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 The incidence of taxation. 
 
 oiin 
 
 3 1924 030 264 232 
 
Cornell University 
 Library 
 
 The original of tliis book is in 
 tlie Cornell University Library. 
 
 There are no known copyright restrictions in 
 the United States on the use of the text. 
 
 http ://www. arch i ve . o rg/detai Is/cu31 924030264232 
 
PRICE THREEPENCE. 
 
 Tht 
 
 Incidence 
 
 0/ 
 
 Taxation. 
 
 BY 
 
 B. F. C. COSTELLOE 
 
 Chairman of the Local Government Committee of the 
 London County Council. 
 
 WITH THE TEXT OF 
 
 THE OWNERS' RATE BILL, 
 
 AND AN 
 
 APPENDIX ON THE EQUALISATION OF RATES. 
 
 LONDON : 
 WARD & FOXLOW, 113, CHURCH STREET, N.W. 
 
 1893. 
 
way in which the subject might be induced to contribute to the 
 common purse, so that the national demand should take the 
 form of a more or less voluntary contribution. 
 
 I have said that comparatively little has been done, smce 
 these canons were stated, to modify the principles formulated by 
 the father of the science. As regards the three latter rules, it 
 is obvious that they are primarily directed against the mischief 
 of a state of things which belongs to the past. Such precautions 
 were natural to people who thought of the tax-gatherer as the 
 rapacious underling of a tyrant, or the unscrupulous exploiter 
 who farmed Royal dues at a fixed rate and was chiefly concerned 
 to make a profit on the transaction. The rules, of course, are 
 still important, especially the last — but they are subsidiary, and 
 their observance is certain to be forced upon the public power so 
 soon as attention is cogently directed to any important breach. 
 
 What we are concerned with in the main statement, and, 
 above all, what we are concerned with at this moment in 
 London, is the canon of equality. That on any theory of 
 government immense sums must, year by year, be raised for 
 the public treasury. Imperial and local, and that these can only 
 come, in the end, out of the pockets of some of the members 
 of the community, — this is the given fact. Who ought to pay 
 the bill, and in what share and form, is the problem. That the 
 distribution of the charge as between all the free subjects of 
 the State should be based upon a rule of equality, is the axiom 
 from which all men start. What is equality for the purposes 
 of taxation is the crux. 
 
 That the rule of Adam Smith is not sufficient, and is not, 
 indeed, correct even so far as it goes, has been practically 
 admitted by later economists, although no one, I think, has 
 taken the trouble to work out an adequate formula. I shall 
 not pretend to do so to-night : but, by way of contribution to 
 the discussion, I shall try to set out some at least of the 
 conditions on which the discovery of the ultimate canon must 
 depend. 
 
 The development which the principle has taken is curious. 
 The theory is suggested at least as early as the old Poor Law 
 of Elizabeth, when the subjects were expected to contribute to 
 the expenses of the State concerning pauperism " according to 
 their ability." I shall have to consider presently, when I pass 
 to the question of local rates, how these words were interpreted 
 at the time, and how oddly they changed their meaning afterwards. 
 But the truth is that no one has yet devised any satisfactory 
 measure of the abihty of each citizen to bear the common burden. 
 
 The standard suggested by the Elizabethan legislators was 
 practically the amount of a man's fixed capital, whether real or 
 personal. For reasons which it is unnecessary to consider in 
 detail, Adam Smith had passed to the contrary view that, for 
 the purposes of taxation, income, and not capital, was the only 
 measure, and for a long time there was a prejudice against any 
 
kind of assessment on capital values, mainly on the theory that 
 capital was so essential to labour that any impost laid on it 
 must be, in effect, obstructive to industry. Probably there are 
 few responsible economists, even of the old school, who would 
 now maintain that theory ; but in practice its influence is still 
 active, and its effects are at the present time distinctly mischievous 
 to the progress of taxation reform. 
 
 In considering the question of the equalisation of contribution, 
 John Stuart Mill was led to discuss the still more important 
 formula of the " equalisation of sacrifice." It was at first assumed 
 to be obvious that equity would be done by rating all the holders 
 of the common estate at (say) five per cent., whatever the income 
 of their property might be. The question that occurred to Mill 
 was whether a levy of five per cent, alike on £s°' £5'^^> iTSiOOO, 
 •and ;^50,ooo could in any sense be said to mean " equality of 
 sacrifice." We all agree now that it is in truth a gross unfairness ; 
 and that the plain effect is to tax the poorer employe out of a 
 holiday or a coat, by a levy which means to the rich man not a 
 single folly the less. The logical result, to us, is the necessity of 
 graduating taxes with increasing wealth. The first form, however, 
 which the working out of this principle took in practical politics 
 "was much milder than the suggestion of a graduated tax. It was 
 the theory that you should practically treat, not all incomes, but 
 all increments of income above a certain irreducible minimum, 
 as being the proper basis for taxation. 
 
 The income necessary for sustenance was to be free, and the 
 balance of the money which a man was free to spend as he 
 ■chose was to be taxed, according to the original canon, equally 
 j>yo rata in every case. This was in no sense a real equalisation 
 of sacrifice. It was rather a way of avoiding it, by removing from 
 the problem the most glaring and palpable instance of the general 
 wrong. Nowadays, we have got further on, in theory, if not in 
 practice. The objection to a "graduated income tax" at the 
 Treasury is now said to be not that it is not equitable, but that it 
 is difficult to arrange, because of our highly specialised methods of 
 collection, I am not insensible to the difficulty ; though I am 
 inclined to reply that Chancellors and permanent officials exist for 
 the purpose of solving just such problems. But it is enough to 
 say here that if there be some difficulty as to income, there is no 
 such difficulty about Death Duties, which even Mr. Goschen 
 began to graduate. Something might surely be done also with the 
 Stamp Duties. As to the Inhabited House Duty, its travesty of 
 ..graduation is sadly in need of improvement. Even as to rates, 
 it should not be impossible to ease the pressure on the poorest 
 grades of property, as is done, in effect, in Paris already. 
 
 There is, however, another note which strikes the modern 
 economist in running over again the earlier discussions of taxation. 
 It is the tacit axiom that taxation is a necessary evil, to be kept 
 under as far as possible. That it might ever be to the advantage 
 of the individual to use the common machinery for any avoidable 
 
purpose, was rarely credited in the time and school of which 1 am 
 speaking. Therefore, in all theoretic arguments, there was a 
 tacit anxiety to avoid making any concession to the objectionable 
 theory that the State was acting as the general agent of its, 
 individual subjects. It was perforce acknowledged that there \yaa 
 a certain amount of common business which could be done only by 
 the State : but the State was regarded as if it had been employed 
 for that strictly limited service, as a paid common servant in the 
 nation's name. The conception seems to have been that the 
 community was to be considered for this purpose as a group of 
 partners who had insured, or had hired a watchman to protect a 
 certam store of spendable commodities belonging to them in 
 unequal shares : and the logical result appeared to be that they 
 must pay insurance, or contribute to the policeman's wages, in 
 proportion to their personal share. In other words, the taxation 
 theory was logically connected with " Anarchy //ms the policeman."' 
 It was tacitly supposed that taxes were paid solely as insurance 
 for the means of personal enjoyment. The more usable money 
 you possessed, the greater was your " stake in the country," and 
 the greater also your fair contribution to the insurance fund. 
 
 It is in this connection that I have placed, in the synopsis of 
 the present lecture, the name of Joseph Hume after that of Adam 
 Smith. I think it is impossible to appreciate the earlier ideas of 
 the equality of taxation without also remembering the earlier 
 Radical enthusiasm for economy at all costs. The common term 
 in both is the distrust of the activities of the State. It was never 
 doubted, in fact it was an axiom, that so long as the partnership 
 strong-box could be kept secure, then the less the taxpayer paidj 
 the better for him.. The amount of joy which Citizen X. might get 
 out of life, was understood to depend not on the use for him of any 
 funds made ever to the common purse, but on the balance of 
 spendable income lodged to his account in the strong-box. That, 
 his contributions were not insurance — except to a limited extent 
 — and that he and all his fellow-citizens, rich or poor, should and 
 might expect far wider social service for the greater benefit of 
 them all, through the general agency of the State, and, therefore,, 
 with increased taxation, was either denied or ignored. I insist 
 upon this side of the history of the problem, because in this, as 
 in much else, we are dominated to-day in unsuspected cases by 
 an antiquated conception, which no thinking politician of any 
 school could any longer defend. 
 
 Before going on to Joseph Hume, it may be interesting to. 
 note, in a word, the relation of the theories of taxation already 
 explained to the growth and working of that extraordinary incident 
 of our finance, the income tax. It followed from the canons, 
 that it was orthodox that only revenue should be taxed, and there- 
 fore holders of capital not visibly producing annual returns were not- 
 included in the charge. The "maintenance of the instrument" was: 
 necessary to the continuance of work, and, therefore, it was agreed 
 that the sustenance of the worker ought to be allowed for before th& 
 
tax was applied. Equally was it necessary in order to ensure 
 industrial security that the instruments of production, including 
 the life of the worker himself, should be insured against risk, and 
 therefore the premiums were exempted from taxation. I note 
 these points because they are among the few cases in which our 
 existing taxes have consciously conformed to theory. And yet, 
 no tax could show more glaringly than the income tax the injustice 
 of our method of levy. 
 
 The theory was, as I have said, that there was a certain amount 
 of revenue which could be devoted to personal enjoyment, that 
 this could therefore be regarded as more or less in the nature 
 of a luxury, and that the levy should be made pro rata on each 
 pound of income beyond what was necessary for keeping the industrial 
 machine in order. 
 
 I think there will be little question now that such a principle 
 does not produce any equality whatsoever, even as regards the 
 problems of the taxation of revenue as distinct from the taxation 
 of capital value. Such a tax errs not only in the methods of 
 collection, but also because there is no attempt made in levying 
 it to differentiate the permanent kinds of income from those which 
 are precarious, or the incomes which depend on wearing personal 
 labour whether bodily or mental, from those which call for no 
 such expenditure, or the income which is derived from the recom- 
 pense of labour, skill, and superintendence, as compared with 
 that otiose " tribute" which is enjoyed by way of interest on 
 capital or rent of land. Had any such attempt been made, it 
 would have been fatal to the reigning theories of taxation. 
 
 So far was the canon of exempting capital from taxation 
 carried, that Ricardo attacks the legacy duty on the ground that 
 legacy duties involve the laying of an impost on capital, and 
 thus brings out with sufficient clearness the curious inconsequence 
 underlying the whole theory. But the death duties had never, 
 in fact, been dealt with on any intelligible principle — certainly 
 not on the only natural basis that they were a resumption by 
 the community of some portion of realised property, which it 
 did not choose to allow the life-owner to control after his death. 
 The old Radicals would have instinctively recoiled from pressing 
 such a view, lest it should put too much of the common stock of 
 wealth into the hands of that suspected entity — the State. 
 
 You will not expect me to embark upon so vast a subject 
 ^as the consideration of the reforms in principle which have been 
 or might be proposed for the adjustment of the incidence of 
 Imperial taxation. It would be impossible to discuss to any 
 purpose in a limited space the theory and practice of graduated 
 taxation, or the advantages and defects of the American system 
 of assessment on capital values, or the adequate reform of the 
 death duties, or the true principles to be applied in the taxation 
 of luxuries, especially where they chance to be the common 
 luxuries of the poor. I cannot even pretend to travel back and 
 do justice to the fiscal reforms which constitute Mr. Gladstone's 
 
chief claim to political greatness. It would be interesting at 
 another time to show how intimately the main theories of financial 
 reform, which have been effective in the past generation, were 
 concerned with the movement of Free Trade ideas, and how 
 the change has concerned itself pre-eminently with the development 
 of that original canon that taxation should not be obstructive to 
 industry. In Mr. Gladstone's abolition of the tariffs, in matters 
 relating to the income tax and, to a very limited extent, in the 
 tangled history of the death duties, some few broad principles 
 have been applied. It may be rash to say so, but I confess that 
 in the preparation of the other Budgets of the United Kingdom, 
 I cannot discover much trace of any scientific principles at all. 
 
