THE TELEGRAPH SYSTEM AS A BRANCH OF THE POSTAL DEPARTMENT
Previous to the acquisition of the telegraphs by the state, the
different telegraphic companies carried on their business in comparative
harmony, a harmony which was occasionally disturbed by the entrance into
the field of competition of new claimants for the confidence of the
public. By far the most important of these companies in 1855 were the
Electric and International, and the British and Irish Magnetic,
controlling between them about 8500 miles of line and having 600
stations open to the public. During the succeeding ten years, by the
growth of the old companies and an increase in the number of the new,
the number of miles of line increased to 16,000, of telegraph stations
to 2040. The number of public messages sent in 1855 was a little more
than one million, in 1860 nearly two millions, and in 1865 over four
millions and a half. The rates for a message of twenty words varied from
1_s._ for a distance under fifty miles, plus 1_s._ for each additional
fifty miles, to 4_s._ for a distance over 150 miles and 5_s._ to Dublin,
including free delivery within half a mile from the telegraph
office.[797]
In 1860 a competing company, the London District Telegraph Company,
started operations in the Metropolitan District, and offered a low rate
of 6_d._ a message. In the following year a far more dangerous rival,
the United Kingdom Telegraph Company, announced that henceforth it would
charge a uniform shilling rate irrespective of distance. Four years
later both of these companies fell into line, forced according to some
by the unfair tactics of their competitors, according to others by the
utter impossibility of making both ends meet, while charging a uniform
rate irrespective of distance. The tariff agreed to in 1865 was as
follows:--[797] _Acc. & P._, 1867-68, xli, 202, pp. 43, 73, 74.
For a distance not exceeding 100 miles 1_s._
from 100 to 200 miles 1_s._ 6_d._
beyond 200 miles 2_s._
Between Great Britain and Ireland from 3_s._ to 6_s._
In some cases these rates applied only to wires of a single company,
and, where a message was transmitted over the wires of two or more
companies, an additional charge was made. Special rates were offered for
press messages, the news being supplied by the agency of the
intelligence department of the telegraph companies.[798]
[798] _Acc. & P._, 1867-68, xli, 202, pp. 87-88, 126; _Rep. Com._,
1867-68, xi, 435, pp. 31, 68.
The earliest proposal for government ownership of the telegraphs seems
to have originated with Thomas Allan, the same Allan who was later
instrumental in establishing the United Kingdom Telegraph Company. In
1854 he submitted arguments to the government through Sir Rowland Hill
in favour of the change, arguments which met with the approval of Lord
Stanley, the President of the Board of Trade, and Mr. Ricardo, formerly
Chairman of the International Electric Telegraph Company, and ex-member
for Stoke. Two years later Mr. Barnes, an official in the Post Office
Department, submitted to my Lords a plan "for the establishment in
connection with the Post Office of a comprehensive scheme of electric
telegraphs throughout the kingdom." In 1866, Lord Stanley, as
Postmaster-General, in a letter to the Lords of the Treasury called
their attention to the fact that the question of the propriety of the
assumption by the government of the telegraphic systems of the Kingdom
had been revived in the previous year by the Edinburgh Chamber of
Commerce, and still more recently the proposition had been embodied in a
petition from the Association of Chambers of Commerce of the United
Kingdom. As he himself had for many years been in favour of such a
change and found his opinion shared by more than one important body of
public men, he directed Mr. Scudamore[799] to report whether, in his
opinion, the telegraphs could be successfully operated by the Post
Office, whether such operation would result in any advantages to the
public over the present system by means of private companies, and
whether it would entail upon the department any large expenditure beyond
the purchase of existing rights.[800]
[799] Receiver and Accountant-General of the Post-Office.
[800] _Rep. Com._, 1867-68, xi, 435, p. 108; _Acc. & P._, 1867-68, xli,
202, p. 7.
The report presented by Mr. Scudamore was strongly in favour of the
control of the telegraphs by the Post Office, and is especially
interesting in furnishing an abstract of the evils which the people
considered that the companies were inflicting upon them. The most
important of these evils, real or imaginary, were as follows:--
Exorbitant charges and a resulting failure to expand on the part of the
system.
