The Dominion's Railways

Hawke's Bay Tribune, Volume XVII, 28 September 1927, Page 8

The Dominion's Railways

Results of Year’s Working

Minister’s Comprehensive Review

Plans for the Future

The Rt. Hon. J. G. Coates, Minister of Railways, in the House of Representatives yesterday, presented his fifth annual Railways Statement, saying that he had to report substantial progress in most phases of railway activity, even though the financial results of the year's work were not so gratifying as were those recorded In the special circumstances obtaining last year. The net revenue, he said, amounted to £1,943,774, which was equivalent to a return of 3.99 per cent, on all the capital invested in lines open for traffic. That represented a decrease of £48,560 compared with last year, but was higher by £169,540 than the forecast contained in his Statement for 1926, upon which the Railway estimates for this year’s Budget were based. Mr. Coates, continuing, said:— “The revenue includes £445,221 received from the Consolidated Fund (in terms of the Government Railways Amendment Act, 1925) for services performed in working such branch lines as, although beneficial for the development of the country, are not in themselves reasonably remunerative railway assets. Out of th year’s revenue has been set aside the sum of £310,544 to strengthen the reserves available for renewals, depreciation, insurance and betterments, while a subsidy of £175,000 has been paid to the Government Railways Superannuation Fund; £17,574 was also provided out of railway revenue on account of (a) increased superannuation allowances granted to widows and children, and (b) the cost-of-living bonus paid to superannuated members in receipt of allowances amounting to less than £lOO per annum. This charge has hitherto been borne by the Consolidated Fund. INCREASE IN GOODS TRAFFIC. “In the pre-reorganization period each of these three items would have (either immediately or ultimately) constituted a charge against the Consolidated Fund. They require, therefore, to be taken into account in any comparison between one year and another, and their total £503,118) may reasonably be regarded as an offset against the branchlines payment referred to above “In comparison with last year, the increase of £85,681 required as payment on account of branch lines and the decrease of £48,560 in net revenue are together less than the amount of shrinkage in passenger receipts following the inflation caused by the Dunedin and South Seas Exhibition of the previous year, and the combined effect of an increased number of private motor cars added to augmented motor bus competition. Apart from passenger traffic, there has been an increase of £98,627 in the net revenue derived from goods traffic and other subsidiary services. “Interest charges increased by £130,122, this sum including £55,600 paid out of revenue on account of railway improvement works under construction. “Railway operating expenditure decreased by £6287, notwithstanding increases in wages and better conditions (estimated to cost £30,000) granted to the staff, and an increase of 4 per cent, made in trainmileage in order to provide improved services for the public. Costs per train-mile were 137,82 d, as compared with 143.37 d last year, and decreased costs were also recorded undei all other headings, excepting general charges, where an increase of 0.56 d per mile, due to superannuation subsidies, is shown. The loss on the year’s working was £99,659. This, after deducting the unappropriated surplus of £21,023 from last year, leaves the deficit at £78,636. "1 think it opportune here to draw attention to the fact that the old method of assessing progress by making year-to-year comparisons, whilst suiting fairly well when there was no vital railway change occurring either in system or outlook, cannot be applied with any accurate effect in the midst of a comprehensive reorganization period. We must look for results and apply analysis over a longer term. The recommendations made by the Fay-Raven Commission and adopted by the Government took account of the railway building and improvement programme contained in my special statement on the subject presented in 1924. Generally speaking, tile putting into effect of that programme and of those recommendations is well advanced. The opinion of the Commissioners was that by 1934-35—about seven years from now—the capital investments in railways would have advanced to £70,000,000, and (through the reduction in operating expenditure made possible by the improvements, and the natural increase of traffic) an annual interest return of 4.59 per cent, could thereafter be earned. “Taking into accopnt the progress already made and the benefits to accrue from the completion of works now under way, I believe the results anticipated will be achieved. APPOINTMENT OF SPECIAL AGENTS. "On the commercial side, too, 1 feel sure that many of the methods in use on the Canadian and American railroads can be inaugurated here, and will be welcomed by the travelling public and business community. Passenger and freight work will be separated. Officers especially selected to attend‘to all passenger requirements will be appointed at the main centres, and it will be their duty to. meet tourists on arrival and see that opportunity is given them to utilize to the best advantage the time at their disposal. An arrangement has been entered into with the Postal Department whereby the Mail Agents on the mailboats between Australia, New Zealand, Vancouver and San Francisco can act as representatives of the Railway Department in assisting passengers bound for the Dominion to frame itineraries including a maximum amount of rail travel. The Agents will communicate by radio with the Railway Passenger Agents at the port of arrival. The latter will take the tourists in hand and see them safely on their way (giving particular attention to the checking of luggage and train-accommoda-tion reservations), ensuring at the same time that every other courtesy and facility available to the travelling public is extended to them. The Passenger Agents will also keep in close personal touch with all public activities, and generally occupy thair time in influencing people to travel by rail, "Steps are being taken also to increase the number of Freight Agents in order that more attention may be given to motor competition and the securing of new business. Freight Agents, each of whom will be allotted a special phase of the work of securing business, some in the main centres and others for the country districts, will be thoroughly coached in the work of business-getting, and fully charged with the latest ideas and information to enable them to secure the attention and respect of the Department’s clients. Their duties will include the preparation of detailed reports regarding the freight possibilities of their respective areas, the best method of transport to cope therewith, and the reasons for existing competition. Generally they will bo expected to possess full information as to the transport potentialities of the districts in which they are stationed. RAILWAY PUBLICITY. “Closely associated with, but distinct from, the activities of the Commercial Branch is the question of efficient publicity and propaganda work covering railway operations within the Dominion. This will be coordinated with the Government Publicity Board, the functions of which are principally for the propagation in other countries of publicity regarding the Dominion. Publicity is now recognized as a very essential part of every progressive railway organization, and I was very much impressed by the highly efficient methods in operation in the larger countries. “The proposals being adopted here include a more intensive publicity campaign, very similar to that carried out in England. To enable this work to be carried out in a most efficient manner, a publicity branch is being established. The publicity branch will co-operate closely with the commercial and operations branches, so that there may be a thorough-going correlation of ideas and their execution. With competition playing so large a part in transportation affairs, the railway management recognise that the provision of the establishment of personal contact with freighters and travellers, the creation of a demand for transport, and the means of transport, are interdependent parts of one process. PAST AND PRESENT TRANSPORT DEVELOPMENTS. "A summarized survey of the past in relation to New Zealand’s internal transport and the actions taken in regard thereto for the protection of public interests, supplemented by a statement of the position as it now stands, will help to clear the way for consideration of what requires to be done in the future.

