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Author: 
 
 Fabian research 
 
 department 
 
 e: 
 
 How to pay for the war 
 
 Place: 
 
 estminster 
 
 lJ3TG 
 
 [1916] 
 
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 PRESERVATION DIVISION 
 
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 ftUSIMESS 
 
 ^D203.5 
 F112 
 
 Fabian research department. 
 
 How to pay for the war: being ideas offered to the chan- 
 cellor of the Exchequer by the Fabian research department. 
 Ed. by Sidney Webb. Westminster, The Fabian society; 
 London, G. Allen and Unwin, limited [1916] 
 
 XV, 278 p. 22i cm. 
 
 CJoNTENTS.— The development of the Post office.— A public service of 
 railway and canal transport.— The nationalisation of the coal sup- 
 ply._A state Insurance department.— A revolution in the income 
 tax. — Index. 
 
 1 European war. 1914-1918— Finance— Gt. Brit. 2. Finance— Gt. 
 BrSr 3. Postal service— Ot. Brit. 4. Government ownership. 5. In- 
 come tax— Gt. Brit. i. Webb, Sidney. 1859- ' ^ « 7 ed. ii. Title. 
 
 Library of Congress 
 
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 THE LIBRARIES 
 
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 ^ME^kit^taigti^i^S»^M& 
 
 i^a^^Ujd 
 
 HOW TO PAY FOR THE WAR 
 
HOW TO PAY FOR THE WAR : 
 
 First published J uly 1916 
 
 BEING IDEAS OFFERED TO 
 THE CHANCELLOR OF THE 
 EXCHEQUER BY THE FABIAN 
 RESEARCH DEPARTMENT. 
 EDITED BY SIDNEY WEBB. 
 
 All rights reset ved 
 
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 PUBLISHED BY THE FABIAN 
 SOCIETY AT THE FABIAN BOOK- 
 SHOP, 25 TOTHILL STREET,. 
 WESTMINSTER ; AND BY GEORGE 
 ALLEN AND UNWIN, LIMITED, 40 
 MUSEUM STREET, LONDON, W.C. 
 
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 INTRODUCTION 
 
 This volutne is the outcome of a Comtnittee of the Fabian 
 Research Department^ and the practice of the Department is 
 to leave its investigators a free hand^ not assuming any 
 responsibility for their conclusions. To the large number of 
 friends in different branches of administration who have lent 
 their help on points within their own experience^ but whose 
 names cannot conveniently be recorded, our warmest thanks 
 are tendered. No one contributor is responsible for any part 
 of the volume ; but among those who have co-operated in its 
 production are : 
 
 ROBERT PAGE ARNOT, 
 JAMES BACON. 
 G. P. B LIZARD. 
 
 EMIL DA VIES. 
 W. GILLIES. 
 J. W. NIXON. 
 
 SIDNEY WEBB. 
 
 To many people the title of this book will suggest a con- 
 sideration of how to raise money to carry on the war. 
 That immediate problem of the Chancellor of the Exchequer 
 is not the one here dealt with. Hard though it may be at 
 the moment to believe it, this war, like others, will presently 
 come somehow to an end ; and the various States will then 
 have the task of " paying the bill." The following pages 
 contain some suggestions — not a complete programme — as 
 to how, in the United Kingdom, the financial burden may 
 be borne. 
 
 When the war is concluded our financial difficulties 
 will, in a sense, begin. A National Debt of three or four 
 thousand million pounds will have to be dealt with, in 
 addition to the new charges for war pensions, and, unfor- 
 tunately, also increased provision for defensive armaments. 
 Even when Peace is concluded, it will be long before the 
 daily Government expenditure can be reduced to the sum 
 to which we must accustom ourselves as the future normal. 
 It is, to say the least, unlikely that we can secure, against 
 the outbreak of another great war, any guarantee on which 
 it would be prudent to rely. Nothing would be more 
 dangerous than for the nation to be caught by such a war 
 whilst still hampered by so large a public debt. For the 
 same reasons that will compel us to maintain in efficiency a 
 powerful navy, an equally effective " air fleet " and at least 
 the framework of a continental army, we must at once 
 arrange to repay to the investors a considerable portion of 
 the millions that we shall have borrowed. The Sinking 
 
 V 
 
VI 
 
 How to Pay for the War 
 
 Fund of I per cent, of which Mr. McKenna has spoken, is 
 quite inadequate. Within the first decade after Peace, it is 
 held by some competent authorities, the Government ought, 
 merely as a measure of national security — as a means of 
 defence if we should unhappily be again involved in war-^ 
 to repay one-third of the " dead-weight debt." 
 
