The Southland Times. PUBLISHED EVERY MORNING. Luceo Non Uro. TUESDAY, OCTOBER 11, 1932. RAILWAYS AND INTEREST

Southland Times, Issue 21834, 11 October 1932, Page 6

The Southland Times. PUBLISHED EVERY MORNING. Luceo Non Uro. TUESDAY, OCTOBER 11, 1932. RAILWAYS AND INTEREST

Operated as a business concern, the New Zealand Railways must meet the interest charges on the capital involved in their construction. When Sir Joseph Ward relieved the Railways Account of some £10,000,000 borrowed from the Consolidated Fund, he gave the system relief, but if the relief is given by the transfer of interest charges to the Consolidated Fund the country is not better off. In fact, it is worse off, because it loses sight of these charges and begins to think that the cost of the railways is smaller than is actually the case. A private concern running a railways system will set aside funds for depreciation and, if its reserves warrant the move, it can retire some of its capital charges; but while the amount in the capital account bears interest it cannot escape that load by pleading that it has been paying interest for a long period of years. Having no Consolidated Fund to fall back on, it must supply the interest on the loans. The Government Railways for many years were conducted as an apparently profitable undertaking, because certain annual charges were not met. When the accounts were put on a sound basis, and the system was treated as a trading concern the actual facts were revealed. This change explains the difference between the figures of the post-war and pre-war periods. To-day it would be a simple thing to transfer the whole of the interest burden of the Consolidated Fund, leaving the Railways Accounts to show a profit; but the only effect of this would be to hide the losses, and so open the way to extravagance in operation. While the money involved in the construction of the railways bears interest, it is plainly the duty of the users of the system to meet that charge, and if they cannot the accounts should disclose, as they do now, the amount of the assistance given the transport system by the general taxpayer. At the moment the Railways cannot meet the interest bill, and the Consolidated Fund shoulders the greater part of it, but it is better to have it that way than to have this big subsidy to the Railways hidden. Undoubtedly the reorganization of the system was hastened by the fact that its accountancy was put on a commercial basis. If the methods of the old Liberal regime had continued the condition of the Government Railways would have been much worse than it is to-day. “Saving the surface” in financial matters does not save everything. It is better that the public should know the facts, particularly when they are unpleasant.