THE POLITICAL OUTLOOK.

Gisborne Times, Volume XXIX, Issue 3184, 1 April 1911, Page 3

THE POLITICAL OUTLOOK.

IS IT SATISFACTORY? FURTHER. ASPECTS OF RAILWAY

AND LOAN FINANCE

(By “Democrat.”)

Twenty years ago the Liberal party, then under the guidance of the Hon. Johni Ballance, started out- on its selfreliant. non-beyrowing policy. Since then £40,000,000 lias been, added to the public indebtedness, of the country, and, so dependent have we become: upon the money-lender, that Sir Joseph AVaid, speaking in Taranaki recently, declared that to stop borrowing would be to bring disaster upon the country. Liberal finance has, therefore, brought us to this pitch; we ai - e compelled to go on borrowing, whether it is wise to do so or not. “ That is the plain English of the- position as Sir Joseph Ward understands it. If it could be shown that the £40.000,000 added to our National debt had been expended wisely and well, there would be no room for complaint. But we know, unfortunately, that there- has been a great deal of waste- in connection with the expenditure, and that large sums of money have been squandered as a result of the adoption of the co-operative works systemi in the building of our railways, etc. This may be seen by the following comparison between, the various Australasian railways, the cost per mile being worked out from the latest available returns: —

Average cost Miles railway per mile. State. Open. £_ Western Australia 1,971 6,589 Queensland 3,444 6,792 South Australia 2,027 7,566 Tasmania 470 8,540 Victoria 3,397 12.507

■. New South Wales ... 3,560 13,374 New Zealand 2,717 10,494 It will -be- seen from this table that the cost per mile was only exceeded on the wider gauge and more expensivelyequipped lines in Victoria and New South Wales, which might- reasonably be expected to cost from- fifty to seven-ty-five per cent, more than our lighter, harrow* gauge, and less expensively lines. But an even more significant comparison can be instituted between the cost of railway construction at varying periods in the history of the Dominion —a comparison that throws into strong relief the costly nature- of the co-operative works system, the official figures covering the- 33-year period from 1877 to 1910 given in the "Statistics of New Zealand” (page 483) shew that in 1881 (the capital, expenditure upon the railways is not available until that year), there were 1287 miles of working railways being operated, and upon these the capital expenditure was £9,228.334, an average of £7170 per mile. In 1891 the mileage had increased to 1842, and the additional cost to £14,287,586, . The additional 555 miles had therefore cost £5,050,252, or £9,095 per mile. On March 31, 1910, there were 2717 miles of Government runways working, the capital expenditure being £28,513,476. representing an average cose of £10.494 per mile. Between. 1891 and 1910 the Continuous Liberal. Administration constructed 875 miles cf railway at a cost of £14.234,870. or £16,290 per mile. A further analysis of the figures (the ealeiilations being imnde on precisely similar lines) gives us the following as the cost of "rail wav construction per mile under the Governments noted: —

Figures such as these require a lot of explaining away, more particularly seeing that the greater increases synchionis(T with the introduction and extension of the co-operative works system. SHORT-DATED LOANS AND THEIR COST.

A feature of Liberal finance is the extraordinary growth of tlie short-dat-ed loan. Ten years ago we raised the greater proportion of our loan moneys m London. We still go to the woikl’s metropolis for our bigger loans as witness the £5,000,000 Joan of last year, but the Minister for Finance lias devejoped a surprising aptitude for mopping up moneys 'wherever he can lav hands upon them, be it in Australia, New Zealand, or elsewhere. Thus wo have the short-dated leans, the inconvenience of which may yet make itself unpleasantly felt in the not-far-distant future. Of loans falling due this year to the amount of £1,482,443, not. one was obtained before 1001. arid the bulk of the money was secured-as recently as 1903, the four-year period being apparently favored by the Minister for Finance. . Next year (that fs in 1012) the Treasury will have to find the nice little sum of £6,426.195, that being the sum total of moeys falling due between January 1 and December 81.* And, with the exception of one sum of £194,200 borrowed under the Consolidated Stock Act, 1884, the whole of this- money lias been obtained since 1901, and by far the large amount since 1906. just what these short-dated loans cost the country it -is hard to say, as fresh loans must be incurred to take their place. In analysing the Public Works Fund moneys,, it was shown that the forty-three millions raised by loan had cost £1,341,932 in charges and expenses ... Account ivas not then taken of the fatat that, of this sum, over nine millions were obtained from the Post Savings Bank (£9,631,707 out of the £12,301,772 held as securities by the Postmaster-General consisting of Government bonds in respect of works loans), and if that amount be deducted from the total, it will be seen that the proportionate cost of raising the balance is materially increased. Instead of costim* 3 per cent the charges and expenses would be nearly 4 per cent on the £33,410,515, raised outside of the post office. There is nothing very inspiring about this, sort of finance, and the multitude that acclaims the Prime Minister as . a financial genius of the first magnitude, would do well to look more closely into the business' before further committing themselves to a form of finance that savors- so strongly of recklessness. The short-dated man is not only expensive, but it may become embarrassing in times of financial pressure. . Apart from the £5,000,000 loan a. portion of which may possibly be redeemable within the same period, the Minister for Finance has to provide £12,029,717 within the next five years. The fact can be verified by a reference to the Public-Debt table in the volume of statistics for 1909, pages 475-7, - in which the several amounts arid their due dates are .set forth' in detail . How' much of this is due to the mistaken notion that investors who take un short-dated loans are prepared to convert their securities into inscribed stock it is impossible to say. No