Delay and inaccuracy in the transmission of messages.
Failure to serve many important towns and communities.
Inconvenient situation, in many places, of the telegraph office, it
being often at a considerable distance from the business centre of the
town, especially when in the railway station.
Inconveniently short periods that offices are open in many places.
Wasteful competition between the companies.
The strongest argument against the existing condition was rather a
result of competition than private ownership. In the more populous
centres the companies very often had their telegraph offices at a very
short distance from each other, being so situated as to compete for the
public patronage, while other and more outlying portions of the town
were quite unserved. The latter were thus made to suffer in order that
favoured portions might enjoy the somewhat doubtful boon of competition.
In order to show the failure to extend telegraphic facilities, Mr.
Scudamore compiled a list of towns in England and Wales having an
individual population of two thousand or more. In his own words "So far
as telegraphic accommodation is concerned, while thirty per cent of the
whole number of places named ... are well served, forty per cent are
indifferently served, twelve per cent badly served, and eighteen per
cent, having an aggregate population of more than half a million
persons, not served at all." By combining the telegraphic business with
the postal service, there seemed every reason to suppose that its
advantages could be more widely extended, the hours of attendance
increased, charges reduced, and facilities given for the transmission of
money orders by telegraph.
Mr. Scudamore proposed to open telegraph offices in all places which had
a population of 2000 and upwards and which already had money-order
offices. All other post offices were empowered to receive telegrams,
which were to be sent by post to the nearest telegraph office for
transmission. The charge was to be made uniform at 1_s._ for twenty
words and 6_d._ for each additional ten words, or part thereof. He
judged that the whole of the property and rights of the telegraph
companies might be purchased for a sum within £2,400,000, and £100,000
more would have to be spent in the extension of the service. His
estimate for gross annual product was £676,000; annual charge, £81,250;
working expenses, £456,000; surplus, £138,750.[801] Finally, his reply
to Lord Stanley's question was in effect that the telegraph system might
be beneficially worked by the Post Office, that there would be
advantages thus obtained over any system of private ownership, and that
the Post Office would have to bear no expense not amply covered by the
revenue.[802] In fairness to Mr. Scudamore, it should be remembered that
his original low estimate of the probable cost of the telegraph
companies did not include Reuter's and other important companies. In
addition, the strict monopoly conferred in 1869, with the necessary
accompaniment of the purchase of all inland telegraph companies,
entirely upset his original estimates. Finally, the decision to include
the public telegraph business of the railways and the excessive price
paid to the railway and telegraph companies should not be forgotten in
contrasting the estimated price with that eventually paid for the
acquisition of the telegraph systems in the United Kingdom.[803] Mr.
Grimston, the Chairman of the Electric and International Telegraph
Company, contended that the extension of telegraphic facilities to any
considerable number of small towns and villages would involve a loss to
the state by greatly increasing working expenses, that village
postmasters and postmistresses were totally unable to work the
telegraphs, and that consolidation could be effected more advantageously
by the companies themselves.[804]
[801] In another place his estimate for gross revenue was £608,000;
annual charge £105,000 on a purchase price of £3,000,000 with expenses
for improvement; working expenses £425,000, and surplus £77,750 (_Acc. &
P._, 1867-68, xli, 202, pp. 145-47).
[802] _Ibid._, pp. 7-39.
[803] _Parl. Deb._, 3d ser., ccxxviii, col. 215; cxcii, coll. 747-751.
[804] _Acc. & P._, 1867-68, xli, 202, p. 131.
