RAILWAYS IN THE PAST AND PRESENT.-THE EXPERIENCE OF 1845-6

West Coast Times, Issue 914, 27 August 1868, Page 4

RAILWAYS IN THE PAST AND PRESENT.-THE EXPERIENCE OF 1845-6

(PROM THE MOSIA' MAEKET REVIEW.)

Eire htindreJ millions sterling liave been spent on our railways, and they arenosv represented in market value by a mncli less sura. Probably the present worth, of these five hundred millions of outlay may be aboxit three hundred millions, and, in that case, the investing public J'ave lost two hundred millions of mouey in this kind of commercial speculation. But, while railway adventurers have thus sunk their money, the country has grown in wealth prodigiously by the sacrifice ; and, as we pointed out last week, though rai'way shareholders have lost, landowners and the rest of the community have gained vastly. This condition of aff-iirs cannot continue, no matter with what kind of loose and haphazard legislation Parliament may, from lime to time, amuse itself. People with money to invest will not part with it if they are sui'o to lose it ; and we must therefore alter tln j conditions, or wo can have no more railways. It is purely a question of finance, nnl in thus stating the broad fact nt issue we advocate the best interests of the community at large. Bat, in order to comprehend the question fully, we mnsfc revert to past railway history, and glance back at its old phases. The retrospect is in many points curious enough. The first application to Parlia- ] ment for a Bill to contract a railway was in the year 1801, for a line between Wandsworth and Croydon. From that time till the year 1825 Acts were obtained for twenty-eight more railways. Thus it will be seen that at the outset the movement was very languid, the world having as yet failed to recognise ihe wonderful lever of progress comprised in ste-im power. After 1825 the movement went < n more rapidly, and in 18J5 there were in existence Acts of Parliament for four hundred and twelve railways, which were to have been constructed at a cost, in round numbers, of £155,000.000. It is specially worthy of remark that, taking the average of railways up to the year 1845. they wore not financially prosperous ; but then ensued a mania which testified to a sudden belief on the part of the public that everything in the shape of a railway must result in certain gain. A few cases may be here cited. Mr George Hudson appeared upon the scene, and contrived to indoctrinate the community with a belief that railways were little less than mines of gold. He became chairman of the Midland Enilwny, of the York and North and Midland, of the York, Newcastle, and Berwick, of the Eastern Counties, and others. In that capacity — to mention only one instance or how things were managed in those days— he thought fit to lease at 6 per cent, the Birmingham and Bristol, which to all appearance had never before earned 2 per cent, -pev annum ; and by this lease the value of the shares was raised from some £G0 to £70 per share to £150. It is a fact that, upon the announcement of this lease, the shares in the railway concerned rose in one day nearly £50 in market value. Then followed other rnilway leases. The "Great North of England" was taken over at 10 per cent, per annum, with a corresponding increase in market value, and then the Leeds nnd Bradford, and the Hull and Sclby. likewise at 1 0 per cent. Next, the Eastern Counties, which had struggled on for years with scarcely any dividend afc all, suddenly paid

7 p?r cent, per annum under Sir Hudson's magic sw.iy, and the price of the shiuvs I'iiSe three or fourfold. But perhaps the most romarknble instance of the effects of his r. 'ginie Mas the e.:tablishuit'iifc of a premium of about £28 per share upon the New castle and Berwick before a sod was turned, and though there was only £2 per share paid-up. These facts were quite paid-up. These facts were quite enough to send th? world mad. It was something astounding to obtain a profit of £2S iv one week by paying £2, and here was th(» foundation of the railway mania of 1815. Adopting Mr Hudson's views or plan of action, other railway companies followed in his wake, and there stands on record a great battle between the London and North- Western and the Gre-it "Western for possession of the unmade railway from Oxford to Birmingham, the one offering 175 per cent, premium for Lhe sharcs.andtho other 50percent. Then came a host of other leases at fixed rates of guarantee — the Trent Valley ; the Lancaster and Carlisle ; the Preston and Wyre ; the Bolton and Bury ; and numerous others. There is little wonder that under such circumstances the railway world lost its senses. It was only to buy and to double, treble or quadruple the purchase-money. But then supervened a still moro questionable class of adventure. Baseless projects were set on foot in all directions ; and we can recall to mind that such a mere sehenio as the "Manchester and Southampton," before even the Bill was lodged, and for which an Act of Parliament was never obtained, was at £4 to £6 premium. The " South Midland a project for a line from Hitchin to Leicester — stood at £12 premium, tho Banbury and Cheltenham ab £7 or £8 premium, and the Cornwall at £6 or £7 premium; while the South Devon, the "Direct Exeter," the South Wales, and a host of others, some of which never bad any real existence, commanded any premium that mad speculation could conjure up. Great Western shares, with £80 paid, at one period approached the enormous price of £235. London and North Western were at nearly £250 ; and it is difficult to say what railway share in the market was not at some ideal premkm. on the same scale, and upon the same false computation of profit. Then came the reaction. It was found that the profits upen which Mr Hudson had based his 10 per cent, leases, and similar arrangements, were wholly imaginary. He paid dividends out of capital, and, to use the words of an official before the committee of investigation of the Eastern Counties Eaihvay, he achieved his purpose by the rule that " capital was to bear what revenue would not." Oi course it is easy to pay dividends on such terms, until the public awoke to a conviction that the whole thing was a farca, and then down came the. entire fabric, involving in utter ruin thousands of families.

'To this day we h ye not yet committed to heart the whole of tho lesson comprised in this niornentoiis financial history. Hitherto, even to this hour, railway profits have been systematically and outrageously overvalued by various means, including the " cooking " of accounts ; and the lesson we have to learn now is, how they can be so raised as to afford a fair rate of return to investors and to makers of new lines. There ousjhfc to be a fair division of the unquestionable gain arising from railway locomotion b tween the losing investor and the winning customer. If, in order to obtain a highway, it has boon found necessary to levy a tax upon the entire population, it is far from extravagant to suggest that a similar principle should be applied to a railway. It is curi -us now to recall to mind that the North British Railway proprietors, possessed with the ideal notions of the old times, once absolutely refused a t;iiar.intfe of 8 per cent, per aunum; and that tho Bristol and Exeter, alter careful deliberation, declined an offer of 6 per cent. Tbe simple truth is that proprietors, as a class, have been utterly misled as to the profits of railways. The gross revenue, it is true, far exceeds tho most sanguine anticipations, and tho wealth conferred upon the nation by these works is beyond calculation ; but then the cost of construction aud of working, the contentions fostered by Parliament, and the ill-deviled and expensive network which has been the natural result, are sufficient to induce a conviction that there is no remedy but in a complete change of method. We have spent 50 ) millions most unwisely; and we want 500 millions more. The money can only be ohtainsd b retracing our errors, and by placing railways on such a footing that they shall pay those who embark their capital in them"