BUBBLE OF THE-AMî OR, THE FALLACY OF RAILWAY INVESTMENT, RAILWAY ACCOUNTS, AND TÎ /a 1 L W AY 1) I A I D E X ]) 8 . BY ARTHUR SMITH, LONDON; SHERWOOD, GILBERT, AND IMPER, PATERNOSTER ROW, 1848. INTRODUCTORY REMARKS. No apology need be made for presenting these pages to the public, as the deep distress which now pervades the Country, should arouse the attention of every one—it affects all. In¬ tegrity is one of the great internal safe-guards of a nation : whenever the parliament, the judges, or an influential portion of the people have been corrupt, commercial and mercantile pursuits have invariably languished, and trade and all mone¬ tary transactions have been placed in eminent danger ; chica¬ nery, repudiation, and low cunning, soon sacrifice every thing that is honorable, noble, or great, on an altar of rapacity and ruin. In 1844 and 1845, the welfare of the country was com¬ promised by an infusion from interested sources, of unhealthy hopes of speedy fortunes, or momentary aggrandizement—gold for the time was alone sought after and worshipped, and the success of the leading individuals was in proportion to their abandonment of all principle. A few years have since passed, confiding and honest men see their wealth fast dwindling to nothing, while the half ignorant and half cunning find they 4 have been impoverished to enrich some Director who was far more knowing and subtle ; men of property find their fortunes reduced, and rent and interest unpaid ; merchants are failing by hundreds, and the minor tradesmen by thou¬ sands; manufacturers can get no orders; tradesmen have either no customers or no money paid them ; and mechanics have no work and no resources, and the inevitable conse¬ quences follow ; namely, political meetings and threatened outbreaks. The working men feel something has been wrong, and attribute it to bad government. We, of the present generation, have received gifts from our ancestors in liberty And property, it is at least our duty to preserve them. Liberty at the present appears in the soundest condition, if any thing, it is too robust; every one is free to go, to do, or to say what he pleases, provided it is in compliance with those slight re¬ strictions which they themselves, or their predecessors by their representatives, have imposed. Royalty and the chief Ministers of the Crown are weekly the subject of caricature, and their public actions hourly liable to praise or censure in the unrestricted liberty of the press ; and with regret it must added, that our greatest, wisest, and most honourable men have been, during the last few years, subjected at meetings, to the grossest abuse. It is property which has been assailed, and that in the most corrupt manner, by false representations, by incorrect returns to our Parliament* and Government, and by manœuvres to obtain an appearance of value by gaining pterniums in the market, all which are matters not concern¬ ing the respective persons interested or injured alone, but they embrace subjects of the deepest import to the whole community : crimes of magnitude affect the whole nation, and should be regarded as such. The assistance of the exe- * An insult to our parliameut is an insult to every individual in the com¬ munity, and should be resented in the severest manner. cutive should be demanded by (he injured, and the whole Country should be watchful and see that the monster iniquity is proportionately punished ; for, depend on it, when this Country once losses its character for integrity, it will soon sink to the level of the lowest European State, and tyranny will be the just reward. A tyrant is the only person capable of governing a corrupt and base people, he is one like them¬ selves ; in the absence of integrity one man or one set of men in each grade of society tyrannize over the other, and inordinate wealth and insuperable poverty become the leading characteristic of the Country where such a state of things exists. The interests of Directors and Shareholders, however much may be said in theory,are not found in practice to be identical, the former have invariably been too powerful for the latter, and the real state of affairs are constantly kept back. During the past few months, for instance, we have seen a large Joint Stock Bank stop payment, in one of our wealthiest and most commercial districts; the shares had stood at high premiums; at the previous half-yearly meeting the dividends declared were large, and the representations of the Directors most encouraging—to the amazement of every one, this flourishing concern stops payment ; and it is, on investigation, discovered that some half a million had been lent to one firm without security; that the shares were held to a considerable extent by parties who had never paid a farthing ; that the capital had been lent to persons on unavailable securities; and that discounts had been effected with some who were not regular customers, and with others whose commercial standing did not justify advances.* The Country has just received intelligence of the result of the Union Bank of Calcutta, a Company under the man- * See ilepoit of Meeting in the Liverpool Slamluid, April 4, 1848. *6 agement of leading merchants in that City, and many shares were held in England ; the Company's affairs had continued in high repute from the enormous premiums of the shares, but it would now appear that the Proprietary's Capital had for years been squandered in keeping up the value of the shares in the market ; that they had issued and distributed notes and securities equal to 1,200,000Z. without receiving consideration ; and that the representations of the Directors were wholly without foundation in truth ; and a call of 501. per share is now absolutely necessary to pay even the debts due by the concern. In the Metropolis of Great Britain we find that the Com- pany of Copper Miners of England, which for some years has stood in high repute, (the principal of the Company being not only the Chairman of the London, Brighton, and South Coast Company, but also a Director of the Bank of England.) The dividends declared had been large, and the representa¬ tions most encouraging, and yet in the midst of all this the innocent proprietary are horrified by finding the Company in difficulties, and the Bank of England applied to for assistance. The Bank commences investigation, and for the firsttime, the Proprietors learn their true position ; instead of the flourish, ing dividends, the losses in the past few years had actually reached 350,000/., and it is openly stated in the public prints, that the Company had borrowed large sums on debentures, without legal authority, and that while there are no assets to pay the securities, the holders have no legal remedy against the Company, and that though the Chart of the Company only authorised dealings in Copper, a trade had also been carried on in Iron. * The injury inflicted by these small companies, however, sinks into insignificance when compared with Railway Companies, to which the attention of the public is, in the following pages^ directed. 7 The Railway Companies previous to 1844, had borrowed without any legal authority, millions on loan notes ;* and on that bold informant, " The Times newspaper," bringing the subject prominently before the public, the Government made inquiry, and it was the opinion of the Law Officers of the Crown, that the holders had no legal remedy whatever for the recovery of their money, either against the Company or the Directors : a bill was immediately brought in, and Sir Robert Peel was publicly denounced, at Railway Meetings, as having used unconstitutional means for carrying the measure, while the interference of Government, and the newspaper in ques. tion, was characterised as most overbearing and tyrannical. By the following pages it will seen, (and the correctness of every figure may be tested by reference to the various Com- panies' accounts) that the dividends of every Railway Com¬ pany, since the introduction of locomotive power, have been paid by charging sums to capital which should be credited to the revenue account, which is in fact, paying the dividends out of capital ; or, what amounts to the same thing to persons investing their money with the view of obtaining a return— the Railways have invariably required a constant outlay greater than the dividend declared, without reference to the expenditure on the branches or extensions. *The sum borrowed on these securities in 1844', is since found to have been 5,582,í2'¿3/.—It was represented before a committee in 1844 to have been about 1,500,000/, R A I L W A Y I N V E S T M E N T, &c., &c. The distrust now so predominant in the public mind on the real nature of Railway investment, is indeed alarming. In the year 1845, Railway Directors enjoyed the confidence of a proprietary unbounded in its liberality. In 1848,instead of im- plicit trust, we see nothing but doubts, fears, and suspicions. Every good Citizen rejoices at the honest success of his neighbour, and the welfare of the nation ; he laments the prostration of trade and the ruin of thousands : nay more, it is his duty to examine into the causes of distress, and to en¬ deavour to eradicate evils. The present pecuniary position of Railway Companies—the mode in which Directors obtained their late unlimited confidence—and the causes of the present distrust are matters, not concerning Railway Proprietors alone, they are of equal solicitude to the whole Country. The position of Railway Companies is most fearful, the ac¬ counts justify suspicion, and the happiness or ruin of thousands at the present moment, depend on the representations which have been hitherto made by Railway Directors. Some few shareholders have commenced their enquiries with moderation, 9 and it is to be hoped they will continue their deliberations with firmness.