iJll!iam.'B! g BW ii .Ul.l i '. l '!-')i iinQ'T'TnnT" rf Local oovernmen r AND State Aid SYDNEY J, CHAPMAN, M.A. MMMI BOUGHT WITH THE INCOME FROM THE SAGE ENDOWNENT FUND THE GIFT OP Henrg W. Sage 1S9X ..fi-.MpAI. S-/A/.JfM.. Cornell University Library arV12011 Local government & state aid; 3 1924 031 475 522 olin.anx The original of tliis 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/cu31924031475522 LOCAL GOVERNMENT AND STATE AID LOCAL GOVERNMENT AND STATE AID AN ESSA Y ON THE EFFECT ON LOCAL ADMINISTRA- TION AND FINANCE OF THE PAYMENT TO LOCAL AUTHORITIES OF THE PROCEEDS OF CERTAIN IMPERIAL TAXES BY SYDNEY J. CHAPMAN, M.A. (Lond.), B.A. (Cantab.) Scholar of Trinity College, Cambridge ; Lecturer in Political Science in the University College of South Wales and Monmouthshire LONDON SWAN SONNENSCHEIN & CO., LIM. PATERNOSTER SQUARE 1899 PREFACE This essay, which was awarded the prize under the Warburton Trust by the Owens College, Manchester, at the beginning of the present year, was originally written in the long vacation of 1897. It has since been revised and expanded, and, wherever necessary, brought up to date. It is, nevertheless, issued very much in its original form, with those defects in pro- portion which can hardly be avoided when discussion is directed to a special subject implying portions of two sciences which are still fields for controversy. Whenever the treatment appears light-handed, the reader is asked to believe that it is due, in some degree, to the writer's fear of being carried far, and for long, from the special subject of the essay. The author desires to express his great obligations to Prof. A. W. Flux for many valuable criticisms and suggestions: and, further, to thank Mr, K. T. S. Dockray for his careful reading of the proofs. S. J. C. The Owens College, Manchester, June, 1899. CONTENTS CHAP. PAGE I. INTRODUCTORY - I II. DISTRIBUTION OF WORK BETWEEN LOCAL AND CENTRAL GOVERNMENTS 4 III. THE DISTRIBUTION OF COST, AND THE GROUNDS FOR SUBVENTIONS TO LOCAL BODIES 1 8 IV. THE LIMITED TAXING CAPACITIES OF LOCAL GOVERNMENTS - 26 V. THE INCIDENCE, BURDEN, AND INEQUITIES OF THE RATES, AND POSSIBILITIES OF REFORM 37 VI. DIFFERENTIAL RATES AND THEIR CAUSES - 66 VII. SUBVENTIONS IN ENGLAND PRIOR TO 1888 88 VIII. THE SUBVENTION IN ENGLAND OF 1 888 AND 1890 .---.. 94 IX. THE AGRICULTURAL RATINGS BILL - 112 X. SUMMARY AND CONCLUSION - - 120 APPENDIX A. THE EFFECT OF SUBVENTIONS ON THE QUANTITY AND INCIDENCE OF TAXA- TION - - - - - 123 STATISTICAL APPENDICES - - I29 LOCAL GOVERNMENT AND STATE AID CHAPTER I INTRODUCTORY A PRELIMINARY sketch of the plan of argument will be of assistance to the reader. Chapter I. deals with the relations with respect to governmental work be- tween the central and the sectional governing bodies in the State. These relations are seen to involve various kinds of financial relations, which are further defined and reduced to principles in Chapter III. In Chapter III. also an a priori solution of the problem of subventions, to serve as a first guide to practical judgment, is offered ; but it is pointed out that the a priori scheme must be modified by the results of an a posteriori investigation, that, in a word, it is not a bed of Procrustes to which actual condi- tions are to be fitted, but a magic jacket to suit all comers. The acceptance of the simple solution offered in 2 LOCAL GOVERNMENT the provisional abstract determination is prevented mainly by two allegations. The one, that socio- logical conditions are such that local bodies are impotent as taxing authorities. This assertion ne- cessitated an investigation in Chapter IV. into the possible range of local taxes, and, w^hen the necessary predominance of the one-tax system was demon- strated, an examination in Chapter V. of its equities, which embraced, of course, some discussion of the incidence of rates. The other, that differential rates imply differential burdens, which should imply differential subventions. Chapter VI. was given over to a minute scrutiny of the grounds for this statement. In the light of the conclusions adopted on all the foregoing topics, the various subventions which are, or have been, existent in England and Wales are criticised in Chapters VII., VIII., and IX ; and in Chapter VIII. the excuse that local governments had to be stimulated in some manner is treated also, together with other small contentions. Chapter X. shortly sums the argument, and attempts a practical conclusion. There, in brief, is a description of what some might term a Nasmyth hammer to crack a filbert. The extent of the argument, however, may be justified from two directions. In the first place, the question of subventions is perhaps more momentous than it at first appears. There are those who so regard it. In AND STATE AID 3 the second place, that which is worth calling ex- traneous to any subject is generally highly relevant. One word must be said in explanation of the method adopted, especially in Chapters II. and III. By trying to avoid the errors of the over-starched philosophy of the middle-century dogmatists I have been driven into a somewhat free use of the biological analogy, without any of that careful definition and limitation which is so necessary to its fruitful employ- ment. The sole excuse for the absence of explana- tions is contracted space. If the treatment here offered prove suggestive I am content that it is not exhaustive or quite exact. Quite apart from the main argument directed against subventions, the chapters of this book may be read as separate essays on some of the important political, economic, and financial problems arising out of local-:government. LOCAL GOVERNMENT CHAPTER II DISTRIBUTION OF WORK BETWEEN LOCAL AND CENTRAL GOVERNMENTS All western countries have a more or less developed system of division of governmental labour.^ England has the County, the County Borough, the Urban and Rural Districts ; the United States the State and the County; Prussia the Province, the Circle and the District ; France the Department, the Arrondissement and the Canton ; and all have the primitive cell, the Parish, or Township, or Commune. Division of labour and distribution of labour, whether in matters of production or in matters of government, are distinct things. Division of labour, to use the term in the sense in which it was employed by Adam Smith, is only one of the methods of arranging work. How does this method of distributing labour arise ? Adam Smith set himself to answer the question, for it apparently seemed to him remarkable that in a society built upon the individuality of the individual I " Governmental labour" is used throughout this work, in the broadest possible sense, of any state functions and municipal activities, of whatever kind. AND STATE AID 5 men should come together and organise their labour. Enlightened self-interest, he seemed to think, was not sufficient to account for the destruction of the self- sufficiency, the instinctive self-supporting policy, of the individual. The cause, he says, is an instinct. The further study of biology and sociology con- firms the hint thrown out by Adam Smith. Prof. Marshall is of opinion that recent researches have indicated " a fundamental unity of action between the laws of nature in the physical and in the moral world. This central unity is set forth in the general rule, to which there are very many exceptions, that the development of the organism, whether social or physical, involves greater subdivision of functions between its separate parts on the one hand, and on the other a more intimate connection between them!' ^ (The italics are mine.) In other words, from one point of view, society is an organic whole, and its end is a determinant of the organisation of labour (whether industrial or govern- mental) within it. One explanation, then, of social organisation lies in the organic nature of society, as the new title " organisation " for an old conception, as old as Plato at least, implies. To speak in analogy, , the local body must be conceived as an organism | within an organism. A developed society is a vital unity built up in an hierarchy of organically related organisms. Special emphasis should be given to the ' " Principles of Economics," 2nd ed., p. 300. 6 LOCAL GOVERNMENT term "hierarchy."' We have around us more than groups of organisms with distinct and independent functions and scopes of operation. We have a system in which it is the function of the higher organism to see to the adequate functioning of the lower organ- isms ; in other words, a system in which it is a special function of the higher centre to stimulate, organise and supervise the general functioning of the lower centres. If it were not so the nation, consisting of groups of localities, could not be correctly viewed as a unity. The conception of the hierarchically constituted organism must be elucidated further, for it is a notion of importance to this investigation. We frequently hear local government contrasted with central govern- ment ; but we seldom hear tell of the problem of the intermediate governments lying between the two. Yet there are such ; and their position has been one of much prominence since 1888. They will be termed " provincial governments," or " county govern- ments," hereafter, when it is sought to distinguish them from the primary local polities, to which also a special term, " district governments," will be applied, when it is desired to summon attention to the primi- tive political cell. A developed western people seems to be invariably drawn by the bonds of civic feeling into formations somewhat like those indicated in the following scheme : I. The Locality a political organism. AND STATE AID 7 /rt) The District or Parish : a simple political organism : part of a larger whole, and a whole it- self, but not of parts. (6) The Province or County : a complex political organism : part of a larger whole, and a whole of ^parts. 2. The Nation : a complex organism in its ultimate form : a whole of parts, but not part of a larger whole. ^ Of course, this analogical scheme is not meant to imply that the government of the complex organism is related to other political organisms only ; that it is not directly constituted by the suffrages of individuals, and that it does not directly govern individuals. It may take many forms, from the federal council of political bodies acting only through those bodies, to the popularly elected county council with its duties of both direct and indirect government. Nor do I mean to assert that existing local governments, always or generally, correspond in structure and function to those which reason proposes. The importance of strongly-developed local governments can hardly be over-emphasised. As national character determines these bodies, so do these bodies react on character. Local govern- iThis is not quite true, because international law just hints at a gradually segregating higher organism. 8 LOCAL GOVERNMENT ment stimulates and educates the political interests of a people, and with political interests the char- acteristics of self-reliance, vigour, and enterprise. The direct effect is political, but the indirect includes almost all social and individual qualities. Over- centralisation of government means a slack and ineffective control on the part of the constituents, and it increases the risk of storms of unreasonable discontent and unreasoning excitement. Moreover the over-loading of the central govern- ment with work clogs its action and so reduces its efficiency. The future of representative government — and in this is involved the future of civilisation — is wrapped up in the future of local self-govern- ment. In seeking to define the scope of local govern- ments, we are immediately and forcibly struck by the fact, indicated in the preceding analysis, that the local body may be conceived in two apparently mutually exclusive ways, as a whole and as a part. It is at the same time an organism and the limb of an organism, which again may be a part in relation to a higher unity. The perplexity which naturally accompanies such a discovery is by no means decreased when the implications of the dual nature force their way to the surface. It is not long before we clearly perceive that the two aspects of the local body lead to two principles for the sub-division of governing powers, and that the two principles AND STATE AID 9 do not necessarily unite in the same thing at the end. Let us now consider each principle and its results. I. The local body as individual must be self- governing. Adam Smith makes this notion the central pivot of " the obvious and simple system of natural liberty." It is the citadel of individualism. Admitting the force of the contention, we are bound to accept the following principle : 0/ the matters which fall within the scope of government, those which are chiefly of local interest must be undertaken by the corresponding local governments, and those which are chiefly of national interest must be undertaken by the central government. In comparing the distribution of work in the two spheres of politics and industry, we must remember that in the former there are no markets, and that, therefore, there is in it no competition to force the greatest eiificiency at the least cost. Hence the special importance of the individualistic principle of self-sufficiency in politics. Manchester and Liverpool cannot in the nature of things strive with one another for the management of, say, the police in either town, even assuming a desire on the part of both to do the Empire's work. In each case the sole possibilities by way of management consist in arrangements be- tween the imperial executive and the city's govern- ment ; in each case all other governments are foreign to the matter. lo LOCAL GOVERNMENT But there are exceptions. For instance, in the matter of the chief constableship of Suffolk, the Home Secretary decided this year in favour of the claim of West Suffolk to appoint its own chief constable, and against the joint standing committee, which aspired to make the appointment for the whole county. 2. The local body as the limb of an organism, that is, as part only of an individual, must do that kind of work for which it is most adapted. This conception gives rise to the following principle : The matters which fall within the scope of government must be distributed among the various governing bodies, central and local, according to their capacities and efficiencies. These are the two main principles for the distribu- tion of work among governing bodies. It need not be added that the second is a particular form of that which used to be known as the Principle of the Division of Labour. In its modern dress it might be known as the Principle of Socialism. The Principle of Individualism would not be a serious misnomer for the first. The two principles are equally true. In all cases we have to appeal to both ; neither must be pushed to an extreme ; but no rule can be laid down as to the weight to be attached to each. Resultant advantages, which, of course, depend on notions of the social ideal, determine the applicability of each. AND STATE AID ii Though there are cases in which the one alone seems called for, the other must always be held in mind. By the aid of the above principles, and in the light of the foregoing discussion, we may now attempt in more detail the design of the distribution of govern- mental function, bearing in mind, however, that deduction can only rudely sketch,'' and that wide experience alone has the power to paint in the detail ; and remembering also that the conclusions below follow not from the bare principles, but from the relative emphasis laid upon each. A first rough apportionment of work may be based on the distinction between matters of purely national and those of purely local interest. Thus, the question of national security may be held to be a purely national one, and the position and administration of naval and military forces may, therefore, be relegated to the central government. More widely, all concerns of external policy must be handed over to the central government, while matters of purely local interest, inasmuch as they concern only their locality, may well be left to local management ; indeed, it would be difficult to find a principle by which central interfer- ence in the latter case could be justified. There are, however, no such cases ; always the nation as a whole is in some degree affected by local policy. It is therefore desirable — unless, indeed, it be held that it is better that unitary states should fall asunder into confederacies, the locality becoming the prime unit in 12 LOCAL GOVERNMENT place of the nation as a whole — that the central government should limit the scope of local govern- mental function by regulation and by general super- vision. In many departments, nevertheless, great latitude may be safely allowed to local bodies. In spite of the above contentions, however, it is possible, for all practical purposes, to separate matters of national from those of chiefly local importance ; but even when the divorce has been effected, the problem of the relation between central and local authorities is by no means completely solved. There remain those matters which at the same time substantially affect both the nation as a whole and the localities. To refer for the present only to the governmental func- tions included in the " Individualistic Minimum " theory of politics, there are affairs of justice and police. Security and the wise and impartial adminis- tration of justice are of vital importance to the localities; but the nation as a whole cannot be indifferent to the provisions for the attainment of these objects. It is of special concern to a town that the detection of crime should be swift and sure, and the positive prevention of crime as frequent as pos- sible; and it is of great concern to the community at large that no district should become a hotbed of vice. On the one hand, therefore, there are strong argu- ments for relegating matters of justice and police to local control ; and, on the other hand, there are strong arguments for centralised authority. AND STATE AID 13 When we pass beyond the narrow confines of Individualistic Politics we find that matters of an appreciable dualistic interest are common, e.g., those of the poor, of pauper lunatics, of sanitation, educa- tion, bridges, and highways. Take the question of the poor as an example. Poor relief, from the "Settlement" of Elizabeth to 1834, was almost en- tirely district business. The cost was colossal, and the unnecessary effort expended was simply mon- strous. "Domicile" or "settlement" became a constant subject of dispute. The good work done by one parish was frequently undone by inefficient administration in the next. Incapable boards peopled the country with paupers. The nation suffered, the deserving poor suffered, and none, except, perhaps, the able-bodied and idle vagabonds, profited. There is, notwithstanding, no reason to suppose that purely central management would have prospered better. No matter requires more patient examination of detail, more minute supervision and local knowledge, than poor relief; and in all these respects the central government is defective. It is unnecessary to enter into detail with regard to the other affairs of divided interest set forth above. They will all be found on a brief inspection to exhibit elements which specially fit them for determination by the central government, and, at the same time, elements which mark them off as the natural business of local bodies. But of which local bodies ? 14 LOCAL GOVERNMENT We must here refer back for a few moments to the conception of the nation as an hierarchy of social bodies. Among developed western peoples we find not only central and district governments, but also intermediate governments lying between the two ex- tremes. The last are of considerable importance. For one reason, because tke intensity of interest in matters of divided interest diminishes in all cases with distance from the locality where the work is performed. Take an example. Efficient policing in Manchester is of almost equal importance to the urban districts lying about it as to the city itself, and it is of much import- ance to southern and central Lancashire ; while its interest to Devon is something infinitesimal in com- parison. This fact will form the basis of many of our conclusions as to subventions. In dealing with the intermediate or county governments, however, we must always remember that there are differences between their relations to the districts beneath them and the relations of the nation to the localities. The control of the county over the district is strictly cur- tailed by the fact that the closer bodies lie together in the scale of government the more friction does control induce, and the more effective is it in degrading the quality of the subordinate board. So far we have been concerned chiefly with the local or national interest attaching to certain opera- tions. Now we have to notice more especially the division of function determined by the nature of the AND STATE AID 15 governmental organs. Each has its particular gifts. In general we may say that the matters assigned to local bodies should be those in which local knowledge is requisite, minute supervision essential, and the co-operation of private and governmental agencies likely to be of appreciable value ; and those in which the need for uniformity is least evident, or in which even diversity in administration is desirable. Some laws are not good if local peculiarities and differences are ignored in their application. Uniform administra- tion is best only when local conditions are uniform or negligible. The administration of the Poor Laws may again be taken as an example. One can barely conceive a greater political mistake than detailed uniformity in the application of these laws — especially with respect to indoor and outdoor relief — in London, say, and in the rural districts of Devon, or in Essex, under the present cloud of agricultural depression. Further, we must carefully guard against the mis- take of supposing that the division of work between the national and the local governing organs is absolute, and quite independent of the quantity of work. In a word, that it is analagous to division of industrial labour within one country. To repeat, many services are the direct concern of both the central and local bodies, and many largely of national interest may be best performed by the locality, either because of its idiosyncracies, or be- cause of the peculiarities in certain districts, or be- 1 6 LOCAL GOVERNMENT cause the central government has its hands full. Moreover, operations of special importance to the locality, and managed by the locality, may be im- proved if brought into contact with the central government. The position of the local government is one of tutelage. It is taught by advice, correction and example. To quote Prof. Sidgwick : " We have also to consider the probability that both the central government and its critics — as compared with local government and critics — will have the superior en- lightenment derived from greater general knowledge, wider experience, and more highly-trained intellects ; and we have to consider the greater danger in a small locality that the sinister influence of a powerful in- dividual or corporation, or combination ef persons with similiar interests, may predominate to the detri- ment of the public." ^ Finally, we must notice that local governments have a wonderful power of adapting themselves to circum- stances. By undertaking a higher quality of work they attract to their boards higher ability. Hence difficult undertakings calling for tact, large knowledge, and perhaps some genius, which cannot at first be safely placed in the hands of local bodies without the most zealous supervision, may in a few years be wholly handed over to them with perfect confi- dence. After the foregoing, Roscher's division of local 1 " Elements of Politics," p. 514. ANB STATE AID 17 functions will be immediately comprehended. They are, he says, {a) State. (3) Compulsory. (c) Optional. The first class sets apart the local administration of centrally initiated services of chiefly national interest. The second class contains only matters of divided in- terest. Of these we may remark again that the division of interest rests very largely between the provinces and districts. The third class comprises those concerns which are specifically local. Lastly, it has to be kept vividly before the mind that the so-called local organism is constituted by function ; that the aggregation of human beings which may be regarded as bound into a whole by civic feel- ing for one purpose may not be so regarded for another purpose. That the size and strength of the local organism varies with its activities ; and more- over that the cohesion of its parts becomes less firm with increasing distance from the centre. i8 LOCAL GOVERNMENT CHAPTER III THE DISTRIBUTION OF COST, AND THE GROUNDS FOR SUBVENTIONS TO LOCAL BODIES After dwelling for some time upon the question of the distribution of cost, we discover fold upon fold of further complications doubled over those which have already taxed our patience in the matter of the distribution of work. Just as we learnt then that not only one but several principles, co-operating and competing, existed for the distribution of govern- mental operations, so we leam now that not only one but several principles, co-operating and competing, exist for the distribution of costs. The chief are the following : — I. Ethical Principles. {a) Those interested should bear the cost, and in proportion to their interests. {b) The burden of cost should be distributed accord- ing to ability to bear it. The former emphasises the indestructible individu- ality both of the locality and of the nation as a whole; the latter the transcending of the mere AND STATE AID 19 individuality of the section by the unity of the whole body corporate. Now to which principle we give precedence — to the other being accorded only the office of limitation — depends upon the priority of the individualities with which we are dealing. In states approximating to confederacies, the first is the fundamental rule, but in those more closely resembling unitary bodies politic the second has the superior claim. Frequently it does not much matter with which we commence, but in England to-day, in view of the importance and the ancient foundation of the local bodies, it will doubtless be best to apply first the ethical principle based upon their individuality. 