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£21,000, imperial subventions by £120,000, fines, dues and all miscellaneous receipts by £368,000, while the surplus receipts of commercial ventures account for £72,000. Now, although these items together make up a substantial increase, none of them, with the exception of imperial subventions and receipts from commercial ventures, form true sources of revenue from which to defray growing expenditure. The growth of the sum yielded by common good is not all genuine, but is caused by the Local Government Board insisting on complete returns from many burghs which did not before give information regarding their common good. Sales of property cannot be regarded as income and are probably due to reselling land acquired for improvements. Dues, fines, and miscellaneous receipts have largely increased, but not because any new source of revenue has been opened up, for the increase is due chiefly to the extension of such works as public baths, wash-houses, markets, slaughter-houses, etc., and it should be noted that the charges made are not sufficient to cover expenditure. The increase shown on these heads is, therefore, not truly revenue, but rather a receipt which falls to be deducted from gross expenditure.

We come now to the other two items, assessments and loans. Assessments yield an increase of £328,000, loans have grown by £503,000, about half a million. This increase is full of significance. It is true assessments yield a larger sum, but relatively, as well as absolutely, the sums annually raised from borrowed money have increased. The rate of the growth of the assessments is 24.2 per cent., that of loans 100-7. In fact, regarded in relation to rental the assessments have not been raised at all, and the increase is due entirely to the rising valuation of the towns. The rates per £ imposed thirteen years ago are the same as those imposed now, within a fraction of a farthing. Further, it must be taken into account that if the extension of the towns has brought in increased assessments, it has also called for a corresponding rise in expenditure. Professor Adams has pointed out that urban expenditure follows the law of decreasing return, and with an increase in the size of a town we get a proportionately larger outlay, so that the gain is by no means a net increase. On the other hand, loans have been so freely resorted to that urban debts are rapidly accumulating, and in thirteen years have risen from £9,800,000 to £16,600,000 exclusive of the new debt incurred for purposes of gas supply, electric lighting, and tramways which amounts to £5,500,000 more.

Attention has often been drawn to this rapid increase of loans No. 34.–VOL. IX.

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as indicating a recklessness in spending which may cause grave difficulties in the future. But when we find this extensive borrowing going on hand in hand with a very small increase only in the annual revenue, the state of affairs arouses even more alarming apprehensions.

Large capital outlay entails an annualirevenue expenditure on upkeep and repairs, interest on debt and instalments repayable, and side by side with this growth of urban debts we should expect to find a rising revenue. That such is the case only to a small degree, and at a time too, when expenditure is increasing in other departments as well as those for which loans are commonly raised, suggests the question whether burghs are charging revenue with the full expenditure applicable to it. This question is of such importance that it should be examined in more detail. Two methods suggest themselves by which burghs may be relieving revenue of the full burden it ought to bear. (1). By charging expenditure on maintenance and repair of public works to capital account and defraying the cost by a loan, and (2) by evading the statutory enactments regarding regular repayments of loans. I shall deal with these in their order.

As regards charging expenses of upkeep to capital, it is by no means an improbable assumption that such should be the case. In actual affairs it is a matter of frequent occurrence. Any one who has known a case where the interests of capital and revenue conflict is aware how fatally difficult it seems to make an equitable distribution of these charges; how invariably it occurs that the representatives of the interests of revenue are too willing to place maintenance charges against capital. It would not be in any way astonishing if bodies whose accounts are imperfectly audited, and who, above all, have statutory borrowing powers of the most ample description, should make a financial blunder of this sort. The only absolutely conclusive method of proving the existence of such a practice would be to call in the ledgers of all burghs and examine the capital accounts, but a very convincing proof can be brought by a careful examination of such information as is available.

In the first instance we may contrast the increase of annual revenue with the probable increase of annual expenditure. The annual revenue, we have seen, has increased by about £520,000, excluding loans and sales of property. Now as regards probable expenditure. In the first place there will be the increased

1 As above :- Assessments £328,000, Imperial Subventions £126,000, Surplus receipts from industrial ventures £72,000.

debt charges. The new loans contracted during the period amount to a balance outstanding of £6,800,000 and the charges for interest and annual repayment at the average statutory rates will absorb considerably over £350,000 annually. Then there is the increased expenditure on police, which is another of the few items which admit of comparison over the period. The increase amounts to £100,000. Besides police, there are the services which cannot be separately traced, but may be indicated. There are roads, streets and bridges, and sanitation, which in counties call for large additional expenditure and presumably do the same in towns. Besides these there are the peculiarly urban charges of artisans dwellings, public parks, public libraries, &c., &c. Is it in the least likely that £520,000 will cover the entire burden of the new duties burghs have taken up since 1883-84 ?

