In any comparison of the indebtedness of the various cities it is probably advisable to exclude London, which, as the metropolis, is in quite an exceptional position. I should like to have included Edinburgh, but the fact that its gas and water debts are not furnished renders its figures misleading. Let us confine ourselves to the five cities with a population over 500,000. These, I think, might be placed in the following order as regards the weight of debt, if effect be given to the general wealth and the assets they possess; but of course there may be special circumstances, not brought out by the statistics, which render the classification unfair:-

The foregoing information as to the corporation debts may serve as an indication of the method of judging as to the comparative merits of the other corporation stocks in the Stock Exchange List. In addition to the information to be obtained from the actual figures, you should keep in view the point I have already alluded to - namely, what are the general circumstances of the town or city, and are they such that its continued prosperity is reasonably assured?

The stocks in the list have been constituted either by the authority of the Local Government Board in terms of the "Local Loans Act" of 1875 and 1882, and the "Public Health Acts Amendment Act" of 1890, or are authorised by special Acts which are generally obtained by large corporations. All loans obtained under authority of the Local Government Board are repayable in a period not exceeding sixty years, while in loans under special Acts of Parliament the repayment is sometimes spread over a longer period. In the case of some of the stocks the security consists of the mortgage of a special rate or rates, while in others the whole assets of the corporation are mortgaged. It is needless to say that the latter forms the better security.

As already mentioned, the list commences with the stocks issued by the City of London and the London County Council. The return which an investor would obtain from them at present prices varies considerably. Take, for example, the three following 3 per cent stocks - namely, Metropolitan Consolidated, repayable 1941, price on 31st December last 97; Corporation of London Debenture Stock, repayable 1923, price 94; London County Consolidated, redeemable after March 1920, price 91 1/2. The returns in these cases are £3, 2s., £3, 4s. 6d., and £3, 5s. 9d. per cent respectively.

It is impossible to consider all the corporations in the list; but the following statement of the rate of interest at the middle price on 31st December of a representative stock of eight of the cities already mentioned will be of interest, the Glasgow and Edinburgh figures being taken from the Glasgow Share List:-

It will be observed that in five of these cities the stocks are marked redeemable; but as they are quoted at a price below par, and as the redemption is dependent on the option of the corporation, the fact does not affect the calculation of the rate of interest. If the redemption had been compulsory the rate of interest would have been increased by spreading the profit on redemption over the number of years for which the stocks are current.

It is right before closing this subject to refer to the risk incurred by municipal corporations which borrow sums repayable on short notice - a risk which is too often lost sight of. They can repay their depositors and other creditors only by fresh borrowing, for they do not possess readily realisable assets. Their borrowed money is tied up in streets and other unmarketable assets. Banking companies, whose business it is to take money on short notice, make provision to meet the withdrawal of deposits by investing a large proportion of them in readily realisable securities; but corporations have no reserves of gold coin, no money at call or short notice, and no bills maturing day by day as banks have.

In so far as municipal corporations undertake banking business, by taking loans on deposit at short notice, they ought to take the same precautions as banks to provide against any abnormal condition of the money market which would create a general call for repayment by temporary creditors. As they are not in a position to take such precautions, they incur the danger of being suddenly called upon to provide large sums of money, at a time of crisis, when they may not be able to raise funds to pay their creditors.