2. TAe Economic Principle. Those who carry out the work should reap advan- tages varying with their economy. The necessity is immediately obvious. That nobody is so careful in spending other people's money as in spending his own is a psychological fact. These are the fundamental rules, but they form only part of the frame-work of principles for guidance in distributing costs. Here are others of secondary importance. 3. The Juridical Principle. Costs, or some portion of them, should be used as legal sanctions to enforce control. In an hierarchy of polities there must obviously be 20 LOCAL GOVERNMENT some control by the head over the lower centres, and practically it is only by the financial method that one corporation can effectively coerce another. 4. TAe Political Principle. Costs, or some portion of them, should be em- ployed as a political regulator, by means of which the activities of local governments may be stimulated or checked. And this is not quite all, for, by the principle of Division of Labour, those bodies which can perform that delicate office best ought to collect the funds for political operations. The last principle is strictly subordinate to all which precede, when it conflicts with them, which it is sometimes said to do so directly and completely as to place the hostility almost beyond reach of com- promise. The prior rules must be observed first, and then, if it is found that there are substantial differ- ences in the powers of different bodies to raise economically and equitably the requisite funds, modifications must be built in, to obviate the inci- dental disadvantages attaching to the arrangements most in accordance with the dominating principles. Many as they are, the principles before us are not exhaustive. Overshadowing all, hangs the great rule of simplicity. We gain frequently by retaining defects to avoid complexities. The more involved are mechanical and social arrangements, the more intricate are the relations between units of any AND STATE AID 21 character in combination, the greater is the friction and incidental loss, the greater the chance of disloca- tion and breakdown. The higher the state of de- velopment, the safer and more economical do the more delicate and complicated sub-divisions in organisation become ; but limits are set to the practicability of theoretical schemes at each stage of development. Let us now attempt to apply the foregoing prin- ciples to the financial problems which arise from the distribution of governmental work treated in the second chapter. For the present, the obligation on the part of the Imperial Government to play the part of Providence to the local bodies is best ignored. We may at once lay it down that State functions performed by the State must be paid for by the State, and that optional functions undertaken by the locality must be paid for by the locality. And who should bear the costs of (a) State functions effected in part by the locality, and (b) compulsory functions ? One of the weightiest problems to which we have been converging is before us. It need not be added that of the solutions given in the past subventions in great variety, doles, loans, sops, and part payments form by far the largest number. The following I take to be the main lines of a rational solution : State Functions. — They should be paid for by the State. But, to enforce economy, definite prices should 22 LOCAL GOVERNMENT be fixed. What difference there is between them and the actual costs should belong to, or be met by, the locality. Payment must be conditional upon" the attainment of some standard of excellence ; and where possible, it may be desirable to vary it, within limits, with the quality of the work done. Compulsory Functions. — Most of them may be con- sidered as in small part State, in large part pro- vincial, and in largest part district functions ; the proportions being determined by relative interests. The hardest task lies in estimating the proportions of interest ; in drawing a line where nature has made no division. Suppose the question settled, however. Assume, for instance, that, as regards a particular piece of work — say, education — experience has shown that outside funds ought to bear about one-quarter of the expense. Then contributions to the cost of administration, roughly upon this basis, must observe the rules laid down with respect to payments for State functions. Definite prices must be fixed, de- pendent upon efficiency, and varying, perhaps, within limits, with the quality of the work done. Here a thought intrudes which calls for some limi- tations. Suppose that each locality contributes to the imperial exchequer through the medium of imperial taxes, for the purpose of meeting the cost of the localities' State and compulsory functions, just as much as it receives from the exchequer for the per- formance of these functions ; then the paying and AND STATE AID 23 paying back is clearly absurd. If such were the case, the sole principles determining contribution would be the third and fourth. We shall have to investigate in succeeding chapters whether such is the case. The obligation on the part of the central govern- ment to stimulate the localities on occasion raises grave issues. It may be taken as pretty generally true that the use of a stimulus implies an ignorance — an ignorance either of the quantity of vitality in the body, corporeal or corporate, or of some disease which has insinuated itself. It is hoped that activity will add to the vitality or drive out the disease ; at any rate it is intended that the body shall at least act as if it were in a healthy condition. Thus, when a man's vitality is yielding, he may keep himself vigorous with brandy, and a fagged horse may be urged to greater speed by whip and spur. But stimuli must increase in something like a geometrical progression to achieve a moderately constant result, and even then they secure it only for a short period, provided that the obstacle impeding vitality has not been detected and removed, and generally at the cost of greatly impaired health. A stimulus of the kind we are considering, then, must be only temporarily applied, if at all, and it must be accompanied by a searching analysis of the constitution of the body stimulated ; even the temporary starting stimulus is undesirable, because it tends to destroy initiative. We shall observe hereafter that in politics the tem- 24 LOCAL GOVERNMENT porary measure has a powerful proclivity to establish- ing itself permanently. What nature should the stimuli to local authorities assume, supposing them to be on occasion really essential political expedients ? In the first place they must be financial in character. Other peculiarities depend upon the ends which they are intended to sub- serve. If it is held that a certain sort of work should be done by healthy local bodies, then it is best to pay a bonus on its performance till the locality has acquired the habit of doing it When this consummation is attained the special stimulus must be removed ; and the cost of the work must thereafter be met in ac- cordance with the prior principles. If the local body persistently refuses to acquire the desired habit, then the local performance of the work and the subvention must cease together. If it is desired simply to stir up the local body, then, overlooking the dangers and granting the expediency of that which is contem- plated, it is wise not to assume certain costs, since that simply means paying some old bills, but to hand over a lump sum, and to vary it occasionally to keep the recipients alive to their financial problems. The preceding is an entirely deductive solution of the problem underlying the policy of subventions. Actual subventions cannot be approved or con- demned without a knowledge of actual condi- tions. The following are some of the questions which AND STATE AID 25 must be faced before a practical judgment can be formed : Can local bodies raise the funds they require as economically and equitably as the Imperial Govern- ment ? Do they ? If not, is the difference sufficient to justify special financial arrangements to meet it? Does the wealth of local constituencies vary much from place to place? If so, should the outside con- tributions to the cost of compulsory functions vary in any way with the resources of the locality? Does poverty justify special assistance ? Is there much difference between the costs of " state functions " and " compulsory functions " in different districts ? Should such differences, if existent, regu- late the amount of outside contributions ? Is the question of the cost of compulsory functions adequately met by financial arrangements between districts and the county within which they lie, or are some exchequer contributions needful ? Has there been anything in the condition of local self-government in recent years to render a special financial stimulus desirable ? Is it desirable now ? These questions will be answered in what follows as fully as space and information permit, and the requirements of the subject render indispensable, and in the order which commends itself as most ap- propriate. 26 LOCAL GOVERNMENT CHAPTER IV THE LIMITED TAXING CAPACITIES OF LOCAL GOVERNMENTS It does on first thoughts seem extraordinary that the Imperial Government should have an almost infinite choice of means for tapping the wealth of the country, that it should use dozens, and that the local governments should be confined to practically one only tax ; especially in view of the fact that the one- tax system is defective because of its oneness ; although much can be said for it. Can local finance escape the one-tax system ? In modern civilised states many forms of taxation possible to the central government are impossible to local bodies. Customs, for instance, can only be levied at the frontiers of a state. Local bodies, therefore, are in- terdicted from that form of taxation. We find, indeed, octrois in many continental European countries ; but they differ from customs in being levied alike on home and foreign goods. Octrois, moreover, are on the wane, as the opinion is gaining AND STATE AID 27 ground that the results are not worth the annoyance caused by collection, the cost of collection, and the impediments to trade which are wrapped up in the system. With a few exceptions, for instance in Italy and France, they have already been commuted for fixed payments. This form of taxation, however, bears a closer resemblance to an impost upon con- sumption than to customs. Excise duties are likewise closed to local authorities. The reason is that sectional governments have no control over one another and over the customs, and so, if they imposed excise duties, the local producer might be ruthlessly sacrificed, with the best intentions in the world. Stamps on business and legal docu- ments fall also within the classes of taxes from which localities are debarred. General supervision from Westminster would prevent such a disaster in .some degree, but probably at a cost that would swallow up any little advantage. Nor could much efficiency be expected in any central organisation and supervision. The probablity, therefore, is that had the local bodies powers to impose these taxes, trade, tossed into an atmosphere of insecurity, would be subjected to arbitrarily induced convulsions. The two chief forms of indirect taxation are, there- fore, weapons not fashioned to the grasp of local bodies. We shall find, moreover, that the scope of direct taxation in their hands is substantially con- tracted. 28 LOCAL GOVERNMENT Of the direct taxes, those on income and property first claim attention. The former cannot be better introduced than by a quotation from Mr. Goschen's report : — " It appears to be impossible to devise an equitable local income tax, for you cannot localise income. An attempt was made in Scotland, and it broke down when an English Lord Chancellor, who drew his ;£^io,ooo a year in London, but had a small place in Scotland, was made to pay income tax on the whole of his income in that country as well as in this. No country has been able to levy a local in- come tax."^ I see no fatal objection in the double payment of the income tax by those who keep up two residential establishments ; and business establish- ments might be specially treated. The subject taxed more than once might be charged at a lower rate, the double imposition being employed in rendering taxa- tion degressive. But a very real obstacle does exist in the fact that a great mass of English income is taxed at its source. If it were not, the opportunities for fraud would be enormous, and experience shows that they would not all be wasted. The plan of stoppage at the source was not included in the first income tax imposed by Pitt in 1799, and the results were disappointing. The tax was repeated three years later, and Pitt complained bitterly of the frauds by which contribution had been evaded. When Addington reimposed the tax in 1803 it was col- 1 " Report on Local Taxation,'' p. 204. AND STATE AID 29 lected at the source whenever possible. Relative productivity was at once doubled as a direct conse- quence, notwithstanding the imperfections of the new method at the outset. Professor Bastable's judg- ment may be taken as final : — " Owing to the variety of modern incomes and the trouble of following them to their source, the income tax should always be a general tax.'" In Switzerland and the United States the general property tax is the main instrument for providing the revenue of the component parts of the federal system. Prussia and Holland have recently reverted to it. The tax is, however, almost universally condemned because of the gigantic difficulty in the way of equit- able administration, and of the fact that fraud can be practised with almost complete immunity from de- tection. The tax comes in consequence to fall for the most part on real property, the least tangible possessions remaining undeclared and undiscovered. Mr. D. A. Wells concludes that the property tax is a scandalous fraud. Professor Seligman considers it the worst known tax in the civilised world. Professor Plehn condemns it in unmeasured terms : — " As at present administered, it fails entirely to reach in- tangible property. It debases public morals by putting a premium on dishonesty. It is regressive, and presses hardest upon those .relatively least able to pay. This is strong language ; even stronger has ^ " Public Finance," p. 360. 30 LOGAL GOVERNMENT been used. But no words are too strong to express the iniquities of this tax."^ Yet the opinion frequently crops up, and is fre- quently expressed in popular debate, that local bodies shduld relieve the rates by a property tax. Notice the dilemma which such a tax creates. It is either grossly unfair, and offers a big bounty on fraud, or else the individual must be subjected to exasperating interferences, and society must be exposed to the damaging effects of inquisitorial investigation. This dilemma applies also to a local income tax ; and the objections to a local income tax, put forward by Mr. Goschen in the passage quoted above, apply with equal force to a local property tax. Against the foregoing general analysis it may be urged that the independence of local finance is not universal. In France, for instance, local funds are chiefly raised by the imposition of centimes additionels on some of the imperial taxes. The local tax thus becomes a mere appendage to the imperial tax. This method of raising local funds has the cordial support of M. P. Leroy-Beaulieu on the grounds of clearness, simplicity, economy, and security against peculation and exaction. But the system simply means that imperial taxes must be innoculated with the infirmities of local taxes in being collected only direct from the localities ; or else that the local taxes must be collected on the basis of part only of the ^ Plehn's " Introduction to the Science of Finance," p. 219. AND STATE AID 31 imperial taxes — which is actually the case — so that the question of the scope of each remains. Further, the additionel method, by robbing local bodies of a certain amount of initiative, undermines anything of the nature of robust independence. Here a very serious difficulty confronts us. We referred in the first chapter to the overlapping of governmental bodies; v/e have now to observe an overlapping on the financial side. The imperial government may draw its income from all the taxes above noted; the local bodies derive their revenues from a portion of them. The disadvantages attendant on financial overlapping are considerable. It is quite obvious that if two bodies have the power of taxing - on the same base neither will be governed by con- siderations of the taxable capacity of that particular base. If two costers possess a donkey in common it will be overworked, for each man will argue, " If I do not overwork this animal my partner in owner- ship will ; if I regard economic and humane con- siderations I shall lose and it will not gain, for there is no guarantee that my partner will do the same." And so it will be with the base controlled by two taxing authorities. And even if we suppose that Her Majesty's Government will see to it that no single tax runs riot, yet there are fatal objections. Suppose the centre only taxed to the amount of the difference between the local rate (confined perhaps within limits) and the maximum which that base should 32 LOGAL GOVERNMENT bear in the taxing system. Then a powerful check on wastefulness on the part of a local body would be withdrawn ; for however high or low its rates the constituency would neither suffer nor benefit (the imperial tax varying inversely as the local tax). Each local body would strive to raise its. taxes as high as was allowable, and its constituents would applaud, for heavy expenditure would simply mean that the locality was sucking the wealth of the nation at large. The central government, indeed, might supervise local taxes, but by so doing it would sap the initiative of local bodies and run the risk of all the dangers of over centralisation. Other ways out of the difficulty have been found in the suggestions that the common base should be divided, or that the central body should take it over entirely and pay to the local authorities a portion of the proceeds — the additionel system again. In the United Kingdom, for example, by the Act of 1888, certain licenses col- lected in any county or county borough are paid to the authorities of those localities.^ ^The licenses thus transferred are those for the sale of in- toxicating liquors by retail for consumption on or off the premises, licenses for dealers in beer, spirits, wine, sweets, tobacco, and game, for refreshment-house keepers, appraisers, auctioneers, hawkers, house-agents, pawnbrokers and plate- dealers, dog, gun and carriages licenses, and licenses for killing game, and for armorial bearings, and male servants. It was originally intended to add the sum which might be collected on certain licenses for trade-carts, locomotives, etc., which it was proposed to authorise by a bill which was before Parliament AND STATE AID 33 It may be argued against their proposed uncon- ditional surrender to sectional governments that uni- formity is essential, since trade would be hampered by differential burdens especially if they were vari- able. But really this objection becomes slight when we consider what the licenses are. The same con- tention holds also with respect to rates on business premises ; but it does not apply to consumers' licenses, nor to liquor licenses, and these are, therefore, specially suitable for local manipulation. The local bodies cannot in the face of the rates reduce them, and no considerable harm could result from a large increase in them. A very obvious fact which vitiates the present system is that, unless responsibility in spend- ing funds is accompanied by responsibility in finding them, there is the risk of preventing anything satisfactory emerging. The base consisting in land and buildings should be entirely yielded up to the localities. This once almost ceased to be a pressing need. In 1871 Mr. Goschen had a bill drafted, to apply to England only, in which the following clause occurred : — " From and after a certain date, to be fixed by an order in Council, at the time of the passing of the Act. On the whole the pro- posal was a good one, as part of the cost of making and re- pairing streets should be considered as an element in the cost of production and circulation of goods, and should be charged in the price of those goods in proportion to the amount of transporting involved. There would be a difficulty however as regards carts kept outside the rateable area. c 34 LOCAL GOVERNMENT the house tax shall cease to be payable to the Crown, but shall be levied by and be payable to the parochial board in each parish." The bill, however, was finally dropped, and Mr. Goschen gave it as his opinion that the time had not yet come for the central government to surrender the house tax. Certainly the time had not yet come if the Govern- ment decided to drop the bill. But, whatever was the case then, the time is more than fully ripe now for the removal of this imperial tax, absurd as it is in the face of rapidly-swelling rates. Not only is its retention needless, unwise, and a standing source of irritation, but it is simply scandalous in face of the doles which Her Majesty's Government have felt constrained to mete out to the localities in the form of allocated taxes and other subventions. Would an estate duty on real property be at all suitable for local purposes ? It is needful of course that any death duty relegated to sectional control should be on realty, which can be localised, while personal property cannot. The duties now paid into the Local Taxation Accounts are based on person- alty ; they are, therefore, in no sense local taxes. If they were levied on realty they could be surrendered to the local authorities, but the objection would then hold that a taxation base was divided, and there are grave disadvantages attaching to the transference to local bodies for taxation purposes of the whole of real property passing at death. Besides, realty and AND STATE AID 35 personalty are so closely related that they form to a certain extent one base ; and we may lay it down as a fundamental principle that no one base