Part 3

Some rates for import traffic are less than for the same description of goods going in the opposite direction. Such cases are probably rare, and the circumstances of all of them are not fully known. The following, however, was the origin of one of them: The millers in the Eastern counties found that their trade suffered by reason of the competition of millers situated on the Thames, who were able to obtain by water foreign grain at low rates. The former urged upon the railway companies the necessity of granting them reduced rates from London for foreign grain to mix with English wheat, and thus enable them to produce better and stronger flour than that produced by home grown wheat alone. The millers pointed out that by so doing the local industries in which the companies and the districts have an interest would be benefited, and that there would be an increased trade in foreign grain down from London and in flour up to it. Admitting the force of these arguments, the railway companies put in force lower rates. Here, as elsewhere, we find a collision of interests, and conflicting demands. These rates have recently been altered with the view of partially removing the grounds of complaint in this case; it remains, however, an apt illustration of the difficulties encountered in framing rates. Reduced rates are complained of by one portion of the public; and yet, if they were cancelled, other sections would consider themselves aggrieved. Such are the difficulties with which railway companies have to contend; bound to serve and accommodate classes at variance with each other; subject to criticism and complaint if they do not satisfy contradictory demands.

There has been much hostile comment on the conveyance at reduced rates of foreign produce and merchandise from the Continent, through English ports to places of consumption. The French traffic from Cherbourg or Havre carried _viâ_ Weymouth or Southampton, and from Boulogne or Calais, _viâ_ Dover or Folkestone, and the Dutch and Belgian traffic from Rotterdam or Antwerp, _viâ_ Harwich, have been especially the subject of unfriendly remark. But the explanation of such rates is simple; they are due to no designs against the English factor. French traffic carried _viâ_ Cherbourg may be sent direct by sea to London. In order that it may be conveyed over a portion of their systems, the London and South Western Company run steamers between that port and Southampton; and until recently the Great Western Company had a line of steamers between Cherbourg and Weymouth. In order to compete with the sea communication, the South Western and Great Western Companies necessarily fixed their rates with reference to the sea freights from Cherbourg and other ports. The distance between Southampton and London is 76 miles, while the distance between Weymouth and London is 159 miles. Of course the Great Western Company charged the same rates by the longer as the South Western Company charged by the shorter railway route. Hence the complaint that French goods were being carried cheaper from Cherbourg to London than from places in Dorsetshire, past which, when carried by the Great Western Company, they were conveyed. The obvious answer was, that if the Great Western Company did not carry at all, the traffic would be sent _viâ_ Southampton, and that if the London and South Western Company ceased to carry, it would be sent to London direct by sea. In fact, the Great Western Company have recently given up the steamboat service, and ceased to carry _viâ_ Weymouth; the grounds of complaint made in the name of the Dorsetshire farmers have thereby been removed. But the competition, such as it is, of French with English produce, continues all the same, only all the traffic is carried, not through Dorsetshire, but by other routes. Indeed, immediately after the service _viâ_ Weymouth was withdrawn a new service was established between Paimboeuf and Newhaven; and by this route a portion of the traffic previously sent _viâ_ Weymouth is now carried.

Irish produce from Waterford is carried to London by various routes: direct to the latter by sea; by sea to Bristol, and thence by rail, 119 miles to London; by sea to Milford, and thence by rail, 282 miles; and by sea to Liverpool, and thence by rail 201 miles. The rates _viâ_ Bristol are, and must be, fixed with reference to those charged by sea, and those _viâ_ Milford and _viâ_ Liverpool, must be the same, or nearly so, as those charged _viâ_ Bristol. Yet, according to the views of some persons, this competition is unfair to intermediate towns between Milford and London, and between Liverpool and London, between which intermediate places and London the rates are higher, or higher in proportion, than those charged between London and Waterford. There are complaints as to this disparity, although the competition, if any exists, would continue, even if no Irish traffic were carried _viâ_ Milford at all.

