13

D.—2a

where the absence of revenue is calculated to restrict transport facilities, not only in a particular area but throughout the country. We recommend, therefore, that loss on new lines should be borne by consolidated revenue, unless such lines form a connecting-link between two sections of the main system, and with the further proviso that the loss be reduced, in so far as liability on consolidated funds is concerned, by the value of traffic (less 70 per cent, working-expenses) contributed to the main line. It will be seen that the mileage opened during the past ten years has been small, but in the next decade there will be a considerable number of lines coming within such an arrangement as we propose. If an arrangement on the basis mentioned had been in operation during 1923 24 a credit to the Railway Department would have arisen of £136,064. Financial Situation of the Future. The prospective financial situation in so far as capital is concerned, taking past expenditure on existing lines and adding thereto obligations to which the Government is committed, together with proposals involving further expenditure during the next eight or ten years, is as follows :— (1.) Expended on existing lines and works to the 31st March, £ 1924 .. .. .. .. .. .. 41,399,427 (2.) Expended on lines not yet open for traffic .. .. 7,025,809 (3.) Estimated expenditure necessary to complete new lines . . 12,911,058 (4.) Expenditure proposed on existing lines in respect of deviations, &c. . . .. , . . . . . 8,081,500 £69,417,794 It will be seen that new capital (£21,000,000) will be needed to meet the construction-cost of new lines and improvements to existing lines, bringing up the total cost per mile to £18,696 —that is, assuming 660 additional miles as shown in the Public Works report are completed. Spread over ten years this will mean raising £2,100,000 per annum on the average. At the end of ten years interest charges upon the total capital figure of, say, £70,000,000 would, at 4| per cent., amount to £3,150,000. The present interest payable on loans (£41,399,427) is at the rate of £4 7s. 6d. per cent. = £1,811,225. The problem is to see how and whether additional net revenue to the extent of £1,338,775 can be obtained during the next ten years to meet these interest charges. Lines proposed and under construction are no doubt necessary as developmental railways, and in the main will link up the system, to the advantage of traffic receipts, as well as making for reduced working-expenses per mile. The expenditure upon existing lines we deal with under the head of " Management (Mechanical and Permanent Way and Works)," and although there may be some variation in the incidence of expenditure we may, for the purpose of estimating the results at the end of ten years, accept the figure of £8,081,500 as the amount needed to put the railways into a fair and economical working-condition. In anticipating revenue it will be undesirable to base anything upon results since 1914, both receipts and expenditure bearing traces of war disturbance, and it is wiser to take the figures of 1904 and 1914 and see in what ratio traffic receipts have responded to increased mileage and facilities. Between those years 535 additional miles were opened, and gross receipts increased from £2,180,641 to £4,043,328, or 85 - 42 per cent. Assuming a like increase during the coming decade with 660 additional miles of track, we have a prospective revenue of £12,950,124, reducing this to 70 per cent, increase; and we think that, apart from unforeseen circumstances, this percentage of increase may fairly be expected to eventuate; we thus arrive at a gross revenue of £11,873,159. We do not base this upon past experience alone. We have regard to the increase of population, the opening-up of new producing areas, the revenue advantage brought about by the linking-up of detached sections of the railway system, and we include also proper payments for the conveyance of lime and road-metal as well as branch-line losses to be made good out of consolidated funds.