Municipal ownership in Great Britain

Front matter

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Preface

This book is the second of a series of four books which will give the results of the author's examination of the actual working, in important instances, of the public regulation and the government ownership and operation of the so-called public service industries: the railway, the telegraph, the street railway, the electric light, the electric power plant, and the telephone. The investigations in question have been carried on since the fall of 1892, and they have covered the United States, Great Britain, Germany, and Australia. The books embodying the results of the investigations will follow each other in quick succession. But that does not mean that they are in any way hasty productions. It has been the author's policy to delay publication until he had covered the entire field, because he desired to put at the disposal of the public the means of comparing the experience of several countries in the various kinds of experiments, without long intervals between the successive books setting forth that experience.

Chapter I Pack

Introduction i

Special value of Great Britain's experiments. British inventiveness in check since 1870.

CHAPTER H

Attempts to build street railways in the sixties. The Act of 1870 leaves control with the municipalities. Street railway building paralyzed. Conditions which destroyed private initiative. Failure of attempts to limit veto power of municipalities. Burdens placed upon street railways. Standing Order No. 22 extends municipal veto to private charters. The bureaucrat versus the men of affairs. The cable system, like steam, not used on British tramways. Reasons for failure to develop electric tramways.

Chapter X

Local and class interests check development of tramways. Parliamentary committee of 1872. Recent opposition to tramways by private interests. Misuse of veto

CONTENTS xi

PAGE

power by boroughs and county council. Inadequacy of tramway service. Overcrowding perpetuated. Public necessity versus municipal gain.

CHAPTER XIV The Cities confess their Incompetence to take hold

OF a New Industry 221

Report of Birmingham Committee of 1882. The value of experiment and experience. Summary of the history of the acquirement of electric plants by Birmingham, Liverpool, Manchester, Sheffield, Leeds, Nottingham, Edinburgh, and Glasgow.

Chapter XV

The Municipalities versus the Consumer . . . 241 Act of 1888 aimed to remove prohibitive restrictions. Municipal policy prevents development. Administrative discrimination against companies. Municipal "orders" for "blocking" purposes. The United Kingdom outstripped by the United States.

xii CONTENTS

Chapter XVI Page

The Municipalities versus the Manufacturer . . 266 Wholesale supply of electricity prevented. Municipal opposition to progress. Needs of the manufacturers. The appeal to prejudice. Parliamentary grant rendered nugatory. Board of Trade sides with municipalities. Parliament helpless before the municipalities. Financial weakness of municipal undertakings.

Introduction

. The opinion is widely held, and is still on the increase, that the so-called municipal public service industries which make use of the public streets differ in vital respects from the ordinary trading and manufacturing industries. It is said that they should be made to share their profits with the public, as represented by the municipality, in return for the franchises which bestow upon them the right to make use of the streets, as well as confer upon them the monopoly of the right to supply. It is urged that the public should collect its alleged share of the profits of these public service companies, either by selling or leasing the franchises, instead of giving them without the exaction of a money payment, as has been the American practice in the past, or by subjecting the companies to special taxation, such as is not imposed upon other trading and manufacturing ventures.

It is also more or less widely held that the municipality should supersede the private company, by assuming the ownership and the conduct of the so-called public service industries. As has already been stated, the main argument advanced for these opinions is that the profits to be made in the industries that depend upon the right to use the streets belong in part to the public at large, as the owners of the streets. Of late, however, a second argument has been advanced — namely, that the public authorities, as the representatives of the people, are more solicitous of the comfort and welfare of the people than are trading companies, and that, therefore, they alone should be intrusted with the conduct of these public service industries which so vitally concern the people. This last argument is a wide departure from the spirit and belief of our forefathers, who were distrustful of the State and believed that, upon the whole and in the long run, the individual or company in pursuing its own selfish interest at the same time promoted the welfare of the community at large.

