IHD13 1 VijSf-^ HD1315.L8T" """'"""■"'"''' Unearned increment figuresFALSE AND TRU 3 1924 013 761 626 Number to be quoted in ordering-, 2. Monographs for Members of Parliament. Parliamentary Candidates, and Other Speakers and Workers. THE LAND QUESTION. 2. Exposure of the Fallacies of SocialistSj Radical-Socialists and " Land-Taxers." UNEARNED INCREMENT, FIGURES— FALSE AND TRUE OR Actual Increment in Land-Rent for Fourteen Years. FEBRUARY, 1911. These Monographs are not for Sale, but will be supplied, on application, ito subscribers to the Economic Department of the London Municipal Society, 11, Tothill Street. Westminster, S.W. 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/cu31924013761626 Number to be quoted in ordering-, 2. Monographs for Members of Parliament. Parliamentary Candidates, and Other Speakers and Workers. THE LAND QUESTION. 2. Exposure of the Fallacies of Socialists, Radical-Socialists and " Land-Taxers." UNEARNED INCREMENT, FIGURES-FALSE AND TRUE OR i^ctual Increment in Land-Rent for Fourteen Years. FEBRUARY, 1911. These Monographs are not for Sale, but will be supplied, on application, to subscribers to the Economic Department of the London Municipal Society, 11, Tothill Street, Westminster, S.W. V)Ul ■2 b C^2319(3 [Monograph.] UNEARHED INCREMENT, FIGUKES— FALSE AND TRUE OR i\ctual Increment in Land-Rent for Fourteen Years. Preliminary Observations. In a separate Monograph is discussed the primary error as to fact on which the entire practical doctrine of Henry George (the apostle of " land- taxers " such as Mr. Ure) is based. The root propositions of such persons (to which even Mr. Asquith has signified his assent) is that the rent of land, whether used for agriculture or building purposes, necessarily in- creases as a whole, in any progressive- country, in a greater ratio than the national income as a whole, thus year by year constituting an ever larger proportion of it. Hence it is argued that if the State could only appropriate the rent of the soil as such, in lieu of all other taxation, it would auto- matically possess itself of a revenue capable of meeting all the increasing requirements of the country. In the Monograph on Henry George, this proposition is submitted to a statistical examination covering more than a hundred years, and is shown in detail to be the wildest inversion of the truth — the most pre- posterous piece of nonsense — that ever gained credence in any civilised country. In that Monograph is shown, by the clearest official figures, that the land-rent, or ground-rent, of the United Kingdom, instead of having increased faster than the income of the country as a whole, is the element that has increased most slowly, and that the proportion borne by it to the rest of the national income, instead of growing greater and greater, is constantly growing less and less. Hence, if the ideas of Mr. Henry George and Mr. Ure had been carried into effect in this country, when they were first promulgated some twenty-eight years ago, and the entire rent of the soil confiscated, in lieu of all other taxation, by the State, the State, instead of having an increasing surplus at its disposal, would now have to put up with a revenue less by some 40 per cent, than the amount which each year it is at present extracting from the country. The reader will see in the Monograph on Henry George that the true ground-rent of the country, agricultural and urban, amounts now to about 4 £94,000,000 as a maximum. The Imperial portion of our public expenditure alone amounted in 1909 to £158,000,000. It was greater by £40,000,000 ttan it was before the Boer War. The net increase on which Income Tax was paid has, since that time, increased by £129,000,000. The rental of the land of the United Kingdom as a whole has increased during the same period by £7,000,000. The increment in the value of land which in that Monograph is the subject of a general surcey, is here submitted to a more minute analysis and the period dealt with is the last fifteen years. The Wild Ideas Promulg:ated by Statesmen as to the Annual Increase of Land-Rent. Mr. Asquith, in defending the increment taxes, when first proposed by the present Chancellor of the Exchequer, declared in the House of Commons that the land of London alone now increases every year in value by about £1,000,000 ; and what was going on in London, he added, " was going on all over the Kingdom. ' ' He made these statements as though they were matters of common knowledge, too well established to need detailed verification, and offered them to the House of Commons as the data