The point may be illustrated in another way. It was necessary in order to make any comparison between burgh finances now and thirteen years ago to state the expenditure in a lump sum and give up the attempt to trace details or to exclude capital expenditure, but let us now leave this comparison and turn to the carefully prepared accounts of 1895—96. The net receipts of every description, excluding only loans and sales of property, amount to £2,100,000. This is the revenue available for the purposes of the year. Now let us go over to expenditure and see how far this sum ought to be sufficient. In the first place, there will be the purposes applicable entirely to revenue, unconnected with permanent works, as police, cleaning and lighting of streets, removal of nuisances, and general sanitary operations, registration, valuation, interest on debt, and so on, including salaries applicable to these departments. These heads appropriated together a of £1,450,000, which leaves £650,000 still available. The services which have still to be provided for are roads and streets, drainage, artisans' dwellings, and all town property, and it is apparent that £650,000 will not cover the proper revenue expenses. These expenses comprise in the first place the annual charge for the repayment of the debt, which itself absorbs about £300,000, leaving a balance of

1 Thus :-Interest on £6,800,000 at say 3} per cent., £238,000 ; repayment after deducting the irredeemable debt of about £2,000,000 at say 3 per cent. per annum £144,000, together £382,000. This is a very low estimate as will be seen later on when repayment of loans is dealt with. Note that debt on account of gas, electric light and tramways is not included.

? Thus :—Total debt charges per taxation return, £521,831. Deduct on account of water and gas supply, tramways, &c., per return £129,792, and further £100,000 being overstatement of repayments as explained later on, making £292,039.

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£350,000. This paltry sum is all the revenue the burghs provide to meet the outlay connected with three important and expensive services, viz., roads and streets, drainage, and town property of all descriptions. The expenditure actually entered for these purposes is £408,000, leaving a deficit for the year, while in addition we have expenditure out of losses, classed as capital expenditure, amounting to £623,000, and for the two years previous to £546,000 and £576,000 respectively.

A comparison of burgh and county accounts throws further light on this point. The cost of maintenance of county roads charged to revenue in 1895-6 is £435,000 and the road debt outstanding is £288,000, or 66 per cent. of annual revenue expenditure. The corresponding figures in burghs are maintenance paid out of revenue £215,000, loans outstanding £725,000, or 337 per cent. of annual revenue expenditure. To some extent these proportions may be explained by the fact that town roads are more expensive to lay out and require less repair than county roads, but even after making every possible allowance the figures are exceedingly striking 1

The second method by which burghs may be relieving revenue from the true burden of the duties they are taking over is by evading the statutory requirements for the repayment of loans. The rates of repayment which are prescribed by acts authorising loans vary considerably. Money raised under the police acts had until recently to be repaid within 20 years, but by the new police act the period has been extended to 30 years, and this affects sums raised during the last three years for which we have returns. Under the public health acts the period is 30 years, under the roads and bridges acts 50 years. Generally speaking therefore, and taking into consideration the relative amounts of the loans under each head, 4% annually would represent a fair average of the statutory rate of repayment.

The difficulty which arises at this point is this. The annual percentage repayable has to be calculated on the full amount of the loan and the returns only give the balance outstanding at the close of each year. A concrete case will bring this point out clearly. A loan of £100 has been contracted and is being repaid at the rate of 4%, so that now the balance outstanding is £25. If we were to make a calculation based on the annual repayment and the loan outstanding, we should come to the conclusion that this loan was being cleared off at the rate of 16%, instead of 4°). Evidently, therefore, the statistical information must be used with extreme care, and the best way of establishing our conclusion is to deal in the first place with individual cases in which borrowing has been so recent as to admit of a complete examination of all loan transactions.

1 The differences between town and county roads as regards initial cost and cost of maintenance must not be exaggerated. For one thing, if county roads require more constant repairs, they are also more cheaply repaired, and further, as regards initial cost, county roads have to overcome natural obstacles which, especially in a hilly country like Scotland, greatly increase their expense. Some allowance may also have to be made for the fact that county roads had to repudiate a large amount of their debt when tolls were abolished, but then if burghs were managing their debt properly they ought by this time to have repaid most of the loans which were co-temporary with the old county road debt. Looked at from every point of view, these figures are well worthy of consideration.

Taking the accounts of separate towns, which lend themselves to such an analysis, we find the returns of an important burgh in Ayrshire, which within the last ten years has borrowed £41,000, while it is repaying annually no more than £400, except in the last year in question when it cleared off £970. Going further we find in the same county a burgh with a debt which since 1880 has increased from £13,000 to £251,000. About two-thirds of this money is repayable at 5% per annum, but during the last three years the total reductions amount to only £5,524. Nor is it only the large burghs with heavy debts which are evading their duty to repay them at the statutory rates. Small burghs are equally neglectful. We find, for instance, the returns of a small town which has borrowed £3,400, and although it began its operations in 1891, it has only made a single repayment of £100. Another townlet has borrowed £7,000, and in the course of ten years has reduced its debt by a total amount of £320—an amount which is not only insufficient, but has been accumulated quite irregularly, this provision having been made in two years. Any one who is curious enough can abstract many more instances from the published returns; but I shall quote one more, the case of a little burgh in Fife which has borrowed £4,000, and for the last three years has done nothing to pay this off, resting content with the achievement of the year before, when, in a moment of zeal, it appropriated to this purpose the sum of £18.

When we turn to the body of burghs as a whole and endeavour to ascertain how far the same state of affairs holds good in the general case, we are met by the obstacle of knowing only the balance of debt outstanding. In an article which appeared in the Accountants' Magazine I dealt with the question fully, but just now I shall adopt a briefer method of examining the figures. We know that the accounts of counties and parishes are supervised by professional accountants, and a comparison of

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