 It is to this problem of how, after the Peace, to arrange 
 for the redemption of the colossal War Debt, and how to 
 raise the necessary revenue to meet a Government expendi- 
 ture that is never likely to be less than four hundred millions 
 a year, without crippling industry, without lowering the 
 Standard of Life and without hampering individual enterprise, 
 that we have to address ourselves. 
 
 We make no suggestions of new or " fancy " taxes. We 
 have no desire to join the crowd, by whom every Chancellor 
 of the Exchequer is besieged, of ingenuous projectors of 
 taxes on cats, on advertisements, on titles or peerages, on 
 changes of name or fancy addresses of residences. The usual 
 answer to all these projectors — who innocently ignore the 
 fact that the same proposals have been made annually for 
 half a century — is that whilst they might yield a few 
 hundred thousands a year, or taken together, even con- 
 ceivably a few millions a year, no such sum is worth the 
 cost and trouble and annoyance that such taxes inevitably 
 cause. At this juncture there is an even shorter answer to 
 all such "fancy" taxes. They might conceivably be useful 
 to meet a deficit of a million or two. They are practically 
 worthless when what is in question is how to find hundreds 
 of millions. 
 
 Much the same answer has to be made to those — 
 whether or not frankly Protectionist in aim — who clamour 
 for increased Customs Duties, either on some specified 
 articles only, or on ** manufactured " goods as such, or on all 
 imports. Whatever ulterior purpose may be served by such 
 a Customs Tariff, with its drawbacks of raising prices to the 
 consumers, putting an unnecessary toll of profit into the 
 pockets of some capitalist employers to the detriment of 
 
 ^•^^ 
 
 Introduction 
 
 vu 
 
 others and diminishing trade all round, one thing is clear, 
 namely that the amount of revenue that it would yield is 
 quite insufficient for the need. We might, by a so-called 
 "scientific tariff," get lO millions of additional revenue ; we 
 might possibly get 20 millions ; at great cost and loss of 
 business we might conceivably get 50 millions. But not 
 even the most ardent advocate of additional Customs Duties 
 can show us how to produce, by a Tariff, some hundreds of 
 
 millions. 
 
 But we have a further objection to all these proposals. 
 We do not believe that the right way to bear the burden is 
 further to tax either the producers in the course of their 
 production or the consumers in respect of what they consume. 
 We need, on the contrary, rather to reduce these charges. 
 There is already too much toll taken on the necessaries of 
 life. Our manufacturers are already too much hampered in 
 their production. We shall not increase our power of 
 bearing the new burdens by taxing either the food of our 
 working people or the materials and incidental components 
 required by our producers. 
 
 We suggest, in fact, that the only effective way of 
 meeting the new burdens is, not by increasing imposts but 
 by making the nation as a whole more productive. The 
 nation can no more pay the cost of the war merely by a 
 manipulation of taxes than Mr. Micawber could discharge a 
 debt by writing an lOU. The only real way to pay for 
 the war is to replace, by new construction, the material 
 wealth that has been destroyed. The only way to do this 
 without lessening the amount that we annually consume is 
 actually to increase the amount of commodities and services 
 that we annually produce. What the community has now 
 to consider is not how to tax but how to inc. ease the 
 national production. 
 
