LET TER TO THE RIGHT HON. W. E. GLADSTONE, M.P. PRESIDENT OF THE BOARD OF TRADE, &c. 8cc. CONSIDERATIONS ASKED FROM AND OFFERED RAILWAY COMPANIES BY GOVERNMENT. G. H. LANG, ESa. LONDON: PRINTED BY J. B. NICHOLS AND SON, 25 , PARLIAMENT STREET. 1844 . LETTER RIGHT HON. W. E. GLADSTONE, M.P. PRESIDENT OF THE BOARD OF TRADE, &c. &c. Sir, I beg leave, on behalf of several Railway Companies, to submit for your consideration a few remarks on the Government Scheme proposed to be laid before the Select Committee on Railways. Before entering, however, upon the examination in detail of the "equivalents’ 5 proposed to be asked from and given to Railway Companies, I hope I may be permitted to make a few observations upon the grounds on which it is assumed that Railways should be subjected to more stringent control than they now are, viz. 1st. That Railway Companies enjoy a monopoly of the means of conveyance; and 2nd. That they do not afford to the public the amount of accommodation to which the public are fairly entitled. 1. Are Railways a monopoly ? As to the first charge.—Monopoly means exclusive privi¬ lege. But Railway Acts do not prohibit other means of conveyance; therefore, Railway Companies have no exclu¬ sive privilege, and no monopoly. } If the public had found former means of conveyance as ! cheap, quick, and agreeable as Railway travelling, the public I would have continued to use these former means, and per- j sons who had embarked millions of private capital in an ] attempt to introduce an improved-mode of locomotion would I have been ruined. But the new mode of travelling was found to be so much quicker, cheaper, and more agreeable, that the public, consulting their own profit and their own convenience, discontinued the use of every other means of conveyance and betook themselves to Railways. Railway Companies, however, did not avail themselves of this preference to exact a high fare, and, instead of fixing their rates according to the scale sanctioned by Parliament, kept greatly within the prescribed limits, and made their fares so low as to extend the benefit of rapid conveyance to almost the poorest classes. If Railway Companies had charged high fares, and tra¬ velled at a slow rate, with few trains and uncomfortable carriages, competition would have continued, the public would have enjoyed an option between two inferior modes of conveyance, there would have been no monopoly, and consequently no pretext for interference. But Railway Com¬ panies charge fares so low, travel so quick, give such fre¬ quent opportunities, and carriages so much more comfort¬ able than the different classes ever enjoyed before, that competition by any inferior mode of conveyance is rendered impossible. The sympathy bestowed on second and third class pas¬ sengers is therefore misplaced; instead of being sufferers from an illiberal monopoly, they have been gainers from a system, in which liberality and accommodation, has been pushed to the utmost practicable limit. Second class passengers may be regarded as composed of persons similar to those who travelled on the outside of 3 coaches. Formerly they were exposed to the inclemency of the weather, and only a limited number could be carried by each conveyance. Now they are conveyed in covered car¬ riages, at lower fares, and at double speed—they have more frequent opportunities, and every passenger who presents himself is certain of being taken. In the case of third class passengers, the benefit is still greater. Formerly, persons who could not afford to travel by coach, had no alternative but either to remain where they were, or to travel on foot; in the latter case there was a certainty of bodily fatigue and waste of time, they had to encounter the risk of bad roads, and their whole persons were exposed to the inclemency of the weather. Now they have frequent opportunities; their feet are kept dry, their persons, as high as the breast, are sheltered from the weather, and they are carried at a speed twice or three times as great as that at which mail coaches travelled, they are not exposed to fatigue, there is little waste of time, and the fare they are required to pay is less than the expense of walking. The monopoly, therefore, of which some persons affect to complain, is occasioned by the discontinuance of dearer, slower, less comfortable, and less safe conveyances; and the only means used by Railway Companies to attain this mono¬ poly, is by carrying the public more cheaply, more quickly, more safely, and more comfortably than they were ever car¬ ried before. In short, if Railway Companies had charged high fares and given insufficient accommodation, competition would have continued; but, because they have at once given the maximum accommodation at the minimum price, compe¬ tition has ceased. And this cessation of competition, which has arisen from the liberal spirit with which Railway Companies have exercised their powers, is now urged as a reason why they should be compelled to extend accommo- 4 dation, which has already reached the utmost practicable limit, and to diminish fares, which are already as low as is consistent with paying even a moderate return on the capital expended. 