We now come to a class of criticisms and proposals wholly different from those which have hitherto been considered. In the report by Sir Bernhard Samuelson (page 22) is a recommendation that railway companies should either amalgamate, or make agreements between themselves, for the division of the receipts from competitive traffic, so as to reduce the working expenses.[102] Probably for the first time has this suggestion come from such a quarter. Manifestly it is beginning to be understood that undue competition between railways is injurious to the companies without being beneficial to the public, and that, in the interests of both, it should be moderated.

Hitherto, the public and Parliament have looked with jealousy on arrangements between railway companies intended to lessen the waste caused by undue competition. The statements so often put forward by companies that the expenditure of capital in the construction and working of unnecessary competing lines is not beneficial to the public, have been disregarded. Any scheme which professed to meet “public requirements,” and promised multiplication of trains and the carriage of railway traffic at a high rate of speed, has met with favour in and out of Parliament.

Whether the particular line could only be worked at undue cost, or could yield a proper or, indeed, any return upon the capital to be expended, has rarely been considered. The Legislature has fostered new schemes, and has favoured competition, not economy; it has not recognised how much interested the public were in the prudent expenditure of capital on railways. Had the reports prepared under the guidance of Lord Dalhousie, in order that railways might be constructed according to a definite plan, been acted upon, or had he been able to carry out here his ideas as to railway extension, as he did in India, the rapid growth of railways might have been retarded.[103] But, undoubtedly, the want of any plan has entailed the outlay of a much larger amount of capital than would otherwise have been required. Upon this excess, interest, if it can be earned, is paid; a fact not to be overlooked by those who now desire that the companies should reduce their rates. Such errors are repeated. Even in recent years Parliamentary Committees have authorised on the most trifling grounds new competing lines. True, they expressed no opinion as to the success of such schemes. But it must have been known that, if the capital were subscribed, it must come from people who were under the impression that only schemes of substantial value would be authorised by Parliament.

Of the many schemes of this description, two or three illustrations may be given. Within the last 13 years, authority was obtained to construct a local line for the accommodation of a sparsely inhabited agricultural district. In this form it was favoured by the companies in whose district it was. The prospect of a return on the capital, however, was so small that comparatively little money could be raised. A scheme was, therefore, got up for obtaining Parliamentary powers to extend the line on the plea that it would thus become a through competitive line connecting two important existing systems; a scheme which quite ignored the fact that the two systems had already a means of communication, which it was their interest and desire to develop to the utmost against any hostile scheme. A large portion of the capital was procured on the faith of statements contained in carefully framed prospectuses, for the issue of which the financiers were paid £60,000. A considerable portion of the capital came from persons residing in remote parts of the country. Some money was borrowed for a time at the rate of 16 per cent. per annum. Although about £1,200,000 in cash and paper has been expended, the receipts do not cover the working expenses, including the rent of stations and expenses of junctions; the line must be imperfectly worked; and of course not a farthing of interest or dividend can be paid on any portion of the capital.

A second illustration may be given. About twenty-five years ago a branch railway of 6 miles in length was promoted and sanctioned by Parliament as part of a line to compete with an existing railway. The original cost was estimated at £42,000, and the total amount of capital authorised was £60,000. Not until 20 years after the Act was obtained was the line opened for traffic. During this period no fewer than eleven applications for increased capital or other powers were made to Parliament; and three schemes of arrangement were entered into with creditors and confirmed by the Chancery Court. The total capital expended has been upwards of £157,000, of which 44 per cent. has been raised by loans, 46 per cent. by preference shares, and 10 per cent. only by ordinary stock. What need there was of the line may be inferred from the fact that, although it has now been open for some five years, the gross receipts are not sufficient even to pay the locomotive expenses.

One more case may be mentioned. An application was made to Parliament for powers to construct a line about 7 miles in length, which was estimated to cost not far short of £120,000. After four years a further application was made for extension of time and for power to raise more than half the share capital by the issue of preference stock and to pay interest out of capital. It was then given in evidence that upwards of one-fourth of the estimated cost of the line had already been expended, although no works had been constructed, and only £1,000 paid towards the acquisition of land.

