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The Unearned Increment
W. H,DA.WSON.
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UNIVERSITY OF CALIFORNIA LOS ANGELES
This Book is now published by CxEORGE ALLEN & COMPANY, LTD.
Ruskin House RATHBONE PLACE. OXFORD STREET,
LONDON.
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THE
UNEARNED INCREMENT
BY
WILLIAM HARBUTT DAWSON,
AUTHOR OF " GERMAN SOCIALISM AND FERDINAND LASSALLE," "PRINCE BISMARCK AND STATE SOCIALISM," ETC.
THIRD
EDITION.
LONDON :
SWAN SONNENSCHEIN & CO. LIM.,
25, HIGH STREET, BLOOMSBURY. 1910.
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c r c re r
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"Whereas I heretofore bought of Hichard Falklnphnm. Esq., diver* lands and tenements . . . part [of wliich] 1 since sold to several (lersons for a good sum of money m.ore than J purchased the same for, I thought myself bound to bestow upon the eldest son of John Green and the eldest son of Richard Hamerton, who married the co-heirs of the said Richard Falkingliam, the surplus of all such moneys as I sold the lands for, over and above what, indeed, they cost me." — (Prom a codicil to the will of John Harrison, of Leeds, 1579-1656, given In Camden's " Britannia," editioo 1685. p. 730.)
First Edition, November, 1890. Second Edition, November, 1691. Third Editiok, September, 1909.
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PEBFACE.
Of making of books on agrarian questions there is no end. A»
yet, however, it cannot be said that the phase of land-law
reform treated of in these pages has received the attention it
* deserves. " Unearned increment " is an expression wlrich has
m long tigured more or less prominently In the works of Liberal
~* and Socialistic economists, both EngUsh and Continental, but
it has not yet become a commonplace of polemic. If the
present inquiry into the meaning and bearings of this still
dignified phrase should take away something of its obscurity
^ for the popular mind, a good purpose will certainly have been
2 served.
ui It was the complaint of the elder Plmy that great estates were ruining Italy. We have in the United Kingdom a multi- tude of plethoric domains, and the beUef is rapidly growing that their existence is not an unmixed blessing. Yet while we may run no risk, or httle, of being ruined by the magnitude of 'J individual estates, very great danger may be apprehended from 5 the magnitude of land-values in this country, so long as, to ^ use the words of John Stuart Mill, " an accession of wealth created by circumstances " is allowed to " become an unearnfKl appendage to the riches of a particular class."
379687
iv PREFACE.
Although writing trom the English standpoint, I have not hesitated to draw illustrations of the principles advanced from various countries, particularly the United States and Germany ; nor have I scrupled to borrow from abroad the testimony of political economists and social reformers favourable to those principles. The unearned increment question is, in the truest sense of the word, a social question, and if the theories advo- cated and the proposals recommended in these pages are vindicable as applied tc one country, they may claim general validity. In endeavouring to establish the position taken up, I have sought to concentrate attention upon great principles, and in the inevitable references to persons, writing without fear or favour, I have nought extenuated while setting down nought in malice.
The annotations, which might without explanation be thought superabundant, form in reality an integral part of the plan of the work. Many facts and figures are contained therein which, thougli they could not properly be embodied in the text, will be found to throw iniportant light upon the path of the uninitiated reader.
W. H. D
1890.
CONTENTS.
CHAPTER I. rxc^^
Penalties OF Progress ... ... ... ... ... 1
CHAPTER II, Reaping without Sowing ... ... ... ... 11
CHAPTER III. Private Gain at Public Cost ... ... ... ... 22
CHAPTER IV. The Rent Screw ... ... ... ... ... 40
CHAPTER V. The Land Monopoly ... ... ... «. ... 68
CHAPTER VI. Land Speculation ... ... ... ^. ... 62
CHAPTER VII. Overcrowding in Large Towns ... ... ... 79
CHAPTER Vm. End or Mend? ... ... ... ... ... ... 107
vi. CONTENTS.
CHAPTEE IX. Mikes AND MmEEAi, Royalties,.. 117
CHAPTER X. Half Remedies ... ... ... ... ... ... 127
CHAPTER XI. Root AND Branch ... 140
CHAPTER Xn. Municipal Uneakned Increment Taxes in Germany 157
J.NDKX 9*« ... «*« ••. ••• *•• ... ^L\}
THE UNEARNED INCREMENT.
CHAPTER I.
PENALTIES OF PROGRESS.
IT is a fact which can need no demonstration that with the progress of society land acquires a spontaneous increase of value, a value which is in- dependent of the expenditure of labour or money upon it. One need not be a political economist or a social reformer in order to know this. Anyone who has had occasion to work amongst ancient rent-rolls, or to trace the histories of ancient endowments in land, must often have been impressed by the vast increase which in the course of centuries has taken place in the value of landed property.' In former times, while this
^ Here is an instance taken at random. In June, 1890, a Leeds charity case came before Mr. Justice Chitty in liOndon, the Attor- ney-General applying for leave to bring: in a scheme to deal with the income of the Wade Charity (Highway Trust), administered by the " Leeds Pious Uses Trustees." The testator, by will dated 1530, left certain lands whose inco e should "go to the use of mending the highways about Leeds." vVhatthe original value of these lands
s
THE UNEARNED INCREMENT.
augmentation was slow and less considerable than now, the process left all but the few unconcerned, and it was indeed seldom that serious thought was given to it. Only when the increasing value of land had pro- duced evils of the gravest character did it become recognised that what to the majority of people seemed but a statistical curiosity, or an interesting fact in archaeology, was in reality a momentous social problem. Reliable information as to the earlier time is meagre, yet we are not left wholly in the dark. Hallam tells us in his " Europe during the Middle Ages " that arable land in England let in the thirteenth century for sixpence an acre, and meadow land for twice or thrice that sum ; while from other authorities we learn that ten to fifteen years' purchase was a common estimate of value at that time. In the fifteenth century, however, land increased materially in value. Professor Thorold Rogers writes: —
"During the fifteenth century . . . not'.vithstanding the diffi- culties and losses of the landowner, the value of land rose rapidly. In the fourteenth century it was constantly obtained for ten years' purchase, the amount of land in the market being probably so abundant, and the competition for its purcliase so slight, that it easily changed hands at such a rate. . . Land was valued at
was, I cannot learn, but in 1827 the yearly value was £627, and now it is £3,000. A?ain, it was stated recently, in connection with proceedings in Parliament, that the living of Burnley was a hundred years ago worth £220 annually, but the income now approximates £.5,000, as the glebe land, formerly let as agricultural laad, has beea built upoo.
PENALTIES OF PROGRESS.
twenty years' purchase in the middle of the fifteenth century. In 1469 a valuation was made of Lord Cromwell's property. His lands were estimated at a capital value of £41,940 9s. OM. ; that is, he was considered to have a rental of £2,097 a year." '
Yet in the time of Henry VIIL land had a very low value when compared with modern estimates. A quar- ter of wheat, six sheep, or an ox would anywhere buy an acre. By the middle of the seventeenth century the rent of land had increased twenty- fold since the Middle Ages. Arthur Young estimated the rental of the agricultural land of England at £16,000,000, the average rent being 9s. lid. per acre, against sixpence four centuries previously. At thirty years' p.urchase this would represent a capital value of £480,000,000.
During the last hundred years, however, the value of land in England has grown at a prodigious rate. The wars at the end of last and the beginning of the present century contributed greatly to increase rents. Sir W. Curtis declared in the House of Com- mons on February 17th, 1815, that "rents have in all cases doubled, and in many cases trebled, during the war." According to Mulhall, too, the land rental of
* " Six Centuries of "Work and Wages," edition 1886, pp. 287, 288. Again, the same writer tells us that during the last five hundred years the rent of aijricullural land has increased in England a hundred and twenty-fold when measured in money, and fourteen-fold when measured in wheat, the food of the people ; but the value of building land has increased to a vastly greater extent.
B 2
4 THE UNEARNED INCREMENT.
the United Kingdom increased from £IG, 600,000 in 1730 to £23,400,000 in 1780, and £49,000,000 in 1814. But the rapid increase of population and the unparalleled development of industry have been the principal causes of the great increase in the value of land in England. According to Professor Fawcett, the capitalised value of this land now amounts to £4,500,000,000.
The income-tax returns — for whose evidence scientific accuracy cannot, it must be admitted, be claimed — testify in their own rough way to the phenomenal growth of land-values in modern times. Taking the category of land alone — which, of course, excludes the sites of buildings of all kinds — we find that the gross annual value assessed in the United Kingdom under schedule A increased from £62,000,000 in 1865 to £64,000,000 in 1869, to £67,000,000 in 1874, to £69,000,000 in 1879, and to £70,000,000 in 1880, though after that year it began steadily to fall, owing to agricultural depression and other causes. The gross annual value of messuages, tenements, &c. (in the same schedule), increased from £69,000,000 in 1865 to £80,000,000 in 1869, to £93,000,000 in 1874, to £110,000,000 in 1879, to £127,000,000 in 1884, and to £133,000,000 in 1887, the increase of £64,000,000 in twenty-two years representing far more than the increased value due to additional building. The total
PENALTIES OF PROGRESS.
gross annual value of both categories, together with manors, fines, &c., increased from £132,000,000 in 1865 to £145,000,000 in 18C9, to £160,000,000 in 1874, to £180,000,000 in 1879, to £190,000,000 in 1884, and to £197,000,000 in 1887.' Yet this increase in the value of land is not by any means peculiar to England amongst European countries. In France, Germany, and Planders the rent and selling price of agricultural land have at least doubled within the last thirty years. According to INI. de Laveleye, too, the same increase has taken place in Belgium since 1830.
^ "It is certainly impossible," says the Hon. G. C. Brodrink in his essay on primogeniture, " to ignore the grave political danger involved in the simple fact that nearly all the soil of Great Britain, the value of which is so incalculable and progressively advanc- ing, should belong to a section of the population relatively small and progressively dwindling. More than twtnty years ago, Mr. Porter, a very high authority on economical statistics, arrived at the conclusion that, 'with scarcely any exception, the revenue drawn in the form of rent has at least doubl^id in every part of Great Britain since 1790.' In the period which has since elapsed the same causes have continued to operate with still greater activity. It was stated in a report issued by Mr. Goschen, as President of the Poor-law Board, that the annual value of lands, houses, railways, and other property in tlie United Kingdom assessed for the income tax under Schedule A, rose from £53,495,375 to £143,872,588 between 1814 and 1868 ; and this must be exclusive of the immense sums (estimated by Mr. A. Arnold at £100,000,000) received by the landed interest from railway companies over and above the market price of the land thus sold. From a later report of the Inland Revenue Office it appears that the assessment of the United Kingdom under Schedule A amounted to more than £150,000,000, and that of England and Wales alone to £122,599,255 in the year 1873-4, and the Commi^si()ne^s give reasons for believing the real advance in the value of landed property to have been much greater." ( Vidt the Cobden Club's " Systems of Land Tenure in various Countries," p. 146, ed. 1881.)
THE UNEARNED INCREMENT.
But we obtain the most impressive evidence of the growth of land-value when, turning from agricultural land, we consider the land upon which towns are built. The capital value of such land has, especially in recent years, often increased to an almost incredible extent. In a city like London a square yard of a building site may now-a-days be worth as much as an acre of agricultural land. It has been calculated that the agricultural rental of the land upon which London stands would be ^250,000, yet the capital value of that land, without the buildings which have been erected upon it, is placed at the enormous sum of £300,000,000. These are figures deserving meditation : £300,000,000 for the land of London ! Contrast this sum with the value of the site of London before the shores of the Thames were covered with buildings, and we have a most remarkable, an unparalleled illustration of the growth of land-value and rent. In the City the annual value of land ordinarily reaches as high a figure as £\ 10s. to £2 per square foot, equal to a capital value of £65,000 to £87,000 per acre.* At times, however, even this value is greatly exceeded. A land expert, giving evi- dence before the Select Committee who considered the Strand Improvement Bill of the London County Coun-
^See also Sir Lyon Playfair's remark at Leeds, December 13th, 1889 : " Take the case of London, spread over a vast space, which formerly was worth £3 or £i an acre. S.)me parts of it are now worth from £oO,OUO to £60,0U0 in rental value."
PENALTIES OF PROGRESS.
cil, said (May 19th, 1890) he valued certain land within the area of the improvement contemplated at a mini- mum of £10 per square foot, equal to i?90 per square yard and £435,600 per acre. Yet it is only in com- paratively recent times that the bulk of this vast increase of value has accrued. " I could show," says Professor Thorold Rogers in his work on " Work and Wages," " that land for two miles round St. Paul's has increased during the last hundred and fifty years a thousandfold in value." Similarly, while land in the suburbs of Boston sells for £80,000 the acre, the rate is £160,000 in the central parts of the city.
That the rapid increase in the value of land, and with it the unexampled augmentation of rent, is a social danger, received recognition from isolated writers several centuries ago. They saw that the larger the tax claimed by the landlord for the use of the soil, the worse became the position of the cultivator and the lot of the labourer.' A striking passage, referring to the early part of the sixteenth century, appears in the writings of Hugh Latimer, and though often quoted it deserves repetition because of its significance : —
"Land which went heretofore for twenty or forty pounds a year now is let for fifty or a hundred. My father was a yeoman, and had no lands of his own ; only, he had a farm at a rent of
^ " The mnre there is allotted to labour the less there will re- main to be appropriated as rent." (H. Fawcett, " Manual of Politi- cal Economy," p. 123.)
8 THE UNEARNED INCREMENT.
three or four pounds by the year at the uttermost, and thereupon he tilled 80 much as kept half-a-dozen men. He had walk for a hundred sheep, and my mother milked thirty kine ; he was able and did find the king a harness with himself and his horse when he came to the place that he should receive the king's wages. He kept me to school ; he married my sisters with five pounds apiece BO that he brought them up in godliness and fear of God. He kept hospitality for his neighbours, and some alms he gave to the poor. And all this he did of the same farm where he that now hath it payeth sixteen pounds rent or more [instead of ' three or four pounds by the year at the uttermost '] by the year, and is not able to do anything for his prince, for himself, nor for his children, nor to give a cup of drink to the poor."
Ever since the time here written of rent has continued to grow, and with increasing rapidity, and as a result the social evils which are the necessary consequence of this increase of rent have tended to become acuter. The higher rent, the less the amount of income divisible between wages and interest. As the produce is distributable amongst the three factors, rent, wages, and interest, it is evident that wages and interest can only benefit by the low value of land, and that the higher land rises in value relatively the smaller will be the proportions of the produce which fall to these two factors respectively. As with the growth of population the value of land increases, it follows that the produce of labour falls more and more to the landlords, who nevertheless do nothing to deserve this augmentation of income. Society makes the land more valuable by requiring a greater area for
PENALTIES OF PROGRESS.
habitable purposes and for food production, yet the increased value, instead of benefiting those who create it, injures them, proves an obstacle to their material prosperity, and is productive of innumerable social evils whose gravity it is often impossible to exaggerate.'
The labourer suffers in an especial degree, because, owing to the growing exactions of the landowners, the fruits of his toil have relatively an ever-diminishing value. As Mr. Henry Greorge pertinently remarks : —
^ " Not indeed that the introduction of improved processes into agriculture has been for nought ; it has resulted in a l^rge augmentation of the aggregate return obtained from the soil, but without permanently lowering its price, and therefore without permanent advantage to either capitalist or labourer, or to other consumers. The large addition to the wealth of the country has
fone neither to profits nor to wages, nor yet to the public at large, ut to swell a fund ever growing, even while its proprietors sleep— the rent-roll of the owners of the soil. Accordingly we find that, notwithstanding the vast progress of agricultural industry effected within a century, there is scarcely an important agricultural pro- duct that is not at least as dear now as it was a hundred years ago — as dear, not merely in money price, but in real cost. The aggregate return from the land has immensely increased ; but the cost of the costliest portion of the produce, which is that which determines the price of the whole, remains pretty nearly as it was. Profits, therefore, have not risen at all, and the real remuneration of the labourer, taking the whole field of labour, in but a slight degree — at all events in a degree very far from commensurate with the general progress of industry." (Professor J. E. Cairnes, in "Some Leading Principles of Political Economy newly Expounded," 1874, p. 333 ) So Mr. A. O'Connor, M.P-, observes in a minority report of the Royal Commission on Depression in Trade and Industry (1885-6) : — " Under the existing land system the owners of the soil are able to obtain, and do exact, so large a proportion of the proceeds of the industry of the United Kingdom, that the remainder is insutfiiiient to secTire adequate remuneration to the industrial classes, either in the shape ot «a.res to operatives, or nasonable profit to the organisers of labour, the employers, or capitalists."
lo THE UNEARNED INCREMENT.
" Labour cannot reap the benefits which advancing civilisation brings, because they are intercepted. Land being necessai-y to labour, and being reduced to private ownership, every increase in the productive power of labour but increases rent — the price that labour must pay for the opportunity to realise its powers ; and thus all the advantages gained by the march of progress go to the owners of the land, and wages do not increase. Wages can- not increase, for the greater the earnings of labour the greater the price that labour must pay out of its earnings for the oppor- tunity to make any earnings at all."
Thus the Elysium of the labouring classes is not the old country where land is expensive and rent high, but the new country, where, the land monopoly not being severely felt, the proportion of the produce falling to rent is still not excessive.
•' New countries, where the aggregate wealth is small, but where land is cheap, are always better countries for the labour- ing classes than the rich countries, where land is dear. Where- ever you find land relatively low, will you not find wages rela- tively high ? And wherever land is high, will you not find wages low ? As land increases in value poverty deepens and pauperism increases. In the new settlements, where laud is cheap, you will find no beggars, and the inequalities in condition are very slight. In the great cities, where land is so valuable that it is measured by the foot, you will find the extremes of poverty and of luxury, and this disparity in condition between the two extremes of the social scale may alwaj's be measured by the price of land. Land in New York is more valuable than in San Francisco, and in New York the San Franciscan may see squalor and misery that will make him stand aghast. Land is more valuable in Loudon than in New York, and in London there is squalor and destitution worse than that of New York." *
1 i<
Progress and Poverty," Book V., chapter ii.
CHAPTER II.
REAPING WITHOUT SOWING.
IN considering the increase of land-value and rent we may with advantage deal with what may, for convenience sake, be called (1) rural and (2) urban (country and town) land separately, since the causes which make for augmented value are not quite the same in both cases.
(1.) By rural land is meant purely agricultural land, land which is utilised for food production — as for the growth of corn, for grazing and pasturage, or lor market gardening — or is otherwise cultivated and not built upon. Here we have to do with the alimentary needs of the population. As a community grows its greater food requirements demand the cultivation of an extended area of ground. Economic rent is, in the words of Mill, " the excess of the produce yielded by land beyond what would be returned to the same capital if em- ployed on the worst land in cultivation." ' It follows that the greater the area cultivated owing to the necessity for increased food supplies, vhe more the rent
• " Principles of Political Economy," Book II., chap, xvi., seo- tion 3.
11
« THE UNEARNED INCREMENT.
which the owners of the soil are in a position to claim. The unoccupied land within the immediate periphery of a town is that which is first used for the production of food, and the land farther distant is put to the same use as the necessities of the population require it. As, however, the cultivators of the soil are willing to pay for conveni- ence of access and transport, the eligible land adjacent to a town increases in value as cultivated, landy apart from any increase from other causes. Proximity to the market, facility of transport by road, canal, or rail, increased power of production owing to such favourable position, and competition amongst tenants, are all factors which tend to aucjment the value of this culti- vated land, and yet it will be noticed that these causes are all social. They act, as it were, automatically, and independently of the owners of the soil, who may not be responsible for any fraction of the increasing value. Thus a farm of thirty-three acres in Whalley, Derby- shire, let in 1797 for £30 a year, the landlord paying all taxes. In 1834 the same farm let for £80 a year, the taxes falling upon the tenant. Near Sandbach, Cheshire, five farms, which towards the end of last century let for £830, bore an aggregate rental of £1,720 in 1834. Again, a case is in mind where land on the outskirts of a small North of England town was let a hundred years ago at what was then regarded as the high rent of 20s. to 30s. per acre as arable land.
REAPING WITHOUT SOWING. 13
Now the same land, as agricultural land, brings the owners three and four times the amount, for population has grown and more food is needed there and else- where.^
There is, however, a time when the land round about towns acquires a far greater value than can be obtained so long as it is only required for food production. It is when the land ceases to be agricultural land and becomes eligible for building purposes — again a social incident which is independent of personal exertions or expenditure on the part of the owners.'* Every large town furnishes examples in abundance of this species of value-growth. Take one which is typical.^ Nearly fifty years ago a small estate, lying a few miles from a busy Yorkshire manufacturing town, the value of
^ Compare the following candid statement : — " I once found a rent in a remote North Couatry dale which had not been disturbed \inder year to year agreements for sixty years ; and when revising the rents I raised it from £28 to £82." (A Land Agent in the " Land Agents' Record " for January 4th, 18'J0.)
* A land report from Folkestone for 1889, published in an estate journal, says : — " As to the value of laud from an agricultural point of view, we can say but little in its favour. The soil is of so poor a quality that its average rental value is but thirty shillings an acre. The most valuable is used for grazing purposes, principallv for sheep. Once, however, let it be treated for as building land, and the value immediately assumes immense proportions, £20 a year per aure being asked lor land two miles out of the town." And again : —
" Laud near towns and popular centres continues to advance in value." (Buckinghamshire.)
"Lands ripe for building purposes in favourable positions, both in Leicester and the smaller towns of the county, fetch good prices and 80 do accommodation lands." (Leicestershire.)
* Related to the author by the land agent referred to.
14 THE UNEARNED INCREMENT.
which was ^^7,000, was entrusted to the management of a local land agent. From the first it was let as agricultural land, yet its value continually increased, owing to the growth of the adjacent town, and the consequent demand for eligible building land. WTien a few years ago the estate changed hands the value had grown from £7,000 to £50,000. The value had thus increased seven-fold in forty years, though the land was never used for other than agricultural purposes, and the landlord had done nothing whatever to improve it, having, to use the land agent's words, " had his hands in his pockets the whole time."
Where the land upon which towns are built is held by single or few persons princely incomes are frequently derived by the monopolists. Cases like those of Bury' (the Earl of DerbyJ, Cardiflf (the Marquis of ButeJ, Huddersfield (the Kamsden family), and many districts of the metropolis (^the Bedford, Norfolk, Portland, and other noble families) will readily occur to those who have studied this question. In such cases it might seem as though a community only existed and pros-
^ The municipal borough of Bury contains 5,835 acres, distributed as follows: — Lord Derby, 4,100 acres; glebe, 150 acres; other owners, 1,585 acres. In 1846 the rateable value was £57,608 and in 1889 it was £221,490, a quadruple increase in 43 years. It is com- monly understood in Bury that Lord Derby's income from the borough is £70,000. During the last generation large blocks of property built on the 99 years' lease and three-lives' systems have "fallen in," thus adding enormously to the earl's revenue.
REAPING WITHOUT SOWING. IS
pered for the purpose of increasing the wealth of the landlords, for even though the latter preserved an attitude of complete passivity, their land would neces- sarily acquire greater value year by year. The more numerous the community becomes and the more it thrives, the higher the tribute it must pay to the owners of the soil upon which its dwellings have been placed. In lending or selling his land the owner renders now no greater service to the community than he did years ago — when land was cheaper — but he requires far greater remuneration for the service. Where the landlord, by his own labour or expenditure, increases the value of his property this growing tribute is, to some extent, justifiable ; but it will generally be found that it is not the owner but society which makes the land more valuable. Nevertheless the law says that society may be rack-rented on its own improvements.
Nowhere do we find such remarkable instances of the growth of land-value as in London. The agricul- tural rental of the land upon which the metropolis stands has been estimated at a quarter of a million pounds, yet it is computed that its annual rental is between fifteen and sixteen and a half millions,' the difference of so many millions representing the increased value given to the land by the fact of population
1 '•The estimate of Mr. W. Saunders, a member of the London County Council, is £16,728,830, while Mr. Sidney Webb accepts the lower computatioa.
l5 THE UNEARNED INCREMENT.
having settled upon it. A short time ago Mr. Sidney Webb made a careful estimate of the unearned incre- ment of London, basing his calculations upon the metropolitan quinquennial valuations, and he placed the yearly addition to this increment at no less a sum than £4,500,000. The estimate was obtained in the following manner : — At the last re-valuation of the metropolitan area, in 188G, the annual rental was found to be £37,027,516, which represents a capital value of roughly £555,000,000, reckoned on fifteen years' purchase. Sixteen yera-s before the annual rental was £22,142,706, representing a capital value of roughly £330,000,000, the gross increase for the period being in rent £14,884,810 a year, and in capital value roughly £223,000,000. The part of this increase which has resulted from building operations is approximately learned from supplementary valuations. Deducting the value thus created by the employment of capital, a balance of £6,092,680 remains as the spontaneous increase of the rental of London between the valuations of 1871 and 1886. As four quinquennial valuations have taken place during the period considered, this increase must be spread over twenty years, and this done the result is an average yearly accession of £304,634, equal to a capital value of £4,569,510. These figures demonstrate the astounding fact that during two decades the population of London has
REAPING WITHOUT SOWING I7
placed an additional six million pounds of rental into the landlords' pockets for no other reason than that the law allows the owners of the soil to appropriate the whole of the increment created by social causes. The capital value of this present to the landlords — reckoned on the basis of fifteen years' purchase — is no less than £91,390,200. If we assume, with Mr. Webb, that the relationship borne by the unearned increment of the last twenty years to the total increase in rental during that period applies also to the gross valuation of the metropolis (in 1886, :€37,027,516), we shall have to conclude that the rent of the land upon which London stands — the " annual payment for permission merely to occupy the swampy marsh by the Thames which London labour makes so productive " — amounts to the handsome sum of fifteen million pounds yearly. Yet the agricultural value of the land cannot be more than a quarter of a million pounds, only one-sixtieth of the value which the people of London have given to it by living and toiling upon it.'
It would be easy to accumulate examples of the prodigious growth of land-value in and around English towns. Thus in an arbitration case which arose at Halifax during the present year a witness admitted
^ The following is Mr. Webb's calculation, based on official returns : — (For Table see next page.)
i8
THE UNEARNED INCREMENT.
having sold the Halifax Corporation four-and-a-haif yards of land for £1,000, the rate being £222 a yard.'
|
On 6th April. |
Gross VaUiation (annual rental). |
Total increase. |
Increase due to new buildings (annual rental). |
" Unearned increment " of annual rental. |
|
1870 1871 1872 1873 1874 1875 1876 1877 1878 1879 1880 1881 1882 1883 1884 1885 1886 Averag'e of 17 years |
£ 22,142,706 24,103,083 24,388,000 24,756,711 25,148,033 25,574,366 27.602,649 28,464,833 29,027,795 29,682,269 30,421,071 33,384,851 33,855,917 34,470,725 35,100,704 35,689,244 37,027,516 |
£ 1,960,377 284,917 368,711 391,322 426,333 2,028,283 862,184 562,962 654,474 738,802 2,963,780 471,066 614,808 629,979 588.540 1,338,282 £14,884,810 |
£ *549,508 284,917 368,711 391,322 426,333 *549,508 862.184 562,962 654,474 738,802 *549,508 471,066 614.808 629,979 588,540 *549,508 |
£ 1,410,869 1,478,775 2,414,272 788,764 |
|
£29,461,204 Increase of ordinary yt Increase of quinqueai periods Total increa |
£8,792,130 |
£6,092,680 |
||
|
12 ;ars 6,594,098 4 lial ... 8,290,712 36 £14,884,810 |
* Estimated at avera8:e of the other 12 years. |
Average unearned increment during- 2'i years, i-304,634 |
1 The report of the Committee on Town Holdings has a signifi- cant passage on this subject, which says:— ''The decrease during the term of a 99 years' lease of the value of the fabric of a house seems, as a rule, to be accompanied by a corresponding increase in the value of the land on which it stands. And in very many eases where the landowner has received a large accession of income, the whole of the increase appears to be due to this increase <U' land-values ; that is to say, the land, as vacant land, is
REAPING WITHOUT SOWING. ig
Leaving England, however, it is worth our while to look abroad, for the same startling facts confront us every- where. "In Boston,a considerable city of 360,000 inhabi- tants, in the best part of the suburbs, in the fashionable residential districts, land sells at £80,000 an acre, while in the central parts of the city it sells at double that — at £160,000 an acre." In Sioux City, Iowa, which has a population of 20,000, land in the residential suburbs sold in 1887 at £4,500 the acre, and in the centre of the city at £40,000. Similarly in Salina, Kansas, a town of 8,000 people, suburban land sold at £4,500 an acre and land in the centre of the town at £30,000.1
Again, take the case of Berlin. Since 1865 the average value of house sites in this city — taking all dwellings and rented buildings — has increased from £2,081 to £5,700, nearly a threefold increase.^ While
worth more than the land with the old house on it. Very striking evidence was given, showing that the great increase in value of the property of King Edward's School was due mainly to the large increase of ground values in the town, and that the school had derived very little benefit from the money expended by its lessees ; and witnesses have spoken of the vast increases in land- values in such diverse places, amongst others, as Kingstown, Cork, Woolwich, the Portland Marylebone estate, Bethesda, and Redruth. This increase seems to be due to the situation, not to the house, or to be inherent in the land and not in the house ; it is mostly position, not the outlay on the land, that gives the value."
^ " l.and Lessons from America," by Dr. A. R. Wallace (1887).
* " There has been an enormous rise in the value of building
c 2
20 THE UNEARNED INCREMENT.
the value of land has thus greatly increased, rents have proportionately risen. In 1865 the average rent was £122> 9s., but it is now £571 8s.»
The manner in which growth of population, with corresponding increase in the demand for dwellings, leads to a rise in rents is well shown by the experience of Berlin, a case which is extremely instructive, as Berlin's growth has since 1870 been phenomenal. Statistics show that in 1878, when the demand for houses was temporarily smaller, no less than 9 per cent. of the habitable dwellings were empty, and the result was that rents fell. In that year (taking the two terms) 43,633 rents were lowered, while only 1,776 were raised. The glut of houses soon disappeared, and the percentage of empty dwellings fell in the spring term of 1886 to two. Mark the result of a greater demand. During 1886 the abatements in rent were 2,510 fagainst 43,633 in 1878) and the increases were 31,572 (against 1,776). The increases in rent had multiplied nearly uninterruptedly since 1878, as the following figures show :— April 1, 1878, 846 ; October 1, 930 ;
land at Berlin. A plot of ground in the Miillerstrasse, which was purchased in 1855 for £500, is now valued at £150,000, and the owner has refused an offer of £100,000 for it." — Newspapers for September, 1890.
^ According to a return recently laid before the Union of Berlin Landowners' Associations, the German metropolis had in 1889 22,400 houses with 385,000 dwellings, representing a value of 5,321,000,000 marks {circa £266,000,000), with aggregate rent of 256,000,000 marks (£12,800,000).
REAPING WITHOUT SOWING.
21
April, 1879, 867; October, 1,024; April, 1880, 1,568 October, 1,820; April, 1881,3,011; October, 3,642 April, 1882,3,160; October, 3,119 ; April, 1883, 3,344 October, 4,775 ; April, 1884, 4,978 ; October, 8,452 April, 1885, 11,062; October, 14,956; April, 1886, 14,533; October, 17,039; April, 1887, 18,422. Later statistics are not available. During this decennial period the population had increased some three hundred thousand.*
• Written in 1890.
CHArPER IIL
PRIVATE GAIN AT PUBLIC COST.
IF we take the second class of land, urban land, we find that the causes of the increase in value are in part different, while also more active and effectual. Urban land, the land which is covered by buildings, or which may prospectively be so utilised, acquires greater value from (1) the mere growth of the community — city, town, or village, as the case may be ; (2) from the carrying out of public improvements ; and (3) from the enterprise and exertions of the individual residents. And here again the landowner may play an absolutely passive part.
(1.) Growth of population. — The progress of a community in numbers and wealth will of necessity increase the value of the land occupied, and, there- fore, the income or rent which falls to those who own the land upon and near which the population dwells. The greater the demand for land for building purposes, the greater the competition for houses, the better the dwellings tenanted, and the higher will be
PKJVA TE GAIN A T PUBLIC COST. 23
the landlords' rent and the higher the price of land. A remarkable case of value-creation by the mere settle- ment of population upon the land was related in the House of Commons on May 6th, 1890, by Colonel Hughes.
" In tlie parish of Plnmstead land used to be let for agricultural purposes for £3 an acre. The income of an estate of 250 acres in 1845 was £750 per annum, and the capital value at twenty years' purchase was £15,000. The arsenal came to Woolwich ; with the arsenal the necessity for 5,000 houses. And then came tlie harvest for the landlord. The land, the capital value of which had been £15,000, now brought an income of £14,250 per annum. The ground landlord has received £1,000,000 in ground rents already, and after twenty years hence the Woolwich estates, with all the houses upon them, will revert to the land- owner's family — bringing another million — meaning altogether a swap of £15,000 for a sum of £2,000,000."
To take an illustration from Ireland. Giving evi- dence before the Select Committee on Town Holdings, Captain Eichard O'Sullivan said : —
" Queenstown in the course of a century has grown by the eheer industry and enterprise of its inhabitants from a barren rock into a property valued at £21,000 a year, a value for a lump sum equivalent to half-a-million pounds. None of it has been created by the landlord, yet he tries to confiscate it. Nearly eight miles of roads and streets, with their flagged footways, main sewers, private drainage, crossings, channels, &c., costing at least £30,000, have been paid for out of the pockets of the people, and on the expiration of the leases the landlord confiscates them also. The public quays have been built at the public expense, and even the foreshore upon which they are erected had after great and ex- pensive litigation to be paid for to the utmost farthing to the landlords, who refused to contribute in the smallest degree to the
24 THE UNEARNED INCREMENT.
erection of the quays. The town as it stands has been paid for many times over by the occupiers, and yet the landlords claim it as their own, and except the occupiers are prepared to purchase it over again at a fabulous amount they must clear out and leave the labour of their lives to the landlords, if the Government fails' to give them protection."
Another witness in the same inquiry, Mr. Beveridge, said of Dublin, that a considerable increase in the value of land had taken place there, this being " due in great' measure to the growth of population." Asked, "Is ib due to any action on the part of the landlords — the^ persons who own this land ? " he replied : " There may* be individual cases in which a landlord has effected improvements, but I do not know of any." Again, he stated : " The general improvement of the land in Dublin is, in my opinion, attributable mainly to two causesj The first is, the growth of the population in the city. The second is, the enormous expenditure that has been made on new roadways, good sewers, water supply, and so on."
(2.) Public Impi'ovements. — These, too, tend to increase the value of urban property. In the category of public improvements fall all the permanent works carried out by local authorities at the expense ot the ratepayers in the interest of the latter's con- venience and health ; such are roads, bridges, public buildings, parks and open spaces in large towns, sewer- age, lighting, water supply, &c. The cost of these
PRI VA TE GAIN Al P UBLIC COST. 25
works — where, as in the case of water and gas, private enterprise does not step in — is a common charge on the inhabitants.^ It is true that these benefit by improvements of the kind, but they are not the only or the principal ones to benefit. The house occupiers only have a temporary interest in the public works constructed at their expense, and they of necessity renounce that interest directly they change their abode. But there is a class of men whose benefit from public works is permanent, though they do not to any considerable extent, if at all, contribute towards the cost. These are the owners of the land upon which the town stands, for though it might at first sight seem as though the inhabited buildings increased in value as a consequence of public improvements, the augmented value falls in reality to the land they cover
^ " As a matter of fact," writes Professor Thorold Ro^er?, in his work, " Six Centuries of Work and Wages" (ed. 1886, p. 533), "the owner contributes nothing to local taxation. Everything is heaped on the occupier. Ttie land would be worthless without roads, and the occupier has to construct, widen, and repair them. It could not be inhabited without proper drainage, and the occupier is constrained to construct and pay for the works which give an initial value to the ground rent, and, after the outlay, enhance it. It could not be occupied without a proper supply of water, and the cost of this supply is levied on the occupier also. In return for the enormous expenditure paid by the tenant for these permanent improvements, he has his rent raistd on his im- provements, and his taxes increased by them. The occupier in towns is worse used by far than the Irish tenant was before the ch anges of the Land Act, for if the landlord made him pay interest on his own outlay ihe cost of local taxation was shared between. the parties."
26 THE UNEARNED INCREMENT.
and adjoin.' If any one doubts whether the works alluded to increase the value of property, and are essential to the maintenance of value, let him imagine what would be the effect of their absence upon the property which now they benefit.^ Let a local authority, for example, be supposed to divert its attention from one quarter of a town to another. In one place the roads are allowed to fall into decay ; sanitation is neglected — the streets are unclean, the draining of the houses is deficient, the water supply is faulty ; public convenience is no longer regarded — no more thorough- fares are widened, no more old buildings are removed. All these acts of omission and commission on the part of the local authority will tend to depreciate the value of the property thus neglected, while the parts of the town to which attention is transferred will proportion- ately increase in value. It is evident, therefore, that the value of urban land is at once preserved and augmented by the public improvements which are
^ In the United States this is widely recognised by law and custom. Thus the Muncipal Code of Ohio says :— " An assessment for the construction of sewers is in its nature a charge for a permanent addition to the freehold, and is to be paid by the owner of the fee or the holder of a perpetual lease, but is not chargeable against an ordinary tenant for years."
