The co-partnership scheme set up in the South Metropolitan Gas Company in 1889 needs to be examined against the background of the industry from which it came and in particular the history of that industry in London.
The London Gas Industry was the first to be set up and it was in London that coal gas was first exploited for commercial gain through sales to the public.
South Met's profit sharing scheme of 1889 links a bonus for workers directly to the price of gas. Gas prices at that time were governed by a mechanism linking them to profits and known as the 'sliding scale'. This system of price and dividend regulation was controlled by statute and they were linked the two so that as one fell the other rose. In the bonus system wages were also tied to the price of gas and like the dividends rose and fell according to variations of price. It is thus apparent that this mechanism provides a built in incentive for the workforce to help to reduce price through efficient working. This was George Livesey's 'big idea'.
Throughout the middle years of the 19th century politicians and public utility companies had worried about the relationship of price and efficiency to management, control and ownership. If a gas company seemed more concerned with high profits then a consumer pressure groups would bring-this to the attention of government. The main consumers of 19th century gas were local authorities buying gas for street lighting.
'Public' concern in the early days of gas manufacture had concentrated around safety and subsequently efficiency of supply. Solutions were put forward which tried to make shareholders more accountable to the public. Thus municipal ownership had grown - but outside of London. Public ownership was still a matter for discussion in London in 1889.
From their earliest days the companies which manufactured coal gas were tied up with the local authorities. Vestries and other local authorities were given the power to levy a rate for the purpose of street lighting in 1736 and used oil lamps as the main available source of light. Gas Lighting from around 1813 provided a more convenient alternative.
The supply of gas for lighting became a goldmine for those who were more interested in making money quickly than in providing a service to the public. Some early gas companies had origins of a very doubtful nature.
The first company in London - indeed in Britain - was the Gas Light and Coke Company, also called 'The Chartered'. In 1810 they obtained a statute to light London and found customers in the vestrymen of City wards anxious to improve street lighting. The Company recruited Samuel Clegg to run their works - his influence was such that in 1877 George Livesey was able to describe the gas industry then as 'much as Clegg left it'. Early gas manufacture did not remain unregulated for long=it took only the first few hints of smells and explosions for public concern to manifest itself about the manufacture of such a dangerous substance in city centres.
By the early 1820s governments were starting to find methods of regulation. Gas companies needing new statutory powers to open up the streets were required to fulfill conditions imposed on them by the authorities. There was a however also a belief that Companies should be left to pursue their own methods in a competitive market and that in this way they were likely to serve the public more efficiently while a degree of control was necessary.
One example of control of gas companies by government policy was in 'districting agreements'. Companies who could limit their activities to one geographical area, and keep others out, could enjoy the advantages of a monopoly. By the mid-1850s voluntary agreements of this nature had been entered into by most companies.
In his evidence to the 1899 Select Committee on Metropolitan Gas Companies George Livesey said most of the companies prior to the districting of the 1850s were in 'a more or less unsatisfactory condition'. He referred to the situation where rival companies supplied customers in the same areas leading to the necessity for mile after mile of duplicate mains - with attendant holes in the road together with leaks and damaged mains. Some companies encouraged employees to connect their own customers to other companies' mains, or damage their mains in some way - and in at least one case pitched battles between rival gangs of navvies ensued. District agreements ended all that.
Governments could chose between the monopoly position created by districting agreements or disruption engendered by free competition. One response was to challenge the ownership of companies. It was argued that a service paid for mainly by public authorities should not be dedicated entirely to private profit. A solution-was attempted in the setting up of 'consumer' groups which proposed a different form of ownership.
At first proposals were put forward for 'consumer' ownership of the mains and this was followed by the setting up of special 'consumer' companies. These differed very little from the ordinary statutory private company except that they pledged themselves to act for the consumers who would be their shareholders. They guaranteed a fixed low price. Through their company meetings shareholders would ensure that the pricing policy was adhered to. Consumer companies were set up in many parts of the country - two in the metropolitan area - the first sponsored by the City of London.
In South London by the 1860s the main gas companies were The Phoenix, covering Southwark, Deptford and Greenwich and the very much smaller South Met. covering Peckham and Camberwell.
The Surrey Consumers Gas Light and Coke Company was set up with a works in Rotherhithe to challenge the two main South London Companies. Prices fell very quickly following the establishment of the consumer company and as the established companies lowered their prices to meet the competition.
However, once prices went down customers stayed with their original company and the consumer company was unable to get enough customers to survive and keep its prices down. Very soon negotiations with the established companies were opened on 'districting' for and the consumer companies were in effect become no different from the existing commercial concerns they had been designed to replace.
As consumer companies began to demonstrate that they were no different from the ordinary private companies so local authority ownership of works was seen a solution and new statutes to commercial companies they began to include clauses which allowed for possible future acquisition by the local authority. These clauses purely came from a desire to keep the rates down.
