SIR JULIUS VOGEL AND THE NEW ZEALAND RAILWAYS.

Globe, Volume XXIII, Issue 2247, 15 June 1881, Page 3

SIR JULIUS VOGEL AND THE NEW ZEALAND RAILWAYS.

The folio-sung is the. text of Sir Julius Yogel's letter to Mr Oswald Curtis, of Nelson, on thi subject of publio works in New Zealand :—;

London, April 21st, 1881. My Dkab Ctbtib,— Stress of icoupation has prevented my replying to y»ur letter before. I have now muoh pleasus in doing so. You enclose me a copy of an article which appeared in the Canterbury Tbbbs, in whioh I am charged with an amotions project for absorbing the Government ailways, and a great many other things, and inwhioh I am aooused of intending to bribe tie people by sending some prizes for the sohols. This latter insinuation is beneath notio, and I am surprised a respectable paper cold allow so ungentlemanly a thing to apper in its columns. Before givug you the information you invite, I must puse to consider how it is that the Pbesb ooiceived the idea that I had any project at all n connection with the oolony. It is generally the case that there is some foundation, hwever small, for the most extravagant ani distorted statements. In the present instano there can be only two ways from which tb Pbbss oan have derived its information, bme time since, I wrote to a member of the Government that I intended to suggest a pin by which the stoppage of railway oonstrotion might be averted, and that I would write out my ideas to Mr I BichardSon. Imay say that I proposed to write to Biohaison, not only beoauie of our long intimacy a colleagues, but beoause _ I consider him fr and away the best administrator I have knwn in the oolony, and because he has an intnate acquaintance with the working of rail ays. There are very few men capable of proprly governing a railway. Suoh men are in reqtst in every oountry, and they easily oommam incomes of from £SOOO to £20,000 for theiiervioes. Bichardson possesses the essential qulities of a conciliatory manner combined with isturdiness of backbone which never allows hiito say " Yes " when he means " No." I did it, however,write to Bichardson as I propoid, beoause further reflection and oorrespondice led me to conclude that the present Grernment were dead against colonising work and that if I had written in the sense I proosed whilst still acting as Agent- General t should be opposing the policy of my aployers, a oourse which I should regard s disloyal. Subsequently I telegraphed th Government that I could make arrangennts for converting colonial stocks on termwhich would leave a certain and oonsiderab profit, and for providing funds to take p the unnegotiated Treasury Bills. This prjosal, if entertained, was to be confidential As it was not entertained by the Gove:ment they committed no breaoh of fait! in regarding it as otherwise. I can dy supposo that the proposal last mentionedor my intention to write to ' Bichardson rea ed in some form or other the ears of ,the wicr in the Pbbbb. I must say, however, t.t I oannot suppose the communication wa direct. The Minister to whom I intimed my intention to write to Mr Riehardsonu also the one to whom I

wired about tl oonveirion, are honorable

men, and oannohave been parties to the unwarrantable stements in the Pbbbs. Something the may have laid may have filtered throug others till their remarks assumed the dorted form in which that print disseminaS them. I have very gat pleasure in telling you the nature of my eas, and you will, I hope, excuse me if irrder to do them justice, lam somewhat lengfr. New Zealancin common with what has happened durio the last fire yean to every country and evy colony in the world, has suffered greatlyom a period of depression. The Governmei instead of recognising that the visitation w.a temporary one, was seized with a panic, anby the oourse they adopted made matters vr serious. Other countries and colonies, talg a common sense view of the position, ma such temporary provision to meet difficulties! would least press on the present re souroosf their various peoples, and least engender drust and helplessness. It was reserved to t> Government of New Zealand to adopt thingular plan of 8* magnifying the difficult as to nearly produce a mistrust which light have wreoked every financial institute and every man of means in the colony, is true there was a falling off in ordinary renue, and a considerable diminution of thevenue expected from land. The former ooulaave been replaced without

