Mr. CILLIERS, as chairman, brought up the first report of the Select Committee on Pensions, Grants and Gratuities.

Report to be considered in Committee of the Whole House on 14th April.

First Order read: Adjourned debate on motion for House to go into Committee of Supply, to be resumed.

[Debate, adjourned yesterday, resumed.]

The final accounts in respect of 1925-’26 will, of course, not be available for some time yet, and for that reason I can give hon. members only a revised estimate of the results for the year which terminated yesterday, but it is possible nevertheless, to give hon. members figures which are expected to approximate closely to the final results when they become known.

First of all, then, it is to be remembered that the estimates submitted to Parliament last session provided for a gross expenditure during the year 1925-’26 of 1925,415,144 and a gross revenue, which was estimated at £25,353,927, which left an estimated deficit of £61,217. To this deficit had to be added the balance of the accumulated deficits outstanding at the 31st of March, 1925, of £5 185, thus making the total deficit anticipated at the end of March, 1926, £66,402.

Owing to the abnormal traffic dealt with during the year just closed, an additional appropriation to the extent of £1,723,797 was recently sanctioned by this House and, after allowing for savings which were not available to meet the excesses, the net additional expenditure was estimated to be £1,678,138, thus making the revised estimated expenditure for 1925-’26, £27,093,282.

When I submitted those additional estimates. I informed hon. members that, in the light of the actual results of working for the nine months from April to December, 1925—during which period the working of the services had resulted in a surplus of £726,152—there was every reason, to expect that the results for the full year would reflect a gross surplus approximating that figure.

Since I made that statement, however, the revenue, particularly that of railways, has not been maintained at the average rate expected, and in consequence the result for the full year is not anticipated to be more than a surplus of £672,987. Compared, however, with the deficit originally forecasted, of £61,217, it shows an improved result for the year of no less than £734,204.

From the estimated surplus for the year 1925-’26, of £672,987, there falls to be deducted the balance of the accumulated deficit which was brought into the accounts from last year amounting to £5,185, this making the estimated net surplus for 1925-’26 to be £667,802.

I shall leave until a later stage the question of how it is proposed to dispose of that surplus presuming, of course, that it is realized.

I would now invite hon. members to study carefully the contents of the Green Book which will be placed in their hands this afternoon.

The contents of that book show that, on the revenue side, the earnings are anticipated to exceed the original estimate by £2,412,342, and that this is made up of an increase in every one of the main heads of revenue to the following extent :—

Harbours.—Main services, £263,331 ; subsidiary services, £4,114. Total harbours, £267,445.

Steamships.—£16,942.

Or, as stated, a gross increase in the revenue from railways, harbours and steamships during 1925-’26, as compared with the original estimate, amounting to £2,412,342.

I shall not detain the House by dealing with all the items which make up these gratifying results. A few remarks only are necessary. Hon. members will see that in the case of the railway main services—that is, passenger traffic, goods traffic, and so on—every class shows a substantially increased revenue, the only exception being that of livestock, where the original estimate is not expected to be realized.

Similarly, in the case of the railway subsidiary services, all these are expected to yield a revenue in excess of the original estimate, with the exception of road motor services, where, owing to the inability to introduce all the services contemplated, the revised earnings are slightly below the estimate framed 12 months ago.

The revised harbour revenue is characterized by similar features ; from all the main sources from which those earnings are derived, and particularly in respect of ships’ dues and wharfage on imports and exports, substantially more than the original estimate is expected to be secured.

In the case of the steamships, a small increase in the revenue is also anticipated.

Turning now to the main features of the expenditure for 1925-’26, it will be observed that, compared with the original estimates, an increase is anticipated of £1,678,138, and that this is made up of: Railways, £1,612,196 ; harbours, £37,873; steamships, £28,069; making the total which I have just given of £1,678,138.

I now desire to show how much of this total increase in the expenditure for 1925-’26 falls under each of the services—railways, harbours and steamships—and to repeat again the estimated increase in the revenue from these services, so that hon. members may see both sides of the accounts.

Hon. members will recall that the expenditure is anticipated to exceed the estimate by £1,678,138, and that the revenue is expected to exceed the estimate by £2,412,342.

These accounts are made up as follows :— The estimated increase in railway expenditure is £1,612,196, and the estimated increase in railway revenue is £2,127,955 ; the estimated increase in harbour expenditure is £37,873, and the estimated increase in harbour revenue is £267,445 ; the estimated increase in steamships expenditure is £28,069, and the estimated increase in steamships revenue is £16,942 ; thus making the total estimated increase in expenditure £1,678,138, and the total estimated increase in revenue £2,412,342. So that, in each case, with the small exception of steamships, the additional revenue exceeds the additional expenditure, and, in the gross result, the increase in revenue is greater than the increase in expenditure by £734,204—a very gratifying feature of the year’s working.

