Why public ownership? Urban utilities in London, 1870-1914

Private gas and water companies received parliamentary permission to act as incorporated companies in the early 1800s. Then, the idea that gas and water would be anything other than a luxury was unthinkable, and government regulated by entry. But by the 1830s the problems with competition were clear. Under pressure from the new sanitary reformers, and from the companies themselves, parliament sought new ways to regulate. However, the institutional endowments of the British state did not facilitate a working regulatory regime, and by the 1870s, the regulatory foundations for public ownership had been set. Public ownership was a viable alternative because of the administrative transformation of local government. There was a deliberate attempt to reduce corruption and make local governments capable of managing projects of increasing complexity. Politicians faced high costs if they used public utilities for personal gain, but the electoral system meant that utilities could be to court an increasingly strong working class and trade union vote. The expansion of the franchise following the 1867 Reform Act reduced the level of wealth of the median consumer-voter and increased the preference for redistribution. Voters favoured higher levels of expenditure, and political parties converged on the policy of public provision. Politicians faced a trade-off. On one hand, they sought to maximize profits; on the other, they sought to maximize political support. Politicians attempted to conclude franchise agreements with private sector agents. However, the problems of contracting were one of the driving forces behind municipalisation. Once in public sector hands, a new contracting problem emerged: Politicians showed themselves to be willing to increase the wages of municipal employees, both as an ideological choice and as an act of political calculation. The outcomes of these choices forced businessmen to weigh the costs and benefits of home versus overseas investment in urban infrastructure projects.