 If the philosophy of taxation remained stationary, the economic 
 action of the community, both national and local, grew rapidly, 
 and with this grew up an enormous expenditure. This increase 
 affected, not only the national Budgets, but also, and still more, 
 those of the local treasuries ; and it is that movement of local 
 administration and taxation which has produced the question, the 
 settlement of which is pressing upon us most urgently at this 
 moment. 
 
 By chance, the whole burden of this expenditure has been thrown 
 on "the rates." There has been, in fact, a most extraordinary craze 
 for throwing every form of local charge upon the existing scheme 
 of rating. This is an accidental outcome of the old Poor Law of 
 Elizabeth, to which I have already referred. The misfortune 
 is that the machinery of that Poor Law for assessment was 
 originally conceived on the very crudest basis, and that it has 
 first been falsified and then has broken down. The contribution 
 of individuals was to be measured by a rough standard of ability. 
 This by no means meant at first according to the rental of land. 
 The history of the Act is one of those charming tricks of 
 unreasonableness which cover th.e surface of English history. It 
 was found that the charitable assistance which had been previously 
 given to the helpless poor had broken down ; but as the fact of the 
 existence of such poor could not be ignored, and it was clear that 
 they might become a serious danger to the public, the brilliant 
 idea was conceived that it might be possible to make charity 
 compulsory. It was therefore enacted that a collection for a public 
 charity fund should be made in all churches, and that the clergy 
 should exhort the people to contribute duly, and should keep an 
 account of the expenditure. In 1555 it was found necessary to 
 enact that special collectors should be appointed to take up these' 
 legal alms in churches, and that those who refused to contribute 
 should be summoned before the Bishop to be reprimanded. 
 Presently it was found necessary to enable the Bishop to bind the 
 recusant over to appear before the justices, who were enabled to 
 enforce their exhortations by levying a discretionary sum if the 
 parishioner continued obstinate. P'lfty years later the regular 
 system of overseers and poor rates was created. The provision 
 was that the "ability " of each parishioner to contribute should be 
 
ascertained by an assessment of the yearly value of his land, and 
 of such personal property as was locally fixed, such, for instance, 
 as his stock in trade. Such personal property continued to be 
 assessable in law until the third year of this reign, although 
 there was, doubtless, much irregularity in the application of the 
 principle. Coal mines were assessed by the Act of Elizabeth, 
 but sporting or fishing rights were not assessed until 1874. It 
 would be incredible, if it were not so well known, that this great 
 engine of public contributions, upon which, by degrees, almost all 
 local charges have been thrown, should never have been the subject 
 until recent times of any theoretical consideration at all. Even 
 when the injustice of taxing stock and not taxing other personality 
 was declared; it was done merely by a special Act, intended 
 to be annually renewed, and it is by this alone that the rates were 
 confined to realty. 
 
 For some time past, however, it has been a settled matter that 
 the occupier of a tenement is to pay the whole charge which is levied 
 by all local bodies for all local purposes, and that they should be 
 levied from time to time, as money may be wanted, in the shape 
 of poor rates, or some other rates analogous thereto. It has 
 undoubtedly been also assumed, whenever people thought about 
 it at all, that this tax would go back upon the land. We are still 
 told when this question is in controversy that it is the owners of 
 the land, the ultimate receivers of the rent, who bear the charge, 
 and obviously there is a theoretic argument in favour of that view. 
 
 It is said that a man will pay in view oi the advantages of 
 any site, whether it be urban or rural, so much in the way of 
 annual outgoings as the advantages of the site make it worth his 
 while to undertake. The whole of this, if no other considerations 
 arose, would be the rent. If other expenses incidental to the 
 occupation or to the rent are thrown upon the tenant, it is said 
 that he will calculate as a whole the annual sum he can afford 
 to pay for the advantages of the site, and will contract with 
 his landlord for only so much rent as remains after he has made 
 provision for these other charges he will have to pay. In other 
 words, if he estimates that his tenancy will be worth to him 
 /loo a year, then if the rates are ;^io, he will be willing to 
 pay the landlord ;^go; but if the rates. are £"30, he will be wilhng, 
 they say, to pay no more than £'jo. Upon this contention the 
 opponents of reform assure us that it does not matter to the 
 occupier what the rates may be, because if he pays so much in 
 rates, he must of necessity pay so much the less in rent. 
 
 Notwithstanding this theoretical consolation, we are all 
 familiar with the constant struggle caused by the powerful resist- 
 ance of the ratepayers to the raising of the rates. If the theories 
 were really found to be correct in practice, the resentment of the 
 occupiers would not be intelligible. If the rates do fall upon the 
 owner, the occupier has no reason to concern himself with them 
 at all. If he pays the same in any case, why has the opposition 
 of the ratepayer to new expenses always been proverbially 
 
vehement ? Probably not because the ratepayer is a fool, but 
 because, in the contest of urban enterprise, the economic theory 
 put forward does not work. In fact, it is practically certain that 
 in London, as regards new increments of local charge, the rate- 
 payer does pay, and does not receive a rebate in any form 
 from rent. Therefore it has become necessary and urgent to- 
 consider how that matter can be put into such a shape that on the 
 one hand the impost shall be borne equitably', and that on th& 
 other hand this resentment of the ratepayer may be removed 
 out of the path of social progress, which is even a more urgent 
 consideration than the first. 
 
 New charges must arise. We have long got beyond the 
 time when it was thought either desirable or possible to 
 minimize the common budget. It is apparent, and nowhere 
 more apparent than in London, that so long as we can avoid 
 administrative corruption or administrative waste, there are 
 large investments of the public money which will pay the 
 taxpayer far better in the end, at least for the higher purposes, 
 of his life, than any personal use to which he could put the 
 increment of rates. It is with these new charges that I am now 
 concerned. They are not far in the future, for they have been 
 coming upon us, if I am to speak of London, ever since 1855 : 
 and it is the constant increase of such charges, made evident 
 particularly by the rapid — and, at first, unexpected — rise of the 
 School Board rate, which has forced the question of the Incidence 
 of Taxation to the front. I frankly admit that it would probably 
 be impossible, however the incidence of the rates were to change,, 
 to make any startling reduction in the burden carried by the 
 present occupier. To save him from further increment of charge 
 is, in my view, not only distinctly possible, but evidently just. 
 To relieve him of similar increments of charge which have been 
 wrongly put upon him in recent years is also possible, and also 
 just. How far such a reflux of existing rates could go, without 
 producing a risk in the shape of a demand for higher rent, is, I 
 think, a question of degree ; and I conceive that in that case, 
 strange_ as it may sound to some, the landlord's only chance of 
 retaliation would depend materially upon the view taken of the 
 whole transaction by the general conscience of the community. 
 
 It is extremely difficult to speak broadly of the relations 
 between owners and occupiers in London, because of the extra- 
 ordinary complication which has been introduced by our, peculiar 
 systems of tenure. I must, therefore, say at once that I am 
 endeavouring to state what are, in my view, the broad or average 
 results, although I am perfectly conscious that it is quite possible 
 to bring forward on every conceivable point individual instances, 
 and even a large number of instances of actual tenancies in 
 London to which the stated rules would not appear to apply. But 
 London is large enough, in spite of its complexity, for the appli- 
 catioii of general rules. It contains, roughly speaking, a million 
 inhabited houses. It is true that in a considerable number of the 
 
poorer dwellingd the system of compounding has made it apparent 
 that rates will fall not directly upon the artisan occupier, but upon 
 the receiver of the first rent. In that case, however, as you will 
 see at once, the ratepayer whom we have to consider is not the 
 lodger, but the purveyor of lodgings, who, of course, in a vast 
 number of cases, is himself a tenant. On the other hand, there 
 are endless dislocating considerations which could be introduced 
 if we were to aim at unravelling in detail the effect of the dates 
 and periods of current leases upon the incidence of the actual 
 burden as between the lessee and his direct lessor. I do not, 
 hxDwever, for a moment propose to embark upon any such 
 impossible speculation, for I conceive that there is a broad 
 principle which runs through the whole matter, and which is quite 
 sufficient for our guidance in the immediate problem we have to 
 solve. That is the principle that so long as the rates are levied 
 upon the occupier exclusively, all increments of rate which were 
 not before the mind of the occupier at tlie time he made the 
 contract, tend to fall on him, at least under any such conditions as 
 prevail in London. 
 
 I add the proviso, because I think it is fallacious to 
 confuse the question with an argument derived from the 
 conditions of tenancies and rents in rural districts, where the 
 pull of the market is often against the landlord, as in Essex, 
 although it may also be, as in Connaught, absurdly in his favour. 
 For the present purpose, I am confining myself to those conditions 
 of occupancy and earnings with which we have become familiar 
 since the growth of great urban communities, for which London 
 is not merely a typical, but an extreme, or even an exaggerated 
 case. The value of sites in London has tended, ever since we 
 have had any means of testing it, to rise steadily, constantly, and 
 almost universally. At the time of the last quinquennial valuation 
 we were commonly told by the apologists for property that large 
 areas of London would be found to have depreciated in value, 
 and that, in fact, the growth of unearned increment alleged by 
 land reformers would be found to be a delusion. In the results, 
 however, it appeared that out of 30 valuation lists in which 
 the metropolis is assessed, almost every one exhibited an increase 
 of value as compared with the previous valuations. The County 
 Council has published a return exhibiting the rateable values of 
 every parish and union now included in the County of London, 
 so far as they can be procured, for 13 quinquennial periods, 
 ranging from 1830 to 1891 : and, if allowances be made for one 
 or two peculiar cases, which probably represent merely errors 
 in assessment, there remains only one area which has not been 
 practically continuous in its increase of rental value, and that is 
 the smallest and poorest of the whole, viz., St. George's-in-the 
 East. In fact, the table in question contains some 400 consecutive 
 figures of the valuations of London and its parts, out of which 
 not more than eight show even an apparent backwardation, and 
 many of these must be erroneous. 
 
Such figures prove with sufficient clearness that the landlords, 
 in most cases, have the London tenants completely at their 
 mercy, and that it will be impossible, as a rule, either for 
 a tenant entering upon a new occupancy to drive a very 
 successful bargain with the owner, or for a tenant who is in 
 ■occupancy to throw up his tenancy and move away, except for 
 reasons of some magnitude. All that he can hope for is — 
 and this is in practice what happens — that he may get 
 possession of a site which gives him some chance in the struggle 
 of London life at a rent not loo extortionate, and that he will 
 then be allowed to stay there, on lease or otherwise, for some 
 -considerable time without being compelled to suffer a -rise of 
 rent. Doubtless, the average man roughly takes into account 
 the amount of the rates as they stand. Under ordinary conditions 
 it is not possible to calculate beforehand what they may become. 
 The system of rating in the different parts of London is so 
 complex that it is never possible to say, with certainty, whether 
 the rates of a given parish are likely to go up next year or 
 not. Under the conditions of a market such as I have described, 
 the average man, of necessity, takes a fairly sanguine view, and 
 hopes for the best. In other words, he calculates roughly for rates 
 of about five or six shillings in the pound, as the case may be, and 
 resolves to do his best to keep them below that figure if he can. 
 