* Note the following extract from a land report for 1889 :— " In Portsmouth, large numbers of small houses have been erected, and land development has been fairly brisk. Where roads have heen made up, curbed, channelled, and drained, £1,200 to £1,600 ]ier acre has been readily obtained on estates skirting the populous parts of the town."
PRIVA TE GAIN A T PUBLIC COST. iy
carried out at the expense, not of the owners of that property, but of the residents who have only a tem- porary interest in it. Further, we are confronted with the singular anomaly that the community which in this way gives to the property it uses a higher value, actually pays the landlords for the privilege of creating that higher value for them. For the more valuable urban property becomes, owing to the growth of popu- lation, public improvements, and other social causes, the higher become also the rents which are demanded of the occupiers.
This second factor in the creation of increased value is the more important at the present time because the tendency of local authorities is to embark more and more boldly upon works of public utility of the kind named. Never before were communities so alive to the importance of careful sanitation ; never before did they pay so much regard to their own physical welfare — as evidenced by the provision of spacious streets, public parks and open spaces ; never before did they devote so much attention to the intellectual and sesthetical sides of social and civil life, in proof of which the public museums, galleries, libraries, and schools estab- lished in such abundance all over the country may be mentioned. Almost invariably the great expenditure incurred by works of these kinds has a tendency to increase the desirability of the towns concerned as
88 THE UNEARNED INCREMENT.
places of residence, to promote the material progress of the inhabitants, and thus to augment the value of the land upon which the inhabitants are settled.'
A few figures, by way of illustration, will make clear to us the extent to which local taxation is employed in the execution of public improvements which make for greater land-value and higher rent. The aggregate amount of the local budgets of England and Wales for the year 1885-6 was £55,738,420 (a good deal more than half the imperial revenuej, of which sum £32,177,883 was levied by rates, though a little more than forty years ago the sum raised in rates was only £8,550,000.^ This enormous taxation includes, of course, the interest payable on public loans, the amount
^ Giving: evidence before the Parliamentary Committee which a short time ago considered the Liverpool Extension Bill, Mr. Shelmerdine, the City Surveyor, referred to the purchase of Sefton Park as follows :— " With regard to Sefton Park, there could be no shadow of a doubt that the construction of that park had developed the estates in the immediate neighbourhood. The agricultural value of the land to Lord Sefton was £1,350. Lord Sefton got £250,000 from the Corporation, which, at 4 per cent., would give his lordship a return of £10,000, which was a very good thing for him. The park had been of enormous benefit to Lord Sefton in developing the land around. No doubt the land around would have been developed sooner or later, but he main- tained that it was developed quicker, and the class of residents were much better than his lordship would probably have got had the park not been there. Thus, in addition to the £250,000, he had for twenty-three years got this increased income from the accelerated development of his land. The portion of Lord Sefton's land still undisposed d was very small."
' These figures are taken from j\Ir. J. F. iloul ton's little work ou ** The Taxation ol (irouua Values."
PRIVA TE GAIN A T PUBLIC COST. 29
of which several years ago was no less than a hundred
and sixty millions. As these loans are only contracted
on permanent improvements, it is safe to say that the
value of property has increased, or will increase, by
every pound spent and borrowed by local authorities.
London alone has incurred a debt of something like
£40,000,000 on account of public improvements, the
effect of which has generally been to make the land on
which London stands more valuable.' The report of
the Committee on Town Holdings says : —
"In the metropolis the gross debt of the late Metropolitan Board of Works outstanding on the 31st December, 1887, amounted to £27,834,000, expended entirely on works of a permanent character. The charges levied in the form of local rates to meet this liability have been paid entirely by the occupiers of the metropolis, but it is important to note that this contributes in many cases to increase the value of the premises which revert to the landlord at the end of a lease there or in any part of the country where similar conditions prevail." "
^ Speaking in the Memorial Hall, July 29th, 1887, Mr. Gladstone alluded to the Thames Embankment, and asked, " At w.iose ex- pense was that great, permanent, and stable improvement >ni de ? Instead of being made, as it should have been, at the expense of the permanent proprietary interests, it was charged, every shilling of it, upon occupants, that is to say, mainly either upon the wages of the labouring man, in fuel necessary for his family, or upon the trade and industry and enterprise which belong of necessity to a vast metropolis like this."
^ Sir C. Russell, Q,.C., M.P., stated at a public meeting held in St. James's Hall, London, February 14th, 1889, to consider the ques- tion of the better housing of the industrial classes, that " the occupying classes of London bore a payment of £800,000 a year in recoupment of money borrowed for great improvements, the benefit of which had gone to enhance the value of the property of the landlords ; and yet towards this taxation the landowners contributed nothing."
30 THE UNEARNED INCREMENT.
That the anomalies under consideration have not
escaped the attention of German economists may be
seen from the writings of Professor A. Wagner, of
Berlin ; take the following passage : —
" The great expenditure of the State, and particularly of the community — out of the resources of the entire population, and, with increasing taxation and its effects, for the most part out of the resources of those who do not own land — for streets, cleanli- ness, sanitation, security, education, &c., has ultimately the tendency to increase the height of rente and the value of property in urban land and buildings, because the increase of the urban population is thereby favoured. In such cases the urban land- owner profits doubly, and the laud-less population pays in taxes the money for expenditure which indirectly leads to a new in- crease in rents, thus suffering in two ways." ^
It is impossible, of course, to say exactly to what extent the value of land in large towns is increased by the fact of population growing, and to what extent by public improvements. Yet valuable data were placed before the Select Committee which recently considered the Strand Improvement Bill of the London County Council.^ The promoters of this measure instanced the following among other cases where property had
^"AUffemeine oder theoretische Volkswirthschaftslehre," 1st part, " Grundlegung," pp. 6.58, 669.
■^ During the hearing of evidence it was proved that owners of property adjoining the projected improvement of the Strand iiad hound leasehold tenants to agree to an iacrease in rent in the event of the improvement being carried out. The following advertisement, showing how public improvements are speculated upon, was read: — ''^ Strand.— One door from Newcastle Street. Freehold premises situate Nos. 4 and 6 and 6, Stanhope Market,
PRIVA TE GAIN A T PUBLIC COST.
31
increased in value after street improvements Lad been executed, and yet no structural alterations liad taken place : —
|
Date of |
Assessment |
Assessment after |
Increased value since |
|||
|
improve- ment. |
before im- provement. |
im |
provement. |
improve- ment. |
||
|
1875 |
1880 |
1885 |
||||
|
£ |
£ |
£ |
£ |
£ |
||
|
A |
1871 |
755 |
806 |
1,2.50 |
1,250 |
490 |
|
B |
9 J |
925 |
1,300 |
i,:joo |
1,300 |
375 |
|
C |
9f |
760 |
1,100 |
1,030 |
1,030 |
270 |
|
D |
440 |
700 |
700 |
700 |
260 |
|
|
E |
570 |
■900 |
900 |
900 |
330 |
|
|
F |
9f |
400 |
600 |
600 |
600 |
200 |
|
A |
1875 |
48 |
a •• |
60 |
110 |
62 |
|
B |
) } |
60 |
• • • |
80 |
120 |
60 |
|
A |
1876 |
72 |
• • • |
72 |
120 |
48 |
|
B |
f y |
75 |
• •■ |
100 |
105 |
30 |
|
C |
99 |
200 |
• •• |
240 |
240 |
40 |
|
A |
1877 |
100 |
• • • |
120 |
220 |
120 |
|
B |
9f |
90 |
■ ■ • |
150 |
150 |
60 |
|
C |
99 |
72 |
... |
150 |
150 |
78 |
|
D |
9* |
60 |
a • . |
120 |
96 |
36 |
|
A |
1878 |
54 |
... |
100 |
100 |
46 |
|
B |
99 |
64 |
. • ■ |
100 |
100 |
36 |
|
C |
99 |
75 |
... |
75 |
120 |
45 |
|
D |
99 |
100 |
. ■ ■ |
100 |
168 |
68 |
|
E |
99 |
160 |
... |
170 |
210 |
50 |
|
F |
99 |
121) |
... |
165 |
165 |
39 |
|
G |
99 |
90 |
... |
112 |
170 |
80 |
|
H |
99 |
70 |
... |
100 |
1.50 |
80 |
|
I |
99 |
106 |
... |
106 |
260 |
154 |
|
J |
9* |
40 |
• a. |
60 |
105 |
65 |
|
K |
) » |
120 |
• a* |
155 |
200 |
80 |
|
A |
1884 |
1,000 |
a a* |
■ • ■ |
1,500 |
500 |
|
B |
>• |
1,080 |
• a. |
• • • |
1,800 |
720 |
|
C |
>» |
180 |
aaa |
«•• |
2.50 |
70 |
|
D |
»» |
3,000 |
aa. |
... |
3,600 |
600 |
Stanhope Street, Clare Market, with the dwelling-houses and work- shops in the rear, occupying an area of about 2,900 superficial feet, at present let and producing about £340 a year, with the prospect of considerably enhanced value upon contemplated extensive im- prcvcments in the vicinity beiny carried out."
•?2 THE UNEARNED INCREMENT.
During the consideration of the same Bill it was stilted by an official valuer (May IGth, 1890) that the rateable value of the property within the area covered by this measure had risen from ^54,159 in 1856 (when the Metropolitan Board of Works began to carry out street improvements) to ^147,986 in 1889. From 1865 to 1875 the increase was £42,648, and from 1875 to 1885 it was £35,505. In this district the percent- age of increase during the period named had been 1 73*34, the percentage for the whole metropolis being 175. Asked, " To what do you attribute the rise in the rateable value in this district ? " witness replied, " Chiefly to the opening of the Law Courts and the general expansion of the value of property in the metropolis.'"
^ Pepys, in his famous " Diary " (date December 3rd, 1667), tells how the value of land in London rose after the Great Fire. Speaking? of the " new street that is to be made from Guildhall down to Cheapside," he instances the case of one owner " who hath a pi'-ce of ground lying in the very middle of the street that must be, which, when the street is cut out of it, there will remain ground enough on each side to build a house to front the street. He demanded £700 for the ground, and to be excused paying anything for the melioration of the rest of his ground that he was to keep. The Court consented to give him £700, only not to abate him the consideration which the man desired ; but told them, and so they agreed, that he would excuse the City the £700, that he might have the benefit of the melioration without paying anything for it. So much some will get by having the City burned. Ground, by this means, that was not worth 4d. a foot before, wiU now, when houses are built, be worth 15s. a foot. But he [Rir Eichard Ford] f«llsmeof the common standard now reckoned on between man and man in places where there is no alteration of circumstances, but only the houses burnt ; there the ground which with a house on it
PRIVA TE GAIN A T PUBLIC COST. 33
It is not necessary, however, to restrict ourselves to London. Other large towns have also expended enormous sums in public improvements, with the same result.' Take the case of Birmingham, which is a typical illus- tration of the growth of land-value owing to social causes of the kind under consideration. The industrial and commercial energy and enterprise of this city are famous throughout the world. The prosperity of Bir- mingham has been built up by the pluck, the skill, and the enlightenment of its citizens. At the beginning of the century the population only numbered 60,000, but this number is now exceeded by 400,000, a phe- nomenal increase due to industrial and mercantile development, and to the existence of an unusuall_y intelligent and vigorous municipal life. Birmingham has distinguished itself among the great cities and towns of England by public spiritedness and liberality in all matters affecting the health and enlightenment of its inhabitants, and herein is a very important factor in its progress and prosperity. It was stated at a recent meeting of the City Council, in the course of
(lid yield £100 a year is now reputed worth i33 6s. 8d., and that this is the common market price between one man and another made upon a good and moderate medium."
* In an arbitration case which arose at Halifax this year, owing to the local Corporation requiring two properties belonging to a tradesman for the purpose of public improvements, £14,850 was claimed for premises which between 1874 and 1878 were purchased for £5,700, to which £2,000 must be added for later improvement*; a total of £7.700. or just half the sum demanded.
34 THE UNEARNED INCREMENT.
a debate on the subject of taxing ground rents, that the ratepayers had expended £700,000 in sewerage works alone, that a further £300,000 had been spent on the improvement of the streets, and that other improvement schemes in progress would increase the capital expenditure on public works to over a million and a half.' What has been the effect on the value of property ? The same authority stated that the unearned increment created in Birmingham during the fifteen years preceding 1885 was £127,000 (the in- crease in the annual value having been from £1,065,000 to £1,192,000, after making allowance for new buildings and other deductions), representing a capital value, at fifteen years' purchase, of £1,905,000 ; and at twenty years' purchase, one of £2,540,000. The yearly increase in the rental value of the land on which Birmingham stands he placed at £8,500, equal to a capital value of £127,500 or £170,000, according as the basis of calculation is fifteen or twenty years' pur- chase. Mr. Fulford said that " The increase in the Talue of land in Birmingham in recent years had been enormous. If he went back thirty or fifty years he could point to the estate of Lord Calthorpe, consisting of about 2,000 acres, the intrinsic value of which was about as many pounds per annum, but which was now
* Speech of Councillor Fulford, meeting of February 18th, 1890.
PRIVA TE GAIN A T PUBLIC COST. 35
worth fifty or a hundred times as much." " The eflormous value of the land," he added, " had not accrued from the labour or capital of those who owned it. It was the eflfect of the growth of the population, and of the great commerce and industry which the enterprise of the population had created. Another cause was the public expenditure in maintaining and increasing the value of the landowners' property, for the development of Birmingham would have been impossible if the expenditure had not been incurred."
It is well for the ratepayers of England that the exemption of the land from local taxation has become a burning question, upon which both political parties are often to be found united. In Parliament itself voices were long ago raised in favour of reform. The Select Committee of the House of Commons which in 1866 reported on the Local Government and Local Taxation of London, recognising the fact that " nearly the whole of the expenditure and obligations of the Metropolitan Board of Works had been incurred for the purpose of supplying the wants arising from the defects of former administration of the metropolis, and of effecting per- manent improvements, which have tended to increase the value of property, and that the effect of works of such magnitude will be felt long after all the charges have been defrayed," recommended unanimously, " That in any arrangement of the financial resources of
D 2
36 THE UNEARNED INCREMENT.
the Metropolitan Board, a portion of the charges for permanent improvements and works should be borne bv the owners of jprojperty within the metropolis, the rate being, in the first instance, paid by the occupier, and subsequently deducted from his rent, as is now provided in regard to the general property tax." Encouraged by this recommendation the Corporation of London promoted a Bill the following year empowering them to levy a tax of sixpence in the pound on owners of property within the City on behalf of improvements to be executed therein. This Bill was considered by the Select Committee, which regarded it as too far-going. Nothing has been done from that day to this.
Again, the report of Mr. Groschen's Select Committee on Local Taxation, which met in 1870, declared the conviction of all members, for the report was adopted unanimously, " That the existing system of local taxa- tion, under which the exclusive charge of almost all rates leviable upon rateable property for current expen- diture, as well as for new objects and permanent works, is placed by law upon the occupiers, while the owners are generally exempt from any direct or immediate contributions in respect of such rates, is contrary to sound policy . . . [and] . . . that it is ex- pedient to make owners as well as occupiers directly liable for a certain proportion of the rates."
Many years later, as nothing had meantime been
PRIVA TE GAIN A T PUBLIC COST. 37
done, Mr. W. Saunders moved in the House of Com- mons (March 16th, 1886), the following resolution : — " That no system of taxation can be equitable unless a direct assessment be imposed on the owners of ground rents, and on the owners of increased values imparted to lands by building operations or other improvements, as recommended by the Royal Commission on the Housing of the Working Classes." ' The resolution was referred to the Select Committee on Town Holdings, and the question was again shelved.
Reform in local taxation will, no doubt, be accelerated
'^ Compare MiU : — " It is only in exceptional cases, like that of favourite situations in large towns, that the predominant element in the rent is the ground rent : and among the very few kinds of income which are fit subjects for peculiar taxation, these ground rents hold the principal place, being the most gigantic example extant of enormous accessions of riches acquired rapidly, and in many cases unexpectedly, by a few families, from the mere accident of their possessing certain tracts of land, without their having themselves aided in the acquisition by the smallest exertion, out- lay, or risk. So far, therefore, as a house-tax falls on the ground landlord, it is liable to no valid objection." (" Political Economy," Book v., chap. iii.. sec. 6.) ...
But an earlier advocate of such special taxation may be found in Adam Smith himself, who writes :— " Both ground rents and the ordinary rent of land ai-e a species of revenue which the owner in many cases enjoys without care or attention of his own. Though a part of this revenue should be taken from him in order to defray the expenses of the State, no discourage- ment will thereby be given to any sort of industry. The annual produce of the land and labour of society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground rents and the ordinary rent of laud are, therefore, perhaps the species of revenue which can best bear to have a peculiar tax imposed upon them. Ground rents seem, in this respect, a more proper subject of peculiar taxation than even the ordinary rent of land. The ordinary rent 0 f land is
38 THE UNEARXED INCREMENT.
by the agitation which has of late sprung up in the country. Manchester is one of the important towns where an urgent demand has been made for the taxa- tion of ground rents, and not long ago the City Council adopted unanimously a resolution expressing " its sense of the great anomaly that arises from the entire exemption of the ground landlords from any liability towards the relief of local taxation," and con- sidering that " the time has fully arrived when all ground or chief rents, freeholds, and mineral royalties should contribute their equitable share on the same ratio as house and other properties towards the tinancial burdens of the communities." It was stated in the course of the debate that "although houses and build- ings of every description were rated to the extent of 4s. 2d. in the pound on the assessment, the ground landlord took in many cases one hundred-fold the
in many cases, owing part!}-- at least to the attention and good management of the landlord. A very heavy tax might discourage too much this attention and good management. Ground rents, so far as they exceed the ordinary rent of land, are altogether owing to the good government of the Sovereign, which, hy protecting the industry either of the whole people, or of the inhabitants of some particular place, enables them to pay so much more than its real value for the ground which they build their houses upon, or to make to its owner so much more than compensation for the loss which he might sustain by this use of it. Nothing can be more reasonable tlian that a fund which owes its existence to the good government of the State should be taxed peculiarly, or should eon- I ribute something more than the greater part of other funds towards t!ie support of that government." (" Wealth of Nations," Book V., chapter ii , part ii., article 1, section on " Taxes upon the Rents of Houses.")
Pl^/VA TE GAIN AT PUBLIC COS T. 39
original value of the land and paid no local rates whatever."
The injustice of the present arrangement is well illustrated by the experience of Bury at the present time. The land on which this large Lancashire town stands belongs to Lord Derby, yet the ratepayers have been called upon to carry out sewage works (for the purpose of keeping the river Irwell pure) which would cost £60,000. As these works benefit the landlord equally with the residents, the latter have declined to execute them until the cost can be fairly divided. A town's meeting on June 3rd, 1890, passed a resolution desiring the Town Council not to proceed until — "having regard to the assurance given to the House of Commons on the 18th July, 1888, by the Right Hon. W. H. Smith, First Lord of the Treasury, in perfect good faith and with absolute sincerity, that it was the intention of the Grovernment to deal with the question of rating at the earliest possible moment" — Parliament *' has found opportunity to deal with the question of rating, and to provide a more equitable mode of raising the money required for the construction and maintenance of this great permanent public im- provemenU"
CIIAPTEK IV.
THE RENT SCREW.
r I IHEN", again, the enterprise and business s"kill of -■- a town's residents produce the same efifect of increasing the value of the land upon which the town stands. The high reputation of a single tradesman may improve all the property surrounding that which be occupies ; while the fact of a prosperous industry or trade becoming located in a town or a certain quarter of a town may add enormously to the landlords' revenue. This accident of favourable locality is, indeed, a matter of the utmost importance in large towns."
^ Mr. B. F. C. Costelloe, a member of the London County- Council, wrote in the Star of London, in January, 1890 : — " I am impressed by the fact that the popularity of the cry for leasehold reform is greatly due to the general conviction that the shopkeepers and small tradesfolk are systematically despoiled by the landlord whenever a lease falls in. The freeholder, or a long lessee, lets a foothold in the business life of London to an industrious and enterprising trader — a butcher, a photographer, a grocer, a
firinter, a draper, what you will. The working occupier gets a ease for a few years, puts in what needful capital he can raise, spends freely his own time and brains, and ' makes a business.' But that business is often wholly and always partially annexed to the spot where it is made. There are not a dozen bakers in London who would not pay a heavy fine rather than move a mile. There- fore, you have him in a trap. Some security you must oflfer him, 0
THE RENT SCREW, 6,\
Evidence of indefinite extent might be adduced U) show that both in large and small towns, though especially in the former, occupiers of property frequent ly suffer great injustice and hardship at the hands of landlords who are enriched by their energy, industry, and enterprise. In London, for example, recent agita- tions and consequent revelations have established the existence of infamous rack-renting as a result of the prodigious value to which land has there been forced up. The " bitter cry " of the Tenant Tradesmen's National Union' and the Fair Kent League, both
or he will not put his money down. But the competition is keen, and he will take a wonderfully short tenure. That done, you watch his business with affectionate interest, for you will skim the cream off it by-and-by . Knowino; he cannot leave without a loss of, say £1,000, you will tine him £900 for your leave to stay. You first charge him what you like tor ' dilapidation ' so called ; then you lay on a rent probably beyond what another man would give you ; then you ask a fine in cash or in the forna of building' improvements, remembering all the while that amazing axiom of the law. that whatever of his property he affixes to the soil forth- with belongs to you." . , tt •
*The programme of the Tenant Tradesmen's National Union lays down the following among other objects:— "To oppose generally the exactions of unjust landlords ; to secure to the tenant tradesman the full value of the goodwill which he has created or purchased ; to secure to the tenant the value of permanent improvements made by him during his tenancy." A news report which appeared in the Pall Mall Gazette in January, 1890, is, to say the least, significant : — " Last night a company of London rack-rented tradesmen met in conference at Exeter Hall. The speakers hailed from all districts of London, and the meeting was unanimous in its condemnation of the law which permitted land- lords to extort arbitrary rents. If rack-rented, the speakers were not robbed of their forcefulness of expression. ' Slaves,* said one speaker, ' I should think we are, only we pay our slave- owners.' It was shown that the more successful a tradesman proved himself
42 THE UNEARNED INCREMENT.
formed in the metropolis in 1889, is that impossible rents are demanded in wealthy and poor neighbourhoods alike.'
Leaseholders suffer severely under the system which gives to the landowner all the unearned increment created by the community. As the law now stands,
the more was he fleeced because of his success, and instances were given of the exorbitant rates tenants paid in comparison to those levied on the ground landlords. Another speaker exclaimed of the landlords, ' Bring them forward before us, and if they escape may heaven help them' ; and then he appealed to the audience to join the Tradesmen's Union. The following resolutions were carried with enthusiasm: — 'That this meeting condemns the system by which the arbitrary exactions of unjust landlords are legalised; that this meetingpledgesitself to support the Tenant Tradesmen's National Union in its efforts to secure to tenants the value of the goodwill which they have created, and of all permanent improve- ments that they have made at their own cost.' "
* In May, 1890, the London newspapers recorded the formation of a Fair Rent Union, with the object of "sweeping away the slums and all other unsanitary structures," and of uniting in " a demand for the extension ot the principle of judicial rents to town and country."
A passage from a letter written to the Times in November, 1889, by Lieut.-Col. G. H. Lloyd-Ycrney, who styled himself " a ground landlord on a smail scale in London," seems to show that the tenants have reason for dissatisfaction. " I venture to think," he says, " if landlords in London took as much interest in and were as easily accessible to their tenants as they are in the country the relations between landlord and tenant would be less strained ; but many landlords in London leave the whole of the administration of their properties in the hands of agents, who are often paid by a percentage on the rents obtained, and to whom the rack-renting of tenants is a decided advantage. Few tenants in London have the same access to their landlords that tenants have in the country, and can only approach the landlord through his agent, who, though perhaps a sharp man of business, thinks more of his own percentage and endeavours to squeeze all he can out of the tenant than to accept an equitable rent and promote harmony and kindly feeling between landlord and tenant."
THE RENT SCREW, 43
not only is society as a whole unable to share in tlu* increasing value which it gives to the land it uses, but the individual citizen is debarred from compensation for the improvements he may have made to the properl y he occupies. Worse than that, it is in the power of the landlord — and the power is not ignored — to make tenants' improvements a pretext for demanding addi- tional rent.
Indeed, so far is this practice of exploitation carried, that often where a tenant has established a business which cannot easily be removed, whose success is depen- dent on local circumstances, the landlord converts his prerogative of changing tenants into a weapon for enforcing higher rent.' The Select Committee on Town Holdings has reported : —
^ The following: is from a daily newspaper (1889) : — " As an illustration ot what a London landlord can exact I may quote the case of a well-known and most prosperous theatrical manager. H«' now pays £10,000 a year for his theatre. The rent has been stt^adily raised for years, till it is more than double the original amount, though the lessee has spent £3(>,000 in im- provements. If he were to quit, the landlord would probably not get a tenant, certainly not at such a rental. But the manager cannot quit, because no other theatre would suit him as well."
The lolluwing passage from Adolph Wagner's work on the " Theory of Political Economy " (his Grtmdlegung, Leipzig, various editions) given us the views on this question uf one of the foremost political economists of Germany : — " A still unfrequented quarter of a town, with new houses, or hitherto either without retail busi- nesses or without good ones, is improved by the owners of the latter. But the fruits of individual industry— which often are very considerable — and even of the expenditure of capital are only enjoyed by the shopkeeper during the first period of his leasehold . Afterwards he must hand them over to the landlord either wholly
44 THE UNEARNED INCREMENT.
** Numerous cases have been laid before the Committee where it has been alleged that greater injustice has been done to tenants who have expended large sums in improvements by their having, at the termination of their leases, either to give up the property so improved without any compensation for the improvements made, or to pay an increased rent for the premises in consequence of the improvements made at their own expense. Somewhat similar grievances are alleged to exist in relation to the tenant's goodwill. This is said in many cases to be practically confiscated by the land- lord, who takes advantage of the fact of the tenant having worked up a good business, in order to obtain on a renewal of the lease a rent higher than the market value, and that the tenant is induced topays'Jch rent in consequence of the great injury that would ensue to his business if he had to quit."
Again, we may read in the same report : —
" There is a widely-spread sense of injustice among lessees in having, at the end of the lease, to give up the buildings they have erected, or to pay a rent calculated on the principle that such buildings are the property of the landlord. This feeling is pro-
or in part in the form of increased rent — so easy to enforce — and in any case he must divide them with him. From henceforth the shopkeeper works and struggles essentially for him — a far more unfavourable econoiuic relationship than the feudal burdening of the peasantry with services and dues to the landowner in the middle ages. For those burdens might not be increased at will, and if the peasant did his duty he could not be driven away. But the shop- keeper in a lur^e town is continually being more encumbered, and may be immediately driven away, and must ever suffer from the often so dishonest competition of his rivals — this being, too, an eifect of the rent-screw— everything tending ultimately to the increase of the landlord's income. He is not, indeed, boimd to the toil, he is ' personally free ' ; that is, he can go when his lease expires, and — begin again from the beginning. In such cases, which are typical of retail businesses in large towns, because their customers are essentially heal, and which might be instanced in hundreds, it is clear that private property in land and houses can lead to an economic exploitation which is not often reached iu uufreedom." (See note to page 656.)
THE RENT SCREW. 45
bably especially strong in cases where working men and others build their own houses, and where, being unable to obtain land either as freehold or long leasehold, they are practically com- pelled to build on leases for short terms. A good deal of evi- dence has been laid before us as to places where these conditions exist, such as the quarry districts of Festiniog and Bethesda, and the mining districts of Cornwall, where large numbers of houses are built by workmen for their own occupation on land previously of little or no value, and where, in many cases, the whole labour and expense of preparing the site, erecting the house, and all other outlay on the property is paid by the lessee. It cannot be a matter of surprise that such a lessee should feel that he is un- justly treated under a system which gives the value of the build- ing and improvements to the lessor at the expiration of a term, in many cases, comparatively short." ^
In regard to the complaints of rack-renting upon tenants' improvements, the Committee — while not justifying them generally — reported that it was of opinion that —
" As a rule, any improvements which may have been made by the tenant are regarded as the rightful property of the landlord on the termination of the lease, and that in such cases rents are commonly raised in consequence of such improvements to the extent of either a part or the whole of the increased value they may have given to the premises."
And, again—
" It cannot be doubted that cases of hardship do occur in con-
^ Captain R. O'Sullivan stated before the Committee that he leased a house site in an Irish towD for 30 years at £3 17s. per annum, building a residence which cost £400, On the expiration of the lease the structure went to the landlord, to whom the builder had in future the pleasure of paying £10 a year rent for his own house.
46 THE UNEARNED INCREMENT.
nection with goodwill, and that landlords sometimes take an undue advantage of their tenants' position in such cases; and it is clear that when the renewal of a lease of business premises is under discussion, the fact of the tenant having created a valuable goodwill gives the landlord considerable power to settle the terms of such renewal in his own favour." ^
The Committee did not, save in exceptional cases, recommend the compensation of tenants under existing contracts for improvements or goodwill on the termina- tion of their tenancies, but as to future contracts they felt that " No injustice would be involved in such an alteration of the law as would entitle the tenant of trade or business premises, on the expiration of his tenancy, to compensation for such improvements as he may have bona fide made for the purpose of carrying on his trade or business, and as may have added to the permanent letting value of the premises."
^ One witness declared : " The tenants are not considered at all now in a renewal ; they are simply told by the asrents, uo matter whom they represent, that they must pay just such a full price as they could get from any stranger outside. Of course, the tenant in possession, who has spent a lot of money in making a goodwill, is bound to pay more than anyone else, and a stranger will pay a higher price for the sake of getting the goodwill of the business that the other man has made." Another witness said that "the landlords do in a large number of instances trade upon the special interest a man has in his lease," and yet another " showed that in his own case he had been obliged to pay as heavily for the business he had established as its profits would allow of by way of increase of rent." The Committee's report adds to these statements : " The general answer of the land agents to the^e complaints was, that when a tenant takes up a lease he does it with his eyes open to the risks of being either turned out or being forced to pay an increased rent at the end of the term."
THE RENT SCREW. 47
The Committee reported to the same effect regarding
Ireland : —
" There is no doubt that a constant increase of rent is made on the tenants' improvements in most of the towns of Ireland ; and that the circumstance of their possessing a goodwill is an important factor to induce the tenants to accede to such a rise. In many cases the grievance does not arise from the action of the ground landlord, but from that of the middleman. It is difficult to devise any fair remedy for such a state of things, but the Committee are of opinion that a considerable number of hard- ships arise owing to the short tenures on which houses have been built, and substantial improvements effected, in many of the Irish towns, although this is being to some extent reme lied, either by the influence of public opinion, or by landlords seeing that it is for their interest to grant longer terms."
It would be easy to multiply evidence of the evils o! urban landlordism when combined with the power of appropriating the whole of the socially-created value of land. The very existence of such a power will always be a social danger, for land being a monopoly article, society is, beyond the limits within which the rights and privileges of the monopolists are restricted, abso- lutely at the mercy of the owners of the soil, whose demands upon the material resources of the commu- nity are often not even limited by the latter's ability to respond. Take the following instance of a laud- lord's power being asserted to the direct injury of society. The Committee on Town Holdings reports : —
" Mr. Burr gave some most unpleasantly cynical evidence to the efl"ect that, in the course of his individual management of leasehold estates at Wimbledon, Torquay, and Swansea, he sye-
48 THE UNEARNED INCREMENT.
tematically worke':! the covenants in the leases so as to obtain the utmost money advantage, and that he meant in one instance, by the use of the covenants restricting the carrying on of trades, to throw a monopoly in the hands of a favourite baker, with the result of raising the price or lowering the quality of bread in the neighbourhood."
Here, again, we have an illustration of how the
individual may suffer from the arbitrary use of the
same power. Several years ago a correspondent wrote
to a London newspaper as follows : —
*' Two years ago I purchased a house on the Portman estate (eighteen years' lease) at £10 10s. per annum. I spent more than £300 to put it into tenantable repair, thinking that I should get a renewal at a fair ground rent. I applied and the agent came to inspect the premises, and a few days after sent me the terms as follows : — Lease for 34 years, ground rent to be £80 instead of £10 ; fine £1,000 renewal, to be paid from the day of application, or 5 per cent, interest on the £1,000 from that date, which would be principal aud interest for eight years, £1,400; improvements to be done as stated in agreemout, amounting to about £500, be- fore a new lease is granted ; all Viscount Portman's solicitor'a tees to be paid by me. (For the simple drawing of this agree- ment I paid £15.) Tlie last year of the 34 years' lease, the house to be re-decorated throughout; the property to be insured by me in the Portman Fire Office. Upon remonstrating at the ex- orbitant terms I received a letter from the agent that I could accept them or not, but in the event of my not accepting I should not have any further opportunity of applying." The remonstrant naturally asked : " What right can the landlord have to take my house ? He has never spent a penny towards its improvement. Of course, the ground has increased ia value, but that is through the tradespeople, and not through the landlord." ^
' Letter of "Englishwoman" (Baker-street, London) m the f/^adon Echo of October, 1882.
THE RENT SCREW. 49
Perhaps the worst evils of the leasehold system arc found in that form which makes the duration of a lease depend upon that of several lives. The life system is nearly universal in Cornwall, or at any rate in the western part of that county. There land is leased to a person, not for a term of years, but for the duration of three lives, named in the lease. Directly these lives have expired, the land and the buildings raised upon it revert to the landlord, independently of the time which may have elapsed since the covenant was drawn up. The result of this obnoxious system of tenure — which has well been described as a " flesh- and-blood lottery " — is that property in great quantities and to great value, for which no equivalent has been given, often falls to a landlord owing to the early expiration of the lives. Thus the families and relatives of leaseholders are literally robbed of the fruits of the latters' providence, industry, energy, and enterprise. It is related that " on one estate in West Cornwall five farm leases on sets of lives ' fell in hand ' within the space of ten years. This exti-aordinary occurrence was the result of an epidemic of typhoid fever, and here were seen the evils of the system in their most flagrant form. Not only was suffering entailed by a loss of life, but the grief of the survivors was aggravated by a loss of those means of subsistence which, under altered and more reasonable conditions, would have been still
50 THE UNEARNED INCREMENT.
at their command." ^ In another case a leaseholder in a Cornish village spent £260 in building a house on land held for three lives. All the lives expired in fifteen years, and the landlord became the absolute possessor of the building. An idea may be formed of the injustice which is suffered by leaseholders, and of the unearned increment which accrues to the land- owners, owing to the existence of so inequitable a system of land tenure, when it is stated that no less than four- fifths of the house property in West Cornwall is believed to be held on life-leases. The injustice is intensified by the peculiar circumstances surrounding the leases. The population of West Cornwall is largely engfiged in minincr, and the duration of the miner's life is far below the average of the industrial life. Yet miners' lives inevitably condition the validity of a large part of the leases in existence. Moreover, the burden of proof of life does not rest now on the landowner, as it originally did, for it has been transferred to the lease- holder, who is allowed a limited time within which to furnish evidence when necessary. As the mining population of Cornwall is very migratory, this con- dition often proves a source of great hardship. Mr. H. Broadhurst, M.P., said at a leaseholders'
^ See an instructive pamphlet called " The Bitter Cry of Cornish Leaseholders " for a full statement of the case. (Truro : Lake Sc
THE RENT SCREW. 51
^^^„.— ^^M, I. — .. - ■ II ■ ■ ' - -I ■ I . — ■ ■! I II. I ^
meeting held at Camborne, in Cornwall, several years
ago:—
" When in JUfevonport last night I was informed that there is a,^ this moment in the Devonport Workhouse, living as a pauper, an old lady who ought to be in the possession of ample means to live in respectability and comfort, because sufficient property was left to her for that purpose, but she failed to produce evidence of th« existence of a life on her property, the person having emigrated."
The Select Committee on Town Holdings reports to
the same effect : —
" It is there a frequent custom for miners to insert in their leases their own lives, or those of others engaged in the same calling, and it is diflSicult or impossible to insure lives engaged in such a hazardous occupation. Cases of great hardship have been referred to where, from a rapid falling in of lives, families have been left unprovided for, and too often the death of the bread- winner may involve the loss of the home to the family. Another difficulty connected with insurance is, that the onus of proving the continuance of the life is usually cast by the lease on the tenant, and in the event of a person on whose life a lease is held leaving the country, the lessee may lose his holding through inability to prove the continuance of the life, and yet not have sufficient evidence of death to enable him to recover any insur- ance he may have effected."
For extremity of injustice, however, the following recital is unique. A contributor to Messrs. H. Broad- hurst and E. T. Eeid's handbook on " Leasehold Enfranchisement " writes from a Carmarthenshire village : —
" This is a large, straggling, mining village. All the houses and cottages have been built on ground leaaes by the occupiera on land belonging to one or the other of two proprietors. Ths
e2
52 THE UNEARNED INCREMENT.
leases granted are mostly for the term of ninety-nine yeara but the ground rents have been almost doubled in the last eight or nine years. I will call your attention to the following clause in all ground leases : ' That if any part <<i the said yearly rent shall be in arrear for tvvent3'-eight days, the lessor may re-enter upon any part of the said premises in the name of the whole, and thereupon the said term of ninet\-nine years shall absolutely determine.' A fortnight ago I heard of nine houses of which the ground landlords had entered into possession under this clause owing to the great fall in wages."