Great Britain has, since 1870, applied the doctrine that the so-called public service industries differ from ordinary trading and manufacturing ventures to all special Value of of the industries that make use of the Great Britain's streets except the gas-lighting indus- Experiments ^^_ Therefore the experience of Great Britain has a double significance for us Americans. It is the experience of our cousins, who, like ourselves, have grevra strong under "that liberty which is the nurse of all great wits" as well as of all spirit of adventure. It is furthermore the experience of a country that has treated one of the public service

INTRODUCTION 3

industries as if it differed not from any other trading venture, while it treated all the other public service industries as if they were things apart, to be subjected to special burdens and disabilities. In other words, the experience of Great Britain affords us the means of comparing the working over a period of thirty-five years of the two policies under discussion, and of ascertaining which policy has the better conserved and promoted the comfort and happiness of the individual, as well as the prosperity of the State.

Before proceeding to the consideration of the experience of Great Britain, it is well to remember that Great Britain's traders, manufacturers, and capitalists have a record for venturesome investment of capital, both at home and abroad, that extends over centuries and as yet has shown no sign's of abatement ; that in the engineering trades — to which the so-called public service industries belong — Great Britain is second to no other country;* that in the past Great Britain has taken the leading position in the origination and introduction of the steam

* The Engineering Magazine, June, 1905.

United Kingdom, 1901 United States, 1902 .

Number of Persons, per 10,000 OF Population,

EMPLOYED IN THE ENGI- NEERING Trades

301 152

Annual Value of Engineering Exports, ter Worker, in the Engineering Trades engine, the steamship, the railway, gas Hghting, and all the older branches of engineering, as well as of the earliest great electrical application, — that of the electric telegraph, both overland and submarine; that the earliest electric light, that of the arc, was discovered by Sir Humphry Davy, at the Royal Institution in Albemarle Street ; and that in the same laboratories Faraday made those fundamental discoveries in electro-magnetism that rendered possible the dynamo, the electromotor, and the telephone. Again, the earliest electric accumulator was the gas battery of Sir William Grove. Varley and Wheatstone in London were the first to evolve the self-exciting dynamo machine. Swan made, and exhibited at Newcastle-on-T)me, the earliest incandescent electric lamp ; and, if the original telephone — that of Graham Bell — was an American invention, the transmitting instrument of to-day is in large measure based on the microphonic discoveries made in London by Professor Hughes.

"Nor in the earlier stages of practical electrical engineering was this country [Great Britain] in arrear of other nations. At a time when, in America and elsewhere, the design of electric generating machinery was in an entirely empirical condition, the late Dr. Hopkinson first worked out the correct underlying principles and put the design of dynamo machinery on a sure scientific basis. One of the earliest private electric-light installations in the

INTRODUCTION 5

world was that of Sir William Armstrong, at Cragside,* while one of the first electric railways f put down for practical use was that in Ireland between Portrush and the Giant's Causeway." t

The reader will note that the foregoing discoveries and achievements relate in the main to the period preceding the year 1870. On the other hand, the British Inventive- electrical industries as we know them ness in Check since to-day have, in the main, been created '^7° since 1870. Writing in 1901, Mr.

J. A. Fleming, F.R.S., an eminent British consulting electrical engineer, used these words in closing a review of the development of the electrical industries in the period from 1870 to 1900: —

"In reviewing the nationality of those who have thus helped to make the electric current the nimble servant of mankind, it is impossible not to be struck with the fact that British names do not preponderate. In the region of pure scientific research, in the development of electrical theory, Great Britain has unquestionably held her own with the world. In detailed improvements or adaptations we have not been backward, but if we except the inventions of Lord Kelvin in connection with submarine teleg-

*The machinery was driven by water-power, and the current was carried a distance of one mile to Cragside, in 1882. The plant was designed by the German engineers, Siemens Bros. & Co., of BerUn, London, and elsewhere.

tin 1883. The current was taken from a side-exposed conductor rail. The system was retained in use until 1898, when the overhead system was installed.

