Crown Copyright Catalogue Reference

Catalogue Reference:CAB/129/83 Image Reference:0011 (THIS DOCUMENT IS THE PROPERTY OF HER BRITANNIC MAJESTY'S GOVERNMENT)

CONFIDENTIAL

CP.(56) 211 COPY NO. ^ 2

21st September, 1956

CABINET

BRITISH TRANSPORT COMMISSION

Note by the Minister of Transport and Civil Aviation

I circulate for the information of my colleagues a copy of the

memorandum "Review of Financial Situation" prepared by the British

Transport Commission.

H.W.

Ministry of Transport and Civil Aviation, W. 1.

20th September, 1956. BRITISH TRANSPORT COMMISSION

REVIEW OF FINANCIAL SITUATION

222, Marylebone Road, N.W.I. SEPTEMBER, 1956. BRITISH TRANSPORT COMMISSION

REVIEW OF FINANCIAL SITUATION

CHAPTER I j INTRODUCTION

On 19th March, 1956, the Minister of Transport and Civil Aviation made a statement in the House of Commons about' the British Transport Commissions charges. The Commission had shortly before this date made an application to the Minister for an increase in their freight charges, and'to the Transport Tribunal for an increase in certain passenger charges and had also announced a proposed increase of further passenger charges which were within their own authority. Briefly, the Minister informed the House that whereas it was Government policy that nationalised industries, in fixing their charges, should seek fully to reflect their costs, the special position and further outlook relating to the Commission^ affairs justified the Government in asking the Commission, in the national interest, to follow a course which would involve an exception to this general policy. The increases for which the Commission had applied or which they intended to bring into force were, therefore, reduced or postponed for a period of six months, during which a fresh assessment of the Commissions position and prospects would be undertaken to be followed by such special action as seemed appropriate at the end of that period. It was on this clear understanding that the Commission had agreed to the course proposed.

Accordingly the Commission have now reviewed once again the financial prospects of their undertaking and in particular the economics of the Modernisation Plan for the railways. This document sets out the results of their review.

Throughout the review and in estimating the future margin between revenue and expenditure the Commission have, of necessity, framed their forecasts on the basis of the present value of money and a continuance of current economic conditions. They have also had to base themselves on certain assumptions about other matters outside their control, the major assumptions being as follows :

(a) That the Commission will not be prevented from adjusting their charges without delay at any time to cover increases in costs, should they consider it expedient to do so.

(b) That the Commission will be free to operate on flexible systems of charging and to determine on a reasonable basis the scale and scope of the services to be provided.

(c) That the necessary resources of all kinds will be available to enable the Commission, in co-operation with industry, to carry out their Plan for the Modernisation and Re-equipment of British Railways according to programme. (d) That the Government policy regarding the framework within which the Commission operate will remain as at present, (in making this assumption for the. purpose of this review the Commission reserve their right to make separate representations on such matters).

(e) That special action will toe taken as soon as possible which will permit the Commission to preserve an atmosphere of proper financial discipline through out their affairs; it follows that financial targets must toe set which are reasonably possible of achievement in the circumstances, tout which contain no element of subsidy. CHAPTER II 5 THE FINANCIAL PROBLEM

4. The Commission have earned a working surplus in every year since they "began operations. On the other hand, in several of these years the surplus earned was not sufficient to meet the financial charges on the fixed interest "borrowings, which constitute virtually the Commission^ sole source of external capital. The rigidity thus imposed on the Commission's financial policy is relaxed to some extent, however, by a provision In the 191+7 Act which allows the Commission to "take one year with another" in "balancing their accounts. It was also intended that the Commission should build up general reserves which would be used to smooth out those yearly fluctuations of profit and loss which are inherent in a eapital structure based purely on fixed interest borrow in gs , but the Commission started without such reserves and never obtained increases in fares and charges large enough to permit their creation.

5. The finances of the railways have, moreover, been considerably affected by the control over capital investment, the consequences of which are likely to depress their competitive power for some years to come. The restrictions placed on the replacement of out-of-date rolling stock, buildings and equipment have been particularly severe. They have led to excessive maintenance costs and the delays in overcoming war-time arrears have meant that the special reserves inherited to finance these arrears at 1947 prices proved to be quite inadequate at the prices ruling when the work was put in hand. Even more important has been the effect on efficiency, involving higher running costs and in some instances loss of traffic to competitors whose equipment was more up-to-date.

6. Even so,Working Surpluses have been earned as follows

£m. 1948 45.2 1949 31 .3 1950 40.0 1951 49.1 1952 53.8 1953 59.4 1954 45.5 1955 29.5 Against these surpluses, the Central Charges, mainly the financial charges already mentioned for remuneration of capital, have averaged about £50m. a year, with a tendency to rise in later years principally because of the need to replace assets booked at pre-war values by assets purchased at the new levels of cost. However, leaving out a bad period in the late months of 1949 and the early months of 1950, when there were special delays in dealing with charging policy after the devaluation of the pound sterling, the Commission were more or less in balance over the first seven years of their existence, that is, they were remunerating their capital practically in full; it was only the exceedingly poor results in 1955 which prompted the view that one could no longer expect the lean years to "be safely recouped out of the better ones in the future, with the level of. the. accumulated deficit kept to negligible proportions in consequence.

The financial shortfall of the year 1955 was attributable to special causes rather than to any inherent weakness in the economics of the Commission's affairs. The railway strike lost the Commission^ about £12m; there was a lapse of several months in putting up charges which cost £10m: and there were sudden increases in prices (chiefly coal) immediately after the process of re-adjusting the charges was completed, which cost the Commission about £5m. in the calendar year. If these special items, totalling £27m., are added to the actual working surplus of £29i-m. for the year, it will be seen that even the year 1955? though it was a year of financial unbalance, was not a year of fundamental economic weakness. Nevertheless there were growing indications, as the year closed, that the Commission^ finances were being very seriously strained under existing circumstances.

Early in 1956 the position deteriorated further, and possibly it changed in nature. Certainly the back ground .changed, and with the general drive throughout the country to halt further increases in the price of basic goods and services, it became doubtful whether the last general increase in transport wages could or should be recouped forthwith in higher transport charges. On railways in particular the general merchandise traffic continued to decline, partly because they were not equipped to improve their standards of service in step with their ccompetitors. In the event, it was decided, as already mentioned, that it was expedient to limit the amount and nature of the proposed increases in transport charges for six months, and to use this period for making a review of the whole position. Allowing for the increases in charges which vi/ere authorised, the Commission were left with a gap in their budget of the order of £35m. a year. Since that date there have been certain further increases in costs and other changes in the position which mean that the probable rate of deficit is about £h5m. a year.

The accumulated deficit at the end of 1955 was already £70m. This was due mainly to time lags in putting up fares and charges, largely on traffics such as the movement of London passengers, rather than to any inherent weakness in the competitive fields. By the end of this year, however, the accumulated deficit will be of the order of £120m., assuming no further increases in wages or other costs, and it is important to realise what the position will be in a few years' time if appropriate measures are not taken. It is not merely that there will be a steady addition of further and growing deficits, mainly from the operation of British Railways, but also from the operation of London Transport and Inland Waterways. To allow the budget to remain unbalanced will have consequences almost more serious in undermining financial discipline within the organisation, and to rely in effect on indefinite subsidy would be disastrous to the self respect of the undertaking, to their urge tov/ards efficiency, and to the basis of their relations with I 7

other parties. The total deficit carried forward would reach unmanageable proportions, and ultimately a default upon the Commission^ obligations would be inescapable. The effect of suoh a course of events on the services provided to the trader and the travelling public need not be underlined.

10. . This is the potential magnitude of the problem in the absence of remedial measures. It has not been created by a mere decision to restrict increases in charges for a brief period, nor can it be dispelled by the simple expedient of discarding all restraint in charging policy. The Commission have taken, and are taking, the measures outlined in Chapters IV and VI below, and on the assumptions previously mentioned the Commission are confident that these measures will ultimately restore the financial position provided that means can be found to enable the Commission to keep the situation under proper control during the next few years of reconstruction and development. The question of dealing with this period is examined in Chapter VII, and the Commission submit that it should be tackled with decision and urgency. They present in this paper evidence to show, that it is not a matter of rescuing a moribund concern from rain, but of enabling one with a sound, even bright, future to pass through this difficult period without being thrown into hopeless disarray. CHAPTER III : THE ROLE OF THE RAILWAYS

11. The railways represent the preponderant part of the Commission's undertaking and the problem of finding a basis for the profitable operation of British Railways is vital to the Commission. The same problem faces trans port administrations abroad where it has been generally accepted that the railways have an essential part to play. It is significant that most rf the Western European nations gave priority to railway reconstruction in their post war plans.

12. The fact that serious financial problems beset the railways in many countries today must be largely ascribed to the difficulties which these railways have encountered in their endeavours to adapt themselves to the changing pattern of industrial economy and society. Some of these difficulties can be ascribed to statutory requirements; some to public unreadiness to appreciate the full consequences of the emergence of alternative forms of transport; some to attempts to preserve .. traffics which are uneconomic or better suited to other forms of transport; and some to restrictions on capital development or to public reluctance to invest.

13* The need for railways, their role in future and the tasks assigned to the railway system as a whole, and in its individual parts, must be constantly reviewed in the light of local circumstances and of changing conditions; but there are two main criteria "indispensability" and "economy". A service may be. classed as indispensable because the traffic can be moved in no other way; or it may be needed as an essential relief to roads; or there may be no other means of sufficiently fast transit over long distances. By contrast, services may be desirable because, of all the alternatives, they are the most economic either in terms of cost to the customer or in use of national resources.

1U. A very large part of the railway track mileage in the great conurbations like London, Glasgow, South Lancashire and Birmingham is primarily used for the urban and suburban passenger services. These services carry about 1-g- million passengers daily, mainly to and from their work, in brief and exceedingly heavy surges. They account fcr about one half of the annual total of 1 ,000 million passengers on British Railways. The roads could not physically cope with such surges. The railways alone can give the concentrated leading, the strict control and the timing which make these movements possible. A railway can deal with a throughput of at least 20,000 persons an hcur for each track and a large city terminus may handle over 100,000 persons cn a busy morning. Moreover, the public travel at higher speeds over rather longer distances, and in safer circumstances, than obtain sn the roads. Clearly there is no alterna tive to these railway services, although they tend to be expensive to provide and relatively unremunerative. 15. On the other hand, the longer distance passenger traffics account for a lesser number of passengers, but the passenger miles and the average fare per passenger carried are much greater and the services are profitable. The railway cost per seat mile on such services is much lower than the comparable road cost and, even allowing for the greater carrying capacity which the railways have to maintain to cope with surges and with seasonal fluctuations in traffic, the train can still operate at fares which attract the public and leave a profit. Moreover, these long distance services offer speed and comfort as well as such convenience as the night sleeper services. They also provide facilities for the carriage of mails, newspapers, perishables and special parcel traffics, which alone bring in nearly £50 million a year.

