventions are found which increase its
efficiency, no time or money is lost in adopting them, even at the
expense of discarding comparatively modern men-of-war or appliances.
The risk to the nation of not doing so is too great to allow
considerations of expense to stand in the way.
But what has happened in the case of so important a commercial matter
as the Telephone? The Post Office are authorised by Act of Parliament
to forbid any competition, a provision evidently enacted under the
impression that a public monopoly must have Statutory protection
against competition, which a private monopoly always seeks to obtain,
but has to pay for. Having this monopoly, and having purchased the
telegraphs, the Post Office from the first regarded telephones with
the utmost jealousy, because it seemed likely to interfere with its
“Profits”! Lord Avebury quotes from “The Times” of 13th June, 1884, as
follows:--[10]
“… the action of the Post Office has been so directed as to
throw every possible difficulty in the way of the development
of the telephone, and of its constant employment by the
public. We say advisedly, ‘every possible difficulty,’ because
the regulations under which licences have been granted to
the telephone companies are in many respects as completely
prohibitory as an absolute refusal of them.” “… the effects of
this claim are nearly as disastrous to the Country as to the
inventors and owners of the instruments.”
When it is remembered that the Post Office insisted on being paid
one-tenth, not of the profits, but of the gross receipts, the wonder
is that our telephone system is not more backward than it is. Lord
Avebury, of course, uses this and other instances, such as the
opposition of municipalities owning tramway and gas undertakings,
to tramway extensions in adjoining districts, and licences to motor
omnibuses and also to the introduction of electricity for lighting
and power, as an argument against nationalisation and municipal
trading.[11] That these constitute a strong argument against public
monopolies being worked for profit, I readily admit, but they do not
weaken the argument that all such concerns which must, in their very
nature, be incapable of effective competition, should be taken over
by the community, and be worked solely for its benefit. What possible
chance is there of competition in a telephone system? It is, of course,
an essential element to its success that each subscriber should be able
to communicate with every other one. How, then, can it ever have been
imagined that there could be any effective competition between rival
systems? And yet competition was actually attempted between various
municipalities and the National Telephone Company, and afterwards the
Post Office itself was authorised to “compete” with that Company.
The ultimate purchase by the State was, of course, a foregone
conclusion, but at what expense of both time and money has this at
length been effected! The complaints which have been made since
the completion of this purchase are evidently the result, not of
nationalisation, but of the mistaken practice followed in a fruitless
attempt at making or retaining so-called “profits” of the telegraph
system, by at first putting “every possible difficulty” in the way of
telephones, then attempting to compete with them, and then waiting a
number of years before completing the purchase, with the result of
being compelled to take over a large number of obsolete plant and
instruments, and linking them up with a new system, thus producing a
state of confusion and useless expenditure of time and money, which
could all have been avoided by purchase of the patents and patent
rights more than 30 years ago.
It is only right to say that Lord Avebury was still of opinion in 1907
that the resolution of the Government to buy up the National Telephone
Company was “an extraordinary and most unfortunate policy.”[12]
Mr. Hanbury, who was the Minister mainly responsible in 1906 for the
purchase of the telephones, had evidently changed his opinion since
1889, when, in answer to a deputation in favour of purchasing the
telephones, he said, according to a report quoted by Lord Avebury from
“The Times”:--
“If the telephone service was cast upon the Post Office it
would be to the detriment of both the postal and telegraph
services. Then, again, it would increase enormously the
Government staff. He need only appeal to the Members of
Parliament present to say whether they would like to have the
weekly appeals for increase of wages from those State servants
still further extended.”
Here we have exactly one of the arguments which is now being used
against railway nationalisation, and by the very Minister who, 17 years
after, did the very thing he had clearly condemned.
I admit the argument would hold good if the restriction be not imposed
by an inflexible rule that there should be no attempt to work the
concern, whether Post Office, telephone, railway or other monopoly for
purposes of profit.
I have already referred to the mistake the Post Office are making in
following the example of the private monopolist, the National Telephone
Company, in charging for telephones according to distance, although
between the very same towns in which different rates are charged the
same department charges 6d. only for telegrams! This can only be with
the strange, yet futile, intention of making more profit without
regard to the benefit of the community. If the same rate were charged
for Trunk calls as for local calls, many more provincial and country
people would subscribe, and the wires being already laid and exchanges
established, the additional expense would be but small.
It would seem, indeed, that the search after profits in the case of
Government or municipal monopolies is as futile as the search by people
after happiness, personified by Maeterlinck as “The Blue Bird,” and
that when the only object is to benefit the community, the profits
come, as does happiness, when the only object is that of benefiting
other people.
Now, in considering the principle here laid down, it appears to me
that there are four rules which should be observed when a nation or
municipality undertakes anything in the nature of a trading concern:--
1. Only such concerns should be taken over as are, and must be,
=in the very nature of things, a monopoly=, or, in other words,
are not susceptible of effective competition.
2. Any such concern taken over should be worked with =the sole
object in view of benefiting the community= and, therefore,
the charges made should be so adjusted as to pay for the
acquisition of the concern and for working expenses, and any
surplus from time to time applied, only in improving the
efficiency of the undertaking, or in reducing the charges made.
3. In the event of any invention or improvement being made,
and proved to be commercially successful, whereby the benefit
to the community can be increased, and provided the concern
remains in its nature a monopoly, such improvements should
be taken over and worked by the State or municipality, and
meantime =there should be no prohibition of any private
enterprise carried on in competition= apparent or real.
4. All such concerns, whether national or municipal, should be
worked or directed by one or more Department of State, having
at its head a Minister, who should be a Member of the Cabinet,
and =responsible to the House of Commons, and as such liable to
a vote of censure for any abuse or want of efficiency in the
concern=.
