DEFICIT ON RAILWAYS

Wanganui Chronicle, Volume 72, Issue 235, 3 October 1929, Page 8

DEFICIT ON RAILWAYS

YEAR’S WORKING IN SURVEY NEW LINES TAKEN OVER PROVE UNPROFITABLE PASSENGER REVENUE AGAIN SHOWS DECREASE In the Railways Statement for the year ended March 31, 1929, which was laid on the table of the House to-day, the Minister (the Hon. W. B. Taverner) disclosed that while operations showed an increase in gross earnings of £223,437 and a net improvement of £59,177 on the results of the previous year, the deficit on account of revenue and expenditure was £432,743 compared with £291,452 previously, an increase of £141,291. This increase was principally due to the unprofitable nature of the new lines taken over during the year, the revenue from which was insufficient to pay working -expenses, thus leaving no margin for interest charges. Revenue from passenger traffic showed a decrease of £20,550, or 0.96 per cent, as compared with a decrease of £158,884 the previous year.

* ‘ln presenting the Railway statement for the year ended March 31, 1929, I have the honour to report that the gross income from all sources was £8,747,975, an increase of £223,437 on that of the previous year, whilst • the expenditure was £6,849.383, an increase of £164,260,’’ said the Minister in his report. “The net earnings were £l,898,592, as compared with £1,839,415, an improvement of £59,177 on the results in the previous year, ‘ 'On March 31, 1929, the capital invested in the lines open for traffic, including the steamers and plant on Lake Wakatipu and other subsidary services, was £56,568,598, an increase of £5,381,222 on the capital account for the previous year. “The increase in capital comprises £3,464,578 construction charges on 107 miles of new lines taken over from the Public Works Department during the year £368,886 expended on new works and charged against capital account under “Additions to open lines,” and £1,547,758 expended under the Railways Improvement Authorisation Act 1914, on works such as new workshops and the Westfield and Tawa Flat Deviations. “Included in the gross income is the sum of £498,937, credited in respect of developmental lines, a sum of £9,309 higher than the amount received under the same heading for the previous year. “ A sum of £655,986 was charged against revenue for depreciation and provision for renewals and the amount expended from this fund was £258,836 for assets written off or renewals effected during the year The accumulated credit balance in this fund at March 31, 1929, was £1,328,020, an increase of £397,150 over the balance at March 31, 1928. “Interest charges amounted to £2,331.335, as compared with £2,130,867 in the previous year, an increase of £200,468. Cause of Deficit “The deficit on account of revenue, and expenditure on the year ’s working was £432,743 as compared with £291,452 for the previous year, an increase of £141,291; and this increase is principally due to the unprofitable nature of the new lines taken over during the year,, the revenue from which was insufficient to pay working expenses, thus leaving no margin for interest charges. “The revenue from passenger traffic totalled £2,124,746, as compared with £2,145,296 in the previous year, a decrease of £20,550 or 0.96 per cent. While these figures are more satisfactory than those for the previous year, when the decrease was £158,884, the fact must not be overlooked that the decrease in ordinary passenger traffic still continues. For the year under review the revenue from ordinary passenger traffic decreased by £148.476. but owing to the fact that Good Friday fell on March 29, 1929, as compared with April 8, 1928, the bookings for 1929 include, the major part of two Faster holidays and the heavy decrease in ordinary bookings is partially balanced by the increase in the holiday excursion issues. “It is satisfactory to note that the efforts of the Department in catering for week-end and picnic traffic and special events have resulted in an increase of £14,992 in the revenue from passengers carried at reduced fares. “Freight revenue totalled £4.846,125 an increase of £165,990, or 3.55 per cent., as compared with the ‘figures for the previous year. The principal increases were in grain, butter, cheese, wool, agricultural lime, soft coal, road metal, benzine and artificial manures. “The live stock traffic totalled 10,319,768 head, an increase of 560,311 as compared with the previous year. “The gross expenditure was £6.849,383, as compared with £6.685,123 in 1928 an increase of £164,260. The principal increases were in maintenance of rolling stock (£43,439) and traffic transportation £65.506). The increase in the former item is due to the greater provision necessary for renewals and. overhead expenses in respect to the workshops reorganisation, while the larger expenditure on the traffic side is due chiefly to the expense incurred in working the additional mileage taken over during the past year and the cost of providing additional services Buch as the night expresses in the South Island. “Immediately on my assuming office I took the opportunity of making myself personally acquainted with so much of the railway system as circumstances permitted. Many Representations “I- course of my tour I received • '-esentations regarding a vari itters affecting the Depart!) operations—a large proportion of these had reference to improvements that were desired. So far as these requests involved the undertaking of new works, I found myself considerably restricted in meeting the requests by financial considerations The very large commitments in which the Department was involved to carry out the extensive works that are now in hand and must be carried to completion absorbed practically the whole or the available finance. I deal more par-

