D.—2.

ROAD SERVICES. The Department in the year 1926-27 commenced its road activities by purchasing and operating the Napier-Hastings and Oamaru-Ngapara-Tokarahi bus services. In 1928 and 1929 services operating between Wellington and the Hutt Valley and in the Christchurch area were acquired. In 1930 a bus service between Dunedin and Port Chalmers was established by the Department. Since 1933 passengers have been conveyed between Waipahi and Edievale by a departmental bus. In 1934 the first long-distance service, that previously operated by S.O.S. Motors, Ltd., between Wellington and Wanganui, was acquired. The Department's road operations on the passenger side were considerably extended in the years 1936, 1937, and 1938, when Yiumeroxis long-distance services in both Islands were acquired. The Wellington-Johnsonville bus services were also taken over in 1936, the Titahi Bay service in? 1937, and long-distance services between Westport and Christchurch over the Lewis Pass Road and between Greymouth and Hokitika were established in 1937 and 1938 respectively. The Lumsden-Te Anau - Eglington Valley and the Invercargill-Queenstown services were also established in 1937. In several areas, as a result of the operation by the Department of the road passenger services, it has been possible to reduce the train-mileage and effect economies in railway operation. In other cases the road time-tables have been altered to provide services when train services are not available, thus providing improved travelling facilities for the public. Whilst certain road goods services run in conjunction with road passenger services were acquired by the Department in 1936 —namely, O'Fee's DunedinBalclutha, Newmans Motors, Ltd.'s Hokitika - South Westland, and Camerons Freight Service to South Westland —it was not until 1938 that extensive operations on the goods side were commenced. In May, 1938, the Department acquired the road goods service previously operated by the Highways Transport Co., Ltd., in the Wellington - Palmerston North and Hawke's Bay districts, and the services of the Felton Waikato Transport Co., Ltd., and of McClymonts Transport Co., Ltd., operating in the Auckland-Hamilton area. The policy of purchasing road goods services in competition with the rail was continued throughout the year, and altogether forty-five services, comprising 218 vehicles, were taken over. The acquisition and operation of many new services in such a short period of time, services which operated under competitive conditions not only with the railway but with each other, each with its separate buildings and organization, has been a work of considerable magnitude. In the meantime the services have, in the main, been operated on much the same lines as formerly, but wherever practicable the traffic is being conveyed between terminal points by rail, and the collection and delivery only carricd out by our road services. At the present time the equivalent of 10,000 tons of goods per annum previously conveyed over the roads is being diverted to the rail, thus reducing road-mileage and costs. The rate schedules of the private operators built up under the competitive conditions which existed are still being adhered to by the Department (subject to 10-per-cent. increase from 11th December, 1938). The conditions that had to be faced when the goods services were taken over were in many respects unsatisfactory. Many of the vehicles were unsuitable for the work they were called on to perform and were in poor mechanical condition. Most of the depots were inadequate and unsuitable. Furthermore, it was found that some of the operators conducted their services with a greater or lesser disregard of transport regulations, licensing restrictions, and award rates of pay and conditions of employment. The rectification of this condition of affairs was in many cases an expensive matter. Some of the services were taken over only a few weeks prior to the closing of the financial year, and some time must elapse before it is possible to put matters on a proper basis. All things considered, it is satisfactory that the new goods services as a whole earned a clear net profit of £2,027 after writing off depreciation amounting to £12,124, debiting interest on capital (including goodwill) amounting to £2,867, and making a payment of £4,946 to the railways for the conveyance of 4,490 tons of goods which were previously carried by road.

VIII