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 direction which must be right and which can be followed with vigour without any danger of eliminating too much or of incurring grossly wasteful expenditure before the position can be reviewed.

The changes proposed, and their phasing, are certainly not too drastic if regarded as a means of correcting the present departure of the railways from their proper role in the transport system as a whole. It is recognised, however, that changes of the magnitude of those proposed will inevitably give rise to many difficulties affecting railway staff, the travelling public, and industry. The Railways Board will do all that it can to ameliorate these difficulties, consistent with its responsibility for making railways an efficient and economic component in the transport system, but the Board knows that it will not be able to solve all problems unaided.

The railways emerged from the war at a fairly high level of activity, but in a poor physical state, They were able to pay their way, because road transport facilities were still limited, and they continued to do so until 1952. From then onwards, however, the surplus on operating account declined progressively. After 1953 it became too small to meet capital charges, after 1955 it disappeared, and by 1960 the annual loss on operating account had risen to £67·7 m. This rose further to £86·9 m. in 1961.

In 1955, a modernisation plan was embarked upon. It was a plan to modernise equipment, but it did not envisage any basic changes in the scope of railway services or in the general mode of operation of the railway system. It was expected that the substitution of electric and diesel haulage for steam, concentration of marshalling yards, reduction in number and increased mechanisation of goods depots, re-signalling, and the introduction of other modern equipment, would make the railways pay by reducing costs and attracting more traffic.

By 1960, however, it had become apparent that the effects of modernisation were neither so rapid nor so pronounced as had been forecast, that the downward trend in some railway traffics would persist, and the operating losses were likely to go on increasing unless radical changes were made.

There is a considerable scope for cost reduction by a multiplicity of economies over the whole field of railway operations, and vigorous efforts are being made to achieve them. Nevertheless, it was obvious, even before detailed investigation started, that neither modernisation nor more economical working could make the railways viable in their existing form, and that a reshaping of the whole pattern of the business would be necessary as well.

Ever since major amalgamations started, the business of the railways has been, from a financial point of view, a mixture of good, bad, and indifferent routes, services and traffics. Nevertheless, the circumstances which obtained throughout the major period of railway history in Britain—conditions of near monopoly, obligation to carry, and statutory fixing of rates without relationship to costs—all tended to cause accountancy to be limited to global accounts for each of the independent railway companies. As the companies merged, the accounting units became larger without an offsetting increase in detail, and this continued to be the position when all the railways were combined by nationalisation.