Part 14

+-----------+-----------+-----------+-------------- | WICK. | WHITBY. | GRIMSBY. | | 749 Miles.| 244 Miles.| 154 Miles.| |-----+-----+-----+-----+-----+-----+-------------- | By | | By | | By | | |Pass-| By |Pass-| By |Pass-| By | Description. |enger|Goods|enger|Goods|enger|Goods| |Train|Train|Train|Train|Train|Train| -------------------+-----+-----+-----+-----+-----+-----+-------------- | d. | d. | d. | d. | d. | d. | Class 1. Cured }| | | | | | | Cod, Ling and }| | | | | | | White Herrings }| ... | 0·27| ... | 0·16| ... | 0·14|minimum 1 cwt. in brine }| | | | | | | | | | | | | | Class 2. Cured }| | | | | | | Red Herrings and}| | | | | | | all other salted}| | | | | | | or dried fish }| ... | 0·27| ... | 0·18| ... | 0·16| (except Cod }| | | | | | | and Ling) }| | | | | | | | | | | | | | Class 3. Crabs, }| | | | | | | Fresh Cod, Ling,}| | | | | | | Haddocks, }| | | | | | | Whiting, Skate, }| | | | | | | Halibut, }| | | | | | | Mackerel, Plaice}| ... | 0·29| ... | 0·21| ... | 0·18|The rates for and Coal Fish; }| | | | | | | classes 1, Eels, Flounders,}| | | | | | | 2, 3, and Sprats in any }| | | | | | | 4 include state }| | | | | | | collection | | | | | | | and delivery Class 3a.--Ditto | 0·43| ... | 0·21| ... | 0·18| | The rates | | | | | | | for classes Class 4.--Salmon }| | | | | | | 3a, 4a, and (in boxes) and }| | | | | | | 5, are S. Soles, Oysters, }| | | | | | | to S. Lobsters, and }| ... | 0·40| ... | 0·29| ... | 0·25| Shellfish, not }| | | | | | | otherwise }| | | | | | | classified }| | | | | | | | | | | | | | Class 4a.--Ditto | 0·54| ... | 0·29| ... | 0·25| ... | | | | | | | | Class 5.--Fresh }| | | | | | | Fish of all }| | | | | | | descriptions, }| 0·70| ... | 0·29| ... | 0·25| ... | not otherwise }| | | | | | | classified }| | | | | | | -------------------+-----+-----+-----+-----+-----+-----+--------------

We now touch a question which comprehends most of those already discussed. When it is stated, as it often is, that the rates charged by the railway companies in this country are generally too high, what exactly is meant? Is it contended that shareholders should be content with smaller dividends than they receive? Let us note the facts. The average dividend in the year 1884 was only 4¼ per cent.; in 1844 it was considered by the Legislature that, at least, 10 per cent. should be earned by the shareholders. In the United Kingdom the average rate of dividend paid during the last 14 years on the capital expended on the construction of railways--which, as already shown, was, at the end of 1884, £801,464,367, and in England and Wales £665,055,379--was only 4·38 per cent. For the year 1884, out of a total of £298,980,000 of ordinary capital, £48,000,000 paid no dividend at all. As an illustration of the moderate return on the shareholders’ capital, it may be mentioned that the Great Western Railway Company, which owns, or jointly owns, 2,496 miles of railway, has during the last 30 years only paid an average dividend of £3 15s. per cent. per annum.

The meaning of the statement cannot be that, as compared with the dividends of other industrial companies, those of railways are too high. The facts are all the other way.

If a comparison is made of the percentage on capital earned by Banks, Insurance, Gas and Water Companies, some of which possess monopolies in a strict legal sense, and not merely in the loose popular acceptation of the word, as applied to railways, it will be seen that these returns are far in excess of those derived from railway capital; that not only is the average dividend, but the maximum dividend higher, and that there are fewer instances of shareholders obtaining no returns. Upwards of sixty Banks pay dividends ranging from 10 to 15 per cent., and twenty from 15 to 20 per cent.; thirty-four Insurance Companies pay from 10 to 15 per cent., and twenty-three over 15 per cent.; and ninety-three Gas and Water Companies pay dividends ranging from 5 to 15 per cent. The average dividends of Banks are 11·83 per cent., of Insurance Companies 12·45 per cent., of Gas Companies 10 per cent., and of Water Companies 5·73 per cent. In face of the above figures, and of the prospects which were held out to those who invested the capital with which the railways have been constructed, it will probably not be directly contended that the present dividend of less than 4¼ per cent, is a sufficient return on railway property. Nor is such an income fixed. There is no inconsiderable uncertainty affecting the income and the net return from the working of railways.