“Prior to 1914 motor competition had not seriously affected the railways. They were carrying out a developmental programme largely on departmental lines, with fares and freights generally set at rates which produced a return to capital lower than was necessary to make them self-supporting in the business sense. They had no provision for the replacement of wasting assets, no endowments, no reserves, no betterment funds, and no commercial balance-sheet to reveal to the public the actual financial position in which they stood. This position, too, was acquiesed in by the majority of New Zealanders, for it was recognized that although not credited with the increased values to land and benefits to settlers which their coming conferred, they did actually assist the country, from a colonizing aspect, far more than their direct earnings revealed. “There was a feeling, too, that competitive business methods were unsuited to a Government Department. In the Department itself, owing to the absence of the necessary incentive usually arising from competitive conditions, there did not exist, nor had there, indeed, been required, a commercial sense or business-getting side to its operations, this position being, moreover, quite in keeping with, and natural to, the then stage of the country’s transport development. The general idea prevailing was to carry what was offered, under certain unbending regulations, many of which were of long standing and proved particularly irksome to traders in view of the general conditions then existing outside in the business world. “The Hiley report of 1914 gave promise of something constructive in the way of progressive development in opening new lines and improving existing ones, but the war cut across all normal industrial developments in the Railways as well as elsewhere; and after the war the post-war problems of staffing, high prices, and general stringency tended to delay adjustment in line with modern requirements. All the time, however, improvements in the motor-vehicle field were being made most rapidly, and by the time (in 1923) that the Railways were placed under my control heavy inroads were being made on the Department’s passenger and goods traffic by privately-owner motor-propelled vehicles. EFFICIENT TRANSPORT ORGANISATION. “My first business was to make a complete tour of the railway system in both Islands, with a view to becoming personally acquainted with the internal working of the Department. This disclosed the fact that the railways were an efficient transportation organization on the technical side, but requiring (in keeping with the changed times) such changes as would develop them along reasonable commercial lines without sacrificing their utility as a developmental asset to the country. “By 1925 considerable progress had been made, and 1 was able to make announcement of policy in regard to tariff, finance, and interrelation of Departments, assistance to primary and secondary industries, improved services and equipment, level crossings and gradeeasements, station improvements and other increased facilities, use of New Zealand coal, commercial methods, the keeping in touch with world standards, excursion traffic projects, staff organization, transport coordination, etc. All of these matters have had my personal attention, and in regard to each of them the position has already changed materially for the better. Then financial reorganization, time-table improvements, workshops reconstruction, stores reorganization, and tariff revision have all assisted to make the Railway Department a much more efficient business organization that it was some years ago. It does give good services; its outlook is much broader, and satisfies the requirements of passengers and shippers to a much greater extent and with a more accommodating spirit; commercial relations are much easier; and greater keenness regarding business progress and opportunities for development is everywhere evident amongst a staff where merit is now the main test of promotion. “All these things are well, but they have not succeeded in providing the Department with an adequate proposition of increased business comparable with the expansion which has taken place in population, and tn our export, import, and internal trade. “On the other hand, New Zealand has made a world’s record in the absorption of motor vehicles during the last two years, the increase from 1925 to 1927 representing a gain of 58 per cent., the greatest increase (from 13,000 to 23,0000) occurred in the demand for commercial motors. MOTOR COMPETITION. “This might have been regarded with satisfaction from the national standpoint, as indicative of enterprise in the adoption of new ideas and of the fuller exploitation of the country’s productive possibilities, had a considerable proportion of them not engaged in direct duplicative and wasteful competition with the railways—much of this competition being possible only because advantage was taken of the developmental purposes which the railways served. For the Railways to have met the position with a full commercialized programme and methods might have been effective' so