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THE ENGLISH RAILWAY RATE QUESTION. 



The chief stages in English railway history may be de- 
scribed as follows : — 

First. There was the period of doubt and suspicion as 
regards the national advantage and probable financial suc- 
cess of railways. This period was short. It really ex- 
tended only from the promotion of the Liverpool and 
Manchester Railway in 1824 until about 1840. Even 
while it endured there were incipient movements towards 
governmental encouragement of railway enterprise ; for 
Parliament was induced to grant a loan to the Liverpool 
Railway of $500,000, at Si per cent, interest, — a low rate 
at the time. Parliament also exempted it from the pas- 
senger tax which was then payable by stage-coaches. 
This tax was practically imposed upon the railways in 
1832; but the terms of its imposition gave the railways 
an advantage over stage-coaches which amounted to a 
not inconsiderable bounty.* 

Second. The great change in the attitude of Parliament 
and the public towards railways came about in the second 
period, when "the extreme of determined rejection or 
dilatory acquiescence " was exchanged for " the opposite 
extreme of unlimited • concession." f This, however, is 
putting the case rather too strongly. The concessions 
were never unlimited, although they were large. Even 
at that time the powers of the railway companies were 
defined by act of Parliament. The promoters of the com- 
panies were shrewd enough to ask not for vague powers, 

* Gf. Thomas Grahame, Treatise on Inland Intercourse in Civilized States, 
1834, p. 106 et seq. 

t Quoted by Herbert Spencer, "Railway Morals and Railways Policy," 
Essays, American edition, p. 265. 



THE ENGLISH RAILWAY HATE QUESTION 281 

— for vagueness is a two-edged weapon in a statute, — 
but for large, definite powers. For example, the maxi- 
mum rates for which they asked were largely in excess of 
what they intended to charge, and largely in excess also 
of what they did charge until the inflation of trade in 
1870-74. They left a large margin for contingencies, 
but they demanded definite powers. Railway enterprise 
was encouraged by these statutory privileges ; and the 
increase of railway dividends, due to the rapid expansion 
of traffic and the relatively high rates, produced the rail- 
way mania of 1845. The railway Acts passed during this 
period were formed upon a definite model, and in one of 
the clauses of this model Act the principles of equal mile- 
age and of equal treatment were laid down.* 

The Regulation of Railways Act of 1844 f gave powers 
to the Treasury to revise the scale of "tolls, fares, and 
charges" of any railway company, when the dividends 
of the company exceeded 10 per cent.J The Railway 
Clauses Act of 1845 § enabled the railway companies to 

* " The rates and tolls to be taken by virtue of this Act shall at all times 
be charged equally, and after the same rate per ton per mile throughout the 
whole of the said railway in respect of the same description of articles, mat- 
ters, or things, and that no reduction or advance in the said rates and tolls shall, 
directly or indirectly, be made partially or in favor of or against any particular 
person or company, or be confined to any particular part of said railway, but 
that every such reduction or advance of rates and tolls upon any particular 
kind or description of articles . . . shall extend to and take place throughout 
the whole and every part of said railway . . . and shall extend to all persons 
. . . using the same." 

See copy in Grierson, Railway Rates, English and Foreign, 1886, Appen- 
dix, p. lxxi. 

1 7 & 8 Vict., c. 85. 

t This limitation has been rather scornfully treated by critics of English 
railway policy, and no doubt with some justice, when regarded from the point 
of view of more recent practices of stock-watering, etc., which must render 
ineffectual dividend limitations pure and simple. In 1845, however, the rail- 
way system was yet in its raw youth ; and the anxiety of the legislature led it 
to the adoption of any feasible plan of preventing the railway companies from 
assuming the position of monopolies. The limitation must be judged in the 
light of experience at the time when it was enacted. The force and interest of 
it, apart from questions of the easiness of evasion, vary with the dividends. 

§ 8 & 9 Vict., c. 20. 



282 QUARTERLY JOURNAL OF ECONOMICS 

vary the tolls upon the railway "so as to accommodate 
them to the circumstances of the traffic," thus withdraw- 
ing the " equal mileage " clauses of the earlier Acts. The 
same Act re-enacted the prohibition of "prejudicing or 
favoring particular parties." 

During the period from about 1840 until 1854 the rail- 
way network of England was practically created. It is 
true that this network was built on no definite plan, that 
it was financed on no very sound principles, that there 
was much chicanery in promotion, and much mismanage- 
ment afterwards. Yet it was made, and made quickly, — 
made much more quickly, perhaps, than it could have 
been made, had any other system been adopted. But the 
want of a plan, besides causing great waste of resources, 
resulted in discontinuity of lines. Transference of traffic 
from one line to another was inconveniently conducted, 
and sometimes even wilfully impeded. Combination or 
amalgamation of lines became both a public necessity and 
a public danger. Parliament endeavored to control amal- 
gamations by still more strenuously defining the powers 
of the companies. But the administration of such laws 
is always hard; and the mere repetition in successive Acts 
of clauses against undue preference, etc., suggests that the 
clauses in the earlier Acts had been disregarded. 

Third. In order to obviate the inconveniences referred 
to, the Railway Traffic Act of 1854* "was passed, with 
the object of securing facilities for through or other 
traffic " and " equal treatment for all persons and arti- 
cles." f This act probably marks the beginning of effec- 
tive control, and may thus be held to indicate the begin- 
ning of the third period. During this period, extending 
perhaps from 1854 to about 1870, there was in England a 
struggle in railway policy, as indeed in general industrial 
policy, between a tendency towards diminution of State 

* 17 & 18 Vict., c. 31. 

t See Fourteenth Report Railway Commissioners, 1888, p. 3. 



THE ENGLISH RAILWAY SATE QUESTION 283 

control over industry and commerce, and a tendency 
towards increase of this control. And there can be no 
doubt that the latter tendency won, at all events, for the 
time. 

Fourth. This victory marks the beginning of the fourth 
period. Until about 1870 the presumption was against 
State and municipal control of any public service which 
was thought capable of being performed by private en- 
terprise. From that date the presumption has been quite 
the contrary.* 

In conformity with the tendency of the time the Rail- 
way Regulation Act of 1868 f developed the system of 
control. The greatly increased traffic had brought into 
existence conditions which could not have been foreseen, 
and therefore could not have been made the subject of 
legislation in earlier Acts. Among the new provisions in 
the Act of 1868 was one upon a subject of which more will 
be heard later; namely, specification of charge. Under 
Section 17 of that Act the railway companies were bound 
to furnish particulars of the charges for goods, and to 
differentiate between " conveyance of goods on the rail- 
way, including therein tolls for the use of the railway, for 
the use of carriages, and for locomotive power," and so 
much of the charge as may be " for loading and unloading, 
covering, collection, and delivery." The next important 
stage in the fourth period is marked by the Report of the 
Committee of 1872, and the consequent legislation of 
1873. The economical conditions of the time must be 
kept carefully in view in examining the conclusions of this 
Report as well as in weighing the evidence given before 
the committee. For two years trade had been advancing 
"by leaps and bounds." The traffic receipts of the rail- 

*The purchase of the telegraphs by the government, 1867-68 ; the General 
Tramways Act of 1870, which gave large powers to municipalities ; the numer- 
ous gas and water bills promoted by municipalities, — are a few among the 
many manifestations of this tendency about 1870. 

t 31 & 32 Vict., c. 119. 



284 QUARTERLY JOURNAL OF ECONOMICS 

way companies increased 20 per cent, between 1869 and 
1872. The proportion of net receipts to capital advanced 
from 3.91 per cent, in 1867 and 4.22 per cent, in 1869 to 
4.74 per cent, in 1872, — a point which they have never 
since reached. Rates had gone up considerably. The 
railway companies were doing their utmost to reap a full 
share of the golden harvest, and the possibilities of their 
reaping an inordinate share did not appear remote. Thus 
there naturally arose demands for legislative interference 
to prevent the railways from taking an excessive advan- 
tage of the powers over inland transport which amalgama- 
tion had secured to them. 

In the discussions before the legislation of 1873 it was 
the interest of both parties in the controversy to minimize 
the effect of previous legislation. The traders adopted 
this attitude because they wanted new and more strin- 
gent acts, and they had to show that the existing acts 
were inadequate ; and the railway companies had to show 
that all legislation of a restrictive kind was useless and 
pernicious. These dialectical expedients, to which the 
commissioners of 1872 fell easy victims, ought not, how- 
ever,' to betray us into the belief that the legislation up 
to 1873 was wholly futile. It is difficult to believe that 
the railway system would have or could have safely de- 
veloped with greater rapidity ; and it would be difficult 
to prove that any other policy could wisely have been 
adopted than that which retained the general principle 
in all Acts, that a railway company was wholly a creature 
of statute, and that special conditions should be legislated 
for as they emerged. 

From 1854 until 1872 the railway companies were 
obviously not allowed to do as they pleased, but they 
were given extensive powers. To call this system laissez- 
faire is to misapply the expression.* It is rather a sys- 

* Cf. Adams, Railroads, their Origin and Problems, p. 94, for a contrary 
opinion. 



