The Finance of Publicly Owned Utilities
| Date | 01 October 1926 |
| DOI | http://doi.org/10.1111/j.1467-9299.1926.tb02269.x |
| Published date | 01 October 1926 |
| Author | R. G. Hawtrey |
The
Finance
of
Publicly
Owned
Utilities
in Relation
to
the General National Finance
By
R.
G.
HAWTREY
Assistant
Secrefary,
Treasury
PUBLIC
utility may be defined as
a
service
in
which
a
tendency
A
to
a
local monopoly necessitates the intervention of
a
public
authority to defend the interests of the c6nsumer.
This
definition excludes
a
service like the police, which is itself an
exercise of public authority, and
it
likewise excludes one like education,
where the intervention
of
a
public authority is not due to any monopolistic
tendency.
A
public utility undertaking nearly always involves heavy capital
expenditure. It is this, or at any rate heavy overhead charges, from
which its monopolistic character arises.
If
heavy overhead charges
were not involved, the service could usually be duplicated without
serious waste.
In the case of the carrying of letters, if
an
adequate transport system
be supposed already in existence, the overhead charges are mainly for
the organization and not for capital.
For
a
telegraph
or
telephone
system they are both for organization and for debt charges in respect of
the capital outlay.
It
would be
so
wasteful to have two separate postal organizations,
that if they existed
in
any region they would almost certainly amalgamate.
Once amalgamated, they would be in
a
position to impose exorbitant
monopoly charges upon the public, and it is to prevent this that the
State institutes
a
postal monopoly in its own favour.
A
public monopoly
is
not the only possible method
of
preventing
exploitation. Excessive charges may be prevented by
a
judicious
regulation
of
a
privately owned company conducting
a
public utility.
Charges may be limited by law, and the company may then be left to
make what it can out of the enterprise. But our present subject is the
finance of
publicly
owned
utilities, to the exclusion of those which are
privately owned
and
publicly regulated.
If
public ownership is
a
method of preventing the abuse of a mono-
poly,
the natural financial policy to adopt would be to
fix
charges, as
nearly
as
may be, at the level to which free competition would have
brought them, had there been no opportunity for a monopoly. This
solution, however, is based
on
hypothesis, and does not always give
unequivocal guidance. Its indeterminateness is due not wholly to
practical uncertainties but partly also to theoretical difficulties.
352
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