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Tariff. The work of revising the tariff was carried on during the year, and, notwithstanding various unavoidable circumstances which tended to delay the work, it was completed shortly after the year closed. In accordance with the announcements that had previously been made in this connection, the tariff, as revised by the Department, has been submitted to the Chambers of Commerce and other interested bodies before being actually brought into operation. At the time of writing the various matters that have been made the subject of representations have been fully reviewed, and it is expected that the tariff will be brought into operation at an early date. The Board in framing its tariff proposals has been much impressed by the change in the general attitude of the public towards the railways;. There is no doubt that during the year previous to that now under review there was a noticeable measure of public demand for a decrease in the railway rates and charges. During the year, however, the public attitude in this respect has undergone a marked change, so that the demand seems now definitely to have taken the form of a desire for improved services rather than general reductions in rates. The Board, therefore, has not instituted any reductions in charges by way of concession except in those cases in which the concession could reasonably be expected to result in an increased revenue to the Department. In taking up this attitude the Board has the support of 'the recent Commission (consisting of Sir Sam Fay and Sir Vincent Raven) which reported that in its opinion the Department was not in a position to make any reductions in rates unless an increased revenue was to be secured thereby. A number of proposals are embodied in the new tariff, however, which it is hoped will benefit the Department's finances. These concessions are principally confined to the passenger section, and among them may be mentioned reduced excursion fares ; family tickets (which permit of parents and their family to any number under sixteen years of age travelling at a cost not exceeding the price of three adult tickets) ; trip bearer tickets ; and reductions in the suburban fares for short distances. Special competitive fares have also been instituted in certain localities where it was considered such action was justified or necessary in order to retain the traffic to the railway. In the parcels section the principal alteration is the inauguration of a system of pre-payment of freight charges on parcels by means of stamps. This is a system which it is expected will very much facilitate parcels business with the railway, and should prove a very great convenience to the large retail firms who have an extensive parcels traffic. This system has been brought into operation 011 other railways with marked success, and there is 110 reason to doubt that the same result will be achieved in New Zealand. In the goods section anomalies have been corrected and many improvements made. Owing to the altered financial arrangements of the Department, which require a considerably increased net revenue to be obtained, it has been found necessary to increase some of the goods charges, but every effort has been made to distribute the burden of the increased charges as equitably as possible, and to avoid any undue hardship or disturbance of business. A noticeable feature is the number of special rates which it has been found necessary to institute in order to meet competition. Very careful consideration is given to each case before any of these special rates are sanctioned. Careful inquiry as to the circumstances is made by the Commercial Branch, which reports fully as to the extent of the competition and the traffic likely to be gained, and the rates which it is considered should be charged. When it is decided to institute a special rate the matter is closely watched from the commencement, and the experience of the Department up to the present has shown that in practically every case the steps that have been taken by combining reduced rates with improved service are proving successful in regaining competitive traffic for the Department. The Board thinks it advisable at this stage to clear up some misconception which appears to exist in the minds of some of the Department's customers regarding the nature and purpose of special rates. Frequently, when a special rate is instituted in a particular locality, interested people in other localities request that the same " concession " should be extended to them, notwithstanding that the conditions which give rise to the special rate exist only in the locality in which the rate has been made operative. In this connection the Board depires to point out that a special rate, as such, is not a concession. It is merely the highest price at which the Department can sell its transport 111 the particular locality, and this pricc happens to be below that normally charged. Its purpose is not to give those concerned a concession (although, of course, as being generally lower than the standard, it has a similar effect to a concession), but it is solely to enable the Department to sell its product (transport), which, owing to the special circumstances existing in the particular locality, it could not sell except at the special rate. The rate is brought into being by the special circumstances, and in the absence of those circumstances would constitute an anomaly. It would therefore be quite illogical to reduce the rate in one locality merely because it had been reduced in another locality without regard to the existence or non-existence in the former locality of the special circumstances which called for the institution of the rate. Not only would such action be illogical, but it would obviously result in financial ruin to the Department. If such a course of action were adopted throughout, the lowest rate which the Department could obtain in any locality would have to be the standard in every locality, and this, of course, is clearly impossible. Another aspect of the special rates is that they have been considered by some to involve a differentiation against those who are not in a position to take advantage thereof. This also is quite a mistaken point of view. The fact is that it is only by retaining to itself the maximum degree of traffic that the Department can keep its general rates down. It is axiomatic in railway transport that, as the traffic increases, working-costs per unit of traffic tend to decrease. Conversely, as the traffic decreases, working-costs, and consequently rates and charges,- tend to increase. This is, of course, due to the fact that in railway working the proportion of fixed charges is relatively very high, and these charges being very little affected by fluctuations in the traffic, it naturally follows that the greater the extent of the traffic over which these charges can be spread the lower falls the average working-cost. If then, the Department took 110 action to combat competition, and was merely content to take such traffic as came to it after its competitors had taken such portion of the traffic as thev