THE WATER COMPANIES AND THEIR PROFITS.
IN the stoppage of all legislation which has been caused by the Franchise Act and the wars and rumours of wars which have occupied the arena during the last two years, there has been a lull in the warfare of London against the corporations which devour it. The City Corporation will outlive the Parliament which has threatened its existence. The City Companies will be left in the undisturbed enjoyment of their gold and silver, and spices and choice wines, for at least another session. The Gas Companies will remain without competitors at least for a season. But, in view of the Return which has just been issued by the Local Government Board, there is just a lingering hope that something may yet be done in the matter of the Water Companies.
The return was moved for by Mr. Firth. It shows in the case of each of the London Water Companies for the twelve years, from 1872 to 1883 inclusive, the amount of profit they have enjoyed in the shape of dividends, the service rendered in return for the payment, and the amount and value of the capital employed in earning it. In effect, of course, these two last items are only another way of stating profits. The amounts are startling in every way. To begin with the service rendered, the number of houses supplied with water in 1872 was a little under half a million. In eleven years this number had increased by nearly a third to 660,000 in round figures. The rate of increase in the growth of London which these figures reveal is quite appalling. If Queen Elizabeth and James I. were so horrified at the growth of the city that they vainly tried to cut it short at Lincoln's-Inn-Fields, what would they have said now, when this mighty polypus increases its girth and the length of its
feelers by a third within one-ninth of a century This mere growth must in itself, apart from any demerits or defects on the part of the existing Companies, give rise to a demand for a new source of supply. The period contemplated as impossible by the ardour of Burns's line," Till a' the streams run dry, my dear," is becoming an actual probability with this terrible growth of the town. It is no wonder, perhaps, that, in view of this growth of the area of supply, the quantity of the supply has relatively diminished. The number of gallons a day supplied for domestic purposes to each house has undergone in every case but two a palpable diminution. To most people the average number of gallons will probably be in itself a surprise. It was in 1872 no less than 279 gallons a day to each house in the case of the Grand Junction, 252 in the case of Chelsea, which embraces Westminster and Belgravia, and 160 even in
East London. This supply has been diminished by the large number of 41 in the case of the Grand Junction, of 17 in the case of the West Middlesex, 12 in Lambeth, and 6 in Chelsea. On the other hand, presumably owing to the previous great deficiency, it has been increased by 45 gallons a day by the East London Company. The general average has been brought more nearly together. But the net result is a falling-off in the quantity of the supply. Yet, at the same time, the rental payable to the Company, the water
rates, as they are called, have increased. This increase has not only been accompanied by a decrease in the supply to each house, but it has been out of all proportion to the increase in the number of houses. For while the houses have increased by not quite a third, the rentals have increased by 58/ per cent., or by more than half. This has been due of course, not merely to an increase in value of new houses as compared with old, but to an increase in the rating, and therefore in the rental of the old houses. At every quinquennial valuation, the value of house property in London is put up. On every increase of valuation, the Water Companies increase their rental. Here is an unearned increment indeed, and one which surely could not have been contemplated or intended by Parliament when it made its bargain with the Companies ; or if it was contemplated and intended, then the bargain was most unconscionable, and ought to be set aside. It is in this increment that the weak point of the Torrens Bill lies. The House of Lords deducted, by its decision in the great Dobbs case, a good deal of unearned increment which the Companies had given to themselves without, and in opposition to, Parliamentary authority, by charging on gross instead of on net value. The Torrens-Bill proposes to settle disputes by saying net value shall be rateable value. But of what avail is the Dobbs case or the Torrens Bill to lightening the burden to the consumer by the difference between rateable and gross value, if in this very year of grace 1885 the quinquennial valuation is to take place which will bring the rateable value of 1886 to the level of the gross value of 1884. The Companies are thus presented with continual additions to their rental without the addition of a single drop of water ; on the contrary, with a diminution of a good many gallons a day of the water for which the rental is paid. A more monstrous sacrifice of the consumer to the distributor can hardly be imagined. The Companies would, no doubt,be inclined to point to the return of dividends as showing that after all the increase was not nearly as great as is represented. For the dividends have only increased by 1 or 2 or, in two cases, some 44 per cent. But, of course, the increase of dividend, marked as that has been, does not represent the whole increase of profit. Far from it. The Chelsea Company, for instance, has, during the last twelve years, issued at par to its shareholders ordinary capital bearing a 74per cent, dividend, no less than £342,000 of fresh stock, The Lambeth Company, whose dividend-rate has increased from 6 to 72, has issued in this way more than
half a million. The value of the bonus thus given to the shareholders may be gauged by the fact that in 1883, in the case of Chelsea, a million-worth of sharecapital was worth on the Stock Exchange £1,672,475. In other words, stock worth 167 was issued at 100. The whole amount thus issued at par to shareholders was .C2,200,000, or, including " loan" capital issued at a similar bonus rate, £3,000,000. The whole ten millions of share-capital now belonging to the various Companies was worth on the Stock Exchange at the end of 1883, 24i millions. The value had rather more than doubled in the eleven years. There is no reason why the value should not go on doubling indefinitely, seeing that the prospect in value is the prospective value of London itself. Yet we still read monthly in the papers how one Company's water was yellow and slightly turbid, and another's was impregnated with organic matter, and all those horrid details that furnish so strong an argument against being addicted to Adam's ale. Clearly, Companies possessed of this inexhaustible future income do not need compulsory powers of cutting-off the water-supply to enable them to grow rich. Clearly, too, Bills dealing with such details as that are no real alleviation of the burden imposed on Londoners of being subjected to a progressive income-tax for the benefit of private persons whose services do not progress.
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