* For some years we have seen the most fiourishing descriptions of Railway Companies, and certainly, if one or two accounts are cursorily looked over, the impression left is one most gratifying and encouraging ; in many Companies, the dividends declared are large ; in others, if the dividends are not large, it is confidently stated, that at no distant period they will be increased, and if a diminution of the dividend is recommended, the proprietary are congratulated on having so large a sum placed to a reserved fund. Un- fortunately it is only by a careful retrospect of the general affairs and accounts of a Company that a correct opinion can be formed, and all must admit, that the unintelligible manner in which the accounts have been kept has proved most inju¬ rious ; for an attentive and careful analysis of a series of the accounts form either a direct contradiction to the state¬ ments and predictions which have been from time to time put forth in Reports and Speeches, or clearly prove that Railways are only to be worked by a constant outlay of capital greater than the dividends declared.f *The proprietors of the London, Brighton, and South Coast Company had remained quiescent for years, with the most implicit confidence in their Directors, until the manner, in which their accounts were kept, and the con¬ stant credit to capital was brought to their notice by a pamphlet entitled " Railwaj'S as they really are" when they at once appointed a Committee of Inquiry from the shareholders, that Committee has now sat seven weeks without being able to report, anda meeting is adjourned that they may have more time to pursue their investigation. •f-The effect on the pockets of the proprietary is the same in either case. If Directors have paid dividends out of capital, or have paid dividends by charging its capital with sums which should have been paid out of the traffic receipts, they have obtained premiumsunderfal.se pretences. Ifou the other hand, the accounts have been mj^stified to hide the fact that Railways can only be worked by a constant addition to the capital account, (greater than the dividends declared) they are guilty of the grosse.st deception to the share¬ holders as well as to the legislature, whom they have equally deceived. Some key to the real expense of working a Railway, will be found in the return moved forby Captain Cihulstone, and ordered to be printed on the 28lh June, 10 Not more than two years have elapsed since an investment in London and Birmingham shares, or in the Shares of either of the amalgamated Companies now forming the Lon¬ don and North Western Railway Company, was generally looked upon, has as safe and as sure as an investment in the Government stocks; since which, the Directors have had their own way, there have been no legislative interference with the management, and no competition. An examination there¬ fore, (as before observed) into the causes, first of the rise, and secondly of the fall in the value of Railway Shares, is a matter of interest not alone to the Railway Proprietors, but it also concerns the public at large, for not a person in the United Kingdom has escaped its effects; directly by the depreciation of their property, or indirectly by the scarcity of money caused by such depreciation ; the dulness of busi¬ ness proceeding from the losses among general consumers, or the absorption of capital in Railway construction, to the prejudice and neglect of mercantile and other pursuits. In the year 1845, the period at which confidence in Direc¬ tors stood at its highest point,—and it must be of the greatest importance to Railway Proprietors to knowwhether their con¬ fidence was misplaced—Railway Shares were purchased in the London and Birmingham Company at 250/. each, that is the market value of 41,250* Shares on which 4,125,000/. had 1847, being a return of the number and description of persons employed on all the Railways respectively, on the 1st May, 1847, which were then opened for Iraßc^ It will there be found, page 14, that the opened line of the Lon¬ don and North Western was 378§ miles, with 140 Stations, and that the üaff necessary for working that mileage was 6418 persons, (exclusive of those em¬ ployed on the inaintainance of the way, which was let under contract j and also exclusive of 458 persons employed on ihe North Union which was rented.) Now patting the average amount of salary and wages at 100/. a year each, we find it will take 641,800/. to pay wages alone. *The 25,000 quarter shares issued in 1837, as well as the 31,250 32/. shares issued in 1839, had been converted from their original position into 100/. shares, by being reduced in number,—these shares added to the 25,000 origi¬ nal 100/. shares issued in 1833, make the above number. 11 been paid, was 10, 312,500/. ; the selling price of 42,968 shares on which 85,936Z. had been paid, was 1,890,592/. ; and the value of 55,000 Shares on which 110,000/. had been paid, stood at 1,815,000/. ; the value then of Shares in the London and Birmingham Railway, on which 4,320,936/. had been paid, was 14,018,092/.*. The Grand Junction Shares on which 2,087,225/. had been paid, stood at 5,697,350/.,t and the Shares of all the leading Railway Companies stood pro¬ portionately high. What then could have caused the present depreciation in the London and North Western Shares ? from 26,406,334/. with 8,656,631/. paid, to 18,795,010/. with 13,091,066/. paid ; the same progressive increase in price in proportion to the sum paid, would make the present value 42,604,220/. ; the depreciation therefore is equal to the difference between that sum and the present value, namely, 23,809,210/.; and the aggregate depreciation in the value of * This is not taking any of the shaves at the highest price. f Copy of Share List, Aug. 7, 1845 : No. of [Shares. London & Birming™ 41250 Ditto, new '42968 Ditto, new 55000 Grand Junction 10918 Ditto, (half) '10918 Ditto, (quarters) ...| 5000 Ditto, (new do.) ...¡17624 Ditto, (eighths) I jverpoolic Manchest' Ditto, (half) Ditto, (quarters) ... Ditto, new Manchester & Birm® Ditto, (quarters) 22033 5100 7968 12024 12089 30000 30000 sum paid ííi 100 *10 2 100 50 25 15 5 100 50 25 4 40 4 2 pnce £ 252 58 37 244 120 61| 53i 22| 212 107 521 46| 90 15 15 Copy of Share Li.'t, March 22, 1848. London & N. Western 1 Ditto, (quarters) ... Ditto, (fifths) Ditto, G. J. 40/. ... Do. M. &B. 10/. A Do. M. & B. 10/. B Do. M. & B.IO/.C ÎCB. The total number of shares issued by the amalgamated Companies, has reach¬ ed "60,223, but the number has been lessened by four quarter shares, three third shares, or two half shares being converted into one too/, share, and called stock ; the present number of shares is 514,626. No. of price Shares, paid 105400 100 125 168380 22 0-ÎÂ - '2 68750 2 6 12090 20 20 30000 ''i 60000 % 8Í 70000 1 3 Ditto, (new do.) .. 600C0 235,955 shares shares were isstied in 1845, at premium.s amounting in the whole to 4,719,100/., and 168,380 shares in 1846 at premiums amounting to 1,863,800/. ♦ The sum of 2/. was paid on the shares,—a call of 8/. had j ust been made, which caused them to be quoted as 10/. paid. These shares at 58/. each, would fetch 2,492,224/., but they are given in this work at half a million less, as the shares are not taken at tlie highest. 12 the shares of all the English Railways, exceeds the enormous sum of 150,000,000/. in two years.* The Government has introduced no Bill to interfere with Railway Management—an Ex-chancellor of the Exchequer has certainly proposed a Bill for auditing Railway accounts, but if anything, that should have the effect of adding to the stability of Railway property, as an official Government an¬ nouncement, confirming the oft repeated declaration of the Directors would be hailed with pleasure—one would suppose— by the Directors themselves; there are no competitions be¬ tween Railway Companies, and if there were, one Company's shareswould certainly augment in value as the other depreciat¬ ed, but all shares have fallen alike.t The Government has done nothing prejudicial : I but the Directors of the London and North Western Company have made a nominal increase of near a million ; that is, they pay dividend on the sum of 964,702/. not received, and have also issued (notwithstanding the pro¬ hibitory Act passed by the Government for the protection of the public in 1844, and limiting dividends to 10 per cent) 08,750 shares, the proprietors of which have been receiving 10/. per cent on the sums called, and 5/. per cent on the sums not called : and the Directors of the MidlandCompany have agreed to guarantee 10/. per cent on the Leeds and Bradford Railway and its extension,—a line which had pre. viously been promoted by themselves, and which had been by * This was previous to the French Revolution—the depreciation is now much greater. Thesharesof Companies sanctioned in 1845, sell now for less, with 25/., 30/., and 40/. paid up j tlien in 1845 with 1/., 2/., or 3/. paid. t The Directors have move than once complained of competition being torced on them, but where is the competition ? J Lord Dalhousie was always the advocate of economy, and maintained a preference for the old Companies, but he in 1845 was opposed by the Railway party in every possible manner; the only inference to be drawn from this and »he oi>position to the present Railway Board is, that the Railway interest (so called) are anxious to destroy every proof of passed transactions. 13 the most unaccountable means, taken out of their hands, and at the time such guarantee was given, was under the control of their own Chairman and his friends, who together held nearly every share. The Directors of the North Midland Com¬ pany have agreed to lease the Hull and Selby Railway (which had never professed in the returns made to Government, to have paid the expense of working) at a guarantee of 10/. per cent, and to redeem the Railway—as the Company chooses to denominate it—at 2,000,000/. when just previously to such guarantee being given, the market value of the shares was under 250,000/., that is, the 8,000 50/. shares were selling for 35/. each, or 15/. discount.* The Directors of the Newcastle and Darlington Company (now York, Newcastle, and Berwick) have agreed to lease the Great North of Eng. land Railway (the 100/. shares of which Company had only just previously to such agreement, sold at 40/. discount,)! until 1850, at a rent equal to 10/. per cent on the 100/. shares, and 52/. per cent on the 40/. shares, and to redeem (as it is termed) the Railway in the year 1850, at 250/. for each 100/. share ; 100/. for each 40/. share, (on which 5/. only is to be called) 75/. for each 30/. share, and 37/. 10s. for each 10/. share ; 1 in other words, 4,000,000/. has been agreed to be *The Hull and Selby Railway was sanctioned in 1836, and opened through¬ out 1st July, 1840, being 30 miles in length; at the time of opening it had cost 517,000/., and on 30th June, 1843, the sum credited on the same 30 miles had reached704,173/. The shares sold in 1839 at 15/. discount, in 1840 at 10/. discount, in 1841 at 7/. discount, in 184'2 at 10/. discount, and in 1843 at 20/. discount,—a reference to a share list whitest the accuracy. ! The great North of England u as sanctioned—45 miles and 19 chains in length—in 183fi, and was opened throughout in 1842: on 30th June, 1843, the line had cost 1,230,000/. and the further sums since credited to the Capital account are very large. The sharessold in 1839 at 15/. discount, in 1840 at 31. premium, in 1841 at 14/. discount, in 1842 at 25/, discount, and in 1843 and 1844 at 40/. and 45/. discount. jiSee the report of the Commissioners on Railways in 1847, No. 164, LXVll., page 3; (this report can he purchased for one penny) yet the Rail¬ way paity complain that this Railway Board have done no good to the Conn- 14 given for a Railway, the shares of which were selling a short lime previously for 438,900/. Let us however, now return to an examination of the affairs of the leading Companies. LONDON AND NORTH WESTERN. The London and North Western is the Company which stands first in point of length as also in traffic receipts; that Company, as at present constituted, is an amalgamation of the London and Birmingham, the Grand Junction, (which had previously amalgamated and included the Liverpool and Man¬ chester, the Warrington and Newton, the Chester and Crewe, and Bolton and Leigh,) and the Manchester and Birming¬ ham Railway Companies. It will be necessary here to draw attention to the Capital Account, or more properly to the expenditure of Capital, and first of all is the item of " total main lines."