THE ENGLISH RAILWAY RATE QUESTION 285 

tem of limited ownership and controlled administration. 
The English railway policy has been of this nature from 
the beginning; as we shall see from its more recent his- 
tory, it has been, for good or evil, a policy of progressive 
intensification of control. Whether the policy is justifi- 
able or not on abstract grounds, the railway companies 
have never been free from the leash of the State, and are 
now more constrained by it than ever. Nor has the 
policy as disclosed by the statutes been wholly ineffective. 

The impetuous conclusion of the Committee of 1872, to 
the effect that English legislation had never accomplished 
anything which it sought to bring about or prevented 
anything which it sought to hinder, is a piece of rhetorical 
exaggeration which is responsible for much misunder- 
standing of the English system. The same phrase is 
applied by Mr. Herbert Spencer to all legislation, and is 
perhaps in some measure true as a general statement ; but 
it has no peculiar application to railway law. The com- 
mittee were judging the existing legislation in the light of 
the situation in 1872, and were not taking into account 
the general history of English railway policy. No doubt 
each step had been looked upon, when it was made, as the 
final one. But this error is not peculiar to railway his- 
tory, and it is not matter of surprise that the rapid growth 
of the railway system should have brought frequent need 
for amendments to the original legislation. 

The main point in the discussions of 1872-73 was the 
question of "undue preference." This was an old ques- 
tion : it had been dealt with in every Act, yet it ap- 
peared in full vigor before the Committee of 1872. The 
reason is not far to seek. Railway rates had been com- 
paratively stationary for some years, until the expansion 
of trade brought a movement of general rates upwards. 
Even if the railway companies had not entertained the 
sinister design of taking a high rate wherever they could 
get it, and of disregarding the explicit prohibition in these 



286 QUARTERLY JOURNAL OF ECONOMICS 

Acts of Parliament, there would still have been room for 
the existence of " undue preferences," and for grumbling 
about them whether they existed or not. It is small 
wonder, therefore, that the cry of "undue preferences" 
should have been the leading one at this period. Perhaps 
the suggestion implies too great astuteness on the part of 
the railway managers; but it may be that they saw the 
advantage of accepting as the issue of the inevitable battle 
between the railways and the public, so comparatively 
trivial an issue as " undue preference." Whether or not 
this was their intention, it is clear that the selection of 
this issue for the fight of 1872-73 led to the postpone- 
ment for nearly twenty years of the much more serious 
discussion in regard to the regulation of railway rates. 
The principal outcome of the legislation of 1873 was the 
establishment of a new tribunal to try railway causes. 
The Railway Commissioners' Court was avowedly an ex- 
periment.* It has probably, on the whole, fulfilled its 
function. Appeal to it is not much less expensive to 
litigants than appeal to the ordinary law courts, but its 
existence has no doubt exercised an important check upon 
the giving of " undue preferences." In recent discussions 
on railway management the question of individual dis- 
criminations has dropped out of the field.f 

The settlement effected by the Act of 1873 was not 
disturbed until about 1880, when the question of differ- 
ential rates, — or of unequal mileage rates, — of low rates 
for long-distance traffic and relatively high rates for short- 
distance traffic (the short-haul question), emerged in cases 
before the Commissioners and also before the law courts.^ 

* Professor Hadley's criticism (Railroad Transportation, p. 177) seems to 
me quite just. The Railway Commission is neither a conspicuous success nor 
a conspicuous failure. 

t A useful summary of important decisions is given by Professor Hadley, 
Railroad Transportation, p. 183. 

$ Especially Budd v. London Sf North-Western Railway, 36 L. T., N. s., 
p. 802, and Denaby Colliery Co. v. Manchester, Sheffield Sf Lincoln Railway, 
Seventh Report Railway Commissioners, p. 5. 



THE ENGLISH RAILWAY HATE QUESTION 287 

According to decisions in these cases, differential rates 
were illegal ; and the result was an agitation mainly in 
the interests of the traders whose traffic was purely local. 
The Select Committee of 1881-82 was therefore ap- 
pointed to deal with this aspect of the question of dis- 
criminatory rates. From the first it was evident that 
this committee would arrive at nothing. It was too large 
and heterogeneous for serious inquiry into a highly com- 
plicated problem. The committee defended differential 
rates against the adverse judgment of the law courts, but 
recommended no legislation, — a futile proceeding, which 
left the rates question in a worse muddle than ever. This 
was soon made evident in the renewed agitation which 
took place almost immediately after the report was issued. 

Fifth. This agitation did not devote itself to the ab- 
stract question of discriminatory rates, but was directed 
towards an all-round reduction of rates. "The subject 
of differential rates became really a subordinate one. It 
was the question of exorbitant rates that most agitated the 
public mind." * The agitation and its results cover the 
fifth stage of English railway history. 

The beginning of the period extending from 1873 until 
1878-79 was a period of high prosperity : the end was 
a period of depression. In 1880-81 there was again a 
revival; in 1882 trade was brisk; but in 1883-84 began 
the period known as the Great Depression, which reached 
its lowest point in 1886. These occurrences have been 
recited because it is impossible to dissociate attacks upon 
the railways by the public from the general economic 
movement. The inflation of trade had led to increase of 
rates, and now the depression of trade led to demands that 
they should be decreased. Clamor for reduction of rail- 
way rates was coincident with the fall of prices. But, in 
order to meet the expanding traffic during the period of 

* An inversion of a statement by Professor Hadley regarding the previous 
period. The whole situation had altered by the time Professor Hadley's book 
was in the press. Cf . Railroad Transportation, p. 180. 



288 QUARTERLY JOURNAL OF ECONOMICS 

inflation, the railway companies had expended great sums 
in extensions, and especially in stations in the large cen- 
tres of population. Much of this additional capital was as 
yet unremunerative or not fully remunerative. The pro- 
portion of net receipts to total paid up capital fell from 
4.74 per cent, in 1872 to 4.15 per cent, in 1879. It rose to 
4.29 per cent, in 1883, and fell to 4.16 per cent, in 1884, 
to 4.02 per cent, in 1885, and to 3.99 per cent, in 1886. 
The traders were feeling the pinch of the times, and, in 
face of a diminishing volume of business and diminishing 
amount of profits, were anxious to obtain reduction in rail- 
way rates ; while for the same reasons the railway compa- 
nies were anxious to keep them up. In 1884 the railway 
companies embarked in a policy which, from a tactical 
point of view, was very questionable, and was necessarily 
unsuccessful. Their rates in many cases already ap- 
proached the maximum rates, and they knew that it was 
futile to attempt to induce Parliament to increase these 
maximum rates ; but they determined to make use of the 
argument that they had expended large sums upon ter- 
minal facilities, in order to obtain legislative sanction for 
charging separately for these terminals. The policy was 
inexpedient, because it raised a question which it was not 
for the interest of the railway companies to raise ; and it 
was defeated because of the overwhelming opposition of 
the traders. Moreover, the battle was a useless one. It 
need never have been fought. The railway companies 
had the power to charge for terminals, and had been 
habitually charging for them. It is true, this proceeding 
was called in question ; but in 1885 the decision in the 
case of Sail v. The London, Brighton & South Coast 
Railway,* in the special case brought before the Court of 
the Queen's Bench on the instructions of the Railway 
Commissioners, settled the law of the question in favor 
of the railway companies. It was held that they had un- 

*Law Reports, Queen's Bench Division, vol. xv. p. 505. 



THE ENGLISH HAIL WAY BATE QUESTION 289 

limited powers to charge " a reasonable sum," and for the 
determination of what constituted a reasonable sum there 
was nothing but the common-law machinery. In asking 
for definite powers, it is clear that they made a mistake. 

The Report of the Royal Commission on Depression of 
Trade affords a considerable amount of evidence upon the 
views of the traders in regard to railway rates during 
the depression. There can be no doubt that the traders 
were irritated by the fall in prices and the absence of a 
corresponding reduction in the cost of transport.* 

The shelving of the problem by the Committee of 
1881-82, the failure of the railway companies to carry 
their proposals through Parliament, and the increasing 
complexity of the rates system, due to the development of 
differential tariffs, had brought the railway system into a 
condition of chaos. No doubt the traders exaggerated the 
difficulties of the situation, but it is certain that it had 
become too highly complex for the conservative and in- 
dolent mind of the English trader. He did not know 
what he was to be charged for the goods he despatched, 
and he objected to terminals which he did not understand 
and to which he affected to be unaccustomed. 

The mere evolution of industry contributed to this 
confusion. The Clearing-House Classification had grown 
by accretion until it reached 4,000 items : the rates had 
multiplied until they became hundreds of millions. Some 
simplification appeared advisable, and the Government 
was ultimately induced to undertake it. Besides, it 
seemed that action of some kind was necessary to relieve 
the pressure upon the miscellaneous trades,f which were 
suffering from the depression and were powerful enough 
to make their clamor heeded; while, on the other hand, 
railway interests were no longer so formidable in Parlia- 

* See below, p. 294. 

T On the development of the miscellaneous trades at this time, see Mr. 
Giffen's Address to Section F, British Association, 1887. 