In such cases the diversion of traffic from existing railways usefully serving the public, the loss of interest on the outlay if the line is in the end purchased by them, and the expense of working it, are so much dead weight which the railway system has to bear. Thus the companies are so much less able to reduce rates.

Many similar cases could be stated. Notwithstanding the absorption of this class of schemes, there is still upwards of £61,000,000 of capital which has paid no dividend at all. An inquiry into the promotion and construction of many of the railways authorised during the last 25 years, would probably bring to light facts as startling as those elicited by the Foreign Loans Committee. The established companies oppose such schemes. But their opposition is generally looked upon as arising solely from selfish objects. They are told that it is not their money which is to be expended, and that though they may have a nominal, they have no substantial, right to oppose. It is a common observation that, if a new line afford accommodation for a part of the traffic carried by the opposing company, it will be useful to the public, and that if it will not carry any such traffic the objections of the opposing company are groundless. Such arguments succeed; the Bill is passed; and what happens? From long experience the existing companies know that nearly all the schemes which are at first brought out as independent competing lines will sooner or later be pressing to be worked or leased, or be in the market, and that the promoters of any of them not taken over, will be continually making applications to Parliament or to the Railway Commissioners, posing, not as an aggressive, but as an ill-used company, and harassing its neighbours with a view to be purchased or to levy blackmail.

The present position of railways is largely due to the action of Parliament and to the public, though some blame is no doubt attributable to the companies themselves. A great improvement has taken place in the relations of the companies, and in the conduct of railways in recent years. But there has been too much readiness, indeed anxiety, to invade districts accommodated by neighbouring companies. In the working of their lines exaggerated importance is too often given to competition without regard to its utility. Frequently passenger trains are run without sufficient regard to whether or not they are fairly remunerative. Wagons containing only a small quantity of goods are often sent long distances at little profit, if not at a loss. Goods trains are run at an excessive speed, and therefore do not and cannot carry such remunerative loads as in other countries, notwithstanding some of the undoubtedly low rates charged there. So-called “concessions,” not really essential, are made to trading or other interests, when it would be better that the companies should earn on the traffic a reasonable income to go into the pockets of the shareholders, or be expended, as suggested by Sir Bernhard Samuelson, in improved accommodation.

While there has been too much proneness to favour competing schemes, there has been an unreasonable jealousy of agreements between companies. Traces of the jealousy with which Parliament has regarded agreements between companies, even for merely working branches in extension of parent lines, are shewn by the provision that agreements shall be reviewed every ten years. It also appears in the views of the Railway Commissioners as expressed in section 6 of their twelfth report (1885). They state that it is the practice of some companies to get such agreements confirmed by means of a schedule to their private Bills, which gives the public no opportunity of knowing what those agreements are about, and that the agreements are confirmed, either for long terms, or in perpetuity, without any provision for a periodical revision in the interests of the public. And yet it is not known that the public have derived any advantages from the periodical revision of agreements for working branch lines, and whenever application has been made to Parliament for absorbing a branch line it has been authorised without any difficulty.

In the last session of Parliament, the Midland Company applied for power to enter into, and carry into effect, agreements with certain other railway companies with respect to the provision of joint terminal accommodation at towns and stations on their respective systems; the alteration and enlargement of existing stations for joint purposes; the providing at joint expense of train services between towns and places served by their respective systems, and of locomotive engines and stock for such joint trains; the appointment of joint staff and the fixing of rates, fares and charges in respect of traffic using such joint stations, or carried by such joint trains, and the division of the receipts therefrom. Any agreements made under these powers were to be subject to the approval of the Board of Trade. With the present view held by Parliament and by a section of the traders as to railways, it is, however, questionable whether such agreements would be confirmed, except on terms which it would be impossible for the companies to accept.

In this country—which is unlike the United States in this respect—agreements to charge equal rates for competitive traffic have been, on the whole, adhered to. Arrangements for the division of such traffic are therefore not so much required here as there. The great desiderata of the companies are the limitation of competition within reasonable bounds, stopping the waste which it now causes, and fully affording to each other and to the public and traffic all practicable facilities and accommodation.