But one need not wish stronger condemnation upon abuses like this than is contained in a small work recently published by one who tells us that he " is himself a lessor or landlord, but he heartily depre- cates the gross injustice of legalised landlordism, which gives the landlord the house that the tenant has built, and seizes everything in it to pay rent before other debts." This candid author says : —
" By the leasehold system the landlord is not content with taking the house that he did not build ; he also takes the good- will of the trade attached to the house, and, on renewing a lease, extorts a heavy payment for allowing the tenant to continue to enjoy his own business which he has brought to the house, under the hard penalty of being turned out of the house altogether. The landlord's lawyers and agents are also allowed to make the burden heavier by adding new restrictive covenants to a new lease, with fees to be paid to them for the tenant asking permission to use the premises in any way that these restrictive covenants may prohibit. It is all cant to talk about freedom of contract where a tenant would be ruined if he di 1 not submit to his landlord's terms." ^
^ " The Remedy for Landlordism," pages 32 and 33. Published anonymously.
CHAPTER V,
THE LAND MONOPOLY.
THE primary cause of the many evils — material, economic, social, moral — inflicted upon the community by the continued increase ia the value of land and the appropriation of this increase by the owners of the soil, lies in the fact that land is a monopoly article. It is not, perhaps, generally recog- nised how powerful a body the land monopolists are. According to the Domesday Book of 1875 one quarter of the land of the United Kingdom was in that year held by 1,200 persons (the average being 16,200 acres each), a quarter by 6,200 persons (average 3,150 acres), a quarter by 50,770 persons (average 380 acres), and a quarter by 261,830 persons (average 70 acres). One half was held by 7,400 persons, and the other half by 312,500 persons. While 4,500 persons held half the area, of England and Wales, 1,700 held nine-tenths of Scotland, a single owner having in his hands more than a million and a quarter acres.' The appended details
* The returns placed the number of landowners in the United Kinj^dom at 1,173,724, but the estimate was far too hi?h, as it included hundreds of duplicates and thousands of leaseholders, and besides, 852,438 of the reputed owners held less than au acre of laud, their average not beiug a quarter of an acre each. Recent
54 THE UNEARNED INCREMENT.
are instructive, but hardly gratifying. When the
Domesday Book was compiled land was held as follows
in the United Kingdom : —
England and Wales, (Total area, ■without London, which the returns exclude, 37,243,859 a^'res.) 1 person owned 186,397 acres.
|
12 |
persons |
» |
1,038,883 „ |
|
66 |
w |
>> |
1,917,076 „ |
|
100 |
» |
>j |
3,917,641 „ |
|
280 |
» |
» |
5,425,764 (one-sixth of the enclosed land) |
|
523 |
» |
» |
one-fifth of all England and Wales |
|
710 |
}> |
» |
one-fourth „ „ |
|
450 |
»> |
11 |
one-half „ „ |
|
10,207 |
n |
» |
two-thirds „ j, Scotland. |
|
(Total |
area 18,946,694 acres.) |
||
|
1 |
person ( |
Dwned |
1,326,000 acres |
|
12 |
persons |
11 |
4,339,722 „ (a quarter of Scotland^ |
|
24 |
M |
11 |
a quarter of Scotland |
|
70 |
•I |
}> |
a half „ |
|
171 |
W |
11 |
11 »i |
|
330 |
»» |
» |
two-thirds |
|
1,700 |
n |
M |
nine-tenths |
Ireland. (Total area 20,159,677 acres.) 1 person owned 170,119 acres 1,297,888 „
6,458,100 „ ur a tliird of the island 9,612,728 „ or half „ „
two-thirds of the inland
returns show that the numher of separate holdings in France exceeds five and a half iLillions, and in Germany exceeds five and a quarter millions.
|
12 persons |
» |
|
292 „ |
11 |
|
744 „ |
»> |
|
1,942 „ |
» |
THE LAND MONOPOLY. 55
It is bad enough when the monopoly extends to rural land — to the soil that is cultivated, to the forest, and the moorland — but it is infinitely worse when a few persons, or perhaps one, can claim to possess the ground upon which a large community lives and has its being. There are many instances of this in the United King- dom. In some cases a single individual practically holds the destinies of a town in his hands. The state of things even in London — heterogeneous as the city is in so many respects — is appalling, and a metropolitan journal only spoke too truly when it said not long ago : —
" Unquestionably legislation in some form will be necessary to reform a system under which nine-tenths of the inhabitants of the metropolis have no interest in their own houses, and the soil of London is rapidly passing into the hands of a few millionaires."^
Owing to the existence of a huge monopoly in land, and to the exaggerated estimate taken by landlords of their legal rights, society has been injured in a multitude of ways. Private enterprise has been harassed, projects of public utility have been thwarted, and their promoters exploited ; in fine, society has been given to understand that the landlords do not exist for it, but it for the landlords. The history of railway enterprise is an apt illustration of the manner in which the interests of the community have invari-
^ The Observer of Septembei 23rd. 1888.
56 THE UNEARNED INCREMENT.
ably been made subservient to those of the landed class. The opposition of the owners of the soil has been a constant obstacle in the way of railway con- struction, and often the public convenience has per- manently suffered by reason of the hostility of those through whose land projected railways would have passed. Then, too, the great cost of railways has generally been due to the opposition of the landowners, and the extortionate conditions on which they had agreed to part with the required land. Nobody now defends the monstrous imposition practised upon rail- way promoters in the past by many landlords. Not only did they demand exorbitant prices for their land, but they imposed an extra tribute of from 10 to 25 per cent, for compulsory purchase, not to speak of allowances required for " severance " (the division of an estate by the line) and other special circumstances, the money received being frequently double the real value, and even more. Mr. Brodrick says : —
" The landed interest of England is estimated to have received a sum exceeding the national revenue ^ from railway companies alone over and above the market value of the land thus sold."
And Professor Thorold Rogers recently wrote :
"In the early days of railway legislation owners constantly got forty or fifty times as much as their property was worth and, I regret to say, constantly in exchange for their votes in
* Mr. A. Arnold says £100,000,000,
THE LAND MONOPOLY. 57
Parliament. One of these persons, a man of rare integrity and honour, tho late Lord Taunton, actually refunded to the Great Il]astern Company £100,000, which he inferred had been paid to him for land in excess of its value." ^
A natural consequence of expensive railway con- struction is that the public have to pay needlessly excessive rates for carriage. Thus the injury done by the landlords to the railway promoters in the first instance fell ultimately upon the entire community ; and yet, while the landlords have done their best to prevent the construction of railways, and to make their construction as costly as possible, they have derived the principal benefit. Owing to the provision of railway facilities their land has often been given a vastly greater value. Agricultural land has become eligible for building purposes, and even as agricul- tural land its value has increased by the existence of improved means of communication and transport. Take the following extracts from land reports of recent date : —
" That the now direct line between Canterbury and Folkestone is materially assisting in the opening up of the country for residential purposes, there can be no doubt. Land companies already have an eye on it, having scented afar off the increaainc cemand for residences with from one to four or five acres of land within a few miles of Folkestone."
' Professor T. Rog-ers in an article, " Vested Interests," iu tuu Contemporary Review for June. 1890
58 THE UNEARNED INCREMENT.
" The hundred of Wirral (Cheshire) is rapidly becoming the choice residential district of merchants and professional gentle- men carrying on business in Liverpool, to which there is excellent accommodation by rail through the Mersey Tunnel and the various ferries across the Mersey. Land is therefore in great demand for building purposes, as vs^ell as for the production of milk, butter, fruit, and garden produce for the Liverpool and Birkenhead markets. The new railroad to be made from North Wales to Liverpool across Wirral will so open up the various building districts that property of all kinds will be materially enhanced in value." ^
Again, writing this year (1890) of Fort Worth, in Texas, two English visitors, Mr. S. Smith and Mr. B. S. Brigg, said : —
" A few years ago it had only a single railway ; its inhabitants were determined to make it a great railroad centre ; now there are eleven systems running into it, seven of which are great trunk lines. A glance at the map of Texas gives the impression that every company is striving to reach Fort Worth. The natural effect has been a wonderfully rapid development and a great increase in the value of property. One gentleman told us that thirteen years ago he bought a site for 300 dollars, and on it built a house, in which he has since resided, costing 1,000 dollars ; in February of this year he sold this property for 15,000 dollars. We heard 22,000 dollars offered for some plots that cost the present owner a short time ago 11,000 dollars."
Similarly, Mr. Henry George tells us that while the Transcontinental Eailway which was to connect New York and San Francisco was in progress, the value of land in California grew enormously : —
• Land Agents' Record for January, 1890.
THE LAND MONOPOLY. 59
"Lota on the outskirts of San Francisco rose hundreds and thousands per cent., and farming land was takeij up and held for high prices, in whichever direction an immigrant was likely to go." ..." What thus went on in California went on in every progressive section of the Union. Everywhere that a rail- road was built or projected, land was monopolised in anticipation,, and the benefit of the improvement was discounted in increased land values." ^
Where the land upon which a town is situated is monopolised by a single person, as is often the case, one of two results occurs : either enterprise is stifled (the condition of the community being stationary) or it is laid under heavy and unjust impositions. More to the purpose of this inquiry is the latter alter- native, for we can here see how the primary effect of individual exertion and public progress is the unlimited enrichment of the owner of the soil. " One nobleman is known to have received three-quarters of a million sterling for the mere sites of docks constructed by the enterprise of others." Monopolists of this kind are able to dictate terms to a town's inhabitants — to say how they shall live, to lay down the conditions of their occupation, and to a great extent to determine the degree of their material prosperity. They may provide them with what dwellings they choose ; they may favour an industry or stifle it ; they may encom-age trade, or drive it away. A correspondent of the Land Agents' Record, writing to that journal on January ISth, 1890, said of Folkestone : —
1 <<
Progress and Poverty,'' Book V., chapter 1.
6o THE UNEARNED INCREMENT.
" The town labours under the disadvantage of bein'^ mostly
held by one man, the lord of the manor, and the consequence
is, that every building operation — nay, more, every proposed
improvement of the Corporation's — is subject to the will and
pleasure of his lordship, or of his agents. Appreciating his
position to the full, the lord of the manor has but to await events,
■ knowing that all who wish to build must apply to him for what
amounts to permission to increase his already overflowing
exchequer. lie does not seek to open up his property for
developing it by competition, but rather allows it to stand idle
until a bidder comes along prepared to pay the exaggerated
ground rent demanded. Mark : none of the land is sold! What
is the result of all this ? Why, that instead of there being fair
villas, and other residences in their own grounds, dotted about,
all are crowded together, with barely a piece of ground that can
be dignified by the name of garden. . . The tendency of land
and residential properties, a few miles out, is certainly to increase
in value to a wonderful extent. Where, but a short time since,
£3,000 was given for a small freehold residential estate, £6,000
is now confidently expected for it. A cottage and three acres
formerly let at £30 a year cannot now be had for less than twice
that amount. Land in the neighbourhood of Hythe, too, which
some years since was bought for the proverbial ' song,' is now oa
sale and actually realises at the rate of £400 an acre."
The manner in which the land monopoly affects industry and commerce for ill in England is well dealt with by Mr. A. O'Connor, M.P., in the special report prepared by him as a member of the Royal Commission on the Depression in Trade and Industry (appointed in 1885) :—
" What are tne circumstances under which manufacturing industry is carried on in this country in respect of the use of latid ? With the falling in of leases so much higher a ground rent is charged that even with an increase of business there ia
THE LAND MONOPOLY. 6l
less profit. Not only in London does the amount paid for the occupation of ground bear a higher proportion to the profits of trade than it formerly did, but in Birmingham too, where trade prices have been lowered, profit reduced, and wages are less, and where there are large numbers of persons vainly seeking employ- ment, the price which has to be paid for the use of land has increased. The evidence on this point from Sheffield, again, was of the clearest ; and it was shown that in Jarrow, which the shipbuilding industry may be said to have created, the land- owners draw from the earnings of the industrial classes an immense income in consideration of the occupation of ground the improvement in the value of which is in no way attributable to them. And so of other places. As in the agricultural and mining districts, so in the industrial and manufacturing centres, the amounts which have to be paid for the use of land constitute a burden upon industry which is constantly becoming heavier, both absolutely and relatively." And he adds : — " It thus appears that over the entire country there is a cause at work — general, permanent, and far-reaching — affecting every branch of industry, in mine, and farm, and factory, the effects of whict are traceable in the languishing condition of the agricultural, and the mining, and the manufacturing interests. That cause is the fact that under the existing land system the owners of the soil are able to obtain, and do exact, so large a proj ortion of the proceeds of the industry of the United Kingdom that the remainder is insufficient to secure adequate remuneration to the industrial 'classes, either in the shape of wages to operatives or reasonable profit to the organisers of labour, the employers, or capitalists."
Thus the land monopoly is not merely an abstract
injustice ; its injurious effects extend in all directions
of social life. It is a wrong in itself, and it is a
begetter of wrongs. The narrowness of this monopoly
in civilised countries is the greatest cause of land
speculation, with its attendant evils, which it is now
necessary to consider.
CHAPTER Vr.
LAND SPECULATION.
SO certain is it that in a progressive society land will increase in value, that there is now-a-days always a speculative element in the value of land. Men buy land with the expectation that it will, like wine, improve by keeping, and when it changes hands in the market regard is had not only to present but to prospective worth. It was stated in evidence before the Committee on Town Holdings that speculation in ground rents is very common in London. " Ground rents," said one witness, "are particularly favourite investments for investors who are more careful about absolute security and the increasing value of the ^property in the future than they are about a higher rate of interest," and the same witness estimated the gross value of the ground rents sold at the London Auction Mart alone in the years 1884-85 at £900,000. Speculation in land, as at present carried on, may justly be regarded as one of the greatest evils associated with the institution of private property in
LAND SPECULATION. 63
the soil. Eightly described, it is nothing more or less than gambling over the probabilities and possibilities of social progress in one form or another. While the speculators benefit, the community as a whole suffers, and so long as the owners of laud are entitled to appro- priate the entire increase of value which accrues from the operation of social causes, this will continue to be the case. Illustrations demonstrate more readily than argument the evils to which speculation in land leads, but it must be self-evident that a practice whose effect is to create fictitious values and bloated rents cannot be a healthy one. It is not too much to say that but for the speculation which forces up the value of urban land to an unnatural height the grave evil of overcrowding, with its concomitant, the excessive rent- ing of the working classes for the inferior accommoda- tion afforded them, would never be heard of in oui large towns.
It is a fact worthy of the thought of political students that this practice of speculating in land, in the hope of profiting by the progress of society — opposed though it is to the interests of the community — is nowhere more common than in democratic America. Dr. A. K. Wallace writ(is : —
" Land speculation, which we think is bad enough with us, is but a trifle here compared with what it is in America. In America land speculation is everywhere excessive. It is the great mode of making money, and it exists more or less all over
fc4 THE UNEARNED INCREMENT.
ttjo country wherever land is for sale and is not monopolised by great capitalists. Men buy land on speculation for the purpobo of selling it again quickly." ^
And the author of " Progress and Poverty " tells us :
" The man who sets out from the Eastern seaboard in search of the margin of cultivation, where he may obtain land without paying rent, must, like the man who swam the river to get a drink, pass for long distances through half-tilled farms, and traverse vast areas of virgin soil, before he reaches the point where land can be had free of rent, i.e., by homestead entry or pre- emption. He Cand with him the margin of cultivation) is forced so much farther than he otherwise need have gone, by the specu- lation which is holding those unused lands in expectation of increased value in the future."*
It is a common thing in America for people to speculate in land far West, where the trail of civilisa- tion is still faint, yet "where in time busy communities will no doubt plant themselves. This land is purchased in the certain expectation that it will increase in value as civilisation presses onward across the prairie. A man who invests to even a moderate extent feels sure that the augmentation of value will in time provide
^ " Land Lessons from America." Again, the same writer says : — "An enormous proportion of the well-to-do people of the country either have made money by land speculation or hope to do so. . . The result of these speculations is that in the cities — in the suburbs ot the cities, in the places where working-men live, we find the land cut up into still smaller strips than in England, and the houses are built still more closely together. . . Here you have private property making land the subject of speculation, producing all the evil effects, such as crowded cities and bad tenement houses, that vou have in our great cities at hn""e."
Mr. Henry George's " Progress and Poverty," Book IV. chap. 1.
LAND SPECULA TION. 6$
him with a satisfactory competency. He may never see his land, and may only know its approximate situa- tion from the map, yet it is year by year increasing in value and accumulating for him a revenue which he never earned. Such a man, to use Mill's words, "grows richer in his sleep, without working, risking, or economising."
A characteristic example of American land specula- tion is related by Dr. A. R. Wallace, in a record of his travels in the States in 1887. He tells us : —
*• 1 stayed some time in a growing city in Iowa, called Sioux City, which has a population of 20,000. They were having what is called a land boom — every city tries its best to have one — we should call it a land fever ; and the consequence was that land wnich sold at £10 an acre three years ago was selling at £150 an acre. It was two miles from the city, and it was sold with the idea that the city would soon stretch out and reach it. In the residential suburbs the price obtained was £4,500 an acre, and in the centre of the city it was £40,000 an acre. In the town of Sahna, in Kansas, with a still smaller population of only 8,000, wbich was first settled by Colonel Phillips thirty years ago, land in the suburbs is now selling at £4,500 an acre, and in the centre of the town at £30,000 an acre. Here also they had a boom, and land had doubled in value in a few months."
Take also the following passage from a description of
Texas published this year (1890) by two English visitors,
Mr. S. Smith and Mr. B. S. Brigg, of Keighley : —
" Tn America the ownership of land is more widely diffused than with us. Almost every man you meet either is, or has been, or hopes to be, the possessor of ' real estate,' and he is generally wishful to own as much as he can possibly find means to buy. A wealthy and very shrewd gentleman in Chicago said to us:
66 THE UNEARNED INCREMENT.
* I keep myself poor by buying land, because I know that it is the way to make my children rich.' Another prominent man in Texas smilingly said : ' It is true I own thousands of acres of land, but I am often in want of a few dollars of ready money.' "
An extract from the report of a British Consul for 1887 will give an idea of the extent to which specula- tion is a factor in the growth of land-values in the United States. Dealing with the price of land in 1^9 Angeles in that year, Consul Donohoe wrote : —
" The price of real estate has advanced steadily for the past four years, and in this city has reached such a figure that the prospect of a further rise can only be predicated on the assump- tion that within four years the population will have reach'i«I 250,000, which I think by no means improbable. The extraor- dinary demand for landed property is best illustrated by the fact that in this city alone there are nearly 2,000 persons paying licence as land agents. £8,000 was recently paid for a lot 20 by 100 feet, or at the rate of £400 a front foot; £600 per front foot was offered and refused for another lot in the centre of the city. At this rate an acre divided into lots 100 feet deep would be worth over £260,000. Upwards of 100 towns and settlements have been laid out within the past year in this district, and I am in- formed that there are 40 new cities on the line of the Atlantic and Pacific Railroad between Los Angeles and San Bernardino, a distance of 60 miles. At the first sales of lots in many of these new cities, in May and June last, many persons remained stand- ing in line in front of the places of sale for more than 24 hours for the privilege of buying a lot. It has been stated, half seriously, that one can walk on ' city ' lots from Ontario to Los Angeles, a distance of 40 miles. Several of these new-born cities are being built up very rapidly, and are increasing mar- vellously in population ; many of them, however, are destined to revert to farming lands. The frantic speculation in lots in almost all the new cities has entirely ceased, and the ' boom ' has to Bome extent abated throughout the whole district."
LAND SPECULA TION. 67
A very dilBferent tale was told when the land " boom " was over. In a report, which well presents the reverse side of the picture of profitable speculation, Vice- Consul Mortimer wrote from Los Angeles respecting the gambling mania : —
" The area of the city of Los Angeles (40 square miles) was not sufficiently extensive for the speculators in city lots. Suburbs were laid out on every side, and upwards of a hundred ' cities ' were projected within forty miles of this city. Many of these * cities ' have no inhabitants as yet, and never will have any. It is no exaggeration to say that city lots (50 by 150 feet) were sur- veyed and staked out in the county of Los An- 'ps sufficient for a population of several millions. In the period of the * boom ' lands were sold and resold at intervals of a few weeks, the price being considerably advanced on every sale. The small profits from the cultivation of the soil were despised, and many fine orange orchards and vineyards were neglected, the owners hav- ing purchased with a view only to reselling at a higher figure. Many of the new ' boom ' cities have reverted to farming lands, and in others, where some improvements were made, and so many lots were sold that they could not be converted into farms, the value of the sub-divisions is merely nominal. I am informed that lots in Monrovia,which were sold during the ' boom ' at from £3,000 to £4,000, cannot now be sold for £100."
The experience of America is the experience of older countries. Wherever there is social and material progress the land speculator is found building his home, for he knows that he can there live and thrive. The history of Berlin after the war of 1870 is very instructive in this respect. The success of Germany led to a remarkable awakening in the political, muni- cipal, and commercial life of the metropolis. Building
f2
68 THE UNEARNED INCREMENT.
began tx) be carried on at once upon a large scale, and furious speculation in land set in. Writing in 1873, before the fever had reached its height, Dr. Engel, the eminent statistician, enumerated many estate and building companies which were then making enormous profits on speculation in land in the periphery of the city. One of these companies had bought land at £2 1 per square rood, and sold it directly afterwards for £51. Another had purchased at jS13 10s. per square rood, and sold at £37 16s. Yet another bought at £213 per Prussian acre, and sold at once at £450. " Thus," he wrote, "hundreds of thousands of square roods of building ground in the neighbourhood of Berlin have been bought " (in the early days of Berlin's phenomenal development) " and sold again, yielding millions of thalers to the first happy purchasers. What labour has been done," he asked, " proportionate to such profits ? What injury is not inflicted by such high middlemen's profits upon the future tenants of the houses which will be built upon ground thus made so expensive ? "
A strange anomaly in the incidence of local taxa- tion— one to which reference has already been made — encourages speculation in unoccupied land in and around towns. This is frequently withheld from use, to the public detriment, because its owners count on increasing value. It does not matter to them that the
' See VerhandUmgen der Eisenacher Versammlung (Leipzig, 1873).
LAND SPECULATION. 69
residential requirements of the population demand that the land shall be built upon. They hold it as a speculation, and as they are not called upon — in England, at least — to pay rates upon its market value, but only upon the income derived from it, the ex- pectation of rising value allows them to treat it for the present as dead capital. In large towns this prac- tice of keeping land, eligible and eventually intended for building purposes, out of the market, leads fre- quently to scarcity and costliness of dwellings. All classes of the population suffer, but it is well known that the working and poorer classes suffer most accord- ing to their means. Speaking of house rent, Professor Thorold Rogers says : —
" The cost is greatly increased by the power which the law confers on corporations and private proprietors to withhold land from the market at a minimum of cost. It will be clear that if the law encourages an artificial scarcity, it creates an unnatural dearness. By permitting coi-poratione to hold land in towns, and by allowing private owners to settle land in towns, it gives such persons a power of exacting the highest terms possible for the use of their property, by keeping it out of the market till they can enforce their price. To use an American phrase, taken from the slang of speculators, the Russells and the Bentincka, the Cecils, the Portmans, the Grosvenors, and the rest, with the cor- porations, have had for a long period a ring or comer in the land market, and can force buyers to give famine prices.' Now what
1 It
' There are large tracts of land allowed to be idle in the out- skirts of rising: towns, like our own Kensinp:ton Fields (London), that they may be sold at a vast advance in price when required tor building purposes. Some of our gieatest fortunes have been made in this way, and yet these lauds escape taxation as long as they are unoccupied." (Mr. S. Smith, M.P.)
70 THE UNEARNED INCREMENT.
13 an injury to the moderately wealthy is oppression on the poor. It is well known that vile and loathsome buildings, probably the property of some opulent landowner, yield from the misery of their inmates a far larger rent than the plots on which the most luxurious and convenient mansions are built. The law which levies rates on occupancy instead of on property makes the evil worse, for it puts the minimum inconvenience on the person who holds the strongest position." ^
The same testimony comes from the United States.^ There, too, the land in and around large towns is fre- quently kept out of use for speculative reasons. This land so lying waste may not always be needed for building purposes, yet it would be of great utility if devoted to productive uses. Thus Mr. Henry George says:
" Within a few miles of San Francisco is unused land enough to give employment to every man who wants it. . . What is it, then, that prevents labour from employing itself on this land ? Simply that it has been monopolised and is held at speculative prices, based, not upon present value, but upon the added value that will come with the future growth of population." '
^ " Six Centuries of Work and Wages," pages 425 and 42r>.
* Speaking for America, Mr. Henry George says :— " If the land of superior quality as to location were always fully used before land of inferior quality were resorted to, no vacant lots would be left as a city extended, nor would we find miserable shanties in the midst of costly buildings. These lots, some of them extremely valuable, are withheld from use, or from the full use to which they might be put, because their owners, not being able or not wishing to improve them, prefer, in the expectation of the advance of land value^<, to hold them for a higher rate than could now be obtained from those willing to improve them." (" Progress and Poverty," Book IV., chap. 4.)
' Ihid, Book v., chap. I.
LAND SPECULATION. 71
In any case the withholding of useful land from employment beneficial to the community, in the interest of private speculation, is a social wrong. The wrong is all the greater because, while suffering the injury and inconvenience caused by the landowners' cupidity, the communities thus denied the use of unemployed land on any save extortionate and impos- sible terms are often increasing the value of that land year by year and month by month. This the owners know ; hence their reluctance to sell at a fair market value. It is a demand of pure justice that unoccupied land shall be taxed upon its selling value. This would drive into the market a great amount of urban land of whose use the local populations have great need. The owners would no longer be able to disregard social interests with impunity, for taxes and loss of interest would between them eat up the value of the land which they allowed to stand waste rather than dispose of it at a reasonable price. Moreover, with the introduc- tion of such a reform the incidence of local taxation would be thrown over a wider area, and would there- fore fall more lightly upon the individual members of a community.
Mr. John Morley stated before the Eighty Club on November 19th, 1889, that "in Kensington there is land vacant to the value of £1,700,000, practically not rated at all, while certain fields, with a selling value of
72 THE UNEARNED INCREMENT.
£400,000 are rated at £62 towards the relief of the rates."
This anomaly did not escape the notice of the Com- mission on the Housing of the Working Classes, whose report proposes that vacant land shall be fairly rated : —
" At present, land available for building in the neighbourhood of our populous centres, though its capital value is very great, is probably producing a small yearly return until it is let for build- ing. The owners of this land are rated, not in relation to the real value, but to the actual annual income. They can thus afford to keep their land out of the market, and to part with only small quantities, so as to raise the price beyond the natural monopoly price which the land would command by its advantages of position. Meantime, the general expenditure of the town on improvements is increasing the value of their property. If this land were rated at, say, 4 per cent, on its selling value, the owners would have a more direct incentive to part with it to those who are desirous of building, and a twofold advantage would result to the community. First, all the valuable property would contribute to the rates, and thus the burden on the occu- piers would be diminished by the increase in the rateable pro- perty. Secondly, the owners of the building land would be forced to offer their land for sale, and thus their competition with one another would bring down the price of building land, and so diminish the tax in the shape of ground rent or price paid for land which is now levied on urban enterprise by the adjacent landowners — a tax, be it remembered, which is no recom- pense for any industry or expenditure on their part, but is the natural result of the industry and activity of the townspeople themselves."
Not only does speculation lead to a false and variable
equation as between land and other commodities, and
to the exploitation of legitimate purchasers, as well as
LAND SPECULA TION. *iz
of the users of the land or the buildings erected upon
it, but it produces unhealthy conditions of commercial
and industrial life, and inflicts deadly injury upon the
great interests of labour. This is strikingly proved by
the experience of the United States, where, as already
shown, land speculation is carried on upon an enormous
scale. Mr. Henry George writes : —
" That land speculation is the true cause of individual de- pression is, in the United States, clearly evident. In each period of industrial activity land values have steadily risen, culminating in speculation which carried them up in great jumps. This has been invariably followed by a partial cessation of production and its correlative, a cessation of effective demand (dull trade), generally accompanied by a commercial crash ; and then has succeeded a period of comparative sta2:nation, during which the equilibrium has been again slowly established, and the same round has been run again. This relation is observable throughout the civilised world. Periods of industrial activity always culminate in a speculative advance of land values, followed by symptoms of checked population, generally shown at first by cessation of demand from the newer countries, where the advance in laud values has been greatest." ^
Or, to take testimony of quite recent date, the more convincing because disinterested and without tendency, A British consular report from Los Angeles and Wilmington for 1888 says : —
" For the past five years I have annually chronicled a remarl<- able growth in population, wealth, and industries in this district. The pri sperity of the past has at last received a check, the extent
^ "Progress and Poverty," Book V., chapter 1.
74 THE UNEARNED INCREMENT.
of which it is as yefc difficult to determine. Over-speculation in real estate has produced its inevitable results. The cessation of speculation in real estate throughout this district has reacted on every branch of business, a large number of tradesmen have had to close their establishments in this city, and there are now hundreds of houses and shops to let where formerly exorbitant rents were readily paid."
The same report says : —
'* In the past year wages have been reduced from 40 to 50 per cent., and thousands of good workmen are now out of employ- ment."
Another instructive illustration of the ebb and flow of " prosperity " caused by speculation is furnished by the recent history of Johannisburg, in South Africa. On January 18th, 1890, an English land newspaper contained the following : —
" Some remarkable figures have been brought out in the de- velopment of a scheme for the valuation of all the properties in Johannisburg, the wonderful gold-mining capital of South Africa. The scheme is in the hands of a firm of surveyors in the city, in conjunction with the city sanitary contractor. Of the extraordinary value of property ia this part of the world some idea may be obtained from the fact that the valuation of one square and part of an adjacent street — known as Marshall's Square and Commissioner Street — amounts to £2,000,000. At the same rate, it is believed, the value of the whole of the property in the town will work out to not less than £25,000,000. The Sanitary Board have power to levy rates not exceeding two- pence in the pound, which is sufficient to produce a yearly in- come of over £200,000. This is a splendid revenue for a city of less than ten years' standing. Values, of course, must be taken into account in dealing with these figures. A pound sterling in Johannisburg is very different from a pound sterling in London."
LAND SPECULA TION. 75
So mucti for the bright side of the picture. Five
months later (June^ the English newspapers published
" A Warning from Johannisburg " in these words : —
"The Rev. R. F. Appelbe, Wesleyan minister, writing from Johannisburg, warns intending emigrant miners from Cornwall and the North of England from going there just now. Conse- quent upon great stagnation in trade, many of the gold mines are stopping and many miners are out of work. For many months past typhoid fever has been raging in the locality, and the hos- pitals are full of fever patients."
A later report runs in a still more gloomy strain : —
" The collapse which we have all along expected in connection with the Traansvaal would seem to be near enough at hand. The extraordinary rise of Johannisburg has been followed by a des- cent into the very depths of depression. Men who were worth, in realisable scrip, from £10,000 to £100,000 a short while back are said to be practically penniless to-day. The prudent workman who had saved a small hoard shares the same fate as the reckless gambler. Youths who, having been office boys or barbers' assis- tants, suddenly made an ostentatious parade of their newly-found wealth, are engulfed in the flood of ruin which has swept over the Randt." ^
And here it will be convenient to refer to the plea
often advanced that speculation in land is legitimate,
and that there is no difference between making profits
from the sale of land and making profits from the
sale of ordinary commodities. Those who hold this
view forget or ignore the fact that land differs from
every product of man's hands in that, besides being a
necessity of existence — the maintainer of life, it is a
^ The Colonies and India for September, 1890.
76 THE UNEARNED INCREMENT.
monopoly article. God made the earth as big as it is, and man cannot make it any bigger. There is so much land in the world, and no one, not even a Kothschild or a Vanderbilt, can add an inch to it. Hats, boots, and coats — manufactured goods in general — can be multiplied indefinitely. The supply is only regulated by the demand, and almost invariably the cost de- creases as the demand is augmented. With the land it is otherwise: the absolute supply cannot be increased, and the cost grows with the growth of the demand. Moreover, in paying for the goods offered by the manufacturer, we pay largely for labour ; but no amount of labour can produce land. It existed before man existed, and is not produced. Landed property is the one commodity of exchange in respect of which civilised society refuses to recognise absolute rights.
It may be granted at once, however, that it is impossible to artificially prevent the value of land from increasing. It would be absurd to try to check the operation of social forces which act from necessity. If there were no private ownership of land, but the State were the custodian and grand lessor, the value of that commodity would inevitably tend to increase owing to a multiplicity of causes which act indepen- dently of private and collective possession of the soil. Yet while it may not be possible artificially to prevent value-growth, it is possible and expedient to check
LAND SPECULATION. 77
artificial value-growth. Were the unearned incre- ment secured wholly or even in part to society, there would be less inducement to speculation in land, and the increase in its value would be dependent upon healthier and socially more desirable causes. Men do not speculate commercially for amusement or the mere love of exc'tement, but for money, and if there were no prospect — or little prospect — of contingent gain, the great inducement to land speculation would be taken away.
At the idea of resistance to speculation the indi- vidualist will raise his hands in alarm and remonstrance. But these pages are written on the assumption that the interests of speculators cannot claim any partial consideration in the adjustment of the important pro- blem under discussion — or, indeed, of any problem afifecting the well-being of society. Those who hold the views here expressed would not dream of prohibiting speculation in land ; all they say is, that society is not called upon to sacrifice its interests to the speculators, or to offer to the latter any facilities for doing it mischief. It cannot surely be considered a social advantage that a small class of men should be able, owing to their possession of a monopoly in land, to force up its value to fictitious and fabulous heights ; nor can it be regarded as desirable that the value of land should be increased in order to allow of specu-
78 THE UNEARNED INCREMENT.
lators enriching themselves. The result is to create extortionate rents, which, so far as trade and industry are concerned, make production dearer, and thus injure the consumer, and, so far as concerns dwellings, compel the householder to disburse an excessive proportion of his income in the mere sheltering of himself and his family within stone walls. Apart from the gains which fall to the intermediary speculator who does not buy land to keep, but to sell, the owners of the soil pocket the public tribute paid in the form of increasing rents. For their part, the huuse occupiers suffer in two ways by the growing value of land : they must pay more for the dwellings they live in, and more for the articles they use and consume. It cannot be to the interest of society that the rents of town dwellings should aver- age, say, £20 instead of £15, and should increase five or even two per cent, every year. If such an increase fell to the whole community, the evil would not be so great, for those who paid it would in one wav or another reap the benefit ; but, as matters are, it all goes into the landlords' purse.
CHAPTEll Vn*
OVKRCROWDING IN LARGE TOW'NS.
FEW social problems have of late years occasioned so much anxiety, alike to philanthropists, reformers^ and Governments, as that which is offered by the con- dition of the working classes in our large towns. Where- ever we find a great aggregation of population, com- bined with conspicuous commercial activity and material wealth — and these conditions are generally seen to be correlative — there may also be expected overcrowding, with the dependent evils of more or less unsuitable, if not uninhabitable, industrial dwellings and excessive rents.* These phenomena are common to both the
^ The evil of overcrowding long ago attracted the attention of foreigners visiting our shores. The Spanish author of a series of '•Letters from England," published in 1807, wrote : — "The dwell- ings of the lahouring manufacturers are in narrow streets and lanes, hlocked up from light and air, not, as in our country, to exclude an insupportable sun, but crowded together because every inch of land is of such value that room for light and air cannot be afforded them. Here in Manchester a great proportion of the poor lodge in cellars, damp and dark, where every kind of tilth is suffered to accumulate, because no exertions of domestic care can ever make such homes decent. These places are so many hotbeds of infection, and the poor in large towns are rarely or never with-
79
to THE UNEARNED INCREMENT.
Eastern and Western hemispheres, and the problem which they present is one of the most difficult, while momentous, which modern society has been called upon to solve.
Many causes contribute to bring about the over- crowding incideiifal t;o all large towns, yet it is safe to say that each of these causes is primarily attributable to the high value which has been acquired by the land upon which such towns are situated. The formation of this high value having already been explained, we have now to consider one of the most serious of its results.
Undoubtedly the utter chaos which prevails in the provision made in large towns for the housing of the working and poorer classes is to some extent due to the absence of any feeling of personal relationship between owner and occupier such as is found on the land and even in small urban communities. This is what the Royal Commission on the Housing of the Working Classes had in mind when it reported : —
*' When the causes of the present condition of the homes of the workino; classes are examined, it will be seen how the pro- perty on many estates has passed for long periods out of the
out an infectious fever among them, a plague of their own, which leaves the habitations of the rich, like a Goschen of cleanliness and comfort, unvisited." ("Letters from England," by Don Manuel Alvarez Espriella. Loudon, 1807. Vol. II., p. 146.)