290 QUARTERLY JOURNAL OF ECONOMICS 

ment as once they were.* Therefore, the government 
(Lord Salisbury's) brought in and carried the Railway 
and Canal Traffic Act of 1888. f This Act practically 
intrusted the Board of Trade with the formulation of 
a thorough-going revision alike of classification and of 
rates. $ It also reorganized the Railway Commission, § en- 
dowed the Board of Trade with the privileges of a " can- 
did friend" of the railways and of the traders alike, 
entitling it to receive complaints from traders, and to 
confer with the railway managers on the subject of these 
complaints, without, however, giving the Board any magis- 
terial powers regarding either the railways or the traders 
in these matters. || These complaints were to be made 
the subject of annual reports to Parliament. The rail- 
way companies were also required to render to the Board 
of Trade such statements as the Board might from time 
to time prescribe.^ 

In undertaking the revision of the classification and the 
maximum rates, the following procedure was prescribed : 
Every railway company was required to submit to the 
Board of Trade "a revised classification of merchandise 
traffic, and a revised schedule of maximum rates and 
charges applicable thereto, proposed to be charged," and 
to state fully "the nature and amounts of all terminal 
charges proposed to be authorized in respect of each class 
of traffic, and the circumstances under which such termi- 
nal charges are proposed to be made. In the determina- 
tion of the terminal charges of any railway company 
regard shall be had only to the expenditure reasonably 
necessary to provide the accommodation in respect of 
which such charges are made, irrespective of the outlay 
which may have been actually incurred by the railway 
company in providing that accommodation."** 

* Financial Reform Almanac, 1891, p. 129. 1 51 & 52 Vict., c. 25. 

t Ibid., Part II., §§ 24-30. § Ibid., Part I., §§ 2-2.",. || Ibid., § 31 . 
If Ibid., § 32. ** Ibid., § 24, subsection 1. 



THE ENGLISH RAILWAY BATE QUESTION 291 

The classification and schedule were to he submitted 
within six months, — extensions of time being granted in 
certain cases, — and then they were to be open to examina- 
tion and objection by all those whom the Board of Trade 
considered entitled to be heard. After having heard the 
evidence and formulated its classification and schedule of 
rates, the Board of Trade was instructed to endeavor to 
come to an agreement upon these with the railway com- 
panies. Should no agreement be arrived at, the Board of 
Trade was itself to determine what was "just and reason- 
able," and to embody this in a report. This report was to 
be presented to Parliament, and after the lapse of a recess 
the proposals contained in this report were to be submitted 
to Parliament in the form of Provisional Order Bills. No 
agreement could be arrived at between the Board of Trade 
and the railways. "Everybody was dissatisfied," and 
the board adopted the course prescribed in the Act. This 
inquiry was held in 1889-90 by Lord Balfour of Burleigh 
and Mr. (now Sir) Courtenay Boyle, on behalf of the 
Board of Trade, in the Westminster Town Hall. The 
inquiry lasted for eighty-five days ; and an enormous mass 
of evidence, filling eleven volumes, was received. The 
report to the secretary of the Board of Trade by the two 
gentlemen named constituted the classification and sched- 
ule which they recommended as "fair and reasonable." 
This classification and schedule were afterwards embodied 
in a set of Provisional Orders. Although the classifica- 
tion was uniform, and the schedules of rates were nearly, 
though not quite alike, each railway company was legis- 
lated for by a separate Provisional Order Bill. These 
Provisional Order Bills were then presented to Parlia- 
ment. They were not promoted by the Board of Trade, 
but were held to follow upon the act of 1888. After 
passing the second reading, they were remitted to a Joint 
Committee of the House of Lords and the House of Com- 
mons ; and in the inquiry before that committee the 



292 QUARTERLY JOURNAL OF ECONOMICS 

whole subject was threshed out once more. The com- 
mittee sat for forty-two days, and heard counsel and evi- 
dence upon all the points, and made several important 
amendments to the bills. Finally, the bills reappeared in 
Parliament, where they were further amended ; * and 
after three years of close discussion the revised classifi- 
cation and rates became law on July 24, 1891, although 
the changes were not to take effect until August 1, 1892.f 

II. 

My purpose now will be to attempt to disentangle from 
the enormous mass of evidence some illustrations of the 
chief among the contested points in the theory of railway 
rates. 

It seems necessary to say a preliminary word about the 
manner in which the Board of Trade and the Joint Com- 
mittee of 1891 have conducted this inquiry, and have car- 
ried into effect the conclusions at which they have arrived. 

Whatever may be the opinion as to the effectiveness of 
the legislative fixation of maximum rates or as to the ad- 
visability on abstract grounds of control over private en- 
terprises being intrusted to government departments, no 
one who watched the course of the three years of contro- 
versy from 1888 till 1891 could fail to be impressed with 
the acuteness and fairness with which both the Joint Com- 
mittee and the Board of Trade approached the subject, as 
well as with the comprehensiveness and thoroughness of 
their examination of it. The revision of the maximum 
rates was a work which could be expected to bring no 
gratitude. The railways were certain to be dissatisfied, 
if the traders were pleased; and, if some traders were 
pleased, others were certain to be dissatisfied. The arbi- 
ters among the rival interests were likely to offend them 
all. 

* Hansard, Series III., vol. 356, cols. 269 et seg. 

t The date was afterwards extended to January 1, 1893. 



THE ENGLISH RAILWAY RATE QUESTION 293 

It is quite certain, nevertheless, that the method of re- 
vision of maximum rates has had a fair trial. The issue 
may be unfortunate from causes external to the railway- 
system pure and simple, or from some inherent defect in 
the principle, or from lack of judgment or temper on the 
part of the railway managers or the traders; but it is 
unlikely that any more impartial investigation into the 
special conditions applicable to railway rates in England 
will be undertaken in our time. 

Although railway companies frequently quarrel with 
each other,* when the question is one of demand for 
general reduction of rates, they stand together. Traders, 
on the other hand, are unaccustomed to united action. 
Their interests, as opposed to those of the railway com- 
panies, although in a superficial view identical, are really 
very divergent. It is the interest of the large trader to 
get low rates for truck-loads or for train-loads, whereas it 
appears to be the interest of the small trader to prevent 
the large trader from getting differential rates for large 
quantities. It is to the advantage of the trader who sends 
his goods to a distant market to obtain low rates, while 
the small trader with whom he is competing in the distant 
market looks upon low long-distance rates as an evil. It 
is to the advantage of certain traders in timber to have 
their goods charged by weight, while for other traders in 
the same commodity it is an advantage to have them 
charged by measurement. It is to the advantage of some 
traders to have a system of charges which involves de- 
tailed specification of charge, since an individual trader 
may prefer to render for himself some of the services 
which a railway company customarily renders ; while 
others object to specific charges as being equivalent to an 

*The time of the Railway Commissioners is largely occupied with the 
quarrels of railway companies. In 1886, 11 out of 12 cases before them were 
cases of railway against railway ; in 1887, 6 out of 12 ; in 1889, 3 out of 11 ; in 
1890, 7 out of 28 ; and, in 1891, 1 out of 19. Annual Reports of the Railway and 
the Railway and Canal Commission for these years. 



294 QUARTERLY JOURNAL OF ECONOMICS 

attempt to extort additional rates. Here is a sufficient 
divergence of interests at the outset to puzzle the most 
benign and patient tribunal. Behind these more or less 
reasonable differences of opinion were various forms of 
unreasonable demands. It was obvious that a series of 
compromises must be effected ; and it was equally obvious 
that, on any principle of averaging, some must be levelled 
up if others were to be levelled down. These considera- 
tions did not at first enter into the representations of the 
traders. Revision of rates must mean for them reduction 
of rates : revised classification must mean that " no article 
should be rated higher than it is at present." * Lord Bal- 
four of Burleigh truly remarked that a classification and 
schedule would have to be devised which would " satisfy 
the most unreasonable of unreasonable people." 

It is not easy to find any definite principle which the 
Board of Trade consistently followed either in the classi- 
fication or in the schedule of rates. Sometimes it would 
appear as though the principle of " what the traffic would 
bear," and sometimes as though " cost of service," were 
the basis. What was really done was to take the clear- 
ing-house classification and the existing maximum rates, 
and deal with them in a purely empirical fashion. The 
principle adopted was avowedly, and perhaps under the 
circumstances unavoidably, the rule of thumb. f It is the 
general method of English legislation to effect a series 
of compromises without troubling about consistency in 
underlying theories. 

As the Board of Trade conceived its duties, three 
things had to be done : " (1) The codification and reduc- 
tion into order of the immense mass of scattered provi- 

*" First Principle of Classification," in the statement made on behalf of 
the British Iron Trade Association. Board of Trade Inquiry, March 12, 1890, 
Statement, etc., London [1890], p. 19. 

t Mr. Courtenay Boyle, statement for the Board of Trade. Report from 
the Joint Select Committee of the House of Lords and House of Commons on the 
Railway Rates and Charges Provisional Order Bills, 1891. 



THE ENGLISH RAILWAY RATE QUESTION 295 

sions relating to the charging powers of the companies ; * 

(2) the revision of the existing maximum charges ; and 

(3) it was necessary in respect to some matters, particu- 
larly terminals, that charges which had not previously 
been fixed and defined should for the future be fixed and 
defined." f The intention of the Board of Trade was 
therefore to simplify the existing complexity of rates, 
and to make exhaustive specifications of what the railway 
companies might charge. 

