The Working and Management of an English Railway/Chapter 13

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The Working and Management of an English Railway by George Findlay
Chapter 13 — Rates and Fares—Division of Traffic—The Railway Clearing House


Rates and Fares—Division of Traffic—The Railway Clearing-House.

It is not the intention of the present writer to enter very deeply into the thorny and much debated question of railway rates, and the many controversial points arising out of them. The late Mr. Grierson, General Manager of the Great Western Railway Company, in the work published shortly before his lamented decease, and entitled, "Railway Rates, English and Foreign," has so completely exhausted this subject from almost every point of view, that, from the stand-point of the railway companies at least, there remains very little to be said. In a work of this character, it will be sufficient to give merely a brief account of the manner in which rates and fares are made, and the way in which the different railway companies share the receipts amongst themselves, where those receipts are derived from "through" traffic, i.e., traffic which has to be carried over more than one railway before its transit is completed.

The rates and fares to be charged upon a railway are, in a sense, regulated by Act of Parliament; that is to say, that, until recently, the Act which authorised the making of the railway fixed the maximum tolls, which were not to be exceeded for any traffic using the line. In practice, however, the maximum tolls were rarely charged, and a great deal was left in the discretion of the railway companies—moreover, it is impossible for an Act of Parliament to fix the precise charge to be made for each particular commodity which may be conveyed over a railway, and, as a matter of fact, the articles specified in the Acts were comparatively few in number, the remainder being summed up in the comprehensive phrase, "other articles, matters, and things." In fixing its rates, therefore, a railway company had to classify these " articles, matters, and things," as nearly as might be with relation to the commodities which were actually specified in the Act. This necessity was met by the companies meeting in conference at the Railway Clearing-house, and drawing up a comprehensive list of the articles usually carried on railways, classifying them under eight different heads, according to their weight, bulk, value, and destructibility, in what is called the "Clearing-house Classification;" for instance: minerals, sand, and such matters, would be in the lowest class, while fresh fruit and fish, furniture, china, and other valuable or fragile articles would be in the highest. Each company then fixed its rates between each pair of stations for each class of goods in the classification, having due regard to its maximum powers; but in addition to these "class rates," there were always a number of special rates for particular descriptions of goods.

But the old order of things has been totally changed since the passing of an Act in the last session of Parliament, entitled "The Railway and Canal Traffic Act of 1888," the provisions of which will be more particularly described in the succeeding chapter. The general effect of it, however, has been to place upon the railway companies the obligation of submitting an entirely new classification and schedule of maximum charges, which, after running the gauntlet of all objectors, and securing the approval of the Board of Trade, will be embodied in an Act, and receive the sanction of Parliament.

The rates are governed by the nature and extent of the traffic, the pressure of competition, either by water, by a rival railway 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 fixing of passenger fares is a comparatively simple process. Between local stations on the North Western Railway the fares are made up, roughly speaking, on the basis of charging twopence per mile travelled for first-class passengers, three half-pence per mile for second-class, and one penny for third-class, the amount of the passenger duty being added to the first and second-class fares; but where there are competing routes, or where, in suburban districts, the opposition of omnibuses or tramways has to be encountered, the fares are often considerably reduced. Railway companies are sometimes very unfairly assailed when they reduce their rates or fares in order to meet competition, and it is somewhat hastily assumed that, if they were able to reduce their charges on compulsion, it was incumbent on them to have done so before. Thus, it is not uncommon to hear the remark, "The —— Company have had to reduce their fares at last, thanks to the opening of the —— line." This is, however, unjust. So long as competition does not exist, the companies are only discharging their duty to their shareholders in obtaining what Parliament has sanctioned as a fair rate of remuneration for the services they perform, but when there is a rival in the field, they are justified in concluding that "half a loaf is better than no bread at all"; although it by no means follows that their previous charges were unfair or excessive.

In days gone by, it cannot be denied that railway companies incurred great losses and sacrificed a considerable portion of their revenue by extreme competition amongst themselves, but in this matter, as in many others, they have gained wisdom by experience, and "profited by the uses of adversity." A certain amount of healthy competition will always exist; but the companies now mitigate its severity by agreeing amongst themselves what the rates between competing points shall be by all routes. The competitive rates between most places in Great Britain are, in the main, governed by two Conferences, "The English and Scotch Traffic Rates Conference," and the "Normanton Conference." The English and Scotch Conference is composed of representatives (who are usually the Chief Goods Managers) of all the companies, both English and Scotch, who are interested in the carriage of goods between places in England and places in Scotland by the various routes. These representatives meet once a month, and deal with all questions arising in connection with the making of new rates or the alteration of existing rates for competitive places between which more than one company can carry. The Normanton Conference, which was originally established to control the rates for a certain district of which Normanton, where its meetings were formerly held, was a convenient centre, has gradually so much extended its scope that it is now composed of representatives of nearly every company of any importance in England, and governs almost the whole of the competitive rates which are not dealt with by the English and Scotch Conference. The cross-channel rates between England and Ireland are controlled by an "English and Irish Traffic Rates Conference," and, besides these three, there are some minor Conferences which have been established in connection with the traffic of particular districts, but have not the importance of those which have been already alluded to.

