RAILWAYS FINANCE BOARD’S REVIEW. POINTS FROM REPORT. THE STAFF. BRANCH LINES.

Manawatu Standard, Volume LV, Issue 243, 11 September 1935, Page 10

RAILWAYS FINANCE

BOARD’S REVIEW.

POINTS FROM REPORT.

THE STAFF.

BRANCH LINES.

THE ANNUAL STATEMENT NET EARNINGS STILL RISING WELLINGTON, Sept. 11. In tlie Railways Statement for the year ended March 31, 1935, presented to Parliament, it is shown that the net earnings of the department recorded a slight increase . from £1,085,558 in the previous year to £1,087,491 in the period under review. This occurred despite a fairly substantial increase in the working expenses, which was largely accounted for by the restoration of 5 per cent, of the wages reduction to employees. The net earnings for the past year, however, still fall short of the interest charges, which total £2,330,886. Ihe difference between the two is £1,243,395. In the previous year the interest charges were £1,196,807 greater than the net earnings. An appreciable gain is noted in the gross earnings of the department, which have risen from £6,332,711 in 1933-34 to £6,627,928. . .... , Por the current year it is anticipated that the revenue will reach £6,746,284, and the expenditure £5,701,883. RESULTS OF WORKING. The following is a statement of the results of working for

REVENUE AND EXPENDITURE

four years has been contributed to substantially by the review of expenditure, a point has now been reached when the prospects for future improvement must depend upon efforts devoted to the further building-up of the board’s revenue. CAPITAL AND INTEREST.

LARGE BURDEN ON TAXPAYER

Tn its report the board states: — The gross revenue for the year showed an increase of 4.66 per cent, or £295,217 over the previous year. Sixty-four per cent of the board’s revenue is derived from goods traffic. The gross expenditure increased by 5.59 per cent, or £293,284. During the year the 5 per cent increase hi salaries au< l wages added £149,475 to the board’s expenditure. Reduced revenue from workers’ dwellings owing to a concession of lower rentals had a further effect in reducing the net earnings of the system. The revenue result was achieved by the strictest supervision and direction over the diversified interests of the system and by the hoard’s constant and unremitting efforts to render prompt and efficient railway service to the public in which it has at all times had the steady and consistently increasing support of the staff in all grades of the service. The entire structure of this great system depends upon its revenue-earning power for its support. The board recognises that such in turn depends upon the measure of patronage accorded by the public, who appear to the board to be impressed by the increasingly high standard of railway service. While the board has particularly directed its attention to the preservation of its goods traffic revenue, at the same time the improvement in passenger revenue follows the efforts of the board to provide cheap, comfortable. and expeditious travel facilities. Nothing comparable to the Government railways for general travel, particularly over the long distances, obtains in New Zealand. The board emphasises this for its direct bearing upon the revenue position. With regard to expenditure, wherever the board could reasonably introduce economies it has done so. Taking the system as a whole and in general terms, the economies of recent years have brought operating-costs down to what the board regards as a minimum. It follows, therefore,, that while the net improvement which has Been recorded in the returns during the last

The steady improvement in the railway position as disclosed in the figures herewith has been a feature of the board’s operations during the last four years. This result has been maintained notwithstanding the severe competitive conditions which the board has been called upon to meet. This competition is chiefly aimed at and attracts the more remunerative lines of railway traffic. This condition, which threatened the stability of the railway service as the principal transportation system throughout tire Dominion, caused the board considerable concern. It cast npon it the responsibility of counteracting this threatened danger of attrition and the consequent loss of the best of railway traffic. In meeting this condition the board, with due regard to the entire range of its business, has been compelled to institute over a considerable volume of goods traffic “special rates” which have enabled the board to hold a large volume of business which otherwise would have been lost to the railway service. Since the commencement of railway operation in New Zealand freight charges have been made under what are known as “classified rates” which are based upon the principle of requiring various classes of goods to pay charges which they can bear. Thus we have “A” class goods (being the highest-rated goods), “B” class, and so on. This policy in the past has given to the railway system of the Dominion the benefit of reasonably payable rates for its highest rated traffic, with the obvious result that with many low rated lines (such as fertilisers and coal) freight rates are relatively inadequate and unprofitable for such individual lines of traffic. Nevertheless the country has enjoyed benefits from these low freights, which are still in operation under the “classified” principle. It will be recognised at once that the benefits derived by the farming community and by the industries alone are considerable: they have been a vital factor in the development of the country’s agriculture and in the volume of its production of primary products. In that development the railway system has thus- played a large Eart. If the conditions which the board as been called upon to meet, particularly in parallel road competition, are to be accentuated, then it is doubtful if the “classified rates” as now operative with the benefits of low cost of transportation of heavy goods (fertilisers, etc.) under the lower rating of the present railway tariff can be maintained without a seriously diminishing revenue. That is the threatened condition which, if further experienced, the board will be forced to meet. The only practical chief alternative to the well-proved and useful system of “classified rates” appears to be a general tariff under which many lines of goods would be carried at much lower charges than those which are now enforced and which, on the other hand, would mean the raising of the rates on many lower-rated essential goods. It • would therefore follow that the very low railway charges on many lines (essential

