D.—2

XI

route, realize that, through the loss in railway revenue consequent on the conveyance of goods by road, they (the public) are the direct losers. A stable and equitable railway-rate system is essential to the success of the commerce of the country. As an indication of how this matter is viewed in a sister Dominion, I cannot do better than draw attention to the following extract from the latest annual report by Sir Henry Thornton, Chairman and President of the Canadian National Railways : — The question, of freight rates continues to be one of importance and some anxiety. It is not the province of the Board of Directors to argue for or against higher freight rates, but a distinct responsibility rests upon the Board to direct attention to the effect of alterations in the rate structure which would reduce the gross revenues of the system. The Board is of opinion that the welfare of the Dominion would be best served if its railways were allowed rates which would enable them not only to maintain solvency, but to make those improvements and provide those facilities which are from time to time necessary to meet the constantly increasing traffic requirements of a rapidly growing country. In so far as the Canadian National Railways are concerned, the property is owned by the people of Canada, and, in the last analysis, the financial position is in their hands. However, the Board ventures to express the thought —as it has, indeed, on previous occasions—that freight rates cannot be constantly decreased and net earnings continue to increase. With fair rates it has been possible to reduce to a minimum the demands of the railways on the public treasury. The Canadian National Railways are emerging from a condition which may be conservatively described as unsatisfactory ; they have reached the point where they are paying interest out of net earnings on all the securities held by the public, and, furthermore, they are furnishing a service which the Board feels is satisfactory to the shipping public. Would it not be wise to allow that condition to continue and to improve ? Workshops.—Reorganization and Progress. New Workshops. Good progress has been made with the construction of new workshops at Otahuhu and Hutt, and with the remodelling of existing workshops at Addington and Hillside. Staff. Owing partly to the completion of the order for building class Ab locomotives, and new rolling-stock in the South Island, and partly to economies resulting from the reorganization of workshops, a reduction in the staff employed became possible. The personnel quota has been automatically adjusted by utilizing the surplus staff to fill vacancies created from time to time by employees leaving the service. This method, while entailing some expense to the Department, was adopted to prevent hardship to the men, and I believe the fact is generally appreciated by them. By this means the total workshop strength has been reduced by eighty-nine since April, 1926, not including staff released to man the two terminal depots. This staff-reduction would have reduced the pay-roll by about £23,000 had not the scale of wages for workshops staff been increased from the Ist April, 1926. The industrial economies to be effected by concentrating special types of manufacture and repair work in the centres most suited for the purpose —instead of, as in the past, carrying on with shops having small plants dealing, or attempting to deal, with almost all classes of work at each centre —were so real that the change was inevitable if the reorganization of workshops buildings, methods, and processes was to justify the new capital expenditure. It was therefore announced two years ago that a reallocation of workshops staff would take place as soon as sufficient progress had been made with the reorganization programme. It is one of the conditions of railway employment that the employee must be prepared to transfer where and when required, and (in common with other branches of the service) workshops employees have so been transferred from time to time according to the exigencies of the service. The private economic and social effect (as relating to family ties, house or property ownership, &c.) produced on the position and prospects of those whom it is necessary to transfer, although not coming within the orbit of the business relationship usually subsisting between employer and employee, and consideration of which is excluded from the general responsibilities of railway-management, cannot be ignored when large numbers of transfers, as in this case, threaten to disturb the. economic equilibrium in the districts concerned.