RAILWAY FINANCE

Evening Post, Volume CXII, Issue 48, 25 August 1931, Page 10

RAILWAY FINANCE

DROP IN INCOME

EXPENSES ALSO DOWN

EFFECT OF ECONOMIES

Decreases in both revenue and expenditure for the year ended on 31st March last are revealed in the Railways Statement, presented to Parliament to-day by the Minister of Railways (the Hon. W. A. Veitch). The gross income from all sources was £7,571,537, a decrease of £716,579 on that of the previous year, and the expenditure was £6,882,810, a decrease of £.476,049. The Minister stated that on. 31st March, 1931, the capital invested in the lines open for traffic, including the steamers and plant on Lake Wakitipu and other subsidiary services, was £60,545,154, as compared with £57,787,671 on the 31st March, 1930, an increase of £2,757,483. "The incrcaso in capital," ho states, "comprises £555,154, cost of the EskdalePutorino extension, 26 miles 74 chains taken over on the 6th October, 1930' and £559,012 expended out of the vote for additions to open lines. This latter sum represents the provision of new rolling-stock, grade-easements between Crichton and Lovell 's Flat, additional dwellings, improvements, and extensions to buildings and plant, workshop equipment, rearrangement of station yards, and other facilities. "Expenditure under the Railways Improvement Authorisation Act, 1914, totalled £1,044,433. The new works carried out during the year included the completion of the new station and yard at Auckland, new goods shed at Wellington, and reclamation for station yard, Papatoetoe-Papakura duplication, reconstruction and strengthening of bridges, completion of RavensbourneBurkes deviation, telegraph and telephone lines, safety appliances, and train control. "A sum of £766,073 was charged against revenue for depreciation ana provision of renewals, and the amount expended from this fund was £385,724 for assets written oft". The accumulated credit balance in the Renewals and Depreciation Fund at the 31st March, 1931, was £2,067,910. PAYMENT OF INTEREST. "During the year ended 31st March, 193«, the cash resources of the Railways Department were exhausted as a result of the policy which required the Department to pay interest charges irrespective of the. fact that the not earnings for the year were insufficient to meet the total interest debit. In order to meet this position a further amendment to the financial arrangements of the Department was made, and Section 14 of the Finance Act, 1930 (No. 2) authorises the Minister of Finance to reduce the interest charges on capital where the annual accounts of the railways disclose that the full amount of interest cannot be paid out of the Working Railways Account. "The Finance Act, 1929, Section 20, provided that interest will be charged on the total amount of capital moneys expended in respect of railways, reduced by the sum of £8,100,000. The interest charges computed in terms of the Finance Act, 1929, total £2,255,345, as against £2,132,324 for the year ended 31st March, 1930. "The sum actually paid for interest charges for the past year is £685,000. The net earnings totalled £688,727, which amount deducted from the total interest charge of £2,255,345 leaves a deficit on the year's operation of £1,566,618, an increase of £355,349 compared with the. figures for the- previous year. Compared with tho previous year, tho net earnings show a decrease of £240,530. Revenue decreased by £716,579, or 8.7 per cent., whilo expenditure docreased by £476,049, or 6.5 per cent., notwithstanding an increase of £66,896 in the amount sot aside to provide for depreciation and renewals. In comparing the net revenue for 1931 with the results of previous years it is necessary to make due allowance for tho variations in enactments, regulations, and policy applying to the finance of the Working Railways Account. It must also be borne in mind that since 1926 systematic provision lias been made for depreciation in a manner w-hieh has not been adopted by the majority of State railways in other parts of tho Empire, and which prior to that year had not been adopted in Now Zealand. EFFECTIVE ECONOMIES. "Channels for economy in expenditure were fully explored in every direction during the year, and tho figures given above indicate the very large measure of success that was achieved in that connection, and there is no doubt that an oven greater extent of reduction in the expenditure might have been achieved if tho staff adjustments that were found possible had been rigorously pursued regardless of any other conideration than tho reduction of expenditure within the Department. It was felt that, having regard to the general state of the labour market and to the very great distress that was likely to bo occasioned if a sudden and extensive reduction of staff had been decided upon, a steady x>rocess of more or less gradual reduction was justified, even though the Department were involved in some oxpenso in so doing. "Consideration of tho financial results for the year would, of course, not be complete without reference to the very severe trade depression that has been experienced during the period under review. For the first four months of the financial year tho revenue held to about the same level as the previous year, but thereafter, as tho trade depression intensified, the revenue dropped extremely rapidly. Services were, cf course, adjusted as much as possible to the changing conditions, but it will bo realised that in such a business as a railway, with its high proportion of fixed charges, the scope for making reductions of expenditure in immediate sympathy with a sudden drop in business is extremely limited. Keeping this in mind, it will be appreciated that the very great reduction of expenditure that was achieved during the year represents more- a permanent lowering of tho production costs of the Department rather than a temporary adjustment to the eudden drop in business that has been the result of the present stringent business conditions. In other words, so far as the financial position has been within the control of the Department —and this has particular reference to the expenditure side—tho record of what was accomplished during the year stands out as a credit to the administration, whilo it must be equally recognised that tho phenomenal drop of gross revenue which brought about the shrinkage in the net revenue was undoubtedly duo to conditions which are affecting practically every other business in common with the railways, and which are quite beyond the control of the railway administration." For the current year tho Minister anticipates the revenue will reach £7,151,000 and the