As to Rule No. 1, there appears sometimes to be a very thin line
between what is, and is not, susceptible of effective competition. As
a general rule, =any concern which involves a right or easement over
land, must be in the nature of a monopoly=. Thus the supply of gas,
water and electricity, all of which must be conveyed by pipes or wires
into houses, are in the nature of a monopoly, but the fittings used in
the houses are not, but are susceptible of very efficient competition,
both as to workmanship, manufacture and design. All roads, including
railroads and tramways, are, and must be, in the nature of a monopoly,
but the manufacture of materials and rolling stock, the catering of
hotels, forming part of the railway undertakings, or in the trains
themselves, or in railway steamers, are all the subject of effective
competition and should, therefore, be put up for competition with
special supervision and restrictions against abuse of the privileges
obtained by competition on Government property.
Now, I would ask any unprejudiced reader who has studied the writings
of the eminent authors already quoted, and other opponents of
nationalisation, to read those books again with these four rules in
his mind, and consider whether all the objections so forcibly brought
forward against nationalisation would not be very nearly, if not
completely, answered, if such nationalisation were carried out with
strict adherence to these rules.
I venture to think that Lord Avebury himself would have admitted the
force of this contention. It would, at least, answer the question he
puts more than once, “Where, indeed, is it (municipal and national
trading) to stop? Is it to stop at all?… It is sometimes said that the
line should be drawn at necessaries. But if so, to light, gas, water
and tramways, we should have to add bread, meat, fire insurance, …
etc., while many would also add tobacco, tea and beer.”[13]
In effect, the whole of the objections to State ownership, as will
appear from a perusal of the various books referred to above, and the
arguments of other opponents, are all comprised under three heads,
namely, according to the relationship of the State:--
1. With traders.
2. With railway servants.
3. With the general public, especially on such matters as
officialism and inefficiency, owing to want of competition, bad
administration, and interference with private enterprise.
The first of the two objections referred to is that the Government
would be in the great difficulty of having to meet the conflicting
interests of traders and merchants on the one hand, and the general
public on the other, with continual disputes as to the claims of
various parties, and possible attempts to bring influence to bear on
the Government and Members of Parliament. This objection was raised
by the Prime Minister recently in reply to a deputation supporting
railway nationalisation. The difficulty has been found in countries
where railways are State owned, and would, I admit, be a most serious
objection, if, after nationalisation, the railways should be worked on
the same principle as now, namely, with the object of making the most
profit possible, and charging according to “what the traffic will bear.”
The objection, however, disappears if the proposed rules are adhered
to, especially when, as in the proposed scheme, fares and rates are
fixed irrespective of distance, locality, class of traders or goods,
and in which, therefore, no question of preference or, indeed, of any
conflicting interests can arise.
As to the second heading, affecting the relationship of the State with
the railway servants. It is suggested that the railway servants (who
would, on nationalisation, become Civil servants) could use their
voting powers to exact undue privileges for themselves which they
cannot now obtain, and that serious abuses might arise owing to the
great political power exercised by a large increase in the number of
voters who are also Civil servants.
This does not appear to me so formidable an objection as the first, but
it is quite possible that a large united body of Civil servants might
have power to so influence the Government as to extract higher wages
or less hours, if they discovered that by their exertions a very large
profit was derived by the railway system.
Some writers have gone so far as to suggest that all persons employed
by Government should be disfranchised. Others suggest that special
representatives of Government officials should be returned to
Parliament. Others that all such officials should take the same oath
of allegiance as soldiers, and, in short, become subject to military
discipline. In two articles appearing recently in the “Westminster
Gazette,” under the title of “Unrest in the Railway World, by an
Expert,”[14] it is suggested that “unless some discipline of the
military kind were introduced” (in the event of nationalisation),
“there would be no available methods of dealing with a national strike
of railwaymen, other than to concede to their demands.” The question
of “Strikes” has already been dealt with above (page 36). As to the
political difficulty, although it is true that the number of Civil
servants would be greatly increased (and it has been estimated that
the total number of postal and railway servants who would have the
vote might be as many as 600,000), it must be remembered, as pointed
out by Mr. Emil Davies, that this number is spread over the whole
Country, and the percentages in each district, compared to the whole
number of voters, would not be a large one, except in railway centres
like Crewe, where they already have a preponderance of votes. In any
case, the same considerations which, as above mentioned, would be
likely to prevent strikes, would operate equally in the region of
politics if the four rules mentioned are adhered to, especially under
the proposed scheme, carried on with the primary object of the public
benefit. Exactly the same conditions would obtain as with the Post
Office now.
Other grounds of objection to State ownership are:--
=1. The fear of inefficiency owing to lack of competition.=
=2. The fear of difficulty in obtaining redress for loss or
injury from a Government Department.=
=3. The fear of officialism.=
=As to competition=, it is now generally admitted that there is no
effective competition on railways.[15] In most parts of the country
there never has been any competition, as one company only is available.
In others, where more than one company operates, working arrangements
have been made not only as to the fares and rates but also as to time
of trains, thus precluding any effective competition. In the very
nature of things no competition can be effective in a system of railway
transit.
As to the questions of =officialism= and =difficulties of obtaining
redress=, can anyone suggest that these are less in the case of private
companies, responsible to no one but themselves, than in the case
of a Government Department with a Cabinet Minister at the head who
is responsible to Parliament? A vote of censure is one of the most
powerful weapons in Constitutional countries against any serious abuse
in a Government Department.
Mr. Edwin A. Pratt, in his book before referred to, cannot but
admit the cogency of the argument in favour of the amalgamation and
unification of the railways, but urges that this should be accomplished
by the amalgamation of the whole of the existing railways into =a Trust
or Traffic Board=. The answer to this is that when once constituted,
even though appointed by Parliament, such a Board =is responsible to no
one but itself=, and, however eminent may be the directors or managers,
the want of ultimate responsibility inevitably and unconsciously leads
to abuses. =Can any instance be adduced of the successful working of
any such large Trust or Board?= On the other hand, instances are well
known to the contrary. One of these was the notorious Metropolitan
Board of Works. And is it certain that the Metropolitan Water Board and
the Port of London Authority, both of which are constituted on similar
lines, will answer all the expectations which were formed of them?
