A History of Inland Transport and Communication in England

by Edwin A. Pratt

On the other hand it was alleged against the companies that, apart from any question of shortness of time for their revisions, they had sought to adopt a policy of recoupment, specially low non-competitive rates having been raised to the new maxima with a view to counterbalancing the decreases.

While the plea of the companies in respect to shortness of time was abundantly warranted, the counter-allegation of the traders would appear to have been not without foundation, in view of the fact that the setting of increases against the decreases was defended by the companies on the ground that, being corporations based and operated on commercial principles, they were bound to see that their revenue did not suffer, while, it was further pleaded, they were still charging no more than the rates which, having been expressly sanctioned by Parliament, were, presumably, reasonable. They gave the assurance, however, that the rates were still undergoing revision, and that the increases made were not necessarily final. They further undertook that no increases should be made which would interfere with trade or agriculture, or diminish traffic, and that, unless under exceptional circumstances, there should be no increases at all which exceeded by five per cent the rates in force in 1892.

The undertaking thus given failed to satisfy the Select Committee appointed in 1893 to inquire into these further grievances. The Committee, in their report, expressed the opinion that the course taken by the companies had been "mainly actuated by their determination to recoup themselves to the fullest extent by raising the rates of articles where the maximum rates were above the actual rates." They were of opinion that the rates not reduced by the new maxima should have been left untouched; and they affirmed that "the margin between the old actual rates and the present Parliamentary maxima was not given by Parliament in order that immediate advantage should be taken of it, or that the policy of recoupment should be carried on, but only to meet certain contingencies, such as rises in prices and wages," etc. They also recommended that further steps should be taken to protect traders from any unreasonable raising of rates within the maxima, the Railway and Canal Commission being empowered to deal with such questions as they arose.

The outcome of all this controversy was the passing by Parliament, in the following Session, of the Railway and Canal Traffic Act, 1894, which introduced an entirely new principle in railway operation.

Turnpike trustees had always had full power to reduce and subsequently to advance their tolls, at their own discretion, provided they never sought to exceed the maxima imposed under their special Acts; and down to this time it had been assumed that railway companies had similar powers in regard to maxima which Parliament had already expressly sanctioned in the Act or Acts of each individual company. There was—and still is—no question (except in cases of "undue preference" or "through rates") as to the right of a company to reduce a rate, or to transfer a commodity to a lower class, thus effecting the same object; and there was, down to 1894, equally thought to be no question as to their right to increase a rate within the same limitations as those applying to turnpike trustees.

What the Act of 1894 did was to restrict the powers of railway companies to increase their rates even within the range of their statutory maxima. It enacted that in the event of complaints being made of any increase of rates, direct or indirect, since December, 1892 (and under the Act of 1888 a railway company had already been required to give public notice of any increase in tolls, rates or charges it proposed to make), "it shall lie on the railway company to prove that the increase is reasonable"; and for this purpose it is not to be "sufficient to show that the charge is within any limit fixed by an Act of Parliament or by any Provisional Order confirmed by Act of Parliament." Complaint is first to be made to the Board of Trade, and, if agreement between the trader and the railway company should not follow thereon, the trader has the right of appeal to the Railway Commissioners, to whom jurisdiction to hear and determine such complaint is given. "So that," as Butterworth remarks in his "Maximum Railway Rates," "the legislation of 1888-1894 presents this remarkable result—that Parliament in 1892, after probably the most protracted inquiry ever held in connection with proposed legislation, decided that certain amounts were to be the charges which railway companies should for the future be entitled to make, and in 1894 apparently accepted the suggestion that many of the charges, sanctioned after so much deliberation, were unreasonable, and enacted that to entitle a company to demand them it should not be sufficient to show" that the charge was within the limit which Parliament itself had previously fixed.

Whether traders have really gained any balance of advantage from this further outcome of legislative policy in the assumed protection of their interests, as against the railway companies, is open to question. On the one hand they have a guarantee against increases that offer even the slightest suggestion of unreasonableness. On the other hand the Act has destroyed the element of elasticity in rate-making, inasmuch as railway managers must needs show extreme caution in granting reduced or "experimental" rates—in the interests of growing industries—when, if the experiment should fail, and the expected traffic not be forthcoming, the company must go through the formality of advertising the "increase" involved in putting the rate back to its former level, and must, also, run the risk of having to "justify" such increase before the Board of Trade or the Railway and Canal Commission. "I know of my own knowledge and my own experience," Sir George Gibb once told a Departmental Committee of the Board of Trade, "that the effect of these sections has been to prevent many reductions of rates that would have been tried experimentally."

When we pass on to consider the principles on which railway rates and charges are based we are met with so many complexities in the solution of transport problems, and with such direct conflict of interests on the part of different groups of traders, that we can in no way be surprised at the controversies and the grievances, real or imaginary, to which the subject has given rise from time to time.

The original idea that railway rates and charges should be fixed on a mileage basis, on the same principle as tolls on turnpike roads and canals, was soon found to be impracticable, and successive Parliamentary Committees have demonstrated its futility; though its advocacy, in one form or another, has not even yet been discarded by those who think that railway rates for any given commodity should be so much per ton per mile for all traders alike, irrespective of distance and all other considerations.

One effect of such a principle of rate-fixing as this would have been to exclude the long-distance trader from any particular market, and to confer an undue advantage on the trader in the immediate neighbourhood, or at a short distance therefrom, who would thus have gained a monopoly of the market, to the disadvantage of other traders and of the local community. Nor would such a system of rate-making have answered for the railway companies themselves, since the discouragement of long-distance traffic would have restricted the area of business, and limited their sources of revenue.