RAILWAY FINANCE

Hokitika Guardian, 5 March 1931, Page 2

RAILWAY FINANCE

CHANGE IN BOOK-KEEPING. METHODS. WELLINGTON, March 1. That the railway accounts are not actually so bad as would appear from the published figures is the opinion ol' the Hon. W. A. Veitch, Minister of Railways, who has handed to the newspapers a statement supporting his conclusion that “had no financial change been made in tiic matter of interest rates and depreciation funds, the railways would have shown a surplus over the last five years of £1,750,761 instead of the deficiency of £2,035,123 indicated in the accounts as the result of these changes in book-keeping ,met r hods.”

“Until .a few years ago,” stated the Minister, “the railways had not presented a balance-sheet. The only gauge of progress was a cash statement (show ing receipts and expenditure) which was submitted to Parliament as at the close of each financial year. No depreciation account was kept; no charges were made agaiiist the Working Railways Account for depreciation; and very little was provided for renewals of structures, rolling stock or other property. Even the full rate of interest was not charged, but a policy rate of 3 per cent was adopted, the balance of interest being provided from the Consolidated Fund.

“Meanwhile throughout -sae years while the Working Railways Account was gradually, hut effectively imp over, ished by concessions, deterioration, and obselescence was occurring to bridges, bui’dings, machinery, rolling stock, and other property. Yet no provisibn was being made for the day (which has now arrived) wtleii money must be found for their replacement with units of greater, capacity The ‘policy rate’ of'3 per cent interest charged against the railways was, however, raised from time to time, until now it stands at 4) per cent. Such increases, however, while appearing to secure to the Government a better return from the railways, did nothing to strengthen the railways financial position. In addition to this increase of interest, depreciation of approximately £1 4s per cent, lias been loaded on to the Working Railways Accounts ljl re'-' cent years.

LEGISLATION OF 1925. The legislation promoted by Mr Coates in 1925 purported to overcome this weakness by setting up certain reserve accounts, the principal of which was called the General Renewals and Depreciation Reserve Account. As this did not provide for the necessary funds, it only served to disclose and exaggerate the position without overcoming the difficulty. it did StvOll tlie ‘paper’ losses considerably. After kb*Ing In existence for five years—record* ing depreciation, but not providing against it—this account was in debt to the Treasury for the sum of £1,687,561 —and it is still in that position. For the five years ended March 31, 1925, the only amount charged, against the Working Railways Account was £94,425 for writing-off of old and obsolete rolling stock and buildings, whilst during the five years following the legislation (1925-30) the amount charged for reserves and depreciation was £2 389.967. In other -words, the average amount written off between 1920 and 1925 was only £18,885 a year while from 1925 to 1930 it was £477,993 a year. In 1930 it amounted to about £700,000.

“These facts indicate that the increases of railway losses appearing m the railway accounts during the last five years are more the result ol a. new system of accounting than of actual deterioration in railway business and finance. SUPERANNUATION IMPOSTS “In five years prior to 1925, the contribution from the Working Railways Account to superannuation was £BO,OOO but in the following five years it was £892,701. When the fund was established, the State undertook liability for its stability. The action taken Sn 1925 to load this liability on to the Working Railway Account instead of leaving it. to be borne by the Consolidated Fund, as formerly and the failure for some years after 1922 to make the full subsidy recommended by the actuarial investigators has still further thrown the railway account out ot focus with previous years’ figures.

ALTERED FINANCIAL ARRANGEMENT’S.

“It has been stated that the legislation of 1928 relieved the working railways account of an interest charge on no less a capital sum than £8,100,000, amounting to £344,250 per annum. It did this, but none of our critics has been generous enough to mention the additional charges imposed at the same time. The effect of the altered financial arrangements of 1923 alone was as follows in the year 1920-50:—, Unrecovered losses on developmental lines, £735,993; Railway Department’s proportion of cost of concession on fertilisers and lime, ££4,lC9; additional interest on moneys expended on development''! lines which is included in the first item above), £36,004; deduct interest at '4} per cent, on £8,100,000, £314,250; increased burden resulting from the 1928 legislation, £512,216. “It will thus he seen that the altered financial policy of 1928 alone, while on the one hand giving the working railways account a concession in" interest worth £344,250 for the year 1229-30 simultaneously imposed addit-

ional annual charges aggregating £856466, in 19x9-30, and left the account worse off by £512,216.

“Since 1912,. no loss than £28,000,000 has been spent for railway capital purposes, the interest alone cm which is £1,400,000 a year. Of this sum, £12,7000,000 has been spent on new lines whilst the balance, £15,300,000, lias been spent on additions to existing lines, such as new workshops, new stations, tunnels, deviations and duplications; yet expenditure upon the latter type of work neither opens up the country nor makes any appreciable audition to revenue. These points are not raised in a spirit of complaint, but I think it only right to indicate to the public the true position of the railway accounts.