There are, of course, difficulties inherent in the administration
of a great Government Department, but, as already hinted, various
remedies may be suggested for many of these difficulties. For instance,
there might be elected =a Railway Council= or Standing Committee in
Parliament, consisting of representatives of several large districts
of the United Kingdom, and of which the “Minister of Transport” would
be, ex-officio, the President. In the first instance possibly some of
the present directors of railway companies, many of whom are already
in Parliament, could be members of this Council. Any proposals for
improvements, extensions or alterations in the services of the railway
or Post Office would be submitted to and decided upon by this Council
or Committee, subject to an appeal to Parliament on questions of
principle or finance. This would be one means of obviating an objection
found in some countries where the railways are owned by the State,
namely, the continual trivial complaints made in Parliament about the
railways.
A further suggestion is that a =special Railway Court= should be
established in London with branches in every important centre, and
presided over by competent arbitrators to determine and adjudicate upon
claims against the Department for personal injuries to passengers and
servants, or for loss of or damage to goods, or by reason of delay,
any one accident, involving a large number of claims, being dealt with
by the same Court instead of being, as now, the subject of innumerable
actions at law in the ordinary Courts. This Railway Court might also be
useful in settling disputes between the Government and the men.
OTHER OBJECTIONS.
Apart from the objection to State ownership there are no doubt many
who are now deriving income from railways who will fear that their
interests may be prejudiced by the proposed change. Fortunately
=there can be but very few who will be thus prejudiced=. As to the
existing staffs, such as booking clerks and the Railway Clearing House
staff, whose services would no longer be required in those particular
departments, there ought to be more than sufficient vacancies for these
in other but more necessary branches of the railway service, especially
in view of the increased traffic which is sure to arise.
=Many traders= who may at first sight consider that their profits would
suffer if the scheme is adopted =will find= on further consideration
=that the benefits= they will have by the proposed scheme =will be
greater= than any loss they could possibly sustain. To take one
instance. =Newspaper proprietors= may consider that upon railways
being nationalised they would lose the benefit of the extensive and
remunerative advertisements they now receive from competing railway
companies. So far from there being any loss, there will be profits,
partly by the official announcements which the Department will cause
to be inserted in all newspapers of time tables, rates, etc., but
even more so by the enormous saving in the carriage of paper and of
the newspapers, in travelling expenses of special correspondents
and others, and by the additional profits arising from increased
circulation which is sure to follow upon the increased facility and
cheapness of distribution.
Mr. W. M. Acworth, the well-known railway expert, to whom I submitted
a rough draft of this pamphlet, was kind enough, while refraining from
any detailed criticism, to call my attention to what he considered a
difficulty in my proposals. He says:
“The fundamental objection to a scheme of average fares and
rates is that people whose fares and goods rates are ‘averaged
up’ will, so far as possible, cease to use the trains; those
whose fares and rates are ‘averaged down’ will increase
enormously, with a corresponding increase in working expenses.
Have you appreciated that under your scheme a passenger from
London to Glasgow would, in fact, in most cases pay, not
1s., but 3d. or 4d., by taking local tickets from London to
Birmingham, Birmingham to Crewe, etc?”
And he instances the Hungarian zone system, which has completely broken
down, as a case in point.
My answer to this is, first, that according to my scheme there is
no “averaging up;” the flat fares are all “averaged down” to the
minimum. Secondly, while welcoming the admission that the effect of
“averaging down” is to increase the traffic “enormously,” I am sure
that Mr. Acworth himself does not mean that the working expenses will
increase in anything like the same proportion. He has himself pointed
out in an article on railways[16] that the train cost of carrying 200
passengers and 10 passengers is practically the same. Further reasons
for this fact are given under the heading of “Working Expenses” in this
pamphlet. Thirdly, while admitting that under my scheme a passenger
might, by taking three local trains which stop at all stations travel
from London to Glasgow for 3d., I can hardly imagine that any but the
smallest percentage of travellers would endeavour to save 9d. by taking
a journey in which they would spend sixteen hours and have two changes
at least, instead of travelling the same distance by one train, in
eight hours, for 1s. As to the zone system, the whole advantage of the
flat rate or uniform fare is lost by the difficulty of passing from one
zone to the other.
FOOTNOTES
[6] “On Municipal and National Trading” by The Rt. Hon. Lord Avebury.
Published by Macmillan & Co., 1907. Price 2/6.
[7] “The Case Against Railway Nationalisation” by Edwin A. Pratt.
Published by Collins, 1913. Price 1/-.
[8] “On Municipal and National Trading,” pp. 56-92.
[9] While this pamphlet has been in the Press, there has been a strike
of the Leeds Municipal workers, and the threat of a strike in the Post
Office. It will be interesting to see whether the considerations above
mentioned under existing conditions will be borne out, and still more
if when the causes are ascertained, it can be proved that had the
principles here advocated been carried out in practice, there would
have been no strike, nor any threat of one.
[10] On Municipal and National Trading, p. 109.
[11] Ibid, Chapter VII.
[12] On Municipal and National Trading, p. 107.
[13] “On Municipal and National Trading,” page 10.
[14] “Westminster Gazette” of December 2nd, 1913.
[15] See “The Railways of Great Britain” by Lord Monkswell. (Smith,
Elder & Co., 1913. Price 6/-). A most interesting book, published
since this pamphlet was written.--Lord Monkswell is not an advocate
of nationalisation, but apparently has an open mind.--He admits that
England is now only served by five groups of railways, and that there
is no effective competition.
[16] In Palgrave’s “Encyclopædia of Political Economy,” Vol. III.
(1899), Article on Railways, signed W.M.A.
CHAPTER V.
FINANCE OF THE SCHEME.
The final and most important criticism of the scheme will be on the
matter of finance.
The question is, can a sufficient revenue be obtained from the small
uniform fares and rates proposed, after providing for working expenses,
to pay not only interest on the purchase money but the purchase money
itself?
It is a curious coincidence that in the year 1838, before Penny Postage
was instituted, the average amount received for every chargeable letter
was 7d. and a fraction--the actual average railway fare now paid by
every passenger (excluding season tickets).
