MUNICIPAL FINANCE.

Evening Star, Issue 23882, 12 May 1941, Page 11

MUNICIPAL FINANCE.

TO THE EDITOU. Sir.—Mr Allen's address at the Northeast Valley was no doubt delivered as a reply to ur M’Millan's proposals, but it cannot be accepted as an answer to those who claim that the iinanoial policy of the council is uneconomic and immoral, and that it can be made more just and economical. Mr Allen did not explain why he supported a policy of borrowing to pay for capital expenditure when he could provide the revenue for it by a revision in charges on those who now get special privileges—in other words, those who get services at less than just charges. To illustrate, Mr Allen says that the 13. P. and L. department made a profit last year of £39,820; out of the profit for the incoming year it has to provide £20,484 for transfer to the municipal department, and £27,500 for capital expenditure. It will be seen that the amount of profit made is less than the amount required by £8,164. The council's policy of meeting capital expenditure is mostly to meet it by borrowing. The effect of this policy is severely condemned, and was proved to bo disastrous in Mr M, C. Henderson’s statement in his report to the council in 1937. He said that diver-* sion of the funds had caused the department to increase its loan indebtedness by well over £500,000 in 30 years, on which it had to pay interest and sinking fund charges. The paying of interest which has reduced the annual surplus has postponed possible reductions in charges. There is no shadow of doubt that an alteration of this policy must be made, and can be made if men can he found of sufficient strength of character to stand for principle before party. If they are not forthcoming soon we shall meet with disaster. The City Council’s last report shows the amount of interest paid by the department to he £46,593 on a loan capital of £1.150,000. In other words, if the policy of the council had been one of sound finance the loan capital would have been at least £500,000 less and the interest rale would have been considerably less. The result would have been that charges could he reduced or the rales could have been lowered.—l am, etc., C. M. Moss. May 10. TO THE EDITOR. Sir,—Mr Allen at North-east Valley took exception to Dr M’Millan using figures to prove that administrative expenses had in- , creased under the present council. Mr Alien is reported as saying, “ Does Dr i M’Millan suggest that over a period _ot three years there can be no normal increase in income? Does he honestly believe that the trading departments must nob expect any increase in business? On the other hand, does he suggest that expendi- . ture can remain stationary, even although ; wages rise, hours of work' are reduced to 40, and costs of materials and services generally continue to advance? Cr M’Millan must indeed have been hard put to it to produce such a ridiculous set of figures and expect them to be accepted as proving anything at all.” In this paragraph Mr Allen asks Dr M’Millan three questions. I row ask Mr Allen the same questions. If, for the sake of argument, we admit Mr Allen’s contentions, what will his answer be? What can ; it be, but that over a normal period of three years the city trading departments i must expect an increase in business and _ incomes, and with increase in the costs of material and wages total expenditure must increase? This is entirely in line Mr Allen's own argument. If these conditions obtain in 1941, did they not obtain in 1958? Mr Allen must admit that it the nature and method of conducting business lias not changed, then the year 1938 was no different from 1941. ■ Will Mr Allen explain,, if he pan, . the. . following extract from a speech delivered by him at Anderson's Bay in 1938? *Mr Allen said, “ Cr Silverstone also objected to my statement that mounting costs of administration and working expenses with dwindling profits, are provoking thought for the citizens of Dunedin.” He quoted trading department figures since 1935. In that year the revenue was £547,568, expenditure £477,841, leaving a profit of £69,728. In 1936 the" corresponding figures were £553,521, £496,596, £56,925; 1937, £585.342, £534,941, £50,401. The figures for 1938 are: Revenue £652,815, expenditure £581,606, profits £71,211. less £5,581, leaving an actual profit of £65,630. The amount of £5,581 was allowed for depreciation, which was formerly, bub not now, deducted. Taking into consideration the significance of these figures, it had to be pointed out that the present council took control after the results given for the year 1935. Another comparison, he said, might be given by adding together the total expenditures in the municipal account and the trading departments—l93s, municipal account £190,131, trading departments £477,341, total £667,972; for the year 1938, municipal account £289,403, trading departments £581,603, total £871,006. That was to say, there was an increased expenditure of £203,034 for a smaller net profit by £4,097. Mr Allen did not explain to his listeners in 1958 that the anti-Labour council of 1933-35 maintained the trading profits by paying low wages to all its employees, and that the Labour council had raised the wages of all its employees to a living standard. At bis meeting at North-east Valley Mr Allen said that “only a scchoolboy would make such a ridiculous comparison. It proves absolutely nothing.” H in 1941 this type of argument proves nothing, what did it prove in 1938? If the use of this type of argument is a schoolboy method of reasoning, is it permissible to that Mr Allen has abandoned, the schoolboy method and at last has adopted the method of the bachelor of commerce, or may we assume that in 1958 he wanted to get in as,mayor and in 1941 he does not like to go out of that position? Can Mr Allen talk himself out of this one?—-I am, etc., M. Silverstone. May 10.