It is alleged that the railway system is not properly managed, and that in some way--how it is rarely explained--the railways might be more profitably worked; that even if considerably reduced rates were charged, as good, or a better, dividend might be earned; or that as a consequence of reducing rates such additional traffic would be carried that the loss would be more than covered by the increased trade. Now, no doubt undue competition between companies exists. The largest possible amount of net revenue is not always obtained. But such an admission affords little encouragement. Here something more than vague general statements are needed; it is incumbent on those who call for a great change to produce facts justifying an expectation that, consistently with a reasonable dividend, a considerable reduction can be made in the rates for merchandise. No attempt has ever been made to show that this can be done, and experience is against it. The most plausible argument is, that by reducing rates the present trade would be considerably increased, that new sources of traffic would be created, and that the companies would be more than recouped the loss which they would sustain by any falling off in the receipts on their traffic. This prospect was held out by the late President of the Board of Trade in introducing the Railway and Canal Traffic Bill. He justified his expectations by stating that the companies who had adopted a cheap passenger system, had reaped great advantages therefrom. Few of them will consider this illustration to be fortunate. Even, however, if the result of the changes in passenger fares had been generally as beneficial as Mr. Mundella seems to have supposed, no comparison can be drawn between carrying a greater number of passengers in trains only partly filled, and conveying additional mineral and goods traffic by trains which must necessarily entail additional mileage and all the attendant expenses. Take, for instance, coal carried at ·50d. per ton per mile and that the rate is reduced to ·45d.; that is a reduction of 10 per cent. in the rate. Assume a train of 240 tons and 1s. 6d. per train mile each way--that is for the loaded and return empty wagons--as the average cost of haulage and maintenance of way, it would require an increase of 16·6 per cent. in the traffic, to leave a railway in the same position as it was before.

The result of such a course as is recommended would be, to say the least, problematical, as the suggested reasons for it are not unknown to the managers of railway companies, and have been carefully considered by them.

SECTION XV.

PROPOSALS FOR FIXING RATES BY RAILWAY COMMISSION--CONCILIATION COURTS.

One of the many proposals for fixing, or controlling rates was contained in a clause in the Railway and Canal Traffic Bill of last session. It was intended to confer on the Board of Trade the power at any time, “on the application either of a railway company, or of any Local or Harbour Board, any Council of a City or Borough, any representative County body which might hereafter be created, and Justices in Quarter Sessions assembled, any Public Local Authority which is now or might hereafter be established, any Association of Traders or Freighters, or any Chamber of Commerce or Agriculture, who should obtain a certificate from the Board of Trade that they were entitled to make such application, to revoke, amend or vary the maximum rates.” This would have been a totally new departure in legislation. Such statutes as the Railway and Canal Traffic Act of 1854, and the Regulation of Railways Act, 1873, exhibit an inclination on the part of Parliament to jealously limit the powers granted to the companies. The tendency of the Courts of Law has been to construe the Acts strictly against companies and give the public the benefit of all doubtful points.[90] But it had never before been supposed that the powers to charge the rates and tolls contained in the original Acts, under which the companies undertook the construction of the railways, could be indefinitely altered, as proposed in the above clause. No such recommendation was made by the Railway Rates Committee of 1882. After what took place in the discussion of the Bill, both in Parliament and out of it, and the announcement of the then Attorney General, “that no one contemplated a perpetually recurring revision,”--which the clause provided for--it is not probable that any such suggestion will again authoritatively be made.[91]

[90] NOTE.--The following remarks, contained in the report of the Joint Committee of 1872, on the subject of periodical revision of rates, are worth reading--

“The difficulty has been felt by many of the witnesses, and they have accordingly suggested that there should be a periodical revision of rates and fares.

