THE PRESS TUESDAY, NOVEMBER 6, 1984. Healing the railways

Press, 6 November 1984, Page 16

THE PRESS TUESDAY, NOVEMBER 6, 1984. Healing the railways

The Minister of Railways, Mr Prebble, did not mince his words when he spoke to Railways Corporation staff at the week-end. His message was that the management and unions would have to co-operate or die together. The message is not new; there can be no guarantee that it will be better appreciated this time than on past occasions; but for the corporation, and for New Zealand, it deserves to be engraved in steel. Disruption to services costs customers and money; it also turns away some of those who might otherwise have used the corporation’s services and many of them stay away long after the cause of their disenchantment has been repaired. No-one in the Railways Corporation can afford to be any less - realistic than Mr Prebble about the need for more harmony in the operation of the railways.

This Government seems as adamant as the last that the railway system will provide a realistic return on the taxpayers’ investment. The previous Administration laid the groundwork when it disbanded the former Railways Department and replaced it with the corporation — writing off, or converting into capital, more than $350 million worth of debts and relieving the corporation of the cost of lossmaking social services along the way. The benefits of these reforms are starting to show through, if only modestly so at present. For the second year in a row, the corporation has returned a profit. The $24 million profit recorded in the last year is about a 3 per cent return on the country’s investment in the rail system. The Minister of Finance, Mr Douglas, correctly draws an unfavourable comparison with the average 11.2 per cent return achieved by New Zealand public companies after tax. The Railways Corporation is exempt from tax payments in this form. Obviously the corporation is still not performing as well as it should; but a profit is a profit, and a great improvement on the horrendous losses that had become customary in Railways Department finances. The principal source of corporation revenue is from freight haulage over long distances. This confirms the place of railways as the most efficient converter of fuel costs into tonnes carried. A significant contribution to this component of the corporation’s income is from the Cook Strait rail ferries, which continue to

dominate inter-island freight traffic. For several years the ferries have been a profitable part of the railways balance sheet, in spite of costly disruptions and industrial unrest. The Picton end of the service has been at the centre of a series of disputes that have helped drive business to the corporation’s competitors. Mr Prebble will have achieved some success if he can encourage the corporation and its employees to put these problems behind them, and to adopt a new sense of purpose to increase freight tonnages across the strait. In spite of the high profit of the rail ferries — or perhaps because of it — the service has been home to extravagances that can have no part in an efficient transport system that seeks to give its customers and shareholders a fair go. The corporation will have to continue to shed excessive costs if it is to hold an advantage over its rivals, and the rail ferries are the logical candidates if rate reductions can be considered in the corporation’s drive to be more competitive.

In this context, a recent survey by the Canterbury Manufacturers’ Association made the pertinent finding that in the six months since the railway system was opened to increased competition from road haulage by the progressive deregulation of the road transport industry, most South Island manufacturers achieved freight cost reductions, some up to 50 per cent, but principally within the South Island and not on inter-island routes. The strait still applies a stranglehold to much South Island industry.

For many years the railways have not wanted for critics. Almost anyone who has attempted to travel by rail, or who has used the railway freight services, has a “horror story” to tell. Progressively, however, the more trenchant criticism and more divisive comments have come from within the railway system itself. Mr Prebble is correct when he says that the task of healing itself is the corporation’s most urgent duty. Like the rest of the transport industry, the Railways Corporation is part of the service sector, the goal is to ensure that a service industry serves rather than burdens its customers. The country’s taxpayers and the corporation’s customers must hope that Mr Prebble’s prescription does not fall on deaf ears.