UC-NRLF
1
$B 2^2 17b
LIBRARY
OF THE
UNIVERSITY OF CALIFORNIA.
Accession 9.9.4.4.0. • Class
LOCAL GOVERNMENT AND STATE All)
LOCAL GOVERNMENT AND
STATE AID
AN ESSA Y ON THE EFFECT ON LOCAL ADMINISTRA-
TION AND FINANCE OF THE PAYMENT TO
LOCAL AUTHORITIES OF THE PROCEEDS
OF CERTAIN IMPERIAL TAXES
BY
SYDNEY j/CHAPMAN, M.A. (Lond.), B.A. (Cantab.)
Scholar of Trinity College ; Cambridge ;
Lecturer in Political Science in the University College of South
Wales and Monmouthshire
LONDON
SWAN SONNENSCHEIN & CO., LIM.
PATERNOSTER SQUARE
1899
^3I
*n
£*■
GENERAL
PREFACE
This essay, which was awarded the prize under the
Warburton Trust by the Owens College, Manchester,
at the beginning of the present year, was originally
written in the long vacation of 1897. It has since
been revised and expanded, and, wherever necessary,
brought up to date. It is, nevertheless, issued very
much in its original form, with those defects in pro-
portion which can hardly be avoided when discussion
is directed to a special subject implying portions of
two sciences which are still fields for controversy.
Whenever the treatment appears light-handed, the
reader is asked to believe that it is due, in some
degree, to the writer's fear of being carried far, and
for long, from the special subject of the essay.
The author desires to express his great obligations
to Prof. A. W. Flux for many valuable criticisms and
suggestions: and, further, to thank Mr. K. T. S.
Dockray for his careful reading of the proofs.
S. J. C.
The Owens College,
Manchester, June, 1899.
99440
CONTENTS
CHAr. PAGE
I. INTRODUCTORY ----- I
II. DISTRIBUTION OF WORK BETWEEN LOCAL AND
CENTRAL GOVERNMENTS ... 4
III. THE DISTRIBUTION OF COST, AND THE GROUNDS
FOR SUBVENTIONS TO LOCAL BODIES - 1 8
IV. THE LIMITED TAXING CAPACITIES OF LOCAL
GOVERNMENTS - - - - 26
V. THE INCIDENCE, BURDEN, AND INEQUITIES OF
THE RATES, AND POSSIBILITIES OF REFORM yj
VI. DIFFERENTIAL RATES AND THEIR CAUSES - 66
VII. SUBVENTIONS IN ENGLAND PRIOR TO 1888 - 88
VIII. THE SUBVENTION IN ENGLAND OF 1888 AND
1890 ...... 94
IX. THE AGRICULTURAL RATINGS BILL - - 1 12
X. SUMMARY AND CONCLUSION - - - 120
APPENDIX A. THE EFFECT OF SUBVENTIONS ON
THE QUANTITY AND INCIDENCE OF TAXA-
TION - - - - - 123
STATISTICAL APPENDICES - - - -129
LOCAL GOVERNMENT AND STATE AID
CHAPTER I
I NTRODUCTORY
A PRELIMINARY sketch of the plan of argument will
be of assistance to the reader. Chapter I. deals with
the relations with respect to governmental work be-
tween the central and the sectional governing bodies
in the State. These relations are seen to involve
various kinds of financial relations, which are further
defined and reduced to principles in Chapter III.
In Chapter III. also an a priori solution of the
problem of subventions, to serve as a first guide to
practical judgment, is offered ; but it is pointed out
that the a priori scheme must be modified by the
results of an a posteriori investigation, that, in a word,
it is not a bed of Procrustes to which actual condi-
tions are to be fitted, but a magic jacket to suit all
comers.
The acceptance of the simple solution offered in
A
2 LOCAL GOVERNMENT
the provisional abstract determination is prevented
mainly by two allegations. The one, that socio-
logical conditions are such that local bodies are
impotent as taxing authorities. This assertion ne-
cessitated an investigation in Chapter IV. into the
possible range of local taxes, and, when the necessary
predominance of the one-tax system was demon-
strated, an examination in Chapter V. of its equities,
which embraced, of course, some discussion of the
incidence of rates. The other, that differential rates
imply differential burdens, which should imply
differential subventions. Chapter VI. was given
over to a minute scrutiny of the grounds for this
statement.
In the light of the conclusions adopted on all the
foregoing topics, the various subventions which are,
or have been, existent in England and Wales are
criticised in Chapters VII., VIII., and IX ; and in
Chapter VIII. the excuse that local governments had
to be stimulated in some manner is treated also,
together with other small contentions. Chapter X.
shortly sums the argument, and attempts a practical
conclusion.
There, in brief, is a description of what some might
term a Nasmyth hammer to crack a filbert. The
extent of the argument, however, may be justified
from two directions. In the first place, the question
of subventions is perhaps more momentous than it at
first appears. There are those who so regard it. In
AND STATE AID 3
the second place, that which is worth calling ex-
traneous to any subject is generally highly relevant.
One word must be said in explanation of the
method adopted, especially in Chapters II. and III.
By trying to avoid the errors of the over-starched
philosophy of the middle-century dogmatists I have
been driven into a somewhat free use of the biological
analogy, without any of that careful definition and
limitation which is so necessary to its fruitful employ-
ment. The sole excuse for the absence of explana-
tions is contracted space. If the treatment here
offered prove suggestive I am content that it is not
exhaustive or quite exact.
Quite apart from the main argument directed
against subventions, the chapters of this book may
be read as separate essays on some of the important
political, economic, and financial problems arising
out of local government.
LOCAL GOVERNMENT
CHAPTER II
DISTRIBUTION OF WORK BETWEEN LOCAL AND
CENTRAL GOVERNMENTS
ALL western countries have a more or less developed
system of division of governmental labour.1 England
has the County, the County Borough, the Urban and
Rural Districts ; the United States the State and the
County; Prussia the Province, the Circle and the
District ; France the Department, the Arrondissement
and the Canton ; and all have the primitive cell, the
Parish, or Township, or Commune.
Division of labour and distribution of labour,
whether in matters of production or in matters of
government, are distinct things. Division of labour,
to use the term in the sense in which it was employed
by Adam Smith, is only one of the methods of
arranging work.
How does this method of distributing labour arise ?
Adam Smith set himself to answer the question, for
it apparently seemed to him remarkable that in a
society built upon the individuality of the individual
1 " Governmental labour " is used throughout this work, in
the broadest possible sense, of any state functions and municipal
activities, of whatever kind.
AND STATE AID 5
men should come together and organise their labour.
Enlightened self-interest, he seemed to think, was not
sufficient to account for the destruction of the self-
sufficiency, the instinctive self-supporting policy, of
the individual. The cause, he says, is an instinct.
The further study of biology and sociology con-
firms the hint thrown out by Adam Smith. Prof.
Marshall is of opinion that recent researches have
indicated " a fundamental unity of action between
the laws of nature in the physical and in the moral
world. This central unity is set forth in the general
rule, to which there are very many exceptions, that
the development of the organism, whether social or
physical, involves greater subdivision of functions
between its separate parts on the one hand, and
on the other a more intimate connection between
them" l (The italics are mine.)
In other words, from one point of view, society is an
organic whole, and its end is a determinant of the
organisation of labour (whether industrial or govern-
mental) within it. One explanation, then, of social
organisation lies in the organic nature of society, as
the new title " organisation " for an old conception,
as old as Plato at least, implies. To speak in analogy,
the local body must be conceived as an organism
within an organism. A developed society is a vital
unity built up in an hierarchy of organically related
organisms. Special emphasis should be given to the
1 " Principles of Economics," 2nd ed., p. 300.
6 LOCAL GOVERNMENT
term "hierarchy." We have around us more than
groups of organisms with distinct and independent
functions and scopes of operation. We have a system
in which it is the function of the higher organism to
see to the adequate functioning of the lower organ-
isms ; in other words, a system in which it is a special
function of the higher centre to stimulate, organise
and supervise the general functioning of the lower
centres. If it were not so the nation, consisting of
groups of localities, could not be correctly viewed as
a unity.
The conception of the hierarchically constituted
organism must be elucidated further, for it is a notion
of importance to this investigation. We frequently
hear local government contrasted with central govern-
ment ; but we seldom hear tell of the problem of the
intermediate governments lying between the two.
Yet there are such ; and their position has been one
of much prominence since 1888. They will be
termed " provincial governments," or " county govern-
ments," hereafter, when it is sought to distinguish
them from the primary local polities, to which also a
special term, " district governments," will be applied,
when it is desired to summon attention to the primi-
tive political cell.
A developed western people seems to be invariably
drawn by the bonds of civic feeling into formations
somewhat like those indicated in the following
scheme :
I. The Locality:
a political organism.
AND STATE AID 7
,(a) The District or Parish : a
simple political organism : part
of a larger whole, and a whole it-
self, but not of parts.
(b) The Province or County : a
complex political organism : part
of a larger whole, and a whole of
^parts.
2. The Nation : a complex organism in its ultimate
form : a whole of parts, but not part of a larger
whole. l
Of course, this analogical scheme is not meant to
imply that the government of the complex organism
is related to other political organisms only ; that it is
not directly constituted by the suffrages of individuals,
and that it does not directly govern individuals. It
may take many forms, from the federal council of
political bodies acting only through those bodies, to
the popularly elected county council with its duties of
both direct and indirect government. Nor do I mean
to assert that existing local governments, always or
generally, correspond in structure and function to
those which reason proposes.
The importance of strongly-developed local
governments can hardly be over-emphasised.
As national character determines these bodies, so
do these bodies react on character. Local govern-
iThis is not quite true, because international law just hints at
a gradually segregating higher organism.
8 LOCAL GOVERNMENT
ment stimulates and educates the political interests
of a people, and with political interests the char-
acteristics of self-reliance, vigour, and enterprise. The
direct effect is political, but the indirect includes
almost all social and individual qualities. Over-
centralisation of government means a slack and
ineffective control on the part of the constituents,
and it increases the risk of storms of unreasonable
discontent and unreasoning excitement.
Moreover the over-loading of the central govern-
ment with work clogs its action and so reduces its
efficiency. The future of representative government
— and in this is involved the future of civilisation —
is wrapped up in the future of local self-govern-
ment.
In seeking to define the scope of local govern-
ments, we are immediately and forcibly struck by the
fact, indicated in the preceding analysis, that the local
body may be conceived in two apparently mutually
exclusive ways, as a whole and as a part. It is at
the same time an organism and the limb of an
organism, which again may be a part in relation to a
higher unity. The perplexity which naturally
accompanies such a discovery is by no means
decreased when the implications of the dual nature
force their way to the surface. It is not long before
we clearly perceive that the two aspects of the local
body lead to two principles for the sub-division
of governing powers, and that the two principles
AND STATE AID 9
do not necessarily unite in the same thing at the
end. Let us now consider each principle and its
results.
1. The local body as individual must be self-
governing. Adam Smith makes this notion the
central pivot of " the obvious and simple system of
natural liberty." It is the citadel of individualism.
Admitting the force of the contention, we are bound
to accept the following principle : Of the matters
which fall ivithin the scope of government, those which
are chiefly of local interest must be undertaken by the
corresponding local governments, and those which are
chiefly of national interest must be 7tndertake?i by the
central government.
In comparing the distribution of work in the two
spheres of politics and industry, we must remember
that in the former there are no markets, and that,
therefore, there is in it no competition to force the
greatest efficiency at the least cost Hence the
special importance of the individualistic principle of
self-sufficiency in politics. Manchester and Liverpool
cannot in the nature of things strive with one another
for the management of, say, the police in either town,
even assuming a desire on the part of both to do the
Empire's work. In each case the sole possibilities
by way of management consist in arrangements be-
tween the imperial executive and the city's govern-
ment ; in each case all other governments are foreign
to the matter.
io LOCAL GOVERNMENT
But there are exceptions. For instance, in the
matter of the chief constableship of Suffolk, the
Home Secretary decided this year in favour of
the claim of West Suffolk to appoint its own chief
constable, and against the joint standing committee,
which aspired to make the appointment for the whole
county.
2. The local body as the limb of an organism,
that is, as part only of an individual, must do that
kind of work for which it is most adapted. This
conception gives rise to the following principle :
The matters which fall within the scope of government
must be distributed among the various governing
bodies, central and local, according to their capacities
and efficiencies.
These are the two main principles for the distribu-
tion of work among governing bodies. It need not
be added that the second is a particular form of that
which used to be known as the Principle of the
Division of Labour. In its modern dress it might be
known as the Principle of Socialism. The Principle
of Individualism would not be a serious misnomer for
the first.
The two principles are equally true. In all cases
we have to appeal to both ; neither must be pushed
to an extreme ; but no rule can be laid down as to
the weight to be attached to each. Resultant
advantages, which, of course, depend on notions of
the social ideal, determine the applicability of each.
AND STATE AID n
Though there are cases in which the one alone seems
called for, the other must always be held in mind.
By the aid of the above principles, and in the light
of the foregoing discussion, we may now attempt in
more detail the design of the distribution of govern-
mental function, bearing in mind, however, that
deduction can only rudely sketch, and that wide
experience alone has the power to paint in the detail;
and remembering also that the conclusions below
follow not from the bare principles, but from the
relative emphasis laid upon each.
A first rough apportionment of work may be based
on the distinction between matters of purely national
and those of purely local interest. Thus, the question
of national security may be held to be a purely
national one, and the position and administration of
naval and military forces may, therefore, be relegated
to the central government. More widely, all concerns
of external policy must be handed over to the central
government, while matters of purely local interest,
inasmuch as they concern only their locality, may
well be left to local management ; indeed, it would be
difficult to find a principle by which central interfer-
ence in the latter case could be justified. There are,
however, no such cases ; always the nation as a whole
is in some degree affected by local policy. It is
therefore desirable — unless, indeed, it be held that it
is better that unitary states should fall asunder into
confederacies, the locality becoming the prime unit in
12 LOCAL GOVERNMENT
place of the nation as a whole — that the central
government should limit the scope of local govern-
mental function by regulation and by general super-
vision. In many departments, nevertheless, great
latitude may be safely allowed to local bodies.
In spite of the above contentions, however, it is
possible, for all practical purposes, to separate matters
of national from those of chiefly local importance ; but
even when the divorce has been effected, the problem
of the relation between central and local authorities
is by no means completely solved. There remain
those matters which at the same time substantially
affect both the nation as a whole and the localities. To
refer for the present only to the governmental func-
tions included in the " Individualistic Minimum "
theory of politics, there are affairs of justice and
police. Security and the wise and impartial adminis-
tration of justice are of vital importance to the
localities; but the nation as a whole cannot be
indifferent to the provisions for the attainment of
these objects. It is of special concern to a town that
the detection of crime should be swift and sure, and
the positive prevention of crime as frequent as pos-
sible; and it is of great concern to the community at
large that no district should become a hotbed of vice.
On the one hand, therefore, there are strong argu-
ments for relegating matters of justice and police to
local control ; and, on the other hand, there are strong
arguments for centralised authority.
AND STATE AID 13
When we pass beyond the narrow confines of
Individualistic Politics we find that matters of an
appreciable dualistic interest are common, e.g., those
of the poor, of pauper lunatics, of sanitation, educa-
tion, bridges, and highways. Take the question of
the poor as an example. Poor relief, from the
"Settlement" of Elizabeth to 1834, was almost en-
tirely district business. The cost was colossal, and
the unnecessary effort expended was simply mon-
strous. "Domicile" or "settlement" became a
constant subject of dispute. The good work done
by one parish was frequently undone by inefficient
administration in the next. Incapable boards peopled
the country with paupers. The nation suffered, the
deserving poor suffered, and none, except, perhaps,
the able-bodied and idle vagabonds, profited. There
is, notwithstanding, no reason to suppose that purely
central management would have prospered better.
No matter requires more patient examination of
detail, more minute supervision and local knowledge,
than poor relief; and in all these respects the central
government is defective.
It is unnecessary to enter into detail with regard to
the other affairs of divided interest set forth above.
They will all be found on a brief inspection to exhibit
elements which specially fit them for determination
by the central government, and, at the same time,
elements which mark them off as the natural business
of local bodies. But of which local bodies ?
14 LOCAL GOVERNMENT
We must here refer back for a few moments to the
conception of the nation as an hierarchy of social
bodies. Among developed western peoples we find
not only central and district governments, but also
intermediate governments lying between the two ex-
tremes. The last are of considerable importance. For
one reason, because the intensity of interest in matters
of divided interest diminishes in all cases with distance
from the locality where the work is performed. Take
an example. Efficient policing in Manchester is of
almost equal importance to the urban districts lying
about it as to the city itself, and it is of much import-
ance to southern and central Lancashire ; while its
interest to Devon is something infinitesimal in com-
parison. This fact will form the basis of many of our
conclusions as to subventions. In dealing with the
intermediate or county governments, however, we
must always remember that there are differences
between their relations to the districts beneath them
and the relations of the nation to the localities. The
control of the county over the district is strictly cur-
tailed by the fact that the closer bodies lie together
in the scale of government the more friction does
control induce, and the more effective is it in degrading
the quality of the subordinate board.
So far we have been concerned chiefly with the
local or national interest attaching to certain opera-
tions. Now we have to notice more especially the
division of function determined by the nature of the
AND STATE AID 15
governmental organs. Each has its particular gifts.
In general we may say that the matters assigned to
local bodies should be those in which local knowledge
is requisite, minute supervision essential, and the
co-operation of private and governmental agencies
likely to be of appreciable value ; and those in which
the need for uniformity is least evident, or in which
even diversity in administration is desirable. Some
laws are not good if local peculiarities and differences
are ignored in their application. Uniform administra-
tion is best only when local conditions are uniform or
negligible. The administration of the Poor Laws
may again be taken as an example. One can barely
conceive a greater political mistake than detailed
uniformity in the application of these laws — especially
with respect to indoor and outdoor relief — in London,
say, and in the rural districts of Devon, or in Essex,
under the present cloud of agricultural depression.
Further, we must carefully guard against the mis-
take of supposing that the division of work between
the national and the local governing organs is
absolute, and quite independent of the quantity of
work. In a word, that it is analagous to division of
industrial labour within one country.
To repeat, many services are the direct concern of
both the central and local bodies, and many largely
of national interest may be best performed by the
locality, either because of its idiosyncracies, or be-
cause of the peculiarities in certain districts, or be-
1 6 LOCAL GOVERNMENT
cause the central government has its hands full.
Moreover, operations of special importance to the
locality, and managed by the locality, may be im-
proved if brought into contact with the central
government. The position of the local government
is one of tutelage. It is taught by advice, correction
and example. To quote Prof. Sidgwick : " We have
also to consider the probability that both the central
government and its critics — as compared with local
government and critics — will have the superior en-
lightenment derived from greater general knowledge,
wider experience, and more highly-trained intellects ;
and we have to consider the greater danger in a small
locality that the sinister influence of a powerful in-
dividual or corporation, or combination of persons
with similiar interests, may predominate to the detri-
ment of the public." 1
Finally, we must notice that local governments have
a wonderful power of adapting themselves to circum-
stances. By undertaking a higher quality of work
they attract to their boards higher ability. Hence
difficult undertakings calling for tact, large knowledge,
and perhaps some genius, which cannot at first be
safely placed in the hands of local bodies without the
most zealous supervision, may in a few years be
wholly handed over to them with perfect confi-
dence.
After the foregoing, Roscher's division of local
i "Elements of Politics," p. 514.
AND STATE AID 17
functions will be immediately comprehended. They
are, he says,
(a) State.
{b) Compulsory.
(c) Optional.
The first class sets apart the local administration of
centrally initiated services of chiefly national interest.
The second class contains only matters of divided in-
terest. Of these we may remark again that the
division of interest rests very largely between the
provinces and districts. The third class comprises
those concerns which are specifically local.
Lastly, it has to be kept vividly before the mind
that the so-called local organism is constituted by
function ; that the aggregation of human beings which
may be regarded as bound into a whole by civic feel-
ing for one purpose may not be so regarded for
another purpose. That the size and strength of the
local organism varies with its activities ; and more-
over that the cohesion of its parts becomes less firm
with increasing distance from the centre.
1 8 LOCAL GOVERNMENT
CHAPTER III
THE DISTRIBUTION OF COST, AND THE GROUNDS
FOR SUBVENTIONS TO LOCAL BODIES
After dwelling for some time upon the question of
the distribution of cost, we discover fold upon fold of
further complications doubled over those which have
already taxed our patience in the matter of the
distribution of work. Just as we learnt then that
not only one but several principles, co-operating and
competing, existed for the distribution of govern-
mental operations, so we learn now that not only one
but several principles, co-operating and competing,
exist for the distribution of costs. The chief are the
following : —
i. Ethical Principles.
(a) Those interested should bear the cost, and in
proportion to their interests,
(b) The burden of cost should be distributed accord-
ing to ability to bear it.
The former emphasises the indestructible individu-
ality both of the locality and of the nation as a
whole ; the latter the transcending of the mere
AND STATE AID 19
individuality of the section by the unity of the whole
body corporate.
Now to which principle we give precedence — to
the other being accorded only the office of limitation
— depends upon the priority of the individualities with
which we are dealing. In states approximating to
confederacies, the first is the fundamental rule, but
in those more closely resembling unitary bodies
politic the second has the superior claim. Frequently
it does not much matter with which we commence,
but in England to-day, in view of the importance and
the ancient foundation of the local bodies, it will
doubtless be best to apply first the ethical principle
based upon their individuality.
