A History of Inland Transport and Communication in England/Chapter 25

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[ 335 ]



The combined result of (1) a vast increase in industrial production; (2) the decline in river, canal and road transport; and (3) the various conditions which checked competition on and between the railways was to increase greatly the need for transportation facilities, and to make traders and the public in general more and more dependent on the one means of consignment and locomotion thus so rapidly becoming paramount. Coupled with the many technical details which, as pioneers of the railway system, the English companies had to work out for themselves, and, also, with the questions arising as to the future relations between the railways and the State, there were the further problems as to (a) the means to be adopted to ensure that the rates and charges were reasonable, and not likely to become unjust or oppressive, and (b) the bases on which the rates and charges should themselves be fixed in order to secure due regard for the public interests, to guarantee the operation of the railways on commercial lines, and to ensure for the railway investors a reasonable return on their investments.

The earliest railway rates of all were simply a toll (as on a turnpike road) at the rate of so much per mile, or so much per ton per mile, for the use of the rails, with an extra charge if the railway owners supplied the waggons. This was the practice in vogue down to the Surrey Rail-way period, the tolls for such use of road being fixed by Parliament because of the railway lines being a monopoly.

The next development came when the Stockton and Darlington Railway Company obtained powers to supply haulage by steam power or steam-engine, and were authorised by Parliament to charge a "locomotive toll," in addition to the road toll, when the trader made use of the company's engines.

There was a further development when the railway [ 336 ]companies undertook the functions of carriers, provided waggons, carriages and staff, and were authorised to make a charge for the "conveyance" of goods.

Parliament did not, at first, specify the amounts of the locomotive and conveyance tolls, but simply required that they should be "reasonable," the expectation at that time being that these tolls would be kept to reasonable limits by the competition of the outside carriers. When it was found that the outside carriers would not run their own locomotives on the railway, and that the railways would do their own carrying, the amounts which could be levied as locomotive and conveyance tolls were specified in the special Acts of the companies concerned.

At one time, therefore, the railway companies were authorised by their Acts to impose three separate charges, (1) road tolls, (2) locomotive tolls, and (3) conveyance tolls; but in 1845 a "maximum rates clause" was introduced which grouped these different tolls into a total charge something less than the aggregate of the three.

In proportion as the railway companies themselves performed the duties of carriers, instead of leaving this branch of the transport business to the outside carrying firms, it became necessary for them to provide goods depôts and warehouses, and to have a staff available for a variety of services—loading and unloading, covering and uncovering, etc.—which were necessary in the handling of the traffic. The companies then claimed that for these "station terminals" and "terminal services" they were entitled to make charges in addition to the maximum rates, whereas it was contended on the part of the traders that these services were included in the maximum rates, and that the companies had no right to charge for them separately. After prolonged controversy and much litigation, the dispute was eventually decided in favour of the companies; but Parliament required them to distinguish the charges for conveyance, terminals, and collection and delivery, and, finally, by the Charges Acts of 1891 and 1892, fixed the amounts of the maximum station and service terminals that each company might demand.

In the meantime much trouble had also arisen as the result of the haphazard fashion in which the railways of the country had been called into being.

[ 337 ]The original classification of goods for transport was of the most primitive kind. In the canal companies Acts the authorised tolls and charges were generally specified in respect to only about a dozen different articles. The early railway Acts followed the canal precedent in so far that each of them contained a classification of the goods expected to go by rail, the main difference being that the list given in the railway Acts generally comprised from forty to sixty articles, divided into five or six groups.

As the railways extended, and began to deal with the great bulk of the commerce of the country, these original lists were found to be hopelessly crude and inadequate, and one of the duties undertaken by the Railway Clearing House, first set up in 1847 and incorporated by an Act of 1850, was the preparation of what became known as the Clearing House classification—a work required in the interests equally of the railways and of the traders. At the outset the Clearing House classification comprised about 300 articles. By 1852 the number had increased to 700, and in 1864 it had further expanded to 1300.

The Royal Commission of 1865 recommended that the new and improved classification thus compiled and put into operation by the companies themselves should be the basis of the classification imposed by the special railway Acts. The Committee pointed out that the rates authorised by Parliament were no longer necessarily an indication of the charges actually made in practice since these charges depended, not on the classifications in the companies' Acts, but on the Clearing House classification, by reason of which they were often lower than the statutory maxima. The Committee regarded the classification of the private Acts as defective and inharmonious, and they advised that the Clearing House classification should be enacted by some general Act which might be adopted in the private Acts by reference. The Joint Select Committee of 1872 also advised the adoption of a uniform classification; but it was not until the passing of the Railway and Canal Traffic Act of 1888 that the recommendation was carried out.

This Act of 1888 was, in part, the outcome of reasonable dissatisfaction among the traders.

In the absence, from the outset, of any real and effective system for the organisation of railways in accordance with [ 338 ]well-defined general principles, based on the needs of the country as a whole, great uncertainty existed as to the rates and charges to be paid. There were then no fewer than 900 Acts of Parliament which dealt with the charging powers of 976 past or present railway companies, while the only uniform classification was that of the Railway Clearing House, which had almost entirely superseded the primitive classification in the railway companies' Acts but had not yet received legal sanction.

