Fire and Steam

by Christian Wolmar

  The Great Northern was the subject of the biggest battle fought in Parliament over a single railway – and with good reason. It was the longest single line approved by Parliament, comprising 188 miles between London and York, as well as a large loop into Lincolnshire and a few smaller branches. It was obvious that such a key trunk route would be a major part of the nation’s infrastructure for generations to come. The Great Northern was also the last of the major companies to be created and therefore was opposed as a latecoming upstart by the existing railways, notably the Midland, which were enjoying a monopoly of traffic.

  Even before the start of the railway mania, the larger companies had become significant players who controlled much of the existing railway and were often able to dominate their smaller neighbours. In 1844, a mere eleven companies controlled half the mileage while the rest was split between no fewer than ninety-two other concerns – an average of a mere twelve miles each – and as we will see in the next chapter, the trend towards domination by the bigger ones strengthened. Despite the emergence of many new companies, thereby increasing the overall number, a process of consolidation was inevitable. Since the larger railways were able to raise capital for expansion more easily, they had, quite literally, an established track record,21 and would build on this dominant position. They not only had the best-situated railways, linking major towns where passenger traffic was always going to be greatest, but their infrastructure was in better condition and their engineering standards higher.

  At the outset of this spurt in growth of railway mileage – that would see 4,128 miles added to the network in the eight years following the start of the mania – the biggest was the Great Western with 230 miles, precisely the same length as the two principal railways operating on the West Coast route, the London & Birmingham and the Grand Junction (amalgamated as the London & North Western in 1846). The Midland, created in 1844 by the amalgamation of the three railways – the North Midland, Midland Counties and Birmingham & Derby Junction – which converged at Derby, putting paid to the crazy competition there, was the second largest. Amalgamations had been resisted by Parliament – or how else to explain the existence in 1844 of more than one hundred railways for a mileage of 2,235 – but the logic behind the creation of the Midland, the first significant rationalization of the railway network, was irrefutable. The merger provided the central section of a railway that stretched from London to York using the London & Birmingham until Rugby, and at the northern end from Normanton, the York & North Midland, a railway which enjoyed friendly relations with the Midland since it had the same chairman, George Hudson.

  Hudson was the dominant railway figure of the period, the first of the big railway barons who emerged as the railway companies expanded, and, according to many railway historians, the greatest, despite the faults and misdeeds that were to prove his undoing. He was not, like the Stephensons with whom he was associated, an engineer, but an entrepreneur and investor – and ultimately a liar and a crook who had a particular dislike of producing accurate financial figures for the enterprises he controlled. He earned the comment from one contemporary wit that he ‘became rich by keeping everything but his accounts’,22 and was helped by the fact that the law placed minimal requirements on companies to produce accounts in a standardized form; effectively the directors were free to spin the shareholders whatever tale was likely to keep them happy.

  A farmer’s son from Yorkshire, Hudson, benefiting from a family bequest of the considerable amount of £30,000, bought himself political prominence in York where he became the Tory Lord Mayor in 1837. He was generous with the town’s money, throwing lavish banquets that earned him many political favours that he would later exploit and at which ‘so much gas was burnt that the York Gas Company elected him a director out of sheer gratitude’.23 Hudson was the driving force behind the promotion and construction of the thirty-two-mile York & North Midland Railway, which was completed in 1839. The following year it became part of the growing trunk route network connecting York with London when its southern neighbour, the North Midland, opened and Hudson took advantage of the slump in railway share prices to gain a controlling interest, becoming its chairman. He gave himself the title of chairman of the various companies he dominated but in practice he wielded dictatorial power as the rest of the directors were usually too starry-eyed to notice that Hudson’s methods were frequently dishonest. He treated these businesses as his personal fiefdom and his ability to accumulate so much power so quickly within the railways demonstrated that the money men of the City, rather than local mercantile interests, were beginning to control the industry.

  It is unclear whether Hudson’s early success with the York & North Midland, where he quickly turned deficits into profits, was based on genuine commercial activity or whether it was merely his particular brand of ‘creative accounting’, a term that could have been invented for him. However, even if he did start off honestly, his modus operandi soon became utterly corrupt. His method was to put forward a range of proposals for new railways and amalgamations with the ultimate intention of creating a controlled monopoly. He was a wheeler-dealer sine qua non, who promoted new railways, bought out existing ones at bargain prices and, having become an MP, used his political position to push his interests and destroy those of his rivals. At one point he was reputed to be walking around Parliament seeking support for no fewer than sixteen bills and it was hardly surprising that he soon became known as the ‘Railway King’.

  All that may have been just about above board and within the norms of the way business and politics were conducted at the time, but his method of attracting investors crossed the threshold into illegality. To show how well his existing companies were performing, dividends were paid out of new capital, a practice that, amazingly, was not unlawful, but was clearly unsustainable – and, worse, Hudson creamed off investors’ money for his own use. Indeed, personal aggrandizement went hand in hand with his ambitions for the railway. He manipulated the shares of his various companies, disposed of his own land to the railways at inflated prices, bought railway equipment on the cheap and then sold it at a profit to his own railways, and tried whenever possible not to pay his debts.