ticularly with the works in hand in another portion of this present statement. ‘ ‘X have also given very careful consideration to the question of the financial position of the Department. “Dealing with the position of the railways from an historical point of view, we start from the point that the railways in the first place, were undoubtedly constructed as a developmental institution, rathe; than as a profit making institution. Indeed, it is scarcely possible to conceive that much of the mileage of the present railway system, even of the main lines, would have been constructed at all if at the time when their construction was decided on a profit making basis. As the years have gone on this policy has been continued. Nor has it been confined to construction only; it has extended also to operations, and many services and tariff concessions have been given in the past on the basis of the developmental aspect of the railway policy. *’ It is, I think, absolutely essential to a proper interpretation of the railway accounts that we should keep these facts clearly in our mind. More especially do I think it timely to emphasize this fact, as there has undoubtedly grown a tendency to regard the deficit as shown in the annual Statement as a “loss.”

“In the light of the police as above enunciated this is quite unjustified. It is beyond the possibility of question that the country has reaped very material indirect return from the existence of the railways. This return, however, has not been "reflected in the annual Bailways Statements. It is none the less real. The whole question resell es itself into one as to whether the time has arrived when the country is paying through the deficit on account of the railway woik too much for the indirect returns that it is getting. “At this point a very great difficulty is encountered. It cannot be denied that the railway position in this as in every country in the world has been very adversely affected by the introduction of road motor transport. Comparison With Pre-War 'lf we take the passenger figures alone we find that as compared with v«n7n a „ r the revenu « is down some £600,000. Taking also the natural Increase that took place in the Department s passenger revenue prior to the advent of the road motor we could confidently have expected that the pas. senger revenue alone, but for the influence on the road motors, would have approximated to the amount of the present deficit, and the extra revenue would have been earned with comparatively small increase in expenditure. The question therefore arises as to what proportion of the railway deflci( . should be regarded as properly payable m respect of the developmental work of the railways. This obviously will depend on what the railways can be made t 0 earn in the face of the fact that road-motor transport has now to be accepted as a permanent factor in tne transport industry. Before this can be determined it is essential that the respective spheres of railways and road transport should be determined and the fullest possible measure of co-ordination obtained. As matters are at present, it would be impossible to say with any degree of certainty what the railways are worth as a revenue-earning institution. The first step, as it appears to me, clearly is to So regulate the transport industry that the true value of each method of transport. can be made clear. The policy of the Government in this connection has already been enunciated in the Budget and need not be here repeated. I desire only to emphasise my firm conviction that the carrying-out of that policy is the first and most essential step in the development of a policy for a solution of the financial problem in regard to railways. Workshops Reorganisation The position in regard to the carry-ing-out of the scheme of the reorganisation of the workshops is fully set out in the report of the General-Manager. As I understand the genesis of this scheme, it arose out of two factors — (l)The unsuitability of the old workshops for the purpose for which they were being used, and (2) the direct financial benefit that was to be obtained from the undertaking of the scheme. “With regard to (1), there seems to be n 0 doubt that with the age of the shops—and the fact that they had developed, as was unavoidable, on more or less of a patchwork system as requirements necessitated from time to time—they had arrived at the stage when their operation could not he carried on with a degree of convenience and comfort to the staff that one would wish for. This would in itself raise a question as to the desirability of undertaking some scheme for improving them, but it still remains to be determined whether the particular scheme that was adopted was the one that should have been undertaken.

“This raises the second question—i.e., the financial results that were expected to accrue from the expenditure that has been undertaken. Estimates on such a matter as that seem to me to hinge very largely on the question of the full utilisation of the shops when completed. This in turn will depend on