O VERCRO WDING IN LARGE TO WNS. 8l
effective control of its nominal owners, with the consequence of utter disregard for the condition in which it is kept."
In large towns the housing of the people is made more or less a matter of speculation. House property is not built and let for the purpose of securing a legiti- mate commercial rate of interest, but of extracting from the tenants the highest rents which scarcity of dwellings, advantage of position, and individual help- lessness make possible.' The result is often to bring about a condition of internecine war, such as may be found at Berlin, between landlords and tenants, a relationship characterised by absolute extortion on the one hand and suspicion and ill-will on the other.^
* When Miss Octavia Hill — the philanthropic lady who has done so much to improve the housing of the working classes in Ijondon by purchasing old' property and improving it into a habitable con- dition— was examined before the Royal Commission of 1884, the foUowiDg question was put to her by Mr. J. CoUings, M.P. : " As fast as your (leasehold) houses fall in, the ground landlords will take your property, re-sell it at a higher price, necessitating higher rents, and consequently the whole operation resolves itself into increased value in the hands of the ground landlords ? " The answer was : " Yes."
^ In few places are the relationships between landlords and ten- ants worse than in the German capital, as all acquainted with that city will testify. Take the following extracts from a form of lease common in Berlin (published in Dr. Engel's paper on "Over- crowding " in the Verhandliingen der Eisenacher Versamm- lung (p. 177, note ; Leipzig, 1873) : " The furniture which the lessee brings into the dwelling shall not have been acquired from a furniture dealer on the monthly instalment system, nor shall the ownership of the same be prejudiced by the rights of a third party, but it shall be his unqualitied property, as well as all objects pledged to the lessor for the duration of this contract for the proper payment of the rent. Without the sanction of the lessor the lessee shall not remove a piece of furniture before
hz THE UNEARNED INCREMENT.
The leasehold system is responsible for much of the wrong suffered bj the working classes in this respect. As house property built upon the leasehold principle reverts in time to the owner of the soil, it is to the interest of the builder to give to his houses just such a degree of durability that they will stand during the period of the lease. Speculative builders are not found willing to spend money to benefit the landlords. They will not expend more upon the houses they erect than is absolutely necessary in their own interest. Thus the leasehold system conduces to wholesale jerry-building. It is the object of the builder to make as much profit as he can out of his bargain with the landowner, and in order that he may do this the tenant
the rent fixed in this contract has been fully paid. Should this contract, including the house regulations, not be fulfilled in all particulars by the lessee, his household, servants, &c., the lessor is entitled to sue not only for the carrying out of the lease, but also for ejectment, and to require immediate removal without notice ; the lessee is, however, bound to pay before leaving the full rent fur the duration of the contract." Commenting upon these exactions, a leading Berlin newspaper observed : — " In all seriousness, the lessee dare not, without the landlord's permission, sell an old coat to a second-hand clothes dealer, or give an old pair of trousers to a poor man. The contract is like a rope which the landlord lays round the tenant's neck, so that he may strangle him at any time ; and yet the landlords wonder that the bitterness against them daily increases."
In Dr. Engel's paper, above referred to, it was stated that at the Michaelmas term of the year 1872 "more than 200,000 persons were compelled by the ruthless rent-screw to leave their dwellings (in Berlin), scarcely a house escaping: the effects of this unexampled migration of inhabitants. In not a few houses the change was, in lact, from roof to cellar." These statistics are nearly twenty years (dd, but the same state of things prevails at the present day.
C VERCRO IVDING IN LARGE TO WNS. ?3
must suffer. The evidence brought before the Select Committee on Town Holdings contains many condem- nations of the leasehold system, and especially short leases. An Oxford witness said the builders of property held on short leases " Did not build substantially : they were unwilling to build substantially. It is within my own knowledge that in the earlier days, before we were able to grant more than forty years' leases, the buildings were built so as not very much to exceed the forty years' term." Similarly, a Truro witness said, speaking for Cornwall : " Buildings put up on lease- holds in the country are to a great extent put up to last only for the term for which they are built, or as near as the lease can hit it, and are of the cheapest construction."
Again, a report prepared for the Corporation of Bury in 1888, on the Earl of Derby's cottage property in
that town, says : —
" The worst class of property we have in the town is certainly that at present in Lord Derby's hands, and that built upon his land ; and from a residence of sixteen years in the town, the latter half of which I have been engaged as sanitary inspector for the Corporation, I have not the slightest hesitation in saying that I consider the present system of leasing land for building purposes is most pernicious in its effects on the sanitary state of the to^vn. I have experienced the greatest difficulty in getting owners of property to carry out needed improvements on lease- holds, when they l^now that all they do goes to the benefit of the landowner. I have been repeatedly told by such property owners, even when there have been eight or ten yeajs of their leases un-
e 2
84 THE UNEARNED INCREMENT.
expired, that they will not make the necessary alterations and reconstructions to put their property in a good sanitary state unless they are compelled, as they would only be adding to what they consider a glaring injustice."
But an even worse evil than leasehold building is purely speculative building, whether leasehold or not. Here the interests of the tenants meet with less con- sideration still. It matters not to the speculator how unsubstantially his houses are built, so long as he can sell them at a profit and proceed to build others. The doors may be frail, the windows shaky, the stairs insecure, and the floors rotten and creaky ; but these defects are only of importance so far as they spoil the builder's bargain when the houses pass out of his hands, for the property was built, not to be lived in, but to be sold. Well might the Berlin Social-Demo- crats, meeting 5,000 to 6,000 strong, adopt a resolu- tion declaring " The scarcity of dwellings and the increase of rents in large towns to be a consequence of the social conditions of the present day, which make it possible for the owners of the soil to exploit the working classes by means of ground rent, and so carry on house building, not to meet the needs of the people, but for the sake of dishonest speculation." '
'' Occasionally we read of representative bodies sacrificing: not merely public interests, but the interests of the poor, to speouLitoPs. Evidence ^iven before the Royal Commission for the Housing of the Working Classes (1884) showed that the Metropolitan Board of
O VERCRO IV DING IN LARGE TOWNS. 85
It is inevitable — and experience proves it — that the domiciliary needs of the working classes in large towns must be worse provided for as population increases, for, as we have seen, increasing population implies the en- hanced value of land. In other words, as a town grows the population of low-rented {i.e. industrial) dwellings tends to decrease. The working classes are gradually elbowed out of the way, and left to find shelter where they can. Statistics for Berlin covering the years 1815-1872 show that while in the former year 58 per cent, of the houses let at rents not exceeding £4 10s., this category had fallen to less than 5 per cent, in 1872. While in 1815 only 11 per cent, of the dwellings bore a higher rent than £15, the percentage in 1872 was over 40. And yet the houses offered for small rents had become far worse in regard to number and size of rooms, favourable position, and sanitary conditions. The experience of Berlin will be found to be that of all progressive cities and towns. This encroachment upon the dwellings which have sheltered the toilers is due, of course, to a variety of causes. The rej^ort of the Committee on the Housing of the Working Classes, for instance, enumerates five principal influences as opera-
Works used privately to sell land acquired by the demolition of decayed industrial dwellines — and which should have been used for the erection of new houses for the working tlasses — to specu- lators. A trustee of Peabndy's Buildina-s complained that he had had to buy back a piece ot laud so sold at a premium of 40 per cent.
86 THE UNEARXED INCREMENT.
live in this country: (1) the action of private owners who have sought to improve their properties ; (2) the operation of the Artisans' Dwellings Acts ; (3) the widening and improvement of public streets ; (4) the erection of public buildings, *as Board Schools ; (5) railway extensions. ^Mlile such private and public improvements as are here indicated are legitimate and desirable in themselves, we should not overlook the suffering which they often entail upon the working classes. And in this place it is impossible to leave un- noticed the harm and injustice too commonly done in large towns by the so-called " improvements " which consist in sweeping away wholesale old and dec;iyed industrial dwellings without providing new habitations in their place. The effect of such "improvements" is simply to increase the overcrowding and its attendant rack-renting and misery. The report of the Commis- sion on the Housing of the Working Classes refers to this question as follows : —
" The pulling down of buildings inhabited by the very poor, whether undertaken for philanthropic, sanitary, or commercial pur- poses, does cause overcrowding into the neighbouring slums, with the further consequence of keeping up the high rents." And again : — " The overcrowded state of Spitalfields is attributed in a great measure to such clearances ; and the rise of rent, which has doubled in the Mint district, is largely owing to demolitions of the same kind." ^
^ "To quote an instance of the srross negrlect of the interests of the poor by the State, take the working of the Artisans' Dwelling
O VERCRO WDING IN LARGE TO WNS. Z^
Whatever the causes, however, which operate ia diminishing the dwellings available in large towns for the toilers, none would be possible in the absence of a material prosperity which the labouring classes dis- placed do so much to create. Before the advance of wealth, labour must shrink into a corner.* It is the great factor in the production of that wealth, and it
Act. Space after space has been cleared under the provisions of this Act, thousands upon thousands of families have been rendered homeless by the demolition of whole acres of the slums where they hid their heads, and in scores of instances the work of improvement
has stopped with the pulling down So limited is now
the accommodation for the class whose wage-earning power is of the smallest, that in the few quarters left open to them rents have gone up 100 per cent, in five years— a room which once let for 2s. a week is now 4s. Worse even than this, the limited accommodation has left the renters helpless victims of any extortion or neglect the landlords of these places may choose to practise. The tenants cannot now ask for repairs, for a decent water supply, or for the slightest boon in the way of improvement. They must put up with dirt, and filth, and putrefaction — with dripping walls and broken windows, with all the nameless abominations of an unsanitary hovel, because if they complain the landlord can turn them out at once, and find dozens of people eager to take their places who will be less fastidious." (" How the Poor Live," by u. il. Sims. Loudon, 1883.)
See also a statement mnde by Earl Compton at a public meeting held in St. James's Hall, London, February l-lth, 1889, on the industrial dwelling qu'^stion : — "Another instance was that of the clearances for the building of the Law Courts. A thousand people had been cleared out, and no proper provision had been made for them. So it was in Chelsea; and he had been informed that Fulhara was now suttering morally because people had been crowded into it out of Chelsea. Clearances aud so-called improve- nu'ii^, which mi^ht be an improvement to the pocket of the ground lautlhirds, but which were a detriment to thousands of inhabitants, luusi be prevented."
^ " At the back of the ' richest street in liurope ' (Regent Street, London) there lies a mass of noverty m^re depress! tg, in some respects, than thai of the East Eud. In this pare the three most
88 THE UNEARNED INCREMENT.
suffers because the wealth is produced. Every fresh stride which a town makes on the path to opulence leads to a rise in the value of land and a rise in rents. The working classes, whose ability to meet the demands of the house-owners does not meanwhile increase, are thus driven from a better class of dwellings to a worse, until they are found at last huddling in dilapidated rookeries unfit for human habitation, yet glad to secure mean shelter even there.
Let us first see what proportion of their incomes labouring families are compelled to disburse in the one item of house rent, and then the kind of accommoda- tion which is often provided. It is unhappily a fact that there are in most large towns a great many work- ing-men who, in order to pay the excessive rents demanded, have to rob those dependent upon them of proper food and clothing. How could it be otherwise when we find, in some cases, as much as half their earnings going to the landlord ? The Inspector of Schools for the London School Board, ]Mr. M. Williams, furnished the Commission on the Housing of the Working Classes with valuable evidence on this subject. He showed that in the parishes of Clerkenwell, St. Luke's, St. Giles, Marylebone, and other poor quarters of London, 88 per cent, of the population pay more than
potent causes of poverty are: (1) low wa^es; (2) intermittent character of the work ; (3) high rents." (Rev. F. L. Donuldsun ia the Pall Mall Gazette, May 11th, 1890.)
O VERCRO WDING IN LARGE TO IVNS. C9
one-fifth of their income in rent, 46 per cent, pay from one-fourth to one-half, 42 per cent, from one-fourth to one-fifth, and only 12 per cent, pay less than one-fifth. The average rent of one room, let as a separate tene- ment, is 3s. lOfd. ; of two-roomed tenements, 6s.; and of three-roomed tenements, 7s. 5^d. In individual cases quoted by the Commission, 4s. a week was paid for a room 10 feet by 7 feet, 5s. a week for "a single room in a state of great decay," and as much as 6s. each for some rooms. To evidence like this was added the not very reassuring statement that " rents in the congested districts of London are getting gradually higher, and wages are not rising, and there is a pro- spect, therefore, of the disproportion between rent and wages growing still greater." A " Eeturn of Expendi- ture by Working Men," published by the Labour Department of the Board of Trade, for 1889 gives some striking figures on this head. The following are a few samples, the working-men belonging to the better- paid class : —
|
Total yearly income. |
Rent, rates, & taxes. |
Percentage. |
|
£ 8. d. |
£ 8. d. |
|
|
62 0 0 |
14 19 0 |
28-75 |
|
150 0 0 |
35 10 0 |
23-66 |
|
38 12 0 |
6 14 5 |
23-50 |
|
50 0 0 |
11 14 0 |
23-40 |
|
44 16 0 |
10 6 5 |
23-04 |
|
80 0 0 |
16 8 0 |
21-13 |
|
55 0 0 |
11 3 0 |
20-27 |
50 THE UNEARNED INCREMENT.
What is true of England is equally true of other countries. Take the case of Berlin. Here house rents have risen continuously for many years. In 1815 the average rent of a house in Berlin was 39 thalers, or £5 17s. By the year 1830 the average rent was 85 thalers, or £12 15s. It was now that the industrial life of the city began to develop, and the result was a steady increase in rents. While in 1830 there were 51,794 dwellings, the number was 173,003 in 1872, and the average rent in the latter year was 171 thalers, or £25 13s. If we inquire how the working classes have been affected by this rise in rents, we find that whereas twenty years ago they paid 25 per cent, of their earn- ings to the landlord they now pay on an average over 30 per cent. Dr. Miquel, when Prussian Minister of Finance, declared in the German Eeichstag on January 20th, 1888 :—
" The working classes, especially those worst situated, pay la Berlin, Frankfurt, Cologne, Kuuigsberg, &c., between 2-5 and 30 per cent. — and sometimes even more — of their total revenue ia rent."
Again, as to France, in an article on " The Work- men of Paris, 1390-1890," Madame Darmesteter has shown that while the rent of the Parisian journeyman mason or fuller was £l 16s. a year in 1385, the rent of a Parisian tailor was £12 in 1885; otherwise ex- pressed, while five hundred years ago rent formed one- twenty-fifth part of the journeyman's wages, it is now about a sixth.
OVERCROWDING IN LARGE TOWNS. 91
So, too, Lord Compton said truly, in a recent article on " The Homes of the People" : —
" High reats are inflicting grievous harm on many who would otherwise have a better chance of fighting for a more prosperous existence. There can be no doubt that the poorer a man is the more, comparatively, he has to pay for his lodging. Everything tends to raise the workman's rent. Clearances and improvement schemes increase the competiti' in for house room ; the sub-letting of tenement houses necessitates a profit to each one in the chain of leaseholders up to the ground landlord ; compulsion to live near their work raises the rent in a working-class quarter ; and if the man could live at a distance, perhaps his wife and daughters cannot. . . All these causes and many others not only produce overcrowding, but also exorbitant rents." ^
And what is the character of the houses offered to the working classes in return for the large slice taken from their earnings ? Of course, there are better and worse dwellings ; but in judging of laws and institu- tions from which abuses of the gravest kind are in- separable— whose inevitable effect is the production of dangerous social evils — we are justified in looking upon the darkest side. For damning evidence upon this subject it is not necessary to go further than the report of the Royal Commission on the Housing of the Working Classes. The Commission found that " the evils of overcrowding, especially in London, are still a public scandal [notwithstanding the " enormous im- provement " effected during the past thirty years] and were becoming in certain localities more serious than
See New Review for June, 1889.
92 THE UNEARNED INCREMENT.
they ever were." The report gives the following London illustrations aniong others : —
" In Clerkenwell, at 15, St. Helena Place, a house was de- scribed containing six rooms, which were occupied at that time by Bix families, and as many as eight persons inhabited one room. At 1, Wilmington Place, there were 11 families in 11 rooms, seven persons occupying one room. At 30, Noble Street, five families of 26 persons in all were found inhabiting six rooms. A small house in Allen Street was occupied by 38 persons, seven of whom lived in one room. In Northampton Court there were 12 persons in a two-roomed house, eight of whom inhabited one room. In Northampton Street there was a case of nine persons in one room. At 5, Bolton Court, a family of 10 persons occupied two small rooms. At 36, Bowling Green Lane, there ■were six persons in an underground kitchen. At 7, New Court, there were 11 persons in two rooms, in which fowls also were kept. In Swan Alley, in an old, partly wooden, and decayed house, there were 17 persons inhabiting three rooms. In Tilney Court, St. Luke's, nine members of a family, five of them being grown up, inhabited one room, 10 feet by 8. In Lion Row there was a room 12 feet by 6, and only 7 feet high, in which seven persons slept. In Summers Court, Holborn, there were two families in a room 12 feet by 8. At 9, Portpool Lane, there were six persons in one small back room. At 1, Half Moon Court, in a three-roomed house, were found 19 persons, 8 adults and 11 children, and the witness, who has had much experience in the neighbourhood, said that he could hardly call that house over- crowded, as he knew of a case of 12 persons in one room in Robin Hood Yard, Holborn. In St. Pancras, at 10, Prospect Terrace, eight persons inhabited one room, 10 feet by 7 feet, and 8 feet high. At 79, Cromer Street, there was an underground back kitchen, 12 feet by 9, and 8 feet high, inhabited by seven persons. At 3, Derry Street, the first floor front room was 13 feet by 12, and 9 feet high, and was inhabited by a family of nine, who had only one bed. At 22, Wood Street, on the top floor, there was a
0 VERCRO WDING IN LARGE TO WNS. 93
room, 11 feet by 9, and 8 feet tigh, inhabited by a family of eight persons,"
adding that " evidence of the same kind was forth- coming from other parts of London," that overcrowding was likewise a great evil in provincial towns, both large and small, and that various other evils were every- where found to accompany overcrowding, "sanitary and structural defects in the dwellings of the poor" being one. And yet,
" Notwithstanding the great change for the better, the evi- dence proves conclusively that there is much disease and misery still produced by bad drainage. The work of house-drainage is imperfectly done, frequently in consequence of there being little supervision on the part of the local authorities. There has been much building, moreover, on bad land covered with refuse heaps and decaying matter. The closet accommodation is most defective in spite of the extensive power confided to local authorities by the law in this respect. In Clerkenwell there are cases where there is not more than one closet for sixteen houses. In a street in Westminster, a witness stated that there was only one for all the houses in the street, fifty or sixty people inhabit- ing each house, and that it was open and used by all passers-by. In other parts of London a similai- state of things was said to exist."
Again, quoting from the same report : —
" In York Place, Clerkenwell, the walls wera described as so damp that the paper was hanging in shreds. In the neighbour- hood of Tottenham Court Road the back rooms of certain houses are described as being dark because where the yard should be what is termed a cottage three storeys high was built within two yards of the back windows of the front house. Instances might be multiplied from other parts of London. At Bristol, houses stand back-to-back, with air and light blocked out. At New-
94 THE UNEARNED INCREMENT.
castle there are very tall houses in the oLl part of the city, built back-to-back, or with uo proper yards, and at Doncaster there are a large number without any back ventilation. Even where the back- to-back system does not exist, houses are often constructed so that the inhabitants obtain as little light and ventilation as possible. . . In Bermondsey, houses were said to be rotten from age. lu Southwark, houses were falling down from decay, and some of them had large cracks and holes in the walls large enough for a man to enter. In Liverpool, where extensive improvements have been effected, but where the death-rate is still unfortunately very high, houses were described to be in the last stage of dilapida- tion. The windows contained very little glass, and even the sashes had disappeared. Few of the roofs were rain-tight, and the walls were alive with vermin. In some cases the walls were crumbling away, exuding a green slime, and so rotten that a stick might be thrust through."
And further :
" In Draper's Place, St. Pancras, there was said to be a kitchen, 12 feet by 10, and only 65 feet high, entirely underground, the ceiling being below the level of the street, and this was inhabited by nine persons. Evidence was given of the existence of in- habited underground cellars in the neighbourhood of Grosvenor Square which were damp,^quite dark, and without any ventila- tion, and in which the inhabitants were never free from illness.''
Eloquent testimony is also afforded by a " Special report on the sanitary condition of cottage property owned by Lord Derby in the borough of Bury," pre- pared for the Corporation of that town by the borough surveyor in 1888. Here is a single extract : —
" Dearden Fold is one of the oldest parts of the town ; the buildings are in a very bad state, the tenants often being snowed upon in bed in winter, as the majority of the bedrooms are open to the slates. There is not a single house with a supply of water
0 VERCRO WDING IN LA RGE TO WNS. 95
laid on, their principal supply being from a pipe out of an adjoin- ing farm yard, the water not fit for cooking purposes. A case of smallpox occurred in one of these houses about three weeks ago. Seven of these dwellings have been in Lord Derby's hands for thirty-five years, and the other four for over ten years, and in each case he threatened to pull them down as they came into his hands; but 'threatened lives last long.' The only thing that I can find of any moment that the landlord has done for the tenants is to raise their rents. The internal fittings in many of them, such as stairs, fireplaces, &c., I consider positively dangerous."
Summing up, this very significant report says that
there are
" not fewer than 260 houses (in Bury) which are in an insanitary condition, by reason of being old and dilapidated, built in crowded or objectionable situations, or constructed in such a manner as to be injurious to the inhabitants thereof, and all of which are in Lord Derby's h;;nds, the lents having been paid \. > him through his agent, for terms varying from one to thirty-five years. I have never known of any desire on their part to remedy the defects stated, or to render the houses more habitable or healthy ; on the contrary, I have had to make frequent complaints in order to get alter, tions or repairs done which I considered absolutely necessary."
It is only right to say that the overcrowding which is so discreditable to many English towns — and par- ticularly to London — afiflicts other countries equally. A Grerman newspaper, devoted to the interests of the working classes, said recently of Berlin : —
"There is overcrowding there. It is a consequence of the in- come of the people not keeping pace with the increase of rents. The result is that thousands of people in inferior positions, \\\,o formerly rented two and three rooms, are now compelled to le contented with two, but mostly with one. Thousands of indus_
95 THE UNEARNED INCREMENT.
trial families living in the back houses of the overcrowded Buburba seek a way out of their difficulty by letting the single furnished room to two or three lodgers, while husband, wife, and children live in the kitchen. The travellers who scarcely know how to praise the brilliant Friedrichstadt and West of Berlin enough would do well to turn their gaze a little upon the •proletariat quarters in the East and North. There even a Zola would probably learn and see much of which the boldest fancy would not dream."
That overcrowding prevails in Berlin is shown by the fact that of the 1,122,330 persons enumerated in the census of 1880 no fewer than 478,052 were living in tenements having but one room that could be heated, or an average of 3*75 inmates to a room; 302,322 in tenements of only two rooms that could be heated, or an average of 2*23 to a room ; and 127,346 in tene- ments of three rooms capable of being heated, an average of 1'56 to a room ; so that over three-quarters of the entire population lived in tenements of not more than three rooms that could be heated, and having on an average 2*51 inmates to a room. Leipzig was even worse off, the average numbers of persons per room being 3*84, 2*53, and 1*80 in the three categories named. The result of the excessive rents demanded is seen in the fact that of every 1,000 tenements rented in Berlin 350 were not held for a year, 196 were occupied from one to two years, 129 retained two or three years, 81 from three to four years, and only 244 over four years. In 1875, out of 166,043 small
O VERCRO WDING IN LARGE TO WNS. 97
tenements 22,823 were said to have been over- crowded, and at the following census 22,890 were over-fdled out of 198,640. All accounts agree that the condition of things in Berlin is now far worse than in 1880.
When we examine the physical and moral evils which follow in the train of overcrowding, it is found that they hardly allow of exaggeration. Exhaustion and enervation, noisome filth, festering disease, devouring epidemic, domestic disorder, discontent,* immorality, intemperance : these are a few of the effects of the human herding which goes on so extensively in all large towns. And could they be absent ? Must not the effect follow the cause ? How can the working man, and still less his family, hope to preserve health in the dismal, dark, and dirty room which has to go by the name of home, breathing a fetid atmosphere, inhaling poisonous odours from rotten floors and reeking walls, and surrounded day by day, week by week, and year by year by disease-breeding influences of all kinds ? Such are his " conditions of life ": it would be more correct to say conditions of death. Official statistics
^ The newspapers for April 6th, 1890, reported that " a great demonstration " was held in Victoria Park, London, the previous day, "to enforce the need for fair rents and healthy homes. Resolutions were passed condemning the inaction of the Government and local authorities in not enforcing the sanitary laws, and urging tenants in the East End not to pay rents until their houses were made healthy and habitable."
9? THE UNEARNED INCREMENT.
represent the mortality of metropolitan districts in which overcrowding prevails as exceeding 44, 53, and even 70 per thousand. Where overcrowding does not kill, it very often keeps its victims lingering in physical torture, bereft of vigour, a prey to continual sickness, going through life without living. The report of the Commission on the Housing of the Working Classes says : —
" Among adults overcrowding causes a vast amount of suffering ■which could be calculated by no bills of mortality, however accurate. Even statistics of actual disease consequent on over crowding would not convey the whole truth as to the loss to health caused by it to the labouring classes. Some years ago the Board of Health instituted inquiries in the low neighbourhoods to see what was the amount of labour lost in the year, not by illness, but by sheer exhaustion and inability to do work. It was found that upon the lowest average every workman or work- woman lost about 20 days in the year from simple exhaustion, and the wages thus lost would go towards paying an increased rent for a better house.^ There can be little doubt that the same thing is going on now, perhaps even to a greater extent. That overcrowding lowers the general standard, that the people get depressed and weary, is the testimony of those who are daily witnesses of the lives of the poor. The general deterioration iu the health of the people is a worse feature of overcrowding even than the encouragement by it of infectious disease. It has the effect of reducing their stamina, and thus producing consumption and diseases arising from general debility of the system whereby
^ "Financially the working classes lose £3,000,000 a year in wages through illness, largely^ caused by unwholesome sur- roundings ; and morally and socially the results of overcrowding are a danger and a disgrace." (The Bishop of Chester in a sermoa preached in St. Paid's, June, 1890.)
OVERCROWDING IN LARGE TOWNS. 99
iife is shortened. Nothing stronger could be said in describing the effect of overcrowding than that it is even more destructive to general health than conducive to the spread of epilemic and contagious diseases. Unquestionably a large amount of the infection which ravages certain of the great cities is due to the close packing of the population. Typhus is particularly a disease which is associated with overcrowding, and when once an epidemic has broken out, its spread in overcrowded districts is almost inevitable. In Liverpool, nearly one-fifth of the squalid houses where the poor live in the closest quarters are reported as always infected, that is to say, the seat of infectious disease."
Nor do adults sufifer only. Worse in many respects
than the wrong suffered by the men and women who,
from no fault of their own, are doomed to pass their
lives in the overcrowded districts of large towns, is the
injury inflicted upon their helpless and innocent
offspring.
" There is a great deal of suffering," says the report just mentioned, " among little children in overcrowded districts that does not appear in the death-rate at all. In St. Luke's ophthalmia, locally known as the blight, among the young is very prevalent, and can be traced to the u. .k, ill- ventilated, crowded rooms in which they live ; there are also found scrofula and congenital diseases very detrimental to the health of the children as they grow up."
The stern moralist may preach against the vices of the poor, but can he wonder that people struggling against such conditions do not all, or easily, keep in the path of rectitude ? Man is the creature of his surroundings, and morality never yet throve where external influences, which contribute so greatly to the
H 2
loo THE UNEARNED INCREMENT.
regulation of life and conduct, were totally bereft of a humanising tendency. The intemperance which is an unfortunate characteristic of overcrowded industrial communities is undoubtedly encouraged in a high degree by the conditions of daily life.'
But cui bono? Why expose the evils of over- crowding ? What is the moral of the story ? Simply this : that overcrowding is a consequence — and an inevitable consequence — of the ridiculously inordinate value to which land is forced in large towns. Were it not that the owners of the soil are able to appropriate the whole of the increment created by growth of popu-
^ " Why," asked a German journal, a short time ago, "do so many thousands of honest working men fall victims in Berlin to the hrandy-shop {Schnapskneipe) and tavern life ( Wirthshaits- leben) ? Simply because they have not homes worthy of men, and because they often only find there dirt and disorder."
See also the following passage in an article on " The Ethics of Urban Leaseholds," contributed by Mr. J. T. Emmett to the British Quarterly Review for April, 1879 : — " Intoxication as a habit is a common consequence, a natural result, of under-sized, unwholesome rooms; and not thelower but the middle and the upper classes are the fabricators and maintainers of the leasehold system, which denies sufficient house accommodation to the poor. These classes are the real culprits in the case of metropolitan intemper- ance ; and to them, much more than to the working-men them- selves, the vice and misery of drunkenness are due. . . . The lower middle classes are sufferers in much the same way as the workmen ; and, to escape the pressing evil, clerks and superior artisans and little tradesmen, who compose so large a part of the suburban population, leave their homes and lose their time and health and money at the billiard-room, the tavern, and the music- hall. This is the secret of the great expenditure on drink, a sum that in ten years would buy up every London ground-rent ; and until this fact is understood no valid diminution of the drinking habits of the people can be hoped for."
O VERCRO WDING IN LARGE TO WNS. loi
lation, and by public and private enterprise, land could not have attained its present bloated value, for there would have been less inducement to speculation, and the landowners' monopoly would have been restricted.
The causes which have operated to increase the value of urban land in the past will operate — and that far more effectively — in the future, unless counteracted. Every year the land in and around our towns becomes more costly ; in other words, the foundation is being laid for a progressive rise in rents.^ Knowing the labourer's position, can we contemplate such a prospect with equanimity ? Already the pressure upon the labouring population is too hard to bear ; what will be the result if this pressure is increased ? Thousands of pounds of industrial wages which should be spent on food and clothing have to-day to be paid to the landlords, because our laws recognise the right of the latter to the increased value which not they, but society, gives to their land. And still the tribute levied upon labour in the form of rent is increasing, though wages, if not decreasing, do not rise. Unless the growth of rents is checked, two alternatives are open to the working
^ A statement, prepared by the London County Council, showing' the increase in ratiuj^s in " back streets of various districts in the metropolis," representing the "normal increase of rateable value of houses at each quinquennial valuation," instances two properties wliose value increased from 1875 to 1880, 6*44 and 7-44 per (!ent. ; and two which increased from 1B80 to 1885, 1044 and 11 78 per cent. The latter increases are equal to 62 and 70 per cent, in one generation. If rents rise to this eiteat, will wages ?
I02 THE UNEARNED INCREMENT.
classes of our large towns: less food or worse dwellings — in either case a more miserable standard of life.
It is true that an effort has been made by the Shaftesbury, Torrens, and Cross Acts to deal with the evils of overcrowding and unhealthy dwellings, but the framers of these and similar measures have com- mitted a fatal error in proceeding upon the assumption that the financial responsibility for the provision of healthy and cheap industrial dwellings belongs to the local communities, instead of to the owners of the soil.* Mr. Chamberlain demanded nothing unjust when he said that "the expense of making towns habitable for the toilers who dwell in them must be thrown on the land which their toil makes valuable, and that without any effort on the part of the owners." ^
That we are, however, very far from attaining the legislative recognition of this fair claim is abundantly
^ See Professor Thornld Eo?ers in "Six Centuries of Work and Wa^es " (edition 1886) : — " Where rent is the most important and the most increasing part of the cost of subsistence, as it is with the urban labourer, especially, the mischief is prodigious. The self-complacency Avith which some persons — owners of land to a great extent in London, for the temporary use of which the severest terms which the law allows and the market gives are extorted, to say nothing of taxes on renewal, equivalent to the appropriation of the tenant's goodwill — advocate the housing of the London poor at the cost of the London occupiers, and of course to the enormous bent-iit of those who hold this induced monopoly, and will be vendors under forced sales, would be absolutely amazing in any other country besides England." (P. 531.)
' Fortnightly Review for December, 188.^,
O VERCRO WDING IN LARGE TO WNS. 103
clear from the indulgent treatment shown by the law, and more still the law's administrators, to the owners of dilapidated house property.' Even now such pro- perty is one of the best investments open in London to people without consciences/ The over-crowding and high rents prevalent in industrial quarters in the metropolis ensure the owners of tumble-down tene- ments high interest upon their capital, and the dearth of workmen's dwellings is, and must be, so pressing that there is no fear of these places being deserted. They will only be disused when condemned by the sanitary authorities, and the owner can always count upon liberal terms on being bought out.
Thus the public improvements made during recent years in Birmingham are estimated to have cost from £300,000 to £400,000 more than they should have
^ " In the worst parts of London the ground rent is almost the whole of that for which rent is paid, and it is well known that when the Metropolitan Board of Works purchased the rookeries, they often paid for a hlthy and dilapidated tenement the price of a mansion in a fashionable square." (Professor Thorold Kogers in his " Six Centuries of Work and Wages," edition 1886, p. 537.)
' "In the valuations of property condemned for human habitation, because totally unfit for it, it used to be the practice to take the rent actually paid by the miserable tenants, and of course to add to this the inevitable 10 per cent. In this way the price paid for getting rid of abominable dens, the removal of which was absolutely needed for the public health, cost the ratepayers more than well- built mansions in the best part of London did. It was a practice to speculate in these places, to cram them with destitute wretches, and make a profit out of what was even then an offence." (Professor T. Kogers in an article on " Vested Interests " in the Conteynporary Jieview, June, 1890.)
I04 THE UNEARNED INCREMENT.
done, solely because the dispossessed landlords liave compelled the Corporation to purchase at fabulously- high prices. " That being the amount," says the report of the Committee on the Housing of the Working Classes, " in excess over what the property [purchased and removed] would have fetched had it been disposed of in the ordinary way." The evidence given before this Commission by the London School Board's surveyor was that " the reason why so many unhealthy areas have remained untouched in the metropolis is the fear of excessive compensation;" and a Peabody trustee complained that " buildings in a bad state have been paid for enormously." Similarly, Mr. A. B. Forwood, speaking for Liverpool, said that " the money paid by the Corporation of that city to the people who owned bad houses was a very much larger sum than they were morally entitled to."
To sum up. The well-being of the working classes in particular — like the interests of society in general — require (1) that the unearned value of land — that value which is created by the operation of purely social causes — shall be diverted from its present channel in such a way that the community as a whole shall share in it ; and also (2) that the incidence of local taxation shall be so modified that the owners of the land upon which towns are built shall bear a considerable share of the parochial expenditure which tends to maintain and increase the value of that land.
O VERCRO WDING IN LARGE TO WNS. 105
It is interesting to note that when there is no question of individual sacrifice a Minister of the Crown can be found ready to advocate the recognition by the State of the doctrine that unearned increment belongs to society and to society should be returned. In its very instructive report, the Koyal Commission appointed to inquire into the housing of the working classes proposed that legislative sanction should be given to the principle contended for, in the disposal by the State of the sites of several public prisons in London at less than their present market value, so that they might be utilised for the erection of industrial dwellings. In a memorandum to this report. Lord Salisbury expressly said that the Commission desired the State to sacrifice the increased value which has accrued through the growth of population and other social causes, adding : —
" It may be objected that such a sacrifice would constitute an eleemosynary expenditure. If the description were accurate the objection would be a serious one. . . But it seems to me that to call the proposed operation eleemosynary is straining the meaning of the word. It is the surrender of an increase which has become unexpectedly disposable — an increase which is caused by that very concentration of population which it is to be applied to remedy. But this excessive concentration on this particular area is in more than one respect the State's own work. If the size of London is excessive the excess is largely due to the circixinstance that Loudon is the residence of the Government. If vast masses of the population are forced to live near the centra of the town and find no room for their drtolliugs, it must bo
I06 THE UNEARNED INCREMENT^
remembered that the State has largely contributed both to swell the population and to diminish the house-room. The number of persons who are in the public service as soldiers, policemen, post- men, and employes in the lower grades of the public offices, constitute a notable portion of the crowds who compete for house- room. The forcible destruction of dwellings authorised by Parliament during the last half century, for purposes of public ornament or utility, has largely contributed to diminish the aggregate of the house-room for which these crowds have to compbte. A proposal to remedy overcrowding, for which the State is largely responsible, by utilising a gain on enhanced value of land which is due to density of population can hardly be called eleemosynary, It more closely resembles the provision of com- pensation than the offer of a gift."
In accordance with this recommendation, Lord Salisbury in 1885 introduced in the House of Lords a Bill, the third clause of which laid down that —
" It shall be lawful for the justices of the peace for the county of Middlesex, if the justices think fit so to do, to sell and convey those respective sites or any part or parts thereof to the Metro- politan Board of Works at such price, to be fixed by agreement or arbitration, as will enable the Board without serious loss to appropriate the sites or parts so conveyed for the purposes of the Labouring Classes Lodging Houses Acts, 1851 to 1867, as amended by this Act."
It is only fair to the Conservative Upper House to say that while it passed this heroic clause the House of Commons so altered it as to spoil it, and Liberals could be found ready to object to its supposed " Socialistic " tendencv.
