LOCAL BODY DEBTS.

Timaru Herald, Volume CXXV, Issue 18382, 28 September 1929, Page 6

LOCAL BODY DEBTS.

GENERAL PRICE MOVEMENTS. AN ECONOMIST’S VIEWS. To Auckland Rotarian.s Professor H. Bolshavv, .professor of Economics at Auckland University College, delivered an instructive address on the subject of local body indebtedness. Tlie importance of local body indebtedness, said the professor, could be realised from the fact that in 1928 the local body expenditure totalled 22.4 million pounds, or somewhat under onethird of State expenditure. Local body taxation waa 6.1 millions, or one-third as great as State taxation. Local body indebtedness was 66.4 mllion pounds, or more than a-quarter of the State indebtedness. During the seven years from 1921 to 1928 State taxation had declined, whereas loeal body taxation had increased nearly 80 per cent. In the same period the gro-s State debt had increased by about 25 per cent, and the local body indebtedness by over 100 per cent. The as-ete of loeal bodies at the present time, exclusive of cash assets, were almost ns great ns the whole of the assets .used in factory production in the Dominion. The very striking growth, of nubli" body indebtedness was shown in the- following table : Gross Debt. Rate Per Million £l.s. Head.

DEBTS MORE THAN DOUBLED. The most striking increase had been since the Armistice, lor the per capita indebtedness had more than doubled. 'lnking the main local authorities, the increase in indebtedness from March 31, 1919, to March, 1928, had been as follows :

It was important to notice that local indebtedness had increased more rapidly than State indebtedness' during the whole of the period since 1891. During the years 189 lto 1927 local body indebtedness had increased by about 270 per cent; general government by about 150 per cent, even including the war debt. Except during the war period, local body debt represented an increasing percentage of the total debt of local bodies, and general bodies taken together. It could he seen from these Agues that the problem was of great importance, both because of the ab-olute amount involved, and because of its rapid increase in recent years NATIONAL INCOME. Professor Belsliaw said it was very difficult to decide just what amount of local body debt was justified, and how rapidly it should increase. Broadly speaking, the considerable increase in per capita expenditure consequent upon local debt was justified during the years, say, 1896—1916, because the per capita income during that period was undoubtedly on the increase. It was doubtful if the present per capita income was much higher, if at all, than immediately before the war. Meanwhile indebtedness and annual loan charges had increased enormously. This increase was out of proportion to the increase justified by charges in the national income. On the other hand, of recent years an. appreciable advance had been justified owing to the new' opportunities for conferring large benefits by public expenditure which had not been balanced by equivalent, opportunities for expenditure by private enterprise. This applied to main roads and the use of electrical power. EFFECT OF PR I OF-LEVELS.

The speaker said that the amount of bodv indebted now that could juFltifioblv be in curred was closely related with gene, ral price movements. With rising prices a given benefit was met by the withdrawal of a smaller amount of real purchasing power from the community, to meet the debt charges. The reverse was the cnee when prices were folding. Since 1929 prices bad been foiling and were b'lrclv to fall further. Henoo the rnnirl iprr«n«* of local bodv indebtedness was a matter of some concern. Related to these was another important noint. Tn respect of some local bodv indebtedness, for example roads, a local body frequently bad the option of adopting n more permanent and more expensive method wi+h low maintenance or ns cii nlto”nntivc a less permanent and cheaper method w : th higher maintenance charges. While each ease must, be considered on its merits, the ease in favour of the latter alternative was strengthened when prices were Falling. Interest, charges on the debt, were fixed quantities in terms, of money, hut represented m incre''s’ng purchasing power withdrawn from taxp'vers while inah,ten''V'e. charges tended to fall as prices fell. OARE TO AVOID WASTE. Professor BeJshaw also toucher] upon iho question of waste in public expenditure. While it could not he proved that the present debt was too large if it had been economic allv incurred, vet much preventive waste had taken place. Further, the rate of increase was such as to g’ve ground for some concern, and it was highly important that nil projects involving further indebtedness should be more closely scrutinised than in tho past, especially in view of falling price levels. SUGGESTION FROM GERMANY. The problem, of courtr. impinged on the question of how the neies-ary funds should ho raised for essent : a] capital works without increasing indebtedness, or how the funds should he raised to meet the annual charges. ProfoMpor B *l- - concluded by stating that he felt that in New Zealand we had laid too much stress on rates as a source of finance, arid the whole system of body revenue required overhaul. Person illy he felt that the desirability or otherwise of special assessment, betterment- taxes, land value increment and local income taxes, the latter being levied as a supplement- to State taxation. as in Germany, should be very carefully investigated bv experts with a view to possible modifications in our present -system.

1897 77 £ 8. 10 2 d. 8 1920 !!! 3o’.2 24 8 1 1927 64.0 44 10 4 ANNUAL LOAN CHARGE. £ Per Head. £ s. d 1897 439.000 0 11 \ 1920 ... 1,600,000 1 6 5 1927 ... 4,000,000 2 16 4

Counties Million £’s. 4.3 Per Cent. 136 Boroughs 17.9 123 Harbour Districts 3.1 41 Klee. Power Boards 10.2 Other 2.9 93 Totals 38.3 136