2. TJie Economic Principle.
Those who carry out the ivork should reap advan-
tages varying with their economy.
The necessity is immediately obvious. That
nobody is so careful in spending other people's
money as in spending his own is a psychological
fact.
These are the fundamental rules, but they form
only part of the frame-work of principles for guidance
in distributing costs. Here are others of secondary
importance.
3. The Juridical Principle,
Costs, or some portion of them, should be used as
legal sanctions to enforce control.
In an hierarchy of polities there must obviously be
20 LOCAL GOVERNMENT
some control by the head over the lower centres, and
practically it is only by the financial method that one
corporation can effectively coerce another.
4. The Political Principle.
Costs, or some portion of them, should be em-
ployed as a political regulator, by means of which
the activities of local governments may be stimulated
or checked.
And this is not quite all, for, by the principle of
Division of Labour, those bodies which can perform
that delicate office best ought to collect the funds for
political operations.
The last principle is strictly subordinate to all
which precede, when it conflicts with them, which it
is sometimes said to do so directly and completely as
to place the hostility almost beyond reach of com-
promise. The prior rules must be observed first, and
then, if it is found that there are substantial differ-
ences in the powers of different bodies to raise
economically and equitably the requisite funds,
modifications must be built in, to obviate the inci-
dental disadvantages attaching to the arrangements
most in accordance with the dominating principles.
Many as they are, the principles before us are not
exhaustive. Overshadowing all, hangs the great rule
of simplicity. We gain frequently by retaining
defects to avoid complexities. The more involved
are mechanical and social arrangements, the more
intricate are the relations between units of any
AND STATE AID 21
character in combination, the greater is the friction
and incidental loss, the greater the chance of disloca-
tion and breakdown. The higher the state of de-
velopment, the safer and more economical do the
more delicate and complicated sub-divisions in
organisation become ; but limits are set to the
practicability of theoretical schemes at each stage of
development.
Let us now attempt to apply the foregoing prin-
ciples to the financial problems which arise from the
distribution of governmental work treated in the
second chapter. For the present, the obligation on
the part of the Imperial Government to play the part
of Providence to the local bodies is best ignored.
We may at once lay it down that State functions
performed by the State must be paid for by the
State, and that optional functions undertaken by the
locality must be paid for by the locality.
And who should bear the costs of (a) State
functions effected in part by the locality, and (b)
compulsory functions ?
One of the weightiest problems to which we have
been converging is before us. It need not be added
that of the solutions given in the past subventions in
great variety, doles, loans, sops, and part payments
form by far the largest number. The following I
take to be the main lines of a rational solution :
State Functions. — They should be paid for by the
State. But, to enforce economy, definite prices should
22 LOCAL GOVERNMENT
be fixed. What difference there is between them
and the actual costs should belong to, or be met by,
the locality. Payment must be conditional upon the
attainment of some standard of excellence ; and
where possible, it may be desirable to vary it, within
limits, with the quality of the work done.
Compulsory Functions. — Most of them may be con-
sidered as in small part State, in large part pro-
vincial, and in largest part district functions ; the
proportions being determined by relative interests.
The hardest task lies in estimating the proportions of
interest ; in drawing a line where nature has made no
division. Suppose the question settled, however.
Assume, for instance, that, as regards a particular
piece of work — say, education — experience has shown
that outside funds ought to bear about one-quarter of
the expense. Then contributions to the cost of
administration, roughly upon this basis, must observe
the rules laid down with respect to payments for
State functions. Definite prices must be fixed, de-
pendent upon efficiency, and varying, perhaps, within
limits, with the quality of the work done.
Here a thought intrudes which calls for some limi-
tations. Suppose that each locality contributes to the
imperial exchequer through the medium of imperial
taxes, for the purpose of meeting the cost of the
localities' State and compulsory functions, just as
much as it receives from the exchequer for the per-
formance of these functions ; then the paying and
AND STATE AID 23
paying back is clearly absurd. If such were the case,
the sole principles determining contribution would be
the third and fourth. We shall have to investigate
in succeeding chapters whether such is the case.
The obligation on the part of the central govern-
ment to stimulate the localities on occasion raises
grave issues. It may be taken as pretty generally
true that the use of a stimulus implies an ignorance
— an ignorance either of the quantity of vitality in
the body, corporeal or corporate, or of some disease
which has insinuated itself. It is hoped that activity
will add to the vitality or drive out the disease ; at
any rate it is intended that the body shall at least act
as if it were in a healthy condition. Thus, when a
man's vitality is yielding, he may keep himself
vigorous with brandy, and a fagged horse may be
urged to greater speed by whip and spur. But
stimuli must increase in something like a geometrical
progression to achieve a moderately constant result,
and even then they secure it only for a short period,
provided that the obstacle impeding vitality has not
been detected and removed, and generally at the cost
of greatly impaired health. A stimulus of the kind
we are considering, then, must be only temporarily
applied, if at all, and it must be accompanied by a
searching analysis of the constitution of the body
stimulated ; even the temporary starting stimulus is
undesirable, because it tends to destroy initiative.
We shall observe hereafter that in politics the tern-
24 LOCAL GOVERNMENT
porary measure has a powerful proclivity to establish-
ing itself permanently.
What nature should the stimuli to local authorities
assume, supposing them to be on occasion really
essential political expedients ? In the first place they
must be financial in character. Other peculiarities
depend upon the ends which they are intended to sub-
serve. If it is held that a certain sort of work should be
done by healthy local bodies, then it is best to pay a
bonus on its performance till the locality has acquired
the habit of doing it. When this consummation is
attained the special stimulus must be removed ; and
the cost of the work must thereafter be met in ac-
cordance with the prior principles. If the local body
persistently refuses to acquire the desired habit, then
the local performance of the work and the subvention
must cease together. If it is desired simply to stir
up the local body, then, overlooking the dangers and
granting the expediency of that which is contem-
plated, it is wise not to assume certain costs, since
that simply means paying some old bills, but to hand
over a lump sum, and to vary it occasionally to keep
the recipients alive to their financial problems.
The preceding is an entirely deductive solution of
the problem underlying the policy of subventions.
Actual subventions cannot be approved or con-
demned without a knowledge of actual condi-
tions.
The following are some of the questions which
AND STATE AID 25
must be faced before a practical judgment can be
formed :
Can local bodies raise the funds they require as
economically and equitably as the Imperial Govern-
ment ? Do they ? If not, is the difference sufficient
to justify special financial arrangements to meet
it?
Does the wealth of local constituencies vary much
from place to place? If so, should the outside con-
tributions to the cost of compulsory functions vary in
any way with the resources of the locality? Does
poverty justify special assistance ?
Is there much difference between the costs of " state
functions " and " compulsory functions " in different
districts ? Should such differences, if existent, regu-
late the amount of outside contributions ?
Is the question of the cost of compulsory functions
adequately met by financial arrangements between
districts and the county within which they lie, or are
some exchequer contributions needful?
Has there been anything in the condition of local
self-government in recent years to render a special
financial stimulus desirable ? Is it desirable now ?
These questions will be answered in what follows
as fully as space and information permit, and the
requirements of the subject render indispensable, and
in the order which commends itself as most ap-
propriate.
26 LOCAL GOVERNMENT
CHAPTER IV
THE LIMITED TAXING CAPACITIES OF LOCAL
GOVERNMENTS
It does on first thoughts seem extraordinary that the
Imperial Government should have an almost infinite
choice of means for tapping the wealth of the
country, that it should use dozens, and that the local
governments should be confined to practically one
only tax ; especially in view of the fact that the one-
tax system is defective because of its oneness ;
although much can be said for it. Can local finance
escape the one-tax system ?
In modern civilised states many forms of taxation
possible to the central government are impossible to
local bodies.
Customs, for instance, can only be levied at the
frontiers of a state. Local bodies, therefore, are in-
terdicted from that form of taxation. We find,
indeed, octrois in many continental European
countries ; but they differ from customs in being
levied alike on home and foreign goods. Octrois,
moreover, are on the wane, as the opinion is gaining
AND STATE AID 27
ground that the results are not worth the annoyance
caused by collection, the cost of collection, and the
impediments to trade which are wrapped up in the
system. With a few exceptions, for instance in Italy
and France, they have already been commuted for
fixed payments. This form of taxation, however,
bears a closer resemblance to an impost upon con-
sumption than to customs.
Excise duties are likewise closed to local authorities.
The reason is that sectional governments have no
control over one another and over the customs, and
so, if they imposed excise duties, the local producer
might be ruthlessly sacrificed, with the best intentions
in the world. Stamps on business and legal docu-
ments fall also within the classes of taxes from which
localities are debarred. General supervision from
Westminster would prevent such a disaster in some
degree, but probably at a cost that would swallow up
any little advantage. Nor could much efficiency be
expected in any central organisation and supervision.
The probablity, therefore, is that had the local bodies
powers to impose these taxes, trade, tossed into an
atmosphere of insecurity, would be subjected to
arbitrarily induced convulsions.
The two chief forms of indirect taxation are, there-
fore, weapons not fashioned to the grasp of local
bodies. We shall find, moreover, that the scope of
direct taxation in their hands is substantially con-
tracted.
28 LOCAL GOVERNMENT
Of the direct taxes, those on income and property
first claim attention. The former cannot be better
introduced than by a quotation from Mr. Goschen's
report : — " It appears to be impossible to devise an
equitable local income tax, for you cannot localise
income. An attempt was made in Scotland, and it
broke down when an English Lord Chancellor, who
drew his £10,000 a year in London, but had a small
place in Scotland, was made to pay income tax on
the whole of his income in that country as well as in
this. No country has been able to levy a local in-
come tax."1 I see no fatal objection in the double
payment of the income tax by those who keep up two
residential establishments ; and business establish-
ments might be specially treated. The subject taxed
more than once might be charged at a lower rate, the
double imposition being employed in rendering taxa-
tion degressive. But a very real obstacle does exist
in the fact that a great mass of English income is
taxed at its source. If it were not, the opportunities
for fraud would be enormous, and experience shows
that they would not all be wasted. The plan of
stoppage at the source was not included in the first
income tax imposed by Pitt in 1799, and the results
were disappointing. The tax was repeated three
years later, and Pitt complained bitterly of the frauds
by which contribution had been evaded. When
Addington reimposed the tax in 1803 it was col-
1 " Report on Local Taxation," p. 204.
AND STATE AID 29
lected at the source whenever possible. Relative
productivity was at once doubled as a direct conse-
quence, notwithstanding the imperfections of the new
method at the outset. Professor Bastable's judg-
ment may be taken as final : — " Owing to the variety
of modern incomes and the trouble of following them
to their source, the income tax should always be a
general tax."1
In Switzerland and the United States the general
property tax is the main instrument for providing the
revenue of the component parts of the federal system.
Prussia and Holland have recently reverted to it.
The tax is, however, almost universally condemned
because of the gigantic difficulty in the way of equit-
able administration, and of the fact that fraud can be
practised with almost complete immunity from de-
tection. The tax comes in consequence to fall for
the most part on real property, the least tangible
possessions remaining undeclared and undiscovered.
Mr. D. A. Wells concludes that the property tax is a
scandalous fraud. Professor Seligman considers it
the worst known tax in the civilised world. Professor
Plehn condemns it in unmeasured terms : — " As at
present administered, it fails entirely to reach in-
tangible property. It debases public morals by
putting a premium on dishonesty. It is regressive,
and presses hardest upon those relatively least able
to pay. This is strong language ; even stronger has
1 " Public Finance," p. 360.
30 LOCAL GOVERNMENT
been used. But no words are too strong to express
the iniquities of this tax."1
Yet the opinion frequently crops up, and is fre-
quently expressed in popular debate, that local bodies
should relieve the rates by a property tax. Notice
the dilemma which such a tax creates. It is either
grossly unfair, and offers a big bounty on fraud, or
else the individual must be subjected to exasperating
interferences, and society must be exposed to the
damaging effects of inquisitorial investigation. This
dilemma applies also to a local income tax ; and the
objections to a local income tax, put forward by Mr.
Goschen in the passage quoted above, apply with
equal force to a local property tax.
Against the foregoing general analysis it may be
urged that the independence of local finance is not
universal. In France, for instance, local funds are
chiefly raised by the imposition of centimes additionels
on some of the imperial taxes. The local tax thus
becomes a mere appendage to the imperial tax.
This method of raising local funds has the cordial
support of M. P. Leroy-Beaulieu on the grounds of
clearness, simplicity, economy, and security against
peculation and exaction. But the system simply
means that imperial taxes must be innoculated with
the infirmities of local taxes in being collected only
direct from the localities ; or else that the local taxes
must be collected on the basis of part only of the
1 Plehn's " Introduction to the Science of Finance," p. 219.
AND STATE AID 31
imperial taxes — which is actually the case — so that
the question of the scope of each remains. Further,
the additionel method, by robbing local bodies of a
certain amount of initiative, undermines anything of
the nature of robust independence.
Here a very serious difficulty confronts us. We
referred in the first chapter to the overlapping of
governmental bodies; we have now to observe an
overlapping on the financial side. The imperial
government may draw its income from all the taxes
above noted; the local bodies derive their revenues
from a portion of them. The disadvantages attendant
on financial overlapping are considerable. It is quite
obvious that if two bodies have the power of taxing
on the same base neither will be governed by con-
siderations of the taxable capacity of that particular
base. If two costers possess a donkey in common it
will be overworked, for each man will argue, " If I
do not overwork this animal my partner in owner-
ship will ; if I regard economic and humane con-
siderations I shall lose and it will not gain, for there
is no guarantee that my partner will do the same."
And so it will be with the base controlled by two
taxing authorities. And even if we suppose that
Her Majesty's Government will see to it that no single
tax runs riot, yet there are fatal objections. Suppose
the centre only taxed to the amount of the difference
between the local rate (confined perhaps within
limits) and the maximum which that base should
32 LOCAL GOVERNMENT
bear in the taxing system. Then a powerful check
on wastefulness on the part of a local body would be
withdrawn ; for however high or low its rates the
constituency would neither suffer nor benefit (the
imperial tax varying inversely as the local tax).
Each local body would strive to raise its taxes as
high as was allowable, and its constituents would
applaud, for heavy expenditure would simply mean
that the locality was sucking the wealth of the nation
at large. The central government, indeed, might
supervise local taxes, but by so doing it would sap
the initiative of local bodies and run the risk of all
the dangers of over centralisation. Other ways out
of the difficulty have been found in the suggestions
that the common base should be divided, or that the
central body should take it over entirely and pay to
the local authorities a portion of the proceeds — the
additionel system again. In the United Kingdom,
for example, by the Act of 1888, certain licenses col-
lected in any county or county borough are paid to
the authorities of those localities.1
JThe licenses thus transferred are those for the sale of in-
toxicating liquors by retail for consumption on or off the
premises, licenses for dealers in beer, spirits, wine, sweets,
tobacco, and game, for refreshment-house keepers, appraisers,
auctioneers, hawkers, house-agents, pawnbrokers and plate-
dealers, dog, gun and carriages licenses, and licenses for killing
game, and for armorial bearings, and male servants. It was
originally intended to add the sum which might be collected on
certain licenses for trade-carts, locomotives, etc., which it was
proposed to authorise by a bill which was before Parliament
AND STATE AID 33
It may be argued against their proposed uncon-
ditional surrender to sectional governments that uni-
formity is essential, since trade would be hampered
by differential burdens especially if they were vari-
able. But really this objection becomes slight when
we consider what the licenses are. The same con-
tention holds also with respect to rates on business
premises ; but it does not apply to consumers' licenses,
nor to liquor licenses, and these are, therefore, specially
suitable for local manipulation. The local bodies
cannot in the face of the rates reduce them, and no
considerable harm could result from a large increase
in them. A very obvious fact which vitiates the
present system is that, unless responsibility in spend-
ing funds is accompanied by responsibility in finding
them, there is the risk of preventing anything
satisfactory emerging.
The base consisting in land and buildings should be
entirely yielded up to the localities. This once almost
ceased to be a pressing need. In 1871 Mr. Goschen
had a bill drafted, to apply to England only, in
which the following clause occurred : — " From and
after a certain date, to be fixed by an order in Council,
at the time of the passing of the Act. On the whole the pro-
posal was a good one, as part of the cost of making and re-
pairing streets should be considered as an element in the cost
of production and circulation of goods, and should be charged
in the price of those goods in proportion to the amount of
transporting involved. There would be a difficulty however as
regards carts kept outside the rateable area.
c
34 LOCAL GOVERNMENT
the house tax shall cease to be payable to the
Crown, but shall be levied by and be payable to the
parochial board in each parish." The bill, however,
was finally dropped, and Mr. Goschen gave it as his
opinion that the time had not yet come for the
central government to surrender the house tax.
Certainly the time had not yet come if the Govern-
ment decided to drop the bill. But, whatever was
the case then, the time is more than fully ripe now
for the removal of this imperial tax, absurd as it
is in the face of rapidly-swelling rates. Not only
is its retention needless, unwise, and a standing
source of irritation, but it is simply scandalous in
face of the doles which Her Majesty's Government
have felt constrained to mete out to the localities in
the form of allocated taxes and other subventions.
Would an estate duty on real property be at all
suitable for local purposes ? It is needful of course
that any death duty relegated to sectional control
should be on realty, which can be localised, while
personal property cannot. The duties now paid into
the Local Taxation Accounts are based on person-
alty ; they are, therefore, in no sense local taxes. If
they were levied on realty they could be surrendered
to the local authorities, but the objection would then
hold that a taxation base was divided, and there are
grave disadvantages attaching to the transference to
local bodies for taxation purposes of the whole of
real property passing at death. Besides, realty and
AND STATE AID 35
personalty are so closely related that they form to a
certain extent one base ; and we may lay it down as
a fundamental principle that no one base must fall
within the control of two or more authorities.
To sum up, we find that district governments are cur-
tailed in their choice of taxes principally because of —
(a) The need of uniformity in indirect taxation,
and the requirement that certain imposts should be
treated together.
(b) The fact that the individual and his capital
pass more easily from district to district than from
country to country.
In the society of Tennyson's ideal of a cosmo-
politan democracy, the income tax will be as impos-
sible to the nation as to the locality, since taxation
at the source will be rendered futile by the inter-
national flow of capital — unless, indeed, people will
then be eager to pay their taxes.
The one-tax system, we observe, is not in the
nature of things compulsory. Local taxation may be
expanded, but its co-efficient of expansion is small.
I am almost inclined to think that for the present
no extension will be found necessary. We shall
see hereafter that the apparent one-tax system is in
reality a three-tax system. It is, moreover, doubtful
whether existing local bodies are sufficiently capable
to take over larger financial responsibilities; but it
must be remembered that enlarged powers, by at-
tracting more of the higher ability, lead to increased
36 LOCAL GOVERNMENT
efficiency. There is, moreover, very much to be
said for the one-tax system; it is simple, it is
economical, it may be made equitable, and the in-
crease or decrease in the expenditure of local bodies
is thereby kept prominently before each citizen.
Adam Smith emphasises this last element as desir-
able in a scheme of taxation. Without giving an
unqualified assent to Adam Smith's dictum, I agree
that this clearness is convenient now in matters of
local finance. For though there are cases in which a
wise increase in expenditure might be prevented by
popular clamour, they are confined in largest part to
affairs of imperial policy.
The scope of local taxation may be widened, but
at its biggest stretch, in comparison with the possi-
bilities of imperial taxation, it can be but a fly on the
foot of a Colossus. It cannot touch most of the in-
direct taxes, because of the need of uniformity and
for other reasons. It must, therefore, never hope to
acquire such a mass of taxes that unintentional and
unavoidable inequalities here and there will be shifted
by the law of error.
The staple financial food of local governments must
always be the rates.
This being so, we are bound to inquire next whether
the failings accompanying the raising of local funds
by rates are essential, or merely accidental and re-
moveable, given the determination and strength to
carry into effect local financial reforms.
AND STATE AID 37
CHAPTER V
THE INCIDENCE, BURDEN, AND INEQUITIES OF THE
RATES, AND POSSIBILITIES OF REFORM
The subject of this chapter is more important than
that of the burden and incidence of a match-tax
or of the stamp duties, or, in fact, of any other single
tax. We might decide about them, that their
incidence was only moderately equitable, and yet
judge them desirable ; and we might yield to the
temptation to give only rough estimates without
doing much harm, because, after all, each of them is
only one of many. But we may not do so in the
case of the rates. They are practically the sole tax
of any magnitude now open to local bodies ; and in
consequence, their incidence means the incidence of
all local taxation. They are, moreover, of colossal
size, so that a mere fractional injustice may be
a very heavy burden.
Consider for one moment the volume of the rates,
with a view to some adequate appreciation of the
pressing practical importance of our inquiry. The
house duty is, of course, a rate which happens to be
38 LOCAL GOVERNMENT
an imperial one, and one, moreover, which should
have been given up long ago. Let us then add to
the rates in the United Kingdom for 1893-4 the
house duty for that year. The result is a sum of
^5°>095>2I2> collected mainly from occupiers. This
is enormous. Some conception of the amount may
be gained by comparing it with other great taxes in
this country. Not one of them yielded half the sum
in the same year, except the excise, which produced
just over half, namely, £25,200,000. The income tax
yielded £15,200,000, less than one-third of the sum
raised by rates and the house tax ; and the customs
only £19,707,000, less than two-fifths as much.
Further, the total imperial net revenue was but
£9I*l33A10 in the same year, a sum not twice as
great by over nine millions.