A recommendation to the effect "that one uniform classification be adopted over the whole railway system" had been made by a House of Commons Select Committee in 1882. They considered that the adoption of this course was necessary in view of the imperfection and want of uniformity in the special Act classifications and charges, in which they had failed to discover any general principle. "In some cases," they said, "reference must be had to more than fifty Acts to determine the various rates the company is authorised to charge."

The position in regard to a new and uniform classification thus so persistently recommended was, however, complicated by the fact that the adoption thereof would involve new maximum rates, since the rates charged for the commodities carried naturally depended on the particular "class" to which those commodities had been allotted. Hence when, by the Railway and Canal Traffic Act of 1888, provision was at last made for a revised and uniform classification, each railway company was further required to submit to the Board of Trade, within a period of six months, revised schedules of maximum rates, with a view to these ultimately—after approval by Parliament—taking the place of the schedules in the existing special Acts. The new scales were, also, to include fixed maxima for "station terminals" and "service terminals," the controversy in regard to which, as already spoken of, was thus to be definitely settled.

The railway companies complied with these requirements, the revised classification and schedules of maximum rates being sent in by March, 1889, to the Board of Trade, which appointed two special Commissioners, Lord Balfour of Burleigh and Mr (afterwards Sir) Courtenay Boyle, to hold an inquiry into them on its behalf. The traders were invited to [ 339 ]send in any criticisms they might wish to offer to the companies' proposals, and by June 3rd no fewer than 4000 objections had been received from over 1500 individuals or trading associations.

By this time the formidable nature of the work that had been undertaken began to be more fully appreciated. Not only were there the 900 Railway Acts dealing with rates and charges, but there were about 18,000 railway stations and some 40,000 pairs of stations between which business was actually transacted in regard to one or more of the 2500 articles that, by this time, were included in the Clearing House classification. As for the rates in force, we have the statement of Sir Henry Oakley that on the Great Northern Railway alone they numbered 13,000,000, while Sir Richard Moon estimated that on the London and North-Western Railway the total at this period was no fewer than 20,000,000.

The task thus imposed by Parliament on the Board of Trade in the revision of rates whose total number seemed almost as countless as the stars themselves was, indeed, of stupendous magnitude, apart altogether from the very heavy labours devolving upon each individual company in the preparation of schedules for its own particular lines. The task itself was, however, rendered still more difficult by the fact that, as pointed out by Mr Temple Franks—[1]

"No principles of revision had been laid down for guidance. The Commissioners were not told to regard either the existing statutory maxima or the actual rates then charged. Amendments to this effect had been rejected in Parliament. The Commissioners, therefore, held that the Legislature contemplated a departure from existing maxima, and that it is equitable 'to make a reduction in their present powers and fix rates based to a great extent on existing rates, but with a reasonable margin of profit for possible changes of circumstances injuriously affecting the cost of or return from the carriage of merchandise by railway.' In determining, however, the principles upon which the future maxima were to be governed, they refused to accept the proposition that they shall cover all existing rates and non-competitive charges."

[ 340 ]With regard to a uniform classification, the Commissioners recommended the adoption, with certain slight changes, of the existing Clearing House classification.

There is no need to record here, in detail, the exhaustive nature of the inquiries, protests, rejoinders, discussions and controversies to which the preparation of the new schedules led. Suffice it to say that these and the revised classification were eventually embodied in a series of Railway Rates and Charges Orders Confirmation Acts which, as applying to the different companies, either individually or in groups, were passed in the Sessions of 1891 and 1892, and came into operation on January 1, 1893. Under these Acts the scales of charges are divided into six parts, viz.: (1) goods and minerals, (2) animals, (3) carriages, (4) exceptional, (5) perishable commodities by passenger train, and (6) small parcels by merchandise train. Each rate is made up of two parts—conveyance and terminals. The conveyance scales for all companies are as near alike as circumstances will allow, and the maximum terminals (station terminal at each end and service terminals in respect to loading, unloading, covering and uncovering) are common to all the Confirmation Acts.

Sir Henry Oakley, who was at this time acting as secretary of the Railway Companies' Association, declared concerning the new conditions thus brought about in regard to the bases of railway rates and charges that "practically they amounted to a revolution." The maximum powers were reduced almost universally; the classifications of the companies' own Acts were abolished, and a new and uniform one substituted; various new scales were introduced; the obligation was now for the first time thrown upon the companies of carrying perishables by passenger train; and a new system of calculating rates was established. "It was not," said Sir Henry, "so much per mile for any distance beyond six miles, as it was in the original Acts, but for the first twenty miles a certain rate, for the next thirty miles a certain less rate, and for the next fifty miles a still further reduction, the effect being that, by that mode of calculating, the longer the distance the goods were carried the less the average rate per mile that was to be charged."

