The Finance of Publicly Owned Utilities
| DOI | http://doi.org/10.1111/j.1467-9299.1926.tb02270.x |
| Published date | 01 October 1926 |
| Author | C. W. Hurcomb |
| Date | 01 October 1926 |
The
Finance
of
Publicly
Owned
Utilities
in Relation to
the
General National
or
Local Finance
By
C.
W.
HURCOMB,
C.B.,
C.B.E.
Principal Assistant Secretary, Ministry
of
Transport
EW
questions connected with public administration have been more
F
ardently discussed than the public ownership of public utilities
and the regulation of such utilities in the public interest when, for political
or other reasons, public ownership is held to be unnecessary dr undesirable.
The first
of
these problems, the limits
of
public ownership,
is
largely
a
political problem, and outside the scope of our conference. The
second problem, the regulation of privately owned utilities, receives
separate treatment in the first series of the papers which are presented
to
us.
I
am
asked to deal with utilities
of
which the ownership is in fact
vested in the community, and to examine the principles which should
properly determine the relations between their finance and the general
public finance. The topic specially allotted to me can, however, be further
narrowed down, since other papers in this series will deal primarily with
public utilities locally owned.
And
as
Mr. Hawtrey will presumably approach our common topic
of the relations between the finance of nationally owned utilities and the
general national finance from the angle of the central Treasury,
I
shall
probably best serve the purpose of our discussion if
I
attempt to present
the
point of view which might be taken on behalf
of
such undertakings
themselves
.
I
have hitherto employed the useful but somewhat abstract term
"
public utility
"
without defining it.
I
employ it to denote an enter-
prise or activity undertaken in order to supply the citizens with an
essential commodity or service in universal demand at
a
price, and at a
price which
will
ordinarily bear
a
reasonable relation to the cost of pro-
ducing the commodity or providing the service.
A service which is rendered free of charge-such
as
defence
and
pro-
tection, or
a
minimum of national education-is not
a
public utility in
this
sense. And if, for example, it were decided
as
a
matter
of
public
policy
to
supply the community
with
free postage or free
gas
as
well
as
with
free
air,
that supply
would
not be
a
public utility
within
the
scope of this paper. When
a
utility is provided free of charge or
at
a
merely nominal charge, the nature
of
the
control which the custodians
360
Finance
of
Public
Utilities
of the national finance would be entitled and expected to exercise must
be different from that appropriate to the control of an undertaking
of
a commercial or quasi-commercial character.
I
have in mind, then, such undertakings as Posts, Telegraphs, Tele
phones, Railways, Tramways, Canals, Docks and Harbours, and other
agencies for providing and selling communication and transport and the
more strictly trading activities
of
States, such as the ownership
of
shipping
or mines.
Usually the service which the State itself undertakes to provide on
the ground that there is a public interest in its supply is by nature
a
monopoly or quasi-monopoly. In these spheres competition would be
wasteful, uneconomic, and in the long run extravagant from the point
of view of the consumer or user. Having assumed the monopoly in order
to protect the user against excessive charges, and to ensure that he
obtains reasonable facilities, the State can, if it chooses, treat the utility as
a
department
of
government, subordinate its administration to inappro-
priate forms of control, and render its finances entirely subservient
to
the
convenience
of
the national Exchequer, regardless of the proper develop-
ment and requirements of the utility itself. The State may exploit
the monopoly and starve the service;
it
may subsidise the service
and through defective accounts obscure the extent to which
it
does
so.
Governments which
find
themselves possessed of public utilities may
resort and have resorted to such mistaken methods, but they are not
bound to do
so
nor are Government Departments necessarily and always
incompetent, stupid, and perverse in their conduct of commercial
businesses, as critics often too rashly assume. Yet it must be admitted
that relationships between State-owned utilities and the national finances
have prevailed, in some notable instances, with results which challenge
the correctness of the relationship itself and make it worth while to inquire
what the respective powers and functions of such undertakings and the
national Treasury should be in regard to the basis of the charges
to
be
levied for services rendered, in regard to the expenditure of the under-
taking, and in regard to its general conduct and control.
Though examples of public utilities which are owned by the State
in many,
if
not most, modem countries, will readily occur to the mind
of every one,
I
have not found, and have not been able to compile, an
exhaustive list. It would,
I
venture to suggest in passing, be
a
useful
contribution to the study of public administration if some member or
associate
of
this Institute were to draw up such
a
list, in which would
appear both the nature of the undertakings publicly owned in various
countries and
a
note
of
the precise relationship in which they stand to
the main machine of Government.
A
classic instance
of
the effects of the complete subordination of the
finances of an industrial undertaking to
the
changing exigencies of
'
361
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