The New Zealand Railways Magazine, Volume 4, Issue 10 (February 1, 1930)
We have recently been giving much thought to the position that has been developing for some years as a result of some of our customers giving their high rated goods to competitive forms of transport while leaving their low rated goods with the Railways. It is quite obvious that such a practice, if allowed to go on unchecked, must eventually lead to an increase in the rates on the lower rated goods.
It is elementary railway economics that it is the high rated business that enables the Railways to keep the rates on low valued commodities down to the level that has hitherto obtained. It is quite evident, therefore, that according as the high rated goods are taken from the Railways the possibility of maintaining the low rates decreases. We have now arrived at the position in New Zealand where it is no longer possible, either from a business or an equitable point of view, to postpone action.
The easiest way out of the difficulty is, of course, to make a general increase on the charges on the lower rated goods. Consideration of this proposition, however, at once suggests the injustice that might result from raising the rates on these goods for many people who have remained loyal to the Railways and have given us the whole of their business. There is the factor also of the great desirability of keeping our low rates down to a minimum, both on general grounds and for the reason that from the special circumstances of the Dominion most of the low rated goods have a bearing more or less direct on our principal industries.
The obvious inquiry suggested by these circumstances is to consider whether some system could not be evolved that would avoid penalising our customers who have remained loyal to us while preventing those who have not done so from continuing to reap the advantages of the low rates which, by their action, they are jeopardising.
Clearly the person who takes away from us the capacity to maintain the low rates can hardly consider himself entitled to those rates. We are therefore taking action that will prevent his doing so.
This action is not only justified, but even demanded, by every reason of equity, not only as between the Department and its clients, but also as between the clients themselves and as between the community in general and the Railway users; for, if the present tendency of people to take their high rated goods away from the Department is not checked, it will result either in further retrogression as regards the financial returns from the Railways, or it will necessitate an increase in the low rates. This latter alternative I have already dealt with and have indicated that this would involve the loyal customers being penalised because of the action of those who have not remained loyal to the Department. As to the former alternative, it simply means that the taxpayer is taking over some of the transport costs of the persons who, by removing their high rated traffic from the Railways, have brought about that position.
Some mention has been made in the public Press of the goodwill aspect of the matter, and it has been suggested that action along the lines I have indicated will cause the Department to lose goodwill, with (I presume) a loss of business. The boot is rather on the other foot. Goodwill, in the last analysis, is worth the business it brings.page 8
The man who takes his high rated goods from us and leaves his low rated goods with us is not a customer because of goodwill, but rather the opposite. The goodwill that is worthwhile—and so worth protecting and fostering—is that of the customer who remains loyal to us, and I am quite satisfied that as those customers see themselves being penalised through the action of others the goodwill of these “loyal” people (to the extent that we fail to take such action as lies within our power to protect them) will become a diminishing quantity. There is not the slightest doubt that on the goodwill argument, as well as on every argument of equity and sound business, a policy along the lines I have indicated herein is amply justified.