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The Fabian Municipal Program (First Series), No. 3.

THE

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.

No

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. 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.*

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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 reported "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 2 to 12 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.

The pecuniary profit to be made by completing the municipalization of the gas supply is, however, of less importance than obtaining complete control over this essentially public service. The thousands of gas-workers ought to be secured fair wages, proper hours of work, and adequate protection against accidents. At present but little is done to bring the comforts of gas, either for lighting or cooking, within the reach of the poor, and, even in London, only every other house has gas laid on. Little attention will be paid to lighting the poorer streets, the public stairways, or the slums and alleys of our great cities, so long as every cubic foot of gas is jealously charged for by a company more anxious about dividends than the public good. Our gas, moreover, is practically our winter sun, and no private considerations ought to be allowed to stand between us and our main source of artificial light. Whatever progress may be made with electric lighting, the use of gas for heating and cooking purposes will remain, and indeed, experts tell us the consumption of gas must inevitably increase.

Hence, INSIST ON THE MUNICIPALIZATION OF THE GAS SUPPLY.

[For exact statistics as to the gasworks in the United Kingdom, see the Annual Returns presented to Parliament by the Board of Trade, as to (1) the London Gas Companies, (2) Gasworks belonging to Public Authorities, and (3) Gasworks belonging to private capitalists.]

FABIAN MUNICIPAL PROGRAM.

First Series (Nos. 30 to 37).—The Unearned Increment. London's Heritage in the City Guilds. Municipalization of the Gas Supply. Municipal Tramways. London's Water Tribute. Municipalization of the London Docks. The Scandal of London's Markets. A Labor Policy for Public Authorities. The 8 in a red cover for 1d. (9d. per doz.): separately 1s. per 100. Second Series (Nos. go to 97).-Municipalization of the Milk Supply. Municipal Pawnshops. Municipal Slaughterhouses. Women as Councillors. [The rest in preparation.] 6 for 1d., 1s. per 100, or 8s. 6d. per 1,000.

100. Metropolitan Borough Councils: their Powers and Duties. 98. State Railways for Ireland. 88. The Growth of Monopoly in Industry. By H. W. MACROSTY. 86. Municipal Drink Traffic. 84. The Economics of Direct Employment. 77. Municipalization of Tramways. 5. Fact for Socialists. This Tract, of which 80,000 copies have been sold, has had more effect on public opinion than any other publication of the Society, except perhaps "Fabian Essays." Eighth Edition, with figures revised up to September, 1899. These Tracts are 1d. each, or 9d. a dozen.

FOR LIST OF OTHER LEAFLETS AND TRACTS APPLY TO

THE FABIAN SOCIETY, 3 CLEMENT'S INN, STRAND, LONDON, W.C.

Printed by GEORGE STANDRING, 7 and 9 Finsbury-street, London, E.C.; and Published by the FABIAN SOCIETY, 3 Clement's Inn, Strand, London, W.C.

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