Our object in this chapter is to discover whether
the rates, fall where, and in the manner in which,
accepted principles of taxation declare they ought to
fall. What the English occupier sees in the rates is
that he pays them, and that after paying them he is
the poorer by exactly their amount. What he does
not see is that his rent may vary in some manner
with them. In fact, he feels impact and not
incidence. What the landlord sees is that if he
possesses two houses point to point the same, from
the cellar damp to the attic wall-paper, offering like
advantages, standing, maybe, side by side, but
subject to different rates, then the rents will differ by
AND STATE AID 39
the amount of the difference in rates. What he does
not see is the general in the particular. In fact, he
feels only a particular incidence.
In passing from the seen to the unseen it would be
fruitful to go through the utterances of authority ;
but they are legion. Besides, paragraph summaries
of systems of political economy have not proved
strikingly successful. It is wiser, perhaps, for our
purpose to be insular and brief. Yet in view of the
prominence given to them, especially during the
sittings of the Town Holdings Committee, it may be
as well to mention in a few curt phrases, which only
claim to indicate their main trend and not to express
them, the violently opposed opinions of two dis-
tinguished thinkers. I am the more anxious to point
to them as they lie at the opposite poles between
which the orthodox economists take their stand, and
as they serve to indicate the differences in doctrine
which exist upon this subject.
Mr. Goschen says that the owner, i.e., the land-
owner, pays the bulk, if not the whole, of the rates,
unless their amount exceeds the average of those
paid in the same locality prior to or at the time of
the leasing of the site. When the average is ex-
ceeded, the excess falls on the house-owner or
occupier, according to the state of demand and
supply. Thorold Rogers maintained that the rates
remained where first placed, that is, on the occupier.
Professor Seligman has adopted and enforced the
40 LOCAL GOVERNMENT
same theory in his book on " The Shifting and
Incidence of Taxation."
Let us now turn from authority to the question itself.
It is necessary at the outset, in order to avoid the
confusions into which many have fallen, to define the
subject of our inquiry with some exactness. The
questions, Where do the rates fall ? and, Who pays
the rates ? are identical ; but they are not equivalent
to the question, What is the effect of the rates ? It
is generally understood that the occupier pays the
whole or a part of the rates on the building which he
occupies, if the annual amount charged to him in rent
and rates exceeds the supply price of the house and
the economic rent of the land upon which it is built ;
that the house-owner pays the whole or a part of the
rates, if the net amount which he annually receives
falls below the supply price of the capital expended
on the building ; and that the landowner contributes
exactly that amount by which his rent is less than it
would have been but for rates, on the supposition
that the quantity of land occupied and the manner of
its occupation remained as before. These are the
meanings which I believe are usually given to the
expression " the incidence of the rates." If we adopt
them, it is immediately obvious that the effect of the
rates is a larger question than that of the incidence of
the rates, for the former includes, besides the subject
matter of the narrower question, the reactions, follow-
ing the imposition of rates, which raise or lower the
AND STATE AID 41
margin of building and affect the quantity and direc-
tion of capital. In the following discussion we shall
be concerned primarily with the smaller ques-
tion ; but the wider one will be incidentally treated
also.
The method here adopted is to ignore leases and
other complications at first, and then to introduce
them later as disturbing forces modifying the abstract
results primarily reached. Let us begin the investiga-
tion by considering the case of houses.
In the long run the rate is divided between land-
owner and tenant ; on the builder it cannot rest, for
average profits and average self-interest protect him.
But how is the division determined ? The tax which
falls on the house at " the margin " of building, that
is, where there is no ground rent practically speaking,
for instance on the twentieth storey of a Chicago
" sky-scraper," falls on the occupier. But where there
is ground rent a portion of the tax, in the ratio of
real ground rent (whether paid or not) to the residue
of rent, gets through to it ; l because building profits
1 This is Mill's view (Bk. V. Ch. 3, § 6). It is really based
on the assumption that the consumer does not estimate a site
value in proportion to building value, but absolutely. For
instance, it is supposed that, if there are two houses differing
only in their situation whose rents are ^40 and ^80 respectively,
the consumer considers the second to be worth, not twice as
much as the former, whatever the rent of the former may be,
but just ^40 as much. Hence, if rates of fifty per cent, are
imposed and he will pay a total (made up of rent and rates) of
,£60 for the former, his demand price (to include rates) for the
42 LOCAL GOVERNMENT
require that the tax on each unit of capital expended
in building should be the same. Were it not so,
capital, ever sensitive, would shun building.
We do not mean of course that the ground-rent
holder is not affected at all. He is affected
when supply price reacts on the quantity de-
manded. The view put forward is simply that the
total sum paid by the occupier must equal (in the
long run, of course) the normal cost of production of
his accommodation and in addition the rates on it.
Take for example a builder who has run up a house
to nine storeys and is hesitating about the tenth.
The tenth storey is then the marginal house. Assume
that it will cost him an amount the expenditure of
which is remunated by a rent of £30 a year. The
rent must then tend to be £30. Let the rates on the
£30 be ;£io. Now, who will pay them ? Not the
builder, for he would stop building at the ninth storey
first. Not the landlord. Why should he? If these
rates did force themselves on to him in any case, he
would see to it that he let his land in future to a
builder who would not go beyond the ninth storey,
because the addition of a tenth would mean ten
pounds out of his pocket. Then the occupier pays
the ten pounds.
In brief, rates are divided between the occupier and
latter will be ^100 and not ^120. The question of how the
estimate of the site value is determined cannot be said to be
settled.
AND STATE AID 43
the ground-owner in the ratio of the value of the
buildings to the value of the site.
Next observe the manner in which the ground-
owner is touched. When rates go up the total paid
by tenants for housing accommodation, i.e.^ the sum
of rents and rates, goes up also ; but not by the
amount of the increase in rates, only by the amount
of the increase in those which fall on buildings. That
being so, fewer houses will be wanted. Some who
lived in palaces will move into mansions, some who
occupied desirable messuages and tenements will find
themselves satisfied with meaner edifices, and so forth
down the scale of residences, till quite at the bottom
there is a little more crowding than before. And
this means that the margin of building land has gone
up; and that consequently real ground-rents have
fallen. But nevertheless the occupier still pays the
rates at the new margin.
Again, the capitalist, as the landowner, may be
prejudicially affected by the rates though he does
not pay them. For capital may be driven from
building, and there may be no fresh openings for
investment, so that the increase of capital might be
checked. Generally, however, the demand for capital
will not diminish, since the expenditure of the income
raised by rates frequently represents a demand for
capital; and at most, therefore, there will be a redis-
tribution of capital. The effect may simply be that
more capital will be invested in streets and drains,
44 LOCAL GOVERNMENT
and less in houses and other buildings. Of course, if
the rates are expended in doing that, to render build-
ings habitable, which the builder previously did, the
total of rent and rates cannot be raised to the
occupier.
When a locality, all parts of which offer equal
advantages, is divided between two rating authorities,
the difference in rates drops on to the land — natur-
ally, because rates have become differential, and rent
is a payment for differential advantages.
The above is, in effect, the whole theory of the
incidence of rates in the long period, with some dis-
cussion of their effects. Whether the objects of the
rates be mansions or cottages, mills, warehouses,
shops, farms, or railways, the theory is one. It is,
nevertheless, desirable to show that the theory is one.
The tax on business premises and on plant is
divided between consumer and landlord. In this
case we have two sensitive capitals — that of the
business occupier and that of the builder — except in
so far as business premises have residential accom-
modation, which, by the forces described above, will
impose on their occupiers the same taxes that they
would pay if inhabiting houses proper with the same
advantages. A part of the tax on shops may be
shifted on to air ; the builder will not pay that
part, nor the landlord, nor the consumer, nor the
occupier. The effect will be a decrease in shop
accommodation. A fall in ground rents, and also a
AND STATE AID 45
contraction of the conveniences offered to consumers
when shopping, will accompany the killing of the old
marginal shop.
The tax on railways (except the part paid by rail-
way servants resident in buildings covered by the
rateable value) is, of course, shared in the long run
by the company qud landlord and the consumer,
except in so far as the railway is a monopoly.
The tax on agricultural land is divided between
the consumer, the landlord, and the farmer ; the
farmer paying as much as he would if he inhabited
an equally desirable house in the district, and the
landlord paying all rates on the value of the product
due to the quality of the farm. The fundamental
fact to be borne in mind is that rates vary with pro-
duct, for they vary with rent, and rent varies with
product. Hence the problem is really that of the
tithe, which is treated by Mill in the third section of
Chapter IV., Book V. of his Principles. Mill puts it
in this way. After payment of the tithe :
" The land producing ioo bushels, reduced to 90,
will yield a rent of 90-54, or 36 bushels.
"The land producing 90 bushels, reduced to 81,
will yield a rent of 81-54, or 27 bushels.
" The land producing 80 bushels, reduced to 72,
will yield a rent of 72-54, or 18 bushels.
"The land producing 70 bushels, reduced to 6$,
will yield a rent of 63-54, or 9 bushels."
46 LOCAL GOVERNMENT
The marginal land has been given as that producing
60 bushels, which, after payment of the tithe, had
only 54 bushels left for the farmer. Then Mill goes
on to argue that the price must rise, in the ratio of
the two marginal products, i.e., 60/54 5 anc* that " the
landlords will therefore be compensated in value and
price for what they lose in quantity."
The discussion is quite correct, and valuable as far
as it goes. It is a little antiquated, or rather, wan-
tonly mediaevalised, seeing that John Stuart Mill's
father introduced the method of "doses." To-day,
instead of only taking different lands producing so
many bushels, we should come a little nearer the
truth by considering the returns in bushels to different
" doses of labour and capital." Mill, again, neglects to
notice the rise in the margin of cultivation which
would follow the rise in the price of corn, and so
reduce rent and bring the price down somewhat.
The reader will be well aware that many difficulties
arise from the varying durabilities of the capital sunk
in the land, difficulties which must not be allowed to
absorb us here.
The outcome so far is as follows : — In the long
run payments for differential advantages — that is,
rents — tend to bear rates in proportion to the ratio of
economic rent to gross rent ; and it must be remem-
bered that the quantity of rates determines to some
extent the different advantages of different localities.
The remainder of the rates, which is not "rolled
AND STATE AID 47
on to air," is borne by residential occupiers and by
consumers.
The next step in the argument should naturally be
the introduction of modifications resulting from leases
and the social friction which prevents rapid repercus-
sion from bringing ultimate incidence close in time
to impact, and which causes it, moreover, to be in-
fluenced by impact. I have decided, however, to
leave impact to the end of the chapter. It is really
no use discussing it until the equities, or otherwise, of
incidence have been settled. The latter is then our
present objective.
How should society distribute the cost of local
operations ?
The reader need not be under any alarm. There
is no intention of introducing here, as a digression,
a treatise on the principles of taxation, though such a
treatise would be by no means irrelevant. Most
principles will be assumed, and their outcome will be
only roughly indicated.
The following proposition is fundamental and in-
disputable. When the benefit resulting from optional
works can be traced, their cost at least should be
fixed on the recipients ;x and when it cannot, the cost
1 This is not quite true, since there are cases in which benefit
can be localised, but in which it is desirable for the community
as a whole that the consumer should employ the service more
than he would if he paid the cost of his use of it. In such cases
payment is best made on the basis of ability, or on that of some
recognised standards of the quantity of service the members of
48 LOCAL GOVERNMENT
should be borne by the units of the local body politic
in proportion to their ability to pay, as should also
the cost of all compulsory services which remains to
the locality.
There are, generally speaking, three classes of
people paying rates, if the preceding analysis of the
incidence of rates is correct :
1. Residential occupants.
2. Consumers.
3. Ground-rent owners.
The shares, if any, which ought to be paid by each,
must now be determined.
1. Residential occupants should be taxed for their
share, which we shall see later is residual, accord-
ing to their ability to pay, as they are units of the
local body politic. Ability is now measured by the
rent of the home. Is this rent a satisfactory test ?
Let us examine a few objections.
Sismondi, among his maxims of taxation, has two
of great importance. They are :
(1) Taxation should never touch what is necessary
for the existence of the contributor.
(2) Taxation should not put to flight the wealth
on which it is imposed.
A tax in space, it is urged, especially on houses,
offends against both of these maxims. Shelter, light,
and pure air, are necessary for bare existence ; a
each class ought to employ. Water may be taken as an
example.
AND STATE AID 49
certain amount of privacy is necessary for healthy
social life. High rates breed congestion. The case
is not yet fully stated. To pass from the depths
to respectable middle-class quarters, even here the
house is said to be no very accurate of ability. Pro-
fessor Seligman believes that it is the best test, and
his opinion must carry great weight. We agree at once
as regards rents above a certain amount and below a
certain amount, but under the lower limit the size of
the house simply indicates the size of the family.
In partial rejoinder, it may be urged that the very
same objection applies to almost all taxes.
The indictment has another count. A house of a
certain size is practically all that is wanted, whether
the income be twenty thousand pounds or forty
thousand pounds. There is point in the contention.
It is very largely true that after the income passes
some limit the size of the house varies in a less ratio
than the income. Nevertheless, the conclusions in-
tended are to some extent, but not entirely, weakened
by the fact that more than one establishment will be
supported from the largest incomes.
None of the above arguments1 prove that the
rates are essentially vitiated as taxes according to
1 There is another, which has been previously indicated, that
perhaps the occupier only pays rates varying with the building
rent of his house, whereas his ability more likely varies as the
gross rent. Probably, as usual, the truth as to the incidence of
rates lies in the mean, and the occupier doejs pay some portion
at any rate of the share which Mill held to fall on the ground
D
50 LOCAL GOVERNMENT
ability. The objections pointed to are common to
most imposts. Moreover, in the case of rates, there
is a possible reform by which most of them could be
obviated. That reform is the grading of rates.
The grading of rates does exist now in a very
small degree in the slight benefit accruing to the
tenant when the landlord pays the rates and receives
some remission for doing so. But it has been esti-
mated that, as at present constituted, rates are
" regressive," that is, they bear more heavily on the
poor than on those in easy circumstances. We have
an excellent example of " degression M (that is, less
than proportional progression) in the imperial tax
based on the occupation of houses. l
owner. However that may be, it is quite certain that the
localities have no other test of ability than that afforded by
rent, or a portion of it, and practically even the portion, I am
inclined to think, provides about as good a criterion of ability
as any which the local or central government can lay its hand
upon.
1 Inhabited House Duties.
On shops, beerhouses, farmhouses and lodging-houses of an
annual value,
Less than ^20 nil in the £
Of ^20 but not exceeding ^40 . . . . 2d. „ „ „
Exceeding ^40 but not exceeding ^60 . . 4d. „ „ „
» £6° >> » » • 6d. „ „ „
On dwelling-houses of an annual value,
Less than ^20 . nil in the £
Of ^20 but not exceeding ^40 . . . . 3d. „ „ „
Exceeding ^40 but not exceeding ,£60 . . 6d. „ „ „
)> £bo „ „ „ . . 9a. „ „ „
AND STATE AID 51
Partially business residences are moreover charged
by this tax at a lower rate. Few objections of any
weight can be found to the adoption of some like
system with respect to rates. Against increasing the
rate per pound for high rents little can be said ; and
much can be said in its favour. A portion of such a
rate becomes a tax on social distinction, and such a
tax, as the Duke of Devonshire has pointed out,
blesses, or at any rate satisfies, both him that gives
and him that receives.
The grading of rates is desirable, provided certain
cautions are observed. Some arise from the facts of
the shifting of rates. These we had better examine at
once. Imagine the rate in the £ steadily increas-
ing with the rent. Where and how would the in-
creased rates fall? The answer depends upon the
variants underlying differences in rents. They are two.
Firstly, variations in the value of the site, secondly,
variations in the value of the buildings. Now, in so
far as the variations in gross rents are due to the
former cause, the degressive part of the rate will tend
to fall on the ground owner ; but, in the degree in
which they are due to the size and quality of the
building, the degressive burden will tend to come on
to the occupiers. The conclusion follows directly
from the foregoing theory of the incidence of rates.
If the rate varied not as the rent but as the quality of
the building, say as the number of rooms or some-
thing of that kind (compare for instance the hearth
52 LOCAL GOVERNMENT
tax and window tax) its degression would find out
the occupier and refuse to pass on to the ground-rent
holder.
The above considerations give rise to the question,
What is required ? Is it desirable to cut off a slice of
ground-values in tempering taxation to the struggling
lower middle-class? My own opinion is, that, in
view of existing conditions and expectations, legis-
lation with the dual object would be objectionable.
The time has come to deal with ground-values ; and
to be dealt with scientifically they must clearly be
treated apart on the basis of a separate valuation.
It is confusing to have two or three legislative
measures, when one is sufficient, and in the result-
ing complications inequities can easily hide them-
selves. Besides it is prudent to avoid, at all moderate
costs, adding fuel to the still merrily blazing debate
on the incidence of taxes. When the actual facts
about the bearing of burdens become matter for con-
troversy we may be sure that the truth is being
obscured by ex parte arguments, and that injustices are
being perpetrated and perpetuated. The rates which
are intended to be borne by occupiers should be
treated apart, and graded to meet differences in
abilities to pay.
One other caution with reference to all reform in
taxation. If any rate which comes down on the land
anywhere is eased, a free gift is made to many
holders of ground rents, for by amortisation early
AND STATE AID 53
burdens remain with the owners at the time of
imposition. If the land has changed hands the new
holder really pays no part of them, as taxes were
in effect capitalised and taken off the purchase
money.
2. The consumers share of rates. The rates on
business premises which do not rest in the land are
passed over to the consumers. By what right are
consumers called upon to pay this share? — people
who are not units in the local body politic, who may
be living miles away from the locality, even in other
countries. By what right does Bolton tax the Babu
on his native soil? By the right to demand full value
for value received. These rates are justified so far
only as they represent part of the cost of production
of commodities. The local government paves the
streets, and lights them, and cleans them, and preserves
order, for instance ; and the cost of these operations
is evidently part of the cost of production of the com-
modities manufactured, or transported, traded in, or
in some manner operated upon, in the spot referred
to.
The whole of the rates on the business premises
which escape the land are here regarded as passing
over to the consumer. Strictly speaking this view is
not correct. Certain portions, standing for the
differential personal comforts of producers, remain
upon them. They are to be regarded as half-day
resident occupiers, and as such they should contribute
54 LOCAL GOVERNMENT
according to ability to the cost of that portion of
local works which is not attributable to the wear and
tear of business qua business. As regards the surplus
local operations, each business should subscribe to
their cost according to the proportion of them which
it exhausts. What they shall be the majority must
determine. If it decides upon wood-paving, then no
business has the right to say, "We will pay the
hypothetical cost of the wear and tear by our cart
of granite sets, which are all that we require." If
such a business cannot bear the cost of its destruction
of wooden sets, it must go elsewhere.
The question of the best practical method of
coming near the equitable in the abstract is one of
the utmost difficulty. It is a question which requires
an intimate knowledge of practical details. That
under the existing arrangements the approximation
is only very rough, and, further, that special busi-
nesses are greatly over-weighted, is certain. Take
railways for instance. It is proved up to the hilt
that railway companies are over-rated, that they are
fleeced more than is justified by the benefits they
derive from the services of local authorities ; that, in
a word, they are heavily taxed instead of being
charged the market price for an element in the cost
of carriage. It may be counter-claimed that the
rates on railways are a device for taxing the whole
country in aid of the localities. Then it is a very
foolish device, because cheap transportion is so
AND STATE AID 55
valuable a boon that no impediments should be cast
in its way.
Take the following picked figures, showing the
rateable value of the Great Western Railway and
that of certain parishes through which it passes.
Rateable value Total rateable value
ofG.W.R.
of Parish
Newport
^5,724
£7,483
St. Devereux
4,114
5,225
Baulking
4,045
6,060
Grove (Berks)
6,240
9,225
It is obviously absurd that the railway company
should continue to play the part of a fairy god-
mother. The plea put forward by the rating agent
to the Great Western Railway that the system of
differential rating for land and railways as authorised
under the Public Health Act, 1875, be extended to
several other rates, seems modest in the extreme. *
The whole system of rating business premises,
machinery, and so forth, requires the careful revision
of specialists. But any revision will be worthless
unless it is definitely recognised that the basis of the
contribution of businesses, qua businesses, to the cost
of local operations is the quantity of exhaustion of
the local services in production. Of course, only the
roughest approximation to abstract justice is pos-
sible.2
^'Commission on Local Taxation," Vol. I. Part II., p. 368.
2 When it is stated that businesses ought to contribute to the
cost of local operations in proportion to the quantity of the
56 LOCAL GOVERNMENT
3. Ground-rent owners. The owners of real
ground-rent are meant, not only those who receive
part, or all, or more than all, of the annual ground
value under contract. The demand for contributions
from them for the conduct of local work is founded
on the production of much of the value which they
hold by the activities of local bodies.
Does the ground-rent bear now more than a just
share according to the above test ? Clearly not, for
though conditions are such that we cannot say how
much of the increased value of sites is due, directly
and indirectly, to what the locality does, and how
much to the growth of population and the great sum
of unmeasurable and undefinable causes which govern
the segregation of human beings, yet it is certain
that the small fraction of augmented value which is
substracted from the ground value through the
medium of rates does not cover the wealth which is
given to the ground-owners directly by the paving
of streets, lighting, policing, sanitation, and the many
other services performed by local popular govern-
ments.