CHAPTEK Vlir.
END OR MEND ?
IT is necessary now to consider more fully than hitherto the question, cannot society with right claim the increased value given to land by distinctly social causes ? We have seen the various factors which tend to create what is generally known as " unearned increment." In one sense this term is very inaccurate. The increment is by no means unearned; what is meant, when the phrase is used, is that the landowner has not earned it. Society, however, has ; and earned it honestly by heavy toil, by exertion of body and brain, by plodding industry, by bold enterprise, by culture and enlightenment, by progress in numbers, in wealth, and in morality. There is not a yard of land in the country — be it used for the growing of corn, the pasturing of cattle, or the habitations of men — whose value has not been enhanced by these social causes. It was the settlement of men with their various activities upon the land which originally gave it value, and the increase of population has been a constant and potent factor in value-growth since the primitive com- munities first established the institution of private
107
io8 THE UNEARNED INCREMENT.
property in the common soil. And yet, wli le society has for centuries been growing and labouring to in- crease the value of the land it required for its food, its industries, and its habitations, it has ever done so to its own detriment. While enriching the landlords it has impoverished itself.
This, indeed, is the greatest anomaly presented by the social increment problem. As a community de- velops and prospers, owing to its energy, enterprise, and enlightenment, it is all the time preparing a rod, armed with which the landlords will sooner or later turn upon it. A town's residents are punished for their industry and merited success by having to pay the landlords more and more money for the land they use. Did not tradesmen, by dint of perseverance and pluck, succeed and thrive, the demands made upon them would not increase; but simply because they reap in prosperity the reward of exertion, the landlords require growing tribute in the form of higher rents. And so it is in all departments of social life. In the eyes of the owners of the soil, human communities become, in fact, simply value-cr-sators, rent-producers. The landlords reap where they have not sown, they gather where they have not strawed. Little of the value of that land which they lend and sell, at prices which are often so fabulous, has been created by them, yet they appropriate it all.
END OR MEND? log
In the words of Mill : —
"The ordinary progress of a society which increases in wealth is at all times tending to augment the income of landlords ; to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer, as it were, in their sleep, without working, risking, or economising." ^
Or, to use the words of a later political economist of
high authority, Professor Thorold Rogers : —
" Every permanent improvement of the soil, every railway and road, every bettering of the general condition of society, every facility given for production, every stimulus supplied to consumption raises rent. The landowner sleeps, but thrives. He alone, among all the recipients in the distribution of products, owes everything to the labour of others, contributes nothing of his own. He inherits part of the fruits of present industry, and has appropriated the lion's share of accumulated intelligence." ^
But because society has made such enormous sacri- fice in the past, should it do so in the future ? Sure ly the question is a grave one. We have seen the results which have been produced by the abuse of the insti- tution of private property in land, which allows the owner to monopolise the value which is created, not by him, but by society. Briefly summarised, those results are : fabulous land-values and rents in towns, with terrible overcrowding and degradation of the working classes in large centres of population ; the over-burdening of agriculture and the harassing of
"Principles of Political Economy," Book V., chap, ii., section 5. 3 " Political Economy," chap. xii.
Eio THE UNEARNED INCREMENT.
industry, entailing dear production and high prices ; unhealthy land speculation, deranging commerce and often inflicting ruin upon the labouring classes ; with social and political evils of many kinds. To these results we have already arrived, and all thoughtful people will acknowledge their enormous gravity. Are we prepared to face the intensification of the dangers now existing ? Unless the system is modified, no power on earth will prevent it from yielding the same evils — the same in character, yet unspeakably more serious in degree. Shall society, then, suffer in the future as in the past, or shall it determine that these things shall no longer be ? Shall it " Take arms against a sea of troubles, And by opposing end them ? " And here I would make it clear that I do not deny
the right of every landlord, of every capitalist, to due reward for his expenditure, whether of labour or of money. For the capital invested in land, for the skill and exertion employed in its improvement, it is right to expect proper recompense. But when allow- ance has been made for a fair return upon these, there is still in the increment constantly accruing to the value of land a social element which is often found far to exceed the just deserts of the owner's investment, industry, and ability. It is with this social value that we have to do, and to whom should it go — to the landlord who did not produce it, or to society which
END OR MENDf IH
did ? Surely justice, equity, expediency, and common- sense unite in saying that the jpuvpose of social institu- tions, social life, and social activities is not to enrich the incomes of individuals — whatever be the actual fact under present circumstances — but that social progress should, primarily and ultimately, conduce to social benefit.' It is evident that such a reform as is here advocated could not be retrospective. As law and custom have encouraged the landlords to keep all themselves hitherto, we should have to make a new beginning, to start with a clean page.
All sorts of remedies and half-remedies — from land nationalisation to leasehold enfranchisement — are pro- posed by men who believe that the community is not justly treated by the property-owners. Among the latest proposals advanced for the better protection of urban occupiers against the exactions of landlords are fixity of tenure and compensation for improvements. In other words, it is asked that the occupier shall have a legislative guarantee that his own improvements, whether caused by expenditure of capital or commercial
1 " The question of unearned increment will have to be faced before many years are over. It is unendurable that great incre- ments which have not been earned by those to whom they accrue, but have been formed by the industry of the community, should be absorbed by those who have contributed nothing: to that increase." (Mr. J. Morley in the House of Commons, May 6th, 1890,}
112 THE UNEARNED INCREMENT.
enterprise, shall not be employed by the landlord as a weapon of extortion, and that on removal he shall be recouped for such monetary sacrifice as has increased the value of the premises occi p ed. A demand like this is not unjust, and the Select Committee on Town Holdings has approved it, but it is clear that, even if we secured the individual against injustice on the part of the landlord, we should not exhaust society's claim against the owners of the soil. We have still to con- sider increased value due to growth of population, the development of trade and industry, the increase of national prosperity, and public improvements — causes which are distinctly social. Here the individual has no claim, but the community alone.' Those who hold this view cannot but recognise the utter inadequacy of measures like Urban Compensation for Improvement Bills, Leasehold Enfranchisement Bills,^ and even
I See the report of the Select Committee on Town Holdings: — " The grievance that the increased value of the land throug-h public improve- ments or the progress of the neighbourhood goes to the landowner is 80 closely connected with the question of the taxation of ground rents, upon which we are not prepared to report, that we defer the consideration of it for the present, and only remark, as regards the increase in value arising from the collective exertions of the com- munity, usually referred to as the 'unearned increment,' that although there may be much to be said against this increase in value going to the lessor, who may have done nothing to earn it, yet no good reason appears to have been put forward why it should be given to the lessee, who may have done no more."
' The principle underlying Mr. Broadhurst's Leaseholder's Bill of 1885 is optional power of purchase by the leaseholder. "The leasehold tenure," to use Mr. Broadhurst's words, '* should be so
END OR MEND? IT3
Agricultural Holdings Acts. These measures would still exclude society at large from participation in the unearned increment or social value given to the land. The only merit they possess — and merit it certainly is — is that they would divert that increment, that value, from the few channels into the many.
In fact, the principle involved in these proposals only furnishes us with a foundation upon which to construct a thorough-going measure of reform. The English legislation which approaches nearest to the ideal to be striven after is that passed in the interests of the tenant-farmers of Ireland. The Irish Land Acts are based upon the principle that the cultivators, the rent-payers, should not be rented upon their own im- provements; that their exertions and expenditure of capital should not be made a source of greater gain to the inactive owners of the soil. From time im- memorial it had been the habit of most Irish landlords to permit or compel their tenants to increase the pro- ductiveness of their holdings only in order that they might demand more rent.'' Often land was originally
altered that a lessee shall be enabled to expend money upon the land, with the certainty that where he has sown there also will he reap ; in other words, that he can become the owner if he pleases. " * Mr. John Brjorht said in 1881, when speakinp on the second reading of the Irish Land Bill of that year: — "If you com])l;iia that the Bill gives too much to the tenants and takes aU that it does give from the landlords, I should make this answer : 1 1 at this moment all that the tenants have done were gone, and nil that file landlords have done were left, . . . the land would be <u
114 THE UNEARNED INCREMENT.
let in a totally sterile and uncultivated condition — " as in the beginning of the world," to use the emphatic phrase of a suppliant of one of the Irish Land Courts a year or two ago — and just as its productive capacity was developed the landlord increased the rent, taking care that the margin of profit, if any, left to the culti- vator, was so small as to compel him to redoubled efforts.^ Thus landlords who purchased undeveloped
bare of house and barn, fences and cultivation, as it was in pre- historic times. It would be as bare as an American prairie where the Indian now roams, and where the white man has never trod. . . , I belie\e, and I think I am within the mark, that nine- tenths — excluding' the towns, of course— of all that is to be seen on the farm land of Ireland — the houses, barns, fences, and what- ever you call cultivation, or freeing land from the wilderness — have been placed there by the lab<'ur of the tenantry of Ireland, and not at the expense of the landlord." This is hardly an over- statement of the testimony furnished by the various Land Com- missions which have inquired into the wrongs of the Irish tenant- farmers.
^ " Now the Irish question was this : that in a vast majority of small holdings, under £10 a year, comprising half the population of Ireland, and to a considerable extent in larger holdings, the landlord had contributed nothing but poor, rocky, and boggy soil, worth certainly on the average not half-a-crown an acre, and often not worth sixijence, of anniial rent, while the tenant had built the houses, drained, fenced, and reclaimed the land, and macib all the improvements which had created a prox)erty worth, say, 15s. or 20s. an acre. Was the law just which entitled the landlord to take the whole or the greater part of this 15s. or 20s., and to leave the other partners, who had created fully three-fourths of the value, nothing but a bare subsistence in a condition of poverty un- matclied in any other civilised country." (Mr. S. Laing in the Contemporary Review for April, 1890; articL, "Aristocracy or Democracy.")
It would be an easy task to adduce hundreds of instances illus- trating the point und<r consideration. The following is taken because it is recent. Th-^ luiriative is a nport of an ai)jilic;ition made before a justice of the Land Judges' Court in Lublin in
END OR MEND? 115
estates for the proverbial old song were able in time to derive large revenues from them.'
This state of things was changed by the Land Acts
December, 1886 :— " An application was made on behalf of Denis Cronau and ten other tenants of the lands of Nadallerbeg portion of the estate in this matter, for an abatement of 75 per cent, on the rents due. The lands are situate among the Nad mountains, near Banteer, in the county of Cork. The atfidavit of the tenants set forth that the lands are i)oor mountain lands which were re- claimed by the tenants or their predecessors, and on which the landlords had not laid out one shilling for improvements. Until 1872 the lands were held by those tenants or their predecessors under lease. On the expiration of the lease in 1872, ejectments were brought, and under pressure of those, and upon the faith of promises then made in writing by the landlords to make roads to the tioldiugs, and to build houses for some of the tenants, and supply slate and timbers to others, new lettings were made at rents more than four times the amount of the previous ones. The athdavit further states that these rents are excessive rack-rents, which the tenants are absolutely unable to pay. The landlords never since made the roads, nor built the houses, nor supplied the slate or timber which had been promised."
The following figures show some of the decisions of the court :^
|
Rent payable up to |
Eeut fixed in |
||
|
1872. |
1873. |
||
|
£ s. d. |
£ s. d. |
||
|
Denis Cronan ... |
5 6 0 |
26 11 7 |
|
|
John Aheru ... |
3 10 8 |
15 12 0 |
|
|
Mrs. Kiely |
15 4 |
7 19 6 |
|
|
Sandy DriscoU |
2 1.3 0 |
8 5 9 |
|
|
John Ihohig ... |
16 6 |
7 6 3 |
|
|
James Thohig ... |
16 6 |
6 12 6^ |
(Related by Mr. J. J. Clancy in the Contemporary Revitio for July, 1889.)
^ " In the notorious Falcarragh estate it has been stated in open court — and the figures have never been contradicted— that the ancestors of tlie present proprietor bought it originally for some- thing like £500, that the landlords have never expended a shilling on improvements, and that the rental before the passing of the Land Act was £2,500 a year, and is still nominally from £1,500 to £2,000." (Mr. S. Laing in Contemporary Review for April, 1890; article, " Aristocracy or Democracy.")
1 2
ii6 THE UNEARNED INCREMENT.
of 1870, 1881, and 1887. Tenants in general now have fixity of tenure, fair rents, and compensation for im- provements. They can no longer be rented upon their own improvements, and on quitting their holdings they are secured indemnification for the increased value they have given to them by the expenditure of labour and money.
"What has been done for the individual agriculturist in Ireland, and to some extent in England, should be done for the community as a whole. Society should no longer be rack-rented upon its improvements — upon the higher value it gives to the land, whether it be agricultural or town or mineral land ; it should no more be compelled to pay to the landlords a penalty for its progress, for the privilege of prospering, IB the form of increasing rent.
CHAPTER IX.
MINES AND MINERAL ROYALTIES.
SPECIAL reference to the subject of mines and mining royalties is necessary, as it furnishes us with a powerful argument in favour of the appropria- tion by society of the unearned increment. The land nationaliser says it is indefensible that the ownership of the soil should carry with it a monopoly of the mineral wealth concealed below the earth's surface. However strong it may be possible to make the position so taken up, I do not approach the question of mining rights from the standpoint of land nationalisation. All that can be claimed here is that in future the unearned increment accruing from mines shall go to society. Whatever injustice may have been done to society in the past, and whatever the injustice which may still for a time be sufifered owing to the legal recognition, hitherto, of a landowner's claim to the minerals beneath the soil, it is impossible to enforce a retroactive measure of reform ; all that we can do is properly to protect society's interests for the future. In other words, the
117
Ii8 THE UNEARNED INCREMENT.
"present value of mines now opened should be secured to the recognised owners, but future increased value and also undiscovered mineral wealth should become a common possession, with the reservation that an ade- quate return should be made for the capital and labour expended in the creation of that increased value, and in the opening of new mines.
Society has a peculiarly strong claim to share — and that liberally — in the wealth yielded by mines, because the owners of the soil, who now practically monopolise it all, have had no part in creating the riches which fall into their laps, and because it is solely owing to social needs that the unproduced mineral wealth of the earth becomes a source of such enormous gain to the landlords. It is not due to the latter's exertion that coal, iron, and lead are valuable articles of merchandise, and the accidental occurrence of minerals beneath the soil which they till should not be allowed to secure to them absolute ownership. All the minerals controlled by the Dudley family would be of little value to them but for the existence of indus- tries which require these minerals. The enormous wealth — extending to millions of pounds — accumulated by this family was not made in remote years, but comparatively recently, since the development of England's great industries.* Here is an instance ot
^ In the course of a notice of the death of the first Earl of Dudley
MINES AND MINERAL ROYALTIES. 119
how society enriches the owners of land containing mineral wealth; it sets forth the principle clearly, though not so emphatically as might be : —
" There is a mountaiu valley in Wales which might have heen worth, at the outside, £800 a year as a sheep farm. But coal and iron were found, works created, and a town of 10,000 in- habitants sprang up, and the landlord now gets a secure income of £8,000 a year. The extra value has been created by the outlay of capitalists, most of whom lost their money, and by the labour of the community who live on the soil." ^
Thus, too, we find Mr. Henry Greorge writing : —
" The coal and iron fields of Pennsylvania, that to-day are worth enormous sums, were fifty years ago valueless. "What is the efficient cause of the difference ? Simply the difference in popu- lation. The coal and iron beds of Wyoming and Montana, which to-day are valueless, will in fifty years from now be worth millions on millions, simply because in the meantime population will have greatly increased." *
It is well known that the landowners generally secure their share in the proceeds of mining in the
the Daily Telegraph stated, May 9th, 1885 :— " In 1835 [he] suc- ceeded, as Lord Ward, to one of the noblest fortunes in the United Kingdom, of which he has been in possession exactly 50 years. Assuming— and the estimate is a low one — that his income had averaged £100,000 per annum for half a century, it will be seen that at least five millions sterling must have passed through his hands. In the year when the coal famine was raging with great intensity it was currently reported that the late Lord Dudley was in rtc^ipt of an income, derived from his coal and iron mines in Staffordshire, which amounted to not much less than one million of pounds in that single twelvemonth."
^ Mr. S. Lain? in article " Aristocracy or Democracy," in the Contemporary Iteview fur April, 181)0.
* " Progress and Poverty," Book IV., chapter 2.
/
120 THE UNEARNED INCREMENT.
form of royalties, rents, and way-leaves. By levying these tributes they are able to obtain a maximum of gain with absolutely no risk, with no possibility of loss. It is of no consequence to them whether mining is remunerative to the capitalist, so long as a fixed royalty is paid to them upon every ton of minerals produced. Thus when profits and wages fall, owing to the low prices ruling, the landowner's proportionate share in the revenue of a mine actually increases. The gains of the real workers of the mine — the men who provide the money and the labour requisite to its develop- ment— may come and go, but the owner's royalty goes on for ever. The evidence laid before the Royal Com- mission on the Depression in Trade and Industry, whose final report was issued in December, 1886, showed that in the county of Durham there was then a reduced output of coal, and prices had declined ; yet, " while the workmen obtain lower wages, and the employer little or no profit, the harden of royalties is greater." It was also " given in evidence that in the Barrow district the royalties have increased in spite of the decrease in the price of iron.
According to Sir I. L. Bell the royalties on a ton of pig iron from ironstone, coal, &c., amount to 3s. Gd. in the Cleveland district, 6s. in Scotland, and 6s. 3d. in Cumberland ; while in Germany the amount would only be Gd., in France 8J., and in Belgium Is. 3d. to
MINES AND MINERAL ROYALTIES. I2l
Is. 4d. It was stated before the Eoyal Commission on Depression in Trade that during the years 1872 to 1875 iron ore on the West Coast of England was leased on royalties as high as 10s. a ton. In Cornwall the mine dues vary from one- fifteenth to one-twenty-fourth of the produce. No wonder that enormous revenues should often be made by English and Scotch land- owners out of the minerals which chance to be found in their estates. The fabulous gains of the Dudley family have been noticed, and similar cases might be
named.
When, a few years ago, a deputation of Members of Parliament had an interview with the Home Secretary on the question of royalties, INIr. jNIason, who spoke for the Lanarkshire miners, said that in that county "one man received no less than £114,000 per annum in mining rents and royalties, or as much for doing nothing as 1,800 miners would earn in 52 weeks." A Cornish representative also instanced the recent renewal of Dolcoath mine lease for 21 years, in con- sideration of which the landlord had demanded £25,000. As to Cleveland, official returns show that the ironstone output of that district during the years 1849 to 1886 (thirty-seven years) was 130,909,940 tons, on which no less than £3,OiJO,000 was paid in royalties. Again, according to the Secretary of the Fife and Clackmannan Miners' Association the output
122 THE UNEARNED INCREMENT.
of coal in Fife and Clackmannan in 1874 was 1,588,000 tons. This output, calculated at 9d. per ton,' gave the landlords about £59,000 in that year. The output continued to increase till 1884, when it reached 2,044,000 tons, increasing the revenue of the land- lords to £91,000 — a clear increase of £32,000 per year going into the pockets of the landlords, who meantime performed no new or more valuable service in return ; and still the average wages of the miners in the two counties were in the latter year only 15s. a week.
As it is in the power of the landlords to impose whatever royalties they choose, the fortunes of the mining industry largely depend upon their caprice. Without risking a penny of capital himself, the owner of mineral land may be able to make or mar the adventurers who sink thousands of pounds in the opening up of his mines : whether they obtain a fair return upon their investments or are reduced to ruin depends — apart from the capabilities of the mine — upon the moderation of his demands.* The capitalists
^ Coal royalties in England, "Wales, and Scotland vary consider- ably. Thus— Yorkshire, 4d. to 9d. per ton ; Lancashire, 6d. to Is. ; Durham and Northumberland, 4d. to lOd.; Staftbrdshire, Midlands, 6d. to 8d. ; Wales, 6d.to Is. ; Scotland, 4|d. to Is. 4d. On the whole rents, way-leaves and royalties are estimated to be equivalent to an average tax of 8d. per ton on all the coal produced.
* In an article on " The Discovery of Coal near Dover," published in the Contemporary Review for April, 1890, Profes-or Boyd Dawkins says : — " The discovery of these hidden coalfields is a question of national importance well worthy of the attention of
MINES AND MINERAL ROYALTIES.
are helpless, and not only they, but the miners and associated workpeople whose employment and wages de- pend upon a mine's successful and profitable working.' It may be said that while a landowner certainly has the power of abusing his privileged position to the injury of both capitalist and labourer, the power is only nominal and is never used; and, therefore, that the dangers just indicated are perfectly imaginary. Unfor- tunately, however, the contrary is the case, as the history of probably every mining district in England proves. Here is testimony upon the point, taken at random : —
"In 1885 a company in West Cumberland had eight blast furnaces, four of which were idle, not because the firm had no work, but simply owing to the high royalty demanded by the landowner. The company applied, but unsuccessfully, for a reduction ; and, in order to fulfil their contracts with the Indian Government, the firm had to import iron from Belgium, while at the same time half their furnaces, and consequently half their workmen, were idle. A blast furnace turns out about 600 tons of pig iron per week, and upon these 600 tons the royalties amounted to £202, while the wages paid to everyone engaged in producing these 600 tons, from manager downwards, amounted to only £9-j. Failing to obtain a reduction in the royalty demanded, the
Parliament. It is closely connected with the question of royalties, which is now being considered by a Royal Commission. As tbe law stands at present, if the search for coal be succfssful, the neishbourins: landowners, who may or may not have contributed to the experiment, are masters of the situation, because they can charsre what royalties they like."
^ The number of workpeople employed in and at mines in the United Kingdom is estimated at 600,000, and to these Come auother 600.000 fur iron and steel works.
£24 THE UNEARNED INCREMENT.
company purchased land in America, trans''erred their works, and are now numbered amongst our foreign competitors." '
And again, in an address delivered in Griasgow in 1885, Mr. Forsyth, president of the Scottish Land Restoration League, said : —
"Out of eighty blast furnaces in Cumberbind forty are at this moment standing idle, and the others are but partially employed. There are many causes which mi;jht have the effect of keeping these forty blast furnaces idle. They might be idle for want of capital : they might be i lie for want of men willing to work; but the Cumberland furnaces are put out, not because of any lack of capital, for only within the last week or two a company of employers there were willing to sink £20,000 in raising iron ore, and were only prevented from doing so by the landlord's ultimatum that he would not reduce his royalty of 2s. 6d. per ton on the ore which might be raised. The company found that with this charge they could not raise ore as cheaply as it could be imported from Spain, and they therefore abandoned their project. Neither can it be that there are not men able and willing to work, for an ironmaster in Cumberland writes saying that there are thousan 's of men unemployed who would be glad to find work of any kind in order to save their wives and children from starvation."
In a pamphlet by Mr. C. M. Percy, Wigan, " Mine Rents and Mineral Royalties," mention is made of a case in which —
" In 1869 a lease was granted for a term extending until 1894, at a fixed certain minimum royalty which had to be paid whether any coal was wanted or not, and if any more coal wus got than
^ Mr. Pl. M'Ghee, in an address to the Govan (Glasgow) Liberul Association (quoted ia the "Financial Reform Almauack " for 1890).
MINES AND MINERAL ROYALTIES. I25
the minimum grant representeri, all that additional quantity paid additional royalty. The tenant expended £50,000, and in 1875 asked the consent of the landlord to the transfer of his lease. The landlord demanded a fine amounting to ten years" rent, and ultimately accepted a fine equal to five years' rent. In 1877 the lease was again transferred, and the landlord made a further demand of a fine amoiuiting to five years' rent, and ultimately accepted a fine equal to three years' rent."
Again, in the same work, as to Cornwall : —
" Leases are granted usually for twenty-one years. There are heavy fixed rates and dues on the output, paid in many cases not from profits but from actual calls on shareholders, the mines themselves being worke 1 at a loss. Enormous charges are made for surface damage to land, as much as £100 per acre of land whose annual value is £1. At the expiration of the lease the entire plant becomes the property of the landlord. . . The tenant gets nothing for * unexhausted improvements ' which his money has made."
Not only is the mining monopoly at present possessed by the landowners a public danger, whether regarded from the standpoint of the capitalist who floats or the labourer who works mines, but the effect of this mono- poly, involving as it does the levying of an inordinate tribute upon industrial enterprise, is to mal^e minerals and their products cost far more to the consumer than should be the case. I lay no stress whatever upon the obstacle thus placed in the way of the export of minerals, regarding it as an advantage rather than otherwise that the natural wealth of the country stored in mines — and especially coal — should be con-
126 THE UNEARNED INCREMENT.
served for home use, instead of being sent abroad, often at absolutely insignificant profit to the producer. '
]Much injustice is, however, suifered by home con- sumers, who have a right to the fullest possible benefit from the minerals with which the country is blessed. This they can only have when the principle for which I am contending is applied to mineral- containing land, equally with the land which is built upon and the land which is merely cultivated. Future increase of value to land from the development of existing mines or the discovery of new ones should not be appropriated by the owners of the soil, since that increase is due to no merit or service or exertion on their part, but to the bountifulness of the Creator who bestowed upon us the minerals and to the society whose needs give them value.^
^ The coal supplies of Great Britain are bein? depleted to the extent of millions of tons yearly for the benetit uf foreign countries, for it is well known that the gain on export is very small. The coal output of the United King-dom for the years 188U-4 amounted to 782 million tons, and we exported during those years about 100 million tons at an average price of 9s. per ton. Our coal- fields are limited in extent, yet of vast importance for our future industrial prosperity. Why should we thus drain them so cheaply?
* In Austria the landlords have no exclusive claim to tiie minerals beneath the surface. " Anybody who takes out a searcli licence is entitled to search for minerals on anybody's property. The proprietor has, of course, to be indemnitied; but, if he be un- reasonable in his demands, the searcher can obtain a compulsory lease, or sale at a valuation price, of the ground which he requires for sinking a pit or borehole."
Writing in September, 1«'J0, a Times correspondent in Vienna says: — "This system has done wonders in Austria, and one may safely say that without it the Austrian mining industry would never have attracted so much foreign capital and attained to its present flourishing state."
I
I
CHAPTER X.
HA LF-REMEDIES.
F it be granted that tlie community can properly claim that social value in land which has been created by causes operating independently of the owners, the more serious question arises : How shall the claim be made good? There are those who regard this practical phase of the subject as in reality very unpractical. Even so clear-sighted a man as Mr. John Bright once declared' Mill's proposal that the State should appropriate a portion of the unearned increment to be " so absolutely impracticable " as to be unworthy of discussion. But are the difficulties in the way so very great as to be insuperable ?
Here it is desirable to refer to two plans which have been recommended as offering at least a tentative solution of the problem. One is the purchase by towns of the fee-simple of their districts. By this arrangement the land upon which a town is built would belong to the local community as a whole, the
^January, 1884. 127
123 777^ UNEARNED INCREMENT.
buildings alone to the inhabitants or other individual owners, and all future increased value -would be a common possession.* This proposal, which has many supporters, especially amongst those who aim at the nationalisation of the land — to which goal it is a half- way house — has attained greater prominence in England since Mr. E. D. Grray, M.P., developed it in a memorandum appended to the first report of the Commission on the Housing of the Working Classes,,
" The only thorough remedy," wrote Mr. Gray, " is to enable the local authority in every town (agricultural land must be con- sidered separately) to acquire the fee-simple of the entire of its district compulsorily, and for this purpose the district should be so enlarged as to include ti.e probable growth of the town for a considerable period. This proposition may appear extravagant, but in principle it is a mere extension of the provisions of Sir Richard Cross's Acts. Tho-e Acts enable a sanitary authority to purchase an ' area ' compulsorily, and to take premises not in themselves in an unsanitary condition, if requisite to make the * scheme ' complete. The principle of taking property compul- sorily for the benefit of the working classes, even when the individual owner has been guilty of no default, is thus fully recognised. If it is just thus to take one man's property, it is just to take many men's property under the same conditions if
^ Overthirty years aeo Professor F.W. Newman, in his "Lectures on Political Economy" (published 1857) said :— " In the centre of a trading town ... we cannot murmur against the existence of ground-rent, however high, but only at the scandal of its having been wantonly granted away to private persons, instead of reserving it by law as a town property. When the use of the land is mani- festly essential to the lite of the community, it is an obvious maxim of political justice that the rent should be limited by law. . . The land on which a town is built ought never to be held in masses by a small number of persons."
HALF-REMEDIES. 120
the public interest requires it. It is now simply proposed tc make the * area ' extend to the whole ' district,' for in no other way can the ' scheme ' be made really complete and of permanent benefit. The community, represented by the local authority, would then have the benefit of such future increase in the value of the land of the town as was due to its increased prosperity caused either by the industry and enterprise of the community, or to circumstances equally beyond its control, and that of the original fee-simple holders of the land. Such a change, while inflicting no injustice upon any individual, provided a fair pur- chase price were paid, would, in consequence of the future enhanced value of the land, eventually not only do away with the necessity of local taxation in towns, but yield a constantly increasing surplus applicable to the benefit of the entire com- munity The local authority would let the land at
its disposal on conditions favourable to the development and protection of building enterprise by giving full security to thost? who invested their money or their labour thereon, while the profit and future * unearned increment ' would go to the com- munity,"
While <^his plan lias nowhere in England been adopted in its entirety, there are nevertheless many- towns whose corporations own considerable areas which they lease to advantage for building purposes, thus securing on reversion the increase of value. To such towns the report of the Committee on Town Holdings alludes : —
" It appears to be sometimes urged that any large increase of land-values during the currency of building leases is not in fact an unearned increment, but is due to the general industry and prosperity of the community. The fallacy of this argument as used for the purpose of justifying the expropriation of the free- holders by the lessees lies in confounding together the lessees and the community. As has bee« already stated, the evidence
K
130 THE UNEARNED INCREMENT.
shows that the lessees are not the community, but ouly a very small fraction of it. And there is neither reason nor justice in assigning to a small seciiou that which is due to the exertions of the general body. The distinction is clearly shown in cases where the Corporation of a town, as at Waterford, Dublin,^ Liverpool, Birmingham, or Nottingham, liold, as trustees for the community, land which they let upon building-lease. By such a process the increase of land-values, which is due, not to tho building that has taken place, but to the localised industry and general prosperity of the whole body of citizen.*, seems, according to the evidence, to be most satisfactorily secured for the general beoefit of those to whom it is due."
This plan is not peculiar to English social reformers. It forms a part of the programme to which many of the leading State Socialists of Germany have com- mitted themselves. Professor Wagner, of Berlin, advocated it years ago in his earlier works on political economy.^ He, in fact, aslcs for the entire abolition of private property in residential land. In towns there should be collective possession of both land and houses, the communities buying the former and building the latter. It is worthy of note, too, that twenty years ago a similar scheme was advocated by the more mode- rate section of the Social-Democratic party in Grermany. A useful object-lesson may, indeed, be taken from that
^ In the year 1881 an amount of property belonging- to the Dublin Corporation fell out of lease — the lease having been made in 1682— and the result was that a largely increased rental fell to the city, the leap being from £:)G 4s. to £2,000.
^ See the Orundlegunq to his " Lehrhnch der politischen Otlionomie " (Leipzig^ 1876), chapter v., sec. 354 et seq.
HA LF-REMEDIES. i ^. r
country. When Prussia annexed Hanover, after the war of 1866, she still retained the " domains " in fiscal hands. These lands were revalued, and as a result rents, which had hitherto been far too low, were advanced from 40 to 120 per cent., the State thus deriving the benefit.
A significant move in the same direction was (theo- retically) made by our own House of Commons when, on May 6th last, it adopted, by 175 votes against 159, the following resolution : —
"That in the opinion of this House a measure is urgently needed enabling Town Councils and County Councils in England to acquire by agreement or compulsorily, on fair terms ;ind by simple and inexpensive machinery, such land viithin or adjoining their several districts as may in their judgment be needed for the requirements of the inhabitants."
Yet, however admirable this proposal in its intention, and however beneficial to the extent of its application, it cannot be denied that it is after all an imperfect and incomplete plan. The unearned increment problem would be solved so far as the towns were concerned, but agricultural land — in fact, all non-residential land — and mines would be untouched. At the best, therefore, there could be no finality about such a measure. Society would still suffer injustice, the same in character if not equal in extent.
Again, great interest has of late been aroused in England in what is kno\vn as the "Betterment" prin-
k2
133 THE UNEARNED INCREMENT.
ciple. We have already seen how the public improve- ments carried on in towns frequently increase the value of the property they adjoin to an enormous degree. The advocates of the betterment principle would allow the owners of such property to retain the increment so created, though they would take away its unearned character by throwing a portion of the cost of an improvement upon the persons financially bene- fited. The betterment tax, as Mr. John Rae^ shows, has been known in America for nearly two centuries. He tells us : —
" The power to Impose such an assessment was given to a Highway Board in the county of Ulster, in the colony of New York, in the year 1691, for the purpose of making public roads, and the same power was again given the same year to the Cor- poration of the city of New York for the construction of the public streets. These Acts were still in force in 1773, when Von Schaack published his collection of statutes, and their better- ment clauses were re-affirmed in 1787, when the old colonial statutes were reTised for the new State constitution under the Republic. As the city grew, fresh Improvement Acts were required, and the same provision of a betterment tax for the partial or total payment of the expense incurred by the improve- ments was contained in the successive Acts of 179.3, 1795, 1796, 1801, and 1813. The betterment tax therefore originated in the very infancy of New York, and has continued ever since one of the ordinary ways and means of meeting the cost of city im- provements. It was a common custom there even before it was sanctioned by any statute. When the city fathers dug a new
^ Article in the Contemporary Revieio for May, ISOO, on ** The Betterment Tax in America."
HALF-REMEDIES. 133
well they always laid half the expense on the city generally, and the other half on the owners of the property nearest to the well. That was done in the case of public wells in Broadway, Pearl Street, and other parts in 1676."
Though the betterment principle set root in New York State so long ago, its introduction into the other States of the North American Union is of much more recent date ; in fact, belonging to the last half-century. Thus the principle has only been in operation in Boston since 1866, having been introduced in the city's Improvement Act of that year, yet by its instrumen- tality many public improvements, costing large sums of money, have been carried out at moderate cost to the ratepayers. So accustomed now are the communi- ties of the States to this tax that " for the last ten years there seems almost an entire absence of litiga- tion' against this form of impost;" and, in the words of a judge of the Supreme Court of Missouri, " it is now as firmly established as any other doctrine of American law."
' A case is related where, owing- to the operation of the better- ment principle, a New York landowner, part of whose land was taken for public improvements, was called on to pay a suna ol money into the bargain on account of the increased value given to the rest of his estate. " He flew to law but was told that he could claim no damages for sustaining a benefit. * The owner ot property taken,' said the Chancellor, 'is entitled to a full com- pensation for the damage he sustained thereby, but if the taking of his property for a public improvement is a benefit rather than an injury to him, he certainly has no equitable claim of damages.' And the Chancellor's view was confirmed on appeal by a unani- mous judgment in the Court for Correction of Errors." (Related by Mr. J. Rae in the Contemporai-y Jteview for May, 1890.)
134 THE UNEARNED INCREMENT.
In England no general law specifically incorporating the betterment principle has ever existed. Here the strange anomaly still exists that while local authorities may be compelled to pay compensation for injury caused to the property of individuals by reason of the measures they adopt in the public interest — as in the erection of public buildings, as schools, the diversion of a road, or the like — they cannot claim indemnity from the persons whose property their expenditure on improvements may benefit.' Partial acknowledgment of this principle- was, however, secured earlier in England than in America.
^ Thus, before the County of London Sheriff's Court on January 3rd, 1890, a licensed victualler and leasehold occupier of a public house in Clerkenwell Ruad "claimed compensation from the London County Council for injury to his interest in the premises in question, consequent upon diversion of traffic and trade caused by the Council's improvements in connection with the construction of the new road known as Rosehery Avenue. The amount entered in the formal claim was o£3,000." The claim was non-suited, as it was found that damage had not been sustained, but the Council's counsel admitted that " if there had been deterioration in the ^ralue of the propeity in consequence of the action of the County Council a legal claim for compensation could have been sustained."
Mr. Charles Harrison, in a letter to the Times, January 8th, 1890, mentions the following case, in which the owner of a public- house near Old Putney Bridge obtained damages: "The Metro- politan Board of Works built a new bridge [to replace the old Putney Bridge] a short distance up the river, but executed no new works in the main street in which the public-house was situated. The Borird made a new thoroughfare joining the old main-street ; the traffic which formerly went along the main street past the public-house subsequently passed along the new thoroughfare and so over the new bridge. The publican claimed and obtained from the iury ^1,031 compensation solely on account of the diversion of tiailio"
HALF-REMEDIES. I35
The first English law in which the principle is asserted is the Sewers Act of 1427 (6 Henry VI.), amended in 1531 by Act of 23 Henry VIII., the Statute of Sewers now in force. By these laws Commissioners of Sewers were appointed and the works executed under their direction were charged upon the lands directly benefited.' Then, again, in the Act of 19 Charles II., c. 2, for the rebuilding of the City of London after the Great Fire of 1666, the principle is clearly laid down.2 Coming to quite recent times the Artisans' Dwellings Acts of 1879 and 1882' recognise the justice of the
^The preamble of the earlier statute states that " considering the preat damage and losses which now late be happened by the great inundation of waters in divers parts of the realm, and that much greater damage is very like to ensue if remedy be not speedily provided," " several Commissions of Sewers shall be made to divers persons by the Chancellor of England for the time being, to be sent into all parts of the realm where shall be needful."