Similar observations apply to traffic between Dublin and Liverpool. Between these cities there is daily steam communication; so that goods carried by sea to Holyhead, and thence by rail, may be conveyed throughout at lower rates than those charged for traffic for places intermediate between Liverpool and Holyhead. Indeed, sea competition influences the rates for traffic between Dublin and Manchester. Traffic is carried by sea, _viâ_ Liverpool, and thence by rail (31 miles) to Manchester, while the distance by rail from the latter place to Holyhead is 122 miles. Consequently the rates between Manchester and Dublin, _viâ_ Holyhead, are less than to some intermediate places.[16]

[16] In the evidence given before the Select Committee in 1881, the rates for foreign hops from Boulogne to London were compared with the rates charged for home grown hops from the Ashford and Canterbury districts to London. The former were complained of as being an undue preference in favour of foreign produce. No doubt there was a considerable difference. The rate from Boulogne to London was 17s. 6d., and that from Ashford to London, 38s. It was, however, shewn that the rate of 17s. 6d. per ton for foreign hops from Boulogne to London was a station to station rate, while the rate of 38s. per ton from Ashford to London included delivery and all station services, and that owing to the difference in the mode of packing the hops, 73 per cent. more foreign hops than English hops could be loaded in a truck. The railway companies concerned urged that the home producer was not prejudiced by the transit rate complained of. While it enabled the railway companies to obtain the conveyance of a portion of the foreign hops, an increase of the rate from Boulogne would not be of any benefit to the English grower. The foreign hops would still find their way to London direct by sea. The rate of 17s. 6d. per ton from Boulogne to London was cancelled in deference to the complaints. What is the result? The foreign hops are imported as before; but they are now carried by the General Steam Navigation Company. The railway companies have to some extent suffered; the English producer has gained nothing.

Tea imported into London may be carried by sea direct to Newcastle or Liverpool. Iron manufactured at Middlesboro’ or in South Wales can be conveyed by water at low freights to London. So, too, tin-plates may be conveyed by water from Glamorganshire to Liverpool. If the importer or the manufacturer, therefore, desires to send, or the companies desire to carry, any of those goods by railway, special rates yielding only a small profit to the companies must be quoted; otherwise the whole, or nearly the whole of such articles, would be sent by sea. Such reduced rates are complained of because of their being less in gross or per mile than those for the same or similar articles carried for the like or less distances. But grocers or consumers of tea, iron merchants or blacksmiths in inland towns, or manufacturers whose works are near the port of shipment would derive no advantage from all these goods being carried by sea at the same or even lower rates than those now charged by railway. The influence of the sea, “the great free trader” as it has been called, is vast and far reaching. England and Scotland being an island, there is all round the coast direct competition with the sea. It exists for instance between London and Yarmouth, Hull, Newcastle-on-Tyne, Leith, Aberdeen on the eastern coast; and between London, Southampton and Plymouth, and the west coast ports, that is, Bristol, the South Wales ports, Liverpool and Glasgow.

If railways in England did not compete with transport by the sea they would in many cases be of comparatively little use to manufacturers and merchants. Only by such competition do they fully minister to the requirements of the trade of the country. If all the intermediate rates were to be brought down to the level of those charged between port and port what would be the result? The companies would have to raise their port to port rates. The public would lose the benefit of rail carriage for goods sent between port and port, and the companies the profit they might have derived from such goods. Who would be the gainer?[17]

[17] Lines of steamers carrying Belgian, Dutch, German, and French goods and produce, run between Antwerp, Rotterdam, Amsterdam, Boulogne, Havre and London. In competition with them the Great Eastern, South Eastern, and London Chatham and Dover Companies carry _viâ_ Harwich, Folkestone and Dover respectively, at such rates as they can obtain in competition with those charged by steamer direct. It has been a subject of complaint that these goods are conveyed at lower rates than similar merchandise from places in Essex or Kent, past which they are carried by rail. No doubt the regular and quick services provided by the railway companies are of great advantage to the senders and consumers. But so far as London is concerned, a great part, if not the whole of the goods, not requiring quick transit could be sent by sea direct, if the Harwich, Dover, and other services were discontinued.

There are import rates to towns in the interior to which there is no direct sea competition. If such rates are not based on the rates to places to which there is such competition, _plus_ the local rates, they may be open to question to an extent not applicable to the rates to and from ports.