-—^The main lines have all been open some years,—the first portion between Liverpool and Manchester was opened on the 15th September, 1830, the last portion between Manchester and Birmingham was opened the 10th May, 1842; now one would suppose that lines which had been opened for many years would require no further outlay ; the contrary however is the fact, those main lines stand in the first account after the amalgamation, as having cost, namely to the 1st January, 1846, (the account being made up to 31st December, 1'845) 12,388,883/.; and two years after the same item (namely in the last account made up to 31st December, 1847) has reached the enormous sum of 14,440,813/.; * it appears therefore by the accounts, that the main line has required an expenditure many years try, and that the 17,000/. paid in 1847 was uselessly expended, why those Com¬ missioners will save 17000 from ruin and save the Country as many millions. * The correctness of the figures can be tested by reference to the accounts ])ublished in the Railway Rapers, or by an examination of the half yearly accounts circulated among the proprietors. 15 afler the whole has been completed, exceeding one million per annum, or in the last two years 2,051,930/., and of this enormous outlay no less than 489,589/. is credited as expended at a period which is described in the Company's report as " a season of extreme stagnation and unprecedented difficulties." Can a Railway be said to be a security when it is only to be worked by a continuous outlay, greater than the dividends declaredl but this is only one little feature in Railway man¬ agement. Let us take a review of the whole system from its commencement. The idea of a Railway like most other inventions was taken from something previously in use, which had been dictated either by necessity or convenience ; thus, we find that Roger North, describing a visit which his brother Lord Guildford made at the end of one of his Circuits to Newcastle, wrote that amongst the curiosities of the region were what were called " way leaves" then in general use in the Colleries for economising the expense of conveying the Coals from various Coal pits to the nearest Wharfs for Shipping, and he describes the manner in which the wooden planks were laid for the wheels of the trucks to run on, and the surface being smooth one horse was enabled to pull the load of two or three, these wood ways in his time were called in the North of England " way leaves," this was about the year 1676.* " Way leaves" were first confined to the Coal districts in the North of Eng¬ land, but, about the middle of the last century as the iron works of Shropshire and Staffordshire developed themselves, some of the Coal Miners of the North were induced by the owners of mines and the Iron Masters of these more Southern districts to migrate South, and these Colliers with their mining knowledge also brought the economising plan adopted in the North for the conveyance of heavy and continuous traffic over * Life of Lord Keeper Guilford, vol. 1, p. 265. 16 agivenspot, and ihus by degrees these "Way leaves" becî universal in the neighbourhood of mines, quarries, and 1 kilns, and in some instances were even laid down for conveyanceof Coal some distance inland. Aboutthe year 1 the continual wear of the wood and the gradual increai expense of procuring it, suggested the plan of iron pla being generally nailed over the surface of the wooden ph and by degrees the solid iron was entirely substituted. ' iron, however, was differently shaped from that of the pre: day, the rail at present used is literally a rail of iron, but 1 formerly in use was a plane, sunk a few inches beneath road way, the wheels ran on the smooth surface and were ] vented running out of the proper track by the raised sides present the rails are raised above the road way and projecting part of the inner side of the wheels keep carriages in their proper course, the name universally gi to these level or sunken tracts of iron was Tramroad, and common had these Tramroads become, that in 1811 t extended to a length of not less than 150 miles in South W; alone. In 1821 an act was passed for authorising a Tramr between Darlington and Stockton, and that appears to h been the first line projected for the conveyance of passeng as also the first promoted by a Company, all the previous "V leaves" and "Tramways" had been made by one or a few pro] etors, solely for their own convenience to economise lal This Darlington and Stockton line was opened for Coal tra in 1823, and for passengers' traffic on the 27th Septeml 1825, and was intended at its formation, and was forms years worked in the old method by horses, the line, howe\ with its various branches has gradually become exclusiv devoted to the conveyance of Coal from the Coal pits Durham to Stockton, and from the shares having fallen i: 17 a few liands, the whole has assumed (he appearance of a private undertaking, the Directors refusing even to publish their accounts or receipts. We now come to the consideration of the progenitor of all our present Railway Schemes, for from the success, or supposed and boasted success of this Railway, sprang all our present companies, that is, the Liverpool and Manchester Railway, and it is curious to observe that the Company, which laid the foundation for the extraordinary madness of 1845 should have originated in a year equally fer¬ tile in bubble projects. Of the two hundred and sixty-four new Companies formed in a short space of time, in the years 1824 and 1825, and requiring according to the estimates set forth in the prospectuses 372,173,100/., fifty-four were for making Canals and Railroads, and only one survived the panic of 1827, and that was, the Company formed for making the Liverpool and Manchester Railway, and strange it is, that, that Railway has been the means of resuscitating manias as general in effect, as unprincipled in execution, and even more direful in consequences, than that in which it had had its birth.* The Liverpool and Manchester Railway Company was pro¬ jected in the memorable year of 1825, and an act was passed in 1826, incorporating a Company " for making, and "maintaining a Railway or Tramroad, from the Town of " Liverpool to the Town of Manchester, with certain branches *Soniaiiy bubble Companies were formed in 1836, on the much boasted suc¬ cess of the Liverpool and Manchester Railway, that Governnierjt was obliged to interfere, and the Parliamentary deposit was raised from 5 to 10/. per cent, the eflectof this mania was severely felt in 1839. The effects of the 1845 mania is now felt in proportion to its violence, and no one knows when or bow it will end, or its ultimate effect.—The overthrow of the French Govern¬ ment was hastened by the corruption ot its members—a corruption which had no bounds in the Railway mania, and which could not afterwards be reduced to moderation. B 18 *' therefrom, all in the County of Lancaster,*" and author was given by the same act for raising 510,000/. by 5,1 Shares of 100/. each, and to borrow 127,500/. The Pari mentary estimate amounted to 510,000/. The chief object this Railway was the transit of heavy merchandize at moderate speed, and for several years after the passing of act of Parliament it was not determined by what power work the line, as however, the works progressed, and it beca necessary to adopt some decisive plan, the Directors in D advertised and offered a premiun of 500/. for the best Ste; Engine to perform certain objects, and Mr. Robert Steph( son was the successful candidate out of four competitors; was this new system of propulsion by locomotives which gE the new feature to Railways. The Liverpool and Manchester Railway, was, we h; seen, authorised in 1826, the estimated expense having be 510,000/. and the length (omitting the branches which w( never made) was 31 miles, the line was opened throughout the 15th September 1830, at that period the cost had exce( ed the estimate by about 355,000/., the expenditure havi been 865,000/. On the 31st Dec. 1836, the expenditure h reached 1,266,969/., that being six years after it was open throughout. In December 1840, being ten years after it h been opened, the expenditure had reached 1,430,304/. and the period of amalgamation with the Grand Junction Railw in the year 1844, the actual sum credited to the Capital e count as expended, amounted to between 1,600,000/. a 1,700,000/. on the same thirty-one miles, and so important is to bring attention to this continual outlay (which, notwii standing the ten per cent, dividends declared, is of so suspii *7 060.4,0. 49, 5th Ma}^, 1826. The Bolton and Leigh Railway v sanctioned the year previous, but that was a very short line projected for < conveyance of goods in conjunction with the Leeds and Liverpool Canal. 19 ous and important a character, important, because the sums credited to this continual outlay in every case exceed the dividends, except in cases where the Directors have had opportunities of dipping into Capital and crediting it to branches or extensions) that the reader is troubled with the following evidence given by Mr. Booth, on 31st June 1846, before the Committee on the Railway Acts Enactments. Question 2229. "To Mr. Booth:—What situation do you "hold? I now hold the. office of Secretary to the " Grand Junction Company, I was Manager of the " Liverpool and Manchester Company." 2230. " What is the length of the line ? about 31 miles." 2231. "What was the original estimate for it? The origi- " nal estimate that we went to Parliament for was " 510,000/." 2232. " Was that the first application to Parliament? No, " the second, the present line is a different line from " the first ; the first failed." 2234. " What was the actual cost ? The actual cost up to the " time we joined the Grand Junction, was between " 1,600,000/. and 1,700,000/." 