 But the conditions of metropolitan government in recent 
 years have made it inevitable that he should fail in keeping them 
 ■down. The new demands have forced themselves upon us, and 
 they have inevitably grown. No better instance could" be taken 
 in illustration of the statement that the increment of charge falls 
 truly upon the occupier, than the School Board rate itself. We 
 all know how little the average ratepayer expected, even down to 
 the last moment, that the nation would take up the work of 
 education at all, or would charge the cost, if there were any, 
 upon his rates. Even when the Bill was in the House, every one 
 argued and agreed that a rate of a penny or two was all that it 
 would mean. In the result the lessees, if there had been any, 
 who made an accurate forecast of their probable rates in 1869, 
 must find themselves to-day upon this one head nearly a shilling the 
 worse. And if one follows out the same system, is it not equally 
 clear that even if a shopkeeper or householder had held on all 
 the time, say, for a running tenancy from year to year, he would 
 •certainly not have been able at any point between 1869 and 
 the present time to say to his landlord, " The education rate 
 ■costs me £$ a year, therefore, you must reduce my rent by that 
 amount, or I will leave." The value of the site to the occupier 
 may or may not have risen in the interval ; but the one thing 
 ■certain is that the tenant will not have been able to obtain any 
 rebate upon the plea that his local charges have increased. 
 
 Broadly speaking, therefore, this shilling in the pound has 
 been borne by the ratepayer, and it is largely for this reason 
 that we have had a constant succession of rows in the School 
 
13 
 
 Board elections. The ratepayers' political force has stopped the 
 rate of progress. I am not discussing the policy. The ratepayer 
 may be right or wrong ; but he has had a great deal to say for 
 himself, because he has borne that charge not as a matter of 
 considered justice, but by an accident of the law. 
 
 But in the case of the great municipal improvements, the bar 
 to progress is infinitely worse. The expense of these improvements 
 has been very great. It is not merely a question of new streets,, 
 but of a reform of the whole drainage system and of other public 
 services equally important to London as a city. The Metropolitan, 
 Debt has increased enormously, and yet the Metropolitan Board 
 and the County Council have not done more thati make a sensible 
 beginnmg of what requires to be done. Remark that mucti of 
 this has been done to improve the value of the land of London as 
 a building estate. It is difficult to make this plain, because of 
 the curious fact that, until the present moment, the statistics of 
 London have never been collected at all. But the Council has. 
 been able to make a beginning in the way of demonstrating what 
 hardly requires to be proved — -that the construction for example,, 
 of a great arterial street does improve not only the value of the 
 frontage of the street itself, but also of large areas of land 
 adjacent to the point of improvement. It is possible to show in 
 the case of earlier improvements, such as the widening of High 
 Street, Shoreditch, in 1887, how the tide of resulting prosperity 
 and the equivalent rise in the curve of rent has spread not only 
 along the street, but over the whole district aflected, within a. 
 limited period of time. The construction of the Victoria Embank- 
 ment did not appear at first to have produced any startling effect 
 on the business habits of London, but it is now manifest that it 
 poured little streams of profit into the hands of the Duke of 
 Norfolk, Lord Salisbury and the other fortunate owners, including 
 the City Corporation, who held lands between the River and the 
 Strand. But perhaps a better instance still is to be found in one 
 of the projected improvements of the present year. The Tower 
 Bridge is approaching completion. It is very necessary that the 
 Southern approach to it should be so improved as to create a 
 great thoroughfare. The new street, as it happens, will open up 
 a very much improved and, therefore, cheaper traffic route from 
 certain of the great goods stations where there are, I am told,, 
 large dep6ts of materials required for building. The result is, as. 
 the experts in the matter tell us, that the opening of the new 
 street will, in fact, cheapen new houses, and by so much increase 
 the value of building sites in many parts of London north of the 
 River. 
 
 The Council has raised since 1889 two millions of capital 
 debt. A large part of this is required for the completion of 
 the main drainage system. No one has ever proposed to deny 
 that drainage is an improvement of the landlords' property. 
 Indeed it has been a universal tradition until Mr. Ritchie's. 
 Act that all sewer rates, great and small, ought to be treated 
 
14 
 
 as owners' rates, to be levied directly from the landlord, and 
 not from the occupier at all. Mr. Ritchie's Act, whether by 
 ■design or carelessness, repealed this rule as regards London, 
 ■and threw everything in the nature of a sewer rate back on 
 the occupier. 1 do not know that anyone has suggested that 
 any occupier in the Metropolis has been able to obtain any 
 reduction of rent because of this perfectly gratuitous increase 
 of his liabilities. Neither have I heard that there has been 
 any effective protest against a change of liability which, besides 
 being unreasonable in itself, was retrospective in its effect, and 
 ■a distinct interference with the conditions of existing contracts 
 of tenancy. These considerations may be of polemical interest 
 presently, but for the moment I am only concerned to insist 
 upon the fact that the expense of London improvements has 
 enormously increased the value of London as a building estate. 
 For these improvements the ratepayer has already paid in one 
 form or another. But it is not the tenant who derives the 
 profit from these improvements. On the contrary, because of 
 the improvement of his landlord's property and its consequent 
 increase in value, the occupier is charged a higher rent. 1 say 
 it is no wonder that we have the ratepayer arrayed in the path 
 of social progress as an obstructionist : and it is, therefore, one 
 of the most urgent of all reforms that the incidence of local 
 ■charges should be made more just. 
 
 It would carry me beyond the present purpose, if I were to 
 •attempt any exact appraisement of what local expenditure may be 
 considered to be incurred chiefly or partly for the owner. That 
 almost every form of urban government and civilization goes to 
 increase the value of London as a building estate is manifest. 
 Even police and education help to secure and to improve the ducal 
 rents. Drainage is admittedly an owner's rate. Sanitation and 
 streets are not very different. Fire brigade and open spaces 
 evidently help him. To cross-river communications and arterial 
 thoroughfares he would be glad to contribute, if there were no 
 public purse to draw upon. Housing expenses are not only an 
 " improvement," but they are also the result of the sins of owner- 
 ship. Lighting is clearly a service to the property. If people 
 make streets and invite the public into their transmitted fields, 
 then they must make and keep their fields in a habitable condition. 
 Such considerations may serve to show how large a share of the 
 London rates the owner, as agamst the occupier, might be fairly 
 asked to bear. I am aware that there are arguments per contra. 
 I do not attempt, at this moment, to apportion the result. That 
 some share, and a large share, is proper to be charged upon 
 owners, if we were now devising a new scheme of local taxation, 
 is all I require to prove : and that, I think, is plain. 
 
 If I have succeeded in showing that the occupier does bear 
 increments of local charges, and that of the increments recently 
 •accruing a large part at least are chirges which ought to fall 
 upon the owner, I have still to deal with a third problem. The 
 
15 
 
 very same persons who tell us that the occupier has nothing to 
 ■complain of, because he does not now bear the charges, turn 
 round and tell us also that if we attempt to transfer any portion 
 •of the charge to the owner, we will effect nothing, because he 
 will raise his rent, and thus put it all back upon the occupier 
 as before. It is a splendid inconsistency : and I must also 
 point out that it does not follow, even if this danger might 
 be real, that the legal change should not be made. It is 
 the business of the law to say how, and by whom its charges 
 ought equitably to be borne. If, among other unjust things, 
 the conditions of competition enable landlords to evade these 
 liabilities, there is at least no reason why the law should not 
 make that as difficult for them as it can. But I am satisfied that 
 it is not true that the landlords of London would in fact be 
 able to evade a proposed transfer of future or recent charges 
 from the occupier to the owner. 
 
 In the first place, I remark that the creation of the Landlords' 
 Property Tax serves as an experiment and an analogy. It was 
 intended by Parliament to fall upon the landlord. For reasons of 
 ■collection, it was levied from the occupier under strict conditions 
 which empowered him by law to deduct it out of rent, and the 
 burden has certainly not been shifted at any time upon the shoulders 
 of the tenant. Many startling things have been said by politicians 
 ■and by experts on this subject, but I have never heard that 
 anyone was hardy enough to say that the fluctuations of the 
 Landlords' Property Tax, which have at times been great, have 
 ■ever affected rents in the slightest degree. The truth is that the 
 imposition of a new direct charge upon the owner does not, either 
 in practice -or in economics, make it any easier for him to get a 
 higher rent from his tenant. That the State imposes a new tax 
 upon him is no more relevant to the outcome of his bargains with 
 his tenants, than if he had lost money at Monte Carlo. There is 
 nothing in the existence of an owner's rate which either increases 
 the value of the property to the occupier or the practical capacity 
 ■of the tenant to pay. I say that there is nothing of this nature 
 involved in the nature of the proposal that I am placing before 
 you ; but even if this be more than the truth, I think it is 
 impossible to show, if the sentiment of the community was in 
 favour of the change and the charges were of sufficiently moderate 
 amount, that any general rise of rent would follow. The truth is, 
 that metropolitan conditions as regards tenancy are abnormal. I 
 believe it is largely true to say, that in London, from the con- 
 ditions of the market, there is not truly an "economic rent." It 
 is impossible to tell beforehand what amount of rent might 
 conceivably be got out of any given site in London ; though I 
 believe the owner is getting a rent just as large as under the 
 circumstances he can get, yet I am sure that that rent is con- 
 ditioned not so much by strictly economic conditions as by what 
 one may call, for want of a better word, the moral conditions of 
 the market. 
 
i6 
 
 There will always, however, be a keen demand for sites, and 
 therefore I believe that an attempt merely to divide the existing:: 
 London rates between the occupier and the owner would give 
 rise to dangerous conditions. It vs^ould tend to create a landlords' 
 ring. An attempt would be made to roll back the owners' 
 share on to the rent, and the occupiers, unless rents happened 
 to be depressed at the same time, would run a risk of severe 
 pressure. I do not say the attempt would necessarily or always 
 succeed ; but, in any case, so great and sudden a dislocation of 
 rents would be a public misfortune. 
 
 In a word, I think it is possible so to put a certain share of 
 taxation upon the owners in London that they cannot roll it 
 back on the occupiers, though, for many reasons, this is not 
 so easy to accomplish as reformers at one time supposed. I have 
 endeavoured to sketch very roughly the conditions of the problem. 
 It remains to suggest what plans are practically open to a willing 
 Government. 
 
 For a considerable time past the "relief of the ratepayer" 
 has served as a political commonplace without being in the least 
 understood. The cry has been largely exploited in the interests 
 of the owners, and the first form which that movement took in the' 
 financial operations of the nation was the demand which came 
 from the owners of the land — Conservatives and Liberals alike— 
 for a series of ' ' Exchequer doles " towards the local expenses. This 
 has been proved to be a thoroughly bad system in every way. 
 In the first, place, the expenditure was so engineered that it 
 tended to assist the owners to the utmost and the occupiers not 
 at all. In the second place, there was no check over the mis- 
 application of such grants to countervail extravagance. If it 
 is really intended to give relief of local rates, the local authority 
 must somehow be made responsible. It is essential, relief or no, 
 that the local authority should remain effectively answerable to 
 their constituents for the amount of the rate. I need not insist on 
 this side of the question, because Sir Thomas Farrer has made it 
 obvious already. The utter absence of scientific principle is 
 nowhere more evident than in this very system of Exchequer 
 doles, which has been carried out by Government in a way as 
 completely self-contradictory and indefensible as any system of 
 taxation could well be. 
 