must fall within the control of two or more authorities. To sum up, we find that district governments are cur- tailed in their choice of taxes principally because of — (a) The need of uniformity in indirect taxation, and the requirement that certain imposts should be treated together. (d) The fact that the individual and his capital pass more easily frorti district to district than from country to country. In the society of Tennyson's ideal of a cosmo- politan democracy, the income tax will be as impos- sible to the nation as to the locality, since taxation at the source will be rendered futile by the inter- national flow of capital — unless, indeed, people will then be eager to pay their taxes. The one-tax system, we observe, is not in the nature of things compulsory. Local taxation may be expanded, but its co-efficient of expansion is small. I am almost inclined to think that for the present no extension will be found necessary. We shall see hereafter that the apparent one-tax system is in reality a three-tax system. It is, moreover, doubtful whether existing local bodies are sufficiently capable to take over larger financial responsibilities; but it must be remembered that enlarged powers, by at- tracting more of the higher ability, lead to increased 36 LOCAL GOVERNMENT efficiency. There is, moreover, very much to be said for the one-tax system; it is simple, it is economical, it may be made equitable, and the in- crease or decrease in the expenditure of local bodies is thereby kept prominently before each citizen. Adam Smith emphasises this last element as desir- able in a scheme of taxation. Without giving an unqualified assent to Adam Smith's dictum, I agree that this clearness is convenient now in matters of local finance. For though there are cases in which a wise increase in expenditure might be prevented by popular clamour, they are confined in largest part to affairs of imperial policy. The scope of local taxation may be widened, but at its biggest stretch, in comparison with the possi- bilities of imperial taxation, it can be but a fly on the foot of a Colossus. It cannot touch most of the in- direct taxes, because of the need of uniformity and for other reasons. It must, therefore, never hope to acquire such a mass of taxes that unintentional and unavoidable inequalities here and there will be shifted by the law of error. The staple financial food of local governments must always be the rates. This being so, we are bound to inquire next whether the failings accompanying the raising of local funds by rates are essential, or merely accidental and re- moveable, given the determination and strength to carry into effect local financial reforms. AND STATE AID 37 CHAPTER V THE INCIDENCE, BURDEN, AND INEQUITIES OF THE RATES, AND POSSIBILITIES OF REFORM The subject of this chapter is more important than that of the burden and incidence of a match-tax or of the stamp duties, or, in fact, of any other single tax. We might decide about them, that their incidence was only moderately equitable, and yet judge them desirable ; and we might yield to the temptation to give only rough estimates without doing much harm, because, after all, each of them is only one of many. But we may not do so in the case of the rates. They are practically the sole tax of any magnitude now open to local bodies ; and in consequence, their incidence means the incidence of all local taxation. They are, moreover, of colossal size, so that a mere fractional injustice may be a very heavy burden. Consider for one moment the volume of the rates, with a view to some adequate appreciation of the pressing practical importance of our inquiry. The house duty is, of course, a rate which happens to be 38 LOCAL GOVERNMENT an imperial one, and one, moreover, which should have been given up long ago. Let us then add to the rates in the United Kingdom for 1893-4 the house duty for that year. The result is a sum of £So,og^',2i2, collected mainly from occupiers. This is enormous. Some conception of the amount may be gained by comparing it with other great taxes in this country. Not one of them yielded half the sum in the same year, except the excise, which produced just over half, namely, ;£'25,200,ooo. The income tax yielded ;^i 5,200,000, less than one-third of the sum raised by rates and the house tax ; and the customs only ;£^ 1 9,707,000, less than two-fifths as much. Further, the total imperial net revenue was but ;^9i. 133.410 in the same year, a sum not twice as great by over nine millions. Our object in this chapter is to discover whether the rates, fall where, and in the manner in which, accepted principles of taxation declare they ought to fall. What the English occupier sees in the rates is that he pays them, and that after paying them he is the poorer by exactly their amount. What he does not see is that his rent may vary in some manner with them. In fact, he feels impact and not incidence. What the. landlord sees is that if he possesses two houses point to point the same, from the cellar damp to the attic wall-paper, offering like advantages, standing, maybe, side by side, but subject to different rates, then the rents will differ by AND STATE AID 39 the amount of the difference in rates. What he does not see is the general in the particular. In fact, he feels only a particular incidence. In passing from the seen to the unseen it would be fruitful to go through the utterances of authority ; but they are legion, besides, paragraph summaries of systems of political economy have not proved strikingly successful. It is wiser, perhaps, for our purpose to be insular and brief. Yet in view of the prominence given to them, especially during the sittings of the Town Holdings Committee, it may be as well to mention in a few curt phrases, which only claim to indicate their main trend and not to express them, the violently opposed opinions of two dis- tinguished thinkers. I am the more anxious to point to them as they lie at the opposite poles between which the orthodox economists take their stand, and as they serve to indicate the. differences in doctrine which exist upon this subject. Mr. Goschen says that the owner, i.e., the land- owner, pays the bulk, if not the whole, of the rates, unless their amount exceeds the average of those paid in the same locality prior to or at the time of the leasing of the site. When the average is ex- ceeded, the excess falls on the house-owner or occupier, according to the state of demand and supply. Thorold Rogers maintained that the rates remained where first placed, that is, on the occupier. Professor Seligman has adopted and enforced the 40 LOCAL GOVERNMENT same theory in his book on " The Shifting and Incidence of Taxation." Let us now turn from authority to the question itself. It is necessary at the outset, in order to avoid the confusions into which many have fallen, to define the subject of our inquiry with some exactness. The questions, Where do the rates fall ? and. Who pays the rates ? are identical ; but they are not equivalent to the question, What is the effect of the rates ? It is generally understood that the occupier pays the whole or a part of the rates on the building which he occupies, if the annual amount charged to him in rent and rates exceeds the supply price of the house and the economic rent of the land upon which it is built ; that the house-owner pays the whole or a part of the rates, if the net amount which he annually receives falls below the supply price of the capital expended on the building ; and that the landowner contributes exactly that amount by which his rent is less than it would have been but for rates, on the supposition that the quantity of land occupied and the manner of its occupation remained as before. These are the meanings which I believe are usually given to the expression " the incidence of the rates." If we adopt them, it is immediately obvious that the effect of the rates is a larger question than that of the incidence of the rates, for the former includes, besides the subject matter of the narrower question, the reactions, follow- ing the imposition of rates, which raise or lower the AND STATE AID 41 margin of building and affect the quantity and direc- tion of capital. In the following discussion we shall be concerned primarily with the smaller ques- tion ; but the wider one will be incidentally treated also. The method here adopted is to ignore leases and other complications at first, and then to introduce them later as disturbing forces modifying the abstract results primarily reached. Let us begin the investiga- tion by considering the case of houses. In the long run the rate is divided between land- owner and tenant ; on the builder it cannot rest, for average profits and average self-interest protect him. But how is the division determined ? The tax which falls on the house at " the margin " of building, that is, where there is no ground rent practically speaking, for instance on the twentieth storey of a Chicago " sky-scraper," falls on the occupier. But where there is ground rent a portion of the tax, in the ratio of real ground rent (whether paid or not) to the residue of rent, gets through to it ; ^ because building profits 1 This is Mill's view (Bk. V. Ch. 3, § 6). It is really based on the assumption that the consumer does not estimate a site value in proportion to building value, but absolutely. For instance, it is supposed that, if there are two houses differing only in their situation whose rents are £/^o and ;^8o respectively, the consumer considers the second to be worth, not twice as much as the former, whatever the rent of the former may be, but just £^0 as much. Hence, if rates of fifty per cent, are imposed and he will pay a total (made up of rent and rates) of £60 for the former, his demand price (to include rates) for the 42 LOCAL GOVERNMENT require that the tax on each unit of capital expended in building should be the same. Were it not so, capital, ever sensitive, would shun building. We do not mean of course that the ground-rent holder is not affected at all. ' He is affected when supply price reacts on the quantity de- manded. The view put forward is simply that the total sum paid by the occupier must equal (in the long run, of course) the normal cost of production of his accommodation and in addition the rates on it. Take for example a builder who has run up a house to nine storeys and is hesitating about the tenth. The tenth storey is then the marginal house. Assume that it will cost him an amount the expenditure of which is remunated by a rent of £^o a year. The rent must then tend to be £^0. Let the rates on the £20 be ;^io. Now, who will pay them ? Not the builder, for he would stop building at the ninth storey first. Not the landlord. Why should he? If these rates did force themselves on to him in any case, he would see to it that he let his land in future to a builder who would not go beyond the ninth storey, because the addition of a tenth would mean ten pounds out of his pocket. Then the occupier pays the ten pounds. In brief, rates are divided between the occupier and latter will be ;£ioo and not ;£i2o. The question of how the estimate of the site value is determined cannot be said to be settled. AND STATE AID 43 the ground-owner in the ratio of the value of the buildings to the value of the site. Next observe the manner in which the ground- owner is touched. When rates go up the total paid by tenants for housing accommodation, i.e., the sum of rents and rates, goes up also ; but not by the amount of the increase in rates, only by the amount of the increase in those which fall on buildings. That being so, fewer houses will be wanted. Some who lived in palaces will move into mansions, some who occupied desirable messuages and tenements will find themselves satisfied with meaner edifices, and so forth down the scale of residences, till quite at the bottom there is a little more crowding than before. And this means that the margin of building land has gone up; and that consequently real ground-rents have fallen. But nevertheless the occupier still pays the rates at the new margin. Again, the capitalist, as the landowner, may be prejudicially affected by the rates though he does not pay them. For capital may be driven from building, and there may be no fresh openings for investment, so that the increase of capital might be checked. Generally, however, the demand for capital will not diminish, since the expenditure of the income raised by rates frequently represents a demand for capital J and at most, therefore, there will be a redis- tribution of capital. The effect may simply be that more capital will be invested in streets and drains. 44 LOCAL GOVERNMENT and less in houses and other buildings. Of course, if the rates are expended in doing that, to render build- ings habitable, which the builder previously did, the total of rent and rates cannot be raised to the occupier. When a locality, all parts of which offer equal advantages, is divided between two rating authorities, the difference in rates drops on to the land — ^natur- ally, because rates have become differential, and rent is a payment for differential advantages. The above is, in effect, the whole theory of the incidence of rates in the long period, with some dis- cussion of their effects. Whether the objects of the rates be mansions or cottages, mills, warehouses, shops, farms, or railways, the theory is one. It is, nevertheless, desirable to show that the theory is one. The tax on business premises and on plant is divided between consumer and landlord. In this case we have two sensitive capitals — that of the business occupier and that of the builder — except in so far as business premises have residential accom- modation, which, by the forces described above, will impose on their occupiers the same taxes that they would pay if inhabiting houses proper with the same advantages. A part of the tax on shops may be shifted on to air ; the builder will not pay that part, nor the landlord, nor the consumer, nor the occupier. The effect will be a decrease in shop accommodation. A fall in ground rents, and also a AND STATE AID 45 contraction of the conveniences offered to consumers when shopping, will accompany the killing of the old marginal shop. The tax on railways (except the part paid by rail- way servants resident in buildings covered by the rateable value) is, of course, shared in the long run by the company qud landlord and the consumer, except in so far as the railway is a monopoly. The tax on agricultural land is divided between the consumer, the landlord, and the farmer ; the farmer paying as much as he would if he inhabited an equally desirable house in the district, and the landlord paying all rates on the value of the product due to the quality of the farm. The fundamental fact to be borne in mind is that rates vary with pro- duct, for they vary with rent, and rent varies with product. Hence the problem is really that of the tithe, which is treated by Mill in the third section of Chapter IV., Book V. of his Principles. Mill puts it in this way. After payment of the tithe : "The land producing 100 bushels, reduced to 90, will yield a rent of 90-54, or 36 bushels. "The land producing go bushels, reduced to 81, will yield a rent of 81-54, °^ 27 bushels. "The land producing 80 bushels, reduced to 72, will yield a rent of 72-54, or 18 bushels. "The land producing 70 bushels, reduced to 63, will yield a rent of 63-54, o"" 9 bushels." 46 LOCAL GOVERNMENT The marginal land has been given as that producing 60 bushels, which, after payment of the tithe, had only 54 bushels left for the farmer. Then Mill goes on to argue that the price must rise, in the ratio of the two marginal products, i.e., 60/54; a^"d that "the landlords will therefore be compensated in value and price for what they lose in quantity." The discussion is quite correct, and valuable as far as it goes. It is a little antiquated, or rather, wan- tonly medisevalised, seeing that John Stuart Mill's father introduced the method of "doses." To-day, instead of only taking different lands producing so many bushels, we should come a little nearer the truth by considering the returns in bushels to different " doses of labour and capital." Mill, again, neglects to notice the rise in the margin of cultivation which would follow the rise in the price of corn, and so reduce rent and bring the price down somewhat. The reader will be well aware that many difficulties arise from the varying durabilities of the capital sunk in the land, difficulties which must not be allowed to absorb us here. The outcome so far is as follows : — In the long run payments for differential advantages — that is, rents — tend to bear rates in proportion to the ratio of economic rent to gross rent ; and it must be remem- bered that the quantity of rates determines to some extent the different advantages of different localities. The remainder of the rates, which is not "rolled AND STATE AID 47 on to air," is borne by residential occupiers and by consumers. The next step in the argument should naturally be the introduction of modifications resulting from leases and the social friction which prevents rapid repercus- sion from bringing ultimate incidence close in time to impact, and which causes it, moreover, to be in- fluenced by impact. I have decided, however, to leave impact to the end of the chapter. It is really no use discussing it until the equities, or otherwise, of incidence have been settled. The latter is then our present objective. How should society distribute the cost of local operations ? The reader need not be under any alarm. There is no intention of introducing here, as a digression, a treatise on the principles of taxation, though such a treatise would be by no means irrelevant. Most principles will be assumed, and their outcome will be only roughly indicated. The following proposition is fundamental and in- disputable. When the benefit resulting from optional works can be traced, their cost at least should be fixed on the recipients ;i and when it cannot, the cost 1 This is not quite true, since there are cases in which benefit can be localised, but in which it is desirable for the community as a whole that the consumer should employ the service more than he would if he paid the cost of his use of it. In such cases payment is best made on the basis of ability, or on that of some recognised standards of the quantity of service the members of 48 LOCAL GOVERNMENT should be borne by the units of the local body politic in proportion to their ability to pay, as should also the cost of all compulsory services which remains to the locality. There are, generally speaking, three classes of people paying rates, if the preceding analysis of the incidence of rates is correct : 1. Residential occupants. 2. Consumers. 3. Ground-rent owners. The shares, if any, which ought to be paid by each, must now be determined. I. Residential occupants should be taxed for their share, which we shall see later is residual, accord- ing to their ability to pay, as they are units of the local body politic. Ability is now measured by the rent of the home. Is this rent a satisfactory test ? Let us examine a few objections. Sismondi, among his maxims of taxation, has two of great importance. They are : (i) Taxation should never touch what is necessary for the existence of the contributor. (2) Taxation should not put to flight the wealth on which it is imposed. A tax in space, it is urged, especially on houses, offends against both of these maxims. Shelter, light, and pure air, are necessary for bare existence ; a each class ought to employ. Water may be taken as an example. AND STATE AID 49 certain amount of privacy is necessary for healthy social life. High rates breed congestion. The case is not yet fully stated. To pass from the depths to respectable middle-class quarters, even here the house is said to be no very accurate of ability. Pro- fessor Seligman believes that it is the best test, and his opinion must carrygreat weight. We agree at once as regards rents above a certain amount and below a certain amount, but under the lower limit the size of the house simply indicates the size of the family. In partial rejoinder, it may be urged that the very same objection applies to almost all taxes. The indictment has another count. A house of a certain size is practically all that is wanted, whether the income be twenty thousand pounds or forty thousand pounds. There is point in the contention. It is very largely true that after the income passes some limit the size of the house varies in a less ratio than the income. Nevertheless, the conclusions in- tended are to some extent, but not entirely, weakened by the fact that more than one establishment will be supported from the largest incomes. None of the above arguments^ prove that the rates are essentially vitiated as taxes according to ^ There is another, which has been previously indicated, that perhaps the occupier only pays rates varying with the building rent of his house, whereas his ability more likely varies as the gross rent. Probably, as usual, the truth as to the incidence of rates lies in the mean, and the occupier doee pay some portion at any rate of the share which Mill held to fall on the ground D 50 LOGAL GOVERNMENT ability. The objections pointed to are common to most imposts. Moreover, in the case of rates, there is a possible reform by which most of them could be obviated. That reform is the grading of rates. The grading of rates does exist now in a very small degree in the slight benefit accruing to the tenant when the landlord pays the rates and receives some remission for doing so. But it has been esti- mated that, as at present constituted, rates are " regressive," that is, they bear more heavily on the poor than on those in easy circumstances. We have an excellent example of " degression " (that is, less than proportional progression) in the imperial tax based on the occupation of houses. ^ owner. However that may be, it is quite certain that the localities have no other test of ability than that afforded by rent, or a portion of it, and practically even the portion, I am inclined to think, provides about as good a criterion of ability as any which the local or central government can lay its hand upon. 1 Inhabited House Duties. On shops, beerhouses, farmhouses and lodging-houses of an annual value, Less than ;^2o nil in the ^ Of ;£2o but not exceeding £^o . . . . 2d. „ „ „ Exceeding £i^ but not exceeding £60 . . 4d. „ „ „ » a6o ,, i> „ . . 6d. „ „ „ On dwelling-houses of an annual value, Less than ;£2o nilin the £ Of;£2obut not exceeding ;^4o . . . .3d.,, „ „ Exceeding £40 but not exceeding ;£6o . . 6d. „ „ „ .. £^° » » » . . 9d- » ,1 „ AND STATE AID 51 Partially business residences are moreover charged by this tax at a lower rate. Few objections of any weight can be found to the adoption of some like system with respect to rates. Against increasing the rate per pound for high rents little can be said ; and much can be said in its favour. A portion of such a rate becomes a tax on social distinction, and such a tax, as the Duke of Devonshire has pointed out, blesses, or at any rate satisfies, both him that gives and him that receives. The grading of rates is desirable, provided certain cautions are observed. Some arise from the facts of the shifting of rates. These we had better examine at once. Imagine the rate in the £ steadily increas- ing with the rent. Where and how would the in- creased rates fall? The answer depends upon the variants underlying differences in rents. They are two. Firstly, variations in the value of the site, secondly, variations in the value of the buildings. Now, in so far as the variations in gross rents are due to the former cause, the degressive part of the rate will tend to fall on the ground owner ; but, in the degree in which they are due to the size and quality of the building, the degressive burden will tend -to come on to the occupiers. The conclusion follows directly from the foregoing theory of the incidence of rates. If the rate varied not as the rent but as the quality of the building, say as the number of rooms or some- thing of that kind (compare for instance the hearth 52 LOCAL GOVERNMENT tax and window tax) its degression would find out the occupier and refuse to pass on to the ground-rent holder. The above considerations give rise to the question, What is required ? Is it desirable to cut off a slice of ground-values in tempering taxation to the struggling lower middle-class? My own opinion is, that, in view of existing conditions and expectations, legis- lation with the dual object would be objectionable. The time has come to deal with ground-values ; and to be dealt with scientifically they must clearly be treated apart on the basis of a separate valuation. It is confusing to have two or three legislative measures, when one is sufficient, and in the result- ing complications inequities can easily hide them- selves. Besides it is prudent to avoid, at all moderate costs, adding fuel to the still merrily blazing debate on the incidence of taxes. When the actual facts about the bearing of burdens become matter for con- troversy we may be sure that the truth is being obscured by ex parte arguments, and that injustices are being perpetrated and perpetuated. The rates which are intended to be borne by occupiers should be treated apart, and graded to meet differences in abilities to pay. One other caution with reference to all reform in taxation. If any rate which comes down on the land anywhere is eased, a free gift is made to many holders of ground rents, for by amortisation early AND STATE AID 53 burdens remain with the owners at the time of imposition. If the land has changed hands the new holder really pays no part of them, as taxes were in effect capitalised and taken off the purchase money. 