When dealing with the

I shall have occasion to comment on certain features of the working results for the year which has just closed, and for that reason, and in order to avoid repetition, I will now deal with the estimates submitted to hon. members for the forthcoming year, 1926-’27.

I want to make the position as clear as it is possible for me to do.

I shall, therefore, deal first of all with the expenditure estimates, then with the revenue estimates, and finally with the difference between these two ; that is, with the estimated net results.

The total expenditure on railways, harbours and steamships for the year 1926-’27, according to the estimates laid on the Table on the 18th of February, is £27,310,572. Compared with the original estimate for 1925-’26 this shows an increase of £1,895,428.

But, as I have explained in my earlier remarks, the original 1925-’26 estimates, that is expenditure, have been increased by the additional estimates since voted, therefore, in order to effect a comparison with the most recent rate of expenditure, the total estimated expenditure for 1926-’27 of £27,310,572 requires to be compared with the revised estimated expenditure for 1925-’26 of £27,093,282.

When this is done it will be observed that the increase amounts to only £217,290, and that it is made up of the following—

I wish to emphasize those figures, i.e.—

The items which I refer to as not capable of reduction are—

other fund balances for which increased provision requires to be made to the extent of £64,173. Contributions towards the superannuation fund deficiency for which increased provision requires to be made to the extent of £50,000.

These three items alone total £360,031, and more than exceed the amount of £217,290 by which the estimated expenditure for 1926-’27 is expected to exceed the actual expenditure for 1925-’26.

Before I proceed to deal briefly with the main heads of expenditure, there are three other important factors which I should like hon. members to bear in mind in reviewing these estimates. I stress the importance of these factors because, to a large extent, they govern the increase in the expenditure. They are—

1. (1) The working of 252 miles of new lines, which have been constructed, and will be opened for traffic during the year.
2. (2) The working of 205 miles acquired from the New Cape Central Railway Company ; or, in all, the working of 457 miles of railway in excess of the mileage covered by the 1925-'26 estimates.
3. (3) The running of approximately 3,000,000 additional train and engine miles, or an increase as compared with the 1925-’26 mileage of 5.78 per cent.

After all, this continued expansion of the Administration’s activities, and the growth of its business, which are reflected by the facts I have just stated, must be a matter for deep satisfaction to us all, and should be remembered, because they are the factors which, more than any other, are responsible for the increased expenditure the House is asked to vote.

They are indicative of the development which is going on throughout the Union and of the increased traffic we are consequently handling.

But if doubts are entertained in regard to the working costs of the Union railways, I would like the House to bear in mind the figures I shall now give comparing our working costs with those of other railways.

The figures represent the cost per train mile, and are for the year ended 31st March, 1925, or the results at the nearest available date thereto. I mention the following railway systems—

With one exception only—that of the Southern Railway of Great Britain, where the work-8s. 4d. per train mile—all these railways are our with compared as 3d. 8s. were costs ing operated at a cost higher ; and, in many cases, considerably higher, than the Union Railways.

Let me deal for a moment with the main items where an increase in the expenditure is reflected in the estimates ; that is, increases over the corresponding estimates submitted to hon. members last year.

I would ask hon. members to refer to page 5 of the estimates, which sets out the railway expenditure.

There it will be observed that the increases are—

These four amounts make up the total increase in respect of the railways of £1,758,854.

Now, if reference is made to page 6 of the estimates, the corresponding position in regard to the harbours will be found, and it will be seen that—

the total increase in the case of harbours being £91,961.

In regard to Steamships, the figures are the following—

thus making the total net increase in the case of steamships £44,613.

These three total increases—Railways, £1,758,854; Harbours, £91,961 and Steamships, £44,613—make up the gross total increase of the 1926-’27 estimated expenditure over the original estimated expenditure for 1925-’26, viz., £1,895,428.

I have, however, already shown that the increase in the 1926-’27 estimates, as a whole, when compared with the revised estimated expenditure for 1925-’26, is only £217,290, and that this is more than accounted for by the interest charges and the additional cost of the Pension and Superannuation Funds.

