INTEREST EARNINGS.

Auckland Star, Volume LX, Issue 245, 16 October 1929, Page 8

INTEREST EARNINGS.

WHAT SHOULD LINES PAY?

TRUE TEST OF SUCCESS.

TWO POINTS OF VIEW.

(By Telegraph.—Parliamentary Reporter.)

WELLINGTON, this day.

Just .what proportion of interest the New Zealand Railways should earn was debated thoroughly in the House of Representatives last night, conflicting views being expressed on this point by the Hon. W. D. Stewart (Dunedin West), former Finance Minister, and Mr. H. E. Holland, Leader of the Labour party. The Reformer argued that reasonable interest should be earned by operating lines and tliat this should be the test in all questions of future construction, while Mr. Holland took the view that railways should be regarded as a utility service, with usefulness as the main test of success.

Mr. Stewart said that if one looked back over the history of New Zealand Railways it wovdd be found that when Sir Joseph Ward was Minister of Railways he laid it down that the lailways should earn at least 3 per cent, and his policy had been to give back to the public anything over and above that percentage; It was given back by way of reduced freight rates and passenger fares, together with more liberal services. It was true, of course, that at that time the railway accounts were not on a proper commercial basis, and no doubt the assumed profits might not liavo been what they,were taken to be if teated by a proper business basis. The Hon. J. A. Miller had laid it down in 1910 that the railways must earn at least their own interest and not be a burden on the taxpayers. Under his administration the railways earned /about 3 J per cent.

The next stage in railway development was during the war years, when, owing to the fact that the trains weie carrying large numbers of tioops and doing a great deal of business, from 4 to s°per cent was earned. Margin Between Interest and Earnings. Mr. Stewart said the main concern of most Ministers of Railways had been to keep the gap between net returns and tho total interest bill on loan moneys as low as possible, and not to let it become serious enough to give causo for alarm. The test of development was not a sound policy. If development was the only factor to be considered there was no standard by which the construction of new lines could be tested. Railways could not be compared with roads, because the road was tho King's highway and anyone could use it, but Parliament did try to make those who did the most damage to the road pay their fair share, through heavy traffic fees. Mr. Stewart said he was not blaming the present Minister for lack of policy, but it was quite obvious that the Government had no policy During the election campaign the Prime Minister had stated frequently that his party's policv was that all future railway construction should cost the_ taxpayer nothing, so it seemed that Sir Joseph Ward expected lines to pay the full rate, of interest. It was important that future lines should not be built on one basis and operated on another. The main concern of the general manager was to conduct the railways 011 a commercial basis, and he was quite right from his own point of view, because he had.no other basis 011 which to work; but the general manager also laid it down that he could not control the policy. "No Protection For Taxpayer." If development was to be the only aim in constructing railways, then the taxpayer had no protection, but Mr. Stewart felt that it was impossible to .expect all lines to pay the full rate of interest. It was impossible, because the raliways were going through a transition stage, owing to the fierce motor competition. It was important, however, that some standard be set, as otherwise there was no test for future lines. He would not say that lines should pay from their inception. In India that was not expected, but the experts considered that if a line paid interest after ten years in operation, its construction was justified. Till the Government had found a solution of this problem, the course- of caution was tho diminution of loan expenditure on railways. Mr. Holland expressed very dissimilar views, stressing the point that roads and railways were the two outstanding social services of the country, upon which depended nearly all activities. How could a distinction be drawn between roads and railways when they served exactly similar ends. Millions were spent on roads, but it was nev.gr insisted that they should show a balance-sheet profit, so why should a balance-sheet profit be demanded of the railways? He could not see the logic of those who distinguished between the two services. The main purpose of the railways should, be to serve the people, if, in doing that, a balance-sheet loss was revealed, then it could be taken that the loss would "be made up in other directions. He disagreed with the present principle of accounting, which had been introduced in 1925. Under this system portion of the annual loss was taken from the Consolidated Fund, but the remainder of it was left to he provided for, not out of the Consolidated Fund, but by another way. Why was this loss not treated as a whole, instead of as a number of slices? It wouftl be better to show the full loss of £929,000, and make it up direct from the Consolidated Fund, and he hoped the present system of accounting would be changed. Co-ordination of Services. It was urged by Mr. J. S. Fletcher (Grey Lynn) that the time had come when an effort should be made to bring about co-ordination between all transport services. His suggestion was that a commission should be established to sit during the recess. It should consist of members of Parliament, who would investigate all questions relating to railway, shipping, road and air services, with a view of finding some- means of 1 educing the costs. The development of motor transport could no more he stopped than the incoming tide. Expert evidence could be called, even from abroad, if necessary. Mr. A. M. Samuel (Thames): The inquiry should not be a Parliamentary one. . * ,_ • Mr. Fletcher: Decidedly it should. It is our business to manage the country s affairs, and it is our job to take this 111 hand.