D.—2

IX

During the war period it became necessary to increase rates, and opportunity was taken to reclassify some of the high-price products that had for a long period been carried at rates that were disproportionate to the, value of the service, rendered. Since the depression set in demands for reduction of rates are being strongly pressed on the Department, and it appears to be regarded as an accepted fact that low rates granted in respect of any commodity when operating costs are low should remain unaltered even although the circumstances which induced the rate to be given have undergone a radical change and costs of service have increased by 217 per cent. A reduced railway rate appears to be looked upon as a panacea for stagnation in trade from whatever cause the same may arise, but the effect the reduction may have on the finances is invariably lost sight of. Reference has already been made to the enormous increase in the cost of wages since the Ist April, 1919. When to this is added the increased price of stores and material used, the causes of the deficit are made apparent. Notwithstanding the fact that the statements published from time to time clearly indicated the urgent need for economy, the curtailment of train services—which was decided upon solely for the purpose of reducing expenditure- was strongly opposed by the public ; at the, same time the financial results of operating were the subject of criticism. This is inconsistent with the pronouncements that the Railways should be run on business lines, and is illustrative of some of the difficulties met with by the Department whenever any proposal is made to bring the train services within legitimate business requirements and so effect economies in the interests of the country. That the condition of railway finance in other countries is similar to our own is shown by the following comment by an authoritative American writer : — " In the aftermath of the World War the, state of the railways of the United States is deplorable, but it is not unique. Throughout the world like causes have produced like results. From Finland to New Zealand crushing advances in rates and fares have not sufficed to maintain the equilibrium between revenues and expenses. Everywhere deficits and deferred maintenance have followed in the wake of exorbitant prices for labour and materials. It is a condition and not a theory that confronts the transportation industry to-day. American railways are in the doldrums because of too little freight-traffic and too much railroad Labour Board. The additional causes are a millstone about the neck of railway efficiency and have been a contributing cause to the long line of deficits that do not adorn annual reports. In the working of foreign railways deficits are the order of the day. The majority of the European railways have not earned operating-expenses, and few of those that do have sufficient net after expenses to pay their interest charges. As a consequence of this condition British and Continental equipment and roadway are very badly in need of repairs. The conditions in the neutral states seem no bettor than in those that still stagger under the losses incident to the World War. The railways of Great Britain have been set adrift on a sea of uncertainty with, little prospect of making port. The managers have yet to prove, what they can do with the heritage of high rates and wages forced on them by war conditions. The writer offers the suggestion that the Carnegie Foundation might do worse than assist in spreading the truth about railways before the people, who use them, practically at cost and seem to delight in abusing and misrepresenting them." The concluding paragraph is indicative of the attitude, of the American public to their railways and can be applied with equal force to many other countries. It is the duty of the Department to faithfully carry out the policy set for it, and its aim in so doing must be to afford the public, the very best services that the circumstances allow, having regard, in particular, to the responsibility which rests upon it to conduct its operations economically and as far as possible in accordance with sound business principles. Its efforts in this direction are, however, seriously hindered by the many local and individual interests encountered, and by the, apparent failure on the part of some, of those concerned to adequately realize the position of the Department. It ought not to be forgotten that the management is in the position of a trustee for the general public, and in the consideration of every request must make the general interest paramount. It is almost inevitable that conflict of interests—local, personal, and general—will arise from time, to time, but the reconciliation of these interests is not at all assisted by the adoption on the part of any of those concerned of an attitude which permits of the consideration of no other interest than, their own. Genuinely constructive criticism cannot be objected to, and is, indeed, welcomed as being both stimulating and cor reetive ; but to secure its maximum value it must be associated with a sincere endeavour to appreciate the true nature and scope of the duty of the management, and should recognize the obvious truth that the management is likely, by reason of its expert knowledge, to be in a position to see further into the ramifications of any proposed change than others who have had little or no exjierience in the work of transport by rail. It is not to be overlooked, also, that increased services entail increased expenditure, and that there is a limit beyond which charges cannot go. The, Department is, of course, bound both by interest and duty to give the fullest services that the users of the railways are able and willing to pay for, but when the limit in charging is reached and increased services can be, given only at the expense of the general taxpayers of the Dominion— many and indeed most of whom will generally derive no direct benefit from the services—it is equally the duty of the Department to subject requests for such services to the, most careful scrutiny, and to be amply satisfied that they are warranted by the general—as distinguished from the purely local public interest. I have, &c, R, W. McVilly, The Hon. the Minister of Railways. General Manager.

ii—D. 2.