In addition to the system of agreeing the rates between competing points, there is another plan which railway companies sometimes adopt, in order to avoid the losses arising from competition, which is known as "Percentage Division of Traffic," and which is carried out in the following manner. Supposing that there is a certain traffic to be conveyed between two towns or districts, and that there are two or more railway companies, each having a route of its own by which it is enabled to compete for the traffic. An agreement is come to that the receipts derived from the whole of the traffic, carried by all routes, shall be thrown into a common fund, and that each company shall be entitled to a certain percentage of the whole—say, for example, 50 per cent, to the company having the best route, 30 per cent, to the second, and 20 per cent, to the third. The percentages are usually adjusted on the basis of past actual carryings, but in settling the terms of the agreement due weight is accorded to any prospective advantages which may entitle one company to claim a larger proportion than it has carried in the past. An agreed allowance for working expenses is made to any company carrying more than the percentage allotted to its route, but, as this allowance is fixed with due regard to the actual cost of the service, it will be perceived that there is no very great inducement for any company to carry more than its share.

Let it not be hastily concluded that an agreement of this kind is opposed to the interest of the general public, for it may safely be asserted that in the long run it is a mistake to imagine that the public are the gainers by an extreme course of competition between two railway companies. If the contest is waged to the bitter end, the public may enjoy low rates for a time, but the result must be the "survival of the fittest"—or, rather, the strongest—and the latter, becoming masters of the situation, will naturally seek to recoup themselves for the severe losses they have sustained during the progress of the struggle. Meanwhile, neither of the competitors will have been in a position to perform the services they have undertaken in as efficient a manner as would have been the case if they had been working with a fair marign of profit. The only competition from which the public can reap a real and lasting advantage is that of two companies carrying at fair and remunerative rates, and each seeking to attract business to its own railway by performing the service to the public in the most efficient, safe, and expeditious manner.

It must be admitted that railway companies set a good example to the community at large in the method they adopt of settling disputed claims and other matters of difference between themselves instead of having recourse to expensive litigation. By the terms of an Act passed in the year 1859, and entitled the "Railway Companies' Arbitration Act," it was provided that any two or more companies might, by writing under their Common Seal, agree to refer to arbitration any differences or disputes in which they were mutually concerned, and which they might legally settle by agreement between themselves. This Act is incorporated in all modern Acts of Parliament and in most agreements entered into by railway companies, and the effect is to reduce litigation between them to a minimum, with a consequent great saving in expense. Under the Act, the arbitrators have power to call for the production of books and documents, to administer oaths, and hear evidence, and their decisions are final and binding upon all concerned, and may be legally enforced in any of the Superior Courts of Law. Two companies may agree to appoint a single arbitrator, or each company concerned may appoint one, in which case the arbitrators appoint an umpire to decide between them in case of difference. In the event of either company failing to appoint an arbitrator after having agreed under seal to do so, or of the arbitrators failing to appoint an umpire, the Board of Trade may be called upon by either of the other companies concerned to name an arbitrator or an umpire, as the case may be.

A very complete machinery exists for the settlement of cases of disputed liability for claims arising on through traffic in which two or more companies are concerned. A tribunal has been constituted which is termed the "Claims Arbitration Committee," and which holds its meetings at the Railway Clearing-house in London once each month. It consists of twelve members chosen by election from their own body by the Goods Managers of the companies who are parties to the Railway Clearing-house, the members holding office for three years, and one-third of them retiring annually and not being eligible for re-election until after the lapse of a year from their retirement. When two or more companies fail to agree as to the liability for a claim arising upon traffic in which they are jointly interested, either party to the dispute may, by giving due notice, appeal to the decision of the Claims Arbitration Committee. Statements of the facts are drawn up and submitted on either side; and, after examining these, the Committee hears the evidence and arguments of the parties Concerned, and gives its decision, which is held to be final.