This was the interpretation the Board of Trade put 
upon the instructions of the Act of 1888. The railway 
companies argued, or seemed to argue, that the sole duty 
of the Board of Trade was codification, while the traders 
seemed to argue that the sole duty of the Board was re- 
duction of rates. 

III. 

A commentary on the principal points which emerged 
in the course of these prolonged discussions falls natu- 
rally into the following heads : — 

A. The demand for specification of the ingre- 
dients of charge. 

B. Terminal charges: (a) Station terminals; (b~) 
Service terminals. 

C. Conveyance charges: (a) Use of road; (J) 
Use of locomotive power; (c) Use of wagons. 

D. Classification: (a) As regards conveyance 
charges ; (6) As regards terminal charges. 

* " They had to codify about 1,200 Acts of Parliament." Mr. Stanhope, in 
the House of Commons. Hansard, July 24, 1891. This, however, does not by 
any means represent the extent of the English Acts regulating the railway 
companies. The London & North-Western Railway Company, e.g., had its 
Acts codified by a parliamentary barrister about ten years ago. At that time 
the company was working under upwards of 1,000 Acts, including, of course, 
all the Acts of the subsidiary lines which it had absorbed. 

fMr. Muir Mackenzie, statement for Board of Trade. Provisional Order 
Bills Report, 1891, Part I., p. 16. 



296 QUARTERLY JOURNAL OF ECONOMICS 

A. The demand for specification of the ingredients of 
charge appears continually in the traders' arguments, and 
is indeed mildly admitted by the railway companies.* 
The ground of the demand is that the trader ought to 
know for what he is paying and how much he is paying 
for it. There may be some part of the service which the 
railway company offers which he is prepared to render for 
himself ; but he does not know whether it is worth while 
to do so, unless he can ascertain exactly what the railway 
company is charging for the particular service in question. 

In order to understand conditions which have not sprung 
into existence in a day, but have their roots in the past, 
one must continually refer to ancient history ; and Mr. 
Justice Wills was indubitably right when he said that 
" the notion of the railway being a highway for the com- 
mon use of the public, in the same sense that an ordinary 
highway is so, lies at the starting-point of English railway 
legislation." f This notion underlies the Acts of 1845 % 
and 1873 § alike. It underlies the provision in the latter 
Act by which the company is obliged to give details of 
rate ; § and it has also formed the ground of various deci- 
sions of the Railway Commissioners || and of the law 
courts.^! The intention of the Act of 1888** was clearly 
to emphasize this historical provision. The reason for the 
maintenance of a provision which to some seems archaic 
is very obvious, when we consider the English railway 
situation. The Midland and North-Eastern Railway Com- 

*As, e.g., ljy Mr. Bidder, Q.C., for the railway companies. Provisional 
Order Bills Report, 1891, Part I., p. 70. 

1 Law Reports, Queen's Bench Division (1884-85), vol. xv. p. 530. 

t 8 & 9 Vict., c. 20, §§ 86-111. §35 & 37 Vict., c. 48, § 14. 

I! E.g., Thirteenth Report Railway Commissioners (1886), pp. 6 and 30. 

If E.g., Hall v. London, Brighton <f* South Coast Railway, L. R., Q. B. I)., 
vol. xv. p. 530. 

** Sect. 33. Cf. also Mr. Courtenay Boyle's statement. Provisional Order 
Bills Report, 1891, Part I., p. 227. 



THE ENGLISH RAILWAY BATE QUESTION 297 

panies are practically the only English companies which 
own their own mineral trucks.* The mineral trucks on 
other lines are almost entirely owned by traders. Again, 
some traders do not use the stations of the companies, but 
have sidings of their own, which they are entitled to have 
if they choose to pay for them ; and, having paid for sid- 
ings, they do not expect to be called upon to pay also 
for the stations which they do not use. Such traders 
clearly want, and of course have had, as matter of practice, 
rates lower than the total rates, which included services 
of which they did not avail themselves. Another equally 
important reason for specification of charge lies in the cir- 
cumstance that, as regards general merchandise, the Eng- 
lish railways are not alone " conveyers " of goods, but are 
also " carriers " ; that is, they undertake the business of 
"common carriers," — they collect and deliver. It may 
or may not be convenient or desirable that the trader 
should intrust the collection and delivery of his goods 
to the railway company ; and, if he does not do so, it is 
argued that he ought not to be charged for a service which 
is not performed for him. 

The extent to which this splitting up of rates may use- 
fully be carried was actively discussed during the contro- 
versy ; and the view adopted by the Board of Trade was 
that the splitting up should be carried out exhaustively, 
so that there should be no room for any other charges 
than those specified. The traders also desired that a 
clear and broad line should be drawn as to what charges 
the railway company may legally make.f 

There were thus two elements in this demand for speci- 

* The latter company has owned all its mineral trucks for many years ; but 
the former only began the policy of acquiring- trucks in 1881, when 60,000 or 
70,000 trucks were purchased from the traders on the system at a cost of about 
$0,000,000. See Report above quoted, pp. 251, 252, and 258, Queries 1179 and 
1195. 

fMr. Woodfall for the Marquis of Bute as trader. Provisional Order Bills 
Report, 1891, Part I., p. 70. 



298 QUARTERLY JOURNAL OF ECONOMICS 

fication of charges. One was that a specific charge should 
be made for each individual service, and the other that 
these charges should be fixed, and not be subject to 
fluctuation. Here a curious question emerged. It was 
clear that, if the charge was to be fixed under the Pro- 
visional Order of the Board of Trade, the trader might be 
at the mercy of the Board, since at that particular stage of 
the proceedings the quantum of none of the charges was 
fixed. It was therefore proposed, in several instances of 
this specification, to provide for an appeal to arbitration, 
the arbitration to be conducted by a nominee of the Board 
of Trade. Here, however, the railway companies stepped 
in, and said : " No ! If the charge is to be fixed, it must be 
fixed now. We will not submit to the arbitration of the 
Board of Trade." Sometimes the railways gained their 
point, and sometimes the traders ; and thus on certain 
charges there is an appeal to the Board of Trade, and on 
certain others there is not. The traders, indeed, as sub- 
sequent proceedings have shown, have had their bugbear, 
" vagueness," banished at a price. 

The publication of rates is a debated point upon which 
no definite provision is made in the bill, or, at all events, 
no provision other than that of previous Acts, which in 
this respect have not invariably been observed. The mo- 
tion that the railway companies should exhibit at their 
stations all the actual rates chargeable from those sta- 
tions was not accepted by the committee. Mr. Acworth 
has scouted this idea on the ground that such exhibition 
would require a forest of timber ; but he has himself made 
the valuable suggestion that changes in the rates should 
be published in the monthly journal issued by the Board 
of Trade,* as the rates on the French railways are pub- 
lished in the Moniteur. The trader may, however, under 
the Act of 1888, demand an exhaustive analysis of his 

* Nineteenth Century, vol. xxxi. p. 149. 



THE ENGLISH RAILWAY RATE QUESTION 299 

rate, * so that he may, if lie pleases, perform for himself 
any one of the services charged for.f 

B. When the railway companies promoted their bills, 
in 1884-85, to place the legality of terminal charges 
beyond question, the traders vehemently opposed them, 
because the proposals were unaccompanied by any modifi- 
cation of rates. When the Board of Trade proposed to 
deal with rates and terminals together, the railways were 
up in arms. J When, however, the traders and the railway 
companies came face to face with the Board of Trade, in 
1889, they were both obliged to give way. The traders 
had to submit to terminals, and the railway companies 
had to submit to the " confiscatory policy " of revision of 
maximum rates. The definite provision of a charge for 
terminals followed, indeed, logically upon the demand for 
specified ingredients of charge. Under the former Acts 
" the rate for ' conveyance ' was the only sum which was 
set out in definite figures. The sums which might be 
charged for station and service terminals were left 
vague." § Terminals were, however, charged, || although 
there were no statutory powers to charge specific sums 
for them ; and the railway companies were ever doubtful 
until the decision in Hall's case ^[ settled the question. 

In pursuance of the policy of exhaustive specification 

* Sect. 33, subsections 3 and 7. 

t Since the Act, with its attendant Provisional Order Confirmation Acts of 
1891 and 1892, came into force, some of the railway companies have, it would 
appear, refused to render the details of rates to traders. In order to affirm the 
state of the law on the point, the Board of Trade took in June, 1893, the 
opinion of counsel. This opinion was as follows : — 

" Upon a proper application being made under subsection 3 of Section 33 
of the act of 1888, the company are bound to dissect the actual charge made, 
on the ground that the subsection applies not only to the maximum rates, but 
also to the charge made or claimed." Hansard, Series IV., vol. 12, col. 
1045. 

t See above ; and cf. Grierson, Railway Rates, p. 80. 
§ Provisional Order Bills Report, 1891, Part II., p. 1075. 
II Ibid., p. 1112. 1[ Quoted above. 



