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The Pamphlet Collection of Sir Robert Stout: Volume 76

Policy that should Govern the Construction and Administration of Railways

Policy that should Govern the Construction and Administration of Railways.

There are many reasons for this. The men who compose these Chambers are busy men. The subject is an abstruse and complicated one, one that 110 man would take up for amuse-

Note.—On page 2, the tenth line from the bottom has been misplaced. This line should precede the first line of page 3.

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study and time than most business men can give to any question not directly affecting their own particular business.

The object of my present paper is to endeavour to create a deeper interest in the railway question, to place very briefly before the Chambers of Commerce of New Zealand the creation, rise, and present position of our railway investment, and to throw out a few hints as to the principles that should govern the construction and administration of our railways in the future.

I have no intention of pressing on your notice, or again on this occasion, alluding to the Stage System. That will take care of itself; it is fast spreading over the world, and will come here in time. What I want to do, is to place clearly before this Congress the real position of our railway investment, to point out the causes of its failure, and to suggest how the position may be improved.

Having had to prepare this paper at very short notice, I have not found time to dig up the ancient history of the earliest efforts at railway construction in this country, suffice it to say, that prior to 1870, short bits of railway had been commenced in Auckland, Canterbury and Otago. These the Government took over at a total valuation of £1,104,281 2/5. I hope for the sake of the credit of the colony that this 2/5 was duly paid.

Our Government scheme of railway construction dates from the year 1870. The credit of the inception of this measure is due to Sir Julius Vogel. It was a grand scheme, and had it been honestly and faithfully carried out, we should have received far greater benefits from it than we have done.

All who are engaged in business pursuits, whether professional, trading or manufacturing, know this,—that, having our establishments as regards premises, plant, stock and assistants, in working order, that we could easily carry on Increased operations of from 50 to 100 per cent, at a very small increase in working expenses.

We also know that if we largely increased the capital invested; that we should expect the increased capital to yield a profitable return, otherwise we should not introduce it.

I propose to show that, tried by these well-known business standards, our railways are a most miserable commercial failure. I shall further prove that their boasted recent successful administration amounts to a fraud, and that they never paid so badly as they have done during the last three years, the year 1900-1901 being the worst failure of all, although in that year by far the largest carrying trade was done.

On the 31st March last we had 2,212 miles of working railways. These cost us £17,207,328, and lines unopened £1,022,729, say, £18,230,000 in all. Desperate, and, in page 4 my opinion, unprincipled, efforts have been made to prove that this investment has given a return or over three per cent., and it is claimed that last year they paid £3 9/8 per cent. I shall easily prove that all they earned was £1 10/-per cent., and I fully expect that for the current year they will not earn more than from 18/ to £1 per cent.

Knowing that our English creditors regard our railways, as our most valuable paying asset, I have hesitated to expose their utter failure, and the deceptive—indeed, I may say fraudulent—manner in which the railway accounts are made up. It, however, Being now fully evident that the Government and the Department are determined that no alteration in the system pursued shall be made if they can help it, and that the real position is being carefully concealed, I think it is my duty to point out the danger that is hanging over us. I invite careful attention to what follows.

For the six years prior to the appointment of the Railway Commissioners, our railways paid an average rate of £2 8/1 per cent, per annum. So far as the records show, and I can find out, this rate, though small, was honestly earned out of revenue, and it is the highest rate they have ever earned. As I shall prove, the increased rates said to have been earned since then, have been made to appear by a very gross manipulation of the public accounts.

The late irresponsible commissioners took charge of our railways in January, 1889, and retired in January, 1895. From their appointment dates the "Starving" of our railways, and the practice of charging to capital account items that ought to have been, and previously had been, charged to revenue account. It was they who opened the account, "Additions to Open Lines." By the aid of £73,518 so obtained, "starving" and not charging interest on amounts spent on "Unopened Lines," they contrived to show that they earned an average rate of £2 14/3 per cent. as against the former £2 8/1. For this fictitious extra 6/2 per cent., we have had to pay most smartly. Prior to the reign of these gentlemen the law provided that interest must be charged on the cost of all lines opened and unopened, but we placed these commissioners above all law and they did as they pleased.

I have always considered the placing our railways under an irresponsible commission as an act of madness, and it is unquestionable that from that period dates the destruction of our railways, and the decrease in their profitable working. Prior to their appointment there were no votes for "Additions to Open Lines." The items so charged were paid for out of revenue.

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In January, 1895, the present Government took charge of our railways and the old position was reverted to. I want to draw your particular attention to the fact that for two years after this Government resumption the account "Additions to Open Lines" disappears, then in 1897 (the Government having passed an Amendment Act to enable them to do as the Commissioners had done) it reappears and rapidly increases, as the following table will show.

How the Rate of Interest said to be Earned during the Last Five Years is Made Up.
Year. Amounts Expended but on which no Interest was charged as formerly. Amounts charged to Capital Account instead of Revenue Account ("Additions to Open Lines") Rates of Interest falsely said to be earned. Rate actually earned.
£ £ £ s. d. £ s. d.
1897 957,588 64,716 3 3 10 2 12 2
1898 878,142 156,732 3 4 10 2 3 0
1899 786,891 179,932 3 5 10 2 1 9
1900 850,385 218,357 3 8 5 2 0 2
1901 1,022,729 325,032 3 9 8 1 10 0

Well, gentlemen, if this is not "cooking" the public accounts, I do not know the meaning of that expressive slang term. You will see how cleverly it has been made to appear that in each succeeding year an increasing rate of interest has been earned, and we all know of the loud boasting about the successful railway administration of the last few years, but when we look into the matter, we find that me rate of interest earned has rapidly decreased, until from £2 12/2 per cent, in 1897 it fell to £1 10/- in 1901.

Taking interest on our loans at A per cent., the loss on our railways last year was £455,750. Is it any wonder that our taxation has increased during the last two years 6/3 per head.

But, gentlemen, the deception practised in the railway accounts is not all that is involved in this matter. Many people have wondered