The History of the British Post Office

by Joseph Clarence Hemmeon

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 1s. for twenty words and 6d. 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]

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]

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 1s. 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]

When the Post Office acquired the telegraphs, a uniform rate was introduced of 1s. for twenty words or part thereof and 3d. 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 6d. 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 1s. for every one hundred words transmitted between 6 P.M. and 9 A.M., or 1s. 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 2d.[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 6d. 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 1s. 1d. in 1885, was reduced to 8d. 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]

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 3d. a mile for the distance beyond the three-mile limit, instead of the distance from the office of delivery.[813]