PARLIAMENTARY PAPER
RAILWAT Lisoniumme. The Report of the Railway Department of the Board of Trade on the schemes for extending railway communication in Kent and the South-eastern district, (the first of the full reports issued by the Board,) has been presented to Parliament. "The list of schemes in this district shows, that on the one hand a very extensive and comprehensive system for the accommoda- tion of the whole Kentish and South-eastern district is proposed by the-South- eastern Company in connexion with their existing lines; while on the other hand, the same or nearly the same objects are proposed to be attained by a number of new and independent schemes." The Board have reported, as is well known, in favour of the South-eastern Company; and about three-fourths of their report is occupied with details setting forth the advantages on either side and the reasons for their decision. In the other quarter' which forms the introductory part, the Board set forth the principles by which they have been guided; and as these are the principles which they appear to have adopted in reference generally to the two hundred and forty-eight schemes which are said to have come before them, this expository part of the document possesses considerable interest. We there- fore reprint it entire.
"In this, as in every other case, we have endeavoured to keep steadily in view the attainment of the greatest amount of public advantage. We have not
nisei' the existence of anything like a vested right in existing companies to protected from the same description of competition which they have themselves inflicted on canals and other existing modes of communication. Beyond, perhaps, a bare preference in cases of absolute equality, due to the interest Of shareholders who themselves constitute a portion of the public, we have not considered that an existing railway company could claim any preference over other parties proposing to effect the same objects, beyond that which 'might result from an identification of interest with the public. Considering the subject in-this point of view, it ap- pears to us, that, as a general rule, the most important point for the interest of the public is to secure the best permanent lines of railway communication for the country at large and for the wants of the district. To sanction an inferior or un- necessarily circuitous line proposed by an existing company, or to reject one of decided public and local advantage proposed by a new company, for the sake of any terms that could be afforded by an existing company, would in our opinion be, except under peculiar circumstances, unfair towards the local interest thus sacrificed, and unwise as regards the general and ,permanent interests of the pub.. lie. We have therefore, as a general rule, considered it as an essential prelimi- nary requisite, before entering upon the question of giving protection to existing companies by allowing, them to complete the railway communications of particular districts, that the hnes proposed by them shall be, in all substantial respects, sound in themselves, and not inferior to those proposed by any other parties. " Assuming this to be the case, the question is at once raised, whether the public is likely to derive most benefit from competition or from arrangements with the existing company. With regard to the general principles which rega- late competition in the case of railways, we have little to add to the reports of the Select Committee on Railways of last session, by whom the subject was fully in- vestigated. The Committee state, in their Fifth Report—' With regard to the check of competition by railways among themselves, the Committee cannot in all cases repose implicit faith in it. When the lines are very short, the probability is, that unless charges be moderate, road-traffic will revive; and in such cases the public have a great degree of security. Again, as respects the carriage of goods, it is found in practice that by other channels of conveyance, such as canals, an effective control may, under certain circumstances, be placed upon railway- charges. But in considering the case of passenger-charges, and in all classes of lines except those which are so short as to be effectually checked by the ordinary road, the Committee think that little Can be perrnaneet 31- expected from the mere multiplication of railways in the way of security for moderation of charge. There may be, indeed, indirect and accidental competition between railways, which may cause cheapness; and there may even be direct and brisk competition, with great reductions of fare, for short periods. But in such cases of competition, somewhat modified, as have hitherto occurred, the result has generally been increase of charge, by mutual arrangement or positive amalgamation of the competing com- panies. The experience of the past is, however, limited, and might not, if taken alone, warrant any conclusive opinion: but, in looking to the nature of the ques- tion itself, the Committee feel this difficulty, that they cannot in case of railways anticipate any such facilities in the introduction of new competitors as to check the proceedings of the companies actually in possession of the traffic; that in fact, there is no district in which the traffic will support any considerable number of railways; that there is no case in which they can imagine a likelihood of more than two or at the very utmost three lines of railway communication which could be so situated as to compete with one another; and they cannot conceive that two bodies, or even three, acting by compact executive beanie, and secure against the entrance of any other party into the field, will fail to combine toge- ther. It is therefore their apprehension, that in such cases, either the different railways will continue to be worked, and then that extreme measures will be taken in concert for the purpose of paying very moderate dividends, and it may be found that several capitals have been expended for performing the business which could have been equally well or perhaps even better performed by one; or a closer combination will take place among the companies—they will choose the line upon which they can most profitably carry the traffic, and will leave the rival line or lines unoccupied.' "The principle here stated, that competition loses more or less of its value as a security for the public, when from the nature of the case it is limited to two or three parties, who are constantly urged by mutual interest to combine, has re- ceived abundant corroboration from the experience of what has already taken place in the history of railways. The following instances may be mentioned where railway companies, in a situation to compete, have after a short time either amalgamated or combined together so as to put an end to competition: the Leeds and Selby with the York and North Midland—in this case, the fernier line being virtually for several years shut up; the Birmingham and Derby with the Midland Counties; the Chester and Greece with the Grand Junction; the Manchester and Birmingham with the Grand Junction; the Bolton and Preston with the North Union; the Northern and Eastern with the Eastern Counties. On the other hand, we are not aware of a single instance which can be .pointed out in which the public are now deriving any benefit from direct competition between
two railways. .
