RAILWAY FINANCE.

Dominion, Volume 1, Issue 124, 18 February 1908, Page 9

RAILWAY FINANCE.

•I:I9:'IT^iUNSpUND.?.: ' '. -I SEVERE CRITICISM • ;Maganne";;-fpr--A/ugust thero . artiolel-by,i'l|rofessori:.l.'.'E. Lo wbrking '/As; W' rd;.'«suit ,pf/-,t.1i0 Auck-. laud//Cha/ml)pr/.pt:Commorco, ii3/'!VO reported ytateTday ) -ias,,mada:ia:.strong ']'eport calling ■ forinv6stigatioA?'7 : ;.Th : o".'; following ria" 'a; sum-" .mary 'df 'ProfM'sor 'Lc RdssigrioPa -'article :— One of the,'' most' iitipbrtaht rcaults "of tho numorbu3,-oxporimcjits.,in ..Stato......Socialism that hiVb*/l)ecn J t :tried,' in 'New'./Zealand//. lias ■ -W; P'lWic debt',/ampnnting,..pn,; Jf!vr(jh -,31,. . 1906,' /.to £59,676,471,/ Or. £C7-rpQr -head of tho- Europwm,;"pdt>uktion'''of 'tho/colony; .'• If the not' : dobt^of^BojTOitpJ/Sta^c's'werd'/asfgreat, 'in' jo , 25,000,05j)j€(30.; dollars,.•instead; of j something . loss -thaijiiiOOO,ooo,oo)),; dollars,. as.l it isj-.tOT' /' day/4<:^f r - .'•>.•' But/it "must' ri'ot "bo' : forgPtteri*''that Now' ; Zoaland has important assets, so, that - tho' /fiiiancial condition -of tho "country is not as -•bad./asiSSiiSifpgKfe' tHe/'Olficial;' ■Year. ::Bpok./fpr.!,l£ps,„thoso are enu- . /./j;- ' i -Mca?-'au'thorifies' ,, Hri'(ls,'^s,s3l^4Bo'' . : / ~ EMqatioafil'/lnMs , .' j- Chnrch'ranfl/ other/lands;- 1 ; ~.i .fe2;975.CM-f, "' r . ! , - ;Vorfc3-; . i( ;v , : ,i'/v5,1i3,132r /-| ,BSG»ICi3'; Frdm/this'list thavicdal authofitie's' lands; und rieducatidnaL lands' should . )f3 aro-not- tho; . jroperty.c\b£i:;,thoi'. General/ Goverpmorit;'.-''and' the revoriue.isjflot'/ayairable for- the; paymuntof interest i:on tho''public dobt-.-': Also, ii tho. Crowarlanda;.■while;, : ; contributo/Mthi-iigi to interest, for,-whilo tho territorial; revenue /is'- £260,789, - tho . tcrri-" Of the, publie; works,-i'other.than/,railways,jnon'o produce. , a the/postal ,and.'.'telegraph'- service;. so-.that the fiovoru/merifc' railwayavare. practically the ouly v i;pr6ductiyo;,vassets-<:ithut iNow/yZealaiid; . has./ilfc is/'.thea/'/a matter;of /concern' to: tho/ ; people .iQ.f/jNew,,;.Ze'alnnd/tb,'-understand. the; ' Enancialjcondition <;of» thpir-.chiefri productive illvgstrncntAnd ■-tho peoplo of .tiio.- l'n.tcd Stat,cs.vare,-jby;iirio.-:mea'ns,\iridiffeTerit to the,l success oiftfaiilure of: Government railways m thatdUtopiaVofc'tliofSbuth Soas.. • ' •» BOTH,'SIDES OF THE RAILWAY STATEMENT The Rkht Honourablo Sir .Jos'pa Georse Ward, K-CrM-Gij /Prirae' Minister "and •-Minister ais latest. un/nual/'^or^p/^ollp#! 1 /^;.." - ;... "Tfio presentation -'-of.; tin's,my J ' sovcuth mo "very \ great pleasure, inasmuch as"ifr r iiriposos :the v ploa'fr;. •.'wg/."dut^of| r :b^yi^^|o^i^oun^/,thijt.j.tho-" rosult.,bf- i tKe i dperatid'ns- ; for. the "ycaif ending March/, satisfactory; ,andj^^i^s^fli^;:%dib«Saity.. of I theC foreeast-niado,-iat-„.the„-end::of,;tho -. previous «tiu -- estimates by, mayho summarised thus:— ■,' .' .. -

