Gross receipts Working expenses 10,000 Id. 10,000d. 5,000d. Ratio of working expenses to receipts 50 p. c. Profit 5,000d. By each change the shareholder has benefited by an increased profit, but the public has also benefited still more. The value of the public benefit of the two reductions is 20,000d., nearly six times the benefit reaped by the shareholders. Perhaps it will be said the Corporation will be just as eager to pocket a profit as the company, and therefore the stimulus of profit will be as operative in the one case as it is in the other, but in practice, it is almost impossible for a Corporation to resist the various influences which are continually at work to distribute any revenue balance before it can reach the pocket of the ratepayer. In London the County Council have leased their tramways on the north side of the river on terms which secure them a rent dependent upon the gross receipts of the undertaking. The tramways on the south side of the river they are working themselves. Before the County Council made the purchase of the undertakings, the South London trams had been exceedingly profitable, and no doubt the Council determined to retain them, with the idea that they would afford a conspicuous example of the success of municipally managed undertakings. From a financial statement made by Sir John McDougall in October last year, it appears that the profit formerly earned on the south side of the river had dwindled away, what with reductions of fares, reduction of hours, increases of wages, and other emoluments to the men, to the paltry sum of £9,000; and even that amount would probably speedily vanish if a proper depreciation allowance were made. On the north side of the river, on the other hand, the rent paid to the Council by the company working the North London tramways was £76,841. This, after providing for the interest and sinking fund upon the Council's outlay, leaves the net profit of £39,450, every penny of which is honestly available for the relief of the ratepayer. A similar comparison might be made between the tramways of Dublin, which were started by a private company upon a freehold basis (for Ireland is in the fortunate position of not being subject to the Tramways Act of 1870, which compels all English and Scottish tramway companies to be started on a leasehold interest of twenty-one years cnly). This company pays about £20,000 a-year to the Corporation for their way leaves. Glasgow, which is three times as populous, and at least ten times as wealthy, had in 1901 only 44 miles of tramways, as against Dublin's 52 miles, and for that year the Glasgow trams contributed to the Corporation £12,500 only. As to fares, in Glasgow they charge d. for a half-mile stage, in Dublin Id. for a two-mile stage. The wages and conditions of the men also show a comparison quite favourable to Dublin. The greatest advantage of Dublin remains to be stated. Electric tramways and this cheap system of fares were started by private enterprise there in the year 1896. The Glasgow electric tramways were not running until 1901. Taking the method by which Sir John Wolfe Barry recently estimated the loss involved by obstructed street locomotion, in an able paper he read as Chairman of the Council of this Society, it would be easy to calculate that this tardy enterprise of municipal trading has inflicted upon the inhabitants of Glasgow, as compared with their contemnporaries in Dublin, a loss equivalent to hundreds of thousands in every year. The fact should be borne in mind that although commercia} profits are more or less out of the reach of municipal management it is quite open to the Corporation to make sure of a revenue from their undertakings by leasing them. By assuming the speculation themselves they commonly sacrifice both the profit and the rent, just as a landowner does who keeps his farms in hand. It may be pointed out in this connection that the Corporation accounts never show any debit for the rent which they thus sacrifice, another evidence of the fallacious nature of their returns of profit and loss. (5.) An Escape from Trusts.-Then it is said municipal trading affords the only escape of a community from the dangers of Trusts. The word Trust seems to be a sort of bogey cry which municipalists use for diciplinary purposes, much as nurses used to shout "Buonaparte" to naughty children at the beginning of the last century. The Trust problem has presented itself as a serious difficulty in countries where the industries are subject to protection, so that the consumer is confined practically to the internal markets which can thus be controlled by combinations of capitalists. It is the protective support of the law which enables the combination to oppress the consumer. It is not the power of capital, but the legal monopoly which is the seat of the evil. In this country (if we perhaps except water) there is no reason why there should ever be any other monopoly than the monopoly of superior efficiency. A tramway down one street can be paralleled by a subway or tube down another street. Gas, which was at one time thought to be above competition, is now an alternative to electricity and petroleum. Hydraulic power has no monopoly. It shares its trade in many places with electric power, and in some also with pneumatic power supply. In private hands, the constant activity of invention, and the rivalry of commerce may be relied upon to secure in a free-trade country competition in one form or another, but upon the principle pointed out earlier in the paper the healthy stimulus and check of competition is always absent from an industry carried on by a Corporation. They have a legal monopoly preserved to them by their own bye-laws, and supported by such combinations as the Municipal Corporations Association, by means of which the united political power of the local bodies all over the country is focussed and exploited so as to secure for them a degree of protection which is absolute. So far therefore from municipal enterprise being a check upon the evils of Trusts, it will, on examination, be found to expose the consumer to all the oppressive conditions of the worst American combine. (6) Better Control.