For claims arising upon through passenger traffic there is a similar committee, having the same functions and constituted in the same manner, but which, in this case, consists of twelve Passenger Superintendents, elected by the members of the Superintendents' Conference. There can be no question as to the great advantages of a system of this kind; for not only are railway companies saved a vast expense which would otherwise be incurred in litigation, but the cases are adjudicated upon by able and experienced railway men, who are perfectly conversant with the facts, and incomparably more competent to arrive at a satisfactory decision than any other tribunal which could be selected. It should be mentioned that in order to secure the complete impartiality of the Committee, no member is permitted to take part (except as an advocate) in the proceedings upon any case in which the company he represents is in any way interested.

In cases where traffic, in being conveyed from its starting point to its destination, has to be carried over the railways of two or more companies, the receipts are divided between the companies concerned in proportion to the mileage travelled over each railway. In the case of merchandise traffic, before this division is made, a certain fixed sum is allowed (according to the class of traffic) to the forwarding and receiving companies respectively, for terminal expenses; that is to say, for the use of the stations, and for the services of loading and unloading and clerkship. A simple illustration will perhaps best serve to show the working of this arrangement.

We will suppose that a ton of goods has to be forwarded a distance of loo miles, and in completing its journey has to travel 60 miles over one railway (A) and 40 miles over another (B). We will assume that the freight amounts to 23s. and that the terminal allowance at each end is 4s.:

Company A will receive—

60/100 of 15s. = 9s. + 4s. = 13s.

Company B will receive—

40/100 of 15s. = 6s. + 4s. = 10s.
Total 23s.

The question of division of traffic brings us to the consideration of one of the most important features of the railway system, which is known as the Railway Clearing-house. In the early days, when railways began to multiply and to run in connection one with another, it was necessary for a passenger who had to travel over two railways before his journey was completed, to change carriages on the termination of the first one and to take a fresh ticket; and similarly every consignment of merchandise had to be transhipped from one company's waggon to that of another at the point of junction, and to be re-invoiced. As the business increased, this was soon found to be a perfectly intolerable system, and a demand arose from the public that they should be enabled to travel between any points by paying the fare for the whole journey at the place of departure, and that in the same way merchandise and live stock should be forwarded throughout without sustaining the delay and possible damage involved in frequent transhipments. The difficulty to be overcome in giving effect to this demand was twofold; for not only would one company be receiving money part of which was due to another company, but each would be obtaining a service from the carriages and waggons of the other for which, clearly, some payment must be made. For a time the companies attempted to meet the case by a system of keeping accounts and exchanging returns of the receipts of each from through traffic; but this plan was open to many objections. Different companies had different modes of keeping their accounts, and no one had any authority to impose uniformity; so that there were mutual difficulties in agreeing the figures, and the consequent disputes engendered ill-feeling, recriminations, and charges of unfair practice. At length, in the year 1842, it occurred to Mr. Morison. who was at that time an audit clerk of the London and Birmingham Railway, that the true remedy for the unfortunate state of things which prevailed was to establish a central office, founded somewhat upon the lines of the Bankers' Clearing-house (which had then been established more than half a century), and which should receive the returns of through traffic from all the companies, impartially make the apportionments, and declare the balances due to each. The scheme thus outlined met with the warm approval and support of Mr. Glyn, who was at that time the chairman of the London and Birmingham Railway, and, after sharing the fate of every innovation or reform in encountering a great deal of opposition from various sources, it was finally brought into operation. Like most great institutions, the Railway Clearing-house had a very humble commencement, for it began its operations with a staff of only four clerks, and dealt with the traffic of only four railways, controlling an aggregate mileage of 418 miles; but its growth has only been paralleled by the growth of the railway system itself, and the magnitude of its operations may be judged by the fact that it employs at the present time a staff of not much less than 2,000 persons, and deals with the traffic of all the railway companies in Great Britain, having, in the aggregate, nearly 17,000 miles of railway. If we add that during the year 1887 the number of traffic settlements made was 9,000,000, and the value of the receipts dealt with was £16,500,000, we shall have said enough to give a fair idea of the extent of the business carried on in the vast building in Seymour Street, Euston Square, where the Railway Clearing-house has found a home.

Since the year 1850 the proceedings of the Railway Clearing-house have been regulated by Act of Parliament (13 and 14 Vic, cap. 33), and its authorised functions are thus defined: "To settle and adjust the receipts arising from railway traffic within, or partly within, the United Kingdom, and passing over more than one railway within the United Kingdom, booked or invoiced at throughout rates or fares." The management is conducted by a Committee of Delegates appointed by the boards of the several railway companies, parties to the system, each company, however great or small, having the power to appoint one delegate, and the expenses being borne by the companies in the ratio of the amount of business done on their behalf. Any railway company not a party to the clearing system may apply under seal for admission, and if the Committee of Delegates assent to the application, the company is at once received on an equal footing with all the other companies already parties to the system. Any company may withdraw at will by giving one month's notice under seal, or a company may be expelled by the vote of two-thirds of the delegates present at a meeting specially convened for the purpose. The Committee meets four times a year, or oftener if needful, and its chairman is elected annually, but is eligible for re-election indefinitely.