300 QUARTERLY JOURNAL OF ECONOMICS 

of charge, the Board of Trade for the first time recognized 
a distinction, which has now become a statutory distinc- 
tion, between station terminals and service terminals.* 
The meaning of this distinction is obvious. Station 
terminals are charges for the use of station buildings or 
sidings, while service terminals are charges for certain 
manual operations. 

The pros and cons of the complicated question of 
station terminals cannot be fully given here, but the chief 
points may be suggested. In the first place, since some 
traders use the station and some do not, it is clear that, 
unless there were a definite reduction to the trader who 
did not use the station, he would be paying for a service 
which he did not demand. Moreover, unless there were 
specific rates minus the terminal, no trader could tell 
whether or not the rate paid by his neighbor, who loaded 
his goods at his own siding, fell within the law of undue 
preference. Again, if the terminal were included in the 
mileage rate, the long-distance traffic might be handi- 
capped in relation to the short-distance traffic, though 
not necessarily. On the other hand, if the same terminal 
were charged irrespective of distance, as was the case in 
the Board of Trade schedule and is now in the Acts em- 
bodying the Provisional Orders, the short-distance traffic 
would be handicapped in relation to the long-distance 
traffic. It happens that the kind of traffic which is most 
affected is the export traffic ; and it was therefore argued 
that the proposed terminal would act as a restraint upon 
exports. Again, it was shown that terminal facilities 
varied very much, and that a uniform charge for these 
would be unfair. The strongest argument, however, 
against terminals was the argument that the schedule of 
the Board of Trade prescribed differential distance rates 
for conveyance, and that these secured for the company 
due payment in respect of the circumstance that short- 

* Provisional Order Bills Report, 1891, Part II., p. 67. 



THE ENGLISH RAILWAY RATE QUESTION 301 

distance traffic was relatively more expensive to deal with 
than long-distance traffic. 

(a) The meaning of station terminal is expressed in 
the following definition : " The maximum station terminal 
is the maximum charge which the Company may make to 
a trader for the use of the accommodation provided, and 
for the duties undertaken by the Company for which no 
other provision is made in this schedule, at the terminal 
station for or in dealing with merchandise, as carriers 
thereof before or after conveyance." * This definition 
must be taken in connection with the specification of ser- 
vices under service terminals. It is held to exclude 
specific charges for such services or duties as signalling, 
marshalling trucks, etc., which are held to be part of the 
necessary functions of the railway,! n °t susceptible of 
being made the subjects of independent charge. 

(5) Service terminals are defined as consisting of (1°) 
loading, (2°) unloading, (3°) covering, and (4°) uncover- 
ing. Each of these is subject of separate charge, when 
separation of charge is required; and no one of them 
may be charged unless the service is rendered.^ 

Prior to 1845 very few of the railway companies did 
the business of carriers,! and thus the question of termi- 
nal charges did not arise until after the railway system 
had developed to some extent. Terminal charges without 
specification came afterwards. It was only in the schedule 
of 1891, constructed by the Board of Trade, that, in obe- 

* Analysis of the Railway Rates and Charges Order Confirmation Acts, 
1891 and 1892. Pari. Paper 0.-0832, p. 102. 

t For which probably they may he held to receive remuneration as " con- 
veyers," although this special point has not been fully tested. 

t In Class C, for example, the following are the charges : maximum station 
terminals, Is. per ton at each end ; maximum service terminals, — (a) loading, 
3d. per ton ; (6) unloading, 3d. per ton ; (c) covering, lrf. per ton ; (d) uncover- 
ing, Id. per ton. Provisional Order Bills Report, 1891, Part I., p. 154. 

§ Cf. Mr. Littler, Q.C., in Hall v. London, Brighton 4' South Coast Rail- 
way, L. R., Q. B. D., vol. xv. p. 528. 



302 QUARTERLY JOURNAL OF ECONOMICS 

dience to the principle of exhaustive dissection of charge, 
the separation between station and service terminals was 
made for the first time. * It is true that the four services 
detailed, with the services of collection and delivery which 
are now by implication excluded from terminal services 
in the legal sense,f were mentioned in the Act of 1873, J 
and traders were entitled to demand revision of them; 
but there was no provision for specification of charge such 
that the trader could determine whether or not he could 
perform any one of the services for himself more efficiently 
or more economically than the railway company was pre- 
pared to do it for him. Here, however, an important 
legal point arose. Had the trader a right to demand 
access to the premises of the railway company for any 
purpose whatever? Under the Act of 1854 the trader 
is entitled to " reasonable facilities " ; § but it is open to 
doubt how far this provision will entitle him to insist 
upon performing services customarily performed by the 
railway companies. The Lancashire and Cheshire Con- 
ference proposed to the committee to make the powers 
definite, reserving powers to the railway companies to 
make by-laws; but this suggestion was not adopted. || 
While arbitration by the Board of Trade is applicable 
to station terminals, it is not applicable to service ter- 
minals. The attitude of both traders and of railway com- 
panies towards arbitration is curiously varied. When it 
is thought that arbitration will be an advantageous pro- 
vision for either party, it is argued by the other that it 

* Provisional Order Bills Report, 1891, Part I., p. 67. 

t Collection and delivery and also weighing may be charged a reasonable 
sum, to be determined in case of dispute by an arbitrator appointed by the 
Board of Trade at the instance of either party. Order Confirmation Acts, 
London & North-Western Railway, 1891 ; e.g., clause 5. 

J Sect. 15. 

§ Compare Mr. Pope's statement, Provisional Order Bills Report, 1891, 
Part I., p. 146, with Mr. Balfour Browne's at p. 155. 

II Ibid., p. 143. 



THE ENGLISH RAILWAY RATE QUESTION 303 

would be very absurd to fix immutably a charge which 
might, under certain conditions, come to be quite unrea- 
sonable ; or it is argued that arbitration establishes no 
principle, and that it costs nearly as much as legal proc- 
ess. The railway companies accepted the principle of 
arbitration so far as station terminals were concerned, but 
objected to it for service terminals. They demanded and 
obtained power of " absolute charge " not changeable by 
arbitration.* 

C. Although there is no legal definition of "convey- 
ance," f the charges for conveyance are held in the Eng- 
lish railway system to be composed of the following in- 
gredients : J (a) toll for the use of the road ; § (b~) 
haulage rates, or the payment for the use of the loco- 
motive for haulage ; and (c) payment for the use of 
wagons. The splitting up of rates into their constituents 
was much insisted upon by the traders. It was regarded 
as a great advantage to them.|| This reaffirmed statutory 
power in the hands of the trader to demand analysis of 
his rate has been one of the immediate causes of the 
recent friction between the railways and the traders.^ 

(a) First, in regard to tolls. Although the apparent 

*Cf. Provisional Order Bills Report, 1891, Part I., p. xv, and Part II., p. 
1114. 

tSee, however, Wills, J., judgment in Hall v. London, Brighton 4" South 
Coast Railway, L. R., Q. B. 1)., vol. xv. p. 505. See also Provisional Order 
Bills Report, 1891, Part I., pp. 34, 37, 91, and 117. "Conveyance" and 
"carriage" are not synonymous. The mileage rate provides for that part 
of the duty which is conveyance, and the station terminal (and the service 
terminal) for another part of the duty which is performed by the railway 
companies as "carriers." Cf. Mr. Bidder, Q.C., Ibid., p. 73. 

$ Report, 1891, pp. 50 and 479. See also Grierson, Railway Rates, English 
and Foreign, 1886, pp. 90, 97. 

§ Signalling is probably included in this, although the point has not been 
legally tested. On the traders' fear that signalling might be made the subject 
of a separate charge, see Provisional Order Bills Report, 1891, Part I., p. 82. 

li Provisional Order Bills Report, 1891, Part I., p. 92. 

II Although the power is not novel. 



304 QUARTERLY JOURNAL OF ECONOMICS 

intention of Parliament was to deal with the whole sub- 
ject of railway rates in the Act of 1888, it was accepted as 
certain by the Board of Trade that, under the terms of 
the Act, while it was empowered to deal with rates and 
charges, it was not empowered to deal with tolls.* This 
defect in the drafting of the Act, if it was a defect in 
drafting, produced the curious result that, if the railway 
companies were dissatisfied with the revised classification 
and schedule, — that is, if the reduction of rates were 
carried too far, — it was open to them to refuse to act as 
conveyors or carriers, and simply to fall back upon their 
function as road-owners and upon their statutory powers 
to levy certain tolls for the exercise of that function.! If 
the maximum rates and charges permitted to them by 
Parliament for the total of their services fell short of their 
powers of charge for one of these services, it might be- 
come their interest to follow this course. Such a policy 
would result in the development of haulage companies 
and of wagon companies, express companies, etc., such 
as are common in America, in order to undertake func- 
tions presently performed by the railway companies. $ 
The railway companies maintained, and the contention 
was not rebutted by the opposing counsel, that the old 
Acts of Parliament were not repealed by the Act of 1888 
and the subsequent Provisional Orders, excepting in so 

* Provisional Order Bills Report, 1891, Part I., p. 119; also Mr. Courtenay 
Boyle's statement, p. 479. 

