Jl!f^i'"i'l!| I'll 'i'i ii'iji ,!ilM' , ,1 ill ' M',, 1^ ,H i 'iimiiPniiiiii ii 1 hiiiiiniDii'rniin n m :lilli!imitiiiiili(iliitlili BOUGHT WITH THE INCOME OF THE SAGE ENDOWMENT FUND THE GIFT OF 1891 ....-.^^ Cornell University Library HJ4707 .S78 1916 British incomes and property: olin 3 1924 030 221 638 Cornell University Library The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924030221638 STUDIES IH ECONOMICS AND POLITICAL SCIENCE No. 47 In the series ot Monographs by writers connected with the London School ot Economics and Political Science BRITISH INCOMES AND PROPERTY BRITISH INCOMES AND PROPERri^: V THE APPLICATION OF OFFIClAsI. STATISTICS TO ECONOMIC PROBLEMS BY J. C. STAMP B.So. (Boon.) Fellow of the Soyal StatUtical Socwty and of the Royal Eeorwmiti Soeiety LONDON P. S. KING & SON, Ltd OECHAED HOUSE WESTMINSTEE 1916 PREFACE. The greater part of this work was completed before the war began. In so far as it is a contribu- tion to economic history, it might well have awaited a more auspicious time for publication ; but ther^Js sufficient justification for its appearance now in the fact that the war itself is raising, and will continue to raise, questions relating to national income, property, and wealth, as well as to the distribution of incomes, in which the official statistics play a more or less important part. Any assistance which this book may afford to those who wish to use and interpret these statistics in economic, statistical, or political investigations is accordingly offered without further delay, although leisure has been wanting for elabo- ration of some of the applications in Part II. on the lines originally planned. The war marks, as definitely as the close of the Napoleonic era, the completion of one economic epoch and the beginning of another, so that a summary of the official record of the past century can hardly be regarded as inopportune at this turning point in our national history. I should not like to miss the opportunity of express- ing to Dr. Bowley my appreciation of his kindly interest in this study. My obhgations are due to vi PREFACE. Messrs. S. Minnis and G. T. NichoUs for criticisms on particular points, and especially to Mr. J. W. Mitchell for his patience and helpful suggestion in many dis- cussions, while I owe much to many old friends in various parts of the kingdom, my colleagues in the Inland Revenue Department, who have given me freely of their experience where a collective opinion has been desirable. Mr. E. C. L. White has rendered invaluable assistance with the indexes. I shall be grateful to any reader who draws my attention to any inaccuracies which may be found in the text, the references, or the tables. Several changes introduced in the Budget of September, 1915, while this book was in the press, have been briefly referred to in footnotes. J. C. S. September, 1915. CONTENTS. PAGE Preface v List op Abbreviations ........ xv Graph I. : Effect of Re-assessment of Property . . . xvi Introduction . . . i PART I.— ANALYSIS OF OFFICIAL STATISTICS. CHAPTER I. SCH. A— REAL PROPERTY, INCOME FROM OWNERSHIP OF LAND, HOUSES, Etc. . . 15-80 Gross Income under Sch. A : — ..... 15 Comparability of Different Areas. Definitions of " Annual Value " : — ........ 16 Metropolis ......... 16 England and Wales (ex Metropolis) . . . . .17 Scotland ......... 18 Scotland, Effect of Rates on " Annual Value " . . 19 Ireland ......... 21 Relation between the legal value as defined, and the true value (Great Britain) ....... 21 Relation between legal values, in theory and in practice — Comparison with the Poor Rate ..... 25 Table Ai : Comparison ....... 29 Table A2 : Classification of Rateable Property . 30 Periodical Re-valuation : Relative Approximation to True Facts in Intervening Years . . . -31 Effect of Re-assessment : Table A3 . . . .36 Graphs II., III., IV. and V. : Effect of Re-assess- ment . 36A-36D Comparability of Different Periods — ^Sequence : — Legal Changes ........ 37 Administrative Improvement ..... 38 Comprehensiveness of Gross Assessments :— • • • 39 Crown Property ........ 39 Places for Divine Worship . . . . . -41 " Concerns No. III., Sch. A " . . . . .41 Property belonging to Persons exempt from Tax . . 41 Hospitals, etc. ........ 41 vm CONTENTS. PAGE Gross Income under Sch. A — continued. In detail : — (i) Lands, etc. ........ 4^ (2) Houses, etc. ........ 43 (3) Other Property : — Tithes 44 Manors ......... 45 Fines ......... 45 Sporting Rights. ....... 47 Other Profits 4* Table A4 : Gross Assessments — England and Wales, Scotland and Ireland ..... .49-51 County Details of Gross Assessments .... 48 Table A5 : County Figures for Lands and Messuages — 1806, 1814, 1842, 1859, 1894, 1903, 1912 . . .54-56 Deductions and Allowances from Gross Assessments . 53 How Allowances are made — Effect on Statistics ... 53 (I.) Impersonal deductions or expenses (i) Land Tax. .... (2) Sea Walls, Drainage Rates (3) Ecclesiastical Payments and Repairs of Churches (4) Rates on Tithe Rentcharges (5) Public Burdens in Scotland (6) Repairs ...... Relation between allowances and the facts (7) Empty Houses ..... (8) Lost Rent (II.) Income, Non-personal : — (i) Colleges and Halls in Universities (2) Hospitals, Public Schools, Almshouses (3) Rents applied to Charitable Purposes . (Ill) Personal Allowances : — (i) Exemptions (2) Abatements (3) Life Insurance . (4) Children's Allowances Net Assessments, Sch. A : Breaks in the Sequence Ownership and Distribution of Property : . The New Domesday Book. .... Agricultural Returns ..... Corporate ownership. ..... Sch. a Statistics : Uses in Economic Literature Miscellaneous Sources of Information outside Annual Reports THE 57-64 57 58 59 59 60 60 62 63 64 64-65 64 65 65 66-71 66 70 70 71 71 75 71 73 75 75 .77-80 71- CONTENTS. ix PAGE CHAPTER II. SCH. B— INCOME FROM THE USE OF LAND 81-106 Definition ..... The Character of " Sch. B " Income Scope of Sch. B Statistics Differences between Sch. A on " Lands " and Sch. B Assessments 87 Gross Assessments : Statistical Sequence from 1842 Breaks in 1853-4, 1873-4, and 1876-7 Break in 1896 ....... Table Bi : Income on Statutory Basis. Deductions from Gross Assessments Net Assessments, Statistical Sequence . Farmers " electing to be assessed," Sch. D, etc. : Losses, etc. Table B2 : Farmers Assessed Sch. D . Sch. B — Statutory Income and the True Income of Farmers ..... Numbers of Separate Properties Assessed Rates of Duty in the Earlier Years . Miscellaneous Sources of Information 81 82 86 87 87 88 91 92 92 93 95 96 104 105 106 CHAPTER III. INCOME TAX (SCH. A) AND INHABITED HOUSE DUTY. THE CLASSIFICATION OF BUILDINGS 107-141 Scope of term — " Inhabited House " . . . . . . .108 Trade Premises, Stables, Gardens, Tenements, Flats, and Lodgings ......... 109 Specific exemptions . . . . . . . .110 Comparison with Sch. A (messuages) and difference in scope . iii Separate Categories : — . . . . . . .112 Private Dwelling-houses . . . . . . .112 Residential Shops . . . . . . . .112 Hotels, Public-houses, Coffee-houses, etc. . . . .114 Farmhouses . . . . . . . . .115 I-odging-houses . . . . . . . .116 Separate Dwellings (or " Artisans' Dwellings ") . . . 117 Premises Exempt from House Duty: — . . . 117-124 Separate Dwellings . . . . . . . • 117 Houses of annual value : — (a) VndeT £10 118 (6) ;fio and under ;£i5 ....... 118 (c) ;£i5 and under ;^20 ....... 118 Small Farmhouses . . . . . . . -119 Houses belonging to Royal Family, etc. .... 120 Hospitals and Charities . . . . . . .121 Houses and Buildings used for Trade ; Caretakers . . 122 Houses in the Census compared with Houses in the Tax Statistics 125 Ireland — Houses ........ 128 CONTENTS. Comparisons between different years — (i) Shifting between values ; (2) Shifting between classes. Comparisons between different Places Empty Houses ....•• Uses of House Duty Statistics Miscellaneous Sources of Additional Information Table HD : Numbers of Houses at different Values 129 133 133 135 137 140 CHAPTER IV. INCOME TAX (SCH. A) IN IRELAND : THE VALUE OF REAL PROPERTY .... 142-162 Brief History of the Valuations . . . . . .142 Use of Poor Rate Valuation for Income Tax Assessments . 147 Irish Land Act Sales ........ 147 Poor Law Valuation (and Income Tax Assessments) in relation to true rental values, 1842-1914 ..... 148 Summary and Graph VI. ...... 158-9 Statement of present Valuation ...... 160 Miscellaneous Sources of Additional Information . . . 161 CHAPTER V. SCH. C— INCOME FROM GOVERNMENT SECURITIES 163-169 Definition and Scope . . . . . . . .163 Gross income assessed ........ 164 Deductions — Exemptions — Charities, etc. . . . .165 Division of Gross Income into Countries of Origin . . . 166 Sequence of Statistics ........ 166 Miscellaneous Sources of Additional Information . . .169 CHAPTER VI. SCH. D— PROFITS FROM BUSINESS, Etc. 170-262 Definition and Scope ..... . . Methods of Assessment for different Classes .... Relation between Assessed Profit and Commercial Profit Statutory Differences : — (i) The Time Element ...... (2) " Wear and Tear " or Depreciation of Machinery and Plant (3) Treatment of Losses : Capital and Revenue {4) Interest on Invested Funds (5) Depreciation of Leaseholds (6) Terminable Annuities .... (7) Expiry of Copyrights and Patent Rights . (8) Bad and Doubtful Debts {9) Income Tax ...... (10) Expenses incurred by Limited Companies, (ir) Goodwill — Depreciation or Reduction . 170 170 174 176 178 181 186 187 189 190 191 191 192 192 CONTENTS. XI statutory Differences — continued. (12) Wasting assets of a physical character : — (a) Mineral Properties, Guano Deposits, etc. . . 193 (6) Cost of Pit-sinking .194 (c) Buildings — Depreciation and Obsolescence . . 194 {d) Machinery : Inadequate Allowance for Wear and Tear ; Obsolescence ..... 196 («) Fixtures, Fittings, etc. — Depreciation . . • 198 (13) Brewers' Expenses for Tied Houses .... 199 (14) Reserves ........ I99 Summary of Effects of the Foregoing .... 202 Co-operative Trading . . . . . . .203 Sequence of Stahstics- •TlME CoM- 204-261 . 204 Gross Assessments : parisons : — .... (i) Ireland, 1842-52 (2) False " Gross Assessments," 1842-67 .... 204 (3) Life Assurance and Expenses, 1853-74. . . . 207 (4) Composition Duty, 1842-59 ..... 207 (5) Effect of Assessinent of Income from Ireland, 1842-52 210 (6) to (8) Exemption Limit Changes . . . .211 (9) Inclusion of Railways, etc., after 1865-6 . . . 212 (10) Unassessed Duty ....... 213 (11) The Transfer or " Drain" from Sch. D to Sch. E . .214 (12) " Wear and Tear " Allowances after 1878 . . . 217 (13) Ireland, 1906-7 — Land Purchase Scheme . . .217 Table Di, 1842-1913 : True Comparable Series of Gross Assessments ......... 218 Table D2. Railways, Mines, etc. ..... 220 Classification by Source of Income : — . . . 221-237 " Businesses, Professions, etc., not otherwise detailed " . 222 Railways, Mines, Gasworks, Ironworks .... 222 Waterworks, Canals, etc. ....... 225 Indian, Colonial, and Foreign Securities, etc. . . . 227 Railways out of the United Kingdom . . . .227 Interest and other Profits ....... 228 Income from Abroad : — ....... 230 Analysis of official figures ....... 230 References to the use of of&cial figures . . . .234 Classification by Place of Assessment .... 237 Classification into Persons, Firms, Companies, Etc. : — 238 Firms — Numbers of Partners ...... 244 Public Companies ........ 246 Graph VII. Firms ....... 247 Local Authorities ........ 249 Employees (Schs. D and E) ..... . 250 Use of Classification to show Changes in different Classes . 251 Interpretation : Miscellaneous Examples .... 252 xii CONTENTS. Note upon Classification of Assessments (Schs. D and E) . Sources and Changes in Form ..... Deductions from Gross Assessments and Net Assessments Income Tax " Profits " used as a Test of Trade Prosperity Miscellaneous Sources of Information . . . • PAGE 252 252 256 257 261 CHAPTER VII. SCH. E— SALARIES OF OFFICIALS . 262-273 Definition and Scope ........ 262 Gross Assessments : Present Statistics ..... 265 The " Drain " from Sch. D 266 Classification by Countries ....... 267 Classification by Amounts ....... 268 Deductions from Gross Assessments ..... 269 Expenses ......... 269 Exemptions ......... 270 Personal Deductions. . . . . . . .271 Gross Assessments : Sequence ; Comparisons of difierent years 271 Table E : True Gross Assessments, 1842-1913 . . . 272 CHAPTER VIII. THE INCOME TAX AS A WHOLE : GENERAL TABLES 274-338 Definitions : Exchequer Receipts, Net Receipts, etc. Use of " Net Produce " Statistics ..... Tables showing " Virtual Rates " — Graduation Gross Income brought under Review Gross Income of Liable Persons ..... Taxable Income ........ Total Gross Assessments : Sequence of Statistics — Time Comparisons : — ....... (i) Omission of Ireland, 1842-53 .... (2) False Gross Assessments, Schs. D and E, 1842-67 . (3) and (4) Changes in Exemption Limit, 1853 and 1876 (5) " Wear and Tear " Allowance, 1878 (6) Change in Exemption Limit, 1894 (7) Change in the Method of assessing Sch. B, 1896 . Use of Gross Assessments ...... Deductions from " Gross Income reviewed " to arrive at Gross Income of Liable Persons ..... (i) Exemptions ....... (2) Charities, etc. ....... (3) Foreign Dividends belonging to Foreign Residents . Impersonal Deductions or Allowances to arrive at Taxable Income ........ Personal Allowances from Taxable Income . Abatements : — Method of Allowance ...... Numbers ........ Table Gi : Abatements since 1894 Table G2 : Abatements from 1863-4 Uses of Statistics ...... 274 274 278 281 283 284 285 285 285 285 287 287 288 291 293 292 294 294 295 295 295 297 299 302-3 304 CONTENTS. xiii PAGE Life Insurance Premiums . . . . . . .304 The Theory of Allowance for Life Insurance . . . 303 Allowance for Children ....... 307 Total Net Assessments : " The Income on which Tax is received " 308 Sequence : Comparisons between Years . . . .309 Miscellaneous Sources of Additional Information . . • 311 Relief to Earned Incomes : Differentiation . . -313 Evasion in Recent Years . . . . . . -315 Table G3 : Income charged at the several Rates 316-7 Table G4 : Taxable Income, 1842 to 1913 31S-9 Evasion in Earlier Years ....... 325 Super-tax Statistics. ....... 329 Graph VIII. ......... 333 Table G5 ........ . 338 PART II.— SOME APPLICATIONS OF OFFICIAL STATISTICS. CHAPTER IX. THE VALUE OF LAND— USE OF SCH. A STATISTICS 339-354 Annual Value of Agricultural Land — Prosperity of Agriculture Value of Land in Counties — Value per Acre . Net Value of Land : Site Value — Economic Rent Standard Estimates adopted by Single-tax Advocates CHAPTER X. THE TAXABLE CAPACITY OF IRELAND Use of Aggregated Gross Assessments .... Use of Aggregated Net Assessments .... Sch. A and the True Value of Property Sch. B : True Values, True Incomes .... Schs. A and B together as a Test of Total Agricultural Income Sch. D as a True Test of Income ..... Place of Assessment as a Test of Origin of Income . Absenteeism ........ The Population exempt from Income Tax Aggregated Individual Incomes as a Test of Capacity The Subsistence Minimum Progressive and Differential Capacity of Individual Incomes Miscellaneous Documents on Financial Relations 339 343 344 348 355- 375 356 357 358 361 362 364 365 367 370 371 371 373 375 CHAPTER XI. THE NATIONAL CAPITAL : GENERAL OBSERVATIONS ON GIFFEN'S METHOD . . 376-414 Detailed Examination : — X^nds .......... 381 Houses . . . . . ^.' . . . . 384 Other Profits, Sch. A 385 Farmers' Profits ........ 386 XIV CONTENTS. Detailed Examination — continued. The National Debt .... Quarries, Mines, Ironworks, etc.. Trades and Professions Public Companies .... Income of Non-taxpaying Classes derived from Capital Furniture, etc. .... Foreign Investments. National and Local Property A New Valuation (1914) List of Valuations .... Estate Duty Statistics and The " Multiplier CHAPTER XII. THE NATIONAL INCOME Conceptions of " Income " . Aggregation and Redistribution " Taxable Income " . Deductions for " Non-personal " Income List of Estimates .... Uses of Income Tax Aggregates page . 388 • 391 • 393 • 395 ■ 398 400 401 . 402 . 404 . 406 407-414 415-429 41S 416 422 423 427 428 CHAPTER XIII. THE DISTRIBUTION OF INCOME AND THE NUMBER OF TAXPAYERS . . . 430-465 Early Methods and Estimates : — Farr, Baxter, Levi, Goschen .... Test by Change of Exemption Limit Test by Statistics of Houses used as Index Numbers The Number of Taxpayers in Recent Years Mr. Mallock's Methods : Statistics of Houses Income Tax Exemption Limit and corresponding Rental Sample Test (Graph IX.) .... Test by Pareto's Formula (Graph X.) . Relation of Rent to Income ..... Statistics of Assessments : Salaried Persons with Income from Property, etc. ....... Pareto's Law ....... House 430 440 444 449 450 454 455 457 458 462 464 CHAPTER XIV. DIVISION OF PROPERTY AND INTO CATEGORIES (I) Differentiation : Capital, etc. .... Real and Personal Property Rateable and Non-rateable Property Classes, by Amounts of Incomes, to Burdens ..... (5) Income directly and indirectly taxed (2) (3) (4) INCOME 466-472 Earned and Unearned, Labour and . 466 . 470 . 471 Test Relative Tax . 472 . 472 CONTENTS. XV PAGE APPENDIX I. — Gross assessments, Schs. D and E, 1894-5, 1876-7, and 1853-4. Methods by which the effects of the changes in the exemption limit have been estimated for the tables in Chapters VI. and VII. ........ 473 APPENDIX II. — Details of the construction of several tables . 491 APPENDIX III. — Estimates for Ireland prior to the imposition of the Income Tax (years 1842-1853) ..... 501 APPENDIX IV. — Statistics of Pitt's Income Tax and Addington's Income Tax (1799-1815), and other early tables . . . 513 Index to Authors, etc., cited ...... 519 Index to Subjects ......... 523 Index to References to Royal Commissions, etc, . . 530 Index to House of Commons Papers ..... 532 Index to References to the Reports of the Commissioners OF Inland Revenue ........ 535 Index to Cases Cited ........ 536 Index to Acts of Parliament Cited ..... 538 ABBREVIATIONS USED THROUGHOUT THIS BOOK. Report. — ^Annual Report of the Commissioners of Inland Revenue. R. C, S. C, D. C. — Royal Commission, Select Committee, Departmental Committee. The numbers given refer to the questions in the evidence. H. C. — House of Commons paper — ^the number and year following. T. C. — Reports on Tax Cases — a standard series of legal reports. S. J. — Journal of the Royal Statistical Society. Hansard. — Hansard's Parliamentary Debates, Sch. — Schedule. Ex. Met. — Extra Metropolitan area (England and Wales, excluding the area covered by the Metropolitan Valuation Act). Graph I. {vide p. 31). Gross Schedule A, England and Wales, 1842 to 1870. Change of direction in Re- assessment Year indicated. Years. Mill. 42 "5 45 48 51 53 57 105 100 95 90 85 80 75 70 65 60 55 50 45 40 35 :^" 1842 45 ■^ ^" "TT^ I 70 ,/"- 48 51 53 57 61 04 67 1870 British Incomes and Property. INTRODUCTION. The statistics of the income tax, together with those of the inhabited house duty (which form in fact merely a sub- classification of one section of the income tax), may fairly be numbered amongst the three or four great branches of national of&cial statistics, and, from some points of view, they may be said to rival in importance statistics of popu- lation, of births, marriages and deaths, and of overseas trade. Their use is both widespread and essential, and they form the only criterion we possess by which to judge certain features of progress, and by which to examine some vexed modern problems in economic sociology. Unfortunately they differ in one important respect from all other great branches of statistics. Census and general registration details, and particulars of foreign trade, can be schemed, and broadly speaking are actually designed, to serve purely statistical ends ; where the statistical framework shows signs of weakness it can be specially strengthened. But the statistics which form the subject of this work are the by- product of a system of taxation. That system is designed, maintained, and modified on legal and administrative lines with a view to its efficiency as an engine of taxation. First and last is the object of raising revenue with a maximum of financial result and a minimum of inconvenience, evasion, and expense. Nowhere does, it study to ensure statistical convenience or completeness. Assessments made in such a 2 BRITISH INCOMES AND PROPERTY. way as to give the best results for all concerned from the point of view of taxation may be in such a form as to give the worst facilities for statistical use. It will of course be urged that the income tax system is cumbrous, archaic, and involved,, and that its general convenience and efficiency would be greatly improved if it were revised and simplified. Even if this be admitted to the full, it does not in the least follow that the revised system would serve the statistician any better, if as well. The broad probability must always remain that maximum advantage for taxation will not coincide with maximum advantage for statistical use. Indeed, a scheme designed to furnish the details required by some statisticians would be a poor revenue-getter, and per- haps its facile " facts " would be further from the truth than the present ' official tables. The Prussian system yields some beautiful tables, but it would need a greater recom- mendation than that before the British public would tolerate it or our officials precipitately adopt it. For many years the life of the income tax hung upon a slender thread. The most fundamental idea of the tax was that it lasted for a year and no longer. It refused to take considerations of justice upon a long view, and was always about to be " abolished." It was administered as a tem- porary extra task by a staff whose main business lay else- where, and who gave it the minimum attention that it appeared to deserve. Who could be enthusiastic about a stopgap, a temporary visitant ? Who could advise laying down an expensive national " plant " for transitory pur- poses ? Even long after the time when the continuance of the tax should — as it appears to us after the event — have shown clearly that the " temporary " idea was out of date, the expenditure upon the staff and its equipment was niggardly and far below the responsibility of the task involved. Indeed, only quite recently, and after seventy years, has the clerical staff been " recognised," established, and dealt with upon an official basis. The large element of local control and administration, although it was probably vital to the life of the system, for twenty years effectively hindered any serious grip of the whole task by the central INTRODUCTION. 3 authority. When all the facts are considered, and especially when some of the complex parliamentary statistical returns of the earlier days are examined, the marvel is, not that the statistics were so bad and so inadequate, but that they were so good and so detailed. One has only to be reminded, by some of the older and retired officials, of the days, when, in a district of great area and importance, it needed all the efforts of the overworked and harassed surveyor of taxes to prevent money " flowing down the drain," in order to set in ' its proper light the annual task of preparing a statistical return which would occupy his time for four or five weeks, or, if that task were confided to the clerk (with a weekly wage of fifteen or twenty shillings), of the equally protracted duty of discovering his errors and adjusting the totals judiciously in the end. In such circumstances the statistical aspects of the official's work could never be regarded as important. Revenue was his objective, and he took the line of least resistance. Where no revenue was involved it may be regarded as axiomatic that statistical completeness was weak. When there came a change in law, a new exemption limit, or a new allowance, the break was frankly and openly made — there was no attempt at statistical sequence. Why should official pos- terity be burdened with such an encumbrance ? Besides, their duty was to record what was actually there in exact figures, and not what might have been in other circumstances. So for sixty years the Commissioners of Inland Revenue have presented to the Lords of the Treasury tabular state- ments of various " assessments," conditioned entirely by the statutory basis of those " assessments." They did not translate that information into terms of ordinary life, into incomes, persons, and so on. From time to time they gave explanations and warnings, but if any investigator wanted " definitions " and guidance there were always the law-books to which he could resort. It could hardly have been other- wise, for, until recent years, the system was so entirely an objective one that there was not the slightest internal evi- dence upon such vital questions as the number of taxpayers or the distribution of incomes Gaps were indeed pointed 4 BRITISH INCOMES AND PROPERTY. out, but it was left for the ingenious and wary to bridge them, and radical changes in law greatly impaired the com- parability of the figures over a series of years, and made it difficult to employ them in ordinary problems. It is small wonder that the statistician, turning from other classes of figures designed for his use to the products of an income tax department whose main function, as it seems to him, should be that of turning out information about " incomes," is filled with impatient disgust. Dr. Bowley, in an address to the Economic Section of the British Associa- tion, has expressed the general defects of official statistics in these terms : — " It has till recently been the custom of departments publishing statistical returns to issue them without explanation of the parti- cular conventions adopted, and then to complain that the ignorant public misquote them, till there was a danger that statistics should be issued only by officials for officials, and even by an official for himself alone, while the use of them (neces- sarily erroneous) by the general pubfic was regarded as objection- able trespass in a private preserve. The growth of popular interest, and of a certain blind and misguided confidence in statistical statements, resulted in the printing of cautions that the statistics did not mean what they appeared to mean ; and then boards were erected to the effect that this table was dangerous to statisticians, and newspaper writers should drive with caution ; but it did not for long occur to those responsible that it was their business to put the public roads in good order for the convenience of travellers." There is no doubt that the Inland Revenue reports would answer to this description very closely, in the opinion of this eminent authority. Indeed, in another place he describes them as the last refuge of " obscurantism," while in writing generally upon the improvement of official statistics he comes to close grips with the difficulties of the subject : " As examples of unsuitable units we may instance . . . /i income brought under the review of the Inland Revenue Com- missioners, which is often not income, while much income is not included. Most official pubfications fail from want of definition. What is meant by gross income, how are estates valued for pro- bate, what is the relation between assessed value of houses and INTRODUCTION. 5 their true value, what is a residential shop ? ... In each of these and in innumerable other cases special knowledge is needed before the exact working definition is known" {Stat. Journal, September, 1908). This lends force to his plea for a central statistical depart- ment which could supervise the existing figures, as well as undertake or direct excursions in pure statistics. But even here he clearly underrates the inherent difficulties owing to the vast legal complications of the subject, and to the fact that the administration of the tax must always have a revenue orientation : — " . . . If the method of samples were employed with com- pulsory powers, we could (for example in statements of income, for which statutory powers already exist) by a rapid and abridged investigation get a great deal of unbiassed information. . . . There is very great delay in publications of many of our statistics. We receive our external trade statistics with wonderful prompti- tude ; it is only a matter of organisation to hasten all the serial publications. As regards occasional reports, the delay is due to methods derived from the Circumlocution Department. With an untrained staff at the bottom hastily brought together and as hastily disbanded, with understaffing at the head, and a hierarchy of officials who must initial every minute and delay every report till it has received their several imprimaturs, there is no wonder that official statistics often do not appear till after their possible utility is passed. This, with many other defects, wiU disappear when we have a central permanent statistical department. . . . , A specially important consideration in the immediate future will be the comparability of the statistics published by the Inland Revenue Commissioners with previous years. It appears that during the past year a great deal of income has been discovered and taxed which had hitherto eluded the collector. Also there has been, I believe, some change in the methods of averaging the receipts of the past years in favour of paying on the most recent year ; certainly the forms issued have altered considerably, and the unit requires new and very careful definition. If the figures either for gross or net income are pubUshed, they will give rise to yet more serious errors as to the growth of income than that with which I dealt just now, and it is of national importance that this should be put right. Further, an immense amount of informa- tion is accumulating with the recent differentiation of the tax, and if it is skilfully handled, it should throw fight on many of the 6 BRITISH INCOMES AND PROPERTY. questions which the Income Tax Committee left doubtful. There is a great opportunity for the statisticians of Somerset House, which Mr. Mallet's recent paper leads us to hope will be taken, to give us a sound and very interesting analysis of a great part of the national income. Incidentally, it may be hoped that the ' gross revenue ' statistics may be amended, or disappear from the Statistical Abstract." In writing upon the same subject another distinguished statistician, Sir J. Athelstane Baines, refers to the income tax statistics, and remarks that the interesting evidence given before the Select Committee of 1906 " showed how much has to be based upon ■ approximation from data more or less remote, as soon as one comes to grips with important ques- tions. ... As a rule, however, the dead weight of returns poured into an office such as this keeps the whole staff at work upon current duties. Nevertheless, it may be assumed from the amount of detail collected that much good work could be done in the way of correlation of the different revenue returns if any one of the officials had the time and the taste for it. ..." ^ Sir L. G. Chiozza Money commented upon Dr. Bowley's paper, quoted above, in terms somewhat more favourable to the reports. He agreed with " all that had been said with regard to the unfortunate habit of publishing statistics without sufficient explanation. For instance, the Statistical Abstract contained scarcely a page which would not deceive a man who came to it without careful study. That was the cause of the misquotations in the newspapers." ... In many official publications of the last two years more and more explanatory matter had been published. The Report of the Inland Revenue Commis- sioners did condescend to explain a great deal of the informa- tion given ; and he noticed that that useful habit was finding its way to other departments, so that they might hope in a few years even the Statistical Abstract might condescend to explain its very valuable contents. It is not my intention in any way to take up this matter, either in defence or in further attacks, but the opinion may 1 " Our Statistics : A Plea for a Central Government Department," Financial Review of Reviews. tNTRODtJCTlON. ^ at any rate be expressed that many of the criticisms urged against the income tax statistics show a real failure to appre- ciate the genuine difficulties of the subject and its intract- ability for ordinary treatment. Some of those criticisms also show a failure to appreciate the degree of ingenuity that has been required to work upon the raw material and present the tables in the form that has been adopted since the year 1900. Any one who imagines that a taxed " income " is — or can be under the most ideal system — a simple objective fact like a death, or a bale of goods, or a cheque, or a railway mile, is recommended to a stout volume like Dowell's " Income Tax Laws," or is asked to devise, with the aid of Seligman's " Income Tax," a scheme of taxation which shall fit all the complexity of modern life like a glove, pay over taxes without irritation, hesitation or evasion, and yield statistics that a babe can handle. Now the classification of assessments under Sch. D is a case in point. It is true its practical value is limited, and it whets the appetite for the unattainable, but it was furr nished under Pitt's tax and has been rendered continuously since the forties, for it represents the best that could be given by way of analysis in those days, and in its improved form it gives what can be known about such assessments now. Practical experience has, however, shown the necessity for careful definition and explanation in order that it shall not be held to convey more than it really does, and a hypo- thetical example is therefore furnished annually. Dr. Bowley is sarcastic at the expense of "an imaginary solicitor, who also owns houses and shares in Government, municipal, and foreign stock and in a public company, who occupies lands, is a land agent and borough auditor, and employs his leisure moments with success as an author. ... It is time that this talented gentleman disappeared, and that the report was devoted to showing what is the case, rather than to proving that the tables printed are only booby traps." ^ The true difficulty and difference of view lie in the assump- tion of an identity in the two tasks — the analysis of the 1 Nineteenth Century, 1910, p. 943. 