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HONG KONG LEGISLATIVE COUNCIL.
the Colony up to the date of the Economic Commission's Report, then I should be interested to know when, and how, the extra $5,500,000 was spent.
In the figures supplied by the Water Department to the Economic Commission there was an item for "depreciation 12% on capital outlay of $10,000,000 prior to borrowing". Of course this charge is in essence the same as the proposed charge of 2% on over $15,500,000, and in connection with this charge this is what the Commissioners said:-
It was admitted that in point of fact (a) the works had been fully paid for out of past revenues, (b) that the annual depreciation of $150,000 was not earmarked or credited to a reserve fund which could be drawn upon for renewals, but was simply paid into the general revenue of the Colony, (c) that depreciation was charged annually upon the full capital value of $10,000,000 and not upon the depreciated capital value, (d) that normal replacements were covered by maintenance charges under Public Works Recurrent, (e) that extensions and small develop- ments were covered by Public Works Extraordinary and, finally, (f) that in the event of a catastrophe rendering necessary renewal of a major work, the undertaking would in all probability be financed out of loans.
"In these circumstances, we cannot agree that there is any justification for the inclusion of this item in Maintenance Charges on Waterworks. To so include it is to mix capital expenditure with revenue, which is contrary to the principles of sound accountancy. The capital outlay of $10,000,000 has already been fully paid for out of revenue and any major replacements which may become necessary in the future should be dealt with as they occur, preferably by means of loans. In our opinion it is quite unnecessary to burden the revenue derived from water with an annual charge of $150,000 for depreciation."
I need not say more to show the injustice of the proposed charge. But it will be observed that the Commission's criticism was based on the assumption that past capital expenditure had in fact been paid out of past revenue generally, and not specifically out of Water Revenue.
But I am not prepared to make any such assumption. Indeed, it may very well be that on a proper account being taken, from the beginning to date, of water expenditure on the one hand, and of water revenue on the other, it will be shown that revenue exceeds expenditure by a very large sum, and that in so far as the past capital expenditure was paid in the past out of revenue, that revenue actually represented "profits" from the water account. In this connection I would like to refer to what I stated in this Council on the 7th October, 1936:—
ཅ་ ་ -་
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