far as conquering the competition was concerned, but it would have played havoc with the national developmental work which, through a long period of years, they have been moulded to perform, and under the shelter and protection of which production has been greatly aided and industrial enterprise encouraged. “The absence of competition in the earlier years had this general advantage: it enabled the Government to use the railways in such a way that by dividin gtlie railway tariff into two broad grades, the higher (Classes A, B, C and D) consisting of general commodities and being rated (in general) somewhat above the actual cost of transit, and the lower (products of relatively low unit value, such as coal, firewood, shingle, fertilizers, etc., and the general necessities called for in the prosecution of primary industries) bejng conveyed at rates producing a return often considerably lower than the cost of production—the combined effect, however, of the total business transacted producing what was generally considered to be a sufficient average return for the work done. Under this plan it had also been possible to protect New Zealand as against overseas industries by arranging discriminative rates in favour of the former. “Motor competitors, however, who, naturally, as individuals, had no direct concern with the natural developmental aspect of the country’s transport, have been able to do quite well by taking only one class of traffic—the high rated—thus disturbing seriousl ythe equlibrium produced under the Railways tariff scheme. “A similar position has developed in the matter of suburban passenger traffic, the ordinary passengers being attracted away from the rail by the extra convenience of the motor ‘pick-up’ and ‘set-down’ facilities, while the low-rated traffic—suburban workers and seasonticket holders (all carried below cost owing to the previously existing balancing factor of a full traffic—is left for the railways. '“As previously pointed out, full commercialism applied to the railways would result in the adoption of methods and rating practices similar to those of motor operators; but this would, besides having a generally detrimental effect upon the country's welfare, bear with especial hardship upon those who had been encouraged to go on the land or settle in the suburbs through the existence and operations of the above special tariff arrangements. MINISTRY OF TRANSPORT. ■'Complete abandonments of these developmental functions by the Railways, although the proper course if the Department had been a private enterprise concerned principally in the protection of its own immediate interests, cannot be thought of when, as a State business, the full effect of such action upon the general progress and stability of the Dominion has to be considered. A striking instance of this condition is found on the manufacturing side of the Department's activities, where, through the adoption of better methods and the setting-up of new machinery, it would have been possible—during the recent unemployment crisis—to carry on without the services of several hundred men, who were kept on, in the public interest, after their services could have been economically dispensed with. It will thus be seen that the peculiar dual nature of the Department's functions has actually provided special protection (against direct retaliatory competitive measures by the Department) to motor competitors, who have also gained tremendously by the heavy expenditure in road-surfacing (in some cases nt the rate of £lO,OOO per mile) undertaken by local bodies. “The question of safeguarding the enormous capital cost of the national transport system requires the gravest consideration, and after, carefully weighing the whole i| the circumstances surrounding the Dominion’s transport problem 1 have come to the conclusion that if we are to secure for the country a continuation of the liberal developmental and protective policy that has been so valuable in the past, it will be necessary to inaugurate transport control through a properly constituted Ministry of Transport. THE FUTURE OF THE RAILWAY SYSTEM. “In view of the capital investment, approaching £60,000,000, already made by New Zealand in regard to her railway system, ai)d the capital commitments, in the vicinity of £15,000,000, for the completion of new lines now under construction and improvements to existing tracks, it must be recognized that a great responsibility rests upon the Government in relation to the future of transport within this Dominion. “The present position is serious, so serious that the public have only two alternatives to look forward to, viz.: — (1) To carry on in accordance with the existing practice, with the certainty of closing certain services. (2) To initiate an intelligent amalgation of transport interests which will make it possible to give continuous reliable service and cheaper freights. “The second course having been decided upon, due following questions arise: How is transport likely to develop during the coming decade, and what can be done to assist its development in directions best suited to the Dominion’s requirements?