Municipalisation of existing works and the erection of new ones by local authorities proceeded outside London. Following the Municipal Boroughs Funds Act of 1872 which allowed ownershp without a statute municipalisation increased. Silverthome (1881) lists sixty towns where gas works were municipally owned but London companies remained in private hands. This failure to municipalise in London was directly because of the lack of a central authority in the capital.
Until 1855 control of lighting in London lay with a multiplicity of vestries; central authority was represented only by the Metropolitan Board of Works with its limited powers. Action could not take place without the consent both the vestries and the board - plus, of course, the City Corporation. Chatterton has suggested that gas companies were amongst the bodies most opposed to the setting up of a strong central London local authority.
By the late 1850s informal 'districting' agreements on areas of supply had been established to cover most of London - and these were ratified by Government in the 1860s. Problems of gas pricing and the right of companies to make profits from the public purse occupied politicians through the succeeding years. A solution was also sought whereby the public interest might be reconciled with those of private Companies.
In 1899 Harry Haward, then Comptroller of the London County Council gave evidence to a Select Committee into Metropolitan Gas Companies. He said 'legislation in 1860 proceeded on the idea that companies should have 'a reasonable prospect of attaining from time to time with due care and management the maximum dividend'.
In 1874 the City Corporation and the Metropolitan Board of Works submitted three bills:- 'the first bill was for the purchase of the companies, the second bill was for the establishment of a competing supply - and the third was for a regulation bill'.
The first two of these bills were eventually dropped and the situation resolved in another series of measures designed to regulate gas prices and to ensure some sort of efficiency in working. The situation in London had thus become one whereby gas companies used their influence to oppose what they saw as attacks on their independence by local authorities representing consumer interests. Mediation took place through the Board of Trade.
At a the Select Committee into Metropolitan Gas Companies of 1875 officials from the Board of Trade produced George Livesey who gave evidence in favour of what became known as the 'sliding scale'.
Livesey was at that time an employee of the South Met. Co. and his appearance was against the policy of his employers. Although he protested that he had spoken 'under Speaker's Orders' - that is he had been required to come - some parties in both South Met. and other companies called for his dismissal.
In his evidence to the Committee Livesey said: 'It should be possible to form a scheme for embodying in a general act, that should make the consumers in a sense partners in the gas company, whereby both should participate in any improved or more economic working '.
'Partnership' was thus a recurrent theme of Livesey's, one on which he had already spoken publicly in the context of gas management, and one on which he was to enlarge greatly once the co-partnership scheme had been set up. In this context it relates entirely to the sliding scale of gas pricing.
It is almost impossible to underestimate the importance of the sliding scale both as a partial solution to the problems of the gas industry in London but also in the context as a recurrent theme of Livesey's. It became a touchstone to which he could return and refer back as the basis on which the whole edifice of his scheme was built.
The sliding scale in the gas industry in the 1870s had no relation to sliding scales in other industries - except in so far as it was an automatic system which tied profit to price. It was designed to separate control over these elements from Government control. In 1875 a letter had been sent from the Board of Trade to the Chairman of the Select Committee on the Metropolitan Gas Companies, which outlined several important points of principle. 'it would seem a priori at least doubtful whether any Government Department or official commissioners ... can succeed in dictating to a trading company the terms and conditions of manufacture on which they can make the. greatest amount of profit'. Any scheme devised should be independent of Government and yet able to guarantee responsibility in terms of price and efficiency while satisfying the need for the incentive of profit.
The sliding scale was seen as a solution to this problem. It was automatic once a base line had been set by the Government, to provide an incentive to lower prices while efficiency in working grew. To quote Livesey again in 1899: 'if it be distinctly in the interests of the company to serve the customer then the customer will be served'.
This suggestion from Livesey provoked a great deal of hostility from the existing gas companies - including South Met. Nevertheless it was adopted and gradually incorporated into new statutes as companies applied for them and it became working practice.
In the succeeding decade it came to be believed that more efficient gas company working could be achieved by fewer but larger companies. To this end both Government and companies began to promote schemes of amalgamation between companies and by the early 1880s London's nine gas companies had been reduced to three. As part of this movement Gas Light and Coke Co. - which had by then subsumed most of the other companies north of the Thames - in 1872 built the giant Beckton works as a central supply point for much of their area.
Eventually a scheme was set up by Livesey aiming to unite both north and south London and this would have gone ahead had it not been prevented by the Board of Trade.
South Met. by then controlled the whole area south of the river, following amalgamations with Phoenix, Surrey Consumers and two small companies in Woolwich. Efficiencies of scale had not always followed amalgamations and South Met's low prices and reputation for high quality had not been copied in north London. Gas Light & Coke Co. were now obliged under their statute to set their prices by the standard of South Met's current charges. South Met. had no such measure to set themselves by and were thus assumed by Government to be achieving prices as low as could possibly be set.
However both City Corporation and Metropolitan Board of Works continued to consider the basis of a publicly controlled supply of gas. Farrier of the Board of Trade speaking in 1876 said: 'the day will come when the gas companies will be bought up by the municipal authorities. I am not going to sanction any further increase in capital... I will do what I can to prevent the public ... when they buy them up to pay an inflated price ... for those premiums that have gone into the pockets of the shareholders.