Within a very short time, however, of the new rates coming into force, there were louder and more vehement protests [ 341 ]than ever on the part of the traders. The advantages of a uniform classification were fully realised, and the traders naturally did not object to the fact that (as stated in evidence by Sir Henry Oakley, in 1893), from thirty to forty per cent of the existing rates had been lowered. But they did object most strongly when they found that certain of the rates had been increased.

It was explained by some of the railway companies that, owing to the vast number of the rates involved, and to the short time between the passing of their Rates and Charges Orders Confirmation Act and the 1st of January, 1893, when such Act came in force (the period in question being in some instances not more than about four months), it had been impossible for them to complete the revision of their rate-books by the date mentioned. The class rates were ready, and what had happened was that these had been temporarily substituted for the special rates when time had not allowed of the latter being duly revised.

On the other hand it was alleged against the companies that, apart from any question of shortness of time for their revisions, they had sought to adopt a policy of recoupment, specially low non-competitive rates having been raised to the new maxima with a view to counterbalancing the decreases.

While the plea of the companies in respect to shortness of time was abundantly warranted, the counter-allegation of the traders would appear to have been not without foundation, in view of the fact that the setting of increases against the decreases was defended by the companies on the ground that, being corporations based and operated on commercial principles, they were bound to see that their revenue did not suffer, while, it was further pleaded, they were still charging no more than the rates which, having been expressly sanctioned by Parliament, were, presumably, reasonable. They gave the assurance, however, that the rates were still undergoing revision, and that the increases made were not necessarily final. They further undertook that no increases should be made which would interfere with trade or agriculture, or diminish traffic, and that, unless under exceptional circumstances, there should be no increases at all which exceeded by five per cent the rates in force in 1892.

[ 342 ]The undertaking thus given failed to satisfy the Select Committee appointed in 1893 to inquire into these further grievances. The Committee, in their report, expressed the opinion that the course taken by the companies had been "mainly actuated by their determination to recoup themselves to the fullest extent by raising the rates of articles where the maximum rates were above the actual rates." They were of opinion that the rates not reduced by the new maxima should have been left untouched; and they affirmed that "the margin between the old actual rates and the present Parliamentary maxima was not given by Parliament in order that immediate advantage should be taken of it, or that the policy of recoupment should be carried on, but only to meet certain contingencies, such as rises in prices and wages," etc. They also recommended that further steps should be taken to protect traders from any unreasonable raising of rates within the maxima, the Railway and Canal Commission being empowered to deal with such questions as they arose.

The outcome of all this controversy was the passing by Parliament, in the following Session, of the Railway and Canal Traffic Act, 1894, which introduced an entirely new principle in railway operation.

Turnpike trustees had always had full power to reduce and subsequently to advance their tolls, at their own discretion, provided they never sought to exceed the maxima imposed under their special Acts; and down to this time it had been assumed that railway companies had similar powers in regard to maxima which Parliament had already expressly sanctioned in the Act or Acts of each individual company. There was—and still is—no question (except in cases of "undue preference" or "through rates") as to the right of a company to reduce a rate, or to transfer a commodity to a lower class, thus effecting the same object; and there was, down to 1894, equally thought to be no question as to their right to increase a rate within the same limitations as those applying to turnpike trustees.

What the Act of 1894 did was to restrict the powers of railway companies to increase their rates even within the range of their statutory maxima. It enacted that in the event of complaints being made of any increase of rates, direct or indirect, since December, 1892 (and under the Act of 1888 [ 343 ]a railway company had already been required to give public notice of any increase in tolls, rates or charges it proposed to make), "it shall lie on the railway company to prove that the increase is reasonable"; and for this purpose it is not to be "sufficient to show that the charge is within any limit fixed by an Act of Parliament or by any Provisional Order confirmed by Act of Parliament." Complaint is first to be made to the Board of Trade, and, if agreement between the trader and the railway company should not follow thereon, the trader has the right of appeal to the Railway Commissioners, to whom jurisdiction to hear and determine such complaint is given. "So that," as Butterworth remarks in his "Maximum Railway Rates," "the legislation of 1888-1894 presents this remarkable result—that Parliament in 1892, after probably the most protracted inquiry ever held in connection with proposed legislation, decided that certain amounts were to be the charges which railway companies should for the future be entitled to make, and in 1894 apparently accepted the suggestion that many of the charges, sanctioned after so much deliberation, were unreasonable, and enacted that to entitle a company to demand them it should not be sufficient to show" that the charge was within the limit which Parliament itself had previously fixed.

Whether traders have really gained any balance of advantage from this further outcome of legislative policy in the assumed protection of their interests, as against the railway companies, is open to question. On the one hand they have a guarantee against increases that offer even the slightest suggestion of unreasonableness. On the other hand the Act has destroyed the element of elasticity in rate-making, inasmuch as railway managers must needs show extreme caution in granting reduced or "experimental" rates—in the interests of growing industries—when, if the experiment should fail, and the expected traffic not be forthcoming, the company must go through the formality of advertising the "increase" involved in putting the rate back to its former level, and must, also, run the risk of having to "justify" such increase before the Board of Trade or the Railway and Canal Commission. "I know of my own knowledge and my own experience," Sir George Gibb once told a Departmental Committee of the Board of Trade, "that the effect of these sections has been to [ 344 ]prevent many reductions of rates that would have been tried experimentally."

