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by the law of 1842. At the present time, the lines in operation extend to 1,000 kilometres, (about 620 miles,) and the whole number of kilometres to which the railways will extend in six years is estimated at nearly 6,000 (about 3,700 miles).
All the lines of France, with one or two exceptions, before the introduction of this system, are conceded for terms of years varying from 99 to 25.
In Germany, divided as it is into a number of independent states, the adoption of a systematic plan of railways was attended with greater difficulty. The nature of the country, however, especially of Prussia, for the most part level, suggested the construction of them at any early period. The choice of lines was at first the work of chance, but the different Governments soon became convinced of the necessity of regulating by treaties the direction of their lines, and proceeding according to a systematic plan.
In Austria, Prussia, and the other German States, the construction of lines has generally been conceded to private companies. In Austria the concession is for 50 years, and in Prussia until the capitals of the companies have been extinguished by sinkingfunds, with a right of purchase, and revision of tolls and fares. The minor German States generally concede the lines on lease.
In this country alone were companies allowed the possession of lines in perpetuity, subject to no available conditions.
That France should have concluded arrangements for the construction of her railways on so much better terms than have been obtained in England, cannot fail to strike with astonishment those who reflect on the superiority of this country in wealth, industry, density of population, and number of great towns, and on the readiness which has always been evinced to embark capital in undertakings promising a fair return, while France has no superiority over England in the means of construction. But not only were our advantages not turned to due account by the Government in the outset, for which some excuse was perhaps to be found in our experience; the opportunity for imposing suitable conditions on railway companies was not seized when that excuse no longer existed.
Year after year companies obtained Acts for the construction of lines through the most important districts of the country, characterised by the same disregard for the interest of the public. Companies still obtained lines in perpetuity; the maximums for fares were still fixed at far too high a rate; and the conditions imposed were of so vague a character, and so utterly inapplicable to the subjects which they professed to regulate, that they could hardly ever be enforced or made available to the protection of the public.
The first material attempt on the part of the Legislature to place the public in a more advantageous position with regard to railways was not a very successful one. The 7 & 8 Vict. c. 85, provides that after a lapse of 21 years, when the dividends shall equal or exceed 10 per cent. the Lords of the Treasury, on giving three months' notice, may revise the scale of tolls, fares, and charges.
The hope of revision held out by this clause, was, however, quite illusory, for no precautions had been taken to settle the principle on which dividends should be calculated. The capitals on which dividends were declared exceeded in many cases by large sums the actual outlay; and there existed no efficient system of accountability by which Parliament could obtain anything like an accurate knowledge of the nett profits of railway companies. By the Companies' Clauses Consolidation Act of 8 Victoria, certain rules were laid down with respect to the augmentation of capital by the creation of new shares: but your committee are given to understand that this Act does not prevent companies from allocating shares among the proprietors at par when actually at a premium, in order that they may pocket the premiums.
It is established by the most satisfactory evidence, that in the case of many companies large additions have been made to the nominal capitals, beyond what has been required by the actual outlay, through the creation of shares, not at the current market price, but at par. To take one of the most common operations of the successful companies, if for instance, shares being at cent. per cent. premium, a million were required for an undertaking, and to raise that million, shares for a million were created in order to enable the proprietors to divide among themselves another million in the shape of premiums, it is clear that the nominal capital exceeds by 500,000l. that of which the actual outlay required the creation; and, consequently, that a dividend is made on a sum exceeding by so much that outlay. In this way the object of Parliament, in subjecting companies to a revision of fares when the dividends should equal or exceed 10 per cent., could always be defeated. Mr. Hudson, a member of your committee, specified several instances, in companies with which he was connected, where large additions were made to the nominal capitals by these and other means. For instance, he states that by an arrangement between the Great Northern and the Great North of England Railway, it was stipulated that the latter should receive 10 per cent. on every 50l. share till 1851, when they had a claim to be paid off in four per cent. stock at 250l. a share; thus creating a new nominal capital of 250l. for every 50l. He states also that, to meet a purchase by the Newcastle and Darlington Company, new 251. shares were issued to the proprietors at par, when they were at a premium of 201. It is obvious that the money required could have been obtained by a much smaller issue of shares, had the 201. premiums, as well as the 251. shares, been applied to the purposes of the company, and not divided as a bonus among the proprietors.