r . ..; ■-.'"'■ &"■ -. ;''" ■■£ Total , earnings- , -3,349-704- ' ■ 2,203,231 Total espondituro ■... 1,C21,239- 1,492,1)00 .Net. profit, oiuworkingt.: j-.-:725,455 ;J ' ■ 71G.351 "Tho -not',' reveaue/<£728;465, -IB ".equal - to8. roturnuoE-.3-24 per cent: ; upon-, tho capital ; open linos,' andv3.o2 per centon _the-.capital'*of-i,£24i092i080 mvosted -in' opened ■'and.-ißnppaned lines f ' > ■■The;;Rßilw»js'' Statement, which few.'.people' read,-; dbesinotistafeT.thatitlie .intercston the t railwayidebtlr estimated-vat tho ayerago rate of omountea'ito -i;9iw ( 453, J so; ; thatjvthfe of £728.465;; whfiil applied; to : .tho payment of • .interest;}becoinGS, r a;: net; loss?. ofi£l74,9Bß&;as compared. with^a;:deficit.; : .of(3 ; £-146;507 rfor tlip. prerioiis jy n.thb'irpra'spbrpus •: rfhel" "pati6ntstaxpayers^of.rNpW[: I .ZeaTand,x payingf .'eacH&jraaiMß&iiß.t'thMii ; -ODO,OQO.- osV interest' on the^uubljoAdept,i«tthink -'nothing.-*oß;this; :to-,;,tho alarming;',utts.rßiices j -of;Wa;\.few-;- (pessimistic' critics/- i.si'Mr.iSanbel-.<Vailb;- of' Aucklahdj'.iwhoflLk'o -ar.yoico.-jci'yiugiin -the. vwildernesii; and : calls* loudly-,for- immodiato. reform;in principles and-;niet)ipd3.v!of frailwayiadministr'atidn; Bat' a--closer i examination-, ofc the* 'RailwayStatement shows that : tbo annual -'.deficit-.™ 1 far-..groater,. than'at.' first .appears,, and that the';, Government,; yearly borrows .- largs.'.sumsv; , i of. existiu'gj.,]inßg-^'jjp pbtaijimg , a/„ ■ • s P?^, ,l ßjs®c|^g ! a.. in^einftt'^imi?g8 s • Bysteui. ~ ;paii}ten : i ance ; funds," tho.pujj paidt butjof, Revenue;,and, tho,other; rogulapJ.'piaiii-. per fqenty of'gr.pss, .■rbvenub'.'-'BuO °tbor ; f^d^pr-j||i»,(^^'e^^^cd, r un(leKtHo hcad.^pf^''A.dd;ti'on;;.tp:'.,' i Oppn: 1^ 'i§: intuiting', to 46t6 ; 'tho ch'jrg^'^.jij-^l^.'f-,--. . WestinghoiiSe; arid; : 'dxton-1 s ! 0I^®i f : ? I SR3lISj.1Sj.- J £^pgraplj r £incl ;-!^>yb.at;Ve3/. lantl, I 'digefcric. ligh'i--fencm^,,'j^ctibnT.fbr ;^yaibj. -railway; and' to-;. olamajiibn'; of.Mechanics'Bay/^Auckland.;' ; ; TAXPAYERS MUST■ MEET- : ANNUAL ;