To have compared the estimated expenditure for 1926-’27 with the revised expenditure for 1925-’26, as has been the practice in the past, would have left little or no variation to explain, and for that reason I have thought it better to compare 1926-’27 with the original estimate for 1925-’26, in order to bring out clearly the extent to which the expenditure has grown, and how 1926-’27 expenditure is anticipated to be greater than the original estimates of 1925-’26.

It is due to the House also that I should indicate the nature of the items responsible for the increases over the original estimates for 1925-’26.

The outstanding of these are: Additional staff to cope with new lines, additional traffic, etc., increase, £331,617.

It will be remembered in my earlier remarks I mentioned that the Administration has now to provide for the working of 457 additional miles of rail—252 miles being lines recently constructed and to be opened for traffic, and 205 miles acquired in August last from the New Cape Central Railway Company. I also mentioned that the estimates provide for an increase of approximately 6 per cent, in the train and engine miles, which increase represents approximately three million additional miles, the gross total provided for being 52,267,956 miles. This additional work necessitates additional labour and material, the cost of which is as stated, and sufficiently explains the increase of £331,617.

Increments account for an increase of £233,015. This consists of provision for the usual scale increments in accordance with the regulations.

The portion payable to the salaried staff amounts to £61,109, and to the daily-paid staff, £171,906, making a total of £233,015.

The extra cost of civilized labour-an increase of £160,553 represents the extra cost in wages and house allowances, where such are paid, to the labourers employed under the policy of civilized labour. This figure should not be confused with that of £191,000, which I quoted quite recently in this connection, because the £191,000 includes the extra cost in respect of labourers on new construction—the wages of whom are included in the capital estimates. I propose to say a few words on this subject at a later stage, so will pass on for the moment.

The next item to which I want to draw attention is the cost of additional repairs, an increase of £35,455. Although, during the year just closed, considerable efforts have been made to effect the large quantity of repair work arising out of the extended use to which the engines and trucks have been put, the demands made by traffic for the use of rolling stock generally have been so great that repairs could not always be effected when due, and, in consequence, it is necessary to make provision during 1926-’27 for a certain quantity of what might be called arrear repair work to be carried out, in addition to the normal repair work of each year.

Additional material for maintenance of permanent way and rolling stock, increase, £88,500.

The growth of the railways and the growth of traffic naturally bring in their train additional demands for rails, sleepers and other material to repair and maintain the extra mileage of railways and the additional locomotives and rolling stock in service, and this accounts for the increase under this head.

It will be, perhaps, appropriate at this stage if I state, and bearing in mind the effect it will have upon the cost of maintaining our rolling stock, that the Administration has adopted the recommendations of the Workshops Commission with one or two minor exceptions.

The Administration has also given careful consideration to the recommendation of the commission with regard to the erection of central manufacturing workshops, and in principle is in agreement with the finding of the commission.

It is felt, however, that the choice of site is one of very great importance, and that the greatest forethought should he exercised in arriving at a decision in this regard.

While economic factors must be fully considered, there are also other national considerations which must be borne in mind.

In view, further, of the rapid growth of capital expenditure, and the large amount involved in providing for the urgent improvements to the existing workshops, the Government has decided to defer the establishment of a central workshop.

I now come to the next item, power for tractive purposes on the electrified sections and maintenance of overhead equipment, an increase of £261,905.

This is the first year in which provision requires to be made for the working of the whole of the electrified sections of the Natal main line, which has, and is, proving such an important factor in moving the record tonnage of traffic over the Natal main line.

With the opening of the full electrified section for traffic and the probable handing over of the power station, etc., to the Electricity Simply Commission, interest on the capital cost will no longer be charged to cost of construction, and will be included as part of the cost of generating and distributing the power.

Introduction of reduced hours of duty for certain grades, an increase of £240,000.

This is the estimated cost of the reduced hours of duty, which I announced earlier in the Session, and my further remarks on this subject can better be deferred until a little later.

The next item to which I want to draw attention is the cost of working additional steamships, an increase of £52,613.

The two new steamships acquired by the Administration are now in commission, and will be fully employed in bringing to the Union our sleeper requirements and in carrying cargoes of export coal.

The acquisition of these two ships will effect a saving in respect of chartered vessels, but as no provision was made for chartering, in the Estimates of last year, an increase in the working costs to the extent mentioned is necessary.

The earnings of the steamships on the other hand, will, of course, be correspondingly increased.

Interest on capital, an increase of £200,199. The total capital expenditure on open lines (railways) at the 31st December, 1925, was £123,450,944, and on harbours and lighthouses £13,748,057, the combined capital expenditure on railways and harbours being £137,199,001, whereas at the corresponding date in 1924 the total was £130,147,166; the increase, therefore, of £7,051,835 being: On railways £6,307,210, on harbours, £744,625.

