Daunton M. The Cambridge Urban History of Britain, Volume 3: 1840-1950
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track and company after twenty-one years. A similar purchase clause was put into
the Electric Lighting Act which also set maximum tariffs for electricity
supply and gave local authorities a clear mandate to set up plant. The gate to
municipalisation of electricity and trams was open and the weak regulatory
regime for gas and water in the – period was a contributory element. But
very many other factors were involved as we shall now see.
(iii)
The huge expansion of municipal water systems and gas works in the latter part
of the nineteenth century together with their promotion by the Webbs and the
Fabians prompted many observers to characterise the rise of municipal trading
as ‘gas and water socialism’. It was a useful characterisation for opponents.
‘Private capital not only complained of government regulation, but also the
stimulus given municipal socialism by the [ Electric Lighting] Act.’
24
Lord
Avebury complained of the ‘the new school of “Progressives” . . . [who] seem
to consider that we might place over any municipal buildings the motto which
Huc saw over a Chinese shop, “All sorts of business transacted here with unfail-
ing success’’’.
25
Both John Kellett and Derek Fraser have shown that municipal socialism as an
ideology was very much a phenomenon of the early decades of the twentieth
century and of debates about London government in particular.
26
It is true, as
Table . shows, that there was a massive spurt in municipal activity at this time.
The metropolitan boroughs were established under the Local Government
Act and many subsequently took to generating electricity. From to
the number of statutory electricity undertakings in Britain shot up from to
of which per cent were owned by local government. The tramways spurt
followed in the next five years; already undertakings in but by
of which one half were municipally owned. But municipalisation was clearly not
just a London matter and actually started a good half century earlier. The most
dramatic growth in statutory water undertakings was from about to the
early s by which time there were systems run by local government. For
gas the most rapid growth was from the s to the s during which period
the share of the municipals grew from per cent to per cent, remaining at
roughly that level right through to the s – though the initial spurt was most
noticeable in Scotland and the share of municipal undertakings in England and
Robert Millward
24
See p. of T. P. Hughes, ‘British electrical industry lag: –’, Technology and Culture,
(), –.
25
Avebury, ‘Municipal trading’, .
26
J. R. Kellett, ‘Municipal socialism, enterprise and trading in the Victorian city’, UHY (),
–; W. H. Fraser, ‘Municipal socialism and social policy’, in R. J. Morris and R. Rodger, eds.,
The Victorian City (London, ).
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Wales continued to rise in a fairly smooth fashion through to the s. Hence,
well before the term municipal socialism was seriously bandied around, a huge
part of the shift to public ownership had taken place. In any case, as we shall see,
the political hue of town councils dominated by businessmen and ratepayers can
hardly be called socialist.
In accounting for the rise in municipal trading many writers have relied on
the monopoly argument discussed earlier. The American observers put this at
the front of their explanations. ‘All services . . . which are in the nature of
monopolies should by preference be in the hands of the Municipalities’, said the
editor of Traction and Transmission in adding that ‘private companies cannot
be trusted to exercise the powers of monopoly with discretion’.
27
A modern
writer on trams said a key element was ‘the economic argument. Tramways were
the monopoly of a public necessity.’
28
The large team of American civic officials
and academics who visited Britain in the early s subscribed to the view that
‘there is a desire to keep the city from being mulcted by a private company’.
29
In the authoritative surveys of municipal enterprise by British academics, the
monopoly issue was central.
30
Of course, other factors were often thrown in –
safety, the disruption of streets by the laying of mains and track. In fact some of
the lists become quite bewildering. The Birmingham Daily Post in claimed
to be capturing a popular mood in discerning
a general feeling that for the purposes of preventing the creation of a new monop-
oly in private hands, to ensure the control of the streets, and then to promote the
public convenience, and also to limit as far as possible, injurious competition with
Corporation gas lighting, the supply of electric light ought to be in the hands of
the local governing authority.
31
There are problems of both theory and practice in this line of argument. If
the sources of concern were the prices and profits of a private company operat-
ing in a natural monopoly setting then one solution would have been to regu-
late those prices and profits. In other words most of the above arguments might
explain the desire for public control but not necessarily the desire for public owner-
ship. Moreover, how is one to account for the behaviour of those town councils
who allowed private companies to continue – not simply the likes of Eastbourne,
Oxford and York but also industrial and commercial centres like Liverpool,
Sheffield and Newcastle did not municipalise operations in some of the utility
areas? There is also a North/South divide in some industries. ‘Geographically,
The political economy of urban utilities
27
Editor, Traction and Transmission, (), .