16. There is no practicable road alternative to these long distance train services, and a sign of the future may be seen in the growing popularity of the "car sleeper" services over the trunk routes, by which the passenger and his car are transported together.

17* In between the urban and suburban services and the long distance traffics, there are the rural and "feeder" passenger services. Here the role of the railway is less certain and it is here that the greatest changes are to be expected. The bus is often a cheaper and more expeditious method of handling these traffics, and the private car is a still more convenient means. Many of these rail services have been running at a loss for a long time and present a problem which is discussed in a later section of this review. Any plan for refashioning the railway system to suit modern transport conditions must first explore alternative methods of operation. Thereafter, those services which cannot possibly be made economic by modern rail methods and which can be better catered for by road transport must be eliminated.

18. For freight traffic, a railway is a highly economic means of transport when the flow of traffic is heavy enough and steady enough to permit of its being handled in regular trains of vehicles with only one motive unit and crew, rather than in individual vehicles each with its own power and crew, provided always that no costly terminal handlings or tranship ments are involved in getting the traffic from door to door.

19* Regular bulk mineral traffics such as coal, coke and iron ore are usually carried far more cheaply and conveniently, even over short distances, by rail than by road. Nearly 1,000 tons of bulk freight can be moved by a train crew of no more than three men. For such traffics, which are still increasing, railways are the economic form of transport, and,the introduction of large wagons with continuous brakes will make these services stil l more "economic". The railways are also "indispensable" for these traffics, many of which are basic to the economy of the country, for it is probable that for various reasons, including the type of terminal facility required, many of them would find it hard to use the road.

20. Every day, in total, British Railways haul some 60 million ton-miles of freight for their customers, and their flexibility enables them to deal with such great surges as the coal mined in "bull weeks" and the big harvest movements. It would'be manifestly impossible to transfer these traffics to road, especially when big surges are involved, without bringing movement on the roads, at least in the big industrial areas, to a standstill. In the ports, also, both import and export traffic must increasingly be handled by rail if con gestion is to be reduced, as the recent report of the Ports Efficiency Committee has emphasised.

21. While there are, of course, traffics, especially merchandise, which are well suited to road transport for economic reasons, the railways stil l have an essential function in providing the customer with a fast, reliable and individual service for general merchandise traffic. The full potentialities of the railway system for cheap and safe movement of manufactured goods in the modern age lies in the solution of the problem of transhipment between road and rail through the use of containers and special equipment or even vehicles interchangeable between road and rail, and In the develop ment of road-served railheads.

22. In general it can be said that in the United Kingdom, unlike the United States, the passenger services in themselves, prove the necessity for the railways. The contrast is brought home when it is realised that the Southern Region carry annually almost the same number of passengers as all the Class I railways of the United States. The railways are, and will remain, the ideal method of transport for carrying large numbers of people to and from their work and without them a great part of the essential daily and business travel of the country and the big seasonal movements of holiday makers and others would be virtually impossible. But the railways are also indispensable to a great part of the basic freight traffics. They are essential for bulk freight and are the indispensable ally of other forms of movement in meeting the total transport requirements of the country. Finally, the v;alue of the railways to national defence, or in emergency, must not be overlooked. Thus, despite the enormous and rapid growth of road and air transport, the railways will always, as far as can be foreseen, .be a vital part of the country's transport system.

23' Given the existing framework of regulation, the British Transport Commission are tackling the problem of achieving a profitable basis for the operation of British Railways under four principal headings : (a) Modernisation. (b) Elimination of services for which there is no longer public need or which can be more efficiently performed by other means of transport, and development of the remaining services. ( c) Increased productivity. (d) Relaxation of statutory and other obligations, particularly the introduction of greater freedom in fixing fares and charging policy.

These measures are outlined in succeeding chapters and a forecast is given of the extent to which they will redress the present financial position. CHAPTER IV ; CORRECTIVE ACTION IN PROGRESS - RAILWAYS ;

A. MODERNISATION

The aim of the Plan for the Modernisation and Re-equipment of British Railways may he simply stated :-

The Commission are determined to exploit the opportunities for re-equipment which modern science and techniques present, and to transform the operations of British Railways so as to offer the public a rail service second to none, whilst deriving from the equipment the full economic benefit it can provide.

Continuous study has been given to all aspects of operation, and lines of development- have been established which will adjust the patterns of the passenger and freight services to the probable requirements of the future. The Plan is spread over fifteen years; it is conceived as an integrated whole, and is not properly remunerati7/-e unless treated as such, but in its detail it is nevertheless flexible. It is already well under way; a few projects are already complete, and a great volume of work is now in progress which will be completed, and begin to fructify, in a few years' time.

Passenger Traffic

' The principal objectives of the Plan for improving the rail passenger services are :

(a) To make still faster and safer the long distance services of British Railways and to make them more comfortable, clean and punctual, thereby enhancing their competitive power and profitability. (b) To complete the electrification of most of the very intense urban and suburban services in the major centres of population, and to provide faster and more frequent diesel suburban and inter urban train services where electrification cannot be carried out.

(c) To recast entirely the form of the feeder and secondary line services by substituting for the infrequent stopping steam train a smaller, cheaper and more attractive diesel or electric unit. This will eliminate one of the most serious drains on the economy of the railway system, whilst providing at the same time an improved service.

The principal means of attaining these objectives lies in the elimination of steam and the substitution of modern forms of traction. The adoption of diesel and electric traction will lead to higher average speeds, punctuality and cleanliness. New timetables, designed to exploit the capacity of K 9 J el

diesel and electric trains to cover large mileages without attention, will reduce operating costs whilst providing greater frequency of services. The ultimate aim is for longdistance main line passenger trains at average speeds of 75 m.p.h. between stops where track conditions allow and where economically justified. In this connection, it is noteworthy that the number of passenger trains in 1956 with scheduled start-to-stop speeds of over 60 m.p.h. is 58 compared with 20 in 1953.

27. Further, rail travel will be made more attractive by improvements in the amenities provided for passengers. New coaching stock is being designed and prototypes are now being constructed. These will provide for higher standards of comfort and decoration, Improved heating, lighting and ventilation, and reduction of noise. At the same time, stations will be modernised, road access and parking facilities improved and better arrangements made for issuing tickets and reserving seats.

28. The first fruits of modernisation have already been seen in the introduction of diesel multiple unit vehicles of which nearly 300 are in use in various parts of the country. Wherever they have been brought into service, there has been ample evidence of public appreciation. The extent of the popularity of the new diesel services can be gauged from the following examples of increases in traffic since their introduction:-

Percentage Increase

Service Inaugurated Journeys Receipts

Leeds-Bradford- Harrogate 14. 6.54 144 100 Carlisle-Silloth 29. 11 .54 66 44 Oarlisle-Whi t ehaven 7. 2.55 44 62 Garlisle-Penrith- Workington 3. 1 .55 84 104 King's Lynn-Wells- Norwich 19. 9.55 40 30 Bi rmingham-Li chfi eld 5. 3.56 210 208 Bury-Bacup 6. 2.56. 132 164

29. Orders already placed cater for the provision of 2,400 multiple unit diesel vehicles by the end of 1958 for use on services throughout the country. The proposed services are shown in some detail in Appendix A. They include inter city services between Edinburgh and Glasgow and between Birmingham and Swansea, as well as other services between important centres such as London and Hastings; Glasgow and Girvan. Suburban diesel services are proposed in South Wales; the Bristol and Birmingham areas; the West Riding; Tees-side and for the Manchester and Nottingham areas; and branch services are projected in East Anglia, North Wales, Hampshire and Cumberland. The total number of diesel multiple unit vehicles allowed for in the plan is /+56OO, all of which should be in use by the end of 1961. Planning is now in hand for the use of those to bo introduced after 1958. For example, the London Midland Region propose diesel services connecting Liverpool, Leeds and Bradford, and Birmingham,, Liverpool and Manchester; and the North Eastern Region are engaged with the other Regions concerned in planning the Leeds- Liverpool and Hull-Liverpool services.

30. Plans are also well advanced for the introduction of a small diesel rail car specially suited to branch lines and other stopping services in rural areas, where, if traffic by rail is to continue, the highest degree of operating economy must be practised.

31* A third type of diesel train is envisaged, offering high speed and special amenities. Accordingly, plans are being developed for the introduction of de luxe multiple unit diesel expresses to operate at high speed on selected services between important cities. These will incorporate all that is best in modern design for the comfort and convenience of the traveller.

3 2 , The programme for electrification is outlined in Appendix A, from which it will be seen that electri fication on the main lines between Euston, Manchester and Liverpool, and King's Cross, Leeds and York, will not be completed until the later stages of the Plan have been reached. This is inevitable in view of the great mass of engineering work they comprise. Diesel traction will, to some extent, span the gap, and electric traction will be brought in, in stages, as sections are completed.

33. Work is well under way in the other elcctrifi cation schemes. In January, 1957? the extension from Shenfield to Southend will be completed, and during the period between i960 and 1962, many new electrified lines will have come into service, including the extensions to the Kent Coast,'the Glasgow suburban lines, the London Tilbury and Southend Line and the Enfield, Chingford, Hertford and Bishop Stortford branch.

3U. The financial results of all these measures in connection with passenger traffic will be decisive. The investment in diesel multiple unit trains for stopping services is expected to result in immediate and very great savings. Economies will also be made on the suburban services, and the profitability of the long distance services will be enhanced. All in all, a total improvement of some £30m. a year may be predicted with confidence as the eventual outcome. This is hardly surprising whon it is remembered that there are the technical developments of twenty years to gather in. Freight Traffic The main objectives for the modernised freight services are reliability; speed; and economic operation. These will be achieved by ;

(a) speeding up the services by providing all wagons with continuous brakes; (b) eliminating delays by providing new and extending existing marshalling yards; (o) building the largest wagons consistent with the requirements of trade and industry; (d) reducing the number of stations dealing with freight business by concentrating on modernised railheads, operated in conjunction with radial road services; (e) increasing the use of containers and other modern devices for rapid transfer of loads between road and rail without handling the goods; (f) developing mechanised handling methods to the maximum extent. By these means it will be possible to obtain a quicker turn round of wagons, greater carrying capacity, and in consequence a substantial reduction in the wagon fleet. Further, by offering traders a faster and more reliable service, and by taking advantage of the new charges scheme, more traffic will be attracted to rail.