“Here, again, we are met in the first instance by the same difficulty as before. The companies will, if experience is any guide, constantly, for their own sakes, charge less than their legal maxima. Is this revision to take effect on their legal maxima, or on the actual rates as they voluntarily reduce them? If the former, its results will be small; if the latter, it will be difficult to effect, and may bear hardly upon the companies in stereotyping a temporary or experimental reduction. In fact, the proposals for revision of rates, if they are to be effectual, really presuppose some such determination of rates according to a fixed standard as we have considered above. If there are no special rates, it is a comparatively simple thing to make a general reduction. If there are special rates it becomes a very difficult task. But a still more serious question with respect to periodical revision is the question--On what principle is it to be performed, and by whom? If it is to be purely arbitrary, if no rule is to be laid down to guide the revisers, the power of revision will amount to a power to confiscate the property of the companies. It is not likely that Parliament would attempt to exercise any such power itself, still less that it would confer such a power on any subordinate authority. Accordingly the witnesses have suggested that the revision should take effect under conditions which would reserve to the companies a reasonable amount of profit, and to some revision founded on this principle, it appears from the evidence that some, at least, of the principal railway companies would not object.

“This leads to the further consideration of the important question, whether it is possible or desirable to fix by law a maximum of profit, or dividend. If it is not possible or desirable to do so, any periodical or systematic revision of charges by any authority subordinate to Parliament, may be pronounced impracticable.”

[91] See the language of Lord Penzance in _Pryce_ v. _Monmouthshire Canal and Railway Company_, L. R. 4 A. C., p. 206.

Another proposal of a somewhat similar character is, that the Railway Commissioners, or some other special tribunal, should fix the rates. Were a Court for the control of rates established with the consent of all concerned, there would remain the question on what principle are the rates to be framed? Are they to be according to equal mileage, or, if not, in what other manner? What better mode can be suggested than the past practice, which, as has been shewn, has been beneficial to the community? Nor is it easy to understand how any Court could fix all the incalculable number of rates, and hear and determine all the practical questions certain to arise. Even if a trifling proportion of the rates were fixed in this manner, and the task in those cases were performed, with reference to all the many circumstances now governing rates, complications and difficulties must arise, and the Court would be placed in a position of great, if not insurmountable, difficulty. So many anomalies must be authorised that it would be impracticable for the Court to decide consistently with precedents. In all probability the control would either become nominal, or the whole system would have to be recast. Nor must the serious loss of time by the staff of railways in attending to such inquiries, and the consequent diminution of the efficiency of their work in the actual regulation and conduct of railway traffic be lost sight of. The costliness of inquiries before such a Court is a secondary, but not an unimportant, matter. In the hope of obtaining reduced rates, or of compelling a company to raise the rates of a competitor in trade, or to raise the rates to and from competing ports, some traders and merchants, separately or combined, might risk the expense of applications to such a Court.[92] But the general interest could not be promoted by the creation of any such arbitrary and anomalous Court.

[92] In the case of the application of the North Wales Colliery proprietors to the Railway Commissioners against the Great Western Railway Company, on the ground that they charged coal from South Wales to Birkenhead, 159 miles, at the rate of ·454d. per ton per mile, as against ·893d. per ton per mile for their coal for 28 miles, the expense incurred by the Great Western Company, exclusive of the time occupied by their own staff, was £1,433; and the time which was taken up in preparing for, and in attending, the hearing was very serious.

Reference is often made to the experience of the United States in regard to the supervision of railways as if it should be a guide to us. There each State may legislate with reference to the construction and regulation of its own railways. At first everything was done to facilitate their construction. They were proceeded with in advance of, or concurrently with, immigration and settlement. Many States have made large grants of land to railway companies. In some States a few individuals, from five upwards, may form themselves into a railway company, and under general laws construct railways between any two places, regardless of the wishes of others and the considerations which here form the subject of Parliamentary inquiry. No scale of maximum rates, as a rule, governs the charges for conveyance; and great variations in them are in fact made. Only, however, in recent times, when railways have become numerous and their extension is not so urgently needed, have State Legislatures interfered with their management.[93]

[93] The rates for “interstate” traffic in the United States are not at present subject to any Government control, but are made at the discretion of the companies to meet the requirements of trade, competition by rail and water, and of cities. Two Bills for the regulation of the interstate traffic of railways have recently been before Congress; one, the “Reagan” Bill, which proposes to fix the charges, to prohibit any discrimination, and to make it illegal for railway companies “to combine or to pool” their receipts without stringent provisions and penalties. The other Bill, entitled the “Cullom” Bill, proposed the appointment of an Interstate Commission consisting of five members, but did not provide for any specific or maximum rates for the transportation of passengers or merchandise, except that they should be reasonable and that there should be no unfair discrimination; while laying down the principle that the rates should be in proportion to the distance carried, it proposed to give to the Commissioners power, in their discretion, to allow lower rates to be charged for long, as compared with short distance traffic. The former Bill passed the House of Representatives and was rejected by the Senate; the “Cullom” Bill passed the Senate, and was rejected by the House of Representatives.

