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HONG KONG LEGISLATIVE COUNCIL.
"In principle I think it is most desirable that there should be provision against the contingency of renewal of all works and equipment which may be expected to require renewal within a reasonable period of time, as is the common practice of other water undertakings and similar enterprises. The proper account- ing procedure is to build up a Renewals Fund to which such expenditure can be charged. In the absence of such a fund the cost of renewal must be met by other means; e.g., renewal of the cross-harbour pipe line is now necessary and will have to be met from loan. There is, however, a factor in Hong Kong finance which forces a departure from orthodox principle-the military contribution. If annual contributions were made to a Renewals Fund and revenue raised from water charges to cover such contributions, military contribution of 20% would have to be paid on such revenue. The gross additional revenue to be collected would therefore be 25% more than the Renewals contribution. On the other hand if renewals are in due course financed from loan the charges on such loan will, if present practice is maintained, be deductible from the revenue assessable to military contribution. Unless and until there is a change in the military contribution system, therefore, the balance of advantage lies in making no current provision for renewals but financing them in due course by loan. Any "surplus" of revenue which may arise should, as already indicated, be regarded as available for renewals."
And yet the public is now being forced to finance renewals, not out of a loan (in which case the liability is equitably apportioned between the present consumers and posterity), but out of current revenue which is liable to a 20% payment for Military Contribution, and against the authoritative and expert views of the Financial Secretary set out above.
For the reasons indicated above I submit that, however much opinion may differ as to the other items of expenditure set out in the Financial Secretary's Memorandum, there can be no question that this gratuitous charge of over $300,000 a year as a working expense of the Water Department is unjust, and cannot possibly be justified.
Apart from all questions of figures, the Financial Secretary's proposals are unsatisfactory for one reason which is fundamental, namely, that the charges do not take into account the difference between a necessary supply represented by a minimum consumption per head per household, and waste, or extravagant use, represented by consumption in excess of such minimum consumption.
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The desirability of making a more or less nominal charge for the initial minimum supply is frankly admitted by the Financial Secretary, and was stressed by no less an authority than a former Governor in this Council--Sir William Peel. I fear that one inevitable consequence of the new scheme is that the very poor will increasingly resort to the use of street hydrants, with all its obvious objections from the point
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