The accounts of the clearing system, and the balances due to and from the several companies, are settled and adjusted by the secretary, who also determines the amount to be from time to time contributed to the funds of the Clearing-house by each company. In case of any difference arising with respect to the accounts, the decision of the Committee that a certain balance is due and payable by a particular company is final and conclusive, and such balance is recoverable in a court of law, upon simple proof that the committee have declared the amount to be payable.

In earlier days, the operations of the Clearing-house were limited to dealing with passenger and parcel traffic, and the mileage and demurrage charges for the use or detention of carriages, waggons and sheets, when travelling upon railways other than those belonging to the owners of the stock; but since the year 1847 the system has been extended to merchandise and live stock traffic, including a considerable proportion of the through coal traffic. The general principle upon which the receipts arising from through traffic are apportioned between railway companies has already been described, but two or more companies frequently enter into agreements for special modes of division of certain traffic, and the Clearing-house gives effect to these on receiving "joint instructions," mutually agreed between the companies concerned, the system being sufficiently elastic to meet every kind of agreement that can be devised for the apportionment of traffic receipts. In any case in which one company claims a larger share of the receipts from a particular traffic than its partners are prepared to concede, the Clearing-house reserves, in making the apportionment, a sufficient amount to meet the claim, until the difficulty can be adjusted by agreement, arbitration or otherwise, and amounts thus reserved are said to be "in suspense."

Having described the results achieved by this admirable, organisation, it may be worth while to glance briefly at the machinery by which those results are attained.

In the first place, all through tickets are forwarded to the Clearing-house; for instance, if a passenger books to-day from London to Aberdeen, on the completion of his journey, his ticket is sent to the Clearing-house, and each of the companies over whose railway he has travelled is credited with its due mileage proportion of the fare he has paid. The same course is adopted with regard to the invoices of merchandise traffic; but, in addition to this, every station makes a return to the Clearing-house daily of passengers and parcels booked through, and of carriages and waggons, either loaded or empty, received and despatched. Then, scattered all over the country, at every junction of two railways, the Clearing-house have number-takers stationed, who record the number and description of every vehicle that passes a junction going from one line to another, and these men forward returns to the head office in Seymour Street All these returns are examined, analysed, and checked, one with another, and thus, with enormous labour, but with the most marvellous accuracy, the accounts are made up and the balances declared. The advantages of such an institution as this, which has had such great results in facilitating intercourse and the trade of the country, can hardly be over-estimated, for it is only by means of this system that the produce of remote districts has been brought to the door of the consumer; while, as for Ireland, if the facilities thus afforded for her cattle, poultry, butter and eggs to command the English markets had not existed, it is certain that the social condition of her people must have been much worse than it is.

The Clearing-house, however, discharges other functions besides the division of traffic receipts. It affords a convenient neutral ground where the various companies, whatever their, conflicting interests or differences of policy, can meet on friendly terms, can agree upon measures of concerted action, and afford one another the benefit of their mutual experience in devising measures for the common good. Three important conferences are held at the Clearing-house every three months, one attended by the general managers of the different companies, another by the goods managers, and a third by the passenger superintendents, all these dealing with the subjects specially germane to their respective departments. Thus the Goods Managers' Conference deals with such questions as the construction of private waggons, the charges for the use of waggons, the classification of goods traffic, terminal allowances, etc.; the Superintendents' Conference deals with the speed and signalling of trains, rules and regulations for working the railways, the block telegraph system, excursion trains and subjects of like nature; the General Managers' Conference reviews the recommendations of the Goods Managers and Superintendents, and, in its turn, frames proposals to be submitted to the Committee of Delegates for adoption by the companies.

Besides these three, there are a host of other committees and rates conferences for various purposes which hold their meetings at the Clearing-house, and the total number of such meetings held in the course of a year is upwards of 250.

Since the year 1847, the Railway Clearing-house, as a central establishment well adapted for the purpose, has been employed to facilitate the recovery of lost luggage, a duty which it discharges in the following manner. A description of every article lost or found is forwarded daily to the Clearing-house, who, in turn, furnish the information to the different stations, and anything found on hand at a station which answers to the description of an article lost is sent up to the Clearing-house for identification. During the year 1887 nearly half a million of articles were reported to the Clearing-house as being lost or found, and in the majority of cases, thanks to the machinery employed, the owners were traced and their property restored to them.