[difficulty by reinstating the tea and sugar taxes removed during a time of prosperity, and by some other taxes of the same character, such as that on beer. A property tax at such a time, however justifiable in , theory, was dolefully inexpedient, beoause the i depredated value of property was the main oause of the depression, and it was obviously unwise to still further reduce it. As to the diminished land revenue, little importance should have been attached to it. The land remained, and if judiciously held would yield what was required in the future. A great mistake was, no doubt, made after the negotiation of the five million loan in spending the money so quickly. It was alleged, it is true, that the prooeeds of the loan were nearly all pre-engaged by contracts already entered into. But nothing oould have been easier than to have arranged to extend the execution of such oontracts over a considerably increased period. Besides the great risk to which I have already adverted, the great mischief produced is consequent on the disengagement offered to emigration of a suitable character. In 1870 the colony camo to the conclusion that, having capabilities for supporting many millions of people, tho country should be opened up in a manner calculated to enable a large population to settle therein. At the very time when the Government were seized with this lamentable panic, circumstances had arisen to drive from the United Kingdom thousands of farmers with means, experience, and knowledge, whioh would have made them the most valuable settlers the colony could rejoioe over. Just at the moment they were ready to go, and when their attention was most favorably directed to New Zealand, they were fatally dieoouraged by the pusillanimous fears of the Government, and turned their attention elsewhere. Half-a-dozen ship loads or so of these settlers would have at once set the oolony on its legs. As for the formers themselves the time was most favorable. There were plenty of labor and land to be had in the oolony, bet how could they make up their minds to go to a country the rulers of which befouled it with suoh gloomy prognostications ? Let us now say all experience shows that New Zealand was justified in its railway policy. I was speaking the other day to a most able financier. Ho said to me, "Of course New Zealand was right to construct railways —you may make railways through a desert population will follow." So much is this the case that in America and elsewhere railways are made at any cost of financing. A great deal of the money has been obtained at 50 per cent, discount, and £lO for £IOO bonds with shares thrown in for nothing, as an inducement to take up tho bonds, are not unknown. I will give you a few instances of the increase in value for only so limited a period as that from 1878 to 1880 :

Instances like these could be multiplied and the'oontrasts over longer periods would appear yet more startling. They show the fluctuations in the value of railway securities which have passed through the shoals of difficult finance. But what has New Zealand known of such difficulties ? The most it has had to endure is the paying the smallest of fractions over 6 per cent, for its money instead of a fraction under. No sensible person can sit down and study the history of railways in various countries, whether passing through thickly or sparsely populated districts, and tell me New Zealand has the smallest reason to fear its railway policy or the least cause to halt in carrying it through to .a rational conclusion. The Government may at times have unduly pressed works, and at times they may have pushed on some railways when it would have

been wiser to construct others. They have also, in my opinion, made the great mistake of not capitalizing the interest spent during construction. But what railway system has been faultless ? It would be just as reasonable to out off one's finger beoauie of a little ache in it, as bring to an end the railway system of New Zealand beoause of a little difficulty in the way of flnanoing. And yet in deep sorrow I notice that virtually the colony is bring deprived of its railway and colonising policy. It is going back to 1868, when the Government deveted themselves to attending to native disturbances instead of to colonising operations. Now, as regards my views. I must at once disclaim all sympathy with the idea of the Government. parting with the railways or making foroed sales of land. Nothing in my opinion would be more evil than these steps ezoepting to permit the continued stagnation of railways unfinished and lands unsettled. I think neither the latter nor the former is neoessary. The course I would adopt is first to seoure a proper railway administration. Whilst the State should not part with its property in the railways, it should yet take care that the management of them is absolutely and entirely free from political influence. The railways should be managed by Commissioners who have the judgment to know how muoh of present profit it is wise to sacrifice to the object of developing the railways, by developing the districts through whioh they pass. To work the railways solely for a profit without reference to aiding the settlers would be a short-sighted policy. But abroad line should be drawn between trains which minister to the necessities of settlers and those which are run to meet possible luxurious requirements. Mr Carruthers lately told me that between two towns in New Zealand eight miles apart £3OOO a year was lost by running unnecessary trains, some of whioh would proceed with scarcely a passenger. The same Commissioners who administer the railways should recommend to Parliament additional railways, with this exception however. I hold that the railway policy was based on a bargain that should be held sacred, the purport of whioh was that there should be a trunk line through each island. Whether the junction between Auokland and Wellington should be by the eastern or western route or whether the line from the east to the west in the North Island should be from Marlborough, Canterbury, or Nelson, I will not pause to consider. But this I do say, the meaning of the trunk line in the North Island was that Wellington, Napier, Wanganui, New Plymouth, and Auokland should be brought into inter-oom-munioation, and the meaning in the South Island was that the same result should be secured for Nelson, Hokitika, Blenheim, Pieton, Christohurch, Timaru, Oamaru, Dunedin Milton, and Invercargill. From any one of these towns a person should be able to travel to all the others. On this basis it was that many parts of the country consented to railways being pushed on more vigorously in other parts. To ignore this eompaot is to make a united community impossible. But granted the two trunk lines, the rest should be done slowly and steadily, with a due regard to the economical questions concerned. I have said enough to show that I do not think the economical question is confined to remuneration. The Commissioners who administer the lines will be poor creatures if they are not able to give proper heed to the question of future developments. There should, I think, be distinct Commissioners for each island, though for the purpose of borrowing money they might ba associated into one oorporate body. If in each island there were one Commissioner nominated by the Government and two elected by the House of Representatives for each island there would be a very useful Board. The management in the two islands should be quite distinct. The circumstances in each are so different that probably the traffic and passenger charges, the wages, &:., will for a long period be different, or rather perhaps should be so. To say that this or that should be charged or paid in one island because of its being the rate in the other, is as absurd as it would be to insist on similar identity between the management of the North and South lines in the United Kingdom. It will be an ambitious enough design in New Zealand to make an identity of system in each island without insisting on the same identity for the two islands.