The number of letters carried during the first complete year after the
uniform rate of 1d. was adopted was more than doubled. Notwithstanding
this the deficiency in net revenue was about £2,000,000, and the
deficiency was made good out of general revenue, this being well worth
while owing to the great benefit to the nation of Penny Postage.
In the case of railways, however, the amount involved is so large that
no Government could be expected to give any consideration to a proposal
which would involve making good so large a deficiency as would be
occasioned by the reduction to a flat rate of 1d. As will be gathered
from the remarks made when dealing with the principles of the scheme,
this difficulty is now overcome by dividing the traffic on railways,
both of passengers and goods, into two kinds of service, namely, Fast
and Slow. It will be found that by this means =no greater percentages
of increase of traffic will be required to produce the same gross
revenue as at present than 15 per cent. of passenger traffic and 10 per
cent. of goods traffic=. It will also be shown that if the increase of
traffic should not exceed this estimate the additional working expenses
will be so small that they would be more than met by the economies
effected by unification. If these propositions prove to be true, then
there will be no deficiency to be provided for.
It is necessary in order to prove this to set out the figures of the
present receipts and expenses, and an estimate of the same under the
proposed new scheme.
PRESENT FIGURES.
The following are in round sums the average figures for the two years
1911 and 1912, based on the Railway Returns published by the Board of
Trade annually under the Regulations of Railways Act, 1871:--
=(_a_) Passenger traffic receipts.=
Season ticket holders £5,000,000
Other passengers 40,000,000
-----------
Total from passengers only 45,000,000
Mails and goods by passenger trains 10,000,000
-----------
Total from passenger traffic 55,000,000
=(_b_) Goods traffic receipts.=
Minerals £30,000,000
General merchandise 32,500,000
Livestock 1,500,000
-----------
64,000,000
=(_c_) Miscellaneous receipts.=
Steamboats, docks, etc. 5,000,000
Hotels, rents, etc. 5,000,000
-----------
10,000,000
-----------
Grand Total £129,000,000
=Expenditure.=
Maintenance of ways,
works, stations, docks,
etc. 18,000,000
Traffic expenses 23,000,000
Locomotive and rolling
stock expenses 28,000,000
General charges, rates
and taxes 12,000,000
-----------
81,000,000
-----------
=Net receipts= £48,000,000
===========
=Total number of passenger journeys=, including
season ticket holders (assuming that each
annual ticket represents 200 double journeys
per annum only), about 1,620,000,000
Of this total there were first or second class
passengers about 160,000,000
That is, about 10% of the total number carried.
=The average fare for every journey is therefore 6½d.=
In other words, if every passenger paid for every single journey, long
or short, the sum of 6½d., then the gross receipts from passengers
would be about the same amount as is now received.
=Total tonnage of goods= per goods train:
Minerals Tons 410,000,000
The receipts as above for these represent
=an average of 1/6 per ton.=
General Merchandise Tons 114,000,000
The receipts for these as above represent
=an average of 6/- per ton.=
-----------
Total tonnage per Goods Train Tons 524,000,000
===========
The total receipts for the two kinds of merchandise together =show an
average of 2s. 4d. per ton.=
Note that the total tonnage of minerals carried is about four times
that of general merchandise.
The total tonnage may be less than the above, owing to overlapping of
the various companies, but for the purpose of my estimates I am taking
these official figures.
ESTIMATES UNDER PROPOSED SCHEME.
(_a_) As to passenger traffic.
There is, of course, no official return as to the proportions of Main
line and Local passenger traffic, but it is clear that the percentage
of small fares must be very great. Assume that this is over 80 per
cent., then there would be in round figures about 300,000,000 (that is
under 20 per cent.) of Main line passenger journeys, and assuming that
the number of first class passengers will be only 10 per cent. (the
above average percentage of first and second class passengers), then
the revenue from the existing number of passengers under the new scheme
would be as follows:--
=Main Line= 300,000,000 at 1/- equals £15,000,000
of whom 30,000,000 at an
additional 4/- for First
Class equals 6,000,000
=Local= 1,320,000,000 at 1d. equals 5,500,000
of whom 132,000,000 at an
additional 5d. for First
Class equals 2,750,000
----------- -----------
=Present No.= 1,620,000,000 will produce £29,250,000
===========
as against the present total of £45,000,000, or a deficiency of about
£16,000,000 per annum, assuming there should be no increase in the
existing traffic. This seems an appalling deficiency, but “Wait and
See!”
It is quite clear that there would be a very large increase of traffic,
more particularly of the long distance or Main line passengers, as
under the existing system the fares for short distances up to 12
or even 20 miles are sufficiently low to remove practically all
restrictions. In the case of long distances, however, there is this
double restriction for passengers--namely, the time occupied and the
high price of the fares. If the latter restriction is removed a very
large increase of traffic is sure to result, not only for purposes of
pleasure but also for business and trade purposes. The Local traffic
will also increase partly by reason of the increased number of long
distance passengers requiring the use of the Local lines (both suburban
and small branch lines), and partly by the reduction to 1d. of many of
the present suburban fares. In order, however, to be on the safe side
in the estimate, I propose to take no account of any increase in Local
passengers and to reckon only the increase required in the number of
Main line passenger journeys. It will then be found that 250,000,000
more Main line passengers will provide for the above large yearly
deficiency, as follows:--
250,000,000 at 1/- £12,500,000
Add 25,000,000 at 4/- for First Class 5,000,000
-----------
£17,500,000
===========
This will bring the gross receipts from passengers to £46,750,000, with
=an increase of about 15 per cent. only= on the present total number of
passengers carried, and £1,750,000 more revenue.
The criticism may be made, however, that this number is nearly double
the existing number of long distance passengers. Will such an increase
be realised?
From a consideration of the following reasons it is submitted that not
only will it be so, but that in point of fact a much larger increase
may reasonably be anticipated.
1. No account as to passenger traffic has been taken of the
normal increase in the number of passengers which has continued
to increase regularly with the increase of population.
2. Under the proposed scheme the uniform fares are for _as far
as the train travels only_, so that a journey say from London
to Londonderry will involve at least three 1s. tickets, one
to Holyhead, a second from Holyhead to Dublin, and a third
from Dublin to Londonderry, whereas under the present system
one through ticket would be purchased and would appear in the
official returns as one journey only.
