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Toll and maximum rate clauses in Railway Acts lxv

INTRODUCTION.

For many reasons the failure to pass the Railway and Canal Traffic Bill ought not to be regretted even by those who are dissatisfied with railway companies, but who sincerely desire to benefit the trade of the country. In the discussion of that Bill, and in the debates on the subject of railway rates in recent sessions of Parliament, the existence of many misconceptions were disclosed. As to principles, there was little agreement; there was, if possible, still less as to details. Charges which had often been explained or refuted were repeated as if they were new, and as if they had never been answered. One of the greatest defects of the discussion was its fragmentary, one-sided character; it was carried on with far too little regard to the interests of many classes, districts, and ports which would have been seriously injured by some of the changes hastily proposed. Many of those who professed to represent traders ignored the interests of large sections of them; and what would benefit consumers was, to a remarkable degree, lost sight of. The delay may be useful; and it may be hoped that any future legislation will be shaped according to the interests of all traders, and not of a part of them only, and of the general public, to whom extended and not restricted trade, cheapness, and a wide area of supply are desirable.

The following observations do not attempt to correct or remove all the misconceptions in circulation, or to answer all the charges against English railway companies. Many of such charges are so vague as to elude refutation; they appear formidable, but only formidable because they are indefinite. Nor is this an attempt to show that, with regard to railway working and rates, all is done for the best by the companies. Considering the fact that the rates are numbered by millions, and the variety of interests which they affect--considering, too, the fact that this is an island with numerous ports, companies and trading interests, all competing with each other--it would be amazing if there were no anomalies and defects. The present purpose is only to show that of the charges brought against railway companies some are erroneous; that some are exaggerated; that many are of a contradictory character; that some are complaints of evils which railway companies did not create and cannot alter; and that other supposed grievances could not be removed without injury to the community. It has recently been stated in Parliament that "this is the first time that traders have had an opportunity of going before a tribunal and putting their views fairly before it." This betrays forgetfulness of the fact that, as lately as 1881 and 1882, during two sessions, a Select Committee heard the complaints of all persons who believed that they had grievances to relate. The statement, too, inadvertently ignores the fact that, when the companies submitted in the session of 1885 Bills to Parliament, and thus offered a further opportunity of inquiry, Chambers of Commerce and other persons professing to represent trades refused to avail themselves of the opportunity, and prevented the investigation taking place. English railway companies need not dread a thorough examination of their working, or a comparison with any foreign system. They need be apprehensive only of a vague uninstructed notion that "something must be done;" of legislation adopted, if not in a panic, in a time of greatly depressed trade; of crude one-sided proposals made on behalf of a part of the interests concerned by persons who have not sufficiently examined and considered all the consequences of their schemes; and of the application of a standard of perfection supposed to exist somewhere, but in truth nowhere realized.

Mr. Forwood. Debate on second reading of Railway and Canal Traffic Bill, 6th May, 1886. Hansard, vol. cccv. 446.

The continued depression of trade, the necessary efforts to reduce the cost of production, jealousy of foreign competition, misapprehensions fostered by agitation, as to the commercial effects of "special," "import," and "transit" rates, have given birth to vague, ill-considered proposals, some of which would be certain to injure the cause which their authors have most at heart.

One point is at the outset very clear--the inconsistent nature of many of the charges made against railway companies. Within the last twenty years such complaints have been the subject of three elaborate inquiries before Royal Commissions or Parliamentary Committees. Before all of them were submitted proposals completely at variance with each other. With equal emphasis railways are now asked to satisfy contradictory demands; and to a large extent the multifarious charges made against them answer or cancel each other. Many traders demand the very opposite of what is a necessity to others, and of what consumers, naturally anxious to enlarge the field of supply, earnestly desire. Some of the former complain, for example, in language which seems borrowed from mediaeval times, that their "geographical" or "natural advantages" are diminished. Other traders blame railway companies for not sufficiently effacing natural disadvantages, and not offering inducements for the development of trade in new districts. Exporters want favourable terms; importers do the same; and another class protests against concessions either in favour of exports or imports. It is a remarkable fact that many of the proposals which were most in fashion a few years ago have now been abandoned, and that in Parliament and the Press we now hear chiefly of schemes totally different from those which were formerly supported. Equal mileage rates were once strongly advocated; and, probably owing to the great success of the Penny Post and to the experiences of the advantages of one uniform rate for all distances, there was a belief in some minds that, with certain modifications, the same principle might be applied to rates for goods. Ingenious schemes were devised for equalizing within certain zones or areas, rates irrespective of distance and other circumstances. There is a fashion in so-called Railway Reform. Such schemes are now little heard of; they have given place to proposals essentially different, which may in their turn make way for others.