It occurs to me the Oommie»ioners might be made use of for future borrowings, and that the absurdity of placing railway servants on the estimates as Civil Service employes might be dispensed with.. As regards borrowing, it seems to me a limit should be set to the indebtedness to be charged to the consolidated revenue for railway purposes. I think the revenue ought to be reoouped the amount paid for interest during the construction of railway, and in the next colonial loan such an amount might be provided to relieve the floating indebtedness and to be added to that of the

' railways. It might also be necessary to pro- , Tide something charged on the consolidated i revenue to complete the trunk line, but I ' rather think otherwise. In my opinion the i ten millions (about) already spent on railways i have brought into existence an estate sufili ciently valuable to remain for the future the primary security (with one exception) for i further borrowing to complete the railway i system. The exception I allude to is the oourse I originally proposed, and whioh was also subsequently proposed by Macandrew when he was Minister for Publio Works, of putting apart oertain lands as a railway estate. Whether or not this is done, the railway, as they stand now yield a sufficient net revenue to afford adequate seourity for any further borrowing required. The borrowing of the Commissioners should be authorised by Act of the Colonial Parliament as the borrowing of Railway Companies is here, only that the Acts should be public not private ones. Those railway loans should constitute a new era, and should be a first security, or a deferrod seourity, as from time to time in each case may be decided, on the net railway reoeipts. The balance of railway reoeipts, after paying all expenses of staffs of management, and construction, and loans specially chargeable, should revert to the consolidated revenue. It may be urged that the railways have already been assigned as leourity for existing debts, and that the course I propose is to some extent a departure from an existing obligation. Ido not think such is the case. The fresh liabilities incurred are merely for the purpose of perfecting and extending the system with the view of enlarging ultimate results. Those results go to the consolidated revenue, and the extensions are really for the benefit of the security holders, who are interested in the success of the eystem. Looking at the policy of creating preferred debt which every railway, more or less, has adopted, I am distinctly of opinion that the course I propose involves no breaoh of faith and will be for the benefit of all ooncerned. To surmount, however, the teohnical difficulty of the railways having been inoluded in the consolidated revenue in the Acts relating to loans, and the same having been mentioned in the last prospectus, a provision should be inserted to the effect that the security given over the railway receipts shall not prejudice the claim of the consolidated revenue to any part of the receipts required to satisfy existing liabilities, or something to that effeot. The sort of clause is familiar to New Zealand draftsmen, for it is put in about the land revenue whenever fresh dispositions are made of that much shifted asset. On the other hand, to complete the security the railway loans must be guaranteed by the colony. Or another course could be followed. The whole of the expenditure on railways alroady constructed could be made part of the railway loans, and its annual charge, together with the charge for fresh loans for railways, oould be made a first olaim on railway receipts, with a contingent but thoroughly complete guarantee of the oolony in addition. It may be said that in either case with the guarantee proposed the loans will be Government loans. In one sense they will be as far as the security they offer is concerned, but they will not be in that sense whioh so often damages New Zealand loans—they will not be a direct part of the publio debt to be quoted as such. There will be little prejudice here against purely railway loans. Why, a single company, the Grand Trunk of Canada, has an authorised oapital of over thirty-seven millions sterling. There are two great purposes served by distinct railway loans. First you gain the opportunity of converting the present publio debt and saving immensely on its yearly cost. Seoondly, your railway loans can be made to suit the ciroumstanoes they have to serve. There are some railways it will be prudent to oonstruot with deferred loans. I can conceive, for example, oases in whioh it would be prudent to submit to a great discount for money borrowed with no interest payable for a term of years.