X A. A. C. Swinton : Ekctrical Engineering and the Municipalities.

raphy, Mr. Swan in electric lighting, and the contribution which the late Professor D. E. Hughes made to telephony by the invention of the microphone, it is difl&cult to name any first-rate new adaptation of electrical discovery for practically useful purposes in the last thirty years which has not come to us first from non-British sources. It cannot be said that the country which has produced a Watt, a Stephenson, and an Arkwright is deficient in mechanical inventiveness, but it is impossible to deny that the period of time since 1870 has not been marked by the evolution of distinctly novel electrical inventive ideas proceeding from British minds." The writer concludes with the words : — "The matter is not one to be lightly dismissed ; the development of national inventiveness is at least as important in the world-struggle of nations for existence as the preservation of national physique. We are apt to consider that invention is the result of the spontaneous action of some heaven-born genius whose advent we must patiently wait for, but cannot artificially produce. It is unquestionable, however, that education, legal enactments, and general social conditions have a stupendous influence on the development of the originative faculty present in a nation, and determine whether it shall be a fountain of new ideas or become simply a purchaser from others of ready-made inventions." *

* The Nineteenth Century, February, 1901.

Chapter II

In 1858, the leading stockholders in the General Omnibus Co., of London, impressed with the success of the street railway in the United States, asked Parliament for a charter for street railways in London. The request was denied. Sir Benjamin Hall, Chief Commissioner of Works for Metropolitan London, moved the rejection of the Bill, saying: "They asked for power to appropriate i6 feet in width of the public thoroughfares of the metropolis, in order that their omnibuses might run on rails laid for that purpose. Now as some of the public thoroughfares were only i8 feet wide, only one foot would be left on each side for the accommodation of carriages, carts, and all the ordinary traffic. It must be admitted that there was hardly a thoroughfare in the metropolis at present sufficiently large to accommodate the existing traffic, and he, therefore, thought it a monstrous proposition to ask permission to appropriate i6 feet of a highway to the purposes of a private omnibus company." *

* Hansard's Parliamentary Debates, March 15, 1858, p. 175. 7

In i860, some British capitalists, under the leadership of an American, the late Mr. George Francis Train, built a street railway in Birkenhead, a suburb Attempts to build of Liverpool. They had no parliastreet Railways mentary charter * but acted with the in the Sixties consent of. the local authority — which, however, had no lawful right to grant power to break up the streets for the purpose either of constructing or of repairing street railways. The opposition of the owners of pleasure vehicles and of the proprietors of retail stores was persistent, and culminated, in 1865, in an action at law, which asked that the tramways be condemned as a nuisance. But the local jury before whom the case was tried found that the tramways were a public benefit, not a nuisance.f

On April 16, 1861, the House of Commons again rejected an application for a charter for Metropolitan London ; and on April 26, it negatived, by a vote of 40 to 20, a motion for a Select Committee "to inquire into the propriety of establishing a mode of public conveyance by means of iron rails in the streets and highways." J Baffled in their parliamentary efforts, Mr. Train and his British supporters laid down several lines on the strength of mere agreements with several of the local authorities forming a part of

* Report from the Select Committee on Tramways Bill, 1878, q. 1252.

t Hansard's Parliamentary Debates, March 3, i8g6, p. 546, Captain Grosvenor.

% Ibid., April 16, 1861, p. 639; and April 26, p. 1155; and The Municipal Journal, January 22, 1904.

Metropolitan London. From the Marble Arch along Bayswater Road, from Westminster to Victoria Station, and from Westminster Bridge to Kensington Park, tramway lines were opened; but the violence of the ensuing agitation led to their hasty removal. .

In May, 1862, Mr. Ayrton, a private member of Parliament, obtained leave to bring in a "Bill to authorize the construction of tramways on turnpike roads and other roads in England." But in July he abandoned the bill, saying: "He hoped, however, that the government would take up the BUI in the next session, for it was the Government alone that could combat the powerful private interests which demanded undue concessions." *

In 1863, Mr. Train and his supporters, acting once more without authority from Parliament, laid down a tramway between Burslem and Hanley, as well as one at Darlington. In 1865 a further unsuccessful effort was made to obtain charters for street railways in London and Liverpool. In 1868 the House of Commons threw out the application of a company that desired to begin by building tramways in 26 miles of street in London,t but at the same time it granted charters for Liverpool, and Glastonbury and Street. In 1869 Parliament sanctioned three

* Hansard's Parliamentary Debates, May 13, 1862, p. 1619 and following; June 3, p. 1619; and July 23, p. 701. t ihid., March 5, 1868, p. 1109 and following.

street railway schemes for 41 miles of street in the suburbs of Metropolitan London ; * and finally, in 1870, it enacted a general act providing for the granting of charters for street railways.