2237. "Was the Liverpool and Manchester connected by " amalgamation with any other line ? (meaning before "it joined the Grand Junction) No." 2238. " Have the Company ever subscribed to any other " lines ? No." 2239. " They have no branches .? No." 11 is necessary to pay particular attention to this Railway because it was the first worked by steam locomotive power, all the previous Tramroads or Railways had been worked by horses or stationary steam engines only, and the introduction of locomotive power was looked upon, in consequence of the superior speed to be attained, as (undoubtedly it was) one of 20 the greatest inventions of the age, but unfortunately since the application of steam locomotive power, we see in every Railway Company, sums continuously credited to the capital account exceeding the dividends declared, and which have actually increased twofold during the last twelve months in those Companies which have continued their previous high dividends * Between the years 1830 and 1836 a great variety of opin¬ ion existed on the success of the first locomotive Railway ; during the first five years, however, 24 Railway Acts passed, in 1836 there were so many bubble Companies that the House of Commons found it necessary to pass a standing order, re¬ quiring a deposit of 10/ per cent, which successfully checked the mania, but 29 Railway Acts passed in that year, and 15 in 1837, after this. Railway shares were in low repute and from gambling premiums fell to great discounts, and a lull in Railway speculations followed. In 1842 it revived, and in 1843, 24 Railway Acts passed, in the year 1844, about 66 Acts passed, in 1845, 109, in 1846, 287, and in 1847 190. The Railways sanctioned at the end of the Session of 1847 in the United Kingdom numbered 11,792 miles, of which rather more than 3335 miles are opened. Thesuras expend, ed, or authorized to be expended f previous to 1845 amoun- ^ To show the complete recklessness in the mode of declaring dividends, the South Western Company need only be referred to. fThe words " expended or authorized to be expended," are made useof» because many of the Railway Companies raised very large sums of money without legal authority, by way of loan ; they first borrowed on debentures the sum authorized, and then obtained further sums on loan notes—these loan notes were not, at the time of their first introduction, a legal security, and previous to the Act legalizing them, the lender had no remedy whatever for the recovery of his money, and of all this the public generally were ignorant, until the Times" newspaper brought the subject before the public in is43, on which tlie Government introduced the 7 and 8 Vict., c 85, legalizing the loan notes, and binding the Companies to pay them off. These loan notes first introduced the practice, sin^e become too prevalent, of sending securities to 21 ted to 143,838,600/. and the expenditure authorised by the acts of 1845, 1846, and 1847 alone amounts to 231,691,022/* the total authorized and unauthorized expenditure for Railway construction at the end of the Session of 1847 was 375,529,622/ of which, about 150,000,000 has been raised. It will be seen that we have not paid half the present sanctioned expenditure ; surely the affairs of the older Com¬ panies should be examined so as to ascertain that all is safe before going on further wilh this outlay, which, in fact, is found to have no ending, for it will be seen hereafter, that the finished lines are continually requiring more to be ex¬ pended, or at least credited to capital, than they profess to earn. The present London and North Western Railway Company was formed by the amalgamation in 1846, of the Manchester and Liverpool, the Grand Junction, the London and Birmingham, and the Manchester and Birmingham Com. panics. The first completed portion of this Company's Railway, was that between Liverpool and Manchester, opened 5th September 1830, and called, up to a recent period, the Liverpool and Manchester Railway, already so frequently referred to. The London and Birmingham, the Grand Junc¬ tion, which (from previous amalgamations,) included the Brolcers and Country Banlrers to sell ; thus, if the lowest sum to be taken for 1,000/. security was 800/., and the Broker or Banker prevailed on a customer to give 1,000/., he pocketted 200/., or if 900/., he pocketed 100/., and so in proportion, and the difference must be credited some where. In one instance, during the late autumn 10,000/. of debentures were offered at 4,000/., in a line which, from the notoriety of the Chairman, has been spoken of in the highest terms. * The following is taken from the return moved for each year by Mr. Moffatt. 1845 1846 1847 Capital. .£44,741,200 90,298,430 25,695,257 „£14,872.326 42,318,938 13,764,871 Loan. Total. £59,613,526 132,617,368 39,460,128 231,691,022 22 Warrington and Newton, the Bolton and Leigh, and Kenyon and Leigh Railways, were opened throughout in 1838 ; the Chester and Crewe (also a portion from a previous amalga¬ mation of the Grand Junction) was completed in 1841, and the Manchester and Birmingham in 1842, These Railways, together, without any branch or extension, form the item of '• main line" in the London and North Western Company's Accounts; and the following table will show, 1st, the origi¬ nal estimates; 2ndly, the sum expended six months after the opening throughout ; and Srdly and 4thly, the pro¬ gressive sums since credited to capital as expended. Expenditure on . Dec. 31.1847 NAME. Manchester and Liverpool London and Birmingham Gd. J unction .Warrington & Newton, Bolton&Leigh, &c, ■}; Manchester and Birmingham* Original Expenditure Expenditure when on Estimate. Completed. Dec. 31, 1845. £ £ £ 510,000 865,000 1.600,000-, 2,500,000 5,018,816 6,073,114 j 1,188,000 1,948,0571 2,510,931 j" 250,000 258,025 J 1 700,000 1,838,404 2,204,8387 5,148,000 9,928,302 12,388,883 £ 14,440,813 Nominal increase made in favour of Grand Junction Propria- ' ;14,440,813 964,762 tors, and participating fully in dividend " j" Nominal increase in favour of the London and Birmingham 1 -, 2oy eqq Proprietors, and on which 5/. per cent is paid.f J ' 16,643,075 * The original Act authorized about three times the number of miles which the estimate for 95 miles was 2,100,000/, only 31 miles were construc¬ ted. f Independent of the nominal increase given to the Grand Junct'on Pro¬ prietors, the London and Birmingham Company alloted 68,750 shares, on which 10/. per cent, is paid, on 137,500/ tlie amount called, and 5/ per cent., on 1,237,500/ which is not to be called up, thus the Company is as it were liable to a rent charge of 61,875/ per annum, which increases the virtual cost to 16,643,075/. This allotment was made in 1845, and it is impossilile to ascer¬ tain what proportion of these shares went to the directors ornominee.s. The premiums at the time of issue exceeded 1,375,000// and the sums credited as profits on shares sold by the Company amounted, on one or two occasions to 8 or 9000/. only 23 We here see that the original estimates of the Railways, including plant, now forming the main line of the London and North Western Company, was 5,148,000/., that sum heing the amount proved by the engineers to be sufficient before the Parliamentary Committees; we next see that the expenditure at the periods when opened throughout, amounted to 9,928,302/. ; that on the 31st December 1845, the further sum credited, had increased the previous sum to 12,388,883/., and that during the last two years the Directors have further credited the same mileage with 2,051,930/. more, besides a nominal sum, entitled to participate equally in dividend, amounting to 964,762/., and to a charge of 51. per cent, in perpetuity on 1,237,500/. The main line is, therefore, at present credited as having virtually cost (considering the nominal sum given to the Grand Junction proprietors, as a debt at 51. per cent., and therefore doubled), 17,607,837/. Can these accounts be correct ? When is Railway expenditure to cease? Has the main line really required an expenditure of 4,512,511/. since it was opened, and does it still require a continuous credit to capital, amounting to 1,000,000/. a year? or have these sums been used for paying dividends? If expended on the line, surely, not only shareholders, but the whole Country should be made aware that Railways are not to be made under twice the amount generally supposed, and that when made, they are only to be worked with a continual outlay greater than the dividends declared. If deception has been practised, it cannot be too soon exposed, before further sums are spent on such unprofitable works. But it is not the main line alone which shews the increase, for on reference to the last capital account presented to the shareholders of the London and North Western Railway Company (the account to the 31st December 1847), the following will be found to be some of the items;— 24 The West London, for which was paid in 1845 £30,000* Aylesbury Branch, original estimate 50,000 Bedford and Bletchley do. ... 125,000 Northampton&Peterborough do. ... 500,000 Warwick and Leamington do. ... 130,000 Trent Valley do. ... 900,000|- Lancaster and Carlisle subscription authorised 400,000 £2,135,000 £3,378,232 Here we find that the sums credited on the opened branches exceed the estimate, or the sum authorised to be subscribed by 1,243,232/. Now if these excesses are added to the sum credited as expended on the main line during the past two years alone, we have the enormous sum of 3,294,962/., when the total dividend declared during the same time, was 2,453,905/. The sums expended on the unfinished lines (the justness and correctness of which we have no mode of examining), amount to 3,389,209/. which, with an item of 114,985/. for Parliamentary proceedings, and a balance of 369,447/. of capital said to be in hand, make a total of 21,882,800/. as follows : — X Total Main Lines 14,440,813 Subsidary Lines opened §3,568,346 Lines in the Course of Construction 3,389,209 Parliamentary Expenses during Half Year ... 114,985 Balance said to be in hand 369,447 £21,882,800 * The sum agreed to be paid for the West London Railway in 1845, was 60,000/., but the Great Western Company afterwards arranged to pay half of it, and 30,000/. is credited as having been paid by that Company f The estimate is taken from a Parliamentary paper, ordered tobe printed by the House of Commons, on the 8th August, 1845. In 1845 the engineers were supposed to have had some experience. Sums credited in last account £48,334 56,474 256,198 729,801 162,178 1,647,906 477,341 25 This sum was raised as follows :— By Shares Debenture and Loan Notes i Calls paid in Advance bearing £8,605,574 £13,091,066 51. per cent, interest 186,160 8,791,734 £21,882,800 To the above loan should be added the nominal increase, participating equally in dividend, amounting to 964,762/., and the further nominal increase of 1,237,500/., participating at 51. per cent., and which makes the expenditure equal to 23,715,515/. The loan and nominal increase is enormous, the former amounting as it does to 8,791,734/. and the latter to 2,202,262/ and requiring in interest, dividends, stamps, and commis¬ sions, an annual payment of 670,000/. How can this debt ever be paid off ? The traffic receipts too of the Company demand attention; in the return previous to which this is written, viz., to the week ending the 27th February, 1848, the sum is 33,598/. on 4461 miles, when the corresponding week of 1846, ending 1st March, it was 35,017/. on 307^ miles. It does not then appear that there was any absolute necessity {as regards traffic), for charging new engines or carriages to the capital account, or that more accommoda¬ tion was needed. J See accounts presented to meeting held February, 1848. 