The railway capital at March 31, 1935, stood at £54,089,190. The interest charges for the past year amounted to £2,330,886, which represents an excess of £1,243,395 over the net earnings of the service. It will therefore be seen that the system, by a net payment last year of £1,087,491 into the Government account, earned a little less than one-half of the interest due. This substantial deficiency has tc be found by the general taxpayer. . It is merely stating the obvious to say that all additional patronage extended to the railways means a decrease in the burden of interest to be found by the general body of taxpayers. This aspect is freely conceded, and meets with general recognition by taxpayers when they think and act collectively. Its recognition is not so apparent, however, when considered from the point of view of the course of action followed by the inividual when making a choice from the alternative transport systems at his disposal, whether for goods or produce or for personal travel. During the year the sum of £204,730 was charged against revenue for renewals, and the amount expended from this fund for track renewals was £147,552. The credit balance in the renewals fund at March 31, 1935, was £729,004. The sum of £556,357 was charged against revenue on account of depreciation. RETURNS AND RATES.

to agriculture and to industry generally) would under such necessity be raised, and in numerous cases would add to the cost of primary production and of other industries.

There has been ample evidence that the increasingly higher standard of railway service lias been appreciated by the public and has been a definite factor in securing to the department an increased share of patronage in the face of highly comiietitlve conditions. At the same time, the board feels justified in stating that the degree of patronage and support accorded to this State-owned enterprise still leaves much to be desired in many directions.

INCIDENCE OF EXPENDITURE

Points of general interest culled from the Railways Statement for the year ended March 31 last are as follow: Maintenance of ways and works showed an increase of £54,618 at £1,047,825. Maintenance of signals and electrical appliances amounted to £137,477—an increase of £27,179. Expenditure on rolling stock maintenance reached £1,236,324 —an increase of £16,222.

The quantity of coal used was 397,310 tons.

The revenue from subsidiary services totalled £719,864 as compared with £703,876 for the previous year. The expenditure on these services was £401,849 as against £370,007. ■ There was an increase of 607 281 passenger journeys and £32,354 in’revenue. On account of the variation in the dates of the Easter holidays no Easter bookings are included in the figures for the year; whereas for the pi evious year two Eastex* periods were included.

The Lake Wakatipu steamer service returned a net revenue of £378 compared with £7 in the preceding year. The income from departmental dwellings was £105,338 and the expenditure £155,302, thus showing a loss of £49,964. In 1933-34 the revenue rvas £137,238, the expenditure £150,781 and the loss £13,543. The substantial decrease in revenue is due to the reductions in rentals consequent upon the agreement reached between the department and the tenants in the matter of a claim for reductions under the National Expenditure Act, 1932. The adjustments amounted to £12,166 for the year 1932-33, £12,138 for the year 1933-34, and £8,506 for the year 1934-35, so that this year’s accounts were adversely affected to the extent of £32,810. The increased expenditure is due to additional repair work and painting carried out during tire year. The suggestions and inventions committee dealt with 563 suggestions and inventions during the year, compared with 813 for the previous year. The number recommended for adoption in whole or in part rvas 45; 157 were referred to heads of branches, were already in operation, or related to matters of policy; 313 were not recommended for adoption; while 48 were under trial or investigation at the end of the financial year.

LOYALTY ACKNOWLEDGED

At March 31 last there were 16,189 employees under the control of the Hallways Board (says the Railways Statement). The average number actually at work throughout the year was 16,048, compared with 14,971 for the previous year; of this number 11,835 were permanent and 4213 were casual employees. During the year 248 members of the permanent staff resigned, 78 retired on superannuation, 45 died, and 31 were dismissed or paid off. The number of employees engaged was 418. There were 14 members of the second division promoted to the first division of the service.