The growth of the capital expenditure on railways and harbours (and I may say since Union it has increased from £87,263,366 to £137,199,001) is considerable, and I would invite hon. members to study the valuable light which is thrown upon this matter in the annual report of the General Manager of Railways and Harbours.

Let me take just a few of the more striking facts which stand out, by comparing the position at the 31st March, 1925, with the corresponding position just prior to Union.

There was then invested in the railways the capital sum of £73,066,830. On the 31st March, 1925, the capital was £118,366,441, an actual increase of £45,299,611, or a percentage increase of 62 per cent.

Prior to Union, the railway system comprised 6,894 miles. On the 31st March, 1925, the mileage had increased to 11,528, an actual increase of 4,634, or a percentage increase of 67.22 per cent.

At Union the railways owned 22,017 standard goods wagons. On the 31st March, 1925, we had 33,326 standard goods wagons, an actual increase of 11,309, a percentage increase of 51 per cent.

But, whereas at Union the aggregate capacity of the goods stock was 390,896 tons, on the 31st March, 1925, it was 694,030 tons, an actual increase of 303,134, or percentage of 77 per cent.

Corresponding increases will also be found in our other rolling stock, while our engines have increased from 1,393 to 1,797 in number, with a considerable increase in the average tractive force also, thus showing that not only in numbers, but in haulage capacity as well, the capacity of the railways, as represented by the locomotives, has advanced.

I need not labour this matter by further illustration. I only want hon. members to study the data in regard to the growth of the capital expenditure which compels the Administration to incur an annual expenditure in interest charges, amounting in respect of the railways to £4,691,644, and, on account of the harbours, to £478,235, or a total interest charge of £5,169,879, an increase, when compared with last year, of—railways, £195,809, harbours, £12,390, or a total increase of £208,199 ; from which has to be deducted the saving in respect of interest on the first three steamships of £8,000, making the net increase in the interest charges for the year 1926-’27, £200,199.

Before I leave the subject of interest and capital, I would direct attention to the fact that the provision of an amount of £250,000 towards reducing the interest-bearing capital of the Administration again figures in the estimates for 1926-’27.

I fully explained the policy behind these contributions last year, and need not recapitulate to-day the remarks I then made. The legality of the procedure has been questioned, but the law advisers are of the opinion that the Administration is acting in accordance with the provisions of the Act of Union, and no further action is therefore contemplated.

I have now outlined the main heads under which the increased expenditure is to be incurred, and have briefly explained the causes for that increased expenditure.

Before I revert, therefore, to those items regarding which I promised to make further remarks—I refer to the additional cost of the civilized labour policy and the reduced hours of duty—there are one or two other items of expenditure to which reference also should be made.

I have stated that the increase in the capital expenditure on account of the railways during last year was £6,307,210. A considerable proportion of this expenditure was, of course, in respect of the construction of new branch lines and the acquisition of the New Cape Central Railway. It will be convenient here if I make a few remarks in regard to the new construction programme in hand ; to the results of working branch lines generally ; and also to those feeders of our railways—the road motor services. Of the 1922 new construction programme, the only lines still to be completed, and the probable dates of opening of these lines, are :—George-Knysna—42 miles—expected to be completed by 30th June, 1927 ; Harrismith-Warden Line—36 miles—expected to be completed by 15th May, 1926 ; Upington-Kakamas Line—55 miles—expected to be completed by 31st July, 1926.

Then there is the Matubatuba-Pongola Line, authorized by Parliament in 1924. This is 90 miles in length. Seventy miles are opened for the conveyance of traffic under construction conditions, and it is expected that the whole of the line will be completed and opened for traffic about the end of August, 1926.

Of the 1925 new construction programme, which provided for the construction of 962 miles of railway, the Elandshoek-Koedoeshoek Line has been opened for traffic. The construction of the Klaver-Bitterfontein Line (83 miles) and the Balfour-Seymour Line (10 miles) is still in hand, and public traffic under construction conditions is being conveyed over 35 miles of the Bitterfontein extension. The survey and staking out of the Citrus-Plaston Line (19 miles) and the Addo-Kirkwood Line (21 miles) also have been completed, and construction work is proceeding. In regard to the many other lines included in the 1925-'26 construction programme, I can only say that it is impossible to find the money to commence all these lines immediately, and that the work must naturally be spread over a number of years, but that the relative urgency of each particular line will be the sole factor in determining the order in which the construction of these lines shall be commenced. The results of working our branch lines can only be approximately computed, but I am happy to be in a position to inform hon. members that, as far as can be gauged, the results are distinctly encouraging, and, in the latest figures which I have (those for December last) the total approximate loss was reduced to £14,150, which is the most satisfactory result we have had for a very long time. I promised to give hon. members an indication of the improved results of working branch lines. The latest approximate figures which are available cover the period April to December. 1925.