5 This exceeds the amount given above by 190,114/., the sum subscribed to the Macclesfield branch. 26 MiDLANQ RAILWAY. This is the next Railway in point of length, and the Com- pany, as at present constituted, was formed in 1844, by the amalgamation of the North Midland, the Midland Counties, and the Birmingham and Derby Railway Companies. The original estimate of the North Midland Rail¬ way in 183d, was ¿£1,499,100 Do. Midland Counties ditto 1,000,000 Do. Birmingham and Derby Junction ditto ... 622,800 Original Estimate, including Working Stock ¿£3,121,900 The North Midland Railway was commenced and com. pleted under the auspices of the present Chairman of the London and North Western Company in 1840, and at that time it had cost* a62,929,696 The Midland Counties Railway was also completed in 1840 for 1,525,000 Birmingham and Derby was opened in 1842, the expenditure having been 1,143,299 Cost at opening, including Working Stock ¿£5,597,995 On the 30th June, 1844, the sums credited to capital had increased, without any additional mileage, as follows;— From the year 1844, there is much difficulty in dealing with this Company. We find by Mr. Hudson's evirlence The North Midland to... Midland Counties Birmingham and Derby ¿£3,329,932 1,708,170 1,206,644 Cost in 1844, including Working Stock £6,244,746 * These sums are taken from the accounts a year after the date of opening throughout, some time being allowed for the adjustmentof disputed accounts. 27 given before a Committee on the 14lh July, 1846,* Question and Answer 3255, that the above three Railways (without any additional mileage), to 30th June, 1846, had cost 6,581,233/., being an increase of 336,487/., in the two years, and as the money had been raised at a discount of 600,000/.,t dividend or interest was payable on 7,180,000/. of share capital, and loan. We also find by the same question and answer, that the Midland Company had some time before agreed, and had since received power by an act of Par¬ liament, to lease the Birmingham and Gloucester, and the Gloucester and Bristol Railways, at a rent equal to 6/. per cent, on 1,800,000/., to take upon themselves the debt, and to pay the rent of 18,500/. a year due to the Great Western Company for the portion of the Railway between Standish and Gloucester. The accounts of these two Companies have not been pub. lished for the last two years, but the line was opened between Birmingham and Gloucester in 1842 ; and the sum then expended was ¿€1,244,545 The line from Gloucester to Bristol was opened throughout in 1845, at which time the sum expended appears to have been 667,822 Total at period of opening £1,912,367 The sum expended on 30th June, 1846, appears by a return made to the Select Committee on Railway Acts Enactments, as follows : — * Minutes of evidence taken before the Select Committee on Railway Acts Enactments. t riie discount actually amounted to 627,364/. at the time Mr. Hudson gave his evidence. 28 BIRMINGHAM AND GLOUCESTER. Parliamentary Expenses Rails Other Works Cost of Land Engineering. áL s. d. *£ 180,656 7 8 .. 47,559 4 3 .. 27,077 2 8 £182,894 799,678 Carriages, Engines, Trucks, &c. 982,572 12 0 121,470 12 6 £1,359,335 19 1 BRISTOL AND GLOUCESTER. Main Line Bristol to Standish, 30 miles.f Total Cost of Construction 707,874 0 0 Expended to 30th June, 1846 £2,067,209 19 1 The accounts of the Birmingham and Gloucester and the Bristol and Gloucester, since 30th June, 1846, have not been published in any of the Railway papers, and therefore, we cannot see the amount since credited to capital. On the 5th Jan. 1847, a call of 21 was made on 7,539 50/. shares, and on the same day became due a call of 3/. 14s 6i/ on 7,539 37/5s shares; these calls would produce 43,161/. and similar calls were made payable on 5th July, 1847, and on the 1st January, 1848, these calls every half year are about sufficient to pay the guaranteed dividends on these two Companies' shares, and as no mention is made of any dividend paid to those Companies in the Midland Company's Revenue Account, we must suppose it used for that purpose.I * This would make an average of 330/. an acre. -f-That portion between Standish and Gloucester belongs to the Great Western, and is rented, together with a portion of the station, at 18,500/. a year—that rent is to be increased in a few years 1,000/. a year. Î A hasty inspection of the accounts would convey the idea that the Bir¬ mingham and Bristol expenditure was included in the 9,853,761/. credited to 29 The sum of 200,000/. is also expended on the Sheffield and Rotherham Railway, about 50,000/, being borrowed and 150,000/. raised on shares on which 6/. per cent is guaranteed, and this expenditure does not appear to be included in Mid¬ land Company's account, The Leicester and Swannington Railway was opened in 1832, the length being 16 miles, and the cost 10,000 a mile. In 1843 the expenditure had reached 175,000/, and 81. per cent, is guaranteed on 2,800 shares, of 50/. each, on which 140,000/. is paid, and this expenditure is not included in the Midland Company's account. The Leeds and Bradford Company have expended 1,093,403/. and the Midland Company have guaranteed (that is, as soon as the line is opened from Skipton to Colne) 10/. per cent on the share capital, and this expenditure is not in¬ cluded in the Midland Company's capital account. The last account (to 31st Dec. 1847,) of the Midland Company, showed an expenditure on the Midland Railway and its branches amounting to *.£ 9,853,761 capital in the last account presented to the Midland Proprietors, but a retro¬ spect of the Midland Company's accounts commencing 51st Dec., 1844, at once shews the fallacy.—See next note. * This sum is made up as follovvs Amount credited as expended on the North Midland, Midland Counties, and the Birmingham and Deiby Railways, at the period of amalgamation, June, 1844, (exclusive of nominal 600,000/.) =£*6,*244,746 Additional sums credited to these lines under the head Land and Rails, &c., to 31st Dec., 1845 345,761 Do. to 30th June, 1846, under the head Waggons, Works, and Rails, &c 355,796 Do. ,, 31st Dec., 1846, do. do, 419,92^2 Do, ,, 30th June, 1247, do. do. 465,189 Do. „ 31st Dec., 1847, do. de. 706,842 Total sum credited to the North Midland, Midland Counties, and Birmingham and Derby Railways Carried forward 8,558,256 30 Brought forward... Í9,853,761 The last published account of the Birmingham and Bristol Railway, i. e. to the 30th of June, 1846, showed an expenditure of ¿£2,067,206 The last published account of the Sheffield and Rotterham Company i. e. to June 1843, showed an expenditure amounting to 200,000 The last published account of Leicester and Swannington Company i. e. to June 1843, showed an expenditure amounting to 175,000 ¿£12,295,967 To this sum should be added the nominal capital on which dividend is payable 600,000 ¿£12,895,967 To which should be added the Leeds and Brad- ford expenditure 1,093,403 Total £13,989,370 • ßrouglit forward... „£8,538,256 NEW LINES. ParlianientÄy Expenses and Law Syston and reterboroiigli Brandl Nottingliam and Lincoln Erewasli Valley Leicester and Swannington Jixlension Nottingtiani and Mansfield Sheffield and Manchester Junction Purchase of Ashby Canal (query, whose property ?) Do. Oakham do. do. Subscription to Manchester, Sheffield, and Lincoln Railway ... Do. ,, Manchester, Brigtiton, and Matlock do. Do. ,, South Staflbrdshire do. Do. ,, South Devon- do. Interest paid out of Capital on ne«' shares Cost of Electric Telegraph Total charge to Midland, not including Birmingham and Bristol, Sheffield and Rotherham, Leicester and Svvanning- > .£9,853,761 ton, Leeds and Bradford, &c J 83,835 330,869 209,617 105.712 101,142 4, 742 15,100 109,900 26,000 21,075 29,925 14,550 60,000 152,621 49,414 31 The Birmingham and Gloucester accounts have not been published since the line was leased by the Midland Company, the Bristol and Gloucester accounts have not been published since 1815, nor have the other Companies' accounts for many years, with the exception of the Leeds and Bradford. The following are the calls made on the shares, and the amounts paid up to Jan. 1847, as appears by the Report of the Commissioners on Railways.* Midland Consolidated Stock, Receipts on the 120,695 Shares £4,531,402 SheiBeld and Rotherhara 61 per cent. J 4000 Shares of 25n preference 1.4000 do. 121 10s J '' ' Leicester and Swannington 8 do. do. 2,800 do. 501 140,000 Bristol and Birmingham 6 do. do. shares viz. ;— 9,374 1001 shares 1001 called £937,400 8,189 251 do. 251 do 204,725 7,539 501 do. 361 do 271,404 7,539 371 5s do. Ill 2s 6d do 83,871 1,497,400 53,293 New Midland Shares of 401 each 401 paid 2,131,720 2,900 Erewash Valley Shares, 61 per cent, guaranteed, 501 each, 371'lOs called 117,300 77,323 Extension Shares, 5 per cent, guaranteed till 1st January, 1852, 151 called 1,159,815 Amount of share capital called to March, 1848 9,727,667 The Loan 2,680,389 12,408,056 Fictitious sum entitled to dividend 600,000 13,008,056 To this should be added the expenditure on the Leeds and Bradford, on which 101 per cent, will be shortly payable on 900,0001. and Int. on its remainder 1,093,403 £14,101,459 This also shows most clearly that the Birmingham and Bristol expenditure is not included in the accounts presented * Report of the Commissioners of Railways 1847, 164, Ixxii, appendix 3 and 4,—the calls since made are added. 32 other leased or amalgamated lines, and that the present arrearage on calls in the Midland Company, alone amounts to 102,089/. Mr. Hudson stated in his evidence in July, 1846, that the North Midland, the Midland Counties, and Birmingham and Derby Railways, had cost 6,581,233/., and to which he added the discount at which the money was raised, namely, 600,000/. (actually 627,364/.) so that the virtual cost was 7,181,233/. and in answer to a question put by Mr. Hume (3265), he says the capital actually raised by shares and bonds up to 30th June, 1846, was 7,963,706/., the accounts submitted to the meeting of August 1846, made up to same date, stated it tobe much less, namely, 7,557,712/.; and by the last ac¬ count (to 31st December, 1847), it will, on examination, be found that the three Railways, and the very same mileage, which when on amalgamation in 1844, had cost 6,244,746/. without the 600,000, (properly 627,364/.) discount, at which the money was raised, has now bee.n credited to December 31, 1847, 568,538,256, £9,138,256 The Branches since made, or now making 1,276,091 1,276,091 Electric Telegraph 49,4l4 49,414 Total actually expended .