Daunton M. The Cambridge Urban History of Britain, Volume 3: 1840-1950
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Southampton all had substantial income from dockside property.
50
Hence the
reason why none of these ports municipalised the local gasworks in the nine-
teenth century. It can be seen in Table . that estate income like this was the
major source of trading income for the sample of thirty-six towns. Leeds,
Manchester and Birmingham, however, did not have large estates and looked
elsewhere. Their ratepayers were no longer dominated by the owners of local
factories and utilities. The water supply undertakings were out of the question
for the reason given before. Indeed, water supply in Manchester and Leeds was
openly cross-subsidised from gas profits.
51
Thus receipts from markets and gas
undertakings were a useful supplement to estates in the early years whilst
electricity and trams were even more attractive because the purchase clauses in
the and acts meant their acquisition prices would be less than for the
gas companies who had unentailed property rights. Mr E. Garcke, that great
student of electricity supply developments, managing director of the British
Electric Traction Company and champion of the private sector, demonstrated
to the Select Committee on Municipal Trading () that most municipal
undertakings were being run with a view to profit, and, therefore, he was
opposed to the majority of them.
52
By that stage trading profits after deducting
loan charges, for the sample towns recorded in Table ., averaged £, per
town, of which £, came from estates. This was a sizeable income and
enough to finance the whole of the annual labour, maintenance and capital
charges of public health and police.
53
Of course, towns with a good rates base like Bournemouth and Eastbourne
would not be under the same pressure to get their hands on trading profits even
though their populations were growing. Their ‘urban’problems were also nothing
like those of Darlington and West Bromwich and the other industrial boroughs
of the North and Midlands – hence the North/South divide in the incidence of
municipalisation. For a town like Chichester or Chester or Norwich, with a stag-
nant or only slowly growing population, the pressures were even less. Some
governmental units were not well suited to provide a home for utilities. London
was the classic case. The formation of metropolitan undertakings was almost
impossible as long as the motley collection of vestries, drainage boards and road
authorities persisted. Only when London government was centralised by the
Local Government Act was it possible to set in train the establishment of London
County Council Tramways and the Metropolitan Water Board. Another kind of
difficulty faced the councils of small towns who could ill afford the administrative
costs of mounting a parliamentary bill needed for municipalisation. Small towns
Robert Millward
50
E. P. Hennock, ‘Finance and politics in urban local government in England, –’, HJ,
(), –.
51
Ibid., .
52
Joint Select Committee of the House of Lords and the House of Commons, Report on Municipal
Trading, PP and ; Garcke’s evidence is quoted in Gibbons, ‘Opposition to munic-
ipal socialism’, .
53
Millward and Sheard, ‘Urban fiscal problem’, .
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in rural areas were the least likely candidates since utilities thrived most econom-
ically in high density conditions and sufficiently large catchment areas would in
any case straddle several local government boundaries. Joint municipal concerns
did emerge but it was more common to leave trams to the private sector and gas
supplies were met by companies like East Kent Gas and South Staffordshire Gas.
54
(iv)
Given the concern about rising municipal debt, about the problems of coping
in both America and Britain with the difficult living and working conditions
which nineteenth-century urbanisation had brought and given present day inter-
est in privatisation and public ownership, there are surprisingly few quantitative
estimates of the performance of the urban infrastructure industries. In the s
and early s there was a lot of good knockabout debate on the merits of
private and municipal enterprise. In America the Street Railway Journal and
Traction and Transmission hosted articles over the whole range of municipal activ-
ities. Much of these took the form of looking at the fares and tariffs levied by
samples of undertakings and recording whose were lowest. Alternatively, the unit
costs of production and supply were calculated in order to gauge the efficiency
of operations. This drew in such worthies as the Director of the Eleventh US
census, special commissioner to Cuba, etc., etc., who felt that ‘with the excep-
tion of two or three exceptionally well managed municipal gas plants, the British
Corporation plants are neither so well nor so economically managed as the
private plants, nor do they serve the public so advantageously’.
