Local Authority Investment and Debt‐Financing*

DOIhttp://doi.org/10.1111/j.1467-9485.1972.tb00516.x
AuthorJ. Bonner
Publication Date01 Jun 1972
LOCAL AUTHORITY INVESTMENT
AND DEBT-FINANCING*
J.
BONNER
Local authority investment deserves more attention than it receives.
Taken together local authorities now undertake more investment than the
nationalised industries, and their capita] assets are involved in the whole
range
of
possible government activities, from education to municipal bus
services. What distinguishes their investment programme, apart from its size
and diversity, is the fact that it has always been largely debt-financed.
If
anything is to be learnt, therefore, from the theoretical debate about debt-
financing government investment it will apply, as far as the U.K. is concerned,
to local authorities.
I
LOCAL
AUTHORITY
FINANCING
Unlike the central government, which can finance its own small invest-
ment programme out of tax revenue, local authorities have to borrow in order
Table
I
FINANCING
U.K.
LOCAL
AUTHORITIES
Outgoings
Incomings
1969
1969
1961
1951
Total current expenditure:
4,412
Gross
trading income:
1,062 220 21.3 20.3
fm
fm
76
%,
%
Rate revenue
:
1,666 34.5 39.4 39.2
Current grants from
Central Government:
2,099 435 39.3 405
4,827 4,827
100.0 1000 100.0
-
----
Balance
:
415
-
Gross
fixed
capital formation:
1,724
Current account balance:
415 24.2 23.4 18.6
Other capital items
:
-7
Capital grants from
Central Government:
143 8.3 5.6 3.5
Government
:
556 32.4
-
69.0
Other borrowing
:
603 35.1
71.0
8.9
1,717
1,717
1000
100.0
100.0
Borrowing from
-
~~--
-
~~____
Sources
:
Annual
A
bsfract
and Financial Statistics.
Notes:
Total current expenditure includes loan servicing
so
charged.
Gross
trading income means trading profits, rental and interest income.
Other capital items allow
for
local authority loans and capital grants to
private sector.
*
The author is indebted for comments on earlier drafts of this paper to
Dr.
C.
Ault,
Mr. A.
J.
Baker, Professor
D.
S.
Lees, Professor
J.
M. Parkin, Professor W.
B.
Redda-
way, and
Mr.
M.
G.
Webb, and apologises for
not
making better use
of
their ideas.
135

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