 What methods, then, are there by which anything can be done 
 for the relief, not of rates as such, but of the occupier's undue 
 burden? Everything has been thrown upon the rates, and the 
 amount of them has become in some places commensurate with 
 the Imperial revenue itself. If they were really a charge on land, 
 a quota taken for public objects out of rent, we, at least, should 
 not object. But the "ratepayer" in London is not the owner, 
 but the payer of rent, and we are satisfied that his relief is not 
 only just, but urgent. There are— and in this I address myself 
 particularly to the London problem — four ways conceivably open 
 for the relief of the occupier. 
 
17 
 
 There is first of all the possibility of a local death duty, in 
 the shape of a sur-tax upon some appropriate portion of the 
 Imperial death duties ; secondly, the plan of a local sur-tax upon 
 some portion of the Imperial income tax ; thirdly, the imposition 
 of an improvement rate ; and fourthly, the laying of a direct and 
 specific rate on the value of land, as distinct from building. 
 This last, which is the most scientific of the four proposals, has been 
 heretofore associated with the name of Mr. Moulton, and is at 
 this moment in process of being put into the practical shape 
 of a draft Bill by my committee of the Council. None of these 
 schemes, however, are free from considerable incidental difficulties. 
 
 I will deal with a municipal death duty first. For many 
 reasons this is the cleanest and clearest way of dealing with the 
 problem before us. As I state it and as I understand it, it is a 
 direct attempt to municipalise the unearned increment of 
 metropolitan landlords. I should define it thus. As soon as the 
 Imperial death duties have been recontrived and placed on such 
 a basis as will suit the Imperial demand, there should be a power 
 created by which a local authority in London — say the County 
 Council — should direct the levy of a sur-tax of a certain amount, 
 for which they should be responsible, over and above the Imperial 
 death duties. This sur-tax is, of course, intended to fall equitably 
 upon all interests on real property in London. Theoretically such 
 a fund ought to give a large revenue. The rental value of London 
 is ;^40,ooo,ooo a year. If it is worth twenty years' purchase, 
 and if it passes from one generation of owners to another on an 
 average once every twenty years, then any death duty should be 
 paid on ;£'40,ooo,ooo a year, and, if so, a sur-tax of 2^ per cent, 
 should, broadly speaking, represent a million. The yield of the 
 Imperial death duties on realty is at present very far short of that 
 proportion ; but this is largely due to the obsolete methods of 
 collection and assessment employed, and we have every reason 
 to believe that the existing Parliament will not pass without 
 effecting a change in this respect. But it will be possible and 
 very desirable, once the Imperial death duties are reorganised, 
 to take the reformed succession duty, assuming that that touches 
 all interests in London lands, — the interests of the leaseholders 
 as well as the interest of the freeholder — and deal with it as 
 the basis of a local sur-tax. if a real assessment were made 
 of all the interests in realty in the County of London at their 
 true capital value, and if the County Council were enabled 
 to put a sur-tax on them of the amount suggested, the result 
 ought to be an increase of the metropolitan revenue by a large 
 part of a million annually. Such a tax could certainly not be 
 thrown back on the rents. It is not, in fact, paid by the holders 
 of the property at all. The existence of a death duty means that 
 we all recognise the right of the State to permit a man's 
 descendant to enter into the enjoyment of his property on any 
 terms it pleases to impose. The State need recognise no vested 
 interests after death, for there is nothing in the theory of property 
 
-whereby a man can claim an indefeasible title to hand on his 
 interests as he pleases, either to his personal descendants or to the 
 chance objects of his post mortem benevolence. Such a concession is 
 a pure allowance by the law for the general advantage, and if the 
 public authority chooses, for just ends, to tax it by an additional 
 i\ per cent, that does not much concern the present holder of 
 the property, nor does it offend at all against vested interests. 
 It is indeed evident that such a tax would be found to incur 
 less resentment than any other form of the taxation of land. ' 
 
 I ought to add at once that this is not a London matter 
 only. The great difificulty of any such new tax is that it could 
 not well be confined to London. It should, at the least, be 
 a tax applied to all urban lands as distinct from rural lands, for 
 we may say broadly that urban land takes the bulk of the unearned 
 increment. If we can get at mines, or deer forests, or other 
 special properties as well, it will be so much the better. If, 
 however, it is to be applied to all urban lands, it is evidenTthat 
 there is no single authority to which you can appeal for an 
 adjustment of the percentage rate. If, on the contrary, the 
 percentage is not somehow voted by the local authorities, you 
 will in effect be running the risk of falling back into the system 
 of Exchequer doles, under a new name. To avoid the confusion 
 that would arise in the collection of a tax varying with every 
 town in the country, it' seems to me that the Legislature might 
 pass an annual Bill declaring a stated rate for the year, say 
 i\ per cent., to which all urban lands should be liable, but leaving 
 each corporation to take up the tax or not as they choose. 
 Thus local responsibility would be preserved, whilst at the same 
 time ease of collection was ensured. 
 
 If such a tax once entered into our system of finance, I am 
 convinced it would become one of the most popular methods of 
 raising money for local purposes that could be devised. One objec- 
 tion that is made against such a tax is that by raising the death 
 ■duties to any considerable extent they will be evaded. My answer to 
 this is that already a considerable amount has been raised in such 
 a duty, and there the attempts to evade it have not been fatal. 
 The action of the death duties will have to be extended in any 
 case. Immense properties escape by settlement, and the question 
 now IS to bring this settled land, as well as that belonging 
 to hmited hability companies into the net of the death duties. 
 In truth, it is evident that the vole of death duties in the 
 system of raising revenue is and will be very greatly extended. 
 As It extends the machinery for its collection will, as a matter of 
 course, be perfected. It has already been very much improved 
 within the last ten years. My contention is merely this • That, 
 as the death duties are in principle a convenient and just means 
 of raising a large part of the public charges, so whatever death 
 duties cover the interest in urban lands is peculiarly a ju^ and 
 convenient means of raising a large part of the public charges bv 
 which urban land is gaining every day. 
 
19 
 
 I am quite aware that there exists in high financial quarters 
 an this country a paramount prejudice against any " confusion," 
 as it is called, of Imperial and local taxation. So far as the 
 •death duties are concerned, the principle of sharing a source of 
 revenue between the Imperial and local budgets has been 
 •already admitted, although it has been applied in such a form 
 as to give the least advantage with the maximum of mischief. 
 But I do not hesitate to say that the prejudice itself is 
 without foundation. It exists in no other country. Both in 
 America and in France — and in neither of these countries are the 
 ■conditions altogether unlike our own — there is a marriage of 
 Imperial and local taxation, and the results are regarded by all 
 parties concerned as distinctly admirable. I am not aware that 
 the principle has been applied in either case to the death 
 duties, which are, in fact, less developed in either country than 
 they have been .among ourselves ; but the system of the centimes 
 ■additionnelles, which is the basis on which our current London 
 proposals have been suggested, is paramount in France, both 
 as regards the impost on real property and as regards the other 
 direct taxes upon personalty and business, which roughly corres- 
 pond to an imperfect income tax. It is clear that there are 
 certain general conditions which must in any such case be kept 
 in view. The collection of the principal impost and the sur-tax 
 must remain, no doubt, in the hands of the Imperial officials; 
 •but beyond the addition of a few extra figures on the demand 
 note and the quarterly transmission of a cheque, to the local 
 authorities, it matters nothing to the Income Tax Commissioners 
 whether they collect a single tax of 6d. or a total sum of gd., 
 •consisting of an Imperial 6d. and a local sur-tax of 3d. I confess 
 that for myself I cannot see the argument against this course, 
 and I certainly see overwhelming reasons in its favour. 
 
 You are aware that there is not at present any machinery by 
 which such an application can be effected. Our own Land 
 Valuation Committee reported some time ago, and I believe most 
 ■experts are now convinced, that it would be possible to separate 
 the valuation of the site from the general rateable value as now 
 •recorded. I am most anxious, as I suppose we all are, that the 
 ■necessary reform of the Metropolitan Valuation Act for this purpose 
 ■should be made forthwith. But we do not want to wait for the 
 ■delays which may beset such a proposal, in order to proceed with 
 the relief of the occupier and with the imposition of a reasonable 
 share of the cost of London improvemements upon the owner. 
 The immediate question, therefore, is by what machinery you 
 can, even upon the present assessment, proceed effectively in that 
 direction ? I think it is clear that the only machinery available is 
 some impost on rent, and it is, to my mind, obvious that the 
 precedent of the Landlord's Property Tax — which was devised 
 and successfully guarded for the very purpose of making the owner 
 and not the occupier pay — is the best to follow. It is this scheme 
 which we are proposing in the measure which is being promoted 
 
as a private bill. We ask leave to arrange with the Income Tax 
 Commissioners for a levy in London of a sur-tax upon the Land- 
 lord's Property Tax, limited, for the present, to 4d. m the pound,. , 
 the proceeds of which are to be handed over— less the proper 
 allowance for collection — to the County Council to form an. 
 Improvement Fund. Upon this fund we have asked to be enabled 
 to charge all the capital charges which may hereafter arise either 
 for the great " permanent improvements " of London or for works, 
 of permanent public utility of an analogous nature, such as are 
 now chargeable to capital account and defrayed out of debt 
 extending over long periods. Some natural surprise has been 
 expressed because we have proposed to throw upon the new fund 
 only one half of the charges arising from the Strand Improvement 
 and the other large schemes for which powers were sought 
 in the present session. I confess I think that a great blot on the 
 Bill ; but we were, in fact, unable to ask for a larger proportion^ 
 because we had practically given notice of these schemes at an, 
 earlier stage of the proceedings upon the footing that the expense 
 should be divided between the owners and occupiers of the 
 metropolis. Like most compromises, which fail to conciliate the 
 enemy, it has proved a misfortune ; but before Parliament, we 
 were bound by it for the present year. We have proposed > 
 however, to charge against the first year's rate a certain amount 
 of immediate capital charges relating to the current capital 
 expenditure of the Council, in order that the operation of the 
 proposed change of incidence may not be unnecessarily delayed.. 
 
 Upon this plan* it is expressly arranged that every payer of 
 rent shall deduct the tax from every receiver of rent upon the full 
 amount he pays. You will see at once that by such a plan each 
 profit rent in the ascending series of interests will pay its propor- 
 tionate share of the main charge. If an intermediate leaseholder 
 — as is constantly the case — pays a leasehold rent of £8b but gels, 
 himself from a sub-lessee ;^ioo, then that fortunate leaseholder 
 will have to pay his 4d. for his profit of ;^20, because it is 
 obviously a portion of the land value, and is, in fact, a case of 
 the purest unearned increment. There has been much talk of 
 difference of opinion in the Council ; but the talk is merely a device 
 of the enemy. The only point about which there was any question 
 was a certain attractive suggestion, made by the Vice-Chairman,. 
 which, however, he ultimately withdrew. Mr. Harrison's amend- 
 ment was designed for the purpose of reheving certain leaseholders. 
 He proposed an ingenious scheme, which was stated in his own words, 
 in my memorandum. The point of it was that the parties who. 
 were to bear the real burden of the owners' rate, (or, as it was 
 then called, the Improvement Rate), were the persons who received 
 the rents at the bottom of the scale, viz., the owner of the ground 
 rent, and of any rent or rents subsequent thereto up to a figure 
 which made one-fifth of the gross value. For the present purpose 
 
 * As will be seen by the reprint of the Bill in the Appendix. 
 
31 
 
 ■we may take it that the gross value is the rack rent. The theory 
 was that the value of the site, apart from building, might be 
 roughly taken at one-fifth, in the absence of any means of 
 valuation. But it was also, I think, erroneously assumed that this 
 fifth was the te^ fifth — the ground rent and the rent immediately 
 •above it in the ascending scale. 
 