8 BRITISH INCOMES AND PROPERTY. existing material and the special preparation of material for statistical ends— both as to the work and expense involved, and also as to the recognised functions of the department. The main practical aims of this work are threefold : — First, it is proposed to describe the subject-matter and to formulate definitions of all the " conventions " of the tax in such a way that their bearing upon statistical and economic investigation shall be clear, and the relations between the figures and the facts be revealed so far as that may be possible. To this end the present form of the statistical returns is examined in detail. Secondly, an attempt has been made to obtain historic continuity in the figures, and to furnish tables, based upon the official returns, which shall bridge the gaps or " breaks " caused by changes in the legal and administrative basis of assessment, so that a real comparability may exist between years widely separated. Sir Athelstane Baines has remarked : " After proceeding a certain distance on an excellent road, the explorer finds himself brought up by an impassable chasm, or perplexed by the dispersal of the track into a number of blind alleys, putting an end to all progress." It is this continual bar to useful comparison that I have endeavoured to overcome by a presentation of the tables upon main uniform lines throughout, and particularly in showing, by close approximation, how the original tables must be modified to give what would have been the figures if recent statutory conditions (as to exemption limits, repairs, allowances, etc.) had obtained throughout. It has been impossible, for example, to get a continuous view of any set of statistics from 1842 without reference to at least six separate volumes (and often many more), and this involves all the perils of transition. Even so careful a worker as Giffen is occasionally trapped. In a comparison of real property values made for the years 1814, 1853, 1868, 1884, and 1901 he gives figures which are really not comparable at all : for the first two dates he quotes England and Wales only, the second is really applicable to 1843, the first includes quarries, mines and ironworks, the second adding also profits iNfRODtJCttOM. ^ of railways and gas works, while the last three exclude]^all these items and refer to the United Kingdom. ^ It will readily be understood that, apart from general comments, no attempt has been made to allow in these tables for the improved efficiency of the tax administration. But the opportunity has been taken — indeed, it was essential to the successful performance of the task — to bring together from widely scattered sources all the available information, to sift it, and to preserve all that is likely to be of value. In the third place, the book illustrates freely the practical difhculties connected with the use of these statistics for economic investigation. The inquirer will find, in connection with any given subject, if the statistics have been applied to it at all, a sufficiently complete reference or bibliography of that application, with the warnings and limitations peculiar to it. The intention has not been to extend the scope of the work unduly by giving a complete examination of all such investigations, but to say sufficient in each case to guide past the chief pitfalls and to provide some definite ideas as to the work already done upon the subject. It is not a part of the purpose of this book to carry on these economic investigations to a final conclusion in each case. That would in most instances involve the use of auxiliary statistics, or an incursion into other spheres, and some of those inquiries would require a volume specially devoted to each. It has been the aim to provide new or improved tools for use rather than to use them when made ; to prepare a road rather than to transport merchandise ; to build the vessel for others rather than to take voyages in her. But in several directions, not involving the use of outside material, constructive work has been done beyond the strict limits of the book where it has arisen directly from the appointed task. This necessary restraint has been exercised even at the risk of such a criticism as that made by Mr. Ernest Barker : " He seems to do a great deal of packing in preparation for a journey on which he never starts." ^ 1 Vide p. 38. 2 In " Political Thought from Spencer," d propos of MacDougall's " Social Psychology." 10 BRITISH INCOMES AND PROPERTY. The official figures used throughout this book are derived from the following sources : — {a) Reports of the Commissioners of Inland Rev emie, i to 57, 1855-6 to 1912-13 (these are referred to throughout briefly, e.g., " i8th Report "). They form the main source, as the annual statistical returns rendered by the surveyors of taxes are summarised therein. The lit, 13th, 28th, and 45th Reports are especially valuable, both for their summary tables, and also their descriptive matter. In many of the earlier ones the information given is somewhat meagre, but important clues are sometimes to be found in them. Great changes were introduced in the content and presentation of the statistics in 1874-5 ^'^^ 1900-1 and a unification of the various periods has been one of the chief tasks of this work. (6) Returns rendered to Parliament, 1801 to 1915 (referred to in the form " H. C. 57 of 1863 " or " H. L. 61 of 1864 "). These returns are very numerous. Some of them form a series [e.g., classification of Sch. D and E assessments), and others were of ephemeral interest only or were embodied in subsequent reports. But in many cases the details given are important and unique. (c) The Reports of Royal Commissions, Select and Depart- mental Committees, together with the evidence. The appen- dices frequently contain specially prepared official returns, and the evidence brings out the character and limitations of official statistics, with valuable and official expressions of opinion on difficult points. {d) Tables supplied officially to eminent investigators : Levi, Giffen, Goschen, etc. (e) Answers to Questions in Parliament, Budget Speeches, etc. (the reference to Hansard is given where necessary). Where the information furnished is likely to be useful in future it has been incorporated. Although a practical acquaintance with the official statistics of income tax and inhabited house duty, with the general procedure of their compilation and with the assess- ments themselves, has materially assisted in the interpreta- tion and manipulation of the figures, this work is in no sense an official one. No statistics are given which had not already INTRODUCTION. ii been published and which are not equally available for all investigators in the documents above mentioned. But for the use that is now piade of them I am entirely responsible. Sufficient evidence for the general definitions and practical statements given may be found in Dowell's " Income Tax Laws " and Dowell's " House Duty Acts," in the Commis- sioners' Reports, in the published Tax Cases, in the evidence before the Income Tax Committees of 1905 and 1906, and in such reference books on practice as Senior's " Income Tax Practice," published in the sixties, and Murray and Carter's well-known work for recent years. Nevertheless, a careful compilation from these sources would hardly have assumed the form which practical knowledge and a study specially directed to statistical ends have given to the present work, for legal lore and technical reference have been severely subordinated to the main purpose. They have been drawn upon freely, but only so far as they are likely to have a bearing upon interpretation and use for statistical and economic investigations. For such purposes the treatment has been as complete as seems to be necessary, but for all other purposes it is manifestly inadequate. The work pretends to no authority, therefore, in general income tax matters from the standpoint of law, accountancy, equity, political theory, or ordinary practice. For some of the difficult research affecting the earlier years I have, before arriving at my conclusions, examined all the original blank forms of assessment, together with blank forms of the statistical returns which formed the basis of the official reports, and on matters of practice I have consulted retired officials whose memory extends, with varying degrees of reliability, to the early sixties. In some matters in which no official data has been obtained or published I have relied upon my own experience and observation (as a sample investigation), or I have obtained expressions of opinion from a number of official friends whose varied experience furnishes the best possible substitute for actual sample tests on a comprehensive scale. The illustrative quotations are not exhaustive in any sense — many that have come under my notice have been omitted 12 BRITISH IINCOMES AND PROPERTY. to avoid tedious repetition— but they are drawn from a wide range of economic and statistical literature. They are not given in any captious or critical spirit. It is true that, in some instances, gross carelessness has been exhibited, by the authors cited, in their use of official returns ; and there are one or two writers who are culpably negligent in their writings generally. But for the most part the errors are excusable or natural, and could only have been avoided by a close study of the statistical material. They are cited in detail to jtistify the treatment of the subject in the text, which otherwise might appear to elaborate unnecessarily or to labour the obvious. It is often valuable, moreover, to observe the precise form in which an erroneous interpretation has been made. Collectively, these references furnish perhaps the best and most obvious justification for the present work. They show that the whole subject is a difficult one and that some guidance in its technicalities is not unnecessary ; and, further, they prove the importance of this class of statistics and the wide and various uses to which the details are brought. The new and entirely original tables compiled from the official data, corrected and adjusted to exhibit consistent sequences, are intended to show as faithfully as possible the true trend of objective facts, uncomplicated by interior changes either in law or administrative practice. The official figures are very unsuited for comparisons over long periods, and these tables are now offered as superior for such purposes and as superseding to that extent the use of official reports in their " raw " state. It is hoped, therefore, that they may be regarded as a real, if humble, contribution to the economic and social history of the United Kingdom in the last hundred years. Mathematical methods of interpolation have occasionally been used, but in most instances (particularly in the distri- bution of known totals over a classification) they do not give results so consistent and accurate as a " free-hand " method which follows, on a technical instinct, the trend of each series of figures, and duly observes the numerous checks and limits afforded by other branches of the statistics. INTRODUCTION. 13 Examples of this may be found in the effect of re-assessment years upon gross assessments on property and the converse effect upon deductions therefrom ; or in the relation between Sch. A on Lands and Sch. B, or Sch. A on Houses, etc., and the House Duty figures. A margin of possible error is given, where necessary, adequate for all purposes — in many cases where an estimate has been given for one factor over a certain period, and comparisons are made within that period, it is unnecessary to take the whole range of error given ; it may be read for both years as plus, or for both as minus, because any error will be constant in direction for that period. Only the final results have been brought into the main tables, for the complicated details in the adjust- ments would be confusing in ordinary reference. In the main tables the ordinary official figures have been given together with the revised figures, where necessary, to facili- tate reference and identification. I have not attempted to make this book " readable " in the ordinary sense, but to provide a work useful for reference, and valuable in conjunction with the current official reports, or largely in substitution for the older official tables. I have accordingly been content to summarise many points briefly, where an indication of their character will be sufficient to inform the investigator, or to warn the unwary. Generally speaking, where such matters have been fully dealt with elsewhere, I have been most brief, but where the considera- tions are being urged for the first time I have felt it necessary to elaborate them more fully. The adoption of such a principle has alone prevented the book assuming excessive proportions. Reference has been made to all matter coming to my notice which is likely to be of real use in pursuing investigations based upon these data. The results of actual observations lasting for some years or covering a great number of cases have generally been conveyed in a few lines, while " workings " for the tables, the methods employed, the adjustment required, and the evidence relied upon are given briefly in the Appendices. " The worth of the individual is measured not by his direct achievement, hut first and foremost by its value for the whole, the 14 BRITISH INCOMES AND PROPERTY. individual piece of knowledge by its significance for the search after truth. . . . Science is not a mere juxtaposition of individual opinions, hut the worker who puts forth effort at any particular spot is conscious that his effort is girt about and sustained by an effort of the whole to which he willingly yields his contribution. . . . Truth won at any particular point is valid and binding throughout." — Rudolf Eucken. " And as in Arithmetique, unpractised men must, and Professors themselves may often erre, and cast up false ; so also in any other subject of Reasoning, the ablest, most attentive, and most practised men, may deceive themselves, and inf erre false Conclusions. . . . For there can be no certainty of the last Conclusion, without a certainty of all those Affirmations and Negations, on which it was grounded and inferred. . . . In Reasoning of all other things, he that takes up con- clusions on the trust of Authors, and doth not fetch them, from the first Items in every Reckoning, {which are the significations of names settled by definitions), loses his labour ; and does not know any thing ; but onely believeth." — Hobbes' " Leviathan." PART I. ANALYSIS AND DESCRIPTION OF OFFICIAL STATISTICS AND THEIR USES. CHAPTER I. Schedule A. Real Property. INCOME FROM OWNERSHIP OF LAND, HOUSES, ETC. Income tax, Sch. A, commonly known as the " Property Tax," is that section which deals with profits from the ownership of lands, houses, etc., and every description of property in the nature of realty. The assessments are re-made periodically, the poor law parish being the unit of grouping for property, and the poor rate order and form are adopted as a basis by the Imperial authorities.^ All properties are reviewed (with a few exceptions mentioned hereafter), whether those interested in them are liable to income tax or not, so that the statistics are very complete. GROSS INCOME UNDER SCHEDULE A. " Gross Income " stands for " gross assessments " which are made upon the " annual value " determined according to statutory rules. " Gross income " is not, therefore, 1 Official evidence on the procedure in making new Sch. A and B assessments may be found in the following {inter alia) : — S. C. on Burdens affecting Real Property, 1846, Qs. 1,900, etc. S. C. on Income Tax, 1851-2, Qs. 1,350, etc. R. C. on Agricultural Depression, 1896, Qs. 45,420, etc. S. C. on Poor Rate Assessments : T. Sargent, Secxetary to, Board of Inland Revenue, Qs. 6,316, etc. R. C. on Land in Wales, 1893-6, Qs. 76,545, etc. 13th Report. i6 BRITISH INCOMES AND PROPERTY. necessarily the same as the gross actual income received or enjoyed, nor is the " income on which tax was received " the same as the actual net income received and enjoyed. The various rents paid, or beneficial occupations enjoyed, in connection with the ownership of lands, houses, etc., have to be brought to a common denominator of " annual value." Thus the rents of five premises of identical " annual value " may be all different— the first being let at a low rent on a long lease,i the second let by the year, the third at a high rent by the week, the fourth at a higher rent, owner paying tenant's rates, and the fifth may be let at a conven- tional or nominal rent, the tenant having a beneficial occupation, or being himself responsible for creating part of the " annual value." The use of a common denominator is very valuable from a statistical point of view, since it secures uniformity as regards both time and space, and makes comparisons perfectly valid between distant places or periods, as well as between different classes of property. But it has the shght disadvantage that it is a legal conception which, over part of the field at any rate, does not correspond to popular conceptions of " rent." Definitions of " Annual Value." — ^The legal defini- tions of " annual value " are not quite identical throughout the United Kingdom. Comparability of Different Areas. Metropolis : Annual Value. — " Gross value " means the annual rent which a tenant might reasonably be expected, taking one year with another, to pay for a hereditament, if the tenant undertook to pay all usual tenant's rates and taxes, and the tithe commutation rentcharge, if any, and if the landlord undertook to bear the cost of the repairs and insurance, and the other expenses, if any, necessary to maintain the hereditament in a state to command that rent.^ ^ On the general and much misunderstood question of taxation of leaseholds, and the " wasting asset " difficulty, vide my article in Economic Review, July, 1911. ' 32 & 33 Vict. c. 67, s. 4. SCHEDULE A. REAL PROPERTY. 17 This definition is for rating purposes, but as the gross value is binding for income tax (Sch. A) and House Duty as the annual value, it is material to examine the conditions under which it is arrived at. Periodical conferences of London rating authorities pass resolutions which make for uniform practice, and the following cases taken from them illustrate general principles : — {a) Weekly and monthly tenancies. A scale is provided in which the gross value is always below the full net rent for the year after deducting rates — e.g., los. per week, owner paying rates at 6s. in £, or in actual amount £4 los. per annum, is not £21 los. gross, but £19 ; ^ and similarly 20s. per week is not £52 - £g =£43. but £37.2 (b) For quarterly and yearly tenancies and ordinary three years' agreements the actual rent is taken as the " gross value." ^ (c) For agreements longer than three years, tenant doing inside repairs, 5 per cent, is added to the rent to arrive at gross value. ^ (d) In the case of a repairing lease, 10 per cent, is added. ^ " In London a householder is subject to a rather vexatious anomaly, which might well be removed, on account of the local assessments for House Duty and income tax under the Metropolis Valuation Act. The Act says that each house is to be assessed at the annual value. Inasmuch as a yearly tenant generally pays more than a tenant on lease, the assessors say that the annual value of a house is what a yearly tenant would pay, and they stick on £10 per cent, when they are dealing with a leasehold." — Hugh Chisholm, " Justice for the Taxpayer," Fortnightly Review, March, 1897. The practice for income tax purposes is similar outside the metropolis. In any case, the " vexatious anomaly " is not very clear. England and Wales (not including Metropolis *) : Annual Value. — " The annual value of lands, tenements, ^ In theory higher rents may be expected to be chargeable " by the week," and the value to be let " by the year " is not necessarily the aggregate of the weekly payments. Moreover, it is a rating practice to allow a " contingency " balance or margin. 2 Assessment and Valuation Conference, 1909, Resolutions, p. 4. 2 Ibid., p. 6. * Since 1870. 18 BRITISH INCOMES AND PROPERTY. hereditaments or heritages charged under Schedule A shall be understood to be the rent by the year at which the same are let at rackrent . . . fixed by agreement within . . . seven years," or " if not let at rackrent, then at the rack- rent at which the same are worth to be let by the year." ^ (Other items of Sch. A, non-commuted tithes, manorial rights, etc., are assessed under special rules ; see pp. 44, 48), The official definition of " rack rent " is well known, and is praptically identical in its terms with that given for the metropoHs above. But whereas the gross value for the poor rate is binding for Sch. A in the metropoHs, outside the metropohs the assessments are quite independent of the values for local purposes. The conditions governing assessments may, however, be taken to be broadly similar to those quoted above from the Metropolitan Valuation Conference resolutions. Scotland : Annual Value. — For rating purposes one uniform valuation exists, upon which all public assessments are based, and it is revised annually. ^ The county and burgh authorities appoint assessors for the purpose. Very frequently, with Treasury approval,^ they appoint the Government surveyor of taxes as assessor, and it is provided by law that the values in the valuation roll are conclusive also for income tax (Sch. A, B) and House Duty * except where the surveyor is not assessor.* In 23 out of 33 counties and 46 out of 85 burghs the surveyors act as assessors,^ so that it is clear that over a considerable part of Scotland rating law governs or influences the income tax assessments.® In "• 5 & 6 Vict. c. 35, s. 60. » 17 & 18 Vict. c. 91. " 52 & 53 Vict. c. 50, s. 83. * 20 & 21 Vict. c. 58, s. 3. ' D. C. on Imperial and Local Taxation, 1912, Q. 11,475. Owing to the fact that Edinburgh and Glasgow are not included, the amount of the valuation made by the surveyors is slightly less than half the total — ;£i6,i86,ooo against ;^i6,694,ooo. In 1892 the numbers were 30 counties and 42 burghs (Armour's " Valuation of Property for Rating in Scotland," p. 23). « Vide evidence before S. C. on Valuation of Lands and Assess- ments (Scotland) Bill, by W. Munro, valuation assessor and surveyor of taxes, Qs. 1,456, etc. Also A. Nisbet before S. C. on Rating of Machinery Bill, 1887, and F. S. Allan before S. C. on Valuation of Lands and Heritages, Scotland, 1865. SCHEDULE A. REAL PROPERTY. 19 the remaining part, the ordinary Income Tax Acts apply, as in England and Wales. The " yearly value " as defined by the Valuation Act is " the rent at which, one year with another, such lands and heritages might in their actual state be reasonably expected to let from year to year . . . and where such lands and heritages are bona fide let for a yearly rent conditioned as the fair annual value thereof, without grassum or consideration other than the rent, such rent shall be taken. . . . Provided always, that if such lands and heritages be let upon a lease the stipulated duration of which is more than twenty-one years from the date of entry . . . the rent payable . . . shall not neces- sarily be assessed as the yearly rent or value . . ." ^ For rating purposes this actually substituted the gross rent for the net rent (after average repairs and other expenses and public charges had been deducted) as contained in the Poor Law (Scotland) Act of 1845. For many years no improvements, even if permanent, could be entered in the valuation roll if they were voluntarily made by a tenant holding under a bond fide lease of less than twenty-one years' duration and without " grassum " or consideration other than the rent ^ — this was remedied by statute in 1895, when the whole property as improved could be dealt with, and included in the Income Tax Asssessments. Effect of Rates on Annual Value. Scotland. — A point of greater importance in comparing " gross value " in Scotland with " gross value " elsewhere is the effect of the difference in rating law and practice as to payment of rates by owners. The Income Tax Act, 1842, naturally made provision that where owners had agreed to pay rates, taxes, and other charges which by law were a charge on tenants, such payments should be deducted from the gross rent in order to arrive at the " gross assess- ment." The Scottish law provides for a part of the rates to be paid by the owner, and the new or " yearly value " for ^ 17 & 18 Vict. c. 91, s. 6. See also D. C. on Imperial and Local Taxation, 1912, evidence by H. T. Eve. 2 Armour, p. 207. 20 BRITISH INCOMES AND PROPERTY. rating purposes is taken to be the yearly rent, and is binding (for the greater part of Scotland) upon the income tax, Sch. A, so that the gross tax assessments in Scotland exceed those in England, in identical circumstances, by the amount of the rates borne by the owner. In 1856 an Act was passed " to grant rehef in assessing the Income Tax on lands in Scotland in respect of certain Pubhc Burdens charged thereon," being the public rates, etc., which in England are by law a charge on occupiers. The allowance is made as a deduction in the assessment, and not in arriving at the gross value, so that Scottish values exceed corresponding English ones, although net assessments may be quite comparable. There are, however, several small anomalies arising out of this difference that may most clearly be seen from an example : A house is let in England at £36 per annum, the tenant paying £12 rates. A similar house is let in Scotland at £42 per annum, the owner paying £6 rates and the tenant paying £6 also. (It will be observed that the owners' net incomes are the same, and repairs will be taken to be actually the same in the two cases.) Deductions. House Duty. £ 36 42 The effect upon the statistics when used for many purposes is sufficiently important to warrant close examination. The actual amount of " public burdens " allowed is not now shown separately. It is included in " other deductions " at the foot of the main table, Sch. A. For 1910-11, " other deductions " amount to £2,154,884 for England and Wales from a total gross assessment of £233,906,688, whereas for Scotland they amount to £2,713,025 out of a total gross of £26,944,348.1 The disproportion is mainly accounted for by this item of " public burdens." In the last year for which separate details were given (1899-1900) they amounted to £1,352,265, out of about £1,393,000 total " other deductions " 2 ; ^ 55th Report, p. 105. ^ 44th Report, p. 118. Gross. Repairs Public' Net (ith). Burdens. Asst. £ £ £ £ England 36 6 30 Scotland 42 7 6 29 SCHEDULE A. REAL PROPERTY. 21 the gross assessment for Scotland amounted to £22,949,891, and so exceeded the gross assessment, according to the EngUsh method, by 6 per cent. (For further details of the deductions see p. 60, Effect on House Duty, p. 133, and Repairs, p. 61.) The effect of this pecularity is much more important in a comparison of places than in one of periods. Speaking generally, when correction has been made for this item, there is no substantial difference in the method of arriving at the " gross assessment " over the whole of Great Britain, although there are some slight differences in local customs as to the repairs that owners of dwelling-houses undertake and as to fixtures customarily let with houses. Ireland. — Here the position is very different. The gross assessments are bound by Grifhth's valuation, now fifty years old, and bear no regular or necessary relation to the facts of any given case. But at the time of the valuation, after elaborate instructions to the valuers they were told that the value was "to be the rent which a liberal landlord would obtain from a solvent tenant for a term of years, rates, taxes, etc., being paid by the tenant." ^ This, however, applied to buildings only ; and land was valued on an entirely different basis. The whole question of Irish assess- ment is full of difficulties from a statistical point of view, and will be separately dealt with in Chapter IV. The movement of values of land in Ireland is sometimes com- pared with the increases in England, when of course no comparison is possible. E.g., Royal Agric. Soc. Trans., 1878, the " small rise in Ireland " 1857 to 1875 is compared with 21 per cent, and 26 per cent, elsewhere. The Relation between the Legal Value as defined AND THE True Value (Great Britain). Assuming that assessments are accurately made according to definitions, and are always up to date, how closely does the statutory gross value, as defined, approach the real value as popularly understood? It was remarked above that over 1 Grififith's " Instructions to Valuers in Ireland," 1853, p. 80. 