11 SEPTEMBER 1858, Page 13


TILE state of railway property is exciting great interest on ac- count of its exceedingly depreciated aspect; and the interest is felt not only by the unlucky victims, the "original share- holders," but by the preference shareholders, who should the downward progress be continued, must begin to suffer as well as the poor ordinary, and by the public who know well enough, from old turnpike experiences, that bankrupt road-trusts make in- different travelling. And if the slow coach roads created anxiety to the trivelling public, how much more intense must the anxiety be on the fast railroads, where a mistake of five minutes or a Worn-out rail may make some score or two of human beings de- viate from the Journey to the next town into the journey to the next world. It is not that railways are at present bankrupt in any sense. One of the most important has this year declared no Profits, but its books do show some profits ; and we have con- siderable doubt whether its affairs are really in so unsound a state as those of some other companies that are exhibiting blighter dividends. But should the retrogression of the last few Years go any further, we must begin to see, on certain lines, even preference profits decline ; while managers would necessarily be exerting themselves to make the accounts pleasant" by savings ; and that too, we must remember, while the journey from one place to another is not always under the care of any one company. The subject has been reviewed in a very comprehensive manner by those who take especial interest in railway affairs. The Rail- way Record has surveyed the general state of railway property; though, no doubt from uncertainties in the later accounts it has not brought down the review subsequently to the end of 1856. In this account, however, we see a return of 5.8 per cent on the borrowed capital, a little more than 3 per cent on the ordinary capital. Mr. John Grinstead has prepared an elaborate condensa- tion of the accounts of the nine railways connected with the metropolis, the table of which was published in the Times on Friday last ; and in a note place we have extracted from that table its totals, with a very slight alteration under the head of "dividend" in order to snit the process of abridgement.' It will be seen from that account that the ratio of traffic receipts to capital expended has been 3.95, while the ratio of profits declared on ordinary paid up capital is but 1.67. Now these are the most important railways of the country ; they have engaged the largest amount of attention ; they have had amongst their managers, Lords, Members of Parliament, and gentlemen who have made their way into the state service. Nevertheless, presented in this monetary aspect, their affairs appear to show a general and a steady aecline. It is true that some of the number exhibit a much' more favourable aspect than others. Excluding the small- est in the list, there is one which stands conspicuous particularly for the amount of dividend, which is 5 per cent, the others rang- ing from 41 to 0. Accident may have something to do with the prosperity of one line during the adversity of another; manage- ment may have something to do with it ; but unquestionably the causes which govern the present state of railways belong mainly to the past, while on the other hand the causes which must go- vern them' in order to renew any appearance of prosperity, may be said to belong altogether to the future. There is no necessity to go into abstruse figures in order to ex- plain the actual condition of railway property. It may be de- scribed in general terms, if not more accurately, than it can In precise terms, yet far more intelligibly. In the first place, these who undertook to construct railways, deeply impressed with the advantage which would be brought to the country, and fore- seeing the profit which would be realized by proprietors, were ne- cessarily anxious in a corresponding degree to overcome the ab- .surd, the almost insane but powerful and consolidated prejudices opposed to them. Many landowners imagined that their property would be injured, others took advantage of the general pre- judice, and enormous prices were exacted for land ; absurd conditions were enforced on railway companies to make them deviate either from this or to that other piece of land ; and thus the one item of outlay was immensely caricatured. As soon however, as the species of enterprise became generally successful, another cause of waste and consumption sprung into active ex- istence. The very formation of large companies and large capitals draws round the office of a manager men who care less for the general benefits to be derived from the speculation, than for the pickings which may be got out of it, and here was presented a case such as has seldom if ever been equalled for the opportunity to make holes in the national pocket. The only parallel which could be found would be this same English nation during the great war, when men lent money to our Government—whose sta- bility could not for a moment be doubted—at a profit of more than 50 per cent. In this modern case persons possessing parlia- mentary powers, and known to be engaged in creating a property represented by millions, wanted, besides land, engineering aid, cash, legal aid, and parliamentary agency. The assistance was given liberally, and liberally paid- for ; and many a committee- room in the House of Commons has been the scene for enriching landowners, lenders, lawyers, surveyors, engineers, aye, legisla- tors also, at the expense of the unfortunate ordinary shareholders; who in those days scarcely understood their real position. Im- mense sums of money were raised ; the progress of railway con- struction and traffic increased every year; we all looked forward to the completion of the iron net work, and knew, what we now know better than ever, that immense revenues would be collected * Capital ordinary £63,414,729

„ Preference 14,547,559 „ Debentures, loans, &c 36,782,992 Total 114,745,280

REVENUE .e.mi ExPENDrruns.

Traffic receipts 4,428,566 Working expenses 1,998,017 Ratio per cent of working expenses 45.12 Total receipts 4,589,324 Total expenditure 2,298 228

Ratio per cent of total expenditure '50-cis Dismanurrow OF RECEIPTS.

Total interest paid on loans and guaranteed shares 1,505,431 Available for dividends 1,063,514 Dividends declared 1,006,130

Average dividend 31 Ratio per cent of preference shares, loans, &c. to ordinary capital 80-94 Ratio per cent of traffic receipts to capital ex- pended 3.95 Ratio per cant of interest on loans, preference,

&c., per cent. 28.44 Ratio per cent of net profits to ordinary paid-up

capital 1.137

annually. All the favourable calculations have been more than realized by this time ; but railway property at large is saddled with the accumulated cost of buying off landlord stupidity, land- lord cupidity, and legislative blundering, while buying in pro- fessional jobbery. During the last few years the amount of profit to be returned to the ordinary shareholder has been gradually de- clining, insomuch that even the preference shareholders are now threatened. Within the very latest years, as we have seen, the decline has gone further ; but we get some of the clearest concep- tion of the actual state of the case from the account of the nine metropolitan railways. Here we find that the property may be measured by the total amount of capital raised, nearly 114,000,0001.; which was raised thus :—

Ordinary 63,400,0001. Preference 14,500, 000/.