During these nine months, the branch lines which were open for traffic during the same months of 1924, after meeting all working expenditure and depreciation, contributed £239,359 towards the payment of interest charges, as compared with £181,212 during the corresponding period of 1924, or an improvement of £58,147.

After making allowance for interest charges, the position was that in the nine months ended December, 1925, the loss on those lines was £300,402, as compared with £320,258 during the nine months April—December, 1924, so that the final result was an improvement of approximately £20,000. In addition to the foregoing, there are, of course, new branch lines which have only been opened for a portion of the year, but as these are only in the initial stages of development, I have not included the results therefrom in the figures I have just given.

Recognizing that it is impossible to meet all the demands for new lines, the Administration has actively pursued the Government’s policy of inaugurating road motor services wherever there is a demand for such facilities, and wherever investigation has shown that such a course was justified. I should like hon. members to know the position of these services at the 31st December, 1925. On that date, the Administration was conducting services covering a total mileage of 1,218, or an increase of 957 miles as compared with the previous year.

I shall not burden the House with too many figures. But these are particularly interesting: During 1925 we carried by these road motor services 243,794 passengers—an increase of 92,331 ; 8,983 tons of goods, etc.—an increase of 1,144 tons ; 72,454 gallons of cream—an increase of 18,589 gallons. The revenue derived from these services was £27,026 ; the expenditure was £25,600 ; the profit being £1,425.

Then there is the Administration’s liability in respect of the Pension and Superannuation Funds. Apart from the provision made for pensions and gratuities of £108,100, which are a charge upon revenue, it is necessary this year to provide for expenditure on account of the Pension and Superannuation Funds in respect of :—

1. (1) The Administration’s £ for £ contributions by members.—Chargeable to railway expenditure, £401,375—an increase of £01 780; chargeable to harbours expenditure, £10,940—an increase of £3,320: total £ for £ contributions by members, £412,315—an increase of £95,100.
2. (2) Contributions towards the extinction of the deficiencies in the funds.—Towards the Pension Fund deficiency, £162,000—which corresponds with the provision made last year; towards the Superannuation Fund deficiency, £150,000—an increase of £50,000 as compared with last year; total contribution towards deficiency, £312,000—an increase of £50,000.

In the aggregate, therefore, the total liability of the Administration in respect of Pension and Superannuation Funds—apart from the £108,100 for pensions and gratuities which comes out of revenue—is in respect of :—

I do not wish to exaggerate this expenditure. That it has increased by £141,600 since last year is due in the first place to the fact that the full effects of the new Superannuation Fund could not then be accurately gauged. It is now found that the number of new entrants to the fund is much in excess of what was expected. Then, incidental to the introduction of the new Superannuation Fund, which was approved by this House last session, the deficiency in the old Superannuation Fund was increased from £1,970,000 to £2,453,000, and the provision made last year under this head was not adequate. The shortage in last year’s contribution, as well as the additional annual contribution for this year, therefore require to be provided for in these Estimates for 1926-’27. It is only right that this House, and every member of the Administration’s service concerned in these funds, should clearly realize the very large expenditure which now has to be met annually in respect of the Pension and Superannuation Funds.

The provision made for depreciation of permanent way and works and rolling stock stands at the same figure as was provided last year, viz., £1,500,000. When I dealt with this matter last session I explained the difficulties which confront the Administration—in common with all other railway administrations throughout the world—in determining upon a satisfactory and reliable basis of calculating the contributions from revenue that should be made towards meeting the depreciation of its assets. How great are those difficulties, and how wide is the scope of the issues they involve, is well known and appreciated by those members who are devoting, or who have devoted, much of their time to the investigation of the question in the Select Committee on Railways and Harbours. I stated last year that the matter was under investigation by the Administration’s officers. With a view to bringing those investigations to a finality, arrangements have been made for a special committee of experienced officers to investigate the question of the magnitude of the contribution, and I had hoped that, before I addressed the House to-day, I would have had the report of that committee and would have been in a position to indicate the Administration’s considered view of the matter. But the issues are so great and so many, and the demands made upon the time of the officers deputed for the work while Parliament is in session have been so great, that it has not been possible for them to complete their investigations. I am assured, however, that the work is well advanced and that it will be brought to a finality at a comparatively early date. Pending the receipt of the report, I do not think I should anticipate their findings nor endeavour to deal further with this subject, which has been left open by the provision of the same amount as was provided in the Estimates of the previous year, viz., £1,500,000. The renewals fund is anticipated to have at its credit on 31st March of this year a balance of approximately £2,500,000, so that the position is entirely satisfactory.