-But there are certain industries which involve an amount of interference with public rights. These it is suggested cannot be properly kept under control, and therefore the only alternative to disorder is to have them municipally administered. The truth is that the authorities are so infected with the idea of acquiring them, that they do not honestly try to regulate them. Their policy produces a reactive tendency in the same direction on the part of the companies. A gas company or a tramway company sees expropriation looming through the fog of local controversy. Its conductors do not see why the authorities should choose their own time for the purchase, and therefore they themselves aggravate the situation in order to hasten the decision of the authority to buy out the company at the precise moment when it will suit them, in view of the depreciated state of its undertaking and of the capital difficulties ahead, to part with the concern. If the policy of acquisition were definitely abandoned the authorities would be able to enforce a much more effective system of control. Confidence would be established in the place of suspicion. It is quite unreasonable to expect, for instance, the railway companies to attribute impartial motives to the London County Council's efforts to regulate the accommodation of workmen's trains, when they know that the County Council is itself engaged in the carrying business to a very large extent, in direct competition with the railway companies themselves. A short time ago, proposals were made by the Manchester Corporation to regulate the heavy traffic in the streets of the city. These were received with an uproar of opposition from the owners of horse vehicles of all kinds, who could not be persuaded that the Corporation were not using their power for the purpose of clearing the track and gaining a preferential treatment for their own tramcars. On the other hand, in American cities, where anything like municipal trading is now practically unknown, the street railway companies are ready to invest millions of money upon an annual concession, knowing perfectly well that, so long as they behave themselves, the concessions will be renewed with the regularity of a publican's license. The American case proves, that as long as companies are not afraid of expropriation, they will be ready to acquiesce in the largest powers of control. On the other hand, what becomes of control when the undertakings are in the hands of the Corporation themselves? We hear of farcical prosecutions of the borough conductor, at the instance of the borough police, for overloading the borough omnibuses -a gentleman from the town clerk's office appearing on both sides, and arguing the case before a bench of the borough magistrates. We see tramcars meeting almost end on in a continuous urban thoroughfare, and the passengers put to the inconvenience of changing from one to the other, in every journey, for years, for no purpose, except to mark the invisible boundaries and the bumble jealousies dividing two local jurisdictions. Verily may we cry, Quis custodiet ipsos custodes. SUGGESTED REMEDIES. Having regard to these social, political, and economic results, it can at least be said that the intrusion of the authorities into the domain of trade leads to evils far greater than any to which their abstention from, trade could possibly lead to. It remains to consider what means can be taken to put matters on a sounder footing. It is evident that Parliament is most reluctant to interfere with the action of the Corporations. No member of the House of Commons can be indifferent to the opinion of the local governing body, and the last thing he desires is to come into conflict with them. In local matters the municipal tail wags the Parliamentary dog. However, the following suggestions have been made : : 1. That Corporations should not be allowed to trade for the purpose of profit. This has the advantage of pleasing the Socialists, to whom the making of a profit seems to be a thing accursed. But even if no profits were made, it would (as pointed out in the last paper) still be unjust to use the credit of the town as a whole in order to establish an industry which will not equally benefit the whole of the citizens. Moreover, the influence of the Corporations in Parliament is such that they would sooner or later be sure to find a way through any regulation of this kind, as they did through the Standing Order prohibiting powers being granted to a Corporation to work tramways. 2. The disfranchising of municipal employés. This has influential support from within the Tanks of orthodox municipalism. 3. It has been suggested that some limitation should be placed upon the financial powers of the local bodies. There is precedent for such a limitation both in the municipal law of America and in the English Public Health Act. The following is the language of each: in the whole the assessible value for two years of the premises assessible within the district in respect of which such money may be borrowed." NEW YORK CONSTITUTIONAL AMENDMENT, 1884.* "No city shall be allowed to become indebted for any purpose, or in any manner, to an amount which, including existing indebtedness, shall exceed 10 per cent. of the assessed valuation of the real estate of the city." This This limit of the Public Health Act is another example of the manner in which wholesome checks imposed by Parliament upon municipal extravagance are continually set aside and rendered nugatory. Almost every Local Authority's Bill directly repeals section 234 of the Public Health Act. ought not to be allowed. It ought to be possible to make such an alteration in the Standing Orders as will prevent the limit being exceeded except in the same way in which an ordinary money Bill can be brought in in Parliament, that is to say, on the initiative of the ministers, and after consideration in the Committee of the whole House. In no single instance has the limit of two years borrowing failed to cover, and more than cover, the financial needs of any of our municipal communities for proper purposes of local administration. The excess of debt beyond that limit-amounting in the case of Huddersfield to over 3 years assessible value-has in every single instance been incurred for trading. 