* After making provision for the enlargement and widening of Tarious old streets and passages, the Act proceeds (section 2i) : — "And forasmuch as the ho jses now remaining and to be rebuilt will receive more or less advantage in the value of their rents by the liberty of air and free recourse of trade, and other conveniences by such regulation and enlargement, it is also enacted by the authority aforesaid that, in case of refusal or incapacity as afore- said of the owners or others interested of or in the said houses to agree and compound with the said Lord Mayor, Aldermen, and Commons for the same : Thereupon a jury shall and may be impanelled in manner and form aforesaid, to judge and assess upon the owners and others interested of and in such houses, such com- petent sum and sums of money with respect to their several interests, in consideration of such improvement and melioration, as in reason and good conscience shall think tit. . . And the money .xo raised shall be wholly employed towards payment and satisfac- ticm of such houses and ground as shall be converted into streets, passages, markets, and other public places atoresaid."
' Before this, various attempts were made to resuscitate the betterment principle. A quarter of a century ago (iu ISOG) the
i36 THE UNEARNED INCREMENT.
principle. In the former measure it is provided that in the fixing of the compensation payable to an owner on account of the demolition of his property, regard shall be had to any additional value thus given to the adjoining property of the same owner. The Act of 1882 goes further, for it provides that where an obstructive building' is taken for the purpose of im- proving the adjacent property, the improvement given to that property may be charged upon it in the form of a rate in aid.2 The betterment provisions of these two
Select Committee on Metropolitan Government recommended the levy of a tax on owners in aid of the cost of permanent improve- ments made in London. The same principle underlay the proposal of the Select Committee upon Local Taxation, which, under the presidency of Mr. Goschen, recommended in 1870 that occupiers should be entitled to throw part of the rates upon the landlords by deducting it from the rent.
^ In the Housing of the "Working Classes (Amendment) Bill of 1890 an " obstructive building" is defined as "a building so situate that by reason of its proximity to or contact with other buildings it (among other things) prevents proper measures from being carried into eftect for remedying the evils complained of in respect of such other buildings" (the "evils complained of" including nuisances injurious to health).
^ The exact wording of section 8 of this Act is as follows : — "Where, in the opinion of the arbitrator, the demolition of an obstructive building adds to the value of such other buildings as are in that behalf mentioned in this section, the arbitrator shall apportion so much of the compensation to be paid for the demoli- tion of the obstructive building as may be equal to the increase in. the value of the other buildings amongst such other buildings respectively, and the amount apportioned to each such other building in respect of its increase in value by reason of the demoli- tion of such obstructive building shall be deemed to be private improvement expenses," &c.
These "private improvement expenses" fall largely upon the occupier. Sir Hugh Owen, Permanent Secretary of the Local Government Board, stated before the Commission on the Housing of the Working Classes :— " A private improvement rate is borne to
HALF-REMEDIES. 137
measures were rendered necessary by the difficulty which always accompanied the removal of old property *by improving communities owing to the extortionate compensation demanded and secured by adjacent landowners. The report of the Commission on the Housing of the Working Classes says : —
" The evidence has shown that there have been striking instances of compensation which has been paid in cases where persons have received payment for actual advantage which has accrued to their property from the demolitions or alterations ; for example, where a portion of property is taken in order to widen a street. It was stated by Mr. Chamberlain that enormous compensations have been paid to landowners in such cases. Six feet, for instance, has been taken off their frontage, and instead of facing, as they have hitherto done, a mean court or a wretched side street, they find themselves on a great thoroughfare, and the i-emainiug part of their property is worth twice or three times as much as the whole of it was worth before ; and yet, although nothing is taken from them by way of contribution, they may have secured enormous cumpensation."
During late months (1889-90) the subject has been much discussed in and out of Parliament by reason of the promotion by the London County Council of a Bill — unfortunately wrecked— containing clauses intended ^to legalise the betterment tax in respect of the con- templated widening of the Strand.* Section 28 of the Strand Improvement Bill said : — •
Bome extent by the occupier of the premises, and I hardly think it quite fair that the occupier should be called upon to pay. in addition to his rent, for the improvement of the owner's property." ^ *' As a practical proof of Strand * betterment' it may be men- 'tioned that a public-house in that thoroughfare, which three years
I3S THE UNEARNED INCREMENT.
" And whereas the improvement, being effected out of public- funds belonging to or charged upon the ratepayers of the county of London, will or may increase in value lands or property fronting on or in the neighbourhood of the improvement, but not acquired for the purpose thereof, and it is reasonable that pro- vision should be made under which such increased value should be reserved wholly or in part for the ratepayers at whose expendi- ture it ha« been prorluced, therefore: (1) Tliere shall be a rent charge, to be called the Strand Improvement Rent Charge, which shall be fixed, ascertained, charged, and payable in manner herein- after described ; but the total of the Strand Improvement Rent Charge shall not be of any amount which, when capitalised on such basis as the Standing Arbitrator may deem reasonable,, would in his opinion exceed one half of the cost of the improve- ment," &c.
Yet here, again, while the aim of the friends of" the betterment principle is laudable, and while that principle is perfectly just and equitable, the same objection holds good as in the case of purchasing the- fee-simple of towns ; we have not here a complete solution of the unearned increment problem.^ The
ago was bought tor £9,200, has just changed hands for .£16,300 ! — and of course during the period in question very large annual- profits were made." — Daily Telegraph, April, 1890.
^ It is important to notice the opinions which have been expressed on this subject by leading Liberal statesmen. The views of Mr. Gladstone have already been referred to. Mr. J. Morley has spoken still more decisively. Addressing the members of the Eighty Club on November 19th, 1889, he spoke of " the monstrous iniquity that landlords whose property is enhanced in value, owing to expenditure to which they do not contribute, are allowed to pocket the enhancement of value," adding : — "It may last till 1899, but I do not think it will, but whether it does or not let us make up our minds what we are to tell to our constituents and to- the audiences that we address in the country. Let us tell theta that those who derive most of the permanent benefit of the en-
HALF-REMEDIES. I39
plan of levying improvement contributions on landlords only applies to one kind of increment, or, to speak with greater accuracy, to only one species of one genus. There is, as we saw at the outset, an urban increment (that created in the town) ; and there is a rural incre- ment, in the production of which different causes operate. Moreover, taking the social value of town land, there is that value which is attributable directly to public improvements — and these only were con- templated by the London County Council — and there is the value which is due to the general progress of society, and it is in respect to this that the inadequacy of the betterment principle becomes especially ap- parent.
hanced value are those wlio contribute least to the expenditure that produced that enhancement. Let us go to those men and say to them, ' You shall not go on pocketing this increased value. You shall not go on taking permanent advantage and paying none of the costs. You shall bear a fair and a good share of the expend!- ture which produced that advantage.' Surely this is all plain common-sense and justice. We need not go into the metaphysics of land nationali^ation, nor into absolute ethics or relative ethics. The plain common-sense of Euglishmen will tell them that this is a system which ought now, without delay, to be peremptorily •brought to an end."
CHAlTKK XI,
ROOT AND BRANCH.
THERE can be no doubt that taxation is the most effectual means of getting at unearned incre- ment— of " taj^ping " it for the benefit of society. By this plan it will be possible to gather the whole of the increment into the social net, thus allowing the com- munity— represented by the State, the County Council, the municipality, the urban authority, or whatever organ may be considered the best for the purpose — for the future to keep its own. It may be said that property owners do already pay both higher taxes and higher rates because of the growing value of their possessions. But it is not enough merely to return to society in this way a low rate of interest on the value which it has created. Society has a right t^ the entire capital worth. To take an example : The value of a given quantity of land is to day £100 ; a later valuation shows it to be worth £120. This increase is demon- strably not due to any labour, any exertions, any expenditure of capital on the owner's part, but to purely
140
ROO T AND BRANCH. J 1 1
social causes. The increment of £20 should not, then, be appropriated by the landlord, who has not done anything to create it, but by the community. Surely no real injustice would be inflicted upon a man by with- holding from him something which he never possessed. This unearned increment never was his ; how, there- fore, could he be said to sufifer injustice if society, with- out touching the orginal £100, kept all value exceeding that amount ?
On this subject Mill (after premising that "there are cases in which exceptions may be made to " the prin- ciple of equality of taxation " consistently with that equal justice which is the groundwork of th® rule ") says forcibly : —
" Suppose that there io a kind of income which constantly tends to increase, without any exertion or sacrifice on the part of the owners : those owners constituting a class in the com- munity -whom the natural course of things progressively enriches, consistently with complete passiveness on their own part. In such a case it would be no violation of the principles on which private property is grounded, if the State should appropriate this increase of wealth, or part of it, as it arises. This would not properly be taking anything from anybody ; it would merely be applying an accession of wealth, created by circumstances, to the benefit of society, instead of allowing it to become an unearned appendage to the riches of a particular class." ^
Here it will be interesting to inquire how far Mill is really prepared to go. After asking what claim the
' ** Principles of Political Economy," Book Y., chap, ii., sec. 5.
143 THE UNEARNED INCREMENT.
landlords have, " on the general principle of social justice," to the increase of riches which is caused by society's progress, he proceeds : —
" In wliat would they have been wronged if society had from the beginning reserved the right of taxing the spontaneous increase of rent to the highest amount required by financial exigencies ? I admit that it would be unjust to come upon each individual estate, and lay hold of the increase which might be found to have taken place in its rental ; because there would be no means of distinguishing between an increase owing to the general circumstances of society, and one which was the effect of skill and expenditure on the part of the proprietor. The only admissible mode of proceeding would be by a general measure. The first step should be a valuation of all the land in the country. The present vahie of all land should be exempt from the tax ; but after an interval had elapsed, during which society had increased in population and capital, a rough estimate might be made of the spontaneous increase whicli had accrued to rent since the valuation was made. Of this the average price of produce would be some criterion ; if that had risen it would be certain that rent had increased, and even in a greater ratio than the rise of price. On this and other data an approximate estimate might be made how much value had been added to the land of the country by natural causes ; and in the laying on a general land tax, which for fear of miscalculation should be con- siderably within the amount thus indicated, there would be an assurance of not touching any increase of income which might be the result of capital expended or industry exerted by the proprietor. . . From the present date or any subsequent time at which the Legislature may think fit to assert the principle, I see no objection to declaring that the future increment of rent should be liable to special taxation ; in doing which all injustice to the landlords would be obviated if the present market-price of their land were secured to them ; since that includes the present ^alue of all future expectations. "With reference to such a tax,
ROOT AND BRANCH. ^.y,
l^eihaps a safer criterion than either a rise of rents or a rise of the price of corn would be a general rise in the price of land. It would be easy to keep the tax within tlie amount which would reduce the market-value of land below the original valuation ; and up to that point, whatever the amount of the tax might be, no injustice would be done to the proprietors." ^
The two principal objections to Mill's proposal of a general uniform land tax are, (1) that it would only dfiford society partial relief and protection for the future, and (2) that the incidence of this tax would be very unequal. The first of these objections needs no further amplification. As to the second, it must be evident that if land of all kinds, and in all parts of the country, were to be placed in one category, neither society as a whole nor individual landowners would be certain of receiving justice. In a country in which, as in England, agriculture is divided between the two great branches of corn-growing and grazing, it is quite possible that there may be considerable variation in the relative values of land applied to such different purposes. It is a fact that, during the agricultural crisis of the past few years, Southern farmers touched a far lower level of depression than farmers in many parts of the Xorth; and even amongst corn growers as a class, and graziers as a class, there was much variety of circumstances and fortune. Again, agricultural land differs considerably in value and
■• *' Principles of Political Economy," Book V., chap., ii, sec. 5.
-44 THE UNEARNED INCREMENT.
in augmentation of value according to location. The land adjacent to towns increases in value more rapidly than that which lies where population is sparse. What, then, would be the effect of the impo- sition of a uniform land tax by reason of a " general rise in the price of land ? " The landowners of indus- trial districts would feel it no hardship to pay the tribute levied on the increment which had accrued to them, but others might find the burden unjust, because disproportionate to the increased value of their lands. The only way of avoiding this inequality is to " come upon each individual estate," and this plan Mill does not recommend.
But the greatest objection to be raised against Mill's proposal of a uniform increment tax arises out of the utterly different position of urban and agricultural land. Where agricultural land may, in a given period, increase in value one per cent., the land upon which towns are built may — and, probably, often does — in- crease a hundred per cent. Indeed, speaking generally, Urban land is perpetually increasing in value, but this cannot be said of agricultural land. While the cloud of depression was hanging heaviest over the farming industry of England, and holdings might be bought at figures lower than for many years, land in our large toTvns continued without cessation to rise in value. It follows, therefore, that a tax fairly representing
ROOT A.\'D BRANCH. ,^3
society's claim on the increment which had accruod to agricultural land might be an utterly and absurdly inadequate proportion of the increment created in towns.
It seems to me that the most effective and the only equitable solution of the difficulty would be foiuid if the plan to which ?dill objects were adopted, and we "came upon each individual estate [urban and rarai alike] and lajd hold of the increase which might b« found to have taken place in its rental." Mill's argu- ment against this plan is that " there would be no means of distinguishing, in individual cases, between an increase owing solely to the general circumstances of society, and one which was the effect of skill and expenditure on the part of the proprietor." In reply it may be admitted that all expenditure which tended to the permanent improvement of land ought to be regarded as a set-off against the increase in its capital value, and to this extent society should have no claim upon the increment caused. For example, if a landlord went to expense in improving an agricultural holding, by draining the land and placing buildings upon it, ther<». should be no claim upon the increment found on re-valuation t<j have been created, so long as that incre- ment was not out of proportion to the addil-ional investment of capital in the land. If, on the other hand, that increment were, for evident reasons, so large
146 - THE UNEARNED INCREMENT.
as to be disproportionate to the capital expended in the permanent improvement of the holding, the excess of increment due to causes acting independently of the owner should go to society.'
It seems probable that the question would best be settled in conjunction with the re-adjustment of the land tax. This tax, as is well known, is now very iasignificant in its return, and very irregular and unjust in its incidence.^ The last statute which
^ The views here expounded receive partial acceptance fr'ni M. Emile de Laveleye, who, writing on ttie increase in land-values in Belgium since 1830 (vide the Cobden Club's " Systems of Land Tenure in various Countries," edition 1881, p. 467), saj-s :— "Part of this progrii'ssive increase in rent may be traced to improvements made by the tarmer in the cultivation of the soil. By raisin? the rent the landlord lays hold for himself of this advance in the value of the land produced by those who cultivate it. The increase of the revenue the landlord derives from his land is not the result of improvements executed by himself, and the fact adverted to is a general one, which may be met witti everywhere. In whatever cases landlords have actually made improvements, they have got tlie interest of the outlay in the shape of an additional augmenta- tion of their revenue. For these reasons (he adds) 1 thiuk that the increase of rent, being due to the progress of societj' at large, and not to the exertions of the landowners, ought not in justice to benefit the latter alone. It would be but fair to divide thia benefit."
^ " In most countries of Europe the right to take by taxation, as exigency might require, an indefinite portion of the rent of land has never been allowed to slumber. In several parts of the Continent the land tax forms a large pr )portion of the public revenues, and has ahvays been confessedly liable to be raised oi- lowered without refere^iee to other taxes. ... In England the l:ind tax has not varied since the early part of the last century," (^i ill's " Principles of Political Economy," Book V., chap, ii., sec, 5.)
" In most countries a tax on the rent of land forms a notable jt"m in the revenue receix)rs. In the United Kingdom it is included iii the income tax, the so-called land tax being a rent issuing from.
ROO T AND BRA IVCH. 14.7
regulated the tax was passed in 1798. The Act im- posed a fixed tax, payable by each parish in perpetuity, subject to the option of redemption.' The rate was 4s. in the pound, and the tax then yielded about two million pounds. Redemptions have reduced the yield to about a million pounds, a sum which is very un- equally raised. As the quotas payable by the parishes were made invariable, strange anomalies have arisen. "WTiere population has greatly increased, and the value of land has proportionately risen, the rate per pound has fallen to a totally inadequate sum. No parish now pays the full original rate of 4s. in the pound, but there are many parishes which pay only Id. in the
the land, invariable, redeemable, and wholly disproportionate to the present value of tlie property from which it is derived." (Professor Thoroid Rogers, "Political Economy," chap, xxii.)
Mr. Groschen said in his report to the House of Commons on Local Taxation, August 10th, 1870 :— " The amount paid by land alone towards imperial taxation in England is live and a-half per cent. ; in Holland nine per cent. ; in Austria seventeen and a-half per cent. ; in France eighteen and a-half per cent. ; in JJulgium twenty and a-half per cent. ; and in Hungary thirty-two and a- half per cent. What do these facts prove ? They prove that, as regards imperial taxation, land in this country is in an infinitely better position than land in any other European State."
^ The effect of Pitt's Land Tax Redemption Act— which was but a money-making expedient — was to perpetuate the laud tax at its then heii^ht. The valuation was that of 1692, made under William III., in accordance with a statute providing " that an aid be granted to His Majesty of 4s. in the pound on the true yearly value of real property and on all salaries," &u. Tiie assessment on the land realised i'2,037,G27, and in 1697 Parliament fixed two millions as the future limit of the laud tax. Pitt's Act made this levy perpetual.
1.2
143 THE UNEARNED INCREMENT.
pound, and the rate of some is as low as a hundredth of a penny.
This tax should, as a preliminary step towards its complete re-adjustment, be redeemed on easy terms. When it had been swept away the deck would be clear for the introduction of a new and rational land tax. A general valuation would be necessary for the purpose, and this made, an equitable tax should be imposed — so much in the pound, applying to urban and rural land equally. For the future, however, there should be valuations at definite intervals — say, every five years for to^vn land, and at longer periods for agricultural land — in order to learn the increase in value, if any. After the first re-valuation and after every succeeding valuation a special tax should be levied upon that increase in the rental which could be shown to be due to social causes. The amount of the original valuation, together with any increase attributable to the owner's expenditure or exertions, would only be subject to the general land tax, but the amount beyond that, as it represented society's contribution to the value of the land, should belong to the community.
"Whether unearned increment socially appropriated should go to the State or to the local communities is a secondary question, though much may be said in favour of each local government district retaining the whole of the additional value which its population may
ROOT AND BRANCH. 149
have given to the land it uses. The freeholder or leaseholder, as the ease might be, should pay over the increment to society in the form of taxation. For various reasons it would not be desirable to require the payment of its capital value in a lump sum. In the first place, such a plan would often entail hardship, as it would compel many owners to borrow or sell part of their property in order to liquidate their indebtedness. But a more serious, and indeed fatal, objection lies in the fact that owners are often, by agreements of various kinds, precluded from present participation in the increasing value of their land. On the one hand it would not be just to expect a landlord so circumstanced to pay down the capital value of an increment of which he does not enjoy the benefit ; but on the other hand it would be equally unfair to ask a temporary bene- ficiary to do this, as his interest in it would often be of short duration. It would not, however, be inequit- able to impose such an annual tax as would absorb the whole of the increased rental falling to the landlord in consequence of the increment socially created. This tax would re{)resent the landowner's pa3'ment to society in consideration of its proprietary interest^ in the land.
To show how this plan would work in two directions ^a{)plied to town and also agricultural land.
(I.) Let us, first, for the sake of argument, suppose the present value of an urban property to be £1,000,
i::o THE UNEARNED INCREMENT.
yielding a rental of £50. The landlord would pay upon the value of the land (apart from buildings) the initial and uniform land tax to be fixed. After a certain number of years a re-valuation is made, and it is found that the property is worth £1,200, and that the rental is £60. In the absence of expenditure by the landlord for the improvement of the property the spontaneous increase will be more than £200 (£10 rental), since the buildings will have depreciated in value.' When the actual value of the land alone had been determined, the increment would be recovered in the form of a special tax, to be modiiied or increased according as the next revision showed a diminution or a further growth in the value of the land. The depre- ciation of a bailding could not, of course, be allowed to prejudice society's claim to all the increment it might give to the land upon which that building stands, since in fixing the rent upon any structure a landlord has regard to its probable duration, and the tenant pays every year at once interest and depreciation. (2.) In the case of purely agricultural land, the mode of proce'Iure would be much simpler. Until a re-valuation took place the landlords would pay the uniform tax. Suppose during the interval an estate increased in
^ So the report of the Committee on Town Holdings says : — " The decrease during: the term of a 99 years' lease uf the value of a house seems as a rule to be accompanied by a correspjuding increase in the value of the land on which it stands."
ROOT AND BRANCH. I5»
value to the same extent as in the first illustration, •roin i?],()00 to £1,200, and the rental from £50 to igCO. Due allowance would be made for the proportion attributable to the landlord's expenditure, and the remainder of the increment (if any) would be claim- able in the way of special taxation.
But should society claim a share in any increment which evidently exists, even though not expressed in the form of increased rent? In order to err on the side of leniency it should not. So long as agricultural land did not return a higher rent owing to the tenant's exertions or social causes, society would be suffering no injury, and it would therefore be equitable to allow the initial tax to remain unincreased. In this respect, how- ever, land built upon and land not so em.ployed stand upon a different footing. Land is not subject to dilapi- dation and eventual decay as buildings are, and, as has been shown, a rise in the value and rent of a house-site is perfectly compatible with the absence of any increase in the value and rent of house and site together.
It follows as a matter of course, however, that on property changing hands either the increased social value which has accrued since the original valuation would be claimed in a lump sum by the community, or the property would be sold subject to a special tax large enough to absorb the return claimable upon that increased value. In other words, the owner would only
It; 2 THE UNEARNED INCREMENT.
receive the prime value lAaa such value as had been caused by his own improvements.
Should land be unused, not because the owner refused to let or sell on favourable terms, but from the absence of tenant or purchaser, some degree of relief from taxation might be considered equitable. There would no longer, however, be any inducement to with- hold land from use because of the expectation of increasing value — a practice at present common in large towns, and one encouraged by existing rating law in England — for marketable land would invariably be returning rent. If it did not, society would be effectively protected by the local taxation of such land ui)on its full value.
But, it may be asked, if the maximum value (to the landlord) of land be fixed, as it practically would by this arrangement, should not that maximum be secured to the owner ? If we determine that social causes shall not henceforth create for the landlords a higher value than their land at present possesses, is it not fair to gviarantee them at least the existing value ? If they may not gain in the future, should they not be protected against eventual loss ? At present they take the good with the bad. If land-values increase at one time, they may fall at another ; yet the owners do not permnnently suffer, for a turn of fortune brings them recompense for their losses. Is not that plan, it may
ROOT AND BRANCH. 153
be argued, inequitable which exposes the laudlords to risk, -while not affording them an opportunity of re- couping themselves for the sacrifices which the vicissi- tudes of industry and trade and other causes may sooner or later entail ? As society is to benefit by all future increment, should not a minimum value be secured to all land ? Those who pursue this line of argum.ent overlook the vital fact that land entirely owes its value to human labour, in one form or other, and to the presence of population. Society originally gave value to the soil by dwelling upon it and by cul- tivating it ; and even now, human need and use is the greatest factor in the value of land. Value may, therefore, be said to exist by the sufferance of society. There cannot be such a thing as a vested interest in the value of land. Did individuals or communities not require, for their own convenience, the land upon which they dwell and labour, it would not be worth more to the owners than such value as might represent the satisfaction of their own needs, desires, and pur- poses. To ask that a certain value may be assured to the landlords is to recognise an absolute obligation on the part of society as a whole to use, and pay for the use of, those portions of the earth's surface wiiich certain of its members have been pleased to claim as their own. No such obligation exists.
It may be said that such a system of taxation as is
154 THE UNEARNED INCREMENT.
here advocated is complicated and would involve great difficulties. Grranted ; but the issues at stake are infinitely greater than any difficulties which might have to be faced. The machinery necessary, too, would be costly. True, but the proceeds of taxation would be enormous, and would afford society incalcul- able relief. Neither difficulty nor cost can be held to be a valid objection. Such fiscal institutions as the income tax, customs and excise, and local assessment were probably regarded as impracticable at one time or another, yet in spite of their intricate character they are found, after experiment, to be eminently workable. Surely the genius and sagacity which have caused our present fiscal machinery to move with at least tolerable smoothness would not find in the imposition of this new tax an insuperable problem. But with this as with all far-going reforms the difficulty lies more in the will than the way. I-.et public opinion call for the social appropriation of the unearned increment, and politicians and parties will vie for the credit of demon- strating that such appropriation is possible.
It is not too much to claim for this question the foremost place in the programme of urgent land-law reforms. Other phases of the land problem may, indeed, for evident reasons, be given a preferential position by those leaders of thought who believe that in dealing with the problem the reforming legislator
ROOT AND BRANCH. 155
will, in the future as in the past, be able to work with his hands in kid gloves. But sooner or later the ques- tion will have to be faced boldly, and it is very desirable that people should begin at once seriously to recognise its significance. There are few social questions the study of which does not bring us ultimately to the land, and generally that destination is reached very soon. Whatever class of people the reformers of to-day may seek to benefit and to elevate — be it the rack- rented and sweated toiler of the city, the husbandman who looks longingly back upon the better days of yore, or the agricultural labourer who weighs the possibilities of a manhood to which, from no fault of his own, he has so lately and so slowly attained — the final crux^ the last and highest stone of stumbling, is the land.
Let us not deceive ourselves. Free land, the disinte- gration of latifundia, allotments, peasant proprie- tary, leasehold enfranchisement are all desirable and excellent so far as they go. But they will not settle the land question. So long as society is punished for its progress, so long as the fair fruits of civilisation, of enlightenment, of public enterprise, and individual exertion are appropriated by the landowners, it cannot be said that the gravity and deep significance of this question are comprehended. All the reforms enume- rated are intended to benefit that part of the com- munity which is directly associated with the land, and
I $5 THE U.y EARNED INCREMENT.
they would only beaetit society in so far as every impro' "ement in the welfcire of the individual improves the welfare of the whole.
But the diversion of the unearned increment into public channels would be a measure of social benetir, for instead of being monopolised by tue few who do not create it, it would be shared by the many who do. Sach a distribution of the growing wealth of the com- munity would not only be an act of social justice ; it would be productive of manifold positive blessings. Everywhere in town and country the pressure of taxa- tion would be reli^?ved. Industry and commerce would be emancipated from many harassing fetters. Honest enterprise would be encouraged. Men and women, born into a world already appropriated, destined here to live, would be able to breathe more freely. Society would henceforth lal^our to benefit, instead of to injure itself. There would, in fine, be laid the foundations of a new and a higher social life, whose crowning characteristic and whose glory would be greater j)ro- sperity and happiness — greater and also truer, because aaore general.
CHAPTEK XII.
MUNICIPAL UNEARNED INCREMENT TAXES IN GERMANY.
During the past ten years the principle of taxing the unearned increment in the value of land for public purposes has made great progress in Germany, where it has now become a recognised feature of local finance. The German States have never shown reluctance to require real estate to contribute freely to the municipal as well as the national exchequer. In Bavaria, parti- cularly, a large part of the municipal revenue is derived from property taxes. This is doubtless due in large measure to the strong State consciousness which has been fostered by the German bureaucratic tradition — a positive advantage of high value which must in fairness be set against the equally obvious evils of patriarchalism and excessive centralisation — the effect of which has been to check the growth of vested interests, and to reserve to the Executive, by the common consent of the community, a far larger discretion in the choice of objects of taxation than would appear to be possessed, or at any rate exercised, by some more democratic countries.
It is thus no accident that Germany is in some respects far more advanced than England in the fiscal treatment ir.7
^58 MUNICIPAL UNEARNED INCREMENT
of the land question, and especially in the powers which municipalities possess to raise revenue by direct taxes upon real estate. In Prussia, as in other German States, a moderate land and building tax has long been universal, and when the last Income Taxation Laws were passed, from 1892 to 1895, introducing a new and heavier income tax, yielding at once some 50 per cent, more than the old tax, this land and building tax, with the trade tax, was handed over by the State to the communes. But this is not the only form which the direct municipal taxation of land takes in Prussia. Many municipaUties, like Berlin, levy a special tax (the Umsatzsteuer) on real estate when it changes ownership, the usual rate being I per cent, on land built upon and 2 per cent, on land still unoccupied, though these rates are sometimes progressive, reaching maxima of 2 and 6 per cent, at Frankfurt. This tax yielded the municipahty of Berhn in the year 1906 no less a sum than ^^219,280, and the proceeds increase yearly.
A more recent local land tax is that on " increased value " [wertzuwachs], the German equivalent of the unearned increment tax outlined in the foregoing pages. It is significant that the Prussian Government was directly responsible for the introduction of this tax, since in the Local Taxation Law of 1893 it expressly directed the attention of municipal authorities to the tax as a legitimate source of local revenue, and as an effective means of checking unhealthy speculation in
TAXES IN GERMANY. 159
land values, and so of relieving, prospectively at least, the pressure of the housing problem.
It is probable that the large amount of land specula- tion which has of late years taken place in many of the progressive German towns, and the enormous gains which have been made by companies and individuals who followed such speculation as a trade, have done much to convince the local government authorities and the public of the expediency and equity of appropriating some portion of the constantly increasing value of land in and around towns.
One of the Berlin land companies, in the autumn of 1908, sold 51 sites of land on the Lietzen Lake and in Reinickendorf at a profit of £42,250, or at the rate of ;fi2 los. per square rod. Recently a building in the Leipziger Strasse, Berlin, changed hands after nine years at an advance of from £18,^^0 to ;^4i,i5o, an increase of 124 per cent. In May, 1909, a property in the Franzosische Strasse, in the same city, which two years before changed hands for ;{25,ooo, was sold for £38,000, an increase of 52 per cent.
It is estimated that the selHng value of building land in the Grunewald, near Berlin, increased between 1889 to 1899 from £2 to £35 per square rod, and that of similar land in Friedenau, a suburb, between 1870 and 1901 from £1 to £40 per square rod.
In i860, a property of 345 acres on the Kiirfiirstcn- damm, in the same city, had only an agricultural value
160 MUNICIPAL UNEARNED INCREMENT
of ;^5,ooo ; coming into the market as building land its value in 1880 was ;^25o,ooo.
In Munich land needed for a public abattoir was bought in 1872 for 4s. iid. per square metre ; in 1896 the adjoining land was sold for £2 los. per metre. The value of the land upon which the town of Charlottenburg stands is said, on good authority, to have increased since 1871 from two-and-a-quarter to twenty milhon pounds.
Similarly, in recommending the tax to the Municipal Council for acceptance the Mayor and Executive of Breslau mentioned the fact that the property in the centre of the town had increased in value since 1885 from twenty-four million to thirty-eight million pounds in 1895, and to fifty- four million pounds in 1905.
The unearned increment tax was first legalised in Germany's Chinese dependency of Kiau-Chau in 1898. In Germany itself it was first introduced by the munici- pality of Frankfurt-on-Main in 1904. Cologne followed in 1905, and the Westphalian touTis of Dortmund, Bochum, and Gelsenkirchen, with Essen, Posen, Breslau, Gorlitz, Kiel, Charlottenburg, Schoneberg, and several of the smaller suburbs of Berlin — Weissensee, Rein- ickendorf, Pankow, Tegel, Mahlsdorf, Ober-Schonweide— have more recently adopted the tax. Hamburg and Dresden are about to introduce the tax and the Municipal Council of Berlin is committed to the principle, but the curious feature of the East Prussian Municipal
T.4A'£:5 IN GERMANY. 161
Election Law, which requires one half of the members of a Municipal Council to be house-owners, has, so far, prevented the introduction of the tax in a form ac- ceptable to the Mayor and Executive of that city. The tax has also been adopted in many towns, both small and large, in other States, and even in villages of 500 inhabitants in Saxony.
What is specially noteworthy about this sudden and widespread recognition of the taxation of unearned increment as a natural supplement to existing sources of municipal revenue in Germany is the fact that the new tax has been introduced without any of those fierce conflicts of interest which are to be apprehended before progress on similar lines will be possible in this country. A Prussian Municipal Council having affirmed its ap- proval, all that is necessary is to obtain the ratification of the District Committee and the Governor or Chief President of the District, except in BerHn and its suburbs, where the Ministers of the Interior and of Finance must be consulted, and the tax can be enforced without delay.
A remarkable illustration of rapid procedure in the introduction of the tax occurred in April of the present year (1909) at Schoneberg, near BerUn. The tax had been approved in principle, and only the Order embod}dng it remained to be adopted, when it became known that a land speculation company was endeavouring to hurry through a large transaction, with a view to escaping the new impost. There was a race between the munici-
162 MUNICIPAL UNEARNED INCREMENT
pality and the speculators, and the municipality won. On April 26th the Municipal Council adopted the Order, and the same day the Executive gave its assent. The following day the District Committee met and passed the necessary resolution of approval. On the third day the project was laid before the Chief President of the District, who ratified it ; on the fourth day the Minister of the Interior and on the fifth day the Minister of Finance gave their agreement, and on the evening of the last-named day the Order was promulgated and entered into force. It is stated that this prompt action saved the municipal treasury no less a sum than ;f5o,ooo in taxation.
The unearned increment tax as introduced in German towns differs in various details — such as the rates charged, the proportions of increased value exempted, the periods of respite, and the hke — but the broad principles are everywhere the same. The taxable increment is held to be the excess of the price or value on resale or transfer over the price or value at the previous change of ownership. The seller is, however, allowed to deduct all expenditure on permanent improve- ments, inclusive of the cost of street-making and sewage connections, though expenditure on new buildings and rebuilding cannot be deducted when covered by the proceeds of fire, water, or other insurances. It is also usual to tax land built upon from one-third to one-half less than land that is still free, and as a rule
TAXES IN GERMANY.
163
an increment which does not exceed lo per cent, of the earlier value is exempted altogether from taxation. In the case of ground not built upon, if not used by the owner for agricultural or industrial purposes, loss of interest and expenditure incurred in keeping it in good condition may be added to the former purchase money, but any receipts derived from the land must, on the other hand, be deducted. While the sale tax {Umsatsstetier) is paid by the purchaser of the property, the unearned increment tax is paid by the seller.
The following are the rates of taxation and other conditions which apply in certain well-known towns : — Frankfurt-on-Main.
The tax only applies where less than 20 years have passed since the last change of ownership. The in- creased value exempted from taxation is here 15 (ori- ginally 30) per cent. Beyond that the rates are as follows : —
Increased Value.
15 to 20 per cent, inclusive
20 to 25 „ „
25 to 30
30 to 35
35 to 40
40 to 45
45 to 50
50 to 55
55 to 60
|
Tax. |
|
|
2 |
per cent |
|
. 3 |
;i |
|
• 4 |
>> |
|
• 5 |
>> |
|
. 6 |
>> |
|
. 7 |
!> |
|
. 8 |
yy |
|
• 9 |
>> |
|
. 10 |
>> |
164 MUNICIPAL UNEARNED INCREMENT
and so on at the rate of i per cent, for every additional 5 per cent, of increased value to a maximum tax of 25 per cent.
The original purchase price is taken as the basis of assessment, but the following additions are allowed, so increasing the sum which is not liable to taxation: — Expenditure on permanent improvements of the ground, including the cost of making streets, sewers, building and rebuilding, but such expenditure is inadmissible when covered by insurance payments ; 5 per cent, of the original purchase price to cover legal costs and stamp and transfer taxes ; in the case of land not built upon which has not been used by the owner himself for agriculture or trade, loss of interest at 4 per cent, and also costs of repairs and maintenance are allowed for, but income derived from the property must be set against these allowances.
Cologne.
The increment tax here is levied on the increase in value above 10 per cent, which has taken place since the last change of ownership. Where not more than five years have elapsed since such change, the tax is as follows : —
Increased Value. Tax.
10 to 20 per cent, inclusive . . 10 per cent.
20 to 30 „ ,, .. II
30 to 40 ,, „ .. 12
40 to 50 „ „ .. 13
TAXES IN GERMANY.
165
and I per cent, additional for every further lo per cent, of increased value to a maximum of 25 per cent, for an increase of 160 per cent. If more than five but not more than ten years have elapsed since the previous change of hands, the tax is only two-thirds of the above scale, and if more than ten years have elapsed it is only one-third. There are the usual allowances.
Breslau.
The first 10 per cent, of increased value is exempt from taxation, and afterwards the following rates apply :—
Increased Value.
10 to 20 per cent, inclusive
20 to 30
30 to 40
40 to 50
50 to 60
60 to 70
70 to 80
80 to 90
90 to 100 100 and over
If there has been no sale for between five and teR years in the case of land built upon, and for between ten and twenty years in the case of land not built upon, these rates are reduced to the extent of one-third and two-thirds respectively
|
Tax. |
||
|
6 |
per |
cent. |
|
8 |
||
|
10 |
||
|
12 |
||
|
14 |
||
|
16 |
||
|
18 |
||
|
20 |
||
|
22 |
||
|
25 |
166
MUNICIPAL UNEARNED INCREMENT
Berlin. The exemption proposed in Berlin is lo per cent., and beyond that the following scale of taxation is con- templated : —
Increased Value. Tax.
