4.— MUNICIPAL TRADING. 



Bv J. M. P. MuiRHEAD, F.R.S.E., F.R.S.L., F.S.8., F.S.A.A., 

 F.C.T.S., etc. 



There i.s no que.stitui conceriiiug local goveniineiit which has been- 

 more debated than the merits, or otherwise, of municipal trarling. It 

 would appear as if there are really three schools of thought on the 

 subject, the first being those who are opposed to municipal trading on 

 general principles, and the most prominent figure among them is Lord 

 Avebury : the second, those who believe in a moderate amount of 

 municipal trading, of which the most prominent supporter is probably 

 fSir Henrv Fowler : and third, those who believe in municipalities 

 trading in almost every conceivable way. The last-named school have 

 a large number of supporters all over the world, but perhaps more 

 particularly in the United States and South Africa. 



It might be well to inquire carefulU^ into the reasons that actuate 

 these three parties, and endeavour to come to some conclusion as to 

 what is the proper course, more particularly in South Africa. 



Now it must be remembered to start with that municipal trading- 

 is the outcome of municipal borrowing, that where there was no power 

 to borrow there would be no capacity to trade. It is therefore neces- 

 sary to inquire just shortly into the question of municipalities raising 

 loans for different purposes. It would appear that there was no 

 proper parliamentary authority in England prexious to the Muni- 

 cipal Corporations Act of 18.35, which was the direct result of a 

 Royal Commission appointed in 18.32, whose report included the 

 following pai'agraph : — 



"That the existing municipal corporations of England and Wales 

 neither possess nor deserve public confidence or respect, and that a 

 thorough reform must be effected before they can become what they 

 ought to be — useful and efficient instruments of local government." 



The result of the Municipal Corporations Act was to a certain 

 extent to restore the public confidence in corporations, and in 1848 a 

 Public Health Act was passed, which practically made municipalities 

 borrow, as the}^ had to carry out its provisions ; and this Act distinctly 

 defined the system of borrowing, viz., by the levying of rates, which 

 rates could l»e mortgaged ;is secuiity against the loans. This system, of 

 course, has i-emained in force ever since, and, generally speaking, the 

 rates are security for all municipal loans. 



In 187") a Local Loans Act was pas.sed, which allowed councils to 

 issue debentures, ttc, but contained the important {)rovision that the 

 sanction of the Local Government Board had to be obtained to any 

 loans before they were issued. In 1874 the outstanding loans of local 

 authorities in Kngland and Wales amounted to c£92,820, 100 : at the 

 present date (1908) they are estimated at £350,000,000. 