 It is plain that such an increase of production of 
 commodities and services is within our reach. There is, 
 first, the possibility of augmenting the power of the human 
 factor. In an ultimate analysis, we have no means of 
 
VIU 
 
 How to Pay for the War 
 
 producing except by the physical and mental capacity of 
 our people ; and our production is very definitely restricted 
 by the narrow limits of this capacity. If we chose, as a 
 nation, to abolish the toll of preventable disease and pre- 
 mature death, to develop to the utmost the physique and 
 intelligence of all our rising generation, and to provide the 
 best possible instruction and education for the whole nation 
 instead of only for a favoured few, this country could, to put 
 it moderately, easily double its present output of commodities 
 and services, and therefore its aggregate wealth production. 
 At present we throw away half our productive capacity 
 through preventable disease, through death before the 
 normal term, through leaving faculties unawakened and 
 hands untrained, and through sheer ignorance. But it is 
 not our purpose in this volume to insist on the necessity for 
 better care of our infants and children, improved measures 
 of Public Health, or increased physical and mental training 
 of our youth. It will be evident that a large increase in 
 public expenditure along these lines is the truest national 
 thrift, furnishing, perhaps, the most important of all the 
 means of paying for the war. 
 
 The second method of increasing national production 
 is by better organisation. We do not pretend to show how 
 each industry might improve its own processes, so as to 
 become more efficient. But there are certain common 
 services upon which all businesses depend. At present, 
 whilst we produce very successfully, we waste enormously in 
 the way we handle what we have produced. It is literally 
 true that it usually costs more to sell and distribute the 
 commodity than to make it. A quarter of a century ago 
 the striking fact was revealed by the then Chancellor of the 
 Exchequer that the profits taken by the directors and 
 capitalists in distribution and transport, and actually returned 
 for Income Tax, were then already twice as great as those 
 of the proprietors and managers in all the great manu- 
 facturing and productive industries.^ They have since 
 ' Goschen's Budget Speech, nth April 1892. 
 
 Introduction 
 
 IX 
 
 been greatly increased. It is on these common services, now 
 so heavily loaded with unnecessary charges, that the success 
 of our production depends. These are the real " key indus- 
 tries," without which the nation's industrial life cannot be 
 maintained. Unless manufacturers can get cheap and 
 speedy and uninterrupted communication and transport, they 
 are as much hampered in their work as if they were taxed. 
 Unless they can rely on a continuous supply of coal at a 
 constant price, their enterprise is checked. Our main 
 proposition is that, instead of taxing production more than at 
 present, we should meet the burdens of the war by untaxing it. 
 We propose that the Government should give to our 
 producers all over the kingdom greatly improved services of 
 communication and transport at lower rates than at present ; 
 and guarantee them an uninterrupted supply of coal at a 
 definitely fixed price, without risk of increase. What we 
 suggest is that one of the most effective ways of meeting the 
 new burdens is to convert our present profit-seeking railways, 
 our decrepit canals, and our somewhat somnolent Post 
 Office into an efficient Public Service of Communications 
 and Transport. We seek to show that this can be done 
 without confiscation, without expense to the State, and 
 actually with financial advantage to the Chancellor of the 
 Exchequer. In the same way we examine the conditions 
 under which the nation now obtains its coal ; and we show 
 that a Government Coal Department could, with actual 
 profit to the Exchequer, furnish every industrial user with 
 coal at not more than pre-war prices, guarantee an un- 
 interrupted supply without risk of increase of price, meet the 
 demands of the export trade, and give every householder in 
 the kinsrdom the boon of coal at a fixed and uniform 
 National Price of One Shilling per hundredweight delivered 
 to cellar, no more liable to be raised than is the penny 
 postage stamp. We propose that a large part of the burden 
 of the war should be met by the Development of the Post 
 Office, by the creation of a Public Service of Railway and 
 Canal Transport and by the Nationalisation of the Coal 
 
X 
 
 How to Pay for the War 
 
 Supply. What is needed, in short, is a more deliberately pur- 
 poseful and a more systematic organisation of the resources 
 of the community. 
 