10 to 20 per cent. . . . . . . 5 per cent.
20 to 30
30 to 40 40 to 50 50 to 60
7 8
rising in steps of i per cent, per 10 per cent, increase, to a maximum of 20 per cent. The tax to be levied on the increased sale price or market value, as compared with April ist, 1907.
SCHONEBERG (April 26, IQCQ).
The increased value of land that is built upon is exempted to the extent of lo per cent., and that of land not built upon to the extent of 3 per cent. Subject to these exemptions the tax is as follows : —
Increased Value. Tax.
3 to 6 per cent. . . . . . . 3 per cent.
4
6 to 10 10 to 15 15 to 20 20 to 25 25 to 30 30 to 35 35 to 40 40 to 45 45 to 50
5 6
7 8
9 10
II
12
TAXES IN GERMANY. 167
and I per cent, extra for every 5 per cent, of additional value to a maximum of 25 per cent, on an increment of 100 per cent. The rates are abated to the extent of 20 per cent, in the case of land built upon, when more than ten years have elapsed since the last sale, 25 per cent, when more than 15 years have elapsed, 30 per cent, for more than 20 years, 35 per cent, for more than 25 years, and 40 per cent, for more than 30 years, the time before April i, 1895, not being counted.
The deductions which may be made from the gross increased value include : —
(i.) All expenditure on permanent improvements, including street making and sewerage works, but the cost of rebuilding and new buildings may not be deducted in so far as it is covered by insurance money of any kind {e.g., fire, water, &c).
(2.) 5 per cent, of the earlier price by way of com- pensation for stamps, sale of property tax, legal costs, commission payable in connection with the purchase
of the property.
(3.) The amount of mortgages or other debts out- standing against the property at its acquisition in excess of its value at that time, where this deficiency was not otherwise covered.
(4.) In the case of land not built upon which the seller has not himself used for agricultural or industrial purposes, the following additions may be made to the original cost, over and above the costs specified, i.e.,
168 MUNICIPAL UNEARNED INCREMENT
(l) to (3) : — interest not exceeding 4 per cent, which may have been paid to third parties on account of mortgages and other debts on the land, and three per cent, interest on the seller's own capital, proved to have been invested in the property on such improvements, &c., as come under the heading (i). On the othei hand all receipts from the property must be deducted.
In all cases only simple interest may be reckoned.
The interest specified in (4) is reduced if since the formal adoption of a building plan by the municipal authorities, in respect of the area to which the property belongs, sales of any portions of the same have taken place.
At Posen there is no exemption, the tax beginning with 5 per cent, and rising to 20 per cent. At Branden- burg-on-Havel the exemption is £2^. The usual retro- spective term is ten years, but Dortmund goes back to i860.
Hitherto the tax has, by general consent, worked smoothly and satisfactorily, and the administrative and valuation difficulties predicted have not been experienced. There never has, indeed, been a practical difficulty in German towns in valuing buildings and sites separately, as is necessary in the assessment of the local land taxes.
The following testimonies received from the authori- ties of four towns which have introduced the tax are conclusive : —
TAXES IN GEEMANY. 1C!>
Frankjurt-on-M ain : — " The decrease in the sale of land apprehended by many people has not taken place, nor has there been a check, much less a decHne, in land prices."
Cologne : — " No influences checking the sale of pro- perty have occurred owing to the introduction of the tax."
Gelsenkirchen : — " No special difficulties have been encountered in carrying out the tax. No decline in transactions in real estate or in building activity has occurred. The new tax has unquestionably justified itself, and it will prove a valuable extension of our communal system of taxation."
Dortmund (report on the first year) : — " Although speculation forced into the market all the properties that could be disposed of before the tax came into operation, it yielded a revenue of ;^I3,I50."
The commune of Weissensee, near Berhn, had no sooner introduced the tax than a property which had cost ^^42,500 exchanged hands for ;{8o,ooo, and upon the increased value a tax of 5(^4,875 was paid to the local treasury. " For this sum," wrote a local journal, " Weissensee can build a new street."
Naturally speculative land buyers and house builders do not approve of this method of tapping the source of wealth by which many of them have hitherto made an easy and profitable livehhood, and during a recent debate on the subject in the Berlin Municipal Council,
170 MUNICIPAL UNEARNED INCREMENT
a critic of the tax pleaded, " In the municipal Socialism of England no counterpart can be found to our tax on unearned increment." The general body of citizens in Germany are heartily in favour of the tax, however, and it may be predicted with safety that in a few years' time it will be generally adopted. Before the Munici- pal Council of BerUn took the final vote which pledged its assent to the general principle of the tax, the Chief Mayor addressed to it an appeal which well states the pubUc mind of Germany on the question.
" Do not deceive yourselves," he said, " the tax will assuredly be introduced, whether rejected to-day or not. You will be unable to withstand this movement of the times, for it is right to the core. Remember that the higher administrative authorities not only pointed us the way to this tax, but pressed us to adopt it. If we should later have to adopt other taxes instead, the question would at once be asked. Why have you not made use of this ? The great majority of the representa- tives of science are also enthusiastically in favour of the tax, and the movement has spread to the widest quarters of society."
APPENDIX.
UNEARNED INCREMENT TAX PROPOSALS IN THE BRITISH BUDGET BILL, 1909-
Mr. Lloyd George's Budget Bill of 1909 contained the first serious proposals made in this country to tax the unearned increment in the value of urban land. The Bill proposed four new land taxes as follows : —
1. — An Increment Value Duty of 20 per cent. (^1 for every com.plete £5 of that value), agricultural land being exempted. 2.— A Reversion Duty on the determination of leases of land at the rate of ;^1 for every full ;^10 of the benefit accruing to the lessor. 3. — A yearly Duty on Undeveloped Land of one half- penny in the pound of site value (equal to 0"21 per cent, of capital). 4.— A yearly Duty on the rental value of all rights to work Minerals and of all mineral wayleaves at the rate of one shilling in the pound. Contrary to the practice of Germany, it is proposed that one-half of the proceeds of the unearned increment tax shall be applied to State purposes. No exemption in respect of a minimum increment is proposed.
The following are the main provisions referring to the operation of the land taxes : —
I.— INCREMENT VALUE DUTY.
Amount and Incidence.
1. — (1) Subject to the provisions of this part of this Act, there shall be charged, levied, and paid on the increment value of any land a duty, called increment value duty, at
ii. APPENDIX.
the rate of one pound for every complete five pounds of that value accruing after ihe 30th day of April, 1909 ; and —
(a) On the occasion of any transfer on sale of the fee simple of the land or of any interest in the land, in pursuance of any contract made after the commence- ment of this Act, or the grant, in pursuance of any contract made after the commencement of this Act, of any lease (not being a lease for a term of years not exceeding fourteen years) of the land ; and
(b) On the occasion of the death of any person dying after the commencement of this Act, where the fee simple of the land or any interest in the land is com- prised in the property passing on the death of the deceased within the meaning of Sections 1 and 2, Sub- section (1) (a), (b), and (c), and Subsection 3, of the Finance Act, 1894, as amended by any subsequent enact- ment ; and
(c) Where the fee simple of the land or any interest in the land is held by any body corporate or by any body un- incorporate as defined by Section 12 of the Customs and Inland Revenue Act, 1885, in such a manner or on such permanent trusts that the land or interest is not liable to death duties, on such periodical occasions as are provided in his Act ;
the duty, or proportionate part of the duty, so far as it has not been paid on any previous occasion, shall be collected in accordance with the provisions of this Act.
Definition and Assessment. 2 — (1) For the purposes of this part of this Act the increment value of any land shall be deemed to be the amount (if any) by which the site value of the land, on the
APPENDIX. iii.
occasion on which increment value duty is to be collected as ascertained in accordance with this Section, exceeds the original site value of the land as ascertained in accordance with the general provisions of this part of this Act as to valuation.
(2) The site value of the land on the occasion on which increment value duty becomes due shall be taken to be —
(a) Where the occasion is a transfer on sale of the fee simple of the land, the value of the consideration for the transfer; and
(b) Where the occasion is the grant of any lease of the land, or the transfer on sale of any interest in the land, the value of the fee simple of the land calcu- lated on the basis of the value of the consideration for the grant of the lease or the transfer of the interest ; and
(c) Where the occasion Is the death of any person and the fee simple of the land is property passing on that death, the principal value of the land as ascer- tained for the purposes of Part I. of the Finance Act, 1894, and where any interest in the land is property passing on that death the value of the fee simple of the land calculated on the basis of the principal value of the interest as so ascertained ; and
(d) Where the occasion is a periodical occasion on which the duty is to be collected in respect of the fee simple of any land or of any interest in any land held by a body corporate or unincorporate, the total value of the land on that occasion to be estimated in accordance with the general provisions of this part of this Act as to valuation ;
subject in each case to the like deductions as are made, under
iv. APPENDIX.
the general provisions of this part of this Act as to valua- tion, for the purpose of arriving- at the site value of land from the total value.
Apportionment of Value.
(3) WTiere It is proved to the Commissioners on an applica- tion made for the purpose within the time fixed by this Section that the site value of any land at the time of any transfer on sale of the fee simple of the land or of any interest in the land, which took place at any time within twenty years before April 30, 1909, exceeded the original site value of the land as ascertained under this Act, the site value at that time shall be substituted for the pur- poses of increment value duty for the original site value as so ascertained, and the provisions of this part of the Act shall apply accordingly.
Site value shall be estimated for the purposes of this provision by reference to the consideration given on the transfer in the same manner as it is estimated by reference to the consideration given on a transfer where increment value duty is to be collected on the occasion of such a transfer after the passing of this Act.
This provision shall apply to a mortgage of the fee simple of the land or any interest in land in the same manner as it applies to a transfer, with the substitution of the amount secured by the mortgage for the consideration.
An application for the purpose of this section must be made within three months after the original site value of the land has been finally settled under this part of this Act.
Mode of Collection. 3 — (1) On each occasion on which increment value duty is collected on the increment value of any land such an amount of duty shall be deemed to be unsatisfied as the
APPENDIX.
Commissioners determine, after giving credit for the amount of duty paid on previous occasions. The Commissioners shall m.ake such apportionments and re-apportionments of any duty paid on previous occasions as they think necessary for the purpose of giving effect to this provision.
(2) Where increment value duty is collected on the occasion of the transfer or passing on death of the fee simple of any land, or on any periodical occasion in the case of land held in fee simple by a body corporate or unincorpor- ate the whole amount of the duty which is determined to be unsatisfied shall be collected by the Commissioners in accord- ance with rules made by them for the purpose.
(3) When increment value duty is collected on the occasion oi the grant of a lease, or on the transfer or passing on death of any interest in land, or on any periodical occasion in the case of an interest in land held by a body corporate or unincorporate, such proportionate part of the duty shall be collected as may be determined by the Commissioners to be payable in respect of the interest in land created, trans- ferred, passing on death, or held, in accordance with rules made by them for the purpose.
(4) Where on the occasion of the death of any person the property passing on the death comprises settled land in wl ich the deceased or any other person had an interest ceasing on the death of the deceased, then —
(a) if the subject of the settlement at the time of the death is the fee simple of the land, increment value duty shall be collected as if the fee simple of the land passed ; and
(b) if the subject of the settlement at the time of the death is any other interest in the land, increment value duty shall be collected as if tiiat interest passed ;
^i- APPENDIX.
but that: duty shall not be collected on any such occasion if under the provisions of Section 5 of the Finance Act, 1894, as amended by any subsequent enactment, estate duty is not payable in respect of the settled land.
(5) For the purpose of the collection of duty on the increment value of any land under this section, the incre- ment value shall be deemed to be reduced on the first occasion for the collection of increment value duty by an amount equal to 10 per cent, of the original site value of the land, and on any subsequent occasion by an amount equal to 10 per cent, of the site value on the last preceding- occasion for the collection of increment value duty, and the amount of duty to be collected shall be remitted in whole or in part accordingly.
Any duty which by reason of this provision Is remitted on any occasion shall not be collected and shall be deemed to have been paid.
Provided that no remission shall be given under this provision on any occasion which will make the amount of the increment value on which duty has been remitted during the preceding period of five years exceed 25 per cent, of the site value of the land on the last occasion for the collection of increment value prior to the commencement of that period or of the original site value if there has then been no such occasion.
(6) Increment value duty shall be a stamp duty collected and recovered in accordance with the provisions of this Act.
Transfers and Leases.
4.— (1) On any transfer on sale of the fee simple of any land or of any interest in land, or on the grant of any lease
APPENDIX, vii.
of any land for a term exceeding fourteen years, increment value duty shall be assessed by the Commissioners and paid by the transferor or lessor, as the case may be.
(2) It shall be the duty of the transferor or lessor, on the occasion of any transfer on sale of the fee simple of any land or of any interest in land or on the grant of any leas« of any land for a term exceeding fourteen years, to present to the Commissioners, in accordance with regulations made by them, the instrument by means of which the transfer or the lease is effected or agreed to be effected, or reason- able particulars thereof, for the purpose of the assessment of duty thereon, and if the transferor or lessor fails to comply with this provision he shall be liable on summary convic- tion to a fine not exceeding ten pounds, and to pay interest at the rate of 5 per cent, per annum on any duty ultimately payable by him as from the date on which the instrument has been executed, but any person aggrieved by any con- viction or order of a court of summary jurisdiction under
this provision may appeal therefrom to a court of quarter sessions.
(3) Any such instrument shall not, for the purposes of section fourteen of the Stamp Act, 1891, and notwithstand- ing anything in section twelve of that Act, be deemed to be duly stamped unless it is stamped —
(a) either with a stamp denoting that the increment value duty has been assessed by the Commissioners and paid in accordance with the assessment ; or
(b) with a stamp denoting that all particulars have been delivered to the Commissioners which, in their opinion, are necessary for the purpose of enabling them to assess the duty, and that security has been given for the payment of duty in any case where the Com- missioners have required security ; or
viii. APPENDIX.
(c) with a stamp denoting that upon the occasion in question no increment duty was payable; but where an instrument is so stamped, it shall, notwith- standing any objection relating to the increment value duty, be deemed to be duly stamped so far as respects that duty.
(4) Any duty assessed by the Commissioners under this section shall be a debt due to the Crown from the transferor or lessor, as the case may be, and for the purpose of calculating the amount of increment value duty to be col- lected on any subsequent occasion shall be deemed to have been paid.
(5) Regulations may be made by the Commissioners with respect to the mode in which any instrument is to be pre- sented to them in order to be dealt with under this section, and for dispensing with the presentation of any instrument, or particulars thereof, in cases where arrangements are made for obtaining those particulars through any registry of lands, deeds, or title, or through a Register of Sasines, and with respect to the mode in which any appli- cation for a return of duty under this section is to be made ; and for the payment of any increment value duty by instal- ments in the case of any lease or transfer on sale where the consideration is in the form of a periodical payment and the Commissioners shall deal with any instrument presented to them and allow payment by instalments in accordance with those regulations. The regulations shall provide that where the duty to be collected on the grant of a lease is payable by instalments, and the lease is deter- mined before all such instalments have fallen due, the instalments which have not fallen due shall be remitted, and that in that case the amount of dut\' which, under this section, is deemed to have been paid shall be reduced by the amount of the instalments so remitted.
APPENDIX. ix.
(6) In any case where increment duty shall have been paid under the provisions of this section, but the trans- action in respect of which the duty shall have been paid was subsequently not carried into execution, the duty shall be returned to the transferor or lessor on his making appli- cation to the Commissioners within two years after the payment of the duty in accordance with regulations to be made by them under this section, and in that case the duty returned shall not be deemed to have been paid for the purposes of this section.
(7) Where any agreem.ent for a transfer or agreement for a lease is stamped in accordance with this section, it shall not be necessary to stamp any conveyance, assignment, or lease made subsequently to and in conformity with the agreement, but the Commissioners shall, if an application is made to them for the purpose, denote on the conveyance, assignment, or lease the amount of duty paid.
Recovery at Death.
5 — The provisions as to the assessment, collection, and recovery of estate duty under the Finance Act, 1894, shall apply as if increment value duty to be collected on the occasion of the death of any person were estate duty ; but where any interest in land in respect of which increment value duty is payable is property passing to the personal representative as such, the duty shall be payable out of that interest in land in exoneration of the rest of the deceased's estate, and shall be collected upon an account to be delivered by the personal representative, set- ting forth the particulars of the increment value in respect of the property.
Provided that in respect of all property of the deceased, other than thitt assess<:d to increment value duty,
APPENDIX.
the Crown shall, as a creditor in respect of such incre- ment value duty, rank pari passu with the other creditors of the deceased.
Property of Corporations.
C. — (1) Where the fee simple of anjf land or any interest in land is held by any body corporate or by any i kIv unincor- porate as defined by section twelve of the Customs and Inland Revenue Act, 1885, in such a manner or on such permanent trusts that the land or interest is not liable to death duties, the occasions on which increment value duty is to be col- lected shall be the fifth day of April in the year nineteen hundred and fourteen, and in every subsequent fifteenth year.
(2) The account to be delivered under section fifteen of the Customs and Inland Revenue Act, 1885, shall, in the case of the account to be delivered in the year 1914 and in every subsequent fifteenth year, contain an account of the incre- ment value of the land, as en the preceding fifth day of April, and that section shall, save as in this Act is here- after provided, apply for the purpose of increment value duty, whether the body corporate or uaincorporate are chargeable with duty under Part II. of the Customs and Inland Revenue Act, 1885, or not.
(3) The provisions of Sections 13 to 18, of Sub-section (1) of Section 19, and of Section 20 of the Customs and Inland Revenue Act, 1885 (with the exception of any pro- visions relating to appeals), shall have elTect for the purpose of the assessment and recovery of increment value duty as they have effect for the purpose of the duty charged under Section 11 of that Act :
Provided that increment value duty may, if the body corporate or uaincorporate chargeable therewith so
APPENDIX. rl
desire, be paid by fifteen equal yearly instalments, and the first instalment shall be due immediately after the assessment of the duty.
Any part of any duty so payable by instalments may be paid up at any time.
(4) Any increment value duty assessed by the Com- missioners on an account delivered in accordance with this section shall, for the purpose of determining- the amount of increment value duty to be collected on any subsequent occa- sion, be deemed to have been paid.
(5) Nothing in this section shall affect the collection of increment value duty on the occasion of the grant of any lease or the transfer on sale of the fee simple of any land or any interest in land by a body corporate or un Incorporate, or oblige an account to be delivered of the increment value of any land on any periodical occasion if under the subse- quent provisions of this part of this Act increment value duty in respect thereof is not to be collected on that occasion.
7.— Increment value duty shall not be charged in respect of agricultural land while that land has no higher value than its value for agricultural purposes only. Provided that any value of the land for sporting purposes, or for other purposes dependent upon its use as agricultural land, shall be treated as value for agricultural purposes only, except where the value for any such purpose exceeds the agricultural value of ihe land.
8.— (1) Increment value duty shall not be charged on the increment value of any land, being the site of a dwelling- house, where immediately before the occasion on which the duty is to be collected the house was, and had been for twelve months previously, used by the owner thereof as his residence, and the annual value of the house, as adopted
xii. APPENDIX.
for the purpose of income tax under Schedule A, does not
exceed —
(a) in the case of a house situated in the administra- tive county of London, forty pounds; and
(b) in the case of a house situated in a borough or urban district with a population according to the last- published Census for the time being of fifty thousand or upwards, twenty-six pounds; and
(c) in the case of a house situated elsewhere, sixteen pounds.
(2) Increment value duty shall not be charged on the increment value of any agricultural land where, immediately before the occasion on which the duty is to be collected, the land was, and had been for twelve months previously, occupied and cultivated by the owner thereof, and the total amount of that land, together with any other land belonging to the same owner, does not exceed fifty acres, and the average total value of the land does not exceed seventy-five pounds per acre :
Provided that the exemption under this provision shall not apply to any 'and occupied together with a dwelling- house the annual value of which, as adopted for income tax under Schedule A, exceeds thirty pounds.
(3) Where a dwelling-house is valued for the purposes of income tax under Schedule A together with other land, and it is necessary for the purpose of this section to deter- mine the annual value of the dwelling-house, the total annual value shall be divided between the dwelling-house and the other land in such manner as the Commissioners may determine.
(4) For the purposes of this section —
(a) the expression " owner " includes a person who
APPENDIX. xiii.
holds land under a lease which was originally granted for a term of fifty years or more; but in such a case nothing in this section shall prevent the collection of increment value duty so far as it is payable in res{>ect of any other interest in the land other than that lease- hold interest ; and
(b) the site of a dwelling-house shall include any ofllces, courts, yards, and gardens not exceeding one acre in extent, occupied together with the dwelling- house. (5) Any increment value duty which would, but for this section, be charged shall, for the purpose of the provisions of this Act as to the collection of the duty, be deemed to have been paid.
9. — Increment value duty shall not be collected on any periodical occasion in respect of the fee simple of or any interest in any land which is held by any body corporate or unincorporate, without any view to the payment of any dividend or profit out of the revenue thereof, bond fide for the purpose of games or other recreation, if the Commis- sioners are satisfied that the land is so used under some agreement with the owner which as originally made could not be determined for a period of at least five years, or under other circumstances which render it probable that the land will continue to be so used, without prejudice, however, to the collection of the duty on any other occasion.
10. — (1) Any increment value duty in respect of the fee simple of or any interest in any land held by or in trust for Kis Majesty or any department of Government, which would have been collected on any occasion had it been held by a private person, shall for the purposes of the provisions of this Act as to the collection of increment value duty bo deemed to have been paid.
3t!v. APPENDIX.
(2) Neither Section 77 of the Crown Lands Act, 1829, nor Section 38 of the Post Office Act, 1908, nor any other enactment exempting- from stamp duty any document made or executed on behalf of or for the purpose of the Crown or any Government department, shall apply so as to prevent increment value duty being collected on any instrument by which the transfer on sale of the fee simple of or any interest in any land, or the grant of any lease of any land, to the Crown or to any Government department, or to any ofilicer on behalf of or for the purposes of the Crown or any Government department, is effected or agreed to be effected.
11.— Where a building is used for the purpose of separate tenements, flats, or dwellings, the grant of a lease of any such separate tenement, flat, or dwelling, and the transfer on sale or passing on death of any lease of any such separate tenement, flat, or dwelling, shall not be an occasion on which increment value duty is to be collected under this Act, nor shall duty be collected on any periodical occasion from a body corporate or unincorporate where the interest held by the body is only a leasehold interest in any such separate tenement, fiat, or dwelling-.
12. — A person shall not be entitled to claim any deduc- tion for the purpose of ascertaining the site value of any land on any occasion on which increment value duty becomes payable if the deduction is one which could have been, but was not, claimed for the purpose of ascertaining the original site value of the land.
II.— REVERSION DUTY.
13. — (1) On the determination of any lease of land there shall be charged, levied, and paid, subject to the provisions of this part of this Act, on the value of the benefit accruing
APPENDIX. XV.
to the lessor by reason of the determination of the lease a duty, called reversion duty, at the rate of ;^1 for every full ;^10 of that value,
(2) For the purposes of this section the value of the benefit accruing to the lessor shall be deemed to be the amount (if any) by which the total value (as defined for the purpose of the general provisions of this part of this Act relating to valuation) of the land at the time the lease determines, subject to the deduction of any part of the total value which is attributable to any works executed or expenditure of a capita! nature incurred by the lessor during the term of the lease and of all compensation payable by such lessor at the determination of the lease, exceeds the total value of the land at the time of the original grant of the lease, to be ascertained on the basis of the rent reserved and payments made in consideration of the lease (including, in cases where a nominal rent only has been reserved, the value of any covenant or undertaking to erect buildings or to expend any sums upon the property), but where the lessor is himself entitled only to a leasehold interest the value of the benefit as so ascertained shall be deducted in proportion to the amount by which the value of his interest is less than the value of the fee simple.
Exemptions and Allowances.
14. — (1) Where, in the case of a reversion to a lease purchased before April 30, 1909, the lease on which the reversion is expectant determines within forty years of the date of the purchase, no reversion duty shall be charged
xTl. APPENDIX.
under this part of this Act on the determination of the lease. Provided that this exemption shall not apply where the lease is determined within forty years by agreement between the lessor and the lessee, whether express or implied, not contained in the lease itself, unless the lease would, apart from any such agreement, have determined within that period.
(2) No reversion duty shall be charged on the determin- ation of the lease of any land which is at the time of the determination agricultural land, nor on the determination of a lease the original term of which did not exceed twenty-one years, nor shall reversion duty be charged where the interest of the lessor expectant on the determination of a lease is a leasehold interest which does not exceed that number of years.
(3) Where a lease of any land is determined before the expiration of the term of the lease by agreement between the lessor and the lessee, whether express or implied, and a fresh lease of the land is then granted to the lessee the term of which extends at least twenty-one years beyond the date on which the original lease would have expired, the Commissioners shall make an allowance in respect of the reversion duty payable of two and a half per cent, of the duty for every year of the original term of the lease which is unexpired when the lease is determined, and any sum so allowed shall be treated as having been paid :
Provided that the allowance shall not exceed 50 per cent, of the whole duty payable.
(4) Where on any occasion on which increment value duty is due in respect of any increment value it is proved to the satisfaction of the Commissioners that reversion, duty has been paid in respect of any benefit accruing to a lessor, or
APPENDIX. xvii.
part of such a benefit, which is identical with the incre- ment value, such sums as the Commissioners determine to have been paid in respect of the benefit or part of the benefit shall be treated as being also a payment on account of increment value duty ; and where on any occasion on which reversion duty is due in respect of any benefit accruing to a lessor, it is shown to the satisfaction of the Com- missioners that increment value duty has been paid on any increment value which is identical with that benefit or any part of that benefit, such sums as the Commissioners determine to have been paid in respect of that value shall be treated as being also a payment on account of the reversion duty in respect of that benefit or part of a benefit. (5) Where a reversion has been mortgaged before the thirtieth day of April, nineteen hundred and nine, and the mortgagee has foreclosed before the lease on which the reversion is expectant determines, the mortgagee shall not be liable to pay reversion duty in excess of the amount by which the total value of the land at the time of the deter- mination of the lease exceeds the amount payable under the mortgage at the time of the foreclosure.
Recovery of Duty.
15.— (1) Reversion duty shall be recoverable from any lessor to whom any benefit accrues from the determination of a lease as a debt due to his Majesty, but shall rank pari passu with all other debts due from such lessor.
(2) Every lessor shall, on the determination of a lease on the determination of which reversion duty is payable under this section, deliver on account to the Commissioners setting forth the particulars of the land and the estimated v.nhu' of the benefit accruing to the lessor by the determina- tion of the lease.
xviii. APPENDIX.
(3) If any person who is under an obligation to deliver an account under this section knowingly fails to deliver such an account within the period of three months after the deter- mination of the lease, he shall be liable to pay to his Majesty a sum not exceeding 10 per cent, upon the amount of any duty payable under this section, and a like penalty for every three months after the first month during which the failure continues.
(4) Section 17 of the Customs and Inland Revenue Act, 1885 (which relates to the power to assess duty according to accounts rendered, and to obtain other accounts), shall apply with respect to any account delivered under this section (with the exception of any provisions relating to appeals).
III.— DUTY ON UNDEVELOPED LAND.
Amount and Incidence.
16. — (1) Subject to the provisions of this part of this Act, there shall be charged, levied, and paid for every financial year in respect of the site value of undeveloped land a duty, called undeveloped land duty, at the rate of one halfpenny for every twenty shillings of that site value.
(2) For the purposes of this part of this Act land shall be deemed to be undeveloped land if it has not been developed by the erection of dwelling-houses or of buildings for the purposes of any business, trade, or industry other than agriculture (but including glasshouses or greenhouses), or is not otherwise used bona fide for any business, trade, or industry other than agriculture :
Provided that —
(a) where any land having been so developed or used reverts to the condition of undeveloped land owing to
APPENDIX. xix.
the buildings becoming derelict, or owing to the land ceasing to be used for any business, trade, or industry other than agriculture, it shall, on the expiration of one year after the buildings have so become derelict or the land ceases to be so used, as the case may be, be treated as undeveloped land for the purposes of undeveloped land duty until it is again so developed or used ; and
(b) where the owner of any land included in any scheme of land development shows that he or his pre- decessors in title have with a view to the land being developed or used as aforesaid, incurred expenditure on roads (including paving, curbing, metalling, and other works in connexion with roads) or sewers, that land shall, to the extent of one acre for every complete hundred pounds of that expenditure, for the purposes of this section, be treated as land so developed or used although it is not for the time being actually so developed or used, but for the purposes of this provision no expendi- ture shall be taken into account if ten years have elapsed since the date of the expenditure, or if after the date of the expenditure the land having been developed reverts to the condition of undevelo;)ed land, and in a case where the amount of the expenditure does not cover the whole of the land included in the scheme of land develop- ment, the part jf the land to be treated as land developed or used as aforesaid shall be determined by the Commis- sioners as being the land with a view to the development or use of which as aforesaid the expenditure has been in the main incurred.
(3) For the purposes of undeveloped land duty, the site value of undeveloped land shall be taken to be the value adopted as the original site value or, where the site value
XX. APPENDIX.
has been ascertained under any subsequent periodical valu- ation of undeveloped land for the time being in force, the site value as so ascertained :
Provided that where increment value duty has been paid in respect of the increment value of any un- developed land, the site value of that land shall, for the purposes of the assessment and collection of undeveloped land duty, be reduced by a sum equal to five times the amount paid as increment value duty.
(4) For the purposes of undeveloped land duty undeveloped land does not include the minerals.
Exemptions from Duty.
17. — (1) Undeveloped land duty shall not be charged in respect of any land where the site value of the land does not exceed fifty pounds per acre.
(2) In the case of agricultural land of which the site value exceeds fifty pounos per acre undeveloped land duty shall only be charged so far as the site value of the land exceeds the value of the land for agricultural purposes.
(3) Undeveloped land duty shall not be charged (a) on the site value of any parks, gardens, or open spaces which are open to the public as of right, or (b) on the site value of any parks, gardens, or open spaces reasonable access to which is enjoyed by the public or by the inhabitants of the locality (including access regularly enjoyed by any of the naval or military forces of the Crown for the purpose of training or exercise) where in the opinion of the Commissioners that access is of public benefit ; or (c) on the site value of any land where it is shown to the Commissioners that the land is being kept free of buildings in pursuance of any definite
APPENDIX. xxl.
scheme, whether framed before or after the passing- of this Act, for the development of the area of which the land forms part, and where, in the opinion of the Commissioners, it is reasonably necessary in the interests of the public, or in view of the character of the surroundings or neighbourhood, that the land should be so kept free from buildings ; or (d) on the site value of any land which is bona fide used for the purpose of games or other recreation where the Com- missioners are satisfied that the land is so used under some agreement with the owner which, as originally made, could not be determined for a period of at least five years, or where in the opinion of the Commissioners other circumstances render it probable that the land will continue to be so used.
Where any land kept free from buildings in pursuance of any definite scheme has received the benefit of an exemp- tion from undeveloped land duty by virtue of this provision, that land shall not be built upon unless the Lxx;al Govern- ment Board give their consent, or being satisfied that it is desirable in the interests of the public that the restriction on building should be removed ; and any such consent may be given subject to such conditions as to the mode in which the land is to be built upon as the Local Government Board think desirable under the circumstances.
The opinion of the Commissioners as to matters which are expressed to be matters for the opinion of the Commissioners under this sub-section shall be final and not subject to any appeal.
(4) Undeveloped land duty shall not be charged on the site value of any land not exceeding an acre in extent occu- pied together with a dwelling-house or on the site value of any land being gardens or pleasure grounds so occupied when the site value of the gardens and pleasure grounds
xxii. APPENDIX.
together with the site value of the dwelling-house does not exceed twenty times the annual value of the gardens, pleasure grounds, and dwelling-house as adopted for the purpose of income tax under Schedule A :
Provided that the exemption under this provision shall not apply so as to exempt more than five acres, and where the land, gardens, or pleasure grounds occupied together with a dwelling-house exceed five acres in extent, those five acres shall be exempted which are determined by the Commissioners to be most adapted for use as gardens or pleasure grounds in connexion with the dwelling-house. Where the dwelling-house, gardens, and pleasure grounds are valued for the purpose of income tax under Schedule A, together with other land, the total annual value shall be divided between the dwelling-house, gardens, and pleasure grounds and the other land in such manner as the Com- missioners may determine.
(5) Where agricultural land is at the time of the passing of this Act held under a tenancy originally created by a lease or agreement made or entered into before the thirtieth day of April nineteen hundred and nine, undeveloped land duty shall not be charged on the site value of the land during the original term of that lease or agreement while the tenancy continues thereunder :
Provided that where the landlord has power to deter- mine the tenancy of the whole or any part of the land, the tenancy of the land or that part of the land shall not be deemed for the purposes of this provision to continue after the earliest date after the commencement of this Act at which it is possible to determine the tenancy under that power.
APPENDIX. Miii.
18. — Undeveloped land duty shall not be charged on the site value of any agricultural land, occupied and cultivated by the owner thereof, where the total value of that land, together with any other land belonging to the same owner, does not exceed five hundred pounds.
For the purposes of this provision the expression "owner " includes a person who holds land under a lease which was originally granted for a term of fifty years or more.
19. — Undeveloped land duty shall be assessed by the Commissioners and shall be payable at any time after the first day of January of the year for which the duty is charged, and any such duty for the time being unpaid shall be recover- able from the owner of the land for the time being as a debt due to his Majesty, and shall be borne by that owner not- wit?istanding any contract to the contrary.
If at any time undeveloped land duty is not assessed within the year for which it is charged, owing to there being no value either shown in the provisional valuation or Hnally settled on which the duty can be assessed, or for any other reason, the duty may be assessed at any time, and shall be payable at any time after the expiration of two nronths from the date of the assessment, so, however, that no such duty shall be assessed more than three years after the expiration of the year for which it is charged.
IV.— DUTY ON MINERAL RIGHTS. |_v>ectioDs 20 to 24].
xxiT. APPENDIX.
v.— METHODS OF VALUATION.
Definition of Value.
25. — (1) For the purposes of this part of this Act, the total v^alue of land means the amount which the fee simple of the land, if sold at the time in the open market by a willing seller in its then condition, free from incumbrances, and from any burden, charge, or restriction (other than rates or taxes) might be expected to realise.
(2) The full site value of land means the amount which remains after deducting from the gross value of the land the difference (if any) between that value and the value which the fee simple of the land, if sold at the time in the open market by a willing seller, might be expected to realise if the land were divested of any buildings, and of any other structures (including fixed or attached machinery), on, in, or under the surface, which are appurtenant to or used in connection with any such buildings' and of all growing timber, fruit trees, fruit bushes, and other things growing thereon.
(3) The total value of land means the gross value after deducting the amount by which the gross value would be diminished if the land were sold subject to any fixed charges and to any public rights of way or any public rights of user, and to any right of common and to any easements affecting the land, and to any covenant or agreement restricting the use of the land entered into or made before the thirtieth day of April, nineteen hundred and nine, and to any covenant or agreement restricting the use of the land entered into or made on or after that date, if, in the opinion of the Commis- sioners, the restraint imposed by the covenant or agreement so entered into or made on or after that date was when
I
APPENDIX. MV.
imposed desirable In the interests of the public, or in view of the character and surroundings of the neighbourhood, and the opinion of the Commissioners shall in this case be subject to an appeal to the referee, whose decision shall be final.
Deductions. (4) The assessable site value of land means the total value after deducting —
(a) The same amount as is to be deducted for the purpose of arriving at full site value from gross value ; and
(b) Any part of the total value which to proved to the Commissioners to be directly attributable to works executed, or expenditure of a capital nature (including any expenses of advertisement) incurred bona fide by or on behalf of or solely in the interests of any person interested in the land for the purpose of improving the value of the land as building land, or for the purpose of any business, trade, or industry other than agriculture ; and
(c) Any part of the total value which is proved to the Commissioners to be directly attributable to the appro- priation of any land or to the gift of any land by any person interested in the land for the purpose of streets, ' roads, paths, squares, gardens, or other open spaces for the use of the public ; and
(d) Any part of the total value which is proved to the Commissioners to be directly attributable to the expendi- ture of money on the redemption of any land tax, or any fixed charge, or on the enfranchisement of copyhold land or customary freeholds, or on effecting the release of any covenant or agreement restricting- the use of
xxr!. APPENDIX.
land which may be taken into account in ascertaining the total value of the land, or to goodwill or any other matter which is personal to the owner, occupier, or other person interested for the time being in the land ; and
(e) Any sums which, in the opinion of the Commis- sioners, it would be necessary to expend in order to divest the land of buildings, timber, trees, or other things of which it is to be taken to be divested for the purpose of arriving at the full site value from the gross value of the land and of which it would be necessary to divest the land for the purpose of realising the full site value. Where any works executed or expenditure incurred for the purpose of improving the value of the land for agriculture have actually improved the value of the land as building land, or for the purpose of any business, trade, or industry other than agriculture, the works or expenditure shall, for the purpose of this provision, be treated as having beea executed or incurred also for the latter purposes.