We find many suggestions and much agitation for
outcome of those operations which they exhaust, the question
may be asked, " But why, then, should not indirect imperial
taxes be regulated in the same way ? " One answer is, because
they are taxes and not merely remunerations for services. The
nation may tax home consumers as constituents of the State,
but Manchester may not tax a resident in London because he
is not a constituent of Manchester.
AND STATE AID $7
carrying the principle of payment for value received
into effect.
There is firstly " betterment," a proposal which is
put forward as specially important in view of the
fact that the increase in urban rates is largely caused
by optional works, most of which have a market
value. A select committee of the House of Lords,
appointed in 1894 to consider the proposal, defined
" betterment " as " the principle that persons whose
property has clearly been increased in market value
by an improvement effected by local authorities
should specially contribute to the cost of the im-
provement." In other words, payment must be in
proportion to benefit whenever benefit can be de-
finitely tracked down. To raise the cry of compen-
sation for "worsement" is to confuse issues. The
principle of " worsement " is applied to-day to actual
positive damage, and only so far is it justifiable.
Claims for compensation can scarcely be based on an
alteration in the ratio of advantages of two situations
caused by the improvement of the one, the other
remaining as before ; but it is unfair that the owner
of the former should gain and pay no more than he
does in the increased rates which come with increased
value. As it is to-day in the United Kingdom for
the actual, positive, and specific betterment, the local
community as a whole pays, not excluding even the
persons whose interests are prejudiced by the im-
provements. If the services were competitively
58 LOCAL GOVERNMENT
performed, the market price of the work done would
be paid by the benefited parties, and it should be
paid by them also (or, at any rate, some part of it)
if the work is undertaken by the local execu-
tive.
Another suggested remedy for the leakage of social
wealth is the taxation of ground-rents. Society in
its dealings with urban land-owners is finding itself
much in the position of Laban in his last transaction
with Jacob. All its cattle are somehow getting the
specks and spots and ring strakes which mark them
as the property of the ground-owner. It is proposed
to tax ground-rents even when the cause of the
increased value cannot be directly traced to local
works. It may be adversely reasoned that the
ground-owner, in the case of a long lease, receives an
unvarying sum each year, and that therefore, as his
income does not increase, he must not be specially
taxed. This argument overlooks the fact that,
although the actual income may be as before, the
capital value may have increased greatly through
increased value in the property which secures it. It
is part of this increased value which the reform
would assure to the community. Against all taxa-
tion of future values the general argument is used
that in purchase they have been taken into consider-
ation. What force there is in the suggestion is
diminished by the facts that only a portion of the
increased value would be confiscated, and that risks
AND STATE AID 59
also have been taken into account in estimates of
future values.
Neither of the above proposed reforms necessitates
that general valuation of sites, which has been re-
garded in the past as impracticable. But as the
valuation of sites is being made every day it is ceas-
ing to be so regarded. I am inclined to regard the
taxation of contract ground-rents as one-sided (in
view of the wider basis afforded by the valuation of
sites), in that it overlooks the ground-value held by
the lessee. It is plain that the rates should come
down, on the whole ground-value, and not only on
the one portion brought within reach by the accidents
of contract.
But the question of the taxation of ground-values is
best treated, for reasons which will appear later, after
a discussion of the relation of impact to incidence.
Impact and Incidence. — Seeing that this chapter has
already proceeded to wearisome length, and moreover
that the modifications which actuality imposes on our
conclusions as to incidence may be left without
danger to the reader to apply for himself, I do not
intend to say much upon the question.
The impact of taxes is of great importance for two
reasons.
(i) Social friction prevents the easy and rapid roll-
ing of taxes.
(2) Legal contracts, in the form of leases, may pre-
vent the incidence described above.
60 LOCAL GOVERNMENT
Such facts give the colour of truth to Mr. Blunden's
statement x that all increases of rates in congested, and
exceptionally advantageous, and decaying districts,
are paid by the landlord of the buildings ; for in the
former two cases he is able to exact a monopoly rent,
and in the latter case, high rates or low rates, there
are empty houses all around.
The occupier with a lease whether of a farm, busi-
ness premises, or residential property, of course pays
increase of rates. The farmer and other producers
cannot immediately shift the increase on to the con-
sumers by reducing their output, and the landlord is
secured by the lease. And the occupier without a
lease — we must almost say, "of course he pays increase
of rates," for there is a social friction which checks the
rolling of taxes, and the cost and trouble of removing,
and the loss therein involved, so far as business pre-
mises are concerned, by reason of the good-will re-
sulting from the habits of customers, and, so far as
houses are concerned, by reason of Xhe pretium affec-
tionis, the drag of old associations, are facts to be
reckoned with. It is in view of all this, and of the
fact that first incidence does affect final incidence, that
Mr. Goschen, and other influential writers and states-
men, urged the division of rates in the first incidence
between occupier, house-owner, and ground-owner,
the last two sharing half the rates in proportion to
the rents received by each. This principle was intro-
1 " Local Taxation and Finance," p. 55.
AND STATE AID 61
duced by Mr. Goschen into a bill, brought forward in
1 87 1, which, however, was subsequently suffered to
drop. Systems of division of rates between occupiers
and land-owners have been in operation in both Scot-
land and Ireland for many years past. The principle
is excellent, provided that the separate valuation of
ground-values is impracticable. But if it is not, some-
thing much nearer perfection is open to us.
Let us here, for the sake of clearness, pause for one
moment to recapitulate and summarise. The funda-
mental basis upon which the conclusions put forward
in this chapter stand are as follows : —
It is required to tax occupiers, ground-rent holders,
and consumers. The tax on each of them is of an
absolutely different character, and the variations in
each should, therefore, be governed entirely by con-
siderations in its own domain. There is no reason
in the world why the occupier's ability to pay, or the
cost of productive processes undertaken by the locality,
should vary as the value given to the land by the oper-
ations of the sectional government. It is therefore
absurd to think to obtain the three ends above set
forth by a single'tax on one class of people (occupiers) *
on a common basis (rent). Even if we were justifiably
optimistic — which we simply cannot be — as to the im-
mediate following of incidence in impact, it would still
be absurd.
1 The present system results in an absurd restriction of the
franchise in the modern city-state.
62 LOCAL GOVERNMENT
This is the only one scientific method of procedure,
if the above basis of local taxation is accepted.
To value sites apart from buildings.
Then to tax : —
Sites according to the value given to them.
Residential occupiers according to their ability.
Business occupiers l according to the cost of the
services by which their businesses are assisted. But
the proportion of rateable value to be taxed in the
cases of particular businesses, and the question of
allowances and so forth, should be settled by the
central government to secure uniformity.
To act on these suggestions we have been told is
quite beyond the scope of practical politics, because
a separate valuation of the site cannot be obtained.
Conclusive evidence is, however, wanting in support of
the contention. Mr. Fletcher Moulton in the debate
in the Queen's speech, on Feb. ioth, 1899, said, " It was
amusing to see the way in which people dropped
their hands and said, ' It is impossible ; you cannot
separate the values.' He challenged the Attorney
General with his unrivalled experience in compen-
sation cases under the Lands Clauses Act to deny
his statement that whenever they made the surveyors
value the house and land, the first thing they did was
1 Business men, qua half-residents in the business centre,
ought to contribute something additional also ; but there is no
reason why those who do not happen to be tenants should be
exempt from local taxes.
AND STATE AID 63
to value the land separately, and then they considered
what the house added to it. In fact, the attempt to
make it difficult to value accurately and relatively the
value of the land site as distinguished from the value
of the house was perfectly hopeless." His assertion
was not denied. Moreover, a list of valuation of
sites has been prepared for London. It was
handed into the present commission by Mr. G. L.
Gomme. It is asserted that such lists can be
drawn up without much difficulty ; that they are in
fact always being drawn up by valuers, though not
separately published. The fear of sinister influences
operating in their preparation is little greater than in
the case of existing lists of rateable values. We may
take it that the separate valuation of sites is not
impracticable.
The impact of the tax intended to abide with the
occupier must, of course, be in the occupier. The
impact of the tax intended to be rolled on to the con-
sumers must, of course, be on the occupier, because
he is closer to the ultimate bearers than the landlord.
And the impact of the tax intended to fall on the
ground-value must be — where ? Some of the ground-
rent is an unvarying sum fixed by contract to be
paid annually to some person or persons. The
remainder, a variable, is received by the lessee
of the plot, in part only perhaps, part being received
by the lessee of the building. The best way, then,
of getting at the ground-value, is to impose the whole
64 LOCAL GOVERNMENT
of the tax on the owner of the building, and to em-
power him to deduct the proportional parts of the
amount of the tax from each contractual rent which
he pays. This method is much simpler than seeking
out the owners of the contractual rents and imposing
their share on them direct. An obvious objection,
however, is that the owner of the building may have
to pay a tax on a portion of the ground-value received
by the occupier under lease. For the sake of sim-
plicity this defect, which is not likely to be great, is
best left to the correction of economic forces. It is
moreover obvious that it is more the function of the
property speculator than of the occupier to shoulder
these short-period risks. It may be easy to value a
site and so get at the economic rent, but in the case
of agricultural land it is so difficult as to be almost
impracticable, since capital, both long enduring and
rapidly exhaustive, is mixed up with it. To insure the
share which falls ultimately on the land, and which is
large, not getting shifted for short periods somewhere
else, there is much to be said for allowing the farmer
to deduct rates from his rent, the house being treated
separately as other residences.
From the foregoing discussion it is apparent, and
the next chapter will render it still more apparent,
that the bitterest complaints as to the burden and
inequities of the rates are founded, so far as they
have foundation, not on any essential defects in the
system of rates, but on existing accidental and re-
AND STATE AID 6$
movable arrangements. Local taxation, if reformed
on the abstract lines above laid down to the extent
to which it is practicable, would show no great in-
feriority, in equity and economy, to imperial taxation.
But to attempt to remove existing blots by means of
subventions is to adopt the most indirect and the
least plausible method of repairing defects, and then,
far from repairing, to aggravate them.
66 LOCAL GOVERNMENT
CHAPTER VI
DIFFERENTIAL RATES AND THEIR CAUSES
The quantitative dissimilarities in rates in different
localities now claim some consideration.
For a successful examination the mind must be
kept constantly alive to the fact that the question
proposed at each stage is of a composite nature. It
is really twofold, with one of its alternatives three-
headed ; thus,
(i) Do any of the differences in rates, or in any part
of them, necessitate some measure of equalisation ?
(2) If so, is the necessity met most satisfactorily
by (a) extending boundaries, i.e.f by giving legal
sanction to the conception that the local organism
is bigger than its present paper description, (b)
county assistance, or (c) State assistance.
The remark will not be out of place here, as a
word of tacit warning, that almost without exception
the second head of the complex alternative, and the
first head also, we might add, have been entirely over-
looked by those who have been most importunate in
their demands for the relief of rates. It has been
pretty nearly universally assumed that the sole choice
lies between the status quo and imperial largess.
AND STATE AID
67
Here is a quotation from a table constructed by
Mr. Cannan, in which the rates, and expenditure on
different objects, of all the county boroughs in
England and Wales are shown.
(From Mr. Carman's Article in " Economic Journal" Vol. V., /. 27.)
RATES IN SOME ENGLISH COUNTY BOROUGHS, AND
EXPENDITURE ON DIFFERENT OBJECTS IN 1890-91.
County
Borough.
Rateable
Value
per head.
Pence in £ expended on
Total
Rate
Raised.
Rate per
Head of
Population.
Sewage.' Streets.
Police.
Schools.
Norwich ....
£
2'55
D.
9
D.
19
D.
IO
D.
20
D.
82
£ S. D.
0 17 7
Preston
3-87
4
IO
7
0
57
0 14 10
Southampton
2*76
1
6
7
8
53
0 16 7
Halifax
3'86
4
11
6
20
5i
0 16 4
Gateshead . . .
2-81
1
6
7
11
47
0 11 0
Wigan
2*57
25
15
10
1
47
0 IO I
Hastings ....
6-76
2
12
3
3
44
1 4 11
Manchester..
5*47
2
9
9
4
43
0 19 11
Liverpool
5"79
3
1
11
4
38
0 18 7
Bath
5'34
2
14
6
1
37
0 16 8
St. Helens...
3'67
0
7
6
0
33
0 10 2
Oldham
4-42
8
7
5
4
28
0 10 3
68 LOCAL GOVERNMENT
It will be seen that the total rates vary from 7s. in
Norwich to 2s. 40*. in Oldham. Like varieties are to
be found among urban districts. This difference in
rates is prima facie hardly consistent with justice,
but further analysis may lead us to modify our
judgment. Let us begin by separating the cost of
the material works from that of the personal works
of local bodies. By "material works" is meant
operations directly on things, by " personal works "
those directly on persons. The distinction is
adopted merely to provide classes suitable for easy
manipulation. It is not the same as that between
" optional " and " necessary," or between " beneficial "
and " onerous " works.
If we confine our attention solely to the material
functions of boroughs we still find enormous differ-
ences in rates. The amount expended on sewage in
Wigan, for instance, came to 3s. 4d. in the £, whereas
in Southampton, Gateshead, and St. Helens, it was
only yd. in the £, and in Liverpool only 4d. The
following examples of the general district rates of
boroughs other than county boroughs for 1895-6
further illustrate this quantitative unlikeness : —
Bacup, 2s. 4d. Bedford, 3s. Bradford, is. iod.
Hyde, 3s. 6d. Wigan, 4s. 6d. Wakefield, 4s.
Godalming, 5s. 2d.
The causes of differences may be tabulated as
follows : — 1
1 With respect to much of the following discussion I am
AND STATE AID 6g
I. In some places the rateable value per head is
greater than in others.1
II. In some places the works cost more than in
others on account of geographical, topographical,
and other circumstances over which the local bodies
have no control. This is of special importance in
the case of sewage works.
III. In some places the cost is greater than in
others owing to inefficient management.
IV. Some places have larger returns to capital
invested in the past, some are investing more capital
in the present.
V. Some places have a larger income besides that
from rates, for instance, from unpurchased endow-
ments.
VI. The local works of some places are of greater
variety than those of others, and superior in kind.
VII. Some places have more contracted boundaries
than others.2
largely indebted to Mr. Cannan's article on " Inequality of
Local Rates and its Economic Justification " in Vol. V. of the
Economic Journal,
1 One cause of this is the proportion of property wholly or
partially exempted from rates within the district.
2 In heterogeneous districts, that is those partly residential
and partly given over to business, there is another reason for
differences in rates, in addition to the seven causes above
enumerated. This eighth cause, which applies also to personal
services, but which will now be treated once and for all in this
note, is the proportion of the rateable value of business premises
to that of residential premises. If businesses are over-taxed by
the rates, that is, if they pay more than the cost of their wear
70 LOCAL GOVERNMENT
These causes will now be examined seriatim with
a view to determining whether they offer any
reason for assistance from the imperial exchequer.
I. There is no more reason for other bodies to bear
part of the cost of local material works, which are
entirely optional, of poor districts, than to pay part of
the cost of the poor man's living. Each is on the same
plane, since outside interest in these works is inappreci-
able compared with local interests. The claim for
assistance to poor districts on the ground of the cost of
their optional works involves the whole ethical and
economic question of the distribution of wealth
which is without the bounds of this essay. But, in
so far as the operations are compulsory, sanitary
works, for instance, low rateable value 1 is ground for
relief, and it has been recognised as such by the
Equalisation of Rates Act, which will be referred to
later. Measures of such a character as that Act
seem to meet the hardship adequately and with
and tear and general exhaustion of local works, then the greater
the proportion of business premises to houses the less have
residential occupants to contribute to the cost of local functions.
The sole method of removing this ground of injustice is to care-
fully determine the relative amounts which businesses qua
businesses ought to contribute to the local funds. In all pro-
bability an investigation with this object in view would result in
the rejection, to a great extent at any rate, of rent as a basis for
taxation.
1 It will be pointed out later that existing rateable values are
unreliable on account of different degrees of under-valuation
and of a variety of systems. The official rateable value cannot
therefore be taken as a correct measure of relative wealth.
AND STATE AID 71
fewer drawbacks than exchequer contributions, the
former being founded, as the latter are not, on the
result of scientific analysis.
II. Geographical and topographical disadvantages
are frequently offset by advantages in the locality,
for instance, climate, harbours, waterway, coal, and
so forth. The calculation of natural utilities and
disutilities is practically impossible, and if it were not,
no more claim could be based upon a balance of loss
than upon the mistakes made by any individual in
choosing a trade by which his income is rendered
less than it might have been.
III. No words are needed under this head.
Efficiency is the business of the locality.
IV. Few words are needed under this head. The
investment of capital is a matter of management
which must rest with the locality. On the one hand
works may be costly and enduring, on the other
cheap and ephemeral. Capital may be borrowed
and invested at once, or investment may be delayed.
These are questions of economy to be duly weighed
by local bodies.
V. I have no ground of complaint if A. presents
an income to B. and I am neglected, and it matters
not whether B. be a person or a locality. When the
gifts to localities are of great age, the central govern-
ment has some reason for interference on the ground
that the present beneficiary is not the same as the
one to which the gift was made, or that the benefit
72 LOCAL GOVERNMENT
has undesirable results ; but care must be exercised
that the generosity of the subject to the locality be
not checked.
VI. No assistance can be grounded here. If my
living costs more than A.'s, because it is more
luxurious, am I therefore to be compensated? Some
towns have roads of wood and of concrete, promenades
and fountains, parks, statues, and art galleries ; and
for these they must pay.
So much for the first six causes of the differences
in rates with regard to the material functions of
localities. We find in them no claim for subventions
from the imperial exchequer. Nor do they convey
any reason for assistance from any treasuries at a
distance, with one exception, sanitation. The
seventh cause, however, the extent of the locality,
reveals an exasperating grievance, that those living
outside the administrative area of some local body,
but at no considerable distance, share the benefits of
the local works without sharing in the cost. For
example, the consumer in the suburbs who makes his
purchases in the towns and takes much of his re-
creation there ; the manufacturer just outside the city
boundary who shares almost all the local business
benefits to the cost of which he pays nothing ; those
just over the border of the county borough of
Manchester, to whose prosperity the Ship Canal
contributes, but who escape the Ship Canal rate ;
the farmers round the market town whose carts
AND STATE AID 73
plough up the town streets at no cost to them-
selves.
It may be taken as sufficiently true for our purpose
that the heaviest expenditure lies about the centre of
the town. Hence at the boundaries ratepayers are
contributing more than is laid out in their immediate
locality. The rates of a town will fall as a rule if its
boundaries are extended ; but if the town opens out,
local self-government must apparently be withdrawn
from urban districts. Hence a very disturbing
dilemma. The best solution is to refuse both alter-
natives. The explanation of the seeming paradox
is simple. It cannot be said exactly at what age
a lamb becomes a sheep, neither can the spot be
indicated at which the town as an organic whole ends.
Is it not possible in some degree to carry the skirts
of the one district over contiguous districts, when
the former happens to possess, as a town always does,
a wide sweep of outer area, which is nevertheless to a
great extent one with the centre ? 1
It has been suggested that zones of rateable area
might be instituted round urban centres ; these zones
to be chargeable, with respect to certain works, at
rates diminishing with distance from the centre. By
this means the burden of town rates would be some-
what diminished. Some such reform is becoming
1 In the adjustment of financial relations between counties
and county boroughs the services performed by the former for
the latter were taken into consideration by the Commissioners.
74 LOCAL GOVERNMENT
more urgent every day as the movement to the
suburbs, not only for residence but also for manu-
facture, gains force, largely through cheapened means
of transit and transport. Of course, it cannot be laid
down in this brief sketch that the adoption of rate-
able zones l is the reform needed. All that we can
assert is that it is the kind of reform needed. A
better project, perhaps, is that districts should be
grouped like parishes in unions, and that a governing
body should be set over the group for the manage-
ment of those affairs which were the intimate concern
of larger organisms than the districts ; for instance, a
city and its surrounding urban districts are one for
many purposes and their government should mark
this partial oneness. It would be a great relief to get
the urban organisms out of their straight waist-
coats.
We have now to consider the difference in rates
due to the personal functions of localities. They are
1 It is worthy of notice that we have to-day in operation in
some places a system practically cognate to that of rateable
zones. Some cities, for instance, which manufacture their
own gas and which supply it to surrounding urban districts,
charge for it more than the market price. To take an example ;
the Gas Committee at Manchester has this year handed over
^52,000, gained on their working, to the City Fund. The
dangers which may easily arise from abuses of this system are
evident. Besides, the system does not ensure that all districts
will be treated alike. Stretford, for instance, one of the districts
round Manchester, does not receive its gas from the city
supplies. A big tax, again, may easily be collected with the
water rate.
AND STATE AID
75
the preservation of order and security, the mainten-
ance of the poor, and education. In the case of
county boroughs, in 1890-91, the cost of the police
varied from nd. in the £ at Liverpool to 3d. in the
£ at Hastings ; the cost of education from is. 8d. in
the £ at Norwich and Halifax to nothing at Preston
and in many other towns.1 To give another example,
the police in 1890-91 cost 47d. in the £ (calculated
in the Metropolitan Poor Rate valuation) in London,
and 2d. in the £ in the counties. Again, in 1890-91
the school board rate in London was 97d. in the £,
but in the boroughs only 5* id. Take the poor
rate again. In 1893 it was I7*8d in the £ in
London and iO"8d. for all extra-metropolitan districts.