In the meantime, the men who had met with rebuff after rebuff from Parliament, nothing daunted, had turned to the Continent; and, in the period of 1864 to 1871, they had built street railways in Copenhagen, Brussels, Paris, Bordeaux, Geneva, Madrid, Genoa, Vienna, Berlin, Barcelona, St. Petersburg, and Constantinople.f This record of persistent appeals to Parliament, of repeated building of street railways in Great Britain with no lawful public authority for such building, and of building street railways on the Continent, where the people were much poorer than in England and were therefore less likely to ride upon the tramways, should be sufficient answer to the misinformed or disingenuous persons who are in the habit of telling us that the municipal ownership of the street railways in Great Britain had its origin in the unwillingness of private enterprise to afford adequate transportation facilities.

In March, 1870, Mr. Shaw-Lefevre, Parliamentary

* Hansard's Parliamentary Debates, March 3, 1869, p. 543 and following; and May 13, p. 735 and following.

t Reports respecting Tramways in Foreign Countries, 1872 ; Further Reports respecting Tramways in Foreign Countries, 1872. Report from the Select Committee on Tramways Bill, 1870, q. 947, 1141, and 12 18; and Report from the Joint Select Committee on Municipal Trading, 1900, q. 1452, I4S77 351. 356, 373, and 370.

Secretary to the Board of Trade, moved leave to bring in the Tramways Bill, 1870* He said : "Honorable Members must be aware that there were before them numerous Private Bills asking powers to lay down tramways in the streets of our principal towns. In all, there were 27 companies asking for such powers over 515 miles of road, with a capital of $20,000,000. For London alone there were seven companies seeking these powers over 125 miles in some of the most important streets ; whUe others had in contemplation systems of tramways for Manchester, Liverpool, Birmingham, Leeds, Glasgow, Portsmouth, and Plymouth. Now, previous to this year, as far as he was aware, only six Private Acts had been passed authorizing tramways. Of these, three companies had obtained powers to lay down and work tramways in London south of the Thames, . . . and although an attempt had been made to show that the Committee (1869) authorized the making of these tramways, as an experiment, he was assured by his honorable Friend (Mr. Sclater-Booth, Chairman of the Select Committee of 1869) that that was not the case, that the Bills were passed on their own merits, and under the full belief, founded upon the evidence, that they would be a success, and would be a great convenience to the public." He referred to the evidence before the Committee (of 1869)

* Hansard's Parliamentary Debates, March 1, 1870, p. 1080 and following.

as to the working of tramways laid (by Englishmen) upon improved principles in many of the leading cities of Europe, particularly at Berlin, Vienna, Brussels, Copenhagen, Geneva, and said: "The evidence, indeed, seemed to him to establish that the more crowded a street was, and the greater the traffic of all kinds, the more useful and important was the tramway, subject only to this, that the street was wide enough to afford room for other carriages to pass on both sides of the tram. Subject to that, the tramway appeared to have the effect of regulating the traffic by sending it in straight lines, and by affording relief to all those vehicles which, although not fitted with flange wheels, could use the raUs with their ordinary wheels. ... He believed the opposition to these Bills would not be against the principle (of tramways) ; but on the part of local authorities to the effect that they did not wish to part with the control over their streets, and that they were prepared themselves to undertake the task of laying down and repairing the tramways in the streets, and of letting them on lease to private omnibus companies on charging tolls for the use of them. He had received deputations during the last few days from the municipal authorities of Manchester, Leeds, Birmingham, Salford, and Stockport, to that effect, praying that they might be allowed the opportunity of making tramways themselves."