The expediency of establishing maximum rates has been discussed in some States. But another course has also been tried; Commissioners have been appointed for the purpose of fixing reasonable charges. Where maximum rates have been fixed, in no case, so far as can be ascertained, have the Legislature altered, or the Commissioners interfered with the powers conferred if the rates charged are within such maximum. Some of the Commissioners fixed rates on so unremunerative a basis as to defeat their object and to prevent the introduction of capital, and the construction of railways. The result was that in one State after a trial of about two years, the law establishing such a tribunal was hastily repealed.[94]

[94] Report of the Committee of Commerce, House of Representatives of the United States, March 8th, 1886.

“The Committee on Commerce, to whom was referred the bills (H. R. 309) to establish a Board of Commissioners of interstate commerce, and for other purposes; (H. R. 770) to regulate interstate commerce through a national court of arbitration (H. R. 1,572) to create an interstate commerce commission, and to regulate its powers and duties; (H. R. 1,669) to establish a bureau of transportation in the Department of the Interior; (H. R. 2,412) to regulate interstate commerce and to prevent unjust discriminations by common carriers; and (H. R. 3,929) to establish a Board of Commissioners of interstate commerce, and to regulate such commerce, beg leave to report said bills back to the House, and ask that they be laid on the table, and to report the accompanying bill as a substitute for H. R. 2,412, and recommend its passage.

“The subject matter of these bills has been so fully and elaborately discussed for several years past, that it is not deemed necessary in this report to enter into an elaborate explanation of the provisions of the bill reported to the House. Your committee may state, however, that the several bills referred to them rest upon three different theories.

“House bills 309, 1,572, 1,669 and 3,929 are framed upon the idea of providing a governmental commission, and of making detailed regulations of freight rates. The theory of these bills did not need the approval of the committee.

“House bill 770, ‘To Regulate Interstate Commerce through a National Court of ‘Arbitration,’ looks to the establishment of a court with power extending in some measure to the regulation of commerce between States, with provisions extending to the regulation of subjects not believed to be within the jurisdiction of Congress, and not embracing in its provisions matters of regulation believed to be necessary in a bill of this kind; and a single court to be held at Washington City, as provided in this bill, would not be sufficiently convenient to the people.

“The bill which we report to the House, and which is an amendment of House bill 2,412, is based upon the theory of furnishing civil remedies in the courts of ordinary jurisdiction to parties for the most conspicuous grievances complained of in railroad management, prohibiting what should not be done, and commanding what should be done; proposing remedies for the violation of its provisions, and avoiding any attempt at detailed regulation of freight rates. This was deemed best as the first effort at legislation upon this subject. The interests involved are so large, and their successful management so important to the country, that it was not deemed advisable to run any risk of embarrassing the management of the railroads of the country, and at the same time it was deemed necessary for the protection of the interests of the people to control and circumscribe the exercise of the monopoly powers of these corporations, to prevent them from making extortionate charges and unlawful exactions upon the people.

“The examination of this subject will show that the attempt to establish a system of legislative rates is impracticable, for the reason that what would be a reasonable rate for one road would be ruinous, perhaps, to others, as the charges for the transportation of freights are largely controlled by the amount of business done by the several roads.

“For instance, what would be a reasonable rate of charges on the Pennsylvania Railroad would not be a reasonable rate upon a road in the new States and in a sparsely settled portion of the country.

“The same difficulty lies in the way of attempting to protect the people by the adoption of maximum rates. What would be a reasonable maximum upon one road would not be reasonable upon others. A maximum high enough to protect the railroads against harm would be too high to benefit the people on most of the roads, and a maximum low enough to protect the people on some roads would be ruinous to the interests of many other roads, so that it is not believed best to attempt to protect the interests of the public by the legislative rates or by the maximum rates.

“The bill which we report to the House, instead of adopting either of these plans, provides that the charges of the railroads shall be reasonable; that persons engaged in the transportation of interstate commerce by railroads shall furnish without discrimination the same facilities for the carriage, receiving, delivery, storage and handling of property of a like character, and shall perform with equal expedition the same kind of services connected with contemporaneous transportation.

* * * * *