  Exploiting the power and prestige accorded to him by his position at the Midland, Hudson expanded his influence rapidly. The Midland was a heavily used railway that had a pivotal role in the network and was therefore ripe for expansion and alliances with neighbours in all directions. The Midland’s potential became apparent when Hudson’s Newcastle & Darlington Railway opened on 18 June 1844, creating a rapid connection between London and the north-east. Even with the necessity of changing engines at Rugby, where the Midland’s territory started, the celebratory inaugural train took just nine and a half hours to travel the rather circuitous route to Newcastle from Euston – a mere quarter of the time that a stagecoach covered the journey in good weather. As well as the Midland, Hudson controlled both the York & North Midland (whose generous dividends of 20 per cent per annum shrank to virtually nothing after his demise) and the York, Newcastle & Berwick, which had won the right to link England with Scotland as it would join the Edinburgh & Berwick at the border town. Therefore Hudson used his considerable deal-making talent to good effect by ensuring that he would have control of the railways which eventually linked England and Scotland on the East Coast.

  The other major railway to fall under his influence was the Eastern Counties. Impressed by Hudson’s burgeoning political power as well as his record of turning around the finances of railways – but ignorant of his financial shenanigans – the directors of several other railways invited him to join them on the board, invariably as chairman since he would accept nothing less. Thus, rather like a successful football manager being approached by a failing club to improve the performance of their team, in October 1845 Hudson was asked to take over as chairman of the Eastern Counties. It was a struggling railway, serving East Anglia, an agricultural area with few sizeable centres of population, and therefore had struggled even
to complete its authorized route from London to Yarmouth, let alone pay any reasonable dividends. Although the Eastern Counties had only reached Colchester and therefore needed funds for completion, he immediately impressed the shareholders by tripling their half-yearly dividends from 2 per cent to 6 per cent without bothering to produce the accounts that merited such largesse. Subsequent investigation showed that Hudson had obtained £145,000 by manipulating the accounts, £205,000 had been charged to capital instead of revenue and he had consequently paid out £515,000 in dividends when only £225,000 was available. He kept paying dividends of 4 per cent over the next couple of years but after his resignation early in 1849 barely anything was paid for the subsequent four years. And why had his fellow directors acquiesced to such unsavoury practice? Because, they told the subsequent parliamentary inquiry, whenever they started to object to his decisions, he would threaten to resign!

  Hudson had had his own reasons for wanting to control the Eastern Counties. He saw its development as a potential alternative to the putative Great Northern for linking London with the North, and came up with various routes to try to block his rival’s progress through Parliament. The Bill for Denison’s London–York Direct railway, the precursor of the Great Northern, had fallen in the 1845 parliamentary session, partly because of bickering with a rival scheme called the Direct Northern, but when the two were merged the following year, permission for what was destined to be Britain’s premier main line route between London and Scotland was at last obtained. Not surprisingly, the Great Northern had been fiercely opposed, too, by the London & North Western which still retained a monopoly on traffic heading north from London, since the Midland used its rails up to Rugby. The cost was to be £5.6m, the largest sum raised for a railway, and the legal fees, too, had been the most expensive ever: £630,000, or 12.5 per cent of the capital, as a result of the protracted opposition. The route was from King’s Cross to York, via Hatfield, Peterborough and Doncaster with a large loop, right into Hudson territory, taking in Boston and Lincoln, rejoining the main line just south of Doncaster. Hudson had tried unsuccessfully to use his position with Eastern Counties to put forward an alternative scheme which would have gone from London (Bishopsgate, which was then its terminus) via Ely and Lincoln to York, but the idea never got off the ground. As O. S. Nock, the doyen of railway writers, puts it: ‘Hudson, by protocols straight and devious, flamboyant and insulting rhetoric, strove might and main to black it at every stage in the Parliamentary procedure – and afterwards.’24 It is no exaggeration to say that these power battles at the height of the railway mania determined the shape of the nation’s railways for ever. The Great Northern’s route to York, Hudson’s home base, was thirty miles shorter than the alternative using the Midland via Rugby, and inevitably the go-ahead for the Great Northern in 1846 spelt Hudson’s doom, though he would hang on for another three years.