the future requirements of the Department and the ability of the country to provide the finance necessary to enable the various works to be undertaken. Whatever the position in regard to these matters may have been when the scheme was formulated and decided upon, it is undeniable that at present it is obscure. The future expansion of the railways can hardly be as great as it has been in the past, while the pressure of other State activities on public finance will tend to make it more difficult to provide money for the railways on the same scale as has been, done in the last decade. What the actual financial result of the reorganisation will be is a matter that lies very much in the future and depends on factors that cannot in present circumstances be determined with any real degree of certainty. Centralisation “One of the salient features of the workshops-reorganisation scheme was the centralisation of the heavier varieties of work. There seems to be some misunderstanding as to the question to which the work of centralisation is being carried. All running repairs and the lighter types of work to rolling stock will be undertaken at the various centres, much as has been the case hitherto. It is only the heavier repair work that is being centralised. This work requires the provision of up-to-date machinery. This machinery is expensive and requires to be worked to its maximum capacity, in order that the full economies of its installation may be obtained. It would not be economical to duplicate it, as there is not enough work in either Island to keep more than one set of the heavy machinery employed. “Another aspect -jf the question of centralisation the" would like to touch on is that oi haulage of rolling stock that requii... obe dealt with at the centralised shobs. It is not correct to assume that the centralisation of the heavy repair work will involve the dead haulage of the rolling-stock that will be dealt with at those points. Except in the case of disablement, the rolling-stock will be “worked” to the centralised points. Engines, for example, as and when they come due for overhaul, will have their runs so arranged that they will do work on their way to the shops. The cases of total disablement arc a comparative small proportion of the heavy repairs that are carried out, and the amount of dead haulage should not be a very serious matter. It may be added that under any arrangement a certain amount of dead haulage is unavoidable. New Works “I have paid much attention to the matter of new works which the Department have in hand and which are in contemplation as disclosed by the programmes that have been formulated. All those in hand will, with the exception of the Palmerston North Deviation, be carried to completion. These works are of considerable magnitude, and the sums required to enable them to be carried on have, as far as the present year is concerned, absorbed all the money that could be made available to the Railway Department for the purpose of new works of this character, and this position is likely to continue for at least the next year or two. “As far as Palmerston North Deviation is concerned, an announcement has already been made regarding that work and I think this may be a convenient place to put on official record the reasons which led to that decision. “The broad basis of the decision to undertake the work of the deviation at Palmerston North was the fact that the increase in traffic at and passing through that station had up to the time when the decision was made been such as to indicate that if the increase were maintained the traffic would within a few years outgrow the facilities. Subsequent traffic developments have shown that the increase has not been maintained. This obviously called for a review of the situation, and on going into the whole matter it was found that, due partly to the failure of the traffic to develop as was expected and partly to the recasting of the traffic arrangements, the pressure at Palmerston North had been much relieved, and it was possible to evolve a scheme of improvements on the present site that would enable the work to be carried on there with a reasonable measure of convenience.

‘ ‘ The cost of these improvements is estimated to be in the vicinity of £33,000; against this we have an estimated cost to complete the deviation and facilities in connection therewith of approximately £725,000. On the basis of cost, therefore, it was quite clear that the completion of the deviation’ would not be justified unless some other very substantial advantages were' definitely in view.

“Further examination showed that no such advantages could be perceived. On the contrary, there were further material disadvantages associated with the removal of the station from its present to the proposed site. On the new site the station would be removed a considerable distance from the business centre of the town, and, having particular regard to the keen competition from road carrier with which the railways are now faced, such a circumstance could not do other than operate to the disadvantage of the railways. Furthermore, there was no economy in working to be obtained by the change; on the contrary, it is estimated that the new station and yards as designed would involve an increase in the operating expenditure of some 50 per cent. “All these facts made an incontestable case in favour of the stoppage of the work and amply justified the Government’s decision not to carry on the work in connection with the deviation and to provide the improved facilities on the present site. Progressive Programme “As regards other works in the programme which have not yet been completed, I desire to say that I propose to review these progressively as time for their commencement approaches. I do not think it wise at the present time to make any final decision as to what might be done some years ahead, principally for the reason that the railway position is in such a state of flux as may make a decision to-day more or less valueless in a few years. The correctness of the position has, I think, been already amply demonstrated. An outstanding example is the case of the Palmerston North deviation, as to, which, however, correct the decision might have been at the time when it was decided to undertake the work, there is not the slightest doubt that the conditions as they exist to-day called for a review of the situation and justified the Government in its decision to stop the work.

“For those reasons I do not think that any other course of action can be fittingly adopted under present circumstances than to do as I have already indicated.—namely, carry to completion the larg® works now in hand, and as

financial possibilities and other circumstances permit review all other propositions for railway improvement. ‘‘One of the aspects of new works required to be undertaken that I think is important is that of the m.eans of communication. From my own experience in moving about, and from consideration of the great changes that have taken place in the machinery of 1 communication during recent years, I gathered the decided impression that the Department was working at great disadvantage so far as these facilities are concerned. The matter has been specially investigated, and the report shows that it is very necessary for efficiency and will certainly make for material economy if improvements are made in the Department’s communication facilities.

“On the 'economy side special significance attaches to the system of traincontrol; a system by which movements of trains on the various sections arc controlled from a central office by means of a special telephone system. Train-control is already in operation on certain parts of the railways, and experience has shown that very considerable economy has resulted and much more satisfactory service has been made possible from the point of view of the more expeditious working of the trains.