Loan 36,780,0001.

In these nine railways the traffic receipts have been 4,428,000/, the working expenses 1,998,000/. On their working therefore, the railways are extremely prosperous ; but they labour under the hideous burdens entailed upon them by the manner of their origin. There is another burden which has been brought upon them by the manner of their administration. They are the victims of most of the passions that can be excited by the hope of gain, and of some others also. It is the object of professional men to in- crease the expenditure of railway companies. The professional men have been in most cases the advisers of the railway compa- nies; and we have formerly seen instances of such men retiring with presents or perquisites, possibly almost dismissed, but still with presents or perquisites, at the very time when the company was explaining to the world the nature of its embarrassments. But railway companies or the managers thereof, who represent millions sterling,—who enjoy incomes of thousands,—who almost fancy themselves the masters of the property which they are ap- pointed to administer—who look upon a seat at the Board as a step to a seat in the Commons, have become inflated with an am- bition second only in sublimity or lowness to that of kings. Each com- pany has, scarcely with a metaphor, considered itself a potentate ; and we have already witnessed the wars which they have carried on, the invasions with which they have rim into each other's territory ; wars and invasions most injurious to those who are attacked, but almost as injurious to the victorious assailant. We have before our eyes the case of two railway companies who have dashed their lines into each other's territories, with a considerable increase to the figure of their capital account; while there is reason to be- lieve that after all, they divide nothing more than the traffic which would have been divided between them without those ag- gressive and retaliatory trespasses ; and the same principle ap- plies to the whole railway map of England. In short, the rail- way companies have acted like the young heir who cries "Damn the expense," because he can always borrow ; and they have sad- dled themselves with an aggregate debt out of all proportion ex- ceeding that of the National Debt. Take the case of the nine railways and you find a total ordinary capital of 63,400,000/, while they have loans more or less disguised amounting to more than 51,000,000/. The total of ordinary capital for the railways in general is estimated at something wider 175,000,0001.; the total of capital represented by preference shares, loans, &c., is about 135,000,000/. Some of these comparisons of figures are most remarkable. The Railway Record estimates the deprecia- tion of railway property, as tested by the decline of dividends, to represent very nearly the amount of stock chargeable with a fixed

return. Now there can be no doubt that if National Debt made so large an approach towards equalling the working pro- perty of the country, we should very soon hear propositions for sponging off," and we should very soon cease to hear such pro- positions because they would be satisfied.

It is time therefore to look the state of things in the face. The progress of railways hitherto, in the sense of profit and loss, must be reversed. We must save the credit even of those who have entered into these reckless obligations; we must prevent those Who buy in, even at a discount, from continuing that ruinous sort of gambling which has heretofore passed under the name of ad- ministration. It is not indeed altogether needless to reprobate the idea of resorting to wild measures, for the very wildest have been suggested, and even in commercial organs. There has been a hint, that since the goods traffic does not make such handsome returns on the amount expended upon it, it might be given up. England at this day giving up the goods traffic of her railways,— the very thing for which railways were constructed, and which has only begun to be developed by tne most recent experience of railways No! it is evident that two giant errors have pre- sided over this waste of railway property and revenue. The first error was the reckless method of constructing the property, the second has been the total absence of anything like guiding prin- ciple in the administration of the working. Here the same am- bitions are followed by the same pitch and toss treatment of other people's money. To " fight " some other company, one railway will reduce through fares to an amount which will not pay for the working of the trains; while passengers are irritated and excited to all kinds of dodges to cheat the railway. A supercilious re- fusal to consult the tastes and wishes of the public has brought about such a state of things that first-class passengers are driven into second-class -carriages, and, the highest class scarcely pays. Irrational dearness in one case is compensated by senseless cheap- ness in another—the railway company literally burning the candle at both ends and in the middle as well. It may be said of the railway proprietors generally that they are paying nearly all their income to the lender, and are throwing away the rest in continued attempts to cheat each other out of it.

The day has come for railway companies to strike out a new course, and one has been suggested ; it is, that the companies instead of fighting with each other, should " cooperate." °the; suggestions have been made that are equally pertinent. It is found that Boards become inflated, with a sense of their own im- porta.nce, while the individual members have a very small re- sponsibility, and nothing like the effectual authority which is pos- sessed by the leading professional men in the company. Thus a Board is proud to be merely the screen of a royal expenditure; hence a proposal to appoint a railway chairman, like the French Emperor, by direct suffrage. Another suggestion is of an ex. ceedingly practical kind : it is, that capital account should be generally closed ; but what railway company would have the courage or decision to effect that necessary operation ? It seems scarcely possible that the subject should be entirely avoided next i session. Perhaps the best way to adjourn t would be to appoint a Select Committee, which might "report the evidence" in the form of ten blue books, or more. Any statesman. of immoderate courage might attempt a bill. Probably the wisest of all plans would, be to appoint a simple Parliamentary Commission, with a real statesman at the head of it—a Lord Overstone if he were not understood to have retired from financial life ; a John Mill, if he had not already shown that he shrinks from a post of less respon- sibility; a Dalhousie, if the labours and mistakes of India had not worn out the man who showed so much intelligence in draw- ing out a plan of order for the railway system. Perhaps the best chairman of a Permanent Commission to consider the best method of retrieving railway property would be Mr. Gladstone.