The amount of £28,198 was paid under the Workers Compensation Act to members of the second division who suffered injury. The amount distributed in salaries and wages was £3,674,371, and it will be seen that this constituted the major portion of the board’s total expenditure of £5,540,437. These figures indicate that the railway system administered by the board is the largest labour-employing undertaking in the Dominion to-day. The importance of this aspect is self-evident when it is considered in relation to the ever pressing national problem of providing reproductive work for the people of the Dominion.

The board’s appreciation of the efficient and loyal service rendered by this large staff is fully acknowledged. Collectively and individually they contribute to a service of first national importance; and the legitimate claim which the railway-system has upon public support is . accentuated by consideration of the employment aspect.

The revenue from season tickets this .yoai' was £175,316, compared with £l/1,603 for the previous year, an inciease of £3,713. The issue of workers’ weekly tickets increased by 12,058, witli an increase in revenue of £2llO, while most other descriptions of tickets also recorded advances, due to a slight easing of the unemployment situation. The revenue from parcels, luggage and mails amounted to £292,096 an increase of £10,207. Goods and live stock revenue reached £4,138,434 (6.023,960 tons), as against £3,911,245 (5,642,199 tons). I raffic in agricultural products increased by 41,396 tons. In the South Island grain showed an increase of 26,686 tons and £12,341 in l'evenue. The North Island showed an increase of 2058 tons and £875 in l’evenue. Animals and their products showed a slight decrease in tonnage. The number of cattle forwarded increased from 311,872 to 336,840, an increase of 8.01 per cent, due to the stimulation given to cattle raising by the potentialities of "the chilled beef trade. The number of calves forwarded by rail decreased by 122,064 (20.13 per cent), due to the operation of the export restriction on veal. Sheep increased from 9,747676 to 10,295,953, an increase of 548,277 (5.62 per cent), due to the comparatively light year experienced in the South Island in 1933-34, when farmers held lambs consequent upon the increase in wool prices. Butter production for the year showed a decrease of 3.43 por cent, due to the dry summer. The commodity statistics show that the tonnage carried by rail declined by 14,685 tons, or 10.04 per cent. Practically the whole of the decline was shown in the North Island. Wool showed a decrease of 25,354 tons (16.68 per cent) and £38,155 (24.17 per cent), due to the fluctuation in market prices. In products of mines the principal variation was an increase of 49,878 tons of agricultural lime, the increase in revenue being £17,536. Coal increased from 1,436,869 tons in 1934 to 1,448,109 tons in 1935, an increase of 11,240 toim (0.78 per cent). There were 593 locomotives in service. During the year 23 engines were scrapped, making a total of 187 obsolete locomotives scrapped since 1926. The net revenue from the refreshment service was £2132 as against £785. The bookstalls yielded a net profit of £6381 (£3948). The department now controls 18 of these stalls, an increase of 10.

The year’s operations of the department’s road motor services resulted in a profit of £5672 as compared with £2368.

ROAD TRANSPORT.

COMPETITION FOR FREIGHT. Reference to the competition between the railways and road transport services for goods freight is made in the annual report of the Railways Board. No transport undertaking, either for passengers or goods, is called upon to establish and maintain travelling and terminal facilities and to provide its own track to the degree that is required from the railway system, the board says. By no means the least of the difficulties confronting the board during the past year and preceding years has been the problem arising from intensive competition in the transport industry. The board realises fully that competition in any major industry is inevitable; it may be said, indeed, that, as a matter of experience, healthy competition is' preferable to the possible evils of unregulated monopolistic control in any such industry. Nevertheless, it is equally true that unregulated and unbridled competition is fraught with grave dangers, and no small part of the world economic problem is attributable to this very factor. The effects of this in the /transport field throughout the world have certainly been as great as in any other field of enterprise, if, indeed, they have not been greater. It is now a matter of history that in all countries it has been found necessary to effect some measure of regulation to minimise and to go some distance towards eliminating the disastrous effects of unrestricted competition in the transport industry. In New Zealand the problem is equally acute, and is thrown into greater prominence by the fact that the main transport system (the railways) is State-owned. As a matter of policy, the board has never sought any undue legislative protection against fair and legitimate competition. The Government, however, of its own volition, lias taken certain steps towards tire regulation of wasteful competition mainly through the transport licensing legislation. In pursuance of its statutory rights and obligations the board has become a party to the hearing of applications for road licenses or appeals against the decisions of the licensing authorities only, when it felt that a case could be established for_ the elimination of wasteful competition. Although the decisions have not always supported the board’s point of view, it is acknowledged that a useful meaure of regulation has been established. It must be submitted, however, that recent decisions raise serious doubts as to whether basic have yet been established and accepted for dealing effectively and consistently with the problem of- wasteful competition in the transport industry. The board submits that the establishment ol sound and well-defined basic principles is a first essential in the national interest. So long as there is conflict on principles between licensing authorities and the final court of appeal—the Co-ordination Board—then so long will uncertainty and dislocation continue in the transport industry. Competition from sea transport is also a factor of importance. _ In this case, however, the position is somewhat different, since the condition ol two systems of transport running on parallel routes does not apply to the same extent as between rail and road. The problem is therefore less acute, and, generally speaking, the board has been able to meet the situation as it has arisen.

