The Pamphlet Collection of Sir Robert Stout: Volume 72
1885. New Zealand. D-3. — Report on Mr. Vaile's Proposals Respecting Railway Rates and Fares. — The Hon. the Minister for Public Works
1885. New Zealand. D-3.
Report on Mr. Vaile's Proposals Respecting Railway Rates and Fares.
The Hon. the Minister for Public Works.
In compliance with your instructions that a report should be made on the so-called scheme of management of Mr. Samuel Vaile, of Auckland, I have the honour to remark as follows:—
While Mr. Vaile appears to claim to have enunciated a "scheme of management," I can find nothing touching on a general "scheme of management," but only some very extravagantly expressed opinions on the subject of rates and fares, mainly unsupported by facts and with many errors and misstatements, comprised in various fragmentary circulars, letters, and addresses.
In his printed circular of the 5th April, 1883, which he addresses to the Chambers of Commerce in New Zealand and Australia, he says, "It seems to have been assumed by the Governments of the colonies that the railways must be made to pay interest on the cost of their construction and maintenance. This I hold to be a most mischievous error." Again, he says. "I deny that they (the Governments) have anymore right to charge interest on the cost of construction and maintenance of the permanent way than they have on the cost of construction and maintenance of common roads." The curious error of supposing that it is usual to try to make railways pay interest on the cost of main- page 60 tenance is repeated in Mr. Vaile's lecture of the 3rd November, 1883. It will be seen that there is a great degree of ignorance displayed in these remarks.
Mr. Vaile means, of course, that it is an error to try to make the railways pay interest on their capital cost; but, with the inconsistency which is displayed throughout his writings, he violently condemns the Government because the railways do not pay interest, and urges steps which he asserts will make them do so.
In the same circular, speaking of the rates and fares in use, Mr. Vaile says, "I have utterly failed to master them." Cadets of fifteen years of age who have passed the Sixth Standard at the Government schools have no difficulty in learning them.
Mr. Vaile's original object in advocating low fares appears to be set forth in the same circular. He remarks as follows: "Take, for instance, the Rotorua Railway, in which I am a shareholder. To go from Auckland to the junction of this line under the plan proposed would cost second-class passengers 2s. and first-class 3s. each; thus, being carried so far on their journey for such a small charge, they would be better able to pay the higher fare for the rest of the distance."
That is to say that, by lowering the fares on the Government lines, Mr. Vaile would be able to secure higher ones on the line in which he was interested.
Mr. Vaile's crude and incomplete proposals for fares and rates, as stated in his circular of the 5th April, 1883, are on a differential basis. In subsequent letters he violently condemns differential rating, and scurrilously attacks those who do not agree with his projects.
We learn thus from Mr. Vaile: (1) That his remarks apply to the Australian railways as well as to New Zealand; (2) That he holds it to be a mischievous error to try to make railways pay interest; (3) That he does not understand the present system of rates and fares; (4) That he would have charged higher fares on the Rotorua Railway, in which he was personally interested, than he proposed for the Government railways; (5) That while he himself does not hesitate to propose differential rates and fares, he at the same time denounces them.
It is difficult to seriously discuss the inconsistencies and misstatements with which Mr. Vaile's writings abound. When he suggests that it costs no more to carry a ton of passengers than to carry a ton of coals he is writing nonsense, though he may be unaware of it.
When he says that "the loss on our railways increased from £180,855 in 1881 to £377,186 in 1884, and at this rate we should, in 1888, require £2,500,000 to support our railways," he is making a statement which is misleading, and drawing a conclusion which is false. He may or may not be aware of this. In either case he is equally untrustworthy as a guide, and consequently should forfeit all claim to the respect of intelligent men as an authority.
The following is an instance of an error in a letter of Mr. Vaile's, dated the 14th July, 1885, in which he misstates the distances on which some coal rates are based. I give Mr. Vaile's figures alongside the correct ones.
|Mr. Vaile's Statement of Distances.*
These figures Mr. Vaile used to give colour to a further misstatement which he made about the coal rates. His figures and opinions are, as a rule, as unreliable and untrustworthy as his misstated distances.
If we judge from these preliminary inquiries we may conclude that we are unlikely to find Mr. Vaile's proposals to be of a reliable character. A brief examination of his paper read before the Auckland Institute on the 12th November, 1883, will enable us to further test his statements.
