Local Public Debt in England and Wales

Abstract

ONE of the lessons which the present depression has most thoroughly inculcated is the' greatly increased weight which a public finance system, normally borne with ease, acquires as the result of a substantial price fall. The peculiar monetary and political conditions of the post-war decade-led to a more than normal development of public investment, and hence it is not surprising that to-day governments and municipalities, from Vancouver to Athens, are faced with an acute problem of indebtedness and illiquidity. In this country, however, more attention has been directed to the problems arising from the enormous dead-weight debt which was the legacy of war finance, than to those concerning local debts held against tangible assets. When local finance has been in the limelight, it has been in respect of the crisis of the rating system. It is true that the high rate poundages of the post-war period have generally been caused by expenditure on current account, particularly, of course, for Public Assistance. Where they have been the result of borrowing it has been for this purpose rather than for investment in durable equipment. Nevertheless, the debt problem is also ultimately a rate problem, since debt service must be met from rates, as far as it is not covered by grants from the Exchequer. There are, moreover, fairly objective limits to rateable capacity-as contrasted with the almost purely psychological limits of taxable capacity in general-since a local rate is a tax that can be avoided by removal to a more favoured district. Hence in so far as public investment is not in respect of self-balancing or paying services, the prospects of its continued expansion are conditioned by the heritage of the past. An examination of the debt position2