MUNICIPAL TRADING

AN ADDRESS Delivered befORE THE SCOTTISH SOCIETY OF ECONOMISTS.

I WISH to consider the question of "Municipal Trading" from the practical point of view of a man who takes his share in the work of a town council, and who, being in a town council, appreciates the pressure which at the present time is certainly brought to bear by the body of the people on town councils, driving them to undertake trading risks; who knows something of the difficulties of municipal finance, which make profits derived from trading very tempting; and who understands better than an outsider can how far the business of town councils can be conducted through officials in a manner likely to produce profit from trading. It appears to me that the discussion of this question of municipal trading is apt to fall into the hands of partisans. On the one side, the Chambers of Commerce say "Municipal trading interferes with the legitimate rights of our members who carry on trade, and therefore the legislature must interfere and forbid it ;" on the other side, those who hold the very latest religion,-Collectivism, declare that the future safety of society depends on corporate action driving the individual capitalist from the field, and every crusade against capital is holy and blessed." Eventually a practical and unimaginative people like the English are likely to settle the question on practical lines, and each city for itself. There are many town councils who may truthfully say, when urged to undertake any form of trading, just as a business man has often to reply, "I would like to take up this new enterprise, but I have already more to do than my strength and capacity for business allow me to do properly;" and there are even more bodies of ratepayers who may well declare, like the man with the big family and small means, "I should like to go into this speculation, but I dare not: for I cannot afford to pay up any loss should the adventure fail."

I wish, before considering the various forms of municipal trading, to recall how heavy is the load of work which a town council has to bear, and how great is the burden of expense which the ratepayers in cities have to carry in order to conduct what is now considered the legitimate business of the administration of a city. First of all, there are the duties which have always been imposed on town councils, of keeping up the fabric of the city, and protecting the inhabitants; and this task is made heavier by the new standard of excellence which is demanded -better lighting, cleaner streets, smoother roadways, why, even wooden paving is twice as costly as granite. Then, secondly, there are the many new duties undertaken for the purpose of keeping towns healthy; chief among these is the introduction of a plentiful supply of water, and the

establishment of hospitals for infectious diseases. Water is essential to health, but if it has to be brought from a distance of sixty or eighty miles it is a costly commodity; and a fever hospital probably costs at least threepence in the £ on the rental. Thirdly, there are the many institutions which it is now deemed incumbent on every corporation to establish for the purpose of raising the moral and intellectual tone of the community-public libraries and art galleries, parks and play grounds, wash houses and baths, and to these have lately been added technical schools. The ratepayers must find money for all these undertakings, and the town council must produce energy and skill to manage them all. In some towns, after these many institutions have received due attention, I suspect that the ratepayers will have but little capital left with which to go into trading, and the town council not much spare ability to give to the management of municipal workshops.

There is frequently mixed up even with these three classes of municipal enterprises some form of trading, but the list which I now give is trading pure and simple, and the nature of the adventure explains how the capital accounts of so many corporations are going up by leaps and bounds.

1. The making and distribution of gas, to which has recently been added the sale and hire of gas stoves for cooking.

2. The manufacture and distribution of electricity for public and private lighting, and also for driving machinery.

3. The laying down of tramways, and to this is added by some corporations the running of tram cars.

4. The distribution of hydraulic power, this business being taken up by corporations to economise water.

5. The building and letting of houses for the poorer classes. 6. The building and conducting of common lodging-houses.

7. The building and maintenance of docks and canals.

8. One city-Bradford-has established a "Conditioning House for testing woollen goods, the staple industry of the place. This house is self-supporting.

9. A new field for municipal enterprise is opened up by an act of last session, in the shape of municipal telephone exchanges.

Let me now go through these nine varieties of municipal trading, or at least the more important of them, and note to what extent the town councils of the kingdom have taken them up; what are the reasons why town councils have gone into such enterprises; and how far I believe them to be justified in their action. First of all, consider the form of municipal trading which has been most frequently taken up the manufacture of gas. This work is done by the municipalities of most of the great cities of the kingdom, with one or two rather remarkable exceptions. The gas supply, like the water supply of London, is still in the hands of companies, and Liverpool, Dublin, and Newcastle still depend on companies for the supply of gas, but with these exceptions all the great cities of the kingdom manufacture

their own gas, and some of them have done so for years. The oldest Act obtained for this purpose by a corporation dates from 1823, and was got by Paisley, being followed by Kilmarnock in 1845. But the real pioneer of the movement was Manchester, which obtained its Acts in 1844 and 1845. The Manchester Corporation gas undertaking has been an immense success, and supplies many of the towns in the neighbourhood. The price in the city is 2s. 3d. and after contributing to sinking funds, the undertaking showed last year a credit balance of over £74,000. The movement in favour of the municipalisation of gas works still goes on steadily, 12 corporations having acquired powers last year, and 21 are at present seeking powers. Up to March, 1899, over £28,600,000 had been invested by town councils in gas supply, while gas companies showed a total capital of over £53,000,000, corporations having, however, almost as many consumers as the companies, over one and a half millions each.

Electricity is, of course, a new form of municipal enterprise, but it is one to which town councils are giving much attention. The first municipality to start electricity works was Bradford, in 1889, and it was followed in 1891 by Brighton and the St. Pancras Vestry. Last year, of the 164 systems giving public supply, 112 were under municipal management, and 52 in the hands of companies, while 94 local authorities and 21 companies were laying down systems. Most of the great towns have municipal works, and the movement has been largely taken up by the London vestries. It is too soon to say anything regarding the success of this branch of municipal action, but it may be noted that the price charged is very different in different towns, being, for instance, 7d. in Belfast, and 34d. in Edinburgh, and that some of the municipal balance-sheets show a loss on the working. All that can safely be stated in the meanwhile is that municipal electricity works are successful in wealthy cities, and that their success in towns which have not a considerable residential population probably depends on the adoption of electricity for motive power, as electric lighting has not been adopted in any part of the country save by the well-to-do.