4. Short of this a slight amendment has been proposed by Sir Alexander Henderson, which would undoubtedly do a great deal to clip the wings of municipal adventure. These bodies mainly rely upon Trust funds for the absorption of their securities, their Parliamentary influence having secured the granting of statutory powers to enable trustees to invest in This power is as follows:municipal loans. Trustee Act, 1893, s. 1, ss. m. "Trustees may, unless expressly forbidden by the Trust instrument, invest in municipal stocks of towns of over 50,000 inhabitants, or County Council stocks issued under Act of Parliament or Provisional Order." The amendment suggested is-"Provided that the debt which any such stock represents does not exceed in the whole the assessable value for two years of the town or county in respect of which the stock is issued." Such an amendment would not only ⚫ Similar provisions are in force in all the other States. Being part of the Constitution they are unalterable except by a convention, and are strictly enforced by the Supreme Court of the Union. be an act of policy tending to restrict speculation with public funds,-it would also be an act of justice to those interested in trust funds, which it is to be feared are frequently invested under the sanction of the Trustee Act in municipal securities, without any regard being paid to the elements of risk which undoubtedly attend them, so long as trading is indulged in. 5. An effective and independent audit of municipal accounts is urgently required, and a strict and intelligent method of book-keeping by which the "teeming and lading" devices should be put a stop to, and the accounts of each department kept distinct. The present system offers unlimited scope for concealment and financial juggling. In this connection may a humble appeal be sent up for more prompt statistics. The figures for the year 1901-2 will not be published until March, 1903, so that offences have got stale before they are possible of detection and reproof. (6.) The protection given by the Borough Funds Act (a Bill for the amendment of which in the direction of relaxing the restrictions, was brought in last session by Sir Albert Rollit) should be rendered really effective by allowing any ratepayer one vote in respect of every £50 of rateable value, without the limit of the 250 as a maximum. Such an amendment, giving those who have to bear the burden of these undertakings some opportunity of raising their voice against them, would be only reasonable. If, as is always contended, such concerns are going to be profitable, the business men who represent the large ratepayers would be the first to perceive this, and, of course, would be most eager to take advantage of it. On the other hand, they would also be alive to the risks of such ventures. There would thus be contributed to the council of the community, a leavening of harder business consideration than is generally given to proposals of the kind. 7. The difficulties and the disadvantages of legislative interference would not apply to the check which might be imposed upon the municipalities if the leaders of financial opinion in the country were to assert their influence. The present outlook is one of uncontrolled expansion; this cannot continue without danger to the money position. It is suggested that the situation calls for the serious attention of high banking authorities whose wisdom and foresight have many times before stayed the spread of economic disease and saved their country from years of disaster and distress. Experience shows how difficult and painful is the process of arresting a course of public expenditure once it has got well on its way; the great thing is to check it in time. No one is in such a good position to do this as the bankers. Bankers, and particularly the Bank of England, would be the first to suffer if the Corporations were to run too far and a crisis should arise. The present monetary situation affords a legitimate excuse for pulling them up. Increased taxation and a higher standard of living are making themselves felt, and bank deposits are not accumulating too plentifully. The regular industries surely have the first call for banking facilities. Therefore it is respectfully submitted that every attempt by Corporations to dip into bank balances either by direct borrowing, or by the issue of bills or receipts for short deposits should be definitely discouraged, and that such discouragement would be the safest as well as the most timely and efficient check which could be resorted to. Whatever may be the remedy or remedies proper to be applied, it is highly important that some means should be found of stopping a practice which leads to unprogressiveness, arbitrary restrictions, and waste of capital. The writer expresses his acknowledgments to Mr. C. M. Knowles of the Inner Temple, who has, with infinite research and ingenuity, compiled the statistical tables; to Mr. Edwin Barker, the rating Surveyor to the Great Central Railway, and to the rating surveyors of several other railway companies, who have most kindly collated numerous figures; to Mr. Ernest Davies, of the London Stock Exchange; to Professor Lloyd, of Sheffield, for valuable suggestions; to Mr. P. S. Bridgford, the Secretary of the Industrial Freedom League; to Mr. H. Graham Harris, and to his firm, Messrs. Bramwell and Harris, who have again been so good as to prepare the diagrams. and to assist in many ways. DISCUSSION. The CHAIRMAN, in opening the discussion, said that four years ago when he presided over a previous meeting, at which the author read a similar paper, he had the pleasure of congratulating Mr. Davies not only upon the exceptional merits of the paper but upon the extremely attractive and interesting way in which he had brought a dry and technical subject. before a mixed audience. It was not often that people twice succeeded in so difficult a subject, but he thought those