3. In practice nearly every single journey undertaken means
_a return journey home_, so that an increase of 250,000,000
more passenger journeys does not involve a greater increase in
the movement of the population than is represented by, say,
150,000,000 passengers.
4. If the number of passengers carried by the railways is
compared with the population it may be noted that the total
number of passengers carried last year in the Tube and Suburban
Railways of London, with a population of between six and seven
millions, was about 500,000,000 in addition to about the same
number carried by omnibuses, and a further similar number by
tramways. A similar proportion of railway passengers to the
population of the United Kingdom of nearly 50 millions would
be over 4,000,000,000 per annum, so that an actual total
of 1,850,000,000 would undoubtedly be much less than may
reasonably be anticipated.
5. It is not only the increased number of people who would
travel to and from all parts of the country who now cannot
or will not do so on account of the expense, but also the
increase in the number of journeys undertaken by existing
travellers. Parents living in remote parts of the country
whose children work in large towns and who, on account of high
fares, cannot visit each other, business men and commercial
travellers who will multiply their long distance journeys for
business purposes if they can do for 2s. what now costs 10 or
20 times as much, are a few among many classes who will swell
the number. It will be remembered that by far the greater
proportion of the population are those in receipt of an income
of less than £3 per week to whom any fares of 10s. or over are
prohibitive except in extreme cases.
Let me give one very homely illustration which has come under
my notice. A domestic servant in London had a serious illness,
necessitating an operation at one of the hospitals. Her parents lived
in humble circumstances in a Cornish village. The mother came to London
and had to pay £2 for a return ticket. Her daughter had to remain about
two months in the hospital while the mother had to return home without
being able to afford the luxury of another return journey to London.
But during the whole of that time trains were going to and from the
same place every day and night with plenty of room for the old lady,
who could, of course, have been carried any number of times without any
appreciable cost to the company.
Now, suppose the uniform fare of 1s. each way had come into operation,
she or some other member of the family would, no doubt, have come up
at least once a week, and instead of one return ticket which cost £2,
and would be included in the Board of Trade returns as two passenger
journeys, the family would have only paid 16s. for the eight double
journeys, the extra cost to the Government would be nil and the
increase in the number of passenger journeys would be 14.
It is not unusual to see long distance trains arrive in London with not
more than 15 or 20 passengers.
(_b_) As to goods traffic.
For the purposes of the estimates of goods traffic there must be
added to existing total receipts from goods train traffic the amount
included in the official returns under the head of “passenger traffic”
of £10,000,000 received for mails, luggage, and other goods carried
by passenger trains, making the total revenue for goods at present of
£74,000,000. There is no official Return as to the tonnage of goods
carried by passenger trains, but assuming that the present average
rate for goods carried by passenger trains is £2 per ton, this would
represent a further tonnage, irrespective of passengers’ luggage, of
20,000,000 tons.
The figures under the new scheme, if there should be no increase in the
tonnage carried, and assuming that goods by fast service should be no
more than the amount now estimated per passenger train, would thus be
as follows:--
By slow service 524,000,000 tons at 1/6 £39,300,000
By fast service 20,000,000 ” ” 10/- 10,000,000
Live Stock, as now 1,500,000
-----------
£50,800,000
Thus showing a deficiency of about 23,200,000
-----------
as against the present total of £74,000,000
===========
Following the analogy of the passenger traffic, I will only estimate
for an increased traffic by fast trains, and for this purpose there
will be required:--
48,000,000 tons, which at 10s. equals £24,000,000, and will
bring the total to £800,000 more than the present total
receipts from goods, by both passenger and goods trains.
This increased tonnage it will be seen is =an increase of under 10 per
cent.= on the present total of 550,000,000 tons. It is probable that
with a reduction of freight per fast train to the uniform rate of 10s.
per ton, a considerable proportion of existing goods train traffic
would be transferred to fast trains, so that the same figure might be
arrived at with much less increase in tonnage. This fact may also be
taken into account when adjusting any mistake in the official figures
of the total tonnage carried.
As in the case of passenger traffic, this percentage is surely not only
a reasonable estimate, but one which may reasonably be anticipated,
and, further, the increase will be progressive.
The following among other reasons may be adduced:--
1. The =example of the Post Office= is the best precedent that
can be given of the result of the adoption of a minimum uniform
rate. In the year before the introduction of Penny Post the
number of letters per head of population was only three. This
number is now 72, irrespective of postcards and parcels, and it
is still increasing. The number of letters carried in 1838 was
70,000,000. In the first complete year after the Penny Post was
established this number was doubled. In 1863 it had multiplied
by eight times, and since then it has been doubled in about
every period of 20 years.
2. The large amount of =goods sent now by road=, especially
in recent years by motors and steam tractors on account not
only of the heavy railway rates but also the cost of loading
and unloading, would with uniform rates be sent by rail. In
this connection it may be mentioned that a very considerable
increase of carriage by trolley trucks of loaded carts and
pantechnicons, or of the “containers” advocated by the New
Transport Company, Limited, thus avoiding both shunting and
the double expense of packing and unpacking, may reasonably be
anticipated.
3. A still greater increase in fast train traffic may be
expected in =perishable articles=, such as fruit, fish, milk
and dairy produce. The so-called reduced rates now in force
for instance for carriage of fresh fruit vary from 1s. 6d. per
cwt. (equals £1 10s. per ton), from Hampshire to London up to
as much as 8s. per cwt. (equals £8 per ton), from Hampshire to
Scotland, these rates being “reduced” on account of the large
amount of fruit (strawberries), requiring in the season special
trains carrying nothing but fruit. The rates for the same goods
from other parts where the quantity is not so considerable are
in some cases more than double, so that the farmers cannot
afford to send the goods. The rates for fish are similar, and
the same considerations apply, so that very little is consigned
to town except from fishing centres like Grimsby where large
quantities are available.
