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on bonâ fide and well-conducted undertakings. The limitation of the borrowing powers is a restriction to which no other kind of business is subject, and which may act injuriously upon even the best concerns; for, if a company, by expending a certain sum of money, sees its way clearly to a profit exceeding the interest on that sum, and if parties are willing to lend the money for that purpose, then the law which prohibits such a transaction fetters the company in the legitimate management of its affairs. Freehold property can generally be mortgaged to about threefourths of its value; and that the limit of one-third in the case of railways is low, is shown by two facts-one being that the best-conducted and best-paying lines have always issued debentures to the full parliamentary limit, and have never fallen below it, although the circumstances are different in each caseand the other, that lines which, starting wholly or partially as contractors' lines, have really borrowed very much more, have nevertheless been brought to a successful issue. But Parliament not only fixes the proportion of share and loan capital, but the actual amount of each, according to the estimate placed before it. Estimates, however, although great care is now always given to their investigation, may after all turn out to be insufficient; or, even if sufficient to provide for all that was originally intended, subsequent circumstances may arise to render further outlay desirable. A traffic, for instance, exceeding previous expectations may necessitate further accommodation. Now we see one of the disadvantages to which railway companies are subject, and from which all others are exempt. The capital having been already determined by the Act, no more can be raised without a fresh application to Parliament, and this involves both expense and delay. The company, in the first instance, sought to obtain compulsory powers over private property, and therefore a parliamentary inquiry at that time was necessary ; but more money may now be wanted to improve stations, to provide more comfortable carriages, or more powerful engines in order to run faster trains, or for any other purpose for the accommodation of the public, but not involving rights over other persons, nor anything else for which legislative sanction could ordinarily be required. For such a purpose any other joint-stock company would only have to call its members together at a special meeting, and, with the consent of threefourths of them, proceed to act at once ; but the railway, being under special control in these respects, must submit to the expense and uncertainty which attend the passing of a Bill through Parliament, must determine on its course of action in November (the time fixed for issuing preliminary notices),
must wait about six months for the Act, and then take the chance of the state of the money-market at that time, instead of being able to choose its own time in the first instance. Any alteration, too, of the terms under which capital is to be raised necessitates an application for parliamentary sanction. No preference shares of any kind can be issued without this, even with the unanimous consent of the original proprietors. When, therefore, a company is in financial difficulties-that is to say, is unable, after its works are considerably advanced, to get the rest of its shares taken up-although the course obviously involving least loss to the shareholders is to offer a preferential dividend, so as to get the remaining capital, complete the work, and begin earning a profit at once, still that course cannot be adopted without all the delay, expense, and uncertainty previously referred to. One effect of these things is, that companies wanting money are led to obtain it by temporary loans of a kind never intended by Parliament, and probably bearing a high rate of interest in anticipation of raising capital by parliamentary sanction.
And, we would now proceed to inquire, on what principle are railway companies treated in these respects differently from other joint-stock undertakings? They have to go to Parliament for compulsory powers to take private property, powers which, being of an extraordinary nature, can obviously be granted only by the Legislature, and should not be granted unless in a case of clear public necessity. The question for consideration by the Legislature is, whether the probable advantages to the public are sufficient to outweigh the probable injuries to private persons; there is no reason why any other question should be entertained, except in so far as it bears upon this. The question of public advantage, however, involves two or three things: one being, that the line should be completed and opened within a reasonable time, otherwise there is no public advantage at all; and another, that the charges for use and conveyance upon it, when made, shall not be unduly high, and that reasonable accommodation shall be afforded. Hence maximum rates for all kinds of traffic are inserted in Railway Acts, and certain provisions are also made for public accommodation. These latter are not numerous ; it is required, for instance, that at least one train every day should convey passengers between all stations at the lowest regulated fare. It is required also that special facilities shall be given for the conveyance of troops and of mails, and that all proper precautions shall be taken to ensure the public safety. Further regulations than these as to fares and conduct of traffic are not generally made, because it is unadvisable to fetter the management, and because the law of supply and demand, assisted
by wholesome competition, is, after all, the best regulator ; but, if clauses requiring particular accommodation in these respects should be at any time inserted in special Acts, such a proceeding would be perfectly legitimate on the part of the Legislature, on the ground that without such accommodation there would not be sufficient public benefit to justify the interference with private property. But while the conduct of traffic affects the public, and is almost entirely left to the companies, the financial arrangements are made the subject of Government regulation, and they affect only the shareholders. Whether the shareholders make a profit or not, or whether one class of them is preferred before another class, is perfectly immaterial to the public who use the line, and on whose behalf Parliament allowed it to be made. It is, of course, very desirable that a man who invests his money in works of public utility should get a good return for it; it is also very desirable that he should not lose it in any other kind of speculation, that he should not waste it in extravagant living, or gamble it away; it is very desirable that he should not injure his health by working, or by drinking, or by eating opium, or risk his life by climbing mountains without guides, or crossing the Atlantic in a canoe; but it is not the province of the Legislature to interfere with any of these things. There is no law against a man taking all his money in sovereigns, and throwing them into the sea, or getting rid of it in other
that injures no one but himself; least of all should he be deterred from laying it out on an undertaking, which, if not remunerative, must at least have been deliberately declared by both branches of the Legislature to be of public and local advantage.'
