WHY THE RAILWAYS LOSE MONEY

Dominion, Volume 16, Issue 5, 30 September 1922, Page 6

WHY THE RAILWAYS LOSE MONEY

LEGISLATIVE COUNCILLOR’S OPINION LINES THAT WILL NEVER PAY “WILD-CAT” ELECTRIC schemes TIME TO CHECK BORROWING There are railway lines all over the country which have never paid their working expenses and will never pay them; there are projected railway extensions which have no hope of ever showing anything but a loss. On some lines the rails should be taken up. The blame for the loss on the railways must be taken by the people because they compelled the building of lines whether the lines would pay or not. Borrowing should be suspended for a time. Hydro-electric works might well be postponed till better times come. The.continual clamour for expenditure on public works must cease in order that the finance of the country may be restored. Such was tho substance of a speech made In the Legislative Council yesterday by Sir Edwin Mitchelson during the debate on the State Advances Amendment Bill.

Sir Edwin Mitchelson first discussed the railways and the. reason of their not paying. The Bailways Statement recently tabled in the House did not, he said, give the real cause of the deficiency. It adduced os explanations the afteririath of the war, tho high price of coal, the increase in wages and the large, amount of work which rhe railways did for little or no payment. He regretted that the Department had not. given its opinion of the real reason for the losses which the railways had been making for a great many years. He proposed to supply the want. He had no hesitation in stating that the cause of the decrease in railway revenue was the great mileage wii}ch had to be worked without any prospect that the actual working expenses would be returned. He would go back to the early dayr. of public works. Some of the railways built then had never paid working expenses, and never would do so. The rails of these lines should be taken up. Some of the "lines should be fumed into roads, instead of being kept running at enormous expense only to make losses. ! ' . The railways showed a loss despite the fact that charges had been increased in 1916, and again in 1917 and 1920. They showed a loss despite the curtailment of some of the sendees. The Statement this year made it clear that if interest at the rate of three and three-quarters per cent, was allowed on the capital there was a deficiency of £1,026,000 on the year’s working. Certain unprofitable services were given for a-.very small return. For instance, the carriage of metal had cost the Department £50.000, and the metal was carried free. He thought the time had arrived when local bodies should pay for the carriage of metal, and find the necessary amount out of rates. Very many taxpayers had to pay under the present system for tilings from which they were receiving no direct benefit. Lime <vas carried tree of charge up to 100 miles. Other services were being given which he considered should be discontinued. There should be a complete revision of the list of things carried at non-paying rates. 1 The original policy with the railways that they should be used for the purpose of opening up the country for settlement. That policy had been followed to some extent, but it had also been departed from. Lines were being extended in districts where there was no chance of their paying. Since 1880 railways had been commenced without an examination of their prospects of paying working expenses and interest on the cost of construction. The Railway Statement showed that over a period of twenty-six years, if interest were reckoned at three per cent, for the first half of the period, and at three and three-quarters per cent for the second, the railways had made a profit of £1.667.968. With the interest reckoned at such low rates, the annual profit was only £64,922. If interest for the whole period were charged at • the average rate ■ paid for the loans raised for the construction of the railwavs. a deficiency would be shown of £1,250.257-or -an annual deficiency of £47,993 'This deficiency could not he attributed to tne war. Surely a better record should have resulted from the working during all those years. It was pitiful that for such a period a handsome profit should not have been shown. At the beginning the railwavs had been charged with interest at 3 per cent., and later they had been charged with interest at 3J per cent. The latter rate was not equal to the average cost ot tho loans raised for public works. A fair charge would be at least 4 per cent., with an additional 1 per cent, for sinking fund. After observing that the statement showed the average daily loss on the railways during the last four months recorded to be £2753, the speaker quoted the ; monthly loss on various lines. 'The Westport line, he stated, was thj? only line in the Dominion that was paying its working expenses and interest. The four-weekly returns given by the Railway’ Department, Sir Edwin Mitchelson continued, showed the losses only on certain lines. He wished to know why it should not give separate returns for all branch lines, as the General Manager stated that 26 branch lines were! not paying working expenses. It was clear that a large number of lines had never paid, and never would pay. It was useless to blame the Government or the Departmental officers. The blame for the running of trains on sections of line that could not possibly pay rested on those —supporters and opponents of the Government alike —who had compelled the Government to build the lines. Tliere was a continual clamour from one district and another for the expenditure of money on public works. To have conceded the demands made by deputations this year alone would have cost millions. A large deputation from the Wairarapa had asked for a deviation from the Rimutaka Incline. If he remembered correctly,, tho cost of the only one of the proposed routes for which the estimates were complete had been stated by the Prime Minister to be computed at £1,060,000. The time had not arrived when this and similar works could safely be carried out. Until the financial condition of the country had improved this project and others should be postponed. Before other projects were executed Wellington should have its new railwav station and yards. 'Hie present station and yards wore a disgrace to the country, and they should be replaced by others before any deviation or extension was made elsewhere.

