WANTED—LESS LIVING ON CAPITAL

Evening Post, Volume CIX, Issue 92, 19 April 1930, Page 6

WANTED—LESS LIVING ON CAPITAL

Broadly ' speaking, Australia's troubles are due to the tendency to do out of capital—borrowed capital —what should be done out of revenue, or not done at all. It is a common tendency, and is found in many branches of local government in this and other countries. For some time past, owing to unemployment loans, health loans, and other spending proposals that come forward backed by special pleas, local bodies in New Zealand have been adding handsomely to their civic improvements' partly at the expense of their capital accounts; and any effort to get away from this state of things, by making special allocations out of revenue, is to be applauded, if only by force of contrast. That is why we have welcomed the Mayor's statement that, for the urgent purposes of footpaths and certain sealing requirements, the City Council will this year make a special allocation from,' revenue of £10,000, with the expressed hope of raising the sum hereafter to £15,000 and even £20,000 annually. The objective set down is "until practically every road in the city is sealed." That implies a longish time, and the future is uncertain. This commendable move towards a greater reliance on revenue for doing works which may be long-lived, but, which are certainly not permanent, cannot be compared in outstanding virtue with the Wellington Harbour Board's cash purchase of a floating dock out of a fund built up by prevision and provision lasting over years. But the City Council's revenue-paving mood is a welcome contrast to the too common practice of1 making our failures an excuse for over-straining our credit. .In a community sense even the unemployment loans come within that category. So long as unemployment. loans are unavoidable, local bodies should as far as possible mitigate their burden by being very reluctant to sanction borrowing for any other noncapital expenditure. If revenue can be made to cover expenditure that is on the border-line—in that it creates assets which are enduring from a revenue point of view, yet not as enduring as a loan —so much the better. Local bodies have been so loose over great things that they may well practise the virtue of being prudent over small, and a zeal for saving the pennies may well leave them with less' energy to dissipate the pounds. But it would be a mistake to attach too much importance to a momentary cash balance in the general account of the Wellington City Council, or to the fact that certain municipal trading departments have profits that can be diverted. The principle of diversion of profits from public trading department is not one that can be enthused over. It

depends on circumstances, and should not come to be regarded as a rule. Apart from the fact that users have some claims on profits, and that employees of trading departments are more apt to be efficient if their business is run strictly as a business and not as a milch-cow, hard experience suggests that profit-making should not be regarded as perennial. Tramways, like railways, may, and indeed do, come upon hard times. So may electrical supply undertakings. Their financial position is measured not so much by one year or two as by decades. In the long run any municipal trading enterprise will probably find that its own job was as much as it could manage. In any case, a spendful feeling created by the impression of trading balances is a bad thing. To say that the ratepayer is not concerned is an assumption. If time and change bring deficits, he will be deeply concerned.