Supposing arrangements were made for clearing off its present floating debt, Now Zealand should not require to oome into the market for years to oome. Its railway extension otherwise provided for, its liabilities merged in its publio debt, it should start fair and live within its income, ezoept, perhaps, occasionally borrowing for some great public works other than railways. By judicious conversion the present burden of the public debt can be greatly lightened, and especially can this be done if the railway loans in future be dissociated from the publio debt. The advantage to the publio debt is obvious, and in my opinion it is equally so to the railway debt. Placed on a proper footing primarily secured on railway receipts indirectly guaranteed by the Government, the railway loans should be negotiable here at 4} per cent, on the par value. The present securities will in crease in value. Within a couple of years 4 per cent. New Zealand inscribed stock will be worth over par, and if the G-overnment convert on suoh a basis the relief of the present annual oharge will bo very great. Meanwhile the railway estate will dovelope,{and in course of time become enormously valuable. The Grand Trunk line of Canada has about doubled its value in two years. Some two years ago the 7 per oent. bonds of the Denver and Bio Grande railway were worth about forty, and the shares were given in for nothing to induce the people to buy the bonds. Now, the bonds are worth 117, and the shares 108. Twenty years hence the railways of New Zealand will be enormously valuable. They will be worth more than the whole publio and railway debt. _ Any one who does not Bee this must be a child in intelligence of railway history. Look at the value of railway systems where fighting and competition go on in every direotion over almost every mile, and then ask what must be the value of a system in which the oostly warfare will of necessity be absent. The Government whioh divested the colony of its contingent profits derivable from keeping the railways for the benefit of the State would, in my opinion, deserve to be hung. Scarcely less should be the punishment of a Government whioh sacrificed the publio lands whioh those railways make every year more valuable, and again only scarcely less should be the punishment of a Government that had not resource sufficient to continue with intelligence the prosecution of the railway system from its present incomplete to a complete condition. Do not be deterred by hard names and extravagant language. What X propose is well within the rights and the obligations of every sort of the Government, and the Commissioners can obtain the funds necessary for resuming railway extension the day after Parliament passes the Aot conferring upon them the powers I have desoribed. It may be (though it is not clear) that the railway loans will oome within the category of loans the Government undertook not to float here for three years, but even so, advances can be obtained on the debentures with a guarantee not to float them for a prescribed term. In short, there is no reason whatever why the progress of the railway system should be stopped, but of course ita continuance should be prudent and fairly moderate.

There are two points more to which I will allude. The Dominion of Canada Parliament has just passed a resolution which for years I have advocated in New Zealand, namely, that of relieving beet root sugar from excise duty for a term of years. Already machinery is Surchased to start the industry in the tominion. In Canada the sugar import duties are high, and a term of eight years is considered sufficient. In New Zealand I think the import duty should be a penny, and for six years the beet root sugar should enjoy complete immunity from paying it. After that for another six or eight years there should be a difference of a half-penny a pound between the excise and the import duties.

One other word. Maoandrew is a hundred timeß right in his anticipations of the benefit New Zealand would reap from a direct service of large first-class stoam vessels. I do not believe the advantages to the colony arising therefrom can be exaggerated. Such a line would afford to New Zealand benefits from which it is now entirely shut out. To have no direct lino of steamers is almost to proclaim tho colony uncivilised, and to shut it out from the most desirable immigration. Whatever the subsidy required it iB extravaganoe of the colony to refuse to pay it. As for the port, in the name of New Zealand I urge, do not let local squabbles stand in the way of an essential boon to the whole colony. The best port is simply the one whioh from time to time the contractors themselves find most convenient for their purposes. Your letter, entirely unsolicited and unexpected on my part, suffioiontly exonerates me from impertinently obtruding on you my opinions, and it is for you to judge if those opinion! are of sufficient importance or interest to give them publicity. You can do so or not, as you wish, acd in either case, I am, very sincerely yours, Julius Vogbl.

1978, 1180. Lowest Lowest and and Highest. Highest, Cairo and Vincennes Bonds, N.S 25 to 35 60 to 78 Central of New Jersey Shares 12 to 46 56 to 92 East Argentine Bonds 4 to 7* 104 to 174 Grand Trunk Stock 54 to 94 14} to 25} Do do do 1st preference 33 to 52 67 to 103 Great Western Canada Shares Si to 84 114 to 15? Mexican Shares 1 to 24 4} to 16} Erie Shares 12 to 23 31 to SO Missouri Bonds 38 to 56 94 to 120