^Provisional Order Bills Report, 1891, Part I., p. 118 ; also Grierson, Rail- 
way Rates, English and Foreign, 188G, p. 97. 

$ The private use of railway lines on payment of tolls is not unknown. See 
Powell-Duffryn case, quoted Provisional Order Bills Report, 1891, Part I., p. 
120. The Court of Chancery decided in this case that the only difficulty in the 
way of private persons running trains over a railway line is that such persons 
cannot compel the railway company to work the signals, — not because they 
cannot require this to be done, but because in the nature of the case they are 
not in a position to see that their orders are carried out. Some traders seem 
not indisposed to attempt to frighten the railway companies by suggesting 
that private companies might establish stations and charge lower terminals 
than the railways. Cf. Ibid., p. 264. 



THE ENGLISH BAIL WAY BATE QUESTION 305 

far as they fixed rates and charges, the tolls being left 
untouched.* Saving, however, this " last trench " of the 
railway companies, the old tolls were practically abolished ; 
and conveyance rates, including them as one of three in- 
gredients, were substituted. 

(b) In considering the second ingredient, haulage rates, 
it is to be observed that the principle adopted in the 
earlier English railway Acts for the fixation of maximum 
tolls was the principle of " equal mileage." This arrange- 
ment was drawn from the canal regulations, and also from 
the fixed tolls of the horse railways which preceded the 
locomotive lines ; but the development of traffic produced 
differential rates, and was accelerated by them. There 
are two leading points in the discussion of haulage rates 
in the English system. These are : (1) the graduation 
of rates for distance, with or without a minimum of 
chargeable distance ; (2) the graduation of rates for ton- 
nage, with or without a minimum of weight, varying with 
the classification. On both of these points there is a cross- 
current of interests. The interest of all large traders is 
to reduce the powers of charge for quantities ; and that 
of some large traders, those dealing in goods which are 
customarily transported to a distance, is to reduce long- 
distance rates. On the other hand, it is the interest of 
small tradersf to prevent the large trader from having 
the advantage over him which would be secured by a 
differential rate in respect of quantity ; and it would be 
the interest of traders, large or small, whose traffic is 

*Mr. Bidder, Q.C. Provisional Order Bills Beimrt, 1H91, Part I., p. 478. 

t Or appears to be ; for, if the railway company makes a large net profit 
on a large wholesale traffic at a low rate, it will he able to charge lower rates 
for small quantities than would be possible if its net profit were reduced, owing 
to the restriction of the wholesale traffic to the goods which could afford to 
pay a high rate. The effect of a differential tariff in respect of quantity 
would, however, be to restrict the small trader to a purely local market. He 
could not compete against the large trader in a distant market, since the 
difference in rates of carriage in respect of quantity might suffice to give the 
large trader a profit. 



306 QUARTERLY JOURNAL OF ECONOMICS 

mainly local, to oppose a differential distance tariff. The 
railway companies' interest lies in obtaining both the 
highest maximum powers and permission to give differen- 
tial rates in so far as these might be necessary to secure 
paying traffic. The railway companies' interests thus 
coincide at a certain point with those of both small and 
large traders. 

(1) Differential Mates in Respect of Distance. — Such 
rates may be calculated by two methods : (a) by simple 
gradation, — so much for 10 miles, 20 miles, 50 miles, and 
so on ; or (6) by the cumulative method, — so much per 
mile for the first 10 miles, so much less for the next 20 
miles, so much less for the next 50 miles, and so on. 
The first method is open to the objection that the charge 
for, say, 19 miles will be positively greater than the charge 
for 21 miles, unless the reduction at each stage is infinites- 
imally small. This objection was surmounted by the 
"overlapping clause," which prescribed that the rate for 
one distance was not in any case to be less than the rate 
for a shorter distance. This method, with the overlap- 
ping clause as a rider, was the method of the English 
system prior to 1892. Now, however, under the new 
regulations, the second, or cumulative, method has been 
adopted, which is free from the objection of overlapping, 
although for long distances it involves some calculation. 
Given the expediency of differentiation of rate in terms of 
distance, there seems little to object to it on grounds of 
principle. 

The question of minimum chargeable distance is neces- 
sarily associated with the question of terminals. Ter- 
minals are not chargeable on Class A (heavy goods) ; and 
on such goods it appeared to the Board of Trade fair to 
give a relatively high minimum of distance, for the reason 
that the cost to the railway for a short haul was greater 
than the amount yielded by the conveyance rate on a 
mileage basis pure and simple.* In this concession to 

* Provisional Order Bills Report, 1891, Part I., p. 290. 



THE ENGLISH RAILWAY RATE QUESTION 307 

the " cost of service " principle the Board of Trade fol- 
lowed precedents as well in connection with the same 
matter as in connection with additional mileage allowances 
for tunnels, etc., — as, e.g., the Severn Tunnel, — and for 
bridges, — as, e.g., the Forth Bridge. 

The older Acts gave a minimum chargeable distance 
of 6 miles for heavy goods conveyed at low rates; but 
the more recent Acts had slightly increased the maximum 
conveyance rate, and had given a minimum chargeable dis- 
tance of 3 miles.* The new regulations give a minimum 
chargeable distance where no terminal is charged of 6 
miles, where one terminal is charged 4£ miles, and where 
two terminals are charged 3 miles.f There is a proviso to 
the effect that, where goods pass from one line to another 
in the course of a journey within the minimum applicable 
to the class, they are not liable to a double short-distance 

charge 4 

The larger proportion of the traffic on the English 
lines is short-distance traffic. § The average journey in 
the South Wales coal region is 20 miles. || In the Stour 
Valley district 35 per cent, of the traffic is transported 
for distances under 6 miles.^[[ A vivid illustration of the 
mode in which short-distance traffic is conducted in Eng- 
land is given by Sir Henry Oakley, manager of the Great 
Northern Railway. " Here is a particular train upon a par- 
ticular morning. It starts with 6 wagons. At the first 
station it stops at it puts off 1 and takes on 4, at the 
next it puts off 3 and takes on 3, at the next it puts off 
1 and takes on nothing, and at the next it puts off 6 and 
takes on 3, and it goes on over a journey of 76 miles. By 
working traffic between stations on that 76 miles, and col- 
lecting through traffic, it lands with 25 wagons at the 

* Provisional Order Bills Report, 1891, Part I., pp. 287, 296. 

t Ibid, p. 313. t Ibid., pp. 321, 322. 

§ Report, Part II., p. 1126, Query 10325. 

1! Report, Part I., p. 249, Query 1167. H Ibid., p. 293. 



308 QUARTERLY JOURNAL OF ECONOMICS 

end, the greatest weight it has ever had on the whole 
journey." * The railway companies profess that the short- 
distance traffic does not pay.f The bulk of the short-dis- 
tance traffic consists of minerals, — coal and iron ore, for 
example, from the pit-mouth to the iron works, or, in the 
case of the former, for shipment coastwise or for export. J 
The remainder of the short-distance traffic is of the sort 
described above. § Some of this traffic, especially on 
branch lines, is probably often conducted in an unnecessa- 
rily expensive manner. || 

According as we regard it from the point of view of the 
" cost of service " or from the point of view of " what the 
traffic will bear," the reduced rate per mile for the long 
haul rests either upon the principle that it costs less per 
mile to move a ton 100 miles than it costs to move it 10 
miles, or upon the principle that the distance to which 
traffic can be procured for carriage is in reciprocal propor- 
tion to the rate per mile.^f 

(2) Differential Rates in respect of Quantity. — In the 

* Provisional Order Bills Report, 1891, Part I., p. 309. The average speed 
of these local trains is 6 miles an hour. Ibid., p. 300, Query 1401. 

t " It has forced itself upon our minds constantly that, practically, the 
long-distance traffic pays for the extra expenses incurred in working the short- 
distance traffic. We must get a dividend ; and, if we cannot get it out of the 
short distances, we must get it out of the long distances." Manager of Great 
Northern Railway in evidence, Provisional Order Bills Report, 1891, Part I., 
p. 309, Query 1529. 

t The extent to which the mineral traffic pays or does not pay is a disputed 
point. Cf. the rival views of Mr. Conder, Proceedings Institution of Mechanical 
Engineers (England), 1878, p. 184, and of Mr. Price Williams, Ibid., 1879, p. 
96. Cf. also observations on the relative profit of passenger and goods traffic. 

Statement British Iron Trade Association [1890], p. 16. 

§ Shunting heavy traffic is said to cost on the London & North-Western 
Railway Company 11.6 per cent, of the entire cost of locomotive power used on 
the line. Proceedings Institution of Mechanical Engineers, 1878, p. 187. 

|| See the remarks of Mr. Bergeron, Ibid., 1879, p. 147 ; and cf. Herbert 
Spencer's criticism, " Railway Morals and Railway Policy," Essays, p. 301. 

If From the point of view of railway administration both principles must be 
taken into account. Cf . Atti della Commissione d' Inchiesta suW Exercizio delle 
Ferrovie Italiane, 1884, Parte II., vol. ii. p. 957 et seq. 



