Present condition of the Italian state railways (I)

«The Economist»,4 novembre 1911, pp. 931-932

On July 1, 1905, the principal Italian Railways began to be worked by the State. Before that date there existed a so-called “mixed” system, under which the Railways were operated by companies, who leased them from the State in return for a royalty upon the gross and net working receipts. This arrangement had the evident defects of placing the companies, who owned the concessions, under the sinister influence of politics, and making them lose interest in improving the working, through fear of increasing the royalties payable upon the gross traffic receipts. It was established by the Conventions of 1885, and consisted of three railway systems run by three companies – the Mediterranean, the Adriatic, and the Sicilian. The continuous and troublesome interference of the Government, and the small amount of concern which it showed to fulfill its obligations towards the companies, added greatly to the unsatisfactoriness of this absurd arrangement. Moreover, the commercial crisis caused by the imposition of Protection, and the tearing up of the Treaty of Commerce with France in 1888, had entirely falsified the optimistic anticipations upon which the companies had based their agreement to alleviate the pressing needs of the Italian Treasury. Consequently, the companies were for their part not particularly concerned to maintain the conventions which required renewal in 1905. For some years past, fortified by the large number of actions which were pending against the State for breach of the most solemn engagements, they had begun to neglect the regular maintenance of the lines and equipment, thus provoking general complaints from the public. The advocates of State intervention, therefore, worked upon exceptionally favourable ground. The campaign for nationalisation was conducted by Conservatives and Socialists, allied for the occasion with the same financial groups which controlled the railway companies. It was strongly supported by the bureaucracy, which is ever on the watch to increase the number of administrative posts. Further, the repeated strikes of the railway staffs, which the Government had to bring to a close by paying for a rise of wages granted by the companies, had spread abroad a feeling that the railway service would be much better assured if it was directly controlled by the State, and if all the men employed were called “public officers”. These were the circumstances which led to the passing of the law of April 22, 1905, which directed the transfer to State management of the railways, which were already public property. The change was to take place as from July 1st of the same year. Shortly afterwards the Southern Railway was repurchased, and the State became at once the owner and the manager of most of the railways in Italy and Sicily.

When comparing the results of direct operation by the State and by the lease holding companies, two things must be remembered: 1) That the management, even before 1905, was largely effected by the same inconveniences and defects which characterise the industrial enterprises of the State or of large public bodies; 2) that Italy, in taking over the management of the Railways in 1905, had to provide for insufficiencies of equipment and maintenance, which were mainly due, however, to her own lack of vigilance and control.

From the point of view of communication itself it must be admitted that the railway service has shown considerable improvement during the last few years, especially since the muddle of the first two years of State management. Travelling on the Italian Railways is less bad, and, on the main routes giving through communication with foreign railways, passengers have few complaints to make. Even on the secondary lines the number of trains has increased and the passenger service has been separated from the goods service, making it possible to avoid the constant delay caused by the obstruction of the stations, and shunting on tracks which are usually single, and inadequately provided with sidings. After these admissions the question arises whether the improvements have been in proportion to the expenditure by the State and the sacrifices demanded from the Italian taxpayers, many of whom are in too wretched a condition to profit by the advantages offered by State Railways. The answer to this question is an absolute negative.

To begin with the financial results, facts have confounded in a striking manner the expectation of those who regarded State management as an inexhaustible source of public revenue. After deducting taxes (which weigh upon State management as upon that of the companies, and cannot be counted as a revenue drawn from the railways), we find that the companies, before 1905, paid to the State about 65 millions of lire annually from their receipts, which, under the same conditions but with an increased traffic, would now have risen to at least 80 millions of lire. The following table shows the actual net revenues which have been paid into the Treasury by the State Railways, omitting the abnormal year 1905-6:

These figures are deceptive, and the growth which they show between the two last years is caused by a manipulation of the accounts adopted for the double purpose of hiding from the taxpayers the financial disaster of working the railways, and maintaining the illusion of a more or less artificial increase in the State budget. The way in which it was done was to pass a law in 1909 relieving the Administration of the Railways of several big items of expense. Signor Ancona, a deputy and a very competent engineer, has reckoned that the relief afforded by the Act of 1909 amounted to a total of 24 millions of lire, so that the net revenue paid by the Administration of the Railways to the Treasury in 1909-10 was really only 13,000,000 lire. But, as Signor Ancona pointed out, this correction is not yet sufficient. Another lightening of expenditure must be taken into account, amounting to from eight to ten millions of lire, due to the reduction of the charges for renewals from 4 per cent., upon the gross receipts, to 2 1/2 per cent. A total deduction, therefore, of from 32 to 34 millions of lire must be made from the net revenue of the State railways for the year 1909-10, and the same will have to be done for the year 1910-11, the actual results of which are not yet published. In addition to this, last year has seen a new State service between the Italian mainland, Sicily and Sardinia, which will yield a further deficit of several millions of lire. The most manifest and certain result of the exploitation of the railways be the State, therefore, is that in a period of live years the State has lost its income from the capital of 5,000,000,000 lire spent on the construction, purchase and equipment of the railways.

To this sum, which may be considered as the share capital of the railways, about 1,000,000,000 lire must be added for advances made by the Treasury to the Administration of the Railways. The latter has hitherto paid the interest and sinking fund upon the advances, just as if the money had been borrowed in the form of debentures by an ordinary joint-stock company. But the tendency is for the Administration of the Railways to relieve itself of the charge, while, at the same time, getting further free advances from the Treasury. It has already demanded 30,000,000 lire per annum in this form to double the most important tracks.