55
This brought
replies from the likes of Mr R. Donald who pointed out that Mr Porter’s sources
were invariably champions of the private sector like the attorney for the private
companies on the first electric power bill, Mr Garcke, whom we have met
already, a committee of the London Chamber of Commerce and an officer of
the London Gas, Light and Coke Company, ‘one of the most hated monopo-
lies in the Metropolis’.
56
Donald then went on to show that the accounts of the
electricity, tramways and gas undertakings revealed that fares, tariffs and costs
were lower in the municipal sector. The trouble was that none of these writers
was looking at what affected costs and prices apart from ownership: the cost of
coal, the location of the plants, the scale of output. Similarly, Milo Maltbie’s
claim, that owing ‘to the cheapness of price and better service under municipal
operations, a larger number of the poorer classes used gas’
57
ignores the fact that
The political economy of urban utilities
54
L. Bussel, ‘Privatisation: tramways: a guide to policy’, Public Enterprise, ().
55
See p. of R. P. Porter, ‘The failure of municipal ownership in England’, Street Railway Journal,
(), –, –.
56
See p. of R. Donald, ‘Success of municipal ownership in Great Britain’, Street Railway Journal,
(), – and –.
57
See p. of M. R. Maltbie, ‘Gas lighting in Great Britain, Municipal Affairs, (), –.
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municipal gas plants were, as we noted earlier, located mainly in the North and
Midlands with the private companies in the South so that they faced different
market and cost conditions. Only if one had satisfactorily allowed for these con-
ditions could conclusions about the role of ownership be drawn.
Similar dangers lie in the strong claim made by some historians, as well as con-
temporaries, about the cost and quality of services before and after municipal-
isation. We might expect Mr Crawford, Glasgow councillor (see above), to wax
eloquent on the newly municipalised gas works. Under the two private compa-
nies, tariffs had been ‘too high, quality bad, service faulty’ whilst after munici-
palisation in ‘there is no complaint on the part of any sector of the public’.
58
But we also find Mr A. Shaw writing a piece in the learned journal Century sug-
gesting that the town had been ‘wretchedly supplied with unwholesome water
at high rates by private companies’ but after these companies had been bought
out in the s the municipal exploitation of Loch Katrine brought to the city
‘a magnificent and inexhaustible supply of mountain water . . . [and] the city has
been able easily to make the works pay’.
59
Finally, William Smart of Glasgow
University can be found explaining in the Quarterly Journal of Economics of
how, as a result of the municipalisation of the tramways in , fares were
reduced, wages increased and the tramcars better fitted whilst the employees had
shorter hours and better uniforms!
60
The before and after comparisons also do
not control for what else was going on. The s and early s in particular
were periods of great technical change in electricity supply and tramways and in
addition the institutional constraints on the private companies need specifying.
Contemporary evidence on this dimension of performance was therefore
contradictory and inconclusive. Subsequently, interest in statistical comparisons
seems to have waned and Herman Finer, in his authoritative study of
municipal trading, avoided ‘comparisons of the success of municipal and private
enterprises . . . for the reason that they are practically impossible’, resting his case
on Pigou’s dictum ‘that attempts to conduct a comparison by reference to sta-
tistics are foredoomed to failure’.
61
Recently, interest has revived and the broad
message from studies of gas and electricity supply in this period is that there is
not much to choose between municipal and private enterprise. The important
issue is the basis of comparison. For example, given that both forms of owner-
ship existed in this period (contrast the nationalised industries in post-
Britain) we can compare towns served by municipal undertakings with towns
served by private companies. In addition, data are usually available on the cost
of fuel, wage rates and the scale of operations. Table . displays figures for gas
supply in in thirty-five towns spread fairly evenly across Scotland, England
and Wales and including London and Dublin. London has an advantage in its
population density, generally a favourable factor for the costs of operation, but
Robert Millward
58
Crawford, ‘Glasgow’s experience’, –.
59
Shaw, ‘Glasgow’, .
60
See p. of W. Smart, ‘Glasgow and its municipal industries’, Quarterly Journal of Economics,
(), –.
