Capital expenditure in Nyasaland is undertaken by both the Federal and
the territorial governments, in connection with the functions for which they
are individually responsible. The expenditures which have been made by
the two governments since the establishment of the Federation are set out
in Table I below.

The average figure for this five-year period, taking both governments to-
gether, is about £3.1 million per annum. This is considerably higher than
the annual average for the Nyasaland Government in the five full years
preceding Federation, which was approximately £1 million. ¹ These two
figures are not comparable, since the Nyasaland Government's capital
expenditure in recent years, even if the territory had remained separate,
would certainly have exceeded the 1948-52 levels; but there can be no doubt
that Federation has led to a higher rate of public investment than would
have been possible if Nyasaland had remained separate. The memorandum
on Fiscal Benefits Accruing to Nyasaland from Federation puts the difference
at £1 million per annum.

It is a common practice to add this estimated difference to the fiscal
gains which the Nyasaland Government has made on current account under
the present financial arrangements. But this is not a legitimate procedure.
It can be defended on the grounds that the additional funds which have been
available to finance capital expenditure would have to be found, in the absence
of Federation, from the Nyasaland Government's current revenues. As will
be seen in the next section, however, this is not necessarily the case. Even
if it were true, the argument ignores the fact that, while the gains on current
account create no liability to the Nyasaland Government, the higher level
of public investment has brought about corresponding increases in its financial
obligations.

This is obviously the case with respect to investment carried out by the
Nyasaland Government itself, in so far as this is financed by borrowing.

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