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Methuen and Co., 36 Essex-street, Strand, W.C.
noster-row, E.C. Stanford, E., 12-14 Long-acre, W.C. Stevens and Sons, 119 Chancery-lane, E.C. Stevens and Haynes, 13 Bell-yard, Temple Bar, E.C. Stock, Elliott, 62 Paternoster-row, E.C. Sweet and Maxwell, Ltd., 3 Chancery-lane, E.C. Truslove, Hanson and Comba, Ltd., 143 Oxford-street, W. Twentieth Century Press, Ltd., 37a Clerkenwell-green, E.C. Unwin, T. Fisher, 11 Paternoster-buildings, E.C. Vacher and Sons, 20 Tothill-street, Westminster, S.W. Ward and Downey, Ltd. (firm no longer exists). Ward, Lock and Co., Ltd., Salisbury-square, E.C. Whittaker and Co., 2 White Hart-street, Paternoster-row, E.C. Williams and Norgate, 14 Henrietta-street, Covent Garden, W.C. Wilson, Effingham, 11 Royal Exchange, E.C.
The Fabian Municipal Program (First Series), No. 3.
Municipalization of the Gas Supply.
(FOURTH EDITION. REVISED MARCH 1900.) The supply of gas for lighting, heating and cooking is a necessity of the life of a great city. Nevertheless some persons who advocate the public supply of water hesitate to apply the principle of municipalization to their local gasworks. Few of such persons, however, can be aware of the rapidity with which the public supply of gas is increasing. Already one-half of the gas consumers in the kingdom burn gas which they themselves as citizens have, through their local governing bodies, manufactured; excluding London and its neighborhood, the proportion is, indeed, over two-thirds. The number of local authorities undertaking the gas supply grew, between 1882 and 1898, from 148 to 212. No public authority in the United Kingdom having once municipalized its gasworks has ever retraced its steps or reversed its action.
But London, along with Liverpool and Dublin, Sheffield and Bristol, and a few other large towns, still leaves this essentially public service in the hands of private capitalists.
These speculators have succeeded in arming themselves with large and far-reaching statutory powers, to the arbitrary and oppressive exercise of which the consumer is constantly liable. Against a powerful company the individual has practically no defence. No private corporation ought to be entrusted with such authority. It can only be safely vested in a representative public body, directly responsible to, and therefore capable of being effectively controlled by, public opinion.
London's gas supply has now fallen, by successive amalgamations, into the hands of three colossal companies (in 1855 there were 20), whose capital outlay, up to the end of 1898, including past competitive waste and lawyers' bills, was $17,494,571. The difference between this sum and the present nominal capital (£33,446,753) represents, in the main, “watered capital” added for two purposes : one, the legitimate one of rendering the stock more easily marketable ; the other, the illegitimate one of concealing from the public the enormous profits made on the capital actually expended. On this amount they manage to obtain a handsome profit, the annual surplus being £1,655,625 in 1898.
In London our gas proprietors are limited by Act of Parliament as to their dividends, according to a sliding scale, and any excess is now partially devoted to a reduction in the price of gas. Nevertheless the largest company regularly pays its shareholders between 12 and 13 per cent.
Particulars for the years ended 31st December, 1896, 1897 and 1898."
Receipts. Expenditure. Surplus. 1896.
€ Gas Light and Coke Company
3,540,778 2,542,818 997,960 South Metropolitan Company
1,267,342 935,148 332,194 Commercial Company
357,700 267,003 90,697 Total
5,165,820 3,744,969 1,420,851 1897. Gas Light and Coke Company
3,613,586 2,613,944 999,642 South Metropolitan Company
1,339,091 1,002,771 336,320 Commercial Company
377,085 281,947 95,138 Total
5,329,762 3,898,662 1,431,100 1898. Gas Light and Coke Company
3,832,012 2,663,000 1,169,012 South Metropolitan Company
1,448,895 1,068,703 380,192 Commercial Company
389,336 282,915 106,421 Total
5,670,243 4,014,618 1,655,625 Notwithstanding a net profit of nearly three-quarters of a million sterling, the Gas Light and Coke Company raised its price in 1890 by 10 per cent., and in December, 1891 by a further 12 per cent. (from 2/6 to 3/1 per 1,000 feet), in order to pay a 12 per cent. dividend to its ordinary shareholders. This involved an additional charge upon two-thirds of London amounting to over half a million a year. The price of gas has recently been reduced to 3/- per 1,000 feet north of the Thames and 2/2 south. The two other companies charge 2/3 and 2/6 per 1,000 feet respectively.