In 1868, the Postmaster-General was given authority by act of Parliament
to purchase the undertakings of the telegraph companies and also the
interests of the railways in the conveyance of public messages, together
with a perpetual way-leave for telegraphic purposes over the properties
of the railway companies. Any telegraph company, with the authority of
two thirds of the votes of its shareholders, was empowered to sell to
the Postmaster-General all or any portion of its undertaking. When the
Postmaster-General had acquired the property of any telegraph company,
he must also, upon the request of any other company, purchase its
undertaking, this privilege being extended also to the railways so far
as telegraphs operated by them for transmitting public messages were
concerned. The price paid for the Electric and International, the
British and Irish Magnetic, and the United Kingdom Telegraph Companies
was fixed at twenty years' purchase of their net profits for the year
ending 30th June, 1868. In the case of the United Kingdom Telegraph
Company additional sums were to be paid for the Hughes type-printing
patent, for the estimated aggregate value of its ordinary share capital
as determined by its highest quotation on any day between the 1st and
25th days of June, 1868, for compensation for the loss of prospective
profits on its ordinary shares, and any sum that might be determined as
loss for its attempt to establish a uniform shilling rate. Every officer
or clerk of the companies who had been in receipt of a salary for not
less than five years or of remuneration amounting to not less than £50 a
year for not less than seven years, if he received no offer from the
Postmaster-General of an appointment in the telegraphic department of
the Post Office equal in the opinion of an arbitrator to his former
position, was entitled to receive an annuity equal to two thirds of his
annual emolument if he had been in service twenty years, such annuity to
be diminished by one twentieth for every year less than twenty. Those
entering the service of the Postmaster-General were entitled to count
their past continuous years of service with the companies as years in
the service of the Crown.
For the most part all the telegraph apparatus belonging to the railway
companies and all belonging to the telegraph companies on the railway
lines necessary for the private business of the railways were handed
over to the railways by the Postmaster-General free of charge. He was
given the use, from telegraph stations not on the railway lines, of all
the wires of the telegraph companies on the lines employed exclusively
in the public telegraph business. The railways might affix wires to the
posts of the Postmaster-General on the line, and in like manner he might
require the railways to affix wires to their own posts for the use of
the Post Office or erect new posts and wires. Finally the railways were
required to act as agents of the Postmaster-General, if required, for
receiving and transmitting messages. The railways as a rule succeeded in
driving a very sharp bargain with the Government for the purchase of
their interests in the public telegraph business. The price paid was
twenty years' purchase of the net receipts from public telegrams
reckoned for the year ending 30th June, 1868, plus twenty times the
increase in net receipts for the three preceding years or for such
shorter period as the business of transmitting public telegrams had been
undertaken. In addition, compensation was made for the rents, etc.,
payable to the railways by the telegraph companies, for the unexpired
period of their respective agreements, for the right of way obtained by
the Postmaster-General over the lands of the railways, for the loss of
power on the part of the railways to grant way-leaves, for the value of
the railways' reversionary interests (if any) in the transmission of
public messages on the expiration of the agreements with the telegraph
companies, and for any loss the railways might suffer in working their
telegraph business as a separate concern. Finally the Postmaster-General
was required to convey free of charge to any part of the United Kingdom
all messages of the railways relating to their own private
business.[805] The act empowering the Postmaster-General to purchase the
undertakings of the telegraph companies did not confer upon the Post
Office a monopoly in the transmission of telegrams, Mr. Scudamore
himself declaring that such a monopoly was neither desirable nor did the
Post Office wish it. The second act, however, declared that no
telegraphic messages, except those sent from or to any place outside of
the United Kingdom, should be transmitted by any telegraphic company for
gain unless the company was in existence on the 22d of June, 1869, and
was not for the time being acquired by the Postmaster-General, who
should be required to purchase its undertaking upon demand.[806]
[805] 31 and 32 Vict., c. 110.
[806] 32 and 33 Vict., c. 75.
Mr. Scudamore's original estimate of the cost of acquisition of the
telegraphs fell far short of the final expenditure; although it must be
remembered that, when he proposed £2,500,000 as sufficient, he did not
anticipate items of expense which later vastly increased the cost.
Before the committee which reported in 1868 he advanced his original
estimate to £6,000,000, and in the following year to £6,750,000, of
which he considered about two thirds to be of the nature of good-will.