 You will have observed that these proposals correspond with 
 the second and third possibilities of the four I named. The term 
 *' improvement rate " has been used, and may usefully be appro- 
 priated, to describe the various forms of the proposal to create a new 
 rate for purposes touching the improvement of the land, so arranged 
 ■as to throw the whole weight either on the ground rent itself, or, 
 if that is too small, then upon the rent that stands nearest to the 
 soil. It is, I fear, unfortunate that the whole agitation was at one 
 time popularised in the form of a cry for the taxation of " ground 
 rents " — as if these forms of the unearned increment were the only 
 rental incomes which escaped unjustly. The ground rent is an 
 obvious and clear case of the mischief; but it is neither the only 
 case, nor the most important. From speaking of ground rents, 
 some of our friends have passed on to speak of " ground values," 
 as if that phrase were more appropriate to the ultimate freehold 
 estate in the land, and as if that alone was the proper subject of 
 the taxation we are now considering. 
 
 To me it is, I confess, a truism that if we are to tax land values 
 by any rate on income, the burden must be apportioned fairly 
 among all receivers of rent, who share in the increase of the value 
 ■of the site. Whether they are ground landlords, or leaseholders 
 who have gained a profit rent on sub-leasing, or occupiers whose 
 •tenement has come to be worth much more than they pay for it, 
 can make no difference to the reason or justice of the case. I think 
 it is not difficult to show that a mere proposal to tax ground rents, 
 if it stood alone, would be neither adequate or equitable. What 
 the ground rent in any actual case may be, is an accident. By 
 ground rent, I mean a rent directly received 'by the owner of the 
 freehold upon a long lease. In most cases this is a building lease, 
 and the ground rent is one which was fixfed at the time when the 
 property first " ripened " into building value. Such rents are of 
 small amount, and represent a considerable, but, at the same time, 
 a moderate advance upon the antecedent occupation value for 
 agricultural or "vacant land" purposes. But there are also 
 ground rents, as, I believe, on the Cadogan estate, which ar6 
 fixed at some hundreds a year, and represent a large proportion of 
 the modern rack rent of the tenements. It is impossible to base 
 any equitable assessment of charges even as between the various 
 freeholders themselves, upon the amount of ground rent they may 
 appear to receive. The ground rent may be fined down by the 
 payment of a capital sum : and, if the tax were put upon ground 
 rents only, this expedient would, of course, be universally adopted. 
 Again, I believe it often happens that in a developed building 
 estate, the proprietor sets upon a given field a certain total ground 
 
22 
 
 rent of, say, ;^xoo. A builder arranges to take the field and build 
 upon it fifteen houses. For his convenience the ground rent i& 
 apportioned upon ten of these houses at £io apiece, while the 
 remaining five stand at a peppercorn. The truth is that it is not 
 the ground rent, but the actual value of the freehold reversion, which i& 
 in the minds ot those who desire to throw back the whole of this 
 taxation upon the freeholder. But I venture to think they do not 
 always see clearly what they themselves propose. In the desire 
 to take due account not merely of the annual rental, but also of 
 the improved value of the reversion, all financial reformers will be 
 at one. My proposal is to attack this element of value by means 
 of a death duty, or, in broader terms, by way of some charge on 
 capital values. I see no way of attacking it through a tax on 
 income ; I am certain that the expedient recently propo^ed^ 
 however ingenious, is not capable of being carried through. 
 
 Before I return to the proposal I have named second — the 
 local surtax on the landlord's income tax, which I call a " Rent 
 Duty" — I ought to direct your attention to that peculiar element 
 in all these calculations which we must call for simplicity " building 
 value." It is of the essence of Mr. Moulton's theory that while 
 an impost laid upon all land values equally will have economically 
 no tendency to raise rent, an impost laid upon building, as distinct 
 from land, should tend to make rents rise. With this as a thereotic 
 proposition one need not quarrel ; but I have already said that 
 the conditions which govern rents in London are by no means 
 strictly economic. As far as I can see, there is only one way by 
 which the upward tendency of rent in London could be counter- 
 vailed, and that is by placing a tax on vacant land. 
 
 Such a tax, in a perfectly moderate form, is embodied in our 
 recent proposals, and it is an integral part of the plan. It seems 
 to me to be a vital part of any scheme for taxation of land value. 
 I confess I cannot see on what principle the exclusion from 
 taxation of building land held vacant for a speculative rise can be 
 defended. It is commonly defended as a case of the imaginary 
 law that taxation ought never to be laid on capital value. I 
 venture to say there is no such law : but even if there were, the 
 present case is hardly one to which it can be rationally applied. 
 For the fact is that such vacant land is producing a return — which 
 might be even stated in the ledger as an annual return— to its 
 owner ; only from a certain speculative instinct he prefers to take 
 that return in the form of a lump sum to be realised at a future sale, 
 rather than in the form of present annual rent. It is commonly 
 said that it is somehow wrong to tax land of this character, 
 because you would thereby " force it into the market." I can see 
 no reason, from the point of view of the community, and especially i 
 of the poorer part of it, why this land should not be brought into 
 the market as soon as it is reasonably suitable tor building, or, in 
 other words, as soon as it is considered to have a " building 
 value." Until that point is reached, it will not be assessed. 
 When it is so assessed, ex hypothesi, it is to the advantage of the 
 
23 
 
 •community that it should be used for housing purposes. I am not 
 forgetting that the partisans of open spaces are afraid lest by such 
 a proceeding the total free space of the metropolis would be 
 diminished. To this contention I will only here reply, that if the 
 community wants, as it most assuredly does, free spaces for the 
 purposes of common health and recreation, it ought to buy and 
 hold them : and it will be able to buy them at a more reasonable 
 rate if speculative holders of land have to pay their fair assessment, 
 instead of being privileged, as they now are, to hold their lands 
 against the community and shut up from everybody else, entirely 
 free of any annual burden. I do not myself suggest that the 
 taxation law should .penalise the retention of an ample amount of 
 free space about each house ; though I confess I could never 
 understand upon what reasonable theory the Earl of Ilchester was 
 allowed to retain for his private use a park of enormous value, 
 practically free from effective rating. 
 
 Apart from the possible effect on rents, however, I do not see 
 that the investment of capital in London houses has any special 
 claim to be exempt from local charges. It happens that, not only 
 in law but in fact, the structures affixed to the soil become 
 inseparable from it. The actual rent is paid, in the common 
 •course of things, not upon the site but upon the tenement. We 
 all agree that to the expert it is possible to assess a theoretic 
 value for the site without regard to structures; but he would do it 
 in effect by imagining the existing structures to be burnt down or 
 •otherwise removed. The " value " of the property, in the familiar 
 sense of the word, is its value as it stands. It is upon that basis 
 that it is now assessed. It would be difficult, and in many cases 
 ■altogether misleading, if you were to take the figures of a correct 
 present value and to attempt to divide them into two parts, one of 
 which should represent the site and the other the building. I do 
 not mean to say that such a process would not in a large number 
 of cases be applicable enough ; but I desire to bring out what is an 
 •essential point both in the scientific and in the practical considera- 
 tion of the problem, by noting that in a large number of cases any 
 such attempt would fail. There are instances, such as that of 
 Millbank Prison, where the existing structures on the whole 
 detract from the value of the site. There are many instances 
 where the present value of the buildings, considered by themselves, 
 together with the present value of the land, if it could be sold 
 at once at Tokenhouse Yard as a " cleared site," would largely 
 exceed the present fair valuation. For these reasons 1 think it is 
 quite clear that as soon as land valuation can be introduced, it will 
 take the form, not of three columns, but of two ; not, that is, of a 
 valuation of the property as it stands, subdivided into two factors 
 for land and structures, but of two independent assessments, one 
 of which will represent the property as it stands, while the other 
 will be the " cleared site value." 
 
 I mention this in order to emphasise my conviction that it is 
 not really possible in practice accurately to disentangle the return 
 
24 
 
 of the fixed capital which has become annexed to the soil, frcmi 
 the rent which, i.s paid for the use of the site itself. It may be 
 inconvenient that the two should be confused, but the fusion is in 
 the nature of the case. I cannot better illustrate this than by 
 recurring to Mr. Harrison's amendment. I know that that 
 proposal commended itself to some on the theory that it would 
 lay the proposed charges upon the land rather than upon the 
 buildings, whereas a rent duty cannot profess to draw any 
 distinction, but taxes all rents alike. It is, nevertheless, easy to 
 show that in many cases the working of any rule for piling up the 
 tax upon the last fifth, would have been to penalise the builder 
 himself. 
 
 To make this clear it will be convenient that I should explain 
 at once how the alternative methods of deductions would really 
 work. Let us suppose the case of a house now occupied from year 
 to year at a rent of £'i.io. Suppose it held by a sub-lessee, who 
 himself pays ;^ioo a year to the original lessee. Suppose, further, 
 that the original lessee pays £']0 a year to the builder, and that 
 the builder pays a ground rent of £"10 to the freeholder. You will- 
 see at onc^ that such a case is normal enough, provided that we 
 are dealing with a property the original building lease of which 
 was granted 60 or 80 years ago. You will also observe that the 
 successive layers of profit rent, after the first, represent the 
 purely speculative gains of those who have turned the unearned 
 increment, due to public improvements and the general progress 
 of the community, into an annual revenue for themselves. The 
 building return, say £"60, was, of course, obtained by putting down 
 capital in the shape of bricks and mortar. How much of this was 
 normal interest and how much speculative profit made out of the 
 prospective value , of the site, it is never possible to say. The 
 ground rent of /lo represents perhaps £,^ of speculative profit, by 
 way, of anticipation of the building value, and £^ for the prior 
 value for some other useful purpose, say as a nursery garden. 
 
 The rent duty would recognise no distinction of persons. It 
 would require from each receiver of rent a small contribution, pro 
 rata, towards those improvements of the metropolis which are 
 assumed to be for the common benefit. It is said that this is hard 
 on the builder. I do not say ihat it is perfect. It was never 
 intended to be more than the first item of a larger plan ; but in 
 that sense, I see no harm, and much reason, in making all the 
 interests pay. 
 
 What would happen if the Improvement Rate were thrown 
 back to the bottom of the scale ? If the Owners' Rate were 4d.> 
 £7. must be levied from the occupier. In either case the occupier 
 will deduct the whole £0. from the man we call the sub-lessee. It 
 is at the next step that the difference begins. By the Bill the 
 sub-lessee deducts from the original lessee, not 480 pence, but 400 
 pence, and the original lessee will deduct from the builder 320 
 pence, who, in his turn, will recover 40 pence from the ground 
 landlord. By Mr. Harrison's table the occupier, the sub-lessee 
 
25 
 
 and the, original lessee would each have deducted the full ;^2 in 
 turn. The builder would, therefore, have paid 480 pence. The 
 whole of this sum would have been supposed to travel back, so. 
 that the whole of these last twenty-four pounds of rental^-the 
 ultimate fifth — whoever may happen to own them, would pay the 
 entire 480 pence. They would be taxed, in effect, is. 8d. in the 
 pound. But in the case supposed, £1^ out of the £21^ are actually 
 in the hands of the builder himself. He, therefore, would have to 
 pay 59 per cent, of the whole tax — that is, £1 3s. 4d. — notwith- 
 standing that he had spent the capital : whereas the profit 
 leaseholders, who are n9t supposed to have spent anything, would 
 escape scot free. By the old plan of taxing the ground rent only,* 
 the whole £2 would have to be paid by the freeholder. In the 
 case supposed, he will have a land value rent attributable to urban 
 improvements of £^, and he will have, no doubt, a reversion to a 
 valuable property after 40 or 50 years, which is, for present uses, 
 of very little money value. The two lessees, who are getting £50- 
 of pure " land value-" between them, and who may have also a 
 leasehold reversion, would pay not a penny under either of the 
 last mentioned schemes of collection. I cannot think that such a 
 plan could pass. 
 