The development of freight train operation, to be both efficient and economic, requires acceleration of timings, regularity of service and greater utilisa tion of motive power and rolling stock. One of the more important contributions to these aims is the fitting of the continuous brake to all freight rolling stock. Details of the programme for the introduction of the vacuum brake are.given in Appendix A. By 1955 about 181,1+00 wagons, one-sixth of the total fleet, had been fitted with continuous brakes. Over the next ten years, brakes will be fitted to new and existing wagons at a rate of over 60,000 a year. This programme will bring a rapid increase in the number of braked trains, which should lead to a steady improvement in .the efficiency of both freight and passenger train operation by eliminating the delaying effect of the slow, unbraked goods train. The freight train of the future will normally travel at speeds up to 60 m.p.h,, with improved punctuality and in greater safety.

The Plan provides for the elimination of many old marshalling yards and t heir replacement by a smaller number of modern yards provided with mechanised braking equipment and advanced communication systems. Apart from the direct savings resulting from the increased efficiency of operation within the yards, considerable benefits will accrue from the closing of old and inefficient yards and the speeding up of traffic. 38. Surveys in progress of the general pattern of freight operation throughout the country have led up to now to the construction of new marshalling yards being put in hand at Temple Mills and Ripple Lane on the Eastern Region, Thornton and Millerhill on the - Scottish Region, and Margam and Severn Tunnel Junction on the Western Region.

39. Eighty-eight per cent, of the total freight tonnage carried by British Railways originates from private sidings and this includes practically all the coal traffic. Fifty-eight per cent, of the total freight tonnage is delivered to private sidings, including half of the coal traffic. The sidings themselves, and the loading arrangements they serve limit the size, type and laden weight of the wagons that use them. This influence goes far to account for the small size of mineral and general merchandise wagons in use in Britain. In seeking solutions to the problem of increasing the pay load of rail wagons, attention is being focussed on higher capacity wagons. Wherever regular flows of traffic justify, and local conditions permit, the use of wagons of kO and 50-ton capacity working in regular circuits, these are being introduced. The movement of iron ore from Tyne Dock to Consett in 56-ton self-discharging wagons is an illustration. For other movements of minerals, the new 2k^-ton wagon is proving its worth and over 2,500 of them are already in service. The production of the 16-ton general service all-steel mineral wagon will be discontinued in favour of a wagon of 21/22-ton capacity which is being designed for services to terminals unable, by reason of their size, to accept the 2ki-ton wagons. Similarly, new vehicles fitted for air discharge are being introduced for special traffics such as cement, and an intensive drive is being made into the means of attracting to rail transport bricks, sheet steel and bulk traffics of a similar nature. i+0. Terminal costs for freight traffic, which include terminal haulage, shunting and marshalling, absorb some luD per cent, of present rail costs (excluding track) in the case of full-wagon loads, and nearly 70 per cent, in the case of less-than-wagon load traffic where goods have to be sorted for forwarding. A recent analysis taken during one week of traffic at a selection of typical stations has shown that 60 per cent, of them dealt with less than twenty wagons during the p eriod.

U1. There are, therefore, conclusive arguments for closing many goods stations and the concentration of rail freight at a smaller number of modern freight terminals served by road and equipped with mechanical handling equipment. These freight terminals will be served by fast trains. Direct services will be operated, wherever possible, to keep time losses in marshalling trains to a minimum. Much preparatory work in the development of the new freight terminals is in hand. In the Eastern Region, schemes for modernisation at Lincoln, Grimsby and Peterborough have been approved and work has commenced on a new railhead depot at Ripple Lane, near Barking. In the London Midland Region, schemes for new goods terminals are in preparation for Manchester, Stoke, Birmingham and London (Dudding Hill). In the Southern Region, plans are in hand for the development of a new depot at Crawley. Similar developments in other Regions are in hand for Newcastle, Stockton, Dundee, Merthyr and Plymouth.

The movement of traffic to and from the ports has been under close examination, and representatives of the Federation of British Industries, together with representatives of the Commission, are engaged in determining means of avoiding the serious road con gestion near the principal ports, by diverting some of the business to rail. A special depot has been opened in the Birmingham area for the reception of small consignments and their subsequent loading in through wagons to the ports with a "Green Arrow" assurance of delivery.

Freight terminals cater for the transfer from one form of transport to another: between road and rail. The simplification of this transfer to suit the needs of ^the consignor or consignee and to accelerate transit is one of the basic problems of freight movement. For full loads the objective is to develop new types of containers or demountable bodies which can be swiftly and mechanically transferred between road and rail vehicles, so eliminating the handling of the goods. The new containers will cater for higher pay loads and will be of lighter con struction than the older types. Freight terminal design, layout and equipment will match these new developments in layout of sidings, roadways, container parks and mechanical appliances. Proposals for pilot schemes for the handling of container traffic under modern conditions are in course of preparation. -

The railways deal annually with many millions of small consignments, which are and will continue to be an integral part of the trade of the country. The assembly of small consignments into trunk haulage loads involves handling operations costly in manpower. These services will be highly mechanised. Railheads for small consignments will be equipped with power operated conveyor belts, stillages, power trucks and fork lift trucks. Plans for development of such terminals are actively in hand.

The financial results of the f oregoing changes in freight transport will accrue more slowly than the results on the passenger side. Indeed, it was thought when the Plan was prepared that in the earliest stages the difficulties and dislocations of the changes to be made wou3.d absorb all the immediate benefits. However, the ultimate financial improvement on the present position, resulting from freight modernisation, will he great, apart from the benefits to the customer of improved service, and is assessed at a minimum of £55m. a year.

Financial effect of the Modernisation Flan,

Taking into account the improvement of £30m, referred to in paragraph 3k the total improvement from both passenger and freight services is thus some £85m, This is before allowing for interest on the capital involved. The expected capital expenditures have been reviewed once more. The total expenditure under the Plan when it was published was put at about £1,200m. and the amount to be borrowed, allowing for internal sources of finance such as depreciation provisions, at about £800m. These figures are now likely to be increased, though not greatly. As to the rate of interest on the borrowings, the Plan allowed for financial charges at 5 per cent, per annum, and on past experience it may be supposed that the long-term rate of interest will, on the average over the years, be less than this figure. On balance, there seems no reason to alter the annual charge of £hOm. previously included in the Plan.

As to the phrasing of the development programme, it has been considerably accelerated since it was first published and it is gathering momentum. An indication of the probable progress is given in Appendix B. As to the financial benefit to be derived from these expend itures., however, the inevitable delay between sowing and reaping will mean that during the first stage - the period to i960 or 1961 - the financial charges on the borrowings, added to the unidentifiable but unavoidable costs of dislocation and disturbance, must be expected to exceed the improvements in revenue. After this period, however, the gap will be eliminated and the finances of the Commission will be strengthened by a rapidly increasing net benefit until, by 1970, a net benefit of at least £k5w* should be available.

It should perhaps be added that the Commission are fully conscious that the physical processes of modernisation and development must be accompanied by similar adjustments in their organisation, methods and outlook. If at one time these intangible changes were thought to present greater difficulty, perhaps, than the physical changes, the Commission are now glad to report that there are already signs of a fresh outlook and a new determination which will be of decisive importance. CHAPTER IV (Continued)

B. ELIMINATION OF SERVICES FOR WHICH THERE IS NO LONGER PUBLIC NEED OR WHICH CAN BEFORE EFFICIENTLY PERFORMED BY OTHER J/JEANS OF TRANSPORT, AND DEVELOPMENT OF THE REMAINING RAILWAY SERVICES

50. The operation by more economic means, or the elimination, of unremunerative passenger services is an essential feature of the Modernisation Plan and it is pertinent to examine the progress that has been made and the results that may be expected. It has to be remembered that British Railways, broadly speaking, were developed a century before power-driven road transport. The latter, requiring no specialised track and with the single vehicle as its natural unit, is clearly superior to rail in convenience and cheapness of operation for shorter distance transport in thinly populated rural areas. The Plan itself referred to "purposeful concentration on those functions which the Railways can be made to perform more efficiently than other forms of transport" (paragraph 6) and foretold "a marked reduction in the stopping and branch line services which are little used by the public and which, on any dispassionate review of the situation, should be largely handed over to road transport" (paragraph 1 2h) * Nevertheless, a railway track is a national asset, and it is essential that before any service is withdrawn every means of making it remunerative should have been examined.

51 * There are four methods of dealing with these unremunerative services. The first is to re-cast the steam passenger services to give a better use of man power, rolling stock and equipment. The second is to introduce diesel and electric traction and, where appropriate, light railway methods. The third is to withdraw trains and substitute road services. The fourth, applicable to suburban areas, is to organise a fully co-ordinated road and rail system. Action is being taken on all these methods.

52. The following table indicates the measure of withdrawal of passenger services since 19h8 : Route miles open Route miles over to passenger and which passenger Region freight traffic services have been in 19U8 withdrawn since 19U8 Eastern 3,01+9 266.. London Midland J+,736 390 North Eastern 1 ,922 U06 Scottish 3,62U U88 Southern 2,278 172 Western a,, 021 322

19,630 230kh

Note; When Regional boundaries were re-drawn in 1950, this involved the transfer of route mileage from one Region to another. In particular, there was a substantial transfer to the North Eastern Region.

Further information on the action taken in each Region is given in the ensuing paragraphs.

53. Eastern Region. In 1,9*4-8, 905 passenger stations were open; 175 of these have since been closed. Diesel cars are already running, or will be running within the next two years, over practically the whole of the remaining branch lines and much of the secondary mileage of the Region. They will reduce operating costs substantially and bring in additional business *

5k* London Midland Region. It is expected that a further 20 services will be withdrawn completely or in part, involving 1,250,000 train miles a year. Mean while, diesel cars are being introduced on a variety of services, e.g., in West Cumberland and between Bury and Bacup. These cars are attracting substantial additional business.

