RAILWAY LOSSES

Taranaki Daily News, 9 July 1929, Page 7

RAILWAY LOSSES

A CANTERBURY VIEWPOINT CHAMBER OF COMMERCE BULLETIN UNECONOMIC EXPENDITURE. An interesting sidelight on the railways problem is afforded in tho latest bulletin prepared by the Department of Economics of Canterbury College, and issued by tho Canterbury Chamber of Commerce. It deals with ‘ Recent Economic Changes,” with special relation to “Transport.” “Tho service rendered by rail transport to economic progress throughout the world is inestimable,” it remarks, “and for many years railways have held a virtual monopoly of most inland transport. During the past few years that monopoly has beerr seriously challenger, by the motor vehicle and some part of the most profitable traffic is benrg transferred from rail to road. In many countries the new competition has stimulate .1 railways to unwonted vigour in providing services and seeking business, and has led to much discussion of the chang irrg transport situation. Where railways arc privately owned and about - per cent, of the world’s railways are controlled by private enterprise—the coordination of road and rail transport is an economic question to be settled on economic rather than on poi ica and consumers are profiting from the competition in transport But where railways are State-control-led there is much clamour for State ‘co-ordination’ of transport, and consumers fear that their interests might bo imperilled by the State’s desire to protect its own business. It is noticeable that most of this agitation for transport regulation comes from the railway interests, and not from the motor-owners. . i v „ “In fact, in many countries, including New Zealand, the commercial motor interests have already developed amongst themselves some very effective co-ordina-tion of services on a purely voluntary IjcXSlS* • “In England it appears that the railways, in desiring co-ordination of road and rail transport, want the abolition of restrictions on their own activities as road transport operators, in- order that they may compete fairly with then rivals. In New Zealand it is widely feared that ‘co-ordination’ inay mean first, tho placing of such restrictions on privately-owned road transport as will prevent competition with a State railway monopoly, which many regard as for from efficient, and, secondly, the bureaucratic control of a new development in transport which promises to benefit the country greatly if left unhampered.” POSITION OF THE RAILWAYS. After discussing the remarkable o-rowth of motor transport, the bulletin deals with the financial position of the Dominion’s railways, which is contrasted unfavourably with that of other countries. , ’ “It appears that the greater losses on the New Zealand railways are due to two main factors, uneconomic internal organisation, and uneconomic capital expenditure. Evidence of the former appears in the figures quoted in the Iff-S railway statement, where it is admitted that the railways are overstaffed, and in the fact that between 1913 and 1928 train miles run per year per person employed have declined from 645 to 58a, or more than 9 per cent. The traffic costa have increased very little, but maintenance charges increased between 1921 and 1928 by 29 per cent., the greatest increase being in maintenance of rolling stock, where expenses increased by 40 per cent. “The fact that many branch lines are heavy losers shows that capital has been expended on lines that are uneconomical. This fact, together with the chronic failure of the railways to pay, and the consequent heavy burden on the taxpayer, might be expected to lead to care and economy when further capital expenditure is projected. In 1910 there were 2704 miles of line in operation which had cost an average of £10,494 per mile. By 19-28 the mileage was 3180, and the average cost £15,413 per mile. In the intervening period 476 miles had been added, and the added cost worked out at £43,000 per mile, while £20,000,000 had been added to the railway’s capital liability. And the position appears to be rapidly growing worse. From .1920 to 1928, capital cost increased by £12,500,000, and mileage by 174; the liability was increased by £72,500 for each mile added. These figures probably do not represent the actual cost of construction per mile of new track; they may include capital expenditure on new buildings, deviations, etc. It is well known, however, that the cost of new construction is now so high that few new lines can bo expected to pay, yet millions of borrowed money are being poured into new construction of doubtful value. “The excuse for uneconomical expenditure and violation of business principles has always been that the railways have aided development. But allowances made for their service to development have cloaked inefficient and costly administration, together with ill-advised and wasteful construction, and the taxpayer has had to bear the heavy and rapidly-increasing burden of railway losses. It is high time that the whole system was overhauled. The developmental aspect of railway transport has lost much of its importance, for a rival is now in the field, and the motor vehicle is in many cases much better suited for exploratory and developmental transport than the railway. TRANSPORT POLICY.

“There can bo no doubt of the existence of a transport problem in New Zealand. There is a problem of the first magnitude in .the railways, which are now costing the taxpayer near a million pounds a year, and on which millions are being spent with little hope, under present conditions, of adequate return. The selection of the most suitable means of transport for his needs can best be

left to the consumer of transport. If ho is given his choice of the methods available he may be trusted to serve his own ends better than others can do this for him. The Dominion is therefore likely to secure the most efficient combination of methods of transport only if free • and fair competition is permitted between rail and road. “But it has been claimed that competition is unfair and that motors take only the cream of railway traffic. There is little evidence of this in published returns. The railways carried 7,358,000 tons in 1927-28, while according to official figures commercial motor vehicles carried 85,500 tons, of which 20,000 tons was general merchandise and ‘other’ goods, and the remainder, metal, stone, gravel, coal, lime and cement, timber, manures and farm produce. It is also claimed that the rail services must .maintain their road while the motor services secure their road at less than cost, But the railways are fed by the road system and benefit from other State services. In other countries privately controlled railways pay taxation and rates; in New Zealand the State railways pay neither, but aro heavily subsidised from taxation. But motor vehicle owners pay all ordinary taxation and in addition pay special taxation which, if Customs be included, must approximate £2,500,900 yearly. It appears that motor traffic pays its full share towards the upkeep of roads, the benefits of which accrue to the whole community, while the railway is dependent on public subsidy. “No case has been made out for restriction of motor traffic with a view to

protecting a railway monopoly. The advantages of the railway in handling bulk goods over distances are too great for this to bo necessary. The best policy would be to leave the railway and the motor services equally free to use the roads, and where necessary voluntary co-ordination might be arranged by agreement. Such arrangements would be simpler and more flexible than any centralised control, and they might vary widely and be modified according to time and place. Under these conditions the I’ailway would retain the bulk of the traffic, and the line of demarcation between rail and road traffic might settle itself in the most economical manner. The essence of effective regulation, here as elsewhere, is to regulate as little as possible, in order to .permit the maximum freedom for progress and development.”

After discussing the problem of “making the railways pay” the bulletin concludes: “Future construction should be determined and controlled rather by the railway management on business lines than by Parliament on political lines. But if ‘ Parliament decides that new routes shall be laid down, then it should be prepared in advance to vote subsidies on construction and running costs sufficient to cover any losses anticipated by the management, and presumably justify such votes to the country. It is only by the aplication of straightforward business methods and proved business practices • such as these that the railways can be placed on a satisfactory basis, and their conduct and management judged fairly by the taxpayers, who are their shareholders.”