on which a new fiscal policy was to be based. Many persons may be surprised to learn that this question which persons like Mr. Asquith, Mr. Lloyd George and Mr. Ure treat as the subject of wild and inflammatory conjectures, put forward as facts, can be studied in the disenchanting light of a series of precise figures which are year by year given in the Government Blue-Books. Of these books, the most familiar is the Statistical Abstract. There, in the Income Tax Tables, is given the gross and the net income which can in any way be associated with the ownership of landed property. This income (Schedule A) is divided into two portions — ^that arising from agricultural land, and that arising from " houses," the latter term including the land on which the houses stand. The official figures show that the rental value of agricultural land (which " land," by the way, includes all improvements, and a large number of houses) has been steadily declining for the last 30 years — being less by some £18,000,000 than it was in the year 1879. In respect of agricultural land, therefore, there is no increment at all. The -only increment that takes place is an increment in the value of such areas (mainly urban and suburban) as are used for buildings and their adjuncts. Thus whatever increment takes place in the value of land as such forms some part or fraction of the total rent given in the Government returns as the gross rent of " houses." The Official Figures as to tlie Combined Rent of Sites and IHouses. Let us now take the latest returns available (The Statistical Abstract, 1910, pp. 38 — 39) and see what during the past fourteen years has been the annual increase in the rental of houses and sites combined. Increase in combined gross rental of houses and sites over rental of preceding year : — 1895 1896 1897 1898 1899 1900 1901 £ 3,752,936 4,234,222 3,107,672 8,207,681 4,241,633 4,532,643 5,613,937 £ 1902 . . 3,628,295 1903 . . .. 9,457,859 1904 . . 3,664,466 1905 . . 4,313,752 1906 . . 4,910 552 1907 . . 3,155,293 1908 . . 3,202,707 Such are the gross — or, to speak more properly, the nominal increases. The annual average for the entire period is about £4,600,000. It will be observed, however, that for the years 1898 and 1903 this average was greatly exceeded. In the year 1903 it was doubled. It appears that on both these occasions this was due to over-building, mainly in England and Wales. Thus, to confine ourselves to the period subsequent to 1903, we find that from the estimated gross rental of houses and sites in England and Wales alone £6,900,000 had to be deducted in 1905 in respect of premises un- occupied ; and though the average annual increment for the following five years was only £3,800,000 (as compared with £9,400,000 for the year 1903) the amount to be deducted in respect of unoccupied premises was, in 1908, greater by £500,000 than it was in' 1905. It is therefore obvious that the actual gross annual increase in the combined rent of sites and houses is appreciably less than it appears to be ; the true average for the period in question being probably less than £4,400,000. We may put it, as a maximum, at £4,500,000. Let us now turn from the Statistical Abstract to the Fifty-Third Report of the Commissioners of Inland Revenue, 1910, where, on pages 78 and 82, we shall find more minute information. There the increase of the combined rental value of lands and houses in London is difierentiated from the increase for the entire country ; and the total for 1899 is compared with, the total for 1908. The excess of the latter sum over the former is shown to be £7,978,433. The average annual increase for the nine years in question (no allowance being made for empty premises) was thus, in round numbers, £886,000. That is to say, the annual increase for London, in the value of buildings and land combined, was less by £114,000 than the increase which Mr. Asquith, in the House of Commons, attributed to the increase in the value of land alone. Such is the way in which even by the heads of a Radical Government fraudulent assertions as to fact are f aimed off on the public. We will now pass on to what is really the crucial question — namely, what proportion of the increased value of lands and houses combined consists of an increase in the rental value of sites (i.e. land as such) and how much is interest on the cost of the structures placed on it ? In the case of individual existing premises it is often a matter of great difficulty to determine how much of the current annual value is due to the structure, and how much to the site. But