'; ;; : ./,'// , DEFICIT..- ; -. been... included- in: the regiilar- 'maintdhahco.* acco.unt and to reveu'uo^ : the(,''.'''nst. profit: from working'.',:, would,have .beoh £375,4'10,"0r' 1.5G por.'ccnt. deficit. for .tno year. wpiild/haye. been. shown as.; £528,013,- v aiL of ..whiph'j'.' and more, has then,, ,'b'orrpw.s inojicy. at-- r 3.75... per ,cant., /'and, at Pw,;<?ori.i;,; fo£ the mamtbrianco/ of . railways' which; e^TO,lossl',ii^aH'Hl;!s.Vi>ejr,"contV-'up6nVthe capital 'po,st,i;'aii;dJthis/ yearly'^,deficit' 1 of . over--2.2sVpw:c.ent./ must/ultimitciy,'.'fall 'upon the .taxpayers; "' Ak'^il^aile;has .'said: : , ' . f'Our 'radways , :;ha'vo,' : './'as.'"'a ! .'c'ommorc'ial concern, .becomo /.utterly' bankniptiT..-.ahdn.-if,. tho y< had not to fall back; on. ' hayo>'"to rbafise'd."'/ ; j '' v' '■■ fi th«^EMir^';'!Oto^6nCaMe®3'tjai'-' : it t 'M''^^'' : 'KP^^W/: r wrrQW!- : /inonfex'''for'-~. the' -"^k^j^ymp^^iJp.'.gaasjfci^v , !ii4osr-* I -.Tliex-' say^ 1 ' that;' it'|ir''tn.'e;pra'cticp^^/of^;tho faylfojr aU;,mereVr.eplaccmentßpu't'of royciiup',' lsiimproved,/ this extra .dost' isV:.in'' some; way, , charged to capital. j 'For/ 'example; when?' 49-ppuii'd rails 'are ! replaced by' 70-po'und rails; it is tho' cuatom cost,J just as iif railways' had; Becn'-'ftfr-, 70-pound rails' 1 and ■othor.' equipment of ,liko; grade. 'Besides'; as 'i%.dMin '.'ib; comraain to bor.row.;fe;'nfew^buildings',,'fiirniturbV'ma';hniery, and'/iniproyeinents 'of 'pyery ; kihd,'/ why • may rot ,tho;'RailjyaysjDepartniprit dp':J:ho sayio ? ■ . It'Js - ;dopbtless',true';that honest -business -m6^,fr^i3en^^r|«T^. ! .f6r:'tiie' purposo of' improving thmr C<jniprnent, but they . do' so with';;thp"/'cxpectation ,of 'paying interest on' the/'lpansj iiiid /.ftafning'-a. .substantial net profit b'esidesV cpuld"'not''at'least pay interest.-they, would,,ipi^y-find .tbemselTcs in 'B«& .the Railways '•Depa'rTO^'i'' < ™;'wi^el'of ; tho' largo' emit' of thb'_'General/.Govern'ment,' lias gono ' on borrofwing ! "year after 'year, hover able to pay interest in full and never epining-' ,to. the place where this , vicious and parasitic poliby- 'coultr'.'b'e" discontiiiuod.; It' is 'clear that' the capital, cost of- the roads has in-' ch. : of to; 'the'increase',' •ill n!jlcag6i' l 'tha. ; t thb"wprking expenses lavo increased; much ] faster tliaii' tho .gross, earn-.: wgs,', and - that:' th' 6'; n'et/:1055,,. inten years, has ; tlio I '.. ehprnions sum ' of £4,330,147,'/ or .more .thaii 21 ;000,000 dol 1 ar3; and'-this'in 'a "time' of'great prosperity, which cannot be/'oxpeeted'; ; t<) v last' forever.;; ; What: •''of, ;v thp'. .rail'yays jniglit industrial depression, it , ~ ' ' PINAN T . -I;ABGELY D [iE •i-r -T.r-r.r-TO'..POLITICS.-' • ■•; - The financial failure of tho Now Zealand railways has been due to a variety of cause 3.„