As it falls within the category of special contributions, it will be convenient if I here refer to the betterment fund for which provision is made for a contribution of £250,000, which also corresponds with the amount contributed last year.

The position of this fund at 31st March, 1926, is estimated to reflect a credit balance of £246,000. In addition to this there will be the contribution of £250,000 during 1926-’27, so that the fund will have altogether £496,000 with which to meet the calls that may have to be made upon it during the year. The position of the fund is, therefore, quite sound and does not, I think, call for any further comment.

I will now revert to the question of the employment of civilized labour which, as I have already explained, is responsible for an increase of £160,553 in the working costs of the Administration over those of last year. Let me say at the outset that the employment of civilized labour is the settled policy of the Government, and, as one of the largest branches of the Government service and as one dependent probably more than any other upon the solution of these problems, the Railway administration in common with other departments must bear its share of the cost of giving effect to this policy. As an indication of the extent to which the employment of this class of labour has been developed since June, 1924, up to the end of December, 1925, 6,836 more European labourers and 960 additional coloured labourers have been taken into the service of the Administration. The reports received from the officers of the Administration are distinctly encouraging, and the number of promotions which have been earned by these labourers, and particularly by the youths engaged as junior labourers, give evidence of the fact that the policy opens up a new vista to this class of employee as it is now the practice to recruit as widely and as far as practicable from these labourers without going outside the service for men required for the graded and better positions, the labourers themselves know that they have many opportunities for advancement which depend largely upon their own individual efforts.

I have stated that the extra cost of this labour so far as these estimates are concerned is £160,000. That represents the difference between the wages of these men and the wages of the other labour which could replace them. But, although there is this difference in direct wages cost, there is evidence that the greater intelligence of these men in the conduct of their work compensates to some extent at least for the enhanced price of their labour, and, therefore, that, indirectly, the difference in the initial cost is to some extent at least compensated. I need only add this, that the policy has the whole-hearted support of the officers of the Administration and I am satisfied that in the interests of the country and in the interests of the Administration it is sound and justified. That being so, and in order to ensure that this civilized labour shall be employed in accordance with the Government’s policy, I have, as I recently informed hon. members, caused a special committee to be appointed to collaborate with heads and sub-heads of all branches of the Administration, with a view to effecting such distribution of this labour as will better serve the Administration’s interests and, with out involving the dismissal of any other employee, will enable the scope of employment to be widened. That committee will also carefully study the question of co-ordinating the methods of working with the dual object of securing economy in the employment of civilized labour and also opening up further avenues for promotion. I am hopeful that the results of the investigations of this committee, of which the divisional superintendent at Pretoria is chairman, and with whom two other senior officers versed in the principal branches of working where civilized labour can more largely be employed are associated will be to the lasting interests of both the Administration and the men themselves. I would like to assure hon. members that nothing will be left undone to make this policy an unqualified economical success in its broadest sense, and I trust that the time is not far distant when all sections of this House will join with me in agreeing that, whatever the initial difficulties may have been, and whatever may have been the extra expense in the first instance, we are fully justified in the action we have token. The reduced hours of duty for which, as I explained earlier, provision has been made in these Estimates to the extent of £240,000 has been fully discussed in this House on previous occasions so that I do not propose detaining the House in this regard. I feel convinced, however, that we shall continue to receive the co-operation of the men themselves, because I am anxious that we should be able to show to this House, and through it to the country, that the action has been beneficial alike to the country generally as well as the concessionaires.

I will now ask hon. members to give me their attention for a few minutes while I deal with the estimated revenue for 1926-’27. The details will be found fully set out in the green book, which I shall lay on the Table at a later stage. The gross estimated revenue from railways, harbours and steamships for the year 1926-’27 is £27,224,791. Compared with the revised estimate of revenue for 1925-’26 of £27,766,269, it indicates a reduction of £541,478. The reduction is made up of: Railways, £430,131 ; Harbours, £135,260 ; total, £565,391 ; less an increase in the revenue of steamships of £23,913, making the total reduction, as stated, £541,478.