The telegraph companies when first approached asked for twenty-five
years' purchase of their prospective profits, and the Government offered
to buy at the highest price realized on the Stock Exchange up to the
25th of May, with an addition of from 10 to 15 per cent for compulsory
sale. The cost of the leading companies, based upon twenty years'
purchase of the net profits for the year ending 30th June, 1868, was as
follows: For the Electric and International, £2,933,826; for the British
and Irish Magnetic, £1,243,536; for Reuter's, £726,000; for the United
Kingdom Electric, £562,000; and for the Universal Private, £184,421,--a
total of £5,650,047. Separate bargains followed with many smaller
companies. The acts of 1868 and 1869 granted £8,000,000, for the purpose
of purchasing the undertakings of the companies and the interests of the
railways; £6,640,000 were spent in purchases, and £1,560,000 in renewals
and extensions between 1868 and 1872.[807] The claims for compensation
on the part of some of the railways were very excessive. The Lancashire
and Yorkshire Railway asked for £1,129,814, with interest, and £1 per
wire per mile a year for all wires erected upon its right of way by or
for the Post Office. By the terms of the award they obtained £169,197
and 1_s._ per mile per wire. The Great Eastern Railway presented a claim
for £412,608, with interest, and £1 per mile per wire. Their claim was
reduced to £73,315 and an annual payment of £200 for way-leave. In all,
the capital sum of £10,880,571 was expended by the Government,
necessitating an annual interest payment of £326,417, charged, not on
the Post Office vote, but on the Consolidated Fund.[808]
[807] _Rep. Com._, 1867-68, xi, 435, p. 162; 1868-69, vi, 348, p. 11;
1867-68, xi, 435, p. 217; 1873, xxxix, 316, pp. 762-64; 1873, vii, 290,
p. 95; _Parl. Deb._, 3d ser., cxcii, coll. 747-751, 1303-04. According
to figures furnished by Mr. Fowler in a speech in the House of Commons
in 1868, the value of the capital and the debentures of the Electric and
International at that time was £1,240,000 while the capital value of the
British and Irish Magnetic was £534,000; of Reuter's Company, £266,000;
of the United Kingdom Electric, £350,000, and of the London and
Provincial, £65,000 (_Parl. Deb._ 3d ser., cxcv, coll. 747-751).
[808] _Rep. P. G._, 1876, p. 10; _ibid._, 1883, p. 9.
When the Post Office acquired the telegraphs, a uniform rate was
introduced of 1_s._ for twenty words or part thereof and 3_d._ for each
additional five words or part thereof, exclusive of the names and
addresses of sender and receiver, which were transmitted free. Delivery
was free within a radius of one mile from the terminal telegraphic
office, or within the limit of the town postal delivery when it
contained a head office and the postal delivery extended more than a
mile from it. Beyond the above limits the charge did not exceed 6_d._
per double mile or part thereof. When special delivery was not required
beyond the free delivery, the message was sent free by the next ordinary
postal delivery. The newspapers succeeded in having incorporated within
the act a clause prohibiting a higher charge for press messages than
1_s._ for every one hundred words transmitted between 6 P.M. and 9 A.M.,
or 1_s._ for every seventy-five words between 9 A.M. and 6 P.M. when
sent to a single address, the charge for the transmission of the same
telegram to each additional address to be not greater than 2_d._[809] On
the day of transfer the Post Office was able to open about a thousand
postal telegraph offices and nineteen hundred offices at railway
stations where the railways dealt with the public messages as agents of
the Postmaster-General. On the 31st of March, 1872, the system comprised
more than five thousand offices (including nineteen hundred at railway
stations), twenty-two thousand miles of line, with an aggregate of
eighty-three thousand miles of wire, and more than six thousand
instruments. A decided increase in the number of messages was the
result. During the first year after the transfer there were nearly ten
millions of messages, the second year twelve millions, and the third
year fifteen millions, or more than double the number transmitted in
1869. The period from 1872 to the adoption of a sixpenny tariff in 1885
was one of steady progress. The number of new offices opened was not
numerous, the increase having been only one thousand, but the
improvements in existing connections were marked and the number of
messages transmitted had increased to thirty-three millions. The new
tariff rate was 6_d._ for twelve words or less, with a halfpenny for
each additional word, but the old system of free addresses was
abolished. Under the old tariff each figure was charged at a single
rate. Under the new schedule five figures were counted as one word. A
large proportion of telegrams were brought within the minimum sixpenny
rate, while the average charge, which had been 1_s._ 1_d._ in 1885, was
reduced to 8_d._ in 1886. The number of messages increased from
thirty-three millions in 1884-85 to fifty millions in 1886-87. Four
cables between France and England and one between France and the Jersey
Isles were purchased by the governments of the two countries, two by the
Belgian and English governments, two between Holland and England, and
one between Germany and England, by the governments of the countries
interested.[810]
[809] 31 and 32 Vict., c. 110.