doubt a very considerable amount was expected to be so converted, when, the loans were- offered, as 'the policy,, or idea, is perpetuated in the five -million lean of last year. Terms that- may be described as"ext-ravagantly liberal were offered to the: investing public, to induce them first to take up short-dated debentures . and then to- convert- them into insqribed stock, the loan in the latter case- being, practically obtained at 7 or 8 per cent, discount, and a consequent increase in the interest payable although, nominally, it remained at the rate quoted in the prospectus. UNSATISFACTORY RAILWAY FINANCE.

In- respect of our national debt, the railways. fonmi one of our principal assets . It- is essential, therefore, that they should be maintained on a sound financial footing. That they are so /maintained is very: much open to question. While there is a very great improvement- noticeable in the transaction for 1909-10, and it is claimed that the percentage of profit to capital invested is- 3,80 per cent., it is evident that the true position is not disclosed. The “net profit” upon the working of the line is given by the Minister as £1,080,316. But, before “profits” can be properly estimated, it is only busi-ness-liko to charge against the revenue the interest.: payable on the capital invested That interest- has to be provided, either by the railways or By the taxpayer. \Ye have over £30,000,000 invested in open and unopen railways, the capital cost- of the open lines being stated at £28,513,476. The interest payable on that sum alone would more than absorb the “profit” made last year.

CHARGED TO CAPITAL ACCOUNT. Other factors have operated to unduly swell the so-called “profits” of the Railway Department -works properly chargeable against revenue are still being charged to capital account-. Under the vote for “Additions to Open Lines” charged to capital account last- year, a sum of £318,090 was expended upon the railways, the greater portion of which, was properly speaking a charge against revenue. . r l he items covered bv such expenditure include additions to station buildings, .platforms, and dwellings, water services for the Lonmotive Department, fencing, gas and electric lighting, signals and interlocking apparatus, loading banks, stockyards, approaches and crossings, etc., and even such perishable things as tarpaulins. Charges of this character are, speaking generally, defrayed in oilier svsems out of revenue, and are regarded in the light of maintenance charges. That this is the case, and that," on the part of the- Minister for Railways at least, there is a recognition of the principle that such matters should not be charged to loan accounts is apparent by remarks recently made by Mr Millar. In speaking of certain regrading works that- were being carried out at Tua'kau, Mr. Millar emphasised the fact that they were paid out of revenue, which was a practical admission of the fact that similar uoiks had been wrongly charged to capital account. .Prior to 1891, al] -such ivoixs had been charged to revenue but m that rear the Railway Commissioners, in their anxiety to make the railways nay, obtained special votes from Parliament for improvements and additions to open lines. They began in a very <■nia.ll way, their first vote only amounting to £12,928, and the votes they ieecived in this respect never ieached anything like the dimensions they have since attained. In. 1895 the- Commissioners were retired, the non-political regime, ended and the Government as sunned direct'control of the- railway’s. Duriim the two years that- followed, the votes "for “Additions to Open Lines were suspended, but in 1397 thev were again commenced, and since 18the expenditure in this direction has amounted to £4,493.090, or an average for the fourteen years of £320,920, per annum. These facts and figures go tar towards showing tnat- the railway “profits” are- purely paper profits Ihe following table shows the amount act ml during the last five yearn under the “Additions to Open Lines heading:— Amounts Voted for Additions to Open Lines. 1906 aV * 351,043 1907 308,898 908 333,386 u,n .... 398.096 ioio sis,o9l

This represents an average of £341 r 902 per annum, which is greater than that 1 of the 14-year the latter includes- votes of £<m,oßJ m 1.902 and £432,167 i n 1903. Ihe comparison certainly does not- a dd t<> t financial reputation of the ment.

Miles of . railway Cost Adminis- conper Years. tration . strutted. mi e. 1884-18S7 Stout-Vogcl 332 5,319 1887-1891 Atkinson 115 10,965 1891-1893 B alliance 44 10,303 1893-9017 Seddon 521 • 14.130 1907-1910 Ward ' 310 191400