The railway revenue has been estimated at £25,480,803, and this is expected to be derived from: (1) main services, £23,733,400; (2) subsidiary services, £1,084,523; (3) net revenue receipts, £662,880; total, £25,480,803. The revenue from main services, estimated at £23,733,400, reflects a decrease of £411,273, as compared with the revised estimate of the actual receipts for 1925-’26. The reasons for this reduced estimate are two: In the first place, at the beginning of February, 1926, tariff reductions were introduced, estimated to entail a sacrifice of £500,000. As I have on a previous occasion stated, this estimate of the sacrifice is, as far as can be judged, being fully realized, but I am hopeful that, ultimately, these reductions will stimulate traffic and create aditional business. Then the second main factor which we have had to consider is that, owing to the partial failure of the crops in the maize belt, the record export of maize which we handled during the year just closed, will not be repeated during this year. This, of course, means a direct loss of approximately £500,000 to the Administration in our earnings for the year, because, whereas last year we handled roughly 1,200 000 tons of export maize, it is not expected that the corresponding export tonnage this year will be great. The average weekly revenue for the year 1925-’26 amounted to approximately £462,000. It is anticipated that, after making due allowance for the tariff reductions of £500,000 and for the falling off in the maize traffic, the weekly earnings during the year 1926-’27 will be £455,000, or a weekly decrease as compared with last year of £7,000. In determining upon this estimate, I have been guided largely by the fact that a whole year’s revenue from the line acquired from the New Cane Central Railway Company in place of eight months only, as in 1925-26, will be received and that a considerable mileage of new lines will also be opened for traffic for the first time. Then, apart from the partial failure of the maize crop, which, as I have stated, is expected to result in a loss to the Administration of half a million pounds in revenue, there are fortunately signs of development in other directions throughout the Union, which will help in meeting the falling off in revenue from that cause. It would occupy far too much of the time of the House for me, even cursorily to review, as I should like to, the economic outlook of the Union, and hon. members have already had from my hon. colleague a very exhaustive survey of that position from the standpoint of the Central Government’s revenue.

In framing the estimate which I have placed before the House this afternoon, I necessarily have had to consider the agricultural, industrial and commercial outlook of the Union, and there is much hope to be derived from such a survey.

The maize elevators have been fully tried out during the last 12 months, and have proved to be an unqualified success. Through these elevators, over five million bags passed during the period July, 1925, to February, 1926. A simplified form of elevator, from plans framed by our own officers, is being erected at the present time, and consideration is now being given to the question of the construction of additional country elevators. Judged from a financial standpoint, the working of the elevators during the 10 months ended January, 1926, was also a success. The revenue was £185,361, and the expenditure £172,409, leaving a profit of £12,952 towards the previous accumulated loss of £74,417.

I would like to say, in regard to the report of the commission on the trade prospects of Port Elizabeth harbour—which has recently been placed in the hands of hon. members— that the Government is under a deep obligation to Mr. van der Horst, the chairman of the commission and to his two colleagues, Messrs. Sturrock and Serton. The commission has furnished the Government with an exhaustive, able and lucid report in regard to the potentialities of the hinterland served by Port Elizabeth harbour, and in regard to the necessity for enlarged and improved harbour works at Algoa Bay. It will have been observed that the commission advocates, as a preliminary step, that a proper survey be undertaken immediately, so that a thorough and accurate knowledge may be obtained of the expenditure involved before a final decision is arrived at. The Administration is prepared to give effect to the recommendation that such a survey be carried out, with a view to ascertaining all possible data to enable a decision being reached after further necessary consideration as to the action that should be taken to provide improved harbour facilities at Port Elizabeth, and the estimated cost of the survey will be included in the Estimates for the forthcoming year.

For the steamships, we are budgetting for a revenue of £247,755 which compared with the revised estimate of the earnings for last year of £223,842, an increase of £23,913. During the past year, the two new steamers have been delivered and are fully employed in the Administration’s service of transporting cargoes of sleepers from Australia for our requirements. On the outward voyages, they are largely utilised in transporting cargoes of coal on private account. The addition of these two steamers is expected to result in the elimination of outside chartered steamers for our requirements, and the effect will now be that practically all our expenditure on steamships will be spent in South Africa.