The difference in the poor rates in some of the
parishes in England and Wales in 1891 are given
below.
Poor Rates, excluding precept rates, in some Unions and
Parishes under separate Boards of Guardians in 1891 (from
Fowler's " Report on Local Taxation ") : —
S. D.
s.
n.
City of London
i o#4
St. George in
the East
0
10-3
Woolwich. .
2 37
Reigate
0
5 '2
Southampton
1 5-0
Great Yarmouth.
1
no
Nottingham
0 n*9
Tarvin
.
0
i*5
Altrincham .
O 1*2
Manchester
.
0
7'9
Liverpool .
0 6-8
Monmouth .
. .
2
o*3
Cardiff
O IO"0
Carnarvon .
. .
2
8-5
Conway
0 8-6
1 See Table, p. 67.
76
LOCAL GOVERNMENT
The following table from the Local Taxation
Returns shows the poor rates in each of the eleven
divisions of English and Welsh Unions in 1894-5 : —
£
s.
D.
£
s.
D.
Metropolitan .
0
3
2
West Midland
0
2
1}
South-West .
0
2
3
North
0
I
9i
East
0
2
9}
North-West .
0
I
Hi
South-East
0
2
2}
York
0
2
3!
South Midland
0
2
2}
North .
0
I
7\
Welsh .
0
2
6f
Enough evidence has been given to prove that the
differences in rates arising from the cost of the per-
sonal functions of localities are great — sufficiently
great to induce an examination into expenditure
under the three heads.
Education. — The variations in the cost per £ of
education are due to {a) voluntary effort ; (b) differ-
ences in rateable value per head of districts ; and
(c) the quality of the educational work done and
the efficiency of school boards.
As regards the first cause no objection can be
made. The endowed schools exist, and if they do
their work well, and are centrally and popularly
controlled, the need for board schools is less. No
importance can be attached to the complaint that
the distribution of endowed schools throughout the
country is not sporadic. It is one case of gifts which
have already been considered.
AND STATE AID 77
The local community may more justly have a
helping hand extended to it on the plea of a low
rateable value per head. It is understood by the
principle of free education that the cost of educa-
tion must be distributed proportionally to ability.
The test of ability should theoretically be extended
to the division of the cost between the locality and
the imperial treasury. If we assume that the division
of interest in education between the nation as a whole
and the locality is practically the same in all cases,
then the money measure of this interest will vary
with the wealth of the locality, because of the
diminishing utility of money. If the contention be
admitted, then the amount of the Government grants
should vary inversely with the rateable value per
head of the district — the true rateable value. The
Government does to some extent recognise its re-
sponsibility to poor districts by making special
grants, which are accorded in cases in which the
actual expenses of a school board during any year
amount to a sum which would have been raised by a
rate of 3d. in the £ on the rateable value of the
district, and when any such rate would have produced
less than £20, or less than 7s. 6d. per child of the
number of children in average attendance during the
year at the schools provided by the school boards.
Again, that the Government does not feel that too
much of the cost of education is being discharged by
it, is demonstrated by the fact that the additional
78 LOCAL GOVERNMENT
subventions made over to Scotland were applied to
the relief of school fees.
The solution above suggested is not quite sound,
because it ignores the responsibilities of the near
localities. Moreover, it suffers from complexities.
An alternative which at once insinuates itself is the
extension of the school district. It is generally
admitted that the parish is too minute a unit for
educational purposes, and that even the districts
formed by most of the existing unions of parishes are
too small. By the widening of school districts more
efficient management would be secured, because
members of the school board would be drawn from a
larger field, which would offer of course a more varied
selection of candidates, and a higher grade of ability
would be attracted because of the increased dignity of
office and the greater responsibility attendant on
further- reaching control. There is no special reason
in the case of education, as in poor relief, for small
administrative districts. The expansion of the dis-
trict within limits can bring with it nothing but gain.
It goes without saying that there would be greater
uniformity in the rateable value per head in larger
districts.
The differences in school rates resulting from differ-
ences in the quality of educational work done introduces
a difficult question. The Government requires a certain
standard : anything above that may be viewed as a
work of supererogation, and as dangerous, because it
AND STATE AID 79
may add another fold to the overlapping of the
regions of operation of different educational organs.
We have an example in the existing competition
between secondary board schools, lavishly equipped,
and many grammar schools, too scantily supported
by their towns — a competition through which the gram-
mar school is rendered less capable of doing the
higher work demanded of it (which the secondary
board school cannot do), and through which, there-
fore, the children are made to suffer. Still, if over-
lapping could be prevented, it would be well for a
central authority to vary its grant somewhat with the
quality of the work done.
Police. — The differences in expenses are principally
due to rateable value and the special requirements of
some towns arising from some disorderly elements
in their population. Mr. Cannan's table 1 shows that
among county boroughs there are 21 cases in which
high rateable value per head is accompanied by low
police expenditure, and only five cases in which high
value and high police expenditure, or low value and
low police expenditure, go together. The four towns
which have high rateable value and high police ex-
penditure are Liverpool, Newcastle, Bristol, and
Manchester. The reason, of course, is the excep-
tional roughness of a part of their population. The
first two of the towns are flourishing seaports, the
third has still much shipping, and the fourth is but a
1 Economic Journal, Vol. V., p. 27.
80 LOCAL GOVERNMENT
day's tramp from Liverpool, and has, moreover, a
miniature port of its own. The requirements of
the Home Office being such that considerable uni-
formity in expenditure per head of population is
secured, offers a partial explanation of the inverse
variations above referred to.
The contention with respect to education that the
Government grant should vary inversely with rate-
able value per head of the district, might be urged
with equal force here. And so might the same ob-
jection. It is a question for the practical politician
to decide whether the gain in justice is worth the loss
in simplicity and uniformity. The work of policing
a town is of such nature, and is so regulated, that
no inefficiency or waste is likely to result from
increased subsidies. Mr. W. A. Hunter,1 indeed,
enters a vehement protest against any such conclusion,
and points in support of his contention to the fact
that the expenses of police have risen in Scotland
with subventions from 8Jd. in 1854 to is. iod. in
1893. The facts must be admitted, but the causal
nexus may be denied. Mr. W. H. Smith has pointed
out in the Economic Journal'1 that the rise may be
accounted for thus: — "(1) The rising wages of the
class whence the police are drawn ; (2) that on paper
a new body always appears cheaper than it really is,
for at first all salaries are at a minimum, and pro-
1 " Lecture on Local and Imperial Taxation," 1894.
2 Vol. V., p. 184.
AND STATE AID 81
vision for pensions, etc., is not thought of — these de-
ferred charges must be added to the expenditure of
the earlier years to get a true figure for comparison ;
and (3) that the officers in question from time to time
have had imposed upon them 'police' duties which
are altogether outside their sphere of service as mere
constables."
Poor Relief, — The causes of the enormous diver-
gences in the amounts of poor rate are — (a) differences
in rateable value per head, (b) differences in the num-
bers of paupers, and (c) differences in economy of
management.
The third cause may be set aside at once ; in it
there is no ground for relief.
The differences under the first head are very
great. To take a few selected examples in England
in 1 89 1 -2 ; the rateable value per head in Eaststone-
house was £2 12s.; in the City of London, £107;
in Wallsall, £2 13s; and in Bellingham, £14 8s.
The first two cases are, however, exceptional. Mr.
Cannan points out1 that of the 195 unions which
have an expenditure per head under 5s., 100 have a
value per head of less than £4 18s., and only 52 have
a value of more than £6 6s.; while of the 208 unions
which have an expenditure of more than J s., 45 have
a value under £4 18s., and no less than 73 have a
value over £6 6s. On the ground of these differences
relief from the Treasury may legitimately be claimed
1 Economic Journal, Vol. V., p. 25.
82
LOCAL GOVERNMENT
— that is, a relief varying inversely with rateable
value per head. However, there is another sugges-
tion to be made. The amount of relief accorded is
difficult to calculate, as the proportion between in-
door and outdoor relief will show. The table below
throws some light on the question.
NUMBER OF PAUPERS IN ENGLAND AND WALES, 1895.
Divisions.
Indoor.
Outdoor.
Total.
Number.
Number
per 1000.
Number. \^^
per 1000.
South West
9,640
5'o
65,109 1 33-8
74,749
East
9,3«>8
S'S
49,422 | 29*2
58,730
Welsh
6,763
3'6
54,087
29*0
60,850
West Midland
20,342
6-i
72,55i
21-7
92,893
North Midland....
7,749
4'i
43,683
23*2
5i,432
South Midland.. ..
9,610
4-8
44,538
22'2
54,148
Metropolis
62,554
i4"3
51,481
11*7
114,035
South East
20,134
6-6
58,842
19-4
78,976
North
8,396
4'3
34,212
*7'3
42,608
York
I3,3i9
4-0
57,794
17*2
7i,"3
NorthWest
30,017
6-i
62,032
12*6
92,049
The cost of indoor relief is as a rule much greater
AND STATE AID 83
than that of outdoor, yet we see that the Metropolis has
14*3 per 1,000 indoor paupers to 4*0 per 1,000 of York,
and 117 per 1,000 outdoor paupers to 17*2 of York,
that is, a total of 26 per 1,000 to a total of 21*2 per
1,000, and at the same time more than three times as
many indoor paupers per 1 ,000. The results of separate
unionsand parishes would expose still greater contrasts.
Ignoring for the moment the principle of economy,
assuming in a word that administrations are equally
wise and economical, and that they will remain so
whatever financial assistance they receive, it is
immediately apparent that it is but common justice
that the poor law centre should be relieved of its
burden in proportion to the number of each kind of
paupers with which it deals per day. Pauperism is
much greater in some districts than in others. What
the present system comes to is that the poor alone
relieve the poor in many places. When the above
results are combined with those adopted with regard
to rateable value, it seems that outside contributions
for the relief of distress should, theoretically, vary
inversely as rateable value per head of the locality,
and directly as the quantity of indoor and outdoor
relief. The objection is the zealous supervision which
would be required to prevent wholesale waste, and an
alarming increase of pauperism. I am not so sure
that the magnitude of this danger is not largely
fictitious to-day ; but in avoiding all appearance of
foolhardiness, and yet obtaining almost the like
84 LOCAL GOVERNMENT
effects, the system of paying constant costs which
vary little with the quantity of pauperism out of
funds obtained from large districts on the basis of
rateable value is preferable. The Metropolitan
Common Poor Fund exemplifies this system.
This fund and the equalisation of rates fund con-
stitute an exception to the allegation made at the
beginning of this chapter that politicians have rather
failed to recognise the diminution of responsibility
with distance as regards the operations of local
bodies. We have in the principles upon which these
two funds are founded an instrument which will
eject a good half of those puzzling inequities which
trouble many a practical man and drive him to attach
himself to the vague agitation for some reform of
some character in local finances. Both these funds
represent organised subventions, which are not im-
perial but local. In a word they are the systematisa-
tion of neighbourly, or provincial, assistance grounded
on the admission of a large common responsibility.
They mean a first step from the conception of society
as made up of rigid, mutually exclusive, local units
to that of an organic nation of organisms, whose size
and strength and nature vary with function, and
which come and go, expand and contract, with
differences in the work set before them.
The Metropolitan Common Poor Fund, which was
created in 1867, is administered by the Local Govern-
ment Board. It is raised by a rate over the whole
AND STATE AID 85
Metropolitan district, excluding Penge, to meet
certain costs incurred under the Poor Law, which are
supposed not to vary at all considerably with
efficiency of administration.1
The effect is, that the wealthier districts assist the
1 Expenses to be paid out of Common Poor Fund by the
Act of 1867.
1. Pauper lunatics.
2. Fever or smallpox patients in asylums.
3. Medicine, and medical- and surgical appliances supplied
to those in receipt of relief.
4. All salaries and cost of rations of officers, managers of
institutions and dispensers, provided the appointment of the
officers is sanctioned by the Poor Law Board.
5. Compensation of medical officers of workhouses on the
determination of their contract by the Poor Law Board, and of
any officer who may be deprived of his office through this Act.
6. Fees for registration of births and deaths.
7. Fees and other expenses of vaccination.
8. Maintenance of pauper children in district, separate,
certificated, and licensed schools.
9. For relief of destitute persons certified by the auditor, and
for provision of temporary wards or other places of reception
approved by the Poor Law Board, under the Metropolitan
Houseless Poor Acts of 1864 and 1865.
"Additional items of expenditure have from time to time
been cast upon the Fund. Thus, by the Metropolitan Poor
Amendment Act, 1869, the cost of the maintenance of pauper
boys on board training ships, and the cost of the maintenance
and instruction of orphan and deserted children boarded out by
the guardians, were made a charge upon the Fund. Under the
Metropolitan Poor Amendment Act, 1870, the cost of the main-
tenance of adult paupers in workhouses and sick asylums to
the extent of fivepence per head per day, and the cost of the
rations of in-door officers according to a scale to be fixed by us
became repayable out of the Fund. In 1873 the school fees
paid by guardians for out-door pauper children were directed
86 LOCAL GOVERNMENT
poorer. In 1896 the net amount contributed was
,£147,375, and the total expenditure charged to the
fund was £631,723 : 19 of the 31 districts received
in excess of their contributions, one district, St.
Saviour's, as much as £17,435. A wider application
has been given to the principle of the Metropolitan
Common Poor Fund by the passing of the London
(Equalisation of Rates) Act, 1894, by which each
parish contributes a rate of 6d. in the £ to a common
fund, which is expended in grants to sanitary
authorities on the basis of population.1
by the Elementary Education Act, 1873, to be paid out of the
Fund. In 1879 the expenses incurred by the managers of the
Metropolitan Asylum District in providing ambulances, ambul-
ance stations, and horses, and in respect of the persons
employed by them in the conveyance of persons suffering from
any dangerous infectious disease, were also charged upon the
Fund, and in 1889 the expenses incurred by the managers for
the maintenance of non-pauper patients suffering from fever or
small-pox or diphtheria, as well as pauper patients, were made
a charge upon the Fund. Payments are also made out of the
Fund in respect of the expenses of the Quarter Sessions for the
County of London under the Valuation (Metropolis) Act, 1869,
and the remuneration and expenses of the clerk and other
officers appointed to assist the Quarter Sessions, the fees
received by the Quarter Sessions under that Act being paid into
the Fund. The expenses of the Clerk to the London County
Council under the same Act are also payable out of the Fund."
(Report of Local Government Board for 1897-8.)
1 The grants have to be spent as follows :
1. In works under the Public Health (London) Act, 1891.
2. The residue, if any, in respect of lighting.
3. The residue, if any, in respect of streets.
The population of the districts has to be estimated each year
from the number of houses.
AND STATE AID 87
The merit of these two funds is that the financial
advantages of big districts are secured with the
administrative advantages of small ones. The distri-
bution of the funds, however, in both cases is not
above criticism.
In the case of the Equalisation of Rates Fund, for
instance, it is bad that population should determine
the grants, for 'there is no guarantee that need is
proportional to population, and not rateable value per
head. Mr. Gomme has said, we may add, in his
evidence to the present commission, that the popula-
tion basis is not final ; that it was taken as a first
experiment to see how it would work out. Since, in
these funds, we have in effect subventions between
local bodies, we must beware of the dangers inci-
dental to subventions, though, indeed, in these cases
they are less, as the whole of the funds are raised in
the locality.
88 LOCAL GOVERNMENT
CHAPTER VII
SUBVENTIONS IN ENGLAND PRIOR TO 1 888
IMPERIAL subventions to local authorities are not
peculiar to the British Isles ; they have appeared in
some form in most modern civilised states.
In England the first of these grants was made in
183 1, others followed in 1833 and x^35- Little was
spent, however, until the time of the famous adminis-
tration, whose claim to glory is the repeal of the Corn
Laws. How far the repeal and subventions were
connected in the mind of Sir Robert Peel is a matter
of debate. It seems natural to suppose that the grants
which came in 1846 were proposed to reconcile the
landed interest to a measure which appeared to be
striking heavily at it. Certainly, a few days after
Sir Robert Peel had announced his conversion to
Cobdenism, Lord Beaumont proposed a commission
on the burdens of land on the ground that " protec-
tion " and " burdens " must live and die together ;
but Mr. Gladstone assures us that he then voted for
the commission and against Sir Robert Peel. But
beyond a doubt the Free Trade Act of 1846 and
AND STATE AID 89
subventions were associated by the landlords, and we
know that the Anti-Corn-Law League was on the
alert to check any attempt to re-adjust local taxation
in the rural districts. In consequence, the Chancellor
of the Exchequer, in the new government of 1851,
announced that he was not going to recommend any
change whatever in the system of raising the local
taxes, and Cobden thereupon wrote to the chairman
of the League : " The Budget has finally closed the
controversy with Protection. Dizzy has in the most
impudent way thrown over the ' local burdens,' as he
did before a fixed duty. The League may be dis-
solved when you like."1 In 1869 the Local Taxation
Committee was formed out of the Central Chamber
of Agriculture with the direct object of organising a
crusade on the consolidated fund. The crusade was
vigorously pursued and with marked success. In
1872 a motion for relief of the rates was carried in
the House of Commons, and, although a motion
practically identical was lost in 1884, it was carried
again in 1886. Subventions rose from £1,420,183 in
1868 to £6,870,206 in 1888. The first amount, if
spread evenly over the poor rate valuation of England
and Wales, is equivalent to a rate of 3^d. in the £,
the second to one of nd. in the £.
All these subventions, with but few exceptions,
were payments for work done, and were dependent
on efficiency. And there is another point to be
1 Morley's rt Life of Cobden."
90 LOCAL GOVERNMENT
noticed besides the fact of the control of the central
government, namely, that all these grants were made
for the performance of local duties which were ad-
mittedly a part of the business of the Imperial
Government. To such kinds of subsidy in general
few objections can be made. Mr. G. H. Blunden
says of them : " By coupling the grants -for police
with the attainment of a fair standard of efficiency,
much has been done in the past to increase the
effectiveness and raise the character of the local
forces. The grants for vaccination and registration
have in like manner secured the performance of
certain functions which would otherwise have been
wholly neglected, or very imperfectly effected in a
very large number of localities. The grant for main
roads is fairly justified by the results secured, but the
cost is heavy. The expenditure on sanitary officers
is at present largely without result in many places,
owing to the lax administration of the sanitary laws
by the local governing bodies."1 The local executive
performs partially imperial duties, and it is paid for
its work, not always the whole cost, but frequently
only a definite proportion or a definite amount. For
instance, only half the cost of the police was met
from imperial funds, and even the half was dependent
on satisfactory work ; and, again, in the case of dis-
turn piked and main roads, the proportion of the
expense borne by the Exchequer was usually one
1 " Local Taxation and Finance," p. 36.
AND STATE AID 91
quarter. In the case of the Dublin Police, however,
the reverse system is in operation. The Imperial
Government directly manages the corps, and receives
from the Dublin Corporation the proceeds of a rate
of 8d. in the £. But here we have an exceptional
case.
The payment of a portion of the cost by the body
undertaking any operation obviously stimulates
economy, if the portion varies directly as the total
cost. The system of part payment alone, however,
would be insufficient to produce the most economical
results, since the operations to which this system
applied would tend to be carried beyond the point of
maximum satisfaction, that is, the point at which
marginal utility equalled marginal cost. This would
result, because the cost to the locality which directly
controlled the operations would be part only of the
actual cost.
Suppose, for instance, that the marginal utility of
100 police in a locality is represented by £2 per man,
and that the marginal utility of 120 police is repre-
sented by £1 per man, and suppose that in both cases
the marginal supply price is £2 ; then if the locality
paid the entire cost, 100 police would be employed ;
but if the central government contributed half, 120
men would be employed. The engagement of the
larger number may be prevented by imperial control
other than financial ; and the difficulty was more of
theoretical than of practical importance.
92 LOCAL GOVERNMENT
Another method of dividing cost is for the central
government to pay, not a part of the total expenses,
but the expenses of a part of the operations. The
objection is that the expenses of this part will grow
unchecked, and that other parts of the work will tend
to become merged with the imperially paid portion,
which will therefore become larger and more expen-
sive than it was before. These tendencies require no
proof. People both individually and in co-operation
are notoriously careless as to expenses which they
have not to meet. The Imperial Government adopted
this method in dealing with the cost of poor relief,
but the grants it made were practically unobjection-
able, because only those costs were taken over, which are
not to any appreciable extent dependent on efficiency.
In the case of education, the central government pays
a fixed amount per scholar and meets certain other
expenses which need not be detailed here. It also
makes additional payments to poor districts. All the
education grants are accompanied by keen scrutiny,
and the government keeps a tight hand on the reins
of management.
Few blots on the system are to be detected. Edu-
cation admittedly concerns more than the locality,
and so a portion of the cost may not unreasonably be
met from the Imperial Treasury. The advantages
in the payment of a fixed sum is that efforts will be
made by the school board, under pressure from the
constituency, to reduce the balance, so far as reduction
AND STATE AID 93
is consistent with efficiency, and perhaps a little
further. The system of payment by results, exem-
plified by the South Kensington grants, has grave
drawbacks in encouraging forcing, in overlooking the
more subtle qualities in teaching, and in inducing
excessively rigid systematization.
So far as the early subsidies 1 were made payable
to rural districts, they had the undesirable effect of
transferring a part of " the hereditary burden " on real
property to the Exchequer. Further[criticisms, which
are common to these and to the later subventions,
must be left to the close of the next chapter.
1 A full detailed description of these subventions will be found
in Appendix B to Mr. Fowler's " Report on Local Taxation."