 I do not suggest to you, however, that any of these immediate 
 plans are capable of working mathematical justice. I never heard 
 of a scheme of taxatiqn which did. I do not hesitate to say that 
 no system will adequately reach the owners of land values and 
 compel them to contribute their share to local expenses, unless it 
 includes as a part of its machinery the collection of a local sur-tax 
 from a reformed succession duty. I am not without hope that 
 Sir William Harcourt may make his Budgets historic, not only 
 by bringing up the Imperial death duty to a reasonable level, 
 but also by making some provision for a local sur-tax on all 
 interests in urban land. 
 
 Before I pass to say a word on the fourth plan — the separate 
 assessment of the value of the site and the imposition of a special 
 rate thereon — I must not forget that sundry other proposals for 
 the relief of the occupier are before us. Though it would be 
 evidently hopeless to discuss them all, it may tend towards clear- 
 ness if I state them at once. I take first, in order to dismiss it as 
 indefensible, the plan of " Exchequer doles," which previous 
 Chancellors invented, and which Mr. Goschen largely developed. 
 If an argument is wanted on the subject, I think Sir Thomas 
 Farrar's book contains an ample and most lucid refutation. But 
 it is worth while to observe here that, so long as it lasts, the grant 
 ought to be just as between London and the rural counties. At 
 present, the quotas are flagrantly wrong. The Local Government 
 Board, and indeed all the official world, agree that London is 
 unfairly treated to an extent which is variously estimated at 
 
 * This has been adopted, unfortunately, in Mr. Dalziel's very interesting 
 Bill for the Taxation of Land, which is now before the House of Commons. 
 
25 
 
 anything from a ad. rate upwards. In round figures, we are 
 deprived of about ;^40o,ooo, which, upon a fair allotment ot the 
 " doles," we should receive. This is an incidental item m the 
 claim of the London ratepayer against the Treasury ; and there 
 are many more, such as the gross under-valuation of Government 
 property, which we cannot go into here. 
 
 Next, I may put aside the old suggestion of an immediate 
 division of rates between owner and occupier, based upon the 
 Scottish plan. I am not forgetting that Lord Hobhouse and, indeed, 
 my own Committee, at one time gave a doubtful support to this 
 proposal, not in itself, but as a portion of a wider scheme. Neither 
 will I now say that when we have dealt with the more vital 
 questions I am here discussing, it would not be well to transfer all 
 local rates as soon as possible on to this more reasonable basis. 
 But I think it is quite clear, in the light of all recent discussions, 
 that a sudden attempt — whether it be retrospective or no — ^to 
 divide existing rates at one stroke between the occupier and the 
 owner, would fail to afford the relief that is required, and would, 
 on the contrary, produce a dangerous dislocation in rent. I do 
 not gather that any party at the present time is pressing this as 
 an immediate measure, and therefore I need not complicate my 
 argument by discussing it any further. 
 
 Another proposal is to ascertain the owners of land values, 
 and levy a tax from them directly. To this there can be no 
 objection in principle. The difficulty is that the absence of 
 registration of title, and the enormous complexity of legal owner- 
 ship, would make it a very cumbrous machinery to set in motion. 
 And if it ever were set up, the problem of handing down the 
 proper shares of burden from the freeholder to the occupier 
 would involve almost exactly the same delicate questions of 
 adjustment as are involved in the current schemes, which assume 
 .that the total impost will be collected, as usual, from the occupier 
 first. 
 
 There remains what I have called the scientific plan — the 
 proposal which involves an amendment of the Valuation Act so as 
 to give us an expert assessment of the land value separately. 
 
 If we are to take it theoretically, I think you will see 
 that there is great scientific value in the idea of commencing 
 by an assessment of the site values, apart from any return for 
 fixed capital placed upon the land. If we had this assessment, 
 and if the whole of the values in question were in one hand, 
 and could be taxed directly in the shape of rent, it would be 
 comparatively simple to put an effective charge upon it. I need 
 not tell you that the problem in London is almost the antipodean 
 opposite of such a simple case. The site value is complicated at 
 every turn with considerations in the nature of capital expenditure, 
 or of what is very roughly called the " building value." Even 
 if it were in one hand, it would be by no means true that the 
 profit is always received directly in the shape of rent. But, 
 so far from being in one hand, all such values are split up among 
 
27 
 
 various interests, ascending from the occupier, who is often the 
 owner of site values himself, through the leaseholder — whose 
 name is legion — back to the noble duke who owns the fee. Even 
 if we had a direct valuation of land inserted in the ratebooks, we 
 should still, so long as we collect our owner's rate primarily from 
 the occupier, be obliged to face the same difSculty, and to decide 
 in what proportion each ot the persons who successively pay rent 
 for that tenement, is to deduct from his immediate landlord. 
 
 As I have said, I am myself engaged with my committee in 
 the endeavour to solve this problem without further delay : and I 
 believe it can be done. But the difficulties are far more serious 
 than is commonly understood. It is not at all impossible to value 
 a tenement as if it were a 'cleared site,' though the existing 
 assessment authorities would hardly like to undertake it without 
 assistance. The difficulty comes after you have provided for this 
 and agreed upon the measure of the specific rate which the rate 
 collector shall levy from the occupier. How is the burden to be 
 laid upon the right shoulders ? To send it all back to the ground 
 landlords — even if it were possible — is clearly wrong. As already 
 noticed, the rate would then fall, if there was a peppercorn rent, 
 upon the only person whom it ought to avoid, namely the builder. 
 We must find a rule which will allow each payer of rent to deduct 
 from each receiver of rent, so much as will leave him still to bear 
 that just proportion of the tax, to which his rental interest in the 
 site value really corresponds. That problem is not insoluble ; but it 
 is idle to say it is easy. Even when you have made your formula as 
 exact as it can be made, there will still be exceptional cases, where, 
 for reasons beyond anyone's control, an existing site value cannot 
 be utilised by some or all of the apparent owners. Such cases must, 
 I think, be left to a tribunal. They are not half so difficult or 
 complex as those conundrums, which now occupy the rating com- 
 mittees, as to the precise philosophy of " the hypothetical tenant." 
 But it is a more practical consideration that, for the solution of 
 such a problem, we require some free parliamentary time. I am 
 not clear that, even if a perfect scheme were ready to-day, it 
 would not still be worth while to obtain a moderate Rent Duty, if 
 possible, as an instalment of reform. 
 
 That, at least, has been the Council's view. The Council has 
 constantly declared, with only an insignificant minority, its 
 demand not merely for an immediate relief of the ratepayer, but 
 also for effective, complete and scientific taxation of land values. 
 There has never been any substantial difference of opinion among 
 the majority. Even on the question of the method of deduction, 
 the amendment was withdrawn, and the Bill, as it stands in 
 the appendix, was approved almost with unanimity, — with the 
 declaration, however, that it was not proposed as a solution of 
 the whole problem, but only of the immediate difficulty as to the 
 deadlock in street improvements. 
 
 This particular small measure which, has been laid before the 
 House of Commons is avowedly the beginning of a larger scheme. 
 
38 
 
 It does not pretend to throw upon the freeholder the full share he 
 ought to pay, chiefly because it is explicitly intended to act in 
 combination with a municipal death duty, or with some other 
 method of taking toll of the capital value of his reversion. 
 
 Freeholders are not the only persons who possess reversions. 
 They are, of course, the commonest case, but then their interest is 
 also, in many cases, somewhat remote. An intermediate leaseholder 
 may have carved a lease for forty years out of an unexpired term 
 having seventy years to run, or he may have granted an occupying 
 lease of seven, fourteen, or twenty-one years even out of a term 
 •of fifty or sixty. In the case supposed, the leaseholder's reversion 
 may be of greater present value in cash than the reversion of the 
 freehold itself. It must not in equity or common sense be forgotten 
 that the freeholder's reversion, although it may be of enormous 
 value when it comes, can only be said to be worth, for present 
 purposes, its present value. Upon what exact scale this should 
 'be estimated is an actuarial question. By the calculations of 
 Somerset House it undoubtedly escapes, at present, at an absurdly 
 easy rate. But in any case it is clear that a reversion at more 
 than fifty years from the present time is of very small value now, 
 however large its value may be when it comes. The monstrous 
 thing is that our present system of re-payment of debt is so 
 arranged, as Mr. Harrison showed in the tables he produced 
 before the Town Holdings Committee, that it constantly happens 
 that the occupier and leaseholder between them not only pay the 
 annual interest, but also pay off the whole of the capital debt 
 raised to represent the cost of improvements, the ultimate profit 
 of which will arrive at the freeholder, when his reversion falls in, 
 absolutely free of charge. The flat injustice of this is beyond 
 dispute : but what I am now endeavouring to make plain is that 
 a remedy must be found for it by some impost on capital values, 
 such as is a local sur-tax on a death duty. 
 
 I cannot detain you further. I will only point out, finally, 
 that the settlement of this financial grievance, though it may seem 
 a dry and unexciting matter in itself, is by far the most vital of 
 the London questions of to-day. Improvements, even if urgent, 
 cannot and should not be made, when they involve a large 
 addition to the ratepayers' unjust burden, until some new source 
 of revenue is found for London and until the occupier is relieved 
 and the owner forced to pay. If the stalwarts of "property 
 defence" were either public-spirited or prudent, they would go out 
 to meet the reform. The longer it delays, the more drastic it 
 -will be. 
 
A BILL 
 
 To authorise an Improvement Rate or Charge in the 
 Administrative County of London. 
 
 56 and 57 Vict. — Session 1893. 
 
 WHEREAS the burden of the cost of permanent improvements and' 
 works effected by the London County Council (hereinafter called " the 
 Council") unduly presses and will press upon the occupiers of houses 
 and tenements within the County unless specially provided for and it is 
 expedient that the Council should have power to levy a new rate as 
 hereinafter provided. 
 
 And whereas the objects of this Act cannot be attained without the 
 authority of Parliament. 
 
 MAY IT THEREFORE PLEASE YOUR MAJESTY 
 That it may be enacted, &c. 
 
 1. This Act may be cited as the " London Owners' Improvements. 
 Rate Act 1893." 
 
 2. In and for the purposes of this Act — 
 
 " The County " means the administrative county of London 
 according to the boundary thereof for the time being. 
 
 " Hereditaments " means and includes all lands tenements and 
 hereditaments within the county. 
 
 3. There shall be leviable in respect of hereditaments throughout the 
 County a rate to be called " The County Improvements Rate " or such 
 other name as the Council may determine, the proceeds whereof shall be 
 applicable by the Council as follows : 
 
 (i) In providing one-half of the sums required in each year for 
 redemption of stock or repayment or replacement of money borrowed 
 and expended on capital account for the purposes of the following 
 Improvements if the same be authorised by Parliament viz. : 
 
 (a) The New Central Street from Southampton Row to the 
 Strand with the subsidiary streets and works ; 
 
 (b) The New Approach to the Tower Bridge in the parishes 
 of Bermondsey and St. John Horsleydown ; and 
 
 (c) The Ferry between Rotherhithe and Ratcliff 
 
 described in and proposed to be authorised by the London Improve- 
 ments Bill now pending in Parliament ; 
 
 (2) In payment of the sum required in each year for payment 
 of interest and charges in respect of one-half of the money so borrowed 
 and expended ; 
 
 (3) In providing the sums required in each year for redemption 
 of stock or repayment or replacement of money borrowed for and 
 expended on any permanent improvements and works of public utility 
 eifected or to be effected by the Council and charged to capital 
 account and in payment of the sum required in each year for payment 
 of interest and charges in respect of money so borrowed and expended ; 
 
 The expression " permanent improvements " in this section 
 means any works of which the Council have power to spread the 
 cost and of which they resolve to spread the cost over a period of at 
 least fifty years. 
 