28
J. P. MacKay, Tramways and Trolleys (Princeton, ), p. .
29
National Civic Federation, Municipal and Private Ownership of Public Utilities (New York, ),
p. .
30
Falkus, ‘Development of municipal trading’,–; Robson, ‘Public utility services’, pp. –.
31
Quoted on p. of Lewis Jones, ‘The municipalities and the electricity supplies industry in
Birmingham’, West Midlands Studies, (), –.
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Table . Number of statutory local utility undertakings in the UK –
a
Electricity Trams Gas Water
PR LG PR LG PR LG PR Munic
b
LG
— — — — n/a n/a
c
n/a
———— n/a n/a n/a
———— n/a n/a
——— —
c
n/a
— — n/a n/a n/a n/a
d
n/a n/a
e
e
f
f
n/a n/a
n/a n/a n/a n/a n/a n/a n/a
n/a n/a n/a n/a
n/a n/a n/a n/a n/a
n/a n/a
n/a n/a n/a
n/a n/a n/a n/a
n/a n/a
d
g
n/a n/a n/a
g
n/a n/a n/a n/a n/a
g
n/a n/a n/a n/a n/a
g
n/a n/a n/a n/a n/a
g
—————— n/a
a
PR is the private sector. LG are local authorities, including all joint boards. The data for trams refer to the ownership of track; for electricity, to
undertakings supplying electricity for light or power. Company data generally refer to financial years ending in the years quoted; for local
authorities the financial years often end in the following spring.
b
Undertakings owned by the corporations of municipal boroughs.
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c
England and Wales only.
d
Data probably exclude S. Ireland.
e
Data refer to .
f
Data refer to .
g
Excludes S. Ireland.
Sources: official: Board of Trade, Annual Returns of All Authorised Gas Undertakings ( onwards); Board of Trade, Annual Returns of Street and
Road Tramways and Light Railways ( onwards), PP ; Board of Trade, Return Relating to Authorised Electricity Supply Undertakings in the
U.K. Belonging to Local Authorities and Companies for the Year , PP / ; Balfour Committee on Industry and Trade, Further Factors in
Industrial and Commercial Efficiency; Ministry of Fuel and Power, Engineering and Financial Statistics of All Authorised Undertakings /, Electricity
Supply Act (---) (London, ). Secondary sources: A. L. Dakyns, ‘The water supply of English towns in ’, Manchester School,
(), –; M. E. Falkus, ‘The development of municipal trading in the nineteenth century’, Business History, (), –; J. Foreman-
Peck and R. Millward, Public and Private Ownership of British Industry – (Oxford, ), chs. , , , , ; E. L. Garcke, Manual of Electrical
Undertakings and Directory of Officials, vol. i: (London, ); J. A. Hassan, ‘The water industry –: a failure of public policy?’, in R.
Millward and J. Singleton, eds., The Political Economy of Nationalisation in Britain – (Cambridge, ), pp. –; W. A. Robson, ‘The
public utility services’, in H. J. Laski, W. I. Jennings and W. A. Robson, eds., A Century of Municipal Progress:The Last Years (London, ).
Cambridge Histories Online © Cambridge University Press, 2008
most municipal gasworks were located in the industrial midlands, the north and
Scotland, though’, said Matthews ‘why some councils decided to take over their
gas works whilst others did not is not immediately obvious and the answer must
await more detailed investigation.’
32
How finally are we to account for the
differences across industries – by the s about two-fifths of gasworks were
municipally owned but it was nearer to two-thirds for electricity and four-fifths
in water supply?
Two groups had a powerful interest in these decisions. One group was man-
ufacturers and other businessmen; the other was ratepayers. The idea that many
councillors were strongly motivated by civic pride is a recurring theme in the
literature and often adduced as a reason for municipalisation – in order to ensure
high standards of service. Robert Crawford LLD, ex-councillor, member for ten
years of the Committee on Street Railways, ex-burgh magistrate, deputy lieu-
tenant of the court of the city of Glasgow etc., etc., claimed in that there
was
a large infusion among citizens of every class of the civic spirit. There is civic pride
in civic enterprise and institutions . . .The secret of success . . . lies deeper than
the mere machinery and must be sought for mainly in the honesty, uprightness,
capacity, self-sacrifice and patriotism of the men chosen by an intelligent commu-
nity and entrusted with this great communal duty.