when we deal with such properties in the mass, a general conclusion can be arrived at sufficient for all general purposes. This conclusion can be reached by two independent methods. The First Method by which Site -Rent can be Differentiated from Total Rent. The cost of erecting structures of similar kinds, although it may difEer somewhat, does not differ greatly in various parts of the Kingdom ; but the rental value of such structures differs to a notable degree. The difference must therefore be due mainly to differences in the value of the sites on which the structures stand. The extent of the gross difference can be readily seen by a comparison of the average rateable value of all buildings per inhabitant in London, in the great provincial towns, in small country towns, in watering-places, and in rural districts. Now with regard to London, systematic investigations on the part of the London County Council have shown that the ground-rent accounts for something approaching one-third of the gross rateable value. Thus, if a house of a certain character in London is worth £100 a year, about £69 will, on an average represent the interest on cost of construction, and £31 will represent the site-rent. If, making all allowances for structures peculiar to a Metropolis, we compare the rateable values per inhabitant in London with the corres- ponding rateable value in other localities — e.g., Liverpool, Birmingham, Portsmouth, Torquay, and the rural districts generally — we shall find that a house which in London would be worth S.100 a year, would in Liverpool be worth about £90, in Birmingham about £.86, in Portsmouth about £B0, in Torquay about S.75, and in the open country about £70 ; the respective ground rents — £23, £19, £14, £8, and £3, — varying from something less than a fourth or a fifth of the total to a fraction which is almost negligible. If, regard being had to the manner in which the population is distributed, the above facts are put together, it will appear that by taking the site-rents of the entire country as one fifth of the rental of sites and structures combined, we reach an estimate which, though defensible, is, in all probability, excessive, A Second Method of Computation by which the First can be checiced. Such is one method of computation. Let us now turn to a second. This is based on evidence, the larger part of which has only just become accessible, with regard to the amounts actually spent per annum in this country on building. A Yellow-Book (Cd. 5806) was issued by the Board of Trade in 1910 dealing with the earnings and numbers of the workers emp]03'ed in the building trades. The number (p. ix.), in 1906 — the year to which the enquiry relates — was approximately 1,000,000 ; and the annual earnings (p. xii.) were not far short of £70,000,000. As to the principal materials employed in building — stone, brick and wood — we are able to get some specific, if incomplete informa- tion from the profits of quarries, as earmarked in the income-tax returns ; from the value of sawn planks imported, as given in the Import Tables ; and from the value of bricks and tiles manufactured in the course of a year in this country, as given in Part III. of the Census of Production (1910) for the year 1907. The value of timber was over £17,000,000 ; of stone about £4,500,000 (the total value being taken, as a minimum, at three times the assessed profits of quarries) ; of bricks and tiles about £6,000,000. Total jor the materials in question about £28,000,000. The above figures for materials do not include home-grown timber, lime, concrete, or plumbers' work, for which we may conjecturally allow something like £3,000,000 or £4,000,000. 8 Such being the case, it is obvious that the annual expenditure on building in respect of wages and materials cannot be short of £100,000,000. If to this we add, as a minimum, one-fifth in respect of builders' profits, architects' fees, clerks' salaries,etc., the total annual expenditure on building' cannot average less than £120,000,000. This entire sum, however, does not represent new buildings. About £30,000,000 in the year 1907 (see Report of Commissioners of Inland Revenue, under head of " Deductions, Schedule A.") represented the upkeep of buildings already existing. Deducting this we get a sum of £90,000,000 which may be taken as representing the minimum average expenditure on new buildings, year by year during the past fourteen years. If we suppose this to yield a gross return of only 4 J per cent., we get an average annual increase in rental exceeding £4-,000,000, which is due to