THE PRESS WEDNESDAY, OCTOBER 27, 1982. The cost of rail services

Press, 27 October 1982, Page 14

THE PRESS WEDNESDAY, OCTOBER 27, 1982. The cost of rail services

Taxpayers had to find more than $1 million a week to meet the losses incurred in running the Railways during the last financial year. The operating deficit, $56.6 million, does not take into account interest payments that had to be made on loans or overseas exchange currency losses. When these are added, the over-all deficit of the Railways for the year was $99.2 million. For the want of any surplus on running the Railways, the repayment of loans and their interest, and working capital, must be found from new borrowing; and losses in operation have been met by subsidies. The creation of the Railways Corporation has, as part of the move, the sensible distinction between commercial services and services that the Railways have been required to perform for what are conveniently called social considerations. These social services continue to account for most of the losses,

according to the General Manager of Railways, Mr T. M. Hayward. The losses on those social services that the Government decides should continue will . still be met by the taxpayer; but they will be identified and paid for from the Transport Vote. In this way, the cost of achieving particular social goals can be appraised. The distinction between the two types of service should enable the corporation to operate more efficiently. When the Railways are required to do more than they would undertake for sound commercial reasons, this requirement will be made politically and the cost of the political decision will be recognisable to the taxpayers. The broad term “social services” allows a wide interpretation and a Government might not be prepared to accept the definition preferred by the corporation. A generous application of the term could enable the corporation to offload virtually all unprofitable activities and defeat the purpose in setting up a corporation: greater efficiency in the Railways.

Nevertheless, Mr Hayward has attempted to define the social services and has put the cost of them at $77 million. Some of this cost was offset by profitable areas in the Railways’ operation. If all of the services identified by Mr Hayward as having a social purpose beyond purely commercial measurement were accepted by the Government,, taxpayers would in

fact be worse off. This realisation should encourage both the Government and taxpayers to question closely their wish to continue subsidising the services and to weigh carefully the benefits obtained from them. The great difficulty lies in assessing the cost of any alternative transport system, let alone, the cost of having none at all in some areas. Suburban passenger services, both rail and road, are the most costly of the Railways’ losing services; few would argue that they should be stopped. The Wellington suburban rail network, essential for hundreds of commuters, lost $l7 million last year; the Auckland figure was $7.1 million. Other passenger services, such as the Northerner express (a loss of $5.8 million) and the Southerner (a loss of $4.4 million) could not be removed without causing great inconvenience — and extra expense — for thousands of people.

The railway system has a high proportion of fixed operating costs that must still be met regardless of the amount of freight or number of passengers carried. Because passenger services require greater staffing levels than freight services, the wages, and wage increases, have a disproportionate impact on the social requirements. Wages account for almost 59 per cent of all Railways expenditure. This is aggravated by another social requirement placed on the Railways. Last year the Railways were obliged to absorb 600 extra staff who had previously been employed under job creation schemes sponsored by the Department of Labour. In addition, the Railways were requested to recruit school leavers, including apprentices, beyond their own requirements and to the maximum capacity of Railways training facilities. Social requirements such as these are expensive. Apprentice training cost more than $4 million last year. The public might consider them a worth-while, even beneficial, use of tax money. Mr Hayward has gone some of the way to identifying the

costs that the taxpayer will continue to be asked to meet. under the new system. Although provision has been made for the losses this year, the Government will have to decide which of those services it deems necessary in future. The public, with a clearer idea of what those services are costing, will judge if the Government’s decision is correct.