55* North Eastern Region. In 1952, about 2^ million train miles a year out of a total of over 12f million were running at a heavy loss. Since then the Region have been actively engaged in cutting out hopelessly unprofitable train miles and in developing multiple unit diesel services where prospects are more promising. The Region have already withdrawn 1^ million train miles a year, and another -g- million will probably be withdrawn in the near future.

56, Scottish Region. Some further economies are expected from the withdrawal of other services especially from the closing of stations, but diesel cars will be introduced where the case for them is established and an experiment is being made with battery-electric rail cars in co-operation with the North of Scotland Hydro-Electric Board. 57. Southern Region. Three more branch lines and eight stations are likely to be closed, but these are marginal cases and, subject to any major change in traffics,- the possibilities of further economies in this direction are limited.

58. Western Region. Out of 1,514 passenger stations and halts open in 1948, 191 have been closed. A comprehensive review is now in hand. The services already under examination affect 316 stations. A further 583 stations are affected by services yet to be reviewed, making a total of 899 stations. About 20 branch lines are included in the review. In addition to the possible withdrawal of services, consideration is being given to the improvement of net receipts by re-casting timetables or introducing diesel services.

59. The result of all these measures will be a substantial reduction of operating costs accompanied, it is hoped, by expansion, of traffic. The activities of the Regions are not limited to the figures quoted and the whole subject is a matter of continual review and progress. It must be noted that the financial justification for the Modernisation Plan made allowances for the considerable benefits arising from these measures this is brought to account in. the figures given in paragraph 47. above. However, the withdrawal of unremunerative services, which no alternative method can redeem, has recently been accelerated, thanks in large measure to the support given by' the Minister of Transport'and Civil Aviation and i t is reasonable to count upon an additional net saving of some £3m. a year by the end of the next six years, at the end of which the ijrocess will be more or less complete.

C. INCREASED PRODUCTIVITY 60. The increases in output per head which have been recorded in this country since the war have largely been the result of the removal of bottlenecks and the introduction of new equipment. The Modernisation Plan for British Railways takes account of these factors to a considerable extent and this section of the paper deals only with increases in productivity which are divorced from modernisation.

61* It is difficult to measure the output of a railway system as a whole, still less that of some of its components, such as the signalling system; but - using a combination of passenger and freight carryings as a measure, it is calculated that since 1948 the output per head on the railways of the United States has risen, in spite of large expenditure, by less than one per cent, per annum.

62. In Prance, with a large scale modernisation programme, with an economy recovering from the devastations of war and with many staff declared redundant, an increase of some four per cent, per annum has been achieved since 1948. On a similar basis of comparison, it is estimated that British Railways have achieved an increase of. "broadly two per cent, per annum over the same period.

63. Railway management keeps under review the results achieved with existing equipment and applies the principles of Work Study. Further, the British Railways Productivity Council is now promoting the wider and more extensive, application of the techniques of Work Study to all aspects of railway work. To he effective this requires staff trained in Work Study methods and having detailed knowledge of railway working. Accordingly, towards the end of 1956, a Work Study Training Centre for British Railways, London Transport, British Road Services, Docks and Waterways will he set up at Watford and it is expected that within three years the numbers of staff so trained will be sufficient for a large expansion of projects.

6I+. Further, a specialist advisory service is being established within the Commission under a Director of Work Study to develop a common policy and central pool of experience relating to the application of Work Study to transport problems. In addition to this the Commission's Director of Work Study is responsible for advising on-the co-ordination of relations with the Trade Unions on Work Study and for the general super vision of the Training Centre. In this task he will be assisted by an Advisory Committee which will include representatives of the Trade Unions and of outside industry.

65. A successful Work Study scheme in the Reading Signal Works has led to a substantial increase in total output with a reduced labour force, a lower wages bill and increased individual earnings. Investigations in other Signal Works are being undertaken. Altogether, spread over several departments, 30 Work Study schemes have been implemented throughout British Railways and at the present time about L\.0 schemes are under investigation. These include a very large scheme at Swindon Workshops, Offices and Stores. Consultants are also at the moment investigating tv/o Motive Power Depots with the object of recommending the introduction of incentive bonus schemes for maintenance work. Further details of Work Study schemes are given in Appendix C.

66. Over the past eight years Incentive Bonus Schemes have been introduced at certain Civil Engineering Depart ment Workshops and Production Depots with considerable success. Increases in output of over 100 per cent, have been obtained in some cases. A pilot scheme of incentive bonus payments for track maintenance was introduced in the Woking area following a work study investigation of the various aspects of the lengthman's job. With the co-operation of the staff the scheme has been extended to the Basingstoke and other areas in the Southern Region, All Regions are now giving consider ation to the introduction of similar pilot schemes. Their introduction has been approved on the Western, Scottish, and North Eastern Regions, and it is hoped to introduce a scheme on the London Midland Region before the end of the year. The results of the extended scheme have been impressive and the application of this scheme on permanent way maintenance alone to the whole of British Railways, which will take several years to complete, may well achieve a larger potential saving than was originally forecast by the Consultants who carried out the preliminary investigations for the pilot scheme.

The broad aim of work study is to obtain the maximum productivity from men, machines and material. It provides a means of determining the best way of doing a job and affords a basis for financial incentive schemes. It also provides a factual basis for introducing changes in traditional working methods and in the elimination of obsolete practices. Moreover, Work Study enables sound labour control schemes to be devised, from which rational financial incentive bonus payments can be made on a basis which gives the Staff concerned a fair share.of the resulting economies. The financial benefit to the Commission will be limited accordingly.

The introduction of new equipment will increase productivity. Mechanised equipment in offices is widely used for payroll, goods and stores accounting. British Railways are as far if not further ahead than ether industries in the country in the development of electronic devices in this field. Electronic equip ment has been installed in offices at Crewe, Derby, Peterborough and Doncaster and is planned for Paddington and Swindon in the near'future and later for Barry and Bristol. A mechanised bureau is being formed in Glasgow and additional mechanisation at Newcastle, Darlington and York is under consideration.

A special advisory panel has been established by the British Transport Commission to encourage and develop electronic computer techniques throughout the Commissions undertakings and to advise on their installation. It is further charged with investigation into the application of electronic control techniques to the operating departments in such form as wagon control and automatic operation in marshalling yards.

The calculation of the improvement in the net revenues of British Railways as the result of the application of work study schemes, modern office methods and other measures designed to improve productivity, should be made on conservative lines. The primary object is to improve efficiency. For example, there is at present a serious shortage of staff to maintain the permanent way: the big gain to be derived from the schemes mentioned in paragraph 66 above is not that they will save men, but that the permanent way will be better maintained. Then again, in the Modernisation Plan credit has already been taken for economies resulting from improved equipment and from improved methods of operation and this credit cannot be taken twice. Many of the activities on British Railways are not susceptible of improved of improved efficiency save by a radical change in organisation; for example, a public road level crossing cannot be looked after by less than one attendant until the law concerning such crossings is changed (paragraph 78) . It is also necessary to bear well in mind the point made in paragraph 67 above. For these and other reasons of similar nature, the Commission, while expecting very important results from the measures now in hand to improve productivity, cannot reasonably assess the additional improvement in net revenue, beyond that taken to account in the Modernisation Plan, at more than £5m. a year by 1961. The introduction of measures to improve productivity must inevitably lead to some displacement of manpower, but it is the Commission^ intention to deal with redundancy problems arising there from, by re-absorption and by non-replacement of wastage in so far as this is possible.

D. STATUTORY OBLIGATIONS AND FREEDOM TO COMPETE

71. First among all the statutory restrictions and obligations which have fettered the operations of rail ways on a strictly "economic" basis must rank the restrictions on freedom in the matter of fixing fares and charges and the obligation to afford equality of treatment to all persons.

72. The 1953 Act has removed the previous obliga tion to afford equality of treatment to all persons and empowered the Commission to submit to the Tribunal a new Merchandise Charges Scheme giving them a much larger measure of commercial freedom than heretofore. The draft Scheme as submitted laid down maximum carriage charges more related to costs, in place of Standard Charges related to a classification of merchandise primarily based on value, and the Commission were to have discretion as to what they charged within these maxima. They would no longer be required to obtain the Tribunal's approval to alterations in actual charges below the maxima or to publish any actual charges other than the maxima.

73. The Charges Scheme has after lengthy public enquiry been amended by the Tribunal's Interim Decision as follows: while agreeing the principle in general of maximum charges for conveyance of traffic, the Tribunal decided that there should be two exceptions (a) any consignment weighing 100 tons or more; (b) goods carried in owners' wagons.

In both these instances the Tribunal decided that the charges made must be "reasonable charges", which would on application be settled by them. The Tribunal not only rejected the Commission's proposal for a single series of scales, but lowered the proposed maximum charges and provided a separate series for a list of named commodities normally carried in bulk; and they also introduced in each series alternative and lower maximum charges for goods consigned to and/or from a private siding. 71+. It follows, therefore, that the extent of the commercial freedom for which the Commission had asked '. has "been appreciably restricted by the Tribunal's Interim Decision, Nevertheless British Railways will take advantage of the freedom permitted under the scheme to reorganise their freight charging arrangements towards the following ends (a) the encouragement of traffic consigned in larger quantities and good wagon loads; (b) the encouragement of regular traffic for which economical services can be arranged; (c) the attraction of good loading traffic, now passing by road, for long and medium distances; (d) the avoidance of loss on some of the shorter distance rail traffic. The consequent changes in the pattern of traffics and railway operations are reflected in the financial estimates, quoted above, of the eventual out-turn of the Modernisation Plan and the right to exercise a much wider measure of commercial freedom is, therefore, an indispensable element in the realisation of these estimates.

75. But the changes in charging arrangements will have to start at a time when road competition is keener and greater than ever before and when the service afforded by the railways is below the efficiency and reliability needed. Also, it will take some time to effect the . complete re-orientation of selling policy and selling methods which is required. Though the benefits will emerge slowly, in the end they will be substantial. How substantial, will depend in large degree on the price policy to be pursued by the Commission in the near future. This is discussed in Chapter V.