The differences of the price of gas in London led to the appointment of a Select Committee of the House of Commons to report as to the method in which the Metropolitan Gas Companies had exercised the powers conferred on them by Parliament. The enquiry took the form of a trial of the Gas Light and Coke Company, and after considering the evidence and "giving due weight to the reasons offered in explanation of the higher price charged for their gas," the Committee reportedt "that the affairs of the company have not been well managed. The intention of the sliding scale was to give the consumers a special interest in economical administration, while the control was left exclusively in the hands of the company. Hence there was an implied obligation on the part of the company that their affairs should be administered with due care and management. Your Committee have arrived at the conclusion that this has not been done. Hence the intention of the Parliamentary bargain, which was in effect made, has not been realized by the company; and thus the benefit to the consumers, which was contemplated when the standard price was fixed nearly a quarter of a century ago, has not been obtained. Your committee think it probable that in years gone by there has been a wasteful expenditure of capital by the Gas Light and Coke Company.” They recommended a revision * House of Commons Papers, C-212, 1897; C—243, 1898; C—206, 1899.
† H.C.--294, 1899.
of the sliding scale; the transfer of the southern area of the Gas Light and Coke Company to the South Metropolitan Company at a reasonable price ; that the charges of all the companies for automatic meters and stoves should be regulated; that capital powers should not be granted to any company for more than five years; and that the recommendations should be enforced when any application is made by any of the companies to Parliament for the issue of new capital.
These recommendations are valuable, but do not go to the root of the question. The gas companies have no legal monopoly; and the local authority (in London the County Council) might always be granted Parliamentary powers to construct a competing supply, unless the companies consent to transfer their works on equitable terms. The London works could undoubtedly now be constructed for much less than the total capital outlay of £17,494,571; but, assuming the whole of this amount to be reimbursed to the shareholders, the interest payable by the Council would only be some £437,500 a year, as compared with three-and-a-half times that amount now paid annually to the share and bondholders. The average profit for the three years 1896-8 was £1,502,525, and the difference between this and the sum which would have been payable in interest had the London County Council owned the works amounts to £1,065,025. This sum would cover more than one-half of the expenditure of the London School Board from rates. Even if the shareholders were given £38,688,937,* which is about the present market value of their stocks, the County Council would only pay about £1,000,000 a year in interest, and thus, by its superior credit alone, could probably effect an annual saving of £500,000.
In Manchester, where the City owns the gasworks, the Corporation, besides steadily clearing off the capital cost by a sinking fund, has applied about a million of money, the profit of its gas undertaking, in aid of the permanent improvement of the town. In 1897-8 a net profit of £56,168 was made after paying interest and sinking fund, on gas supplied at 23 per 1,000 feet within the city. Birmingham, with gas at 23 per 1,000 feet, made £50,336 profit in the same way after paying interest and sinking fund on gas loans, and devoted this sum to City improvements.
In Bradford, the profits of the municipal gasworks in 1897-8 amounted to £18,346, the price of the gas being 2/3 per 1,000 feet, with discounts varying from 24 to 127 per cent. In addition, the public lamps are lighted free of charge.
Why should not London do the same as Manchester, Birmingham, Bradford, and more than two hundred other places? The profits of municipal gasworks in London, after paying interest on capital and providing for the sinking fund, could be put towards public improvements, the lighting of the streets (now paid for by the ratepayers, and amounting to a rate of twopence in the £), and the better treatment of London's ten thousand gas-stokers.
* When this Tract was first issued in 1892 the market value of these Stocks was only £25,000,000