“Dealing first with the latter question, lets correct solution Je of such vital importance, affecting, as it does, the welfare of the whole country, that I am considering the advisability of fully investigating the general field of transportation in the Dominion. The information available at present is not sufficient for the accurate statement of definite economic conclusions. For instance, while the amount paid annually in railway fares, freights, and services— now amounting to over £8,000,009 —is common knowledge, other costs of transport are not so fully realised. Such charges as those incurred for road and coastal steamer fqres and freights, and for interest on roadconstruction, may be mentioned. “The investigating authority would require to go into the whole question thoroughly, both in relation to the economic effect of transport as now carried on, and also in regard to improvement which could be made possible by a better inter-relation of transport effort to reduce overlapping, and cheapen for the people of the Dominion their overall transport costs. PROGRAMME OF WORKS UNDER WAY. “The programme of works now under way for roads and railways is taking shape in accordance with a carefully prearranged and comprehensive design, if this were stopped, or even retarded, it wou.d occasion much loss in capital return and transport efficiency. The whole work, therefore, requires the closest attention from the Government as the programme develops, in order that the full -.gs oouinmble from a perfected transportation system may accrue to the country. “I believe that a broad and forward-looking policy is nenaaqary not merely with a view to the transport position as it will exist one to two years hence, but keeping in mind the conditions likely to obtain eigne or ten years from now, when the bulk of the work in railway and road construction upon which we are at present engaged will have been completed. “Ten years hence the railway system of the Dominion will be much more homogeneous than at present. For instance, loose ends of sections like those at Dargaville, Stratford, Gisborne, Tauranga, and Westport will be linked up with the main fines. The Pokeno-Paeroa railway will be an accomplished tact, as will the northern rail outlet from Auckland, and the Westfield and Tawa Flat deviations. “All these improvement will make possible increased standardisation of rolling-stock and equipment, with consequent reduction in production, operation, and upkeep costs, and favouring increased mobility for locomotives, cars, and wagons, with consequent increase B their operating efficiency as revenue-earning units. IN 10 YEARS’ TIME. * “In ten years’ time it may be expected that a definite line of demarcation will exist between the kinds of work that railways and road services are performing (the most suitable in each case having been selected after practical and searching tests), and that there will be an absence of wasteful competition between them in their respective spheres, such competition as now exists being replaced by a sensible co-ordination of work between private operators and rffil-owned services by train and road, equally applicable in its usefulness to the requirements ot the most distant farm and the most crowded city area- By chat time, too, New Zealand will be vastly better known as % tourist and health resort, and on account of the attractions it offeers to sportsmen. “The alternative railway routes which the linkiog-up of several now detached rail-heads will make possible, such as the Okahukura-Stratford route on the east and the Pokeno-Paeroa-Tauranga-Gisborne-Napier on the west of the North island, will help to make rail tours particularly attractive for overseas visitors“Looking ahead, it may be expected that the practice ot ‘land cruising’ by train, recently initiated in Great Britain and America, will be fully established, and in this country the Railways may look tor heavy work of this kind during the summer months in routing and conveying chartered trains loaded with sightseers to the favourite redserved resorts. “The collection and delivery of train-passengers and luggage trona and to their homes or hotels by cars or buses which will be provided tor at stations so that they may dock right alongside the trains, and which will be worked fully in conjunction with train services as pert of the ordinary routine of railway-operating, is another development that I hope to see brought about during the period named. CONVEYANCE OF PRODUCTS. “But it is in the conveyance of the country’s products and general commerce that I look tor the most useful developments of transport to take place. A more thorough organisation of collecting and delivery services operating to and from farms situated away from the routes of railway-lines, with properly scheduled services and tames for picking up and setting down, and with capacity tor handling every kind ot transportable commodity, may be looked tor. I fils wifi enable further favourable adjustments of rates. “It may here be pointed out how usetul has been the reduction introduced last year in rail freights forfertilisers with the purpose of encouraging their more general use. A great increase in the quantities railed has ensued, and the effect on production may be expected very shortly in increased returns per acre and further transport work for t;ie railways. "The fine terminal facilities for giving quick despatch to overseas vessels, which large-scale business at the principal porta has justified the Harbour Boards concerned in supplying, is reacting on the attitude of shipping companies. These naturally appreciate the opportunities lor expeditious terminal-port work, and are in consequence tending to concentrate their visits on the principal ports. As this movement develops further the Railways will be required to undertake port haulage for goods over much longer distances than at present, and a new development of haulage at special shipping rates may bo expected as a corollary to the general trend of transport evolution. "Ihe restless energy of our people may naturally be looked to as a potent agency in stimulating change in the methods of production, distribution, and consumption in the years ahead, and such changes preven forecasting with precision in any given direction; but certain general deductions may be made from past experience, and I am hopeful that in a decade the country’s position in regard to her transportation enterprises will be much stronger than they can be in the present transition stage. CONCLUSION. “In conclusion, 1 desire to place on record my appreciation of the capable manner in which all employees of the Department have carried on the year’s work. Every emergency has been met with good judgment and in the right spirit of practical helpfulness. The year has been one in which the generally low prices received for the country's exportable surplus of products have reacted unfavourably upon what might be termed 'pleasure travelling’ within the Dominion, yet it is to the building-up of this class of business that the Railways, as such, must look if they are to make up the leeway in' passenger traffic resulting from defections to the road by so many business travellers in the suburban areas. The general outlook is now 'more promising; and with continued co-operation in the administration and operation of Railway affairs, supported by further effort and new enterprise in the directions suggested earlier in this statement, I feel assured that, given a period of normal progress within the Dominion, the Railway position can be still further improved as the present programme of extensions and betterments draws towards completion.’’ SUMMARY OF YEAR’S WORKING. “The following is a summary of the working for the year ended Slat March, 1927, as compared with 1926:—