2. TAe consumer's share of rates. The rates on business premises which do not rest in the land are passed over to the consumers. By what right are consumers called upon to pay this share? — people who are not units in the local body politic, who may be living miles away from the locality, even in other countries. By what right does Bolton tax the Babu on his native soil? By the right to demand full value for value received. These rates are justified so far only as they represent part of the cost of production of commodities. The local government paves the streets, and lights them, and cleans them, and preserves order, for instance ; and the cost of these operations is evidently part of the cost of production of the com- modities manufactured, or transported, traded in, or in some manner operated upon, in the spot referred to. The whole of the rates on the business 'premises which escape the land are here regarded as passing over to the consumer. Strictly speaking this view is not correct. Certain portions, standing for the differential personal comforts of producers, remain upon them. They are to be regarded as half-day resident occupiers, and as such they should contribute 54 LOCAL GOVERNMENT according to ability to the cost of that portion of local works which is not attributable to the wear and tear of business ^ua business. As regards the surplus local operations, each business should subscribe to their cost according to the proportion of them which it exhausts. What they shall be the majority must determine. If it decides upon wood-paving, then no biisiness has the right to say, "We will pay the hypothetical cost of the wear and tear by our cart of granite sets, which are all that we require." If such a business cannot bear the cost of its destruction of wooden sets, it must go elsewhere. The question of the best practical method of coming near the equitable in the abstract is one of the utmost difficulty. It is a question which requires an intimate knowledge of practical details. That under the existing arrangements the approximation is only very rough, and, further, that special busi- nesses are greatly over-weighted, is certain. Take railways for instance. It is proved up to the hilt that railway companies are over-rated, that they are fleeced more than is justified by the benefits they derive from the services of local authorities ; that, in a word, they are heavily taxed instead of being charged the market price for an element in the cost of carriage. It may be counter-claimed that the rates on railways are a device for taxing the whole country in aid of the localities. Then it is a very foolish device, because cheap transportion is so AND STATE AID 55 valuable a boon that no impediments should be cast in its way. Take the following picked figures, showing the rateable value of the Great Western Railway and that of certain parishes through which it passes. Rateable value Total rateable value ofG.W.R. of Parish. Newport .£5,724 £7A^i St. Devereux 4,114 5,225 Baulking 4,045 6,060 Grove (Berks) 6,240 9,225 It is obviously absurd that the railway company should continue to play the part of a fairy god- mother. The plea put forward by the rating agent to the Great Western Railway that the system of differential rating for land and railways as authorised under the Public Health Act, 1875, be extended to several other rates, seems modest in the extreme. ^ The whole system of rating business premises, machinery, and so forth, requires the careful revision of specialists. But any revision will be worthless unless it is definitely recognised that the basis of the contribution of businesses, qua businesses, to the cost of local operations is the quantity of exhaustion of the local services in production. Of course, only the roughest approximation to abstract justice is pos- sible.^ 1 " Commission on Local Taxation," Vol. I. Part II., p. 368. ' When it is stated that businesses ought to contribute to the cost of local operations in proportion to the quantity of the 56 LOCAL GOVERNMENT 3. Ground-rent owners. The owners of real ground-rent are meant, not only those who receive part, or all, or more than all, of the annual ground value under contract. The demand for contributions from them for the conduct of local work is founded on the production of much of the value which they hold by the activities of local bodies. Does the ground-rent bear now more than a just share according to the above test ? Clearly not, for though conditions are such that we cannot say how much of the increased value of sites is due, directly and indirectly, to what the locality does, and how much to the growth of population and the great sum of unmeasurable and undefinable causes which govern the segregation of human beings, yet it is certain that the small fraction of augmented value which is substracted from the ground value through the medium of rates does not cover the wealth which is given to the ground-owners directly by the paving of streets, lighting, policing, sanitation, and the many other services performed by local popular govern- ments. We find many suggestions and much agitation for outcome of those operations which they exhaust, the question may be asked, " But why, then, should not indirect imperial taxes be regulated in the same way ? " One answer is, because they are taxes and not merely remunerations for services. The nation may tax home consumers as constituents of the State, but Manchester may not tax a resident in London because he is not a constituent of Manchester. AND STATE AID 57 carrying the principle of payment for value received into effect. There is firstly " betterment," a proposal which is put forward as specially important in view of the fact that the increase in urban rates is largely caused by optional works, most of which have a market value. A select committee of the House of Lords, appointed in 1894 to consider the proposal, defined " betterment " as " the principle that persons whose property has clearly been increased in market value by an improvement effected by local authorities should specially contribute to the cost of the im- provement." In other words, payment must be in proportion to benefit whenever benefit can be de- finitely tracked down. To raise the cry of compen- sation for "worsement" is to confuse issues. The principle of " worsement " is applied to-day to actual positive damage, and only so far is it justifiable. Claims for compensation can scarcely be based on an alteration in the ratio of advantages of two situations caused by the improvement of the one, the other remaining as before ; but it is unfair that the owner of the former should gain and pay no more than he does in the increased rates which come with increased value. As it is to-day in the United Kingdom for the actual, positive, and specific betterment, the local community as a whole pays, not excluding even the persons whose interests are prejudiced by the im- provements. If the services were competitively 58 LOCAL GOVERNMENT performed, the market price of the work done would be paid by the benefited parties, and it should be paid by them also (or, at any rate, some part of it) if the work is undertaken by the local execu- tive. Another suggested remedy for the leakage of social wealth is the taxation of ground-rents. Society in its dealings with urban land-owners is finding itself much in the position of Laban in his last transaction with Jacob. All its cattle are somehow getting the specks and spots and ring strakes which mark them as the property of the ground-owner. It is proposed to tax ground-rents even when the cause of the increased value cannot be directly traced to local works. It may be adversely reasoned that the ground-owner, in the case of a long lease, receives an unvarying sum each year, and that therefore, as his income does not increase, he must not be specially taxed. This argument overlooks the fact that, although the actual income may be as before, the capital value may have increased greatly through increased value in the property which secures it It is part of this increased value which the reform would assure to the community. Against all taxa- tion of future values the general argument is used that in purchase they have been taken into consider- ation. What force there is in the suggestion is diminished by the facts that only a portion of the increased value would be confiscated, and that risks AND STATE AID 59 also have been taken into account in estimates of future values. Neither of the above proposed reforms necessitates that general valuation of sites, which has been re- garded in the past as impracticable. But as the valuation of sites is being made every day it is ceas- ing to be so regarded. I am inclined to regard the taxation of contract ground-rents as one-sided (in view of the wider basis afforded by the valuation of sites), in that it overlooks the ground-value held by the lessee. It is plain that the rates should come down, on the whole ground-value, and not only on the one portion brought within reach by the accidents of contract. But the question of the taxation of ground-values is best treated, for reasons which will appear later, after a discussion of the relation of impact to incidence. hnpact and Incidence. — Seeing that this chapter has already proceeded to wearisome length, and moreover that the modifications which actuality imposes on our conclusions as to incidence may be left without danger to the reader to apply for himself, I do not intend to say much upon the question. The impact of taxes is of great importance for two reasons, (i) Social friction prevents the easy and rapid roll- ing of taxes. (2) Legal contracts, in the form of leases, may pre- vent the incidence described above. 6o LOCAL GOVERNMENT Such facts give the colour of truth to Mr. Blunden's statement ^ that all increases of rates in congested, and exceptionally advantageous, and decaying districts, are paid by the landlord of the buildings ; for in the former two cases he is able to exact a monopoly rent, and in the latter case, high rates or low rates, there are empty houses all around. The occupier with a lease whether of a farm, busi- ness premises, or residential property, of course pays increase of rates. The farmer and other producers cannot immediately shift the increase on to the con- sumers by reducing their output, and the landlord is secured by the lease. And the occupier without a lease — we must almost say, "of course he pays increase of rates," for there is a social friction which checks the rolling of taxes, and the cost and trouble of removing, and the loss therein involved, so far as business pre- mises are concerned, by reason of the good-will re- sulting from the habits of customers, and, so far as houses are concerned, by reason of the pretzum affec- tionis, the drag of old associations, are facts to be reckoned with. It is in view of all this, and of the fact that first incidence does affect final incidence, that Mr. Goschen, and other influential writers and states- men, urged the division of rates in the first incidence between occupier, house-owner, and ground-owner, the last two sharing half the rates in proportion to the rents received by each. This principle was intro- * " Local Taxation and Finance," p. 55. AND STATE AID 6i duced by Mr. Goschen into a bill, brought forward in 1871, which, however, was subsequently sufifered to drop. Systems of division of rates between occupiers and land-owners have been in operation in both Scot- land and Ireland for many years past. The principle is excellent, provided that the separate valuation of ground-values is impracticable. But if it is not, some- thing much nearer perfection is open to us. Let us here, for the sake of clearness, pause for one moment to recapitulate and summarise. The funda- mental basis upon which the conclusions put forward in this chapter stand are as follows : — It is required to tax occupiers, ground-rent holders, and consumers. The tax on each of them is of an absolutely different character, and the variations in each should, therefore, be governed entirely by con- siderations in its own domain. There is no reason in the world why the occupier's ability to pay, or the cost of productive processes undertaken by the locality, should vary as the value given to the land by the oper- ations of the sectional government. It is therefore absurd to think to obtain the three ends above set forth by a single'tax on one class of people (occupiers) ^ on a common basis (rent). Even if we were justifiably optimistic — which we simply cannot be — as to the im- mediate following of incidence in impact, it would still be absurd. ^ The present system results in an absurd restriction of the franchise in the modern city-state. 62 LOCAL GO VERNMENT This is the only one scientific method of procedure, if the above basis of local taxation is accepted. To value sites apart from buildings. Then to tax : — Sites according to the value given to them. Residential occupiers according to their ability. Business occupiers ^ according to the cost of the services by which their businesses are assisted. But the proportion of rateable value to be taxed in the cases of particular businesses, and the question of allowances and so forth, should be settled by the central government to secure uniformity. To act on these suggestions we have been told is quite beyond the scope of practical politics, because a separate valuation of the site cannot be obtained. Conclusive evidence is, however, wanting in support of the contention. Mr. Fletcher Moulton in the debate in the Queen's speech, on Feb. loth, 1899, said, " It was amusing to see the way in which people dropped their hands and said, ' It is impossible ; you cannot separate the values.' He challenged the Attorney General with his unrivalled experience in compen- sation cases under the Lands Clauses Act to deny his statement that whenever they made the surveyors value the house and land, the first thing they did was 1 Business men, qua half-residents in the business centre, ought to contribute something additional also ; but there is no reason why those who do not happen to be tenants should be exempt from local taxes. AND STATE AID 63 to value the land separately, and then they considered what the house added to it In fact, the attempt to make it difficult to value accurately and relatively the value of the land site as distinguished from the value of the house was perfectly hopeless." His assertion was not denied. Moreover, a list of valuation of sites has been prepared for London. It was handed into the present commission by Mr. G. L. Gomme. It is asserted that such lists can be drawn up without much difficulty ; that they are in fact always being drawn up by valuers, though not separately published. The fear of sinister influences operating in their preparation is little greater than m the case of existing lists of rateable values. We may take it that the separate valuation of sites is not impracticable. The impact of the tax intended to abide with the occupier must, of course, be in the occupier. The impact of the tax intended to be rolled on to the con- sumers must, of course, be on the occupier, because he is closer to the ultimate bearers than the landlord. And the impact of the tax intended to fall on the ground-value must be — where ? Some of the ground- rent is an unvarying sum fixed by contract to be paid annually to some person or persons. The remainder, a variable, is received by the lessee of the plot, in part only perhaps, part being received by the lessee of the building. The best way, then, of getting at the ground-value, is to impose the whole 64 LOCAL GOVERNMENT of the tax on the owner of the building, and to em- power him to deduct the proportional parts of the amount of the tax from each contractual rent which he pays. This method is much simpler than seeking out the owners of the contractual rents and imposing their share on them direct. An obvious objection, however, is that the owner of the building may have to pay a tax on a portion of the ground-value received by the occupier under lease. For the sake of sim- plicity this defect, which is not likely to be great, is best left to the correction of economic forces. It is moreover obvious that it is more the function of the property speculator than of the occupier to shoulder these short-period risks. It may be easy to value a site and so get at the economic rent, but in the case of agricultural land it is so difficult as to be almost impracticable, since capital, both long enduring and rapidly exhaustive, is mixed up with it. To insure the share which falls ultimately on the land, and which is large, not getting shifted for short periods somewhere else, there is much to be said for allowing the farmer to deduct rates from his rent, the house being treated separately as other residences. From the foregoing discussion it is apparent, and the next chapter will render it still more apparent, that the bitterest complaints as to the burden and inequities of the rates are founded, so far as they have foundation, not on any essential defects in the system of rates, but on existing accidental and re- AND STATE AID 65 movable arrangements. Local taxation, if reformed on the abstract lines above laid down to the extent to which it is practicable, would show no great in- feriority, in equity and economy, to imperial taxation. But to attempt to remove existing blots by means of subventions is to adopt the most indirect and the least plausible method of repairing defects, and then, far from repairing, to aggravate them. &(> LOCAL GOVERNMENT CHAPTER VI DIFFERENTIAL RATES AND THEIR CAUSES The quantitative dissimilarities in rates in different localities now claim some consideration. For a successful examination the mind must be kept constantly alive to the fact that the question proposed at each stage is of a composite nature. It is really twofold, with one of its alternatives three- headed ; thus, (i) Do any of the differences in rates, or in any part of them, necessitate some measure of equalisation ? (2) If so, is the necessity met most satisfactorily by {a) extending boundaries, i.e., by giving legal sanction to the conception that the local organism is bigger than its present paper description, {b) county assistance, or {c) State assistance. The remark will not be out of place here, as a word of tacit warning, that almost without exception the second head of the complex alternative, and the first head also, we might add, have been entirely over- looked by those who have been most importunate in their demands for the relief of rates. It has been pretty nearly universally assumed that the sole choice lies between the status quo and imperial largess. AND STATE AID 67 Here is a quotation from a table constructed by Mr. Cannan, in which the rates, and expenditure on different objects, of all the county boroughs in England and Wales are shown. {From Mr, Cannan's Ariicle in. '* Economic Journal^'* Vol, K., p. ^7.) RATES IN SOME ENGLISH COUNTY BOROUGHS, AND EXPENDITURE ON DIFFERENT OBJECTS IN 1890-91. County Borough. Rateable Value per bead. Pence in £ expended on Total Rate Raised. Rate per Head of Population. Sewage. Streets. Police. Schools. Norwich .... 9 D. 19 D. 10 20 82 i, s. D. 17 7 Preston 3-87 4 10 7 57 14 10 Southampton 2-76 1 6 7 8 53 16 7 Halifax 3-86 4 11 6 20 51 16 4 Gateshead... 2'8l I 6 7 11 47 IX Wigan 2-57 25 15 10 I 47 10 I Hastings 6-76 2 12 3 3 44 I 4 II Manchester.. S'47 2 9 9 4 43 19 11 Liverpool S'79 3 I 11 4 38 18 7 Bath 5 •34 2 14 6 1 37 16 8 St. Helens... 3-67 7 6 33 10 2 Oldham 4"42 8 7 5 4 28 10 3 68 LOCAL GOVERNMENT It will be seen that the total rates vary from 7s. in Norwich to 2s. 4d. in Oldham. Like varieties are to be found among urban districts. This difference in rates is prima facie hardly consistent with justice, but further analysis may lead us to modify our judgment. Let us begin by separating the cost of the material works from that of the personal works of local bodies. By "material works" is meant operations directly on things, by " personal works " those directly on persons. The distinction is adopted merely to provide classes suitable for easy manipulation. It is not the same as that between " optional " and' " necessary," or between " beneficial " and " onerous " works. If we confine our attention solely to the material functions of boroughs we still find enormous differ- ences in rates. The amount expended on sewage in Wigan, for instance, came to 3s. 4d. in the £, whereas in Southampton, Gateshead, and St. Helens, it was only 7d. in the £, and in Liverpool only 4d. The following examples of the general district rates of boroughs other than county boroughs for 1895-6 further illustrate this quantitative unlikeness : — Bacup, 2s. 4d. Bedford, 3s. Bradford, is. lod. Hyde, 3s. 6d. Wigan, 4s. 6d. Wakefield, 4s. Godalming, 5s. 2d. The causes of differences may be tabulated as follows : — ^ ^ With respect to much of the following discussion I am AND STATE AID 6g I. In some places the rateable value per head is greater than in others.^ II. In some places the works cost more than in others on account of geographical, topographical, and other circumstances over which the local bodies have no control. This is of special importance in the case of sewage works. III. In some places the cost is greater than in others owing to inefficient management. IV. Some places have larger returns to capital invested in the past, some are investing more capital in the present. V. Some places have a larger income besides that from rates, for instance, from unpurchased endow- ments. VI. The local works of some places are of greater variety than those of others, and superior in kind. VII. Some places have more contracted boundaries than others.