See Report of Royal Commission, 1867; Report of Joint Select Committee of House of Lords and Commons, 1872; Report of Select Committee, 1881-2.

In all the recent discussions of rates much was heard of those who were discontented, but very little of those who, being satisfied, were silent. Most errors in Political Economy, it has been said, come from not taking into account what is not seen. Especially true is this of the question of railway rates, not the least important problem of Political Economy. Of the trades and interests which are dissatisfied with existing arrangements, people hear and see much. Unfortunately they appear to take little heed of other interests, equally important, which are contented, or comparatively so, which do not send deputations to the Board of Trade, and which changes such as have been from time to time proposed would injure or even go far to ruin.

THE PRINCIPLE UPON WHICH RATES SHOULD BE BASED.

COST OF SERVICE.

But it is no light presumption against this principle that, though so often proposed, especially by theorists, nowhere has it been carried out. Obviously cost of conveyance bears no relation to value of goods--the mere transit of some descriptions of very valuable goods costs as little as that of low priced articles. It will be generally found that when pressed, the advocates of this theory are not prepared to maintain that for a cwt. of coals and a cwt. of copper the charge should be the same. They shrink from the application of their own principle, recognising, as is the fact, that it is absolutely inconsistent with any classification of goods, such as traders and the Board of Trade have been urging the companies to adopt.

NOTE.--See illustration of cubical contents in proportion to weight, page 83.

So serious are the difficulties in the way of ascertaining the facts as to cost of transport, so varied are the circumstances in this country, that it is not surprising that in every instance in which the principle has been brought before a Parliamentary Committee or Royal Commission it has met with the condemnation expressed by the Select Committee of 1872--"it is impracticable."

See also page 18.

EQUAL MILEAGE RATES.

Another proposal which, though always condemned by competent judges, is still, in some form, very often brought forward, is to charge equal mileage rates. Admitting the impossibility or impropriety of making rates vary according to the cost of conveyance of goods without reference to their value or quality--recognising the expediency of classification in some form--many persons think that it would be well to charge for the same kind of goods the same sum per mile universally. This plan is simple; it has an appearance of being equitable; and, as such, it is attractive. But, on the slightest consideration, it becomes apparent that exceptions which mar this simplicity must be admitted. In fact, no one proposes that this principle should be inflexibly carried out. Far from being really equitable, equal mileage rates would often act most unfairly. Mileage run is only one element out of many in cost of service; and to compel companies to charge the same sum between points equally distant, irrespective of the original cost of constructing the way, the nature of the gradients, the amount and regularity of the traffic to and fro, and the extent of back haulage of "empties," would be doing great injustice. Obviously an allowance must be made to cover the cost of specially expensive undertakings, such as the Runcorn, Tay and Forth Bridges, the Sol way Viaduct, or the Severn Tunnel. So, too, allowance must be made for steep gradients; manifestly the same paying load cannot be carried over gradients of one in forty as over one in eight hundred. In Germany and Holland an effort has been made to adopt the mileage system; and it is assumed to be carried out. But patent facts could not be ignored; in these countries an extra mileage up to 12 kilometres is taken into the calculation of rates for expensive bridges and steep gradients. Speed, too, must be taken into account; as it increases, a more than proportionate increase in engine power is necessary.

The late Member for West Wolverhampton, in comparing the rates for Coke between Staveley and Northamptonshire and Staveley and Wolverhampton, practically advocated mileage rates, although, probably, not intending to do so.

If an engine and tender weighing together 56 tons is capable of drawing a maximum load of say forty loaded wagons weighing 560 tons at 25 miles per hour on the level, it will only take the following loads over the gradients named below, and, in addition to the reduction in the load, the speed would also be considerably reduced.

Level. 40 wagons weighing 560 tons. Incline 1 in 100 20 " " 280 " " 1 " 50 10 " " 140 " " 1 " 30 6 " " 84 "

Equality is here not equity. To all railway companies the result of establishing a system of equal mileage rates would not be the same. Much would depend on the question whether the rates were the same over all parts of the same railway, or whether equal mileage rates were in force throughout the country: a distinction not always borne in mind by those who propose such rates. Undoubtedly to many railways the loss of traffic as the result, of equal mileage rates would be serious. Unless a very low scale of rates, entailing heavy and unnecessary loss, were adopted, much of the long distance traffic would cease to be carried. On other railways, however, the present net revenue might be maintained by levelling up rates; although the amount of traffic would be less, the working expenses might be reduced. On the whole, the more the theory of equal mileage rates is studied, the clearer it becomes that its adoption would probably be much less injurious to some railway companies than to colliery proprietors, manufacturers, traders, ports, and to the country at large.