This practice of swelling the nominal amount of stocks beyond the actual outlay on the lines, which has extensively prevailed, was recently noticed in Reports presented by Mr. Ellice from the Select Committee on Group (58) of Railway Bills, in which it is stated that in the Hull and Selby Purchase Bill the actual outlay and estimates for further works is 955,3637., while the money to
be raised by the Bill is two millions, exceeding the outlay and engagements of the Hull and Selby proprietors by the large sum of nearly a million, and that in the Great North of England Railway Purchase Bill, the actual outlay and estimate for additional works is 1,496,796l. 18s. 4d., the proposed capital 4,000,000l., exceeding the actual outlay and engagements of the Great North of England proprietors by the sum of 2,503,003l. 1s. 8d. The committee in question add the observation that, in their opinion, " It would be greatly for the public interest that some fixed and uniform rules should be clearly laid down by the House for the guidance of their committees with respect to the whole system of raising capital, loans, the conversion of loans into capital, the payment of rents and profits on separate lines and branches, not from the actual traffic on such separate branches and lines, but from the surplus receipts of old companies, in all cases where new powers for raising money are applied for, of Extension, Purchase, or Amalgamation Bills." These illustrations of a system extensively prevalent, which are taken from numerous instances brought before the notice of your committee, are sufficient to prove that so long as it is suffered to continue, the intentions of Parliament in passing the 7 & 8 Vict. must be defeated.
This practice, of issuing new shares to the present shareholders at par, has not been allowed in any other country. Mr. William Reed, a director of the Paris and Rouen Railway, states, that when the exigencies of the company rendered it necessary for them to raise money, they applied to the Government to be allowed to issue to the then shareholders new shares at par, in the proportion of one new share for every five shares they held. This application was rejected by the Ministry, and they borrowed the money required, for which no authorisation was necessary. The French Government contended that the rights of the future proprietor would be compromised by the issue of shares at par when at a premium; but it has been maintained by some of the railroad proprietors in this country, that it is immaterial whether the money required by companies be raised by the creation of new stock or by loans; and whether the shareholders receive increased dividends on smaller capitals, or smaller dividends on larger capitals. But if the rate of dividend is to determine whether the scales of fares shall be subjected to revision by the Government on behalf of the public, it is of the very first consequence that the capitals should correspond with the original outlay. It may be the same thing to proprietors whether they pocket large bonuses, and increase their capitals by sums exceeding the money laid out on the roads by the amount of such bonuses, and receive proportionately smaller dividends; but it is a very different thing to the public, if the scales of fares are to be governed by the rate of dividend, whether they pay high fares or low fares.
But by another section of this Act, the second, the Lords of the Treasury are empowered, after the expiration of 25 years, to purchase the railways, whatever the rate of divisible profits may be,
upon giving three calendar months' notice in writing of their intention, on payment of a sum equal to 25 years' purchase of their profits, estimated on the average of the three preceding years.
This power to purchase on such extravagant terms, and under such limitations, held out small hopes of relief; so that, upon the whole, the position of the public with regard to railways, was not thereby materially improved.
Whilst your committee thus express their regret that the public interests were so little consulted in the arrangements with railways for so long a period, they have seen with satisfaction the commencement of a better system. In consequence of Sessional Orders of the House, both in this and the previous session, clauses have been introduced into all Acts relative to railways, either for the construction of new lines, or the extension of old lines by branches, reserving the power, whenever it should be deemed necessary, to revise and regulate the scales of fares and charges; and as nearly all the great companies have either obtained or applied for Acts for the construction of branch lines, and the extension of old lines, they have thereby enabled Parliament to place them under such control or supervision as it may be deemed expedient to adopt ; and thus the hope may at length be entertained, that means for securing the public against oppressive and extravagant charges will yet be adopted.