22 BRITISH INCOMES AND PROPERTY. part of the field the legal conception and the popular concep- tion are not identical ; but fortunately they are alike over a sufficiently wide range for the idea of the properties of the whole country let uniformly at rack rent by the year, tenant paying rates and owner doing repairs, to be fairly easily received and apprehended. Dr. Bowley asks, " What is the relation between assessed value of houses and their true value ? " ^ Does he mean by this a true value in a hypo- thetical common denominator or measure, enabling unlike expressions to be aggregated ? or true value in the sense of current expressions (8s. 6d. per week, £70 per annum on seven, fourteen, or twenty-one years' lease, £30 per annum three years' agreement, and so on) ? If the latter is intended, then the answer must be given piecemeal,^ and no one con- spectus of the aggregate is possible, because these terms cannot be aggregated. If an answer as to the aggregate is required, then that annual value, which is a hypothetical expression for many of the cases, must perforce be taken. This is in some instances to postulate a demand curve running practically parallel to the demand curve of ordinary terms — the mere translation of a " weekly rent " into a rent ex rates, and the translation of that result into a yearly rent, after allowing a contingency margin. But when we come to another class of properties which are nowhere let on the terms required by the definition, we postulate an imaginary demand curve for those terms. Thus the attempt to get the annual value of a large isolated country mansion or residence such as Chatsworth or Arundel Castle, or of a town hall, strictly according to the definition, leads us dangerously near the ridiculous, and it is a moot point whether the value, year by year, on such terms is not zero. As a fact, we really modify our definition, and almost forsake the hypothetical demand curve, falling back in practice upon the supply curve, i.e., the reasonable rate of interest on the building outlay which would be necessary to call forth that outlay. ^ 1 " Improvement of Official Statistics," S. J. 1908. ^ As above, p. 16. ' " For a fuller discussion of the difficulties attending the valuation of the properties, see " Land Valuation and Rating Reform," Econo- mic Journal, March, 191 1, by the writer. Also " Rating of Country SCHEDULE A. REAL PROPERTY, 23 Two cases where the value as defined differs from the " rent " as commonly used may be mentioned as additional to those referred to on p. 16. The first is the labourer's, or estate, cottage, in rural districts, let at a nominal or con- ventional " rent," but assessed on its rack rental value. The second is the public-house tied to a brewer, where the tenant pays a rent less than the rent which would be required from a free tenant, and makes up the balance in the less advantageous terms upon which he is entitled to purchase his beer, etc. This difference is not really what is ordinarily known as " beneficial occupation," because a full rent is really paid, but in a different form. Similarly the rent paid by the brewer to the superior landlord may exceed the rack rental value of the definition, the excess being an expense of the brewer's investment in obtaining a market, and having no relation to the rent a tenant would afford to pay. Where brewers are competing for tied houses belonging to private owners, it is a nice point whether the rack rental value should be decided as in a brewer's market, or in a market for tenants (who will be the actual occupiers). It is generally and rightly considered that the weakest part of rating and assessment is the treatment of " owner- occupied " property.^ Failing the test of practical letting, value must be a matter of judgment which will be nearer the truth according to the extent to which valid comparison is possible. Probably the statistical importance of the devia- tion from " rental " truth is insignificant, although expert valuers are perhaps inclined to emphasise it. It is true that for neither local nor imperial purposes is the machinery of valuation strong enough, or rather fine enough, to do the work with exactness. But approximation to a general rental standard is certainly sufficient for ordinary purposes, although it fails to satisfy some experts. Mr. H. T. Eve, in evidence before the D. C. on Imperial and Local Taxation, Mansions," an article in the Transactions of the Surveyors' Institute, 1874-5, p. 177. 1 For the significance of this as " income " in the case of dwelHng- liouses, vide Chapter XII., " The National Income." For its importance^^in the case of factories, etc, vide Chapter VI., " Sch. D — Buildings"." 24 BRITISH INCOMES AND PROPERTY. recently declared that in rating the property in unions he found the rent was too high or too low as a representation of real value in 50 per cent, of the cases ! When asked whether he was not " too much of an artist," he said that " many rents are fixed by many minds at many times," but in valuation " one rent is fixed by one mind at one time." Commenting upon the value of the services of the surveyor of taxes in Scotland for rating valuation, he remarked that in Scotland he fmist assess on the basis of rent by law, and however useful the surveyor might be there he would fail in England, under the Rating Act of 1836, to find what property is worth to be let from year to year — the real distinction. Woodlands and Timber. " It may be urged that timber goes with the land, and is included in the valuation of the land, but this is not so according to the method of income tax returns. The real income from woods and plantations is not included in Sch. A, but only an assumed agricultural or prairie value ... 100 million £ for woods and forests." — Giffen, " The Growth of Capital," 1889, p. 18. Income from the sale of timber is regarded as covered by the Sch. A assessments on the land on which the timber grows. The assessments usually correspond with poor rate valuation, and the peculiarities of rating law in this respect are fully set out in standard works on rating, but they may be briefly mentioned here. The governing Act of 1874 gives three classes : (i) Land used only as a plantation or a wood, where the value is to be taken as though divested of timber and in a natural, unimproved, or " prairie " state ; (2) land used exclusively for growth of saleable underwood — to be valued in full, as if let for that purpose ; (3) land used for both the foregoing purposes — to be valued on either method according to the discretion of the assessment committee. On a representation from the British Timber Conference the Local Government Board circularised the assessment committees recently, calHng attention to these provisions. Appeals against valuations of woodlands have been very SCHEDULE A. REAL PROPERTY. 25 numerous in late years, and they now stand mostly in relation to class (i), on an artificial " prairie " value, and it is doubtful whether, in strictness, this should be a governing consideration for the Sch. A value. It should be understood, of course, that the shooting is separately valued, and added to the value of the woodlands. There is far more point in Giffen's argument now than when he wrote, because at that date the ratings of woodlands were much higher and nearer to the true full annual value for all purposes.^ The next question, and the more important one, is : How closely do the assessments as made in practice approach the true values as perfectly assessed in theory ? Comparison with the Poor Rate. It is generally acknowledged that the income tax, Sch. A, assessments are the best approach to the true values that we possess.^ In the metropolis, in Ireland, and most parts of Scotland it has no advantage over the poor rate because it is made upon the same figures. But in England and Wales, apart from the metropolis, it is always considered to be superior. A great feature of the early Reports was a com- parison of the Sch. A totals with the corresponding totals of the poor rate, the figures being adjusted so as to relate to exactly the same properties. This was often given in great detail by counties, showing clearly in which counties the poor rate was most below the rack rental. This is not to say that in such counties the poor rate was the worst, — we should apply such an adjective to the relative correctness of the parts ; and it is often found that a low-rated parish has its ratings in excellent proportion to each other, where a parish in which the aggregate is practically correct abounds in anomalies, ratings erroneous both in excess and deficiency. The local authorities have statutory right of obtaining information upon the Sch. A assessments, and of late years have availed themselves so freely of it that a much closer ^ Vide the interesting examples of assessments, in different circum- stances, to include th.e average value of large timber in Senior's " Income Tax Law and Practice," 1864, pp. 206-9. 2 R. C. on Agriculture, 1896, Lord Milner, Q. 63,358. 26 BRITISH INCOMES AND PROPERTY. approximation now exists between the totals of the two valuations.^ The influence of the poor rate valuations and the Sch. A assessments upon each other, reciprocally, has often been misunderstood. It is true that the poor rates are used as a basis for the Sch. A assessment, so far as the skeleton plan is concerned, but the amount of the assessments can be quite independent of the ratings. There was provision for the Sch. A assessments being based upon a " scale " of poor rate values in each parish, but this never meant anything else than taking a number of sample properties whose aggregate rack rentals were known, finding the aggregate rateable values of the same properties, and using the comparative totals as a ratio for use where rack rentals were not independently known or obtainable.^ It was theoretically impossible, after the Parochial Assessments Act, 1836, to carry out the pro- vision as to scales, but as the ratings did not hasten to amend themselves under that Act there was no difficulty in practice.' A specimen of the adjustment and comparison made in the early Reports is given below (Metropolis, Ireland and Scotland are omitted as the differences are negligible and due to infrequent exceptions to the general agreement) : — Year 1875-6 {Rest of England) . Poor Rate Assessment. Total gross estimated rental , . . 112,664,631 Total rateable value .... 95,961,497 Value of property rated, but not ] gross . 13,446,279 assessed under Sch. A * . {rateable 10,765,712 Value of property rated and j gross . 99,218,361 assessed under Sch. A . {rateable 85,195,785 1 In many cases this means merely that the poor rate defects plus and minus balance each other. For a detailed description of the present condition of rural rating, vide Economic Journal, March, 1911, already cited ; for the growing use of the Sch. A for the county rate basis, vide D. C. on Imperial and Local Taxation, Qs. 10,512-5, 10,522. ~ 2 5 & 6 Vict. c. 35, s. 64, taken from 46 Geo. 3, c. 65. 3 For the general practice as to using the poor rate as a guide, see evidence by T. Sargent, S. C. on Poor Rate Assessments, 1868, Qs. 6,316, 6,381-2, etc. Also R. C. on Agriculture, Q. 45,570. * Such as quarries, mines, railways, etc. SCHEDULE A. REAL PROPERTY. 27 Sch. A Assessment. Gross annual value of property rated in the poor rate ...... 109,096,483 Gross annual value of property not rated in the poor rate 1 ' 721,937 Total 109,818,420 Thus the property rated at £99,218,361 was assessed, Sch. A, at £109,096,483, or practically 11 per cent. more. In 1876-7 a comparison was given by counties. Anglesea (26-57), Lincoln (25-08), Bedford (20-97), Carnarvon (19-03) were the worst cases, and Northumberland (2-65), Cornwall (5-16), Salop (5-13), and Wilts (6) were the best. In the Table Ai the information in the different reports is collected to show the progressive improvement in the poor rate. Leone Levi, pleading for a common unit of valuation, illus- trates the necessity by quoting Sch. A against gross estimated rental and rateable value in 1870, and also in 1881-2, but without making any allowance or adjustment for property rated but not assessed, so that the comparison is valueless and the difference proves nothing — it would exist even though the rates and income tax values were identical (S. /., 1884). Goschen gives a table showing rateable value and its proportion to the Sch. A values : 1815 (estimated), 75 per cent. ; 1841,72-89 per cent. ; 1847, 75 per cent. ; 1856, 70-25 per cent. ; 1868, 70 per cent. The former increased 169 per cent, and the latter 150 per cent, in the interval (Report on Local Taxation, p. 17). "According to the local taxation returns, the rateable value of farms and farmhouses in England and Wales amounted in 1907 to £30,900,000 . . . if we add for repairs and also add the figures for Scotland, we obtain £38,500,000 as the estimated gross rental of the farms of Great Britain. . . . Sch. A amounted to £42,300,000. Empty property and deductions on appeal would slightly reduce this figure, but if we take it at £41,500,000, it only leaves £3,000,000 in excess of the former figure as the annual value of residential estates, sporting lands, etc. This is almost certainly 1 Such as Easter offerings, pew rents, interest secured on chapels, etc. 28 BRITISH INCOMES AND PROPERTY. far too low, but there is little doubt that there is considerable undervaluation of such properties, especially when they are inhabited by the owners themselves " (" Rent, Wages and Profits of British Agriculture," Economist, 1913, p. ii75)- The first figure appears to be obtained by adding to the " agricultural lands " for 1907 ^23,654,000, the value of " other lands, including farm buildings, etc.," £7,278,000 from House of Lords paper 150 of 1900 (the analysis has not been available since) . But the actual gross estimated rental for these two classes was available {£Zifi75>5^7) i^i the same return for 1899, the Sch. A being ^37,110,000. These cover practically the same ground, the difference being due to valuation, and not to the omission of park lands, sporting, etc., as suggested. The point intended to be made as to a difference in classification is not sound. Q. " Why is it that the assessment of land for income tax purposes is so very much higher than for local purposes — the difference being about 7 per cent. ? " — A. " Gross estimated rental is a column in the rate book which is regarded very differently by dift'erent overseers. ... I find in many cases they deduct the tithe rentcharge before arriving at the gross estimated rental, which of course is wrong. The gross estimated rental should afford the means of comparison between two pieces of land of equal value, one of which may be subject to tithe rentcharge, the other of which may be free." ... Q. " The tithe mistake, if it were general, would account for £3,000,000 of this ? " — A. " Yes, but I do not suppose it is universal ... it is very common, I fancy. . . . There is a difference of nearly £3,000,000 in com- paring the income tax assessment with the gross estimated rental — ^it might be practically covered by tithe " (Evidence of Mr. W. C. Little before R. C. on Agriculture, Qs. 63,911 — 63,921). There is great confusion of thought here, and in so far as the statement of fact is correct it operates in an opposite direction to the explanation intended. Is the tithe separately rated ? If it is, and the ratings on the farms are net, after tithe is deducted, the principle is the same as that under Sch. A. If the tithe is rated, and the farms are rated gross, the total must exceed Sch. A. If the tithe is not rated and farms are rated gross, the totals should agree. The only case in which the explanation is vahd is where lands are rated net, and the tithe is not rated — a very rare occurrence, no single instance of which has ever come under my notice. SCHEDULE A. REAL PROPERTY. 29 Table Ai. — Comparison Assessments (Sch. A) i£ooo omitted). between Value in Income Tax and Value in Local Assessments Year. Local Rate Assess- ments, Gross Estimated Rental. Sob. A. Gross Assessments. Percentage Excess. Re-assessment Years.* 1874-5 97,813 107,690 lO-I 1875-6 99,218 109,096 1876-7* 103,848 115,609 II-3 1877-8 106,031 117,392 1878-9 107,399 118,966 1879-80* 111,042 123,107 10-9 1880-I II3.O61 124,454 1881-2 114,040 125,201 1882-3* 114,819 125,399 9-2 1883-4 116,584 126,390 1884-5 118,025 127,047 1885-6* 118,360 127,662 7-8 1886-7 119,860 128,090 1887-8 120,982 127,988 1888-9* 118,874 127,469 7-2 1889-90 120,499 128,211 189O-I 122,158 129,176 189I-2 123,456 130,359 1892-3 125,230 131,119 1893-4* 125,008 134,334 7-3 1894-5 127,287 135.309 1895-6 129,757 137,015 1896-7 132,492 138,760 1897-8 135,161 139,967 3-6 1898-9 Not published. This table is perhaps relevant rather to the history and progress of rating than to income tax, since the closer approximation now attained is due to improvements in rating, but some comparison of the two chief valuations we possess is of interest in a work of this kind. No information is available for years subsequent to 1897-8, but there is no doubt from an inspection of the gross totals that the diver- gence increased considerably in the 1898 and 1903 re- assessments. Local authorities have lately been so active 30 BRITISH INCOMES AND PROPERTY. in revising their ratings, however, that the difference is probably now under 4 per cent.^ Table A2. — Classification of Rateable Hereditaments, England and Wales. Compiled from House of Lords Return 183 of 1906 and other Sources (jf 000 omitted) . Description. 1870. Per- cent- age. 1894. Per- cent- age. 1899. Per- cent- age. 1906. Gross Estimated Rental. Lands : — Agricultural . Other .... Buildings {not farmhouses) Railways .... Quarries, etc. Total of all rateable hereditaments (exclu- ding Crown property) 123,000 100 \ 37.287 124,946 17,709 13,189 I93.I3I I9'3 64-7 9-2 6-8 100 ( 26,278 1 8,398 141,641 20,114 15,028 211,459 12-4 4-0 67-0 9-5 7-1 100 23,384 254,888 Rateable Value. Lands : — Agricultural . Other .... Buildings {not farmhouses) Railways .... Quarries, etc. } 39.836 55,157 4,871 5.007 38-0 32-6 4-6 4-8 33.655 102,720 13.871 10,894 20-9 63-7 8-6 6-8 / 24.035 \ 7,278 116,436 15,598 12,277 13-7 66-3 8-9 7-0 17,461 Total of all classes ex- cept Crown property. Annual value on which contri- butions were received from the Government in respect of non-rateable property in the Crown's occupation •104,870 100 161,140 100 174,317 1,306 205,432 1,635 Total of all classes * — — - 175,623 100 207,068 • Uncertain as to extent to which Crown occupation is included. ^ Early details of rateable values for England and Wales may be found in the Poor Law Reports. Appendix XXXII. of R. C. on Agriculture, 1896, gives the following (in thousands) : — 1841, ;£62,54o; 1847, ;£67,32o; 1850, ;£67,7oo ; 1856, lyi.9>^o {£9'6.o^S gross X) '. 1866, ^^93,638 (;^iio,o79 gross %). Also see H. C. 215 of 1874 and H. C. 461 of 1875 : 1867-8, ^100,669 (;£ii8,43i gross) ; 1869-70, ;£i04,405 (;£i23,365 gross) ; 1870-1, ^107,398 (^£126,474 gross) ; 1871-2, ;£i09,447 (;ii29,o39 gross) ; 1872-3, ;£ii2,3i8 (£132,453 gross). X Vide F. Purdy, S. /., 1869, " Pressure of Taxation on Real Property." Vide also S. C. on Burdens affecting Real Property, 1846, p. 17. The rateable value is given as £64,540,030, "below the true figure," Sch. A. being £85,802,735. H. C. 332, i860, showed that for 1856, the gross poor rate was 8-9 per cent, below the Sch. A. m Metropolis. — Parish details are given in H. C. 254 of 1854-5 : — Total, Sch. A, £13,462,000 ; county rate, £9,294,300 (rateable value) ; poor rate, £9,975,600 (rateable value). SCHEDULE A. REAL PROPERTY. 31 Periodical Revaluation : Relative approximation to true facts in intervening years. Except in Ireland, the income tax, Sch. A, figures un- doubtedly represent most closely the real facts, but in re- valuation years far more closely than at other times. Indeed, in those years they are probably slightly in excess of the true figures, because many adjustments are made during the collection of the tax {after the totals have been made up) and allowed by way of " schedule " or repa3anent. But in non-valuation years they are, in England and Wales more especially, below the true figure. The reason is that while effect is given in practice to all bond fide reductions in rents wherever they occur, no effect is, or can be, given to increases in rents, and the totals are only maintained by new properties and structural alterations. There is a continuous drag down- wards, and the " slack " is not taken up until the next re- valuation year. No analysis of the Sch. A totals which omits to recognise this fact can therefore give valid results. As the metropolitan revaluation falls generally in a different year from that for England and Wales (ex. met.), the totals for the two combined rather mask the effect, but if they are taken separately it is very clear. In Table A3 the effect of revaluation is very obvious, especially in the case of messuages (see particularly 1893-4, 1898-9 and 1903-4). The peculiar history of " Lands " since 1880 serves to mask the effect of revaluation when the two are taken together, for it seems that reductions in the case of farms are most freely made on the occasion of new assessments 1 (see Table A3, 1882-3, 1885-6, 1888-9). Prior to 1876 the effect upon lands was the same as upon buildings — a marked rise in the revaluation year ; and when the two are taken together it is cumulative (see especially 1857-8, 1861-2, 1864-5 and 1867-8). This "statutory" result must not be taken as representing the actual facts. Probably the true rise would be represented by a line, practically straight, joining points slightly below the position reached in each re-assessment year {vide Graph I.). 1 R. C. on Agricultural Depression, 1896, Qs. 45,575, etc. 32 BRITISH INCOMES AND PROPERTY. If the true increase in a year (TI) consists of the aggregate rent increases (i), minus the aggregate rent decreases {d}, plus the value of new structures (s) , TI = i — d + s, but the increase shown by Sch. A figures in non-valuation years is s — d, and that shown in a revaluation year is, after four non- valuation years, si + s — d. Now i can always be found from the formula, and s — d also, but s and d separately are not determinable. The bearing of the analysis will be clear from the following attempt to use the annual increases exhibited by the figures : " The allocation of the new capital of the United Kingdom between different forms of investment cannot be made with any precision on the basis of existing information. The erection of houses on land on the borders of urban areas absorbs much new capital. The gross profits from the ownership of houses, as shown in the reports of the Inland Revenue Commissioners, were greater by £3,155,000 in 1907-8 than in 1906-7, and a further increase of £3,113,000 was shown for 1908-9. Capitalising the indicated increase in revenue at fifteen years' purchase, there is an addition of about £47,000,000 to new capital in the form of houses (including sites) " (Census of Production, Final Report, p. 32). In this instance the endeavour was made to capitalise s, but as a matter of fact s — d was taken, and the decrease in rents has been ignored. The result obtained represents a minimum, and the true figure may be much greater. Any comparison of the annual increases with each other will lead to fallacious results if the effect of re-assessment years is forgotten : — Examining the connection existing between the average value of building land per head and the wealth per head, Mr. MaUock seeks to show that a constant proportion has existed, and appeals to the " facts " : — " If we take the annual increase in the value of houses, as given in the Statistical Abstract for the years 1893- 1907, there are only three years out of the fifteen in which the average was very greatly exceeded. These were the years 1898, 1901, and 1903. Now for the two years following the year 1893, the gross amount assessed to income tax exhibited a continuous SCHEDULE A. REAL PROPERTY. 33 decline, and had in 1896 not so much as recovered its previous level. In 1897 it exceeded this by £30,006,000. Next year the increase in the value of houses rose to nearly twice the average. Two years later, in 1900, the gross amount assessed to income tax showed an increase on the previous year of £42,000,000. The year following (1903) the increase in the value of houses exceeded the average by more than 50 per cent. . . . But not only do the figures thus show us the close connection between the increase in total income and the increase in the gross value of houses. They also show us that with each fall in the increase of gross income the increase in the gross value of houses in a similar way falls. Thus after the record increase in gross income in 1897, with record increase in the value of houses that followed it, the annual increase in the gross value of houses sank to one half of the maximum to which the record year had raised it. In 1902 the same phenomenon repeated itself. The increase in gross income was £42,000,000 in 1900, and £33,000,000 in 1901. In 1903 it was not more than £13,000,000. The increase in the gross value of houses was, in 1904, less than one half of what it had been in 1903. . . . These facts show that the amount which the population will consent to spend in house rent ... is limited by the amount per head which the population has to spend on its wants and enjoyments." Mr. Mallock omits (a) to look at the 1893-4 increase over 1892-3 ; (b) to observe that statutory as well as commercial reasons account for a stationary state in 1896 gross income {vide, p. 288) ; (c) to take account of 1893-4, 1898-9, and 1903-4 as re-assessment years — although warned by a footnote — and of 1901-2 as a year of revaluation in the metropohs. The whole " connection " falls to the ground. Mr. Mallock proceeds in a similar manner to show that when there is a special increase in dwelling-house values, there is also one in business premises ! But this is alleged to have ceased about 1903. After much manipulation of the figures in the Statistical Abstract (Table 21, Inhabited House Duty) and con- fusion through mixing the columns, he concludes that business premises are falling in value or stagnant, while dwelling-houses increase in value. He finds " the clue to the riddle " in the table deahng with foreign investments, Sch. D, in which, after 1903, a marked advance in the rate of increase is shown ! It is unneces- sary to labour his conclusion, since the premises are worthless (" Phantom Millions," Nineteenth Century, November, 1909). An examination of Table A3 shows that, of a total increase of £39,000,000 in messuages, 1845-6 to 1870-1, England 34 BRITISH INCOMES AND PROPERTY. and Wales, £24,000,000, or 62 per cent., was registered in the eight assessment years, and only 28 per cent, in the other seventeen years. For messuages (England and Wales, extra-met.), 1871-2 to 1910-11, the increase was £93,500,000, of which £40,000,000, or 43 per cent., took place in ten valua- tion years, and the remainder in thirty ordinary years. So in the first period the normal rise or surplus of new structures over rent decreases was just under one million pounds per annum, while the amount of increased rents taken up on each revaluation was about two millions, or two thirds of a million per annum. For the second period, the ordinary surplus (s—d) was over one and two-third millions, the increased rents for valuation were two and a third millions, or just over half a million annually. Just as the effect of revaluation may be to cause the assessments to lag behind the true values when ascending, so there are sometimes reasons why they should also descend less rapidly. In the case of houses, first, in a town where there has been great overbuilding, and there are many houses standing empty, such houses remain in the assessments at the old rents until, upon re-occupation at lower rents, the assess- ments are reduced. A re-assessment year affords a statutory opportunity for putting them all upon the correct basis, and if there has been a general fall in rents, the aggregate for all houses, occupied or void, may be suddenly much less than before the re-assessment. Secondly, with regard to lands, in time of depression reductions of rent commonly start as temporary abatements or remissions, which, made year by year, end in becoming permanent.^ This point is well dealt with by R. J. Thompson, " An Enquiry into the Rent of Agricultural Land in England and Wales during the Nineteenth Century." 2 He constructed a table and graph showing index numbers for rents of specimen estates, income tax values, and Sauerbeck's price index number for each year from 1846 to 1900. 1 Economic Journal, ibid., March, 1911. See also R. C. on Agri- cultural Depression, 1896, Q. 45,589, etc., as to the effect of mortgages, R. C. on Depression in Trade, 1886, Q. 743 ; R. C. on Land in Wales, 1893-6. Qs. 76.545. etc. " S. J. 1907' SCHEDULE A. REAL PROPERTY. 35 He remarks : " Looking at this table, it will be seen that the income tax figures in column 3 start at practically the same level as the rent figures in column i, and in 1851 showed a decline corre- sponding to the fall in column i, which was the result of the short period of depression in prices which occurred in 1849-52. The influence of the decline in rents operated in the case of the income tax returns until 1856, from which date a steady rise set in and continued until 1879, though the influence of the triennial valua- tion is very well marked. " The income tax figures moved much more slowly than the rent figures. It is interesting to notice that they stood several points above the figures for rent in each of the periods of depres- sion, for instance in 1849-53, 1864-67, 1870-2, and 1879-1900, whereas in prosperous times of rising rents they are usually a few points lower. This is only natural, as their adjustment must come subsequent to alterations in rent ; but there is, I think, another reason why they should remain higher than a faUing rent, viz., that, as explained above, abatements and deductions are not shown in the income tax figures, which represent the gross rent payable under agreement. The rent curve, on the other hand, shows only the rent actually received, and it must be remembered that the dechne in rent is very largely caused by abatements, which are called ' temporary ' for several years (and sometimes for long periods) before they are made permanent. It is natural, there- fore, that the rent curves should reach a lower point and reach it earlier than do the income tax figures. The latter attained their lowest point in 1900, when they stood nine points below what they were fifty-four years earlier." The metropolitan values since 1871 have been dealt with by Mr. J. Calvert Spensley : — " These figures " (totals of supplemental valuation lists) " may be taken to fairly represent the case, for although in the £11,873,819 there is probably included some increment of value ... on the other hand, there is no doubt a considerable amount of decrement of value, due to the fact that an individual ratepayer will procure a reduction of assessment consequent upon a decreased rent, while he will not declare an increase of his rent until he is required to do so at the next quinquennial valuation " (S. /., 1903. P- 73)- Vide also Mr. Sidney Webb's use of the metropoUtan valuation lists to show the increase due to new buildings, and the " un- earned increment " ; S. C. on Town Holdings, 1890, p. 341 ; and Criticisms, 1891, p. 136. 