The charters granted in 1868 and 1869 had contained clauses giving the local authorities power to purchase the street railways at the expiration of a specified period at the actual value, plus 30 per cent for good-will.* Of these clauses Mr. Shaw- Lefevre said: "He might mention here that the clause for purchase under the Acts of 1869 appeared to him to be so drawn as really to make it impossible for any local authority to carry it out. They included in the purchase money to be given for the undertaking not only the value of the tramway, but also good-will, and prospective profits would be excluded ; the local authorities would have the right to purchase after 21 years, on payment of the actual value of the tramway and the other property of the company necessary for working the same. The only question which could arise upon this was whether capital could be raised Upon such terms. He could not, for his part, doubt that it would, the more so, as he had inserted no limitation of dividend in the interval, and no compulsory lowering of fares. . . . Now, although the Bill would give power to local authorities to construct tramways, but not, of course, to work them — yet he believed that, as a general rule, they rnight look forward to the tramways being constructed rather by companies than by municipal authorities ; but there was a process under this Bill, which he thought might with advantage be resorted

* Report from the Select Committee on Tramways BUI, 1870, q. mi to 1 133; and The Municipal Journal, March 31, 1905.

to by municipal authorities who wished to have the general control over the laying down. It was that which would enable local authorities to apply to the Board of Trade for a certificate for tramways upon a general system within their district, and, having obtained the necessary powers, to sell or lease the concession to a company or companies. Under this provision a corporation * would have the power to lay down a general plan for tramways, and then to offer it as a whole or in sections to competition. The consent of the Board of Trade would be necessary for any such transaction, and the principle to be acted upon in such cases appeared to him not that very great profits should be made for the ratepayers, but that the public should gain as much as possible by lowering the fares. He did not think that profit should be made by local authorities out of tramways at the expense of the general public, for whose use they were intended, and more good was to be arrived at by reducing fares than by reducing the local rates (taxes). This was the principle which was not laid down in the Bill, but would be left to the Board of Trade, to carry out in its application of the Bill."

Before the Select Committee to which the Bill was referred, Mr. John Morris, of Ashurst, Morris & Co., solicitors, appeared as the "selected witness of the tramway interests." Mr. Morris himself was a

* Throughout this book the word "corporation" is used in the British sense, — that is, to denote a city.

Stockholder in the tramways of Brussels, Genoa, and Copenhagen. He asked that the clause authorizing the municipalities to purchase at the end of 21 years on the basis of "the value of the tramway estimated as a constructed work, such value to be in case of difference determined by an engineer or other fit person nominated as referee by the Board of Trade" be changed to "actual structural value, plus 30 per cent." He asked for the allowance of 30 per cent on the ground that 21 years would not always be a sufficient period to allow a company to make good the losses incurred in the early years ; and that the price of the material used in building a tramway might decrease very much during the life of the charter, and thus make a sale on the basis of the mere value of the material in the tramway a hardship.* Parliament overruled this request of the men who for twelve years had been seeking permission to build street railways in Great Britain, and had carried the tramway to upward of a dozen cities on the Continent. The purchase clause enacted, read : "upon terms of paying the then value (exclusive of any allowance for past or future profits of the undertaking, or any compensation for compulsory sale, or other consideration whatsoever) of the tramways, and all lands, buildings, . . ." f When Parliament enacted the purchase clause put

* Report from the Select Committee on Tramways Bill, 1870, q. mi to 1 132, and 1 198.