94 LOCAL GOVERNMENT
CHAPTER VIII
THE SUBVENTION IN ENGLAND OF 1 888 AND 1890
In 1888, and again in 1890, came great changes. A
new colour was given to subventions by grants being
made the amount of which was not determined by
the cost of specific work done, or by needs, but by
the accidents governing the proceeds of given taxes.
Mr. Fowler says : " The financial arrangements of the
Local Government Act (1888) constituted a new
departure from the principles on which Treasury
subventions had previously been sanctioned by Par-
liament. On all previous occasions, except in the
case of payments made by the Treasury in lieu of
rates in respect of Government properties, the sub-
ventions annually voted had been allocated to specific
purposes, to which it was considered that contributions
might properly be made by the Exchequer; and
their distribution had been regulated either by the
expenditure in aid of which they are paid, or by the
efficiency of work done by the local authorities or
their officers. These principles were recognised by
AND STATE AID 95
the Local Government Act, so far as the payments
required to be made by the County and Borough
Councils in substitution for the discontinued grants,
were concerned ; but they were disregarded as
regards the application of the surplus remaining after
the payments of these grants and the Union Officers
Grant."1
The Local Government Act of 1888 transferred to
the Councils of Counties and County Boroughs of
England and Wales certain licenses, referred to in
the Act as Local Taxation licenses, and a share of
the Probate Duty. Certain of the old grants were
charged on the new funds when the Act came into
force. They were those in respect of Teachers in
Poor Law Schools, Poor Law Medical Officers, the
County, Borough, and Metropolitan Police, Public
Vaccinators, Medical Officers of Health and Inspec-
tors of Nuisances, Criminal Prosecutions, Pauper
Lunatics, Registrars of Births and Deaths, Disturnpike
and Main Roads, and Compensation to Clerks of the
Peace. These grants were certified by the Local
Government Board to have amounted for the year
ending 31st of March, 1888, to £2,860,384.
The share of the Death Duties allocated to local
authorities has varied from time to time. In 1888-9
one third of the Probate Duty was paid, in the years
1889-90 to 1893-94 one half of the Probate Duty, and
in 1894-5 one nalf °f tne Probate Duty paid on the
1 Report on Local Taxation, p. xlvii.
96 LOCAL GOVERNMENT
property of persons dying before the 2nd of August
1894, and also a share of the Estate Duty (1894)
paid on the personal property of persons dying after
1st August 1894, such share being equivalent to one
and a half per cent, on the net value of the property
on which the Duty was leviable. The Act substitut-
ing the New Estate Duty for the Probate account
and Old Estate Duty came into force on 1st August
1894, and now only the share of the Estate Duty
mentioned above is paid into the Local Taxation
Accounts.
In 1890 followed the sequel to the great change of
1888 in the form of the Local Taxation (Customs and
Excise) Act, and the Customs and Inland Revenue
Act. The latter of these Acts " imposed additional
duties on spirits, and provided that the proceeds of
these additional duties and the portion of the duties
of excise and of customs in respect of beer " (namely,
so much as will arise from duties of 3d. per barrel on
beer and 6d. per gallon on spirits) " should be appor-
tioned between England, Scotland and Ireland, and
that the English share should be paid into the Local
Taxation Account and appropriated as Parliament
might by any Act passed in the same session direct.
The Local Taxation (Customs and Excise) Act, 1890,
contained provisions for the application of these
duties. That Act provided that out of the amount
paid into the Local Taxation Account for England in
respect of these duties the sum of ^"300,000 should be
AND STATE AID 97
applied for purposes of Police Superannuation,
namely, £150,000 in aid of the Superannuation fund
for the Metropolitan Police force, and £150,000 in
aid of the superannuation of the other police forces in
England (except the police force of the city of
London). The residue of the proceeds of the duties
was to be distributed between the counties and
county boroughs as if it were part of the English
share of the local taxation probate duty under the
Local Government Act. The County Councils were
enabled by the Act to apply the sum received by
them in respect of these duties to technical education
within the meaning of the Technical Instruction Act
1889, and in the case of any County to which the
Welsh Intermediate Education Act, 1889, applied,
towards intermediate and technical education under
that Act."1
By the legislation of 1888 and 1890 a surplus of
more than £3,000,000, over and above the discontinued
grants, was handed over to the English County
Councils and County Boroughs. A new grant, how-
ever, to Boards of Guardians for Union Officers,2
1 Mr. Fowler's " Report on Local Taxation."
sThe Union Officers' Grant, amounting to about one million
pounds, was given to a rate which was steadily falling, and
which, moreover, had already been relieved by no less than
four Treasury subventions, exclusive of the Grant for awards to
public vaccinators, namely, the grants for (1) teachers in poor
law schools, (2) poor law medical officers, (3) pauper lunatics,
and (4) registrars of births and deaths.
G
98 LOCAL GOVERNMENT
amounting to ^967,793 was charged upon this surplus.
The distribution of the funds under the new Acts is
wonderfully complicated.
The problem is divided into two stages ; firstly
division between the counties j1 and secondly, division
in each County between its own Council and the
County Borough Councils contained within its borders.
With respect to distribution between counties, in
the first place the licenses are divided according to
the amounts collected in each county. The rest of
the grants are then added together, and from them
are deducted the new allowances for police super-
annuation.2 The residue is then divided among the
counties in proportion to the shares which the Local
Government Board certified to have been received
by each county3 out of the discontinued grants
during the year which ended on the 31st of March,
1888.
lrrhe following are treated as separated counties under the
Act : Ridings of Yorkshire ; Divisions of Lincolnshire ,* East
and West divisions of Sussex ; East and West divisions of
Suffolk ; Isle of Ely ; Residue of Cambridge ; Soke of Peter-
borough ; Residue of Northampton. The Metropolis also,
which is further subject to special regulations.
2 Another small sum may also be deducted, for, if in any
financial year the money standing to the Cattle Pleuro-
pneumonia Account is insufficient to defray the costs of the
execution of the Act of 1890 in Great Britain, the Local Govern-
ment Board have to pay out of the Local Taxation Account
such additional sums as the Board of Agriculture certify to be
required.
3 " In the case of the six counties of South Wales and the Isle
AND STATE AID 99
We have to consider next the distribution of
the grants to each county between the County
Council and the County Borough Councils. Com-
missioners were appointed to make equitable
adjustments. It was said by Mr. Ritchie, when
President of the Local Government Board, in reply
to questions on the 3rd of July, 1888, that "the
Government desired as far as possible that the
boroughs should have the same control over their
license duties as that which was given to the counties,"
and again that "the instruction to the commission
was that regard should be had to the amount derived
from license duties." The Act of 1888, however, in
referring to the adjustments, has it, "that the county
is not to be placed in any worse financial position by
reason of the boroughs therein being constituted
county boroughs, and that a county borough is not to
be placed in any worse financial position than it
would have been in if it had remained part of the
county." The Commissioners found it impossible to
discover any means of carrying out the intention of the
latter clause, since all the surpluses (left after payment
of the grants charged to the allocated taxes) would, had
there been no county boroughs, have gone to swell
the general purposes account of each county fund.
of Wight add also the amount which each of said counties and
the Isle of Wight would have received if the roads maintained
by the County Roads Boards or the Highway Commissioners
had been main roads." (Act of 1888.)
ioo LOCAL GOVERNMENT
It was a matter of doubt how far each borough would
have benefited from the expenditure of the surpluses,
especially as the whole cost of the maintenance of
main roads had to be defrayed by the County Council
as a general county purpose, and the Borough
Councils might have been able to obtain recogni-
tion of some roads within the borough as main
roads. The Commissioners state in their report that
they decided that an equitable adjustment would
be effected "by giving to such several authorities
in each year the annual amount received prior to
the passing of the Local Government Act out of
the grants discontinued after the passing of that
Act, together with the amount payable under . . .
section 26 " (payments to guardians in respect of the
cost of Union Officers), * and dividing the remainder
in proportion to the rateable values of the county
and boroughs." But Mr. Wharton, a member of
the Commission, declares that "the Commis-
sioners did not adopt the principle of rateable
value as their guide. They adopted the principle
of rateable value and population." l The award of
the Commissioners stands for five years. After that
period the whole question may be reopened by
appeal.
Both methods of division, that between the counties
and that between the county boroughs, are open to
1 See question 10,273 before Commission on Local Taxation,
now sitting.
AND STATE AID 101
severe criticism. Take, firstly, division between the
counties. In so far as it relates to the probate,
estate, and beer and spirit duties, its basis is irrational.
There is no reason why the Empire's contributions to
the counties, to be largely spent on technical educa-
tion in all probability, should vary, inter alia, with the
numbers of people vaccinated and of inspectors of
nuisances in the year 1887-8. There is no rational
connection between a county's claim on the Imperial
Exchequer in 1898 and its band of pauper lunatics in
the year 1887-8. No thought was taken for different
rates of growth in the counties in the future. As Mr.
Hulton put it "when the Act was passed the distribu-
tion . . . might be right and proper, but after the
lapse of nine years a distribution based on an
accidental state of things in a previous year seems
anomalous, and ought to be reconsidered."1 Ob-
viously, if the old grants for specific pur-
poses had been continued, the counties which have
grown in population would now be receiving larger
proportions of the whole, so that if the basis were
right in 1887-8 it must be wrong now, and it will every
year become more and more wrong. The favoured
counties are, of course, acquiring a vested interest in
the ratio of 1887-8, and the more absurd it becomes
the more difficult it will be to overthrow it."2
1 Memorandum handed into present Commission, c. 8765,
page 114.
- Mr. Edwin Cannan in a letter to the Manchester City News,
March 8th, 1899.
102 LOCAL GOVERNMENT
In Appendix VII. the amounts of the discontinued
grants, the shares received, and rateable values for the
counties of England and Wales, are given. In the last
two columns the enormous difference between the
existing distribution and one based on rateable value
is shewn. Side by side with this Appendix VI.
should be studied. It shows that a distribution on
the basis of population would also give results widely
different to those brought about by existing arrange-
ments.
We may now pass on to a consideration of the
principle by which the division of the residue of the
grants between the county borough councils and the
county councils was regulated. If in division of the
proceeds of the licences between counties the simple
and obvious principle of giving to each its own was
satisfactory, it is difficult to understand why it was not
sufficiently satisfactory for a final subdivision. As it
is, the basis adopted, whatever it was, has compelled
almsgiving, in many cases by the poorest to the
wealthiest. Appendix V. shows that the excess of
receipts over contributions has amounted to as much
as £23,058 5s. od. (in Manchester) and deficiencies to
£13,601 17s. iod. (in the County of Lancaster).
Excesses and deficits amounted together to £184,211
12s. 2d. in 1896. Division, there is little doubt, was
largely made on the basis of rateable value. There-
fore, if there are two boroughs with equal populations,
and alike in all respects, except that the one is rich
AND STATE AID 103
and the other poor, the richer receives the greater
amount.
An instructive commentary on existing distribution,
both between counties and afterwards between
counties and county boroughs, will be found in
Appendix VI. We find there that the shares of the
doles of 1890 amounted in 1896 to io'id. per head
in London, io*3d. in Bootle, 3'id. in Walsall, and
4'5d. in Durham, to take a few examples.
Distribution of the residues is made on the basis of
poor rate assessment, in so far as rateable value is
taken into account. Now the poor rate assessments
are made in one county by many different bodies with
different ideas. Moreover, different rates of reduction
are used in obtaining rateable value from gross
estimated rental. Sheffield, for instance, allows 20 to
25 per cent on houses and shops, while Bradford
allows only 15 per cent. On stone quarries Burnley
deducts 15 percent, and Prescot makes no deduction
at all.
The county rate valuation is made by one body,
and the system upon which it is based is therefore
uniform throughout the county. When we compare
it with the valuations of the assessment committees of
the Unions the differences are seen to vary consider-
ably, as we should naturally expect from the foregoing
facts. Here they are for a few picked parishes in
East Sussex in 1895.
io4
LOCAL GOVERNMENT
Poor
Rate Assessment.
County Rate Basis.
Percentage below
County Rate Basis.
^359,149
111,006
100,288
312,614
63,230
58,363
(From Vol. I., par
of the present Comm
^368,202 2-458
115,234 3-669
108,980 7*975
363,351 13*963
76,957 17*837
73,721 20-832
t ii., page 116, of the Minutes of Evidence
ission.)
Moreover, it is not the easiest matter in the world
to get the poor rate valuation revised. It cost Walsall
seven years of agitation. .
It follows directly, of course, that the distribution
of the residue of grants on the basis of poor rate
valuation must be in cases extremely inequitable, even
supposing that true rateable value would be an equit-
able basis.
The method of distributing the present subventions
is indeed hopelessly casual. Mr. Cannan's " the
thimble-rig of exchequer contributions " l exactly
describes it.
Quite apart from their foolish distribution the grants
of 1888 and 1890 are objectionable for many other
reasons. Take the licenses for instance. They are
raised in the counties ; the central government
imposes and collects them ; the counties receive them.
It would be preferable if the clause in the Act which
provides for their collection by the recipients, when
1 Economic Journal, Vol. IV., p. 26.
AND STATE AID 105
decreed by order in Council, had been carried out, as
the fatal stamp of " dole " would then have been
removed. The allocation of certain taxation bases, in
their entirety, to the complete control of the local
bodies, if some assistance really was needful, would
have been even more preferable. Nevertheless, of the
imperial contributions in and after 1888 the duties on
licenses are the least objectionable as they are
collected from the beneficiaries. They simply mean
borrowing half-a-crown from a friend for the purpose
of making him a present of it. Some may object to
them because they do not vary with expenditure. If
they were still destined for the Imperial Exchequer,
it may be argued, they would tend to vary in rate
with the Exchequer's wants. But this point is not of
much importance since a barometer of expenditure is
as a rule sufficient, and local rates provide it.
Passing from the licenses to the other grants in the
later period we find cause for disapprobation in the
fact that the areas of collection and distribution are
not coterminous. For the moment there seems to be
nothing portentous in the fact, but it soon becomes
apparent that it means no guarantee that the proceeds
of the allocated taxes will tend to vary as the needs
of the recipients, when growth alone is taken into
consideration. Very much in the rough, we may put
the situation thus. When a tax is imposed by a
governing body on its own constituents, then doubling
the constituents doubles the financial needs of the
106 LOCAL GOVERNMENT
Government, but it doubles also the receipts. But
collect a tax from the nation at large and pay the
results to a locality ; then, although the constituents
of the locality may increase in numbers, and its needs
may therefore increase, the proceeds of the tax need
not increase, since the nation as a whole may have
diminished.
For example, Manchester's needs vary as its popula-
tion, but its allocated taxes, excepting only duties on
licenses, do not vary with its population. The natural
and rational thing is for mere movements in popula-
tion not to affect taxation burdens. But they do, as
regards local imposts, now that the reforms of 1888
and 1890 are in force, Another very insidious
element of chance has been screwed into local
finances, and improvidence must therefore be cheer-
fully awaited. An element of chance accompanied
the earlier subventions. Their most harmful effects
followed rather from the manner in which they were
accorded than directly from them. Harried govern-
ments took to casting sops in the sWfk of subven-
tions. The outcome was inevitable. The assumption
of certain charges was innocent enough, comparatively
speaking, but the hap-hazard manner of the assump-
tions, and their seemingly time-serving character,
gave rise to a sanguine uncertainty. It was the
unexpectedness of the doles which created the great
expectations whose outcome was waste: it is so
much easier to agitate for help than to manage not
AND STATE AID 107
to need it. The allocated millions of 1890 were
simply windfalls, nothing more nor less, with the dust
and ashes within almost concealed. The money was
collected for the payment of compensation for sup-
pressed liquor licenses, of which the House of
Commons stubbornly refused to approve, and when
that object was dropt the money had to be expended
in some other way. It was proposed by the Govern-
ment to leave it ear-marked in the Treasury for a
time, but the Speaker held that, in view of the budget,
it would be illegal not to spend it in the same year.
Hence the compulsory decision to throw it after the
grants of 1888. There was no conviction of need
and no prior design. Special circumstances are
claimed in justification of the grants of 1888. In
that year new bodies with large powers were called
into being ; or, more correctly, some ancient institu-
tions were revived and given a modern dress.1 Their
fate hung in the balance. They might become mere
excrescences, lifeless aggregations of inefficiency.
Granting their enthusiasm, their aspirations might
easily be checked on the financial side by the murmurs
of an already overburdened constituency. The new
bodies must be sent forth with the strength of an
assured revenue. If income frequently tends to con-
siderably exceed expenditure a governmental body
may find itself branching out in new directions,
1 A few years later came the Parish Councils Bill with promise
of further financial pressure.
1 08 LOCAL GOVERNMENT
assuming new functions, and hurrying along new
paths, as the most progressive of progressivists.
" New occasions teach new duties." Ways must be
found to spend the balances. True, American ex-
penditure of surplus revenues seems to have been
unfortunate, but this was perhaps due to the adop-
tion of the costly and scandalous pension system,
which, like the young cuckoo, soon ousted all com-
petitors. Certainly adverse balances are a check on
hasty decisions ; yet it is possible for a public body
to hurry too little, and it may be wise on occasion to
stimulate it at the temporary sacrifice of economy.
It is alleged that subventions, especially the allocated
taxes, have applied a much-needed stimulus ; that
the burden of rates was checking the development of
local government, and that the new funds removed
this check.
We have been told that there is a very practical
example of the value of largess in the effect of the
surpluses ear-marked for technical instruction. Mr.
G. H. Blunden says : — " The grants for technical
instruction and intermediate education have only
existed since 1890, but they are rapidly building up a
great and excellent work, which, although much
needed, was likely to have remained undone without
the stimulus and aid thus afforded. In both direc-
tions a vast amount of voluntary effort and public
spirit has been evoked, which only needs wise direc-
AND STATE AID 109
tion to ensure excellent results before long."1 But
educational specialists present to us the reverse of the
view offered by Mr. Blunden. They point out that
there is a mist enveloping technical education which
prevents a clear presentation of its nature to the
untrained intellect, and that on this account alone
much money has been foolishly disbursed. Too
large a proportion of the funds has flowed into
already swollen channels, and many streams of
equal importance, and whose need is greater, have
been left to dry up. Hence the proposed Bill drawn
up by the Head Masters' Association, and founded
on the conviction that the existing elective bodies
are incapable of judiciously disposing of these funds
without assistance from educational specialists. Per-
haps the educational question is a peculiar one. But,
however that may be, we have here the advantages
and disadvantages contrasted : on the one side " a
great and excellent work," on the other, waste and
the misdirection of much expenditure.2
How shall the two sides be balanced ? This is a
hard question, but one conclusion at least is certain,
namely, that if any unconditioned grant is made it
must be only temporary. We are then face to face
with the difficult problem as to when a temporary
1 " Local Taxation and Finance," p. 36.
2 The objection above noted applies only in the present.
Educational wisdom is finding its way to the boards of local
governments.
no LOCAL GOVERNMENT
support is to be removed. If history affords any
guidance, a temporary support tends to become a
permanency ; partly because of opposition from the
vested interest created by the support. The policy
of protecting infant industries has split upon this
rock, and there is no reason to suppose that a policy
of temporary subsidies will be more fortunate. The
two sides, however, need not be balanced. The
present murmurings about the burden of the rates
are directed entirely to defects in the existing system
which are removable.
It has been seriously questioned whether sub-
ventions have relieved rates at all. It is urged that
they cannot, as rates have not fallen. In proof an
appeal is made to statistics. It is pointed out that
in England and Wales subventions amounted to 3|d.
in the pound in 1868, nd. in 1888, and is. 6£d. in
1892 ; and that rates in the pound were, in 1868,
3s. 4d., in 1880, 3s. 3jd., in 1888, 3s. y\d.y in 1891,
3s. 7^d., and in 1893, 3s. g\d. The only fall was
between 1868 and 1880, and then it only amounted
to one-fifth of a penny. The inference we are in-
tended to draw, apparently, is that the subventions
have been wasted. Now the figures will not support
this conclusion. Firstly, there is no proof that rates
would not have increased more if there had been
no subventions. We cannot even fall back for proof
on an average increase in rates, as many changes
have been introduced into local government which
AND STATE AID in
affect rates. The enormous change of 1888, for
instance, cuts off the years succeeding from those
preceding that time. There is another alternative to
the conclusion above, which is that the new funds
have been swallowed up in new functions, or in old
functions more efficiently performed. Besides, the
facts are really not quite as they are represented in
the above argument. If allowance were made for
variations in the purchasing power of money, a fall,
both in total rates and in rates per head, in 1888
would probably appear. The use of Sauerbeck's
index numbers at any rate shows it. Rates, in fact,
did not resume their natural rate of growth again till
1892.
U2 LOCAL GOVERNMENT
CHAPTER IX
THE AGRICULTURAL RATINGS BILL
The Agricultural Ratings Bill raises two distinct
questions. The one, Is farming as a business over-
taxed for local purposes ? The other, Have the
hereditary burdens on the land increased, and if so
ought the landlords to be compensated ? By the
hereditary burdens is meant those which are fixed to
the land by the diminution which they cause in its
value through amortisation, that is, those which fall
ultimately on the landlord in possession at the time
of their imposition.
With regard to the first question, it has already
been said that an investigation into the quantity of
productive work (including transport) performed by
local bodies in the performance of local operations,
with reference to different businesses (including agri-
culture), and a careful estimation of the costs of those
services regarded as productive, is a pressing need,
and, moreover, an essential step preliminary to
reform in local taxation. It is a labour requiring the
co-operation of experts thoroughly representative of
the multitudinous business concerns of this country.