36 BRITISH INCOMES AND PROPERTY. 4) ea o o s B o o o o 05 I o 00 H U3 CO 00 (n Clio tnoo m own -^-^mo^ ■■tinNOiio >*-m mas ^T * C^^ ^ !P ^i> J^ 5?Ji ■^l-oo o mmo ■ij-fNir) inHN omcotoo o«3rt-HcokOvocowp> rfOOf^o "2°^ ^ 9 "S "*0\Ol'*N ^rxosooi *^^^vOO^MO oooio nvoiOOtN -^J-NWO-* C^-* rOVO ■* ■* Ch fOOO CO iOOO-*M MNiniOW inMMioWHN O OMD ■^vo fN M en -^ CNco' d\ w coco wSvb'oc)' d\ o -^vD ccT C3" cT ^ cf moo H o\ w ml^QO N ■* i^oo o iDiavO ^rstN. ^ININOOOOOO OOOOOOOOC:\ C\0*0*00 OwmmC* C^COCOCOCO^M- •'i'Thm mvo o\ owco ooictco -^oo oo c< co Olio C-^OCO OQVO-')- iococ^oco-oo M vo w (mo m-^ >*■M(OM»oHO^ t^N^ MMM cofC^ inio-^ mhmmo cSdi Sooaa K *nvo vo ^o lo lo vo vo »o»o vo »o io>o u-iioio ^J- ^ ^ ■***-'* ■* 1*- •5^ ^ ■* cncoentoto cocototoco to to co co co co to to « tn oo H c4 en -^ lo o fvoo -. Titli (rill J T i . . 1010 f>00mOM« tOih 10*0 ^^ 00 0\ O M N ff ' ^ O M M m ■^^ »r)«3 ^sOO o^ w M H I m-j-u-ivo tNQO o» O M ( OOOOOOO MM! ^ ^ O N *o ^co ■* *o o oo « tJ- m cnvo M t^ tN.00 D3 M H M MM ^^.t^ts ooooco 00 oo coNcoM "fcn ^sw^^^ M^DN^^. W'^HQO rvHo^ ootoif) woom ^o* *Ncn»n ojvooa M M oo tv -^ oorvtN. ^oNo^ iN.Mt^ c^^^-ti- o\o\fo ro ■* iri 1848-9 42,853 5,634 10,550 59,037 1849-50 42,829 5.586 10,350 58,765 ■300 1850-1 42,790 5,543 10,280 58,513 1851-2 41,490 5,487 9,540/ 56517 1852-3 41,449 5,499 9,260 56,208 1853-+ 41,430 3,687 8,900 V 56,017% 1854-5 41,597 3,725 8,950 56,272 1855-6 41,485 5.873 8,890 55,248 1856-7 41,545 5.932 8,840 55,317 . 1857-8 42,895 6,254 9,400 -100 58.549 100 1858-9 42,912 6,230 9,420 58,562 1859-60 42,995 5,282 9,430 58,707 1860-1 43,036 6,357 9,490 J 58,883'' 1861-2 44,685 6,675 9,723\ 61,084 \ 1862-3 44,653 6.715 9,720 61,098 1863-4 44,724 6,718 9,699 61,141 1864-5 46,462 6,831 9,877 63,170 1865-6 45,482 6,850 9,887 63,219 1865-7 46,556 6,965 9,992 I20 63,513 ■20 1867-8 47,767 7.186 9,961 ' 64,914 1868-9 47,799 7,217 9,952 64,968 1869-70 47.857 7.19s 9,879 64,931 1870-I 49,011 7,301 9,886 66,198 1871-2 49,027 7,326 9,884/ 66,237/ 1872-3 49,035 - 7,363 9.885 66,283 1873-4 49,956 7,497 9.924 57,377 1874-5 50,272 7,493 9,923 57,688 1875-6 50,408 7,505 9,921 67.834 1876-7 52,016 7,690 9.938 69,544 1877-8 51,934 7,566 9,937 69,537 1878-9 51,870 7,668 9,940 69,478 1879-80 52,041 7.769 9,981 69,791 1880-1 51,847 7,712 9,981 69,540 1881-2 51,419 7,549 9,980 69,048 1882-3 48,559 7.573 9,981 66,213 1883-4 48,211 7.505 9,982 65,698 1884-5 47.864 7.462 9,983 65,309 J885-6 46,255 7,320 9,954 53,530 1885-7 45,635 7,100 9.958 62,593 1887-8 44.732 6,824 9,958 61,513 1888-9 42,534 6,540 9,941 59.015 1889-90 42,053 6,417 9,942 58,411 1890-1 41,635 6,375 9,941 57,952 l8gi-2 41,385 6,319 9,943 57,647 1892-3 41.059 5,291 9,874 57,224 1893-4 40,335 6,252 9,895 56,482 1894-5 39,942 6,193 9.895 56,031 1895-5 39.624 6,148 9.894 55,666 1895-7 39,045 6,100 9,894 55,040 1897-8 38,378 5,045 9,749 54,172 1898-9 37,526 5,967 9,747 53.240 1899-1900 37,332 5,957 9,747 53,036 1900-1 37,160 5,944 9.751 52,854 1901-2 37,017 5,912 9,748 52,577 1902-3 36,836 5,883 9,655 52,374 1903-4 37,149 5.853 9,718 52,720 1904-5 36,896 5.838 9,723 52,455 1905-6 36,810 5.821 9.721 52,351 1905-7 36,715 5.811 9.727 52,253 1907-8 36,629 5,802 9.725 52,156 1908-9 36,584 5.772 ^■m 52,095 1909-10 36,567 5.775 9.768 52,111 1910-11 37,044 5.757 9.694 52,495 1911-12 36,990 5.739 9.691 52,420 1912-13 37.013 5,730 9,695 52,438 1913-14 37.071 5,713 9.699 52,484 (For details as to the constmction of these tables see Appendix I] ) ^0 BRITISH INCOMES AND PROPERTY. Houses and Messuages (£000 omitted). Year. England and Wales. Scotland. Ireland. United Kingdom (+ or -) (+ or -) (+ or -) (+ or -) 1814-15 14.895 1,364 1842-3 35,556 2,919 2,790 \ 41,265 (200) 1843-4 33,600 100) 2,700 (lOO) 2,790 41,090 i ,00 41,290 ; 3" 1844-5 35,800 100) 2,700 (100) 2,790 1845-6 36,576 2,961 2,790 42,327 (200) 1846-7 37,010 3,000 (50) 2,790 42,800 (250) 1847-8 37,282 3.199 2,790 >200 1 43,271 1848-g 38,822 3.493 2,790 45,105 1849-50 39.056 3.607 2,740 45,403 "200 1850-1 39.354 3.624 2,720 45,698 185 1-2 40,047 3.784 2,520 46,351 1852-3 40,621 3.847 2.450/ 46,918 1853-4 42,828 4.131 2,3601 49,319 \ 1854-5 43.425 4,209 2,364 49,998 1855-6 44,710 4.239 2,351 51.300 1856-7 44,994 4.358 2,342 ■100 iiiit\-° 1857-8 47.439 4.704 2,480 1858-9 48,138 4,842 2,489 55,469 1859-60 48,779 4.989 2.504 56,272 1860-1 49.505 5,109 2.514 57.128 186 1-2 53.235 5,355 2,634 \ 6l,324\ 1862-3 54,104 5,447 2,644 62,195 1863-4 55.121 5,576 2,691 63,388 1864-5 59.286 5,802 2,713 67,801 1865-6 60,812 5,952 2,731 69.495 1866-7 62,467 6,182 2,797 ^20 71,446 V20 1867-8 68,013 6,546 2,847 77.406 1868-9 69,540 6,729 2,900 79.169 1869-70 70,949 6,930 2,926 80,805 1870-1 75,307 7,309 2,966 85,582 1871-2 76,475 7,530 2,995 87,000; 1872-3 77,832 7,876 3,035 88,743 1873-4 80,728 8,521 3,060 92,309 1874-5 82,033 9,023 3.071 94,127 1875-6 83,852 9,397 3.091 96,340 1876-7 90,451 10,372 3.121 103,945 1877-8 93.104 10,829 3,148 107,181 1878-9 95.585 11,291 3,181 101,058 1879-80 100,079 11,766 3.260 115,106 1880-1 102,417 11,838 3.309 117,565 1881-2 105,622 If,992 3.357 120,971 1882-3 109,374 I?,047 3.404 124,825 'tS3-4 111,565 12,130 3.451 127,144 ^5^-5 112,791 l?,28o 3,482 128,573 1885-6 115,436 i?,557 3,510 131,503 1886-7 117,183 12,615 3,561 133,359 '?!r* 118,524 12,716 3,596 134,836 1888-9 120,514 l«,907 3,600 137,020 1889-90 121,907 13,027 3,656 138,590 1890-1 123.721 13,246 3.716 140,683 1891-2 125,946 13,426 3,775 143.147 1892-3 127,544 13,643 3.736 144.723 1893-4 131,860 14,008 3.858 149,726 1894-5 133.512 14,303 3.933 151,747 1895-6 135.929 14,595 4,016 154,540 1896-7 139,670 14,999 4,105 158,775 1897-8 142,128 15,418 4.335 161,881 1898-9 149,632 15,104 4,453 170,189 1899-1900 I5j,193 16,664 4.573 174,431 1900-1 157,160 17,215 4.588 178,963 1901-2 162,263 17,656 18,076 4.653 184,573 1902-3 165,629 4,800 188,505 1903-4 174.653 18,556 4,754 197.963 1904-5 177,666 19,076 4.832 201,573 1905-6 181,153 19,475 4,858 205,486 1906-7 185,452 19.935 5,011 210,397 1907-8 188,286 20,193 5,073 213,552 1908-9 191,077 20,461 5,127 216,665 1909-10 193,223 20,573 5,132 218,928 1910-11 196,196 20,761 5.276 222,233 1911-12 197,632 20,858 5,323 223,813 1912-13 199,648 20,978 5,364 225,991 1913-14 20^,018 21,202 5,419 228,639 SCHEDULE A. REAL PROPERTY. 51 Gross (Sch. A : Assessments). Lands, Houses and other Property (£000 omitted). Year. England and Wales. Scotland. Ireland. United Kingdom. J 8 14-15 52.237 6,350 1842-3 78,354 8,547 13,350-1 100,251 -V 1843-4 78,260 7,891 13,350 99.501 1844-5 78,460 7,741 13.350 99.551 1845-6 79,330 8,529 13,350 101,209 1846-7 79,715 8,559 13,350 ± 101,624 ± 1847-S 79,952 8,890 13.360 ■200 102,202 -200 1848-9 82,251 9,183 13,350 104,784 1849-50 82,445 9,244 13,100 104,789 1850-1 82,704 9,218 13,010 104,922 1851-2 82,103 9,322 12,070 103,495 1852-3 82,588 9,392 11,720 J I03,700> 1853-4 84,791 9,869 11.270 105,930 1854-5 85,619 9,993 11,324 106,936 1855-6 86,816 10,177 11,251 108,244 1856-7 87,114 10,362 11,192 108,668 1857-8 90,902 11,033 11,897 113,832 1858-9 91,620 11,153 11,919 114,692 1859-60 92,403 11,353 11,944 115,700 1860-1 93,165 11,550 12,014 116,729 1861-2 98,692 12,119 12,368 123,179 1862-3 99,535 12,253 12,374 124,162 1863-4 100,587 12,389 12,399 125,375 1864-5 106,488 12,756 12,600 131,844 1865-6 108,053 12,932 12,626 133,611 1866-7 110,697 13,310 12,861 136,868 1867-8 116,341 13,898 12,831 143,070 1868-9 117,907 14,116 12,852 144,876 1869-70 119,430 14,291 12,805 146.526 1870-1 124,699 14.797 12,852 152,348 1871-2 125,896 15,042 12,879 153,818 1872-3 127,272 15,430 12,920 155,622 1873-4 131,085 16,213 12,984 160,282 1874-5 132,721 16,716 12,995 162,432 1875-6 134,698 17,106 13,013 164,817 1876-7 142,889 18,225 13.059 174.173 1877-8 145,482 18,573 13.085 177,140 1878-9 147,922 18.994 13,122 180,038 1879-80 152,554 19,582 13,242 185,378 l88o-l 154,711 19,597 13.290 187,598 1881-2 157,505 19,688 13.338 190,532 1882-3 158,451 19,668 13.385 191,504 1883-4 160,228 19,684 13.433 193,345 1884-5 161,117 19.790 13,468 194.375 1885-6 162,207 19.925 13,468 195,600 1886-7 163,375 19,766 13,522 196,664 1887-8 163,831 19,600 13,557 196,987 1888-9 163,582 19,513 13,544 196,640 1889-90 164,541 19,510 13,601 197,652 1890-1 165,956 19,683 13.661 199,300 1891-2 167,864 19,805 13.723 201,391 1892-3 169,107 19,991 13,688 202,786 1893-4 172,670 20,318 13,755 206,742 1894-5 173,748 20,548 13.829 208,125 1895-6 175,908 20,798 13.911 210,616 1896-7 179,029 21,170 14,000 214,199 1897-8 180,845 21,528 14,085 216,457 1898-9 187,502 22,129 14,201 223,832 1899-1900 191,113 22,950 14.321 228,384 1900-1 194,979 23,492 14.339 232,810 1901-2 199,899 23,931 14,402 238,232 1902-3 203,098 ^+'31i 14,455 241,887 1903-4 212,524 24,788 14,473 251,784 1904-5 215,269 25.302 14,557 255,127 1905-6 218,672 25,696 14.580 258,949 1906-7 222,856 26,147 14.739 263,742 1907-8 225,600 26,400 14,800 266,800 1908-9 228,356 26.666 14,867 269,889 1909-10 230,488 26,757 14,902 272,147 1910-11 233,907 26,944 14.972 275,823 1911-12 235,290 27,025 15,015 277,330 1912-13 237,3" 27.164 15,061 279,536 1913-14 239,757 27,385 15,120 282,262 52 BRITISH INCOMES AND PROPERTY. cases. For example, 13th Report, p. 114, compares 1803 and 1867 for certain counties. Details of total Sch. A. in each county are available as follows : — 1814 (not Scotland or Ireland), 24th Report, Supplement, H. C. 331 of 1831, 238 of 1814-15 ; Marshall's Digest, 1814 and 1842 to 1869 inclusive in H. C. 511 of 1866, and 454 of 1870 ; 1842, 1852, 1862, 1872, 1874, 1876, 1879, 24th and 28th Reports ; 1874, 1876, 1879, in 19th, 2ist, and 24th Reports ; 1876, 1879, 1882, 28th Report ; 1883 to 1894 inclusive in H. C. papers, 292 — 1882 to H. C. 217 — 1896 ; 1894 to 1899 inclusive, 40th to 44th Reports ; 1902 and 1903, 56th and 57th Reports ; 1911 and 1912, 56th and 57th Reports. The important division into Lands and Messuages is, how- ever, not so extensively available : — 1813 and 1814 ; Parlia- mentary returns in 1814-15 and Marshall's Digest, II., 30 ; 1842, H. C. 102 — 1845 ; 1859, H. C. 546 — 1860 ; 1894 to 1899, 40th to 44th Reports ; 1902 and 1903 and 1911 and 1912, 56th and 57th Reports. In view of the interest of these details, and their lack of general accessibility, the chief features are repeated in Table A5. A similar classification of poor rate values for 1840-1 is given in H. C. 235 — 1842 (reprinted in the Appendix to the evidence before the S. C. on the Burdens on Real Property, Vol. II., p. 150), where for each county in England and Wales the details are given under these heads ; — Total £. Lands .... 32,655,137 Dwelling-houses . . , 23,386,401 Other property . . . 6,498,492 Total .... 62,540,030 The rate per £ in each county, the rate per head for value of property, and the value per acre are also given. It is only necessary to compare the income tax values in 1842 to see how little real effect had been given to the law enacted a few years before to secure a poor rate valuation upon the full rental values. SCHEDULE A. REAL PROPERTY. 53 SCH. A. DEDUCTIONS AND ALLOWANCES FROM THE GROSS ASSESSMENT. These may be classed under three heads : — (i) Deductions from assessable gross income in the nature of expenses, impersonal and objective. (2) Allowances in respect of the whole gross value of properties which is not enjoyed as personal income assignable to individuals. (3) Allowances from personal incomes, facultative and subjective, designed to procure the progressive graduation of the tax on individual incomes, i.e., exemptions and abatements. The different categories have been treated separately for many years in the official statistics, and are summarised from 1868 to 1883 in the 28th Report. How Deductions are made in Practice : Effect on Statistics. It is necessary to draw attention to a very important feature in the earlier statistics prior to 1900-1. Deductions and allowances may be made in three ways, or at three stages in the tax administration. (i) " In the assessment " itself, at the time it is made, and before it is closed and totalled. (2) " By schedule," in which case the collector is authorised to make the allowance of duty, and return it in part satisfaction of the total charge against him in a schedule of discharges. Allowances for empty property, except in Scotland, are made in this way, and, speaking generally, it may be applied to all the allowances, and it is often an accident of time whether (i) or (2) operates. (3) " By repayment," where an error is discovered, or where, by the machinery of the tax, repay- ment is the remedy provided. This is the method naturally applicable to cases where persons exempt from tax have received income, with tax already deducted, by way of mortgage interest, dividends, ground rents, etc. Now all the early tables give the deductions under I. 54 BRITISH INCOMES AND PROPERTY. B o o o o o I— ( H < O Hi O >< H \^ O o m I I I OimoooooDoo coMQo ovo -^h cot^H oeo o « CO ^o Mm w *o * H m M «noo mo oxno a-^N ■*oo Oi «n m ^o m cn«nir>N oNWWO fovo o^Omw OMOwrs"* tN en ^s tN. *^ tNiOo wf^rsMinTt-M town iooo\ H CO w cf ^tOM-* m" in CO m \o o\o MOO m'^oit^.o*'* mco o o o o o> t» o rO roio O^st^O^O -^lOM lOO M*s* fOQO O ^O «n o iniooo «otN.>OM mCiM o O woo moooo co O O c< Ooo fONmOiM-^O^M^O ^s^O OM COO\N OVO^O COOO OO 0\ tHO OT M P« Is « CO« COM W€OU-)0\« tNlO Cl CiM CO Ol O CO MO M^^.o^sMco^sM o^t^o moom cooo m COM M'OOOt^N NIO CON M -^COC* ■*^^.^N^>^M MCONNrNWNCOt^NrfmOOt^MCO cOtsfO CI ION N M CvO\-*t^t^N OOOO lOCOOOvO^O CO coco lO U-) M OO O\oo 00 O >oO CO in M co m m m M MM COMC^WCOM in'4-H III I OlN COCOCOO^CO-^fOO O tN.M M u-)tN.■<^0^^^(S, c< o ts. mvo Oivo »o M r«. o CO o\»o ci o\ -"HO inqo M M COMMMM coo <^^O^sM (ocoOmu-)0 -^oo cocoo t^'«J-« -^m coco■T^N M mcovo Mt«.vo o\>n^o o n *m m co cO"*"ntNMooOfNO lnlnoooots^o *e* M mtN ^no^coOlO com co txO CO Ov<0 »n -^OO ^ O l^ O COM mo CO^OO 0\0>O^000*N'O OlM cooo lO CO CO ■^ m^o M OO vo fN m m moo oot»*m'*M m mtN o -^mo foo>M'o o^cocft -"tuo -ij-oo oim m o\co oooo o -"i-Mco "*coM Th^o m^*■>*-co^^.m^v■^o^ CO Tfvo t^ M CO ^sQo *^»o m o oioo ^ -^ft co»o tN •3 " 5.S *0 ^f^O ^cOm ^C^ m cooo M H N 0> N N. f«.iO CO M M U-) ^^ tJ- M CO iJ-OO O f^-^t^txPsu-iM f^O CO ^\D kO 00 O fs^o CO m tN m ■>* M civo m co ">j-o Oi mmmNooo ■*« NO roio mmmtJ-onvoo\ OO M M OOOmMlOtNlXlV o>vo ClVO Ol n ■* ts M covo VD OO ooo OOO^O^O mcOMCOvO -^CO -^O Ol 1 1 Invo u-immo M o mN tvco mcoOicoo\mo 0\ M in m^o cooo N o •tl-Ooo coo^m ^mvooo moo CO m m m o\vo m t** "*^o m n oiqo m ■* n o -* ts O t^CO CO O coOifON O^^n^smO\0vO^O^sO^n vo M t^M c^'fM Moovooo mo o ^^r^moo co t* -rj- 11- -^o m ihm M >(■-.*■ ox^^o -^h CO M OO mo Sag SCHEDULE A. REAL PROPERTY. 55 OS O (OVO n«aiMoO vo -^o ro>0"^o\«co OO H \0 MHpTm tO'^M'in'*'* MO « N O »*0 WiO«00«0»OtsO-* OiOO VD -"^ C rnwNir)«M^i-t ^vo W N O W h I^ OOO ^ t N m t^ H o\ OO ^% m o lo o >o mio m o -^ c <0 OO O M O O ■*« O •* « lO *^o>t^wi(ntN,oieo •*■ « M m M H O H tx rhoo to O w N >0 fnw o\^HfvioM ei w ooo f^ tvo m t^ oi m •l^ »o««^-.tommto fnON*noovo too o M COCO o ThM HO « -+»nato\ ooo « n m »ntoo> oo o ■"j-O^mt^oOMO (0inr0iHWO00N(0-*N MOD W MMM MOMCIOmM MMOO ID lO "-^ t^ M OO COOmN H M OfOOHCOOt^ W (O TfOO ONOOO OOO^^WO'^fONMO'**- MO M M M->J-MHtN.MM M O MO MOO OOCO «00 OW1<0W0t^.(00 H O ■»1-00 O '^ fO ^ OCO OH-^K-^IOMO OO ->1- C* M M to 01 tNQO m * M O m O ts -^oo ts N t^o O to O ■+ fs (OOO O O O N N CO OOO NM M HOfOrOOv^iO MW«-»1-M cOMtOH (Otni-t •*rv fo ot^ (OCO tv N o -ff ■* ■«*■ ■^o «o o ot^ ooONNtNor^MOMfo ij-o N M o to CO o H (o to w r^oo m ■* H o >o o rv rj-oo tv w *so o M o o o moo «no m o ts eo OOC^MMMOMtOO^U-l MMW-^WtONtOM tOtOM too o n oo-^t^NO mN omm vio h eo o M VIM row r^-ttON tJ-O >000 HiriM NtxO M to to ^co coo mM OO Ooo motN tooo o oo "* o ■*J-o o to tots mo m o ooo*ot» H NO M fOH -^m MM « TUMfOWtOMtOtOM HO N « OtNOrOM tv»r)r«.mwooOOooOOO ■*co to to M o ^^ m -^^oo mco o o h ^o o m m O to tooo O Ot^O H or^O N ThOONOtsM H o eo^mi^o N o fs HO mo r-eotsNOtNNco o to HHMtOHtOMCIHMtOH o Noom■^^mo m'^i-H m^«.to^s -tco ■»»• m m in OO-iJ-OMCOOt^N toco IVtOH fN-^J-tOtSO -*0 to 1j- tO*N, ^00 ^O M O^M M -i-00« M^^^O 'vfNroe^fiMrOHMooHf}- " oi H MHMtOHtOMC^HMMM ) M o o OO OO H Noooo to-otoot^o -^y- St^tOOMOOOMfN. *^0 -^OO OH ■»*■■* W DO > ^« pioo ommHoo looo oo ^tsoo noo^ > ij-HommH (Titoo ■) ■* M o ■* to o Ooo o IMHMHMHHH O fs ■* "*00 OOOOOO MOO fOO O OO M fxO « to looo ow m^ooo o fvo m*^ >ooo o n h w totOMcooooTfm t^MjN.cv(omiowtsmo ■a o rt o oa 00 o il o a AC S2 M-3 13 3S 5S o o O o llilp ill sillill ^S^e B^ gS'C OS'S .«^«»0 f ^ONO^M M H^O W HiOO W t-t « W M OjWyD 'd-O M to o o to N rs "o M m Thiri o mn»oioo o-^r^oio o>oo ^01^"^^M ;*^^o^np^o m m o to to oo" M t CO «gK a£'SS,?5'?R=?|ps,S :J?.J^|.2-S ?^ftSgRSj?S ? H 6. oo H «SKS'2'S?rS'5g£"2£'^^'^?2S|;RX**?S|;SR1SS,'"^" oo H 4 H OO H <^ 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 I 1 1 1 1 1 1 1 1 1 1 M »1 1 I 1 1 1 1 1 I 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 g M «HIH"-"-°-SH»2"8s-F--5H^-??^^ o R to f M «l?2?s--S§IS?rs>"sS"^--*Htr-^'?" «o H «^H^.""" -S2 rH^ 5"^^^?^ ?S |5^|-,S ^p fO C7> 'O CO H «r?s?i "--= s HHr-H»i "=?i^f ?H -r-S" N OO CO «^HSff""«-t-l,aa^a"?s»F""SssffS»ss'& (N OO to ■4- w CO M «l 1 1 1 1 1 M 1 I 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 O >o oo OO »l ] 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 I 1 1 11 1 M «3 N I H Z D 1 s Scotland. Aberdeen . Argyll. Ayr . . . Banff . Berwick Bute . Caithness . Clackmannan Dumbarton Dumfries . Elgin . Fife . Forfar Haddington. Inverness . Kincardine . Kinross Kirkcudbright . Lanark Linlithgow . Midlothian (Edinburgh Nairn Orkney Peebles Perth . Renfrew Ross and Cromarty Roxburgh . Selkirk Stirling Sutherland . Wigtown Zetland SCHEDULE A. REAL PROPERTY. 57 only. After 1870 there are some rather intractable details of deductions under IIL (Classification of Repayments), but no information is available on deductions " by schedule " until 1900-1, when the " net assessment " was replaced by " net income on which tax was received," a much lower figure, and the deductions under each head included all the allow- ances, at whatever stage they were made. The comparative figures were carried back for ten years, but prior to that we have no details. Hence no attempt has been made to estimate the figures for eai-lier years on these lines in detail ; no important purpose would be served thereby, but in Table G4 the total deductions have been estimated, in order that a true net income comparable with the present one may be given for all schedules together. ScH. A Allowances — I. Deductions from the Gross Assessment (Objective or Impersonal). (i) Land Tax. — " The amount of land tax charged on lands, tenements, hereditaments, or heritages," under the Land Tax Act, 1797, " where the charge thereon shall not have been redeemed." This is recognised as a landlord's burden, payable out of the rack rent, so that where a tenant covenants to pay land tax, the amount has to be added to the rent to arrive at the gross assessment, Sch. A, and then allowed again as a " deduction." This secures uniformity for statistical purposes, both under Sch. A. and Sch. B. The full land tax charged, in the statutory sense, is allow- able, although half the charge may be excused under the Finance Act of 1894 on the ground of the owner's income being under £400 per annum. It will be seen from the Reports that the total amount allowed has gradually become less, pari passu, with the process of " redemption." But in any case the amount allowed as a deduction is considerably less than the total sum charged, which in 1910-11 was over ^^700,000, the allowance being only about £400,000. The difference is mainly accounted for by the fact that there are very many 58 BRITISH INCOMES AND PROPERTY. small sums which on individual properties are only fractional deductions and are not worth including as such. For example, on a £40 house charged to Land Tax at xd. in the £ the deduction of 3s. makes an insignificant difference to the net assessment and duty payable. The statistics of land tax are now of very little value for economic investigations. The original assessments themselves are sometimes useful for local inquiries, where they are available. The statistics have been used to determine distribution and occupy- ing ownership, with a device to give an acreage classification ; "numerous traps are spread for the unwary statistician " (Johnson, " Disappearance of the Small Landowner," 1909, p. 131). In allocating " Deductions " between " Lands " and " Messuages " Sir T. H. Elliott referred land tax, sea walls, ecclesiastical deductions, repairs of churches, rates on tithe rent charge to " Lands " and divided the remainder in the proportion of three-fourths to buildings and one-fourth to lands.^ Lord Milner, in a general division of tax burdens, assigned £802,700 Land Tax to lands and £219,000 to houses. ^ The question whether land tax, redeemed or not redeemed, is to be regarded as a tax or burden upon lands, or whether it is now a rentcharge, is of some importance when matters relating to relative tax burdens or site values are under discussion.^ (2) Sea Walls, etc. : Drainage Rates. — ^An allowance is made for the amount expended by the owner of lands in respect of the actual average of the preceding twenty-one years in making or repairing sea walls or other embank- ments necessary for the preservation and protection of the lands against the encroachment or overflowing of the 1 S. /., 1887, p. 208. " R. C. on Local Taxation, Appendix, 582. 3 Vide pp. 352, 470. Lord Milner, when Chairman of the Board of Inland Revenue, in giving evidence before the R. C. on Agriculture, 1896, though loth to express an opinion, evidently considered it a true tax (Qs. 63,085, 63,425, etc.) ; but the deputy-chairman. Sir F. L. Robinson, gave it as the " Inland Revenue view " that it was a variable rentcharge (Q. 45,247). Also vide comments by the present writer in Economic Journal, July, 191 1. The view held in 1846 may be gathered from the Report of the S. C. on Burdens affecting Real Property. SCHEDULE A. REAL PROPERTY. 59 sea or a tidal river, although the sums expended may not have been charged by any public rate or assessment.^ This came into force in 1853. It does not apply to expenditure in order to increase the value of the land to the owner by changing its condition, either in reclamation or permanent improvement.^ Drainage rates have been allowable since 1842 — " for the amount charged on lands, tenements, hereditaments or heritages by a public rate or assessment in respect of drain- ing, fencing or embanking the same." * The economic justice of treating these as specific deduc- tions from the gross value rather than as items to be allowed for in computing gross value is referred to in Chapter IL (3) Ecclesiastical Payments, and Repairs of Churches. — Tenths and first fruits and duties and fees on presentation, paid within the year preceding the assessment year ; • pro- curations and synodals on the average of the preceding seven years ; repairs of collegiate churches and chapels and chancels, or of any college or hall in any of the universities, on the amount paid in the preceding year * by any ecclesias- tical or collegiate body, rector, vicar, or other person bound to repair. These allowances are granted from assessments upon the persons liable to the payments. They are, for statistical purposes, negligible (;^i6,8o9 in 1899-10). (4) Parochial Rates on Tithe Rentcharges (£326,802 in 1899-00 and considerably more at the present date). — " For the parochial rates, taxes and assessments charged upon or in respect of any rentcharge confirmed under the Act passed for the commutation of tithe on the amount paid in the year in which the assessment shall be made." ^ Except for the next case (Public Burdens in Scotland) this is practically unique as a method of allowance, the burden of rates being provided for in other cases before the gross assessment is arrived at (as in the case of weekly pro- ^ 16 & 17 Vict. c. 34, s. 37. 2 Hesketh v. Bray, (1888) 2 T. C. 380. 3 5 & 6 Vict. c. 35, s. 60 ; Sch. A, V., 4. * By the Act of 1853 ; it had previously been a twenty-one years' average. ' 5 & 6 Vict. c. 35, s. 60 ; Sch, A, V., 4. 6o BRITISH INCOMES AND PROPERTY. perties where the owner pays the tenant's rates). The origin is doubtless in the old method of assessing commuted tithes.i where the titheowner receiving his income from various quarters, with full tax deducted, had to claim these expenses by repayment. As in the case of land tax, the allowance is to be for the " amount charged," and not the actual sum paid, by the recipient of the gross income. Therefore, although under the Tithe Rentcharge Rates Act of 1899 half the burden of the ordinary rates upon tithe rentcharges paid to incumbents is borne by the State, the allowance of the full rates is still made from the Sch. A assessment. (5) Public Rates and Burdens (Scotland) (Relief to Land- lords under Act 19 & 20 Vict. c. 80), £1,352,265 in 1899-1900, and at the present time probably about twice that amount. — In Scotland landlords are charged with a share of public rates, taxes, and assessments which in England are by law a charge on occupiers, and since these are a deduction from the gross rent received before the net income is ascertainable, and the gross assessment is made upon the rent, it was neces- sary to provide for the exceptional deduction in this way. As to the effect for statistical purposes upon the gross figures Sch. A, Sch. B, and House Duty, see pp. 20, 86, and 133 respectively. (6) Repairs. — The original Income Tax Act, 1799, allowed, in the case of farm buildings of a farm with a principal messuage, repairs up to 8 per cent, on the annual value, and where there was no principal messuage, up to 3 per cent. In the case of houses and buildings not occupied with a farm, the hmit was 10 per cent.* In 1806 the allowance for repairs was discontinued, the reason being that cases of fraudulent claims had occurred, " where landlords, demand- ing an allowance for repairs, in fact done by the tenants, had obtained an advantage over others who were correct in their returns."^ No provision for the allowance was made in the Act of 1 Viie p. 43 on Tithe Rentcharge. 2 Vide Dowell's " Income Tax Laws " (fifth edition), p. xlvii. ' Ihid., p. li. SCHEDULE A. REAL PROPERTY. 6i 1842, and the omission was the subject of much discussion and debate for many years. Gladstone opposed the allow- ance and considered that by its absence differentiation was provided between income from property and income from personal exertion. In 1894 the increase in the tax rate was partly offset by a higher exemption limit, a higher abatement allowance, and the allowance for repairs. The chief points to note are — (i) The one-eighth on lands is allowed upon the gross, or Sch. B, value, including tithe, and in the case of farm cottages excluded from the Sch. B assessment one-sixth is allowed. (2) The one-sixth is not always allowed, or fully allowed, in the case of lease rents. (3) The " repairs " allowances are given on all classes of properties, whether exempt, abated, or allowed as " charities," etc. " The Report of the Commissioners of Inland Revenue for the year 1908-9 shows that the sum of about £33,000,000 was allowed in respect of 1907-8 by way of deduction in respect of repairs to houses ; a small portion of this sum is doubtless included in the amount allowed for industrial repairs, but on the other hand, repairs executed by house owners whose incomes fell below the exemption limit were not included " (Census of Production, Final Report, p. 36). The assumption in the sentence italicised is incorrect. It can be seen on examination that the repairs allowance is given generally, and without regard to ownership, the income assigned to exempt owners being pro tanto reduced. (4) The " repairs " allowances in Scotland exceed those in England in proportion to the annual value {vide p. 20). (5) The " repairs " allowances in Ireland are specially affected by statute. The one-eighth on lands is allowed in practically aU cases, but in the case of buildings the existing valuation is already so much below the true rental value that where it is more than one-sixth below no allowance is given. ^ The allowance given in Ireland is therefore far 1 Finance Act, 1894. 62 BRITISH INCOMES AND PROPERTY. less than one-sixth of the whole gross value of buildings.^ The effect upon the net assessment is sometimes peculiar : assume two different cases with a rental of £120 and valua- tions of £102 and £98 respectively, the net assessment in the first case would be £102 minus one-sixth £17, or £85, and in the second case 1^98. How closely does the statutory " repairs " allowance approximate to the facts ? The one-sixth allowance for buildings was adopted by Sir William Harcourt in 1894, following on the suggestions by Mr. Hubbard in 1861, and it was intended to provide not only annual repairs, but also " a sufficient sinking fund for the eventual replacement of the building." ^ For ordinary dwellings the allowance is generally regarded as adequate,' and it covers also the cost of insurance, but probably most owners do not greatly concern themselves as to whether it is sufficient to provide a sinking fund in passing an opinion on the general question. Its adequacy in the case of trade premises is discussed in another connection, as very different and difficult issues are raised.* It has been called into question in relation to cottage property, and was the subject of special legislation in 1910. For some years the heavy outgoings in the case of agricultural estates had been urged as a reason for more liberal allowances from cottages and lands. The Central Land Association gave evidence for 241 estates covering nearly two million acres, with details as follows : — Repairs ...... New works necessary to maintain rents Management and legal fees Insurance ..... Total average expenditure ^ Per cent. 20-8 3-1 6-02 1-2 29-5 ^ Vide p. 160. * Income Tax Committee, 1905, Evidence, Q. 1,807. = Ibid., Q. 1,809. * Vide p. 195. ° Vide Transactions of Surveyors' Institute, 1911 : " Upkeep on Agricultural Estates," W. A. Haviland. SCHEDULE A. REAL PROPERTY. 63 A little uncertainty naturally exists about the second item, and the ultimate concession was said to be due to it being shown that " costs of upkeep averaged 27^ per cent, of the gross rents." ^ The provision actually made in 1910 allows for repayment wherever an estate owner proves an average expenditure on farms and cottages (not exceeding £8 in annual value ^) in excess of the existing one-eighth and one-sixth allowances, up to a maximum of 25 per cent., i.e., it doubles the allowance on land and increases the allowance for buildings from one- sixth to one-quarter. The amount of duty (at is. 2d. in the £) assigned for this additional relief was £500,000 ; one writer says the Chancellor " hoped they would be contented with this paltry sum." ' There seems to be confusion between this figure and the amount of assessment allowed : — " If they had been able to get ;£6,ooo,ooo off land under the 1894 Act, they ought to be able to get a great deal more than £500,000 under section 69 ..." * Up to 31st March, 1910, only £7,900 was repaid — " very disappointing." The actual statistics of repayment have been given as follows : — 1910-11, £9,000 ; 1911-12, £53,000 ; 1912-13, £65,000. An allowance of £500,000 would provide for an additional 8|^ millions of assessment to be deducted, and this is equal to more than the maximum claim on all the agricultural land in the United Kingdom.