Tho Government hnd warned the people of the state of the finances. Still tho people clamoured for expenditure, and were supported in their demands by members of Parliament who had no responsibility beyond that of getting grants made for their own districts. So long as the clamour continued there was no hope of better things. ‘The people should bo assisting the Government, not embarrassing it. He was not a pessimist, but unless strong measures were taken and borrowing entirely stepped the country would drift into a position from which it would not be extricated without the greatest difficulty. He would not like to say, in view of tlie unemployment rife in the country, that borrowing should cease immediately; but it should be tapered, down, as it had been between 1887 and 1891. In 1887 the amount voted for public works was £3,500,000: in 1891 it was about £450,000. The respite given by those four years had enabled the finances to recover, and in 1891 a surplus was shown for the first time in 20 years. The public was to blame for the borrowing. They were always out for grab and plunder, and they got it. Instead of leaning on the Government for everything, districts should endeavour to meet their own needs in a greater degree. Something like £5,000,000 was being put into the extension of lines of railway that could not be made to pay. It would be better to stop tho work and pay the interest on the £5,000,000 than to g> on and burden the country not only with: the interest, bub also with the prospective loss on the working of the lines. If it was intended to go on constructing railways, the Government would be wise to appoint a commission to inquire what railways were likely to pay and what railways should have their rails pulled up. 'J he speaker proceeded to enumerate the new lines and extensions, which, he was sure would not pay. He mentioned the Whangarei line, the Kaihu line, the Gisborne to Wairoa line, the Ope tiki line, the Napier to Wairoa lino, the Thames to Te Aroha line, the Stratford to. Ta.umarunui line, the Nelson to Picton line, -the Christchurch to Otira line, the Gbre to Kingston line, the Winton to Kingston line, and tho Otago Central, Seaward Bush, and Gatlins River lines. He did not object, he said, to railway extensions in general, but only to extensions and new lines that had no chance of paying their working expenses.. It would bo a good thing, Sir Edwin Mitchelson thought, if railways, roads, and other public works were taken out ot the hands of Parliament. Members were afraid to speak, about a line that was not paying in their neighbour’s district, because they feared that some extension they wanted in their own would not be made. . . , The country was committed to enormous expenditure on wild-cat hydroelectric schemes. No man could toll what tho final cost of the schemes would be. Lake Coleridge, though it had been working for some years, showed a loss to date of some £70,0.00. No one know what Aranuni was going to cost. He had been told on reliable authority that the foundations Mono would cost £1.000,000. It would be some six or eight 1 , years before the work was finished tuid able «to supply the Waikato and Auckland Why not stop it? Mangahao was going to cost twice the amount originally estimated, and it was doubtful whether there was sufficient water to warrant the execution of the work. AU these schemes could wait tor better times. It was impossible, for the country Lo continue borrowing fo works which might not pay. Ll¥» countrv was going to borrow anothei six millions. Could it bear additions to its debt? The time had arrived when the public must ston clamouring for expenditure that the country could not afford. Taxation was so heavv as io bo crippling industries. The fact that taxpayers had not been able to find money to pay their taxes showed how hard they had been hit. Tire Prime Minister bad recently given them some relief, and taken a risk to do it. The daylight seemed at least a year away. There was no sign of it at present. He congratulated the Prime Minister on having informed he people so clearly of the state of the finances, .and the necessity for economising. ’ The country would recover if the people helped the Government. (Applause.) FINANCE AND KINDRED TOPICS I VIEWS OF I LEGISLATIVE COUNCILLORS There wao a general discussion on finance and kindred topics following Sir Edward Mitchelson’s speech. Sir William Hall-Jones said the Railway League of Auckland had been responsible for the building of many of the unprofitable railway lines referred to by the previous speaker. Railway construction must go on, but not just now, when everything was dear. It would be euicidal to pull up unpayable lir.es; it would be far better to adopt a differential system of charges. He urged that the Public Service Superannuation Fund and those of the Railways and Education Departments should be under one control. It was absurd for the Government to continue its subsidies to these funds. The total accumulated funds exceeded £3,009,000, and last year there was a surplus of £.160,000. yet the Government had paid £204,000 in.subsidies. Regarding, the sinking funds, he deplored the issue of £51,000,000 worth of tax-free War Bonds. It was impossible to know what loss .in revenue this had entailed without knowing how the bonds were held, but it was satisfactory to know that the Prime Minister was• buying in a quantity of them. He had seen the finance of the Coalition and- of the Reform Governments, and he preferred the latter. There was no necessity to issue tax-free bonds.