76, In addition to the benefits to be derived from the greater freedom of charging, which be it rememberod has yet to come into operation, there is also the possibility of obtaining, with the support of the Government, relief from other outdated statutory obligations. '

78. Another example is the cost of level crossings. Where lines were carried across public roads on the level, the railway companies came under a statutory obligation to provide gates which, when opened to road traffic, completely fenced in the railway, and also to provide an attendant to superintend the crossing and to open and shut the gates. In many instances, particularly at level crossings adjoining stations, the gates are controlled by a signalman from a box at the crossing, but there are also very many public crossings up end down the country at which it is necessary to provide special staff. The cost of manning these crossings at present day wage rates is considerable; in a number of cases it has increased from about £50 to around £1+00 a year, and the total figure has risen from £220,000 in 1938 to about £1m. now. Often, moreover, the staff at these crossings, though in continuous attendance, are by no means busily employed.

79. The Commission already have powers to substitute lifting barriers for gates at public level crossings, subject to the Minister's consent in each individual case. These barriers, however-, would lead to no major economies so long as the Commission are required by law to maintain staff at all public road crossings. Economies could be effected if the staff at many crossings could be removed by operating lifting barriers either automatically by track circuits or remotely from the nearest signal box. An adaptation of these methods might also enable some signal boxes at level crossings to be closed in slack traffic hours with resultant economies. There is, however, no experience of these methods in this country although they are widely used abroad. It is not even possible to try them out while the law remains as it is.

80. The Commission, therefore, consider that the time has now arrived to review the statutory provisions which require attendants at all public level crossings. Any changes must have due regard for safety and the Commission are already in touch with the Chief Inspect ing Officer of Railways on the relevant problems.

While the Commission are on the look out for ways of obtaining relief from obligations which have become out of date with the passage of time, and would like to see this process speeded up, the rights of other authorities and individuals are, as a general rule, so closely linked with railway obligations that there is rarely a short cut to freedom, and progress must inevita bly be rather slow.

71+. It follows, therefore, that the extent of the commercial freedom for which the Commission had asked '. has been appreciably restricted by the Tribunal's Interim Decision, Nevertheless British Railways will take advantage of the freedom permitted under the scheme to reorganise their freight charging arrangements towards the following ends (a) the encouragement of traffic consigned in larger quantities and good wagon loads; (b) the encouragement of regular traffic for which economical services can be arranged; (c) the attraction of good loading traffic, now passing by road, for long and medium distances; (d) the avoidance of loss on some of the shorter distance rail traffic. The consequent changes in the pattern of traffics and railway operations are reflected in the financial estimates, quoted above, of the eventual out-turn of the Modernisation Plan and the right to exercise a much wider measure of commercial freedom is, therefore, an indispensable element in the realisation of these estimates.

76. In addition to the benefits to be derived from the greater freedom of charging, which be it remembered has yet to come into operation, there is also the possibility of obtaining, with the support of the Government, relief from other outdated statutory obligations. '

77. As an example the case of road bridges over the railways may be cited. Where lines were constructed so as to cross existing public roads, and the road was carried over the line by means of a bridge, the railway companies came under a statutory obligation to maintain not only the structure of the bridge, but also the surface of the road over the bridge and the raised approaches. The position in this respect has radically altered with the growth of motor traffic on the roads and the cost of maintaining these surfaces has become a heavy liability. While these responsibilities are being or have been transferred to other Authorities, the Commission remain responsible for financial contributions. 78. Another example is the cost of level crossings. Where lines were carried across public roads on the level, the railway companies came under a statutory obligation to provide gates which, when opened to road traffic, completely fenced in the railway, and also to provide an attendant to superintend the crossing and to open and shut the gates. In many instances, particularly at level crossings adjoining stations, the gates are controlled by a signalman from a box at the crossing, but there are also very many public crossings up and down the country at which it is necessary to provide special staff. The cost of manning these crossings at present day wage rates is considerable; in a number of cases it has increased from about £50 to around £LuOO a year? and the total figure has risen from £220,000 in 1938 to about £1m, now. Often, moreover, the staff at these crossings, though in continuous attendance, are by no means busily employed.

79. The Commission already have powers to substitute lifting barriers for gates at public level crossings, subject to the Ministers consent in each individual case. These barriers, however-, would lead to no major economies so long as the Commission are required by law to maintain staff at all public road crossings. Economies could be effected if the staff at many crossings could be removed by operating lifting barriers either automatically by track circuits or remotely from the nearest signal box. An adaptation of these methods might also enable some signal boxes at level crossings to be closed in slack traffic hours with resultant economies. There is, however, no experience of these methods in this country although they are widely used abroad. It is not even possible to try them out while the law remains as it is.

It is difficult to assess the financial benefits to be derived from the policy of freedom in charging and from relief from statutory obligations. Making^the most reasonable assumptions possible and taking into account in particular the benefits to be derived from a less restricted, more selective and more aggressive selling policy and from such alterations in fares and charges (net) as may "be feasible within the ambit of Charging Policy as described in the next chapter, a total improvement of £20m. a year by 1961 or 1962 can reasonably be expected. It would represent, indeed, a rate of improvement of less than 1 per cent, a year, over the next six years, on the present takings of British Railways. An increase in this figure of at least a further £5m. by the end of the following eight years would seem a safe assumption. The Commission have already announced that they will not make general increases in their fares and charges during 1956, provided that as a result of the re-assessment of their financial position now being made, a course of action consistent with their statutory obligations.and the proper development of their undertaking can be worked out and adopted. Pares and charges were in any case "frozen" until the end of September by the decisions of the Government and the Commission taken in March of this year. As to the remaining months of the year, the Commission felt that on commercial grounds alone the time was un propitious for general increases in passenger fares or other charges. In respect of the policy to be pursued after this period of "freeze", however? the Commission are presented with several alternatives.

Firsts having regard to their duties under the

19^4-7 Act 5 the Commission might attempt to meet the present unbalance, and recoup their past deficitst by increasing their charges in the near future to the full amount necessary. Theoretically, an increase producing an average of 15 per cent on heavy railway traffics like coal and minerals j and 2-g- per cent on other railway goods? would mean almost £30m. a year; an increase of 10 per cent on railway parcels and mails by passenger train would mean almost £5m. a year; and a general increase in railway fares of 10 per cent would mean £1 2m. a year. The total of £U7m. from railways would suffice, in con junction with minor increases elsewhere, not only to stop the existing gap in the Commission's budget but also to leave a small margin over.

But British Railways are faced v/ith sharp competition over a considerable part of their passenger and freight traffics. Moreover, public opinion would be particularly resentful of any heavy increases at this time. In the long run the immediate gain of revenue would probably be purchased at the expense of a substantial contraction in the traffics offered to the Commission. In other words, any attempt to impose large increases in their fares or charges in the near future would, so far as can be estimated at present, damage the Commission^ business temporarily for certain, and possibly permanently.

As the second alternative of policy ? the Commission might attempt to make a partial reduction in their current deficit by imposing all the increases in fares and charges which any particular traffics would bear. However, the general objections given in the previous paragraph apply in lesser degree to a partial operation of this kind. Also, the Commission hope that the new scheme of charging control, to which reference is made in Chapter IV, will be in operation by the middle of 1957. The greater charging freedom thereby afforded? if introduced against a background of widespread dissatis faction at the level of fares and charges? would be given a bad start, and much of its benefits might thus be forfeited. 87. Looking beyond.the immediate situation, it is a basic assumption of this paper that the Commission should have reasonable charging freedom. If their costs should rise they must be free to adjust their charges. There are, in any case, certain instances where local or selective increases are justified and should be made.

88. To sum up, it is too soon yet to say in detail what should be done after the end of the year, and in general, apart from adjustments of the kind mentioned in paragraph 87 above, the wiser policy to pursue in the near future is one of price restraint - not necessarily "price freezing" - in the knowledge that the results of this policy and of the consequent goodwill will substantially improve the position of the railways within the next few years and protect permanently the whole scope of their business. Any net revenue so sacrificed, temporarily, may be regarded as an investment which will not only prevent an undermining of railway traffics in a critical period - and a consequent decrease in the benefits of the Modernisation Plan - but will also help to provide in the not-too-distant future the positive financial improvement of many millions of pounds a year already mentioned in the previous chapter. CHAPTER VI : CORRECTIVE ACTION IN PROGRESS - OTHER ACTIVITIES

89. It has already "been remarked that , of the . other activities belonging to the Commission, the least, satisfactory from a financial point of view are London Transport and the Inland Waterways.

90. As regards London Transport, their operations have in each year since 1950 failed to make a proper contribution to the interest and other central charges of the Commission. In the result, about £15m. of the Commissions accumulated deficit of £70m. at the end of 1955 is attributable to London Transport. Though it is generally accepted that London should pay its way, the delay between increases in wage rates and price levels and the subsequent increases in fares has produced this long series of yearly shortfalls', and unlike British Railways, London Transport offers no real prospect of financial improvement except by increasing fares.

91* London Transport is already a modern and efficient transport system, and the volume of service it offers cannot be reduced significantly. Nor, unfortunately, is there much prospect of increases in traffic. With more private motoring attracting customers away from the public services and with increasing congestion in the streets, which both increases the cost and reduces the attractiveness of the London Transport road services, the future trend of traffic is more likely to continue the decline of recent years.

92. The Commission have recently made certain local adjustments to fares in London. While they will always endeavour to keep fares in the London area as low as possible, current costs must in future be met by the current level of fares. There are no future expectations to justify a different policy.

93. As to Inland Waterways, the efforts of the Commission to remedy the position are well-known. The opposition to these efforts is equally well-known. The position is now being investigated by another Committee of Inquiry, the Bowes Committee, and until this Committee report and the Government announce their policy on the future of the waterways, it is not possible to say what future easing of the financial position can be counted on. In relation to the sum-total of the Commission^ problem in its present magnitude, the relief will in any case be marginals however important in itself.

94* Efforts will continue to be made to improve the financial results of other activities of the Commission including docks, road passenger and freight services and hotels and catering, by greater efficiency and, when appropriate, increases in charges. CHAPTER VII : THE FINANCIAL POSITION DURING THE PERIOD OP RECONSTRUCTION AND DEVELOPMENT

The foregoing sections have summarised some of the major factors in the financial and commercial position of the Commission. This is not the only aspect which matters. Questions of defence and of general strategy are involvedj and questions of social policy and the public benefit. The economics of a public service are not reflected exclusively in its own particular account of profit and loss. Nevertheless -it is relevant to enquire how the financial problem of the Commission would appear if the results of the remedial measures outlined above were tested by the ordinary criteria of commercial finance.