Before Mr. Cardwell's Committee the late Mr. Robert Stephenson, the eminent engineer, gave the following illustration, which is not yet antiquated:--

"I referred to that in order to shew the Committee the great impropriety of attempting anything like an equal mileage rate on railways. I can elucidate that in a very remarkable manner, and shew the injustice that the carrying out of the principle would inflict upon some railway companies, especially where goods are concerned. I will take the case of the Great North of England Railway, from Newcastle coal-field towards York, and towards the rivers Tees and Tyne. In one direction there were 5,450,000 tons of coals carried over one mile, which was equal to 320,588 over one mile for each engine; there having been employed by the York, Newcastle and Berwick Company for the performance of that duty 17 engines. Towards York, where the distance was greater, and the gradients were better, and the loads heavier, and the work more uniform, 13 engines took 14,435,000 tons over one mile, which was equal to 1,110,000 tons for each engine over a mile; in the other case, the duty that one engine performed was carrying 320,588 tons over a mile; therefore in this case one engine has done 3?466 more work than the other engine, so that on the first line it cost the Company nearly four times as much as it cost them for doing the same duty on the other line. On the one line there are a number of collieries; the engines have to stop and pick up the traffic, and the railway wagons do not average perhaps more than seven or eight miles per day, whereas in the other case they work for hours continuously, and with heavier loads and no stoppages."

About thirty years ago, when the iron works at Westbury in Wiltshire were constructed, it was anticipated that fuel would be obtained from the Badstock district, about 14 miles distant. But after sinking collieries it was found that the coke was not suitable; so that it has now to be obtained from South Wales, a distance of about 130 miles. The pig iron is sent to South Wales in the return coke wagons, and also to South Staffordshire, a distance of 140 miles. The coke and pig iron are carried at special low rates below those in force for traffic to intermediate places. Without such special rates, or if mileage rates were charged, the works would have to be closed.

An American writer points out that the following would be the result of applying the principle of equal mileage rates, or of basing rates on cost of service:--

Some advocates of the theory of mileage rates may concede that their adoption would entail loss on certain districts and to some individuals, but deny that the community as a whole would suffer. Is this a reasonable view? Even if the home trade were not injured, the result of equal mileage rates must be to increase the cost of production of many articles manufactured at a distance from ports of shipment. Would not this make competition with foreign countries more difficult than it is? And must it not reduce the demand for labour?

Very recently the fishermen in the North of Scotland have been asking that the same gross rates shall be charged from Wick to large towns in the South as are charged from the fishing ports, such as Grimsby, on the East Coast of England. What would they, or most consumers of fish, say to equal mileage rates?

The principle of equal mileage rates, it may be added, has been condemned by every Royal Commission and Parliamentary Committee which has investigated the subject; and this condemnation has been pronounced on grounds for the most part wholly independent of the interests of railway companies. As pointed out by the Select Committee of 1872, the principle would "prevent railway companies from making perfectly fair arrangements for carrying at a lower rate than usual goods brought in large and constant quantities, or for carrying for long distances at a lower rate than for short distances."

"It would prevent railway companies from lowering their fares and rates so as to compete with traffic by sea, by canal, or by a shorter or otherwise cheaper railway, and would thus deprive the public of the benefit of competition, and the company of a legitimate source of profit."

"It would compel a company to carry for the same rate over a line which has been very expensive in construction or which from gradients or otherwise is very expensive in working, at the same rate at which it carries over less expensive lines."

The Committee add--"It will be found that the supporters of equal mileage, when pressed, often really mean, not that the rates they themselves pay are too high, but that the rates which others pay are too low." In other words, they desire to apply the principle when it works in their favour, and to reject it when it does not.

"We have nothing to do here with the study of the tariff systems adopted on the Alsace-Lorraine lines, and extended with some modifications to the generality of German lines. Seductive by its simplicity, the principle of fixing the rate according to the weight only, and without regard to the value of the object carried, has not found numerous partisans in France. Such a radical reform would overthrow our commercial habits, and would occasion results, in a financial point of view, which would be impossible for us to estimate." Report of the French Commission of the Third System on Railway Tariffs, by M. Richard Waddington. , 1881-2, Vol. 11. p. 449).

DIFFERENTIAL RATES.