61
Finer, Municipal Trading, p. .
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the average cost of supply was actually lowest in the provincial municipal under-
takings – £, per million cubic feet of gas. One reason for this was the tech-
nology of plants which were of a more modern vintage in the municipal
undertakings. However, choice of plant in the provincial and London private
companies had to take into account the cost of finance which, as Table .
records, was higher than in the municipal plants as were wage rates and coal
prices. Overall, this study suggests that, allowing for such factors, there is no
The political economy of urban utilities
Table . Gas costs and prices in Britain in (sample of towns)
Provincial
Municipal London private
Cost per million cubic feet in £ , , ,
Population density (inhabitants per acre) ,. ,. ,.
Wage rates in shillings per week
a
,. ,. ,.
Price of coal in £ per ton ,. ,. ,.
Price of capital (% interest rate on loans) ,. ,. ,.
Technology of plant (age in years) , , ,
a
Engineering turners, whose wages were highly correlated with gasworkers’ wages. See
the source for details
Source: R. Millward and R. Ward, ‘The costs of public and private gas enterprises in
late nineteenth-century Britain’, Oxford Economic Papers, (), table and annex .
Sample of towns and undertakings
Private Municipal
Alliance & Dublin Consumers Gas Co. Blackburn Corporation
Barnet District Gas & Water Co. Bolton Corporation
Brighton & Hove General Gas Co. Bradford Corporation
Brentford Gas Co. Carlisle Corporation
Bristol Gas Co. Darwen Corporation
Bromley Gas Consumers Gas Co. Dundee Gas Commissioners
Commercial Gas Co. Dunfermline Corporation
District Gas Co. Edinburgh and Leith Corporation
Croydon Commerical Gas & Coke Co. Glasgow Corporation
Crystal Palace Lancaster Corporation
Gas Light & Coke Co. Manchester Corporation
Harrow & Stanmore Gas Co. Nottingham Corporation
Hastings & St Leonards Gas Co. Oldham Corporation
Newcastle-upon-Tyne & Gateshead Co. Salford Corporation
Sheffield United Gas Light Co. Stafford Corporation
South Metropolitan Gas Co. Stoke-on-Trent Corporation
Tottenham & Edmonton Gas Light Co. West Bromwich Corporation
Widnes Corporation
Wigan Corporation
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statistically significant difference in the cost of supply as between the private and
public undertakings.
Did the utilities (whether private or municipal) raise the efficiency of the
urban economy? Better quality and cheaper urban transport, gas, electricity and
water could lower the costs of factories and property owners in urban areas, raise
the productivity of their own machinery, buildings and equipment and lower
insurance risks and therefore premiums (for example fire insurance premiums via
better water supplies for fire fighting). Few studies in Britain have tackled these
issues head on. What is clear is that the ability to lower the costs of local busi-
nesses and residents is very much a function of the productivity of the urban util-
ities themselves and there is some evidence that this was not only high but
showed a faster growth than other sectors of the British economy. There is an
interesting contrast with the USA, blessed as that country was with abundant
natural resources. The opening of the American West, the development of water
resources, railways, minerals and the prairies have been shown to be an integral
element in the faster growth of living standards there than in Britain.
62
Productivity in the manufacturing sector of the USA was well above that in
Britain but the size of the gap did not change over the next years so it was
the role of sectors other than manufacturing which explains overall differences
in economic growth. No direct comparison of the infrastructure in USA and
Britain, nor indeed Germany, has yet been done. What we do know is that pro-
ductivity growth in transport and communications (mainly railways and ship-
ping) in Britain from the s to the s was generally less than in
manufacturing and than the UK average. For the local utilities the picture is
rather different. Electricity, water and gas seem, by these standards, to have per-
formed rather well. They were growing very rapidly, output for example at
about per cent per annum. Table . shows that the resources used were
growing less rapidly and hence the conventional measure of productivity shows
an impressive increase, of the order of three times the UK average. Capital per
unit of labour (a simple measure of ‘mechanisation’) was growing at only . per
cent up to the First World War, so much of the high productivity growth of .
per cent must have been due to technical, managerial and organisational
advances in operations – to which local government regulation must be given
some credit. It is in the interwar period with the expansion of electricity trans-
mission grids that pure investment plays a much stronger role.
