The Railway Library, 1909 / A Collection of Noteworthy Chapters, Addresses, and Papers Relating to Railways, Mostly Published During the Year

by Unknown

1. Excessive rates.
2. Undue preference.

The complaint that railway rates are excessive generally takes the shape of a comparison of the charges on some foreign railway. Now, I confess that it is very difficult to meet such allegations, because of the difficulty of presenting all the conditions of which account must be taken in order to make a fair and sound comparison, and also owing to the absence of adequate data or materials in the published statistics of English railways.

A general allegation that English rates are higher than those charged in some countries cannot even be discussed, because the factors needed for the comparison are not available. Are they in fact higher is a question the answer to which must precede discussion as to reasons and explanations. The facts in regard to the average length of haul, the average rate per ton mile for different kinds of traffic, or the average charge per passenger mile, and general information as to the nature of commodities carried, speed of transit, and services rendered for the rates charged must be ascertained before any comparison is possible, and these facts are not ascertainable for English railways.

My belief is that having regard to the capital expended on construction of railways, English railway rates are not excessive for the services rendered, and I greatly doubt whether, after making proper allowances for differences in capital cost of railway accommodation, and for other essentially different conditions, rates in any country are lower, comparing like with like, than railway rates in England. This is an issue of fact. It lies at the threshold of any inquiry into the subject of railway rates, and I confess I do not see how much progress can be made with any discussion which turns on assertions as to the relative dearness of English railway rates until adequate materials are available for a sound comparison.

It is true beyond question that English railways have cost more to construct than the railways of any other country. The capital expenditure of all railways in England is represented by the figure of about £56,000 per mile as compared with about £21,000, which is the corresponding figure for German railways, and about £12,000 per mile for American railways. Railway proprietors in England are not responsible for the high capital cost. They were forced by law, and by custom powerful as law, to pay monstrously inflated values for their lands. Burden upon burden has been heaped upon them by the action of the Legislature, by the requirements of Government departments, and by the exactions of public opinion. They have borne heavy losses in being compelled to spend capital without regard to their ability to secure adequate return upon it, and assuredly no reckoning is due from them to the public in this matter. The reverse would be more true.

The total capitalization of railways in the United Kingdom in the year 1907, as given in the Board of Trade Returns, was 1,294 millions sterling, of which 196 millions represents nominal additions. The net earnings (some of which, however, arose from miscellaneous sources independent of the operation of the railways) amounted to £44,940,000, or 3.47 per cent on the nominal capital. Out of a total of 1,294 millions sterling, 136 millions of loan and preferential capital received interest or dividends in excess of 4 per cent. This presumably arose from the insecurity of capital, involving the payment of a high rate of interest or dividend. One hundred and eighty-one millions of ordinary capital received dividends in excess of 4 per cent. per annum. The capital receiving interest or dividends in excess of 4 per cent. per annum is, therefore, 317 millions, or 24.5 per cent. of the total. It cannot be said on these figures that the interest received by those who provided the capital for the railways is excessive.

But would it be possible for State railways to reduce the amount included in railway rates for interest and dividends? It cannot be denied that our present system does involve the needless duplication of railway accommodation—the inevitable waste of competition. There is the constant endeavor to divert traffic, the corresponding effort to keep it. Capital is wasted, but public facilities are increased. The public could certainly secure by monopoly the saving of waste, but only at the cost of losing the advantages, such as they are, of getting more than they pay for. I suspect that on a broad and comprehensive view these advantages are not worth to the community the waste of capital involved in providing them. But it is rather late in the day to adopt this view. Enormous waste has already been incurred, and it must be remembered that this drain on the resources of the nation is not likely to be so serious in the future as it has been in the past, even if the system of leaving railways to private enterprise is not abandoned.

The private ownership of railways provides for the absorption of the wastage of capital in a manner which would be impossible under State ownership. Eighty-eight millions of the capital expenditure on railways goes without dividend, and 151 millions has to be content with a return less than 2 per cent per annum. Although this undoubtedly represents a loss to the community, the loss is distributed. It falls on those who voluntarily spent their money in the hope of gain, and lost it. The State cannot lose capital in this way. All expenditure incurred by the State would be represented by money borrowed on the public credit, and the interest would have to be paid in full, whether the expenditure proved remunerative or the reverse.

That there would be savings, and large savings, under State management I would not deny, but that is because the railways would be worked as a monopoly, and not because they would be worked by the State. The same and still larger economies in working could be effected under private enterprise if competition were abandoned in favor of universal combination or monopoly. The whole question depends on the waste of competition. Each railway company works for its own route. The result is that unnecessary train mileage is run, and train loads are lessened. The secret of success, the foundation of all economy in railway working, lies in securing the largest possible train loads. This is a simple rule, but it embodies a universal truth. If those responsible for the handling and carriage of railway traffic could work with a single eye to economical results, and in all cases forward traffic by the routes which yielded the best working results, great economies could undoubtedly be effected. This consideration does indicate that a source of improvements in railway results would be open to a railway system under Government management which is not available for privately owned railways competing with one another. And in fairness one must admit that this source of economy obtainable only under the conditions of monopoly must be set down as a point to the credit of State ownership.