2. Do Railways give as much accommodation as the public are fairly entitled to expect? It has been already shewn that Railway Companies enjoy no exclusive privilege and no monopoly, and, although every Railway in this country has at some period been in great pecuniary difficulties, no assistance has ever been ren¬ dered by Government. Why then should Railway Com¬ panies, who have hazarded many millions of private capi¬ tal in these undertakings, be compelled to employ a certain description of carriages, and to charge only a certain amount of fare, while every other coach proprietor is left unfet¬ tered ? Many poor persons travel on the decks of steam boats exposed night and day to all the inclemency of weather, but it never was attempted to compel steam boat owners to protect them by a covering, or to give persons who could only pay for a passage on deck, all the accommodation of a steerage passenger. Yet steam boats have superseded every other species of marine conveyance, and are as much a monopoly as railways. Indeed in the case of steam boats there might have been more reason for interference, as steam boat owners do not construct the road on which they travel, are exempt from taxation, and if dissatisfied -with any new regulation of government, can, without much loss, discontinue the trade. Railway Companies have no such alternative; their capital when once expended can never be recalled, and the public, without sharing in the risk, are se¬ cured in a permanent benefit, as the Company must con- 5 tinue to work the line, whether it affords an adequate remu¬ neration or not. Besides, Railway Companies have encountered an enor¬ mous outlay on the faith of Acts of Parliament, which intitled them to make a certain charge for each passenger. These charges have not only never been exceeded, but their full amount has never yet been levied. It would therefore he an unheard-of stretch of power to interfere with Companies which had exercised their powers with such moderation. I may add, that the great majority in point of number of the Railways of Great Britain have been unsuccessful, but, while the shareholders have been losers, the gain to the pub¬ lic has been beyond calculation. Previous to the opening of the Manchester and Leeds Railway the transit of goods from Manchester to Hull occupied six days, and cost £2 per ton. Now the same ser¬ vice is performed by Railway in ten hours, at a charge of 15s. Gd. per ton, thereby making a clear saving, or, in other words, a profit to the merchants of Manchester and Leeds, of at least £370,000 per annum. It is evident, therefore, that in every point of Anew, whether in the conveyance of passengers or of goods, the pub¬ lic have not only derived their full share of advantage from the establishment of Railways, but the balance of advantage is in favour of the public; and, if any concessions are now to be demanded from Railway Companies for the benefit of the public, fully equivalent concessions should be made for the benefit of Railways. Starting therefore with the principle that Railway Com¬ panies are entitled to an equivalent for the advantages now asked to be yielded to the public, I shall offer a few observa- 6 tions in detail upon the outline submitted to the Railway interest by the Board of Trade. 3. Covered Third class Carriages. It is stated that a leading object of Government is to secure as a minimum, one train per day for the poorer classes, in carriages protected from the weather, at a fare not exceed¬ ing a penny a mile, and a speed not less than 12 miles an hour. The Railway interest in general, it is believed, will not j, oppose this requirement, but they are prepared to show that ] compliance will subject them to considerable loss. The \ t addition of a roof, sides, and seats, will add about 20 per cent, to the dead weight of the carriage. The present car- ,s riage, when filled, contains about seventy passengers, but one with seats could not contain more than from thirty to thirty- five. The weight, therefore, of each passenger, including his portion of dead weight, would be more than doubled, and the expense to the Railway Company of conveying that passenger would be more than doubled. It is scarcely necessary to add that the net receipt from each third class passenger is small, probably on the average of Railways less than 50 per cent. If, then, the fare remains the same while the expense is more than doubled, it is evident that a train which at present yields a small profit, would under the proposed system be attended with con¬ siderable loss. This, however, does not by any means exhibit the full measure of loss to which Railways would be subjected. The addition of a covering and seats to a third class carriage, in ^ effect, makes it a second class carriage. The temptation of riding in a second class carriage at a third class fare, would 1 withdraw a large portion of the second and third class pas¬ sengers from the train immediately before and that imme¬ diately after the covered train. The result, therefore, would he, that the net return from three trains each way, or six trains per day, would be seriously injured. The Railways in the north of England and in Scotland already give the greatest accommodation to the poorer classes, and it is these lines which would be most