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The Pamphlet Collection of Sir Robert Stout: Volume 72

No. 7. — Financial Results

No. 7.

Financial Results.

I shall now proceed to argue out the financial aspect of the question, and to prove that the proposed stage system will give greatly better financial results, both directly and indirectly, than the mileage system now in use.

Having proved my position as regards finance, I shall point out the effect the new system will have on some of the great Social questions of the day, and also draw attention to the difference in this respect between the proposed plan and the Hungarian "Zone" system. I shall also show how I would apply the New Zealand system to the British railways.

Before plunging into this part of the subject, it may be well to pause and ask ourselves the question, Ought the direct payment of interest to be the first business of a railway? I have always held, and after seven years of the closest study, hold still more firmly, the opinion that the direct payment of interest ought to be a very secondary consideration.

Is there any government of any English-speaking—I think I might say, any civilised people under the sun—that would dare to propose to sell or lease the common roads of its country, to any man or set of men, for the purpose of making money out of them Why then should they do this by the rail" roads?

The only difference I can recognise between a railroad and a common road is this, on a common road the user provides and works his own rolling stock, while on a railway that portion of the service is necessarily done for him, and, consequently, in all fairness, must be charged for. My contention then is, that the user of the rail-road ought not to be charged for interest on the cost of construction of the permanent way, but that he ought to be charged for the use of the rolling stock and its manipulation, with a fair profit added. That is to say, that the charge made should be the same in kind as that made by an ordinary carrier on the common roads. If this were not done it would not be fair to those who are obliged to content themselves with the use of the common roads.

As to the financial outcome. The fair business profit on a monopoly of the inland carrying trade, if it were intelligently carried on, would be so enormous that it would far more than pay working expenses and interest on the £15,000,000 we have invested.

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Our Railway Commissioners have a valuable monopoly in hand, but they do not know how to make use of it. I repeat my assertion that the sole cause of out railways not paying is due to the fact that those who have control of them have neither the breadth of mind nor the business ability to enable them to frame a policy of administration suited to the wants and requirements of the whole people. Our present no-system does not provide for more than one-fourth of them.

In devising a new system of railway ad-ministration, the great object I have kept steadily in view is distribution as opposed to centralisation, and to produce a system that would provide for the wants and secure the business of the poorest as well as the richest classes. It is only in such a scheme that we can hope for financial success.

I take up the ground, that it is absolutely impossible to secure permanent financial success in railway working by any system of mileage rating, no matter how skilfully it may be manipulated. We have now had fifty years' experience of this system, modified by differential rates, twisted, distorted, contorted into every conceivable shape, and not only has it failed utterly to meet the world's requirements, but the Board of Trade returns conclusively prove that it is a financial failure also.

The only reason why it has existed so long is because the conditions have been different from what they ever can be again. In Great Britain, for instance, the railways, when they first came into existence, had to deal with a country thickly populated, vastly wealthy, and with a trade having an enormous margin of profit. It took a long time to make such a country feel the evils of its new transit system. In America the railways had to deal with a country having a large and wealthy population located on its sea coasts, a vast and fertile unappropriated inland territory, a constant and immense inflow of population, bringing with them great sums of money, and a ready market in Europe for their grain and other products at a large profit on the cost of production. These conditions have either disappeared or are rapidly disappearing, and can never appear again.

The conditions in Victoria were somewhat similar to those of America, but the country being smaller, poorer, and the inflow of population much less, it has taken less time for the evils of the system to manifest themselves. In New Zealand the conditions applying: to America exist in a still less degree, and it will take a very few years of the present administration to use this colony up entirely.

Having arrived at the conclusion that mileage rating must be abolished, my task was to find something to take its place. Naturally a system of even stages, say, of seven or ten miles each, presented itself, but a little thought made it obvious that such a system would have all the evils of mileage rating, although for a time in a less degree. Then I thought of the arrangement of stages at 7, 10, 15, and 25 miles, as described in my last paper, but I was pulled up by the financial difficulty.

It is a pity that on this great question of public policy the present pound should be of such paramount importance. It is, however, sometimes necessary to bow to circumstances.

To insure financial success I had to consider the following points:—
1.Should we commence with goods or passenger traffic? It did not take long to decide for the passengers, because, in the first place, it is the natural order of things. We cannot have products without producers, therefore we must first place our men on their land. Next, men do not follow goods, but goods follow men, that is to say, goods have no wants to be provided for by men, but men have numerous wants to supply, for which goods have to be provided, and wherever you place men a goods traffic must follow. Then again as to finance, if sufficient inducement is given there is hardly any limit to the number of times passengers will pass up and down the lines, but no matter what the price charged, no sane man would send his goods twice over the lines if once sending them would do. If we increase passenger traffic an increased goods traffic must follow.
2.It was necessary to ascertain the present average passenger fare. This proved to be 1s 11½d.
3.It was also necessary to ascertain the average distance travelled. This I found was 13 miles.
4.The relative position of first to second class passengers. I found that three and a-half second-class tickets were issued for one first-class.
5.How to adjust the stages so as to make sure of securing an amount, at least, equal to the present average fare, in one, two, or three sums. This would, of course, depend on the inducement offered to people to travel, and the average length of journey they could fairly be expected to take.