When we pass on to consider the principles on which railway rates and charges are based we are met with so many complexities in the solution of transport problems, and with such direct conflict of interests on the part of different groups of traders, that we can in no way be surprised at the controversies and the grievances, real or imaginary, to which the subject has given rise from time to time.

The original idea that railway rates and charges should be fixed on a mileage basis, on the same principle as tolls on turnpike roads and canals, was soon found to be impracticable, and successive Parliamentary Committees have demonstrated its futility; though its advocacy, in one form or another, has not even yet been discarded by those who think that railway rates for any given commodity should be so much per ton per mile for all traders alike, irrespective of distance and all other considerations.

One effect of such a principle of rate-fixing as this would have been to exclude the long-distance trader from any particular market, and to confer an undue advantage on the trader in the immediate neighbourhood, or at a short distance therefrom, who would thus have gained a monopoly of the market, to the disadvantage of other traders and of the local community. Nor would such a system of rate-making have answered for the railway companies themselves, since the discouragement of long-distance traffic would have restricted the area of business, and limited their sources of revenue.

Another once much-favoured theory is that the railways should charge so much for cost of service, plus a reasonable profit for themselves.

Here, in the first place, there is the impossibility of deciding what is the cost of the service rendered in regard to each commodity and each consignment thereof that is carried. No basis exists on which the most expert of railway men could decide the respective costs of transport for each and every article in a train-load of miscellaneous goods, nor could any one apportion the exact amount that each should bear in regard to interest on capital outlay and other standing charges which must needs be covered as well as the proportionate cost of actual operation.

[ 345 ]Then we have the fact that, even if these figures could be arrived at, many of the commodities carried would be unable to pay the rates fixed thereon. This would especially apply to coal, iron-stone, manure and other things either of low value or of considerable weight or bulk. Whatever may be the real cost of carrying them, commodities of this kind cannot pay more than a certain rate. If that rate is exceeded either they will be sent in proportionately smaller quantities or they will not be sent by rail at all.

We arrive, in this way, by the logic of actual facts, at the fundamental principle, adopted by railway companies, of charging "what the traffic will bear"; and by this is meant "charging no more than," rather than "charging as much as," the traffic will bear. Findlay, in his book on "The Working and Management of an English Railway" (fourth edition, 1891) says of the practice based on this principle:—

"The rates are governed by the nature and extent of the traffic, the pressure of competition, either by water, by a rival route, or by other land carriage; but, above all, the companies have regard to the commercial value of the commodity, and the rate it will bear, so as to admit of its being produced and sold in a competing market with a fair margin of profit. The companies each do their best to meet the circumstances of the trade, to develop the resources of their own particular district, and to encourage the competition of markets, primarily, no doubt, in their own interest, but nevertheless greatly to the advantage of the community."

The application of the principle is worked out by the division into various classes of all minerals and merchandise carried on the railway. The classes are known respectively as A, B, C, 1, 2, 3, 4, 5, the rates charged being lowest for commodities in Class A and highest for those in Class 5. The type of article included in each class may be indicated by the following examples:—

Class A (applicable to consignments of four tons and upwards).—Coal, coke, gravel, iron-stone, limestone, stable manure, sand.

Class B (applicable to consignments of four tons and upwards).—Bricks, concrete, various articles of iron and steel, granite (in blocks), lime (in bulk), salt (in bulk), common slates.

[ 346 ]Class C.—Parsnips, pitwood (for mining purposes), potatoes (in bulk or in sacks), salt (packed), soda, straw (hydraulic or steam-packed), waste paper (for paper-making).

Class 1.—Cardboard, cotton (unmanufactured), onions, printing paper, finished wrought iron in shafts (for driving mill wheels), soap, sugar (in bags, cases or sacks), tallow, vinegar (in casks).

Class 2.—Bacons and hams (cured and packed), celery, coffee, copper, earthenware (in casks or crates), crucibles (plumbago or clay), oranges, ropes, raw wool or yarn.

Class 3.—Baths, calicoes, carpeting, china (in hampers), combs, cotton and linen goods (in bales, boxes, etc.), cutlery, groceries, hardware, lead pencils, tea, wheelbarrows.

Class 4.—Light drapery (various), footballs, garden arches, grates, ovens or stoves, haberdashery, hats (soft felt), lamps, umbrellas.

Class 5.—Amber, engravings, feathers, cut flowers, hothouse fruit, furs, dead horses, lace, looking-glasses and mirrors, musical instruments, picture frames, silk.

These examples indicate the gradual rise in value in the articles included in the several classes, though, assuming that the traffic will bear the rate, other considerations as well as value will apply, among these being liability to damage during transit, weight in proportion to bulk, and nature of packing or cost of handling.