present would agree with him that what he said on the previous occasion, on the first paper, was equally merited by the present. He would commence the discussion by reading a letter which he had received from a very old colleague, a very distinguished man, who had taken a great interest in the subject, Sir Edward Clarke :— "I am sorry not to be able to come this evening to hear the discussion of one of the most interesting and most important of public questions. I trust that we shall have a strong Royal Commission before any further trading powers are granted to municipal bodies. The burden of rates, recklessly increased, and unfairly levied, is very heavy, and the debts which will make that burden permanent, are increasing with alarming rapidity." The opinion of such an experienced statesman and lawyer as Sir Edward Clarke showed that, at any ate, others who had not had the advantage of hearing the reasoning of the paper had arrived at some of the conclusions to which attention had been drawn. He desired to say nothing more than he said on the last occasion upon the legal questions-that undoubtedly the rights of Corporations to spend money in such undertakings must depend upon statutory authority, and it was extremely important that before fresh statutory powers were given the subject should be thoroughly understood, and the people who pressed their members to support municipal trading, should know to what point it was bringing the financial aspect and condition of the country. He had not either the means or the opportunity of testing figures, or of forming his opinion on them, beyond what he read; but the gravity of the question was really attested by the enormous figures to which local indebtedness had reached, and by the very rapidly increasing burden which would be forced upon the public if further obligations were to be undertaken, and further powers given. He wished to allude to one part of the subject which had only been touched upon by the author, but which he (the Chairman) as a Member of the House of Commons for a great many years had frequently had pointedly brought before his notice. The author had referred to the Municipal Corporations Association. Only those who had been in the House of Commons knew the really almost unfair weight and power which municipal bodies had in the House, because, not only did the local member not dare to resist the wishes of his local friends, but all the municipal corporations acted together, and when there had been an attempt to get statutory powers for private enterprise which was thought to conflict with the possibility of municipal trading in a particular place, not only was the influence of the municipality in that particular place set to work, but the influence, through the Municipal Corporations Association, of many other municipal bodies which had nothing whatever to do with the particular scheme. Without fear of contradiction he could say that the question under those circumstances was not fairly determined upon its merits, and was not fairly discussed. Being no longer in politics he had no right to express any opinion upon the merits of the case, beyond saying that it was a question of such vast importance that it ought to be thoroughly understood and tested upon its merits and not dealt with by any considerations of popularity, public sentiment, or anything of that kind. There was brought to his notice some time ago the lamentable effect of municipal trading in the direction of the housing of the working classes. He believed it had had a disastrous effect. It was ridiculous and absurd to say that persons engaged in the building trade could expect to carry out such undertakings at a profit of 3 or 3 per cent., and one had only to study the accounts most superficially to see that to a large extent the rates had to pay for some of the unproductive expenditure of Corporations in that direction. As those who had read the statements of ladies like Miss Octavia Hill, and others who understood the subject knew, what had happened to a large extent was that the genuine, good builder had been driven out of the field, and the only people who could now compete with municipalities were the jerry builders and people who did not put up substantial houses. The question ought to be looked at and investigated upon its merits. He wished to endorse what had been said by the author as to the necessity for a real audit of municipal accounts from that point of view. An opportunity was given of so presenting the figures that the real, true state of the speculation could not be got at, except by an examination of books which were not represented in the synopsis of the accounts that was given. That gave an opportunity for what he might call two evils. If the municipal trading was being carried on at an excessive rate of profit, it was an unfair act to the consumer who was paying for the article supplied to him, and he was then contributing in aid of the rates. That was a small evil, but it was an evil which might, in some instances, be of importance. But the other side was to him of far greater importance, namely the impossibility of finding out what had become of the unproductive capital which many Corporations had embarked in their undertakings; and it was because he felt, in regard to such local loans, towards which, as the author said, in so many instances trust moneys had been contributed, there should be no doubt as to their financial security, that they ought to know to what point they were going, if the system was to be extended to any greater extent. The point of his observations was that he trusted a thoroughly representative Royal Commission would be appointed to inquire into the matter. The author had stated that, although a large amount of evidence was taken by a Joint Parliamentary Committee, unfortunately no conclusion was arrived at. He hoped that whatever body inquired into the matter it would be independent of anything which he might call Parliamentary interest, that it would be thoroughly representative, that it would be composed, to a certain extent, of men who knew what private enterprise had done and |