Tho country is' rough in 'places, making railway construction difficult and expensive. It ;is,-.thiuly • settled, .so that the. yoiupio' -jf trafiio is not great. " ' It. has a long' coast lino with many goal harbours, so bnat tin chief;., towns -are,.on tlio. coast of tho .traffic, goes/by soa/ . Wages aro.rather highalso; tho' cost of, .'materials/ whether imported or raaiiufabtured in the Dominion. Tho 'cost 1, of' construction ■ has, been -further i'enhanced ;by tho delays, waste, and gdnerni. ' inofiicioncy • that aro inseparably,', connected :with. Goyornmontal enterprise, in New Zta.land.as in ovdry other country/*"' The Gdvcfrnmdnt, too, lias-made serious 'mistakes'in building roads that ought, not i to. have been built;.and .in leaving 'unbuilt roads that .ought to have been -built.: Politics, has. had alto-, gothor,,to.o; much .to, do, with the 'construction of roads, tho appointment" and promotion of officials,''tlio frequency of'service; tllq fixing -of jratea, arid'tile '-departmental'" administration in general." Hallways havo frequently beori built for tho sake ' of scouring votes ■rather 'than traffic,' and',- business has been >so.often' subordinated 'to' politics that,'it.is rio wonder that tho' net returns aro -political,rathdr/'tlian financial ill their- oharacter. .. - PUBLIC RAILV,A\& NOT BANKRUPT. '/'; Tho ; financial condition '.of' tho : New _ Zea- ; 'Wd is certainly had, ,but, it is_ by 'ho means tas -bad/as tlio foregoing statistical examination' to show. .Tho country 'is young., arid rapidly 'increasing,.in wealth and .population; /and, in- ; tho course!of ,a"few •years,- if, prosperity, coiijfcin'uds, /only/the most' inefficient. management; will .prevent, tho' jail- , ways,, from • earning; tho full, amount of , tlio . yearly-., interest., and a substantial",.net profit ! besides:-, r, -.; Even 'now,-. under efficient' manageiiiont,i tho system, could .'be made, to, pay, - and thd officials, Qfrtho. ; .pbj»rtn»ent-.are'' doubtless, rightv.wHen-,they, .say ,:thati it,could,, at .any .tjimo, .bp/sold /ata/prico sufficient, to', pay tho ~on tiro ./railway./ debt.-, arid,. that; /■ possibly, a. i still .higher .-price., coiUd-: be,,obtained/.',..1t', is ' aitdg6tlior,i.prpbable. -that a/private. company uoukl so opera to. the roads, as to ; pay, interest 911' fho capital' .cost, taxes' oil - its., property, /and m6dorato-,but;incroasing;diyidends,ori its. 'stockj-.and,- at :thß, ; ; sanio;time,. rediico, ; rather' ■ than, increase, the- charges for.., passengers ■ and freight:; \ From 'a, merely, financial point.' ,'piyiow it ..would, pay to .sell, •tho' railways, to a private corporation, which., like'tho .railway companies of tho.',. United iStatesj -and Canada, would, do much to .develop ■the .-varied. resources of - the. jcouritry./;. - ;Tlio.-people of. New Zealand .do appear.' ,'to realise, ;that .they, havo'- a form of corruption as .injurious'ito.tho. moral; fibroVpfvtnb -community arid !as.menacing! to 'the/industrial lifo of;,th6-country: as ; aiiy /form of. corruption that. ejnsts in,countries,like England, .Canada, -and ~thej ; United *States,./where..'private, corr pnrations ;perform' many, functions, .which .in :Ncw: Zealand.arc monopolised, by, tho General, Government., The activities; of /, tho' general, .Government in,, New Zealand' aro. so.; varied' and "extensive that it hiw;become^/ doming, ,ing power in tho,industrial,' and / political world wlii<>h: : few individual.' or coipaunities aro able .to 'resist.- • :,.ti:'v,-; - /,