^ The additional allowances have been included in the statis- tics of deductions under the heading " Repairs," so that this item is much more complete than formerly.® (7) Empty Houses not charged to Duty.' — ^This covers not only properties void for a whole year, but als6 for ^ A. R. Stenning, Transactions of Surveyors' Institute, 1909. Vide also Evidence before R. C. on Agricultural Depression ; and Nicholson, " Rates and Taxes as affecting Agriculture." * Since extended to £x2. * W. A. Haviland, loc. cit., p. 107. * W. A. Haviland, ibid., p. 115. ^ It was an estimate of the " maximum amount which might be repayable in any one year." Mr. Lloyd George, 30.5. 1911 (Hansard, Vol. 26). The statutory limit of 25 per cent, has since been removed. 70. 64 BRITISH INCOMES AND PROPERTY. portions of a year, even down to a week. Since 1894-5 the amount has represented net assessments after allowance for repairs, i.e., if a house is void for three months, one quarter of the net assessment is allowed. If it is desired, therefore, to deduct from the gross values the value of empty property, one-fifth should be added to the figures given. Sir Thomas Whittaker divides the total allowance for empty property proportionately between land and buildings (" Owner- ship and Taxation of Land," p. 87). But the amount applicable to lands is infinitesimal (probably not more than -2 per cent.), as there is no statutory provision for such an allowance. Only small building sites and waste land are included. Practically the whole sum should be assigned to buildings. There is an administrative peculiarity which affects the earlier statistics (up to 1900-1) in an important way. It will be seen that the statistics given were for Scotland only, and none were available for England and Wales or Ireland. The reason is that practically the whole allowance for Scot- land is made in the assessment, whereas elsewhere it is given " by schedule." ^ The present reports give all sums, how- ever allowed. (8) Other Allowances : Lost Rent. — There is no statutory provision for any allowance when premises have been occupied but the tenant is in default with his rent, which is finally lost. But the concession made in such cases dates almost from the beginning of the tax.^ The amount allowed is not separately shown ; it is not a large part of the whole " adjustment " item, but it mainly relates to small house property. ScH. A Allowances — 11. Non-personal Income. (i) Colleges or Halls in Universities (£46,408 in 1899- 1900). — " For the duties charged on any college or hall in any of the universities of ... in respect of the public buildings and offices belonging to such college or hall and not occupied by any individual member thereof, or by any person paying rent for the same." ^ * Vide p. 53. " S. C. on Income Tax, 1851, Q. 1,649. ' 5 & 6 Vict. c. 35, s. 61, No. VI. SCHEDULE A. REAL PROPERTY. 65 The sum exempted appears in the tables since 1894-5 as the five-sixths of the value, i.e., after deducting the one- sixth for repairs, so that to get the gross value of these cases one-fifth should now be added. (2) Hospitals, Public Schools, Almshouses (£2,472,077 in 1899-1900). — " . . . any hospital, public school or alms- house, in respect of the public buildings, offices and premises belonging to such hospital, public school, or almshouse, and not occupied by any individual officer or the master thereof whose whole income, however arising, . . . shall amount to . . . £150 per annum, or by any person paying rent for .the same ... or any building the property of any literary or scientific institution, used solely for the purposes of such institution and in which no payment is made or demanded for any instruction there afforded, by lectures or otherwise : provided also, that the same building be not occupied by any officer of such institution, nor by any person paying rent for the same." ^ The value appearing since 1894—5, as in the preceding case, is generally five- sixths of the gross value. Throughout these two cases the exemption is narrower than the popular use of the words quoted in the headings. Many cases in the courts have been necessary to determine the question of liability in individual cases. Thus, the Manchester Free Library fell within the exemption and the Dundee Library did not ; the City of London School was allowed, but the Free Church of Scotland Theological College was not ; the Nottingham Lunatic Asylum was within the exempting clause, while the Dundee Royal Lunatic Asylum was chargeable. Vide also House Duty — Exemptions, p. 121. (3) Rents and Profits of Lands applied to Charitable Purposes (£762,120 in 1899-1900). — " On the rents and profits of lands, tenements, hereditaments or heritages belonging to any hospital, public school or almshouse, or vested in trustees for charitable purposes, so far as the same are appUed to charitable purposes." * The word " charitable " is interpreted in a wide sense. 1 5 & 6 Vict. c. 35, s. 61, No. VI. 2 Ibid. 66 BRITISH INCOMES AND PROPERTY. Lord Macna^hten says : " ' Charity/ in its legal sense, com- prises four principal divisions : trusts for the relief of poverty, trusts for the advancement of education, trusts for the advancement of religion, and trusts for the other pur- poses beneficial to the community, not falling under any of the preceding heads. The Act of 1842 has nothing to do with casual almsgiving or charity of that sort, nor indeed has it anything to do with charity which is not protected by a trust of permanent character." ^ Since 1894-5 the figure appearing in the tables has been after the repairs allowance. But whereas the old tables gave only the sums exempted in the assessments, the recent reports show the total sum, including the very considerable amounts granted by repa3nnent. Deductions and Allowances — III. Personal Allowances. (i) Exemptions. — The sum given in the official reports as exempted is that assignable to recipients of the income assessed under Sch. A (owners, mortgagees, ground landlords, etc.) who had total incomes below the exemption limit. This sum is a necessary deduction when the total income of taxable persons is being ascertained. It is, moreover, sometimes desirable to ascertain the approximate value of land owned by the working classes, and this figure gives a good maximum limit. It indicates that the following is excessive : — " Would it destroy the moderation of my estimate if I put the value of all the urban and rural property of small landlords of the working class at £20,000,000 ? (previously defined as " value of houses actually acquired by workmen, properties of smaD freeholders, farmers, market gardeners, owners of allot- ments, etc., crofters in Scotland, and peasant proprietors or small tenants who have purchased their holdings in Ireland "). — Jesse Quail, "The Wealth of the Workers," Contemporary Review, August, 1907. Division in " Lands " and. " Houses." The " exemptions " are always given in one sum for all classes of property, and there is nothing to indicate how * Commissioners for Special Purposes v. Pemsel, 3 T. C. 53. SCHEDULE A. REAL PROPERTY. 67 much of the gross value of " lands " is exempt, as distinct from " messuages." Mr. Christopher Turner gives the gross income from land in Great Britain as £42,000,000, of which £4,000,000 goes to " exempt owners," = £38,000,000 for agricultural landowners, less 30 per cent. 12,600,000 for upkeep £25,400,000 net, or 6-6 million pounds " less than the Land Conference memorandum of 20th January " (Letter to The Times, 23rd February, 1914, on " Income of Agricultural Owners "). An opportunity for computing the relative proportions of the net exempt Sch. A belonging to " Lands " and " Houses " respectively, and, therefrom, the respective gross assess- ments belonging to exempt persons, appears to occur at the first occasion for the allowance of repairs. At present it is not possible to say what fraction, between one-fifth (for houses) and one-seventh (for lands) should be added to the net exemptions to give the gross, because these proportions are not known, If 1893-4 and 1894-5 were in all other respects alike, the latter year would show an amount for exemptions less than the amount in the former, by the repairs allowance, and this allowance would represent a composite of allowances one-eighth and one-sixth, from which the pro- portions of the two could be determined. But apart from a normal growth in the year we have the complication that 1893-4 was a re-assessment year, and the amount and number of exemptions as recorded were in consequence much lower than usual, and lower than the true figure (as explained elsewhere). Moreover, the repairs allowance was not the only change, but the exemptions in 1894-5 were up to £160 instead of £150. In the net result, for England and Wales, we had exemptions : — 1893-4. 11,453,468 (number of properties affected 1,094,549) 1894-5 . 11,073,817 ( „ „ 1,209,726) Decrease 379,651 Increase 115,177 Despite the higher exemption limit, and the increased number of properties exempted, the repairs allowance made the sum 68 BRITISH INCOMES AND PROPERTY. " exempted " smaller than before. With the three com- plications it is not possible to work upon the aggregate charges, though the average value of properties exempted, which was constant, should apparently furnish a standard unaffected by re-assessment years ^ ; but the material is too rough to give satisfactory results on a fine fractional difference. It points to the fact that a mere transfer from one deduction column (exemptions) to another deduction column (repairs), having no fiscal significance, did not receive full administra- tive effect at once in assessments already made up, and all other methods based upon this change fail for the same reason. 2 In evidence before the R. C. on Agriculture, 1896, the Chairman of the Board of Inland Revenue, Lord Milner, put in a table ® (which may be regarded as an official estimate) £ as follows (England and Wales) : — Lands, 1893-4 gross assessment . 40,065,831 Approximate statutory deductions and abatements ..... 4,924,178 Discharges and repayments by way of appeal, etc 3,457,079 Net annual value .... 31,684,574 As far as I have been able to analyse the deductions, they seem to be computed by taking separately the deductions specifically applicable to lands (or almost entirely so), land tax, sea walls, ecclesiastical deductions, rates on tithe rent- charge, rents and profits applied to charitable purposes, and dividing the deductions not specifically belonging to any single category directly in the ratio of the lands and mes- suages. Therefore in this figure exemptions and abatements have been allotted to lands and messuages respectively almost in proportion to the gross assessments. (The " discharges by schedule " were heavy in that year, because it was a re-assessment year.) 1 By the formula :— Difference in average = t±^ _ CZL , ^\ i from which L (lands) should be found in terms of M (messuages). ' Vide also Appendix II., p. 500. • Evidence, p. 481. SCHEDULE A. REAL PROPERTY. 69 From this it may be gathered that, on the best evidence available at that time, the lands in the hands of persons exempt in 1894-5 (£160 limit) amounted in annual value to about — £ England and Wales , . 2,900,000 Scotland .... 380,000 Ireland .... 750,000 Total .... 4,030,000 This sum was strictly only the amount allowed in the assessments, and therefore (except in Ireland ^) did not generally include the interest payable to exempt mort- gagees : such interest would form the major part of the repayments under Sch. A applicable to lands, and the amount is not ascertainable from the Reports. It is unlikely that the present total exemption should be similarly divided in proportion to the total value of lands and houses respectively. The greater part of the increase in exemptions is assignable to houses, except in Ireland, and, although doubtless the splitting up of landed estates has added to the numbers of exempt owners, the change must be relatively small. On the proportional method, it would give- ^ England and Wales . . 3,600,000 Scotland .... 540,000 Ireland .... 4,300,000 Total .... 8,440,000 but in my judgment these figures are more likely to be, in fact- ^ England and Wales . • 3,300,000 Scotland .... 500,000 Ireland .... 5,400,000 Total .... 9,200,000 1 Vide p. 148. 70 BRITISH INCOMES AND PROPERTY. assuming the figures for 1894-5 to be correct. This figure, however, includes repayments, and therefore mortgagees who are exempt. In cases where exempt owners pay mortgage interest to persons who are liable, the annual interest is of course not included in the exemption, but in the remaining " net assessment." But this rule is completely interfered with in the case of interest paid to building societies, because these concerns are assessed under special arrangements. Generally the property is exempted outright, and the society receives its interest without any tax being deducted. Then the society is assessed (under Sch. D) for interest which it pays to liable shareholders, members, or other recipients. The effect of this arrangement is to make the " exempted " interests in real property appear rather larger than they really are at the moment. There is a similar arrangement in Ireland for dealing with interest paid under the land pur- chase schemes.^ There the value appearing as exempted is the value that will belong to exempt purchasers, when they have paid off all their indebtedness. (2) Abatements. — The sums allowed under this head are Moi closely indicative of the numbers of incomes/;'ow property, which fall between certain limits. In the case of mixed incomes the abatement for property owners may be allowed under another schedule. In general, however, since " earned income " rates were introduced in 1907, abatement in such cases is allowed in the first instance from such income, e.g., in the case of a total income £280, £140 from property and £140 from salary, the salary will be " abated " and the balance (£20) of the £160 abatement allowed from assess- ment on the property. It is because information is lacking as to the number of these part abatements that no inference can be drawn from the total sum allowed under Sch. A. Prior to 1900 only the abatements " in the assessment " were given in the tables,** and these were always much restricted in the re-assessment years. ^ (3) Life Insurance Premiums. — These are allowed only ' Vide p. 148. " Vide p. 53. » Vide p. 499. SCHEDULE A. REAL PROPERTY. 71 by schedule and repayment under Sch. A, and therefore did not appear in the tables before 1900. (4) Relief in respect of Children.— This is more fully dealt with in Chapter VIIL No inference can be drawn from the sectional allowance here. Sch. A Net Assessments — Sequence., The " breaks " are much more numerous than in the gross assessments, and practically rob the net assessments (as given in the Reports) of any value for comparative purposes over long periods. The chief breaks are — (i) 1853-4. Ireland introduced (exemption limit altered) . (2) 1866-7. Concerns No. IIL, Sch. A, transferred to Sch. D. (3) 1862-3. Abatements introduced. (4) 1872-3. Abatements altered. (5) 1876-7. Abatements altered and exemption limit changed. (6) 1894-5. Abatements altered and exemption limit changed. (7) 1898-9. Abatements altered. (8) 1894-5. Repairs allowance introduced. (9) 1900-1. Methods of statistical presentation altered, "Net income on which tax received" substituted for " net assessments." The net income from property, free from personal allow- ances, can now be computed for comparative purposes. Breaks (6), (7), and (8) ignored : — " Sch. A exhibits a rather puzzling anomaly, inasmuch as its gross assessments show for the decade 1891-2 to 1900-1 an increase of 31I millions sterling, while the income actually taxed declined more than 11 millions." — W. R. Lawson, " Two Record Budgets," Fortnightly Review, May, 1903. Ownership and Distribution of Property : The New Domesday Book. The tax statistics furnish very little information about the ownership of land. Owners are assessed as statutory 72 BRITISH INCOMES AND PROPERTY. " occupiers " in certain cases, such as property let for periods less than a year, or houses under £io in annual value, but otherwise, in taxation " at the source," it is the tenant to whom the Revenue looks, and the name and circumstances of the owner are immaterial. Only where the owner is concerned to claim exemption or abatement or some allow- ance from the assessment is it necessary to take notice of him. The poor rate authorities are even less involved in matters of ownership, and it may therefore be understood why the " ownership " column of the valuation list is often so unreliable and out of date : it is only from casual information that the opportunity arises for its correction. In 1873 a classification of owners as given in the rate books or valuation lists was undertaken and issued as a Parliamentary Return in 1875. It has since been widely known as the " New Domesday Book," and is the chief source of information as to the distribution of ownership. A good summary is given by F. Purdy.^ Classification by extent of holdings :— Under one acre . 703,289 One to 100 acres . . 227,023 100 to 500 acres 32,317 962,629 500 to 1,000 acres . 4,799 1,000 to 2,000 acres 2,719 Over 2,000 acres . 2,689 10,207 (Total, 972,836 owners.) Another summary may be found in Dawson's " The Un- earned Increment " (p. 54) : — One quarter of the land of the United Kingdom was held by 1,200 persons (average acreage, 16,200) ; a quarter by 6,200 persons (average acreage, 3,150) ; a quarter by 50,770 persons (average acreage, 380) ; a quarter by 261,830 persons (average acreage, 70). One-half was held by 7,400 persons, and the other half by 312,500. While 4,500 persons held half the area of 1 S. J., 1876, p. 393- SCHEDULE A. REAL PROPERTY. 73 England and Wales, 1,700 held nine-tenths of Scotland, a single owner having in his hands more than a million and a quarter acres. " The returns placed the number of landowners at 1,173,724, but the estimate was far too high, as it included hundreds of duplicates and thousands of leaseholders, and besides, 852,438 of the reputed owners held less than an acre of land, their average not being a quarter of an acre each. Recent returns show that the number of separate holdings in France exceeds five and a half milUons, and in Germany five and a quarter millions. — Dawson, op. cit., p. 53. Similarly, J. Ellis Barker quotes the figures in comparison with Germany (1895), and states that 12-2 per cent, of the English acreage was occupied by owners against 87-4 per cent, in Germany [Nineteenth Century, September, 1909). Major Craigie gave a somewhat destructive criticism of the return before the S. C. on Small Holdings, 1889, ^ dealing with the uncertainty of owners' names and their duplications. It is quite certain that all inquirers do not bring away the same lessons. A " Re-examination " by W. H. Mallock with regard to the value as weU as the extent of the properties, lays stress upon the fact that in Great Britain and Ireland (excluding the metropolis) there were 900,000 " estates less than one acre," gross rental £38,000,000 — average rent per acre, £190 (" Statistical Mono- graph," I.). Ownership and Use of Property. Other information has been obtained from returns of agricultural holdings. Major Craigie handed to the S. C. on Small Holdings, 1889,^ an analysis of the agricultural returns, in counties, showing the following results : — — England. Wales. Scotland. Great Britain. (i) Returns from occupiers farm- ing their own land. 60,935 6.454 6,044 73.433 (2) Total returns from occupiers . 425,886 62,127 82,193 570,206 (3) Percentage of (i) 14-3 10-4 7-4 12-9 (4) Acreage of land owned and occu- pied 3.967.675 315.844 626,557 4,910,076 (5) Total acreage . 24,964,483 2,841,402 4,878.514 32,684,399 {6) Percentage of (4) 15-9 II-I 12-8 15-0 1 Qs. 4,961, etc. P. 503 and Q. 4,974- 74 BRITISH INCOMES AND PROPERTY. In the Appendix! to the Report of S. C. on Poor Law in Scotland, 1869-70, details are given by counties and parishes, the totals being — Annual value of £500 and upwards . 4,106 „ £100 to £500 . . 9,776 „ £50 to £100 . . . 11,217 „ £20 to £50 . . . 22,844 Total number of holdings 47.943 J. Ellis Barker quotes the agricultural holdings returns (from Cd. 4533) to show that freehold properties are in the greatest proportion among smallest holdings (except for those over 300 acres), and to show that freehold is mostly desired by the smallest holders {Nineteenth Century, October, 1909). In 1867 the following classification was given for Irish agricultural holdings ^ (thousands) : — — Counties. Towns. Total. Less than £4 . £4 and under £8 £8 and under £10 . £10 and under £15 . £15 and under £20 . £20 and under £50 . Over £50 175 142 48 78 46 83 36 157 41 ■ 44 1 30 Total Area (acres) . Valuation Population 609 20,190 10,191 4,286 272 97 2,451 1,512 20,815 13,245 5.798 Another classification gave five-sixths as being under £15 per annum, as follows : — Less than £15, 512 ; £15 and under £30, 94 ; £30 and under £50, 38 ; £50 and under £100, 25 ; over £100, 13 — total, 682 : of which tenancies at will numbered 429, 63, 21, 10, and 3 respectively — total, 526. 1 P. 366, Vol. IL * H. C. 144 of 1867. SCHEDULE A. REAL PROPERTY. 75 In 1872 a parliamentary return^ gave a classification of the assessments on property owned by corporate bodies, in counties. The totals were (in thousand £) : — Municipal Corpora- tions. Ecclesias- tical and Educational Bodies. Joint Stock Companies, Othef Corpora- tions. Totals. England and Wales . Scotland . Ireland . 707 143 27 3.I4I 330 197 2,006 28 2,386 197 58 8,240 866 310 United Kingdom . 877 3,668 2,229 2,641 9.415 It is not possible at the present time to state what amount is similarly held, but it must be very much greater so far as corporations and companies are concerned. An interesting return ^ gives details of the deer forests and lands exclusively devoted to sport in Scotland, in counties other than crofting counties. In eleven counties, with a total area of six million acres, 557,344 are so used, the rental value being £36,118, or less than is. ^d. per acre. There were 87,000 acres at 5|rf. in Aberdeen, 40,000 at yd. and 160,000 at lid. Early Sch. A Statistics used as Evidence of Increase in Property. The following are given by way of example : — " A few years after the beginning of the century, viz., in 1802-3, the average annual value of real property, according to the income tax returns, amounted only to about £35,000,000. In 1814 the amount was £53,500,000. In other words, in about ten years time the property of the nation, so far as it was derived from real property, increased about 50 per cent., and we may assume that there was an equal increase in the proj^erty itself."-^ Sir R. Giffen, "Are we Living on Capital?" "Economic Inquiries," II., p. 291. Vide also under " Sequence " (p. 38) lor similar extended use by Giffen. Goschen makes similar use, and it would serve httle purpose to multiply examples. 1 H. C. 122—1872. » H. C. 344—1907. 75 BRITISH INCOMES AND PROPERTY. A Prophecy. — Writing in 1871, Giffen said that the real property worth £150,000,000 then would be worth £250,000,000 in thirty years ("Taxes on Land," "Economic Inquiries," I., p. 275). The actual period was thirty-three years. Statistics of Messuages used as a Test of Prosperity in the Building Trade. These figures have been used for this purpose by Sir Algernon West,^ Mr. W. H. Mallock,^ and others. As it is usually desired to consider this prosperity from year to year rather than over long periods, the statistics are not well adapted for the purpose. In valuation years it is difficult to distinguish increases in values from new values, and in intermediate periods it is necessary to estimate for the downward " drag." ^. The total numbers of aU premises are not subject to quite the same limitations, however, and inferences may be more safely drawn therefrom.* Comparison of Increase in Sch. A and Pauperism. (i) 1847-65. Sch. A increase 61 per cent., and pauperism 49^ per cent. (S. C. on Poor Law in Scotland, 1869-70, Appendix, p. 479). (2) Various heads of poor law expenditure measured annually against the aggregate Sch. A assessments from 1845 (S. C. on Poor Law in Scotland, 1869-70, Appendix, ?• 453)- Use of Schs. A and B (County Details). (i) Trend of Agriculture. — Caird uses figures for 1878 and 1869, grouped into corn districts, arable, grass, etc. (" Ten Years of British Agriculture," S. /., 1880). F. Purdy compares 1814-15 and 1864-5 (■5. /•, 1869, p. 308). R. C. on Agriculture, 1896, compares 1870-1, 1879-80, and 1893-4, p. 554. Royal Agricultural Society's Journal, 1858, p. 301. R. C. on Land in Wales : comparisons 1842 — decadal to 1892. Vide also Chapter IX. 1 R. C. on Depression in Trade and Industry, 1886, Q. 729. " Vide p. 33. * Vide p. 31. * Vide Quarterly Journal of Economics, 1915, p. 816, R. S. Tucker on " The New Land Taxes in Practice." SCHEDULE A. REAL PROPERTY. ^'j (2) Burden of Land Tax as a Fixed Charge.— Proportion of Sch. A in each county to the total for comparison with land tax percentages at different periods (F. Hendriks, " British Land Tax Statistics," 5. /., 1857). Use of Sch. A Details (Parishes or Towns). Ratings and Sch. A compared. — Lumley, S. /., 1858, quotes H. C. 337 — 1856-7, sess. 2 ; Purdy, S. /., 1869. Miscellaneous Sources of Information, other than Annual Reports. (i) Parliamentary Papers. H. C. 235 — 1842. Return of Real Property for England and Wales in Counties, giving the annual value, 1815, and the net rental rated in 1840-1, and annual value per acre. H. C. 316 — 1844. Sch. A Assessments, 1842-3 : valuation by Parishes and Counties. The total valuation given in subsequent reports is not fully accounted for. H. C. 102 — 1845. Return for 1842-3 by Counties, dis- tinguishing details : Lands, Messuages, Quarries, Mines, etc. H. C. 165 — -1845. Similar Return to the foregoing, with full details, by Parishes. H. C. 449 — 1849. Burdens on Land. Tables comparing 1814-15 with 1842-3. Comparative value of poor rate. Unfairness of Sch. B if profits small (Lord Monteagle's report) . H. C. 185 — 1851. Sch. A in classes 1814, 1842, 1845, and 1848. H. C. 680 — 1852-3. Sch. A Assessments in Metropolitan Parishes. H. C. 254 — 1854-5. Sch. A Assessments in Metropolitan Parishes, with comparison. County Rate and Poor Rate Valuations. H. C. 408 — 1856. Scotland : County and Parish Return of Valuations. H. C. 317 — 1857 (2). County and Borough Return of Sch. A and Population. 78 BRITISH INCOMES AND PROPERTY. t H. C. 3 — 1859. County and Borough Return of Sch. A. H. C. 123—1859. County and Borough Return of Sch. A. H. C. 155 — 1860. Counties and Burghs, Scotland. Income Tax, Voters, Population, etc. H. C. 332 — 1860. Cities and Boroughs, England and Wales. Comparison between Sch. A and Gross Poor Rate. H. C. 393 — 1860. Sch. A Statistics for certain Cities and Large Towns. H. C. 400 — 1860. Poor Rate Assessments by Counties and Parliamentary Divisions (England and Wales). H. C. 546 — 1860. Sch. A Assessments, Great Britain, by Parishes, 1859-60, giving in great detail Lands, Messuages, Tithes, etc. H. C. 155 — 1861. Assessments in Chelsea, Kensington, Hammersmith, Fulham, and Scotland. H. C. 455 — 1861. Metropolitan Parishes — Sch. A on Houses. H. C. 518 — 1861. Metropolitan Parishes — Sch. A and Poor Rate, Sewers Rate, County Rate Valuations, with rating deductions (gross to net) . H. C. 518 — 1861. Ditto, Kent, Middlesex, and Surrey. H. C. 199 — 1863. Unions in Lancashire. Gross Poor Rate, Rateable Value, and Sch. A, i860. H. C. 548 — 1863. Metropolitan Parishes. Gross Poor Rate and Sch. A 1861-2 and 1862-3. H. C. 321—1864. Ditto. H. C. 116 — 1864. Scales of Rating Deductions in difterent Unions. H. C. 568 — 1864. Cities, Boroughs, and Counties in United Kingdom. Gross Sch. A, 1857 and 1862. H. C. 113 — 1865. Scotland — Valuation of Lands and Heritages — in Parishes : (i) Land let ; (2) land occupied, including woods ; (3) houses ; (4) mills and factories ; (5) gas and water works ; (6) mines, quarries, and railways. H. C. 477 — 1865. Classification of Lands, etc., 1864-5. H. C. 485 — 1866. Metropolitan Assessments, 1863-4 ^^'^ 1864-5, by Parishes, Sch. A, and Gross Poor Rate. H. C. 511 — 1866. 1814-5, England and Wales, Sch. A, by Counties. SCHEDULE A. REAL PROPERTY. 79 H. C. 524 — 1866. Scales of Rating Deductions in different Unions. H. C. 53—1867-8. 1862-3, 1863-4, 1864-5, England and Wales, Sch. A, and Ratings. H. C. 454—1870. 1842-3 to 1869-70, Great Britain, Sch. A, by Counties. H. C. 287 — 1871. Local Taxation — Return for various dates, 1748 to 1870. Population, Sch. A, rate per head, etc. H. C. 397 — 1872. Assessments, Sch. A, in Liverpool. H. C. 42 — 1874. Scotland — Valuation Rolls : Parish Returns for 1855, 1861, 1867, and 1872. H. C. 368—1869. Five decadal Returns : Gross Assess- ments. H. C. 461 — 1875. England and Wales — Classification in Lands, etc. H. C. 335 — 1876. Owners of Land, by Counties, in Great Britain, with Acreages of Holdings and Gross Values (Poor Rate). H. C. 7 — 1877. Government Property not rated (no totals) . H. C. 234 — 1878. Annual Value chargeable under different heads, and duty thereon. H. C. 292—1882; 206—1883; 25—1884; 235—1884. Return by Counties. H. C. 20 — 1884. Agricultural Depression. Repayment of Income Tax to Landlords under certain conditions, 1881-2 and 1882-3. H. C. 170 — 1890. Government Property (London) — Rateable Contributions. H. C. 32 — 1892. Return by Counties. H. C. 124 — 1894 ; H. C. 42 — 1896 ; and H. C. 309 — 1898. Similar return to 170 — 1890. H. C. 204 — 1895. Rateable Value of Lands, 1869-70, and Gross Value and Rateable Values, 1894 : Lands, Buildings, Railways, in each Union. Appendix gives quotation from Goschen's 1870 Report comparing Income Tax on Lands, Houses, etc., 1814, 1843, 1850, i860, 1868. H. C. 454 — 1895 (2). Government Property in the 8o BRITISH INCOMES AND PROPERTY. • Provinces : Contribution in lieu of Rates and Valuation (not totalled). H. C. 217 — 1896 (continuing 32 — 1892) County Returns, 1889 to 1894-5, and comparison with 1869-70, 1874-5, 1879-80, and 1884-5. H. C. 312 — 1898. Similar return to 454 — 1895. H. C. 150 — 1900. Rateable Values and Wages : Com- parative Return 1870, 1894, 1899. H. C. 307 — 1 901 (continuing 216 — 1896). Assessments, 1895 to 1899-1900. H. C. 183 — 1906. Rateable Hereditaments by Unions, 1899 and 1906 : Gross and Rateable Values. H. C. 344 — 1907. Deer Forests, Scotland, and Lands devoted to Sport. H. C. 414 — 1912-13. Sch. A Classification in Counties. Lands, Houses, etc. H. C. 119 — 1913. Agricultural Land and Rates paid, 1911-12 : DetaUs for each Municipal Borough and Urban District Council. (2) Parliamentary Questions. (See also " (3) Miscellaneous.") Hansard (7), ist July, 1909. Gross annual income Sch. A, Lands, England, Scotland and Ireland, with repairs and agricultural depression statistics. (3) Miscellaneous. Division of Rateable Property into Lands, Houses, Rail- ways, etc., and percentage of total — 1798, 1814 and 1868 ; Tables 9 and 10. Appendix A, p. xxxii., R. C. on Agriculture. Decline in Value of Lands, Sch. A — Agricultural Depres- sion. R. C. on Depression in Trade, 1886, Table 3. Wales and Six English Counties, 1842, decadal to 1892. R. C. on Land in Wales, 1893-6. CHAPTER II. Schedule B. Income from the Use of Land. Definition. — " For and in respect of the occupation of all such lands, tenements, hereditaments and heritages as aforesaid,^ and to be charged for every twenty shillings of the annual value thereof . . ."