Following the adoption of a uniform sixpenny rate the department has
granted other facilities to the public, which, though popular enough,
have undoubtedly tended to place the working of the telegraphs upon a
less secure financial basis. In 1889, the issue of telegraphic money
orders was begun as an experiment, and in the same year was extended to
all head and branch post offices in the United Kingdom.[811] Two years
later the Post Office ceased to require the repayment of the capital
outlay on telegraph extensions made under guarantee, and the rural
sanitary authorities were empowered to defray the cost of such
extensions in places within their districts.[812] For the six preceding
years the average annual number of guaranteed telegraph offices was
seventy-seven, and during the next five years the average annual number
increased to 167. As part of the Jubilee concessions in 1897, the
guarantors were required to pay only one half of the deficiency, with
the result that during the following two years the average annual number
of guaranteed telegraphic offices increased to 290. At the same time the
free delivery limit was extended to three miles and a reduction was
granted in the porterage charges beyond that distance. Finally, in 1905,
the guarantee was reduced to one third of the loss incurred, the
delivery charge being fixed at 3_d._ a mile for the distance beyond the
three-mile limit, instead of the distance from the office of
delivery.[813]
[810] _Rep. P. G._, 1895, app., pp. 33-35; 1889, p. 13.
[811] _Ibid._, 1890, p. 7.
[812] _Rep. P. G._, 1892, p. 20; 54 and 55 Vict., c. 46.
[813] _Rep. P. G._, 1900, p. 15; 1898, p. 19; 1906, pp. 1, 15.
In 1896, the main routes from London having become crowded, especially
by the telephone trunk lines, the principle of underground lines between
the most important centres was sanctioned by the department. London and
Birmingham were first connected, and the line was ultimately extended
through Stafford to Warrington, where it joined existing underground
wires between Manchester, Liverpool, and Chester. By 1905, underground
wires were laid as far north as Glasgow through Carlisle, to be extended
later to Edinburgh. At Manchester a junction was effected with a line
passing through Bradford to Leeds. During the same year underground
lines were completed from London to Chatham and from London westward
toward Bristol, with the intention of extending it into Cornwall in
order to secure communication with the Atlantic and Mediterranean
cables.[814]
[814] _Ibid._, 1900, p. 15; 1902, p. 13; 1905, app., p. 99; 1906, p. 16.
In 1875, England joined the other important European powers in a
telegraphic agreement which went into effect in January of the following
year. By this agreement each of the contracting parties agreed to devote
special wires to international service, government telegrams to have
precedence in transmission and to be forwarded in code if desired.
Private telegrams could also be sent in code between those countries
which allowed them, and the signatory powers agreed to pass them in
transit, but each country reserved to itself the privilege of stopping
any private telegram. For the purpose of making charges, any country
might be divided into not more than two zones, and each of the signatory
powers owed to the others an account of charges collected.[815] So far
as foreign telegrams were concerned, the use of manufactured expressions
in place of real words gave rise to considerable trouble in view of the
fact that such combinations were difficult to transmit. In 1879, the
languages which might be used for code words were reduced by common
consent to English, French, German, Italian, Spanish, Portuguese, Dutch,
and Latin. At the same time the use of proper names as code words was
prohibited. This did not remove the evil, as the roots of words in one
language with terminations in another were used. An official vocabulary
was compiled by the International Telegraph Bureau, to become obligatory
in 1898, but its publication in 1894 aroused considerable opposition, as
many of the words were dangerously alike, and in 1896 the decision of
the Paris Conference of 1890, by which the official vocabulary was to
become compulsory for European telegrams in 1898, was rescinded. It was
also decided that an enlarged vocabulary should be published by the
International Bureau, but, owing to the action of the English delegates,
the official vocabulary was not made compulsory at the meeting of the
International Telegraph Conference in 1903, although artificial words
were allowed if pronounceable in accordance with the usages of any one
of the eight languages from which the ordinary code words might be
selected. It was also decided to admit letter cipher at the rate of five
letters to a word, and several countries agreed to lower their charges
for the transmission of extra-European telegrams, the English delegates
contending that the rates for such telegrams should be made the same as
the rates for European telegrams.[816] In 1878, negotiations with the
German and Netherland Telegraph Administrations resulted in a charge of
4_d._ a word being fixed as the rate between the United Kingdom and
Germany and 3_d._ a word between the United Kingdom and the Netherlands.