Particulars. Total miles open for traffic Year ended 31st March. 1927. 3,164 1926. 3,138 Average miles open for year 3,157 3,108 Capital cost of opened and unopened lines £56,028,477 £53,716,455 Capital cost of open lines £49,183,916 £47,608,676 Capital cost per mile of open lines £15,545 £15,172 Gross earnings £8,434,654 £8,460,762 Working expenses £6,490,880 £6,468,428 Net earnings £1,943,774 £1.992,334 Interest charges £1,913,811 Appropriation for betterments . .1.1. £58,000 Unappropriated surplus £21,028 £99,659 - Percentage of total working expenses to .. .Ah gross earnings 76.95 76.46 Percentage of net earnings to capital invested 3.99 4.35 Railway operating earnings £7,423,472 £7,589,274 Uailway operating expenses £6,158,283 £6,164,570 Net railway operating earnings £1,265,189 £1,424,704 Percentage of railway operating expenses to earnings 82.96 81.23 Operating earnings per average mile open £2,351 £2,446 Operating expenses per average mile open £1,951 £1,987 Net operating earnings per average mile open £400 £459 Operating earning per train-mile 166.14d 176.5ld Operating expenses per train-mile 137.82d 143.37d Net operating earning per train-mile 28.32d 33.14d Passengers, ordinary 10,305,065 11,813.480 Season tickets 585,094 600,292 Total passenger journeys 26,002,137 27,03,414 Boods tonnage 6,833,436 6,808,600 Live-stock tonnage ~ 475,013 447;6!W Train mileage 10,723,864 10.319,407 KnainA 15.212.086 14 6W nae “For the current year I anticipate the revenue will reach 00Q and the expenditure £6,571,945.”