Railway Rates: English and Foreign

by James Grierson

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]

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.

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]

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]

The rates charged in the United States are mainly governed by competition with water carriage, or between the companies themselves. Occasionally they are so reduced over large districts as to be totally unremunerative. As soon, however, as the struggle between competitors is ended, and an arrangement is arrived at, the rates are suddenly raised. The circumstances of England and the United States are so unlike that, even were those tribunals suited to the latter, no case would be made out for establishing here a Court armed with such powers. Here railway companies can make charges only within their statutory maxima; there, as a rule, no statutory maxima, or prohibitions of undue preference, similar to those enacted here, are known. Here no municipalities have largely subscribed to the capital of railways, no grants of public lands have been made to them, as have been freely done there.[95]

To legislation in Continental countries as to the fixing of rates, we only briefly refer; in Appendix III. are full details as to the law on this subject of Prussia and the German Empire. It may, however, be here observed that the Prussian General Railway Law of 1838 provided for a reduction of rates when the net profits exceeded 10 per cent.; that the concessions to private companies stipulate for the control of the Government over rates; but that, in recent concessions, greater freedom is accorded to the companies, which may, within certain maximum limits, modify rates at pleasure. Such legislation is well worthy of attention; only it may be suggested that it is not reasonable to pick out for commendation this or that provision without regard to its concomitants—to propose to adopt provisions to the disadvantage of railways, and to ignore those which recompense them.

In Germany exist District Consultative Councils or Conciliation Courts, which deal with all questions relating to conveyance of goods on railways, and with the application of existing tariffs and the introduction of new local tariffs. It has been stated that those Councils or Courts are of great practical utility. Whether this be so or not the circumstances under which Conciliation Boards are appointed in Germany are very dissimilar to those of the railways in this country. Their constitution is peculiar; similar elements do not exist here. These Boards are composed of representatives of the Government as workers of the railways and representatives of the traders as users of them. Both, however—the nominees of the Government and the traders—may be said to represent the owners (in reality—the public) of 85 per cent. of the lines, who are liable for any loss in working them. In this country neither the Government nor the traders are the owners.[96] Moreover, in Germany the representative of the Government which controls the working of the railways, has, in fact, the power of fixing any rate by his final decision, whatever may be the views of the traders or the Conciliation Boards. In the last resort the owner of the lines controls the rates.

Were such Councils established here their duties would not be so light as those which fall to them in Germany. There the questions to be considered must be few, the time occupied in deciding them short, owing to there being practically no competition, and to the great bulk of the rates being based on a mileage scale. Much more complex questions would arise here, much longer time must be taken up in deciding them in England, where rates are adapted to all the requirements of trade and competition in its many forms.

In Holland, Belgium, and France, railways have been constructed with, in some cases, considerable financial assistance from the Governments, and under concessions for certain periods. Not unnaturally or unreasonably the Governments have reserved the right to control the rates and charges to be made while a concession is in existence, or when it ends. It will be found, however, that when there is power to reduce the rates before the expiration of the concession, the State guarantees the dividend in the event of loss arising from the compulsory reduction. Such is the case in Holland. The Dutch Law (Article 29) provides that reductions in the tariff can at all times be ordered by the State. But if, in consequence of such reductions, the net gain of the company be diminished, compensation is to be paid out of the State Treasury, and any dispute as to the amount of compensation is decided by a Court of Justice. In no case, however, must the amount of compensation raise the net profits of the year or years for which it is demanded above 8 per cent. of the Company’s capital. Thus the right to control rates is part and parcel of a system wholly unlike our own. It exists in a country where the State has helped to construct, and to a very large extent actually constructed, railways. It is alien to this country, where capital for the whole of the railways has been provided by private individuals, on the faith of the powers to levy the tolls and rates fixed in their private Acts.