FUTURE OF THE RAILWAYS.

New Zealand Herald, Volume LXVIII, Issue 20846, 13 April 1931, Page 8

FUTURE OF THE RAILWAYS.

The Government's acceptance of the proposal that management of the railways should be removed from political control is to be confirmed this week by the introduction of .legislation providing for the new method of administration. The change cannot be made merely by transferring control from the Minister of Railways to a Board of Directors. Decisions must first be made upon several questions of policy and the functions of the board must be defined precisely, especially its financial obligations to the Treasury. The present position of the railways is extremely serious. The capital expenditure on the system, including lines under construction, amounted a year ago to £65,500,000, and, according to the official Year Book, the loan indebtedness was almost £60,000,000. At the average rate of interest on the public debt, the annual charge on railway debt is £2,700,000, and for the last financial year, if proper provision were made for reserves, the net profits available as a contribution toward that charge, which is borne by the Budget, would be only about £500.000. It is conservative to say that the taxpayers arc being required to pay over £2,000,000 a year as a hidden subsidy on the unprofitable operations of the railways. 1 Heavy capital losses have accumulated owing to the abandonment, obsolescence and wastage of various assets. Already the department lias been relieved of the interest charge on £8,100,000 of capital ; the Royal Commission last year stated that it is necessary to write off a further sum of £1,900,000, and then to continue reasonable annual provision for renewals, the amounts being paid to the Treasury, in precedence of interest, as reduction of capital liability. Essential reserves have been depleted by the "unsound and unreasonable" process of the Treasury demanding payments by way of interest in excess of net earnings, and the commission recommended that £200,000 a year should be set aside for five years to replenish the general reserve of working capital. Other recommendations would further reduce the remnant of real profits to set against the mounting interest bill. In these circumstances, before the change in control is made, Parliament must decide what is to be done about capital losses arising from the. disappearance of assets: whether the railways are to be run according to approved methods, the Treasury's claim for interest being subordinated to the need for reserves, depreciation and renewals funds; and especially whether the board is to be given absolute control of new construction as well as of railway services. Tt is perhaps significant that the application of sound commercial methods in the Post Office has received emphatic endorsement by the Leader of the Legislative Council. Sir Thomas Sidey's speech makes it impossible for the Government to propose half measures with the Railways.