' 1 ■■LOG-ROLLING,.LOBBYING AND' . ; NEPOTISM < 5' 1 For,' 'this'reason,/the, people' of ; ever jf" part' of -tb.oicountry, 'instead, 1 of; imiting;qr;.'divid-'-ing .along ;brOad;; lines';' of .'■'; public p'oljoy;/ or ' agitating 'for'; much-needed/ •' reforms 4 , . stand: • toward;'the.Geri?ral,Government in';the attk ltudo':;6f . v ctiildreri;aiid : supplianfa,, anil,-.toward one another/; in'.-.thp .attitu'do' •of ;rivali 'con"teriding ,/for, more, than'^tbeir 'dud ; :si)aVb in. /the ;diatnbution.'of.'public >-f»vourSi\ '."PracV ticallv; all, ,thp/mombOTs <of ;.tho/House: ofßepresentatives,.'' i.a'ro/ "blected. for" the" avowed, purpose of seciirihg ;'fayour3 of 'one, sort, or rbad/ :l a bridge'/ a .plibho ; building, , a railway, : a jharbppr. with,tho result that' lobbying and .iog-rplling|. .Usith,. ; their attendant ■ evils',.,arb so,, common', <as 1 to, cause no. comment .. and , occasion no criticism';.;,' ; r .Tho , public,; .'amounting to .more . than .', B,OQO,OQO;.doHax's . a year ; .is .distributed' ; coi!htryj; '■ostensibly' aoc6rding'.'te;.. : nealsi:' butj. actuallyf.; i;n 'proportion. to, political. influence); and be-, comes, in-'effect, a, coiTflptipn, fundj .used for. thej purpbs'e'.of maintaimto.'fliQ'po^j^f,'tlip" .existing ; amount :.pf, -this kind., of politicalcorruption,, fiot ,to ( sprak ; .of;.secrot. cojntyission?/ political; and,.'bthbr.; ,minor;; cijlsj., .of . which;

RAILWAYS! SHOULD. ,BE . DIVORCED -. ' FROM POLITICS. - v

Itgoes'. without. saying,. .' then,;'.,tliat.the 1 .business'' activitibs'. of; the, ' jaoybrniijent .can-; .'pot. be carried 'on; wholly' upon' business"pri-n-. '.ciplos', ahd.'.it..would' be Btran'ge if. thpy.'.wero, 'successful frbm ■ j point or; view/ ,'!fbu's" 'iji.is/with"tho railways', ; which''ar.e.ad-, /ininistored'.'by/ a,,politicaldepartment, ;with; a Cabinet Muiister. at . the. head. .'Political "iiifluenco, is .so .strong . .would' requiro; vmoro;.thfii;'h.eroic'.virtue on. tlio part..of, .the Minister" and'his' ossociates/to'.'ddopt' a sound ; financial .'policy' and.:consistently ''t0... follow; /it through' the ..storm'and Btruss'.of'.political, 'life.;;'' No,; 'doubt the grbwin'g ;prosperity, of jNew/Zealand, iif it' coiitinijes,, wiU ultimately; /railways' -^uiwh;,!, a.;' ./solid.financial.,; '.tasis l ; • but/-;if ' they." aro; to bo economically J niaiiago'd, so 1 .that. „they;i:.raay-:vrcndcr the' possiblo. service at-the least possible ■cost,: and-if -they to"a' pri--1 vato corporation, it'. : ":ill. bo - necessary 'to r put Hhe'm ,in the/'hands. ul : a' non-political board, ; br commission',' such;as thoy have'.iri -Victoria' ■'ahd'New; South-Wales, where the Goverhihent railways - hiiye . boen.'i>; measurably- 1 successful' ; sirico- ; they- -wero • 'divorced .from ■ politics; -- r

TH EPREM IE RIN REPLY.'

" NOT '" A" JIERE'■ EEVENUE-BARNING MACffiiXE." ,

: ■ (riiVTBtiORArU—I'IiEBS ' )