“The gross receipts increased from £7,112,524 in 1925 to £8,279,914 in .1930. The summary of the situation outlined above indicates why, in spite of this increase of £1,167,390, by reason chiefly of the specially devised imposts created and the extraordinary capital expenditure upon already opened lines, the net earnings fell from £l,. 567,108 in 1925 to £921,055 in 1930. Had the same method of accounting been adopted for 1930 as for 1925, the net earnings for 1930 would have appeared as £1,294,188, and the decrease in net profit on working would have been £272,920 instead of £646,053. Accumulations of years in arrears of repair work to rolling stock which had to be undertaken in 1930 accounced for no less than £256,754 of the £272,920 drop. By making the necessary allowance for the changed methods of acmurUing, and by making proper comparisons in re’at ion to services, fares and freights, it will be seen that the railways are still a valuable asset to the country. HOPEFUL OUTLOOK.

“Since I assumed the portfolio of Minister of Railways about eight months ago, substantial economies have been effected, which, together with others now under consideration will reduce expenditure by £750,000. In these circumstances, there is no reason to fear for the future of our railways. When normal trade conditions return—which is certain—the resultant increase of business, together with these economies, will bring the railway accounts to a much more wholesome condition.”

THE GAME’S THE THING. “Even to-day most English—and a few Americans also—believe that the feverish intensity which is necessary to nurture and equip a breed of superchampions is entirely out of keeping with the real spirit of games as they should be played; that the attitude of mind which forces a twenty-year-old boy to travel about playing t.?mi is for seven months of the year, even for the sake of a grail as holy as the DaviCup, is the acme of imbecility, lint impressed with*.our example and our world-wide successes, many British leaders of the sport are being bitten by the American victory bug. Tiic mui'e wo meet upon the common ground of sport the less respect we> have for each other. It is distressing, but it is a fact. Let us not blink facts, let us face them. And the facts are that the fundamental purposes of sport about which we- all agree are being defeated, not furthered, by international cqitosts. Lt.t us have done with them. Let us shake hands like sports, men and say good-bye.—Mr Sol R. Tunes in “Harper’s Monthly.”

THE ICING’S DEPUTIES OVERSEAS. “It is obviously right that the King should have intimately personal knowledge of his Deputies. If by the decisions of 1926 it is thought ho longer appropriate that the imperial Government should ikivise His Majesty On these matters, the choice might surely bfe left t 5 tile discretion of the Crown. Wo feci ifure that the appointments so ihade would be in far less danger of political taint and far more likely to commend themselves to the Dominions than the- selections of interested politicians. The new system may seem more democratic than the old; but we doubt it it will maintain so well either the liberties of the- subject or the dignity, tlie popularity, and the impartiality of the Crown.”—“Morning Post,” London.

THE SCIENTIST’S OUTLOOK. “During the last twenty years the outlook and method of the biological sciences, and in particular those related f o t.ho study of man, have been revolutionised. The extended use of the experimental method, especially in psychology' the application of the rediscovered Meudelian principles to the study of hereditary, and a more regorous application of the method of observation have brought biological studies into close grip with realities. This intense preoccupation with facts and the desire to sec them in their true relation to one another, which is characteristic of biological science to-day and lies at the root of the mistaken charge of materialism it is now fashionable to bring against science in general, does not necessarily imply neglect of larger issues.”—Sir Richard Gregory, coition of “Nature.”

OUT I*ARTY SPITE! “Unemployment is increasing so rapidly that soon it will be unmanageable ; production shows n continuous decline, ’ btlt tlm burden of taxation grows heavier. Our national income is being fatally reduced, while the claims on our income are being steadily increased. Workers should realise that even the “dole” must he paid out of production and services rendered, unless it is to be paid by money from the printing press, with a steadily declining value and ultimately no value. The constantly increasing overhead costs of production must be rerlucfd. The national council in principle are opposed to wage reductions and are in favour of good wages but good wages can be paid only out of money earned—i.e., wealth produced The price of keeping people in idleness is paid by the people in work. The committee urge that the Government of the day shall deal with these questions of unemployment and taxation at once and on a strictly non-party basis. The time is long past when parties can or should be considered at all.”—-The British National Council of Industry and Commerce.

AUSTRALIA’S BREAK FROM TRADITION.

The name of Australia’s new Gover-nor-General has apparently been submitted to the King without any alternative, and without that informal preliminary consultation which has always formed an essential part of the procedure in the past. There seems reason to doubt whether his Majesty knows Sir Isaac Isaacs so much as by sight; and it is this new feature of the appointment which, trivial as it may seem in the light of other developments, is really the most significant to those of us who care for the maintenance of the Crown as the one remaining and most vital link of Umpire. The form in which the appointment is announced (from Australia House) seems to limit the approval entirely to Mr Scullin. On previous occasions, if memory serves, it has always been his Majesty who lias been graciously pleased to approve. The change oi style may or may not be deliberate, but it seems accurately to represent the facts.”—“The Times” (London.) A IRS H IPS CONDEMN ED. “The large airship when she puts out lias no place of refuge in bad weather. There were only four points in the whole world where RlOl could have moored. What would be thought of a passenger steamer of such design that it could only outer four harbours, coiT* not lie at sea, and had no means what ever of putting its crew ashore in the event of a breakdown? No more money should be spent on these huge, dangerous gasbags; and certainly no more lives should be risked in them. The aeroplane can do all that is required and is, moreover, capable of working to a time-table, which no airship in our present state of science can do.”—The “Daily Mail,” London,