 But the heaviest part of the burden is the necessity for 
 securing the redemption of the National Debt. All the 
 developments that we propose will, we believe, not only 
 earn easily all the interest charges that they will involve, 
 but also yield some net revenue to the Chancellor of the 
 Exchequer. But at his board there will now sit always 
 the spectre of amortisation — the necessity for redeeming 
 the colossal debt, or at least for making such substantial 
 repayments to the investor as will enable the State once 
 more to borrow freely and rapidly in case of the outbreak of 
 another war. We suggest that, if it is thought necessary, 
 for national defence, to pay off, within a decade, one-third 
 of the " dead-weight debt," a special national effort will be 
 required, in the shape of an exceptional levy of lo per 
 cent of the capital value of all property, payable by ten 
 yearly instalments, and accompanied by some equivalent 
 levy on the earned incomes of those without property, 
 except such as are earning less than a prescribed National 
 Minimum of Family Subsistence. But beyond this excep- 
 tional and transient levy, we do not think that taxes are 
 required for a Sinking Fund. We show that help may be 
 found in this connection, without detriment to any one con- 
 cerned, in the Nationalisation of Life Assurance — by the 
 merging of all the existing Companies and Societies in a 
 State Insurance Department, which should guarantee all 
 policies, existing and future ; replace the present objection- 
 able " Industrial " business (which amounts to a tax on the 
 people of 1 8 millions a year for " burial money ") by the 
 simple addition of Funeral Benefit to the Benefits already 
 provided under the National Insurance Act ; and place 
 some hundreds of millions of investments at the disposal 
 of the Chancellor of the Exchequer. What is even more 
 important, this Nationalisation of Life Assurance would 
 bring in annually for investment, as an addition to the Life 
 
 Introduction 
 
 XI 
 
 Assurance Fund, some i 5 or 20 millions a year— a steadily 
 increasing subvention that would, year after year, enable 
 War Loan Stock to the same amount to be taken out of 
 the hands of the private investor. By the end of the 
 present century the State Insurance Department might 
 well come to hold the whole of the then unredeemed public 
 debt, and be the only remaining creditor of the State. 
 
 What we offer is, without asking the taxpayer after the 
 first decade for any contribution whatsoever for this purpose, 
 nothing less than the redemption of the entire National 
 Debt, colossal though it will be— including the nominal 
 addition involved in the substitution of Government stock 
 for the bonds and shares of the railway, canal, colliery and 
 insurance companies taken over— by the end of the present 
 century. Two hundred years ago, when Sir Robert Walpole 
 was called in to devise means of meeting the indebtedness 
 left by the South Sea Bubble, he found relief for the nation 
 in dividing the burden between the Bank of England, the 
 East India Company and the South Sea Company, each of 
 which was put in a position, not only to pay the interest 
 on its allotted share, but also eventually to redeem the 
 whole liability. Somewhat in the same way we suggest 
 that provision for the repayment of the whole of the Public 
 Debt not otherwise redeemed can be undertaken jointly by 
 the Ministry of Communications, into which the Post Office, 
 along with a State Railway Department, should be developed, 
 the Government Coal Department, and the State Insurance 
 Department. We give reasons for believing that this can 
 be done without any charge on the taxpayer. 
 
 Meanwhile we suggest a revolution in the Income Tax 
 which should stop evasions and remedy the present unfair- 
 nesses, so as to enable the Chancellor of the Exchequer to 
 obtain — without interfering with either the processes or the 
 channels of trade, without hampering individual enterprise, 
 and without lowering the Standard of Life — a greatly 
 increased revenue with even less personal hardship than is 
 at present involved. We propose to do this mainly by the 
 
xn 
 
 How to Pay for the War 
 
 Introduction 
 
 Xlll 
 
 substitution, as the basis for assessment, of Family Income 
 
 for the incomes of the several members of the family by 
 
 this device adjusting the burden carefully between those 
 who have only themselves to maintain, the childless couples, 
 and the parents of children. At the same time we propose 
 to equalise and extend the graduation of the rate, so as to 
 ask the father of a family living on a salary of ^^13 i a year 
 only for id. in the pound, whilst at the other end of the 
 scale the impost on incomes over ;^ 100,000 a year would 
 rise to sixteen shillings in the pound. The raising, for 
 1 91 6-1 7, of the nominal rate to five shillings in the pound, 
 without redressing the manifold unfairnesses of the impost, 
 makes this " revolution " in the Income Tax more than ever 
 urgent. 
 
