CO129-572-16 Proposals to prevent wastage of water 30-3-1938 - 15-9-1938 — Page 21

HONG KONG LEGISLATIVE COUNCIL.

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on the past because any such contribution is necessarily calculated on past expenditure, but the real purpose of such contribution is to provide for the future. From time to time renewals are required, or such expensive repairs as to amount to renewals. Unless money is set aside to provide for these renewals as they arise, they have got to be financed either by new loans or by money found from general revenue. It is always very pleasant to finance new works out of loans but it is never sound if it can be avoided and I am quite sure that if these water under. takings were in the hands of a public utility company it would certainly put a sum aside every year to provide for the renewals. I am equally certain that the provision would be larger than is proposed by Govern- ment. It may, for instance, be instructive to compare a provision of that nature made by a utility company in this Colony. The Telephone Company is permitted under its Ordinance to set aside provision for depreciation of its capital equipment, and also contributes to a reserve fund designed to pay off the whole of the company's capital within the period of its extensions. In this case we are merely proposing to set aside a small provision to provide for future capital replacements.

In that connection the criticisms of the Economic Commission which the Hon. Mr. Lo referred to are very instructive. They objected to former provisions for depreciation, included in the P.W.D. figures, because, among other grounds, the sum provided for depreciation was not ear-marked or credited to a reserve fund which could be drawn upon. This is precisely what we intend to do, to set aside a separate fund, which will not be available for general revenue. Replacements used to be covered by maintenance charges under Public Works Recurrent, but now replacements will be charged to this fund and will correspondingly reduce the charge of maintenance which is debited to the water account elsewhere. So I venture to think that the Economic Commission's opinion now would be very different. Looking at it from this point of view I don't think it matters very much whether the original capital expenditure was found from water revenue itself or from the general revenue of the Colony because it still remains desirable to make proper provision for future capital replacements.

Finally, on this point, the Hon. Mr. Lo referred to the opinion I previously expressed on the effect on this particular issue of the military contribution complications. My first answer to that is that, as in all these matters, it is a question of balance of advantage, and the military contribution is only one factor. But my second answer, which is perhaps more convincing, is that I received a private but none the less authoritative hint from the Colonial Office that it was not safe to assume that any future loan raised on the water account would be exempt from military contribution as the last one was.

Finally, all three members have criticised the general basis of the charge and the Hon. Mr. Lo suggests that I had myself admitted the desirability, in principle, of an initial supply at a nominal charge. I

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