Provided that these measures are given a proper chance to fructify, and on the assumptions set out at the beginning of this paper, the prospect is that the annual net revenue account of the Commission will be in balance by 1961 or 1962. This is after charging all remuneration on capital borrowings in full, old and. new, save only interest on deficits. By 1970 there should be not only a balance, but a surplus of £50m. a year over and above the cost of servicing the capital.

These prospects for the future must be compared, with the immediate outlook. It is clear from what has been said in this paper that for the next few years, the period of reconstruction and development, the revenues of the Commission are not likely to cover the interest charges in full. For this there are two main reasons

(a) In the early stages the rising yield from modernisation will lag some years behind the increased interest charges on the capital works set in train. The sowing must be in advance of the reaping.

(b) It will be two or three years before the results of the other measures now in progress can produce a really substantial effect on the present running rate of deficit.

A commercial concern faced with a similar situation, being financed by equity capital, would probably ask its shareholders to forgo remuneration of their capital during the period of reconstruction. If the shareholders were satisfied that the undertaking was fundamentally sound and that the future revenue prospects were sufficiently good, they would be likely to agree.

The Commission, however, are financed entirely by fixed interest capital which must continue to be serviced. They are not permitted to borrow money to cover their deficits. Even if they were, it would only mean a further increase in the annual deficit and a still-mounting accum ulated deficit to be carried forward in the balance sheet. By such a piling on of burdens beyond the ability of the Commission to meet them during this period, financial discipline would be undermined; the affairs of the Commission would be made to appear In an unreasonably hopeless light, which "by its effect on public opinion would hamper them commercially and by its effect on their own staff would weaken morale. The physical recovery of British Railways ought, on the contrary, to be matched by a stimulus- to morale, an improvement in public esteem, and a firm financial discipline directed towards clear financial objectives.

100. There is ample cover both of revenue and of capital for dealing with this situation in the way in which, it has been suggested, a commercial concern would deal with it. The balance sheet at 31st December, 1953? was one of great inherent strength, despite the deficits accumulated. The capital assets, excluding goodwill, had a written down book value of over £1,500m. ; their real value today is dependent on their earning power, no doubt, and this again must depend mainly on the fares and charges which are permitted and on the burdens of public obligation which are carried; but the replacement cost of the total investment, in terms of current money values, can be put at well over £4,000m. It is not proposed to write re valued asset figures into the books, as has occasionally been done elsewhere? but if the assets were so written up, the net assets would be three times as large as the capital'liabilities (1. e. the British Transport Stock in issue) of £-1,444m.

101. The prospective revenue results are illustrated by the graphs in Appendix D. The effect of the time-lag in the fructifying of new capital expenditure is seen on curve A, which shows that during the next few years there will be, naturally and inevitably, a slight burden (net) rather than a benefit, but that thereafter there will be a net annual benefit rising to at least £45m. a year after paying all interest on the capital expenditure involved. On curve B is seen the effect of the remaining measures now in progress. After an initial worsening of the position, the existing deficit is rapidly overhauled, and is turned into a net benefit of £5m. Taking the two curves together, by the close of the 1960's there is a total surplus revenue of £50m. a year (after charging to revenue all interest except on deficits) but the critical period of reconstruction and development terminates much earlier and the Commission would probably "cross the line" from annual deficit to annual surplus in 1961 or 1962. The position at the three major points of time shown in the curves may be illustrated in the folTowing fignree : 1961 December or 1956 1962 - 1970 £m. £m. . £m. Annual rate of deficit at starting point (excluding interest on deficits and finance of Modernisation Plan) - kO - 1+0 . - 1+0

Improved contributions . from Activities other than British Railway - i 5. i 5. Improved contribution from British Railways (Chapter IV) (a) Modernisation o r (Section A) - * 35 t a 5 (b) Pruning Services , (Section B) - * ^ t ^

(d) Freedom 2 5 (Section D) - i-f5

less: Interest on

Modernisation ^ ^ 0 borrowings - 2 7, ^2 - 2 4 38 * 8 3

Total - i+2 + 3 4- i+8 Say, Balanced Say, 4- 50

Note : As stated in paragraph 96, the figures in the above table do not provide for interest on accumulated deficits. This, if calculated at the rate of 5 per cent, per annum, would result in a charge of about £6m. a year on the deficit at the end of 1956, rising to about £20m. for the year 1961 or 1962 and falling again to about £10m. for the year 1970.'

It will be seen that the ultimate revenue prospects, which are very satisfactory, depend mainly on modernisation, but when it is remembered, for example, that a steam stopping train (stopping trains cover some 80 million train miles a year) has a movement cost of approximately ten shillings a mile, whereas in favourable conditions the multiple unit diesel has a movement cost of only a third of this figure, the magnitude of the economies to be derived from modernisation will be understandable. It may be added that the financial expectations of the Modernisation Plan have not been falsified by any of the development projects tackled since 1954.

102. There is., therefore, ample scope for a rocon struction of the Commission's finances. Alternatively, there is ample cover for an operation by which the Revenue Account of the Commission, during the next few years of development and reconstructions should be relieved temporarily of the obligation to meet the exceptional charges (partly of a quasi-capital nature, partly legacies from the past) falling upon it during this time. These amounts are represented by the shaded areas shown in Appendix D. In total some £200m. would be accumulated in suspense by 1961 or 1962, to which must be added the deficit of about £120m. to be carried forward at the end of 1956. These are large sums but they are not large compared with the later surpluses which should be more than sufficient to amortize any. amounts so held in suspense over a reasonable period. Nor are they large in relation to. the undertaking as a whole.

103, In this situation the Commission urgently recommend that some financial plan should be adopted which, while it avoids subsidy, will place their organisation on a firm, sound basis during these critical years of recon struction. They expressly request that any relief temporarily accorded to them in relation to their immediate obligations should be strictly limited in time and amount.

10h, The justification for this recommendation is represented by the forecasts given in this i')aper. In a long-range assessment of this nature there are necessarily many imponderables. The forecasts are subject to the basic assumptions stated at the outset; they could be upset by factors beyond the Commissions control. Never theless. the Commission are confident that in general terms their assessment of the future outlook is reliable and that it represents a proper basis for the formulation of policy at this time.

1 3 SEP 1956 APPENDIX

THE PROGRAMME FOR RAILWAY MODERNISATION

1. The following sections deal with the programme of modernisation works and with the associated schedule of production of equipment. For convenience, the programme is divided under the main headings of engineering activity

(a) Electrification. (h) The Locomotive Building Programme. (c) The Carriage and Wagon Building Programme. (d) Civil Engineering. (e) Signal Engineering.

In fact all these activities are interdependent, and in most phases of modernisation work, overlap. For example, in an electrification scheme, all come into play and the rate of completion may he governed by the pace at which civil and signal engineering work can be carried out, rather than by the rate of supply and committal to service of electrical equipment and rolling stock.

Naturally, the plans that have been made lack definition when referred to the later stages, ten years or more ahead.

Concentration has been given to planning the work that must be carried out during the next six years. But the ultimate objectives of the Modernisation Plan have been borne in mind throughout.

2. Electrification

On 6th March, 1956, the Commission published their decision to adopt the 25kV A.C. system for future electrification, throughout British Railways save on those sections of the Southern Region where the existing 660v. D.C. system would be extended. Energetic steps were at once taken, in conjunction with the manufacturing industry, to put in hand the design, development and supply of the new equipment required, and notification was given to the Central Electricity Authority concerning the first requirements for the supply of power.

A preliminary programme for the completion of all the electrification schemes contained in the Plan has been worked out. This takes into consideration the time that is required to develop and test in service the completely new forms of equipment and rolling stock required for electrification by the 25kV A.C, system, the rate at which the equipment and rolling stock can be manufactured, installed and put into service, and the rate at which the very large volume of associated Civil and Signal Engineering work can be carried out. The provisional programme of completion dates is as follows : - London Midland Region (25kV A.C. System). Slade Lane Junction (Manchester) Mid 1958. to Wilmslow (Test Section). Manchester to Orewe. Mid 1959. Remainder of Main Line electri- (Tentative) 1967. fication, Euston to Manchester and Liverpool.

Eastern Region (25kV A.G. System, except where otherwise shown). Shenfield - Southend (1500v. January, 1957. D.C. System) Colchester - Clacton (25kV. Mid 1958. A.C. System) (Test Section). Conversion of Liverpool Street, Mid 1959. Chelmsford, Southend Sections from D. C. to A, C. System. Enfield-Chingford, Hertford and Mid 1960. Bishop's Stortford. London-Tilbury and Southend Mid 1961. Chelmsford to Ipswich and By Stages up Coastal Branches. to 1965. King's Cross? Moorgate, Hitchin and Letchworth. (Tentative)1962. Eastern and North Eastern Regions King's Cross - York and Leeds

Scottish Region ( 25kV A. C. System). (Tentative) 1970. Glasgow Suburban, Stage I. North of Clyde. 1960. Stage II. South of Clyde. 1962.

Southern Region (660v. D.C System) Extension of electrified lines 1962. to Ramsgate, Dover, Folkestone and Hastings (via Ashford).

The programme has been laid down to provide for work to proceed at the most rapid rate which the combined capacity of the Railways and of private Industry is estimated to allow. The rate of electrification at present planned builds up to a peak in 1962 and thereafter decreases. At the peak of production it will be necessary to commission electrified single track at the rate of 1 ,000 miles per annum, and to place in service at least 200 electric locomotives and 900 electric multiple unit train coaches per annum. After 1962, it is estimated that capacity will be available for undertaking electrification works in addition to those provided for in the Plan. The Commission have under consideration proposals by which advantage could be taken of this, so as to exploit to the full the great operational and economic benefits the Railways will derive from a wider extension of electric traction.

3* The Locomotive Building Programme

(a) Steam Locomotives :

The Commission have already announced that no new express passenger or suburban steam locomotives will be built after the 1956 building programme.

A further 8k heavy freight and 61 mixed traffic steam locomotives will be built during 1957 and early in 1958? completing existing programmes.

Pew, if any, steam locomotives will be built thereaf t er.

(b ) Electric Locomotives :

Electric locomotives, now in the development stage, will be supplied by manufacturers during 1958 in small numbers in prototype form. Thereafter, after final designs have been settled, production will rapidly be stepped up to reach the peak of over 200 per annum during 1961.

There are at present in use on British Railways 510 diesel shunting locomotives. This total will be increased to about 900 locomotives on completion of authorised programmes in 1958.

The Plan envisages a further 1,200 shunting loco motives being required to replace the 1,500 steam shunting locomotives which will still then remain.