Your committee wish here to dwell a little on the immense importance to the community of a judicious system of railways, both with reference to the selection of lines, and the rates at which the fares and charges are fixed. It is hardly possible, indeed, to exaggerate the importance of a railway, not only to the great cities which are connected by it, but to the districts through which it runs. It has been generally assumed that railways are better suited for the seats of commerce and manufacturing industry than for agricultural districts; but a highly respectable and intelligent witness, Mr. Samuel Morton Peto, who has had considerable experience in the construction of railways in manufacturing districts, and is deeply interested in the Norfolk lines as a proprietor, states, as the result of his experience, that " the people in manufacturing districts do not travel anything like so much as an agricultural population;" and that," he would rather, if he could get a moderately-priced line, have it in an agricultural district than in a manufacturing district, as far as the population of the district is concerned." Mr. Peto adds, that the experience of Belgium furnishes a striking corroboration of the soundness of these views, as it has been proved by the Report of M. Desart, in whose hands the Belgian Government placed the whole of its railway statistics, that in a given population, the traffic of the small towns and villages along a line is proportionately greater than the traffic between two large cities at the termini. New branches of industry are every where called into existence by the facility and cheapness of communication afforded by railways; and land previously of little or no value, is at once made productive by cheap access to
materials by which the soil may be improved, and to markets for disposing of its produce. On the subject of this revolution in the value of land, some important evidence is given by Mr. Miller, and by Mr. Smith, of Deanston. Mr. Miller states that manufactories of sulphuric acid, extensively used for agricultural purposes, have been established in suitable situations by the sides of railways in several districts of Scotland, and that manures are conveyed on them at charges lower than the mere tolls on turnpike roads. Mr. Smith states that upon those lines which have been in existence for some years, over which he has had occasion to travel, a very great agricultural improvement has taken place, chiefly in consequence of the cheapness and facility of transport; and by way of illustrating the amount of the benefit, he takes a farm of 200 acres on a six-course shift with 15 miles of transport, and shows that by the old mode the charges of carriage would amount to 1421. 6s. 3d., while by railway it would be only 40l. 8s. 9d. Mr. Smith states also that land along the Glasgow and Edinburgh Railway, previously not worth 5s. an acre, is now worth between 30s. and 40s. By way of illustrating the benefit of railroads, when the charges are sufficiently low, this intelligent witness further states, that " a low rate would very greatly tend to the increased consumption of manures, and to the transport of earths for agricultural purposes; that this would give a much increased produce to the land, which would enable the agriculturist to furnish his commodity at a lower rate; that this cheapness again would increase the consumption in large towns; and in manufacturing populations it would also create a greater traffic upon the railways, and enable them still further to reduce their rates; and as the heavier articles are more consumed by the working classes, it would add very much to their comfort; and there are great tracts of country which could be cultivated to much advantage, if favoured by railway communication, which are now allowed to lie comparatively barren."
With regard to these views of Mr. Smith, as to the important change which railways might effect in agriculture, by the transportation of manure and earths, your committee conceive that as the fertility of soils depends on the proportion which certain earths bear to each other in their composition, it is merely a question whether by any mode of transport the proportions of earths can be so varied as to create fertility at an expense which would be remunerative. It has been demonstrated by an intelligent gentleman, who has devoted much attention to this subject, that the cost of conveyance diminishes with every increase of quantity. Taking fixed sums for the interest on the capital and working the railway, the charge (which with a traffic of 20,000 tons would only be remunerative at 10. a mile) with a traffic of 1,000,000 tons, would be remunerative at about a halfpenny a mile. It is impossible, therefore, to over-estimate the importance of this new instrument placed at the command of the agriculturist.
Cheapness of fares may thus create a traffic which otherwise