Page:The empire and the century.djvu/326

 was 'barely half what it should be.' What, then, is the use and necessity of Reserve Funds?

Reserve Funds have three grounds of existence: The constant repairs in cables must be defrayed out of them. Next, after a certain number of years of life, a cable becomes unworkable, and, repairs being no longer available, must be renewed out of the Reserve Fund. Thirdly, modern trade and strategy cry out for alternative routes of cables between points of importance. But alternative routes of cables create no fresh traffic between the points thus additionally connected. Hence, the new cables should be charged not to capital, but to reserve.

But a practical illustration is better than abstract statement. Let me construct from experience the finance of a cable system.

Certain cables were laid. Their length was 5,800 miles. The cables cost £1,154,000. The cost of the five stations on the route was £126,000. The total cost of laying was thus £1,280,000, or an average of £220 per mile.

No sooner was this done than it was found essential to duplicate this route. The new cables cost, like the first, £1,154,000. By a fortunate and unusual economy it was found possible to use all the existing stations of the first cable. They had to be enlarged and refitted at a cost of £82,000. Thus the total cost of the second cable was £1,186,000. The grand total for the two cables was thus nearly £2,500,000.

The annual outlay on the working of these two cables was as follows: Cost of working the five stations was, for the one cable, £88,700; add £8,000 for working the second cable. Total working cost £41,000. But to maintain a cable in good repair, experience directs to lay aside annually in reserve 2½ per cent. on the original cost of the cable. This, for two cables, comes to an annual allocation to reserve of £57,680.