Sir AValter Buchanan paid a tribute to Sir E. Mitchelson for his valuable speech. It showed that he was the same stalwart who had entered Parliament with the speaker, but had been absent from Parliament for twenty-six years. He agreed that tho position into which New Zealand had drifted with its eyes open was to be deplored. It was correct that member after member, representing constituencies, thought it his duty to get a slice of the funds for purposes which _ sometimes would not stand examination. A few days ago there had been a pronouncement by the president of tho Employers’ Federation that the year bad been an anxious and trying one, and the Dominion was to be congratulated on having weathered tho storm. In the coal industry, which was one of the most important industries,, the Arbitration Court had been trying to reconcile the workers and employers. Tho return per pound for tho year 1919 for a certain clip was 12.8 ponce to the settler; on the same station for 1920, tho wool being sold in London, tho return was -93 of a penny, and in 1921 it was 2.18 pence. The shearing rate demanded by the shearers was an impossible one without cutting deep into the settlers’ capital. He knew of several consignments of beef sent to London, where the price was so ruinous that it would have paid tho owner to slaughter the cattle on the farm and lot them rot. It was wasteful to spend millions of money in building railways, and at the same time to spend money in hydro-electric works which would mean tho scrapy-ing of certain parts of tho railway equipment by the electrification of some sections. Tlio Rimutaka railway was built many years ago, and the productiveness of tho Wairarapa district was a strong Argument against the heavy cost of haulage by that route. Only by tho increased production of wealth fr°m