33
But the businessmen and ratepayers had some very specific economic inter-
ests. Linda Jones has estimated that per cent of Birmingham councillors in
the period – were businessmen.
34
The fortunes of their factories were
often contingent on good local water and transport and if that required munic-
ipal operations, so be it. To take one example of business influence, Wakefield
council wished to avoid some of the health problems in taking their water supply
from the local polluted rivers by drawing on the good clean water in deep local
wells. This option was eventually dropped because the water was hard and there-
fore unsuitable for use in textile mills whose owners were well represented on
the council.
35
In all towns businessmen had a vested interest in a good water
supply for fire fighting and the American literature shows that fire insurance pre-
miums were noticeably less in towns with good water systems.
36
Robert Millward
32
Matthews, ‘Laissez-faire’, .
33
See pp. and of R. Crawford, ‘Glasgow’s experience with municipal ownership and operation’,
Annals of the American Academy of Political and Social Science, (), –.
34
See p. of L. Jones, ‘Public pursuit of private profit: liberal businessmen and municipal politics
in Birmingham, –’, Business History, (), –.
35
C. Hamlin, ‘Muddling in bumbledom: on the enormity of large sanitary improvements in four
British towns, –’, Victorian Studies, (–), –.
36
L. Anderson, ‘Hard choices: supplying water to New England Towns’, Journal of Interdisciplinary
History, (), –.
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The other group, sometimes overlapping with businessmen, were ratepayers.
The last quarter of the century saw town councils in the rapidly expanding
industrial boroughs faced with immense financial burdens as they struggled to
overcome the terrible living and working conditions which industrialisation had
brought. All were investing heavily in water supply, sewerage systems and roads
and also had responsibility for the growing bill for policing and education. A
commonly quoted index is that, in the last quarter of the century, population in
Britain rose by per cent, rateable values by per cent and rates by per
cent.
37
Any device which could lower the burden on ratepayers would find ready
ears. Fraser suggests that rates were paid by the landlord in England and Wales
but by the tenant in Scotland, one outcome of which was that in Scotland
municipalities never aimed at using trading surpluses to ease the rates burden.
38
The story in England and Wales was quite the reverse, as we shall see, since
setting fares and tariffs for electricity, gas and trams at levels sufficient to gener-
ate profits which could finance urban improvements was a way of taxing non-
ratepayers, and indeed non-residents, who used the service.
The case of water supply is probably different from that of electricity, gas and
trams and nearer to the way councils organised and financed other services like
paving, refuse collection, sanitation, bathhouses and cemeteries. The
Public Health Act required local authorities to ensure that adequate water sup-
plies existed. Table . shows the average levels of local authority trading profits
each year for a sample of thirty-six towns. The water undertakings made large
operating surpluses but (as the – data show) these were usually not
enough to meet loan charges and so water undertakings generally made a
financial loss. If the object was to generate profits, the achievements were poor.
More likely the aim was to expand supplies of clean water for residents, as the
act required, and to develop soft water and a firefighting capability for
factory owners. Why, though, was water municipalised? In some respects the
issue is more difficult to pin down than the cases of electricity, gas and trams
where the large set of private operators continued to flourish and provide a
benchmark for comparison. Most of the water undertakings became municipal
and fully absorbed into local government by virtue of water charges for domes-
tic consumption being levied as a rate – a tax on the rateable value of property
like the rest of local taxation.
Some of the explanations in the literature for this shift are not convincing.
John Hassan and, much earlier, Albert Shaw and Douglas Knoop, argued that
the large-scale schemes for taking water supplies to the large urban conurbations
involved levels of finance and a degree of planning beyond the scope of private
The political economy of urban utilities
37
Millward and Sheard, ‘Urban fiscal problem’, –; M. J. Daunton, ‘Urban Britain’, in T. R.
Gourvish and A. O. Day, eds., Later Victorian Britain, – (London, ), pp. –.
38
Fraser, ‘Municipal socialism’, p. .
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Robert Millward
Table . Average annual gross trading profits per town council – (sample of
towns: £ )
Profits – – – – –
Water n/a .
a
. . .
Gas n/a . . . .
Markets n/a .
b
. . .
Estates n/a . . . .
Total profits .
c
. . . .
– – – –
Water
Profits ⫺. ⫺. . .
