The Daily News THURSDAY, APRIL 15, 1926. RAILWAY FINANCE.

Taranaki Daily News, 15 April 1926, Page 8

The Daily News THURSDAY, APRIL 15, 1926. RAILWAY FINANCE.

When the scheme for placing the railway finances upon an entirely new system was outlined last year by the Rt. Hon. J. G. Coates, speculation was aroused as to the effect which would be produced. It was generally considered that the move was one that shouldhave been inaugurated many years ago. At the same time the details, in some respects, were regarded as open to criticism — as is mostly the case in new departures in methods of accountancy. As the new system dates back in its operation to April 1 of last year a cmplete twelve months’ results are now in evidence. as regards approximate figures. When sneaking at Kingsland on Tuesday,. Mr. Coates was able to give a general summary of the results achieved by the entire reorganisation of the accounting system of this important State enterprise, and to announce that, it is anticipated, “after paying all expenses, providing adequate reserves, and meeting interest charges, a small surplus will be shown on the year’s working.” It is to be hoped the anticipation will materialise. Time will show. It is often said that figures can be made to demonstrate any result that the manipulator desires, and the commercial world is occasionally brought face to face with balance-sheets which are more remarkable for ‘being ingenious than ingenuous. There would, however, be neither sense nor reason for presenting the railway accounts in such a way as to convey a misleading impression as to the true working results of the enterprise. While it is most desirable the State should set an example in the matter of expert accounting in relation to each of its departments, and especially those which come under the category of trading concerns, it is obvious that the most perfect system can neither increase the earnings nor decrease the expenditure. The most it can do is to make fair and legitimate adjustments which will ensure the results being placed in their true light when viewed as a trading (concern sueh as would be the case of a joint stock railway company, the capital of which is provided (by shareholders. The accounts of the New Zealand railways cannot, however, be judged by that standard, inasmuch as provision is made in the new scheme for (recouping the losses made in .operating “isolated sections and branch lines which, though they contribute substantially to the development and prosperity of the country as a whole,” cannot, claims the Premier, be run as a commercial undertaking. Obviously, if non-paying portions of the railway system are subsidised to paying point cut of the Consolidated Fund, there should bo no doubt as to a profit being shown, but the loss exists all the same on these branches. Mr. Coates maintains that the policy of subsidising railways operating in sparsely settled 'districts, by means of either grants of land or guaranteed minimum earnings is practically universal, and that the benefits accruing to the State, either directly or indirectly, as a result of that policy are greatly m excess of the cost. That is . a point whereon opinions may differ, it being quite possible that the owners of land served by these lines —some, at least, of which should never have been constructed—will reap a much greater reward than the State. That, however, is past history, and the taxpayers have to bear the burden' as represented by their contributions to the Consjlidated Fund. As a matter of fact it is immaterial whether the loss is shouldered by one fund or the other, but the railway accounts should plainly disclose the actual working results exclusive of subsidies, these being inserted at the foot merely for the purpose of striking a balance. The section o-f these accounts which chiefly interests the public is that relating to the overhead expenses, including the whole of the departmental charges; for it is considered important the accounts should disclose accurately the ratio these charges bear to the running and other expenditure, also to the revenue earned. The Premier stressed the faet that the accounting and statistical data Hi ad been recasted to conform

with the best modern practice in order that more accurate costing might disclose any sources of weakness or inefficiency. The avowed intention Is praiseworthy, but it seems difficult to conceive that departmental officers will be eager to disclose either the weakness or inefficiency of their colleagues, so it would not be wise to expect too much in this matter. Apparently the new system lias not differed from the old in one respect, namely, that no matter how much the revenue may increase, the expenditure follows suit, and there are always plausible reasons for this peculiarity. The detailed results of last year’s working of the railways should, under the circumstances, arouse greater interest than usual.