Many apparent anomalies in railway rates arise from competition of the railways with the sea: others are the results of comparisons of the rates charged by railway companies, which must carry, if they are to carry the traffic at all, at the same rates as a company having a shorter route. Inasmuch as competition between railway companies is carried on extensively, many such disparities exist. The apparent anomaly in tin plates being carried from South Wales to Liverpool _viâ_ Stockport, near Manchester, at lower rates than to Manchester, was referred to by Mr. Johnson Ferguson in the debate on the second reading of the Railway and Canal Traffic Bill. This arises from the Midland Railway Company competing with two shorter routes between these places, and from the rates by those routes being so fixed as to meet the competition by sea; the former company’s longer route is through Stockport (not Manchester), to which latter place of course there is no export trade, and at which there is no sea competition. This anomaly would be entirely removed by the Midland Company ceasing to compete for the Liverpool traffic; but the consumers of tin plates in Manchester would not in any respect be benefited by the change. The distance by the shortest railway route between London and Bristol is about 119 miles. There are two other railway routes, the shorter of which is 161 miles; there is also direct transport by sea; and by all of these routes there is competition for the conveyance of merchandise traffic. To suit the requirements of the trade between these ports, as well as to contend with competition by water, special rates are charged. Withdraw them, and either the interchange would not take place or the goods would have to be sent by sea. Of course the other railway companies carrying between the two places charge the same rates as those in force by the shortest railway route, otherwise they would obtain no share of the traffic; and these rates are necessarily less for the throughout distance than those charged for like descriptions of goods to some of the intermediate towns on the longer route.

To take one more illustration: steamboats ply between Liverpool and Bristol. Goods carried by railway between these two places by one or other of the three available routes must pass through some one of the following places:--Birmingham, Worcester, Hereford, Shrewsbury, Chester or Warrington. The local rates to all these intermediate towns may appear disproportionate to those charged between the extreme points. But is there any real injustice done? Is it disadvantageous to the public that railway companies should compete with sea carriage between different ports in the Kingdom? Should not railway companies be allowed to accept in respect of traffic so carried, which would otherwise be wholly lost to them, a less percentage of profit without being compelled to reduce all their rates to intermediate inland places to the same or proportionately less amounts? What injustice is done to those whoso goods are carried to and from intermediate inland places by the fact that their rates are higher, or higher in proportion, than the competitive rates, provided the rates to intermediate places are in themselves fair and within the Company’s legal maximum?

A third source of complaint of disproportionate rates arises from the competition between ports. Assume, for instance, port A to be 51 miles, port B 72 miles, and port C a greater distance from D, one of the great seats of manufacture and commerce. The merchants and shipowners at C and B desire to compete with A, and they induce the railway company to carry from all three at the same rates. The result is that the rates are lower for the throughout distance than to and from some of the intermediate places. The grounds of grievance would be removed by the railway company ceasing to carry from C and B at the same rates as from A. But the importation of foreign goods would continue; the only difference being that they would be carried through one port instead of two or more. And here a curious fact may be noted. If, in the case supposed, the railways between A and D, B and D, and C and D belonged to separate companies, in all probability no complaint would be made of the rates from A, B, and C to D being the same. On the contrary, competition being always desired by the public, it would be considered in that case advantageous and in the interest of the public. But because the lines between B and D and C and D belong to the same company as that between A and D complaints are made on account of the rates being equal. What is hailed in the one case as a benefit is decried in the other as mischievous and unjust.[18]

[18] Many of the rates from Hull are affected by inland water competition, or by those charged from Liverpool. On the other hand, the rates from Hull govern those from Grimsby (as a competing port), Harwich, West Hartlepool, Newcastle, Sunderland and Shields. In fact, a large portion of the anomalies in railway rates arise from the competition between ports. Although improvements in detail as to such rates, no doubt, are possible, the interests of some ports would be seriously affected by any change in the principle on which railway rates are fixed.

The chief explanation of differential rates have been mentioned; another cause less important is in operation. In carriage by road, cost may be roughly measured by distance, though even as to the expenses of cartage that is subject to exceptions. But this test--admitted to be practically useless as regards freight by sea--does not hold good of railway transport. Of the various kinds of outlay on the part of a railway company, a large portion remains fixed, whether the distance run by a train is ten miles or one hundred. Such, for example, are the cost of terminal accommodation, and the services of loading and unloading, and clerical work. Such, too, speaking broadly, are the interest on cost of construction, repairs of bridges and earthworks, the permanent staff of employés, and of signalling. Another kind of expenditure increases directly with the mileage run; for example, the provision of, and wear and tear of locomotives, rolling stock and permanent way, and liability for loss of or damage to goods in transit. Certain kinds of expenditure increase with the distance run, but not in the same ratio. Obviously wages, cost of locomotive power, and cost of haulage generally are not four times as much in the case of a train which has run a hundred miles as in one which has run twenty-five. With the progress of railways, with improved economy in the use of machinery, and in other ways, this tendency--recognised to some extent by the Legislature in the rates for short distance traffic--in expenditure not to increase in the same proportion as mileage distance, becomes an important element. The result of all this is to make mileage less a criterion of cost, and tends to place large towns at a greater distance at an advantage as compared with intermediate towns, and to give rise to differential rates.[19] It is also obvious that from many intermediate towns the quantities forwarded are not so large and regular as from terminal towns, and that from the former there is not a constant traffic to and fro.

