GOVERNMENT IN BUSINESS

Hokitika Guardian, 7 November 1927, Page 3

GOVERNMENT IN BUSINESS

WHAT IT COSTS

saaymills and factories

(Taxpayer)

It may be argued that there was good reason for tho Government establishing a sawmill at Frankton Junction a few years ago. At the conclusion of the Great AVar there was a scarcity of timber, not merely in New Zealand, hut practically throughout the British Empire. The strength of the nations, in men and material, had been turned during the long years of calamitous strife from orderly production to ruthless destruction and whence peace came at last, the whole fabi'lc of industry had to he repaired. The erection and equipment of the sawmill at Frankton for the supply of such timber as the Railway Department might require may have been regarded by the Government as one of its obligations in this respect. But unfortunately the authorities, with a very poor conception of the needs of tho situation, went into the business upon a much larger scale than the requirements of the Railway Department justified, and upon the temporary shortage of timber being overtaken found themselves saddled with buildings and plant and stocks for which they had no legitimate purpose. In this dilemma, rather than confess the mistake they had made, they entered into competition with private enterprise. ignoring the cost ol production and seeking to camouflage their bltin-

CUTTING PRICES The result of this policy, and its extension. lia.s been to subvert tho sound relation between the cost of production and the selling pries; of the commodities supplied from the sawmill and to involve the Government in a continuous loss, which, after depriving the private sawillers of their reasonable returns, is passed on to long-suflcring taxpayers. The two classes of business carried on at Frankton are: (1) Sawmilling and timber retailing; (2) The provision of roady-to-ercct houses, in these undertakings the large sum of £127,-108 Is 5d of public money has been invested. This is the amount of the capital account, as at 31st. Alarch, 1927, and does not include any amounts written off to cover depreciation and losses in past years. The Department publishes a printed statement of accounts annually purporting to cover tho whole of its activities in connection with sawmilling and house construction, and an expert committee was set up hv the Dominion Federated Sawmillers’ Association to scrutinise closely the accounts for the year ended on March 31st. 1920. An exhaustive examination satisfied tho committee that the cost to tho Department per 109 feet super of sawn timber amounted to no loss than 29s Oil at the point of delivery. HOAY IT WORKS. The committee: further ascertained that although the cost of production a.t the Frankton mill was much higher than the cost at any privately owned mill, the department was selling timber to the public considerably below market rates. The average selling price of timber Kv The privately owned mills was about 20s per 100 feet, and yet the Frankton mill, whose cost of production reached nearly 30s per 100 feet, was competing with those mills at this low rate or even at a still lower owe. A deputation from the Sawmillers’ Association, armed with the facts just stated, waited upon the Prime Minister in connection with the matter and he at once recognised the unfairness of this development of State trading, particularly when it was directed against “ono of the railway’s best customers.” and undertook to inquire into the matter with a view to remedying the evil. But in spite of this assurance, the Frankton mill oon-

tinues to produce timber to its full rapacity and to sell it at a figure far below its cost price. Immediately fho accounts for 1926-27 were available the

nembers of the committee' met to nalv.se them, as they had analysed the

figures for 1925-26. but they found this impossible. The accounts mad,, no mention whatever of the quantity of

timber produced, or the quantity sold, mid no accountant, whatever his gifts could gather from the scanty particulars given how the loss of £8.662 5s 4d was incurred, or how nearly or how remotely the figures approached the actual deficiency c.n the year’s operations. CONFt'SED ACCOUNTS

The authorities responsible for the aunchiug of the State sawmills and louse factories would have the public iclieve that they entered upon their task with the most laudable intentions in regard to the account-keeping of

the two enterprises. “The objects aimed at.” it is recorded in the official report for 1925-26, “were, firstly, to set up an organisation that would apply tfie best of financial results to the administration of the Department, and. secondly, to ensure that the accounts should record the results of the departments in the clearest possible form.” If the authorities ever entertained such “ob'-eets” they were very speedily abandoned. The official report for 1925-26 as already indicated, gave som

idea of the progress that had been made, and of the money that bad beer, spent' and lost, but the report for lastyear supplies only material for guessing at the items making up the loss of £61.246 in 1925-26 and the loss of £54. 172 in 1926-27. If his silence on this subject is due to his inability to understand the figures submitted to him. the Prime Minister may be excused. It is of the first importance, however, that lie should give his personal attention to this glaring example of the failure of the “Government in business” and save for the State what he can from the wreckage. New South Wales had the courage to cut its loss on sawmills long ago New Zealand cannot afford to ignore its example.