While shrinking from advocating equal mileage rates, many persons take up an intermediate position. They object to rates being much out of proportion to distance; they do so although the traffic may not be carried over the same parts or sections of a railway. The rates to which objection is taken are of several kinds:--Special rates for export traffic; special rates for import traffic; transit or through rates; special rates generally--special rates for long distance as distinguished from short distance or intermediate traffic.

Such differential rates exist--and the circumstance is not unimportant--in all countries in which railways have been developed; and it will be found that, here as elsewhere, they have been adopted, not solely or even chiefly with a view to benefit railway companies, but mainly to meet the not unreasonable demands of traders and consumers.

The following are a few instances of special import and export rates charged by the railway companies in this country, viz.:--

a. Exclusive of hampers. b. Inclusive of hampers. X Bacon in 1 ton lots 22/6 per ton C. & D. Butter and Lard in 4 ton lots 22/6 per ton C. & D. C. & D. In other words, collected and delivered.

In the interest of shippers transit rates have been adopted; and as an illustration, may be mentioned the rate for tea from China, Japan, and India, brought by water to London, and despatched to Liverpool by rail for shipment to America or elsewhere, viz.:--

In the abolition of these rates the home trader or consumer can have no direct interest; although the transit rate is lower than that for home traffic, it cannot in any way prejudice the English trader. If the special rate were withdrawn he would be no better off; the traffic would simply go to its destination by water.

To reduced export rates the objections are few. They are generally admitted to be useful; and at a time when on all hands it is urged to be necessary to extend our trade abroad, they could not be abolished without causing serious loss and loud complaints. It is important to enable a colliery owner to export coal, or a manufacturer without a port in the vicinity of his works, to export his wares on such terms that he will not be at a heavy disadvantage or be driven out of the field. Special lower rates enable the manufacturers of exported goods, such as manufactured cottons from Manchester, and hardware from Birmingham, to send them to London, and to avail themselves of lines of steamers sailing from several ports. But for such facilities exporters would be confined to one, and that the nearest, port, and they would lose the benefit of the competition in facilities and sea freights. The railway company which happened to own the route to the nearest port would possess a monopoly of the traffic, and might charge their full rates instead of the present reduced rates.

Nor is the practice recently introduced in the interest of railway companies. In the Act authorising the very first railway on which steam was used, the Stockton and Darlington, the principle is recognised. The tolls upon the coal shipped on board any vessel for export were fixed at one halfpenny per ton per mile, while the toll on all other coal was 4d. per ton per mile. Each of the special export rates has been made, it may be truly said, at the instance of some manufacturer or shipper who would be injured by their withdrawal. In granting such terms, railway companies have endeavoured to satisfy the urgent demands of customers. And if the rate to one intermediate place is fair and reasonable in itself, is it any substantial grievance that it is higher than the rate on goods for shipment?

The rate for the carriage of flour from Minneapolis for consumption at Milwaukee or Chicago is one-third higher than the rate for flour for shipment.

Special import rates are not charged on foreign goods merely because they are foreign; the chief, though not the only, explanation of their existence, is the desire of steamboat companies and merchants that a part of the goods consumed in other places may be carried through the port in which they are interested, instead of the goods being all sent through ports nearer to or direct to the ultimate destination. The railways have, in fact, complied with urgent local demands.

Some rates for import traffic are less than for the same description of goods going in the opposite direction. Such cases are probably rare, and the circumstances of all of them are not fully known. The following, however, was the origin of one of them: The millers in the Eastern counties found that their trade suffered by reason of the competition of millers situated on the Thames, who were able to obtain by water foreign grain at low rates. The former urged upon the railway companies the necessity of granting them reduced rates from London for foreign grain to mix with English wheat, and thus enable them to produce better and stronger flour than that produced by home grown wheat alone. The millers pointed out that by so doing the local industries in which the companies and the districts have an interest would be benefited, and that there would be an increased trade in foreign grain down from London and in flour up to it. Admitting the force of these arguments, the railway companies put in force lower rates. Here, as elsewhere, we find a collision of interests, and conflicting demands. These rates have recently been altered with the view of partially removing the grounds of complaint in this case; it remains, however, an apt illustration of the difficulties encountered in framing rates. Reduced rates are complained of by one portion of the public; and yet, if they were cancelled, other sections would consider themselves aggrieved. Such are the difficulties with which railway companies have to contend; bound to serve and accommodate classes at variance with each other; subject to criticism and complaint if they do not satisfy contradictory demands.