[19] See as to this Dr. Otto Michaelis’s _Differenzialtarife der Eisenbahnen_, in which the natural and necessary rise of differential rates in Germany is explained.

The urgent demands of traders and producers have created differential rates; the interests of the public and consumers have maintained them; interests, it may be added, which have been little heard in any of the inquiries which have taken place, but which, if any change were meditated, would probably be found to have more at stake than the railway companies. They would ask,--Why should such special rates be withdrawn? They would be losers by the change. The railway companies also would be losers. So too would the public interested, especially as regards perishable goods, in the more rapid and regular conveyance of merchandise than is possible by water. Who would be the gainer? Not, certainly, the home producer, who would find foreign goods brought direct to London by sea; not the consumer, who wishes cheap goods rapidly conveyed, and to whom it is immaterial how they reach him. The fact is that differential rates have arisen in no small degree out of the same causes as have necessitated a classification of goods. Goods of small intrinsic value will not be conveyed at all unless at low rates; only on special terms can such goods produced at a great distance be brought to market.

Sometimes it is urged as an objection to differential rates, that by reason of them companies sustain, on long distance traffic, a loss which is made up by charges on short distance traffic. Repeated, as if it were an axiom, this statement is generally erroneous; though producing, no doubt, a lower percentage of profits than the latter, the former yields some profit, unless where undue competition operates.

To carry traffic at a rate yielding a small profit, is better for a railway company than to have its permanent way for many hours unused, and its plant not fully employed. It may be expedient to accept traffic producing only a small percentage of profit, if it can be got on no better terms; such traffic will at least help to defray the fixed charges, which must be incurred whether it is carried or not. But is a company bound to do all its business on such terms, or would it be desirable that it should do so? Can the senders of other traffic paying only reasonable rates, yielding the company what would otherwise be admitted to be only a fair profit, justly object? and if a company be deprived of this long distance traffic, will it not be forced to raise rates on other traffic in order to maintain its revenue?[20]

[20] NOTE.--See Extract from Sir T. Farrer’s Evidence at page 66.

But, it is also objected, differential rates deprive the inhabitants of certain towns of the natural advantages of their geographical position. This argument would be more persuasive than it is if it were not generally expressed in the very language of Protectionists, if it were not so often a claim of an exclusive right to supply certain markets, and a scarcely concealed dislike to the intrusion of competition. Even supposing that low rates, which enable the produce of remote parts of England and Scotland to be conveyed throughout the length and breadth of the land may interfere with the trade of manufacturers nearer London and other great towns; so may the making of a railway. Places which have one, or districts which are left without any, may be injured by railway communication elsewhere being opened. The existence of any such right as is claimed is questionable. Preserving the natural advantages of one town means preventing the removal of the natural disadvantages of others. In truth, the abolition of differential rates would deprive many places of their natural advantages. That Liverpool is on the sea, and that Birmingham is not, that there is sea communication from the former to London, are circumstances which railways did not create, and to which they must accommodate themselves. Railway Companies are not answerable for the fact that certain kinds of traffic come from a point having the advantage of a sea route; that there is competition at one place and not at another; and that goods may be conveyed from New York to London all the way by sea, or partly by sea and partly by land.

If the rates for all traffic between intermediate places were either made the same as or less than those to terminal points, companies would be compelled to consider whether raising the export and import rates, or reducing those on local traffic, would result in the least loss. If the former course were adopted, as, in the majority of cases it would be, the facilities which manufacturers and merchants now enjoy would be withdrawn; it would be to their interest to ship at the nearest port. The railways would suffer some loss. The inhabitants of intermediate places and the port towns would derive no advantage except the removal of what generally is merely a sentimental grievance. What would a London draper gain if the Manchester and London Shipping rate were withdrawn, and if manufacturers shipped all their goods in Liverpool instead of a portion of them being shipped from London? What would it avail an Essex farmer if Dutch and Belgian produce were sent direct from Rotterdam and Antwerp to London, instead of through Harwich? Would farmers in the South of England be any better off if French eggs and butter were sent by sea to London instead of through Southampton or Newhaven?

SECTION VI.

GROUPING HERE AND ON THE CONTINENT.