Financing sanitation infrastructure in nineteenth-century England and Wales

This paper investigates the role of high borrowing costs in deterring sanitation investment in late nineteenth-century Britain. Many councils were not providing public goods such as water supply and sewer systems even at the end of the century, despite having had access to government loans since the 1860s. Using an annual dataset of the financial accounts of almost seven hundred town councils, the paper identifies significant variation in the interest rates that towns had to pay when borrowing to fund investment. Panel regressions show that higher interest rates were associated with significantly lower levels of sanitation investment, with the relationship robust to controlling for town tax base, non-tax revenue sources, demographic characteristics, and town fixed effects. The regression estimates imply that providing loans at the government’s cost of borrowing would have increased the stock of sanitation infrastructure in 1903 by around 25%, and so potentially hastened Britain’s mortality decline.