4. =With a regular service= from every station, village
stations as well as the large towns, and =similar to the
present postal service=, in fact forming an extension to all
goods of the present Parcels Post service, no one can doubt
that the total increase will be considerably more than the 10
per cent. estimated for.
CHAPTER VI.
WORKING EXPENSES.
Most critics will contend that the increased traffic will lead to an
enormous increase of working expenses.
In the first place allowance must be made for the several economies in
management occasioned by the amalgamation of the whole railway systems
in one and with the Post Office as already mentioned, and of which the
following is a brief list, viz.:--
Abolition of,
(_a_) The Clearing House,
(_b_) Separate boards of directors and clerical staffs,
(_c_) Legal and Parliamentary expenses,
(_d_) Advertisements,
(_e_) Book-keeping, printing and booking clerks now required
for differential fares and rates.
Economies by avoiding,
(_a_) Competing Receiving Offices, Post Offices or stations in
same localities,
(_b_) Competing trains,
(_c_) The waste of rolling stock now occasioned by the
ownership of different companies, instead of being used
according to the requirements of traffic.
The latter has already been referred to in Chapter II. A further proof
of a practical nature was given by Mr. Oliver Bury, the retiring
General Manager of the Great Northern Railway in 1912, who then said
that after the working arrangement with the Great Central Railway had
been entered into, although there had been an increase of 4,000,000
tons of merchandise carried, this additional traffic had actually been
worked with a decrease in the goods train mileage of 1,000,000.
Apart from all these economies, =the working expenses cannot increase
proportionately with the increase of traffic=. Most of the long
distance passenger trains now running, except on special occasions
or holiday time, could easily hold twice the number of passengers
with but little, if any, appreciable increase in the cost of haulage.
It must be remembered that a sufficiently powerful locomotive and
sufficient coal must be provided for every passenger train, on the
assumption that it will be full, whether it leaves with a full
complement of passengers or not. Therefore, even though the number
of passengers now carried were to be doubled in the case of all Main
line trains very little increase in the working expenses would result,
certainly not so much as the saving effected by the various economies
mentioned. So far as goods traffic is concerned, an increase of 10 per
cent. only, as estimated in the tonnage would certainly not cause any
great increase in the expenditure. If, on the other hand, the increase
of traffic should be very much more than the percentages mentioned
(as may very likely be the case), then the revenue derived will be
more than sufficient to provide whatever additional working expenses
there may be. The expenses of the important items (which constitute
probably 50 per cent. of working expenses) of permanent ways, stations,
signal boxes, and general establishment charges would not be seriously
affected by increase of traffic, only the rolling stock, coal, and part
of the staff.
In addition to these economies, and others set out more fully in
Chapter II., there will also be great economy in the working expenses
of the Post Office itself, including the telegraph and telephone
services. The actual effect of the amalgamation of the two services of
railways and Post Office on the total working expenses of the combined
services cannot be estimated with any degree of accuracy, but there
can be no doubt that it will result in large economies. The working
expenses of both, must, of course, be lumped together. No advantage can
possibly be gained by attempting to separate the expenses of various
branches of one State Department. This has actually been attempted in
the case of the telegraph service, one of the numerous branches of
the Post Office. It has been continually asserted that this service
has been, and is being, carried on at a loss, especially since the
introduction of the sixpenny rate. This assertion has always been an
enigma to me, for how any proper apportionment of the working expenses
of over 20,000 Post Offices throughout the United Kingdom can be made,
in order to ascertain what proportion is to be attributed to the
telegraph service alone, passes comprehension!
That this impossible task has been attempted, and apparently carried
out to the satisfaction of some persons in authority, does not prove
that the alleged loss has actually been made, but only that a large
amount of time and expense has been lost in elaborate and costly
calculations, which can be of no possible advantage to the service or
the Country! It is to be hoped that this attempt will not be continued
with the telephone service.
If, and when, the scheme proposed in this pamphlet for combining
railways with the General Post Office is carried into effect, I trust
that no such expensive and useless task will be attempted as to
endeavour to ascertain what proportions respectively of the expenses
of running the Royal Railways are to be attributed to carrying His
Majesty’s Mails on the one hand, or His Majesty’s subjects and their
goods on the other!
It is quite evident that on the two services being combined a portion
of the present working expenses of the Post Office, namely, those which
now consist of amounts paid to the Railway Companies for carriage of
mails, for rents of telegraph and telephone wires, and other services
rendered, will be swallowed up in the general working expenses, just as
the gross receipts of the Post Office will swell the total revenue of
the combined services.
For the purposes, however, of ascertaining what increase of traffic
will be required to produce (_a_) the same net revenue as under the
present system of railways, and (_b_) a sufficient revenue to purchase
the present system, I have taken no account of the decrease of Postal
expenses nor of the normal increase of the Postal Revenue. I also
am assuming that notwithstanding all the economies referred to, the
working expenses of railways will remain the same, or even increase,
owing to higher prices of goods and materials and higher wages, to the
round sum of £85,000,000.
It will thus be apparent that ample margin has been allowed for any
increase in working expenses that is likely to take place, and that
allowance has been made for the whole of the existing staffs to be
retained, whether now employed in services which may then be discarded
or not.
P.S.--While revising the final proofs of this pamphlet during the
Christmas Holidays, I have noticed in the “Daily Telegraph,” of 24th
December, 1913, a long letter signed “G.P.O.,” referring to an article
in the same well-known newspaper of the previous day. The letter is
printed in prominent type under the following heading:--
“PREHISTORIC METHODS OF POST OFFICE FINANCE--TELEGRAPH SERVICE ‘LOSS.’”
The correspondent, who evidently has expert knowledge of the subject,
refers to the “alleged great loss” of the telegraph service as “a
polite fiction.”
His letter completely confirms the views expressed above as to the
folly of attempting to apportion expenses of one branch of the service,
and he places the cost of the accounts at “hundreds of thousands of
pounds a year!”
CHAPTER VII.
TERMS OF PURCHASE.
If the railway system be purchased by the nation it will be in
contemplation as =a business proposition= to repay the capital expended
in the purchase, and this means, therefore, that if this scheme is
a practicable one =the shareholders and stockholders of the present
companies will be able to receive back their capital=, although, under
existing conditions, this appears absolutely hopeless. It is therefore
now proposed to consider upon what terms the railways can be purchased
and how the purchase money can be provided.