Agreements for the division of traffic, or for “pooling,” as they are termed in the United States and Canada, are not unknown in this country. Some have been sanctioned by Parliament; others have been made between the companies without any express Parliamentary authority, and have been carried out. For instance, Mr. Gladstone made, in 1851, an award apportioning, for a period of five years, the receipts for traffic carried between, London, York, Leeds, Sheffield, and several other places, between the Great Northern, and London and North Western, and Midland Railways. In the year 1857 he made a further award determining, for a period of fourteen years, the proportions in which the proceeds from the passenger and goods traffic between the same and other places, including Hull, Halifax, Bradford, &c., were to be divided between these companies and the Manchester, Sheffield and Lincolnshire Company.

Parliament has sanctioned agreements for the division of traffic receipts between the South Eastern and London Chatham and Dover, and between the London Brighton and South Coast and South Eastern Companies. But it is more than doubtful whether the parties to these agreements have derived all the advantages which, consistently with the interests of the public, they might have obtained.

It is well known that nowhere on the Continent has the construction of competing lines been carried out to the same extent as in this country; it is one of the great permanent advantages possessed by Continental railways.[104] In France the companies have districts within which they exclusively afford railway accommodation. The Government recognise and sanction agreements between the companies for the prevention of undue competition where it inevitably arises, and for an apportionment of the receipts from competitive traffic. The following is an instance:—An agreement made 31st March, 1885, between the “Western of France Railway and the Orleans Railway Companies, provided that the receipts in respect of traffic carried between Paris and Angers, Nantes, Montoir, St. Nazaire, Redon and stations beyond, after deducting taxes (“ImpÔts”) and terminals should be apportioned thus:—

1. Traffic between Paris and Redon and stations beyond as far as Plaermel and Pontivy—

55 per cent. proportion to the Western Company.

45 ” ” ” Orleans Company.

2. Traffic carried between Paris and Angers, Nantes, Montoir, St. Nazaire, and branches leading out of the latter two stations, as well as Pont Chateau, by whatever route the traffic may have been carried—

49 per cent. proportion to the Western Company.

51 ” ” ” Orleans Company.

3. Traffic carried between Paris and stations beyond Angers or Martre d’Ecole on the States Railway—

230/304 to the Western Company.

74/304 ” Orleans ”

In Belgium there is practically no such competition as exists in this country. The Government have had to face the difficult questions respecting it: they have solved them in a manner different from that adopted here. They have entered into an agreement for the division of competitive traffic between the State railways and the Grand Central Belge. Under this arrangement the route over which the traffic is conveyed is credited with the whole of the terminals, and 50 per cent. of the carrying receipts. The remaining 50 per cent. is apportioned between the two competing routes on the following basis, viz:—

Each route is credited with 25 per cent. if the mileage is equal.

The longest route is credited with

The route selected by either the State railways or the Grand Central Belge must not exceed the distance by the shortest route by more than 25 per cent.; above which limit all competition ceases.

In Germany exist arrangements practically amounting to a division of traffic. For instance, the shortest route from Elberfeld to BÂle is vi Coblenz-Strasburg. The traffic to BÂle is carried every alternate month by the Right Rhenish route over the Badisch State railway, and by the Left Rhenish route over the Alsace-Lorraine railways. As regards traffic with Austria-Hungary arrangements are made which ensure to each line a certain percentage. In the event of the returns showing that one company have not carried their fixed share, they are entitled to a money compensation.

Undoubtedly the suggestion of Sir B. Samuelson that reductions should be made in the expenses of working railways, and that undue competition should be avoided by arrangements between the companies, is important and well worthy of consideration. To commerce generally, and to the traders using railways, it might clearly be advantageous. It may, however, be premature to expect that at present such agreements as he suggests would be sanctioned by Parliament, except upon onerous conditions. If such agreements were favourably regarded by the representatives of commerce and agriculture in Parliament, the companies would more willingly enter into them. In many cases greater economy and improved working would undoubtedly result, and there is no reason why such arrangements should not be made beneficial to the public as well as fair to the railway companies.