What did this all mean for the finances of these undertakings?
Comprehensive data for all undertakings are limited in their breakdown of
financial detail though a picture for all the local authority sector is available and
is probably indicative of trends in the private sector. The financial outcomes
Robert Millward
62
G. Wright,. ‘The origins of American industrial success, –’, American Economic Review,
(), –; S. N. Broadberry, ‘Comparative productivity in British and American manu-
facturing during the nineteenth century’, Explorations in Economic History, ().
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reported in Table . are a mirror image of the objectives of the municipalities
discussed earlier. These sectors are very capital intensive. In water supply and
trams, operating costs account for only about one half of total outlays with
capital charges taking the rest. Though operating costs account for a much larger
share in electricity and gas, this is because they use a lot of coal so that their
capital–labour ratios are probably similar to water and trams. Over the whole
period, gas and trams made the largest net profits (aside from estate property, cf
above) – about per cent of turnover – with electricity slightly lower. The big
difference is with water supply and Table . shows that for all sample years for
which full data are available, the receipts from water charges were never enough
to cover operating costs and loan charges. There is some tendency in all sectors
for profit rates to decline after the First World War which is partly a reflection
of the problems of coping with the shift to a less urban, more regional dimen-
sion to operations, a quite decisive factor in eroding the influence of local
authorities and other local power groups.
(v)
The urban utilities had flourished during the nineteenth century as long as the
technology for water supply, gas and electricity plants and tramways was efficient
over areas corresponding roughly to the size of the average provincial town.
Economies of scale were substantial and favoured Glasgow, Leeds, Manchester
and Birmingham over Dundee, Swansea and Oxford. But all reasonable sized
towns could expect to enjoy efficient operations and with little need to worry
about having to cooperate with neighbouring towns. All that changed in the
twentieth century as regional and national technologies emerged and became an
important element in denuding local authorities of influence. We start with a
The political economy of urban utilities
Table . Output, resources and productivity growth in gas, electricity and water in
Britain – (annual % growth rates)
– – – –
Output ....
Labour ....
Capital ....
Total factor productivity
Gas, electricity and water ....
UK ....
Source: R. C. O. Matthews, C. H. Feinstein and J. C. Odling-Smee, British Economic
Growth – (Oxford, ), table ..
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Robert Millward
Table . Financial performance of trading activities of all local authorities in Britain
– (£ million)
Water Gas Electricity Transport Docks, piers, etc. Total
a
Oper. costs .. n/a n/a . n/a
Gr. profit .. n/a n/a n/a n/a
Revenue .. n/a n/a n/a n/a
Oper. costs .
a
..
b
.
a
..
c
Gr. profit .
a
. n/a .
a
n/a n/a
Revenue .
a
. n/a .
a
n/a n/a
T. costs ......
Net profit ⫺.. . n/a .
d
Revenue .... n/a .
d
T. costs ......
Net profit ⫺.... n/a .
d
Revenue .... n/a .
d
T. costs ......
Net profit ⫺.... ⫺.
e
.
e
Revenue .....
e
.
e
T. costs ..... .
Net profit ⫺. ⫺.. ⫺. ⫺.
e
⫺.
e
Revenue .....
e
.
e
T. costs ..... .
Net profit ⫺.... ⫺.
e
.
e
Revenue .....
e
.
e
T. costs ......
Net profit ⫺.
a
. ⫺.. ⫺.
e
⫺.
f
Revenue .
a
....
e
.
f
T. costs .. ... .
Net profit ⫺.
a
. ⫺...
e
⫺.
f
Revenue .
a
. ...
e
.
f
a
Excludes Scotland. For water revenue and it is the net profit element only
in receipts which are not covered.
Cambridge Histories Online © Cambridge University Press, 2008
brief case study of electricity to illustrate the issues and then go on to show how
the problems of transition for all utilities were, from the early s, a key
element in the pressures for nationalisation.
