STATE ENTERPRISES.

New Zealand Herald, Volume LXII, Issue 19170, 9 November 1925, Page 7

STATE ENTERPRISES.

LOSSES IN VICTORIA.

DRAIN UPON THE , TAXPAYER.

UNPROFITABLE UNDERTAKINGS.

Several State enterprises in Victoria arc shown by the State Auditor-General, Mr. J. A. Norris, in his annual report to have drifted to the stage when, instead of contributing to the consolidated revenue for the relief of taxation, they have become a drain upon the taxpayer. Of 10 departments of industry operated by the State four combined to produce a total loss of £114,934, while the total profits on six other enterprises amounted to only £41,018. The two industries responsible for nearly £IOO,OOO of the total loss are the State coalmine, Wonthaggi, 4 and the Victoria Dock cool stores. Mr. Norm' analysis of the State coalmine's operations for the last five years shdws that to meet the working costs, to provide for the areas exhausted, and to pay interest and sinking fund on the capital, the mine requires an average ; price at the pit's month for all coal of 22s 9d a ton. Unless values are increased or working expenses reduced and the output materially increased, the AuditorGeneral considers it difficult to see how the mine will pay its way without supplementary payments and subsidies.

| The financial record of the Victoria Dock ! cool stores for the last eight years is not I inspiring. Post-war receipts have not fulj filled expectations held when the extenl sions and increased capital outlay wera ! authorised. The position now is. that the normal receipts are insufficient to pav 4 ; per cent, on the "capital and provide £27,000 a year for working expenses. Here, again, if the stores are to be regarded as a business undertaking, rates must be increased. One of the healthiest of the State's undertakings is the Maffra sugar factory, of which the net profits increased from £19,017 in 1923-24 to £23,142 in 1924-25. For the rebuilding work now in progress loan moneys are being drawn upon, Mr. | Norris is of the opinion that when these ! improvements have been completed there should be a revaluation assets and a readjustment of the capital liability. The Electricity Undertakings. While th« State Accident Insurance Office showed a net profit of £14,270, the experimental farms conducted by the ; State are not financially a success, The I Werribee Research Farm continues to be a drain upon the taxpayer. The net deficiency in last year's accounts was £5182, and before charging up interest and depreciation there was a loss of 2.8 per cent, on the capital invested. On the Rutherglen viticulture! and experimental farms the Treasury has invested a total of about £72,(XX), while £62,000 has been sunk in eight agricultural high school farms. The net loss to the State on all these activities for 1924-25 was £10,133. The Auditor-General is now completing the audit of the balance-sheet and accounts of the State Electricity Commission for the year ended June 30. Figures submitted for audit throw interesting light on the operations of this gigantic enterprise. The abstract of operating acj counts for 1924-25 shows a net loss on the ; year's operations of £277,202. By far the greatest contributor to this deficit was the metropolitan su"-°" system, which* | showed a net loss of fW Q R B. while the briqnetting factory showed a k*s of i £36.258.

To June 30 the total capital outlay on the electricity enterprise was £7.921.848, ■ while the amount of interest capitalised jis £514,642, and the accumulated loss on operations is £335,663. For these last j two items, representing a total of £8150,305, there are no assets. The auditor-general : points out that the, commission is paying i and will continue to pay interest on tha two items until the debit "is written off ! out of profits. When £149.047 interest on j works in course of construction is added to the net loss on operations, the actual deficiency in last vear's receipts to meet cost and all interest charges was £426,249. % Financial Position of Tramways. The analysis by the Auditor-General of the finances of the Melbourne and Metropolitan Tramways Board shows that the '■ main feature of the board's finances is ! the manner in which appropriations were | made to genera! reserve and renewals rei serves. At June 30 the board had a net j surplus of £117,512, out of which statnI tory contributions to consolidated revenue nhwScd £106,211, leaving a credit balance of £11,301. Under the terms of the Tramways Act, j a board is reauired to appropriate to j renewals, general, and maintenance funds : not less than 4 nor more than 6 per cent, of the capital cost of the undertaking. ' After allowing for interest credited from the net revenue account, 4 per cent, on 1 the capital cost was £197,580. The board therefore proceeded to appropriate £80,731 to general reserves and £117,269 to renewal reserves. The total appropriations to other reserves brought the total reserve appropriations to £243.546, so that after taking into consideration the credit of £11,301, resulting from the year's operations, the board actually drew upon its general reserve fund to the extent o? £232,245, or, allowing for the appropriation of £80,731 made to general reserve, it transferred £151,514 from general reserve to renewals and other reserves.

Depleted Reserve Funds. The point about these allocations is thai an amount of £117,269 which mig;ht hava ! gone to general reserve was appropriated to renewals reserve, which, with reconstruction re-erve, now stands at £1,037,535. This reserve, which has not been touched for two years, is the fund from »'h;ch the board will finance the I conversion of the metropolitan cable tram- | way system. But its general reserve, | which, under the Tramways Act, is the | only provision made to meet a deficit, has been whittled down to £22,930. This small balance at credit of the general reserve is, in the Auditor-General's opinion, the weakness in the board's financial position. Mr. Norris sounds a note of warning in respect to the current year's appropriations, and points out that should it bo necessary to increase further the renewals reserve out of tiic currant year's revenue, difficulty may arise in providing money for the statutory appropriations, unless the law is amended to give a wider application to the several reserves of the board during the period when the tramways are under reconstruction and conversion. Analysis of Loan Flotations. Some remarkable figures are included in the Auditor-General's analysis of loan flotations made during the year, which show the heavy co:t of loans floated in Australia. as" compared with the issue floated in London. During the year the Commonwealth Government issued in Australia two loans for the States. The first cost the. State an annual amount, including redemption in 1930, of £6 10s 5s per cent. , while the second loan on the same basr cost £6 9s 7d per cent. The loan of £6,000,000 floated in London cost the State,, including redemption, only £5 0s 2d per cent.