[815] _Acc. & P._, 1876, lxxxiv [c. 1418], pp. 116-119.
[816] _Rep. P. G._, 1904, pp. 15-22.
In 1885, the following reductions in rates were announced:--
To Russia from 9_d._ to 6-1/2_d._ a word.
Spain 6_d._ 4-1/2_d._
Italy 5_d._ 4-1/2_d._
India 4_s._7_d._ 4_s._
to be followed six years later by still greater reductions:--
To Austria from 4-1/2_d._ to 3_d._ a word.
Hungary 4-1/2_d._ 3_d._
Italy 4-1/2_d._ 3_d._
Russia 6-1/2_d._ 5-1/2_d._
Portugal 5-1/2_d._ 4-1/2_d._
Sweden 5_d._ 4_d._
Spain 4-1/2_d._ 4_d._
Canary Isles 1_s._7-1/2_d._ 10_d._
the minimum charge for a telegram being 10_d._ in all cases. The
transmission of foreign money orders by telegraph was inaugurated in
1898 by the opening of an exchange with Germany and its extension
shortly afterward to the other important European countries.[817]
[817] _Rep. P. G._, 1897, pp. 40-42; 1879, p. 21; 1886, p. 10; 1892, p.
19; 1900, p. 10.
In 1892, an attempt was made, curiously suggestive of Marconi's
discovery, to transmit telegraph messages without a direct wire. The
experiment was conducted between the island of Flat Holm in the Bristol
Channel and the mainland, a distance of three miles. A wire was erected
on the mainland parallel with one on the island, and, by means of strong
vibratory currents sent through the former, signals were transmitted and
messages exchanged. Three years later and before the practical value of
the Flat Holm experiment had been substantiated, Mr. Marconi arrived in
England to submit his plans to the Post Office. A private wire from
Poldhu to Falmouth was provided for him on the usual rental terms, and
it was announced that the Post Office would act as his agent for
collecting messages to be transmitted by wireless telegraphy when he had
proved the feasibility of his project. At the international congress on
wireless telegraphy held in Berlin in 1903 it was recommended that shore
stations equipped with wireless apparatus should be bound to exchange
messages with ships at sea without regard to the system of wireless
telegraphy employed by the latter, that the rate of charge for the shore
station should be subject to the approval of the state where it was
situated, the rate of the ship to the approval of the state whose flag
it carried, and that the working of wireless stations should be
regulated so as to interfere with other stations as little as possible.
In order to enable the Government to carry out the decision of the
congress and to place wireless telegraphy under its control for
strategic purposes, an act was passed in 1904 making it illegal to
instal or work wireless telegraphic apparatus in the United Kingdom or
on board a British ship in territorial waters without the licence of the
Postmaster-General. The act was to be operative for two years only, but
before its expiration, was extended until the 31st of December, 1909,
before which it might again be renewed. Arrangements were also made for
the collection and delivery of the telegrams of the Marconi Company by
the post offices throughout the country. The company charges its usual
rate, 6_d._. a word, and the Post Office in addition charges the
ordinary inland rate.[818] The international agreement providing for
compulsory communication between shore stations and ships was signed in
1906 in spite of the protests of the Marconi Company, Sir Edward
Sassoon, and others, who contended that the agreement was unfair to the
company and a mistake on the part of the Kingdom, "which was thus giving
up advantages obtained by the possession of the best system of wireless
telegraphy in the world." The majority of the countries represented were
also in favour of compulsory communication between ship and ship, but
this was successfully negatived by Great Britain and Japan. In 1908, Mr.
