Down the Tube: Stephen Halliday Investigates the Murky World of Financing London's Underground. (Cross Current)
Halliday, Stephen, History Today
IT HAS NEVER BEEN EASY to raise money to build and run the London Underground. The present travails of Robert Kiley and Ken Livingstone echo those of their predecessors, who had to rely upon a mixture of deviousness, dishonesty and, more recently, unemployment to give London the underground railway that it desperately needed.
The problems began before the system was built. In the 1850s Charles Pearson, solicitor to the City of London, devised a plan to build an `Arcade Railway' beneath the Farringdon Road to connect the Great Northern railway at Kings Cross with Farringdon, in the City of London, thereby reducing traffic on the capital's congested streets. The Great Northern, recognising advantages for its own passengers, agreed to subscribe 170,000, [pounds sterling] a substantial proportion of the capital required. Unfortunately, in the words of the explanation offered to the Great Northern's 1857 annual general meeting, one of its officers misappropriated the money and used it for `the furnishings of magnificent houses and the purchase of articles of vertu'. The culprit, Leopold Redpath, was one of the last criminals to be transported to Australia for life, but that didn't help Pearson's plan.
The scheme was revived later in the decade in the form of the Metropolitan Railway, which would connect Paddington, Euston and Kings Cross to the Farringdon terminus. The plan was condemned by The Times as `Utopian and one which, even if it could be accomplished, would certainly never pay'. The writer added, with unconscious foresight, that `the whole idea has been gradually associated with the plans for flying machines, warfare by balloons, tunnels under the Channel and other bold but hazardous propositions of the same kind'. Most of the capital was contributed by engineering firms who hoped thereby to gain contracts to build the proposed railway. They included the firms owned by Thomas Brassey, who had built railways throughout the world and also constructed London's main drainage, and by Sir Samuel Morton Peto, who built much of London's club-land, erected Nelson's column in Trafalgar Square and thereafter became bankrupt. This relationship between investment funds and engineering contracts echoes the Public-Private Partnership that has caused such trouble for Robert Kiley. The Metropolitan Railway opened on January 9th, 1863, and earned its shareholders reasonable dividends, though these were mostly due to its policy of building railways overground into the suburbs like Amersham and taking advantage of the increase in land values which occurred when agricultural land was developed for housing in `Metroland'.
The next financial problem to affect the Underground involved the Bakerloo Line, which had been authorised by an Act of 1893 to link Baker Street and Waterloo. Once again the directors had difficulty raising finance, so in 1897 they were relieved when they were approached by Whitaker Wright on behalf of the London and Globe Finance Corporation. Wright was the first in a line of colourful characters who were to play a critical role in financing the construction of the Underground. Wright (1845-1904), an Englishman, had made a fortune from mining in the USA and was a millionaire by the time he was thirty-one. In 1897, having returned to England, he became managing director of the London and Globe Finance Corporation, owning almost one-third of the shares. Wright offered to invest 700,000 [pounds sterling] in the new railway which enabled construction to begin in 1898. Work had proceeded for eighteen months at a cost of about 650,000 [pounds sterling] when the London and Globe ran into difficulties, largely as a result of the collapse in the share price of one of its other investments. An attempt by Wright to `rig' the market by buying up London and Globe shares resulted in further disastrous losses, whereupon he tried to unload on to the market shares in the still embryonic railway. This, predictably, failed as did an optimistic speech to shareholders. …