£9,863,761 ""„''anT' ¿£10,463,761 The impression conveyed by the Midland Company's ac¬ counts is, that the Midland Company have expended (includ¬ ing the Leicester and Swannington, the Sheffield and Ro- therham, the Birmingham and Bristol Lines) 9,863,761/. really, and 10,463,761/. nominally, but that sum is actually credited as expended on the late North Midland, Midland Counties, and Birmingham and Derby lines, a few exten- sions, two canal purchases, and the 125,550/. subscribed to other Companies alone, and the sums expended between 33 Birmingham and Bristol, Sheffield and Rolherham, Leicester and Swannington, the Leeds and Bradford, and other rented or guaranteed lines, are not included. Again, a return was ordered by the House of Commons on the 2nd March, 1847, " of the amount of money expended in the actual cost of construction, and for working Stock on all Railways previous to January 1847." And in this return the expenditure of the Midland Railway is stated to be 7,862,27iL, but no return is made of the expenditure on the Birmingham and Bristol, or any of the lines amalgamated or leased, and the impression conveyed is, that the whole expenditure on lines worked by the Midland Company, is confined to that amount. Again, Mr. Ellice moved for a return on the 28th Jan. 1847, "of all Mortgages, Bonds, Debentures, or Engagements for borrow¬ ing Money contracted by Railway Companies then outstand- ing." The return made by the Midland Company was 1,815,355Z., omitting all mention of the Birmingham and Bristol Railway, and the debts of the other Companies under its controul, and entirely omitting to make (as in the other return), any return of those companies. And in every return, and in every account, there is this same omission. Attention should be again brought to the fact, that the original estimate of the North Midland, the Midland Counties, and the Birmingham and Derby Railway,-was 3,121,900/., that the sum expended, when opened throughout, was 5,597,995/., that the expenditure had increased on the same mileage in 1844, to 6,244,746/., and that at the present time, as far as it is possible to collect from a close examination of the accounts, the sum credited on that very same mileage, has increased to 8,538,256/. really, and 9,138,256/. nominally ; by nominally is meant, that 600,000/., (or more properly 627,364/.) is supposed to be paid up on shares, and is en¬ titled to a dividend, though not paid. It is impossible to c 34 let this Company pass without some remarks, on their agree¬ ments and guarantees. The Leeds and Bradford Railway was formerly projected by the North Midland Company ; but on the shares being allotted, the shareholders found that the whole matter had been taken out of their hands, and Mr. Hudson and Mr. Waddington acknowledged that they had allotted a very large number of the shares to themselves; but that is not all; Mr. Hudson, as the Chairman, and Mr. Wad. dington as a Director of the Midland Company, have agreed to lease to the Midland Company the Railway of which they themselves were also Chairman and Deputy-Chairman, and chief proprietors ; and the terms on which they on behalf of the Midland Company agreed to give was lOf. per cent., the highest dividend allowed by law, and the shares were made by that and other means, to reach 60 and 70 premium, with a nominal sum paid ; and the proprietors of the Midland Company not only lost the allotments of shares which stood at high pre¬ miums, but have also encumbered their line with a heavy guarantee. Another of these peculiar transactions was the Bir¬ mingham and Gloucester amalgamation. The shares of this Company sold in 1841 at 40/. discount, in 1842 at 50/. discount, in 1843 at 52/. discount, and in 1844 at 50/. discount; and yet early in 1845, the Midland Company agreed to guarantee 6 per cent, on the share capital, take to the debts, and pay the rents and liabilities, and redeem the shares after 1848, at a premium of 50/. per cent. The Midland Company have also agreed to guarantee 8 per cent, on the Leicester and Swan- nington, and purchase at 100/. premium ; and several other Railways and Canals were purchased or leased at enormous sums, for no other apparent reason but that of raising the price of shares ; for if Directors could purchase shares for themselves or nominees, at great discounts, for their own benefit, surely they might have done the same for the Com¬ panies under their own controul or direction. 35 THE CREAT WESTERN. The original estimate for this Railway, from the present station at Paddington to Bristol, 118| miles, including sta¬ tions and working stock, appears to have been 4,999,999/. It was opened throughout on the 30th June, 1841, the expen¬ diture at that time amounted to 5,877,426/., and the sum credited on that same 118| miles on the 31st December, 1847, had reached 7,415,711/. The branches show a similar in¬ crease, and the Berks and Hants portion, sanctioned in 1845, the estimate for which was 400,000/. has already been ere. dited (though not near completed), 714,913/. In stating the estimate to have been 400,000/., the Parlia¬ mentary Paper is quoted, which was ordered by the House of Commons on the 17th July and 4th August, 1845, to be printed, being a return of the Railway Bills passed in 1845.* * A complete analysis of this Company, and also of all the broad gauge lines is given in No. 5 of a work now publishing by Messrs Sherwood, Gilbert, and Piper, Paternoster Row, entitled " Railways as they really are,'* and no Share or Debenture holder should be without it. The affairs of this Com¬ pany, as well as the other broad gauge lines, are there so fully treated of, it is impossible to add anything nevv. 36 LONDON AND SOUTH WESTERN. The estimate for this Railway, as originally projected from London to Southampton, was 1,000,000/., the sum expended on 30th June, 1840, when opened throughout, was 2,065,609/. The estimate for the Portsmouth branch was 300,000/., and the sum expended on the 31st December, 1041, when opened, throughout, was 356,930/., the expenditure then on these two lines, at the time of completion, amounted to 2,422,539/., or an excess over the estimate, of 1,122,539/., and the sums since credited have increased it to 2,639,118/. It is to the items credited by this Company to branches and extensions, to which attention should be directed. The estimate for the Richmond line was 200,000/. It stands in the last account as having cost 353,490/. The esti¬ mate for the Bishopstoke and Salisbury line was 240,000/., the sum already expended is 257,909/. The estimate for the Southampton and Dorchester line was 500,000/., the sum credited as expended, is already 657,153/., on a single line of rail. The London and South Western Company have ere- dited as having expended on opened lines, that is to say, be- twen London and Southampton, the Gosport branch, the Salisbury branch, the Richmond Railway, the Guildford Junc¬ tion,' and the Southampton and Dorchester Railway, the sum of .£3,986,627 On Lines in the Course of Construction, includ¬ ing the Metropolitan Extensions, and the Andover and Southampton Branch 1,462,495 It advanced (without legal authority) to the South Western Steam Navigation Com¬ pany, and to other Companies, most of Carried forward... 5,449,122 3/ Brought forward... 5,419,122 which have not obtained their Acts of In¬ corporation, commencing with the Windsor, Staines, and South Western, to which 142,164L is credited, and ending with West- ern Lines, to which 140,340L is credited ... 520,529 Credited to Capital Account for Engineering, Law, Rails, Engines, Carriages, Stationery, Interest, &c., which should have been charged against Revenue 452,436 If a proprietor refers to the Revenue Account of 31st Dec. 1844, he will find that the balance shewn for dividend was 101,1911. at a period when 2,604,4051. had been expended on the opened lines, and if he refers to the last Account, i. e. to December 1847, being a corresponding half year, when 3,976,736/. had been expended on the opened lines, (without including those recently so,) and to which 400,000/. must be added, that sum being entitled to dividend, being the discount at which the 16,000 shares were issued, making a total of 4,376,736/. he will find the balance for dividend, 104,479/. Yet, strange to say, in 1844, a dividend of 6^ per cent was declared, and in 1848,a dividend of 8 per cent. If 101,191/. will pay a dividend of 65 per cent, when 2,604,405/. is expen- ded, and 92f miles opened—surely an additional 3,288/. will not enable the Company to declare a dividend of 8 per cent, when a sum equal to 4,376,736/. is expended on opened lines, and the traffic mileage increased from 92| to 188. Attention cannot be too strongly directed to the sums Total expenditure Fictitious Discount at which 16,000 shares were issued 6,424,087 400,000 The present expenditure equal to £6,822,087 38 credited 'to capital in the last account, commencing with the 11,810/. charged for surveying and engineering, and ending with sleepers, 1,683/. ; between these two items are sums amounting in the aggregate to 450,000/., certainly chargeable to Revenue, and sufficiently large to swallow up two or three years' dividend ; and which sum is in addi¬ tion to 520,529/. credited to other Companies, making together very nearly one million sterling. These additional credits to capital, but too clearly shew the state and man¬ agement of this Company. LONDON, BRIGHTON, I SOUTH COAST. The original estimate of the Croydon line was 140,000/. ; that of the Brighton line from Croydon to Brighton and Shoreham, 1,800,000/. making a total of 1,940,000/. The sum expended to 31st Dec. 1841, when opened throughout, inclu¬ ding stock, amounted to 2,907,234/. ; the sum credited to the same mileage in the last account, had reached about 3,822,118/. and the whole sum credited as expended on the main line, and branches in the last account amounted to 6,087,821/. to which should be added a fictitious sum of 354,066/. charged on the Brighton and Croydon line, and 91,500/. on the branches, all which is entitled to dividend, and amounting in the whole to 445,566/. : the total expendi¬ ture therefore, is eijual to 6,533,387/. The most remarkable items in the Capital Accounts, are, those vvhich belong to Revenue. In the last account, for instance, are the items of Engines, Tenders, and Machiney, 59,008/.—Carriags, first, second, and third'class, 21,574/.