RAILWAYS BOARD

Evening Post, Issue 82, 6 April 1936, Page 10

RAILWAYS BOARD

REPLY TO MINISTER

A COMPLETE DENIAL

INTERESTS OF MEMBERS

CLOSING OF MAMAKU MILL

(By Telegraph—Press Association.) ; CHRISTCHURCH. This Day.

A complete denial lhat the com T mercial interests of members of the Railways Board had conflicted with their work on the board was made in a statement issued by Mr. D, Reese, a member of the board.

Mr. Reese dealt at length with criticisms made of the board, its members, and their actions by the Minister of Railways (the Hon. 1). G. Sullivan), and dealt categorically with the Minister's statements. He also traversed at length the position about the-Mamaku Mill, which was owned by the Railway Department.

"Mr. Reese said that the Minister of Railways was reported to have stated that there were two or three men on the Hailways Board who had sent in tenders for railway supplies. Mr. Sullivan had added, "These men sit there and obtain information not only about their own firms, but also about their competitors. They have all the details. I wonder what the commercial people of the country think of that." Mr. Reese declared, "What are the facts? The board consists of: five, members, Messrs H. H. Sterling (chairman), E. Newman, a farmer, G. Reid, a public accountant, and Sir James Gunson and myself, engaged in commerce. Notwithstanding the fact that before my appointment;to the board I did considerable business with the Railway Department I. have, during my five years as a member of the board, scrupulously refrained from any business dealings with the Railway Department. Neither my own firm nor my own firm's saw.milling company has either directly or indirectly ■ either tendered for or supplied materials to . the Railway Department. My colleague, Sir James Gunsorv, acting chairman of the board, though the - holder of important company chairmanships, ,has retired from active commercial life. Sir James's reputation, in my opinion, places him above the necessity of replying to any such charges as have been made. "The. Minister, while disclaiming any casting of aspersions, and asserting that in his criticisms of the board he was to be understood as strictly impersonal, is also reported to have said, 'The original suggestion to close down the .Mamaku railway mill came from a gentleman on the board who is deeply interested in the timber trade. How can one square that kind of situation with the best interests of the State?' "NOT THE WHOLE OF THE TRUTH" "This is not the whole of the truth," said Mr. Reese. "I did suggest that the Mamaku Mill should be closed down, but not for any reason such as is suggested or in the; circumstances stated by the, Minister. I will explain what I did suggest and why. "About 1933 the Railways Board asked me, as being the only member w,ith-a knowledge of the timber industry, to make a report on the Mamaku MilL From the mill I personally obtained all information regarding the cost of production and the rates at which'timber was issued to the workshops. From.the Head Office I received balance-sheets covering several years... This.is what I found. First, the cost of .production far exceeded that of privately-owned mills; secondly, the price of timber as being invoiced to the. Otahuhu, Wanganui, and Petone workshops was far, in excess of the price at which the timber could have been purchased on the open market. Despite the.enormous price drop that had, taken place, the invoicing to the workshops was still being based on the 1930. Sawmillers' Association price-list. "Year: after year the balance-sheets, instead of showing the losses regularly being incurred, showed mill profits by the simple'process of charging the workshops more than the prices at which they could have bought on the open market. . "The Minister of Railways will be able to tell the House the figure at which r estimated the losses that should have been shown. No great .amount of Knowledge of accountancy or of timber trading is necessary to determine • whether balance-sheets based on. such a principle are or are not true balance-sheets. Another irregularity which made returns from the mill appear greater than they were was'the crediting of the sawmill account with a profit on all firewood for locomotive depots purchased from sawmills throughout the North Island. Outside the matter of irregular costing, it became .obvious, during my. investigation, • that the mill could not possibly supply the amount of heart timber required by the Railway workshops." .•.-,■' ALTERNATIVE COURSES. Mr. Reese said he was forced to the conclusion that the Mamaku mill as operating was not a business proposition, and he reported accordingly to the board.. "My report submitted alternative courses of action; (1) to let the mill on contract and purchase timber ' for' Mamaku at prices which would approximate to market rates, preference of tender to be given to the Mamaku mill staff; (2) to call tenders for the lease of the mill and plant, carrying with it the right to supply the railway workshops' rimu requirements and the right to sell the balance of the mill output outside; (3) .to close down the mill and purchase timber supplies on the market; (4) to offer the mill for sale as a going concern.

"I recommend that the above courses of action should be considered by the board in the order to which they are placed. I favoured the contracting course • because a mill in the South Island in which I am personally in-terested-was at that time, and is.still, running successfully on a similar contract basis. Unfortunately the Department reported that this course was impracticable on the ground that no contractor would tender. The Department not only reported adversely, but questioned the accuracy of my figures as to market prices. Because of the Department's attitude tenders were called to test the open market. STATEMENT IN HOUSE. "Before the mill was closed down the Minister of Railways stated in the House, in reply to an interjection by Sir Alfred Ransom, 'that tenders were called to find whether supplies could be got cheaper from our own mill than from the outside market. The balance was in favour of our own mill, yet in face of that the Mamaku Mill was closed down.' How could Sir Alfred Ransom accept as true a statement for which no proof was forthcoming? I challenge the Minister to disclose to the House and to the country my reports on the Mamaku M:il and/or details to enable a comparison of the tenderers" prices on which the board acted in deciding to close! the mill. "The Minister of Railways said in the House: 'From the moment I became Minister I have had extended to

me every possible courtesy at the hands of the board.' Mr. Sullivan's reciprocation of this courtesy has been what he is pleased to call impersonal attacks upon members of the board. One at least of those members is compelled to consider that these statements arc not impersonal. I feel that the Minister, possibly being ill-informed, may have overlooked the implications of his statements.

"I can hardly believe that the Prime Minister will refuse to do my colleagues and myself the justice of separating his party's legitimate advocacy of a change in the' system of railway control, based on election pledges, from attacks in the House on the reputations of absent men. If rewards for the type of service expected from members of such bodies as the Railways Board arc to be such as those meted out by Mr. Sullivan, the country's call for men lo fill such positions will be likely to fall on deaf ears.

"Any omissions, any irrelevancies, and any seeming want of consideration that may be found in this hurriedly prepared statement I regret. I hops they will be debited to my limited time and to my finding it impossible to accept the Minister's charges as philosophically as, according to him, my colleagues and I accepted the abolition of the Railways Board."