I have now fully explained the Estimates of Expenditure as well as the Revenue Estimates and have shown that—

The question as to the manner in which that surplus shall be appropriated has received earnest consideration. One of the most pressing necessities—and one which will accord with the policy of the Administration—is to write off the capital value of the Administration’s dead harbour assets which stand in our books at £384,588 and which involve the payment of annual interest charges amounting to approximately £13,461. In addition to these assets, there are two amounts of a similar nature to which I made reference in my Budget speech last year, when I expressed the hope, that a surplus would be secured from the results of working for the year 1924’25, sufficient to enable the Administration to write off the capital cost of the loss sustained on the Durban elevator foundation of £250,000 and the portion of the Sea Point line capital which is not represented by any tangible asset, which amounts to £42,662, a total of £292,662. Much as the Administration would have liked to have utilised the expected surplus for 1925-’26. Towards writing out the whole of these dead assets, i.e.,

it is felt, that at the moment, we are not justified in writing off the whole of this amount of £677,250 which would be necessary assuming that the surplus available actually reaches that sum. On the other hand, the Administration feels that the unaccomplished proposals of last year should this year be given effect to, and that of the estimated surplus of £667,802 the cost of the Durban elevator foundations, and that portion of the Sea Point railway line capital, unrepresented by any tangible asset, should be a first charge to the surplus. This will require as I have indicated £292,662, and will leave, still available an estimated balance of surplus of £375,140. Now it is the Administration’s intention to contribute that sum, or whatever may be the amount available from the actual surplus realised after providing for the two items I have mentioned, to the Rates Equalisation Fund. I would recall that this fund, which was established by the Act of Union, has been without any credit whatever since 1914-’15. This has been entirely due to the fact that, since then, the finances of the Administration have not admitted of any contribution being made. But it will be admitted on all sides, that the object of that fund, which is to provide money to meet any serious fall of revenue, so as to enable the Administration to avoid the necessity for increasing its tariffs during a time of financial stringency, demands that the fund be re-established at the first possible opportunity, and, in view of the very considerable reductions in tariffs, amounting to £i,000,000 per annum, which during the last 14 months have been made by the Administration, it appeals to the Administration that the opportunity to take this course now must not be lost. As I have already stated, the most recent tariff reductions, are involving a sacrifice of revenue fully equal to the £500,000 which was expected. I am confident that, ultimately, this sacrifice will more than be made good by the increased traffic which will result. But it will take time, and it is absolutely necessary that we should have available in this fund sufficient to tide us over the interim which may elapse before the benefits to be derived from these reductions can be secured. Without this balance, the Administration might be forced to increase its tariffs, which would be most unfortunate, and I do not think, therefore, that any better means for employing the remainder of the surplus secured from last year’s working can be found, than placing it to the credit of the Rate Equalisation Fund.

I shall now detain hon. members only a few minutes longer. I have already dealt with the important matters of the hours of duty of the staff and of the civilized labour policy. I want to say a few words in regard to the staff generally. The year which has passed has been a record year from the standpoint of traffic. Naturally this has necessitated a severe strain upon all ranks. We have moved the largest maize crop in the history of the Union, and also moved it within a record period. We have handled also unprecedented volumes of other traffic. That this was successfully accomplished is, in no small measure, due to the loyal efforts of every member of the Administration’s service, and I think the House will gladly join with me in recording this fact. I am pleased to say that the Administration has received from its servants of all ranks the utmost co-operation. During the year which has just closed, the New Service Act, passed by this House last session, has been brought into operation, and this I feel sure has gone far to remove many causes for discontent. The new Superannuation Fund has also been brought into operation, and to a vast number of servants this has removed misgivings with which they were previously faced, when contemplating the time that they would have to retire on pension. The Conciliation Board, established in 1919, has assumed an altogether different status consequent upon the passing of the Service Act. It is now a statutory board, and the good results which followed from its establishment will, I am certain, continue to mark its meetings in future, while, in addition, it will be a greater link between the Administration and its servants.

Many important subjects were dealt with by this board during the last year, and if the features which have characterised the board’s deliberations and its decisions in the past are continued, it will be impossible to exaggerate the usefulness of this body in maintaining the good relations between the Administration and the staff employed in the railways, harbours and steamships services.

Estimates of Expenditure on Capital and Betterment Works will, I hope, be laid on the Table soon after the recess. I will then take an opportunity of explaining the nature of the works and the magnitude of the expenditure involved.

Notwithstanding certain setbacks, the prospects for the railways, harbours and steamships of the Administration are most encouraging. Our financial position is sound and our staff are loyal. With faith in our country, our people and our staff, we once more go forward determined to maintain the high standard of the services of our Administration.

I lay on the Table the green book containing the necessary particulars.

Second Order read: Second reading, Railways and Harbours Unauthorized Expenditure (1924-’25) Bill.