 To some people the conception of a reorganisation of 
 Great Britain, on the lines of a systematically developed 
 provision of the best possible means of communication and 
 transport, and a deliberately regulated production and dis- 
 tribution of coal — not to say the formation of a State 
 Insurance Department — will be intensely repellent. They 
 will be apprehensive of such an increase of State and 
 Municipal enterprise ; and they will resent the passing out of 
 private hands of such opportunities of profit-making. To 
 them we venture to appeal not to be hasty in the rejection 
 of these ideas. To their adoption we believe that the 
 nation must eventually come. Only by organisation can it 
 stand. What we have to do is to see that we get State and 
 Municipal enterprise without the dominance of Bureaucracy, 
 and the advantages of public — that is to say of disinterested 
 — administration without any loss of popular control. Of 
 popular control we have, indeed, in these departments none 
 to lose. Prior to the war we had no more control over our 
 transport system or over our coal supply — even now we 
 have no more over our Life Assurance — than over the tides : 
 we have in each case the option of using what we find before 
 us, or of doing without ! But what it is important for such 
 objectors to remember is that if the Government is not 
 
 permitted to adjust the burden of National Indebtedness in 
 the way that we propose — if we do not provide for the 
 redemption of the debt, as is here suggested, by the aid of 
 the railways, the coal-mines and the growing accumulations 
 of the Life Assurance Fund — some alternative way of re- 
 paying this huge sum must be discovered. That alternative, 
 we suggest, will almost certainly eventually take the form, 
 unwelcome though this will be, of direct taxation of incomes 
 and property more severe than we have ventured to propose. 
 If the debt can be paid off by a better organisation of Coal, 
 Communications and the hoarded Capital of Life Assurance, 
 without any one being a penny the poorer, would it not be 
 better to try this course ? 
 
 To those willing to consider our ideas, we would add 
 that any value that there may be in these proposals may 
 lie in their detail, and we have accordingly done our best, at 
 the risk of wearying or confusing the reader, to develop each 
 of them so as to indicate how exactly they would work. 
 We have, for this purpose, obtained such technical assistance 
 and expert advice in each case as was within our reach. In 
 such a study it is impossible to avoid errors ; and we can 
 only say that we have done our best to check and verify 
 our statements of fact, for which we have in most cases 
 cited the authorities, and to probe and weigh our assump- 
 tions and estimates, which are the most consonant with the 
 evidence that we have been able to obtain. 
 

 jgtfiHiliiiffirff li^fti iiTiili 
 
 CONTENTS 
 
 CHAPTER I 
 
 The Development of the Post Office 
 
 PAGE 
 I 
 
 CHAPTER n 
 
 A Public Service of Railway and Canal Transport 
 
 51 
 
 CHAPTER HI 
 
 The Nationalisation of the Coal Supply 
 
 113 
 
 CHAPTER IV 
 
 A State Insurance Department 
 
 181 
 
 CHAPTER V 
 
 A Revolution in the Income Tax . 
 
 219 
 
 INDEX 
 
 273 
 
 XV 
 
CHAPTER I 
 
 THE DEVELOPMENT OF THE 
 POST OFFICE 
 
 B 
 
CONTENTS 
 
 I. Introduction. 
 II. The Post Office as the Common Carrier: 
 
 (a) Systematic Revision and Simplification of Postal Rates and 
 
 Regulations. 
 (3) Adoption of the newest and most effective Apparatus and Plant. 
 {(■) Development of Special Letter Services. 
 {(i) Newspaper Delivery in Country Places. 
 (<f) Extension of the Parcel Post. 
 {/) Lower Rates for Local Delivery. 
 (^) "Collect on Delivery." 
 
 III. The Post Office as the Common Banker : 
 
 {a) The Postal Cheque System. 
 
 (d) Increase in the Rate of Interest. 
 
 (c) Development of the Banking and Remittance Business. 
 {d) The Traveller's Letter of Credit. 
 
 IV. The Post Office as the Common Debt Collector. 
 V. The Post Office as the Common Investing Agency : 
 
 (a) Safe Custody of Securities. 
 
 (d) Investments for the People. 
 
 {c) Increased Activity in obtaining Deposits. 
 
 VI. The Post Office as the Common Remittance Market of the 
 World. 
 
 VII. The Post Office as the Common Agent; 
 
 (a) Newspaper Subscriptions. 
 