forward by the municipal corporations, rather than the purchase clause put forward by the men who The Ad of 1870 stood ready to build the tramways, leaves control with it yielded to the contention of the the MunicipaUties municipal corporations, that the profits derivable from industries that use the streets should be applied to the reduction of the taxes, and should not be permitted to flow into the pockets of "speculators." That contention, or doctrine, was clearly enunciated in 1874 by Mr. Joseph Chamberlain, then Mayor of Birmingham, in the course of his speeches in support of his proposal that Birmingham purchase the gas plant belonging to a joint stock company. Before a Select Committee of the House of Commons, Mr. Chamberlain, as a witness, said : "It is with the object of diminishing the direct taxation of Birmingham that we are promoting this Bill" (to acquire the gas works). In the Birmingham Council, he said: "All these duties (street widenings and the rebuilding of unsanitary districts) involve a largely increased expenditure, and I believe that the pressure of the rates will become intolerable unless some compensation can be found by some proposal, such as this one I now lay before you. * . . . When the purchase of the Water Works comes before you, it will be a question concerning the health of the town; the acquisition of the Gas

* Report jrom the Joint Select Committee on Municipal Trading, 1900, E. O. Smith, Town Clerk of Birmingham, q. 1894.

Works concerns the profits of the town and its financial resources. . . . Both are matters of absolute public necessity. ... I distinctly hold that all monopolies which are sustained in any way by the State ought to be in the representatives of the people, by the representative authority should they be administered, and to them should their profits go, and not to private speculators. In the second place ... I am always inclined to magnify my office (the Mayoralty) : I am inclined to increase the duties and responsibilities of the local authority, in whom I have myself so great a confidence, and will do anything in my power to constitute these local authorities real local Parliaments, supreme in their special jurisdiction."* To this same doctrine subscribed also the Joint Select Committee of the House of Lords and the House of Commons on Tramways, 1872, in the following statement: "We are far from being insensible to the advantages attaching to the construction of tramways by an authority having entire control over the tramway and roadway, and able to devote the profits arising from the undertaking to the relief of the rates. We think it, however, premature to discuss in any detail the question of central management of Metropolitan Tramways by a municipal authority which has yet to be created, though we are of

* N. M. Morris : Joseph Chamberlain, The Man and the Statesman, pp. 112 and III.

opinion that when such an authority is established, every facility should be afforded to enable it to obtain possession of the tramways by purchase upon fair terms, at the earliest possible period." And finally, one may cite the argument made in 1869, and repeated in 1871, by the vestry of the Parish of St. George, Hanover Square, London, against the granting of street railway charters to stock companies. "The Metropolitan Board of Works has already undertaken two great works — drainage and embankment of the Thames — which, important and valuable as they are, have resulted in heavy pecuniary burdens to the ratepayers of London. It seems then only fitting that the carrying out an operation such as the construction of Tramways (which promise large pecuniary returns) should also be placed in their hands for the benefit of the ratepayers." *

In 1870, Mr. Shaw-Lefevre had stated that 27 companies were asking Parliament for charters covering 515 miles of street. In 1880, there were street Railway in the entire United Kingdom only Building para- 386 miles of first main track of street ^^^^"^ railway. In that same year, there

were in the United States, in the cities of 50,000 and more inhabitants, no less than 1584 miles

* Report of Proceedings of the Board of Trade under the Tramways Act, 1870, with regard to the Proposed Tramways in and about the Metropolis, May 3, 1871; and Hansard's Parliamentary Debates, March 3, 1869, p. 547.

of first main track of street railway* In the United States there were living, in 1880, in cities of 50,000 and more inhabitants, 8,700,000 people. For England and Wales the corresponding figure was to,3oo,ooo people. Had England and Wales possessed the same mileage of street railway as the United States, in proportion to its population living in cities of 50,000 and more inhabitants, it would have had, in 1880, no less than 1875 miles of first main track of street railways. This comparison takes no account of the 466 miles of first main track in the United States, in 1880, in cities of less than 50,000 inhabitants.

In 1890, the cities of the United States having 50,000 and more inhabitants had 3205 miles of first main track of street railway. Had the corresponding cities of England and Wales had a proportionate mileage, they would have had 3190 miles of first main track. As a matter of fact, England, Wales, Scotland, and Ireland had an aggregate mileage of 948 miles only. This comparison again takes no account of the 2578 miles of first main track in American cities of less than 50,000 inhabitants. If the latter mileage be taken into account, England and Wales, in 1890, must have had fully 5200 miles of first main track of street railway, before the people of England and Wales could have been said to be