Programmes now in preparation provide for the supply of about 700 diesel locomotives, during the period 1958 - 1962, and if possible the rate of supply will be accelerated.

By 1962 the plans provide for about 1,600 diesel shunters in service.

Thereafter the remainder of the diesel locomotives required to dispense with steam shunting altogether will be obtained as rapidly as circumstances will allow.

Considerable savings v/ill flow from this trans formation. Apart from instant availability offered by the diesel shunter, and the small loss of operating time required for servicing, it can be operated by one man. (d.) Main Line Diesel Locomotives :

Orders have been placed for 174 main line diesel locomotives at a cost of £11.4 million.. Delivery will commence towards the end of 1957.

These have been allocated to Regions as follows London Midland - 65 Eastern - 80 Western - 14 Southern - -15

Although the first cost of diesel locomotives is three to four times that of steam locomotives of comparable power, depreciation is a small item in the total cost of providing locomotive haulage.

Diesel locomotives can cover large mileages without the frequent and lengthy absences from service re quired by steam locomotives for fuelling service and maintenances, and much lower operating costs are possible when full advantage is taken of their capacities.

The first fleet of main line diesel locomotives is to be put into intensive operation, under careful observation, and is intended to be the subject of a thorough and selective trial.

Essential data will be obtained in the shortest possible time to enable the Commission to place orders for large numbers of locomotives in standard types, specifying designs which can be depended upon to give the service they require.

Until these trials have been.completed, the Commission intend to restrict further orders to comparatively small numbers.

By 1961, however, it is expected that annual orders will reach a level of about 200 locomotives and that this rate of production will be required to continue each year for an indefinite period.

The Carriage and Wagon Building Programme.

(a) Passenger Rolling Stock :

During the period of seven years ending in December 1962, it is expected that a total of about 20,000 coaching vehicles of all kinds v/ill be constructed, replacing about 25,000 existing vehicles, including all the remaining wooden-bodied coaches, some 14,000 in number.

The programme is based upon a substantial increase in the rate of replacement of vehicles of obsolete type, which at the present rate would have to be retained in service for a further four or five years. The programme covers units of all types, and apart from locomotive hauled stock? includes electric multiple unit stock, and diesel multiple unit stock of varied designs.

(i) Multiple Unit Electric Stock

During the period ending in 1962 a total of i+,500 electric multiple unit vehicles will he required to cover the needs of electrifi cation of the Manchester-Crewe line? with extensions towards Euston? and of the other electrification schemes in South-east Essex? East Kent? Glasgow? the King's Gross suburban lines? and extensions of the existing electrification to Ipswich and coastal branches.

The majority of the stock will be of the open suburban type. Special attention is being given to the development of a high standard of riding quality? and the special requirements of the suburban or short distance passenger are being studied in relation to internal design.

During most of the period? a rate of production of 900 vehicles a year will be required. The first supplies of prototype units for service on lines electrified by the 25kV A.C. system are expected to be available for trials in the later months of 1957.

(ii) Multiple Unit Diesel Vehicles

The Modernisation Plan envisaged 4,600 vehicles of this type being placed in service.

Contracts have already been placed in railway shops and with manufacturers? for 2,1+01? which are expected to be completed in 1958.

The following table gives details of the services to which these vehicles have been allocated. Two hundred and seventy-two vehicles are already in service.

It is anticipated that the remainder of the 4*600 vehicles covered by the Plan will be in service before the end of 19,61. DIESEL MULTIPLE UNIT VEHICLES ALLOCATION FOP PERIOD ENDING DECEMBER 1958.

Operating Motor Trailer Region Type and Service Cars Cars Inter-City Scottish Glasgow-Edinburgh 31 15 Western Birmingham-Swansea 12 6 Scottish Glasgow-Ayr-Girvan 44 22

Suburban (Bristol Area 20 10 (London Area 28 14 Western (S. Yifales Area 30 11 (Cardiff Area 90 (Birmingham Area 36 43 18

Cross Country or Branch (East Anglia 62 62 (Norwich 37 37 Eastern (Lincoln 37 37 (Cambridge 25 25 (Colchester 19 19 ,West Riding 48 .Newcastle-Middles North - brough-Carlisle 44 42 Eastern ,Hull Area 31 31 ' k York-Leeds-Scarboro. 78 78 ^County Durham 62 62 'Other N.E. schemes 63 3 9 [North Wales 7 7 J/. Cumberland 18 13 London "Bury-Bacup 7 7 Midland Birmingham schemes 82 5 8 Manchester schemes 206 11 7

i Derby-Leicester- Nottingham 34 17 (Birmingham Area 36 18 "Bristol 56 9 Western (London 10 5 S. Wales 62 29 Other schemes 31 21

Diesel Electric (London-Hastings Southern (Hampshire

GRAND TOTAL The trains described, above? with the exception of those required for the London-Hastings service? are built to a number of basic designs? and are fitted with under-floor engines and mechanical or hydraulic transmissions.

The internal design of the cars is adjusted to suit local requirements.

Development work is now proceeding on two further types of diesel trains of radically differing characteristics? one for use in high speed? luxury? main line services? and the other for operation in lightly used branch lines where economy of running cost is the prime consideration.

The high speed luxury train will run between large cities and will contain all that is best to offer for the comfort and amenity of the passenger. It is expected that a few of these trains will be in operation towards the end of 1958? and their further introduction will depend upon the way in which they are received by the travelling public.

A light rail car? powered with a single under-floor diesel engine? and designed to achieve maximum economy in running and maintenance costs may prove of great value? since some rail services in rural areas? at present running at a loss greater than can be counter-balanced by the use of present types of diesel trains? may thereby be preserved.

The Commission intend to carry out extensive practical trials with such vehicles in a number of rural services throughout the country? giving particular attention to the changing needs of the country passenger? and to economic operation in all its aspects. It is hoped to commence the trials in 1957.

(iii) Locomotive Hauled Stock

Whatever may be the trend in favour of multiple unit express trains? the need will continue to haul long distance traffic by locomotives? either electric or diesel? and for many years? steam.

During the period 1956/1962? about 7,700 gang way ed locomotive hauled coaches for main line operation will be built.

New standard coaches are being developed which will provide very much improved passenger accommodation? in which special attention has been paid to

Smooth riding. Comfortable seating. Attractive decor. Heating, Ventilation and Lighting. Reduction of noise. Improved toilet facilities. Cleanliness.

It is expected that vehicles of improved design will begin to appear during 1957. New and improved types of Restaurant and Buffet Cars are being developed, and it is intended that a five-year programme of replacement of the present stock will commence towards the end. of 1957. involving the construction of a fleet of 600 vehicles.

During the 1956/62 period a programme of construction will be undertaken covering a further 2,800 vehicles of various types, classed as coaching vehicles, such as luggage'vans, fish vans, mail vans and the like.

(b) Freight Rolling Stock

(i) Mineral Vfagons

The plan provides for the replacement of all remaining low capacity timber-bodied coal wagons by all-steel wagons of higher capacity. Existing contracts for manufacture of the 16-ton steel wagon will, by the end of 1957 have provided British Railways with a total fleet of 320,000 of this type. About 190,000 low capacity timber bodied wagons will remain. These will be re placed by 2l4-i-ton steel wagons to the extent that traders1 terminal facilities will permit, but it has become apparent that their use will be limited during the period of the Modernisation Plan. It is therefore necessary to construct a wagon of slightly lower capacity; 21/22-tons? to give as wide a use as possible.

Such a wagon is now being designed.

Plans are being made to build numbers of high capacity wagons, largely of the new 21/22-ton type in a long term programme commencing in 1958, with a target of the complete replacement of the 190,000 old wagons by 1966 by a reduced number of high capacity wagons. Similarly, wagons for the transport of iron ore will be of higher capacity, and where it is economic and desirable to do so in the interests of the trader and British Railways, special wagons with high axle loading and with limited route availability will be built to be operated in circuit working.

(ii) General Merchandise Wagons

Under this heading, wagons will be built in annual programmes to meet the changing needs of industry? and in addition to vehicles of the standard types? wagons are being, and will continue to be designed of a specialised character for the carriage of specific types of traffic, e. g. cement in bulk? steel strip coil, palletised consignments? containers.

The plans provide for a total of 255?O00 wagons of all types to be built during the period 1956/70. 9 "2

sit -9-

Containers

The design of containers is "being reviewed? and it is expected that there will be considerable development in this type of traffic.

It is probable that an average of 5*000 containers " a year will be constructed during the period . 1956/62.

(iii) Continuous Brakes on Freight Trains

The Commission have decided to adopt the vacuum brake as standard for freight rolling stock? and to fit brakes to all stock as quickly as possible.

The rate of fitting is dependent upon a number of factors, notably :

(a) The rate at which the necessary equipment can be provided by industry and.by railway ,shops; ijyi;:.: (b) The rate at which the equipment can be fitted into wagons, and other necessary modifications made; and

The operation of freight trains at speeds up to 60 miles per hour, entails modifications to various types of wagon apart from fitting of brakes. For example, it is necessary to close couple all freight stock running at these high speeds, and this will entail the provision of screw type couplings and new buffers.

Mineral wagon operation at express speeds requires ..,the larger mineral wagons to be fitted with roller bearings. This will.involve the fitting of some 600,000 roller bearing axleboxes to existing wagons.

Arrangements must also be made to provide for the maintenance of the mechanical brake equipment and for testing in marshalling yards and goods depots as well as in v/orks and outstations.

Taking all these considerations into account, and having regard to the numbers and varying types of , vehicle involved, the programme for fitting continuous brakes to all freight stock has been designed initially to cover a period of ten years, but it is hoped that this period might be reduced, and every effort to this end will be made. The preliminary programme of fitting is as follows:- Fitting to Total Number Existing By new of Wagons Year Wagons Building to "be fitted 1957 25,000 17,000 42,000 1958 47,500 28,000 75,500 1959 47,500 24,000 . 71 ,500 1960 47,500 19,000 66,500 1961 . 47 * 5.00. 19,500 67,000 1962 47,500 19,000 66 ,500 1963 47,500 18,000 65,000 196U 47,500 15,000 62,500 1965 47,500 10,000 57,500 1 966 47,500 10,000 57,500

(iv) Development The Commission have recently authorised the establishment, at Faverdale Works, Darlington, of a development unit fully equipped to deal with all aspects of Carriage and Wagon development. This unit will initiate and carry out development on a wide range of carriage and wagon subjects, in some cases in collaboration with industry. It will cover, such matters as : (a) Design and prototype production of new designs of rolling stock and carriage bogies; (b) Design and experimental production of improved axleboxes, drawgear, buffers and brake details; (c) Developments of new methods of heating and ventilating of coaching stock;

(d) Entirely new conceptions which might be inspired by the availability of new materials or new processes.