The early years of electricity supply involved a dimension of economic perfor-
mance which we have not so far touched on. Was long-term development stultified
by either regulation or municipalisation? ‘Notwithstanding that our countrymen
have been among the first in inventive genius in electrical science’, said the British
Institution of Electrical Engineers in , ‘its development in the United
Kingdom is in a backward condition’.
63
For contemporaries like V. Knox, writing
in the Economic Journal and Mr E. Garcke again, as well as Ian Byatt (current British
regulator of water) in his early scholarly days, the legislation for tramways and
electricity inhibited development, especially that of the private companies.
64
Does the evidence bear that out? Early ventures in electricity were of course
speculative and so much so as to prompt the Birmingham Gazette to suggest that
an experiment in electric lighting ‘is good enough, perhaps, for speculative
investment of private capital, but not good enough to justify the risking of public
funds’.
65
The Electric Lighting Act, as we have seen, gave powers to local author-
ities to take over private companies after twenty-one years. The editor of the
American Municipal Journal noted that though there were many complaints that
this restricted the horizons of private companies, local authorities also had to
write off the capital of their undertakings over twenty-five years.
66
In any case
the purchase clauses never applied to the power companies and for lighting it
The political economy of urban utilities
63
Hughes, ‘British electrical industry’, .
64
V. Knox, ‘The economic effects of the Tramways Act of ’, Economic Journal, (),
–; E. L. Garcke, Manual of Electrical Undertakings and Directory of Officials, vol. :
(London, ); I. C. R. Byatt, The British Electrical Industry, – (Oxford, ).
65
Jones, ‘Municipalities’, .
66
Writing in Traction and Transmission, (), .
Table . (cont.)
b
Excludes England and Wales.
c
Excludes water supply and transport in Scotland and electricity in England and Wales.
d
Excludes net profits of docks.
e
Excludes net profit of docks in Scotland.
f
Excludes net profits of water supply and docks in Scotland.
Definitions: revenue includes all receipts, grants, tolls and fees. Oper. costs comprise
annual labour, fuel, maintenance and other operating costs. T. costs comprise operating
costs plus annual loan charges. Gr. profit is revenue less operating costs as defined
above. Net profit is revenue less total costs as defined above. Before the cost
figures for England and Wales in our source exclude loan charges as do the data for
Scotland before . The post- data do not identify loan charges separately. The
coverage of the cost data for England and Wales changes in but this has a very
small quantitative impact. See Mitchell, British Historical Statistics, p. n. .
Source: B. R. Mitchell, British Historical Statistics (Cambridge, ), pp. –.
Cambridge Histories Online © Cambridge University Press, 2008
was extended to forty-two years by an act of . It did not stop a flurry of
private companies being set up, some with cables laid on streets or slung over
wooden poles. The USA was progressing more quickly than Britain where in
sales were still small and most generating stations had less than . mega-
watt capacity.
67
The USA did not, however, have the same British advantages in
gas and steam power. The latter was important in manufacturing and transport,
and, for lighting, electricity prices could not compete with gas until about
.
68
The town clerk of Birmingham was sufficiently confident to be able to
report to the Gas Committee in that ‘it may . . . be the wiser course to
permit speculators to experiment at their own risk’.
69
A related source of concern was trams, per cent of which had been
electrified in the USA as early as . The investment needed for electricity
may have appeared a risky proposition in Britain in the s when the twenty-
one-year clauses on the undertakings established in the s were coming to an
end. The lag with the USA only lasted a short time because the municipalities
took the initiative. Some had stepped in where private development had not
been forthcoming – hilly Halifax and Huddersfield, for example. By the
municipalities had been given general permission by parliament to operate trams
as well as lay track, and electric mileage rose from in to , in /
by which time per cent of Britain’s trams were electric.