 {5) Maps and Blue-books. 
 
 {c) Books and Photographs. 
 
 {d) Periodical Payments. 
 
 VIII. The Conditions of Service 
 OF Communications. 
 
 IN A fully -developed MINISTRY 
 
 IX. The Right of the Chancellor of the Exchequer to the Post 
 Office Profits : 
 
 {a) The Post Office Employees have no claim to the Post Office 
 
 Profits. 
 {6) The Customers of the Post Office have no claim to the Post 
 
 Office Profits. 
 
 X. What Increase of Revenue can be got by the Post Office 
 
 AND what is the ALTERNATIVE? 
 
 THE DEVELOPMENT 
 
 OF THE 
 
 POST OFFICE 
 
 I. Introduction 
 
 The British Post Office is far and away the biggest business 
 undertaking in the British Empire ; and it is none the less 
 a business enterprise because it is a Government Department. 
 It began with no capital, and (with the exception of 32 
 millions exclusively on telegraph and telephone account) it 
 has no debt, although it now possesses many million pounds' 
 worth of land, buildings and plant ; and the enterprise, as a 
 whole, which thus represents an extremely valuable national 
 piece of saving, could certainly be sold, any day, on the 
 basis of the annual profits, to an American or other capitalist 
 syndicate for ;^ 100,000,000. It began by merely carrying 
 a few letters for the King. It now performs dozens of 
 different services for the use and convenience of the public, 
 which we willingly buy at the price of nearly ;£^3 2,000,000 
 annually ; and no single purchaser at the Post Office shop 
 ever doubts that he gets good value in return for his ex- 
 penditure. Thus the ;6"3 2,000,000 of Post Office receipts 
 represents (unlike the revenue from Income Tax), not a 
 deduction from our private wealth diminishing the amount 
 of commodities and services that the individual can enjoy, 
 but (like our purchases of clothes and books) merely an 
 exchange in which the buyer gets what he considers worth 
 the money. T/ie Post Office is therefore {unlike the Custom 
 House) a producer of utilities, and {unlike our Public Health 
 
 3 
 
 ii 
 
4 The Development of the Post Office 
 
 Departments) actually of saleable utilities having a price in 
 the market. The more extensive its business — measured, of 
 course, by the amount of service rendered to the public, not 
 by the price that is exacted for this service — the greater is 
 its productivity. What is here suggested is that the useful 
 work that the Post Office does for the public can, at relatively 
 low cost and with an immediate response in willing demand 
 — representing an addition to the net revenue — be greatly 
 increased. It is in this sense that we advocate the develop- 
 ment of the Post Office as a real increase in national 
 productivity. 
 
 II. The Post Office as the Common Carrier 
 
 The British Post Office began its work as a carrier of 
 communications, and it is open to the criticism that, whilst 
 it performs this service, now widened so as to include every- 
 body's communications, very admirably — perhaps on the 
 whole as well as any other postal administration in the 
 world — it has been unduly slow to utilise the immense and 
 ubiquitous organisation of its carrying service for new 
 developments. With 25,000 post offices in the United 
 Kingdom, and over 250,000 postal employees, there is 
 necessarily a large amount of time and space, at one place 
 or another, which is not fully utilised. Many post offices 
 stand part of the day empty. Many postmen trudge great 
 distances carrying very few letters. Many daily reports 
 have to be filled up for very small sums. An increase in 
 the variety of business, even more than an increase in 
 aggregate revenue, not only means an increase in the 
 amount of service rendered to the public, and thus in the 
 gross productivity of the Department, but also, in so far as 
 new kinds of business fall at different periods or places, 
 almost always a rise in the " load factor, " and thus, a 
 diminution in the percentage of working costs to gross 
 receipts. It ought to mean, also, a reduction in the 
 percentage of central administrative and other standing 
 
 The Post Office as the Common Carrier 5 
 
 charges, and thus, in more than one way, an increase in 
 net revenue. 
 
 id) Systematic Revision and Simplification of Postal Rates 
 
 We say nothing here of the obvious advantages to be 
 gained from a revision of postal charges, and especially of 
 postal regulations (including .those for the telegraph and 
 telephone), in the direction of simplicity and uniformity. 
 If the Post Office were looked at frankly as a business, 
 which aimed always at attracting customers, we should 
 recognise the commercial value of making its regulations 
 positively alluring in their simplicity ; and of effecting every 
 reduction of charge that would lead to a prompt increase in 
 the trade. We need not repeat the striking arguments of 
 the late Sir J. Henniker Heaton. The penny postage to 
 the British Empire and the United States has quickly led 
 to greatly increased business, and some incidental gains, 
 although the profits have not yet attained to as high a 
 figure as was latterly reached at the old rate. Would not 
 penny postage to the whole world have many public 
 advantages ? 
 