Loan charges ⫺ n/a ⫺ n/a .
d
.
Gas
Profits ⫺. ⫺. . .
Loan charges ⫺ n/a ⫺ n/a .
d
.
Electricity
Profits ⫺ . ⫺ . . .
Loan charges ⫺n/a ⫺ n/a . .
Trams
Profits ⫺ . ⫺. . .
Loan charges ⫺ n/a ⫺ n/a . .
Market profits ⫺ . ⫺ . . .
Cemetery profits ⫺. ⫺. . .
Harbour profits ⫺. ⫺. . .
Estates profits ⫺. ⫺. . .
Total profits ⫺. ⫺. .
e
.
e
Loan charges ⫺ n/a ⫺ n/a . .
Transfers (net) ⫺ n/a ⫺ n/a n/a .
Balance ⫺ n/a ⫺ n/a . .
a
Excludes Leicester , , .
b
Excludes Gt Torrington .
c
Includes only some of the years for some of the towns.
d
Excludes Sunderland .
e
Excludes Thetford –.
Sources and definitions: The source is Local Government Board, Annual Local Taxation
Returns –. See below for details of the sample towns. Entries are unweighted
averages of the towns and therefore columns do not necessarily add up. Profits data
are gross trading profits. Profits of electricity, trams, cemeteries and harbours were non-
existent or zero before . Loan charges include interest; relevant aggregate data for
both these items are not available for the years before . Data refer to the financial
years of town councils ending in the year quoted.
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enterprise.
39
The investment requirements of the Rivington Pike scheme for
Liverpool in the s and the later one for Vyrnwy in Wales, the Loch Katrine
project for Glasgow in the s and the Thirlmere and Longdendale schemes
for Manchester in the s and s were certainly substantial. But private
enterprise had laid a route network for railways in the s and s equiva-
lent to our modern motorway network and the later work on lines linking the
outer reaches of Wales and Scotland involved even more costly outlays on
bridges, viaducts and tunnels. Rather, one might point to the institutional
difficulties in the way of companies earning sufficient profit to expand supplies
at a rate demanded by town councils.
That is, water supply is obviously dependent on natural resources and hence,
like agriculture, is liable to diminishing returns. Unless significant technical
progress in storage and delivery takes place, expansion will lead to rising costs.
Clearly this happened in the nineteenth century as the demands from rapid
urban population growth and industrialisation exhausted the more obvious local
The political economy of urban utilities
39
J. A. Hassan, ‘The growth and impact of the British water industry in the nineteenth century’,
Ec.HR, nd series, (), –; A. Shaw, ‘Glasgow: a municipal study’, Century, (),
–; D. Knoop, Principles and Methods of Municipal Trading (London, ).
Table . (cont.)
The sample of towns: the location of each of the sample of towns and their status in
are as follows.
North Midlands South
& Wales
County boroughs Blackpool Bristol Hastings
Bradford Hanley Norwich
Leeds Leicester Plymouth
Liverpool Lincoln Southampton
Manchester Northampton
St Helens Nottingham
Sunderland Oxford
Preston Swansea
York Wolverhampton
Boroughs Carlisle Carmarthen Gt Torrington
Doncaster Louth Kingston
Richmond Luton Marlborough
Wrexham Ramsgate
Shaftesbury
Thetford
Urban district councils Tottenham
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supplies and towns had to look further afield. Data on the cost of water are actu-
ally quite meagre but Jose Cavalcanti’s recent work on supplies to London sug-
gests that costs per gallon did rise. The annual supply of all the London water
companies came to , million gallons in and rose to , million by
. His estimates of the companies’ total annual costs are £, in
and £,, in , implying that the costs per thousand gallons rose by
per cent from d. to d.
40
Relative to the prices of all other goods and services,
most of which were falling, the real cost of water may have risen by about
per cent in the nineteenth century. For the companies to make a normal rate of
return, water charges would have had to rise accordingly and large numbers of
customers captured in order to exploit the economies of scale and contiguity
central to keeping costs per unit down. This is where the maximum prices
specified in the legislation did appear to bite. A contemporary authority, Arthur
Silverthorne, suggested the maxima allowed in the Clauses Act were never
high enough for the companies and so they, instead, engaged in protracted legal
battles over the valuation of property to which the water rate was applied.
41
Most
business customers were metered; for example, another contemporary reported
that in a sample of twenty-nine undertakings all ‘trade’ customers were supplied
by meter.
