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moment he was trustee for the nation at large, his permanent position was that of trustee for the company of which he was the responsible head. That this system has worked as well as it has is a tribute to the good sense and patriotism of the men who have worked it.

The financial bargain between the Treasury and the separate companies is, in its main outline and neglecting unnecessary detail, a singularly simple one. The Government guarantees to each separate company the same net revenue which it earned in the year 1913. As between the different companies, each company keeps all the money it takes. If, for example, a man books from Woolwich to Wick, the South-Eastern keeps the whole fare, and neither the North-Western, the Caledonian, nor the Highland receives any portion of it. Similarly, if the passenger on his return journey takes a ticket from Wick to Woolwich, it is the Highland Company that keeps the whole fare. Traffic carried on behalf of the Government, whether military or naval passengers, or goods or coal, is carried on warrant and no money passes at all. . The natural result of this system is to upset altogether the previous standard of receipts. One company may do a great deal of work and get very little money, while another company may do comparatively little work and get much money. In the case given, for example, the North-Western Railway would do the bulk of the work and not receive one penny for it. Each company has, however, not only to meet its own working expenses, but also to have available at the end of the half-year the same amount of money as it had in the corresponding half of 1913 to meet its interest and dividend payments. Consequently some companies have balances to hand over to the Executive Committee, while other companies have to draw on the Committee to make up the deficiency. Looking at all the companies as one from the Treasury's point of view, it is evident that, if the gross receipts are equal to the expenses plus the guaranteed net revenue, the Treasury neither pays nor receives anything ; if the gross receipts are less than the sum of these amounts, public taxation has to make up the deficiency. If the gross receipts are more, the excess goes to the Treasury in relief of taxation.

As to what has actually happened, there is no public information available. Since 1913 the accounts of the companies

For 1915

have been issued only in skeleton form. The Board of Trade Railway Returns, which in 1913 occupied 201 pages, are, for the year 1914, compressed into a single page. nothing has yet been published. Why the figures, which must exist and have been printed for the use of the accountants and Treasury officials concerned, should not be made public, it is impossible to understand. It cannot be that information of use to the enemy would be disclosed. The French railways, including the Nord and the Est, the whole of whose systems are in the zone des armées except those portions which are actually in enemy occupation, continue to publish their reports as usual. Their expenditure is given under all its usual heads, and the receipts are duly classified under the heads of passengers, merchandise, military traffic, &c. But all the information vouchsafed by the Board of Trade is set out as follows :—*Total receipts, including miscellaneous net ' receipts, £139,098,000. Expenditure, £88,173,000. Net 'income, £50,925,000.' To the figure of the total receipts' a note is attached saying that it includes the estimated 'amount receivable by the companies in agreement with the Government in respect of the control of British Railways during the period from August 5th to December 31st.'

In the absence of official information we can do some guessing, probably sufficiently accurate for present purposes. For the first five months, during which there was a slump in trade, there must have been a considerable deficit to be met by the Treasury. Then, in 1915, trade rapidly improved. Big wages were earned by the working classes; and they travelled almost as freely as usual, not at the old cheap fares, with excursion and week-end tickets, but paying the full penny a mile. Moreover, the passenger services being much curtailed, the trains were very crowded ; and no one needs to be told that it is more profitable to carry 180 passengers in one train than to run two trains carrying 100 each. In the early part of 1915 it was commonly understood that the Government had made a very good bargain; that the money received from the general public sufficed to cover the working expenses and to provide the guaranteed net income of the companies ; so that in effect the Government was getting its vast military traffic carried practically for nothing

Later the scene once more changed. Railway wages have always been on the low side, and just before the outbreak of war it looked as though strong measures would be taken by the staff to force a considerable increase all round. When the war began the men patriotically waived their claims. Then came the rise of prices, and their claims could not be put aside. Not only were the wages low, but railway men were not free, like the ordinary workman, to leave their job and go in quest of higher wages elsewhere. Quietly but firmly, the men's leaders demanded an increase; and a bonus of five shillings a week was granted to the great bulk of the staff. The cost of this increase may be put at £6,500,000 a year. Three-fourths of this sum was by agreement borne by the Treasury, the remaining fourth came off the net revenue of the companies. As a set-off, a large part of the wages of the men who had enlisted was saved. It may be assumed that from the end of 1915 there was a substantial deficit in the guaranteed net revenue which the Treasury had to make up.