— Horse Boxes, &c. 20,771/. These items on a first comparison with the last account, appear to be merely a slight increase 39 on the former items, but are in fact entire additions, and the whole of those sums, amounting to 101,353/. are credited to capital, in the one half year ; and there have been similar increases in the preceding half years. The item of relaying Croydon line is increased nearly 4,000/., and the two following items 10,000/. ; all of which are very suspicious additions to the capital account. The estimate for the Brighton, Lewes, and Hastings line, sanctioned in 1844, was 425,000/., the sum credited in the last account is 683,737/. The estimate for the Keymer branch, in 1845, was 140,000/., the sum at present credited is 177,314/.; and now, glancing over the last account, and passing items on which there are increases of more than 100,000/. to the capital account in the half year, we see the Croydon Atmospheric item increased from 495,573/. to 522,408/., and " Great Kent line," (a lost line,1 from 51,544/. to 78,214/. These two last items, making 600,262/. look so much like wilful waste, that it is difficult not to anticipate a woeful want.* This last capital account shews an expenditure of 78,741/. over and above the capital and loan receipts. The Com¬ mittee of shareholders now sitting, have a duty to perform quite at variance with their interests ; if they report the Company in a state of insolvency as regards revenue, they virtually say that their property is worth nothing, at any rate, from the immense sums which have been credited every half- year for working stock and plant, amounting to upwards of 200,000/, a year; the engines and carriages must be in the most complete order. What information, the single fact that no Company has closed its capital account, should convey- to the cautious. ^ The Share and Debenture holders in this Company, are retened to No. 1 of " Railways as they really are," Sherwood and Co., Pattriio.ster Row. 40 THE SOUTH EASTERN AND DOVER. The estimate for this railway was 1,400,000/., and the sum expended on the 1st of August 1844, when opened throughout, amounted to 3,224,074/. the expenditure has since increased to 6,932,181/. and the following are a few of the items: the Kent lines not yet sanctioned, stood in the account to 31st of July, 1846, at 206,560/., and the Parliamentary expenses and Engineering have since that period increased that single item to 400,196/,, and the line is not yet sanctioned. The interest charged to capital, already amounts to about 295,607/. The item of Engines and Carriages has increased in the Capital Account, from 128,702/. in 1844; to 422,825/. in 1848. The receipts on shares and loans, to 31st Jan. 1848, amounted to 7,118,103/. (not including the outlay on the Greenwich Rail, way, which is rented at 40,000/. a year, to be increased to 45,000—nor the outlay on the Canterbury and Whitstable Railway, for which 2,200/. a year is given, to be increased to 3,000/.—nor any part of the outlay on the old Croydon line, for the use of which, in the last half year, this Company credits its revenue 10,515/.—while the Brighton Company generously debit themselves 13,188/.*) to which enormous fictitious discounts are to be added—for instance, 28,000 shares, on which 25/. only have been paid, are considered to have 50/. paid up ; other shares when 30/. and 32/. is paid, are to be considered as having also 50/. paid—in fact, the discounts at which 252,500 shares have been issued is equal to 4,500,000/. * Tills Company's affairs are so fully treated of in No, 2 of " Railways as tliey really are," tliat it is difficult to write anything new. 41 LANCASHIRE AND YORKSHIRE. If the accounts of this Company (late Manchester and Leeds) were examined, everything connected with its affairs, is most deplorable, everything in the shape of a Railway Company has been amalgamated with ; and the reasons for so doing are best known to the Directors, 12 of whom alone ■"signed Railway Contracts in 1845, to the extent of more than 2.000,000/.* The original estimate of the Manchester and Leeds Railway was 1,300,000/., the expenditure to June, 1841, had reached to 2,728,278/. and has since increased to 3,364,418/., or with its branches, extensions, and amalgamations, to 7,597,617/.* The Chairman has signified his intention of retiring, and the last half yearly accounts are not published as in previous instances, but the Company acknowledges that it is in debt over and above (its loans and receipts on shares), a sum exceeding a quarter of a million. No one can examine the capital accounts with any degree of attention without being impressed and—were it not for the declarations of the Chair¬ man to the contrary—being convinced that this Company paid all dividends out of capital. *See Pailiainentary leturn. f The affairs of this Company are most fully shewn in No. 7 of " Railways as they really are/' Numerous letters have appeared in the "Railway Times" under the signature of "Junius.'' The Company has been very severely handled by that writer, but it may be questioned whether those letters have notemenated from some one in the Directory, whose object it was to lead the public attention from the vital points j namely, the accounts and the real object of the amalgamations ; it would be interesting to know what this Company has aciually paUldiw in^ the past lO months in advertisements. 42 EASTERN COUNTIES. The original estimate of this line was 1,600,000/. and that estimate included a line the whole distance frotn London to Norwich and Yarmouth, but the Company never executed more than about one third the distance, that is to Colchester, and that was opened at an expenditure of 2,718,020/. that is to say, the sum credited to the 30th June 1843, when opened 51 miles amounted to 2,718,020/. and by a return made in 1846, m the same 51 miles is stated to have cost 3,100,000/. being an increase in 3 years of near 400,000/. This Company rents the Northern and Eastern line at a guaranteed dividend of 5/. percent, on 911,850/. and 6/. per cent, on 269,550/. and the holders of the whole of this stock amounting to 1,180,400/. are entitled to the same rate of dividend as the Eastern Counties proprietary, when such dividends exceed the guaranteed amount. This Company issued without legal authority, in 1844 no less than 144,000/. shares, and in 1846 185,000/. shares, and the sum expended by the East¬ ern Counties Company amounted on the 4th January. 1848, to J7,297,242 Fictitious addition entitled to dividend 884,860 8.182,102 Northern and Eastern expenditure 1,180,400 *£9,362,502 The most remarkable feature in this Companyf is the man- *Tliis sum does not include the 12 miles from Peterborough to Stamford, or the 5 miles from St. Ives to Huntingdon. f i his Company's affairs, as also the affairs of other Railway Companies ii> the Eastern District, have been fully discussed in a smail shilling pamph¬ let published by Smith, Elder, and Co., Cornhill, entitled ** The Eastern Counties Railway viewed as an Investment." 43 ner in which the accounts are presented to the proprietors, namely, 400,000?. was added to the last capital account as ex¬ pended in 6 months, without stating for what line it had been applied. In the account to 4th July, 1847, the enormous sum of 741,944?. was similarly credited to capital in another 6 months, in fact, during the past two years, the sums credited to the capital account of the Eastern Counties Company, have been increased from 3,248,063?. to 7,297,242?. Nor should the mummery of the bonus be forgotten, the idea of shares of this Company becoming more valuable, because the Chair¬ man said 20?. should be considered paid when only 16?. Os. 2§ r the Gieat North of England purchase. The Country is fast coming to its senses, and mu.st demand to be released from this monster humbug, or more properly, the sad hallucination which pervades the public mind on the subject of Railway fortunes. By accident, some people unconnected with Railway manage¬ ment, have sold at a profit, and some few by design, have had shares allotted them, (as an advertisement, or to secure the interest of some poweri but the large fortunes have only been acquired by the corresponding ruin and disap¬ pointment of others, accompanied with an abandonment of principle equal to that of a Trustee or Executor who purchases his own property at an enormous price with trust fund, and prevails un his inexperienced ward to sanction the proceding by false representations on the first burst of delight felt on acquiring a majority, f The following is taken from the Parliamentary Report from the Select Committee on Railway Acts Enactments, August 25, 1846, page xx. :— " Your Committee are unable to state with exactness the amount of money divided, or to be divided in this country, among proprietors, as premiums on new shares, but they conceive it cannot fail much short of fifty millions. The payment of large sums to obtain the consent of competing lines to amalga- D 50 SCOTCH AND IRISH RAILWAYS. The capital accounts of the Scotch Railway Companies pre¬ sents the same features as the English. The promoters of the Irish Railways, seeing in 1845, that the shares of those Eng¬ lish Railways, which were proved before Parliamentary Com¬ mittees, to be lines that would pay 10/. per cent, stood at high premiums, immediately proved before Committees, that their lines would pay 11/. and 12/. per cent., amongst these 11/. and 12/. per cent, lines are the Belfast, and Bellymena, and the Cork, and Bandon, mations, which at one time excited so much sensation, was not so objection¬ able in itself as in the use that was made of such amalgamations, and of the power to raise money for the extension of old, and the construction of branch lines. By issuing shares representing capital to an amount far beyond that of the money required, in order to enable proprietors to divide among them¬ selves large premiums, sums were pocketed by proprietors, which, if applied to the purposes of the lines, would have rendered a corresponding issue of shares unnecessary, and in so far diminished the amount of stock created. Of these practices a striking illustration has already been given by your Com¬ mittee, from the Report from the Select Committee on Group (68) of Railway Bills, relating to the Hull and Selby Railway Purchase Bill, and the Great North of England Railway Purchase Bill. Were an account taken of the sums already divided and to be hereafter divided among proprietors in this objectionable way, and of the expenditure incurred in buying off parties sup¬ posed to possess powerful interest, and in proceedings before Committees, u hichat a low estimate alone must have exceeded 25 millions, they would have been found sufficient for the construction of trunk lines for the whole country.'' 