There are several methods of measuring the relation which the debt bears to the resources of a city. We may calculate its amount per head of the population; but this alone is not a satisfactory test, as one town may contain more valuable properties and more prosperous industries than another. The amount of debt in proportion to the rateable value of the town is perhaps a better standard; but even the rateable value does not form a complete test, for, again, one town may have spent much larger sums than another in reproductive works. To understand this last point you must remember that in the case of a municipality there are two classes of capital expenditure - unproductive and reproductive. The former is the more necessary of the two, but is not as remunerative as the latter from a monetary point of view, though it may be really more valuable if the health and comfort of the inhabitants be taken into account. The expenditure of the corporation includes many costly works, of which it is only just that future years should bear part of the expense, as the inhabitants will reap the benefit of them for many years to come. Streets have to be constructed, drains and sewers have to be laid under them, proper provision has to be made for sanitation; slaughterhouses, town-halls, fire-stations have to be erected; and in order that the outlay may not bear too hard on any one year the corporation borrows, and thereby spreads the expense over a number of years. All these works, however, bring in no revenue. On the other hand, if a supply of water is wanted, or the corporation purchases the gasworks or electric-lighting plant, it borrows in order to pay for them, and thus, as before, spreads the cost over a number of years; but in this case the expenditure results in an annual revenue for water, gas, or electric light, which should be sufficient to pay for the interest and leave something over to wipe off the debt. These latter debts are reproductive.

The amount of debt, therefore, per head of population or per £1 of assessed value may not form a suitable guide to the weight of the corporation's burdens. For instance, a town which has its own water-works, gas-works, and electric lighting is in as good a position, even though it has borrowed a large sum - not larger, however, than what they are worth - to pay for them, as another which has no water, gas, and electric-lighting debt, but is also without the corresponding assets. The object, therefore, for which the debt has been borrowed, or in other words, the way in which the money has been spent, forms an important element in considering the financial position of a corporation.

The Stock Exchange Official Intelligence

The Stock Exchange Official Intelligence, in the statistics to which I have already referred, gives details of the purposes for which the municipal loans have been obtained; and those who wish to study the subject should, after reading the chapter on municipal finance in that volume, take up in detail the information given as to the various municipal debts. To-night I can only treat the point very superficially.

The aggregate of the municipal and local debts of England and Wales was, in 1900, as I have mentioned, £293,864,000; and this sum is made up of loans borrowed for the purposes shown in the following table (the figures of which are extracted from 'The Stock Exchange Official Intelligence'):-

Principal Purposes for which the Local Debt of England and Wales was created, the Amounts outstanding in respect of these purposes as at 31st March 1900, and the Ratio which each of the amounts outstanding bears to the total.

Purposes.

Amount outstanding.

Ratio to total.

1.

Reproductive undertakings -

Water-works ......

£53,404,347

18.2

Gas-works ......

19,819,301

6 7

Electric lighting .....

7,853,061

2.7

Markets.......

6,760,311

2.3

Tramways ......

5,776,147

1.9

Working-class dwellings . .

5,655,151

1.9

Baths, wash-houses, etc. ....

2,154,734

.7

Cemeteries ......

2,802,998

1.0

Harbours, piers, docks, canals, quays, etc.

41,873,377

14.3

Total debt on reproductive undertakings

£146,099,427

49.7

2.

Other purposes -

Streets and highways ....

£37,243,780

12.7

Schools, libraries, and museums

31,229,780

10.6

Sewerage......

29,326,175

10.0

Poor Law purposes ....

8,967,295

3.1

Hospitals and lunatic asylums

10,367,005

3 5

Parks and open spaces ....

5,936,059

2.0

Public buildings not included under other headings ......

8,411,637

2.9

Bridges and ferries.....

4,452,238

1.5

Miscellaneous.....

11,830,828

4.0

Total debt for purposes not productive .

£147,764,797

50.3

Total debt for all purposes .

£293,864,224

100.0

You will observe that as nearly as possible one-half of the debt has been incurred for reproductive works, such as gas-works, water-works, electric lighting, tramways, working men's dwellings, harbours, etc. It must be remembered that the amounts there stated are considerably less than the actual prices paid by the municipalities for these undertakings. The figures in the table give the present debts after they have been reduced in most cases by the sinking funds provided in terms of municipal legislation. These debts may, therefore, be held to represent valuable assets which, if the rule as to regular reduction by means of sinking funds is adhered to, should, when the relative debts are cleared off, add materially to the wealth of the municipalities. At present a city which is proprietor of, say, its own water-supply has a revenue from it, but it has to pay out the larger portion of that revenue in interest and sinking fund. "When the debt is wholly paid off it will have a handsome sum to be applied in reduction of the rates. I do not think that we need discuss how far it is legitimate for municipalities to enter into reproductive undertakings, or how far they should go in the way of municipal trading. We all agree that a town should possess its own water-supply, and most concede that it should also have its own gas and tramways; but there arises difference of opinion as to electricity, telephones, the erection of workmen's dwellings, and other forms of municipal enterprise. The subject is too large to take up, and it is sufficient for us to deal with the facts as they are at present. The only question we, as investors, have to put to ourselves is, - Is the municipal trading adopted by a corporation likely to pay, or is it likely to be a burden on the rates?

It is probable that the lavish borrowing by municipalities in the past has been fostered by the cheap rate at which they were able to raise money some years ago, and that many debts were then incurred which are now felt to be injudicious. 'The Times' last year made an interesting inquiry into the general question of municipal borrowing, which should prove of considerable service, as it has opened the eyes of the public to the disadvantages that may attend popular government. Where the capital expenditure has been prudently arranged, the authorities have no reason to' regret any attention which may be drawn to the subject; and where it has been imprudent, the note of warning which has been sounded should brace the electors to take steps to keep a check on the extravagance of their civic representatives.