^ largely indebted to Mr. Cannan's article on " Inequality of Local Rates and its Economic Justification " in Vol. V. of the Economic Journal. ^ One cause of this is the proportion of property wholly or partially exempted from rates within the district. '^ In heterogeneous districts, that is those partly residential and partly given over to business, there is another reason for differences in rates, in addition to the seven causes above enumerated. This eighth cause, which applies also to personal services, but which will now be treated once and for all in this note, is the proportion of the rateablevalue of business premises to that of residential premises. If businesses are over-taxed by the rates, that is, if they pay more than the cost of their wear 70 LOCAL GOVERNMENT These causes will now be examined seriatim with a view to determining whether they offer any reason for assistance from the imperial exchequer. I. There is no more reason for other bodies to bear part of the cost of local material works, which are entirely optional, of poor districts, than to pay part of the cost of the poor man's living. Each is on the same plane, since outside interest in these works is inappreci- able compared with local interests. The claim for assistance to poor districts on the ground of the cost of their optional works involves the whole ethical and economic question of the distribution of wealth which is without the bounds of this essay. But, in so far as the operations are compulsory, sanitary works, for instance, low rateable value ' is ground for relief, and it has been recognised as such by the Equalisation of Rates Act, which will be referred to later. Measures of such a character as that Act seem to meet the hardship adequately and with and tear and general exhaustion of local works, then the greater the proportion of business premises to houses the less have residential occupants to contribute to the cost of local functions. The sole method of removing this ground of injustice is to care- fully determine the relative amounts which businesses gua businesses ought to contribute to the local funds. In all pro- bability an investigation with this object in view would result in the rejection, to a great extent at any rate, of rent as a basis for taxation. ^ It will be pointed out later that existing rateable values are unreliable on account of different degrees of under-valuation and of a variety of systems. The official rateable value cannot therefore be taken as a correct measure of relative wealth. AND STATE AID 71 fewer drawbacks than exchequer contributions, the former beinig founded, as the latter are not, on the result of scientific analysis. II. Geographical and topographical disadvantages are frequently offset by advantages in the locality, for instance, climate, harbours, waterway, coal, and so forth. The calculation of natural utilities and disutilities is practically impossible, and if it were not, no more claim could be based upon a balance of loss than upon the mistakes made by any individual in choosing a trade by which his income is rendered less than it might have been. III. No words are needed under this head. Efficiency is the business of the locality. IV. Few words are needed under this head. The investment of capital is a matter of management which must rest with the locality. On the one hand works may be costly and enduring, on the other cheap and ephemeral. Capital may be borrowed and invested at once, or investment may be delayed. These are questions of economy to be duly weighed by local bodies. V. I have no ground of complaint if A. presents an income to B. and I am neglected, and it matters not whether B. be a person or a locality. When the gifts to localities are of great age, the central govern- ment has some reason for interference on the ground that the present beneficiary is not the same as the one to which the gift was made, or that the benefit 72 LOCAL GOVERNMENT has undesirable results ; but care must be exercised that the generosity of the subject to the locality be not checked. VI. No assistance can be grounded here. If my living costs more than A.'s, because it is more luxurious, am I therefore to be compensated? Some towns have roads of wood and of concrete, promenades and fountains, parks, statues, and art galleries ; and for these they must pay. So much for the first six causes of the differences in rates with regard to the material functions of localities. We find in them no claim for subventions from the imperial exchequer. Nor do they convey any reason for assistance from any treasuries at a distance, with one exception, sanitation. The seventh cause, however, the extent of the locality, reveals an exasperating grievance, that those living outside the administrative area of some local body, but at no considerable distance, share the benefits of the local works without sharing in the cost. For example, the consumer in the suburbs who makes his purchases in the towns and takes much of his re- creation there ; the manufacturer just outside the city boundary who shares almost all the local business benefits to the cost of which he pays nothing ; those just over the border of the county borough of Manchester, to whose prosperity the Ship Canal contributes, but who escape the Ship Canal rate ; the farmers round the market town whose carts AND STATE AID 73 plough up the town streets at no cost to them- selves. It may be taken as sufficiently true for our purpose that the heaviest expenditure lies about the centre of the town. Hence at the boundaries ratepayers are contributing more than is laid out in their immediate locality. The rates of a town will fall as a rule if its boundaries are extended ; but if the town opens out, local self-government must apparently be withdrawn from urban districts. Hence a very disturbing dilemma. The best solution is to refuse both alter- natives. The explanation of the seeming paradox is simple. It cannot be said exactly at what age a lamb becomes a sheep, neither can the spot be indicated at which the town as an organic whole ends. Is it not possible in some degree to carry the skirts of the one district over contiguous districts, when the former happens to possess, as a town always does, a wide sweep of outer area, which is nevertheless to a great extent one with the centre ? ^ It has been suggested that zones of rateable area might be instituted round urban centres ; these zones to be chargeable, with respect to certain works, at rates diminishing with distance from the centre. By this means the burden of town rates would be some- what diminished. Some such reform is becoming ^ In the adjustment of financial relations between counties and county boroughs the services performed by the former for the latter were taken into consideration by the Commissioners. 74 LOGAL GOVERNMENT more urgent every day as the movement to the suburbs, not only for residence but also for manu- facture, gains force, largely through cheapened means of transit and transport. Of course, it cannot be laid down in this brief sketch that the adoption of rate- able zones ^ is the reform needed. All that we can assert is that it is the kind of reform needed. A better project, perhaps, is that districts should be grouped like parishes in unions, and that a governing body should be set over the group for the manage- ment of those affairs which were the intimate concern of larger organisms than the districts ; for instance, a city and its surrounding urban districts are one for many purposes and their government should mark this partial oneness. It would be a great relief to get the urban organisms out of their straight waist- coats. We have now to consider the difference in rates due to the personal functions of localities. They are ^ It is worthy of notice that we have to-day in operation in some places a system practically cognate to that of rateable zones. Some cities, for instance, which manufacture their own gas and which supply it to surrounding urban districts, charge for it more than the market price. To take an example ; the Gas Committee at Manchester has this year handed over ;£ 5 2,000, gained on their working, to the City Fund. The dangers which may easily arise from abuses of this system are evident. Besides, the system does not ensure that all districts will be treated alike. Stretford, for instance, one of the districts round Manchester, does not receive its gas from the city supplies. A big tax, again, may easily be collected with the water rate. AND STATE AID 75 the preservation of order and security, the mainten- ance of the poor, and education. In the case of county boroughs, in 1890-91, the cost of the police varied from iid. in the £ at Liverpool to 3d. in the £ at Hastings ; the cost of education from is. 8d. in the £ at Norwich and Halifax to nothing at Preston and in many other towns.^ To give another example, the police in 1890-91 cost 47d. in the £ (calculated in the Metropolitan Poor Rate valuation) in London, and 2d. in the £ in the counties. Again, in 1890-91 the school board rate in London was 97d. in the £, but in the boroughs only 5'id. Take the poor rate again. In 1893 it was i/'Sd in the £ in London and lO'Sd. for all extra-metropolitan districts. The difference in the poor rates in some of the parishes in England and Wales in 1891 are given below. Poor Rates, excluding precept rates, in some Unions and Parishes under separate Boards of Guardians in 1891 (from Fowler's " Report on Local Taxation ") : — S. D. s. D. City of London I 0-4 St. George in the East 10-3 Woolwich. . 2 37 Reigate 5 '2 Southampton I 5-0 Great Yarmoi th. I II'O Nottingham irg Tarvin I'S Altrincham . I"2 Manchester 7-9 Liverpool . 6-8 Monmouth . 2 o'3 Cardiff IQ-O Carnarvon . 2 8-S Conway 8-6 1 See Table, p. 67. 16 LOCAL GOVERNMENT The following table from the Local Taxation Returns shows the poor rates in each of the eleven divisions of English and Welsh Unions in 1894-5 : — ^ s. D. £ s. D. Metropolitan . 3 2 West Midland 2 li South-West . 2 3 North . I 9i East 2 9i North-West . I I If South-East . 2 2f York 2 31 South Midland 2 2i North . I n Welsh . 2 6f Enough evidence has been given to prove that the differences in rates arising from the cost of the per- sonal functions of localities are great — sufficiently great to induce an examination into expenditure under the three heads. Education. — The variations in the cost per £ of education are due to (a) voluntary effort ; (b) differ- ences in rateable value per head of districts ; and (c) the quality of the educational work done and the efficiency of school boards. As regards the first cause no objection can be made. The endowed schools exist, and if they do their work well, and are centrally and popularly controlled, the need for board schools is less. No importance can be attached to the complaint that the distribution of endowed schools throughout the country is not sporadic. It is one case of gifts which have already been considered. AND STATE AID 77 The local community may more justly have a helping hand extended to it on the plea of a low rateable value per head. It is understood by the principle of free education that the cost of educa- tion must be distributed proportionally to ability. The test of ability should theoretically be extended to the division of the cost between the locality and the imperial treasury. If we assume that the division of interest in education between the nation as a whole and the locality is practically the same in all cases, then the money measure of this interest will vary with the wealth of the locality, because of the diminishing utility of money. If the contention be admitted, then the amount of the Government grants should vary inversely with the rateable value per head of the district — the true rateable value. The Government does to some extent recognise its re- sponsibility to poor districts by making special grants, which are accorded in cases in which the actual expenses of a school board during any year amount to a sum which would have been raised by a rate of 3d. in the £ on the rateable value of the district, and when any such rate would have produced less than ;^20, or less than 7s. 6d. per child of the number of children in average attendance during the year at the schools provided by the school boards. Again, that the Government does not feel that too much of the cost of education is being discharged by it, is demonstrated by the fact that the additional 78 LOCAL GOVERNMENT subventions made over to Scotland were applied to the relief of school fees. The solution above suggested is not quite sound, because it ignores the responsibilities of the near localities. Moreover, it suffers from complexities. An alternative which at once insinuates itself is the extension of the school district. It is generally admitted that the parish is too minute a unit for educational purposes, and that even the districts formed by most of the existing unions of parishes are too small. By the widening of school districts more efficient management would be secured, because members of the school board would be drawn from a larger field, which would offer of course a more varied selection of candidates, and a higher grade of ability would be attracted because of the increased dignity of office and the greater responsibility attendant on further-reaching control. There is no special reason in the case of education, as in poor relief, for small administrative districts. The expansion of the dis- trict within limits can bring with it nothing but gain. It goes without saying that there would be greater uniformity in the rateable value per head in larger districts. The differences in school rates resulting from differ- ences in the qualityof educational work done introduces a difficult question. The Government requires a certain standard ; anything above that may be viewed as a work of supererogation, and as dangerous, because it AND STATE AID 79 may add another fold to the overlapping of the regions of operation of different educational organs. We have an example in the existing competition between secondary board schools, lavishly equipped, and many grammar schools, too scantily supported by their towns — a competition through which the gram- mar school is rendered less capable of doing the higher work demanded of it (which the secondary board school cannot do), and through which, there- fore, the children are made to suffer. Still, if over- lapping could be prevented, if would be well for a central authority to vary its grant somewhat with the quality of the work done. Police. — The differences in expenses are principally due to rateable value and the special requirements of some towns arising from some disorderly elements in their population. Mr. Cannan's table ^ shows that among county boroughs there are 21 cases in which high rateable value per head is accompanied by low police expenditure, and only five cases in which high value and high police expenditure, or low value and low police expenditure, go together. The four towns which have high rateable value and high police ex- penditure are Liverpool, Newcastle, Bristol, and Manchester. The reason, of course, is the excep- tional roughness of a part of their population. The . first two of the towns are flourishing seaports, the third has still much shipping, and the fourth is but a ■^ Economic Journal, Vol. V., p. 27. 8o LOCAL GOVERNMENT day's tramp from Liverpool, and has, moreover, a miniature port of its own. The requirements of the Home Office being such that considerable uni- formity in expenditure per head of population is secured, offers a partial explanation of the inverse variations above referred to. The contention with respect to education that the Government grant should vary inversely with rate- able value per head of the district, might be urged with equal force here. And so might the same ob- jection. It is a question for the practical politician to decide whether the gain in justice is worth the loss in simplicity and uniformity. The work of policing a town is of such nature, and is so regulated, that no inefficiency or waste is likely to result from increased subsidies. Mr. W. A. Hunter,^ indeed, enters a vehement protest against any such conclusion, and points in support of his contention to the fact that the expenses of police have risen in Scotland with subventions from 8|d. in 1854 to is. lod. in 1893. The facts must be admitted, but the causal nexus may be denied. Mr. W. H. Smith has pointed out in the Economic Journal'^ that the rise may be accounted for thus: — "(i) The rising wages of the class whence the police are drawn ; (2) that on paper a new body always appears cheaper than it really is, for at first all salaries are at a minimum, and pro- 1 " Lecture on Local and Imperial Taxation," 1894. 2 Vol. v., p. 184. AND STATE AID 8i vision for pensions, etc., is not thought of — these de- ferred charges must be added to the expenditure of the earlier years to get a true figure for comparison ; and (3) that the officers in question from time to time have had imposed upon them ' police ' duties which are altogether outside their sphere of service as mere constables." Poor Relief. — The causes of the enormous diver- gences in the amounts of poor rate are — (a) differences in rateable value per head, (3) differences in the num- bers of paupers, and {c) differences in economy of management. The third cause may be set aside at once ; in it there is no ground for relief The differences under the first head are very great. To take a few selected examples in England in 1 89 1 -2 J the rateable value per head in Eaststone- house was £2 12s.; in the City of London, £\07 \ in Wallsall, £2 13s; and in Bellingham, £\if 8s. The first two cases are, however, exceptional. Mr. Cannan points out^ that of the 195 unions which have an expenditure per head under 5s., 100 have a value per head of less than £/i^ i8s., and only 52 have a value of more than £6 6s.; while of the 208 unions which have an expenditure of more than f s., 45 have a value under £^ i8s., and no less than 73 have a value over £6 6s. On the ground of these differences relief from the Treasury may legitimately be claimed ^ Economic Journal, Vol. V., p. 25. 83 LOCAL GOVERNMENT — that is, a relief varying inversely with rateable value per head. However, there is another sugges- tion to be made. The amount of relief accorded is difficult to calculate, as the proportion between in- door and outdoor relief will show. The table below throws some light on the question. NUMBER OF PAUPERS IN ENGLAND AND WALES, 1895. Divisions. Indoor. Outdoor, Total, Number. Number per 1000. Number. Number per 1000. Southwest........ 9,640 S'o 65,109 33-8 74.749 9,308 5 '5 49,422 29-2 58,730 Welsh 6,763 3-6 54,087 29"o 60,850 West Midland.... »,342 6-1 72,551 21-7 92,893 North Midland.... 7,749 4"l 43,683 23-2 51,432 South Midland.... 9,610 4-8 44,538 22'2 54,148 Metropolis 62,554 14'3 51,481 11-7 "4.035 South East 20,134 6-6 58,842 I9'4 78,976 North 8,396 4'3 34,212 I7'3 42,608 York , I3,3'9 4'o 57,794 I7'2 71,113 Northwest 30,017 6-1 62,032 12-6 92,049 The cost of indoor relief is as a rule much greater AND STATE AID 83 than that of outdoor, yet we see that the Metropolis has I4'3 per 1,000 indoor paupers to 4-0 per 1,000 of York, and 117 per 1,000 outdoor paupers to I7'2 of York, that is, a total of 26 per 1,000 to a total of 21 "2 per 1,000, and at the same time more than three times as many indo.or paupers per i ,000. The results of separate unionsand parishes would expose still greater contrasts. Ignoring for the moment the principle of economy, assuming in a word that administrations are equally wise and economical, and that they will remain so whatever financial assistance they receive, it is immediately apparent that it is but common .justice that the poor law centre should be relieved of its burden in proportion to the number of each kind of paupers with which it deals per day. Pauperism is much greater in some districts than in others. What the present system comes to is that the poor alone relieve the poor in many places. When the above results are combined with those adopted with regard to rateable value, it seems that outside contributions for the relief of distress should, theoretically, vary inversely as rateable value per head of the locality, and directly as the quantity of indoor and outdoor relief. The objection is the zealous supervision which would be required to prevent wholesale waste, and an alarming increase of pauperism. I am not so sure that the magnitude of this danger is not largely fictitious to-day ; but in avoiding all appearance of foolhardiness, and yet obtaining almost the like 84 LOCAL GOVERNMENT effects, the system of paying constant costs which vary little with the quantity of pauperism out of funds obtained from large districts on the basis of rateable value is preferable. The Metropolitan Common Poor Fund exemplifies this system. This fund and the equalisation of rates fund con- stitute an exception to the allegation made at the beginning of this chapter that politicians have rather failed to recognise the diminution .of responsibility with distance as regards the operations of local bodies. We have in the principles upon which these two funds are founded an instrument which will eject a good half of those puzzling inequities which trouble many a practical man and drive him to attach himself to the vague agitation for some reform of some character in local finances. Both these funds represent organised subventions, wAick are not im- perial but local. In a word they are the systematisa- tion of neighbourly, or provincial, assistance grounded on the admission of a large common responsibility. They mean a first step from the conception of society as made up of rigid, mutually exclusive, local units to that of an organic nation of organisms, whose size and strength and nature vary with function, and which come and go, expand and contract, with differences in the work set before them. The Metropolitan Common Poor Fund, which was created in 1867, is administered by the Local Govern- ment Board. It is raised by a rate over the whole AND STATE AID 85 Metropolitan district, excluding Penge, to meet certain costs incurred under the Poor Law, which are supposed not to vary at all considerably with efficiency of administration.^ The effect is, that the wealthier districts assist the ^ Expenses to be paid out of Common Poor Fund by the Act of 1867. 1 . Pauper lunatics. 2. Fever or smallpox patients in asylums. 3. Medicine, and medical and surgical appliances supplied to those in receipt of relief. 4. All salaries and cost of rations of officers, managers of institutions and dispensers, provided the appointment of the officers is sanctioned by the Poor Law Board. 5. Compensation of medical officers of workhouses on the determination of their contract by the Poor Law Board, and of any officer who may be deprived of his office through this Act. 6. Fees for registration of births and deaths. 7. Fees and other expenses of vaccination. 8. Maintenance of pauper children in district, separate, certificated, and licensed schools. 9. For relief of destitute persons certified by the auditor, and for provision of temporary wards or other places of reception approved by the Poor Law Board, under the Metropolitan Houseless Poor Acts of 1864 and 1865. "Additional items of expenditure have from time to time been cast upon the Fund. Thus, by the" Metropolitan Poor Amendment Act, i86g, the cost of the maintenance of pauper boys on board training ships, and the cost of the maintenance and instruction of orphan and deserted children boarded out by the guardians, were made a charge upon the Fund. Under the Metropolitan Poor Amendment Act, 1870, the cost of the main- tenance of adult paupers in workhouses' and sick asylums to the extent of fivepence per head per day, and the cost of the rations of in-door officers according to a scale to be fixed by us became repayable out of the Fund. In 1873 the school fees paid by guardians for out-door pauper children were directed 86 LOCAL GOVERNMENT poorer. In 1896 the net amount contributed was £^47j37S> ^"d the total expenditure charged to the fund was £6^1,72^ : 19 of the 31 districts received in excess of their contributions, one district, St. Saviour's, as much as ;^I7,43S. A wider application has been given to the principle of the Metropolitan Common Poor Fund by the passing of the London (Equalisation of Rates) Act, 1894, by which each parish contributes a rate of 6d. in the ;^ to a common fund, which is expended in grants to sanitary authorities on the basis of population.^ by the Elementary Education Act, 1873, to be paid out of the Fund. In 1879 the expenses incurred by the managers of the Metropolitan Asylum District in providing ambulances, ambul- ance stations, and horses, and in respect of the persons employed by them in the conveyance of persons suffering from any dangerous infectious disease, were also charged upon the Fund, and in 1889 the expenses incurred by the managers for the maintenance of non-pauper patients suffering from fever or small-pox or diphtheria, as well as pauper patients, were made a charge upon the Fund. Payments are also made out of the Fund in respect of the expenses of the Quarter Sessions for the County of London under the Valuation (Metropolis) Act, 1869, and the remuneration and expenses of the clerk and other officers appointed to assist the Quarter Sessions, the fees received by the Quarter Sessions under that Act being paid into the Fund. The expenses of the Clerk to the London County Council under the same Act are also payable out of the Fund." (Report of Local Government Board for 1897-8.) ■■■ The grants have to be spent as follows : 1. In works under the Public Health (London) Act, 1891. 