 4. The Council when estimating or revising the estimate of the 
 amount which they will require to raise in each financial year by- 
 
30 
 
 •contributions to meet the expenditure for general county purposes shall 
 ■estimate the amount which they require to be raised by means ot ine 
 County Improvements Rate to meet the expenditure to be defrayea out 
 ■of moneys raised by that rate during the same year, and the amount so 
 estimated shall be taken into account in ascertaining the arnounts to De 
 'levied by contributors in respect of expenditure for general County pur- 
 poses, and such estimate shall be open to inspection by any person 
 without payment and shall be conclusive for all purposes whatsoever. 
 
 5. If and whenever any agreement is arrived at between the Treasury 
 ■and the Council with respect to the collection of the County Improve- 
 'ments Rate by this Act authorised along with the Property Tax under 
 Schedule A of the Act 5 and 6 Victoria cap 35 the following provisions 
 •shall have effect : 
 
 (i) The Council may fix and determine in respect of each financial 
 year the amount of the rate in the pound on the gross value of lands 
 tenements hereditaments and heritages in the County which in their 
 judgment will be necessary to produce the amount required to be levied 
 in respect of that year under the powers of this Act as the County 
 Improvements Rate, and such rate shall be charged upon the value at 
 which such lands tenements hereditaments or heritages within the 
 'County are assessed for the payment of Property Tax under Schedule 
 A of the Act 5 and 6 Victoria cap. 35 but shall not exceed the rate of 
 fourpence in the pound upon such value. And such rate shall be 
 demanded and collected along with the Property Tax payable under 
 the said Schedule A. 
 
 (2) On or before the first day of November in each year the 
 Council shall furnish the Commissioners of Inland Revenue a certificate 
 under their seal stating the amount in the pound in respect of such 
 value as they have resolved should be levied as and by way of the 
 County Improvements Rate, and a separate column shall be provided 
 in the demand note for Property Tax under Schedule A, which shall 
 specify separately the amount to be collected in respect of the 
 Improvements Rate. 
 
 (3) Every occupier of any lands tenements hereditaments or 
 heritages being tenant of the same and paying the Improvements Rate, 
 shall deduct from the rent payable by him to the landlord for the time 
 being an amount in the pound after the rate at which the Improve- 
 jnents Rate is fixed, and every such deduction shall be made and 
 
 allowed in the same manner in all respects as a deduction from rent 
 in respect of Property Tax charged under the said Schedule A, and all 
 ■the rules and regulations in the said schedule and all the provisions of 
 the said Act relative thereto shall mutatis mutandis extend and apply to 
 the said Improvements Rate. 
 
 6. In the event of no agreement being arrived at between the Council 
 and the Treasury as to the collection of the said Improvements Rate 
 •then the following provisions shall have effect : 
 
 (i) The amounts which the Council require to be levied by means 
 of the said Improvement Rate may be demanded by the Council by 
 the precepts by which they demand county contributions for the 
 purpose of the county rate. 
 
 (2) The amounts required to be levied by means of the County 
 Improvements Rate shall be stated in the precepts of the Council 
 separately from the arnounts required for contributions for general 
 county purposes or special county purposes and shall not in the case 
 of any parish or place exceed a sum equivalent to fourpence in the 
 pound on the total of the gross value of the hereditaments in such 
 ■parish or place as stated in the totals of the gross values of the 
 
31 
 
 ■valuation lists for the time being in force under Section 17 of the 
 Valuation (Metropolis) Act 1869. 
 
 (3) As regards any parish or place within the county not included 
 in the unions subject to the Valuation (Metropolis) Act 1869 the amount 
 ■of the contributions required by the Council to be levied by means of 
 the said Improvements Rate shall not exceed a sum equivalent to 
 fourpence in the pound on the gross value of the hereditaments in such 
 parish or place according to the valuation list then in force for the 
 purpose of the assessment for the relief of the poor.* 
 
 (4) The several authorities and persons empowered to levy and 
 ■collect the county rate shall (subject to the provisions of this Act) 
 levy and collect the amount required for contributions under this Act 
 along with the rate for general county purposes and in any demand 
 note the amount stated to be levied in respect of County Improvements 
 Rate shall be distinguished from the amount stated to be levied for 
 other purposes. 
 
 (5) Where the occupier of rateable property in the county is liable 
 "to pay a rent in respect thereof he shall in the first instance pay the 
 County Improvements Rate but he shall be entitled to deduct from 
 such rent in respect of the amount ■which he shall have paid for the 
 said rate an amount in the pound after the rate at which the Improve- 
 ments Rate is fixed and where a person entitled to receive a rent in 
 respect of which anj such deduction shall have been made is also 
 ■liable to pay rent in respect of the same rateable property or any part 
 thereof he shall be entitled in his turn to deduct from any rent payable 
 by him in respect of the same property an amount in the pound after 
 the same rate. 
 
 (6) All persons or corporations entitled to receive rent in respect 
 of hereditaments in the county and their representatives and assigns 
 according to their interests shall allow the deduction directed by this 
 Act on receipt of the residue of the respective rents which they are 
 entitled to receive and the occupier or other person liable to pay rent 
 in respect of any such hereditament in the county shall by virtue of 
 ■any such deduction be discharged of an equivalent amount of rent as 
 if the same had been actually paid by him to the person entitled to 
 receive such rent. 
 
 7. -The Improvements Rate shall be assessed and payable in respect 
 ■of unoccupied houses and buildings and of vacant land including land on 
 which there are uncompleted buildings as well as in respect of houses 
 and buildings which are occupied and of other land and shall so long 
 as the house building or land upon which the rate is charged remains 
 unoccupied or vacant be payable by the owner thereof on demand. If 
 and so far as at the commencement of a new tenancy or occupation of 
 any house or building or land any arrears of the Improvements Rate 
 remain due in respect thereof then such arrears shall be payable on 
 ■demand by the first tenant or occupier thereof and any tenant or occupier 
 who shall have paid such sum may deduct the amount paid by him in 
 respect of the house building or land. A proper receipt for the payment 
 by such tenant or occupier of any arrears of Improvements Rate payable 
 in respect of the house building or land shall be and operate as a 
 release and discharge of the tenant or occupier from such part of any 
 rent payable by him as shall be equal to the amount paid by him in 
 respect of such rate. 
 
 * This clause was not, in fact, necessary, because an agreement was under- 
 stood to be practically arrived at, under which the sur-tax might have been 
 levied with Schedule A. 
 
33 
 
 8. (i) The Overseers and Assessment Committee acting under th& 
 Valuation (Metropolis) Act 1869 shall in making out the next valuation, 
 list or supplemental valuation list after the passing of this Act ™clude- 
 or add and assess all unoccupied houses and buildings and vacant lana 
 including land on which there are uncompleted buildings so far as such 
 houses buildings and land would not but for the provisions of this Act: 
 be included in such lists and shall cause the totals of the gross and 
 rateable values of such buildings and lands to be ascertained and, 
 included in or added to the valuation lists to be made under the said. 
 Act after the passing of this Act ; 
 
 (2) The totals of the gross values of such buildings and land shall' 
 for the purposes of this Act be added by the Council to the totals, 
 of the valuation lists printed in accordance with Section 17 of the- 
 Valuation (Metropolis) Act 1869 ; 
 
 (3) As regards any parish or place within the County not included 
 in the unions subject to the Valuation (Metropolis) Act 1869 the 
 separate valuation and assessment of uncompleted and unoccupied 
 houses and buildings and vacant lands shall be made and prepared ia 
 like manner as the basis or standard for the county rate in such parish 
 or place ; 
 
 9. All the provisions of the Valuation (Metropolis) Act 1869 with 
 respect to proceedings on appeals shall extend and apply to any supple- 
 mental valuation list and hereditaments contained in any valuation list 
 under this Act and every valuation and assessment made under this Act 
 in respect of any parish or place not included in the unions subject to- 
 the said Act shall be subject to appeal in the same manner as the 
 valuation lists forming the basis or standard of the county rate. 
 
 10. All the provisions of the Local Government Act 1888 as. 
 applicable to the county relative to the assessment and raising of sums 
 for general county purposes shall subject to the provisions of this Act 
 extend and apply to the assessment and raising of the County Improve- 
 ments Rate. 
 
 11. The Council shall keep separate accounts with respect to the 
 sum raised by the County Improvements Rate and the apphcatioa 
 thereof. 
 
 12. The County Improvements Rate shall be a charge and encum- 
 brance on the freehold of the hereditaments in respect of which it is 
 made, and shall not be a rate tax charge imposition assessment or out- 
 going payable by the tenant or occupier within the meaning of any 
 existing contract to pay rates taxes charges impositions assessments or 
 outgoings in respect of the hereditaments the subject of such contracU 
 and any deed agreement covenant or contract made after the passing of 
 this Act purporting to deprive or which would have the effect of 
 depriving any tenant or other person of his right under this Act to deduct 
 any County Improvements Rate paid by him from the amount of his 
 rent, or purporting to provide for the cancellation or alteration of the 
 terms of any tenancy in the event of such a rate being imposed as 
 authorised by this Act, or tending otherwise to defeat the intention of 
 this Act shall so far as it purports to have or might have that effect 
 be void. 
 
 13. All costs and expenses of the Council in the execution of this 
 Act (except so far as they may be otherwise provided for by this or 
 any other Act) shall be defrayed as payments for general county 
 purposes within the meaning of the Local Government Act 1888 and the 
 costs charges and expenses preliminary to and of and incidental to the 
 preparing applying for obtaining and passing of this Act shall be paid ■ 
 by the Council in like manner. 
 
APPENDIX 
 
 ON THE 
 
 EQUALISATION OF RATES IN LONDON.* 
 
 Since the foregoing lecture was delivered many changes 
 have taken place. The Owner's Rate Bill was, in accordance 
 with the opinion of several of the highest authorities on the Law 
 of Parliament, introduced as a Private Bill. On the invitation 
 of Mr. James Lowther, who acted apparently for an association 
 of property owners, it was ruled out of order by the Speaker. 
 There was no opportunity for any effectual discussion of the 
 point, and, of course, no appeal. The grounds alleged were 
 (i) a wholly novel interpretation of a standing order relating to 
 the Council's Money Bills — which, as it was settled very recently 
 by the late Government, had no reference whatever to proposals 
 for rating reform ; and (2) the theory that, though other munici- 
 palities had presented Private Bills to change the incidence of 
 local charges, London is too large a place to be so dealt with by 
 anything but a public statute. The first point- was, at the best, 
 a technicality, and could have been set right by a resolution of 
 the House ; but the second was fatal, not only to this Bill, but 
 to all hope of immediate progress on these lines. If London may 
 not proceed, in its internal finance, by Private Bill, it is helpless. 
 An important and opposed Public Bill in the hands of a private 
 member is now-a-days little better than waste paper. A 
 debateable measure on a comparatively new and contentious 
 subject, touching the London ratepayers only, is one which it is, 
 under present parliamentary conditions, most difficult to induce 
 any Government to adopt, and still more difficult to make them 
 pass. The only escape from the deadlock would appear to be by 
 the passage of an express standing order declaring that the Council 
 may proceed by Private Bill under any conditions that may be 
 thought expedient. 
 
