MUNICIPAL ACCOUNTS AND MUNICIPAL AUDITS.
E cannot congratulate the Progressive minority in the London County Council upon their tactics on Tuesday. Sir Francis Mowatt's speech was perfectly correct in form, but it did not dispose of the argument for a commercial audit of the trading concerns of the Council. He objected to Mr. Robinson's motion on the ground that provision already exists for obtaining everything that the majority desire. But in that case where was the harm of Mr. Robinson's proposal ? It did but record the opinion of the Council that "the accounts of its trading under- takings should be subject to audit on commercial lines," and instruct the Finance Committee to "consider and report as to the manner of giving effect to this resolu- tion." If, therefore, the accounts of the trading under- takings of the Council are already audited on commercial lines, the Finance Committee will only have to report that Mr. Robinson's resolution was unnecessary. The audit it contemplates is already made. If, on the other hand, it turns out that the present audit is not a commercial audit, the Finance Committee will have to take steps to replace it by one of the right kind. Later speakers on the Pro- gressive side did not, indeed, attempt to conceal their dis- like of a commercial audit. Sir J. Macdougall thought the demand unreasonable, "as many of the matters which the Council had to deal with were matters of opinion." But even on matters of opinion it may he useful to know the facts. The only interpretation that Sir J. Macdougall's words seem to bear is that there is a difference of opinion in the Council on the question whether their commercial undertakings should be made to pay. But Mr. Robinson's motion did not touch this point. It merely committed the Council to the not very extravagant doctrine that it is well to know whether they pay or not. When the Finance Committee has made provision for the commercial audit, and it has proved that one undertaking pays X10 per cent., and another £5 per cent., and a third nothing at all, the Council will still be free to discontinue the undertakings that return a profit and to go on with those that bring in nothing. The only difference between the action of the last and of the present Council will be that the former did not know whether it was losing or gaining by its municipal trading, while the latter will, at all events, have the information that is wanted to make this point clear. However much the London County Council may wish to multiply unprofitable ventures, it will still be expedient that it should know how much it loses on each. Nor is there much weight in Sir J. W. Benn's objection that to call in an outside auditor is an insult to the County Council. If the idea of insult is brought into the controversy, the blame would rather lie with those who seem to dread the particulars of the enterprises in which the Council is engaged being set out in full. Sir J. W. Benn's statement that no other municipality has done the same thing has already been challenged in the Press, and in any ease proves nothing as to the need of doing it in London. Other municipalities may prefer to remain in happy ignorance of their financial position. That is their own affair. Londoners may prove to have been unduly nervous as to their municipal balance-sheet, but the wish to know exactly how the profit-and-loss account under each head stands is not in itself unreasonable. Possibly some other municipalities might do well to copy the example now for the first lime set them.
It is not quite obvious, indeed, why the Progressive minority on the Council should have been so sensitive on this head. In the recent contest a great deal was said about the excellence of their finance. They have embarked on various commercial undertakings, it is true, but their enterprise has been justified by results. When six, and even ten, per cent, has been gained for the ratepayers by these very concerns, the most hidebound economist must admit that municipal trading has its bright side. Then why put any obstacles in the way of bringing these successes to the light? Ten per cent, has charms even for Municipal Reformers, and if it has been really earned we may expect to find them sitting as new and ardent disciples at the feet of the Progressive leaders. But in order to make this happy conversion possible the figures must be set out in their full significance, and this is just what a commercial audit will do. We shall see how much the judicious investment of municipal capital in trading under- takings has done to relieve the rates, and betake ourselves with renewed zeal to the search for additional ways in which the Council may make money. The Progressive speakers on Tuesday seemed to forget that in order to attain this happy result there must be a large production of figures. If, for example, money is made in one concern and lost in another, it is very important that the ratepayers should know which concern has realised a profit and which has had to put up with a loss. The most convinced advocate of municipal trading may have an affection for the concern that pays. Or if he has risen above any such weakness, and learned to put the public good before the ratepayer's pocket, he must not complain if the community at large fails to rise to this height of altruism, or if it at least insists upon knowing how much it is the poorer by its virtue. The audit to which the accounts of the London County Council are now subjected is perfectly accurate as far as it goes. It shows what money the municipality has spent, and whether it is authorised to spend it. But a balance-sheet may perfectly satisfy an investigation con- ducted on these lines, and yet leave the ratepayer entirely in the dark as to the results of the trading undertakings to which his representatives have committed him. The auditor is able to tell them that the finances of the Council have been honestly administered, that not a farthing has gone into any private pocket, that no outlay has been ordered which the Council is not legally justified in incurring. But when these conditions have all been certified, the ratepayer is still ignorant whether the various trading undertakings in which the Council is engaged have meant profit or loss. Nor is it only the individual ratepayer who is left in uncertainty upon this point. The very.meu who have successfully recommended this policy to the Council may be in the same position. A legal correspondent of the Times tells of a case in which he was concerned not many years ago, which showed that what a certain local authority maintained, and honestly believed, to be a valuable trading property was really worthless. There was nothing in the accounts that disclosed this, and it was only when a commercial audit was applied to them that the fact became visible. It is conceivable, at all events, that this may happen in the case of some of the undertakings of the London County Council. If so, it is surely desirable that the truth should no longer be withheld from us.
It is convenient that this question of audit should be kept quite separate from the further question whether municipalities should become traders. Let us suppose that, in the outcome, the audit which has now been directed shows that the London County Council is making money by some of its enterprises, and losing money on others, will it follow that the former should be persevered in, and the latter abandoned? Not necessarily. There may be good reasons why, in the interest of the community, the municipality should not interfere with private enterprise in order to keep down the rates. There may conceivably be good reason why a municipality should supply the ratepayers with a particular article, even though it cannot do so at a profit. These are matters that must be decided in each particular instance, and decided on larger considerations than any auditor can supply. But this has nothing to do with the question decided, on Tuesday. An exact knowledge of facts is equally necessary in either case. The ratepayer has a right to know the precise liabilities to which his representatives have committed him. When he is in possession of that knowledge, it will be time enough for him to consider whether he wishes the municipality to go on making money, or to supply this or that necessary at a price which forbids all thought of profit. On these questions Progressives and Municipal Reformers may take different sides. But both ought to desire to have the figures of each undertaking submitted to them, and to have them presented in a form which shall make their general meaning clear. If the common-sense of the com- munity determines that the things which incur the largest loss should be those which are first abandoned, we shall see in it the natural consequence of a clear understanding of the finkncial situation. But even if the County Council determined to go on trading at a loss, it would still be well that it should do so with its eyes open.
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