AND STATE AID 113
It is not denied here, though it certainly is not taken
as established, that the business of agriculture suffers
especial hardship. What is denied is that the
inquisition of commissions has been such as to
provide the evidence to justify a categorical state-
ment upon the matter. Moreover, we must remember
that concessions have been already made to the
farming interest by the Lighting and Watching Act
of 1833, and by the series of sanitary and improve-
ment Acts which commenced in 1848. "Watching
and lighting rates under the first mentioned Act are
chargeable only on one-third of the full rate in the
pound, when levied in respect of land and tithes ;
lines of railway and canals being comprehended
under the term 'lands.' Sanitary rates in urban
districts, and those for special sanitary purposes
in rural districts, are chargeable in respect of agri-
cultural land, tithes, railways,1 docks, and canals, on
one quarter only of the rateable value." 2 No such
concession is made as regards borough rates, al-
though much of the expenditure to which the
proceeds are applied is of a similar character.
Turning from the business aspect to that of the
burdens on land, we find ourselves in a far less help-
less position. That portion of the average rates of
the last fifty years or so which fall on the landlord
1 In urban districts in which the repair of highways has been
taken over by the counties, the expenditure is now charged on
land and railways in full, instead of at one-fourth as heretofore.
2 Blunden, Op. cit., p. 25.
H
H4 LOCAL GOVERNMENT
have, by amortisation, become a fixed charge in the
land — "an hereditary burden," as Mr. Fowler expresses
it. Lands have been bought and sold subject to this
charge : the tax was paid for all time by the owner
when the rates were imposed. A remission now
would therefore be in very many cases a free gift to
those who have contributed nothing. But it is urged
that rents are falling — this is the popular form that
the argument takes, and it was the form current at
the time of the great increase in subventions, after
the repeal of the Corn Laws. But the Government is
not responsible for the rise or fall in rents, and the
landlord has (or should have) taken into consideration
average and foreseen rates in his purchase. No
Government would hearken unto a speculator for the
rise who claimed assistance because of the fall in the
stock in which he operated ; and what if the stock be
land!
But a claim has been entered for relief with re-
ference only to the increase of rates. Now, if there
were an increase, it would be incumbent upon us to
investigate with a view to discovering whether as
much value had been given to the land by the
services of local bodies as was taken away in the
form of rates. But a wide review reveals no appreci-
able increase, if increase at all. It will be seen from
the following figures that the actual charges on land,
and the charges per pound, have decreased since 1868,
and very greatly since the beginning of the century.
AND STATE AID 115
(Compiled jrom figures given in Fowler's Report on Local Taxation.)
Local Rates Borne by Lands
(including Gardens, etc.,
exceeding one acre).
Value of Land
(from Income Tax Valuations).
Rate
per £ on
Lands.
1817 £6,730,000
1868 5,500,000
1891 4,260,000
Shillings.
3*63
23
2#02
On pages 1 16 and 117 tables are given showing that
although the amount of the urban and rural rates has
augmented since 1868 by about one quarter, and that
of the rural rates by a little more in the same period,
yet the rate in the pound of these rates has fallen.
There is an advance in the rate for the rural sanitary
authorities, but this is offset by a considerable fall in
the poor rate.
Now all that is contended is that the evidence of
loss is not sufficiently convincing to justify a national
gift to the landlords. In support of the contention,
here are two quotations from Mr. Fowler's Report : —
" The burdens of Local Taxation on lands were
found in 1868 to be not heavier than they had been
at various periods of the century, nor so heavy as in
most foreign countries."1 Again : " If in the distri-
bution of Treasury subventions an undue share of
any grants was awarded to the rural districts, the
result would be that the owners of agricultural lands
1 Report, p. 51.
n6
LOCAL GOVERNMENT
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AND STATE AID
117
RATES IN THE POUND FOR VARIOUS LOCAL AUTHORITIES
(Compiled Jrom Foivler's Report, Appendix A , and from Report 0/
Local Government Board).
Urban Metropolitan —
Rate in £ of Rates
raised by all Local
Authorities, calcu-
lated on Poor Rate
Valuation
1873-4-
1879-80.
1887-8.
1890-1.
1893-4.
3. M*3
4- 4'3
4. 6-6
5- o'2
5. 4*o
Extra Metropolitan —
Rate in £ of Rates
raised by purely Ur-
ban Extra Metro-
politan Authorities
2. 4'8
2. 4-1
2. 8-6
2. IO*2
Urban and Rural Poor
Law Authorities —
(Extra Metropolitan)
1. 4-4
1. 1 -4
I. I'O
io'9
io*8
County Authorities-
County Rate
Police Rate
Other Rates
2-7
2 '4
ri
2'5
1 '9
o'5
2*3
2'0
Rural-
Sanitary Authorities
Highway ,,
6-9
7'7
6-9
»'9
6*o
2*4
6-9
would derive a greater advantage than the occupiers
of houses in urban districts."1
In 1896 the Agricultural Land Ratings Bill was
forced on a protesting House. It dealt with certain
rates on agricultural land ; and it was based upon an
interim report of the Royal Commission on Agri-
cultural Depression. The Bill declared that the rates
to which it applied should only be half as much on
agricultural land as on houses.2 The Commission
1 Ibid., p. 41.
2 This involved the valuation of the land apart from the
farmhouse.
u8 LOCAL GOVERNMENT
had suggested that lands should be charged on only
a quarter of their rateable value ; but the exigencies
of the Government forced it to adopt the proportion
of one-half. The deficit in local revenues was to be
made good out of the Imperial Exchequer. It was
estimated at £970,000 for 1896, and £1,950,000 for
succeeding years. The amount was to be divided
between England, Scotland, and Ireland in the pro-
portions of 80 per cent, 1 1 per cent, and 9 per cent
The Bill met with the most violent and sustained
opposition, and the closure had to be persistently
applied to get it through.
It was denied that the money would go into the
pockets of the landlords. Against this view we may
instance evidence, 1 brought forward in the course of
debate, which showed that landlords were even then
taking the relief into account in estimating reductions
in rents. The discussion in Chapter V. of this essay
makes it evident that the relief accorded at the
margin will ultimately benefit the consumers, but
that the difference between this and the amounts
remitted will ultimately go (in great part) to the
landlords. In the meanwhile, however, farmers will
receive benefits, but in different degrees, as the Earl
of Rosebery was careful to point out during the
debate in the House of Lords. Those farming the
more expensive lands will receive the biggest doles.
That this should be so is not only unfair, but it
1 See Hansard, also Annual Register.
AND STATE AID 119
means also that the very object of the Bill is defeated,
for the cloud of depression hangs more heavily over
the low rent lands — for instance, over Essex.
We may put the several objections to this piece of
legislation as follows : — Little relief was given where
the Commission showed it was needed most, and
much was given where it was not needed. The
amount of the doles was determined by imperial
surpluses and not by needs. The division of spoils
between the heads of the Empire was practically
arbitrary. A free gift was made incidentally to some
landlords.
The Bill is to continue in operation for five years.
An attempt to cut down the period to three years
proved unsuccessful. It has been welcomed in certain
quarters, but the welcome is almost drowned in a
clamour for more : for example, the following is part
of a resolution passed unanimously by the Central
and Associated Chambers of Agriculture on May the
5th, 1896:—
" That this Council welcomes and approves the
Agricultural Land Ratings Bill as a partial measure
of relief, but regrets that it does not reduce the
assessment of agricultural land to one-fourth, as
suggested by this Council." (The italics are mine.)
120 LOCAL GOVERNMENT
CHAPTER X
SUMMARY AND CONCLUSION
The practical conclusions arrived at in this essay
may be expressed in the three following proposi-
tions.
I. The subventions to which the local governments
in this country have been subjected were not all
equally objectionable. Some were less desirable than
others. Some offended against many financial and
political principles, and some against only a few.
The subsidies accorded prior to 1888 assumed on the
whole the least objectionable shape possible, but
among them also there were degrees of defects. The
subventions of 1888 and 1890 ran counter to most
principles which the statesman should hold in mind
in directing legislation of this kind, and their division
between counties, and between counties and county
boroughs, was even more unreasonable.
II. Even if the burden of the rates, and the
injustices committed in their imposition, be admitted,
and also the lethargy of local bodies, both the old
AND STATE AID 121
and the newborn, in consequence of difficulties in
raising funds, and even if it be assumed that the
fundamental evils {i.e., the burden and inequity of the
rates) are irremovable, yet the policy of subventions
is a very doubtful policy. Those who argue that
subsidies bring more troubles than they remove have
a strong case. Nevertheless, it must be granted that
the balancing of advantages and disadvantages under
these assumptions is a matter of the greatest
difficulty.
III. But the arguments in Chapters IV., V., and
VI. clearly show that no such balancing of utilities
and drawbacks is needful, because the fundamental
evils in the existing system of raising local finances
are not essential but chiefly accidental and remov-
able. The opinion was expressed that a system of
local taxation, as nearly perfect as any system can
be, might be constructed. In the light of this belief
most subsidies stand absolutely condemned, as
panaceas with some disagreeable accompaniments for
troubles which might be directly removed. But
some subsidies escape this condemnation, those,
namely, which follow upon the division of govern-
mental labour between the various governments
in the nation, (Chapter II.). The rules by which
such subsidies should be governed are outlined
in Chapter III. It must be carefully borne
in mind that in practically all these cases the
obligation to contribute to the cost of local services
122 LOCAL GOVERNMENT
diminishes with distance from the locality. In a
word, it must not be forgotten that a nation is a
hierarchy of social organisms constituted by civic
feeling.
AND STATE AID 123
APPENDIX A
THE EFFECT OF SUBVENTIONS ON THE QUANTITY1
AND INCIDENCE OF TAXATION
The sole excuse for this Appendix is that the
question with which it deals has been gravely
discussed.
Let us clearly understand what it is we are
attempting to estimate. The problem has been ex-
pressed as the effect of subventions on the quantity
and incidence of taxation. Now it is at once
apparent that such a problem is insoluble ; for ex-
pressed otherwise it becomes, to find the differences
in the quantity and incidence of taxation between
present conditions, of which subventions are a
part, and conditions which would have been had
subventions not been given. When the question
is thrown into this shape, we see at once that an
answer is impossible, for we have no means of know-
ing what the conditions without subventions would
have been.
^his is treated to some extent in Chapter VIII.
124 LOCAL GOVERNMENT
It is possible, indeed, to overcome the difficulty by-
making the violent assumptions that, had the sub-
ventions not been introduced, the same funds would
have been required by the local authorities as in the
previous year, and that they would have been raised
in the same manner, and that the amount of imperial
funds raised would have been the same, less the sub-
ventions, as in the year in question. But it would
be folly to conduct an investigation vitiated by such
wild hypotheses.
Again, it is possible to overcome the difficulty by
assuming that the total amount raised by local and
imperial taxation would be the same under both con-
ditions— therefore the first part of the question, as to
11 quantity," must be begged — and that the difference
in incidence will be the difference between the
incidence of the amount of the subventions, if raised
on the basis of imperial taxes, and the incidence of
this sum if raised by an increase in rates. But these
hypotheses, big as they are, are not big enough.
What is meant by the expression, "raised on the
basis of imperial taxes " ? It might mean perhaps —
Mr. W. A. Hunter 1 gives it this meaning apparently
— if raised in a manner least advantageous to the
working-classes. Why not indeed, we may ask, in
a manner most advantageous to the working-classes,
or in any manner we choose to imagine? Mr.
Hunter's hypothesis is truly "a very bold one" as
1 Contemporary Review^ Oct., 1893.
AND STATE AID 125
Mr. W. H. Smith l suggests. It may be urged that
the imperial system of taxation must be taken as a
whole, and that therefore " raised on the basis of
imperial taxes" must mean distributed over all
the taxes in proportion to their yield. If we
acted on this interpretation, then the effect of the
subventions on the incidence of taxation would be
the difference between the incidence of their amount,
if raised by rates, and the incidence of the imperial
taxes, divided by the amount of their yield, and
multiplied by the amount of the subventions. If we
worked this out we might find that subventions had
raised a burden from the classes which escape income
tax. But a detailed investigation would be wasted
labour as the suppositions worked up in the reason-
ing would render the results worthless.
But, to follow another line of thought under the
direction of the assumptions previously made, the
expression, " raised on the basis of imperial taxes,"
might mean " as the subventions actually are raised."
Here seems light at last. But it proves to be only a
Will o' the Wisp leading to the slough of fallacy.
Subventions may take the form of specific taxes ear-
marked for the local authorities, or they may not.
If they do not, then how are they actually raised ?
If they do, then they may be old taxes ; and if so,
the effect of the subventions is obviously not identical
1 Economic Journal, Vol. V., p. 190.
126 LOCAL GOVERNMENT
with the effect of these old taxes, but with the effect
of the operations whereby \ after payment of the subven-
tions, imperial revenue and expenditure are again
brought together. Developing this idea, we might
assume that the operations mentioned are increases
in taxation, and that increases to the amount of the
subventions would not have been imposed but for the
introduction of the subventions. But we need not
make this assumption. The operations whereby
imperial expenditure and revenue are again brought
together are not bound to be on the side of revenue
at all ; they might consist in reduced expenditure.
And even if equilibrium were restored from the side
of revenue, the cause need not be an increase of
taxes. It might be a spontaneous increase in the
proceeds of existing taxes. But assuming that
expenditure and revenue again balance, and that
taxes have been increased to bring about this result,
yet the proceeds of the increases in taxation may be
less or more than the amount of the subventions : if
they are less, what can we say of the difference ? if
they are more, which find their origin in the new
expenditure on subventions, and which in decreased
revenue, or increased expenditure, in other direc-
tions ? Again, if the operations, whereby balance is
restored in the accounts, consist in a spontaneous
increase in the proceeds of certain taxes, what is the
effect of the subventions? We can only say that it is
the difference between the effect of taxes as they are
AND STATE AID 127
and the effect of taxes as they would have been, if
subventions had not been. This only throws us
back on a difficulty already treated : What would
have been if the subventions had not been ? If
taxes would have been reduced, in which taxes
would the reduction have taken place ?
We are led to the conclusion before stated, that no
solution is possible.
STATISTICAL APPENDICES
STATISTICAL APPENDICES
i3»
TABLE I.
(Compiled from Mr. Fowler's Report on Local Taxation, 1893.)
A. PARLIAMENTARY GRANTS IN AID OF LOCAL RATES.
Grants in aid of
When
first
voted.
1867-68.
1877-88.
1891-92.
Teachers in Poor Law Schools
1846
£34,500
£36,825
Poor Law Medical Officers
1846
104,500
149,506
..
Police (Counties and Boroughs)
1856
225,300
864,083
Metropolitan Police
1833
164,848
575,141
£4,300
Criminal Prosecutions
1835
150,000
133,732
County and Borough Prisons and J
Removal of Convicts "1
1835
and
1846
109,000
Metropolitan Fire Brigade
1865-66
10,000
10,000
10,000
Berwick Bridge
1831
90
90
90
Industrial Schools (Local Authorities)
1876
3,574
32,212
38,800
Elementary Education (School Boards)
Fee Grant
1891
, ,
329,285
Annual Grants for Day and Evening
Scholars
1870
1,255,938
1,608,427
School Boards in Poor Districts
1870
7,167
8,395
Medical Officers of Health and In-
spectors of Nuisances
1873-74
73,910
Pauper Lunatics
1874
485,169
• •
Registration of Births and Deaths . .
1875
9,500
Disturnpike and Main Roads
Total (carried forward) ..
1882
498,797
-
£801,512
£4,132,070
£1,899,297
32
STATISTICAL APPENDICES
TABLE I.— -Continued.
B. LOCAL CHARGES TRANSFERRED TO, AND OTHER CHARGES OF A LOCAL
NATURE BORNE BY, ANNUAL VOTES OF PARLIAMENT.
Charges in respect of
When
first
voted.
1867-68.
1887-88.
1891-92.
District Auditors
1846
£17,900
£15,246
£14,069
Clerks of Assize
1852
18,500
19,602
17,975
Compensation to Clerks of Peace, etc.
1855
6,400
1,806
198
Central Criminal Court
1846
5,181
..
Middlesex Sessions
1859-60
819
1,454
Public Vaccinators
1867
6,000
16,468
..
Elementary Education (Voluntary
Schools) Fee Grant
1891
,,
493,155
Annual Grants for Day and Evening
Scholars
1854
443,345
1,927,285
2,089,473
Reformatory Schools
1854-55
J- 99,426
f 66,920
62,365
Industrial Schools (other than those
of Local Authorities)
1856-57
1 103,667
109,026
Rates on Government Property
1859
27,000
182,459
192,344
County and Burgh Prisons and Re-
moval of Convicts
1879
398,683
398,047
Pleuro-Pneumonia
Total
1890
••
140,000
£618,571
£2,738,136
£3,518,106
Carried forward from previous page
Total Parliamentary Subventions,
excluding Allocated Taxes
£801,512
£4,132,070
£1,899,297
£1,420,083
£6,870,206
£5,417,403
All the Education Grants are not included in the above tables, for instance, the
Science and Art (South Kensington) Grants are omitted. The total grants for education
(including everything) made to schools in England and "Wales in 1897-8 amounted to
£4,501,895, and of this sum £3,597,496 went to Board Schools.
STATISTICAL APPENDICES
33
TABLE II.
(From Fowler's Report on Local Taxation.)
Parliamentary
Grants in aid of
Local Kates.
Local Charges
transferred to, and
other charges of
a Local Nature
borne by, Annual
Votes of
Parliament.
Parliamentary
Grants in aid of
Local Rates.
Local Charges
transferred to, and
other Charges of
a Local Nature
borne by, Annual
Votes of
Parliament.
1868.
£801,512
£618,571
1881.
£2,733,993
£2,450,101
18C9.
866,082
721,339
1882.
2,857,463
2,455,390
1870.
902,317
800,904
1883.
3,170,983
2,529,525
1871.
901,383
872,417
1884.
3,380,808
2,623,905
1S72.
925,590
1,088,474
1885.
3,523,418
2,667,742
1873.
938,965
1,169,368
1886.
3,658,746
2,681,766
1874.
1,033,416
1,214,867
1887.
3,767,696
2,715,164
1875.
1,623,360
1,330,203
1888.
4,132,070
2,738,136
1876.
2,115,809
1,526,312
1889.
4,891,548
2,797,384
1877.
2,268,641
1,635,036
1890.
6,312,936
2,778,868
1878.
2,469,408
1,802,664
1891.
7,485,875
2,924,224
1879.
2,540,043
2,329,878
1892.
8,328,376
3,518,106
1880.
2,636,096
2,434,651
134
STATISTICAL APPENDICES
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oo
STATISTICAL APPENDICES
135
TABLE IV.
(Tables prepared by Association of Municipal Corporations for
Royal Commission on Local Taxation.)
A. EXCHEQUER CONTRIBUTIONS TO COUNTY BOROUGHS AND AMOUNTS
PAID TO GUARDIANS OUT OF SUMS RECEIVED BY CORPORATION
FROM LOCAL TAXATION ACCOUNT.
Local
<u a
3 O
Local
3 0
Government
•OS.-
Government
•0 sh-
City or
Borough.
Act, 1888.
nt received from Resi
ties under Local Taxa
stoms and Excise) Ac
1890.
City or
Borough.
Act,
L888.
elved from Res
ider Local Taxa
and Excise) Ac
1890.
ross Amount received
from Local Taxation
icenses, Probate Duty
rant and Estate Duty.*
Hi
ill
it received
Taxation
)bate Duty
tateDuty.*
O O en
Amoui
Local
es, Pn
EtndEs
ill
O H 00
2-3 2
<
2 3 3
1«B
ross
from
icens
ranti
3*
S g 3
O Kio
^O
O ^O
Barrow - in •
Manchester
£100,419
£39,923
£14,469
Furness
£5,521
£1,617
£1,205
Middlesbro'
8,426
3,586
944
Bath
Birkenhead . .
Birmingham
8,431
14,069
78,251
3,504
5,108
35,026
1,509
2,360
11,083
Newport, Mon
Norwich
Nottingham
9,154
13,848
31,726
2,475
6,316
11,695
1,349
1,511
4,248
Blackburn ..
Bolton
11,295
12,665
3,700
4,937
2,150
2,121
Oldham
11,936
4,179
2,423
Bootle
Bradford
Brighton
Burnley
10,179
27,050
23,080
6,776
5,692
9,450
11,113
2,683
2,121
5,271
3,268
1,407
Plymouth ..
Portsmouth
Preston
11,438
22,344
10,730
3,959
10,794
3,841
1,592
3,217
1,745
Bury
7,712
4,404
1,263
Reading
10,004
3,989
1,415
Rochdale . .
8,481
3,330
1,360
Canterbury . .
3,811
1,491
553
Chester
6,103
2,068
841
St. Helens . .
7,347
2,871
1,446
Coventry
5,977
2,379
845
Sheffield .
44,422
16,358
5,642
Southampton
South Shields
Sunderland . .
Swansea
12,467
4,510
1,533
Derby
Devonport ..
13,807
6,870
4,943
2,387
1,912
955
7,853
16,821
12,577
2,475
6,516
3,361
1,139
2,092
1,167
Gateshead ..
9,740
3,563
1,092
Walsall . .
7,887
3,020
931
Gloucester ..