Any reference in this Act to site value (other than the reference to the site value of land on an occasion on which increment duty is to be collected) shall be deemed to be a reference to the assessable site value of the land as ascer- tained in accordance with this section.
(5) The provisions of this section are not applicable for the purpose of the valuation of minerals.
2 6. — (1) The Commissioners shall, as soon as may be after the passing of this Act, cause a valuation to be made of all land in the United Kingdom, showing separately the total value and the site value respectively of the land, and
APPENDIX. xxvii
in the case of aj^ricultural land the value of the land for agricultural purposes where that value is different from the site value. Each piece of land which is under separate occupation, and, if the owner so requires, any part of any land which is under separate occupation, shall be separately valued, and the value shall be estimated as on the 30th day of April, 1909.
(2) Any owner of land and any person receiving rent in respect of any land shall, on being required by notice from the Commissioners, furnish to the Commissioners a return containing such particulars as the Commissioners may require as to the rent received by him, and as to the owner- ship, tenure, area, character, and use of the land, and the consideration given on any previous sale or lease of the land, and any other matters which may properly be required for the purpose of the valuation of the land, and which it is in his power to give, and if any owner of land or person receiving any rent in respect of the land is required by the Commissioners to make a return under this section, and fails to make such a return within the time, not being less than thirty days, specified in the notice requiring a return, he shall be liable to a penalty not exceeding fifty pounds to be recoverable in the High Court.
(3) Any owner of land may, if he thinks fit, furnish to the Commissioners his estimate of the total value or site value or both of the land, and the Commissioners, in making their valuation, shall consider any estimate so furnished.
27. — (1) The Commissioners shall cause a copy of their provisional valuation of any land to be served on the owner of the land, and unless objection is taken to the provisional valuation in manner provided by this section, the values shown in the provisional valuation shall be adopted as the
xxviii. APPENDIX.
original total value and the original site value respectively for the purposes of this part of this Act.
(2) If the owner considers that the total or site value, as stated in any provisional valuation, is not correct, he may, with a view to an amendment of the provisional valuation, within sixty days of the date on which the copy of the provisional valuation is served, or such extended time as the Commissioners may in any special case allow, give to the Commissioners notice of objection to the provisional valua- tion, stating the ground*-- of his objection and the amend- ment he desires, and if the Commissioners amend the provisional valuation so as to be satisfactory to all persons making objections the total and site value as stated in the amended valuation shall be adopted as the original total and the original site value for the purposes of this part of this Act.
(3) The Commissioners may amend any provisional valua- tion, whether objected to or not, before it is finally settled, and the amended provisional valuation shall be deemed to be a provisional valuation for the purposes of this section.
(4) If the provisional valuation is not amended by the Commissioners so as to be satisfactory to any objector, that objector may give a notice of appeal under this Act with respect to the valuation, but if no such notice is given the total and site value as stated in the provisional valuation, subject to such amendments as may be made by the Com- missioners in order to meet objections, shall be adopted as the original total and the original site value respectively for the purposes of this part of this Act.
(5) Any i>ersons interested in the land, not being an owner, may apply to the Commissioners for a copy of the provisional valuation of the land before it is finally settled, and shall
APPENDIX. xiix.
then have the same right of giving' notice of objection and of appealing as the owner.
(6) Where the value to be adopted as the original total or the original site value of any land for the purposes of this part of this Act has not been finally settled at the time when any duty under this part of this Act becomes leviable, any duty under this part of this Act shall be assessed as if the values as shown in the provisional valuation, or, if the provisional valuation has been amended by the Com- missioners, as shown in the valuation as so amended, were the values adopted as the original total and site values for the purposes of this part of this Act, and, on the values to be adopted being finally settled, if it is found that the amount which should have been paid as duty exceeds that actually paid, the excess shall be deemed to be arrears of the duty, except so far as any penalty is incurred on account of arrears, and, if it is found that the amount which should have been paid as duty is less than that actually paid, the difference shall be repaid by the Commissioners.
(7) Where a lessee is the owner of the land within the meaning of this Act, this section shall apply as if any person entitled to the fee simple reversion or to a leasehold reversion for a term of years exceeding twenty-one were the owner as well as the lessee.
28. — For the purpose of obtaining a periodical valuation of undeveloped land the Commissioners shall in the year 1914 and in every subsequent fifth year cause a valuation to be made of undeveloped land showing the site value of the land as on the 30th day of April in that year, and for the purpose of ascertaining the value at that time the provisions of this Act as to the ascertainment of value shall apply for the purpose of ascertaining value on any such periodical
>xx. APPENDIX.
valuation as they apply for the purpose of ascertaining the
original value :
Provided that if on any such periodical valuation the valuation of any undeveloped land which is liable to undeveloped land duty is for any reason begun but not completed in the year of valuation, the Commissioners may complete the valuation after the completion of the year of valuation, subject to any appeal under this Act.
Separate Parcels of Land. 29.— Any duty under this part of this Act may be assessed on or in respect of any such pieces of land whether under separate occupation or not, as the Commissioners think fit.
(2) The Commissioners shall make such apportionments and re-apportionments of any original site value or any site value fixed on a periodical valuation as they consider neces- sary for the purpose of the collection or assessment of increment value duty or undeveloped land duty, or which they may be required at any time to make on the application of any person entitled to the fee simple of any land or to an interest in any land.
On any such apportionment or re-apportionment for the purpose of the collection of increment value duty on the occasion of the transfer on sale of the fee simple of the land or any interest in the land, or on the occasion of the grant of any lease of the land, the consideration for the transfer, or for the grant of the lease, shall be treated as one of the matters to which regard must be had in making the appor- tionment or re-apportionment.
(3) The provisions relating to the procedure on the valua- tion of land for the purposes of this part of this Act shall apply with respe<:t to the apportionment or re-apportionment
APPENDIX. xxxi.
of site value under this section as they apply with reference to the ascertainment of the original site value of land.
(4) The value attributed on any such apportionment or re- apportionment to each part of the land shall for the pur- poses of this part of this Act be treated as the original site value or the site value of the land, as the case may be.
30« — (1) The Commissioners shall record particulars of all valuations, apportionments, re-apportionments, and assessments made by them under this part of this Act, and of any deductions allowed in determining any value, and of the amount of any duty paid under this part of this Act in respect of any land.
(2) The Commissioners shall furnish to any person interested in any land, or to any person authorised by any person so interested, on his application and on payment of such fee, not exceeding two shillings and sixpence, as thei Commissioners may fix with the approval of the Treasury, copies of any particulars so recorded by them relating to the land, certified, if required, by a Secretary or Assistant Secretary to the Commissioners.
31._(1) Every person who pays rent in respect of any land, and every person who as agent for another person receives any rent in respect of any land, shall, on being required by the Commissioners, furnish to them within 30 days the name and address of the person to whom he pays rent or on behalf of whom he receives rent, as the case may be.
(2) For the purpose of the exercise of their powers or the performance of their duties under this part of this Act in reference to the valuation of land, the Commissioners may give any general or special authority to any person to inspect any land and report to them the value thereof, and
xxxii. APPENDIX.
the person having- the custody or possession of that land shall permit the person so authorised, on production of the authority of the Commissioners in that behalf, to inspect it at such reasonable times as the Commissioners consider necessary.
(3) If any person wilfully fails to comply with the pro- visions of this section he shall be liable to a penalty not exceeding fifty pounds, to be recoverable in the High Court.
(4) Any notice requiring a return for the purpose of valua- tion, any copy of a provisional valuation, and any other notice or document which is required to be given or sent to an owner or a person interested in land under this part of this Act by the Commissioners, shall be sufficiently given or sent if sent by post to the address of the owner or person interested, furnished to the Commissioners under the powers given by this section, or if the address cannot be so ascer- tained, by leaving- the notice or a copy of the document addressed to the owner or person interested with some occupier of the land, or, if there is no occupier, by causing ^t to be put up in some conspicuous place on the land.
3 2.— (1) Where the value of any consideration for a transfer or lease is to be determined for the purf>oses of this part of this Act, that value shall, so far as the con- sideration consists of the payment of a capital sum, be taken to be the amount of that capital sum, and so far as the consideration consists of a periodical money payment, be taken to be such sum as appears to the Commissioners to be the capital value of that payment.
(2) If the Commissioners are satisfied that any covenant or undertaking to discharge any incumbrance, or, in cases where a nominal rent only has been reserved, any covenant or undertaking to erect buildings, or to expend any sums
APPENDIX. x"iil-
upon the property, has formed part of the consideration, the Commissioners shall allow such sum as they think just in respect thereof as an addition to the value of the con- sideration.
(3) Where it is necessary to apportion any consideration for the purposes of this part of this Act as between proper- ties included in any transfer or lease, the consideration shall be apportioned by the Commissioners in such manner as they determine.
Appeals.
33.— (1) Except as expressly provided in this part of this Act any person agg-rieved may appeal within such time and in such manner as may be provided by rules made under this section against the first or any subsequent determination by the Commissioners of the total value or site value of any land ; and againsit the amount of any assessment of duty under this part of this Act ; or against a refusal of the Commissioners to make any allowance or to make the allowance claimed, where the Commissioners have power to make such an allowance under this part of this Act; or against any apportionment of the value of land or of duty or any assessment or apportionment of the consideration on any transfer or lease made by the Commissioners under this part of this Act ; or against the determination of any other matter which the Commissioners are to determine or may determine under this part of this Act : Provided that —
(a) an appeal shall not lie against a provisional valua- tion made by the Commissioners of the total or site value of any land except on the part of a person who has made an objection to the provisional valuation in accordance with this Act ; and
xxxir. APPENDIX.
(b) the onf^^'ma] total value and the original site value as ascertained under any subsequent valuation shall be questioned only by means of an appeal against the determination by the Commissioners of that value where there is an appeal under this Act, and shall not be questioned in any case on an appeal against an assessment of duty.
(2) Any appeal under this section shall be referred to such one of the panels of the referees appointed under this part of this Act as may be selected in manner provided by rules under this section, and the decision of the referee to whom the matter is so referred shall be given in the form provided by rules under this section and shall, subject to appeal to the Court under this section, be final.
(3) The referee shall determine any matter referred to him in consultation with the Commissioners and the appellant, or any persons nominated by the Commissioners and the appellant respectively for this purpose, and may, if he thinks fit, order that any expenses incurred by the appellant be paid by the Commissioners, and that any such expenses incurred by the Commissioners be paid by the appellant.
Any order of the referee as to expenses may be made a rule of the High Court.
(4) Any person aggrieved by the decision ot i!he referee may appeal against the decision to the High Court within the time and «r the manner and on the conditions directed by Fules of Court (including conditions enabling the Court to require the payment of or the giving of security for any duty claimed) ; and subsections two, three, and four of section ten of the Finance Act, 1894, shall apply with reference to any such appeal :
Provided that where the total or site value as alleged by the Commissioners of the property in respect of which
APPENDIX. xxxT.
the dispute arises does not exceed five hundred pounds, the appeal under this section may be to the county court for the county or place in which the appellant resides or the property is situate, and this section shall for the purpose of the appeal apply as if such county court were the High Court, and in every such case anv party shall have a right of appeal to the Court of Appeal.
(5) Provision shall be made by rules under this section with respect to the time within which and the manner in which an appeal may be made to a referee under this section, and with respect to the mode in which the referee to whom any reference is to be made is to be selected, and with respect to the form in which any decision of a referee is to be given, and with respect to any other matter for which it appears necessary or expedient to provide In order to carry this section into etlect.
Those rules shall be made by the Reference Committee, subject to the approval of the Treasury.
Rating Authorities' Exemption.
3 5. — (1) No duty under this [)art of this Act shall be charged in respect of any land or interest in land held by or on behalf of a rating authority or any statutory combina- tion representative of two or more rating authorities, and any increment value duty in respect of any such land which would have been collected from the authority (whether on the occasion of the transfer on sale of the land, or any interest in the land, or the grant of a lease of the land or on the periodical occasions provided in this Act) shall, for the pur- [X)ses of the provisions of this Act as to the collection of increment value duty, be deemed to have been paid.
xxxvi. APPENDIX.
(2) For the purposes of this section the expression " rating authority " means any body who have power to raise a rate or administer money raised by a rate, and the expression " rate " means a rate the proceeds of which are applicable to public local purposes, and which is leviable on the basis of an assessment in respect of the yearly value of property, and includes any sum which, though obtained in the first instance by a precept, certificate, or other instrument requir- ing payment from some authority or officer, is or can be ultimately raised out of a rate as before defined.
3 6. — Where m pursuance of any public general or local Act any capital sum or any instalment of a capital sum has been paid to any rating authority in respect of the increased or enhanced value of any land due to any improvements made or other action taken by the authority, the amount of that capital sum or instalment shall be deducted from any increment value of the land for the purposes of the collection of increment value duty and from the site value of the land for the purposes of the collection of undeveloped land duty, and from the value of the benefit accruing to the lessor for the purposes of reversion duty, and in the case of increment value duty the duty on the amount deducted shall be deemed to have been paid.
37. — (1) No reversion duty or undeveloped land duty under this part of this Act shall be charged in respect of land or any interest in land held by or on behalf of any governing body constituted for charitable purposes while the land is occupied and used by such a body for the purposes of that body, and increment value duty shall not be collected on any periodical occasion in respect of the fee simple of or any interest in any land held for the purposes of such a body, whether it is occupied or used by that body or not, without prejudice, however, to the collection of the duty on any other occasion.
APPENDIX. xxxvil.
The expression " governing body constituted for charitable purposes " includes any person or body of persons who have the right of holding, or any power of government of, or management over, any property appropriated for charitable purposes (including property appropriated for the purpose of any of the naval or military forces of the Crown), and includes any corporation sole and all universities, colleges, schools, and other institutions for the promotion of literature, science, or art.
(2) This section shall apply to the fee simple of, or any interest in, any land held by a registered society or by a company within the meaning of the Companies Consolida- tion Act, 1908, or any body of persons incorporated by special Act, if that company or body are by their memorandum or Act precluded from dividing any profit amongst their members, as if the purposes of the society, company, or body of persons were charitable purposes.
In this provision the expression " registered society " means any society or body of persons who are registered, or whose rules are certified or registered, by a registrar of friendly societies in pursuance of any Act of Parliament, and who by their rules make provision for the benefits set out in section eight, subsection one, of the Friendly Societies Act, 1896, and where the contract between the society and the mem.ber is of a permanent character.
38. — (1) Neither increment value duty, reversion duty, nor undeveloped land duty shall be charged in respect of any land whilst it is held by a statutory company for the purposes of their undertaking and cannot be appropriated by the company except to those purposes ; but nothing in this pro- vision shall prevent the collection of increment value duty when any such land is sold or ceases to be so held.
XXXTiii. APPENDIX.
This provision shall not be construed so as to exclude from the benefit thereof land held by a statutory company which is intended to be ultimately appropriated for the pur- pose of works forming or to form part of the company's undertaking, but, pending the carrying out of those works, is used for other purposes.
Settled Land. 39.— (1) Where the fee simp'e of any land or any interest in land in respect of which increment duty or reversion duty is charged is settled land within the meaning of the Settled Land Act, 1882, or is vested in a trustee, and the tenant for life or persons having the powers of the tenant for life is the person who is liable to pay any sums on account of either of these duties, he shall be entitled to charge by deed upon the land or interest in land any amount paid by him, or which he may then be or may thereafter become liable to pay in respect of either of these duties, and the amount of any expenditure which he may have reasonably incurred in connection with the valuation, and the benefit of any such charge may be transferred in like manner as a mortgage.
(2) In the case of settled land a deed executed for the purposes of this section shall not take effect until notice thereof has been given to the trustees of the settlement for the purposes of the Settled Land Act, 1882.
{:<) Sections 59, 60, and 62 of the Settled Land Act, 1882 (which relate to the exercise of powers on behalf of infants and lunatics), shall apply to the exercise of the power under this section in the same manner as they apply to the exercise of the powers of a tenant for life under that Act.
(4) Where the fee simple of any land or any interest in land in respect of which increment value duty or reversion
APPENDIX. xxxix.
duty is charged is vested in a mortgagee who is liable to pay any sum on account of either of those duties, he shall be entitled to add to his security the sum for which he is so liable, including any costs or expenses properly incurred by him in respect of the payment of the duty,
(4) In Scotland, where any person having a limited interest in the land or interest in land in respect of which any duty under this part of this Act is charged is the person who is liable to pay any sums on account of the duty, he shall be entitled to charge such land or such interest in land by means of a bond and disposition or bond and assignation in security in his own favour which he is hereby authorised to grant.
Printed by Oha*. Stkakkr & Sons, Ltd., Biibopsgate Avenue, Loudon, E.G. P
INDEX.
AGRlctTLTUEAT, Holdings Acts,
113 Arnold, Mr. A., 5 America, land speculation in,
63-67 Artisans' Dwellings Acts, 86, 102 Austria, mineral riglits in, 126
Bell, Sir I. L., on mineral
royalties, 120 Brodrick, Hon. G. C, 5, 56 Broadhurst, M.P., Mr. H., 50,
51, 112 Berlin, value of land in, 19, 20,
67, 68, 95 Bright. Mr. John, 113, 127 Betterment principle, the, 131-
139
Cairnes, Professor J. E., 9 Chamberlain, Mr. J., 102 Compensation due to tenants
for improvements, 45-48, 112,
116 Ceilings, M.P., Mr. J., 81 Compton, Earl, 87, 91
Depression in Trade and In- dustry, Roval Commission on, 60, 120, i21
Derby's property at Bury, the Eai-l ot, S3, 84, 94, 95
Engel, Dr., 68, 81
Fatvcett, Professor, 4, 7 Fee-simple, purchase of urban, 127-129
George, Mr. Henry, 9, 58, 64,
70, 73, 119 Gladstone, Mr., 138 Goschen. Mr., 5, 36, 147 Gray, M.P., Mr. E. D , 128
Hallam on land-values, testi- mony of, 2
Houbiug of the "Working Classes, Commission on the, 72, 80, 84, 86, 91, 98, 99, 105, 137
Hill, Miss Octavia, 81
Irish Land Acts, 113-116
Land in the Middle Ages,
value of, 2, 3 Land in modern times, value of,
3-10 Land in towns, value of, 6, 7,
13-39, ,55-61 Land in London, value of, 6, 7, 15, 19 „ Berlin, 19, 20, 67, 68 ,, Birmingham, 33-35 „ Dublin, 130 ,, Burnley, 2 „ Bury, 14, 39 „ Germany, 5, 19, 20, 131 ,, France, 5 ,, Flanders, 5 „ Belgium, 5 ,, San Francisco, 10, 58,
59, 70 „ New York, 10 ,, United States, 7, 19, 58,
59, 65-67, 70, 119 „ Halifax, 33 Latimer, Hugh, on sixteenth
century land-values, 7, 8 Land, jn-ice of, effect on wages
of labour, 8-10 Land speculation, 30, G2-78 „ monopoly, the, 53-61, 70 ,, dearness of, and poverty, 9, 10, 61 Land and overcrowding, 79-106 Local Taxation, Select Com- mittee on, 36 Laveleye, M. E. de, 5, 146 Leasehold system, evils of, 42- 52, 82, 84
INDEX.
Leasehold enfranchisement, 112 Life-leases, 49-52 Landowners in the United
Kingrdom, number of, 53, 54 Land Tax, the, 14G
Mill, John Stuart, 37, 65, 109,
127, 141-146 Mines and mineral royalties,
117-126 Monopoly, the land, 14, 53-61,
70 Morley, Mr. John, 71, 111, 138
Newjian. Professor F. "W., 128
O'Connor, M.P., Mr. A., 9, 60 Overcrowding in large towns,
79-lOG Overcrowding and morality, 98-
100
Pepys' Diary, 32 Playfair, Sir Lyon, 6 Population, etfect of on land-
value and rent, 8, 22-24 Poverty and the land, 10 Public imin'ovements, effect of
on land-value, 24-39, 86, 103 Private gain at public cost, 22-
52 Penalties of social progress, 1-10
Rack-rentixu in towns, 20, 21,
40-52, 69, 70, 81-103 Rae, Mr. John, 132, 133 Reap without sowing, how the
landlords. 11-21 Rents in towns, high, 19-21, 40-
52, 67-70, 81-103 Rogers, Professor Thorold, 2, 3,
7, 25, 57, 69, 102, 103, 109,
147 Rent screw, the, 40-52, 81-103,
114, 115 Railways, landowners and the, 5,
55. 59
Railways and land-values, 57-9 Rent and wages of workpeople, 88-93
Salisbury, Lord, 105 Saunders, Mr. W., estimate of
London laud-values, 15, 37 Smith, Adam, 37, 38 Social progress and land- values,
1-21 Strand Improvement Bill, the,
30, 137-139 Speculation in land, 62-78, 103 Speculative building, 82-84
Taxation of ground values, 36- 39, 71, 152
Taxation of unearned incre- ment, 140-156
Town Holdings, evidence of Committee on, 18, 19, 23, 43- 48, 62, 83, 112, 129, 150
Tenants, exploitation of, by landlords, 40-52
Unearxed Increment, ex- amples of, 6, 7, 14-24, 30-39, 119
Unearned Increment, how formed, U-39
Unearned Increment, in towns, 13-52
Unearned Increment, in country , 11-14
Unearned Increment should go to society, 105-116, 140-156
United States, land-values in the, 7, 19, 58, 59, 65-67, 70, 119
TotTNG, Arth., on land-values, 3
Wagner, Professor A., 30, 43,
44, 130 Wallace, Dr. A. R., 19, 63, 65 Webb, Mr. S., 15-18 Wages and rents of working i people, 88-93
WORKS BY WILLIAM HARBUTT DAWSON.
«-*-
a r^ERMAN SOCIALISM & FERDINAND ^*^ LASSALLE : a Biographical History of German Socialistic Movements during this Century." With portrait of Lassalle. By WiLLiiiM Hakbtttt Dawson.
Cloth, 300 pp. Price 4s. 6d.
Contents: — Chapter 1, Historical Basis of the German Socialistic Movement ; 2, Early Socialistic and Communistic Theories ; 3, Karl Rodbertus and the Wages Principle ; 4, Karl Marx and Surplus Value ; 5, Ferdinand Lassalle ; 6, Organisatioc of the Working Classes ; 7, The Productive Association ; 8, Failure of Lassalle's Agitation ; 9, Lassalle's Death ; 10, Characteristics of Lassalle: the Man and the Agitator; 11, Lassalle's Socialism- J 2, Development of Social-Democracy ; 13, The International Association ; 14, The Era of Eepression ; 15, Present Aspect of the Socialist Movement, Index.
OPINIONS OF THE PRFSS.
Saturday Review.—" Mr. Dawson's book exhibits tlie results of thorough and conscientious study."
National RefoTmer. — " We regard this work as one of the best, if not the best, wliich has on tliis subject yet come under our notice."
Academy " The strongest point of Mr. Dawson's book is the very extensive
knowledge he shows of the sources from which the history of German Socialism must be drawn. His book is based on a study of the relative documents, which has been exceptionally thorough. Such fulness of knowledge is not usual among those who speak with authority on Socialism, for or against. The can- dour, sympathy, and moderation which Mr. Dawson brings to the treatment jf the subject are also rare."
The Gnardian.—"The bioji^raphical sketches are generally clear and careful, and that of Lassalle has merits of a higlier order. Anyone who wishes to understand what is undoubtedly a remarkable phenomenon of our times can scarcely do better than master this work."
Morning Post. — "A treatise marked by moderation in argument and ability in grasping and focussing the various details of an intricate subject. . . . Well worthy of careful consideration.
Literary WorW.—" A well-written and not too lengthy account of the rise and progress of Socialism in Germany. Mr. Dawson's book covers, to a consider- able exttnt, the ground already occupied by M. Emile de Laveleje in " Le cocialisme conteuiporain," but 'there is ample room for both work*.
d
OPIKIOKS OF THE VHESS— continued. Leeds Mercury. — " Mr. Dawson's bouk on German Socialism is in reality a biographical history of the movement in the present century. Studiously moderate in tone, the volume is written with candour, knowledge, and skill. Mr. Dawson has written what is in many respects a remarkable book, and the impartial tone which he preserves inhis treatment of a difficult historical theme renders thfc book all the more valuable.
Binningham Post.—" So far as we can judge Mr. Dawson has performed hi9 task of tracing the growth of this social force carefully and well."
London Star. — "Mr. Dawson s volume, with its remarkable portrait of tba great German agitator (Lassalle), deserves nothing but thanks and praise.'"
London: SWAN SONNENSCHEIN & CO.
"DISMARCK and STATE SOCIALISM :
■""^ an E.xposition of the Social and Economic Legislation of Geroauy since 1870. By William Harbutt Dawson. Cloth, 182 pages. Price 2s. 6d.
Contents. — Theory of State Socialism — Early Economic Policy of Prussia — Bismarck's Social Principles — The New Empire — Abandonment of Free Trade — The State as Monopolist — State Railways — Industrial Legislation — Insurance of the Working Classes^ — Bismarck's Principles of Taxation — The Colonial Era — Appendix.
OPINIONS OF THE PRESS, &c. " I cannot but feel gratified that you have chosen to give your countrymen an account of the ' Economic and Social Legislation of Germany since 1870.' " — Letter from Prince Bismarck.
" A very complete work on Prince Bismarck's social policy, and from that point of view most interesting." — Athenaum.
" It will be read with interest, both by students of Socialism generally and by students of political history." — Scotsman.
"We commend Mr. Dawson's volume to people of all political creeds. It will give them a clear idea of Bismarck's aims, his social ideals, and their relation to the traditional policy of Prussia, and it will be found to throw much lii^ht upon the domestic condition of Germany, and the work ready to the hand of the youthful limperor." — Ecening News.
" A succinct, well-digested review of German social and economic legisla- tion."— Saturday lieview.
" Most useful for comparing the state of things in Germany with that in our own couutry." — Glasgow Herald.
"The material, carefully collected, is of unspeakable impartance, not only to the poU'-iciau, but to the monil reformer."— i?rai//orrf Observer.
4
SOCIAL SCIENCE SERIES.
SCARIy:^T CLOTH, EACH ^s. (id.
1. Work and Wages. Prof. ]. E. Thorold Rogers.
" Nothing that Professor Rogers writes can fail to be of interest to thoughtful people." — Atheitaum.
2. Civilisation : its Cause and Cure. Edward Carpenter.
" No passing piece of polemics, but a permanent possession." — Scottish Review.
3. Quintessence of Socialism. Dr. Schaffle.
"Precisely the manual needed. Brief, lucid, fair and wise." — British Weekly.
4. Darwinism and Politics. D. G. Ritchie, M.A. (Oxon.).
New Edition, with two additional Essays on Human Evolution. " One of the most suggestive books we have met with." — Literaiy World.
5. Religion of Socialism. E. Belfort Bax.
6. Ethics of Socialism. E. Belfort Bax.
" Mr. Bax is by far the ablest of the English exponents of Socialism."— Weslmitister
Review.
7. The Drink Question. Dr. Kate Mitchell.
" Plenty of interesting matter for reflection." — Graphic.
8. Promotion of General Happiness. Prof. M. Macmillan.
"A reasoned account of the most advanced and most enlightened utilitarian doc- trine in a clear and readable form." — Scotsman.
9. England's Ideal, &c. Edward Carpenter.
" The literary power is unmistakable, their freshness of style, their humour, and their enthusiasm." — Pall Mall Gazette.
10. Socialism in England. Sidney Webb, LL.B.
" The best general view of the subject from the modern Socialist side." — Athenceitm.
11. Prince Bismarck and State Socialism. W. H. D.-\wsoN.
"A succinct, well-digested review of German social and economic legislation since 1870." — Saturday Revieiv.
12. Out of print.
13. The Story of the French Revolution. E. Belfort Bax.
"A trustworthy outline." — Scotsman.
14. The Co-Operative Commonwealth. Laurence Gronlund.
" .\n independent exposition of the Socialism ot the Marx school." — Contetnporary Review.
15. Essays and Addresses. Bernard Bosanquet, M.A. (O.xon.).
" Ought to be in the hands of every student of the Nineteenth Century spirit." — Echo.
"No one can complain of not being able to understand what Mr. Bosanquet means." — Pall Mall Gazette.
16. Charity Organisation. C. S. Loch, Secretary to Charity Organisation
Society. " A perfect little manual." — Athenceum. " Deserves a *ide circulation." — Scotsman.
17. Thoreau's Anti-Slavery and Reform Papers. Edited by H. S. Salt.
"An interesting collection of essays."— Literary World.
18. Self-Help a Hundred Years Ago. G. J. Holyoake.
" Will be studied with much benefit by all who are interested in the amelioration of the condition of the poor."— .Voi«t«g- Post.
19. Out of print.
20. Common Sense about Women. T. W. HiGGiNSON.
"An admirable collection of papers, advocating in the most liberal spirit the emancipation of women." — Woman's Herald.
21. The Unearned Increment. W- H. Dawson,
" h concise but comprehensive volume." — Echo,
SOCIAL SCIENCE SERIES— (Conthnied).
22. Our Destiny. Laurence Gronlund.
" A very vigorous little book, dealing with the influence of Socialism on morals and religion." — Daily Chronicle.
23. Out of print.
24. Out of print.
25. The Land and the Labourers. Rev. C. W. Stubbs, M.A.
" This admirable book should be circulated in every village in the country." —
Manchester Guardian.
26. The Evolution of Property. Paul Lafargue.
" Will prove interesting and profitable to all students of economic history."— Scotsman.
27. Crime and Its Causes. W. Douglas Morrison.
" Can hardly fail to suggest to all readers several new and pregnant reflections on the subject." — Anti-Jacohin.
28. Principles of State Interference. D. G. Ritchie, M.A.
" An interesting contribution to the controversy on the functions of the State." — Glasgow Herald,
29. Out of print.
30. Out of print.
31. Origin of Property in Land. Fustel de Coulanges. Edited, with an
Introductory Chapter on the English Manor, by Prof. W. J. Ashley, M.A. " His views are clearly stated, and are worth reading." — Saturday Review.
32. Out tf print.
33. The Co-operative Movement. Beatrice Potter
" Without doubt the ablest and most philosophical analysis of the Co-Operative Movement which has yet been produced." — Speaker.
34. Out of print.
35. Modern Humanists. J. M. Robertson.
" Mr. Robertson's style is excellent — nay, even brilliant — and his purely literary criticisms bear the mark of much acumen." — Times.
36. Outlooks from the New Standpoint. E. Belfort Bax.
" Mr. Bax is a very acute and accomplished student of history and economics."
— Daily Chronicle.
37. Distributing Co-Operative Societies. Dr. LuiGi Pizzamiglio. Edited by
F. J. Snell. " Dr. Pizzamiglio has gathered together and grouped a wide array of facts and statistics, and they speak for themselves." — Speaker.
38. Collectivism and Socialism. By A. Nacquet. Edited by W. Heaford.
" An admirable criticism by a well-known French politician of the New Socialism of Marx and Lassalle." — Daily Chronicle,
39. The London Programme. Sidney Webb, LL.B.
" Brimful of excellent ideas." — Anti-Jacobin,
40. Out of print.
41. The Condition of Labour. Henry George.
" Written with striking ability, and sure to attract attention." — Newcastle Chronicle,
42. The Revolutionary Spirit preceding the French Revolution.
Felix Rocquain. With a Preface by Professor Huxley. " The student of the French Revolution will find in it an excellent introduction to the study of that catastrophe." — Scotsman.
43. The Student's Marx. Edward Aveling, D.Sc.
" One of the most practically useful of any in the Series."— G/asg'ozj' Herald.
44. Out of print.
45. Poverty : Its Genesis and Exodus. J. G. Godard.
" He states the problems with great force and clearness." — N. B. Economist.
46. The Trade Policy of Imperial Federation. Maurice H. Hervey.
"An interesting contribution to the i\%Q.Vi^i\ox\,"— Publishers' Circular,
SOCIAL SCIENCE SERIES— {Continuedy
47. The Dawn of Radicalism. J. Bowles Daly, LL.D.
" Forms an admirable picture of an epoch more pregnant, periiaps, with political instruction than any other m the world's history." — Daily Telegraph.
48. The Destitute Alien in Great Britain. Arnold White ; Montague
Crackanthorpe, Q.C. ; W. A. M' Arthur, M.P. ; W. H. Wilkins, &c. " Much valuable information concerning a burning question of the day." — Times,
49. Illegitimacy and the Influence of Seasons on Conduct.
Albert Leffingwell, M.D. " We have not often seen a work based on statistics which is more continuously interesting." — Westminster Review.
50. Commercial Crises of the Nineteenth Century. H. M. Hvndman.
"One of the best and most permanently useful volumes of the Series." — Literary Opinion.
51. The State and Pensions in Old Age. J. A Spender and Arthur Acland,M. P.
" A careful and cautious examination of the question." — Times.
52. The Fallacy of Saving. John M. Robertson.
" A plea for the reorganisation of our social and industrial system." — Speaker.
53. The Irish Peasant. Anon.
" A real contribution to the Irish Problem by a close, patient and dispassionate investigator." — Datlv Chronicle.
54. The Effects of Machinery on Wages. Prof. J. S. Nicholson, D.Sa
" Ably reasoned, clearly stated, impartially written." — Literary World.
55. The Social Horizon. Anon.
"A really admirable little book, bright, clear, and unconventional." — Daily Chronicle.
56. Socialism, Utopian and Scientific. Frederick Engels.
" The body of the book is still fresh and striking." — Daily Chronicle.
57. Land Nationalisation. A. R. WALLACE.
" The most instructive and convincing of the popular works on the subject." — National Reformer.
58. The Ethic of Usury and Interest. Rev. W. Blissard.
" The work is marked by genuine ability." — North British Agriculturalist.
59. The Emancipation of Women. Adele Crepaz.
"By far the most comprehensive, luminous, and penetrating work on this question that I have yet met with." — Extract from Mr. Gladstone's Pre/ace.
60. The Eight Hours' Question. John M. Robertson.
" A very cogent and sustained argument on what is at present the unpopular side." — Times.
61. Drunkenness. George R. Wilson, M.B.
"Well written, carefully reasoned, free from cant, and full of sound sense." — National Observer. 62 The How Reformation. Ramsden Balmforth.
"A striking presentation of the nascent religion, bow best to realize the personal and social ideal." — Westminster Review.
63. The Agricultural Labourer. T. E. Kebbel.
" A short summary of his position, with appendices on wages, education, allot- ments, etc., etc."
64. Ferdinand Lassalle as a Social Reformer. E. Bernstein.
" A worthy addition to the Social Science Series " — North British Economist.
65. England's Foreign Trade in XlXth Century. A- L. BowLEY.
" Full of valuable information, carefully compiled." — Times,
66. Theory and Policy of Labour Protection. Dr. Schaffle.
" An attempt to systematize a conservative programme of reform." — Man. Guard.
67. History of Rochdale Pioneers. G. J. HOLYOAKE.
" Brought down from 1844 to the Rochdale Congress of 1892." — Co-Op. News.
68. Rights of Women. M. Ostragorski.
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69. Dwellings of the People. Locke Worthington.
" A valuable contribution to one of the most pressing problems of the day." — Daily Chronicle.
70. Out of print.
71. Out of print.
72. Land Systems of Australasia. Wm. Epps.
" Exceedingly valuable at the present time of depression and difficulty."— Soots. Hag.
SOCIAL SCIENCE Sl^^ES— (Continued).
73.
74.
75.
76.
77.
78.
79.
80.
81.
82.
83.
84.
85.
86.
87.
88.
89.
90.
91.
92.
93.
94.
95.
96.
97.
98.
99. 100. 101. 102. 103. 104. 105. 106. 107. 108. 109.
07ii of print.
Population and the Social System.
Out of print.
British Freewomen.
Out of print.
Out of print.
Three Months in a Workshop.
Darwinism and Race Progress.
Local Taxation and Finance.
Perils to British Trade.
The Social Contract. J. J.
Labour upon the Land.
Moral Pathology.
Parasitism, Organic and Social.
Allotments and Small Holdings.
Money and its Relations to Prices.
Sober by Act of Parliament.
Workers on their Industries.
Revolution and Counter-Revolution.
Over-Production and Crises.
Local Government and State Aid.
Village Communities in India.
Anglo-American Trade.
A Plain Examination of Socialism
Commercial Federation & Colonial Trade Policy
Selections from Fourier.
Public-House Reform.
The Village Problem.
Toward the Light.
Christian Socialism in England.
The Philosophers and the French Revolution.
Dr. NiTH. C. C. Stopes.
The History of the English Corn Laws.
The Biology of British Politics.
Rates and Taxes as Affecting Agriculture.
A Practical Programme for Working Men.
John Thelwall.
Rent, Wages and Profits in Agriculture.
P. GOHRE, with Pref. by Prof. Ely.
Prof. J. B. Haycraft.
G. H. Blunden.
E. BURGIS.
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Karl Marx.
K. Rodbertus.
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Baden-Powell, M.A., CLE.
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GusTAVE Simonson, M.A., M.D.
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G. F. MiLLIN.
L. H. Berens.
A. V. WOODWORTH.
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6. A Handbook of Socialism. W. D. P. Bliss.
7. Socialism : its Growth and Outcome. W. Morris and E. B. Bax.
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