70
Where the local authorities proved a real stumbling block was in the struggle
to shift from an urban to regional focus in the production of electricity. The devel-
opment of high pressure speed turbines meant unit generating costs were lower
in larger stations. In addition, developments in the scientific understanding of
electrical current allowed supply to be transformed by stations. Interconnection
of areas by grids would therefore allow more use of large generating plants and
the elimination of idle capacity. Calls for greater coordination between urban
areas were being made in the early s and, immediately after the First World
War, there was much agitation for the establishment of district boards. Following
the Williamson Committee Report of ,
71
the only gain was the establish-
ment of a body, the electricity commissioners, to promote technical develop-
ment. Another government committee was established in and reported in
strong terms on the relatively high cost and low consumption of electricity in
Britain, the proliferation of small plants and the need for interconnection.
72
The
Robert Millward
67
L. Hannah, Electricity before Nationalisation (London, ), p. .
68
Byatt, British Electrical Industry, p. ; J. F. Wilson, ‘Competition between electricity and gas in
Britain, –’, International Economic History Association, Pre-Conference on the
Development of Electrical Energy (Paris, ), pp. –.
69
Jones, ‘Municipalities’, .
70
Hannah, Electricity before Nationalisation, pp. –.
71
Williamson Committee, Report of the Committee Appointed by the Board of Trade to Consider the
Question of Electric Power Supply ().
72
Weir Committee, Report of the Committee Appointed by the Board of Trade to Review the National
Problem of the Supply of Electricity Energy ().
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solution, ingenious said Leslie Hannah
73
in the light of fears of nationalisation,
was to set up the Central Electricity Board (CEB). Its basic functions were to con-
struct a national grid, close down small stations and standardise electricity fre-
quencies. But it was the institutional arrangement which was truly innovative.
Certain stations were to be ‘selected’. The CEB would buy electricity from them,
transmit and then resell leaving the job of retailing to the companies and local
authority undertakings. It bestowed the honour of being selected rather gener-
ously in order to oil the process of transition and the work of James Foreman-
Peck and Michael Waterson suggests that the best practice local authority and
private generating plants were equally efficient (though with a longish ‘tail’ of
unselected municipal plants) which also would have facilitated a smooth transi-
tion.
74
The managers of the CEB were not appointed by the Treasury and all
capital was raised on the stock market without a Treasury guarantee. It was this
which allayed the fears, even though the reality was that it was a publicly owned
enterprise since none of the stock was equity. On the face of it the Board was a
success. The grid networks were set up first on a regional basis with the Board’s
first chairman, Andrew Duncan, experimenting in his home territory in Scotland
and the national grid completed in . Capital formation each year averaged
£ million (see Table .). The number of consumers shot up from million
in to . million in /. With production in non-selected stations dwin-
dling, the thermal efficiency gap with the USA eliminated, the system load factor
raised from per cent in to per cent by and the Battersea mega-
watt station the largest in Europe, complaints were few.
The huge number of electricity undertakings still in existence in the s –
cf. in Table . above – constituted the remnants of the ‘urban’ dimension,
mainly involved in retail distribution, many with only a small turnover. In
over undertakings accounted for less than per cent of sales, distribution
costs were high and the multiplicity of boundaries prevented efficient develop-
ment of networks. The trouble was that local authorities accounted for per
cent of the undertakings and they were particularly stubborn. Not for them to
give up empires and profits. Joint electricity authorities had emerged but the
experience was not encouraging and Herbert Morrison did not see them as the
way forward.
75
Civic pride and political rivalries permeated the system. The
member of parliament for Ashton-under-Lyme observed in that the local
council would rather its electricity undertaking be taken over by a new public
board than see it fall into the hands of Oldham borough, the neighbouring
authority. Later, when nationalisation loomed, many municipalities were
The political economy of urban utilities
73
L. Hannah, ‘A pioneer of public enterprise: the Central Electricity Generating Board and the
National Grid’, in B. Supple, ed., Essays in British Business History (Oxford, ).
74
J. M. Foreman-Peck and M. Waterson, ‘The comparative efficiency of public and private enter-
prise in Britain: electricity generation between the world wars’, Economic Journal, , Supplement
().
75
Hannah, Electricity before Nationalisation, pp. –.
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