injuriously affected by the proposed measure. Most of the northern Railways have hitherto been unsuccessful, and have yielded very insufficient returns to the shareholders. It is, there¬ fore, respectfully submitted that they are entitled, from the boon already conferred on the poorer classes, to some assistance or relief from Government, instead of being com¬ pelled to grant further accommodation, by which their present scanty dividends may probably be rendered still smaller. The Board of Trade appear to consider that the proposed measure may be rendered less objectionable by the speed being limited to twelve miles per hour, and by a permission to attach passenger carriages to a luggage train. These limitations, however, could not be carried out in practice. For example, the Manchester and Leeds is the line on which the greatest number of third class passengers is carried, and this Railway is occupied by a constant traffic; thirty-four passenger trains arriving and departing from Manchester daily, besides numerous goods trains. The length of the Railway from Manchester to Leeds is sixty miles, so that a train travelling at the rate of twelve miles per hour would be on the line five hours, and it is evident that, on a Railway with a traffic so overflowing, there would be great danger of a slow train being run into by the faster ones that followed. With regard to attaching the covered carriages to a goods train, this is equally impracticable. The goods trains on the Manchester and Leeds line sometimes extend to several hun¬ dred yards in length, and require to be propelled by three engines. It would therefore be highly inexpedient if not dangerous to increase the weight of these trains, and it would be impossible to stop a train travelling with a momentum so prodigious at the intermediate stations. The practical result of the measure therefore would be, that Railway Companies would be obliged to carry a consi¬ derable portion of their present passengers in second class carriages at the same speed as at present, and at third class fares. 4 .—Revision of Rates. The next branch of the Outline regards a right of revision of rates as to passengers, &c., at the end of twenty years, if the dividend should then be upon an average of five years, beyond what, under present circumstances, the Railway Com¬ pany may fairly look to; Railway Companies being divided into two classes, the one limited to a dividend of ten per cent, and the other to a dividend of seven per cent. Such revision would be unjust. It is believed that the promoters of every Bill in applying to Parliament proved on the average an expected return of 10 per cent; but, as this was to he realized from a scale of charges less than the public had ever before paid, Parliament did not limit the dividend. Railway shareholders, therefore, in the hope of a large dividend, encountered the risk of getting a small one, or perhaps none at all. The return from, at least, four-fifths of the Railways of this country, has fallen infinitely short of what was relied on by the promoters; but, as shareholders are generally inter¬ ested in several Railways, it frequently happened, that the loss on one undertaking was, to a certain extent, compensated by the gain upon another. If Railways are viewed as a whole, it will be found that no class of investments has hitherto yielded so small a return; and it would be unjust to diminish the value of successful Railways, when it is not proposed to assist, in an appreciable degree, the unsuccessful ones. Besides, in entering on such undertakings, parties calculate on a progressive increase. Of this, canals afford a remarkable example; several, which were at first un¬ productive, now paying a dividend of 100 per cent.; and the greater the dividend, the greater the public benefit, as a large revenue derived from low charges, proves the extent to which the public have availed themselves of its acccom- modation. The Monkland, which is now' one of the most prosperous canals in this country, as the £100 share is now worth £3000, did not pay any dividend until it had been in operation for thirty years. At this period, the shareholders had no cer¬ tainty of ever receiving 7 per cent., yet within twenty years they were receiving above 50 per cent. If the revision proposed by the Board of Trade had been then exercised, the dividend would, of course, have been reduced to 7 per cent; and even after this reduction, the shareholder would have no guarantee that it would be continued. If he asked a guaran¬ tee, government would, under the proposed scheme, have had the option of purchasing his shares at so many years’ purchase of a 7 per cent, dividend; or, in other words, would have given him £150 for property which is now worth above £3000. This would not only have been unjust to the individual shareholder, but injurious to the country at large, as these in¬ stances of good fortune encourage the proprietors of unsuc¬ cessful works to persevere in affording the utmost possible accommodation to the public, in the hope of being them¬ selves remunerated at some future period. As Railway Companies object altogether to revision, it is 10 perhaps scarcely necessary to state that they object to the proposed division into two