* " in addition to the duties to be charged under Sch. A . . . except a dwelling house," not being " occupied . . . with a farm for the purpose of farming . . . and except warehouses or other buildings occupied for the purpose of carrying on a trade or profes- sion." ^ " The profits arising from lands occupied as nurseries or gardens for the sale of the produce . . . shall be estimated according to the rules contained in Schedule D . . . and charged under Schedule B as profits arising from the occupation of lands." * An official definition runs as follows :— " The tax under Schedule B is chargeable in respect of the occupation of all lands. It is in effect a charge on the profits made by the occupier from the exercise of his capital and skill in hus- bandry, just as under Schedule D a charge is made on the trader in respect of the profits derived by him from the exercise of his capital and skill in trade." ^ It will be observed that the statute begins by making the Sch. B co-extensive with Sch. A, and then proceeds with exceptions. It is probable in strict law that these exceptions do not really limit the sphere of operation to " lands," to which it is in practice confined, but that Sch. B could ^ I.e., under Sch. A. ^ 16 & 17 Vict. c. 34, s. 2. 3 5 & 6 Vict. c. 35. s. 63. * 5 & 6 Vict. c. 35, s. 63 (viii.). Hop grounds were originally included with nurseries, etc., but were subsequently, in 1853, brought under the ordinary Sch. B. 5 28th Report, p. 80. 82 BRITISH INCOMES AND PROPERTY. actually be charged upon a town-hall or a university lecture- hall ! The Character of " Sen. B " Income. It is important to note that Sch. B is different in character from all the other parts of the income tax. The other schedules, though having conventions and rules, give assess- ments which move in close relation to actual money income. The Sch. A assessment upon a house occupied by its owner is no real exception when the original assumption is admitted, viz., that every one must pay rent for the house he lives in, even if he pays it to himself, and that a dwelling- house is sui generis in a man's possessions or expenses. But Sch. B is made up of two quite different parts : — (i) A tax on farming products, based on a presumptive or conventional proportion, and independent of all actual variations due to personal factors or temporal changes. This basis was, in 1803, three-fourths of the rental value for England, and one-half in Scotland ; in 1842 and 1853 one- half of the rental value in England and one-third in Scotland, and in 1853 one-third in Ireland ; in i8g6, one-third uni- formly for the United Kingdom.^ " It was doubtless owing to the fact that in 1803 farmers did not as a rule keep trade accounts that this system was adopted. ... In 1842 a suggestion was made by Lord Howick that it would be better to charge farmers under Sch. D, but it appears not to have met with any considerable support." ^ As a reason for altering the proportion in 1842 Peel expressed " his perfect conviction that the rent of the farmer had been raised in proportion to his profits," and he considered the reduction was " consistent with justice." There is no doiibt, moreover, that the reduction of import duties on corn in 1842 was also a reason. This basis is obviously " rough and ready." Its soundness in economic theory is quite open to question.^ 1 The basis was raised to the full rent in the Budget of September 1915, while these pages were passing through the press. " 28th Report, p. 81. ^ Vide article on " Land Valuation and Rating Reform " by the present writer. Economic Journal, 1911. Some objections on similar lines were ineffectively raised in 1842 (vide Hansard's Debates). Assume that farm A is on the margin of cultivation, and yields no SCHEDULE B. INCOME FROM USE OF LAND. 83 If a farmer makes more than the assessment he cannot be charged more ; if he makes less, he may claim a reduction. The favourable treatment formerly given to Scotland had its basis partly in a supposed difference in the actual pro- portion ^ and partly in the fact that the owner bore certain charges or rates which were paid by the tenant in England and which made the tent correspondingly higher. An adjustment for the latter by itself almost sufficed to equalise the charges. For exairiple : — £ 1868-9, Sch. B gross assessment in Scotland ..... 7,208,000 Approximate rates applicable thereto ..... 358,000 English equivalent . . . 6,850,000 economic rent, but £100 intisrest on owner's capital is paid by the tenant in the name of rent ; that farm B pays ;^ioo interest and ;^ioo economic rent, or ;£20o rent in all ; and farm C pays ;^ioo and ■^300 economic rent, or ^400 total. Assume that the degree of skill, etc., required is the same in all three and that their profits are in equiUbrium, and equal, at ^^loo. The Sch. B profit will be — A £33, B^66, andC;£i33. Suppose farms A ahd B each yield a net divisible product of ;^5oo, of which £100 is retained by the farmers, and rents of ;£400 paid. If the owner of farm B has to pay ;£ioo drainage or embankment assessment rate for keeping the sea out, it is a deduction under Sch. A, but not under Sch. B, and to that extent the law and economic theory agree. But if, as sometimes happens, the tenant pays half the drainage assessment, obviously his rent will be £350, from which the £^0 allowance is made for Sch. A, but for economic consistency the assessment under Sch. B should be one-third of ;^4oo, and not of £350- 1 Vide Hansard (12th May, 1853, col. 240). Mr. Gladstone. — " The hon. member had demanded that he should be placed in the same position as the Scotch and Irish farmer ; but if that were done . . . that concession would be at once made a standing ground for a further appeal to alter 'the law in favour of the Scotch and Irish farmer. As foi: the Scotch farmer, his case was irresistible, and was founded partly on acknowledged facts, and partly on reasonable belief. It was founded, in the first place, upon the fact that the public burdens in Scdtlartd, which weire mostly borne by the tenants in England, ■were borne 'p^rinoipally by the landlord, and consti- tuted a portion of the rent. . . . The case of the Scotch farmer also rested on the beliief that he had a smaller share of the profits from the land than the English farmer had." For evidence of the'feeling that Irish farmers were " over-rented," ee Chapters IV. und X. 84 BRITISH INCOMES AND PROPERTY. English income computed at one-half,^ £3,425,000 ; Scotch income computed at one-third of the gross £3,403,000. The reduction of the proportion in England in 1896 was made regardless of this difference, and on the presumed merits of the case at that time.^ (2) A large part of Sch. B is not a tax on profits, but a privilege tax or licence, akin to a carriage licence. All land, even though it is not occupied for husbandry or profit, is liable to Sch. B. This is a unique feature in the income tax — the inclusion of an element that is not, and never can be, " income." It is a tax incidental to possession or enjoyment, but represents nothing that comes within the category of profits or gains. An illustration may perhaps make the fact clearer. If A. is owner of a. farm, and B. is tenant, the total net produce (which we assume is not sold) is divisible between A. and B. as rent and profits, and if A. works the farm himself the two elements remain — they correspond to the Schs. A and B. If, however, A. owns a beautiful park which yields no physical -produce, he may let it to B. and go and live abroad himself. B. pays a rent (which A. turns into consumable goods, so that he is in the same position as before), and this rent represents the whole annual value of the enjoyment income of beauty yielded by the park.^ B. consumes what he has paid for, and what he consumes is purchased, it is neither earned nor unearned income. So that when he pays the tax under Sch. B he pays a licence to keep a park, or a sumptuary presumptive tax on an expenditure indicative of wealth paid out of that wealth which is already wholly reached and taxed by the other schedules of the tax. This part of the assessed " income " may be an element in reaching true faculty, but it is not a part of true national income in the ordinary sense. One might quite consistently convert carriage licences by the current 1 The question of the deduction of one-eighth for tithe does not arise, as it appUes to payment of duty rather than to computation of income. 2 Proportion raised by Budget of September, 1915, to equal the whole rent. 3 Vide Transactions of Surveyors' Institute, 1896 : Col. G. W Raikes on " Re-apportionment of Rates and Taxes." SCHEDULE B. INCOME FROM USE OF LAND. 85 rate of tax into terms of " income " and add them to the national income. I draw a distinction between consumption of corn and consumption of beauty for this purpose — they both minister to human needs, but they are of a different order. Let us assume that economic rent is non-existent because there is no differential yield, and because satisfac- tions are equal to what equivalent effort in other businesses will obtain ; the " labour " of walking round a " blackberry farm " provides a fund of food which I may consume as I go along, or which I may store and sell and buy bread with. The equivalent " labour " of walking round my " beauty farm," and securing points of vantage, yields me satisfactions which I must consume as I go along and cannot exchange ; meanwhile I want for a living, in the vital sense. The satisfactions in the first case are of the order of an income, within the sphere of an income tax ; the satisfactions of the second are of a different order altogether and cannot yield a part of themselves as a money tax.^ These considerations are of some importance when the income tax figures are being used for computing national income and national capital,* and also when that section of the whole assessments actually applicable to persons liable to tax is being treated as the income of liable farmers.^ Unlike the tax on farmers' profits, this tax on occupation is payable in any event, and absence from home does not render the occupation " void." If farmers' profits were to be transferred to Sch. D, this section would stand out clearly in its own special character. The distinction between the two sections is of course not always clearly cut. There are some lands which are yielding produce, but not to the fullest extent of ordinary husbandry : the experimental or hobby farming of some home farms attached to great estates, in which, the making of a com- mercial profit is a secondary consideration, is a case in point. ' The value of sporting attached to lands is included under Sch. B as well as under Sch. A when land is occupied by the owner, and the position taken in the text is therefore emphasised. 2 Vide p. 386. 3 Vide p. 103. 86 BRITISH INCOMES AND PROPERTY. Actually what comes within the terms " occupying lands for purposes of husbandry only "^ is sometimes a nice question. The abolition of Sch. B and the transfer of farming profits to Sch. D has been advocated for many years. It was mentioned in the evidence before the 1851-2 Committee, and also by Giffen before the R. C. on Trade Depression, 1886.2 Scope of Sch. B Statistics. The Sch. B assessments, like the Sch. A, are comprehen- sive ^ — they cover all land, and not merely land owned or occupied by persons liable to tax. They approximate as closely to the true values as Sch. A assessments ; * they exhibit the same effects of re-assessment as Sch. A assess- ments on lands ; ^ and the differences between England and Wales, Scotland and Ireland, are precisely those detailed under Sch. A.* In fact , they are so closely similar to the latter that for all ordinary statistical uses the two sets of gross assessments may be used indifferently.' It is not an uncommon error to suppose that small holdings and allotments as well as peasant farms are omitted from the Sch. B values : — (i) Quotation from Report of Committee of the British Associa- tion on Amount and Distribution of Income below the Exemption Limit, p. 103. (2) Professor Sidgwick, misled by Giffen's statement that a large part of the £7,000,000 Irish Sch. B exempt assessment (then assessed on the full rent) was " peasant class income," deducted £3,000,000 on this account, comparing the balance v/ith. Great Britain, from which he made no corresponding deductions, apparently assuming that no " peasant class tenants " were included in our assessments (note in Appendix I., p. 180, R. C. on Financial Relations, 1894). 1 The criterion for the right to appeal to have actual profits substituted for the fixed assessment. " Qs. 755, etc., and general evidence on Sch. B to Q. 775. * Vide p. 39. * Vide p. 35. ^ Vide p. 31, and Table A3. " " The nearest approach to a record of agricultural rent" (Major Craigie, S. /., 1880, p. 304). ' Vide p. 87. SCHEDULE B. INCOME FROM USE OF LAND. 87 But it is important to note that the official tables give only the net Sch. B liable to duty in Ireland for the earlier years (see Appendix III. and Table B). The actual omissions from the assessments are : — • (i) Property occupied by the Crown ; (2) Gardens under one acre in extent attached to dwellings and assessed to House Duty {q.v.) ; (3) Various profits enumerated under the " Differen,ces between Sch. A assessments on lands, etc., and Sch. B assessments." Differences between Sch. A Assessments on " Lands, ETC.," AND Sch. B Assessments. Although similar, the two sets of figures never exactly agree. ^ In the first place, there are some few items classed under this head for Sch. A that are not assessed to Sch. B, such as land in connection with works, waste and building land, and public recreation grounds rented. In the second place, nurseries and market gardens are assessed on their rental value under Sch. A, but on their profits under Sch. B. In the third place, since farmers may " elect to be assessed under Sch. D," ^ no assessments exist under Sch. B to cor- respond with the Sch. A assessments upon the lands affected by the operation of this clause. Fourthly, there are some minor administrative reasons for other differences. In the net result it will be found that the Sch. A totals are generally slightly in excess of Sch. B. Sch. B Gross Assessments — Statistical Sequence from 1842. (i) Break in 1853-4 (introduction of Ireland). — The Irish figures introduced at this date into the oflEtcial tables are net only. The estimated gross assessments for these early years may be taken as practically the same as Lands. Table A 3. (2) Break in 1873-4. — The Irish Sch. B is given in the official tables for the first time (gross). ^ 1 R. C. on Land in Wales, 1893-6, Qs. 76,545, etc. 2 50 & 51 Vict. c. 15, s. 18 ; vide p. 93. 3 Vide S. J., 1880, p. 304 (Major Craigie). 88 BRUSH INCOMES AND PROPERTY. (3) Break in 1876-7. — ^The value of farmhouses was not previously included in the Irish statistics. The estimated correction is made in Table A3 (vide Appendix III.). (4) Break in 1896. — The gross assessments under Sch. B were subjected to a change of great statistical importance by the Finance Act of 1896, which simplified previously existing methods of making assessments upon farm profits and of estimating a farmer's total income for purposes of exemption and abatement. Under the Acts of 1842 and 1853 the assessments were made upon the full annual value of the land, but a special rate of duty was charged thereon, subject to a deduction of one-eighth of the duty on lands that were tithe free. A farmer's income, for the purpose of com- puting his total income for exemption or abatement, was deemed to be one-half of the full annual value in England and Wales, but only one-third in Scotland and Ireland ; ^ while the special rates of tax charged were based upon these proportions — i.e., a leading rate of yd. for the other schedules gave a rate of 2^d. in England and z^d. in Scotland and Ireland, while 5^. gave z^d. and ifi. respectively, and 8d. gave 4d. and 3d. respectively.^ In 1894 the rate was made uniform — ^d. for the whole kingdom, with a leading rate of 8d. But in 1896 the one-eighth deduction ceased to exist, the special rate was abolished, and the leading rate was made payable upon one-third of the full annual value.* The proportions in the old income tax, which obtained from 1803 to 1816, were three-fourths of the rent in England, and one-half of the rent in Scotland. The alteration has been frequently misunderstood : — " As to the earnings of this class, we have official evidence which is sufficient. Certain figures with regard to them are given in the income tax returns (Sch. B). These, however, as they stand now, are most misleading. The farmers' profits have, for purposes of assessment, been theoretically reduced since the year 1896. Up to that date they were estimated as being about equal to the rent (see Cd. 4954, p. 137). Since that date it has 1 5 & 6 Vict. c. 35, s. 167, and 16 & 17 Vict. c. 34, s. 28. ^ 41st Report, p. g8. '^Finance Act, 1896, s. 28. SCHEDULE B. INCOME FROM USE OF LAND. 89 been assumed that they amount only to one third." — W. H. Mallock, " The Nation as a Business Firm," p. 114. The same statement is repeated in " Statistical Monograph," No. 30. Vide also p. 94. Statistically these changes are of great importance. Down to 1896-7 the statistics given for Sch. B are those of " gross assessment " or gross annual value, and what they are intended to represent in terms of income must be computed by reference to the proportions above quoted. But since 1896-7 the gross assessment under Sch. B is only one-third of the gross annual value, and it is intended in itself to represent " income." Assuming for the moment that the present proportion is a correct one, the Sch. B assessment is now comparable with other schedules, whereas before 1896-7 it was not comparable, and when the totals were included in a general aggregate of assessments under all schedules, to represent total taxable income, it was a quantity wholly unlike the others, as if one should include 50 fowls with 100 bullocks and 100 horses and speak of a total of 250 cattle. Before inclusion with the totals of other schedules the Sch. B totals should be reduced to terms of income. As examples of errors arising through treating the assess- ments as income ^ — All the computations in the evidence, etc., given before the R. C. on Financial Relations between Great Britain and Ireland, dealing with Sch. B, treated the assessments as equivalent to income ^ {vide Appendix and Qs. 7,722, etc.) " In the year 1890-1 the assessments under Sch. D in respect of profits from the occupation of lands, the occupiers of which availed themselves of this option, amounted to ;f6,826, whereas the assessments which would have been made under Sch. B on the yearly rent or value of such lands would have amounted to 2— Q3 £55.977 " (Board of Agriculture Leaflet, A —f^)- This is certainly so expressed as to suggest that the two sums are comparable. Giffen took the Sch. B, and " for some reason which was not made quite clear he took the gross assessment," instead of one- half, as the income, and multiplied by 10, getting twice Craigie's figure. He afterwards defended this course : " The presumption 1 Pointed out by Major Craigie, S. /., 1887, p. 324. 9P BRITISH INCOMES AND PROPERTY. of law . . . gives no better guide what those profits are than the rental itself. The one is just as good as the other." — Rew, " Farming Revenue and Capital," Journal of Agricultural Society, 1895. The majority of cases arise, however, not upon the use of the Sch. B figures by themselves, but in the aggregation of all the schedules, where this change can easily be over- looked. Two courses are open for this purpose. We may assume that the proportions in force under the statutes from time to time were the true ones, or we may assume that the general " one-third " should properly have existed throughout. In making comparisons of years not far removed from each other and on either side of the change, it is perhaps desir- able to treat the matter uniformly by employing one pro- portion. Over a long period, however, it may fairly be assumed that the statutory difference did reflect a real difference, and therefore it may be better to adhere to the statutory terms. On the one hand it would be absurd to assume that in 1892 profits reaUy were one-half the rent and that in 1900 they were one-third, while on the other hand in the middle of the nineteenth century it is prob- able that the proportion was actually higher than at the end. In any case, the method employed must be clearly stated. The most frequent " pitfall " brought about by the change of method is in the comparison of aggregate tax assessments without allowing for the break of £37,000,000. For examples, vide p. 288, on " Comparisons of Years." Table Bi gives the actual gross assessments under Sch. B since 1842, rediiced to the income computed therefrom on the statutory basis actually existing at the time. The income on the present basis is given officially from 1888-9 to 1895-6 with a corresponding comparison of net assess- ments.^ It is necessary to deduct from the gross total for England the profits of nurseries and market gardens (charged according to the rules of Sch. D), to divide the remainder by 3 or 2 as the case may be, and to add the * 41st Report, p. no. SCHEDULE B. INCOME FROM USE OF LAND. 91 1 iixempt and T.iable. N roio M « N W N ■^00 N N M CO M- fOU^cp VO v£) NCp ino t^ob oi 6 6 w 01 N nw f^7i"7^ M H a>ob o f^ t^ t** fOcnNNNNMiHM i w "3 e2 H CO in H N H N fO f'l M M M M M ION N copot^Tt-00 Hco ino ininw b\ b^ b^ b\ b^ Q\ a\ owmmmnowh g •6 1 l-H lomu^o .o H T*" 7*" 7*" 7^ T^ TfTj-u-im •a >> 1 VO M 0\ H H H M CO Th '^ Tl- fO M Q\ 0\ 0\ 0\ 0^ 0\ 0\ »n o\ foo w OOmmOOhhih HHHM HMMWMHIHHM 1 1=1 N N 0\ "^ 0^ N 1>*N 00 00 roco t^ -^lO N N H 0\ mo 0^ ino M o\ Tj- 09 fl a 1 CO 00 00 a» O^ i£) ^o vo 'O ^o in INOO CO CO CO 0\ (> !>. !>■ ^^1 r^ ro f-. Oi M 000 Tt- Tftn rl- rn fO ro N H M M IH M O^'O O^C0 lO f"?^ "T" ^ 9 ■? ^ ino 00 ot 6 6 M M H W M « M M mo 000 '^r^rhw in H H m^^o^mo^ M 6 CO Tt- mo ih W W H H M H •• 03 • M 1 h- 1 vO -^ f*^ o\ t--.N CO 00 HOO VO 00 0\ Oi 0\ 0^ 0\ H M WOOOCO Tt-N Qv 0\ O^OO 00 CO t^ l>. C^ IH M H M M H 1 00 !>. t^ 1>- !>. 00 -^ Oi -^vO 00 Oi M M N Tj- 10 in OC^OOOOOONN in-^Tt-N H ocoooco ^g| fO t^O\ '^ « \D "O 00 rj-o m i>.M CO r*- o^co o\\o fo IN « ONO CO M l>.0 w (>.o m a» N r^ 'i- M r^ w M en Tt- in\o t^co o\ 00 i>-»n'^N M inrf'd- m -^ r^ in fo 1 1 1 1 1 CO 00 CO CO 00 W M IH H H in a^ rovo Oi N in 1 1 1 1 T 1 1 ■^00 N >nco M Th 10 iny^ vo t^ (>• 00 00 00 00 CO 00 00 H H H M IH M M 8 C\ 09 H Tj-r^o\ inw 10 N 1 I 1 1 1 1 1 1 1 i>- mo o\ ^iut of cquilibrimu would bo at a loutal of about J4S. per aero, Tho Committoo got iivto difticultios at the lower end. imd were foreed to assume, quite erroneously, thv\t " the profits of small holduigs are not ivtvuued to the survexor." Sir J. Bai-ton stated that nearl\- all the " liable " Schedule B tax paid in Ireland is from landloixis on their demesnes.' Numbers of SinwRAn: PKcirERTiES Assessed. Fur man\- yours othcial statistics wore a\ ailablo as to the uvunbors of properties assessed. The relationship between the statistics of the " nunibor of separate properties assessed undei" Sch. H " and the " holdings " returned by the Board of .-Vj^riculture has been studied by Major Craigie, who found they were " in no sense comparable " (England and Wales, 708,800 against 473,100 ; Scotland, 70,300 against 80,700 : and Ireland, 718,000 against 5t\=;,.UKi ; United Khigdom. i,5qti,ooo ag.iinst 1,121,000), He accounted for the difieiences as follows : - (i) Properties occupied by the same man, counted separately for Sch. B ; (i) " holdings " exclude plots less than a quarter of an acre : (S) " holdings " refer only to the technical " cultiwited area," 24 per cent, short of the full area in England, 40 per cent, in Wales, and 75 per cent, in Scotland. The tignres for Scotland he could not explain (" Si/e and Distribution of Agricultural Holdings," 5. /., 1887. p. 88). Major Craigie, in a return hantlod to the S. C. on Small Holding's, lS8(i.'- contrasted the ntnubors of Sch. B assessntonts from i81hi to 1888 with the .Agricidfural Kolm'us each year in order to con- firm the indications in the latter of ineieasing subdivisions of holdings. This coniirmation was general only, and, in view of the large dilferenee between the Iwo reinrns, coukl not be taken in detail. Mr. \V. II. Malloek made an elaborate comparison, using Cd. ().Z77 and the Reports. The former, he said, refers only to hoklings o\er one acre (500,000), while 800,000 acres " consist of small eullivaletl plots ol less than one acre in extent, I heii' number being siimething over 1,000,000 (see 4 1st Report)." This relerence merely gi\es the statement that the tolul numbeis of separate properties assessed (including those exempted and abated) are 1 ]v, C. on Local Taxation, vol. t, (.}. 3321). ' r. 50.', ami Os. .|,i)(),| and .|,i)ii.|. SCHEDULE B. INCOME FROM USE OF LAND. 105 922,282, so that the statement is quite unverified, and there is no reconciliation (" Statistical Monograph," No. 30). In general it may be said that the separate ratings are grouped for income tax assessment purposes in order to make up the whole of one " take," although extending into several parishes. But several separate " takes " between the same parties would be separately assessed. Land in the occupa- tion of the owner is usually assessed in separate parcels, according to the way it is rated, and one holding extending into several parishes would therefore appear as several assessments. No precise statistical computations can be based on these figures. Rates of Duty in Earlier Years. The rates of duty for Sch. B after 1842 were :- Incomes £150 or over. Incomes f loo i md under £150. - England. Scotland and Ireland. Composition lor Tithes. England. Scotland and Ireland. d. d. d. d. d. Up to ! ^« 1852-3 2i 2 i inclusive) ) 1853-4 3i 2i 2 2i If 1854-5 7 5 4 5 3i 1855-6 8 5* 4f 5f 3i 1856-7 8 5^ 44- 5f 31 1857-8 Z\ 2j 2 2^ Iff 1858-9 2i if 1^ 2I If 1859-60 4i 3i 2f 3i 2\ 1860-1 5 3i 2f 3i 2I 1861-2 4i 3 2f 3 2 1862-3 4i 3 2t 3 2 1863-4 Z\ 2i 2 1864-5 3 2i If 1865-6 2 li A 1866-7 ■-> li 1> 1867-8 2i I^ If 1868-9 3 2i If 1869-70 2.\ If If lo6 BRITISH INCOMES AND PROPERTY. Parliamentary Papers (containing Additional Information). H. C. 491 — 1852. Appeals by Tenant Farmers, Great Britain, under 14 & 15 Vict. c. 12, s. 3 (1,200 cases : 756 allowed, £3,419 duty relief). Counties detailed. H. C. 492 — 1857-8 and (2) of 1859. County Return. H. C. 130—1860. Rates of duty, 1852 to 1859. H. C. 300 — 1860 ; 1857-8 and 1858-9. United Kingdom. Sch. B Assessments classified in amounts. H. C. 546 — 1860. Detailed Return of Assessments by Parishes, for Great Britain. H. C. 571 — 1860 ; 454 — 1870. 1814-15. England and Wales by Counties (estimated from Sch. A Lands and total Sch. B. 1842 to 1869. Great Britain, Sch. B, by Counties. H. C. 292—1882; 206—1883; 25—1884; 235—1884; 32 — 1892. County Returns. H. C. 217 — 1896. County Returns. Gives tables for 1889 to 1894, and comparison with 1869-70, 1874-5, 1879-80, 1884-5. H. C. 307 — 1901. Continuation of foregoing, 1895 to 1899-1900. H. C. 344 — 1907. Deer Forests and Sporting Lands, Scotland. H. C. 414 — 1912-13. Sch. B — Classification in counties. Other Sources of Information. (See also under Sch. A.) 1882. R. C. on Agriculture. Giffen's evidence. Qs. 64,812, etc. 1886. R. C. on Depression of Trade and Industry — Table 4. Profits under Sch. B, 1864-5 to 1883-4 (as distinct from assessments). 1896. R. C. on Agriculture, Appendix A, p. xxxix. Sums charged to duty, allowed by schedule, and by repay- ment, with net amount received : England and Scotland separately. 1896. R. C. on Agriculture, Appendix XV. County Table— Lands : 1872-3, 1879-80, 1888-9, 1893-4. CHAPTER III. Income Tax (Schedule A) and Inhabited House Duty. THE CLASSIFICATION OF BUILDINGS. The statistics of these two distinct duties are now com- bined in such a way as to give a classification of buildings according to value and use or occupation. For the purpose of this work, the House Duty furnishes a sub-class of messuages, and as its values are identical with those for Sch. A, the division of the latter into " Premises Liable to House Duty " and " Premises Exempt from House Duty " is the preliminary step, necessary for clearness, which has been adopted in the Reports for some years. Inhabited House Duty (Great Britain only). This is a " tax on houses which are occupied either wholly or partly as dwelling-houses, and is a charge upon the occupier. It does not extend to houses which are used solely for purposes of trade," ^ or to houses under £20 in annual value. But it includes premises which are not dwelling- houses in the ordinary sense of the term, e.g., chambers or apartments in the Inns of Court, or in colleges or halls in any of the universities.^ A tax on inhabited houses was first itnposed in 1696, and was assessed at various rates until April, 1834, when it was repealed. From 1808 the rates were — £$ and under ;£20, is. 6d. in the £ ; £20 and under £40, 2s. 3^. in the £ ; ^^40 and upwards, 2s. xod. in the £.^ 1 28th Report, p. 86. ^ 56th Report, p. 69. 3 28th Report, p. 86. io8 BRITISH INCOMES AND PROPERTY. When the window tax was repealed in 1851, the present House Duty was imposed, but houses under £2.0 in annual value were no longer charged. Houses occupied for trade as well as for dwellings were charged at a lower rate, 6d., and the ordinary dwelling-houses at grf. in the £. The two rates afterwards became six, but the categories remained the same, viz., houses used for dwellings and trade, 2d., ^d., and bd., according to value ; and houses used for dwellings only, 3^., 6d., and gd., according to value. Scope of Term " Inhabited House." There is no doubt that " inhabited " had a wider meaning under the original Acts than has subsequently been attri- buted to it ; it referred to occupation, and not necessarily to " dwelling, residing and spending the night as well as the day." But subsequent Acts narrowed the extent of that considerably.^ A building occupied by a working men's club had, since its erection, never been furnished as a dwelling- house, or slept in at night. The ground floor was used as a club, the upper floor being let as an auctioneer's office. It was held not to be assessable.^ But the occupation of club premises by a caretaker would make the whole premises liable, as they do not come within the statutory exemption.* The premises of the Glasgow Philosophical Society and also of the Glasgow Museum were similarly made liable by internal communication with residences of caretakers and curators. Generally speaking, a tenement, structurally self-contained and without internal communication, is treated as a separate house, but the whole subject, involving definition of structural separation and internal communica- tion, in its legal aspects is a very intricate and difficult one.* It is sufficient for statistical purposes to remember that statistics of private dwelling-houses are wider than ordinary "■ Lord President in Re The Glasgow Coal Exchange Co., (1879) I T. C. 211. 2 Riley v. Read, (1879) i T. C. 217. 