Borrowing by Local Authorities
| Date | 01 January 1928 |
| Published date | 01 January 1928 |
| Author | I.G. Gibbon |
| DOI | http://doi.org/10.1111/j.1467-9299.1928.tb02319.x |
Borrowing
by
Local
Authorities
By
I.
G.
GIBBON,
C.B.E.,
DSc.
HAVE been asked to deal with some questions which arose
I’
1
out of the recent address
on
this subject given by Mr. Holden
at
a
meeting of the Institute. Within
a
short space
it
will be possible
to treat only
of
a
few of the many matters which merit discussion
;
I
may return to others
at
a
later opportunity.
First, some brief particulars
of
borrowing by Local Authorities.
The latest return (for March,
1925)
showed that the outstanding debt
of
Local Authorities was then
~865,000,000,
against
’
which there was
~63,000,000
in sinking funds. Of this debt, in round figures
45
per cent.
was for various trading undertakings,
25
per cent. for housing,
20
per
cent. for basic services, such
as
highways, sewerage, and the like, leaving
about
10
per cent. for personal services, education being
far
the largest.
These figures need
to
be
known
in order to understand the significance
of
the debt. But this aspect of the question is not my subject at {lie
present time.
Pay-as-you-go.
2.
One
refreshing indication
of
the larger amount
of
thought which
is
being devoted by Municipal Treasurers
to
the question
of
debt
is
the
attention which
is
being paid to the pay-as-you-go policy, the provision
out of revenue of moneys needed for expenditure of
a
capital character.
It
is significant that the subject is receiving equal attention in, for
example, the United States.
The advocates of pay-as-you-go depend chiefly
on
two arguments-
(I)
That payment by loans means that
in
the aggregate very large
sums are paid by the ratepayers over and above the actual
cost
of
the works.
Thus,
if
LIOO,OOO
be borrowed for
30
years
at
5
per cent., the aggregate
sum
which has to be met before
the loan is fully redeemed, amounts to
L1g5,15o,
nearly twice
the amount of the original loan. These arguments, with
figures, are well developed
in
an
article by
Mr.
Arthur Nettleton
in the
Financial Circular
for January,
1927.
Total aggregate payment, however, is only
a
small part of
the case
;
thus-
(a)
The old economists held that the less money that was
taken out of the pockets of the tax- or rate-payer, the
16
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