It must be remembered that shareholders or their predecessors invested their money with the reasonable and proper expectation of having an adequate return for it. No doubt they put down their capital with the primary, possibly the sole, object of benefiting themselves, but the fact remains that their capital has been the means of providing the splendid net-work of British Railways now available for the nation to purchase.
On the other hand, railway stock and shareholders must recognise that their position under the present system is by no means an enviable one. Many of them have for years been in receipt of no dividend whatever. In no case has there been any attempt at repayment of capital moneys, nor does there seem any prospect of it. The average net annual receipts now earned by the whole of the companies is only a fraction over 3½ per cent., and this percentage (which is less than before the year 1870) has for the last few years been practically stationary. The working expenses have been increasing to such an extent by reason of the increase of wages and price of materials that last year the companies decided on an all-round increase in fares and rates. According to the latest returns this has already been to a large extent counteracted by a decrease in traffic.
If, therefore, an offer were made by the Government to purchase the whole of the railways upon similar terms to those on which the East Indian Railway was acquired, namely for a sum equal to the mean market price of the shares during the three years preceding the year in which the Act to acquire the railways is introduced, it is submitted that there could be no effective opposition to the proposal. In effect this would mean a purchase at a price which is the value the public to-day put upon each line of railway. The only practical difficulty of this proposal will be to ascertain the market value of the shares of some of the smaller companies, many of which are held by the larger companies.
In order, however, to avoid under-estimating the amount required, I suggest for the purposes of my argument that the Government and the companies mutually agree on a total sum of £1,350,000,000 as the purchase price of all the undertakings of the companies, subject to the existing liabilities for loans and debenture stock, now amounting to £357,500,000, which would be assumed by the Government. This would make a total in round figures of £1,700,000,000, or nearly £400,000,000 more than the total of the ordinary preference and guaranteed stock. Surely this would be an outside figure. Indeed, it might be suggested that the nation would be paying an excessive amount.
Mr. E. A. Pratt gives various estimates of what the purchase price would probably be.[18] These vary from £1,052,000,000 up to £1,769,847,000, an estimate of “The Railway News,” confirmed by the “Financier and Bullionist,” of September 7th, 1912. “The Financial News” in 1912 suggested £1,941,865,000 in 2½ per cent. Stock in order to yield the present annual income of £48,546,000.
Taking the precedent of the East Indian Railway as a mode of payment and without making any allowance for better terms of interest which the Imperial Government might well obtain, it will be seen that the annual amount required to provide a purchase money of £1,350,000,000 and meet the above liabilities would be as follows:—
Annuities at the rate of:—
| 4¼ per cent. on £1,350,000,000 | £57,375,000 |
| Interest at 3 per cent. on Debentures of £360,000,000 | 10,800,000 |
| Total | £68,175,000 |
According to the estimates set out in Chapter V. (if no further increase of traffic is secured than is required for producing the present revenue), there would be available toward this annual sum required for purchase the following:—
| Passengers | 46,750,000 |
| Goods | 74,800,000 |
| Miscellaneous, as now | 10,000,000 |
| Total | £131,550,000 |
| Deduct for working expenses, as above | 85,000,000 |
| Net revenue | £46,550,000 |
| This shows a deficiency to be made good of | 21,625,000 |
| In order to make up the annual sum of | £68,175,000 |