3 Vide p. 123. * For a summary of the deciding cases see Piper's " House Tax Laws," 1903, pp. 16 et seq. INCOME TAX AND INHABITED HOUSE DUTY. 109 appearances would indicate, and statistics of residential shops are narrower. Houses used wholly for trade are exempted if no person dwells therein. Generally, sleeping accommodation, even though only used occasionally, will render premises liable. But it must not be imagined that " sleeping at night " is a final test of dwelling, for it is only houses used for trade, etc., that are exempted upon the test. Other premises in which there is dwelling, in a broad sense {e.g., clubs), are liable. If the tenant of a building used partly as a house and partly as a shop (or warehouse) sublets the shop to a person in trade, but retains the other apartments for his own use as a dwelling-house, he is chargeable at the higher rate (i) for the entire premises if there be internal communication between the shop and apartments, and (2) for the apart- ments only if the shop is entirely cut off from them.^ In arriving at the annual value of premises, coach-houses, stables and other offices, together with gardens and pleasure grounds not exceeding one acre, are valued together with the dwelling-house. The acre so included is not chargeable to income tax, Sch. B. Lodges are included in the assessment on the mansion to which they belong, even though they are situated outside the acre above mentioned. Traders' Premises adjoining Dwellings. — There are certain exceptions to this rule in cases where the dwelling-house of a trader has attached to it buildings or gardens, etc., used by him in the course of his business ; such buildings, etc., are not included in the value. For instance, barns are not to be included in the value of a farmhouse, nor a livery stable keeper's stables in the value of his own dwelling-house. Market gardens, nurseries and greenhouses attached to the residences of their proprietors are not brought into charge, nor are cowsheds, etc., held with a dairyman's premises." ^ Tenements, Flats or Lodgings. — In the case of houses let in different storeys, tenements or lodgings, and inhabited by two or more persons or families, the same are to be 1 28th Report, p. 86. 2 Ibid. no BRITISH INCOMES AND PROPERTY. chargeable to the duty as if they were inhabited by one family only, but the landlord is deemed the occupier.^ Blocks of artisans' or labourers' dwellings, however, have now been exempted from the duty when it is found on inspec- tion that the occupiers really belong to the industrial class, and that each tenement or set of rooms is self-contained and structurally severed from the rest, and is under the value of £20. In certain cases, a house specially constructed for the provision of separate dwellings may be the subject of a separate assessment in respect of each dwelling of an annual value not exceeding £60." Where any dwelling-house is divided into distinct tenements belonging to different owners, each tenement, if it amounts to £20 in value, is liable to duty as a distinct house. Where any such tenement is used solely for trade purposes, the assessment in respect of that particular tenement may be discharged. In the case of any house being one property, but divided into and let in different tenements partly for trade and partly for residential purposes, the assessment on the house is confined to the portion residentially occupied. The characteristic fiats of Scotland are separately assessed, although structurally they appear to form only parts of houses. Specific Exemptions : — (i) Houses belonging to members of the Royal Family. (2) Public offices. (3) Hospitals, charity schools, and houses for the relief of poor persons. (4) Convalescent homes, lunatic asylums, infirmaries, dispensaries, training institutions, when they are of a strictly charitable character.^ (5) Houses wholly occupied for trade. (6) Houses used for trade and occupied only by a care- taker. (7) Houses and structurally separate tenements under £20 in annual value. 1 28th Report, p. 87. 2 56th Report, p. 69. 2 aSth Report, p. 87. INCOME TAX AND INHABITED HOUSE DUTY, iii Comparison with Sch. A (Messuages) and Difference in Scope. At one time House Duty was re-assessed annually, but it is now assessed at the same time, and almost invariably in the same amount, as the Sch. A income tax. What has been said relative to the effects of the periodical re-assessment under Sch. A applies equally to the House Duty, so far as a consideration of the aggregate amount is concerned.^ The peculiar effect upon the details of the classification will be considered below. The House Duty assessments include " farmhouses "^ over £20 annual value which are excluded from Sch. A (messuages) and included in Sch. A (lands). They also comprise cer- tain railway refreshment premises which are not charged to Sch. A at all, being part of the railway premises included in the Sch. D assessment. But generally the premises excluded from House Duty are dealt with under income tax, Sch. A, even though no duty is paid, as in classes (i) to (4) of the specific exemptions above. The House Duty statistics therefore provide a sub- classification of a part of the field covered by Sch. A messuages and add thereto those farmhouses and refresh- ment premises which are not included in Sch. A messuages. The assessments are on gross values, and no allowance for repairs is made, so that a house may be assessed to Sch. A £25 net, and to House Duty £30. But as only gross values are classified in the statistics, no confusion arises. " Inhabited House Duty is only levied upon houses assessed at over £20 per annum. A house assessed at £20 is of the real rental value of £23 13s. 4d., as one-sixth of the annual value of buildings is allowed to be deducted for the cost of repairs. A note to this effect appears on p. 161 of the Commissioners' Report " (1908). — J. C. L. ZoRN, " The Incidence of the Income Tax " (1909), in which the writer turns all the tables into these new gross figures, and in the course of fifty-five pages upon this foundation proves many astonishing things, e.g., the number of income taxpayers is over 2,000,000, and those with incomes under £1,000 under-pay by 46 per cent., those^above by 27 and 36 per cent. ! 1 Vide p. 31. \yi4e p. 115, 112 BRITISH INCOMES AND PROPERTY. OFFICIAL TABLES— SEPARATE CATEGORIES. Private Dwelling-houses. While this class is doubtless, for the most part, well described by its title, it actually includes a very considerable number of premises which are not ordinarily called private dwelling-houses ; for all inhabited premises which do not clearly fall within the legal definitions of the classes entitled to assessment at the lower rates fall here, and this class is the " sweeping clause " of the tax. For example : — (i) A " farmhouse " which is occupied by the owner, or by some person whose living is not confined to farming the land around, despite its outward claim to the title, is not included with " farmhouses," but in this class. (2) Premises which in a popular sense look like a " shop " may come within this class if nothing is exposed for sale on the ground floor or basement, and in the front. So also may similar premises where the person occupying the shop is not also the person " occupying " the house, and there are numerous cases where the shop premises are divided off from the upper portion, and the latter is assessed at the higher rate as a private house. (3) Some private houses used partly for letting lodgings, etc., are not included in lodging-houses because the neces- sary claim is not made with a declaration of the facts. ^ Then professional premises of all kinds, doctors', solicitors', etc., are classed as private dwelling-houses for their whole value, to include the part occupied for professional purposes. Particularly to be noted are schools, which account for not a few of the large assessments. So, too, large premises which do not come clearly within the exemptions for hos- pitals, etc. [see exemptions (3) and (4)] rank as private dwelling-houses. Residential Shops. Definition.— This is an official, though not a legal, title. It conveys fairly well what is intended. The Act prescribes : "A dwelling-house (a) occupied by any person in trade who (b) exposes to sale and sells any goods, wares, ^ Vide p. 116. INCOME TAX AND INHABITED HOUSE DUTY. 113 or merchandise in any shop or warehouse, (c) being part of the same dwelling-house, and in the front and on the ground or basement storey thereof." The three conditions of occupation, sale, and position must all be met, otherwise the higher rate is chargeable and the house comes under the " private dwellings " class {q.v.). Analysis. — Some writers have fallen into the error of forgetting that these are only the shop premises of £20 in value and upwards, and therefore that there are many shops classed under " Houses " exempt from House Duty. Vide p. 118 for examples. " Dwellings over shops, such as are occupied by minor trades- men, are not treated as dwellings, but are numbered amongst business premises. The actual number of dwellings, therefore, and specially dwellings of small rental value, will exceed the numbers given in the official returns." — ^W. H. Mallock, Nine- teenth Century, 1910, p. 477. This is not the case. For " lock-up " shops, see p. 123. There are therefore many premises which are shops in the ordinary sense of the word not included in these tables. It wiU be noticed, on inspection of the tables, that the numbers and values are practically stationary during the past ten years, or exhibit, perhaps, a declining tendency. This is due of course to the constant increase of " lock-up " premises, and the habit of " living away from the shop," which takes away from this class and increases the " Pre- mises not used as dwellings " class, that in the same period has grown enormously. It is not uncommon in the case of the large multiple-shop companies for the premises above, if used residentially, to be structurally divided from the shop and let off for a comparatively small rent, so that really imposing shop premises may not figure in the House Duty assessments at all. The effect of re-assessment on these assessments should be noticed. By inspection for 1898-9, 1903-4, and 1910-11, it will be seen that a very considerable but transient increase takes place so far as England is concerned. There is a considerable number temporarily "borrowed" from the " lock-up " class, i.e., re-assessed, and on due claim and 114 BRITISH INCOMES AND PROPERTY. inspection allowed as " lock-ups " by " schedule " and taken out of assessment in the subsequent years. The other characteristic features of the re-assessment years are of course exhibited also.^ There is nothing to support the assumption made by Mr. Mallock that the number of " employing owners " may be gauged from the number of shops (" Nation as a Business Firm," p. 117). Hotels, Public-houses, Coffee-houses, etc. Definition. — A dwelling-house occupied by any person duly licensed to sell therein by retail beer, ale, wine or other liquors, although the room or rooms thereof in which any such liquors shall be exposed to sale, sold, drunk or consumed are not such shop or warehouse as referred to under {b) (p. 112). Or a dweUing-house occupied by any person who carries on therein the business of an hotel-keeper or an innkeeper or coffee-house keeper although not licensed to sell therein by retail beer, ale, wine, or other liquors. ^ The Act of 185 1 gave a narrower definition : " occupied by any person who shall be duly licensed by the laws in force to sell therein by retail beer, ale, wine, or other liquors, although the room or rooms thereof," etc. ; and the Act of 1871 (34 & 35 Vict. c. 103), s. 31, brought in the hotel- keeper and coffee-house keeper. Analysis. — No distinction is made in the statistics between the various classes included in the heading. Premises under £20 in value, although licensed, appear under " Houses under £20," and there are of course many small beerhouses under this value. Recent statistics exhibit very clearly the falling off due to extinction of licences under the Licens- ing Act, 1904, but in the last two or three years, since 1908-9, the decline is not wholly due to this cause. Values, for House Duty purposes, have followed a decline in tied rentals and have also been affected by the increased licence duties. Although there were 1,352 fewer in 1910-11 than in 1909-10, all the classes above £41 felt the effect of the re-assessment, and showed increased numbers, the decreases 1 Vide p. 31. 2 56th Report. INCOME TAX AND INHABITED HOUSE DUTY. 115 being 2,878 in the £20 to £41 class, but for 1911-12 the reductions in values put back all the classes below 1910 (and all the higher ones below 1909-10 figures) except the " ;f20 and under £41 " class, which received from the classes above and showed an increase. The total decrease of 600 in 1911-12 is in part real and in part apparent, some going into the " under ;^20 " and exempt class. It should not be forgotten that the majority of the premises in this class are assessed on amounts in excess of the " tied " rents paid, which are no criterion of the annual value.^ The word " hotel " is not free from ambiguity, and, speaking generally, the private hotel, which is only a superior boarding or apartment house (unlicensed), may not be included in this class. ^ The status of the proprietor is sometimes a factor.^ Farmhouses. Definition. — A dwelling-house being a farmhouse occupied by a tenant or farm servant and bond fide used for the purpose of husbandry only. Analysis. — Here again appearances are deceptive. If the house is occupied by its owner it is liable as a private house, while if the occupier carries on some other business it may also fail to secure the lower rate.* According, then, to the character of the occupier rather than the position or external appearance of the house will the classification be settled. If a house comes within this class for House Duty it falls under " Lands," and not under " Messuages," for Sch. A, and is included in the Sch. B value also, while one-eighth, and not one-sixth, is the proper " repairs " allowance. In the assessment are included such offices as usually belong to a dwelling, and farm buildings are excluded. It may be "■ With regard to the methods of assessment, vide " Taxation of the Liquor Trade," Rowntree and Sherwell (second edition), p. 127. 2 But a hydropathic establishment in which some visitors were patients receiving treatment under the advice of a resident physician, and in which all visitors were subject to the rules of the house, was admitted to this class (Sirathearn Hydropathic Establishment Company, I T. C. 375). * In a case in which the statutory " occupier " was not the person licensed, the house was not chargeable as an hotel (McDougall v; Campbell, (1899) 37 Sc. L. R. 181). * Vide ^dth. Report, p. 80. ii6 BRITISH INCOMES AND PROPERTY. remarked that there is no precise criterion for assessment, the rent of a farm rarely distinguishing the separate value of the house, and the local rating valuation lists seldom separate it, but include it with the farm buildings, and often with farm cottages. Speaking generally, therefore, assessment is rather lenient. The " value to let by the year " in a remote and not easily accessible situation may be very different from the apparent accommodation value. Nearly 98 per cent, of the whole number of farmhouses assessed to House Duty are under £40 annual value. Lodging-houses. Definition. — A dwelling-house occupied by a person for the main purpose of letting furnished lodgings therein as a means of livelihood. Analysis. — The statute imposes the obligation upon the occupier to claim the relief and to maintain the claim annually. For many of the smaller houses devoted to letting purposes the difference in duty is so small that there is no doubt many occupiers do not trouble to claim, or do not know of their rights, and therefore the statistics do not show the true number of lodging-houses. Those not classed as such are included in private houses. The class dates from 1890-1 only, prior to which all of these houses belonged to the private house class. In a statement of the numbers of various classes of earners other than manual labourers and productive or manufacturing employers, Mr. Mallock includes lodging-house keepers, 207,000, with a note " These figures are no more than estimates, except in the case of lodging-house keepers, the number of which is taken from the Report of the Commissioners of Inland Revenue, and obviously relates to a portion of this group only " (" The Nation as a Business Firm," p. no). The number of lodging-houses (50th Report, p. 185) over £20 in Great Britain was 25,934, and it does not appear from whence the figure of 207,000 is taken. Apparently, with an addition for Ireland, it was intended for 27,000, but on the other hand Mr. Mallock's aggregate for the group accounts for the larger number. On p. 113, however, the number is given as 27,000, so that this aggregation is wrong ; on p. 112 the average income • of the lodging-house keepers is put at £180. Mr. Mallock's figure INCOME TAX AND INHABITED HOUSE DUTY. 117 for " shopkeepers living over their own shops " is 310,000, and the residential shops in Great Britain assessed to House Duty were 307,000 ; his hotel keepers and public-house keepers number 90,000, and the House Duty figures (to include coffee- houses, etc.) were 95,714. " Separate Dwellings " (54 & 55 Vict. c. 25, s. 4, and 3 Edw. 7, c. 46, s. II) (or " Artisans' Dwellings " in Reports prior to the 48th). Definition. — " Where a house, so far as it is used as a dwelling-house, is used for the sole purpose of providing separate dwellings," any dwelling which is under £20 in annual value is excluded from the assessment upon the whole, while dwellings worth from £20 to £40 per annum are chargeable at 3^. in the £, those from £41 to £60 at bcl. in the £. This renders unnecessary the charge in cumulo of the whole value at ()d., such as might be otherwise necessary if structural separation of the dwellings was not complete. Analysis. — It will be observed that there are more of these cases in Scotland. The flat system had already been fully recognised by separate assessment of the dwellings as " houses," although technically this might not have strictly accorded with the House Duty law. The only condition laid down is that as regards the dwellings up to £40 a certificate must be produced from the medical officer of health for the district that the house is " so constructed as to afford suitable accommodation for each of the families or persons inhabiting it, and that due provision is made for their sanitary requirements." Premises Exempt from Inhabited House Duty. (i) Separate Dwellings (54 & 55 Vict. c. 25, s. 4, and 3 Edw. 7, c. 46, s. 11).— An explanation of this class is given above. These represent the dwellings under £20 in value which form part of large tenement premises. (2) Houses of Annual Value : {a) Under £10 ; (6) £10 AND under £15 ; (c) £15 and under £20.1 — These include ^ Vide p. 132 for a consideration of this class over a period of years. The statistics in the present form have been available since 1874, and for prior years recourse may be had to Electoral Returns — " Of the total number in England and Wales, more than half are rated at less than £Q per annum " (W. Newmarch, S. J., 1857, p. 199). ii8 BRITISH INCOMES AND PROPERTY. not only the private dwelling-houses ejusdem generis with those over £20 so classified, but also residential shops under £20, hotels, beerhouses, etc., under £20, lodging-houses under £20, but not farmhouses (under £20) let to tenants, for these are included in " lands " under Sch. A, their number and value not being ascertainable separately, in these statistics. Farmhouses (in the ordinary sense) occupied by their owners are, however, included in this class, as they are not farmhouses in the technical sense. The proportion of this class which is not strictly private dwelling-houses is not known. ^ Vide quotation from Sir Thomas Whittaker, p. 131. Zorn (" Incidence of the Income Tax ") ignores these houses (assessed with lands) altogether. " The highest total of values is reached ... by the exempted dwelling-houses, of value £10 to £15 ; their total is £21,300,000. Shops are not included." — J. Bonar, " The Inhabited House Duty," Economic Review, 1907. W. H. Mallock gives the total number of dwelling-houses in Great Britain in 1898 as 6,300,000 and in 1908 as 7,500,000 instead of 6,808,000 and 8,089,000, because he adds together the dwellings exempt from House Duty (which include small shops with dwell- ings above) to private dwelling-houses, omitting shops, etc., charged to House Duty. The latter have all residential accommo- ^ In 1852 the number of houses £xo to ;^2o and values were : — Number. Value : Shops, etc. Value : Dwelling- houses. England and Wales Scotland 359.740 36.930 396,670 £ 1,749,400 127,400 1,876,800 £ 3.337.400 343,000 Great Britain 3,680,400 ;^5,557.20o Average value = £1^. It appears, therefore, that " shop " premises formed one-third of the whole number, but this proportion has probably diminished greatly since that date. (These figures have been computed from H.IC. 244—1852.) INCOME TAX AND INHABITED HOUSE DUTY, iig dation, or they would not pay the duty (" Phantom MiUions," Nineteenth Century, 1909, p. 761). The fact that practically all farmhouses are assessed to income tax as land, and are not separately distinguished in the statistics (except so far as they are also assessable to Inhabited House Duty), considerably detracts from the value of these figures as a total of all the buildings and dwellings throughout the country. An attempt may be made to estimate the number of houses let with farm lands and under £20 in value. (i) The total number of houses in the Census Reports may be compared with this assessment total and the balance assigned to such properties. This is a rather risky method, because the balance is small in relation to the aggregates, and differences of classification and definition would be important in relation to that balance.^ But it indicates rather more than 205,000 for England and Wales. A pro- portionate addition for Scotland would give 230,000 for Great Britain. (2) Up to 1910 the House Duty classes were more finely graded (£20 to £25, etc.). From these figures the distribu- tion tendency may be ascertained ^ and the result continued logarithmically downwards, giving 54,500 in the class £15 to £20. It would be dangerous to carry the index unchanged any lower, but if the same proportion for the classes £15 to £20, £10 to £15, and under £10 exists as for other houses (not let with farms), the total number would then be 348,000. (3) Taking the return of agricultural holdings for Great Britain, we get a distribution as follows : — Thousands. Over 300 acres .... jy-2 50 to 300 5 to 50 I to 5 Total 1517 234-6 iio-o 513^ At the top of the scale are a good many holdings worked ^ Vide p. 126. ^ Above £30 the Pareto index is ^'o^, but below £^0 it is uniformly 3"4. Vide p. 46/j. 120 BRITISH INCOMES AND PROPERTY. with houses not assessed as farmhouses over £20, but for various reasons as private houses.^ Both classes over £20 account for about 36,000. A part of the smallest class of holding would fall wholly (both land and house) into the House Duty assessments, but the greater part would be smaU farm holdings worked by tenants of cottages rented inde- pendently. We are left with a maximum of 377,000 holdings for which farmhouses may be assigned, and in many of these cases (holdings by graziers, butchers, cattle dealers, etc.) no houses are necessary. The indication is that there are a little over 300,000 farmhouses under £20 assessed with lands and omitted from the statistics of houses.^ The census of occu- pations effectively prevents a much higher estimate. Hospitals, Schools, Royal and Diplomatic Residences, etc. (i) Houses belonging to His Majesty or any of the Royal Family and Houses occupied by Foreign Ambassadors. — The exempting statute reads : " Any house belonging to His Majesty, or any of the Royal Family, and every public office for which the duties have been paid by His Majesty, or out of the public revenue " (House Tax Act, 1808). Figures were given separately prior to 1900. The 1899 statistics were :- Numbers. Amounts-;^. Metropolis . . . .62 20,803 Rest of England . . .26 2,292 Scotland .... 9 2,604 Total . . . -97 25,699 This class does not include properties which belong to the Crown and are actually in the occupation of the Crown — Government offices and official residences of Royalty. But . it includes all non-official Royal residences which, though exempt from House Duty, may be liable to income tax. (2) Hospitals. — The House Duty exempting statute reads : — " Any hospital, charity school, or house provided for the reception or relief of poor persons " (House Tax Act, 1808). The income tax exemption is : — " On any hospital, 1 Vide p. 115. 2 In 1896 G. H. Blundenestimated the waZwe omitted at ;^3, 500,000, wbjch at an average of £10 would give 350,000 (S. /., 1896). INCOME TAX AND INHABITED HOUSE DUTY. 121 public school, or almshouse, in respect of the public buildings, offices and premises belonging to such hospital, public school or almshouse and not occupied by any individual officer or master thereof " liable to income tax, "or by any person paying rent for the same." For all practical purposes these exemptions may be regarded as covering the same ground, but the statistics for income tax deductions under this head are wider in scope, because they cover also the exempted rents of ordinary properties, where such rents are applied to charitable pur- poses. Thus, the gross value of premises used for hospitals, etc., is £4,800,000, but the net value of property both used for, and applied to, charitable purposes is £8,400,000.^ Separate figures for the different descriptions of premises are not available. They have always been classed together, and since 1900 the class preceding (houses occupied by Royalty, etc.) has also been included. The class includes — (i) Lunatic asylums, generally, provided they are not wholly supported by the receipts of patients and that there is a substantial element of endowment.^ A separate house provided for the medical superintendent, if within the hospital grounds, is exempt.* (2) Schools, charity, as distinct from public schools. ■ — The Charterhouse, which was originally a " hospital for the poor and a free school," is now, for the larger part, carried on without the aid of the charitable foundation, and exemption from House Duty is not granted.* But the masters are occupiers of their respective houses and are assessable to House Duty for them.* The school buildings do not, taken by themselves, form an inhabited house.* (All the school buildings belonging to and occupied with a house in an ordinary school are assessable therewith.') Westminster School, with £3,325 annual endowment out of £16,000 total ^ Vide p. 65. The figures given for iSgg-igoo are the sums allowed in the assessment only. 2 Vide cases of Needham v. Bowers ; Cawse v. Nottingham Lunatic Hospital ; Musgrave v. Dundee Royal Lunatic Asylum (2 & 3 T. C). ' Jepson V. Gribble, i T. C. 78, and Wilson v. Fasson, 1 T. C. 526. * Charterhouse School v. Lamarque, 2 T. C. 611. ' Charterhouse School v. Gayler, 3 T. C. 435. ' Clifton College v. Tompson, 3 T. C. 430. ' Browne v. Furtado, 4 T. C. 537. 122 BRITISH INCOMES AND PROPERTY. income, was held not to be exempt as a charity school.^ Brad- ford Grammar School and HoUoway College failed similarly in their claim. For income tax exemption as a public school the City of London School succeeded, but the Edinburgh Free Church College failed. Generally speaking, the statistical significance of this class is in what is excluded rather than what is included, for the public schools help to swell the number of " dwelling-houses " of large annual value. (3) Workhouses and Almshouses. — " Poor persons " is a relative term, so that " The Mary Clark Home " (in which the ladies in reduced circumstances all have from £25 to £55 a year independent means) obtained exemption.^ Premises not used as Dwellings — i.e., Houses, etc., USED solely for Trade, etc. This class was formerly given under three heads, and it comprises three distinct sub-classes {vide 44th Report, p. 90). (i) Messuages and Tenements not used as Dwellings. — In 1899 this group numbered 520,058 out of a total for the whole class of 544,428, and the value was £33,083,199 out of £37,398,951. No separate figures have since been given annually. It comprises industrial premises of all descrip- tions, on which residence is prima facie unlikely or impossible. The following is an approximate classification of all classes (1912) :— £ Textile Mills . . . 3,850,000 Engineering Works . 3,320,000 Breweries and Distilleries 1,200,000 Other buildings used for manufacture . . 5,550,000 Chemical Works, Tanneries, and other premises containing specialised fixed plant ..... 3,630,000 Warehouses and Stores, used for storage, blending, etc. . . . 6,730,300 Shops, etc., locked up at night . . 19,460,000 Other premises .... 11,426,278 1 6 T. C. 166. ' 5 T. C. 48. Premises containing fixed machinery INCOME TAX AND INHABITED HOUSE DUTY. 123 (2) Parts of Houses used solely for Trade, etc., Purposes (41 & 42 Vict. c. 15, s. 13 (1) ) (1899 figures) :— Numbers. Amounts — ^^. Metropolis .... 1,027 806,183 Rest of England . . 971 101,436 Scotland .... — — Total .... 1,998 907,619 The statutory exemption is : " Where any house, being one property, shall be divided into, and let in, different tenements, and any of such tenements are occupied solely for the purposes of any trade or business, or of any profession or calling by which the occupier seeks a livelihood or profit ..." relief shall be given " so as to confine the same to the duty on the value according to which the house should have been assessed, if it had been a house comprising only the tenements other than such as are occupied as aforesaid." It is the value of the tenements, etc., excluded from the House Duty charge under this section which is included in this statistical class. The case law interpreting the words " divided into and let in different tenements " is very complex and extensive, and it is quite unnecessary for statistical purposes to attempt closer definition. (3) Houses used solely for Trade, etc., Purposes (41 & 42 Vict. c. 15, s. 13 (2) ) (1899 figures) :— Numbers. Amounts — £. Metropolis 5,545 2,249,716 Rest of England 16,607 1,101,386 Scotland . 220 57.III Total . . . 22,372 3,408,213 The statutory exemption reads : " Every house or tene- ment which is occupied solely for the purposes of any trade or business, or of any profession or calling by which the occupier seeks a livelihood or profit, shall be exempted from the duties, . . . and this exemption shall take effect 124 BRITISH INCOMES AND PROPERTY. although a servant or other person may dwell in such house or tenement for the protection thereof." Shortly after it became necessary to define " servant " " to mean and in- clude only a menial or domestic servant employed by the occupier, and the expression ' other person ' shall be deemed to mean any person of a similar grade or description not otherwise employed by the occupier, who shall be engaged by him to dwell in the house or tenement solely for the protection thereof." ^ The following points from decided cases will indicate the operation of this exemption ; — "Trade or Business, Profession or Calling": Exemption allowed. — Glasgow Coal Exchange, membership subscriptions payable — used for exchange purposes by coal masters, merchants and brokers, and occasionally let for balls, etc.