RAILWAYS FINANCE.

Dominion, Volume 1, Issue 272, 10 August 1908, Page 6

RAILWAYS FINANCE.

For a considerable time past we have periodically discussed the ruinous condition of our railways finance, which, wc arc glad to say, is attracting the hostile notice of our evening contemporary. It is a reasonable assumption that everybody who takes any interest in public affairs, and every member of Parliament, ought by now to be thoroughly well aware that tho railways are run at a yearly loss of anything up to half a million sterling. Yet, on Friday afternoon last, Parliament passed tho " working railways " vote of £2,020,000 without a single word of criticism of this most serious state of affairs. This is an omission that the public can view only with the.gravest anxiety; since it must be concluded, either that members have been unaffected by the emphatic publicity .given, to the finances of the railways, or that, prcoccupicd with the . impending elections, they have no time or enthusiasm to spare for a condemnation of that to which,aa- t most more than to any other single thing, is referable our depcndcnce on loan money. We do not intend hero to go again into the depressing figures which, though they show a real deficit of something like half a million sterling, the Minister for Railways regards as " satis-' factory " and, in some of their aspects, even "gratifying." Our purpose is to call the attention of Parliament to an article on " Australian Railways " in the Quarterly Journal of Economics, from the pen of that sound and acute economist, Dr. Victor Clark. In that article will bo found a minute study of Australian railway history, and an examination of the railway policies of the Australian States. Tho whole article is most valuable, but we can only note a few points of special interest to this country. Whenever it is suggested that the New Zealand railways should be taken out of the sphere of political interests, the customary retort'is that under Commissioners the railways administration would be worse than ever. The Commissioner system obtains in most of the Australian States, and tho results, even although the conditions are less favourable than in New Zealand, are' distinctly good. The Commissioners have full control of railway management; the appointment of employees is governed by a civil service law; appropriations for new lines are made by Parliament, generally on the report of a standing committee which " takes testimony as to the probable cost and profit of the proposed line, its relation to land development, and other matters of public interest." Before considering the financial results of the Australian railways, it should be noted that of the total railway debt of £137,000,000, a great portion was borrowed in the early days at very high rates, and the cost of construction was in some instances enormous. Dr. Clark notes that the natural conditions in Australia are unfavourable to cheap operating. Yet, with all these defects, the Australian railways arc paying. During the last year for which statistics arc available, the railways of Australia showed a net profit, after paying interest on loam, of £992,947. In the case of New South Wales, the excess of interest earned, after all charges were met, was 1.36 per ccnt. The only return for the just-ended June quarter that we have is that for New South Wales. The percentage of expenditure to earnings was 59.89 per cent., as against New Zealand's 70.59 per cent, for the year 1907-8. Dr. Clark is much impressed by the high ratio of working expenses to revenue in Australia—63.Gß per cent, in 190-1. What, wo wonder, would he say to our 70 per cent. 1 So much for tho results of the Commissioner system as compared with tho method in vogue in this country. It is worthy of remark that in Tasmania, where the Ministerial system obtains, " tho annual deficit varies from slightly over lA per cent, to nearly 31 per ccnt. on the interest invested."

The only other portion of Dr. Clark's paper which we need now notice is his discussion of the familiar question of the apportioning of expenses between revenue and capital. As in New Zealand, so in Australia, revenue is helped out by charging to capital items that should be borne ( by revenue. " There is room," says Dr. Clark, " for honest difference of opinion

as to the items to be charged to capital." The practice varies in different States. Rut there is nowhere such unsound accountancy as in New Zealand, and the Victorian method may be quoted for the benefit of those who approve of buying footwarmers out of loans. In Victoria, in order that appropriations for capital shall not be applied to working expenses, a special Act of Parliament is required to charge the relaying of a track to capital account. No expenditure from capital is legal unless it has been approved by the Commissioner in accordance with a prescribed form. In all replacements of line or bridges, the entire cost is charged to working expenses if the new work simply restores the property to its original condition. All maintenance must by law be charged to working expenses. In Victoria and Queensland laws have been passed making the local authorities partly responsible for the cost of branches solicited by them. " These laws," says Dn. Clark, " help the Government to resist political pressure for lines through districts where the traffic is not likely to pay interest upon the cost of construction." It is a pity that this wholesome idea is not in operation in New Zealand. What Rusden, the historian of Australia, said of the bad old days of Australian railway history may be said of the condition of things in New Zealand to-day. " The facility of borrowing money in England to construct railways," he said, " was largely availed of, at first with circumspection as to probable remuneration from traffic, afterwards with less calculation. Each district marshalled its forces to obtain lines. Ministerial necessities encouraged the demand. Loans afforded the supply. It was accepted by all that railways could only be constructed by means of loans, and every hamlet put forward a demand for its branch line. It was difficult to satisfy all, but vigorous efforts were made to win political support." This bad system flourishes in New Zealand still. The railways administration is unsound, and increasingly ruinous, and we triist that before the session ends somebody in Parliament will perform the duty of criticism that was so indefensibly shirked by everybody on Friday last.