RAILWAY FINANCE.

Hawera Star, Volume XLVIII, 30 December 1924, Page 7

RAILWAY FINANCE.

SEPARATE FROM TREASURY ADEQUATE RESERVE ESSENTIAL ■ After setting out «.the financial results for the past eleven years ; and commenting 4511 them, the Railway Commissioners state. ; “So long as. the Treasury is in a sanguine mood the, estimates, ori rev enuc and betterment meet with approval, jbut; iri times of .' financial stringency the Railway is treated in the same way as Departments 61 State which are non-revenue producing, and pressure is applied in the direction of reduction. “New Zealand would appear to have escaped some of the more flagrant disadvantages due to the inclusion of revenue and capital receipts and expenditure in a. consolidated State fund, but there is ample justification for the opinion expressed by the Minister of Railways as desirability of separating railway'finance from Treasury accounts. “British budgeting methods, which are followed in New Zealand, were not at their inception, formed for the purpose of administering a large industrial undertaking such as a system of railways, and they do not, and cannot, conform to the requirements of a revenue-producing establishment which needs not a- yearly vote, but financial provision arranged from time to time as necessity arises; capable of dealing with a policy and. programme over a. period of years; and at the same time sufficiently flexible to meet any emergency . that may arise. “We. recommend ' that loans/ and obligations which can be earmarked a‘s Attributable tri railways be transferred to a separate railway account, that railway revenue and expenses, including purchase of stores, be included in this /account, the whole being dealt with by the Railway Department. “Provided there is a, statutory• obligation to keep railway funds liquid and available on demand, the Treasury might , continue, to be the banker to the Railway Department, although experience in other countries lias shown that in times of financial stress moneys, representing reserves' or current remittances have proved too alluring to escape seizure in aid of other- State 1 obligations. , ‘There are .no reserves to meet wasted and wasting assets in the shape of wear-and-tear of rollingstock or permanent-way. . . . An adequate reserve is: a necessity, not only for /the purpose of meeting the cost of replacement, but iii order to equalise the charge for reriewals.'’ Dealing with, the financial situation of - the. future, the' , Co3nriiissoners say;

'ln .anticipating, revenue it will he undesirable to base auythiiig upori results siiice 1914, both receipts arid expenditure bearing traces 'of war. disturbance, arid it is wiser to take the figures of 1904 and 1914 and see iri what r atie tfaffid ■ reefeipt-s ■ have resporided to mileage and facilities. Between. those years 535 additional miles; wer’e- opened, ’ and gross receipts. increased froth £2,180 - 6fl to. £4,043,328, or 85.42, per cent. Assuming a like increase’ during the coming decade/ with 660 /additional miles of brack, we have a- prospective revenue of £12,950,124, reducing this to 70 per cant, increase; and/ ivri think that, apart from unforeseeii circumstances, this,, percentage of increase may fairly he expected to eventuate; we thus arrive at a gross revenue/ of ,£11,873 ; 159. We do riot base this upon past experience alone We have regard to llie increase of population, the opening up of new pi'odiicing areas, the revenue advantage brought about by the linkiiig up of detached sections of the railway system,, arid we include also proper payments for the conveyance of lime and road metal as well as Branch line losses to he made good out of consolidated funds.” After puttihg .the l>ereentage of working expertises! to receipts at .70 per .cent, when the various changes have been made, the works proposed carried font, and a greater density of traffic, involving less cost ir. propor tion tonnage cbnyeyed,' which may be anticipated iii the; prdinarv course of events, the report states :—. “The position in .1934-35; liia.y therefore be expected to- be; Gross revenue £11,873,159; ivofkihg expenses at 70 per cent. £8,311,211, reserves £350,000 —£8,661,211, leaving a. net revenue of £3,211,948, and yielding 4.59 per cent, interest iipoii a capital, of £70,000,000. “Iri making our ' recommendations W® couple therewith a continuarice of the present liability of consolidated revenue to meet interest during construction, of new lines by the Public Works Department. “We recoonmend that stores be paid for out of railway funds, and that as soon as possible, by appropriation from liet receipts, the cost of stores he eliminated from loan account. “We advocate the submission of quarterly and yearly reports to the House of Representatives in accordance with. past practice, together with a. yearly balance-sheet showing capital, revenue, ami net revenue, followed by departmental -accounts in the usual company form, and. a forecast 0/ capital commitments for the following yea. l '.. This, should hear the' signature of the chairman, of the hoard "and accountant, and be certified by the Auditor-General. ‘We , recommend that the railways he so worked and managed that gross receipts shall n.ot be more than sufficient to cover working expenses, reserves, and the interest on capital, including sinking funds—that in the event of-a surplus it be devoted to reduction of rates and fares. If, on the other hand, a loss appears, that rates and fares be increased to cover the deficit.”