1. By the Railway Act of 1844 the Government is empowered to purchase
every railway company formed after that date. The price fixed is the
equivalent of 25 years’ purchase of the average annual divisible
profits for three years before such purchase, subject to the proviso
that any company whose divisible profits are less than 10 per cent.
on its capital is at liberty to have the terms of purchase fixed by
arbitration. At the date of this Act most of the Trunk lines, to the
extent of about 2,300 miles had already been constructed and are not
therefore subject to the provisions of this Act, but as the total
length of lines open in 1911 was 23,417 miles, it will be observed that
the Act applies to 90 per cent. of the whole railway system.
Notwithstanding this, there are undoubted difficulties in estimating
the actual purchase price, having regard to the fact that the majority
of the smaller companies, including the modern Tube Railways with
their large prospective profits, and probably the whole of the Irish
railways, pay less than 10 per cent. and would, therefore, be entitled
to arbitration.
There is, however, another precedent, viz., (2) The Indian State
Railways, which have been actually purchased by the Government from the
private companies by whom they were owned.
The dates and terms of purchase of these railways are included in an
official return of railways acquired by the Government. This return
was issued by the Board of Trade in 1908, pursuant to an order of the
House of Commons.[17] In India the railway undertakings of 16 separate
companies were acquired by the State between the years 1868 and 1906.
Of these companies six were purchased at a price mutually agreed upon
between the Government and the companies, these being small companies,
and the purchase moneys varying from £30,000 to £300,000. Three
companies were acquired at a purchase price equal to the share capital.
The remaining seven companies were purchased for a sum equal to the
value of the shares calculated at the mean market price during the
three years preceding the date on which notice of purchase was given.
In addition to payment of the purchase price the Government assumed
the liabilities of the company in respect of debentures and debenture
stock. Four of these companies (the larger ones) were, under an option
reserved by the contracts, paid by annuities spread over 73 or 74
years. One of these, the East Indian Company, was purchased in 1879 at
the price, calculated on the above basis, of £32,750,000, payable by an
annuity of £1,473,750 for the term of 73 years from 1880. This amounts
exactly to 4¼ per cent. on the purchase money, and will cease to be
payable after the year 1953.
In addition to this annuity, interest is paid on the debentures and
loans amounting altogether to about £16,500,000, the interest whereon
is about £500,000 or a little over 3 per cent.
If the Act of 1844 were now applicable to the whole of the companies in
the United Kingdom, and if we assume that by the time when the option
to purchase is exercised the net profits of £48,000,000 in 1911 shall
have risen to £50,000,000, the purchase money would be 25 times that
sum, viz., £1,250,000,000.
This sum is really slightly more than the total paid-up capital of the
railways after allowing for “watered” stock.
The following were the figures in 1911:--
Ordinary Stock £493,484,151
Preference and Guaranteed Stock 473,073,163
Loans and Debentures 357,461,047
------------
=Total paid-up Capital= £1,324,018,361
==============
There is included in this total, stock to the nominal value of
£198,000,000, or approximately 15 per cent., which represents nominal
additions made on consolidations and divisions of stock, and commonly
known as “watered” stock.
It will be noticed that the present net revenue of £48,000,000 only
represents an average of about 3½ per cent. on this total paid-up
capital. The total paid-up capital in the returns recently published
for 1912 is £1,334,963,518.
The Railway Nationalisation Society has prepared heads of a Bill in
Parliament, providing that the price to be paid for the whole of the
railways shall be calculated on the basis of the Act of 1844. No doubt
this would be opposed by holders of railway stocks and shares, having
regard to the fact that the result might be in effect to merely return
the capital, no account being taken of profits. If the purchase of the
railways is to be considered as “a business proposition” it will be
necessary to look fairly at both sides of the question, and endeavour
if possible to arrange terms which will not prove an injustice to the
present owners, and at the same time will be such as can be provided
for out of the ordinary revenue of the railways without financial loss
to the nation.
It must be remembered that shareholders or their predecessors invested
their money with the reasonable and proper expectation of having an
adequate return for it. No doubt they put down their capital with the
primary, possibly the sole, object of benefiting themselves, but the
fact remains that their capital has been the means of providing the
splendid net-work of British Railways now available for the nation to
purchase.
On the other hand, railway stock and shareholders must recognise that
their position under the present system is by no means an enviable one.
Many of them have for years been in receipt of no dividend whatever.
In no case has there been any attempt at repayment of capital moneys,
nor does there seem any prospect of it. The average net annual receipts
now earned by the whole of the companies is only a fraction over 3½ per
cent., and this percentage (which is less than before the year 1870)
has for the last few years been practically stationary. The working
expenses have been increasing to such an extent by reason of the
increase of wages and price of materials that last year the companies
decided on an all-round increase in fares and rates. According to the
latest returns this has already been to a large extent counteracted by
a decrease in traffic.
If, therefore, an offer were made by the Government to purchase the
whole of the railways upon similar terms to those on which the East
Indian Railway was acquired, namely for a sum equal to the mean market
price of the shares during the three years preceding the year in which
the Act to acquire the railways is introduced, it is submitted that
there could be no effective opposition to the proposal. In effect this
would mean a purchase at a price which is the value the public to-day
put upon each line of railway. The only practical difficulty of this
proposal will be to ascertain the market value of the shares of some of
the smaller companies, many of which are held by the larger companies.
In order, however, to avoid under-estimating the amount required, I
suggest for the purposes of my argument that the Government and the
companies mutually agree on a total sum of £1,350,000,000 as the
purchase price of all the undertakings of the companies, subject to
the existing liabilities for loans and debenture stock, now amounting
to £357,500,000, which would be assumed by the Government. This would
make a total in round figures of £1,700,000,000, or nearly £400,000,000
more than the total of the ordinary preference and guaranteed stock.
Surely this would be an outside figure. Indeed, it might be suggested
that the nation would be paying an excessive amount.