"In addition to the instances of combination between directly competing com- panies, recent experience has furnished numerous instances of the tendency of smaller lines, originally sanctioned as independent undertakings, to resign their independence into the hands of powerful neighbours. We may mention, am other instances of this tendency, the amalgamation or lease of the Sheffield Manchester to the Midland and Manchester and Birmingham; of the Bristol and Exeter, and Cheltenham and Great Western, with the Great Western; of the Hull and Selby, and Manchester and Bolton, with the Manchester and Leeds; of the North Union with the Liverpool and Manchester and Grand Junction; of the Greenwich with the South-eastern; of the Sheffield and Rotherham with the Midland; of the Chester and Birkenhead with the Chester and Holyhead; of the Bristol and Gloucester with the Birmingham and Gloucester: beside others that might be quoted. "'The same principle has received further elucidation from the inquiries of Par- liamentary Committees on former occasions, as well as from the great body of evidence collected by the Conunissioners of Inquiry into the Sanitary Condition of Large Towns, in regard to the operation of the principle of competition as compared to that of well-regulated monopoly in the analogous cases of water and gas companies. Indeed, it is too evident, as a general proposition, to be disputed, although great caution may be required in its application, and in discriminating those cases where the competition is of a pure and simple nature, such as mast eventually lead to a compromise, from those where a certain degree of indirect and incidental competition may exist, from which the_public may expect to derive lasting benefit, either in the shape of reduction of charge or of extension of accommodation.
"When an existing railway company proposes schemes which, although only partially sufficient for the full accommodation of the district, may yet be sufficient to prevent other parties from entering the field with further or improved projects in that district, the arguments against the creation of a monopoly acquire addi- tional strength. The simpler case is, when, as in the present instance, the ex- ist-mg company comes forward with a complete and comprehensive scheme, and the question is reduced to this—whether the existing company is able and willing to offer guarantees for the public advantage superior to any that can be afforded by a new company.
"Of the ability of an old company to offer such guarantees, there can, generally speaking, be little doubt.
"1. An established company, which has a valuable property and large available income independent of the new scheme, Can, of course, offer a guarantee for the fulfilment of all that it undertakes to accomplish greatly superior to that of any new company, however respectable. This consideration derives great weight from the experience which has been already afforded of the failure of many new companies to accomplish the objects for which they were incorporated. We need only refer to the instances of the Eastern Counties Company, which was incor- porated as a line from London to Norwich, and has never yet been carried beyond Colchester; of the Northern and Eastern which for many years stopped short of Cambridge; and of the Great North of England, which abandoned the portion of its line between Darlington and Newcastle.
"2. The traffic of a syeteni of lines connected with one another can always be
worked more economically and conveniently under one uniform management than by independent companies. The company which works the main trunk-line, and
the principal terminal stations, can run more frequent trains, and make Mare75::rangements for forwarding the traffic of the cross-lines, than it could afford to do if two or three separate establishments had to be maintained, and the harmony of arrangements depended on two or three independent authorities. Under such circumstances, a conflict of feeling and interest has almost invariably grown up, from which the public has suffered the most serious inconvenience. When the traffic is large this conflict has frequently led not only to increased in- convenience but to increased danger; and where the terminus or a portion of the rails of one company have been common to the other, these results have been greatly aggravated. "3. An established company can always, if so disposed, offer guarantees and advantages for a greater extent of railway than the new company, viz, for the existing as well as the projected lines. When the existing company is already in possession of the principal trunk of the district, the advantage of securing such guarantees for the whole system. rather than for only a small portion of it, is rendered more apparent. The Select Committee of last session, for reasons which are fully stated m their report, attach great importance to the obtaining gua- rantees from existing companies, by voluntary arrangements similar to those which they recommended, and which Parliament subsequently adopted in the case of new railways, and express a strong hope ' that among the existing com- panies there may. be those which will be disposed to accede to arrangements resembling, in thew general principle and effect, those which are now proposed for new railways.'
" 4. Whatever guarantees may be thus offered by existing companies, possess the double advantage, as compared with similar offers from new companies, of coming into immediate operation, and of being more certainly rendered effectual. An offer from a new company to bind itself to charge fares considerably lower than those usual upon other lines might readily be made, in the hope of thereby securing their bill; but the fulfilment of it would depend almost entirely upon the eventual success of the line, and its ability to perform its engagements. No act of Parlia- ment could compel an insolvent concern to carry at as tow rates and afford as ample accommodation as a prosperous undertaking might be able to do. A mo- derate offer from an established company, who can be relied on to fulfil their en- gagements, is therefore preferable to one apparently more advantageous from a new company. "For these among other reasons, we conclude that the policy indicated by the Committee of last session, of giving a preference to the schemes of existing railway companies for supplying their own districts, when such schemes are as good or better than those of any other parties, where no special reasons exist which should induce us to look for advantage from competition, and where the old com- pany voluntarily offers such guarantees as may reasonably be required to protect the public against the possible abuses of monopoly, or such conditions as at once place the public in a better position than they could hope to obtain from competi- tion, is that from which the greatest amount of permanent public advantage is likely to be derived. " We by no means intend these principles to be considered as rules of universal application; being satisfied that no abstract or invariable rule can be safely laid down by which to decide cases of such complexity, and varying so greatly in detail: but we have thought it desirable to state thus generally the views which have guided us in cases like this of the"South-eastern district, and upon which the soundness of the conclusions at which we have arrived must mainly depend."
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