Admitting, however, as is almost universally admitted, that the control exercised by Parliament is intended in the interest of the public and not in that of the proprietors, is there any ground for the distinction between railway and other companies ? Compare a railway company with a steam navigation company: both may be equally great undertakings, judging by the amount of capital and revenue concerned and the pecuniary interests involved both are entrusted with the lives of their passengers, both undertake the conveyance of mails. Is there any reason why the Government should interfere in the financial management of the one rather than of the other ? Does the fact that the highway of the one is the ocean, and that of the other a road which the Government gave leave to make, afford any ground for making a distinction in this respect? There is only one case, indeed, in which the financial condition of either company can affect the public, and that is the extreme case of its becoming bankrupt, and so failing to carry on its business at all. And this can only
happen, as it now appears, when not only shareholders and debenture-holders are alike unpaid, but the actual working expenses are not met. For the debenture-holders can have no power to stop the working of a line, only execution creditors can interfere with that: it follows, therefore, that the regulation by Government of the railway companies' financial management, if intended to be exercised in the interest of the public, can only be designed to prevent a management resulting in actual failure, for it is not required for any purpose short of this. This actual failure, too, can be produced only by a class of debts which no law, special or general, can prevent a company from incurring, and with the enforcement of which, until within the last few months, no legislator ever thought of interfering.
A Bill has been recently introduced by Lord Redesdale, proposing for a limited period to prohibit creditors of any kind from taking proceedings against railways. That such a measure should have been brought forward at all proves two things ; first, that all existing regulations have failed to prevent companies from falling into such a state of insolvency that the public are in imminent danger of being deprived of the use of the lines; and secondly that, in order to avert such a result in future, it will be necessary to make special laws, not only for shareholders and bondholders, but for every person who may have occasion to transact any kind of business with a railway company. And in this particular case the special law, in order to be effectual, must. be retrospective in its action. The injustice of denying the ordinary remedies for debt to landowners who have already parted with their lands, or traders who have already parted with their goods, on the faith of being able to have recourse to those remedies, is apparent. It is doubtful whether any case of public necessity could be held to justify such a proceeding. Apart, however, from the retrospective action proposed by this particular measure, which has since been withdrawn, in consequence of the disapproval it met with in the House of Lords, let us consider what would be the effect of a similar law which might be prospective merely, and which should prevent in future the recovery of debts against railway companies by execution upon their property. The consequence of the passing of such a law would be that all railways would be generally distrusted, commercial houses would avoid doing business with them as much as possible, such business would be looked upon as primâ facie of a bad” or “doubtful' character. The companies, with the exception, perhaps, of some of the longest established and most successful, would have the greatest difficulty in getting goods supplied to them on credit, and in some way or other would always have to pay more for that accommodation: their privilege of exemption from execution would thus cost them very dear, although there might never have been the slightest fear of their being exposed to such a proceeding. And yet, if the Legislature is to continue to take upon itself the duty of preventing railways from becoming embarrassed by debts, something of this kind must be done. Either it must be made illegal for them to receive goods without paying cash, or the means of enforcing the payment afterwards must be denied to the creditor. The futility of any attempt to carry out the former of these two measures is obvious: the latter, therefore, is the only course that remains; and, in order to save some two or three insolvent companies from being proceeded against to extremities, a manifest injury would be done, and a slur cast upon the reputation of all. Nevertheless, we repeat, if the principle of parliamentary interference with the finance of railways is, that the public may be secured in their use of the line, and if that principle is to be carried out, some action with reference to general creditors must be taken. It is useless to frame Act after Act to regulate capital and limit debts to bondholders, and then to stop short of the one class of creditors who alone have power by the enforcement of their claims to hinder, or even stop entirely, the public use of the undertaking.
Although, however, the claims of general creditors are those which press most seriously on the embarrassed railways, and which alone threaten to interfere directly with their public utility, this class of debts has not in any case contributed very materially towards causing their embarrassment. The proximate cause has been in every instance inability to meet the principal of debentures falling due. And to do this is at times a difficulty with even the best companies. Five-sixths of the railway mortgage debt consists of terminable debentures, issued generally for periods of three, five, or seven years; and at the end of that time they have necessarily to be renewed either with the same or different holders. In the earliest times it was supposed that these debts would only be incurred for temporary purposes, namely, for the completion of the undertaking, and for furnishing it with rolling stock, &c., and that they would then be paid off. This idea was soon shown to be a fallacy; all companies have renewed their debentures from time to time as they came due, and have no intention whatever of paying them off, and there is no reason that they should, any more than that the country should pay off the National Debt. But even the Government might fall into difficulties, if five-sixths of the National Debt consisted of Exchequer Bills and half of them were returnable at once in a time of pressure. Just so the railway companies, which have no diffi