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The New Zealand Railways Magazine, Volume 4, Issue 11 (June 1, 1930)


In a recent address at the quarterly meeting of the South Canterbury Chamber of Commerce, Mr. H. H. Sterling, General Manager of Railways, comprehensively reviewed the position of the Railways, particularly from the aspects of developmental and community services. After discussing certain features of motor competition Mr. Sterling indicated a basis of action to check the diversion of comparatively high-rate goods from the Railways to the roads.

The railways are the biggest industry in the country,” Mr. Sterling said. “Transport has been called the vital industry of commerce—the basic industry of commerce—and I believe that very aptly describes it, because I cannot conceive that anything could tie up the commercial life of the community more definitely than any tie-up in the transport industry.”

Therefore he felt that the Chamber could not bend its energies or the capacity of its members as business men to any more important subject than that affecting the railways of this Dominion.

Commercial and Developmental Factors.

Railways stood in the commercial life of the Dominion as a two-fold organisation—firstly as a commercial institution, and secondly as a developmental institution. It had been a curious psychology that had been developed within the last decade that very often the standards of the one were applied without reference to the standards of the other. What he meant by that was that there was becoming undoubtedly a tendency in modern times to judge the railways of this country from an exclusively commercial standpoint, when it must be very well known, on the slightest reflection, that they were being run, and must indeed be run, from quite a different standpoint wherein the developmental aspect, if not uppermost, was at least a very potent factor.

It was said that the railways were not “paying,” that the railways were “losing” such and such an amount, generally the amount that represented the difference between revenue and expenditure as shown in the figures of the revenue and expenditure account that was contained in the Annual Railways Statement, but he just wondered if, on reflection, anyone would dare to say dogmatically that those amounts fairly and squarely enabled anyone to say that the railways of this country, when regarded in the two aspects he had mentioned, did not pay. He thought that was a very difficult matter, as he would endeavour to elucidate.

Revenue Account Does Not Show All Benefits.

The railways gave certain services—some on the commercial basis, some more or less confessedly on another basis. The expenditure was commercial in such a sense that the whole of the cost of the railways, the whole of the cost of giving those services, whether either directly remunerative or not so as to be reflected in the revenue account, was shown in the expenditure account; but was the whole of the benefit from that expenditure shown in the revenue account? He dared to say, without the slightest fear of contradiction, that it was not. He need only remind the meeting that the railway had some services—and a good many services—which were not expected to be directly revenue-producing because it was believed that they would be in the interests of the community either as resulting in an indirect pecuniary advantage to the community, or in some other way—such as social service—they were for the welfare of the people.

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Preferential Rates.

For instance, they might take such rates as the preferential rates which were given for locally manufactured commodities. The reason for such rates were generally the belief that the railways were helping to establish local industry and giving employment to people, and consequently it was worth while to give those rates. From that viewpoint, those rates “paid” or presumably they would not be there. There was a direct pecuniary advantage from the sum received which was reflected in the railway revenue account, and there was that indirect advantage not capable of mathematical statement, but which was the basis of the justification of the preferential rate, and was, by the making and continuance of the rate, postulated to exist. That was a rate he placed in the category of those where there was a direct financial return reflected in the railway accounts, and an indirect return not in the railway accounts.