It is further to be remembered that although a good deal of raw material is carried in the lowest classes at rates which might work out at less than "cost" price, when every item in respect to "cost of service" and interest on capital expenditure had been allowed for, the commodities in question may reappear in various successive forms as part-manufactured or, eventually, as manufactured, articles, paying a successively higher rate, in accordance with their progressively greater value, on the occasion of each further transportation. Even when these results do not follow, the commodities carried at these low rates may help to develop the resources, or to expand the population, of a particular district, and thus serve to create traffic in other directions.

While, also, the rates for the low-value articles may not cover every item in the so-called cost of service, they do contribute to the revenue an amount which might otherwise [ 347 ]have to be made good by the fixing of higher rates on goods in other classes. Traders dealing in commodities of the latter type do not themselves lose by the fact that minerals, raw materials, or other things are carried at rates which, although exceptionally low, are the most they can be expected to pay. No injustice is done to them because the other classes of traders concerned get lower rates than they do themselves. They may even gain—directly, because they are saved from having to cover a larger proportion of the total railway expenditure; and indirectly, because the help given to those other lines of business may either bring trade to them or else keep down the cost of production in regard to manufactured articles they deal in or which they themselves require.

The principle of charging "what the traffic will bear" does more than govern the rates as applying to visible traffic. It embraces the further principle of what Hadley, in his "Railroad Transportation," calls "the system of making rates to develop business."

An immediate result of its application, not alone in England but in various Continental countries, was to bring about a substantial reduction in rates, so that, as Hadley further says, between 1850 and 1880 railway rates were reduced, on an average, to about one-half of their former figures. It may be assumed, also, that these former figures were themselves a substantial reduction on the rates once charged under the toll system in force among the "get-rich-quick" canal companies.

There was thus a gain to the traders as regards both an increase in facilities and a reduction in the cost at which those facilities could be obtained, as compared with previous conditions. The principle in question necessarily involved discrimination between trades; but it became one of the objects of the Legislature to prevent discrimination between individual traders in the same line of business as carried on in the same town or centre.

The general position has been further influenced by the existence of an ever-active sea competition, which is said to affect probably three-fifths of the railway stations in the United Kingdom. The rates for traffic between Newcastle and London, or any other two ports, will necessarily be influenced, if not controlled, by the possibility of the commodities going by a coasting vessel if the railway company [ 348 ]should try to get more than, in these particular circumstances, such traffic will bear. The amount of the railway rate in such a case as this will, in fact, be determined far more by the element of sea competition than by any question as to either presumptive cost of service or actual mileage.

It may well happen that between two other points, in regard to which there is no sea competition, the rates are higher than between two where there is sea competition, although the distance is the same. Here we have the elements of one of those "anomalies" which have often been urged as a reason for equal mileage rates. The inequality in the rates is, however, directly due to the inequality in the conditions. It is not a case of making the no-sea-competition places pay a rate in itself unreasonable; it is simply a case of charging the sea-competition places no more than they would be likely to pay. There may be an apparent inconsistency; but an increase in the rates where the sea competition exists would not necessarily be of advantage to the trader in the district where there is no such competition, though it might lead to the traffic going by sea, and involve the railway company in a loss of revenue which would not improve their position in giving the best possible terms to the inland trader. Nor could any claim by the latter to be put on the same footing as the trader on the coast, who has the alternative of sea-transport open to him, necessarily be made good. Discrimination of places, in addition to the discrimination of trades, there certainly may be; but it is a discrimination due essentially to geography and economic laws.

Other apparent anomalies arise from the fact that where two or more railway companies have lines running to the same destination, the rates charged by each and all of them are, by arrangement between the companies concerned, generally governed by the shortest distance. Here, again, the idea of equal mileage rates is found impracticable. If the rates charged by each of the companies were arbitrarily fixed at so much per ton per mile, the line with the shortest route would naturally get all the traffic. When all charge the same between the same points all of them benefit, and the traders have the advantage of several routes instead of only one; though there is still the "anomaly" that the trader whose consignment is carried twenty miles, and the trader whose [ 349 ]goods are conveyed thirty miles or more to the same destination both pay the same rate.

How the general principle of a sliding scale, under which the charge per ton per mile decreases with distance over twenty miles, works out in practice may be shown by taking the case of merchandise in Class 5, the rate for which would be 4.30d. per ton per mile for a distance of up to twenty miles. For the next thirty miles the rate would be 3.70d. per ton per mile, for the next fifty miles 3.25d., and for the remainder of the distance 2.50d. If, however, the consignment travels over the lines of two or more companies on a through rate, the application of the scale begins over again in respect to the territory of each company concerned. The greatest degree of relative advantage is thus gained by the trader whose consignments travel throughout on the lines of one and the same company.

In any case, however, the effect of the principle is that traders in, say, Cornwall or Scotland are enabled to compete far more effectively on the London market with other traders who are located much nearer to London and thus pay less for rail transport, yet, it may be, do not have the same advantages in respect to economical production as the trader at the greater distance. The "tapering" railway rate—in addition to giving the companies a greater volume of long-distance traffic, and bringing greater prosperity to the long-distance places—thus helps to establish equality in the general conditions in regard to a particular market, whereas the equal mileage rate would keep the distant trader to markets within a circumscribed area, and shut him out from others at which he might otherwise hope to get a far better sale.