Auckland, -February 17.- -. i! Tho' .Preini'er, hitervi'ewod. at,.-.Uambridge ( , ; ;• mado . a - iurthor /reply, to tlio- .oritieismg :i,ot» ;Noy t .ZiWttni'.railway.',foaneoi^;.,se.-?aid"Pr6: fes'sor jLo .-l{ossign6l'B. assumption that, thero/ has. bsen-.a loss .of £4,'380,147-,ph. the; railways ,during "tiie;last'/.,ten years 'is,,entirely.. crro 7 ', iieous:, It/ is., .manifestly' wrong -to - inehido £3,l22 () 47B:expendituro; on,additions,to opeii, lines.,in tho;capital, cost;of.,lines,and .compute interest, on .that; suni, /and at the /B.amp. timo ,doduct,;ad(litions : .to open. lilies .oxpendituro fr'pm .tho not'profit, of. working. , Having,loft: tlio . amquiit,,,in ; capital it.': may,' fairly ;-;be. assumod-.- that , ,the, .professor ' ~ satisfied, -that./tho,'practico of including, .additions ..to open Jinos.expendituro: in. capital .vras. correct and,,sound 'in principle. ~, Clearly, /therefore,; lie .erfei'.in' deducting-,£3,122,47.8 from" the. net'.earnings.! The net loss showed by, him 'must, ./therefore,. be;,.roducod.. b.T .this ,£3,122,478.:' which ,:he had-iwTongly.. deducted;

;• CONCESSIONS NOT ALLOWED TOR. This 'leaves" a difference of ''£1,257,699: re"Quired,;: according to the professor's showing, to" bring tW " interest' 1 on 1 the capital; coGfc of the••railways' up to' 3.75 ; per centj,'' which ho'contends they ' should earn. Concessions given to the- public in ! tho 'matter of fores and freights - to £850,000, 'and--.tho .valuo: of- increased' train .services to £883,000.' r.-These■■ '• concessions,. - representing' money the Government' lias returned to the: users of railways,'jointly'total £1,733,000, or £475,000 in. excess of; tho amount that would havo -boon required, ;to pay 3J per coirt. interest ' which the -professor assumes t'o, be the average rato paid- for the capital invested; . This takes iio account 'of tho concessions in .pay given to: tho railway staff,which amounted to another £375,000. : Professor Le■:Rossignol's-''line of "argument- Us that tho railways- should i earn the: full amount of f interest,- and that the-value of the -lines . as adjuncts to settlement should not be taken into consideration; 'in -fact, 'that tho policy of being ~ satisfied with a not. return of 3 per cent, from tho railways and giving; tho people, of the Dominion as'concessions in fares and freights thn surplus over 3 per cent, is rt'rong in principle, and that'what should bo. dono. is to >i work the. railways, as a mere- revenue-earning machine: • Tho net profit • on working,' to which rdfererico is made, is shown clearly in ■the'-Railway Statement as . being tho di'fforenco''between*'the rovoniie and expenditure' and is available for' interest: purposes. Tho figures shown' iu the railway reports and ■ copied;, into Profossor ,Lo. Rossignol's table, -give tho > true., results- of • the, working of tho railways;-and show.that iu no instaneo havo 'our railways' given - a ■ return of less than 3 per cent., oven when tho capital cost of unopened lines has been included.

CHARGING TO CAPITAL. With regard to the question of what items should or should not bo; r eharged to additions to open linoSj the practico.followed by the department is perfectly sound in. principlo and is,'moreover, in accord with tlio 'practice in oporation in other States. It has bcon fully- discussed at various times, and has received tho conciir'rcnc'c. of such men as J.;Matliesori (late Chief Commissioner of Victorian Railways, afterwards General Manager of tho Midland Railway, England), Charles Olliver (Chief Commissioner, of New South Wales Railways), David Kirkcaldio (of tho same 'line), Pendleton (Chief Commissioner,' South Australia), Shalldn (Commissioner in Queensland), and John Davies (formerly General Manager of West Australian Railways, now holding; a. prominent, position .on /tlio Midland, Railway, England). Thp/valud of tho concessions to .the users of railways was incalculable, even beyond the total, of • amounts which had been conceded to jtliem. It would bo tho. easiest thing in tho world. •, to make ' the , State Railways of New Zealand; produce largo dividends.Thero was no reason why 10 p_cr cent, could not bo taken out, hut would it be a wise courso to follow,? ; Quitb irrespectiyely of Professor La ■Rossignol's opinion tho Dominion would, for at least mhiiy. ( years,_ go on utilising its railways, as; a,great' eiigino tc> help arid;promote tho goner'al^interests .of the people/both in town.and country. ' . .'./:..