2. The residue, if any, in respect of lighting. 3. The residue, if any, in respect of streets. The population of the districts has to be estimated each year from the number of houses. AND STATE AID 87 The merit of these two funds is that the financial advantages of big districts are secured with the administrative advantages of small ones. The distri- bution of the funds, however, in both cases is not above criticism. In the case of the Equalisation of Rates Fund, for instance, it is bad that population should determine the grants, for ^there is no guarantee that need is proportional to population, and not rateable value per head. Mr. Gomme has said, we may add, in his evidence to the present commission, that the popula- tion basis is not final ; that it was taken as a first experiment to see how it would work out. Since, in these funds, we have in effect subventions between local bodies, we must beware of the dangers inci- dental to subventions, though, indeed, in these cases they are less, as the whole of the funds are raised in the locality. 88 LOCAL GOVERNMENT CHAPTER VII SUBVENTIONS IN ENGLAND PRIOR TO 1 888 Imperial subventions to local authorities are not peculiar to the British Isles ; they have appeared in some form in most modern civilised states. In England the first of these grants was made in 183 1, others followed in 1833 and 1835. Little was spent, however, until the time of the famous adminis- tration, whose claim to glory is the repeal of the Corn Laws. How far the repeal and subventions were connected in the mind of Sir Robert Peel is a matter of debate. It seems natural to suppose that the grants which came in 1846 were proposed to reconcile the landed interest to a measure which appeared to be striking heavily at it. Certainly, a few days after Sir Robert Peel had announced his conversion to Cobdenism, Lord Beaumont proposed a commission on the burdens of land on the ground that " protec- tion " and " burdens " must live and die together ; but Mr. Gladstone assures us that he then voted for the commission and against Sir Robert Peel. But beyond a doubt the Free Trade Act of 1846 and AND STATE AID 89 subventions were associated by the landlords, and we know that the Anti-Corn-Law League was on the alert to check any attempt to re-adjust local taxation in the rural districts. In consequence, the Chancellor of the Exchequer, in the new government of 185 1, announced that he was not going to recommend any change whatever in the system of raising the local taxes, and Cobden thereupon wrote to the chairman of the League : " The Budget has finally closed the controversy with Protection. Dizzy has in the most impudent way thrown over the ' local burdens,' as he did before a fixed duty. The League may be dis- solved when you like."^ In 1869 the Local Taxation Committee was formed out of the Central Chamber of Agriculture with the direct object of organising a crusade on the consolidated fund. The crusade was vigorously pursued and with marked success. In 1872 a motion for relief of the rates was carried in the House of Commons, and, although a motion practically identical was lost in 1884, it was carried again in 1886. Subventions rose from ;^i,420,i83 in 1868 to ;£'6,870,2o6 in 1888. The first amount, if spread evenly over the poor rate valuation of England and Wales, is equivalent to a rate of s^d. in the £, the second to one of i id. in the £. All these subventions, with bijt few exceptions, were payments for work done, and were dependent on efficiency. And there is another point to be 1 Morley's " Life of Cobden." 90 LOCAL GOVERNMENT noticed besides the fact of the control of the central government, namely, that all these grants were made for the performance of local duties which were ad- mittedly a part of the business of the Imperial Government. To such kinds of subsidy in general few objections can be made. Mr. G. H. Blunden says of them : " By coupling the grants [for police with the attainment of a fair standard of efficiency, much has been done in the past to increase the effectiveness and raise the character of the local forces. The grants for vaccination and registration have in like manner secured the performance of certain functions which would otherwise have been wholly neglected, or very imperfectly effected in a very large number of localities. The grant for main roads is fairly justified by the results secured, but the cost is heavy. The expenditure on sanitary officers is at present largely without result in many places, owing to the lax administration of the sanitary laws by the local governing bodies."^ The local executive performs partially imperial duties, and it is paid for its work, not always the whole cost, but frequently only a definite proportion or a definite amount. For instance, only half the cost of the police was met from imperial funds, and even the half was dependent on satisfactory work ; and, again, in the case of dis- turnpiked and main roads, the proportion of the expense borne by the Exchequer was usually one 1 " Local Taxation and Finance," p. 36. AND STATE AID 91 quarter. In the case of the Dublin Police, however, the reverse system is in operation. The Imperial Government directly manages the corps, and receives from the Dublin Corporation the proceeds of a rate of 8d. in the £. But here we have an exceptional case. The payment of a portion of the cost by the body undertaking any operation obviously stimulates economy, if the portion varies directly as the total cost. The system of part payment alone, however, would be insufficient to produce the most economical results, since the operations to which this system applied would tend to be carried beyond the point of maximum satisfaction, that is, the point at which marginal utility equalled marginal cost. This would result, because the cost to the locality which directly controlled the operations would be part only of the actual cost. Suppose, for instance, that the marginal utility of 100 police in a locality is represented by £2 per man, and that the marginal utility of 120 police is repre- sented by ;^i per man, and suppose that in both cases the marginal supply price is £2 ; then if the locality paid the entire cost, 100 police would be employed ; but if the central government contributed half, 120 men would be employed. The engagement of the larger number may be prevented by imperial control other than financial ; and the difficulty was more of theoretical than of practical importance. 92 LOCAL GOVERNMENT Another method of dividing cost is for the central government to pay, not a part of the total expenses, but the expenses of a part of the operations. The objection is that the expenses of this part will grow unchecked, and that other parts of the work will tend to become merged with the imperially paid portion) which will therefore become larger and more expen- sive than it was before. These tendencies require no proof. People both individually and in co-operation are notoriously careless as to expenses which they have not to meet. The Imperial Government adopted this method in dealing with the cost of poor relief, but the grants it made were practically unobjection- able,because onlythose costs were taken over, which are not to any appreciable extent dependent on efficiency. In the case of education, the central government pays a fixed amount per scholar and meets certain other expenses which need not be detailed here. It also makes additional payments to poor districts. All the education grants are accompanied by keen scrutiny, and the government keeps a tight hand on the reins of management. Few blots on the system are to be. detected. Edu- cation admittedly concerns more than the locality, and so a portion of the cost may not unreasonably be met from the Imperial Treasury. The advantages in the payment of a fixed sum is that efforts will be made by the school board, under pressure from the constituency, to reduce the balance, so far as reduction AND STATE AID 93 is consistent with efficiency, and perhaps a little further. The system of payment by results, exem- plified by the South Kensington grants, has grave drawbacks in encouraging forcing, in overlooking the more subtle qualities in teaching, and in inducing excessively rigid systematization. So far as the early subsidies ^ were made payable to rural districts, they had the undesirable effect of transferring a part of " the hereditary burden " on real property to the Exchequer. Further]criticisms, which are common to these and to the later subventions, must be left to the close of the next chapter. ' A full detailed description of these subventions will be found in Appendix B to Mr. Fowler's " Report on Local Taxation." 94 LOCAL GOVERNMENT CHAPTER VIII THE SUBVENTION IN ENGLAND OF 1 888 AND 189O In 1888, and again in 1890, came great changes. A new colour was given to subventions by grants being made the amount of which was not determined by the cost of specific work done, or by needs, but by the accidents governing the proceeds of given taxes. Mr. Fowler says : " The financial arrangements of the Local Government Act (1888) constituted a new departure from the principles on which Treasury subventions had previously been sanctioned by Par- liament. On all previous occasions, except in the case of payments made by the Treasury in lieu of rates in respect of Government properties, the sub- ventions annually voted had been allocated to specific purposes, to which it was considered that contributions might properly be made by the Exchequer; and their distribution had been regulated either by the expenditure in aid of which they are paid, or by the efficiency of work done by the local authorities or their officers. These principles were recognised by AND STATE AID 95 the Local Government Act, so far as the payments required to be made by the County and Borough Councils in substitution for the discontinued grants, were concerned ; but they were disregarded as regards the application of the surplus remaining after the payments of these grants and the Union Officers Grant."! The Local Government Act of 1 888 transferred to the Councils of Counties and County Boroughs of England and Wales certain licenses, referred to in the Act as Local Taxation licenses, and a share of the Probate Duty. Certain of the old grants were charged on the new funds when the Act came into force. They were those in respect of Teachers in Poor Law Schools, Poor Law Medical Officers, the County, Borough, and Metropolitan Police, Public Vaccinators, Medical Officers of Health and Inspec- tors of Nuisances, Criminal Prosecutions, Pauper Lunatics, Registrars of Births and Deaths, Disturnpike and Main Roads, and Compensation to Clerks of the Peace. These grants were certified by the Local Government Board to have amounted for the year ending 31st of March, 1888, to ;£'2,86o,384. The share of the Death Duties allocated to local authorities has varied from time to time. In 1888-9 one third of the Probate Duty was paid, in the years 1889-go to 1893-94 orie half of the Probate Duty, and in 1894-5 o"s h^^f °f *^h^ Probate Duty paid on the ' Report on Local Taxation, p. xlvii. 96 LOCAL GOVERNMENT property of persons dying before the 2nd of August 1894, and also a share of the Estate Duty (1894) paid on the personal property of persons dying after 1st August 1894, such share being equivalent to one and a half per cent, on the net value of the property on which the Duty was leviable. The Act substitut- ing the New Estate Duty for the Probate account and Old Estate Duty came into force on ist August 1894, and now only the share of the Estate Duty mentioned above is paid into the Local Taxation Accounts. In 1890 followed the sequel to the great change of 1888 in the form of the Local Taxation (Customs and Excise) Act, and the Customs and Inland Revenue Act. The latter of these Acts " imposed additional duties on spirits, and provided that the proceeds of these additional duties and the portion of the duties of excise and of customs in respect of beer " (namely, so much as will arise from duties of 3d. per barrel on beer and 6d. per gallon on spirits) " should be appor- tioned between England, Scotland and Ireland, and that the English share should be paid into the Local Taxation Account and appropriated as Parliament might by any Act passed in the same session direct. The Local Taxation (Customs and Excise) Act, i8go, contained provisions for the application of these duties. That Act provided that out of the amount paid into the Local Taxation Account for England in respect of these duties the sum of ;^300,ooo should be AND STATE AID 97 applied for purposes of Police Superannuation, namely, ^150,000 in aid of the Superannuation fund for the Metropolitan Police force, and £ic,o,ooo in aid of the superannuation of the other police forces in England (except the police force of the city of London). The residue of the proceeds of the duties was to be distributed between the counties and county boroughs as if it were part of the English share of the local taxation probate duty under the Local Government Act. The County Councils were enabled by the Act to apply the sum received by them in respect of these duties to technical education within the meaning of the Technical Instruction Act 1889, and in the case of any County to which the Welsh Intermediate Education Act, 1889, applied, towards intermediate and technical education under that Act."i By the legislation of 1888 and 1890 a surplus of more than ;£'3,ooo,ooo, over and above the discontinued grants, was handed over to the English County Councils and County Boroughs. A new grant, how- ever, to Boards of Guardians for Union Officers,^ ^ Mr. Fowler's " Report on Local Taxation." sThe Union Officers' Grant, amounting to about one million pounds, was given to a rate which was steadily falling, and which, moreover, had already been relieved by no less than four Treasury subventions, exclusive of the Grant for awards to public vaccinators, namely, the grants for (i) teachers in poor law schools, (2) poor law medical officers, (3) pauper lunatics, and (4) registrars of births and deaths. G 98 LOCAL GOVERNMENT amounting to £967, yg^ was charged upon this surplus. The distribution of the funds under the new Acts is wonderfully complicated. The problem is divided into two stages ; firstly division between the counties ;^ and secondly, division in each County between its own Council and the County Borough Councils contained within its borders. With respect to distribution between counties, in the first place the licenses are divided according to the amounts collected in each county. The rest of the grants are then added together, and from them are deducted the new allowances for police super- annuation.^ The residue is then divided among the counties in proportion to the shares which the Local Government Board certified to have been received by each county^ out of the discontinued grants during the year which ended on the 31st of March, 1888. 'The following are treated as separated counties under the Act : Ridings of Yorkshire ; Divisions of Lincolnshire ; East and West divisions of Sussex ; East and West divisions of Suffolk ; Isle of Ely ; Residue of Cambridge ; Soke of Peter- borough ; Residue of Northampton. The Metropohs also, which is further subject to special regulations. ^ Another small sum may also be deducted, for, if in any financial year the money standing to the Cattle Pleuro- pneumonia Account is insufficient to defray the costs of the execution of the Act of 1890 in Great Britain, the Local Govern- ment Board have to pay out of the Local Taxation Account such additional sums as the Board of Agriculture certify to be required. * " In the case of the six counties of South Wales and the Isle AND STATE AID 99 We have to consider next the distribution of the grants to each county between the County Council and the County Borough Councils. Com- missioners were appointed to make equitable adjustments. It was said by Mr. Ritchie, when President of the Local Government Board, in reply to questions on the 3rd of July, 1888, that "the Government desired as far as possible that the boroughs should have the same control over their license duties as that which was given to the counties," and again that " the instruction to the commission was that regard should be had to the amount derived from license duties." The Act of 1888, however, in referring to the adjustments, has it, " that the county is not to be placed in any worse financial position by reason of the boroughs therein being constituted county boroughs, and that a county borough is not to be placed in any worse financial position than it would have been in if it had remained part of the county." The Commissioners found it impossible to discover any means of carrying out the intention of the latter clause, since all the surpluses (left after payment of the grants charged to the allocated taxes) would, had there been no county boroughs, have gone to swell the general purposes account of each county fund. of Wight add also the amount which each of said counties and the Isle of Wight would have received if the roads maintained by the County Roads Boards or the Highway Commissioners had been main roads." (Act of 1888.) loo LOCAL GOVERNMENT It was a matter of doubt how far each borough would have benefited from the expenditure of the surpluses, especially as the whole cost of the maintenance of main roads had to be defrayed by the County Council as a general county purpose, and the Borough Councils might have been able to obtain recogni- tion of some roads within the borough as main roads. The Commissioners state in their report that they decided that an equitable adjustment would be effected "by giving to such several authorities in each year the annual amount received prior to the passing of the Local Government Act out of the grants discontinued after the passing of that Act, together with the amount payable under . . . section 26 " (payments to guardians in respect of the cost of Union Officers), " and dividing the remainder in proportion to the rateable values of the county and boroughs." But Mr. Wharton, a member of the Commission, declares that "the Commis- sioners did not adopt the principle of rateable value as their guide. They, adopted the principle of rateable value and population." ^ The award of the Commissioners stands for five years. After that period the whole question may be reopened by appeal. Both methods of division, that between the counties and that between the county boroughs, are open to ^ See question 10,273 before Commission on Local Taxation, now sitting. ANB STATE AID loi severe criticism. Take, firstly, division between the counties.' In so far as it relates to the probate, estate, and beer and spirit duties, its basis is irrational. There is no reason why the Empire's contributions to the counties, to be largely spent on technical educa- tion in all probability, should vary, inter alia, with the numbers of people vaccinated and of inspectors of nuisances in the year 1887-8. There is no rational connection between a county's claim on the Imperial Exchequer in 1898 and its band of pauper lunatics in the year 1887-8. No thought was taken for different rates of growth in the counties in the future. As Mr. Hulton put it " when the Act was passed the distribu- tion . . . might be right and proper, but after the lapse of nine years a distribution based on an accidental state of things in a previous year seems anomalous, and ought to be reconsidered.'" Ob- viously, if the old grants for specific pur- poses had been continued, the counties which have grown in population would now be receiving larger proportions of the whole, so that if the basis were right in 1 887-8 it must be wrong now, and it will every year become more and more wrong. The favoured counties are, of course, acquiring a vested interest in the ratio of 1887-8, and the more absurd it becomes the more difficult it will be to overthrow it."^ 1 Memorandum handed into present Commission, c. 8765, page 114. ^ Mr. Edwin Cannan in a letter to the Manchester City News, March 8th, 1899. I02 LOCAL GOVERNMENT In Appendix VII. the amounts of the discontinued grants, the shares received, and rateable values for the counties of England and Wales, are given. In the last two columns the enormous difference between the existing distribution and one based on rateable value is shewn. Side by side with this Appendix VI. should be studied. It shows that a distribution on the basis of population would also give results widely different to those brought about by existing arrange- ments. We may now pass on to a consideration of the principle by which the division of the residue of the grants between the county borough councils and the county councils was regulated. If in division of the proceeds of the licences between counties the simple and obvious principle of giving to each its own was satisfactory, it is difficult to understand why it was not sufficiently satisfactory for a final subdivision. As it is, the basis adopted, whatever it was, has compelled almsgiving, in many cases by the poorest to the wealthiest. Appendix V. shows that the excess of receipts over contributions has amounted to as much as ;^23,os8 5s. od. (in Manchester) and deficiencies to ;^i3,6oi 17s. lod. (in the County of Lancaster). Excesses and deficits amounted together to ;£'i84,2ii I2s. 2d. in 1896. Division, there is little doubt, was largely made on the basis of rateable value. There- fore, if there are two boroughs with equal populations, and alike in all respects, except that the one is rich AND STATE AID 103 and the other poor, the richer receives the greater amount. An instructive commentary on existing distribution, both between counties and afterwards between counties and county boroughs, will be found in Appendix VI. We find there that the shares of the doles of 1890 amounted in 1896 to lO'id. per head in London, io"3d. in Bootle, 3"id. in Walsall, and 4"5d. in Durham, to take a few examples. Distribution of the residues is made on the basis of poor rate assessment, in so far as rateable value is taken into account. Now the poor rate assessments are made in one county by many different bodies with different ideas. Moreover, different rates of reduction are used in obtaining rateable value from gross estimated rental. Sheffield, for instance, allows 20 to 25 per cent on houses and shops, while Bradford allows only 15 per cent. On stone quarries Burnley deducts 15 percent, and Prescot makes no deduction at all. The county rate valuation is made by one body, and the system upon which it is based is therefore uniform throughout the county. When we compare it with the valuations of the assessment committees of the Unions the differences are seen to vary consider- ably, as we should naturally expect from the foregoing facts. Here they are for a few picked parishes in East Sussex in 1895. I04 LOCAL GOVERNMENT Poor Rate Assessment. County Rate Basis. Percentage below County Rate Basis. .