In the United States the effect of this "tapering" rate, when applied to large volumes of traffic carried for distances of 1000 or 2000 miles or even more, is to give a very low average rate per ton per mile, and especially so when such average is worked out for the whole of the goods and mineral traffic in the country. The United States average is, in fact, for these reasons, much lower than the corresponding average for this country, where both the average haul and the average weight per consignment are considerably less. Then, also, as the charges for terminals remain the same, whatever the length of haul, they make a material difference in the rate per ton per mile for a haul of five, ten or twenty miles while [ 350 ]assuming infinitesimal proportions per ton per mile when spread over a haul of a thousand miles.

There is thus no real basis for the comparison formerly so often made between average cost of transport per ton per mile in the United States and the United Kingdom respectively. The only fair method of comparison is to discard averages altogether, and contrast charges for actual consignments of equal weight carried equal distances in the two countries; and comparisons made on this basis will be found to favour the British lines rather than the American.

In some instances group rates are in operation for a series of producing centres or for a series of ports, the rates being common to all the places or ports included in the group. This arrangement is of advantage to the general body of the traders concerned, since it puts them all on a footing of equality, without reference to differences in distance; and it is, also, of benefit to the railway companies since it simplifies the clerical work and helps further to avoid unremunerative competition.

Another important feature in connection with railway rates is the distinction between "class" rates, which represent the authorised maxima given in the railway companies' scales for the various classes already mentioned, and "special" or "exceptional" rates, in which the companies concerned have made reductions below their maximum powers, whether for the encouragement of traffic or because of such reductions being warranted by the volume or other conditions of the traffic already carried. In "The Fixing of Rates and Fares," by H. Marriott (1910), it is stated that "probably about seventy per cent of the traffic between stations in the North of England is conveyed at 'exceptional rates,' much below the statutory authority."

In my book on "Railways and their Rates" I have already given, as follows, the general principles on which these special or exceptional rates are fixed:—

(a) Volume and regularity of traffic between the points concerned.

(b) Weight per truck or by train which can be maintained by such regular traffic.

(c) General earning power of the traffic.

(d) Liability or non-liability to damage.

[ 351 ](e) Competition, direct or indirect, by water, by road or by other means.

(f) Special requirements of shipping traffic to or from ports.

(g) The creation of traffic by enabling new or increased business to be done.

(h) A general consideration of what the traffic will bear.

The following examples illustrate the actual difference between the class rates and the special rates at which the traffic is actually carried:—

per ton.
per ton.
0s.00d. 0s.00d.
17 Soap 08009 (a) 07011 (a)
107 S"ap 21009 (a) 17006 (a)
154 S"ap 28002 (a) 22009 (a)
46 Undressed leather 17006 (a) 15000 (a)
179 Cotton and linen goods 45007 (a) 40000 (a)
54 Common window glass 21009 (a) 15010 (a)
207 Com"on win"ow gl"ss 43004 (a) 30005 (a)
20 Iron in Class C 05003 (b)(c) 03008 (b)(d)
51 Grain 09005 (b)(c) 07006 (b)(d)
150 Common bricks 11000 (b)(d) 10005 (b)(d)
Notes: (a) Collection and delivery. (b) Station to station.
(c) 2-ton lots. (d) 4-ton lots.

Yet another characteristic of English railway rates is their division into "company's risk" rates and "owner's risk" rates, the latter being a lower scale on which consignments are carried provided the trader signs either a general indemnity for the whole of his traffic or a separate owner's risk consignment note on the occasion of each despatch relieving the railway from "all liability for loss, damage, misdelivery, delay or detention, except upon proof that such loss, damage, misdelivery, delay or detention arose from wilful misconduct on the part of the company's servants."

The difficulty of proving such "wilful misconduct" in case of damage or loss has long been a grievance with traders consigning under "owner's risk" rates, and vigorous efforts have been made by them, or on their behalf, from time to time to obtain a modification of these conditions.

The railway point of view in regard to this vexed question was thus expressed by Mr F. Potter, in an address on "The [ 352 ]Government in Relation to the Railways of the Country," given to the Great Western Railway (London) Lecture and Debating Society on February 11, 1909:—

"Traders are apt to conveniently overlook the fact that owner's risk rates did not precede the ordinary rates, but that they have depended from the latter, and proposals have actually been made that the order of things should be reversed, and the owner's risk rates made the base rates, the company's risk rates being arrived at by the addition of some percentage. Traders well know the value of the insurance which the difference between the two classes of rates represents to them, and, indeed, base their practice in making use of either rate upon this knowledge. If the trader is prepared to be his own insurer, that is, when there is a sufficiently wide margin between the two rates, he takes the owner's risk rate; but if he considers his goods are too valuable for him to accept the risk himself, he makes the company do so by sending his freight at the ordinary rates."