Mr. E. A. Pratt gives various estimates of what the purchase
price would probably be.[18] These vary from £1,052,000,000 up to
£1,769,847,000, an estimate of “The Railway News,” confirmed by the
“Financier and Bullionist,” of September 7th, 1912. “The Financial
News” in 1912 suggested £1,941,865,000 in 2½ per cent. Stock in order
to yield the present annual income of £48,546,000.
Taking the precedent of the East Indian Railway as a mode of payment
and without making any allowance for better terms of interest which the
Imperial Government might well obtain, it will be seen that the annual
amount required to provide a purchase money of £1,350,000,000 and meet
the above liabilities would be as follows:--
Annuities at the rate of:--
4¼ per cent. on £1,350,000,000 £57,375,000
Interest at 3 per cent. on Debentures of £360,000,000 10,800,000
-----------
Total £68,175,000
===========
According to the estimates set out in Chapter V. (if no further
increase of traffic is secured than is required for producing the
present revenue), there would be available toward this annual sum
required for purchase the following:--
Passengers 46,750,000
Goods 74,800,000
Miscellaneous, as now 10,000,000
------------
Total £131,550,000
Deduct for working expenses, as above 85,000,000
------------
Net revenue £46,550,000
This shows a deficiency to be made good of 21,625,000
------------
In order to make up the annual sum of £68,175,000
============
This annual amount could be provided by the following further increase
in passenger and goods traffic respectively, viz.:--
100,000,000 passengers at 1/- £5,000,000
10,000,000 ” ” 4/- 2,000,000
30,000,000 tons ” 10/- 15,000,000
----------
Total £22,000,000
==========
In these estimates no account has been taken of the increased revenue
of the Post Office, nor the increase in Local passengers and slow goods
traffic respectively, which is sure to be realised, and the receipts
for which would probably cover any increase in working expenditure. It
will be noticed that if the above increase should be obtained the total
estimated increase of passengers over the present totals would be as
follows:--
Passengers 350,000,000 or about 21%
Goods 78,000,000 or about 15%
It is, of course, not essential to the success of the scheme that
the whole of the increase here estimated should be obtained in the
first year after nationalisation has been carried out, although it is
considered that even in that short period, according to all precedents,
so small a percentage of profits may fairly be anticipated. It would
probably be necessary for the Government to raise a temporary loan
for initiating the scheme, but in any case it appears essential that
the purchase of the whole of the existing undertakings of the United
Kingdom should be completed as =at one and the same date=.
Other advocates of railway nationalisation suggest that the purchase
should be carried out gradually, and this course has been followed by
other nations. It is, however, of the very essence of the scheme here
proposed that every part of the country shall have the benefit of the
uniform fares and rates, and this would be impracticable unless the
whole system be taken over by the Government at one time.
The proposal that the price should be fixed by taking the mean price
of stocks for the three years preceding the year in which the Act
should be passed, is in order to avoid the market changes which might
be caused by anticipation of purchase by the State. It is suggested
that whatever price is taken as the basis of the purchase money, such
price should include everything, so that the whole undertaking would be
taken over without the necessity for any valuation of stock and plant,
a prolific cause of so much trouble and expense, as in the case of the
purchase of the National Telephone Company.
It may be said that the figures of the railway systems are so vast
that it would be impracticable to cope with them in one transaction.
Enormous as the figures must necessarily be, the principle is exactly
the same as in other financial transactions. Just as the Government
acquired the undertaking of the National Telephone Company by purchase,
which took effect on one day, so can this much larger transaction,
or series of transactions, be carried out. It is assumed that the
existing shares and stocks of railway companies would be converted into
Government Stock, all necessary apportionments being made up to a date
to be named in the Act of Parliament authorising the acquisition of the
railways. Upon such date the completion of the whole transaction will
be deemed to be effected.
FOOTNOTES
[17] This was on the initiation of Mr. Chiozza Money, M.P.
[18] In “The Case against Nationalisation,” page 186.
CHAPTER VIII.
CONCLUSION.
All reforms meet with opposition, mainly from persons whose interests
may be prejudiced by the proposed change--also in many cases by
experts. As to the latter, one remembers the story of the expert who,
when the first proposal was made to cross the Atlantic by steam, wrote
a pamphlet conclusively proving, to his own satisfaction, that it was
a scientific impossibility to construct a steamer capable of carrying
sufficient coal to do the journey! One of the first steamers to cross
the Atlantic carried a consignment of such pamphlets!
As to the former, as has already been pointed out in considering
objections to the scheme, there is but a very small section whose
interests need be prejudiced. Even those few who might suffer loss by
the reform will recognise that the increased facilities of transport,
with accompanying decrease of expense, will inevitably result in a
great increase in and expansion of trade, by reason of the opening up
of markets which have hitherto been practically inaccessible.
Nor is there any reason why this opening up of new markets should
be confined to the United Kingdom, for if other nations find that a
system of small uniform fares and rates is not only practicable but
remunerative here, they will surely follow our example, as in the case
of Penny Postage, and the day will not be far distant, after the system
has once been adopted in this country, when it will be possible to
travel all over Europe at the cost of a few shillings, and to transmit
and receive goods at correspondingly low rates.
It is impossible to foresee all the social and political as well as
financial effects which may be produced by such a revolution. The
advantages of travel, which have hitherto been restricted to the
wealthy, will be thrown open to all, whatever their means.
Another important result may be anticipated and hoped for, namely, that
the intermingling of the people of the various races and nations will
tend to remove the prejudices, misconceptions and misrepresentations
which have so often produced disastrous wars in the past.
Should this be so, it may be that the reform here proposed will bring
nations nearer to the desired haven of Peace.
_A QUESTION
for to-day and to-morrow_
The Case for
LAND
NATIONALISATION
BY JOSEPH HYDER
(_Secretary to the Land Nationalisation Society_).
It deals with every aspect of the land question in a
thorough and comprehensive manner.
Full of facts, figures and cases which every land
reformer ought to know. It gives numerous illustrations
of the abuses which spring from treating land as private
property.
=2s. 6d. net.=