In regard to goods rates, we find in Mr. Vaile's circular of the 5th April, 1883, a proposal published to carry, trucks for "horses, cattle, sheep, calves, pigs, goats, hay, straw, and firewood at 8s. per truck; minerals at 2s. per ton; timber, at 6d. per hundred superficial feet or fraction of 100ft.; all other merchandise, of every class and description, at 5s. a ton." This is for each fifteen mile, thirty mile, and one hundred mile units of distance, so that for sixteen miles the charges would be double those for fifteen miles. Grain would be charged for sixteen miles, 10s. a ton; the present Government rate is 4s. a ton.
Then, to use Mr. Vaile's words, "On more mature consideration, I thought it desirable to double the number of stations and to halve the fares. This alteration was made in November, 1883."
Turning to Mr. Vaile's lecture of November, 1883, we find his proposals for goods rates varied thus: "Trucks for horses, cattle, sheep, calves, pigs, goats, hay, straw, agricultural produce of all kinds, and firewood, 4s. per truck; minerals, 1s. per ton; timber, per 100ft. or fraction of 100ft., 3d.; all other merchandise, 2s. 6d. per ton."
This is first for four units of distance of seven miles each, and after that units of fifty miles each, as he explains. Yet he deliberately ventured to say in another printed letter of the 9th July, 1885: "My proposals have never been altered, and the only modification made is this: in my first letter I proposed to have half the number of stations and to charge double the amount of fares now suggested." Let us see how he did alter his proposals as they affect one item—agricultural produce—which under his proposals of April, 1883, he would have charged 10s. a ton for sixteen miles, and 15s. a ton for forty-six miles. Under the proposal of November, 1883, he would charge for sixteen miles 2s. 5d. per ton, and for forty-six miles 4s. a ton; and yet he says he has only halved the distance and doubled the fares!
After this we find Mr. Vaile at the Napier Chamber of Commerce, in March, 1885, reported in the Daily Telegraph to have said, "He had not published any proposed goods rates, because there were no statistics published on which he could found any scale of charges, and he had no wish to make a mistake which would be freely used by his opponents."
As we have seen, this statement was untrue; but, at any rate, it is an acknowledgment of failure, and an admission that his proposals were bad. It is therefore of no use to try to pursue the subject of goods rates further, except to remark that if the latter proposals of Mr. Vaile were adopted the revenue would fall far below the working expenses.
We will now consider the subject of passenger fares.
The impression Mr. Vaile has conveyed to the public, is that he proposes a universal reduction in passenger fares. It is found, on investigating his proposals, that his scheme would largely increase a great proportion of them. On the Auckland line, for instance, there were last year 411,745 journeys due to ordinary tickets, and 240,352 due to season tickets.
A six monthly season ticket holder for stations seven miles apart can travel as many journeys daily as trains permit; first-class for 9d. a day, second-class for 7d. a day. Mr. Vaile's lowest proposed fares for the distance are 6d. and 4d. for each separate journey. For a fifteen mile distance the six monthly season ticket costs 1s. 4d. first-class, and 1s. ½d. second-class per day. Mr. Vaile's proposed fares are 1s. and 8d. for each separate journey respectively. If Mr. Vaile's fares were substituted, the heavy increase would be objectionable on many grounds, and would page 62 diminish the traffic. If the present season tickets were retained, then, as regards this section of travellers, they would be unaffected, and no increase of traffic would result.
The ordinary tickets, Auckland to Onehunga for return passengers, now cost 9d. and 7d. per journey first-class and second-class respectively. Mr. Vaile's proposal would raise them to 1s. and 8d. for each journey respectively.
Between Auckland and Otahuhu the present fares for return passengers are 1s. and 9d., first and second class respectively, for each journey. Mr. Vaile proposes for each journey 1s. and 8d. respectively.
Thus for more than one-third of the total number of journeys, viz., for the season-ticket journeys, Mr. Vaile's proposals would, if adopted, involve an excessive increase in fares. Of the remaining journeys, by far the larger proportion are for distances under ten miles, for which Mr. Vaile's proposals provide either increased fares or fares not very materially differing from those prevailing. So that no practical increase in passenger traffic could be expected by adopting Mr. Vaile's proposals in these respects. Mr. Vaile has deceived himself and has misled others by his averages.