INCREASE IN RETURNS.

I The operating revenue from branch lines totalled £322,531, an increase of £22,510 (7.50 per cent.) compared with the previous vear. savs the report of the Railways Board. The operating expenditure was £416,307, an increase of £46,940 (12.69 per cent.) compared with the previous year. The operating loss was £94,307 and interest charges amounted to £388,505, making a total loss of £482,812, as against a total loss for the previous year of £458,450, an increase of £24,362 (5.31 per cent.). The increased revenue was caused by an increase of £5647 on the six North Island branch lines, and an increase of £16,863 on the twenty-four South Island branch lines. Eighteen of the branch lilies showed a total advance of £20,133, while the remaining six lines showed a total decline of £3250. In the South Island it is gratifying to record that the greatest increase was shown on the Otago Central branch, which is an absolutely essential line to the district. The revenue there advanced by £8765 (10.64 per cent.). This increase was reflected in all classes of revenue, but particularly in that obtained from goods traffic due to a better fruit season. Several other South Island branches show fairly substantial revenue increases. Of the six remaining branches showing a decreased revenue the Pukeuri-Kurow branch was the most marked. On this line the total decrease was £2216, or 14.44 per cent., which was due to the completion of the AVaitaki hydro-electric works. Passenger traffic on this line increased by £344, or 31.5 per cent. The remaining five branches in the South Island showed smaller decreases. The increased expenditure on branch lines in both islands was due chiefly to expenditure upon “Maintenance of way and works.” In the North Island this expenditure was incurred chiefly on the Paeroa-Taneatua and OtiraOkaihau branches. In the South Island it was incurred chiefly on the WaiparaParnassus and the Otago Central branches. The board’s policy of endeavouring to stimulate, branch line traffic by appealing to the people concerned has been successful with few exceptions, and on most branch lines the drift from the rail has been checked. The branch-lino problem as a whole, however is by no means settled to the board’s satisfaction. In consequence of this the board feels bound to indicate again that in those districts where, despite its efforts to provide a satisfactory service and encourage patronage the people either directly or indirectly fail to support their railway to the extent of the traffic available, the board may regard the continued operation of suck sections or the line as unjustified and review the position accordingly. In this connection the board is at present reviewing the position of the Te Puke-Taneatua portion of the East Coast railway, in which area the department is not, m the board s opinion, receiving tjrat measure ot support to which it is entitled.

the past five years :■ — , Year ended March 31. 1931. Particulars. 1935. 1934. 1933. 3,315 1932. 3,315 3,322 traffic Capital cost of open3,320 ' 3,320 cd and unopened lines £59,477,143 £59,337,917 £59,228,894 £59,055,701 £68,679,025 Capital cost of open £54,089.190 £53.909,347 £51,480,949 £51,424,883 £60,545,154 £6,627,928 £6.332,711 £6,034,403 £6,508.948 £7,571,537 £5,540.437 £5,247,153 £5,183,859 £5,670.955 £5,882,810 £1,087,491 £1.085,558 £850,544 £837.993 £688,727 Interest charges .... £2,330,886 £2,282,365 £2,230,655 £2,221,465 £2,255,345 Net railway operating earnings .... £769,476 £751,689 £505,321 £487,312 £376,245 Percentage of railway operating expenses to earnings 86.98 86.65 90.54 91.58 94.47 Net operating earnings per average £232 £228 £152 £147 £114 Not operating earnit ings per train17.38d 17.75d 12.34d 11.50d 7.98d Passengers, ordinary Season tickets 7,809,-035 457,546 7,511,346 442,742 6.870,570 437,775 6,503,566 459,063 7,288,674 600,440 Total passenger jour19,654,467 19,047,186 18,366.654 19,151,480 22,813,708 5,444.977 5.093,396 4.945.592 5,272.253 6,400,851 Livc-tock tonnage .. 578,983 548,803 545,094 552,558 556,498