£359,149 111,006 100,288 312,614 63,230 58,363 ^368,202 115,234 108,980 363,351 76,957 73,721 2-458 3-669 7'975 i3'963 17-837 20-832 (From Vol. I., part ii., page 116, of the Minutes of Evidence of the present Commission.) Moreover, it is not the easiest matter in the world to get the poor rate valuation revised. It cost Walsall seven years of agitation. It follows directly, of course, that the distribution of the residue of grants on the basis of poor rate valuation must be in cases extremely inequitable, even supposing that true rateable value would be an equit- able basis. The method of distributing the present subventions is indeed hopelessly casual. Mr. Cannan's " the thimble-rig of exchequer contributions " ^ exactly describes it. Quite apart from their foolish distribution the grants of 1888 and 1890 are objectionable for many other reasons. Take the licenses for instance. They are raised in the counties; the central government imposes and collects them ; the counties receive them. It would be preferable if the clause in the Act which provides for their collection by the recipients, when ^ Economic /oumal. Vol. IV., p. 26. AND STATE AID 105 decreed by order in Council, had been carried out, as the fatal stamp of " dole " would then have been removed. The allocation of certain taxation bases, in their entirety, to the complete control of the local bodies, if some assistance really was needful, would have been even more preferable. Nevertheless, of the imperial contributions in and after 1888 the duties on licenses are the least objectionable as they are collected from the beneficiaries. They simply mean borrowing half-a-crown from a friend for the purpose of making him a present of it. Some may object to them because they do not vary with expenditure. If they were still destined for the Imperial Exchequer, it may be argued, they would tend to vary in rate with the Exchequer's wants. But this point is not of much importance since a barometer of expenditure is as a rule sufficient, and local rates provide it. Passing from the licenses to the other grants in the later period we find cause for disapprobation in the fact that the areas of collection and distribution are not coterminous. For the moment there seems to be nothing portentous in the fact, but it soon becomes apparent that it means no guarantee that the proceeds of the allocated taxes will tend to vary as the needs of the recipients, when growth alone is taken into consideration. Very much in the rough, we may put the situation thus. V/hen a tax is imposed by a governing body on its own constituents, then doubling the constituents doubles the financial needs of the io6 LOCAL GOVERNMENT Government, but it doubles also the receipts. But collect a tax from the nation at large and pay the results to a locality ; then, although the constituents of the locality may increase in numbers, and its needs may therefore increase, the proceeds of the tax need not increase, since the nation as a whole may have diminished. For example, Manchester's needs vary as its popula- tion, but its allocated taxes, excepting only duties on licenses, do not vary with its population. The natural and rational thing is for mere movements in popula- tion not to affect taxation burdens. But they do, as regards local imposts, now that the reforms of 1888 and 1890 are in force, Another very insidious element of chance has been screwed into local finances, and improvidence must therefore be cheer- fully awaited. An element of chance accompanied the earlier subventions. Their most harmful effects followed rather from the manner in which they were accorded than directly from them. Harried govern- ments took to casting sops in the shape of subven- tions. The outcome was inevitable. The assumption of certain charges was innocent enough, comparatively speaking, but the hap-hazard manner of the assump- tions, and their seemingly time-serving character, gave rise to a sanguine uncertainty. It was the unexpectedness of the doles which created the great expectations whose outcome was waste: it is so much easier to agitate for help than to manage not AND STATE AID 107 to need it. The allocated millions of 1890 were simply windfalls, nothing more nor less, with the dust and ashes within almost concealed. The money was collected for the payment of compensation for sup- pressed liquor licenses, of which the House of Commons stubbornly refused to approve, and when that object was dropt the money had to be expended in some other way. It was proposed by the Govern- ment to leave it ear-marked in the Treasury for a time, but the Speaker held that, in view of the budget, it would be illegal not to spend it in the same year. Hence the compulsory decision to throw it after the grants of 1888. There was no conviction of need and no prior design. Special circumstances are claimed in justification of the grants of 1888. In that year new bodies with large powers were called into being ; or, more correctly, some ancient institu- tions were revived and given a modern dress.' Their fate hung in the balance. They might become mere excrescences, lifeless aggregations of inefficiency. Granting their enthusiasm, their aspirations might easily be checked on the financial side by the murmurs of an already overburdened constituency. The new bodies must be sent forth with the strength of an assured revenue. If income frequently tends to con- siderably exceed expenditure a governmental body may find itself branching out in new directions, ^ A few years later came the Parish Councils Bill with promise of further financial pressure. io8 LOCAL GOVERNMENT assuming new functions, and hurrying along new paths, as the most progressive of progressivists. " New occasions teach new duties." Ways must be found to spend the balances. True, American ex- penditure of surplus revenues seems to have been unfortunate, but this was perhaps due to the adop- tion of the costly and scandalous pension system, which, like the young cuckoo, soon ousted all com- petitors. Certainly adverse balances are a check on hasty decisions ; yet it is possible for a public body to hurry too little, and it may be wise on occasion to stimulate it at the temporary sacrifice lof economy. It is alleged that subventions, especially the allocated taxes, have applied a much-needed stimulus ; that the burden of rates was checking the development of local government, and that the new funds removed this check. We have been told that there is a very practical example of the value of largess in the effect of the surpluses ear-marked for technical instruction. Mr. G. H. Blunden says : — " The grants for technical instruction and intermediate education have only existed since 1890, but they are rapidly building up a great and excellent work, which, although much needed, was likely to have remained undone without the stimulus and aid thus afforded. In both direcr tions a vast amount of voluntary effort and public spirit has been evoked, which only needs wise direc- . AND STATE AID 109 tion to ensure excellent results before long."' But educational specialists present to us the reverse of the view offered by Mr. Blunden. They point out that there is a mist enveloping technical education which prevents a clear presentation of its nature to the untrained intellect, and that on this account alone much money has been foolishly disbursed. Too large a proportion of the funds has flowed into already swollen channels, and many streams of equal importance, and whose need is greater, have been left to dry up. Hence the proposed Bill drawn up by the Head Masters' Association, and founded on the conviction that the existing elective bodies are incapable of judiciously disposing of these funds without assistance frohi educational specialists. Per- haps the educational question is a peculiar one. But, however that may be, we have here the advantages and disadvantages contrasted : on the one side " a great and excellent work," on the other, waste and the misdirection of much expenditure.^ How shall the two sides be balanced ? This is a hard question, but one conclusion at least is certain, namely, that if any unconditioned grant is made it must be only temporary. We are then face to face with the difficult problem as to when a temporary ^ " Local Taxation and Finance," p. 36. 2 The objection above noted applies only in the present. Educational wisdom is finding its way to the boards of local governments. no LOCAL GOVERNMENT support is to be removed. If history affords any guidance, a temporary support tends to become a permanency ; partly because of opposition from the vested interest created by the support. The policy of protecting infant industries has split upon this rock, and there is no reason to suppose that a policy of temporary subsidies will be more fortunate. The two sides, however, need not be balanced. The present murmurings about the burden of the rates are directed entirely to defects in the existing system which are removable. It has been seriously questioned whether sub- ventions have relieved rates at all. It is urged that they cannot, as rates have not fallen. In proof an appeal is made to statistics. It is pointed out that in England and Wales subventions amounted to 3Jd. in the pound in 1868, iid. in 1888, and is. 6^6. in 1892 ; and that rates in the pound were, in 1868, 3s. 4d., in 1880, 3s. 3id., in 1888, 3s. 7|d., in 1891, 3s. 7|d., and in 1893, 3s. 9|d. The only fall was between 1868 and 1880, and then it only amounted to one-fifth of a penny. The inference we are in- tended to draw, apparently, is that the subventions have been wasted. Now the figures will not support this conclusion. Firstly, there is no proof that rates would not have increased more if there had been no subventions. We cannot even fall back for proof on an average increase in rates, as many changes have been introduced into local government which ANB STATE AID iii affect rates. The enormous change of 1888, for instance, cuts off the years succeeding from those preceding that time. There is another alternative to the conclusion above, which is that the new funds have been swallowed up in new functions, or in old functions more efficiently performed. Besides, the facts are really not quite as they are represented in the above argument. If allowance were made for variations in the purchasing power of money, a fall, both in total rates and in rates per head, in 1888 would probably appear. The use of Sauerbeck's index numbers at any rate shows it. Rates, in fact, did not resume their natural rate of growth again till 1892. 112 LOCAL GOVERNMENT CHAPTER IX THE AGRICULTURAL RATINGS BILL The Agricultural Ratings Bill raises two distinct questions. The one, Is farming as a business over- taxed for local purposes ? The other, Have the hereditary burdens on the land increased, and if so ought the landlords to be compensated ? By the hereditary burdens is meant those which are fixed to the land by the diminution which they cause in its value through amortisation, that is, those which fall ultimately on the landlord in possession at the time of their imposition. With regard to the first question, it has already been said that an investigation into the quantity of productive work (including transport) performed by local bodies in the performance of local operations, with reference to different businesses (including agri- culture), and a careful estimation of the costs of those services regarded as productive, is a pressing need, and, moreover, an essential step preliminary to reform in local taxation. It is a labour requiring the co-operation of experts thoroughly representative of the multitudinous business concerns of this country. AND STATE AID 113 It is not denied here, though it certainly is not taken as established, that the business of agriculture suffers especial hardship. What is denied is that the inquisition of commissions has been such as to provide the evidence to justify a categorical state- ment upon the matter. Moreover, we must remember that concessions have been already made to the farming interest by the Lighting and Watching Act of 1833, and by the series of sanitary and improve- ment Acts which commenced in 1848. "Watching and lighting rates under the first mentioned Act are chargeable only on one-third of the full rate in the pound, when levied in respect of land and tithes ; lines of railway and canals being comprehended under the term 'lands.' Sanitary rates in urban districts, and those for special sanitary purposes in rural districts, are chargeable in respect of agri- cultural land, tithes, railways,^ docks, and canals, on one quarter only of the rateable value." ^ No such concession is made as regards borough rates, al- though much of the expenditure to which the proceeds are applied is of a similar character. Turning from the business aspect to that of the burdens on land, we find ourselves in a far less help- less position. That portion of the average rates of the last fifty years or so which fall on the landlord ■" In urban districts in which the repair of highways has been taken over by the counties, the expenditure 'is now charged on land and railways in full, instead of at one-fourth as heretofore. 2 Blunden, Op. cit., p. 25. 114 LOCAL GOVERNMENT have, by amortisation, become a fixed charge in the land — "an hereditary burden," as Mr. Fowler expresses it. Lands have been bought and sold subject to this charge : the tax was paid for all time by the owner when the rates were imposed. A remission now would therefore be in very many cases a free gift to those who have contributed nothing. But it is urged that rents are falling — this is the popular form that the argument takes, and it was the form current at the time of the great increase in subventions, after the repeal of the Corn Laws. But the Government is not responsible for the rise or fall in rents, and the landlord has (or should haye) taken into consideration average and foreseen rates in his purchase. No Government would hearken unto a speculator for the rise who claimed assistance because of the fall in the stock in which he operated ; and what if the stock be land! But a claim has been entered for relief with re- ference only to the increase of rates. Now, if there were an increase, it would be incumbent upon us to investigate with a view to discovering whether as much value had been given to the land by the services of local bodies as was taken away in the form of rates. But a wide review reveals no appreci- able increase, if increase at all. It will be seen from the following figures that the actual charges on land, and the charges per pound, have decreased since 1868, and very greatly since the beginning of the century. AND STATE AID 115 (Compiledfront figures given in Fowle-^s Report on Local Taxation.) Local Rates Borne by Lands (including Gardens, etc., exceeding one acre). Value of Land (from Income Tax Valuations). Rate per £ on Lands. 1817 ^£6,730,000 (1814) ;£37)063,ooo Shillings. 3*63 2-3 2 '02 1891 4,260,000 On pages 1 16 and 117 tables are given showing that although the amount of the urban and rural rates has augmented since 1868 by about one quarter, and that of the rural rates by a little more in the same period, yet the rate in the pound of these rates has fallen. There is an advance in the rate for the rural sanitary authorities, but this is offset by a considerable fall in the poor rate. Now all that is contended is that the evidence of loss is not sufficiently convincing to justify a national gift to the landlords. In support of the contention, here are two quotations from Mr. Fowler's Report : — " The burdens of Local Taxation on lands were found in 1 868 to be not heavier than they had been at various periods of the century, nor so heavy as in most foreign countries."^ Again : " If in the distri- bution of Treasury subventions an undue share of any grants was awarded to the rural districts, the result would be that the owners of agricultural lands ^ Report, p. 51. 1x6 LOCAL GOVERNMENT Hi <« R s O 1 S S < -!! J ■-1 •a! ^ s ^ > |< O 1 t W ■^ H g ■§ to 1 ■< k; « >f ■p. a O « ''Ji l4 ■*; n V ^ i ^ w u 'V 1^ PS ^ 12 >«; z 8 ■'i' ^ ^s «>! ■«, ^ .8 fi U -3 I a . cj 9 M 5 d li " " .o t« a ja 1 " I § « -2 o -S » o o a i ^ s o IS H •sag IS s ■!3 .S -S ■2 fi "^ fi 1 •2 s? V .>« S B I -" O V B - « oa .s .S las ■3 JS AND STATE AID "7 RATES IN THE POUND FOR VARIOUS LOCAL AUTHORITIES {Compiled /rottt Fowler's Report^ Appendix Ay attdfrom Report of Local Government Board), Urban Metropolitan'— Rate in £ of Rates raised by all Local Authorities, calcu- lated on Poor Rate Valuation 1873-4- 1879-80, 1887-8. i8go-i. 1893-4. 3- ii'S 4- 4'3 4. 6-6 5. 0-2 5- 4"o Extra Metropolitan — Rate in A of Rates raised by purely Ur- ban Extra Metro- politan Authorities 2. 4'8 2. 4'i 2. S-6 2. 10*2 Urban and Rural Poor Law Authorities — (Extra Metropolitan) I. 4-4 I. 1-4 I. i"o io*g io"8 County Authorities — County Rate Police Rate Other Rates 2-7 2 '4 M 2 '5 ^■9 o'S 2"3 2*0 Rural- Sanitary Authorities Highway „ 6-9 7 "7 P. 6'o 2 "4 6-g would derive a greater advantage than the occupiers of houses in urban districts." ^ In 1896 the Agricultural Land Ratings Bill was forced on a protesting House. It dealt with certain rates on agricultural land ; and it was based upon an interim report of the Royal Commission on Agri- cultural Depression, The Bill declared that the rates to which it applied should only be half as much on agricultural land as on houses.^ The Commission 1 Ibid., p. 41. * This involved the valuation of the land apart from the farmhouse. "8 LOCAL GOVERNMENT had suggested that lands should be charged on only a quarter of their rateable value ; but the exigencies of the Government forced it to adopt the proportion of one-half The deficit in local revenues was to be made good out of the Imperial Exchequer. It was estimated at ;£'97o,ooo for 1896, and ;£■ 1,950,000 for succeeding years. The amount was to be divided between England, Scotland, and Ireland in the pro- portions of 80 per cent, 1 1 per cent., and 9 per cent. The Bill met with the most violent and sustained opposition, and the closure had to be persistently applied to get it through. It was denied that the money would go into the pockets of the landlords. Against this view we may instance evidence, ^ brought forward in the course of debate, which showed that landlords were even then taking the relief into account in estimating reductions in rents. The discussion in Chapter V. of this essay makes it evident that the relief accorded at the margin will ultimately benefit the consumers, but that the difference between this and the amounts remitted will ultimately go (in great part) to the landlords. In the meanwhile, however, farmers will receive benefits, but in different degrees, as the Earl of Rosebery was careful to point out during the debate in the House of Lords. Those farming the more expensive lands will receive the biggest doles. That this should be so is not only unfair, but it ''■ See Hansard, also Annual Register. AND STATE AID 119 means also that the very object of the Bill is defeated, for the cloud of depression hangs more heavily over the low rent lands — for instance, over Essex. We may put the several objections to this piece of legislation as follows : — Little relief was given where the Commission showed it was needed most, and much was given where it was not needed. The amount of the doles was determined by imperial surpluses and not by needs. The division of spoils between the heads of the Empire was practically arbitrary. A free gift was made incidentally to some landlords. The Bill is to continue in operation for five years. An attempt to cut down the period to three years proved unsuccessful. It has been welcomed in certain quarters, but the welcome is almost drowned in a clamour for more : for example, the following is part of a resolution passed unanimously by the Central and Associated Chambers of Agriculture on May the Sth, 1896 :— " That this Council welcomes and approves the Agricultural Land Ratings Bill as a partial measure of relief, but regrets that it does not reduce the assessment of agricultural land to one-fourth, as suggested by this Council." (The italics are mine.) 120 LOCAL GOVERNMENT CHAPTER X SUMMARY AND CONCLUSION The practical conclusions arrived at in this essay may be expressed in the three following proposi- tions. I. The subventions to which the local governments in this country have been subjected were not all equally objectionable. Some were less desirable than others. Some offended against many financial and political principles, and some against only a few. The subsidies accorded prior to 1888 assumed on the whole the least objectionable shape possible, but among them also there were degrees of defects. The subventions of 1888 and 1890 ran counter to most principles which the statesman should hold in mind in directing legislation of this kind, and their division between counties, and between counties and county boroughs, was even more unreasonable. II. Even if the burden of the rates, and the injustices committed in their imposition, be admitted, and also the lethargy of local bodies, both the old AND STATE AID 121 and the newborn, in consequence of difficulties in raising funds, and even if it be assumed that the fundamental evils {i.e., the burden and inequity of the rates) are irremovable, yet the policy of subventions is a very doubtful policy. Those who argue that subsidies bring more troubles than they remove have a strong case. Nevertheless, it must be granted that the balancing of advantages and disadvantages under these assumptions is a matter of the greatest difficulty. III. But the arguments in Chapters IV., V., and VI. clearly show that no such balancing of utilities and drawbacks is needful, because the fundamental evils in the existing system of raising local finances are not essential but chiefly accidental and remov- able. The opinion was expressed that a system of local taxation, as nearly perfect as any system can be, might be constructed. In the light of this belief most subsidies stand absolutely condemned, as panaceas with some disagreeable accompaniments for troubles which might be directly removed. But some subsidies escape this condemnation, those, namely, which follow upon the division of govern- mental labour between the various governments in the nation, (Chapter II.). The rules by which such subsidies should be governed are outlined in Chapter III. It must be carefully borne in mind that in practically all these cases the obligation to contribute to the cost of local services 122 LOCAL GOVERNMENT diminishes with distance from the locaHty. In a word, it must not be forgotten that a nation is a hierarchy of social organisms constituted by civic feeling. AND STATE AW 123 APPENDIX A THE EFFECT OF SUBVENTIONS ON THE QUANTITY ^ AND INCIDENCE OF TAXATION The sole excuse for this Appendix is that the question with which it deals has been gravely discussed. Let us clearly understand what it is we are attempting to estimate. The problem has been ex- pressed as the effect of subventions on the quantity and incidence of taxation. Now it is at once apparent that such a problem is insoluble ; for ex- pressed otherwise it becomes, to find the differences in the quantity and incidence of taxation between present conditions, of which subventions are a part, and conditions which would have been had subventions not been given. When the question is thrown into this shape, we see at once that an answer is impossible, for we have no means of know- ing what the conditions without subventions would have been. ^ This is treated to some extent in Chapter VIII. 124 LOCAL GOVERNMENT It is possible, indeed, to overcome the difficulty by making the violent assumptions that, had the sub- ventions not been introduced, the same funds would have been required by the local authorities as in the previous year, and that they would have been raised in the same manner, and that the amount of imperial funds raised would have been the same, less the sub- ventions, as in the year in question. But it would be folly to conduct an investigation vitiated by such wild hypotheses. Again, it is possible to overcome the difficulty by assuming that the total amount raised by local and imperial taxation would be the same under both con? ditions — therefore the first part of the question, as to " quantity," must be begged— and that the difference in incidence will be the difference between the incidence of the amount of the subventions, if raised on the basis of imperial taxes, and the incidence of this sum if raised by an increase in rates. But these hypotheses, big as they are, are not big enough. What is meant by the expression, "raised on the basis of imperial taxes " ? It might mean perhaps — Mr. W. A. Hunter i gives it this meaning apparently — if raised in a manner least advantageous to the working-classes. Why not indeed, we may ask, in a manner most advantageous to the working-classes, or in any manner we choose to imagine? Mr. Hunter's hypothesis is truly "a very bold one" as ^Contemporary Review, Oct., 1893. AND STATE AID 125 Mr. W. H. Smith ^ suggests. It may be urged that the imperial system of taxation must be taken as a whole, and that therefore "raised on the basis of imperial taxes" must mean distributed over all the taxes in proportion to their yield. If we acted on this interpretation, then the effect of the subventions on the incidence of taxation would be the difference between the incidence of their amount, if raised by rates, and the incidence of the imperial taxes, divided by the amount of their yield, and multiplied by the amount of the subventions. If we worked this out we might find that subventions had raised a burden from the classes which escape income tax. But a detailed investigation would be wasted labour as the suppositions worked up in the reason- ing would render the results worthless. But, to follow another line of thought under the direction of the assumptions previously made, the expression, " raised on the basis of imperial taxes," might mean " as the subventions actually are raised." Here seems light at last. But it proves to be only a Will o' the Wisp leading to the slough of fallacy. Subventions may take the form of specific taxes ear- marked for the local authorities, or they may not. If they do not, then how are they actually raised ? If they do, then they may be old taxes ; and if so, the effect of the subventions is obviously not identical 1 Economic Journal, Vol. V., p. 190. 