classes. The one subject to re¬ vision when the dividend reaches seven per cent; and the other subject to revision when the dividend reaches ten per cent. This classification is unfair. Why should one set of Railway proprietors be compelled permanently to accept a less rate of dividend than another? And why should a Railway from Manchester to Liverpool be allowed to pay ten per cent, and a Railway from Manchester to Leeds be prohibited from ever dividing more than seven per cent ? If one Railway Company at first pays a small dividend and another pays a good dividend from the beginning, it is evident that, in order to place the two classes of shareholders upon an equality, the Railway which at first paid the smaller dividend should be allowed even¬ tually to pay the larger one : but instead of this the share¬ holder in the unsuccessful line is not only told that he must submit to present loss, but is forbidden even to hope for reimbursement by a higher dividend at some future period. Railway Companies protest against even a uniform limitation, but a graduated scale is still more objectionable. I shall only add one other consideration : but to my mind it is conclusive. If a person invests money upon an ordi¬ nary security, he is assured of receiving back his principal sum, and of receiving a certain annual return. If on the other hand he invests in a Railway, he has no security that he will ever receive back his principal sum, and no guarantee that he will receive a certain annual return, or indeed any return at all. And if he does receive a dividend for a few years, he has no guarantee that it will continue. The share¬ holder therefore encountered all these dangers, trusting that he was to receive permanently the highest rate of profit (whatever it might be) that was consistent with a fair exer¬ cise of the powers secured to him by Act of Parliament. 11 Is it then possible t .at Government will interfere by an ex post facto regulation with property called into ex¬ istence by the authority and on the faith of Acts of Parlia¬ ment ? The parties applying for these Acts proved in every case that it would be of great public advantage if the Railway was formed, and a certain amount of accommodation given at certain rates; Parliament accordingly gave power to charge these rates; and now that the Railways have been formed, the Companies have, in every instance, given more accommodation than they were bound to give and charged lower fares than they were entitled to exact. The public therefore have received greater, and Rail¬ way Companies less advantage than was contemplated by Parliament. If a Railway pays a large dividend, it proves the extent of accommodation given; and if a Railway pays a small dividend, it proves that the public do not pay an adequate price for that accommodation. In these circum¬ stances, I respectfully ask, is it fair , that all the attention of Government should be directed to limit dividends one way ? and why should more anxiety be shown to prevent Railway Companies from getting more than a certain amount, rather than to prevent them from getting less ? I have thus attempted, although in an imperfect manner, to show the importance of the concessions asked from Rail¬ way Companies; I shall now make a few observations on the value of the equivalents offered to Railway Companies. 1. Discouragement of competing lines of Railway. It would undoubtedly be an object of much importance to existing Railways if competing lines could be effectually discouraged. I fear, however, that the amount of discourage¬ ment contemplated by Government would not afford any real protection to existing interests. The “Outline” states that competing lines, without a 12 legitimate traffic of their own, ought not to be encouraged. But the question. What is a legitimate traffic ? must be de¬ termined by the cost of the line. £300 per mile would be a legitimate traffic on a line costing £6000 per mile, although it would not be a legitimate traffic on a line costing £60,000 per mile. If then a cheap Railway can be laid down, passing through a different district, although at no great distance from the original line, it does not appear to be the intention of Go¬ vernment to discourage its construction, provided it can show a very moderate amount of local traffic. Sir Robert Peel stated in Parliament very recently, a If, on a turnpike road, or by other means, you can construct a line of Railway for 2000/. a mile, the original Company can¬ not have the slightest right to complain; it says, ‘ we ex¬ pended 60,000/. a mile on our lineand the answer of Par¬ liament and the public may be, ‘ we are not responsible for your profits; we gave you great advantages, but we distinctly told you that you must enter on the undertaking at your own risk, and you have no right to complain of this new and cheaper route/ ” And he afterwards added, “ Agreeing that it is not right to encourage two lines of Railway running close and nearly parallel to each other, I do not mean to ex¬ clude a species of competition which would be quite as effectual for the restraint of unfair charges or practices; namely, for example, the competition that may take place between Manchester and London, between lines striking each