The rise in food prices continued, and again, in September 1916, the railway staff claimed and secured a second five shillings a week. In this case the whole of the £6,500,000 per annum is being paid by the Treasury. To be on the safe side, let us assume that the whole additional cost is £12,000,000 a year.

There can be little doubt that for the latter months of 1916, and thenceforward indefinitely for at least so long as the war lasts, the Treasury will have to meet a substantial deficit. Whether, even so, the Government has made a bad bargain, is a question that can only be answered by those who know what has been the amount of Government traffic passing without charge, and what the charges for it would have been, if the agreed rates, as they were before the war, had been paid or credited to the companies.

It is useless to speculate what further changes in the situation the progress of war may bring about. Let us see what would be the position, if, at the end of the war, the Government were to exercise its right to hand the railways back to the respective owning companies forthwith. As we have said, the war bonuses imply something like £12,000,000 per annum addition to the present wages bill. Moreover, many men who have enlisted and are now drawing pay from the army will, after the war, come back on to the railway pay roll. We

cannot, therefore, put the future additional charge at less than £12,000,000. Possibly, even probably, if the price of food falls abruptly, some portion of the war bonus may come off again; but no one can suppose that the average rate of wages will go down again to the pre-war figure. Assuming that in other respects the receipts from traffic and the expenses of working will revert to the pre-war figures—and this is not likely to be true, for additional cost of material will probably more than absorb any increase of traffic receipts—the companies will be faced with a net revenue reduced by at least £12,000,000 per annum. In the last year before the war the total sum paid in dividends on ordinary stocks was £17,700,000. Of course different companies will be differently affected, but, regarding the companies as a whole, it would appear that roughly three-fourths of the ordinary dividend has been swept away. It would evidently, therefore, be inconsistent with justice to the ordinary shareholders for the Government merely to hand back the railways and terminate their bargain. For, though nominally the increase of wages granted to the staff was the act of the railway managers, in fact the managers were only the agents of the Government, and public policy was the main ground of the sweeping concessions that were made.

There is another reason which makes it impossible for the Government to hand back the railways sans phrase. Goodwill is an important item in the value of every commercial concern, and it is certainly not less valuable than usual in railroad business Now the course of trade has been entirely upset by the war. Traffic is being carried over unaccustomed routes, to and from strange ports; and the selection of routes and inlets and outlets has been made, not by the trader influenced by the eloquence of a railway canvasser and the excellence of a company's service, but in conformity with the interest of the traffic as a whole, by the over-mastering authority of the railway Executive Committee and the Board of Admiralty. It is impossible that after the war traffic will resume its old channels; and yet one company has been exalted and another abased, not for any fault or virtue of its own, but by overruling necessity. And the State must in fairness take responsibility for its own action.

But while on the one hand the Government cannot leave

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the shareholders to lie on the bed which it has itself made for them, on the other hand the Government cannot undertake permanently to guarantee the shareholders against a reduction of their former income. As matters stand, some £500,000,000 of ordinary stock, representing not expectations, not 'water,' but hard sovereigns honestly put into the concern, would be left earning income at the rate of about i per cent. per annum. The situation is extremely difficult, and it will have to be faced. Doubtless some politicians would be only too pleased for the Government to retain control of the railways after the war. The war has certainly accustomed us to the exercise of large and unquestioned powers by the Executive Government. But it would be a very serious matter indeed for the Government to assume new liability of not less than £1,000,000,000, and place 600,000 voters upon the pay sheets of the national exchequer. It is eminently desirable, therefore, that the matter should be discussed betimes.

Even before the war, it was clear that the railway policy of this country was in a state of unstable equilibrium. Competition had practically ceased; and it was to competition that the English people had looked for two generations as the main regulative force. The three great companies between London and the North-East, the Great Northern, the Great Eastern, and the Great Central, had entered into a close alliance, and it was understood that the bulk of their traffic was pooled. To the West of them, three other great companies, the NorthWestern, the Midland, and the Lancashire and Yorkshire, were in the same case. The Scottish companies, too, were working in close combination. Alone of the great companies, the Great Western maintained its independence, though even the Great Western Railway had entered into agreements with the South-Western in respect of the traffic to Exeter and the South-West. There was a good deal of dissatisfaction in the ranks of the railway staff, as was very clearly shown by the great strike of 1911, which the Agadir crisis, followed by strong Government pressure, abruptly brought to an end. There was also a widespread feeling among the public that our railway management, as a whole, had fallen behind the times, and that far-reaching reform was necessary. Railway shareholders, who had seen the market quotations of their stocks

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