126 LOCAL GOVERNMENT with the effect of these old taxes, but with tke efiect of the operations whereby^ after payment of the subven- tions, imperial revenue and expenditure are again brought together. Developing this idea, we might assume that the operations mentioned are increases in taxation, and that increases to the amount of the subventions would not have been imposed but for the introduction of the subventions. But we need not make this assumption. The operations whereby imperial expenditure and revenue are again brought together are not bound to be on the side of revenue at all ; they might consist in reduced expenditure. And even if equilibrium were restored from the side, of revenue, the cause need not be an increase of taxes. It might be a spontaneous increase in the proceeds of existing taxes. But assuming that expenditure and revenue again balance, and that taxes have been increased to bring about this result, yet the proceeds of the increases in taxation may be less or more than the amount of the subventions : if they are less, what can we say of the difference ? if they are more, which find their origin in the new expenditure on subventions, and which in decreased revenue, or increased expenditure, in other direc- tions ? Again, if the operations, whereby balance is restored in the accounts, consist in a spontaneous increase in the proceeds of certain taxes, what is the effect of the subventions? We can only say that it is the difference between the effect of taxes as they are AND STATE AID 127 and the effect of taxes as they would have been, if subventions had not been. This only throws us back on a difficulty already treated : What, would have been if the subventions had not been ? If taxes would have been reduced, in which taxes would the reduction have taken place ? We are led to the conclusion before stated, that no solution is possible. STATISTICAL APPENDICES STATISTICAL APPENDICES 131 TABLE I. {Oompiled from Mr. Fowler's Report on Local Taxation, 1893.) A. PAELIAMENTAEY GRANTS IN AID OF LOCAL RATES. Grants in aid of When first voted. 1867-68. 1877-88. 1891-92. Teachers in Poor Law Schools 1846 £34,600 £36,825 .. Poor Law Medical Officers 1846 104,600 149,506 .» Police (Counties and Boroughs) 1856 226,300 864,083 Metropolitan Police 1833 164,848 576,141 £4,300 Criminal Prosecutions 183S 150,000 133,732 ■• County and Borough Prisons and f RemoTal of Convicts \ 1835 and 1846 109,000 Metropolitan Fire Brigade . . 1865-66 10,000 10,000 10,000 Berwick Bridge 1831 90 90 90 Industrial Schools (Local Authorities) 1876 3,674 32,212 38,800 Elementary Education (School Boards) Fee Grant 1891 329,285 Annual Grants for Day and Evening Scholars 18?0 , , 1,255,938 1,608,427 School Boards in Poor Districts 1870 7,167 8,396 Medical Officers of Health and In- spectors of Nuisances 1873-74 73,910 Pauper Lunatics 1874 485,169 Registration of Births and Deaths . . 1876 9,500 .. Disturnpike and Main Roads Total (carried forward) .. 1882 498,797 •■ £801,612 £4,182,070 £1,899,297 132 STATISTICAL APPENDICES TABLE I.— Continued. B. LOCAL CHARGES TRANSFERRED TO, AND OTHER CHARGES OF A LOCAL NATURE BORNE BY, ANNUAL VOTES OF PARLIAMENT. Charges in respect of When first voted. 1867-68. 1887-88. 1891-92. District Auditors Clerks of Assize Compensation to Clerks of Peace, etc. Central Criminal Court Middlesex Sessions Public Vaccinators Elementary Education (Voluntary Schools) Fee Grant Annual Grants for Day and Evening Scholars Reformatory Schools Industrial Schools (other than those of Local Authorities) Rates on Government Property County and Burgh Prisons and Re- moval of Convicts Fleuro-Pneumonia Total 1846 1862 1855 1846 1859-60 1867 1891 1864 1854-55 1856-57 1859 1879 1890 £17,900 18,500 6,400 6,000 443,345 99,426 27,000 £15,246 19,602 1,806 5,181 819 16,468 1,927,285 r 66,920 I 103,667 182,459 £14,069 17,975 198 1,454 493,155 2,089,473 62,365 109,026 192,344 398,047 140,000 £618,571 £2,738,136 £3,618,106 Carried forward from previous page Total Parliamentary Subventions, excluding Allocated Taxes . . £801,512 £4,132,070 £1,899,297 £1,420,083 £6,870,206 £5,417,403 All the Education Grants are not included in the above tables, for instance, the Science and Art (South Kensington) Grants are omitted. The total grants for education (including everything) made to schools in England and Wales in 1897-8 amounted to £4,501,895, and of this sum £3,597,496 went to Board Schools. STATISTICAL APPENDICES 133 TABLE II. {From Fowler's Eeport on Local Taxation.) Parliamentary Grants in aid of Local Kates. Local Charges transferred to,and other charges of a Local Nature borne by, Annual Votes of Parliament. Parliamentary Grants in aid of Local Bates. Local Charges transferred to, and other Charges of a Local Nature borne by. Annual Votes of - Parliament. 1868. £801,612 £618,671 1881. £2,733,993 £2,460,101 1869. 866,082 721,339 1882. 2,857,463 2,455,390 1870. 902,317 800,904 1883. 3,170,983 2,629,625 1871. 901,383 872,417 1884. 3,380,808 2,623,905 1872. 926,690 1,088,474 1886. 3,523,418 2,667,742 1873. 938,965 1,169,368 1886. 3,658,746 2,681,766 1874. 1,033,416 1,214,867 1887. 3,767,696 2,715,164 1876. 1,623,366 1,330,203 1888. 4,132,070 2,738,136 1876. 2,115,809 1,626,312 1889. 4,891,648 2,797,384 1877. 2,268,641 1,635,036 1890. 6,312,936 2,778,868 1878. 2,469,408 1,802,664 1891. 7,486,875 2,924,224 1879. 2,640,043 2,329,878 1892. 8,328,376 3,518,106 1880. 2,636,096 2,434,651 134 STATISTICAL APPENDICES 1-1 pq < o o u ->l IZ! O M E^ ta H CO 00 CO IH c« o u -^ 1 1 t- 04 U3 iH «i ua to ia ^ rH o> la o •*" iH^ o" 1> -* N t^ CO r^ ^S J?^ 1 in o U3 rH ^ •^ t- t- t- t' »q crt M o 3 o H 1 o eo O Jt- s ?H rJ rH CO is ■* W 03 < o" oo" t-^ CO oT •o af i> cT Ph "m 04 -* S s o o U3 a> n I> OS ■* rH oa 01 OS m 5" "Wr lO 5D eo" oJ" lO- o » C4 (M IN t- lO ■^ rH •i ^ °i. \a 1-1 J. o *a ■<*r "« eo of ^ 1 o oo .t- rH t^ «o 5 -# iH os °1 o CO o in csT J?- t^ I> t- 1>- CO H c« P O £■ >. P •kS^b . Q — ^ 00 t^ Q o> (N ^ § CO ■o T« o rH^ o lO Si (^ lO" ■^ m oT co- N sf .llilc rn CO OJ rH "* g rH" «■ (N* &f of of Oq- o4- pT ij; H "tt M ■< H o oa !>. t- CO C4 M ^J g l-H CO eq ua ■« O ■* t- to ea tt rH 3 n ■nT r^ « of "*■ ^ CO O) CO t- (M g M CO ■* tH «3 ©r CO- CO" co- cS co- CO- co- o m H B 1 1 ^ « l> os Oi rn CO rn ^ ," oo CO iH '^ (-H *"* rH "^ ^ rH STATISTICAL APPENDICES 135 TABLE IV. (Tables prepared hy Association of Municipal Corporations for Boyal Commission on Local Taxation.) A. EXCHEQUER CONTEIBUTIONS TO COUNTY BOROUGHS AND AMOUNTS PAID TO GUARDIANS OUT OP SUMS RECEIVED BY CORPORATION FROM LOCAL TAXATION ACCOUNT. Local §§ Local 11. Government ■ol-- Government City or Borough. Act, 888. received from Resi under Local Taxa Qis and Excise) Ac 1890. City or Borough. Act,_ 1883. received from Res: under Local Taxa ms and Excise) Ac 1890. LOunt received cal Taxation Probate Duty Estate Duty.* ■a °'2 a ount received cal Taxation Probate Duty Estate Duty.* T3 Hi 111 13 fl ill Ill S'-s a Gross from Licena Grant 1^ Gross . from Licens Grant! f Ms Barrow- in - Manchester £100,419 £39,923 £14,469 Earn ess £6,521 £1,617 £1,206 Middlesbro' 8,426 3,586 944 Batli.. Birkenliead.. Birmingham 8,431 14,069 78,261 3,504 6,108 36,026 1,609 2,360 11,083 Newport, Mon Norwich Nottingham 9,154 13,848 31,726 2,475 6,316 11,695 1,349 1,611 4,248 Blaclcbum ,. Bolton 11,296 12,665 3,700 4,937 2,160 2,121 Oldham' .. 11,936 4,179 2,429 Bootle Bradford .. Brighton Burnley 10,179 27,060 23,680 6,692 9,450 11,113 2,683 2,121 6,271 3,268 1,407 Plymouth .. Portsmouth Preston 11,438 22,344 10,730 3,969 10,794 8,841 1,692 3,217 1,746 Bury . . 7,712 4,404 1,263 Reading 10,004 3,989 1,416 Rochdale . . 8,481 3,330 1,350 Canterbury . . 8,811 1,491 563 Chester 6,103 2,068 841 St. Helens .. 7,347 2,871 1,446 Coventry . . 6,977 2,379 846 Sheffield . 44,422 16,858 6,642 Southampton 12,467 4,510 1,588 Derby Devonport .. 13,807 6,870 4,943 2,387 1,912 955 South Shields Sunderland.. Swansea . . 7,863 16,821 12,677 2,476 6,616 3,361 1,139 2,092 1,167 Gateshead .. 9,740 3,663 1,092 Walsall .. 7,887 3,020 931 Gloucester .. 4,240 1,713 912 Wigan 6,543 1,684 868 Grimsby 4,486 866 751 ■Wol'hampton 11,716 5,310 1,421 ■Worcester .. 8,516 2,579 947 Halifax .. Hanley Huddersfleld 10,700 8,474 13,722 3,360 2,892 3,404 1,645 936 1,962 York.. 8,030 1,919 1,061 Hull .. 27,262 8,624 3,134 Grand Total \ Leicester . . 22,878 8,715 3,127 for47 English and Welsh £730,369 £279,638 £105,653 Lincoln 4,976 1,419 734 Co. Boroughs * Excluding costs of revising barristers' and election petitions. 136 STATISTICAL APPENDICES TABLE lY. —Contimied. BXCHEQTTEE CON TEIBUTIONS TO NON-COTTNTY BOEOUGHS— AMODNTS RECEIVED FEOM COUNTY COUNCILS UNDEE LOCAL GOVERNMENT ACT, 1888, AND LOCAL TAXATION (CUSTOMS AND EXCISE) ACT, 1890. « ^ •a /S 1 ■a -S 1 received bounty 1 under taxation i& Excise) 1890. City or Amount receive from County Council under Local Governme: Act, 1888. receive (ounty L under axation &Excis 1890. City or Amount receive from County Council under Local Governme Act, 1888. Borough. Amount fromC Council Local T (Customs Act, Borough. Amount from i Counci (Customs Act, Ashton-under- Kidwelly .. £60 Lyne £3,01S £619 King's Lynn.. 2,492 £374 Bacup Banbury Bamdey Bedford .. 4,420 1,200 1,028 2,29S 267 600 Lancaster .. Leamington Spa.. .. Lewes . . 1,496 2,665 783 421 630 168 Berwick-npon- Tweed .. Beverley 2,108 168 253 LoDgton Loughborough 1,683 964 188 239 103 Bishop's Castle Blackpool .. Boston Brighonse .. 358 715 1,605 476 Luton.. Lydd .. Lyme Begis .. 3,448 100 495 350 Buralem 3',6a6 4,162 Macclesfield.. 1,868 2,323 Calne.. Cambridge . . Carmarthen . . Chatham Cheltenham . . 28 8,557 859 2,351 2,209 446 780 860 Maidstone .. Maldon Middleton . . Montgomery Mossley 4,208 2,631 1,446 2,600 196 170 Chesterfield . . 2,432 182 Neath.. 531 25 Chichester . . 95 90 Nelson 1,036 230 Chorley Christchurch 6 640 230 Newcastle- Under-Lyme .. Colne . . 1,975 170 Oasett.. ,^ Ill 1,399 68 2,712 1,976 513 Pembroke Peterborough 910 1,624 Illll 2,129 667 30 295 2,260 367 Bawtenstall . . Beigate Bichmond Yorks Bipon 3,376 3,302 160 292 332 Dover 4,421 866 Sandwich . . 468 Dunstable . . 353 100 Scarborough.. 2,098 1,100 Durham 735 Shrewsbury .. 2,896 Eastbourne .. 3,639 711 Southport . . Southwold . . 4,042 23 7i9 EastBetford Eccles 1,109 1,867 340 Stalybridge .. Stafford 1,924 260 lob 169 Faveraham .. 66 218 Stokeon-Trent 2,300 198 Glastonbury Godalming .. 751 710 is Tenby.. Thomaby-os- Tees Tiverton 223 Guildford . . 1,569 73 2',264 Harrogate . . 2,100 Todmorden .. ,, Haslingden .. 2,735 204 Torquay i',ioo ,, Hertford 102 185 Tunbridge Heywood . . 2,636 289 Wells 6,219 582 Huntingdon.. 302 Wakefield . . 2,188 2,930 Hyde.. 1,892 586 Warrington .. Wisbech 412 Kendal 1,382 35 Kidderminster 2,048 Wrexham . . 670 114 STATISTICAL APPENDICES 137 TABLE V. {Tables handed in by Mr. John Bichmond Cooper, Town Clerk of the County Barovgh of Walsall [see Minutes of Evidence, Vol. I., Questions 10,179 — 10,292'\ to Royal Commission on Local Taxation. STA.TEHSITT Showing the Besulih of the Apportioi^meni of the LocAi. Taxation LicBNSEB and Probate Dutt Grant and Estate Duty between Counties and County Boroughs in England and Wales in the year ended 31st March, 1896. A. ADMINISTEATIVE COUNTIES.* Counties receiving an Amount in Excess of their Contributions. Counties receiving Less than they Contribute. County. Amount of Excess. County. Amount of Deficiency. Chester Derby Devon Durham .. ., Gloucester Kent Lincoln (Lindsey) Norfolk Northampton . . Northumberland Notts Oxford Somerset Stafford Suffolk (East) .. Sussex (East) .. York (East Biding) .. York (North Biding) .. Total £ S. D. 1,614 16 2 1,278 11 1 366 6 6 415 6 3.363 3 10 1,200 13 7 3.364 4 6 4,42.2 10 9 2,401 6 6 2,941 11 11 821 19 2 766 1 7 2,067 16 10 1,608 8 8 697 16 2 860 9 1,210 3 1 838 18 Berkshire Essex Lancaster Leicester Monmouth Warwick York (West Biding) .. Glamorgan Total £ S. D. 268 16 7 4,798 15 1 13,601 17 10 460 5 11 177 12 11 3,478 17 6 4,809 8 11 671 17 7 £30,120 1 1 £28,147 12 4 * The counties of Southampton, Surrey, and WorccBter, received the same amounts a8 were contributed by them. 138 STATISTICAL APPENDICES TABLE Y.— Continued. STATEME17T Bhowing the Results of the Appobtionmekt of the Local Taxatiok Licenses and Pkobate Duty GBAira and Estate Duty between CoomiES and County Bobouohs in England and Wales In the year ended Slat March, 1896— continued, B. COUNTY BOROUGHS.* County Boroughs receiving an Amount in Excess of their Contributions. County Boroughs receiving Less than they Contribute. County Borough. Amount of Excess. County Borough. Amount of Deficiency. Barrow-in-Pumes Birlienhead Birmingham Bootle Bradford .. Brighton . . Bristol . . Cardiff Devonport Gateshead.. Hanley Halifax .. Huddersfleld Leeds Leicester .. Liverpool ,. Manchester Middlesbrough . Newport (Mon.) . Reading . . Salford .. Sheffield .. Sunderland West Bromwich . West Ham s £ S. D. 40 9 10 976 7 11 6,731 6 11 4,281 14 7 2,365 1 4 665 1 . 12 9 5 1,864 16 5 599 15 7 662 12 2 1,014 10 1 618 18 10 952 16 2 330 17 5 460 5 11 2,037 8 3 23,068 6 829 7 9 177 12 11 258 16 7 7,618 14 3 1,098 3 8 404 18 10 746 9 1 4,798 15 1 Bath Blackburn Bolton Burnley Bury Canterbury Chester Coventry Derby Exeter .. ..- .. Gloucester Great Grimsby . . Great Yarmouth , . Hastings Ipswich Kingston-upon-HulI . . Lincoln Newcastle-upon-Tyne .. Northampton . . Norwich Nottingham Oldham Oxford Plymouth Preston Rochdale South Shields .. St. Helens Stockport Swansea Walsall .. Wigan Wolverhampton . . York Total £ B. D. 2,070 6 9 4,333 10 7 2,079 17 11 1,797 6 6 394 12 11 1,200 13 7 1,932 16 9 3,252 9 5 1,278 11 1 343 16 2 3,373 3 4 1,821 2 3 635 10 3 1,515 10 597 16 2 62 S 6 1,533 2 3 2,941 11 11 2,401 6 6 3,787 6 821 19 2 3,257 4 7 766 1 7 612 5 11 4,503 5 9 1,920 6 4 1,482 17 1,629 4 9 1,101 11 1 1,292 18 10 1,672 12 7 3,076 1 1,696 15 2,772 11 10 Total £61,986 16 £63,958 3 9 * The county boroughs of Portsmouth, Southampton, Croydon, Dudley, and Worcester received the same amounts as were contributed by them. STATISTICAL APPENDICES 139 TABLE VI. (Tables handed in by Mr. J. R. Cooper to the Royal Commission on Local Taxation.) Statement showing the Total Amounts and the Amounts per Head received by certain Counties and County Bobouohs in England and Wales from the Besidue of the Fboceeds of the Local Taxation (Customs and Excise) Duties in the year ended 31st March, 1896. A. ADMINISTRATIVE COUNTIES. County. Durham Cornwall . . Staffordshire East Suffolk Yorks (West Riding) Derbyshire . . Hampshire . . Monmouthshire . . Lancashire . . Cumberland Yorks (North Riding) Northumberland .. Nottinghamshire . . Leicestershire Devon West Sussex Westmorland Cheshire Worcestershire . . East Sussex Bedfordshire Salop Norfolk . . Cambridgeshire . . Warwickshire- Northamptonshire Hertfordshire Kent Lindsay (Lines.) ., Berkshire .. Oxfordshire Somerset . , Dorset Wiltshire . . Surrey London Population] 1891. Share of Residue of Proceeds of Customs and Excise Duties distributed in same manner as English share of Local Taxation Probate Duty. 721,481 322,671 818,290 183,478 1,361,670 426,768 386,849 203,347 1,768,273 266,649 284,837 319,730 231,946 200,468 465,363 140,619 66,098 636,644 296,661 240,264 160,704 236,339 317,983 121,961 307,193 679,355 203,247 224,560 785,674 199,055 176,109 145,449 386,866 194,617 264,997 418,866 4,232,118 £ 12,913 6,873 16,961 3,833 30,734 9,997 9,039 4,372 40,485 6,830 6,824 7,881 6,802 6,486 12,120 3,779 1,792 14,.5]0 8,667 8,113 4,770 7,169 9,064 3,696 8,518 18,073 6,187 7,034 24,634 6,364 6,789 6,099 13,237 6,778 10,123 16,172 178,568 3. D. Oil 11 7 12 7 7 6 1 9 18 6 16 7 6 5 11 8 13 7 7 9 13 1 13 5 8 11 18 7 14 9 3 10 8 7 13 1 2 3 11 6 15 6 4 2 6 5 2 9 12 6 17 5 14 6 7 4 Amount Paid to each County Council. Total Amount. £ S. D. 13,619 13 2 6,873 11 7 17,727 3 1 4,059 6 2 30,606 16 9,975 6 3 9,039 5 4,781 1 7 42,443 3 6,330 11 8 7,160 14 11 8,003 6 11 6,988 4 5,201 1 8 12,266 10 11 3,779 18 7 1,792 14 9 14,997 5 7 8,667 8 7 7,102 10 4,770 2 3 7,169 11 6 9,596 7 3,696 12 7 9,410 8 8 18,077 19 1 6,358 8 2 7,034 4 24,570 12 9 6,236 18 11 5,672 19 4 4,796 11 11 13,198 15 2 6,778 12 6 10,183 17 6 16,172 14 6 178,668 7 4 Amount per Head. Pence. 4-6 6'1 6-1 6-3 5-4 5-6 6-6 6-6 6-7 6-7 6-0 6-0 6-1 6-2 6-4 6-4 6-5 6-5 6-9 7-0 7-1 7-2 7-2 7-2 7-3 7-4 7-5 7-5 7'5 7-5 7-7 7-9 8-1 8-3 9-1 9-2 10-1 140 STATISTICAL APPENDICES TABLE Nl.— Continued. SiATEUEHT showing the Total Amounts and the Amounts per Head bbceived by certain Counttes and County Bobouqhs in England and Wales from the Besiduk of the Pboceeds of the Local Taxation (Customs and Excise) Duties in the year ended 31st March, 1896— continiMd. B. COUNTY BOEOUGHS. County Borough. Population, 1891. Share of Residue of Proceeds of Customs and Excise Duties distributed in same manner as English share ol Local Taxation Probate Duty. Amount Paid to each Borough Council. Total Amount Amount per Head. £ S. D. £ s. D. Pence. Walsall 71,789 1,082 5 11 931 2 10 31 Norwich 100,970 1,999 19 8 1,610 12 5 3-6 Northampton 61,012 1,079 14 9 908 6 11 3-6 Eingston-on-Hull 200,044 4,677 18 7 3,134 8 3-7 CoTcntry 52,724 897 4 6 845 4 3-S Stockport 70,263 1,967 2 1,170 3 1 3-9 West Bromwlch . . 96,474 1,070 1 5 1,010 7 1 4-0 Wolverhampton .. 82,662 1,622 8 11 1,421 U 4-1 Blackburn 120,064 1,913 11 2 2,149 12 7 4-2 Hanley 54,946 1,289 6 2 936 1 4-3 Bolton 115,002 2,278 5 2,120 14 3 4-4 Kochdale 71,401 1,606 14 11 1,349 10 10 4-5 Nottingham 213,877 4,433 15 11 4,248 8 8 4-7 Portsmouth 159,251 3,217 6 4 3,217 6 4 4-3 9t. Helens 71,288 1,090 10 9 1,445 18 10 4-8 Worcester 42,908 947 5 1 947 5 1 5-2 Birmingham 478,113 11,922 17 3 11,083 8 6-5 Manchester 505,368 13,969 16 1 14,469 9 6-8 Bath 51,844 1,349 4 10 1,609 3 10 6-9 Oxford 45,742 1,148 10 8 1,452 6 2 7-6 Liyerpool 517,980 19,823 17 4 17,033 3 5 7-8 Bootle 49,217 1,393 17 6 2,120 14 3 10-3 STATISTICAL APPENDICES 141 TABLE VII. Memorandum hy Mr. F. C. Hulton to the Royal Commission on Local Taxation. TjlbiiTS showing the Distbibuiion between Cooniies (including County Boroughs deemed to be situate therein) of the Fbobate Bciy Gbajit and Estate Duty for Year ending 31st March, 1896, on the Basis of Disoohtihved Gkants (Local GoTemment Act, 1888, Section 22) and the effect of distribution according to Rateable Valve at Lady Day, (See Minvtes ofEvidmee, Vol. I., Queslima 6014-6026, 6030-6037, 6046-6048, 6067-6069.) ^a-§ .&& Distribution according to Rateable Value. ill 3*2 "S Bis 1 ■si si Eateable Value Share of Probate Effect. §gSo6 ||ss (Poor Eate) Duty Grant and Increase ( + ) 01 Name of County €'i»S8 2s Sd of Counties Estate Duty sup- Decrease (— ). ^ g Hr-t re of I stand ■Year Marc (including County Boroughs posing Distribu- tion had been §1" deemed to be according to Actual Amount. Per- igss ^SS situate therein), Eateable Value centage MO^ as*" March, 1896. at Lady Day, 1895. Amount. Eholand. £ £ * £ £ £ Bedford.. 16,779 10,640 826,392 9,207 — 1,433 — 13-5 24,932 16,809 1,428,800 15,919 -t- 110 + -7 Buckingham , 20,676 13,111 1,167,949 13,012 — 99 — -8 Cambridge 13,003 8,245 685,514 7,637 — 608 — 7-4 Cheshire 68,93S 43,712 4,070,871 46,356 + 1,643 + 3-8 Cornwall 24,178 16,331 1,309,788 14,693 — 738 — 4'8 Cumberland . 22,268 14,120 1,605,480 17,887 + 3,767 + 26-7 Derby . . 41,814 26,514 2,625,901 28,142 -1- 1,628 + 6-1 Devon . , 55,986 36,501 3,245,239 36,157 -1- 666 + 1-8 Dorset . . 23,844 15,119 1,058,800 11,796 — 3,323 — 22-0 Durham . . 63,115 40,021 4,287,160 47,764 + 7,743 -1- 19'3 Ely, Isle of . 8,045 5,101 431,311 4,805 — 296 — 5-8 Essex .. 81,691 51,800 3,816,088 42,516 — 9,284 — 17'9 •Gloucester . 69,735 44,219 3,282,704 36,573 — 7,646 — 17-3 Hereford 18,772 11,903 885,969 9,871 — 2,032 — 17'1 Hertford 24,743 15,690 1,343,942 14,973 — 717 — 4-6 Huntingdon . . 7,473 4,739 404,783 4,510 — 229 — 4'8 Kent 88,374 56,038 4,599,823 61,248 — 4,790 — 8'5 Lancaster 837,083 213,744 19,487,828 217,119 + 3,376 + 1-6 Leicester 29,296 18,576 1,981,754 22,079 -1- 3,503 + 18'9 Lincoln .. 47,737 30,270 2,968,533 32,962 + 2,692 + 8-9 London ,. 628,084 398,267 34,457,948 383,904 — 14,363 — 3"6 Middlesex 80,397 50,980 3,394,406 37,818 — 13,162 — 26-8 Monmontb 21,661 13,672 1,199,342 13,362 — 310 — 2-3 Norfolk .. 42,118 26,707 2,287,264 25,483 — 1,224 — 4*6 Northampton ., 25,661 16,208 1,423,996 16,865 — 343 — 2'1 Northumberlanc 42,228 26,777 2,929,227 32,635 + 6,868 + 21'9 Nottingham . . 36,007 22,832 2,244,809 25,010 + 2,178 -1- 9-5 Oxford .. 21,977 13,936 1,052,044 11,721 — 2,215 — 15*9 Peterborough .. Jutland 3,667 2,718 2,262 1,723 217,359 181,676 2,422 2,023 -t- 160 + 300 -t- 7'1 -H7-4 •Bristol county borough is in the counties of Gloucester and Somerset, but in the returns of the local taxation account it is treated as in Gloucester. 142 STATISTICAL APPENDICES TABLE NIL— continued. Iff fe Distribution according to EateableTalue. Sateable Value Share of Probate Effect. , l-gS^ (Poor Kate) Duty Grant and Increase ( + ) or Name of County. ' *^ S^ of Counties Estate Duty sup- Decrease (— ). ■ if'^ HI ^including County Boroughs posing Distribu- tion had been ffi^S deemed to be according to Per- liis IP sitdate therein), Bateable Value Actual Amount. centage S|s lOiS March, 1896. at Lady Day, 1896. Amount. EirGLAUD— con- tinued. £ £ £ £ £ Salop 25,184 15,969 1,610,089 17,938 + 1,969 + 12-3 * Somerset 61,308 32,534 2,880,755 32,095 - 439 — 1-3 Southampton .. 48,505 30,757 2,979,142 33,191 + 2,434 + 7-9 StatEord .. 77,476 49,127 4,434,692 49,408 + 281 — -6 Suffolk .. 25,902 16,424 1,680,455 18,722 -1- 2,298 + 14-0 Surrey . . 70,448 44,671 3,698,260 40,089 — 4,682 — 10-3 Sussex . . 55,436 85,152 3,497,190 38,963 + 8,811 + 10-8 Warwick 76,060 47,595 4,116,949- 46,868 — 1,727 — 3-6 Westmorland .. 6,306 3,999 634,816 6,959 -1- 1,960 + 49-0 Wight, Me of .. 9,062 6,746 432,632 4,820 — 926 — 161 WUtB .. 35,611 22,581 1,435,121 16,989 — 6,692 — 29-2 Worcester 36,418 23,093 1,859,432 20,716 — 2,377 — 10-3 York, Bast 28,118 17,830 1,936,314 21,573 + 3,748 + 21-0 York, North .. 28,196 17,879 2,298,979 25,613 -1- 7,734 + 43-3 York, West .. 181,286 114,953 10,844.494 120,821 -1- 5,868 + 5-1 York, County Borough 3,955 2,508 244,095 2,720 + 212 + 8-5 WiLBB. Anglesey 2,516 1,595 211,787 2,360 + 766 + 48-0 Brecon . . 5,136 3,267 276,971 3,086 — 171 — 5-3 Cardigan 4,396 2,787 234,854 2,617 - 170 — 6-1 Carmarthen 9,107 5,776 586,812 6,527 + 762 -I- 130 Carnarvon 8,364 5,297 474,182 5,283 — 14 — -3 Denbigh 10,923 6,926 591,346 6,588 - 338 — 4-9 Flint .. 7,829 4,964 431,766 4,810 — 164 — 3-1 Glamorgan 41,345 26,217 3,661,936 40,799 -H4,582 + 66-6 Merioneth 3,788 2,402 234,276 2,610 + 208 + 8-7 Montgomery . . 7,646 4,784 366,594 4,084 — 700 — 14-6 Pembroke 5,787 3,670 396,406 4,405 -1- 735 + 20-0 Eadnor .. Total, (Eng. and 2,692 1,707 166,537 1,744 -1- 37 + 2-2 Wales), 2,860,384 1,813,766 162,797,519 1,813,766 — J ~~ * Bristol county borough is in the counties of Gloucester and Somerset, but in the returns of the local taxation account it is treated as in Gloucester. Printed, iy Cowan &• Co., Litnittd, Perth. SOCIAL SCIENCE SERIES. SCARLET CLOTH, EACH 28. 6d. 3. Work and Wages. Prol. J. E. Thorold Rogers. ** Nothing that Professor Rogers writes can fail to be of interest to thoughtful people. " — AthenasuiA, 3. Clvnisation : Us Cause and Cure. Bdwabd Oarpenter. " No passing piece of polemics, but a permanent possession." — Scottith RevUv. 8. Quintessence of Socialism. Dr. Schaf fle. " Precisely the manual needed. Brief, lucid, fair and wise."— JntisA Weekly. 4. Darwinism and Politics. D, G, Ritchib, M.A. (Oxen.). New Edition, with two additional Essays on Human Evolution. " One of the most suggestive books we have met with."— £i«wary World. &. Religion of Socialism. E. Bblfort Bax. 6. Ethics of Socialism. E. Belfort Bax. " Mr. Bax is by far the ablest of the English exponents of Socialism.'*— irM(mi?M£er RtTtiew. 7. The Drink Question. Dr. Kate Mitchell. *' Plenty of interesting matter for reflection. ' — QrapMc. 8. Promotion of General Happiness. Prof. M. Macmillan. 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