It is expected that this unit would be able to start its work within twelve months, and will be built up to be fully operative in two years.

Civil Engineering Work The- following paragraphs outline the main features of the work : (a) Works Associated with Electrification The principal works required for electrification are preparation of the track for higher speeds, structural and track alterations at stations and junctions, bridge and tunnel alterations to pro vide for electrical clearances, and the construction of depots for the new motive power and rolling stock. Work is.already in hand on the strengthening of the road bed and extensive re-ballasting and additional relaying of track as necessary on the lines included in the first stages of electrification. Surveys are in hand to. determine the details of the structural alterations required to give electrical clearancesj and site work, already commenced to cover the early stages, will be a continuing xorocess throughout the spread of electrification.

(b) Other Track Works In addition to the track improvement work required on lines to be electrified, similar work must be carried out on other main lines to meet the higher speeds that will be attained by express diesel hauled trains and high speed multiple unit diesel trains. Goods lines must also be improved to allow for the faster speeds of freight operation made possible by the continuous brake. Orders have been placed for additional heavy mechanised equipment to assist in this work. By 1958 there will be available, for service 100 ballast tamping machines and 16 ballast cleaning machines. Orders have also been placed for four electric rail welders which will be delivered in 1957 and 1958. When these have been received and installed in depots, an extensive programme of installation of long welded rails will be undertaken. With the elimination of the rail joint, track maintenance costs will be reduced, and smoother riding of trains' will result.

(c) Building, Structural and Other Heavy Construction Work A wide range of work is to be undertaken, apart from that associated with Electrification, The planning of building work is involved in character, and must be built up in detail, item by item. Hence it is not possible at this stage to give a comprehensive picture of the whole of the work covered by the Plan. Building work will include station reconstruction and improvements, the construction of new depots for diesel locomotives and multiple unit trains and other rolling stock, and the provision of new freight terminals. Much of this work is already in hand. Important station reconstructions have been authorised at Peterborough, Plymouth, Banbury and Cannon Street and many other schemes are in the design stage. New maintenance depots for diesel multiple unit trains are authorised at Lincoln, Norwich, Stratford, Glasgow, Ayr, Edinburgh, Darlington, St. Leonards, Tyseley and Cardiff (Canton). A model layout of a diesel train depot has been evolved, and details have been issued for the guidance of designers. Considerable changes are foreseen in the design and layout of freight terminals to facilitate interchange of goods and containers from road to rail, and the development of model designs is under close study. Over £14 million has already been authorised for the construction of new marshalling yards, which, for the Civil Engineers, involve heavy earthwork and extensive track laying. The most important works so far authorised are those at Ripple Lane (Barking), Millerhill (Edinburgh), Thornton (Fife), Perth, Temple Mills and Port Talbot. A heavy programme of bridge reconstruction is contemplated, to overcome arrears which still re main as the result of the war, and the steel shortages which followed. The plans are designed as far as possible, to carry out bridge renewals on lines to be electrified in advance of the opening of the new services, so as to avoid placing speed restrictions on them at a later date, necessary'during the period of reconstruction.

It is expected that the level of expenditure on these works will build up to a level of about £25 million a year by 1959 and will subsequently be maintained at this level until the later stages of the Plan have been reached. In achieving this output, considerable assistance will be required from Consultants and Contractors, and they are already being employed to an ever increasing extent.

6. Signal Engineering Y\fork The work of the Signal Engineer may be considered under the following five heads : (a) Work associated with Electrification. (b) Installation of Automatic Train Control. (c) Signalling of new Marshalling Yards. (d) Other Signal Modernisation Works. (e) Telecommunications. Q 6

The following paragraphs outline the main features of the work : (a) Work Associated with Electrification The electrification of a line of railvray has a very considerable effect on the requirements, for signalling. There is not only the necessity to take measures to avoid electrical interference and physical obstruction to the sighting of semaphore signals? but in addition there are the changes necessary to cater for the increased density and speed of traffic which electrification makes possible. For these reasons it is generally the practice to carry out a complete re-signalling of the line while it is being electrified. This involves the provision of track circuiting through out, the replacement of semaphore signals by a much greater number of colour lights and the centralis atlon of traffic control at large centres in the interests of labour economy and free traffic flow. The programme of work for signalling is in accordance with the overall time-table for elcctri fication already set out in Section 2,

(b) Installation of Automatic Train Control Plans are being made for automatic train control to be provided on the main traffic routes through out the country. During the period 1956-1962, the following routes will be equipped London (King's Cross) via Newcastle to Edinburgh. London (Euston) to Glasgow (including Manchester and Liverpool). Edinburgh to Glasgow. London (Waterloo) to Bournemouth and Exeter, London (Liverpool Street) to Norwich,

(c) Signalling of New Marshalling: Yards Apart from the signalling and communications system required in the yards, the programme allows for the installation of automatic braking equipment to control the speed of wagons during gravity shunting. Considerable developments are anticipated in this field, in the provision of automatic control devices for the brakes, so eliminating human error, and enabling shunting to continue in fog and other adverse conditions. (d) Other Signalling Modernisation Works Work programmed under this heading covers the provision of track circuiting and colour light signalling in a large number of localities, where the existing signalling systems are inadequate to deal efficiently with the higher speeds and frequency of the future services. In addition, the schemes provide for more economical operation by the replacement of numbers of outmoded manually operated signal boxes by single modern power boxes.

(e) The telecommunications.system - network of British Railways is inadequate to deal with modern conditions. The plans provide for an automatic "on demand" service between all important points. Many years will elapse before the work can be completed. A commencement will be made by the concentration, in important localities, of several exchanges into one automatic exchange, and by increasing telephone route capacity where most needed. Intense study is being given to the extended use of teleprinter services, and- of the application of electronic devices to the gathering, storage and presentation of control information.

It is expected that the level of expenditure on Signal Engineering work will.build up to about £12 million a year by 1958 and thereafter continue at about the same level. This will require a considerable expansion in the output of Signalling Manufacturers and Contractors, who are aware of the need. APPENDIX 'B'

BRITISH RAILWAYS INVESTMENT EXPENDITURE

(Provisional Estimate)

£m.

SO . .4. ' \ \ c A ** -- 4 0 A

3 0 ' 1 B S y / S 2 0

1956 1957 1958 1959 I960 1961 1962

Annual Totals (provisional estimates) £90m. £120m. £135m. £UOm. £135m. £14-Om. £I40m.

Key: A Freight Services - Wagons, Marshalling Yards, Goods Stations, etc, B Passenger and Parcels Services - Coaching vehicles (including diesel and electric multiple unit stock), Stations, etc. C Provision of Electric and Diesel Traction - Locomotives, Electrical Equipment of Line, etc. D Track and Signalling Improvements.

Notes: (1 ) The figures charted above cover all expenditure t o be incurred on Investment (i.e. gross fixed capital formation as defined for the purposes of the National Income and Expenditure statistics). (2) The estimates assume no changes i n price levels. APPENDIX ' C WORK STUDY : SCHEMES UNDER CONSIDERATION

Below are given details of Work Study schemes implemented or under investigation : (1 ) SCHEMES IMPLEMENTED. Civil Engineering Department . Bridge Repairs Parley District Central Reclamation Depot Darlington Concrete Depots, Exmouth Junction Hawick Lowestoft Newton Heath Taunton York Creosote Depot We s t Ha rt 1 epo ol Materials Depots Lenton Northampton New Works Section Waterloo Permanent Way Maintenance Woking District (h Schemes) Brighton & Purley Districts (one scheme in each) Rubbish Tip Shewalton Station Painting Gangs Southern Region Switch & Crossing Shops Peterborough Angerstein Workshops) Redbridge Stanningley & Low Moor Gateshead (Park Lane) Signal Engineering Department Signal Works Reading (.2) SCHEMES AUTHORISED BUT NOT YET FULLY IMPLEMENTED Civil Engineering Department Engineering Depot West Baling Pre-assembly Depot Newlands Gas? Water & Maintenance Fitters Southern Region Permanent Way Maintenance Glasgow (North) District (Pilot Scheme) Signal Engineering Department Outside maintenance and Reading District installation work S & T Workshops York (3) SCHEMES UNDER INVESTIGATION Civil Engineering Department . District Organisation King's Cross Headquarters Offices York Materials Depots' Castleton Fazakerley Rubbish Tip (Unloading Barlow Wagons) Point & Crossing Shops & Motherwell Depots Mit cham New Cross Gate Three Bridges Permanent Way Maintenance Selected places in Schemes al l Regions

( Continued). .. (3) (Gontd. )

Workshops Stratford Workshops & Provision of Facilities for Stockyard Doncaster Workshops Organisation . Norwich District in connection with Lowestoft Harbour Works Maintenance Signal Engineering Department Maintenance & Renewal Work Glasgow South Area Office Organisation Reading Signal Works Mechanical & Electrical Engineering Department Locomotive Main Works Swindon Outdoor Machinery Maintenance Birmingham London, S.R. Outdoor Machinery Design and Specification Section CM. & E. E. Doncaster Outdoor Machinery Services Rugby Technical & Administrative Offices Swindon Motive Powex1 Department Motive Power Depot Peterborough Springs Branch Carriage & Wagon Department Main Works Swindon Outdoor Machinery Services Rugby Technical & Administrative Offices Swindon Wagon Repair Depots) Peterborough Tyne Dock Simonside Stores Department Catalogue system of stores material Eastern Region Offices and Stores Swindon Signal & Telegraph Stores Reading Commercial Department Goods Depot Gloucester Oxford Bi-Regional Organisation Birmingham District Operatinp; Department Freight Train Working & Yard Scottish Region Shunting (investigation into possibility of introducing train and shunting bonus scheme) Carriage Cleaning Scottish Region Accountant's Department Stores Accounting Scottish Region Marine Department Marine Workshops Newhaven Appendix D"

FINANCIAL POSITION OF COMMISSION 1957/ 1970

(A) Yield of Modernisation

Improvement in earnings before additional interest

Net effect

Additional interest

(B) Yield of other measures, after deducting present rate of deficit