4,240
1,713
912
Wigan
5,543
1,684
858
Grimsby
4,486
866
751
Wol'hanipton
11,716
5,310
1,421
Worcester ..
8,516
2,579
947
Halifax
Hanley
Huddersfield
10,700
8,474
13,722
3,350
2,892
3,404
1,645
936
1,962
York..
8,030
1,919
1,051
Hull ..
27,262
8,524
3,134
Grand Total )
for 47 English (
and Welsh'"
Co. Boroughs )
Leicester
22,878
8,715
3,127
£730,359
£279,638
£105,653
Lincoln
4,975
1,419 734
Excluding costs of revising barristers' and election petitions.
136
STATISTICAL APPENDICES
TABLE IN.— Continued.
B. EXCHEQUER CONTRIBUTIONS TO NON-COUNTY BOROUGHS— AMOUNTS
RECEIVED FROM COUNTY COUNCILS UNDER LOCAL GOVERNMENT
ACT, 1888,
AND LOCAL TAXATION (CUSTOMS AND EXCISE) ACT, 1890.
« -s
t3 ^'a?
Ti "S
rrt /§
City or
Amount receive
from County
Council under
Local Governme
Act, 1888.
receive
lounty
. under
axation
& Excis
1890.
City or
receive'
lounty
under
^ernmei
1888.
receive
lounty
under
axation
& Excis
1890.
Borough.
Amount
from C
Council
Local T
(Customs
Act,
Borough.
Amount
from C
Council
Local Goi
Act,
Amount
from C
Council
Local T
(Customs
Act,
Ashton-under-
Kidwelly
£60
Lyne
£3,045
£619
King's Lynn . .
2,492
£374
Bacup
Banbury
Barnsley
Bedford
Berwick-upon-
Tweed
4,420
1,200
1,028
2,295
2,108
168
358
715
257
500
Lancaster . .
Leamington
Spa..
Lewes..
Longton
1,496
2,655
783
1,683
421
530
168
239
Beverley
Bishop's Castle
Blackpool . .
253
476
Loughborough
Ludlow
Luton..
Lydd ..
Lyme Regis . .
964
188
3,448
103
350
Boston
Brighouse . .
1,605
100
495
Burslem
3,626
4,i62
Macclesfield . .
1,868
2,323
Calne..
28
446
Maidstone . .
4,208
2,600
Cambridge . .
Carmarthen . .
8,557
859
Maldon
Middleton ..
2,531
195
Chatham
Cheltenham . .
2,351
2,209
780
850
Montgomery
Mossley
l',445
i70
Chesterfield . .
2,432
182
Neath..
531
25
Chichester . .
95
90
Nelson
1,035
230
Chorley
6
230
Newcastle-
Christchurch
540
Under-Lyme
..
Colne
1,975
170
Ossett..
Congleton . .
1,399
1,975
Conway
68
Pembroke
910
Crewe..
2,712
513
Peterborough
1,624
Darwen
2,129
357
Rawtenstall . .
3,375
332
Daventry
Denbigh
Dewsbury . .
Doncaster . .
567
30
295
2,260
Reigate
Richmond
Yorks
Ripon
3,302
160
292
Dover
4,421
865
Sandwich
468
Dunstable . .
353
100
Scarborough . .
2,098
1,100
Durham
735
Shrewsbury ..
2,896
Eastbourne ..
3,539
711
Southport . .
Southwold . .
4,042
23
7i9
East Retford
Eccles
1,109
1,867
340
Stalybridge ..
Stafford
1,924
260
100
169
Faversham . .
55
218
Stoke-on-Trent
2,300
198
Glastonbury
Godalming . .
751
710
'i3
Tenby..
Thornaby-on -
Tees
Tiverton
223
Guildford . .
1,559
73
2',264
Harrogate . .
2,100
Todmorden . .
Haslingden ..
2,735
204
Torquay
i',ioo
Hertford
102
185
Tunbridge
Heywood
2,636
289
Wells
6,219
582
Huntingdon . .
Hyde..
302
1,892
586
Wakefield . .
Warrington ..
2,188
2,930
412
Kendal
1,382
Wisbech
35
Kidderminster
2,048
Wrexham . .
570
114
STATISTICAL APPENDICES
137
TABLE V.
(Tables handed in by Mr. John Richmond Cooper, Town Clerk of
the County Borough of Walsall [see Minutes of Evidence, Vol. I,
Questions 10,179 — 10,292] to Royal Commission on Local
Taxation.
Statement showing the Results of the Apportionment of the Local Taxation
Licenses and Probate Duty Grant and Estate Duty between Counties and
County Boroughs in England and Wales in the year ended 31st March, 1896.
A. ADMINISTRATIVE COUNTIES.*
Counties receiving an Amount in Excess
of their Contributions.
Counties receiving Less than they
Contribute.
County.
Amount of
Excess.
County.
Amount of
Deficiency.
Chester
Derby
Devon
Durham
Gloucester
Kent
Lincoln (Lindsey)
Norfolk
Northampton
Northumberland
Notts
Oxford
Somerset
Stafford
Suffolk (East) ..
Sussex (East)
York (East Riding) . .
York (North Riding) ..
Total
£ 8. D.
1,614 15 2
1,278 11 1
356 6 6
415 6 0
3,363 3 10
1,200 13 7
3,354 4 6
4,422 10 9
2,401 5 6
2,941 11 11
821 19 2
766 1 7
2,067 16 10
1,608 8 5
597 16 2
860 9 0
1,210 3 1
838 18 0
Berkshire
Essex
Lancaster
Leicester
Monmouth
Warwick
York (West Riding) . .
Glamorgan
Total
£ S. D.
258 16 7
4,798 15 1
13,601 17 10
450 5 11
177 12 11
3,478 17 6
4,809 8 11
571 17 7
£30,120 1 1
£28,147 12 4
The counties of Southampton, Surrey, and Worcester, received the same amounts
as were contributed by them.
138
STATISTICAL APPENDICES
TABLE V.— Continued.
Statement showing the Results of the Apportionment of the Local Taxation
Licenses and Probate Duty Grant and Estate Duty between Counties and
County Boroughs in England and Wales in the year ended 31st March, 1896—
continued.
B. COUNTY BOEOUGHS.*
County Boroughs receiving an Amount in
County Boroughs receiving Less than they
Excess of their Contributions.
Contribute.
County Borough.
Amount of
Excess.
County Borough.
Amount of
Deficiency.
£ S. D.
£ S. D.
Barrow-in-Furness
40 9 10
Bath
2,070 6 9
Birkenhead
976 7 11
Blackburn
4,333 10 7
Birmingham
6,731 6 11
Bolton
2,079 17 11
Bootle
4,281 14 7
Burnley
1,797 5 6
Bradford ..
2,365 1 4
Bury
394 12 11
Brighton . .
655 1 0
Canterbury
1,200 13 7
Bristol
12 9 5
Chester
1,932 16 9
Cardiff ..
1,864 16 5
Coventry ..
3,252 9 5
Devonport
599 15 7
Derby
1,278 11 1
Gateshead..
662 12 2
Exeter
343 16 2
Hanley
1,014 10 1
Gloucester
3,373 3 4
Halifax . .
518 18 10
Great Grimsby
1,821 2 3
Huddersfield
952 16 2
Great Yarmouth
635 10 3
Leeds
330 17 5
Hastings
1,515 10 0
Leicester . .
450 5 11
Ipswich
597 16 2
Liverpool ..
2,037 8 3
Kingston-upon-Hull . .
62 5 6
Manchester
23,058 5 0
Lincoln
1,533 2 3
Middlesbrough .
329 7 9
Newcastle-upon-Tyne ..
2,941 11 11
Newport (Mon.) .
177 12 11
Northampton
2,401 5 6
Beading . .
258 16 7
Norwich
3,787 0 6
Salford
7,618 14 3
Nottingham
821 19 2
Sheffield ..
1,098 3 8
Oldham
3,257 4 7
Sunderland
404 18 10
Oxford
766 1 7
West Bromwich .
746 9 1
Plymouth
612 5 11
West Ham
4,798 15 1
Preston
4,503 5 9
Rochdale
1,920 6 4
South Shields
1,482 17 0
St. Helens
1,629 4 9
Stockport
1,101 11 1
Swansea
1,292 18 10
Walsall
1,672 12 7
Wigan
3,076 1 0
Wolverhampton
1,696 15 0
York
Total
2,772 11 10
Total
£61,985 15 0
£63,958 3 9
* The county boroughs of Portsmouth, Southampton, Croydon, Dudley, and Worcester
received the same amounts as were contributed by them.
STATISTICAL APPENDICES
139
TABLE VI.
(Tables handed in by Mr. J. E. Cooper to the Royal Commission
on Local Taxation.)
Statement showing the Total Amounts and the Amounts per Head received by
certain Counties and County Boroughs in England and Wales from the Residue
of the Proceeds of the Local Taxation (Customs and Excise) Duties in the year
ended 31st March, 1S96.
A. ADMINISTRATIVE COUNTIES.
Share of Residue
of Proceeds
Amount Paid to each
of Customs and
Population,
Excise Duties
County Council.
County
1891.
distributed in
same manner as
English share of
Local Taxation
Probate Duty.
Total Amount.
Amount
per Head.
£ S. D.
£ S. D.
Pence.
Durham
721,481
12,913 0 11
13,619 13 2
4-5
Cornwall
322,571
6,873 11 7
6,873 11 7
5'1
Staffordshire
818,290
16,961 12 7
17,727 3 1
5-1
East Suffolk
183,478
3,833 7 6
4,059 5 2
53
Yorks (West Riding)
1,351,570
30,734 1 9
30,506 16 0
5-4
Derbyshire
426,768
9,997 18 7
9,975 5 3
5-8
Hampshire..
386,849
9,039 0 5
9,039 0 5
5-6
Monmouthshire
203,347
4,372 6 0
4,781 1 7
5'6
Lancashire
1,768,273
40,485 16 5
42,443 3 0
5'7
Cumberland
266,549
6,330 11 8
6,330 11 8
57
Yorks (North Riding) . .
284,837
6,824 13 7
7,160 14 11
60
Northumberland
319,730
7,881 7 9
8,003 6 11
6-0
Nottinghamshire
231,946
5,802 13 1
5,988 0 4
61
Leicestershire
200,468
5,485 13 5
5,201 1 8
6-2
Devon
455,353
12,120 8 11
12,255 10 11
6'4
West Sussex
140,619
3,779 18 7
3,779 18 7
6-4
Westmorland
66,098
1,792 14 9
1,792 14 9
6-5
Cheshire
536,644
14,510 3 10
14,997 5 7
6'5
Worcestershire
296,661
8,557 8 7
8,557 8 7
6-9
East Sussex
240,264
8,113 13 1
7,102 0 10
7-0
Bedfordshire
160,704
4,770 2 3
4,770 2 3
7-1
Salop
236,339
7,159 11 6
7,159 11 6
7-2
Norfolk
317,983
9,064 6 5
9,596 7 0
7'2
Cambridgeshire
121,961
3,696 12 7
3,696 12 7
7-2
Warwickshire
307,193
8,518 15 4
9,410 8 8
7-3
Essex
579,355
18,073 15 6
18,077 19 1
7-4
Northamptonshire
203,247
6,187 0 4
6,358 8 2
7-5
Hertfordshire
224,550
7,034 4 0
7,034 4 0
75
Kent
785,674
24,634 18 4
24,570 12 9
7'5
Lindsey (Lines.) ..
199,055
6,354 9 3
6,236 18 11
7-5
Berkshire
176,109
5,789 0 2
5,672 19 4
7'7
Oxfordshire
145,449
5,099 6 5
4,795 11 11
7-9
Somerset
386,866
13,237 2 9
13,198 15 2
81
Dorset
194,517
6,778 12 6
6,778 12 6
8-3
Wiltshire
264,997
10,123 17 5
10,123 17 5
91
Surrey
418,856
16,172 14 5
16,172 14 5
92
London
4,232,118
178,558 7 4
178,558 7 4
10-1
140
STATISTICAL APPENDICES
TABLE VI.— Continued.
Statement showing the Total Amounts and the Amounts per Head received by
certain Counties and County Boroughs in England and Wales from the Residue
of the Proceeds of the Local Taxation (Customs and Excise) Duties in the year
ended 31st March, 1896— continued.
B. COUNTY BOROUGHS.
County Borough.
Population,
1891.
Share of Residue
of Proceeds
of Customs and
Excise Duties
distributed in
same manner as
Amount Paid to each
Borough Council.
English share oi
Local Taxation
Probate Duty.
Total Amount.
Amount
per Head.
£ S. D.
£ S. D.
Pence.
Walsall
71,789
1,082 5 11
931 2 10
3-1
Norwich
100,970
1,999 19 8
1,510 12 5
3-5
Northampton
61,012
1,079 14 9
908 6 11
3'5
Kingston-on-Hull
200,044
4,577 18 7
3,134 8 0
37
Coventry
52,724
897 4 5
845 0 4
3-8
Stockport
70,263
1,967 0 2
1,170 3 1
3-9
West Bromwich
95,474
1,070 1 5
1,010 7 1
4-0
Wolverhampton ..
82,662
1,622 8 11
1,421 0 11
41
Blackburn
120,064
1,913 11 2
2,149 12 7
4-2
Hanley
54,946
1,289 5 2
936 0 1
43
Bolton
115,002
2,278 0 5
2,120 14 3
4*4
Rochdale
71,401
1,506 14 11
1,349 10 10
4-5
Nottingham
213,877
4,433 15 11
4,248 8 8
47
Portsmouth
159,251
3,217 6 4
3,217 6 4
4-8
St. Helens
71,288
1,090 10 9
1,445 18 10
4-8
Worcester
42,908
947 5 1
947 5 1
5-2
Birmingham
478,113
11,922 17 3
11,083 8 0
5-5
Manchester
505,368
13,959 16 1
14,469 0 9
6-8
Bath
51,844
1,349 4 10
1,509 3 10
6-9
Oxford
45,742
1,148 10 8
1,452 6 2
7-6
Liverpool
517,980
19,823 17 4
17,033 3 5
7-8
Bootle
49,217
1,393 17 6
2,120 14 3
10-3
STATISTICAL APPENDICES
141
TABLE VII.
Memorandum by Mr. F. C. Hulton to the Royal Commission
on Local Taxation.
Table showing the Distribution between Counties (including County Boroughs deemed
to be situate therein) of the Probate Duty Grant and Estate Duty for Year ending
SlBt March, 1896, on the Basis of Discontinued Grants (Local Government Act, 1888,
Section 22) and the effect of distribution according to Rateable Value at Lady Day,
1895.
(See Minutes of Evidence, Vol. I., Questions 6014-6026, 6030-6037, 6046-6048, 6057-6059.)
lis
CO -£
3 i 3
cos
Distribution according to Rateable Value.
•robate
Estate
ending
h, 1896
Rateable Value
Share of Probate
Effect.
0 *>iS .
a S n a
(Poor Rate)
Duty Grant and
Increase ( + ) or
Name of County.
of Counties
Estate Duty sup-
Decrease ( — ).
0 5S
re of I
it and
Year
Marc
(including County
Boroughs
posing Distribu-
tion had been
8™ §
deemed to be
according to
Actual
Amount.
Per-
£25
£2,2
situate therein),
Rateable Value
centage
■Js
a^O
March, 1895.
at Lady Day, 1895.
Amount.
England.
£
£
£
£
Bedford..
16,779
10,640
826,392
9,207
— 1,433
— 13-5
+ '7
— -8
— 7'4
+ 3'8
Berkshire
24,932
15,809
1,428,800
15,919
+ 110
Buckingham . .
20,676
13,111
1,167,949
13,012
— 99
- 608
+ 1,643
Cambridge
Cheshire
13,003
68,935
8,245
43,712
685,514
4,070,871
7,637
45,355
Cornwall
24,178
15,331
1,309,788
14,593
— 738
— 4*8
Cumberland
22,268
14,120
1,G05,480
17,887
+ 3,767
+ 267
Derby
41,814
26,514
2,525,901
28,142
-{- 1,628
+ 6-1
Devon
55,986
35,501
3,245,289
36,157
4- 656
+ 1*8
— 22-0
+ 19*3
— 5-8
— 17-9
— 17-3
— 171
— 46
— 4-8
— 8-5
+ 1-6
+ 18-9
+ 8'9
Dorset
23,844
15,119
1,058,800
11,796
— 3,323
Durham
63,115
40,021
4,287,160
47,764
+ 7,743
— 296
— 9,284
Ely, Isle of
8,045
5,101
431,311
4,805
Essex
81,691
51,800
3,816,088
42,516
* Gloucester . .
69,735
44,219
3,282,704
36,573
— 7,646
Hereford
18,772
11,903
885,959
9,871
— 2,032
Hertford
24,743
15,690
1,343,942
14,973
— 717
— 229
— 4,790
Huntingdon
7,473
4,739
404,783
4,510
Kent
88,374
56,038
4,599,823
51,248
Lancaster
337,083
213,744
19,487,828
217,119
+ 3,375
Leicester
29,295
18,576
1,981,754
22,079
-j- 3,503
Lincoln ..
47,737
30,270
2,958,533
32,962
+ 2,692
London ..
628,084
398,267
34,457,948
383,904
— 14,363
— 3'6
— 25-8
— 2-3
— 46
— 21
+ 21'9
+ Q-5
— 15-9
+ 7-1
+ 174
Middlesex
80,397
50,980
3,394,406
37,818
— 13,162
Monmouth
21,561
13,672
1,199,342
13,362
— 310
.— 1,224
Norfolk ..
42,118
26,707
2,287,264
25,483
Northampton ..
Northumberland
25,561
42,228
16,208
26,777
1,423,996
2,929,227
15,865
32,635
— 343
+ 5,858
+ 2,178
— 2,215
+ 160
-r 300
Nottingham
Oxford ..
36,007
21,977
22,832
13,936
2,244,809
1,052,044
25,010
11,721
Peterborough ..
fiutland
3,567
2,718
2,262
1,723
217,359
181,576
2,422
2,023
Bristol county borough is in the counties of Gloucester and Somerset, but in the returns
of the local taxation account it is treated as in Gloucester.
142
STATISTICAL APPENDICES
TABLE VIL— continued.
*g4
ibate Duty
state Duty
ding 31st
1896.
Distribution according to Rateable Value.
Rateable Value
Share of Probate
Effect.
li»s
(Poor Rate)
Duty Grant and
Increase ( + ) or
Name of County.
0 a a -
of Counties
Estate Duty sup-
Decrease ( — ).
(including County
Boroughs
posing Distribu-
tion had been
2-2 §
deemed to be
according to
Per-
OS g M
,3*1
555
situate therein),
Rateable Value
Actual
centage
March, 1895.
at Lady Day, 1895.
Amount.
Amount.
England— con-
tinued.
£
£
£
£
£
Salop
25,184
15,969
1,610,089
17,938
+ 1,969
+ 12*3
* Somerset
51,308
32,534
2,880,755
32,095
- 439
— 1-3
Southampton . .
48,505
30,757
2,979,142
33,191
+ 2,434
+ 7-9
Stafford ..
77,476
49,127
4,434,692
49,408
+ 281
— '6
Suffolk ..
25,902
16,424
1,680,455
18,722
+ 2,298
+ 14-0
Surrey
70,448
44,671
3,598,260
40,089
— 4,582
— 10-3
Sussex
55,436
35,152
3,497,190
38,963
+ 3,811
+ 10*8
Warwick
75,060
47,595
4,116,949
45,868
— 1,727
— 3-6
Westmorland .
6,306
3,999
534,816
5,959
+ 1,960
+ 49'0
Wight, Isle of .
9,062
5,746
432,632
4,820
— 926
— 16*1
— 29-2 1
Wilts ..
, 35,611
22,581
1,435,121
15,989
— 6,592
Worcester
36,418
23,093
1,859,432
20,716
— 2,377
— 10*3
York, East
28,118 17,830
1,936,314
21,573
+ 3,743
+ 21-0
York, North .
28,190 1 17,879
2,298,979
25,613
+ 7,734
+ 43-3
York, West .
York, County
Borough
181,285 i 114,953
10,844,494
120,821
+ 5,868
+ 5-1
3,955
2,508
244,095
2,720
+ 212
+ 8'5
Wales.
Anglesey
2,516
1,595
211,787
2,360 + 765
+ 48-0
Brecon
5,136
3,257
276,971
3,086 — 171
— 5-3
Cardigan
4,396
2,787
234,854
2,617 — 170
— 6-1
Carmarthen
9,107
5,775
585,812
6,527 + 752
+ 13-0
Carnarvon
8,354
5,297
474,182
5,283 — 14
— '3
Denbigh
10,923
6,926
591,346
6,588 i - 338
— 4-9
Flint
7,829
4,964
431,765
4,810 154
— 31
Glamorgan
41,345
26,217
3,661,935
40,799
+ 14,582
+ 55-6
Merioneth
3,788
2,402
234,276
2,610
+ 208
+ 87
Montgomery .
7,545
4,784
366,594
4,084
— 700
— 14-6
Pembroke
5,787
3,670
395,405
4,405
+ 735
+ 20-0
Radnor ..
Total, (Eng. and
2,692
1,707
156,537
1,744
+ 37 + 2-2
1
Wales),
2,860,384
1,813,766
162,797,519
1,813,766
~~ i ~~
Bristol county borough is in the counties of Gloucester and Somerset, but in the returns
of the local taxation account it is treated as in Gloucester.
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