Buxton was able to announce in the House that the relations between the
Post Office and the Marconi Company "are now of the most friendly kind,"
and that they have accepted and adopted the principle of
intercommunication. In the preceding year two experimental stations were
started by the Government which will enable the department to extend
its operations quite independently of the companies.[819]
[818] _Rep. P. G._, 1893, pp. 19-22; 1903, pp. 15-18; 1905, pp. 16-18; 4
Edw. VII, c. 24; 6 Edw. VII, c. 13.
[819] _Parl. Deb._, 4th ser., clxxix, coll. 841-858; cxcii, col. 1116,
London _Times_, 1906, Nov. 5, p. 5; 1907, July 1, p. 14.
From a financial point of view, government ownership and control of the
telegraphs in the United Kingdom has not been a success. In addition,
the Telegraph Department, for some time previous to 1874, had been
drawing upon the balance in the possession of the Post Office, a balance
which was required to be invested for other purposes and whose
expenditure for the use of the telegraphs had not been authorized by
Parliament. Mr. Goldsmid, in introducing a motion for the appointment of
a committee of enquiry, alluded to this error on the part of the
department, to the excessive price paid for the telegraphs, and
complained that the telegraph system was not being operated on a paying
basis. His motion was withdrawn, but an agreement was reached with the
department by the appointment of a committee, with Mr. Playfair as
chairman, "to inquire into the organization and financial system of the
Telegraph Department of the Post Office." The committee in their report
commented unfavourably upon the unnecessarily large force, the cumbrous
organization, and the far from economical management of some of the
divisions of the department, advised that an attempt be made to remedy
these faults, and that press messages be charged a minimum rate of 1_s._
each, and not at the rate of 1_s._ for each seventy-five or one hundred
words obtained by adding together separate messages requiring separate
transmission. This suggestion with reference to press messages was
adopted, promises were made at the same time to diminish the force, and
a scheme was submitted for the reorganization of the department.[820]
[820] _Parl. Deb._, 3d ser., ccxxviii, coll. 172 f.; _Rep. Com._, 1876,
xiii, 357, pp. i-xiii, 147, 240.
The number of telegrams for the year ending 31st March, 1887, the year
following the sixpenny reduction, was 50,243,639; for the year 1891-92
it had increased to 69,685,480. In 1896-97 the number was 79,423,556 and
in 1899-1900 the total was 90,415,123. During the next three years there
was a reduction, followed in 1902-03 by an increase to 92,471,000.
Since 1902-03 the number has again fallen off, the figures for 1906-07
being only 89,493,000.[821] It is rather difficult to make definite
statements about the telegraph finances on account of the lack of
uniformity in presenting the accounts since 1870. Under gross revenue is
now included the value of services done for other departments, but this
was not always the rule. The expenditure of other departments for the
telegraph service may or may not be included under ordinary telegraphic
expenditure. Net revenue may also be increased or a deficit changed to a
surplus by deducting the expenditure for sites, buildings, and
extensions from ordinary expenditure. Finally, the interest on capital
is not charged on the Telegraph Vote, and so is not included under
expenditure. In 1871, 1880, and 1881 there seem to have been surpluses
over all expenditure, including interest on capital. Excluding interest
from expenditure, the net revenue decreased from £303,457 in 1871 to
£59,732 in 1875, when the pensions to officials of the telegraph
companies were first charged to the Telegraph Vote. With an increased
net revenue of £245,116 in 1876, following the report of the committee
of investigation, the department did very well from a financial point of
view, until 1884, when the net revenue fell to £51,255, and in 1887
there was a deficit of £84,078, due to the fact that expenses were
increasing at a greater rate than receipts. The sixpenny reduction seems
to have made but little change in the financial situation, the gross
revenue increasing from £1,755,118 in 1884-85 to £1,855,686 in 1886-87,
the expenditure for the same years being £1,731,040 and £1,939,734. The
net revenue began to recover in 1888-89, and averaged about £150,000 a
year during the four years ending March 31, 1892. During the fiscal
years 1894 and 1895 there were deficits, then a slight recovery from
1896 to 1900 and a succession of deficits from 1901 to 1905. The
interest on stock, £214,500 in 1870, increased steadily to £326,417 in
1880, at which figure it remained until 1889, when a reduction in the
rate of interest from 3 per cent to 2-3/4 per cent lowered the amount
payable to £299,216. In 1903, there was a further reduction to
£278,483.[822]
[821] _Rep. P. G._, 1891, app., p. 40; 1901, app., p. 57; 1907, app., p.