Now the question of financial success or failure rests on the answer to this question: Have I so adjusted these stages, and will an average fare of one shilling (1s) be secured?

In order to make quite sure of this point, I ought to have had before me a table of the passenger bookings from every station to every station. Three times through various members of Parliament I asked for this return, but the department always refused it, on the ground that it was too costly. I therefore had nothing to guide me but the tables attached to the annual report on working railways.

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After full consideration, I decided to make the passenger stage fares sixpence (6d.) first and fourpence (4d.) second-class, and to endeavour to secure the present average fare in two sums of one shilling each.

In order to do this, it was necessary so to locate the stages that the average distance travelled would land the passengers past the second and into the third stage. I calculated that the great reductions made in long distance fares would extend the average distance travelled at least from two to three miles, say, from thirteen to fifteen or sixteen miles. This it was that made me decide for the seven-mile stages, the second of which is from one to two miles within the estimated travelling distance, and the other two seven-miles stages were so placed as an extra financial precaution. This arrangement, I have always maintained, made me absolutely certain of an average fare of 1s., and, as I have said, the whole result hangs on the answer to the question: Is this a correct estimate?

When I laid my plans before Mr. Maxwell, he simply met me, by telling me in plain, straight English that I did not understand the question at all; that he had no doubt I thought I did, but that I had not the necessary information, that the offi-cers of the department alone could deal with the question, as they alone had the correct information, and that I could not obtain it. I tried to show him that it was only the policy of administration and financial portion of the subject I was dealing with. But it was of no use; he wound up the interview by recommending me to try and educate the public up to my ideas. I need hardly say that this is the only personal interview I have ever had with Mr. Maxwell.

Well, I have taken his advice, and done some little in public education. I hope he is satisfied with the result. Most certainly I am not; the apathy with which the general public treat this vitally-important question is a marvel, and a great discouragement to me. We shall, however, wake up to its importance before long—I hope before it is too late.

The hostile attitude Mr. Maxwell then took up he and his chief subordinates have ever since maintained. There has been no attempt on their part to investigate; simply an assumption of superior knowledge, which their own accountant has conclusively proved they do not possess, it would be scarcely possible for any set of men to be so hopelessly beaten by their own figures as these men have been.

As this matter of the financial result is very important, I may again remind my readers that all my calculations and estimates in regard to revenue have been carefully examined and reported upon by Messrs. W. Conyers (late Commissioner of South Island Railways), R. W. Moody, J. Stoddart, and T. D. Edmonds.

These are all railway men of, to say the least, equal experience with our Railway Commissioners, and they have all signed a statement to the effect that the introduction of my system would lead to an increase of 200 per cent, in the passenger traffic; that my average fare could not sink below one shilling (Is), and that the increased traffic "would not perceptibly increase the working expenses." This means that £200,000 per annum would be added to the net railway revenue.

This, then, is their statement and mine; the statement of five men who have carefully examined the whole question.

On the other hand, we have the unsupported, and certainly not very disinterested opinions: that is, if people who have not investigated can be said to have opinions, of four railway officials, Messrs. Maxwell, Hannay, Grant and Hudson. I must now show what these opinions are worth, or rather show how utterly worthless their own figures prove them to be.

After some contention, the committee ordered the production of the return I had asked for, so far as regards the Auckland lines. In order to prepare it I was asked to lay down a diagram of my system as applied to the Auckland lines, and to mark on it my fares from every station to every station. This was handed to Mr. A. C. Fife, the accountant for the Railway Department, and he was instructed to prepare a table showing the number of passengers that actually travelled at various distances in 1885-6, with the amount of money received for those distances, and he was also to say what number of fares would require to be taken under my system to produce the same financial results.

The references which follow in parenthesis are to the minutes of evidence taken by the Parliamentary Committee of 1886 on "Vaile's System of Railway Fares and Charges," I—9. It can be seen in the Public Library. The figures refer to the question and answer.

Mr. Fife first brought up the table on page 86. This the committee declined to receive as sufficient, because it made no alteration in the relative position of first and second-class fares, and he was instructed to produce the table which appears on page 89. Most, if not all, of the committee being of opinion that under the new system there would be at least an equal number of each class, while some thought there would be two first to one second.

I should mention that these tables were only brought up the day after the committee work closed. I managed to get a sight of the first table, and sent in a few hurried remarks. Had it been produced a week earlier it would have been hardly possible for the committee to have done other than report in favour of an unconditional trial. Auckland, March 22nd, 1890.