and thus the value would for the time being be
wholly fictitious, without regard to intrinsic merits.
There are many amongst us undoubtedly who have
been so alarmed by the deterioration in the value
of railway stocks and the decline in profits and
dividends that they have given up all hope of
future recovery. Whilst this may represent the
extreme of pessimism, it would not be unprofitable
to consider the question whether present conditions
are permanent or are likely to be aggravated in the
future. Such a question is not to be answered in any
off-hand manner. It is not a ridiculous question,
but a serious and vital one, and it is one, accord-
ingly, to be answered at length. I hope this book
will help towards some conclusion to it. I hope to
be able to show that permanency and aggravation
are not only possible, but probable. We are
drifting in this direction, but it is not too late to
stay our course in the wrong direction, and to turn
it vigorously in the right. That is the change of
action I advocate, and I only seek to show that
such advocacy is reasonable and necessary.
Complaint is made by our Consuls all the world
over of our lack of adaptability to new conditions
and to new wants, and it is this shortcoming of
ours that is responsible for the little headway we
are making in the contest with our American and
Continental rivals. This cannot be imaginary. It
is not supported by one man's word only, but by
all, and they bring forward quite a mass of evidence
BRITISH RAILWAY FINANCE
in support of their assertions. Moreover, we know
that this want of adaptability is inherent in our
character. It is flesh of our flesh and bone of our
bone, and it would require both a vigorous and a
painful effort to change it. This idiosyncrasy we
find in a most marked degree characteristic of our
railway directors and managers. They have so
accustomed themselves to take things easily that
they find themselves quite impotent to meet
adversity, and all they can do is to lament it help-
lessly, and to hope that time will come to their
rescue. Time is not so charitable. Time, too,
shows a lack of adaptability to all our wants, and
all we can do is to fight it and make it amenable to
our necessities. But railway directors cannot see
that they can utilize time in this fashion, and if
they cannot see it, then there is no harm done if
we try to show them how to take advantage of it.
They may not thank us for the interference, and
may regard it as confounded impudence. It would
be if they were running the railways with their
own private money. They are not, however,
masters, but servants a fact that they are some-
what apt to overlook and it would not be in-
judicious gently and kindly to remind them of
their obligations. When they see traffics decline
they seek help in no other way than by putting the
burden upon capital, when the obvious and wise
policy would be to put it upon revenue. If this is
not incompetence and an utter lack of all business
at lity, then I don't know what competence and
business ability are.
12
INTEODUCTOEY
All that is wanted is economy, and that is all
that we ask for, and that is what it seems we shall
ask for in vain. The directors seek for possibilities
to economize, but they cannot see for looking a
peculiar sort of blindness that afflicts many of us
at times. Still, we can see when objects are pointed
out to us, and we are now pointing our fingers to
those objects for which the directors of our railways
say they are searching. Still, they cannot see, or,
rather, to come to the real truth of the matter,
they will not see ; hence the futility of our efforts.
Wherever we look we see nothing but extravagance
and improvidence, and courage as well as vision is
needed to curtail it. If only more up-to-date
scientific methods were adopted we should see
wonders done, or at least great improvements ; but
the directors are either too timid or too apathetic
to cope in this manner with their increasing neces-
sities. An increase in the train load, increased
hauling power of locomotives, larger waggons, are
all needed, and seem in some vague way actually
to be recognised by railway managers, but there
seems to be no progress beyond this vague recogni-
tion. What seems to be more comprehensible and
attractive to them is increasing the rates and
cutting down wages, which is about as sensible as
cutting off one's nose to spite one's face. If they
wish to ruffle traders, the customers upon whom
they rely for their well-being and existence, then
they could not do it more effectually than by raising
the rates ; and if they wish to strain their relations
with their employes and to ignore the lessons of
13
BRITISH RAILWAY FINANCE
the past, then they could not succeed more surely
than by reducing wages. With more advanced
methods of working they would be able to
economize with far more expedition and advantage
than by either of these two suicidal methods.
They may if we may venture to suggest it take
with advantage a little leaf out of the book of our
American cousins in regard to up-to-date scientific
methods. But they seem obstinately averse to any
such action, plead with them how we may.
