The Dominion. TUESDAY, FEBRUARY 18, 1908. RAILWAY FINANCE.

Dominion, Volume 1, Issue 124, 18 February 1908, Page 6

The Dominion. TUESDAY, FEBRUARY 18, 1908. RAILWAY FINANCE.

The article by Professor Le Rossignol, upon which the Auckland 'Chamber of Commerce has based its indictment of the finances of the Railway Department, is summarised by us in another portion of this issue. As it drew from the Premier an angry attack upon the "disloyalty" of the railway critics, which lie has followed up with a lengthy statement' bearing plain upon its face a determination to confusethe question at issue' as' much as possible,'the public will, be ready, to believe that Professor Le Rossignol has struck home very shrewdly. A perusal of'the Prdfessor's lucid article will convert that suspicion into a certainty. We need not for the present concern ourselves with Professor Le Rossignol's explanation of - the causes of the unstable position of railway finance, nor with' his speculations concerning. \the best 1 means of securing reform. The vital point to be grasped is that a consideration, of the figures of any reqeut year reveals a most disturbing departure from the rules of prudence that should govern the greatest of our public enterprises, There is nothing new, pf course, in the fact that the railways every year fail to pay. interest, nor in'the; allied fact that the "net profits on working," inadequate as they are, would be still less adequate if the revenue were not given a'fictitious buoyancy by being aided by loan money. ■ It may be as well, however,-to quote an. example of - what-" the Government's policy nieans. In the yetr 1905-6, the total .earnings ,pf the railways, according to the Minister's Statement, amounted to £2,349,704, while the expenditure was, £1,021,239, leaving a "liet profit on working" amounting to £728,405. This net revenue, the Minister commented, "' is ' equal to a return of 3.24 per cent, upon the capital invested, in the open lines, and 3.02 per cent, on the capital .of £24,092,085 invested iii opened and unopened lines.", The Statement omitted the fact that the interest on the railway debt, which may be estimated at the. average rate of 3.75 per cent., /amounted to £903,453, so that the " net; profit' on - working " was really a ,net loss of £174,988. Moreover, much of. the expenditure- that should have been borne by revenue was charged, to capital, so that, if revenue" had been employed to meet these charges, the " net profits on working" would have been a great deal less than;,appear.-ironi .the, official figijres. If - revenue :Jiad borne , the £353,025 expended 911 " additions to open lines," the " net . profit" would have been £375,440, or, according to Professor Le Rossignol, 1.5.6 per cent, on capital, . To the eye of legitimate finance', that is to: say, itlie railways' are : being run 4t a' steadily increasing loss.

With, tlie indictment we print tlie Premier's reply, but readers will not haveread far .before realising that most of it may bo disregarded as irrelevant to the_point at issue. The Premier complains tliat in working out his percentages Professor lie Rossignol forgot to deduct the cost of " additions to open lines" from capital, and this is all that lie really establishes.,' This Was certainly an errox - on the-profes-sor's part, but it is a. small one, for, as anyone can work out for himself, it makes only a .difference of .02 per cent, in the "net profit" for 1905-6: The ''net profitwoukU be 1.58 per ceut. instead of 1.56 per cent., as calculated by the' American critic. The Premier evidently regards it as important to, remove jblie impression created by Professor Le Eossignd's but lie has npt succeeded in his aim. The'public may safely be left to judge whether tlie Committee" of the Auckland' Chamber of Commerce has not ieason to ask for. an investigation ,of the whole position. '■■■ V