the soil could the financial situation of the country be improved. The Hon. It. Moore held that sometimes it was a good policy to bui!£ a railway to open up country. The Lake Coteridga hydro-electric scheme was paying to-day, and if other schemes were as lieneficial the Government and local authorities would Ixj justified in going on with. them. The Rimutaka lino and the Otira route were parallel cases of necessary connecting lines, working lor the mutual benefit of the districts served by them. The Hon. W. Earnshaw thought the .views expressed would have been more appropriate when tho Imprest Supply Bill was before the Council. Tito pessimistic talk ho had listened to had been depressing. Thomry was: “Reduce, reduce, reduce. It this was carried to its logical conclusion it meant disaster. The dismissal ot Government employees had been a loss to the country —so many wero still out of employment. These were tho times to carry out public works and avoid this economic waste. It was beside the question to say that tho money could not bo got. lhe Government could get all it wanted for oevolopment of public works at a leasonablo rate of interest. Behind the wool question was the tod value question. Gambling had inflated the values and the high prices must come down. It was not Labour alone which was responsible for the poor returns to the woolgrower. The Hon. G. J. Garland moved the adjournment of the debate. CONTROL OF THE PUBLIC SERVICE REORGANISATION MAY BE DISCUSSED NEXT SESSION An expensive superfluity” was the description - applied last Jfißnt by ie Leader of the Opposition to the 1 übhc Service Commissioner’s office. Mr. Wilford argued that if the commissioner’s control was a good thing for some of the Public servants it must be a good tiling for all; yet the Public servants under the commissioner s control numbeted only 7000, while the whole body of Public servants numbered about 51,000. His personal inchMtion would be to do away with the commissioner system altogether.. - any rate, the commissioners should control all the servants of the State or •The Prime Minister said that he was not in favour of political control of the Public Service. A deputation of Public servants had recently interviewed him and told him that a rumour about a proposal to abolish commissioner control had caused considerable apprehension in the service. When he had assured them that there was no foundation for the rumour they bad expressed satisfaction. He was prepared to admit that there were some defects in the present organisation. He believed there were several Departments which were not under the commissioner and ought to be. Next s»o--ston he hoped, the House would have an opportunity of discussing proposa s for the reorganisation of the lublic Service. the hardship clause INQUIRY PROMISED The Prime Minister was asked m the House yesterday by Mr. (Wellington South) whether he would speed up the boards so that cases under tho hardship clause of the Public Ex penditure Adjustment Act would be heard and disposed of The member mentioned that he had been advised that certain members the service had been .compelled to take a holiday without pay on Monday last -Dominion Day—although there was work for them to do and they did not desire the holiday. ’These men, he said, could not afford to take unnecessary assey said that ho would be glad to make inquiries if specific cases were supplied, to aim. On the question of compulsory holidays, the Tnm< Minister said that he was of the opinion that on such occasions to that mentioned the employees should be given the opportunity to work if there was work for them to do. . He saw no objection to permission bemg given “! cannot understand that sort of thing,” said the Prime Minister when assured that the permission had been refused. “It does not seem to me at all satisfactory.”

SAMOAN OBSERVATORY SHOULD BE MAINTAINED The Samoan Observatory was mentioned in the House of Representatevea yesterday afternoon when . the estimates of the External Affairs Department wero under consideration. this observatory was doing very Y aluabl ® work under German control before the war The New Zealand Administration took over the institution and continued tho work. It invited Britain, Australia, India, and Canada to assist financially, and Britain agreed to pay £bUU a year. Since then the Carnegie Institute has given some assistance. A vote of £lBOO appears on this year s Estimates for the observatory. Mr. R. AlcCallum (Wairau) suggested a reduction of the vote by £1 as an indication that the Government should press the other countries to pay a share of the cost of the observatory, which was doing good work of international importance. , Mr. E. J. Howard (Christchurch South) objected warmly. He did not think that New Zealand need go cap in hand to any other country for assistance in maintaining thq observatory. Why should tho Dominion plead poverty with such small excuse. Alembers seemed te be agreed that tho observatory should be maintained, and Afr. Alassey assured them that tee Government had no intention of allowing the work to stop. Mr. McCallum did not press his motion.

STRANDED NEW ZEALANDERS

A vote of £7OO for “assistance to stranded New Zealnders” appeared in the estimates oi the Internal Affairs Department, and Sir George Hunter AVaipawa) asked for particulars. Where were the stranded New Zealanders and what provision was made for their return to the Dominion ? Sir William Herries explained that the people te be benefited by the vote were mostly New Zealand soldiers who had stayed in England These men kept turning up at the High CommisBioner’s office in search of assistance. Much of the money advanced for the payment of their passages to New Zealand was refunded when they reached the Dominion. V.c. PORTRAITS ‘T want to know who did the work, whothe- it has been finished or not. and whore the portraits are te be X,” said Mr. T. M. Wilford (Hurt) last night apropos of a vote on tlie Estimates for payment of the artists commissioned to paint tho portraits of the New Zealand V.C.’s. “Some of the pictures are in process of being painted,” said Sir William Herries in reply. Afr. Wilford: By whom? Sir William Herries: By different artists. The completed portraits are in tlie museum at present.