through a different line of country, taking separate routes, each affording accommodation to towns and districts distant from those approaching the other. This competition would be quite as effectual for all puposes of competition, and not liable to the objection of those within a few miles of each other’s route.” After this exposition of the views of Government it need 13 not excite surprise that all classes of Railway Companies, attach little value to the proffered discouragement of com¬ peting lines. To a Railway paying 10 per cent, it would not afford the smallest protection, and a Railway paying 2 per cent., has no fear of a competing line. Amalgamation has only been proposed in the case of Railways where the revenue was insufficient to pay a mode¬ rate dividend, and where the Shareholders have accordingly sustained a heavy loss. It is not proposed in any case to increase the rates already sanctioned by Parliament; and, instead of diminishing the accommodation already afforded to the public, it will be increased, as a greater length of Railway will be under one control, and more convenient arrangements will be made for the conveyance of passengers along the united Railways. The proposed unions will, therefore, benefit the Share¬ holders, promote the convenience of passengers, and injure no one. The Railway Companies find it difficult to imagine on -what fair or legitimate ground they can be objected to, and do not, therefore, estimate at a high value the proffered abstinence from opposition. 3. Facilities in construction of new lines of liail- ivay. This is proposed to be effected by a revision of the Stand¬ ing Orders and Model Bill, by a reduction of the deposit to 5 per cent., and permission to alter curves, gradients, &c. in the course of construction, with leave of the Board of Trade. These measures will certainly be improvements on the present system, but the benefit will be chiefly felt by new Railways. It is therefore scarcely fair to diminish the pre¬ sent and prospective profits of existing Railways, and to offer 14 as an equivalent facility in the construction of new, perhaps of rival lines. 4. Recognition of tenantalle value as the principle of rating. This will be an act of substantial justice, and will certainly be a great improvement: but I respectfully ask, is not every other description of property rated upon tenantable value ? And why should not Railways be rated upon the same prin¬ ciple ? Why should Railways be required to pay an equiva¬ lent for the recognition of this principle, and to receive, as a matter of favour and concession what is enjoyed by every other description of property as a matter of right ? 5. Remission or reduction of the passenger tax on fares at and under a penny per mile. This will be received as a boon by the low fare Railways : but it humbly appears to me to be the oiky real concession to Railways, and is greatly outweighed by the concessions required from Railways. Recapitulation. The general result may be stated in a few words. 1. Railway Companies are required to give a certain amount of second class accommodation at a third class fare. 2. To submit to a prospective reduction of their rates, al¬ though they have been sanctioned by numerous Acts of Parliament, although millions of private capital have been expended on the faith of these rates being continued, al¬ though the public are carried cheaper, quicker, and more agreeably upon Railways than is possible by any other means of conveyance, and although experience has proved that Rail¬ way receipts, under the present scale of charges, are so low as not to afford an adequate return on the capital expended. 15 The equivalent offered by government as a compensation for these formidable requirements, are : 1. That competing lines are to be discouraged, accompanied by a declaration that a Railway between the same termini, but following a different route, although to all intents and purposes a competing line, is not to be discouraged. 2. That the amalgamation or union of continuous lines, by which the public will be more conveniently carried and at the same fares as at present, will not be opposed. 3. That facilities will be given for the formation of new, perhaps competing lines. 4. That the principle on which every other description of real property is rated as a matter of right, should be con¬ ceded to Railways as a matter of favour. 5. That a recent tax on the movement of the poor should be remitted or reduced. I hope I appreciate duly the advantages proposed to be extended to Railways: but I respectfully submit that con¬ cessions are required from Railway Companies while no con¬ cessions are offered in return. A great benefit has already been conferred on the public at large by the establishment of Railways: but Railway shareholders, in the great majority of cases, have not re¬ ceived an adequate return; and the unsuccessful Companies consider they were fairly entitled to the relief now pro¬ posed to be given, without any equivalent being required either from them or from the more successful lines. I have the honour to be, Sir, Your most obedient humble servant, G. H. LANG. 11, Park Street, Westminster, Feb. 20, 1844. LONDON: AND SON, 25 , PARLIAMENT STREET, PRINTED NICHOLS