  Like its predecessors, the Great Northern struggled given the huge capital outlay required and the shortage of labour. This was the height of the building boom on the railways with 200,000 men working on their construction around the country. There was a shortage of manpower but work started relatively quickly on the line, which was opened in stages between 1848 and 1852. It was actually Hudson’s response to the imminent arrival of the Great Northern that precipitated his downfall because his behaviour exposed the conflict of interest between the various railways he controlled. With the Great Northern eager to save the cost of building its authorized line right into the centre of York, Hudson foolishly agreed to a request from his erstwhile rival for running rights over the tracks of the York & North Midland,25 which was great business for that railway but a disaster for the Midland with its longer route. The author of the principal history of the period points out the clear anomaly: ‘How Hudson could have reconciled his own position as chairman of all three companies when the policy of two [the York & North Midland and the York, Newcastle & Berwick, which also benefited from the shorter route to London] of them was directly opposed to the interests of the third and largest company is a mystery only to be explained by his overweening confidence in his own power to extricate himself from any position in railway affairs, however impossible.’26

  After a power struggle, Hudson was forced to resign the chairmanship of the Midland and the house of cards began to collapse. Soon after, at a shareholders’ meeting of his original railway, the York and North Midland, rather more incisive questions than normal were asked into the precise nature of the company’s accounts. Hudson was no great public speaker at the best of times and his bluster for once carried no weight as he tried to explain the anomalies in the accounts that had various noughts added to them randomly and which later showed he had appropriated 11,000 Newcastle & Berwick shares fraudulently. The bubble had burst and with similar questioning at meetings of the Eastern Counties and his other companies, his downfall was amazingly rapid. The establishment of a committee of inquiry by Parliament found that he had ‘abused the confidence that was placed in him by wielding the power he obtained to forward his own interest’.27 It was the Enron scandal of its day: the accounts of the various companies were in such a muddle that it was impossible to unravel them. After the parliamentary inquiry had found against him, he was charged with bribing MPs and embezzling £600,000 from his own companies, and was briefly imprisoned for debt. He fled to Paris where he lived in poverty, only returning to Britain just before his death in 1871.

  At his peak in 1849, Hudson controlled 1,450 miles out of the railway’s total mileage of 5,000, but if the aim was to create a unified national railway, he failed, since the network he controlled was rather a hotchpotch. Its spine was a route linking Newcastle with Bristol, but with the route through to London and the terminus at St Pancras not completed until much later, it was clearly ‘work in progress’ when his career was brought to its abrupt halt. Amazingly, he survived the end of the mania and the start of the collapse in share values, but once he had lost the battle to stop the Great Northern cutting through the heart of his territory it became impossible to maintain the pretence that all his various companies were profitable.

  Hudson is often denigrated as more of a crook than a railway pioneer, but this is too harsh a verdict on a man who understood the importance of melding the haphazard collection of railways into an integrated whole. He was a visionary who saw the potential of running trains, both goods and passenger, across the country, and understood the need to standardize equipment and modernize operating methods. At the height of his fame, he was the guest of prime ministers and royalty, and his large mansion in Kensington, scene of countless social events, became a regular haunt of the great and good. The fairest summary is given by railway historian Jack Simmons: ‘His financial chicanery is indefensible, and that met its proper reward. Along with it went a true vision of the weaknesses of the railways of his time and his understanding of the means to repair them.’28 Hudson’s name still hangs over a railway office in York, a recognition of his contribution to the industry.

  With the network now consisting of a dozen large companies and ninety others, it was essential to create a mechanism for collecting and distributing income in order to prevent people having to get off trains to purchase new tickets when their journey took them across a company boundary. Hudson had strongly supported the creation of the Railway Clearing House, an idea put forward by the London & Birmingham, and ‘without his co-operation, it would not have been possible’.29

  The Railway Clearing House was launched at a meeting of representatives of nine major companies held near Euston in January 1842. Until its creation, rival companies caused each other – and their passengers – all kinds of complications. Some would not even accept the carriages of ‘foreign’ companies while others shunned third-class passengers by only accepting second-class tickets from rival railways on their trains. In the worst cases, through booking was simply not possible. The purpose of establishing the clearing house went beyond merely enabling passengers to buy one ticket to cover
their whole journey. The huge team of clerks that quickly assembled to deal with this enormous administrative task also allocated the income from such tickets and ensured that inter-company debts were settled. The clearing house had a role in goods traffic too, with the establishment of a group of number-takers – a breed of early professional trainspotters, as it were – who checked on the numbers and contents of goods wagons travelling beyond their own companies’ borders so that the right track charges could be applied.

  One by-product of the creation of the Railway Clearing House was the standardization of the ticketing system. Obvious ideas are sometimes, well, just too obvious, once someone comes up with them. Tickets had hitherto been little more than scraps of paper made out by hand. Now an enterprising clerk, Thomas Edmondson, a Quaker, appalled at the ease with which company money was expropriated by dishonest ticket office staff (the information on the paper was not necessarily reconciled in the station accounts), earned his name in railway history by suggesting that tickets be numbered consecutively, thereby facilitating accounting and preventing fraud. He also devised a system of serially numbered and dated card tickets ready to be sold to passengers which initially he produced himself on a simple wooden printing frame. His system was quickly adopted by most British railways and he was rewarded handsomely with a royalty of 10 shillings (50p) per route mile. Edmondson tickets became the norm for railway networks across the world and lasted in Britain for 150 years, until the advent of computer-generated tickets in 1990.30