In the evidence given before the Select Committee in 1881, the rates for foreign hops from Boulogne to London were compared with the rates charged for home grown hops from the Ashford and Canterbury districts to London. The former were complained of as being an undue preference in favour of foreign produce. No doubt there was a considerable difference. The rate from Boulogne to London was 17s. 6d., and that from Ashford to London, 38s. It was, however, shewn that the rate of 17s. 6d. per ton for foreign hops from Boulogne to London was a station to station rate, while the rate of 38s. per ton from Ashford to London included delivery and all station services, and that owing to the difference in the mode of packing the hops, 73 per cent. more foreign hops than English hops could be loaded in a truck. The railway companies concerned urged that the home producer was not prejudiced by the transit rate complained of. While it enabled the railway companies to obtain the conveyance of a portion of the foreign hops, an increase of the rate from Boulogne would not be of any benefit to the English grower. The foreign hops would still find their way to London direct by sea. The rate of 17s. 6d. per ton from Boulogne to London was cancelled in deference to the complaints. What is the result? The foreign hops are imported as before; but they are now carried by the General Steam Navigation Company. The railway companies have to some extent suffered; the English producer has gained nothing.

Tea imported into London may be carried by sea direct to Newcastle or Liverpool. Iron manufactured at Middlesboro' or in South Wales can be conveyed by water at low freights to London. So, too, tin-plates may be conveyed by water from Glamorganshire to Liverpool. If the importer or the manufacturer, therefore, desires to send, or the companies desire to carry, any of those goods by railway, special rates yielding only a small profit to the companies must be quoted; otherwise the whole, or nearly the whole of such articles, would be sent by sea. Such reduced rates are complained of because of their being less in gross or per mile than those for the same or similar articles carried for the like or less distances. But grocers or consumers of tea, iron merchants or blacksmiths in inland towns, or manufacturers whose works are near the port of shipment would derive no advantage from all these goods being carried by sea at the same or even lower rates than those now charged by railway. The influence of the sea, "the great free trader" as it has been called, is vast and far reaching. England and Scotland being an island, there is all round the coast direct competition with the sea. It exists for instance between London and Yarmouth, Hull, Newcastle-on-Tyne, Leith, Aberdeen on the eastern coast; and between London, Southampton and Plymouth, and the west coast ports, that is, Bristol, the South Wales ports, Liverpool and Glasgow.

If railways in England did not compete with transport by the sea they would in many cases be of comparatively little use to manufacturers and merchants. Only by such competition do they fully minister to the requirements of the trade of the country. If all the intermediate rates were to be brought down to the level of those charged between port and port what would be the result? The companies would have to raise their port to port rates. The public would lose the benefit of rail carriage for goods sent between port and port, and the companies the profit they might have derived from such goods. Who would be the gainer?

To take one more illustration: steamboats ply between Liverpool and Bristol. Goods carried by railway between these two places by one or other of the three available routes must pass through some one of the following places:--Birmingham, Worcester, Hereford, Shrewsbury, Chester or Warrington. The local rates to all these intermediate towns may appear disproportionate to those charged between the extreme points. But is there any real injustice done? Is it disadvantageous to the public that railway companies should compete with sea carriage between different ports in the Kingdom? Should not railway companies be allowed to accept in respect of traffic so carried, which would otherwise be wholly lost to them, a less percentage of profit without being compelled to reduce all their rates to intermediate inland places to the same or proportionately less amounts? What injustice is done to those whoso goods are carried to and from intermediate inland places by the fact that their rates are higher, or higher in proportion, than the competitive rates, provided the rates to intermediate places are in themselves fair and within the Company's legal maximum?

A third source of complaint of disproportionate rates arises from the competition between ports. Assume, for instance, port A to be 51 miles, port B 72 miles, and port C a greater distance from D, one of the great seats of manufacture and commerce. The merchants and shipowners at C and B desire to compete with A, and they induce the railway company to carry from all three at the same rates. The result is that the rates are lower for the throughout distance than to and from some of the intermediate places. The grounds of grievance would be removed by the railway company ceasing to carry from C and B at the same rates as from A. But the importation of foreign goods would continue; the only difference being that they would be carried through one port instead of two or more. And here a curious fact may be noted. If, in the case supposed, the railways between A and D, B and D, and C and D belonged to separate companies, in all probability no complaint would be made of the rates from A, B, and C to D being the same. On the contrary, competition being always desired by the public, it would be considered in that case advantageous and in the interest of the public. But because the lines between B and D and C and D belong to the same company as that between A and D complaints are made on account of the rates being equal. What is hailed in the one case as a benefit is decried in the other as mischievous and unjust.

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