In the controversies which have arisen on this question of owner's risk frequent reference has been made to the fact that in Germany there is only one kind of rate, and that under it the State railways do, nominally, assume the risk. I have, however, already shown in my pamphlets on "German versus British Railways" and "German Railways and Traders" that unless the consignments forwarded on the German State railways are packed so securely that it is practically impossible for them to come to any harm, they are accepted by the railway officials only after the trader has signed a form of indemnity declaring that the goods are either "unpacked" or "insufficiently packed," thus absolving the State railways of the responsibility they are supposed to accept.

Complaints respecting "preferential rates" have been an especially fertile source of controversy and litigation. The phrase as here used is somewhat misleading. The real ground of complaint is against, not simply "preference," but "undue preference."

If a lower rate is given for a 2-ton or a 5-ton than for a 2-cwt. or a 5-cwt. consignment, the trader in the former case gets a distinct advantage over the trader in the latter case, just in the same way as the wholesale man buys a large quantity of goods at a lower price than that asked for from [ 353 ]the purchaser of only a very small quantity. Here, in each instance, we have "preference" strictly in accord with commercial principles.

The question really at issue turns upon the consideration whether there is undue or unfair preference. It is thus dealt with in a proviso to sub-section 2, section 27 of the Railway and Canal Traffic Act of 1888:—

"Provided that no railway company shall make, nor shall the Court, or the Commissioners, sanction any difference in the tolls, rates or charges made for, or any difference in the treatment of home and foreign merchandise, in respect of the same or similar circumstances."

The position is thus controlled by the words "same or similar circumstances." In what is known as the "Southampton case," decided by the Railway and Canal Commission in 1895, the fact that foreign produce was being carried at lower rates by the London and South-Western Railway Company from Southampton to London than were being charged for English produce was not disputed; but it was successfully argued (1) that lower rates might reasonably be granted for train-loads of produce capable of being loaded into the waggons at the docks and carried through, under the best transport conditions, direct to London than for small consignments, picked up at wayside stations, and loaded and carried under far less favourable traffic conditions; (2) that there was no real detriment to local producers, since the towns concerned were importing more than they were sending away; and (3) that in no respect were the circumstances "the same or similar." There was, said Sir Frederick Peel, one of the Commissioners, "no concurrence between the two classes of traffic, and the greater economy of transport in the dock traffic justified the lower rate."

The principle here involved disposes of, probably, most of the complaints which have been made from time to time on the subject of undue preference; but as these complaints were especially rife in 1904, a Departmental Committee, presided over by Lord Jersey, was appointed by the Board of Trade to inquire whether or not the railway companies were according preferential treatment to foreign and colonial farm, dairy and market-garden produce from ports to urban centres as compared with home produce. The Committee declared [ 354 ]in their report "that the evidence tendered has failed to show that the railway companies are giving undue preferential treatment to foreign and colonial produce as compared with home produce contrary to the intention and effect of existing legislation." They found that some of the traders who complained had compared rates which did not include terminal services with rates that did; had quite wrongly divided what were, in effect, "through" rates, first subtracting the full charge of the shipping company and then assuming that the remainder could be compared with the rate from the first; or had omitted to take into account differences in regard to bulk of consignments, packing, etc.

In effect, no British railway rate may give a preference to foreign as distinct from British produce so far as quantities, conditions and circumstances are the same. The rates are to be available for like consignments whatever the source of their origin. Where the home producer has been unable to provide the same quantities, under the same conditions and circumstances as the foreigner, he has equally been unable to avail himself of a rate open to all the world. He has had the disadvantage of the retail trader as compared with the wholesale trader. The principle involved is practically the same as that in operation on Continental State railways, where the traders who can provide the biggest loads get the advantage of the most favourable rates. On the Belgian State railways, for instance, there are special rates for 50, for 100 and even for 300-ton consignments which can obviously be taken advantage of by only a limited number of traders. But while the retail man cannot expect to get the same terms as the wholesale man, there is no adequate reason why the wholesale man should be kept to the same level as the retail man, and be refused the lower rates for his consignments to which he is entitled on account of their greater bulk or better loading. The question is certainly complicated by the fact that the wholesale man here in question is generally a foreigner; but the railway companies could not be required to discriminate against him, and to penalise him on account of his nationality. The matters at issue must needs be looked at from the point of view of a business proposition rather than from that of expecting the railway companies to usurp the functions of the State in carrying out a policy of Protection.

[ 355 ]Of late years far less has been heard, in the agricultural world, at least, of these allegations of undue preference. The whole position has been changed through the praiseworthy efforts of the Agricultural Organisation Society in spreading among the agricultural community a practical appreciation of the advantages of combination, as adopted by their foreign competitors, included in such advantages being the lower rates which the railways already offer for grouped or other large consignments. The excellent work carried on by the society is calculated to confer, in many different directions, much more benefit on market gardeners, dairy farmers and agriculturists in general than would be gained by them simply from seeking to persuade, or even to force, the railway companies to carry at wholly unremunerative rates the small consignments of non-associated producers, forwarded under the least favourable conditions in respect to economical transport.