51 CONCLUSION. A review has now been taken of the leading companies, and it sufficiently indicates their real position, it is but too evident, that as soon as calls cease to be paid and loans to be made, from that period also cease the payment of dividends. If it were possible to look forward and see a period at which Rail¬ way Companies could with any probability extricate them¬ selves, it would be advisable, however bad the present position, to be silent and live in expectation, but that being completely hopeless, the whole system cannot be too soon brought before the public, especially when it is openly stated that the grossest and lowest tricks are daily resorted to by some Companies, to raise the shares, and make the traffic receipts appear larger," and every day adds to the amount called and the suras borrowed. Many will exclaim, surely noone would voluntarily enter on schemes of such vast magnitude without being convinced of their ultimate success; many no doubt did believe at one time in ultimate success, but it is singular that every Company origi¬ nated with interested persons, and we have but to look at the Parliamentary Agents, Chairman, Directors, and Officers, to see how well they have attained their end. On looking over the accounts presented to Ihe meeting during only the last half year, (a half year when no Parliamentary proceedings are going on) and following a lull in new schemes, it will be found that about half a million is credited to Engineers, that up- wards of a million is credited to Parliamentary expenses, while * It lias bf en aoommoii topic of conversation, that many Conipap.ies make their servants and labourers pay the fares before proceeding to tiie places reipiired, (it is not known uhetlier the guards, engine drivers, and stokers take return lieketst the money being given in one office to pay in another, the object being an apparent increase in the traffic receipts. 52 the items of Engines, Carriages, and Horse Boxes,* amounted to 2,000,000/. the sums credited every half year to land and compensation would purchase a moderate size County,f and the item of sleepers, rails, and works, no doubt bring a fair profit, as the contractor has not unfrequently found the Par- liamentary deposit,t and if we mistake not, some few Bankers who have combined the office of Chairman, Treasurer, and Banker, have not done badly, while some half dozen Merchants and Tradesmen have for some years found the Chairmanship of a Railway Company, far more profitable than their previous business, though now when the public is becoming enlightened they find their businesses too large (Mercantile pursuits be. ing at stand still) to allow of their retaining office.§ This item in the last Midland account, stands at 318,683/. for that one half year. fChairinen and Directors have purchased even estates, and afterwards sold the comparatively smali quantities necessary for their Railway, for sufficient to pay for the whole. One chairman of a Railway , not a hundred miles from Birkenhead, actually signed the conveyance conveying the land to himself and broihcr Dire< tors on behalf of the Company, before he had had it conveyed to himself in his private capacity, and therefore, before he liad paid fur it. J It was admitted before a select Committee, that contractors had fre- .quently supplied the parliamentary deposits with the secret understanding, that he should have the coiUract on certain terms, and that that was a matter of common notoriety in the Railway world; see minutesof evidence taken before the Select Committee on Railways 1844, question 56, page5. § Mr, Glyn has signified his intention of retiring from the Chairmanship of the London an North Western Company, in case Lord Monteagle's bill passes, giving power to the shareholders to apply to Government for an audit of Railway accounts. Mr. Grenfeld has signified his intention of abdicating from the Chairmanship of London, Briglitou, and South Coast Company, since, has he says, abdication is all the rage ; Mr. Holdsworth announced at the last meeting, that it was his intention to retire from the Chairmanship of the Lancashire and Yorkshire Company, his business not allowing him lime sufficient to devote to the Company ; and Mr. Hudson has more than once threatened his subjects with abdication on a simple question being asked, but this threat has only been resorted to of late ; in fact. Railway honora are beginning to dcspited in proportion to the inquisitiveness of the shareholders. 53 The Country at large, isnowleft to form its own conclusions. If the dividends have been paid out of capital, and the pre¬ miums fictitiously obtained, an enquiry should be demanded, and every reparation should be insisted on the behalf of the unfortunate shareholders, by restoring to them as far as possible their fortunes so surreptitiously taken from them. If on the other hand, the continuous sums credited to capital, have been fairly and honestly expended, it becomes the duty of the Government to inquire inio the subject, for not only will the legislature have been deceived by false evidence and false estimates, but the persons embarking their capital have been induced to enter into heavy responsibilities and to part with their money under false pretences. The writer has given a most patient investigation to the subject, purely on public grounds. He has had no interests whatever, for or against railways ; and it would have given him the greatest satisfaction to have found all the Companies the very opposite to what they really are. There is but one parallel in our history to the present period, and that was the years 1721 and 1722, consequent on the speculations of 1718 and 1719 ; and the writer believes he cannot do better than promulgate the course taken at that period ; and it will be found in the following extract of a modern historian * " No interested project was so absurd as not to meet with encouragement during the public delirium (1719); but the South Sea Scheme continued to be the chief object of attrac- Mon. At length, to use the phrase of the times, ' the bubble began to burst.' It was discovered that such as were thought to be in the secret, had disposed of all their stock, while the tide was at its height. A universal alarm was spread ; every one wished to sell, and none would buy except at a very reduced price. The stock fell as rapidly as it had risen, and Russell's Modern Europe, period 1719. 54 to the lowest ebb, so that, in a little time, nothing was to be seen of this bewitching scheme but the direful effects of its violence—the wreck of private fortunes—and the bankruptcy of merchants and trading companies; nor anything to be heard but the ravings of disappointed ambition, the execra¬ tions of beggared avarice ; the pathetic waitings of innocent credulity ; the grief of unexpected poverty, or the frantic bowlings of despair. Only the seasonable interposition and steady wisdom of Parliament, could have prevented a general bankruptcy. " A Committee of the House of Commons was chosen by ballot (December 21), to examine all the books, papers, and proceedings relative to the execution of the South Sea Act. and this Committee discovered that before anv subscription could be made, a fictitious stock of 500,74/.* had been dis¬ posed of by the Directors to facilitate the passing of the Bill. Mr, Aislabie, Chancellor of the Exchequer, who had shared largely in the stock, was expelled from the House of Com¬ mons, and committed to the Tower (1721), for having pro¬ moted the destructive execution of the South Sea Scheme with a view to his own exorbitant profit ; and having com- Ijined with the Directors in their pernicious practices to the ruin of public credit. Secretary Craggs, and his father, also great delinquents, died before they underwent the cen¬ sure of the House ; but the Commons resolved, nevertheless, that Mr. Craggs, senior, was ' a notorious accomplice, with Robert Knight, treasurer to the South Sea Company, and some of the Directors, in carrying on their scandalous prac¬ tices, and therefore, that all the estate of which he was pos¬ sessed at the time of his death, should be applied toward the relief of unhappy sufferers by the South Sea Scheme.! The * The ficticious Capital of the London and North Western RuiKvay Com- |) iny created in IS-to, alone amounts to 2,0. 0,000/, f Journals of Commons 1721. 55 eslates of the Directors were also seized, and ordered to be applied to the same purpose, with the exception of a certain allowance for each Director, according to his conduct and circumstances. " The Commons having thus punished the chief promoters of this iniquitous scheme by stripping them of their ill-gotten wealth, proceeded to repair, as far as possible, the mischief it had occasioned. They soon prepared a bill for that purpose. On the enquiries relative to the framing of this bill, it ap¬ peared that the whole capital stock of the South Sea Com¬ pany, at the end of the year 1720, amounted to 37,800,000Z. ; that the stock allotted to all the proprietors, did not exceed 24,000,500/., and that the remaining capital belonged to the Company in its corporate capacity, being the profit arising from the execution of the fraudulent stock-jobbing scheme. Of this it was ordained, that 7,000,000/. should be paid to the public sufferers; it was also enacted that several additions should be made to the stock of the proprietors out of that which the Company possessed in its own right; and that after such distributions, the remaining capital stock should be divided among the proprietors. By these wise and equi¬ table regulations, public credit was restored, and the ferment of the nation generally subsided." Let it be asked in conclusion, should the opinions of men who have sprang into notice by wild speculations * be adopted * The origin of many of the Railway leaders will be soon a matter of in¬ terest. One of the greatest comemced life as follows :—He was intimate with an old hatchelor worth 30,000/., who had made a will in favour of a nephew, the son of a drunken brother; he had the greatest antipathy to a man that drank, and declared that if his nephew took to that vice he would disinherit him. The neplierv when coming to pay a visit to his uncle, was met by the great railway man in question, and made exceedingly tipsy, and in that con¬ dition was introduced to the uncle, who, the next morning, disinherited him in favour of the man who had been the cause of his mifortune. Anothergreat Railway man commenced life as a banker's clerk Another went to India as a surgeon, and returned rich after negociating a loan for a young rajah. An- 56 in preference to a Peel* or a Russel ! Should Railway pro¬ prietors, after the sad examples they have had,follow the advice of men who have profited by their losses, or should they submit themselves to the responsible advisers of the Crown. other drove a coach and and ran off with an only daughter from a boarding school. Most of the remaining leading railway men found Railway specula¬ tions far more lucrative than their mercantile pursuits, and abandomed the one for the otiier, * Has the country forgotten tiie letter from Sir Robert Peel found in poor Haydon's desk ? London: George Watson, Kirby Street, Hatten Garden.