THE ENGLISH RAILWAY BATE QUESTION 309 

earlier Acts there was no minimum of quantity. There 
were equal tonnage rates within the class ; and the class 
was fixed with exclusive regard to the nature of the goods, 
irrespective of quantity.* Under the railway clearing- 
house classification the minimum of weight was fixed 
at 4 tons for goods heavy in relation to their value per 
unit of weight, and at 2 tons for light goods.f This 
limitation grew up in practice within the maximum total 
rates.f There are two elements in the fixation of the min- 
imum quantity : (1) the minimum quantity consignable 
at a certain rate, and (2) the minimum load at a certain 
rate. That these elements are distinct § will be obvious 
when one considers that the same trader — a chemical 
manufacturer, for example — might send in one consign- 
ment separate packages of different goods which could not 
be loaded in the same truck without danger. Such goods 
are subjected to a provision for a minimum load inde- 
pendently of the provision for a minimum consignment. || 
The increasing size of the trucks in use on the railway 
system rendered such provisions necessary from the rail- 
way point of view;^| and the large traders demanded 
concessions in rates in consideration of large consign- 
ments. These large traders, whose business required rela- 
tively small consignments, together with the small traders, 
objected to a high minimum of weight at a certain rate, 
because they were unable to take advantage of the reduc- 
tion by consigning in large quantities. It happened that 
the agricultural interest was involved in this question, not 

* " In no important act is there any limit of consignment for tonnage rate." 
Mr. Courtenay Boyle, Provisional Order Bills Report, 1891, Part I., p. 503. 

t Provisional Order Bills Report, 1891, Part I., p. 497 et seg. 

t Ibid., p. 503. § Ibid., p. 504. 

|| These are in Class 10. Ibid., pp. 504 and 510. 

IT In 1860 the largest truck had a capacity of 6 tons, in 1891 of 10 tons. 
Provisional Order Bills Report, 1891, Part I., p. 510, Queries 3475 and 3476. 
See also Proceedings of Institution of Mechanical Engineers, 1884, p. 416. "The 
average daily load of goods trucks does not exceed one-half." Ibid., p. 431. 



310 QUARTERLY JOURNAL OF ECONOMICS 

so much because agricultural produce was usually sent in 
lots of less than 4 tons, — for, as it happened, the con- 
signments usually exceeded that quantity,* — but because 
artificial manures were customarily sent in lots of 2 tons 
and under 4 tons.f There were also many products 
of iron manufacture which came in the same category 
as chemical manures in this respect. These interests pre- 
vailed at the Board of Trade inquiry, and the minimum 
consignment in the heavy class at a low rate was fixed 
at 2 tons.$ But this did not satisfy the railway com- 
panies nor the large traders,§ and they succeeded in in- 
ducing the committee to raise the minimum from 2 to 
4 tons. || Perhaps the chief consideration which weighed 
with the committee was that the railway companies had 
reduced actual rates for long-distance traffic on the basis 
of a 4-ton limit, and that reduction to a 2-ton limit 
might weaken the argument for maximum rates approxi- 
mating to the existing actual rates. The differential 
rate as finally adjusted follows the classification. Heavy 
goods are charged according to the rate in Class A, if 
they are in 4-ton lots ; according to Class B, if in lots of 
less than 4 tons ; and in Class C, if in lots of less than 2 
tons.^T Apart from the inferior limit of consignment, 
there is the question of graduated rates for quantities. 
The Board of Trade proposed to divide heavy traffic into 
three divisions as regards weight of consignment: (1) 
consignments under 10 tons ; (2) those between 10 and 

* Provisional Order Bills Report, 1891, Part I., p. 510, Query 3470. 
t Ibid., p. 504. X Ibid-, p. 487 et seq. § Ibid., p. 488. 

|| Ibid., p. xxxi. 'i Ibid., pp. 530 and 540 ; also p. xxxii. 



Note. — In England the goods ton is 2,240 pounds, and the mineral ton is 
2,352 pounds. In America the ton is 2,000 pounds. The ratio of American to 
English weights is thus 1 to 1.12 and 1 to 1.176 for goods and minerals re- 
spectively. These important differences are generally overlooked in attempts 
to compare rates. 



THE ENGLISH RAILWAY HATE QUESTION 311 

250 tons; (3) those above 250 tons.* These figures 
were employed to define precisely the indefinite expres- 
sions "truck-load" and "train-load." But the traders 
in 4-ton consignments now united with the traders in 
smaller consignments to defeat the 10 to 250 ton pro- 
posal, which was clearly made in the interests of the large 
traders. f Since, again, high maximum powers were what 
the railways wan ted, J and since the railways and some 
of the traders united their forces, the stronger battalions 
were against the proposal ; and so the committee were 
constrained to throw it out. The differentiation of rate 
thus existing is that indicated above in connection with 
minimum consignments. Having offended the small 
traders by fixing the minimum consignment at 4 tons, 
the committee propitiated them by rejecting the train- 
load proposal of the Board of Trade. § 

(c) The third ingredient of the conveyance rate is the 
payment for the use of the wagon. The clause dealing 
with this point, as finally adjusted, states that in cases 
where the railway company do not provide trucks "the 
charge authorized for conveyance shall be reduced by a 
reasonable sum, which shall, in case of difference between 
the company and the person liable to pay the charge, be 
determined by an arbitrator to be appointed by the Board 



* Provisional Order Bills Report, 1891, Part II., p. 1075. As regards the 
10 and 250 ton gradation, the reduction of rate applies only to Classes A and B ; 
as regards the 10-ton gradation (the second division), it applies only to Classes 
C and 1. Ibid. 

t There were alleged to be only 6 or 7 coal-traders in London who could 
deal with train-loads. Ibid., p. 1138, Query 10601. For the arguments of the 
large traders, see Statement British Iron Trade Association [1890], p. 18. 

t The railway companies denied that there was any material difference in 
cost between handling traffic in truck-loads collected from several different 
traders and handling traffic in train-loads forwarded by individual traders. 
Some colliery owners agreed with this view. Provisional Order Bills Report, 
1891, Part II., Query 10211 ; also Query 10756. 

§ Provisional Order Bills Report, 1891, p. xlix. 



312 QUARTERLY JOURNAL OF ECONOMICS 

of Trade." * The provision of trucks is not obligatory 
upon the railway in respect of Class A and certain other 
selected goods in Class B, — lime, for instance. In the 
older Acts the charge for wagon hire was not invariably 
specified ; but, where specified, it was, as a rule, one- 
eighth of a penny (-rV cent) per ton per mile.f The 
traders were exceedingly anxious to have this portion of 
the dissected rate definitely fixed.J Some urged that it 
should be fixed at one-half the rate mentioned-! But 
the differences between one railway and another, and be- 
tween one set of traders and another, were found to be so 
great that the charge for wagon hire was not fixed at a 
uniform specific rate ; but it was held to be included in 
the conveyance rate, specification to be made by the rail- 
way companies to the traders on the general principle of 
specification of ingredients of rate. 

The question is an exceedingly difficult and important 
one ; for in practice it may occur that the rate for Class 
A, which is exclusive of wagon hire, — the railway com- 
panies not being obliged to provide wagons for that class, 
— -may, when the wagon hire is added, actually exceed 
the rate for Class B, where the companies do customarily 
provide the wagons. The rate of wagon hire must there- 
fore be kept at a point below that under which this state 
of charge would arise. It seemed difficult to do this ar- 
bitrarily with equal justice to all the interests ; and there- 
fore, as in other cases of a similar order, the matter was 
left for settlement by arbitration by the Board of Trade 
in case of need. 

In connection with this the following features of the 

* Provisional Order Bills Report, 1891, Part I., p. 55. The number of 
traders' trucks on the London & North- Western Railway system alone amounts 
to 84,000, while the number of trucks owned by the railway company is only 
54,550. Railway and Canal Traffic Act, 1888, Return in pursuance of Sect. 32. 
etc., c. 5930, 1890, p. 10. 

t Provisional Order Bills Report, 1891, Part I., p. 263. t Ibid., p. 1056. 

§ Statement by Mining Association of Great Britain, quoted Ibid., p. 263. 



THE ENGLISH RAILWAY BATE QUESTION 313 

English system are to be noted. The return of empty 
trucks is not in present practice made the subject of a 
separate charge.* The wagons of private owners or com- 
panies are subject to very great detention. A wagon 
makes, for example, on an average, only two journeys 
a month, when employed in traffic between the north 
and the south of England. f A journey of twenty-five 
miles usually takes a wagon a week to go and return.J 
The interests of the railway companies and of the wagon- 
owners are, up to a certain point, identical ; and then 
they become divergent. It is important for both that 
a relatively large charge should be made for wagon hire ; 
for the railways charge those who do not have wagons 
the prescribed rate, while the wagon-owners get the pre- 
scribed rate by way of rebate. § On the other hand, it 
is not to the interest of the railway companies to have 
the specified rate for wagons too high, otherwise the 
rebate to the owners of private wagons would be ex- 
cessive. || In consequence of the strength of the interests 
of owners of wagons, — not wagon companies, but traders 
carrying their own traffic in their own wagons, — a pro- 
viso was inserted, giving the owners of wagons power 
to charge demurrage against the railway companies for 
detention of trucks,^[ the railway companies having 
similar powers of charge for detention of trucks belong- 
ing to them. 