Thus civil servants believed they should could safeguard ithe public purse in the event of future political action. That action was anticipated but never happened. J. Beal the later Progressive Member for Fulham in the first session of the LCC put forward purchase of the existing Metropolitan Gas Companies as a source of indirect taxation and an anonymous pamphlet of 1878 echoes this - gas works profits could be used to subsidise other public services and keep rates down. E. Dresser-Rogers is quoted in an address to the gas companies of the City of London, in 1864 as having said that 'a monopoly to supply the public with an article of necessity should belong to the public'
These ideas found expression in 1876 in J.B.Firth's Municipal London which devotes a chapter to the moral necessity for public ownership of gas and paints the vision of a city such as London entirely directed in the public interest. These ideas were eventually taken up in the 1880s by various progressive groups and eventual expression was found in the early days of the London County Council.
The London County Council as the first strong and united Local Authority in London first took office in 1889 and striking gas workers in that year were quick to point out to Livesey that: 'this company will be transferred to the County Council for the benefit of London'.
One of the first actions of the LCC in March 1889 was for Councillor Beal to call for an officers' report on the practicalities of municipalisation of London's gas and water supplies. It was however felt that the case for gas muncipalisation was 'weak' and that part of the report was not proceeded with. The cause of municipalisation of gas by LCC was seen as one of the calls from the 'left' - the great John Burns mentioned it regularly and described the London industry as 'moribund'.
Public ownership was seen merely in municipal terms - ownership by national government was not considered. The London gas companies behaved in ways which would have been expected of them - they opposed bills put forward to regulate them and tried to prevent public ownership being seen as a solution. Companies gave money to political groups which were opposed to public ownership. In 1899 the South Suburban Company, of which Livesey was Chair, gave donations to the Liberty and Property Defence League. In 1889 Livesey was involved in alternative forms of worker's politics - he was helping to set up "The Workmen's Association for the Defence of British Industry' - as an attempt to find channels which would support the defence of capital.
This brief description of the political background to the gas industry in the nineteenth century must be extended by an explanation of some technical changes. In the 1880s gas was becoming more widely used by ordinary people as a means of cooking and lighting. Prepayment meters were introduced, in London by South Met. Companies were anxious to extend their sales to working class customers and arrangements were made to install free appliances and to make special arrangements for lodgers. It is significant that South Met. in the early 1960s was responsible for changes in the calorific value of the gas it sold in order to make it more suitable as a heating and cooking medium - rather than lighting. Other promotions in this field led to exhibitions of gas appliances - like the one at Crystal Palace in the early 1880s - and demonstrations of gas for cookery, and the opening of gas showrooms.
Men like Livesey, who were managers in the industry in this period were anxious to be seen as professionals. They saw a difference between themselves and those who manufactured appliances. They were anxious to be seen as professional men in the public service with technical rather than business expertise.
Competition was being experienced from the electricity industry. For many years gas had sold by-products. Coke sales were an important part of any company's economy and these were joined by numerous chemical products. The gas industry in the last decades of the 19th century and the first of the 20thj put up a tremendous fight against electric competition for the lighting contracts. The pace of innovation and invention of gadgets and devices that would rival electricity was enormous. The gas industry was changing
One company was outstanding in its attempts to meet that change. That company was South Met. We must look closer at this modest London company which made such efforts to meet both technical and political challenges, and attempted to involve its workforce to identify with it in these challenges.
Rostron, Laurence, W.S. - Powers of Charge of the Metropolitan Gas Companies. A history of the question of price in London from the introduction of gas lighting to the year 1899. 1927. (Rostron was a South Met. Director and eventually a member of the LCC in the Municipal Reform interest. The book is entirely concerned with the effects of government action on the changing price of gas - and is an apology for South Met).
W.J.Liberty - The History of Gas Lighting. 1921 (Liberty was a South Met. employee).
Chandler, Dean - Outline of the History of Lighting by Gas. 1936. (Chandler was a South Met. employee.)
Report of the Select Committee on the Metropolis 1875.
Minutes of the Evidence taken before the Committee on the Gas Companies (Metropolis) Bill. 1860.
Report from the Select Committee on the Gas (Metropolis) Bill 1860
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Harry Haward. The London County Council from Within
Everard, Stirling. The History of the Gas Light and Coke Co. 1812-1949 1949.
D.A.Chatterton, State Control of the Public Utilities in the Nineteenth Century: the London Gas Industry. Business History Vol XIV No.2. July 1972.
M.E.Faulkus, The British Gas Industry before 1850. Economic History Review. XX Second Series 1967
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Arthur Silverthorne. The Purchase of Gas and Water Works, with the latest statistics of Metropolitan Gas and Water Supply. 1881.
Minutes Metropolitan Board of Works
J.B.Frith. Municipal London, or London Government as it is and London under a municipal council. Longmans & Co. 1876.Labour Elector
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