“The system of train-control has a special value in New Zealand with our high proportion of single-line working, which calls for a higher standard of organisation to reduce delays to trains resulting from initial delay of any. particular train. In th® allocation of available finance in future I propose to pay special attention to the requirements of the Department’s means of communication. For the year now current the sum of £51,000 has been allocated under this heading. Train Services. “I have commenced an investigation into the train services with a v|jw to seeing whether improvements might not be possible to ensure better running or improved services. Some adjustments have already been made in the schedules affecting passenger trains in th'c South Island and on the Rotorua and East Coast Main Trunk linos. “The running of the night trains in the South Island has been continued, and has given a large measure of satisfaction, especially to the business community. It will b'e my policy to develop night-passenger services as far as possible, as I am convinced that this is a field in which the railways should have considerable scope for the development of a traffic that should become both profitable to the'‘Department and increasingly appreciated by the community. ‘Another matter of growing importance, and one which will come more frequently up for decision in connection with th« Department’s operations in the future, is that of the working of traffic by the Department through the medium of road vehicles. “My own view is that such operations should be decided upon with very great caution. We are by no means in a position to say that the road-motor .operations that are now being carried on.J® the community are on a sound and I feel that any action on the part of the Department in the direction of embarking on road-motor operations to any great extent requires careful examination as it might have sjSrious results on the Department’s financial position. “I can quite realise, however, that there may well be cases where the Department could, with advantage to itself and for better service to the community, undertake road-motor work; and when a case is clearly established for sound working on. these lines then 1 think there is go good reason why the Department shoal 1 not undertake the work. “I am impelled to make these observations, because there have been suggestions that the Department should not carry on road-motor services. I do not think that th'a matter can be carried to the point of absolute prohibition of any such action on the part of the Department; first and foremost the Department is a transport institution and its duty is'clearly t 0 give the transport service for which it is P ro_ vided by the cheapest and most efficient means. Only when a road proposition is definitely ascertained by examination of all the facts to be the cheapest and most efficient means, and not till then, should the Department turn to that form of transport to enable it to carry on its services. Branch Lines. “Considerable attention has already been given to investigating thjj position of the branch lines so as to determine their value as compared with possible alternative forms of transport. ‘‘As far as the internal working of the Department is concerned, and assuming that the branch lines still remain, consideration of the matter at cnee raises the question of the more extended use of rail-cars. A committed of executive officers of the Department, representing every phase of railway operation that may have a bearing on the question, is now undertaking a thorough and systematic examination of the position with a view to the formulation o f definite recommendations—firstly, as to the best method of working the traffic: that is, whether by railcars, road services, or trains; and, secondly, in the event of rail-cars being recommended, what is the most useful type for the particular service required in each case. In this latter connection the rapid development that has taken place in recent years in connection with various types of rail-cars, particularly Diesel electric and other similar types, renders it very desirable, more especially in view of the very large issues involved, that we should have first-hand information regarding the most modern types of vehicle? and thoir adaptability to our conditions. To that end I propose to send abroad immediately a competent officer to inquire on the spot into the actual performance of the various kinds of rail-cars on railways systems where they have been adopted. I confidently expect that during the coming year we shall be able to formulate definite proposals. “The standard of our locomotives has been a matter that has coma pointedly under my notice. This has been brought about by some failure of locomotives of a greater or lesser magnitude, in some cases involving disorganisation of the passenger service. Investigations made at my request have shown that certain difficulties which appeared unavoidable have had a direct bearing on the question of the efficiency of our locomotives.

“It was inseparable from a change over from the old workshops to the new ones that, the work of passing the locomotives through the shops should become somewhat disorganised and fall jinto arrear. Joined with this fact was the circumstance of a peak pressure of traffic. We had during the concluding portion of the year a record tonnage, and our locomotives were kept continuously employed, considerably r«-

stricting the opportunities for running repairs and general overhaul. This conjunction of circumstances is, however, a passing phase, and definite arrangements have now been made for the overhaul of locomotives to be rigorous ly pursued so that the standard of efficiency of our engines will be fully up to requirements for the next ensuing busy season. Use of New Zealand Coal. ‘‘The figures supplied in th® General Manager’s report under the heading of ‘ ‘Coal Supplies’’ indicate the pleasing fact that the quantity of New Zealand coal utilised during the past year amounted to the unprecedented figure of 356,724 tons representing 84T25 per cent of the total coal consumed. “It will also be noted that whereas in 1925 the total importations from overseas amounted to 313,107 tons, which represented a percentage of 76.84 of the total consumption, this figure dropped in. the year under review to 66.675 tons, or a percentage of 15.75 ‘‘lt is very gratifying to be able to record that the Department has been able to utilise the local product in an increasing ratio, thus assisting in the maintenance of one of our great national industries.”