The Timaru Herald. MONDAY, JUNE 2, 1930. TOUCHSTONE OF SINCERITY

Timaru Herald, Volume CXXV, Issue 18583, 2 June 1930, Page 8

The Timaru Herald. MONDAY, JUNE 2, 1930. TOUCHSTONE OF SINCERITY

“For the current financial year,” declared the Prime Minister, in his review of the national finances, “from sheer lack of cash reserves, the railways must fall short of their interest payments by the amount of the net loss for the year, estimated on the present basis of operations at about £1,250,000 .... the extent of the railway shortage will this year mean just as much more to be found out of taxation or savings in other directions.” The Prime Minister’s statement in relation to railways contains very little information which is new; on the contrary, it is well known that the New Zealand railways have for some years not been paying their way. It was tliis knowledge that prompted the United Party to make its railway policy palatable to thoughtless people hy ihe pledge to spend £10,000,000 on railways, “without one penny additional taxation, direct or indirect.” It. is now clear that eighteen months' administration by the United Party has not brought an economic millennium to New Zealand. On the contrary, the Prime Minister's review of the financial position of the Dominion emphasises the urgent need of a complete review of the Government’s impossible election pledges, particularly iu relation to railways; in view of the Ministerial confession that existing railways are imposing an additional burden of £1,250,000 on the taxpayers. For many .years the Government has been faced with the desperate plight of the railways. In 1925-26, the loss was £280,000; in 1926-27, it was £514,000; ip 1927-28, it was £781,000, and the loss last year passed the million mark, and now the country is warned by the Prime Minister to anticipate a loss of £1,250,000, which must he drawn from the pockets of the everyday taxpayer. These figures show that the loss has been a progressive one, and the returns now furnished by the Prime Minister should force the Government to concede the demands of its critics who insist that before further railway construction is proceeded with, a special and urgent inquiry should be made. Mr Forbes lias already decided to set up a Special Commission outside the Public Service to fully investigate all branches of the Department’s activities, and advise the Government where economy can be effected. This inquiry will not achieve very much, good unless its order of reference includes the question of railway construction, since it must be obvious to the least observant of our citizens, that the efforts of the Commission will be futile if the Government, while engaging in an economy campaign involving hundreds of pounds, persists in carrying out its policy of providing for the expenditure of millions on railway construction which can only provide facilities for additional unremunerative railway operations. If the Government is really sincere in its intentions, one of the first members invited to join the Special Commission should be the late chairman of the Board of Management of the New Zealand Railways. It was Mr Jones who, having spent a lifetime in the service of the Railways Department, subjected the Government’s railway policy to such an unwelcome yet critical examination that was so shattering as to make thoughtful people hesitate to endorse the proposal to expend £10,000,000 on railway construction. Moreover, it was Mr Jones who exploded the pretty bubbles the supporters of the Government were blowing when they talked so glibly and so recklessly in support of the pledge of spending £10,000,000 on railways that would not cost the taxpayer a penny. Already the railways are costing the taxpayers something like £1,250,000, and if Mr Forbes is really sincere, he will cease further expenditure on unprofitable construction and thus avoid adding to the crushing burden now being borne hy the taxpayers. The statement of the Prime Sfinister is doubly interesting, in view of the substantial indictment already levelled at the Government’s railway policy. Mr F. J. Jones, in his review of the proposal to join up the gap iu the South Island main trunk railway, said: “The distance between Wharanul to Parnassus is approximately 80 miles, and taking into account the nature of the country, it is safe to place the cost of construction at an average of £32,000 per mile. The interest charges would be £I6OO per mile, the working expenses at least £6OO per mile, while the revenue would be £450 per mile. In other words, the cost per mile per annum to earn £450 would be £2200, representing a loss to the State and the country of £1175 per mile. If this is put into figures to cover the whole 80 iphes between Wharanui and Parnassus, the revenue will total £36,000; the expenditure (working costs plus interest), will amount to £176,000, so that the loss to the State by the business deficit on this 80 miles of line will be £140,000 per annum."

Mr Forbes should go further. He should Explain just how it will be possible to pay C>i per cent, on loan money (at which funds are now. being borrowed) if millions are poured into the construction of a new railway, when ,it can be shown that over the

whole of the railways id -New Zealand the percentage of net earnings to capital invested is something like £3 15s per cent., while the South Island main line and branches earned only 18s. 3d per cent, interest. Moreover, even if the branches are eliminated, can it be shown that the main lines earned anything like 5 per cent.. The answer to these inquiries is embodied in the Prime Minister’s statement in which lie makes the startling confession that “the fact the railways have reached the end of their financial resources and are unable to meet a large part of their interest charges is the principal cause of the present financial predicament.”