61.
[822] _Ibid._, 1881, app., p. 53; 1891, app., p. 66; 1901, app., p. 83;
1905, app., p. 99.
The financial loss experienced by the Government in operating the
telegraphs has naturally produced considerable interest in this phase of
the question. Mr. Blackwood, the Financial Secretary of the Post Office,
in his evidence before the committee, considered that the financial
control and oversight of the department were inadequate and that the
department was over-manned. On the other hand, he was of the opinion
that many expenses were met by revenue expenditure which should have
been charged to capital. Mr. Baines, the Surveyor-General, among other
causes of the financial deficiency, called attention to the shorter
hours and longer annual leave of the telegraph staff as government
employees, the higher standard of efficiency established by the Post
Office, and the prevalence of much overtime work as a result of the
maintenance by the companies, just before the transfer, of an inadequate
staff.[823] The fact that the yearly increase in messages continued to
diminish after 1879 is commented on by the Postmaster-General in 1884 as
due to the stagnation of trade, the competition of the telephones, and
the rapidity of the letter post. Mr. Raikes called attention to the
large number of telegrams on the business of the railways which were
transmitted for nothing. By an agreement with several of the railway
companies to send, as a right instead of a privilege, a fixed number of
messages containing a fixed number of words, this increase was checked.
In 1892, the following comment is found in the Postmaster-General's
Report: "This stagnation of business, viewed in connection with an
increased cost in working expenses, is a matter for serious
consideration, and necessarily directs attention to that part of the
business which is conducted at a loss," the reference being to the
increased number of press messages transmitted at a nominal charge. When
in 1868 the newspaper proprietors succeeded in obtaining the insertion
in the Telegraph Act of special rates for the transmission of press
messages, no condition was laid down that copies, in order that they
might be sent at the very low charges there enumerated, should be
transmitted to the same place as the original telegram. The newspapers
combined to receive messages from news associations in identical terms,
and, by dividing the cost, obtained a rate equal on the average to 4-1/2
_d._ per hundred words. Under the arrangements adopted for the
transmission of news messages the number of words so sent did not
necessitate a corresponding amount of work, but it is an interesting
fact that in 1895 the number of words dealt with for the press formed
two fifths of the total number. In that year the loss on these telegrams
was estimated at about £300,000 a year. The high price paid as purchase
money is another of the factors to be considered, only in so far,
however, as the Telegraphic Department has failed to meet the interest
on the debt so incurred. The telegraph companies were very liberally
treated, and in certain cases excessive prices were undoubtedly paid.
Probably the most important reason for the financial failure of the
telegraphs under government ownership and control has been the influence
of forces productive of good in themselves, but quite different from
those which had previously been dominant when the telegraphs were under
private control and during the early years of government management. The
effect of these forces is clearly seen in the reduction of the tariff in
1885, the extension of facilities under inadequate guarantee, and the
increase in the pay of the staff.[824] Mr. Buxton is of the opinion that
the worst feature of the postal business is the telegraph service. "It
has never been profitable and now the telephone system has so largely
taken its place that the revenue is falling off," while the "Economist"
considers that "it is obvious that both in the Savings Bank and the
Telegraph branches reforms are urgently needed in order to place matters
on a sound financial basis."[825]
[823] Between 1870, when the telegraphs were taken over by the state,
and 1873, the number of employees was more than doubled, although,
during the same period, the number of messages--not including news
messages--increased only from ten to fifteen millions (_Rep. Com._,
1876, xiii, 357, pp. 18, 90, 232, 240).
[824] _Rep. P. G._, 1895, pp. 37-38.
The proportion of the amount spent on salaries and wages which in 1881,
before Mr. Fawcett's revision, stood at about 55 per cent, increased, as
a result of that revision and Mr. Raikes' revision in 1890, to about 65
per cent.
[825] _Parl. Deb._, 4th ser., clix, col. 389; _Economist_, Sept. 21,
1907, p. 1576.