buildings alone. Now the average annual increase of building-rents, and site-rents combined does not exceed, as we have seen, £4,500,000. Thus the average annual increase in site-rent — the only kind of land-rent showing any increase whatever — would not exceed £500,000. Summary. Without insisting on the accuracy of the above figures in detail (for they are incomplete and can only be given approximately), the reader will see in them a demonstration that of the annual increment of the value of sites and buildings combined, the estimates which assign to site-rent one-fifth of the total — or an average for fourteen years of from £800,000 to £900,000 — are too high and not too low. f^" Even if we adhere to the estimate of one-fifth, during the last five years with regard to which detailed information is available — namely, those following the year 1903 — the average increment derived from land has not exceeded £760,000 a year — or £240,000 less than the increment attributed by Mr. Asquith to land-rent in London alone. The cases quoted hy Mr. Lloyd George and others, in which the value of particular plots have risen in a sensational manner, are altogether misleading — partly because they are exceptional and not representative any more than the exceptional earnings of a few great painters are representative of the earnings of the great mass of struggling artists ; and partly because those who quote them take no account of the fact that the rising value of sites in certain localities is constantly accompanied and to a great extent neutralised by falling values in others. lasund by The London Municipal Society, Department of Anti-Socialist Economics, 11, Tothill Street, Westminster, S.W. Printed by Vacher & Sons, Ltd., Westminster, S.W. — 27366. MEMORANDA FOR PLATFORM USE. These Memoranda can be supplied assorted according to the requirements of applicants. EACH MEMORANDUM IS DETACHABLE. Analytical Catalogues of Monographs and Memoranda in preparation. Fnbllsbed by The London Municipal Society Department of Social Economics. H. Tothill Street. Weitmlnrter, B-W- . . ^ , Printed by George Berrldge & Co., 174, Upper Thamea Btreet, B.C. \.voyynii"ii Memorandum (correspondiDg to Monograph on Land, 2). Number to quote in ordering, 5. IL FAYOXJRITE FALH-iLCY OF" SOCIALISTS AND RADICALS EXPOSED. Ill "The Case for the Labour Party " — the Labour Party's Statistical Manual — it is stated that, according to the New Doomsday Book, 1875, " 30,000.000 perSOnS " in England and Wales alone were "entirely landless." In Ene-land and Wales, at that date, the total population was only 24,000,000. But The main error in all such grotesque statements is the assumption that every youth, boy, wife, girl, and baby, is a possible landowner, and ought to possess a ireehold. THE ONLY POSSIBLE LANDOWNERS ARE THE HEADS OF FAMILIES, and the true state of the case was that OF RESPONSIBLE OCCUPIERS OF HOUSES ONE OCCUPIER OUT OF EVERY FOUR WAS A LANDOWNER. Memohandum (con-eBpondiiig to Monograph on Laud, 2). Number to quote in ordering, C>. "UNEARNED INCREMENT": ITS ACTUAL ANNUAL AMOUNT FOR FOURTEEN YEARS. AxUliO)itks: — Iiqwrts of Cimuniysionris of Inland llcrenue, Jirj)'irl on Ilousing and Earnings in IJie Building Trades, 1910, Census of Production, 1910. FIRST FACT. — The Official Return shows tliat tliere has been no increase, but a constant decline, in the rental value of Agricultural land. SECON D FACT. — The only increment has been in the rental of building sites. THIRD FACT. — The Official Ecturns include site rent in tigurea, giving the rent of sites and buildings combined. FOURTH FACT. — The average increase in the rents of sites and buildings combined since the year 1895 has not exceeded £1,500,000. PROPORTION OF SITE RENT TO TOTAL RENT. For London, as shown by the London County Council. Site Rent, One-Third of total annual value. Average for United Kingdom, One-Fifth (as a maximum) of total annual value. That One-Fifth is a maximum estimate is shown by the fact that the average annual amount spent on new buildings is at least £90,000,000 a year, the interest on which, at 4},- per cent., would be £4,000,000, out of a gross annual increment of £4,.500,000. The average annual increment in site rent, or land rent, for the past 14 years has, therefore, been far less than £1,000,000. ftf^F' Since the year 1903 the annual amount has been DECREASING. Published by The London Municipal Society Department of Social Economics, n, Tothill Street, Westminster, S.W. I'riiited by (itorgo lierridj,'6 & Co., 171, Upper Th;imes Street, E.C. [Cojnjriglit.] % •" ' ' ^«^'mS- J