H
CHAPTER II
SOME REFLECTIONS ON THE HALF-YEARNS WORKING
THE year 1900 was a bad enough year as far as
railway results were concerned in all conscience,
and the most pessimistic of shareholders could
hardly imagine a worse state of things overtaking
them. All consoled themselves with the hope that
the worst had been seen, that misfortune had
reached its nadir, and that a change for the better
was not only probable, but the only thing to
expect. Instead of these hopes coming to fruition,
however, a greater misfortune has overtaken them,
the greatest misfortune they have yet had to endure,
and who shall dogmatically predict that nothing
worse can happen ? I for one can see many worse
things, and I can see the probability of their hap-
pening. To avert them will depend upon the
wisdom of our railway managers and directors,
upon their foresight, and upon the extent to which
they conduct their business on true business
methods. But if they institute no changes and
reforms in their methods, and are content to go on
in the old ways, then I see nothing but hopeless-
15
BRITISH RAILWAY FINANCE
ness for the future, nothing but disaster to result
from folly of this kind. Dividends have descended
to the vanishing point now, and we shall see them
vanish altogether presently ; and once they do
vanish they will go, in all probability, never to
return. All through 1900 we saw with dismay an
unchecked decline in the gross receipts, and instead
of showing an improvement, the second half of the
year showed worse results than the first half, whilst
at the same time the expenditure advanced, when,
in order to minimize the effects of this falling-off
in revenue, it ought to have decreased.
When the results were made known and pub-
Hshed it was fully anticipated that shareholders,
when they met together at the half-yearly meetings,
would assume a more critical attitude than it had
been their habit to assume, and that they would
insist upon something or other being done to avert
a crisis which was being hastened by the extrava-
gance of their directors. But, no ; they were as
supine and as indifferent as ever. They may have
gone to the meetings, as many of them do year
after year, boiling over with indignation, and fully
resolved to know this, that, and the other, to speak
their minds freely to the directors, and to demand
explanations of their conduct, but, as usual, they
were dumb. They were either carried away by the
eloquence of chairmen, by their suavity and per-
suasiveness, to say nothing of their cheery optimism,
that their mouths were effectually closed, and they,
too, went home again encouraged and hopeful.
Evidently we have not yet fathomed the folly of
16
REFLECTIONS ON THE WORKINGS
the average investor. Whilst they would not allow
incompetence and extravagance on the part of their
own servants at home or in business, they overlook
it on the part of their public servants, and allow
their money to be spent as prodigally as though
they were building fairy palaces with it, and wanted
simply to get rid of it in insubstantial gaudy
splendour. And their money is being spent in
this princely fashion, as though the stream of it
were inexhaustible. It has hitherto looked to be
inexhaustible, but directors will find out some day
that the source of it will be suddenly dried up, and
then starvation will come, with all its attendant
sufferings.
We pressmen also hoped that there would come
a change over the attitude of directors themselves
at the recent meetings. Nothing of the kind
happened. They said precisely the same things
they have been saying for years ; they told the
old story with the old gusto ; they expressed the
old contempt for the misfortunes they had passed
through and for the dangers ahead. They had
weathered them in the past, they would weather
them in the future. There was nothing to fear, no
alarm to be felt. These storms must be expected
and must be endured. They must not be lamented
over, but faced with resolute determination and
with the defiance that comes of conscious power
to combat them successfully. No wonder such
rousing words as these cheered the despondent
shareholders and worked them up to something
like enthusiasm, to a courageous defiance of any
17 c
BRITISH RAILWAY FINANCE
crisis they might have to face. 1 feel sure that
these chairmen must have felt some fervent thank-
fulness that they could put the blame upon coal,
when they must have known that coal was respon-
sible for only a part of the onerous troubles they
have been going through. However, it was a god-
send of an excuse, and not only an excuse, but it
gave something solid upon which to base hopes for
the future. Salvation would come from the lower
prices at which contracts have been fixed. Never
mind the increasing capital charges ; they could
be passed over superficially, as they always had
been. Never mind the decreasing net profits ;
shareholders could be easily persuaded into the
belief that it was a mere temporary phase. So that,
whatever they may have privately thought of the
crisis they are passing through, and of the dim
prospects of their passing through it harmlessly,
the chairmen in their public utterances concealed
such opinions effectually from the intuition of share-
holders. But the latter will be woefully misled if
they fail to bear in mind that the advance in coal is
only one of a number of adverse features, and whilst
admitting that the cost of fuel is certainly declining
and giving some relief to the railways, the other
items are not likely to decline unless special efforts
are made to economize.
