C. RAILWAY ECONOMICS Capital.—Railway capital is the money expended upon the construction and equipment of the railway property, a railway company being permitted by its act of incorporation to raise capital for these purposes to the extent of a stated amount ; in the case of the Great Northern Railway, as originally projected, the capital was to be £3,500,000 in shares of iioo with a deposit of £2 per share. The railways of Great Britain possess a high capitalization per route mile, resulting from the great opposition of landowners. Thus, in the case of the Liverpool and Man chester 86 landowners were opposed out of the 335 whose ground was required for constructing the lines. This has resulted in heavy legal costs and great difficulties in Parliament in obtaining the passing of the various railway acts. It has been estimated that in the case of the London and Brighton Railway the law charges alone averaged 13,400 per mile. The price of land in England at the time of railway construction 1825-70 was probably higher than in any other country, while the standard of construction was certainly second to none. Heavy traffic was visualized and many of the lines were built with double tracks, while no financial assistance was granted by the State either in the form of cash grants, loans at low rates of interest or in the form of free gifts of land, such as characterized so notably the construction of rail ways on the Continent of Europe and more especially in coun tries at that time practically undeveloped. Canada, perhaps, is one of the most extreme examples of this position, where the C.P.R. not only took over a State constructed railway, but re ceived a cash grant as well as land, in return for constructing a line through to the Pacific Coast. In the United States, railways south and west of Chicago were granted Federal, State and municipal aids for construction in order to open up these terri tories.
The capital of the British railways was somewhat reduced as a result of amalgamation brought about by the Railways Act of I921,`owing to the exchange of shares and stock of the old com panies for that of the new being based upon the market value of those stocks, which in reality meant the prospective earning power of the stocks in question. Thus, too of ordinary stock upon
which, let us say, a dividend of 2% per annum had been made, and which was worth £40 at the time of amalgamation, was allotted 4o of the new stock which carried prospects of a 5% dividend. Thus large sums of nominal capital which had small earning power were converted into smaller sums of capital with more adequate earning power. By this process over L too million of nominal railway capital was eliminated. The capital expendi ture of all the large British railways at the end of 1933 was L1,149,892,098, a decrease of L56,324,625 on the total for 1926, and comparing with in 1913. There are several measurements of British railway capital as shown in the annual returns of the Ministry of Transport. Thus : from which may be deducted the balance of nominal additions and deductions including those consequent upon the passing of the Railways Act 1921, namely, From these figures it will be seen that the British railways as a whole have been conservatively managed as regards finance, and there is no basis upon which to claim that watered capital has tended to increase the level of charges in the form of passen ger fares and freight rates. It is noteworthy that the average rates of interest paid per cent of issued capital were 4.28% in 1913, 4.40% in 1925, and 3.73% in 1926, the last a year of acute industrial depression owing to the long drawn out deadlock in the coalfields and the general strike of that year. The capital of the four large railways at the end of 1927 was as follows :— The percentage of shares and stock to total capital is much greater on British railways than in the case of the American railroads and is a source of financial strength.