42
Many councils dominated by manufacturers had meter schedules
which were very generous as was the ‘compensation’ water allowed to factories
operating near rivers and reservoirs subject to development in water schemes.
None of this meant profit for the water companies. Similarly, it was important
for the companies to capture large numbers of customers given the ‘lumpiness’
of the investment required in water resource development. Ideally such custom-
ers should be geographically concentrated in order to take advantage of the
economies of contiguity inherent in distribution networks. A major problem
which the companies therefore faced was that for constant high pressure supply
to be introduced – which all parliamentary reports were promoting – it was
essential for customers themselves to invest in pipes, sinks and drains in their own
homes. A great deal of uncertainty therefore surrounded the operation of com-
panies dealing on a one to one basis with households, some of whom would be
reluctant to make the necessary investments. A great attraction of municipal
operation was that it involved the finance of water services to households by
rates, the tax on rateable values. By such a uniform levy, councils automatically
enrolled all ratepayers on to the water undertakings’ books.
43
For electricity, trams and gas different issues were involved. One was the desire
to curb the excess profits that would arise when private enterprise were left to
Robert Millward
40
Cavalcanti, Economic Aspects, tables ., ., ., ..
41
A. Silverthorne, London and Provincial Water Supplies (London, ), pp. , , .
42
See pp. – of W. Sherratt, ‘Water supply to large towns’, Journal of the Manchester Geographical
Society, (), –.
43
Royal Commission on Water Supply, Report of the Commissioners (), pp. –.
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operate services which were natural monopolies. On the face of it this could be
done by controlling fares and tariffs and by taxing profits. Such local taxes and
controls were often not available to local authorities in Britain, unlike
Germany.
44
This helps to explain municipalisation in Scotland where in addition
the companies were cheap to buy out since the law never gave them the right
to operate in perpetuity, as in England and Wales. For the latter, our thesis is that
a driving force behind municipalisation was the desire of local councils to get
their hands on the surpluses of these trading enterprises and use them to ‘relieve
the rates’. This was Joseph Chamberlain’s dictum. Unless a council had substan-
tial property income (‘estates’), essential town improvements would be deferred
unless some revenue other than rates was found.
45
But if it was paramount why
did York, Bournemouth, Salisbury and many others refrain from extensive
municipal trading? Why did Liverpool, Bristol and Hull allow private gas com-
panies to flourish? Why was there the North/South dichotomy reported by
Matthews?
46
It is important to recognise that in the early years of the century, the owners
of the private companies – gas only at that stage of course – were often major
local ratepayers. Together with bankers, lawyers and other professionals, they
would form the local body of improvement commissioners or councillors.
47
By
the late nineteenth century they were a much more dispersed group as capital
came from various sources and the local ratepayers were as likely to be domi-
nated by shopkeepers.
48
Many of the growing industrial towns of the Midlands
and the North faced a substantial fiscal problem emanating from the rising
demands for expenditures on public health, roads, policing, poor relief, educa-
tion and other services. The local authorities had little room for manoeuvre since
they had no powers to raise income taxes or levy duties on commodities or
profits or land. Some grants and assigned revenues emerged from central govern-
ment in the last decades of the century
49
but, in general, little was done to alle-
viate the widely differing circumstances of the local authorities. The ratepayers
staged revolts but also, as Peter Hennock noted, they looked for alternative
revenue sources. The ports of Liverpool, Swansea, Bristol, Hull, Yarmouth and
The political economy of urban utilities
44
J. C. Brown, ‘Coping with crisis: the diffusion of water works in the late nineteenth century
German towns’, Journal of Economic History, (), –.
45
Fraser, ‘Municipal socialism’, p. ; P. J. Waller, Town, City and Nation (Oxford, ), p. .
46
Matthews, ‘Laissez-faire’.
47
For Preston see B. W. Awty, ‘The introduction of gas lighting to Preston’, Transactions of the History
Society of Lancashire and Cheshire, (); for Chester see J. F. Wilson, ‘Competition in the
early gas industry: the case of Chester Gas Light Company –’, Transactions of the
Antiquarian Society of Lancashire and Cheshire, (), –.
48
E. P. Hennock, Fit and Proper Persons (London, ); J. Garrard, Leadership and Power in Victorian
Industrial Towns, – (Manchester, ).
49
G. C. Baugh, ‘Government grants in aid of the rates in England and Wales, –’, Bull.
IHR, (), –.
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