I was greatly amused by reading an article in
the Financial News, in which the writer facetiously
imagined the change that would come over the
scenes we are accustomed to see at the half-yearly
assemblages of railway shareholders. This imagina-
18
EEFLECTIONS ON THE WORKINGS
tive picture is really too good to be thrown aside
and forgotten, and so I take the liberty of repro-
ducing it in order to enliven a little the tedium
of the tale I am telling. Speaking of the deplorable
results of the half-year's working the writer said :
* As these facts and figures soak into the minds of
railway shareholders we may expect a change to
come over the scene of half-yearly meetings. The
rows of smiling faces, the noise of many umbrellas
whacked recklessly upon the floor as the chairman
descants upon the " highly satisfactory record of
your company," the impatient murmurs which meet
the stray objector, who rises in the body of the hall
to ventilate once again his pet reform, will be suc-
ceeded by gatherings of a different kind. Directors
will be scowled at, chairmen will find their nicest
phrases met with sceptical smiles, and the voice
of the reformer will be the signal for applause.
How long it may take for this change to come
about we do not profess to foretell railway share-
holders' minds move almost as slowly as do those
of railway directors yet we shall be surprised if,
during the approaching season of half-yearly meet-
ings, a change in the direction we have anticipated
is not apparent to some extent. Eailway chairmen
and officials will do well, therefore, to equip them-
selves for the task of answering awkward questions
when they next meet their shareholders, for there
are many signs of awakening and discontent. Divi-
dends are going to be reduced, and he is a bold
optimist who will say when they are going to be
raised again. We would advise chairmen to antici-
19 c2
BRITISH RAILWAY FINANCE
pate criticism by embodying a policy of reform in
their speeches. The chairman who really saw and
was ready to face the position would address his
shareholders after this fashion : " Gentlemen, years
of prosperity have made us slack and sleepy ; a fine
old crusted conservatism has gathered round the
hoary traditions of this board, but we see the need
of bestirring ourselves, and we are going to alter
all that. We are going to reduce haulage expenses
by using bigger waggons ; we are going to maintain
our rolling stock chiefly out of revenue instead
of, as hitherto, almost entirely out of capital ; we
are going to extend the corridor system instead
of perpetuating the aboriginal idea of a railway
carriage as a stage coach on rails. We shall look
favourably upon schemes for mileage tickets, which
persons who travel much may find a great boon ;
but we are going to turn our backs upon the policy
of dislocating traffic and exasperating ordinary
passengers by carrying trippers to the seaside at
crowded times for fares which are about a sixth
of the amount charged to ordinary passengers. We
are going to cultivate the countryside by facilitat-
ing the despatch to market of home produce at
rates not four times higher than we charge upon
the foreign produce which helps to deplete the
villages, and so reduce our earnings. We are going
to consult the claims of punctuality and despatch,
but we do not propose to treat the railway as a
locomotive racing track, because sport is an expen-
s : 7e luxury in hard times." And so on, according
to taste and the needs of the particular company.
20
EEFLECTIONS ON THE WORKINGS
Some chairmen might add the provision of light,
and even of electric railways, as feeders to, or in
relief of, the congested traffic on their main lines ;
others might promise to maintain more cordial
relations with their workmen and with Parliament.
All might find a long list of matters needing
reform, and the application of a more vigorous and
up-to-date and less prejudiced spirit.'
The satire of this writer is in every way justified,
and, far from being too bitter, it is hardly bitter
enough. Humorous as the imaginative picture is,
we cannot look upon it without a feeling of
seriousness, for it is conceived in reason and
common-sense. Sound, weighty advice is given,
and, notwithstanding that it is given in a joking
manner, it is sufficiently grave to be pondered over
in anything but a light-hearted mood. The same
article goes on to advocate reforms in minor matters,
and as these are matters I do not propose to deal
with at length, I will content myself with quoting
them, adding that I endorse every word that is
said :
' Some of these reforms touch upon very big
matters, others deal with comparatively small
things, but even the small ones would repay
attention. Take, for example, the questions of
return tickets and of excursion tickets. We men-
tion these two because they happen to have just
been taken in hand upon the prosperous Prussian
and Hessian State Kailways. Ordinary return
tickets are in future to be issued upon these rail-
ways, to all stations, at one and a half times the
21
BRITISH RAILWAY FINANCE
single fare, and the return half is to be available
for forty-five days. Our companies would make
themselves much more popular if they would follow
suit. They might well go further, indeed, and
allow a return half to be used at any time within
a year. But hitherto the companies have refused
to alter their present arbitrary and complicated
system of stipulating for the return tickets to be
used upon the day of issue, or the next day, or the
next week, or at most within the month, charging
lower fares according to the shortness of time, as
if it cost them more to bring a passenger back two
months hence than two days hence ; whereas, when
the ticket is issued in a very busy time, such as an
August Bank Holiday week-end, the passenger
studies the companies' convenience by deferring
his return journey. This consideration leads up
to the excursion problem, which the German rail-
ways have also been taking in hand. The ridicu-
lously cheap excursion fares are to be abolished, so
as to remove the anomaly of a lower fare to an
obscure watering-place than is charged to an im-
portant city not so far along the line. English
railways might well imitate the German in this
respect. The cheap excursion system has been
allowed to grow into an abuse. At one time the
excursionist paid a lower fare because he was
packed into a special and crowded train, whose
movements waited upon the convenience of the
ordinary trains. Now he sits cheek by jowl with
che ordinary passenger in an ordinary train, though
paying a very much lower fare than that of the
22
REFLECTIONS ON THE WORKINGS
ordinary passenger, simply because his ticket is,
say, for a week-end and the other man's for a
month. Either the one is charged too much or the
other too little. By attention to even trifling points
of railway policy such as these no inconsiderable
progress might be made towards improving the
very clouded prospects of our railways.'