D. The railway companies throughout the country 
had, by common consent, adopted the classification of the 

* Provisional Order Bills Beport, 1891, Part I., p. 419 et seq. Occasionally 
it happens that the railway company use these private trucks, admittedly with 
or without permission. See Ibid., p. 421. 

t Ibid., p. 246. t Ibid., p. 251. 

§ Compare Beport from the Joint Committee of the House of Lords and the 
House of Commons on the Bailway Bates and Charges Provisional Order Bills, 
1891, Part I., p. 160. 

II Ibid., p. 242. J Ibid., p. 209. 



314 QUARTERLY JOURNAL OF ECONOMICS 

Railway Clearing House. This classification had no statu- 
tory force. It simply embodied the customs of the trade. 
It had not been made : it had grown. There were 4,000 
specified articles, and the recognized plan of altering 
rates was to move the article in which the change was to 
take place from one class to another.* The railway clear- 
ing-house classification was therefore subject to constant 
change. Lord Balfour of Burleigh and Mr. Courtenay 
Boyle conferred with the railway managers and the 
traders for thirteen days upon classification,! and the 
outcome was the classification proposed by the Board of 
Trade in the Provisional Order Bills of 1891. Although 
the proposed classification was based upon that of the 
railway clearing house, it was, necessarily, entirely differ- 
ent in effect. The old classification was subject to altera- 
tion from day to day, as the movements of rates de- 
manded.J The new classification was immutable, at all 
events, without the sanction of Parliament. The first step 
of the Board of Trade was to reduce the number of the 
specified articles from 4,000 to 2,000. § The resulting 
classification is really entirely empirical. It is not fixed 
on any logical basis. Any serious change in established 
practice would have been open to the charge of giving 
particular districts or particular trades undue advantages 
over others. 

*Cf. The Railway and Canal Traffic Act, 1888, by W. A. Hunter, LL.D., 
M.P., London, 1889, p. 82. 

t Yet the traders' counsel pleaded before the Joint Committee that the clas- 
sification satisfied neither party. Provisional Order Bills Report, 1891, Part I., 

p. 488. 

J English railway rates do not fluctuate nearly so much as rates in Amer- 
ica, while sudden and considerable changes are almost unknown. The 
changes following upon the legislation of 1891-92 are the most violent that have 
taken place in England for many years. 

§ The Lancashire and Cheshire Conference, which was the exponent in 
general of the traders' grumbles, complained of this reduction in number of 
specified articles ; but they did not object to the principles on which the classi- 
fication had been based. Provisional Order Bills Report, 1891, Part I., p. 487. 



THE ENGLISH RAILWAY RATE QUESTION 315 

The principles of classification urged by an influential 
body of traders * were these : — 

1. That no article should be rated higher than it is at present (i.e., 
under the railway clearing-house classification as it existed in 1890). 
The traders have now got a classification which should be amended, 
not increased. 

2. Classification means liability to damage or special expense. 

3. Undamageable articles should all be placed in the lowest cate- 
gory, which should be varied in proportion to damageability and 
costliness of carriage. 

4. The nature of a commodity, its degree of safeness, its easiness 
of transit, its bulk, its quantity, and its traffic-producing qualities are 
the considerations that should regulate its classification. 

This statement illustrates the attitude of the traders. 
The principles upon which the Board of Trade actually 
proceeded were the following: f — 

(a) Value ; (5) damageability ; (c) risk ; (d) weight 
in proportion to bulk ; (e) facility for trading ; (/) mass 
of consignments; (#) facility for handling. 

The Board of Trade, in seeking to attain uniformity, 
was obliged, on one hand, to invade the privileges of the 
railway companies, and, on the other, to trespass upon the 
feelings of the traders by raising the classification of cer- 
tain goods. J In cases of new articles arising, the Board of 
Trade is now empowered, under Section 24 of the Act of 
1888, § to class such articles; but it has no power to alter 
the classification or the maximum rates fixed by the Pro- 
visional Order Confirmation Acts of 1891 and 1892. 

In the fixation of the maximum rates, the Board of 
Trade applied a uniform scale to the railway companies, 

* The British Iron Trade Association. See Statement [1890J, p. 19. 

t Provisional Order Bills Report, 1891, Part I., p. 18. 

X The bulk of the discussion upon classification was in connection with 
manufactured iron. See Mr. Courtenay Boyle's statement, Provisional Order 
Bills Report, 1891, Part I., p. 612 et seq. 

§ 51 & 52 Vict., c. 25, § 24, subsection 11. 



316 



QUARTERLY JOURNAL OF ECONOMICS 



so far as seemed practicable. Yet the differences are not 
unimportant. The following table exhibits the mode in 
which the scale has been applied : — 



MAXIMUM RATES. 



I. 


II. 


III. 


Absolutely the same. 


Slightly higher than 
List I. 


Slightly higher than 
List II. 


L. & N. W. Ry. 
Great Western 
Great Northern 


Midland 

Great Eastern 


Brighton 
South-Western 
South-Eastern 
L., C. & Dover 



The chief differences are in Classes A and B. In the 
higher classes the rates are practically the same.* 

The following tables f illustrate the differences between 
the proposals of the Board of Trade, the railway com- 
panies, and the traders : — 



TABLE A. 
Boaed op Trade Cumulative Scale. 



Class. 


For first 20 
miles. 


For next 30 
miles. 


For next 50 
miles. 


For remainder 
of distance. 


C 


l.SOd. 


1.50d. 


1.20d. 


0.70d. 




2.20 


1.85 


1.40 


0.90 




2.65 


2.30 


1.70 


1.35 


3 


3 10 


2.65 


1.75 


1.65 




3.60 


3.15 


2.20 


1.80 


5 


4.30 


3.70 


3.25 


2.30 



*Lord Balfour of Burleigh, Provisional Order Bills Report, 1891, Part I., 
p. 432. The terminals are uniform. See Ibid., p. liv. 

t From Provisional Order Bills Report, 1891, pp. Iv, lvi. 



THE ENGLISH RAILWAY BATE QUESTION 317 

TABLE B. 

Kail way Companies' Cumulative Scale. 

Alleged to be the Equivalent of the Normanton Scale. 



Class. 


For first 20 
miles. 


For next 30 
miles. 


For next 50 
miles. 


For remainder 
of distance. 


C 

4 


2A0d. 

2.80 

3.00 

3.30 

3.90 

4.50 


1.30d. 

1.70 

2.50 

2.80 

3.40 

4.00 


1.10e«. 

1.60 

1.80 

2.40 

3.00 

3.30 


0.90& 

1.20 

1.T0 

2.20 

2.60 

2.75 



TABLE C. 
Traders' Cumulative Scale. 



Class. 


For first 20 
miles. 


For next 30 
miles. 


For next 50 
miles. 


For remainder 
of distance. 


C 


lid. 

U 

2 

21 

3 

31 


lid. 

1* 

1| 

2 

2* 

3 


Id. 
H 
li 
i| 

21 
2i 


id. 
1 
H 
H 

2 
21 



The above tables contain exclusively suggested maxi- 
mum " conveyance " rates. 



OLD MAXIMUM RATES* 



Coal, coke, etc. (now Class A) : 
Up to 50 miles . . . . 
Beyond 50 miles . . . 



Per Ton per 

Mile. 



lid. 

id. 



*Prom the leading Act of the London and North-Western Railway, 1846 
(9 & 10 Vict., c. 204). Cf. also Hunter, Tfie Railway and Canal Traffic Act, 
1888, London, 1889, p. 142. 



318 QUARTERLY JOURNAL OF ECONOMICS 

Per Ton per 
Mile. 
Heavy goods (approximately Class B): 

Up to 50 miles ljd. to lid. 

Beyond 50 miles Id. to ljd. 

Heavy goods (approximately Class C) : 

Up to 50 miles 2d. 

Beyond 50 miles \\d. 

Higher goods (Classes 1 to 5) : 

Up to 50 miles 2id. to Sid 

Beyond 50 miles 2d. to 3d. 



NEW MAXIMUM BATES. 

Cumulative Scale proposed by Board of Trade and now 

adopted.* 

Rates per Ton per Mile in Fractions of Id. (2 cents). 







msx 


»rf 


CM 


■*» 










fH 






8° 




S " 


03 

aj 


a 




<0 »o 






ai 

+3 a> 


S . 
33 




r- fl rf 

o S3 


-"I 


O CO 






ft 


ft 


ft 


ft 


CO 


Class A, minerals, etc., exclu- 












sive of charge for trucks 






0.95<i. 


0.85cZ. 


0.50d. 


OAOd. 


3.00el. 


Class B, including trucks 






1.60 


1.20 


0.80 


0.50 




Class C 






1.80 


1.50 


1.20 


0.70 




Class 1 






2.20 


1.85 


1.40 


0.90 




Class 2 






2.65 


2.30 


1.70 


1.35 




Class 3 






3.10 


2.65 


1.75 


1.65 




Class 4 






3.60 


3.15 


2.20 


1.80 




Class 5 






4.30 


3.70 


3.25 


2.30 





* Provisional Order Bills Report, 1891, pp. 1, liv, lv. 

James Mavoe.