 Meanwhile it became clear ^that some alternative relief must 
 be proposed. The hard-pressed ratepayers cannot wait while we 
 are mending the breakdown of the parliamentary machine. The 
 first alternative was, of course, a municipal death duty. It was 
 
 • Some of the matters embodied in this Appendix will be found, with further 
 information, in the Memorandum on the Bill prepared by me for the Local 
 Government and Taxation Committee, and afterwards issued with the Council's 
 minutes (Steel & Jones, Spring Gardens, S.W.) 
 
34 
 
 thought, until the last moment, that Sir William Harcourt was 
 determined at least to take in his first Budget the preliminary 
 step of adjusting to a consistent and reasonable level the chaos of 
 Imperial death duties. Therfe is no indication that he was ever 
 willing to do more ; but this, as a necessary condition precedent 
 of any local surtax, would have been welcome to London 
 reformers. For reasons sufficiently discussed at the time, the 
 great Budget has vanished. It is doubtful enough whether it 
 will even reappear next Easter. Even if it should, it will by 
 itself do nothing for London, and the Chancellor has no plan. 
 One obvious measure is within his power — the equitable 
 readjustment of the Exchequer contribution so as to restore to 
 London the three or four hundred thousand pounds by which she 
 was underpaid in 1888 — but it is suggested that he will not t6uch 
 so delicate a subject for fear of the provincial votes. 
 
 In these circumstances, there remained one possibility. The 
 burdens of London rating are notoriously unequal. The bitterness 
 of the pressure is most felt in the poorest and most populous 
 quarters. If the charge could be equalised, then, although no 
 absolute relief would be given to the body of ratepayers as a 
 whole, a great actual relief would be felt where the worst hardship 
 now exists. To do this completely it would be necessary, first of 
 all, to provide for the metropolis some new and efficient form of 
 central financial control. No such proposal has just now a chance 
 of immediate or early success. The problem therefore was to make 
 an approach toward equalisation in some way which would be 
 automatic, equitable, sufficient and safe. 
 
 Few who are not experts have any idea of the wild inequality, 
 or rather chaos, which at present holds. There are in London 
 200 different rating areas, in each of which at least seven, and 
 often ten, distinct rating authorities can require their quotas of the 
 local charge. The result is that in 1892-3 the total of rates levied, 
 if we take only the larger areas, varied from 4s. in St. James's, 
 Westminster, to 7s. 5d. in Bromley. This is sufficiently absurd, 
 seeing that every other great city works upon either an absolutely 
 uniform rate, or at least a practical uniformity of charge. But 
 the case is far worse when the details are known. The Council 
 has published charts and returns showing the parishes arranged 
 in order of their " rateable value per head," and showing also the 
 excess in each case of the local charges beyond the common 
 burdens. A summary of the results in the 27 independent 
 parishes is printed on pp. 38-39. Broadly speaking, the heaviest 
 burdens fall where there is least wealth to support them. These 
 inequalities of London rating as between the various parishes, 
 and especially as between the richer and poorer districts, have, 
 to put it plainly, long amounted to a public scandal. 
 
 The result is not only the financial unfairness. There is an 
 aggravation of the general feeling of injustice as to the present 
 incidence of rating among the large masses of occupiers so 
 oppressed, and there is a dangerous local parsimony in the areas 
 
35 
 
 adversely affected. The East End is badly lighted and poorly cared 
 for in sanitation, street maintenance and other matters, chiefly 
 because the burden of rate is already so severely felt that the 
 smallest increase is a terror. The main cause is that Westminster 
 and St. George's, Hanover Square, do not share municipal expenses 
 with Poplar and St. George's-in-the-East. The practical difficulty 
 of any complete scheme of equalisation lies, of course, in the question 
 of control. So long as large sections of expenditure are to be dealt 
 with by local autonomy, without any supervision beyond the present 
 system, it would be obviously impossible to throw the resulting 
 cost directly on the metropolis as a whole. Possibly it may be 
 always felt to be the better plan to forego an ideal equality of 
 taxation, in favour of a higher degree of local responsibility. 
 
 The effort towards equalisation, so far as it has gone, has not 
 followed any consistent principle. The chief effort after fairness 
 has been in Poor Law finance, because of the large powers 
 of control already vested in the Local Government Board. The 
 first step was to create a Common Poor Fund for the metropolis, 
 fed by a rate levied evenly on rateable value, and fixed annually 
 at the amount required for .the statutory distribution. Out of 
 this fund, certain kinds of service are paid, for in whole or in part ; 
 and it is the opinion of the experts that this process, though the 
 result is far from perfect, has been carried almost as far as it can 
 go. Outdoor Relief is beyond its reach, until some general rule 
 can be found which all Boards shall apply. Much of the Poor 
 Law Debt and certain optional charges are also outside it ; and 
 so long as local control remains there must be a margin of cos 
 borne locally, to serve as a check on local extravagance. 
 
 Besides the Common Poor Fund, there are, of course, the 
 central precepts, which raise, evenly over the whole total of 
 rateable value, the cost of the work of the County Council, the 
 School Board, the Metropolitan Asylums Board and the Metro- 
 politan Police. Further payments for equalisation have come in 
 the form of charges taken out of the County Fund. Some are 
 levied as charges on the Exchequer Contribution — already most 
 unjust to London — for certain medical and lunacy expenses ; others, 
 such as Mr. Ritchie's grant of 4d. per head on indoor poor, and 
 half the cost of electoral registration, and certain grants for main 
 roads, are practically added to the Council's rate. The result of 
 all these varying plans is to equalise the Metropolitan charge to the 
 extent of 3s. 3d. in the £ out of an average of a little more than 5s. 
 
 There remains a balance of about ^'2,750,000 of metropolitan 
 charge which is unequalised : and it is this balance solely which is 
 responsible for the startling and oppressive inequalities above noted, 
 and which turns what might be a level of about 5s. into a disparity 
 running from 7s.' 5d. to 4s. It remains to inquire what are the 
 constituent charges making up this balance. For this purpose, 
 upon the figures of the year i888-g, as analysed in the Council's 
 last volume of statistics, we have in round numbers the following 
 totals: — 
 
36 
 Poor Law Charges not yet distributed : — £ 
 
 Outdoor poor (important in certain unions only)..- igi.ooo 
 Special expenditure borne on poor rate (certain 
 
 parishes only) 41,000 
 
 Poor Law Debt=;f 2,4.65,477 : giving a total 
 
 annual charge of ... ... ••• ... 204,000 
 
 Other expenditure for poor relief proper 42,000. 
 
 Expenses of assessment, elections, cost of col- 
 lecting poor rate, and various payments for 
 public and common charges other than ^poor 
 relief, still borne on the nominal poor rate ... 126,000 - 
 
 Total ... 604,006.'; 
 
 That is to say, after deducting the out-door relief 
 
 and other special expenditure ... ... ... 232,000 
 
 A total, for purposes more or less common, of ;^372,ooo. 
 
 , Local Management Charges for purposes mainly of common concern : — 
 
 Sanitation ... ... ... ;^i90,ooo. 
 
 Local sewers and urinals ... 113,000. 
 
 Lighting 232,000. 
 
 Scavenging and Street Maintenance 827,000 
 
 Mortuaries, &c. 8,000 
 
 Establishment, elections, legal & incidental expenses 192,000. 
 
 Cost of collection of rates ■ ... 50,000. 
 
 Local Management Debt^;^3,685,840 : giving an 
 
 annual charge of 420,000 . 
 
 Total ; ^2,032,ooo 
 
 These totals of ;^372,ooo and ;^2,o32,ooo represent practically 
 the whole common charge now remaining undistributed. They 
 represent in all a further possible "common rate " of is. 3d. beyond 
 the 3s. 3d. above stated. They take, of course, no account of 
 exceptional City finance or of what may be called the " sporadic "j 
 charges now incurred on those special local accounts as to which 
 some of the 84 Metropolitan and 112 City parishes (or groups of 
 them) may by law elect to incur public expense and raise a raXtf 
 and others may not do so. These exceptional charges include Free 
 Libraries, Baths and Washhouses, Maintenance of Local Open 
 Spaces, Burial Boards, Square, Estate and Garden Rates, and 
 Church or Rector's Rates, which make up about ;^ioo,ooo in all. 
 
 The proposal to which these considerations appear to point is. 
 that a further step towards equalisation should be now made, by 
 means of grants from a common fund, towards local municipal 
 services of common concern, to be levied evenly on rateable value, 
 and distributed in some ratio to local needs. Of the various possible, 
 standards of distribution there is only one "which seems to be 
 immediately practicable ; that is to make the ratio of population 
 to rateable value a basis for aid from a central fund, for th& 
 expenses of public health and lighting. Broadly speaking, th^ 
 
needs of each area for most local expenses (other than street 
 maintenance proper) vary normally as its population. 
 
 The principle of the Equalisation Bill is to create a Municipal 
 Common Fund, by means of an equal levy of a sixpenny rate on 
 rateable value, and to make out of it grants to local sanitary 
 authorities in aid of the heads of expense which concern the public 
 health of the metropolis as a whole. In these expenses will be 
 included, in effect, the bulk of the charges above summarised under 
 the head of sanitation and local sewers or lighting, as well as a 
 large part of the expenses included under the head of " scavenging 
 street maintenance," to which there would fall to be added a 
 proportion of the establishment and other general charges. The 
 total of these figures may be put at something over a million. 
 The grants in aid (amounting in all to £840,000) are to be calculated 
 in proportion to the population of sanitary districts — on the theory 
 that, as already stated, the municipal necessities of local iarea.s for 
 the purposes which touch the public health are broadly propor- 
 tionate to their excess of population and their deficiency of rateable 
 wealth. As in the areas under Schedule B of the Act of 1855, the 
 Districts Boards are the sanitary authorities, they will necessarily 
 be the unit to receive any grant ; but they will be bound to distribute 
 their total grant among their constituent areas in proportion again 
 to their relative populations. The sixpenny rate is not intended 
 to be really levied. It is only a basis for calculation, and against 
 it the local grants will be set off. The balances, as they are shown 
 in the Table annexed, will then be paid or called for as the case 
 may be. Other proposals of great value as to the separation of 
 the whole equalisation accounts from the county rate, and the 
 prescribing of a clear and intelligible form for demand notes and 
 rate papers, are included in the bill; and their effect will be to 
 provide a new and important check upon any tendency to extrava- 
 gant expenditure by any of the various local bodies. The practical 
 effect is to relieve the areas where the municipal needs and the 
 pressure of the health and lighting charges are greatest, by con- 
 tributions from the areas where there is a high average of rateable 
 value per head. 
 
 It remains to note one thing which has caused much miscon- 
 ception. This Bill, being only one stage of a large reform, deals 
 with one class of local burdens only. It does not, for example, 
 touch the inequalities arising from the undistributed balance of 
 Poor Law, whether for outdoor relief or otherwise. It does not 
 deal with the varying charge of the Local Debt, which must be 
 dealt with, if at all, in an entirely different way. It leaves 
 untouched a considerable balance of street and establishment and 
 other charges included in the Vestry General Rate — as well as the 
 Libraries, Baths, and other local levies. It does not solve the 
 City problems. It leaves aside the questions which arise as to 
 compounding allowances, empties, and cost of collection generally. 
 As to all these, the way is open for further proposals, for which 
 the present Bill has, at least, prepared the way. 
 
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