The only portion of the passengers that Mr. Vaile's proposed fares would largely affect are those travelling beyond distances of ten miles, He proposes fares which may average, according to his own views, about one-fifth the present fares. The long-distance travellers form a small proportion only of the ordinary ticket-travellers, but, being charged at a uniform scale of fare, they bring not less than two-thirds of the total ordinary ticket-revenue. While, therefore, the number of passengers is small in proportion to the total ordinary ticket-passengers, the revenue affected is large in proportion to the total revenue.
While we could expect no practical effect on passenger traffic within short distances, we should have to increase the number of long-distance passengers five times to get the same revenue from that source.
If such a passenger traffic did arise there would be a heavy loss, as passengers could not be profitably carried for such long distances at such low fares, with the conditions under which we are working.
The demand made for lower fares, rates, and charges is a natural one, and it is one which the Government and its officers must always be most desirous of meeting, because the granting of concessions and remedying of grievances are always popular, and therefore grateful to those in control as well as to the public.
Last year the railways yielded £355,685, after deducting working expenses, which sum was available towards the payment of interest on the loans. This amount was about 33 per cent, of the gross revenue. If, then, the rates and fares were lowered by about 33 per cent, all round, we might expect that the revenue would just cover working expenses, and there would be no net proceeds available towards payment of interest, and there would be an additional sum of, £355,000 or thereabouts to be raised by taxation.
If the colony is of opinion, with Mr. Vaile, that it is a mischievous error to try to make the railways pay interest on their capital cost, it is quite easy to reduce the rates, fares, and charges so as to make no profit.
A second-class single fare for eighty-four miles is now 11s. 8d. If it were reduced by 33 per cent, it would be 7s. 9d. Mr. Vaile proposes to make it 1s. 8d.
We must be clear on this point. We have seen that, were fares, rates, and charges reduced all round by 33 per cent., we might expect to realise no profit, and additional taxation in some form, to the extent of about £355,000 a year, would be needed to pay interest.
It is easy to see that if they were reduced all round, as Mr. Vaile suggests, a further large sum would have to be raised to pay the deficiency of the revenue below the cost of working.
The question is asked by Mr. Vaile, "If applying the law of averages page 63 has been so successful in the cases of letters, parcels, and telegrams, why should it not succeed in the case of railways?"
There is a strange confusion of ideas in classing the transmission of telegrams with the conveyance of goods. It sounds like a suggestion that the transmission of telegrams should be by the ton. As regards letters, letters at a uniform postage of 2d. each will cost about £600 per ton to transmit. They will at this rate be carried from Auckland either to Onehunga or the Bluff. There is a material difference in dealing with letters or with parcels of light weight and with goods. In the former the element of weight only affects the cost of operations in a most trifling degree in proportion to the other elements which determine the cost of working the Post Office. In railway goods traffic the bulk and weight rank as chief factors in making up the cost of conveyance.
It has often happened that persons contrast the services, rates, and fares of the New Zealand railways with those of Great Britain, or other great countries, to the disadvantage of the former. The New Zealand railways management and services, &c., have been contrasted with the Midland Railway, for instance. The Midland Railway is situated in one compact system, occupying a small area in the most densely populated part of one of the most densely populated countries. The Company works about fourteen hundred miles of railway, in which is invested more than seventy millions of capital; it has an annual gross revenue of over seven millions sterling. The rates of wages for working range from one-third to one-half the rates of wages current in New Zealand. The lines are most expensively and perfectly constructed, and equipped with the very finest locomotives and rolling-stock, and there is a professional control with absolute powers of management. The colony has fifteen hundred miles of very lightly-constructed lines, with steep gradients and sharp curves, with light stock designed for low speeds. The system is in detached portions scattered over the whole area of a very sparsely-populated country. The colony deliberately went in for a system of very cheap lines and very humble accommodation and equipment, because the means were not available to do better. There can be no doubt of the prudence of adopting such an economical course. The originators of the railway system, I am informed, never contemplated building first-class lines and equipping them in the luxurious and complete manner suitable for a densely-populated country. Nor was it anticipated that wages would be lowered to approach those in Great Britain, so as to enable the working of the railways to be done as cheaply.
It is idle to suppose that, under such widely-differing conditions, the New Zealand railway system could perform its work as cheaply as the Midland Railway system, or that rates and fares can be placed so low here as in England unless a much lower percentage of net earnings is looked for.
J. P. Maxwell,General Manager, New Zealand Railways. Wellington,
17th September, 1885.
* This error arose from the fact that the Government were working a loop-line which had not been proclaimed open.—Note by S. Vaile.