At the present time, the whole system of working tramways throughout the country is in a state of transition. The change is two-fold. Municipalisation is being extensively carried out, and mechanical traction, chiefly electricity, is largely taking the place of horse traction. The general law regarding tramways is the Act of 1870; it allowed municipalities to construct and own tramways, or to license companies. to lay them down, but it forbade town councils to work them. The temper of Parliament has, however, changed altogether, and now corporations readily get power to buy up companies or take over the concerns at the expiry of the companies' leases. When a corporation. supersedes a company, it usually introduces mechanical traction, and two courses are then open to it. It may let the working of the reconstituted system to a company, charging a rent for it; or it may take the working into its own hands, and place it under the charge of a No. 38.-VOL. X.

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municipal department. The first town to operate its tramways directly was Huddersfield, which obtained authority in 1882, and it is peculiar in this respect also that steam is employed for haulage. At present it is difficult to say exactly how the country stands as a whole, but the inclination among the great cities is, undoubtedly, to take the working of tramways into their own hands. Glasgow and Liverpool have done so, and Manchester and Birmingham have resolved to take this course in the near future. The London County Council took over the tramways a few years ago, and while it works the southern lines, it leases the northern to a company. According to the official return at June 30, 1899, the total capital expenditure on tramways in this country was over £18,000,000-£10,000,000 belonging to companies, and £8,000,000 to corporations, but so many corporations are at present municipalising that these figures are somewhat misleading.

The work of building and letting houses for the working classes has probably not been willingly undertaken by any corporation, but it is under the Act of 1890 the prescribed accompaniment of any improvement scheme. Such schemes have been forced on municipalities, as there have grown up in most large towns slum districts, whose condition seriously injures the health of the community; they have been carried out at great expense to the corporations. By the Housing of the Working Classes Act, 1890, when any district is cleared under a slum scheme, houses to take the place of those taken down must be erected. Under this Act most of the great corporations have invested very considerable sums in houses, chiefly tenements, both the City and County Council of London having engaged largely in this work.

Closely allied in intention to the building of houses for the working classes is the establishment of model lodging-houses for the poorer classes. This development of municipal work seems to have been introduced by Huddersfield in 1853, but it has been most successfully carried out by the City of Glasgow, whose municipal lodging-houses have been a financial success, and are followed as models by other towns. It is not a form of trading which required a great expenditure of capital, but it is work which probably can better be done by companies conducted on semi-philanthropic basis than by corporations.

The making of docks is the oldest form of municipal trading, as the great systems of docks on the Mersey and Clyde were originally started by the town councils of Liverpool and Glasgow, although now they are managed by trusts. A very considerable number of docks in England are still owned by corporations, which have at the present time nearly 4 millions of corporation funds in such undertakings. Bristol is responsible for more than £2,000,000 of this sum, as she is attempting to re-establish her shipping business by building docks at Avonmouth, a few miles from the city. investment of corporation funds is the City of Manchester gave in order to finished.

Closely allied to this form of great subscription which the allow the Ship Canal to be

Of the other forms of municipal trading it is not necessary to say much. The business of distributing hydraulic power is only conducted, as far as I can discover, by two corporations-Manchester and Glasgow -each of which has erected a hydraulic power station, from which it sells power for working lifts and presses. This has been done for the sake of economising water. With regard to the house for testing woollen goods which Bradford Town Council has established, it is, I believe, looked upon as a boon by the staple trade of the town and district, the yarn manufacture, and the house is made to pay. The new field for municipal enterprise which was opened up by the Telephone Act of 1899, seems to me a very undesirable one for corporations to enter, as it will lead to a contest with the National Telephone Company. Glasgow, which has long been agitating for Parliamentary powers to institute a municipal telephone system, is so far the only corporation which has resolved to enter the field against the company, having in the beginning of this year passed a resolution to establish an exchange at the cost of £95,000.

The next points to consider are the reasons which impel town councils to enter these trading risks, and these reasons belong to two classes. In the first place, there is the desire to secure to the ratepayers the profit arising from certain services, which have in past years been performed by companies, but which are believed to be capable of being managed by departments of municipalities. There is no doubt that the success which has followed the transfer of gas works from companies to corporations, has very greatly stimulated the movement for the municipalising of other things. The manufacture of gas under town council management is a proved success, for it has been tried now for half a century, and in most cases has resulted in much lower rates for the consumers, and sometimes also in relief to the rates.

But there exists another reason which now influences the decision of town councils in this matter. Town councils desire to retain control of the streets, and also to obtain as much revenue as possible for giving up the use of the streets for trading purposes. It must be borne in mind that the public streets are practically the only way in which gas and water-pipes can be led to houses, along which electric wires can be laid and tramway lines put down. Town councils very properly hold that, as they have the duty of making and keeping up the streets, these should not be interfered with save with their permission and as far as possible by their own servants; and in these later years corporations have wakened up to the fact that money may be got for the use of the streets. In former times the companies which used the streets-gas, water, and tramway companies-paid no rent for the privilege; now town councils either have taken the service of the public into their own hands in these matters, or else they charge way leave to the companies. This discovery that the streets are a valuable asset has certainly very much stimulated municipal trading.