the repayments by these bodies with those of burghs will throw light on the management of urban debt. The annual statutory repayments for counties and parishes average about 3 per cent., which, it should be noted, is a lower rate than that for towns. In the following calculations I shall make use of the term percentage, but it must be clearly understood that this is not the real amount repaid per cent. per annum, but the proportion expressed as a percentage which the yearly repayments bear to the balance of debt outstanding. This result should be higher than the statutory rate of repayment owing to loans which are standing at a reduced amount. Further I shall exclude the debt outstanding for purposes of a commercial nature. This gets rid of the large amount of irredeemable debt on account of Water and Gas Supply, and also otherwise simplifies matters owing to the very different principles on which such understandings are managed.

The results then are these: County repayments give an average percentage over all purposes of 5 per cent., burghs of 3'6 per cent. County drainage debt gives a percentage of 36 per cent., burgh drainage 24 per cent. That is to say that although the percentage ought to be higher in burghs, it is really lower. The debt for roads and bridges is repaid at the same statutory rate in both counties and burghs-namely 2 per cent. Working out the percentage on balance of debt we get for counties 52, for burghs 39, the same story. There is no department of burghal administration which forms a counterpart to parochial loans for poorhouses, but it is interesting to note that this debt, which has always been under the supervision of the Local Government Board, gives a percentage of repayments of 8.2 per cent.

This proves as clearly as can be done that the unsatisfactory state which plainly exists in some individual cases is sufficiently prevalent to materially affect the rate at which urban debts are being repaid. But this is not all. The repayments appearing in the burgh returns are greatly overstated. In many cases they include in the annual repayments out of revenue amounts which are really paid out of sinking fund or some other accumulated moneys. Let me take a glaring instance. In the course of an examination of some details of the returns, I noticed that the 1895-96 repayments of a town in Renfrewshire were about five or six times larger than those of previous years, while there was a deficit for the year in the accounts of over £100,000. After entering into correspondence with the Local Government Board, where my inquiries were answered with the greatest courtesy by the Head of the Statistical Department, I found the point had

come to their notice, and that, as a matter of fact, the figures relating to this burgh were exceedingly unsatisfactory. The repayments for the year must be taken as overstated by about £100,000. I have made the necessary adjustment in regard to this case before calculating the percentages of repayment, but there are many other cases in which similar inaccuracies have occurred, although to a much smaller extent. It is clear that the figures I have given, significant as they are, by no means reflect the full laxity which exists in repaying loans.

Summarising this inquiry into burgh finances we draw the following conclusions:-Public demands of the most varied kind have induced municipal authorities to increase their expenditure to a very considerable extent. We have noticed the same tendency in the accounts of counties and parishes, but a fundamental difference arises in the manner of defraying the expenditure. We saw that in both counties and parishes large imperial grants are received, sufficient to take off the rates the entire burden of many new duties, and that in addition to these grants, assessments have been very considerably raised. In burghs, on the other hand, the increase of revenue has been small. A certain supply has, so to speak, provided itself. Imperial subventions have grown, although in burghs they make up a comparatively small proportion of revenue; industrial ventures have yielded surplus receipts, and the extension of the area of the towns has brought in an increased sum of taxation which as far as it goes must be placed against payments. But these sources of supply have not been sufficient, and when it came to the point of either adding to the rates or adding to the debt, the latter method has been resorted to. In this way burghs have succeeded in going through thirteen years of growing activity in all spending departments without raising their rates one farthing, but as a consequence their debt has grown considerably. County debts amount to one-fourth of valuation, parish debts to one-seventieth, school-board debts to one-fifth, while the debts of burghs exceed the valuation by 60 per cent., and of the total £8,000,000 is a direct burden on the

rates.

This survey of the progress of local finance explains the rapid rise to public importance of the question of decentralised government, and it indicates some of the problems which will come up for solution in a not very distant future.

An essential difference exists in the management of imperial and local finance. The one is guided and watched over by men of careful training, who are imbued with the traditions of sound

policy, while local bodies can command no such services, so that intelligent criticism may be said, in the words of an eminent authority, to be almost wholly wanting. It is a matter for congratulation that public interest in these questions is being roused. But under present conditions, if we wish to criticise, what have we to go on? In the most important department, that of urban management, the statistics are incomplete and unsatisfactory. Our conclusions, where they ought to be precise, are vague, while in many points intelligence is simply not to be had. The questions about which we desire particulars are numerous and of growing importance. The whole group of problems connected with the incidence of local taxation have been left unreferred to, as our present information will probably be superseded when the evidence taken before the Royal Commission is published. But there are wide questions of policy which call for attention. Let me indicate one only. Urban authorities are adopting every means in their power to avoid an increase in their rates of assessment, and none of the methods raises graver apprehensions than the desire to take over the management of profit-yielding enterprises. On this point we have, however, as good as no information. It may be the destiny of this country to proceed in the direction of municipal communism, but whatever happens, let us not permit such a development to be hastened by efforts to evade the consequences of reckless mismanagement.