As regards the machinery provided by Parliament for dealing with traders' grievances, there is, in the first place, the Railway and Canal Commission, which, taking the place of the earlier Railway Commissioners, was made a permanent body under the Act of 1888. The Court consists of two Commissioners appointed by the Board of Trade, and three ex-officio members, chosen from the judges of the High Court, and nominated by the Lord Chancellor, the Lord President of the Court of Session and the Lord Chancellor of Ireland for England, Scotland and Ireland respectively; though in practice only one of the three takes part in the proceedings in connection with any case brought before the Court. The jurisdiction of the Commissioners includes powers to enforce obligations under special Acts, and to deal with questions of traffic facilities, private sidings, undue preference, through rates, etc.

Whether or not procedure before this body is too costly for other than wealthy litigants to take advantage of is a question which need not be discussed here; but traders have the further advantage of what is known as the Conciliation Clause of the Act of 1888, which provides that "(1) Whenever any person receiving, or sending, or desiring to send goods by any railway is of opinion that the railway company is charging him an unfair or an unreasonable rate of charge, or is in any other respect treating him in an oppressive or [ 356 ]unreasonable manner, such person may complain to the Board of Trade. (2) The Board of Trade, if they think that there is reasonable ground for complaint, may thereupon call upon the railway company for an explanation, and endeavour to settle amicably the differences between the complainant and the railway company." A resort to this expedient by aggrieved parties involves the payment of no fees or costs.

The eleventh report by the Board of Trade of their proceedings under the Conciliation Clause shows that during 1908 and 1909 the number of complaints made to them was 280—a total insignificant in comparison with the many millions of separate transactions in which the traders and the railway companies must have been concerned during the two years in question. The 280 complaints are classified as follows: Rates unreasonable or excessive in themselves, 39; undue preference, 65; rates unreasonably increased, 22; classification, 30; delay in transit, 27; owner's risk, 17; rebates, 23, through rates, 15; miscellaneous, 42. Settlement or partial settlement was effected in 91 cases; in 62 the complaints were not proceeded with; in 122 an amicable settlement could not be arrived at; and in five the proceedings had not been completed. "In certain of the cases," the report further states, "in which an amicable settlement was not reached, it seemed clear to the Board of Trade that the complainants had no real ground for complaint."

Boyle and Waghorn are of opinion that in matters more or less personal to the applicant, or of comparatively minor importance, the procedure under this Conciliation Clause has saved much litigation; though when questions of general principles are at issue the Board of Trade, as a rule, prefer to remit the determination of them to the Railway Commission. They further say: "The principal cause of the comparative absence of litigation lies in the fact that a law of railway traffic is being gradually evolved, reasonably considerate of the rights of both parties, and adapted to the actual circumstances of the traffic. In the early days of railways this was very far from being the case." ("The Law Relating to Railway and Canal Traffic.")

Much of the adverse criticism of railway rates and charges which has been indulged in of late years, without even any resort to an inexpensive complaint to the Board of Trade, [ 357 ]has been due to comparisons with railway conditions in other countries.

At one time the comparison specially favoured was between English and American railway rates; and this was persisted in until it was conclusively shown that there was, and could be, no basis of comparison between huge consignments, carried long distances, on comparatively inexpensive lines, and small average consignments, carried short distances, on the most costly railway system in the world. The element of "the same or similar circumstances" was obviously lacking.

Comparisons were then made with railway conditions in Continental countries, and various tables of comparative rates were published from time to time, in support of railway nationalisation theories or otherwise. But many of these comparisons have been wholly untrustworthy because, once more, they have not compared traffic carried under the same or similar circumstances. Exceptional rates granted, say, by the Prussian Government in the special interests of their commercial policy, but (1) applying to large consignments sent to a port for shipment, the rates being substantially higher when the commodities do not go further than the port, (2) granted in competition with routes passing through adjoining countries, and (3) being simply haulage rates, which include no additional services whatever, have been compared with English "domestic" rates for smaller quantities of traffic, or, it may be, with "paper" rates for traffic that is practically non-existent, and, therefore, has not called for special rates, while the English rates may also include a variety of supplementary services by the railway company (loading, unloading, collection, delivery, warehousing, etc.), which the Continental trader would either have to perform himself or pay for as extras.

The comparisons may thus be wholly misleading; but, assuming that complete equality of conditions could be assured, or allowed for, and assuming that the Continental rates were then found to be lower than the really corresponding English ones, it would still be necessary to remember that in this country there have been, from the earliest period of railway development, many circumstances and conditions, due to State policy or to other causes, which have tended to swell [ 358 ]to abnormal proportions the capital expenditure that the revenue based on rates and charges must needs cover if any reasonable return at all is to be made to the investors. There would, in fact, be no cause for surprise if rates and charges on British railways could be proved to be higher than those in force on the Continent, where the conditions attendant on railway construction and operation have differed so materially from our own. The wonder is, rather, in view of all that I have said as to the past history of our railway system, that British railway rates and charges should, generally speaking, be as low as they are.

  1. Lectures on the "History of Traffic Legislation and Parliamentary Action in Connection with Railways," delivered at the London School of Economics. See "The Railway News," November 30, 1907.