Taking a cursory glance over the results of the
past half-year, we find a steady decline in the
gross receipts, and as there has at the same time
been a considerable increase in the expenditure, we
find an appreciable falling off in the net revenue.
The six companies that managed to make an
addition to their gross receipts were the Great
Eastern, the Great Western, the London, Brighton
and South Coast, the London and South-Western,
the London and Tilbury, and the South-Easteru
and Chatham, but not one could show a halfpenny
increase in the net revenue. And we find that
these five depend more on passenger than on
mineral traffic, so that if there is any revival in
trade, as is so confidently predicted by railway
directors, they will not stand to gain so much as
the heavy lines, which depend more on trade con-
ditions. Their outlook, therefore, cannot be said to
be rosy, especially as any improvement in gross
receipts may again be more than swallowed up
by capital expenditure and further reduction in
the net revenue. They may find a great deal of
ease in the greater cheapness of coal, but the
saving in this may be quite nullified by another
appreciable falling- off in traffic, which, at the
23
BEITISH KAIL WAY FINANCE
time of writing, is foreshadowed in the weekly
returns.
The Great Eastern directors took from the
Contingent Fund the sum of 55,000, or nearly
half its total, in order to enlarge the dividend on
the ordinary stock for the half-year. Allowing for
the balance brought into the past six months and
that draft, the company was actually short by
about 13,000 in the amount required to pay its
preference charges in full. The South-Eastern
paid all its preference dividends, though its accounts
revealed that there was a shortage of 14,427
therein, and that sum was accordingly taken from
the Steamboat Depreciation Fund. The Great
Northern took from reserve the sum of 60,000,
equal to f per cent, on its ordinary capital, in
spite of the fact that there is a suspense account in
its balance-sheet to which the auditors have called
attention for years past. The Great Central took
8,000 from the reserve fund, but the prospects of
this company are dubious in the extreme.
The following tables, which give the analysis of
accounts of thirteen English railways for the past
half-year, I take from the Financial Times of
August 13.
These tables lucidly tell their own tale, and
require little or no comment. The receipts from
the passenger traffic increased by 408,268, and
we have to go back some twelve or thirteen years
to find a parallel to this improvement. Had it
rot been for this, we dare hardly contemplate what
would have been the consequences to the paltry
24
REFLECTIONS ON THE WORKINGS
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25
III
BEITISH EAILWAY FINANCE
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26
REFLECTIONS ON THE WOEKINGS
dividends that were paid with so much effort and
struggle. Is this improvement permanent, or
merely spasmodic ? Time alone will show, but it
is nevertheless strange that nothing like it has
been seen for a long period of time past. Sup-
posing that next year the passenger traffic happens
to decline and the gross receipts to improve, which
is not an impossible contingency, the railway com-
panies will hardly be better off than they are
now, and possibly worse. I do not wish to be
too pessimistic, but it is wise to take such possibili-
ties into consideration, and accordingly to make
provision for them. There is one hopeful feature
revealed in some accounts, and that is a decrease
in the mileage run. Evidently directors have seen
at last the importance of economizing on this head,
and we may take some little comfort from such
enlightenment. Nevertheless, in spite of this
saving, the expenditure is higher than it has ever
been in any similar period in the history of our
railways, and this is sufficient to disquieten us not
a little. The same may be said of the increasing
additions to the pre-ordinary charges a feature
that is gravely imperilling the security of the