Before the problems of local taxation can be studied with the minuteness they demand, a radical improvement must take place in the tabulation of the statistics. After what has been said it must appear that to make this possible an efficient audit is unquestionably necessary. The only debatable point is whether the supervision ought to be private or official. At present counties and parishes are audited by a number of private practising accountants, but recently it has been suggested to create a public department for the purpose of auditing the accounts of all local bodies. The proposal created considerable discussion at the time, and the one important argument brought against it was the impossibility of completing the work within a short time of the date of closing the accounts. The work would have to be spread over the year, otherwise the department would lie idle for part of the time. This is a strong argument, but all the same I think that a satisfactory result can be obtained in no other way than by a central, that is to say an official audit. Local accounts differ in essential respects from ordinary accounting matters. In trading companies the important 1 Bastable, Public Finance.

point is to put the accounts into final shape without loss of time and determine the profit for the year. In Local Government accounts no such imperative necessity exists, and the important point is to collect all these accounts into one carefully prepared return so that we may have information regarding the tendencies of local taxation.

Such information can be best secured by a central audit on account of the special nature of the result we desire to obtain. In the first place absolute uniformity of accounts is necessary if a reliable summary is to be produced; uniformity not only of bookkeeping, but of the methods of treating each group of transactions, and above all things consistency of practise in one year with another. There can be no question that this result can be more completely attained by a central audit. Secondly, accuracy, that is to say compliance with the statutory provisions, will be more authoritatively guaranteed if the supervision is official. The legislative enactments regulating local finance are complicated in the extreme, and for proper control a centralised staff which is engaged in this class of work all the year round must be superior to innumerable private practitioners who meet with this highly technical matter only once a year. On this point we are not confined to general suppositions, we can be guided to some extent by experience. Parochial accounts are at present privately audited, but although the statutory regulations are comparatively simple, the results are not quite satisfactory. Let me take an instance. Parochial rates are imposed, not on gross rental, but on the rental after deducting an allowance for taxes and repairs, and the Poor Law Act gives directions that this abatement shall take into consideration the different sums demanded for this purpose by various kinds of property. One can well imagine what a vast amount of trouble would be entailed in carrying out such a direction. The worthy man who holds the office of parish clerk feels a very natural disinclination to calculate a few thousand proportion sums, so the practice has crept in of deducting a uniform percentage from all rents, and I believe 10 per cent., which can be computed mentally, is a special favourite. But it is obvious that to deduct a uniform percentage from all rents leaves matters the same as before, and completely alters the contemplated incidence of taxation. Still I have never heard of a parish clerk having been bothered by his auditor on this account.

It is also probable that an official audit would insist more effectively and more strictly on compliance with statutory regulations. Let me again take an instance from parochial finance.

Parochial rates are levied on owners and occupiers not at equal rates per £, but at such rates as will realise the same total of taxation from both classes. This introduces great complications and would involve endless trouble if it were carried out. We find from the returns that out of 877 parishes, 839 levy rates, which are equal for owners and occupiers. Evidently no one bothers much about this either. The system of private audit is altogether a curious feature of our local government. No one has ever advocated a local audit of the accounts of the various outposts of the Inland Revenue authorities, or of custom houses, but local authorities in reality are nothing more than agencies of the central government distributed over the country, because of the convenience of local services for certain duties of administration. The present method of supervision can only be explained by the fact that the interests involved were at first insignificant.

I am afraid I have dealt with this point in tiresome detail, but in the interests of public finance the question demands settlement. This endowment of local authorities with financial powers is nothing more than an experiment really. It is of recent growth; it has been developed on no settled line of policy,1 and it seems to have been inaugurated in exaggerated belief in the financial capacity of a democracy. In the meantime I wish to say nothing more than this. What we need, and what at present we have not got, are reliable sources of information by which to judge this

venture.

It is likely that in the near future we shall see a still larger extension of local expenditure and local taxation. Everything points in this direction. "It is evident," says Sir Henry Fowler in winding up his report on the local taxation of England, "it is evident that the local expenditure which exceeded £50,000,000 in 1891 will continue to increase." Sir John Skelton prophesies the same regarding Scotland, and Professor Marshall in estimating the likelihood of a permanent reduction in the rate of interest bases his disbelief, among other grounds, on the unlimited capacity for spending possessed by local authorities.

It may be a grand development this: we may believe with Sir Erskine May that it is due to her free local institutions that England alone among the nations of the earth has maintained for centuries a constitutional policy. Or with De Tocqueville we

1 Compare Mr. Goschen's speech of 3rd April, 1871. "Above all things I think it is our duty to make up our minds clearly as to what we want and to put a stop to that piecemeal legislation as regards local government which has produced the chaos at present existing."