^ Premises occupied by mutual insurance society (Scottish Widows' Fund and Life Assurance Society).' Exemption not allowed. — An hotel, where the hotel-keeper and his family resided elsewhere (Young v. Douglas *). Two farmhouses, one occupied by a farm servant, and the other hy the stewa.rd (In re Ainslie^). Premises occupied by Merchant Company of Edinburgh, the secretary also carrying on his business as law agent.® Premises occupied by London Hbrary — attendant and wife in residence for protection of premises.' Premises occupied by British Institute of Preventive Medicine.^ " Caretaker " — " Servant or other Person " : Exemption not allowed. — Clerk (with salary of £150 per annum), with wife, children, and servant occupying eight rooms and two attics.^ Bank clerk (salary £100), with wife, daughter and son, both of age. The salary included services in closing offices, cleaning and firing, and attendance at door.^" Premises in charge of female caretaker, a condition of her employment being that her son, aged 22, should sleep on the premises for increased safety. He was a clerk elsewhere ; an adult daughter and servant were also resident. ^^ 1 44 & 45 Vict. c. 12, s. 24. ' 2 T. C. 594. 2 I T. C. 211. « 3 T. C. 376. 3 4 T. C. 369. » I T. C. 260. * I T. C. 227. " 47 L. T. 252 ^ I T. C. 342- " 2 T. C. 86. « 2 T. C. 533. INCOME TAX AND INHABITED HOUSE DUTY. 125 Premises comprising eighteen rooms and concert-hall. Care- taker and wife occupied five rooms, the others being let for meetings, etc. He had other employment as librarian to a library occupying two rooms. ^ Premises occupied by life assurance company ; two messengers also employed as caretakers.^ Other cases decided that a salesman, an attendant, and a bank manager respectively could not come within the description " caretaker." But generally it may be said that if there are no adult children in independent, employment resident with the caretaker a fairly liberal interpretation is given in practice. Writers upon problems of distribution of income who have been concerned with occupied houses have always ignored the class " Premises not used as Dwellings," but it is clear that the sub-class (3) is not a wholly negligible factor, and that an estimate of the number of families resident in such premises in the " caretaker " capacity should be made. Houses in the Census compared with Houses in THE Tax Statistics. The 1911 census gives an elaborate classification of buildings which should be theoretically reconcilable with the assess- ments. But the difficulties of definition were considerable, and differences in interpretation by the many investigators must have been very numerous. The assessment classifica- tion and definition are, on the other hand, brought to the critical test of taxation, and have been rendered more uniform by many years of administrative practice and a special code of law. The first difficulty is that of time. The census is taken for a particular day, and the assessments represent, at the nearest, the conditions of a whole year. But roughly it may be said that the year 1910-11 must be taken to correspond. 1 3 T. L. R. 191. = 3 T. C. 268. 126 BRITISH INCOMES AND PROPERTY. The census for England and Wales gives (in thousands) : — (i) Buildings used as dwellings : Inhabited 7M'^-^ Uninhabited .... 4087 7.550-5 (2) Buildings not used as dwellings (ex- cluding churches, etc.) . . . 355'0 Total 7.905-5 The tax total is : (i) . . . . 7.244-9 (2) . . . . 525-7 Total 7,770-6 Now it is prima facie probable that the enumeration of " buildings " not inhabited, made for a census not primarily directed thereto, and with inadequate time and powers for the purpose, would be short of the true number, as compared with a long-established assessment based on parish rating and local knowledge. The report shows that considerable difficulties were encountered, and it appears to be beyond doubt that the enumeration is quite incomplete. The test of the division is very similar to that adopted for the tax classification, viz., the existence of sleeping accommodation, but cases of caretakers on business premises come within (i) of the census and within (2) of the assessments. This only makes the disparity between the 355,000 and 525,700 the greater. It is probable, moreover, that premises counted as one dwelling for the census have been divided into dwelling and " lock-up " shop to a much greater extent in the assessments, and this would account partly for the differ- ence. In the opposite direction is the omission from the assessments of all buildings forming part of gasworks, waterworks, railways, etc.,^ which should presumably be in the census. On the whole the conclusion appears irre- sistible that a great number of rated premises were omitted from the census enumeration of " buildings not used as 1 Concerns No. TIL, Sch. A, assessed under Sch. D. Vide p. 222. INCOME TAX AND INHABITED HOUSE DUTY. 127 dwellings," the number shown being about two- thirds of the true number. Proceeding to compare only the " inhabited houses," we may first deduct, say, 10,000 " caretaker " cases from the census figures. The " flats " class presents great difficulties, and the census report shows that there was much lack of uniformity in the methods adopted : it is highly improbable _ that the method of counting and the definition were quite in accordance with the purely technical tax distinctions, and no kind of exact comparison is possible, so that perhaps the least error will be introduced into the aggregate comparisons if what both methods describe as " flats " or " separate dwellings " are eliminated. The com- parison then stands (in thousands) : — Census. (I) Properties assessed to House Duty. (2) Census Houses not assessed to House Duty. (Difierence between cols. I and 2.) (3) Houses under £20 assessed to Income Tax, exclud- ing separate dwellings and trade premises. (4) Ordinary dwelling-houses Of&ces, warehouses, work- shops, factories and other premises . 6,869-5 71-0 1.439-6 88-5 308-7 5.500-9 -3* 136-0 Hotels, inns, and public- houses Shops .... 6,940-5 88-2 444-7 5.349-1 [ i35-7t Total . 7.473-4 1,836-8 5.636-6 5.484-8 Difference un- accounted for, 151-8 * The tax description is broader, and includes cofEee-houses and tem- perance hotels, so that the two classes are not strictly comparable (see Census Report, VI., 5). t This represents the shops, etc., under ;£20 in value. In 1850 these were about 120,000 in number {vide p. n8). The point now for consideration is whether the difference 151-8 would be increased if " flats " were dealt with on 128 BRITISH INCOMES AND PROPERTY. identical lines. In view of the fact that we have taken from the census figures what is equivalent to 253'4 separate flats, and from the tax figures what is equivalent to only 947 separate dwellings, the difference I58'7 represents separate flats which are not so classified for House Duty, and which probably appear as at least (one-third) 53,000 houses therein. These increase the unassigned balance to 204- 8 +. The difference is of course mainly due to the fact that all farmhouses under £20 are assessed as land for tax purposes, and this is perhaps one measure of the number so assessed.-' Ireland. The fact that the House Duty does not extend to Ireland has always been a pitfall for statisticians, and in making comparisons with figures which relate to the United King- dom it is often forgotten. When remembered, a rough estimate is usually made, for no information is available as to^the number and value of houses above £20 at the present time. But in 1864 there were 33,763 houses rated over ^^20 by the unions in Ireland ^ : these valua- tions were of course very low, and it may be said that, compared with England, this was the number above £25 in value. In discussions upon the distribution of incomes, the following estimates have been made : — Zorn : 100,000, all values over £20 (" Incidence of the Income Tax "). ' Morgan Browne : 100,000, all values over £20 {New Liberal Review, April, 1902). Mallock : 100,000, all values over £20 ; 350,000, under £10 ; 150,000, £10 to £15 ; 150,000, £15 to £30 ; 40,000, £30 to £50 ; 13,000, £50 to £60 [Nineteenth Century, March, 1910). 830,000, under £20 ; 15,000, £20 to £60 ; 15,000 over £60 ("The Nation as a Business Firm," p. 71). Money : 9,000, over £50 (S. C. on Income Tax, 1906). ^ Vide p. 119. " H. C. 207—1864. INCOME TAX AND INHABITED HOUSE DUTY. 129 Comparisons between Different Years. (i) Shifting between Values. Upon the question of the aggregate valuation the remarks that have been made about Sch. A (messuages) as to the effect of re-assessment fairly apply.^ But the question of the total numbers and values of houses liable to House Duty is affected in a second way, owing to the £20 exemption limit, quite distinct from the effect on all houses from highest to lowest values. For in the ordinary years many existing houses are dropping below ^^20 and disappearing from the statistics of liable houses, and none are coming up from below, but in the revaluation year all the arrears of increasing rents are brought in, and many cases that were standing under £20 come above £20. The classes tend to press upwards throughout in the re-assessment, and, although masked to some extent by the actual new houses, there is a downward drop in the ensuing years that is very clearly visible in the tables. In a reciprocal manner the houses under ^^20 tend to be fewer in the re-assessment year and more numerous in subsequent years. " In 1897 144,000 new dwellings were built ... in 1898 the number had sunk to 114,000 ... in 1889 (probably 1899 is meant) it was 147,000, or 17,000 above the average." — Mallock, " Phantom Millions," Nineteenth Century, 1909, p. 761). It is not possible to see how these figures have been obtained, but they clearly ignore the effect of the quinquennial assessment in 1898. Mr. MaUock uses the houses over £20 as a divisor (the gross income reviewed being the dividend) to obtain an " average assessed income " for use as an annual index number with which to compare wages. It is clearly unsuited for the purpose. The quotient drops from 695 in 1902 to 660 in 1903, because of the effect of the re-assessment on the divisor (" Statistical Mono- graph," p. 26). The care which is necessary in drawing inferences from the separate classes of these tables is well illustrated by the series of questions by Mr. Royds, M.P., in the House of Commons in 1912 and 1913, and the ministerial replies.^ Mr. Royds designed to 1 Vide p. 31. ^ Vide Hansard : Vol. 45, cols. 1483 and 1507 ; Vol. 46, cols. 349, 1180, 2063 ; Vol. 47,'cols. 411, 1322, 2194 ; Vol. 48, cols. 1485, 1490 ; Vol. 51, col. 1628 ; Vol. 52, col. 339 ; Vol. 55, col. 1233. 130 BRITISH INCOMES AND PROPERTY. show that the official tables indicated a great slackening in the building of cottages and small houses in 1910 and 1911, and that the whole housing question had also been prejudiced by the Budget taxation of 1909. The small increase in houses under £20 in 1910-11 compared with other years was pointed out and explained to be very largely due to the fact that 1910-11 was a year of new valuation — the first since 1903-4. " Somewhat similar falls have invariably followed the periodical revision of the assess- ments." The diminished value in 1910-11 (notwithstanding the larger number) was then referred to ; and the reply stated that the average had fallen from £g 19s. 4^d. to £g 18s. 2%d. " This small decrease of is. 2d. per hereditament might be due to a slight corresponding diminution in the average rent paid by the working-class occupiers of this class of property ; but as 1910-11 was a year of new assessment it is probably attributable to other causes, and especially to small differences in estimating yearly rental values from the weekly rents at which a large proportion of this class of property is let." Mr. Royds then got to the root of the matter by taking the total number of all classes together and calling for information as to 1893-4 re-assessment, when it appeared that the " under £20 class " showed a decrease of 6,536 and the " over £20 " class an increase of 45,540. He summarised the matter in a motion for adjournment on 14th February, 1913,^ in which he dealt with building generally ; and Mr. Masterman in his reply showed that revaluation had the effect of checking the automatic increase in the " under £20 " class, but did not refute Mr. Royds on the subject of all houses taken together. How easily the matter can be misunderstood is shown by the following comment : — " He made great play with the ' year of re-assessment,' and declared once more that after every such period ' the number of houses under £20 valuation decreases automatically.' We confess that both of these statements puzzle us considerably. In the first place, what is a ' year of re-assessment ' ? If the expression has any meaning at all it is that the whole of the country is re-assessed simultaneously. That is certainly not the fact ; every year is, more or less, a ' year of re-assessment.' Moreover, in many unions appeals against assessments are held at least once, and often twice, a year, so that valuations are in a constant state of flux. Then, is it a fact that the number of houses under £20 valuation ' decreases automatically ' after every revaluation ? In a healthy and normal period it would seem reasonable to suppose that the value of the new buildings would * Hansard, Vol. 48, cols. 1485. etc. INCOME TAX AND INHABITED HOUSE DUTY. 131 at least make up for the reduced value of the old ones. That would hardly be so when the new houses were small in number ; but when they reach, or exceed, the average, there certainly ought to be Uttle, if any, fall in the number of buildings assessed up to a given figure, the more especially when the figure is as low as ^20 " {Estates Gazette, 22nd February, 1913). Sir Thomas Whittaker quotes the private dwelling-houses table 1890-1 against 1910-IT, and gives the percentage increase in each case. Private Dwelling- 1890-91. 1910-11. Increase. houses. Rental. No. No. Per cent. Under £10 3,271,261 3,240,221 —96 £10-15 1,088,329 2,103,820 93-4 £15-20 586,511 960,395 63-5 £20-40 572,506 1,087,750 89-9 £40-60 150,093 232,432 54-9 £60-80 46,362 64,827 39-8 £80 109,208 127,679 16-9 Total . 5,824,270 7,817,124 34-2 " These figures indicate a great improvement in housing ; . . . the most striking and interesting facts revealed by these figures are — (i) that there was no increase, hut really a small actual decrease, . . . in the number of the smallest and poorest houses ; and (2) that the smallest increase in actual numbers . . . was in the number of houses the annual value of which was more than £80 a year. . . . The great increase was in houses of from £10 to £40 a year rental, exclusive of rates and taxes. Clearly the working people are better housed, are able to pay better rents, and now live in much larger numbers in £10 to £15 houses, where they used to live in £6 to £10 houses " (" Ownership and Taxation of Land," pp. 81-2). Now the inferences itaUcised in this quotation are probably correct, at any rate in part. But they do not necessarily follow from the statistics. The figures are quite compatible with the following conditions : an increase of nearly two million houses, but all of the worst and smallest type, and a great and general increase in rents of all kinds of property — almost the reverse of the above conclusions ! 132 BRITISH INCOMES AND PROPERTY. The first three classes (up to £20) do not strictly follow the heading, for they are not ejusdem generis with the remainder. They are officially described as " houses," and include residential shops, beerhouses, etc., that would be charged at the lower rate if over £20 in value (vide p. 118). Giffen, " Some General Uses of Statistical Knowledge " (S. /., Jubilee volume, 1889, p. 113) quotes : — 1833. 1880. Houses above £20 annual value 215,000 713,000 £15 and under £20) ,28000 l425.ooo £10 and under £15 1 ^^'^'^^^ i755,ooo Houses under £10 . . . 2,252,000 ^ 3,091,000 Giffen shows that the lowest class has increased only 40 per cent, against the general increase of 85 and 90 per cent. He deals with the argument that increase of house rent would give these figures and yet not be a sign of better accommodation. " The argument is self -contradictory. The wages of labour being ultimately the main element in the cost of producing houses, becomes a proof that the wages of the builders of houses have increased — probably greatly, . . ." because of labour-saving machinery. " That much higher rents are paid is a proof of the rise in the standard of Uving." Giffen's contention surely goes beyond the evidence, for the rise could take place against a stationary wage, by mere pressure of population, and it might be a factor in depressing the standard of Uving, which can hardly be tested by the fact of a higher payment for the same thing ! In discussing the progress of the working classes (S. /., 1883) he used the 1834 and 1881 returns, and looked entirely at the £10 to £20 class, ignoring the class below except as a modification, and considered that the working classes had obtained a better article. The same criticism applies, viz., that the under £20 houses may have gone above £20, the £10 to £20 class received the lower class houses at higher rents, and all the new houses may have come in at the lowest class. (2) Shifting between Classes. Re-assessment Years. — An additional feature of import- ance is that the " private dwelling-house " class is swollen not only actually from the " under £20 classes," but also from the various exempt classes, and the various lower rate 1 This figure is arrived at by deducting the houses subject to duty from the total number of inhaloited houses. INCOME TAX AND INHABITED HOUSE DUTY. 133 classes, to an extent partly real, partly fictitious. The actual title to exemption or lower rate comes up prominently for review, and it may be found to be invalid permanently, or, the onus of proof being upon the taxpayer, it may stand charged at the higher rate when the assessment books are made up, but may be subsequently reduced by schedule ^ on satisfactory evidence. Thus, title to be ranked as a lodging-house, as a farmhouse, or as a shop, or to be exempt as a charity school, or as a " lock-up," may be called into question. The private dwelling-houses are therefore abnor- mally increased by the re-assessment, and lock-ups, shops, etc., will be found to show a relative falling off by the transfer. Private Dwelling-houses prior to 1890. — When any com- parisons before and after 1890 are made, it must be remem- bered that this class formerly included the whole of the present lodging-house class. Comparisons between Different Places. The remarks made under Sch. A ^ about Scotland apply equally here. The values are relatively higher than in England owing to the inclusion of rates. Mr. C. P. Sanger, writing on the incidence of rates, omits this point, but as he uses the assessment only as a ratio it is not very material (" Incidence of Taxation in United Kingdom," Yale Review, 1898). Empty Houses. Under income tax, Sch. A, the net allowance for void pro- perty is given,^ but the House Duty statistics do not show the amounts of duty " allowed by schedule," * so that we have no means of computing the number of houses void in any year. Mr. Masterman stated in the House of Commons that the percentage of void houses had increased of late years : — 1902-3, percentage 4-8 1909-10 „ 6-3 1910-11 „ 5-9.5 1 Vide p. 53. « P. 53- " Vide p. 60. " Hansard, Vol. 47, col. 1,491. » Vide p. 64. 134 BRITISH INCOMES AND PROPERTY. This information was probably obtained from rating sources.^ The actual duty irrecoverable from this and other causes was at one time given in the official reports, but it is difficult to compute the number of houses therefrom because of the varied rates of tax involved. The allowance for void pro- perty under Sch. A includes mills, factories, etc., and there is no good method of ascertaining therefrom the number of dwelling-houses affected. The 28th Report ^ shows the duty not recovered in respect of unoccupied houses and from other causes from 1870-1 to 1882-3. From io'8 per cent, for England and Wales in 1870 it sank to 9 per cent, for some years, rising abruptly in 1878-9 to nearly 12 per cent., and remaining over 11 per cent, till 1882-3. For Scotland, owing to the administrative methods adopted in making the assessments, it was always under i per cent. The corresponding figures in recent years must be obtained by computing the duty for each class from the tables and subtracting the actual duty. For 1911-12 ' the percentage for private dwelling-houses was 9^4, for residential shops I2'6, for public-houses i'2, for farmhouses '3, and for lodging-houses i'6, the percentage for the whole House Duty being just under 9. This, it should be observed, has to cover reductions in values and losses from other causes than voids, and since the details under Sch. A show that rather more than 4 per cent, of the gross assessment on houses, messuages, etc., was allowed as voids, it is probable that the House Duty figure is not very different. The census furnishes some relevant information.* The ^ On 15th March, 1912, Mr. John Burns stated in the House of Commons, in debate on the Housing of the Working Classes Bill, that there were 500,000 houses void in the country generally, 60,000 being in London. ^ Pp. 244, etc. The of&cial evidence by T. Sargent, before the S. C. on Poor Rate Assessments, 1868, that the loss on House Duty assessments was I per cent, and included loss by voids, must have been given under a misapprehension as to the true facts. 3 Vide 56th Report, p. 70. * For definitions, etc., see S. C. on Town Holdings, 1890, p. 663. INCOME TAX AND INHABITED HOUSE DUTY. 135 following is quoted from Sir Thomas Whittaker's " Owner- ship and Taxation of Land " : — Houses and Persons. Year. Houses Uninhabited to Inhabited. Persons per House. Persons per Square Mile. Per cent. 181I 2-84 5-65 174 183I 4-83 5-6o 238 1851 4-68 5-47 307 1871 6-14 5-33 390 189I 6-83 5-32 497 I90I 7-17 5-20 558 1911 572 5-05 618 Mr. Mallock remarked that the new houses provided have exceeded the requirements of the population because " in 1905 £7,000,000 had to be deducted from the assessed value of houses Sch. A " for void property. " The average value of premises being £22,, it thus appears that there were over 300,000 premises unoccupied " (" Phantom Millions," Nineteenth Century, 1909, p. 761). But to the amount allowed as above should be added one- fifth (because of the repairs allowance), making £8,400,000 gross for comparison with House Duty statistics. Then of course some of the premises exempted from tax under Sch. A have also been void, and if these are taken in proportion and the result added, the final figure has at any rate the virtue of being a maximum one. In the absence of any reasons to the contrary it may then be sub- divided in proportion to the various classes of premises, making up the whole class of Sch. A messuages in order to ascertain the number of premises void in each class. Uses of House Duty Statistics. (i) The chief use for the determination of the distribution of wealth and the number of taxpayers is discussed at length in Chapter XIII. (2) Value of Furniture in Great Britain. — Vide Chapter XI, Qn " National Capital," 136 BRITISH INCOMES AND PROPERTY. W. J. Harris used the classification of values to estimate the value of furniture, by assigning an average amount to each grade :— Houses— under £io, £i8 ; £io to £15, £40 ; £15 to £20, £60 ; £20 to £23, £100 ; £25 to £30, £130 ; and so on, making a total of £599,000,000 (S. /., 1906, p. 726). (3) The classification tables have been used to show the increase of moderate incomes (houses in classes from £20 to £50) compared with those above (Goschen, S. /., 1887). (4) Wages and Profits. — W. H. Mallock uses an index number (obtained by dividing the " gross income reviewed " by the number of private houses charged to House Duty ^) for comparison with an index number of wages. The validity of the method would perhaps be greater if the divisor were confined to houses having a relation to the tax hability, but it might still contain the average income fallacy.^ (5) Progress of Housing. — Some of the quotations under heading " Shifting between Values " refer to this use. Palgrave, S. J., 1869, uses Baxter's data from poor rate figures, etc. The yearly increase in the number of dwelling-houses under £20, 1900-1 to 1912-13, is used to show the progress of housing, reference being made to the effect of revaluations (Report of the Land Inquiry Committee (Urban), p. 72). This increase represents only the increase in houses (71,500 annually), and takes no account of those built to replace those demolished (estimated at 20,000) {ibid., p. 80). Reference to 1901 statistics and comparison with 1833 : — 45 per cent, were houses " under £10," but in 1833 they were five or six times as numerous as those above (Institute of Surveyors, Transactions, 1904-5, H. T. Steward on "Housing"). (6) Improved Standard of Living.— Giffen, " Progress of Working Classes," S.J., 1883 ; " General Uses of Statistical Knowledge," S. /., 1885. Craigie : full discussion of House Duty Statistics, 5. /., 1902. (7) Income Tax Evasion. — Houses over £30 compared with assessments over £200 to determine number evading >• "Statistical Monographs." His figure for 1900 appears to be wrongly calculated. " P. 374- INCOME TAX AND INHABITED HOUSE DUTY. 137 tax (H. C. 384 of 1872 and 397 of 1873 ; Levi, " Recon- struction of Income Tax," S. /., 1874). (8) Use of House Duty statistics to determine the numbers of shopkeepers liable and not liable to income tax respectively. {a) Assumption that the residential portion of premises equals one-third of the value and is also one-tenth to one-eighth of the income at about ;£i5o, so that a £50 shop (;£6o in London) corre- sponds to an income of £160 ; (6) 80,000 cases above this Umit, ± 30,000, as taxpayers, and 230,000 below £50 (but above ^20) ; (c) by deduction from census figures of occupation there would be 280,000 below £20. (The number of " lock-up " shops for small retailers is not large, so that this figure is in conflict with the number gained by using the census enumeration of buildings ^) (" The Amount and Distribution of Income (other than Wages) below the Exemption Limit " : British Association Committee's Report, S. /., 1910, p. 61). (g) Inquiries into the Incidence of Taxation. — G. H. Blunden uses the I. H. D. figures to divide up property and to determine distribution (S. J., 1896). Also Col. G. W. Raikes, Institute of Surveyors, Transactions, 1896. Additional Information beyond that contained IN THE Reports. (z) Parliamentary Papers. H. C. 125 — 1845. Houses charged to Window Duty. H. C. 259 — 1845. Window Tax and Property Tax com- pared for certain roads in London, in classes, 1843-4. H. C. 630 — 1849. Graduation of Ratings in Lancaster, Suffolk, Hants, and Gloucester. H. C. 54 — 1852. House Duty, Numbers in Counties, and Window Duty, showing loss sustained. H. C. 331 — 1852. House Tax — City of London appeals. H. C. 360 — 1852. Various Divisions — Houses classified. H. C. 547 — 1852. Houses charged at each rate, 1851. Classified Ratings £5 to £10 and £10 to £20 in London, 1 Vide p. 127. 138 BRITISH INCOMES AND PROPERTY. Liverpool, Manchester, Birmingham and Sheffield, with estimated yield of House Duty. H. C. io6— 1852-3. House Duty, Population, etc., by Electoral Divisions, England and Wales. H. C. 244 — 1852-3. An important Return, in Counties, for Great Britain, showing (i) the number of houses charged to Window Duty, 1851, and amount charged ; (2) the number and amount charged to House Duty (this information being subsequently included in Official Reports — vide 13th Report); and (3) number of houses between £10 and £20 in value (either assessed to Income Tax, or rated to the poor), and estimated yield for House Duty at gd. for shops, and at IS. 6d. for houses {vide footnote on p. 118). H. C. 5 — 1859 (2). Scotland, in Counties : Houses classified £2 to £10. H. C. 400 — 1860. England and Wales : Counties and Parliamentary Divisions : Poor Rate Assessments, ratings of £10 and over. House Duty Assessments, Electors. H. C. 572 — 1860. England and Wales by Counties : Numbers of houses in classes £20 to ^^25, £25 to £30, £50 and upwards. Cities and Boroughs : Messuages and tene- ments of £8 and upwards. H. C. 155 — 1861. Amounts and numbers in Chelsea, Kensington, Hammersmith, Fulham and Scotland. H. C. 358 — 1862. Scotland : Dwelling-houses, 1857 to 1861. Annual values of £3 and £4 ; amount of ratings. H. C. 410 — 1862 (reprinted as 1866, No. 131). Return of Population and Houses. H. C. 428 — 1863. Return by Counties and Divisions, showing numbers of houses in classes £20 to £30, £30 to £50, £50 to £100, £100 to £150, £150 to £200, etc. H. C. 279 — 1866. England and Wales : Male Occupiers ; various rentals classified — not exceeding £10, £10 — £11, etc., up to £20. H. C. 494—1866. Electoral Returns : Male Persons in each Borough, etc., in occupation of houses, £10 to £20, £20 to £30, etc. H. C. 143 — 1867. Farmhouses, England and Wales (23,582 : £557720 annual value). INCOME TAX AND INHABITED HOUSE DUTY. 139 H. C. 341 — 1867. Certain Parliamentary Borough and County Statistics of House Duty. H. C. 384 — 1867. Return by Counties and Divisions for 1865-6 similar to No. 428 of 1863. H. C. II— 1867-8. Dwelling-houses, not covered by a Composition Act, on which the owners pay poor rate by agreement with the assessing authorities, in ParUamentary Cities and Boroughs in England and Wales (98,598 cases) . H. C. 300 — 1871. House Duty in the Metropolis, by Wards (1870-1). H. C. 384 — 1872. Classification of Houses, by values {vide also S. C. on Town Holdings, p. 663). H. C. 292 — 1882. County Return for Sch. A and House Duty charged. H. C. 206 — 1883. County Return for Sch. A and House Duty charged, 1880-1 and 1881-2. H. C. 25—1884-5 ; H. C. 235—1884 ; H. C. 39—1892 ; H. C. 217^ — 1896, in continuation. H. C. 344 — 1883. Very detailed classification by Counties, showing values £20 to £25, £25 to £30, etc., up to £1,000, and also premises exempt from House Duty (see also Leone Levi, S. J., 1884). (2) Commission Reports. S. C. on Town Holdings, p. 368, Appendix XIV. Metropolis. — Special information obtained from the Inland Revenue Department, classifying shops and dwelling-houses, 1881-2 and 1887-8, by numbers in several classes (£20 to £25, etc.), with percentage borne by each class to the total. 140 BRITISH INCOMES AND PROPERTY. Table H. D.— Numbers of Houses, £20 and over— Annual Value (Great Britain), 1851 to 1873 (in thousands). Charged at Shop Rates. Dwelling- houses. Year. Public- Farm- Residential houses. houses. Shops. ^ ■* 1851-2 . 189-1 275-9 1852-3 189-I 277-1 1853-4 189-4 281-7 1854-5 1937 291-3 1855-6 194-0 295-0 1856-7 195-2 299-9 1857-8 198-0 307-8 1858-9 201-8 317-4 1859-60 204-7 327-9 1860-1 208-3 336-1 i86i-i 210-0 346-4 1862-3 214-3 363-3 1863-4 219-I 375-0 1864-5 225-2 389-5 1865-6 236-3 412-0 1866-7 240-1 424-4 1867-8 62-4 26-5 i6i-i 450-7 1868-9 65-4 27-0 i66-2 472-1 1869-70 67-5 27-5 172-5 486-2 1870-1 68-6 28-2 178-8 520-8 1871-2 67-9 30-8 180-1 527-2 1872-3 67-8 32-1 181-1 536-9 1873-4 . 70-3 32-2 190-6 557-5 INCOME TAX AND INHABITED HOUSE DUTY. 141 s 9 '1 s i-l "S o o 5; O MMMHHHM«HMW«««NW«NN«MW««N jn tfiio o M « m o^co (n*o ^. mfvfN. 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