 {h) Adoption of the newest and most effective Apparatus 
 
 and Plant 
 
 Nor is this either the time or the place to dwell upon 
 the importance, in so large a business, of having the best 
 appliances. The British Post Office is strangely slow to 
 adopt underground pneumatic or other underground tubes 
 for town transit (one at last under construction in London), 
 with the result that the vast bulk of the mails are still 
 dragged through the crowded streets of our great cities by 
 the horse vans of three-quarters of a century ago, — even 
 motor traction being still an exception in most places. 
 Because it will not multiply the automatic machines for 
 the delivery of stamps and post-cards, as yet installed in 
 only a few offices, the Post Office has unnecessarily to 
 
6 The Development of the Post Office 
 
 employ more desk-room and counter-clerks, and waste the 
 time of the public kept waiting in the more crowded post 
 offices to be served with single stamps.^ Because it cannot 
 or will not arrange with the railway companies (if that is 
 the reason), it refuses (except in the few cases in which 
 there are travelling post offices) to put letter-boxes on the 
 trains, as nearly all other countries do ; and fails to utilise 
 railway stations as post offices, and even as places for the 
 sale, by automatic machines, of stamps and post-cards. 
 Because of Treasury parsimony, it denies the public the 
 opportunitfes, offered in every other country at every large 
 post office, of writing the letters that it stands waiting to 
 carry ; and the Post Office, instead of being as it usually is 
 elsewhere, the largest and most prominent building in each 
 neighbourhood, is often only a shabby office hidden in a 
 back street." Because it is not allowed to stipulate for 
 additional concessions to the public, whenever a railway 
 company comes to ask Parliament for new powers, the 
 British Post Office submits, not only to failure to utilise 
 for its purposes the railway stations and trains, but also to 
 a continuance of such extortionate terms for the railway 
 conveyance of parcels (55 per cent of the gross receipts 
 
 ^ In other European countries these automatic machines deliver, for the 
 equivalent of a penny coin, either one penny or two halfpenny stamps, or two 
 halfpenny post-cards. They have the great advantage of selling stamps all night 
 and on Sundays, when post offices are closed. Such machines might be installed 
 on steamships and corridor trains, at railway stations and (to relieve the counter- 
 clerks) inside and outside offices which tend to be crowded. The District and 
 Tube Railways have found such machmes for delivering railway tickets very 
 helpful in taking pressure off the booking-office clerks, and diminishing the staff 
 required. They might eventually be combined with pillar-boxes, a line in which 
 some promising experiments have actually been tried. 
 
 * The Treasury takes the view that, because the Post Office has 2, monopoly 
 and people must make use of its services, it is unnecessary to incur the expense 
 of prominent buildings in main thoroughfares. This is to ignore the fact that 
 the extent to which people use the Post Office is not by any means fixed and 
 invariable. More telegrams will be sent, and the public telephone will be more 
 frequently used, more deposits will reach the Post Office Savings Bank, and more 
 parcels will be brought to the post, if the offices are more easily accessible, and 
 more ostentatiously brought to our notice. If it pays a Monopolist Railway 
 Company, or a State Railway Department to advertise, it ought also to pay the 
 Post Office. 
 
 The Post Office as the Common Carrier 7 
 
 from all parcels go to the railway companies, under an 
 agreement which has not been revised for 33 years, though 
 the terms of the Act of 1882 were due for revision in 1907) 
 that it finds it is positively cheaper to transmit them 
 hundreds of miles by coach on the road — as if there had 
 been no cheapening of the cost of conveyance during a 
 whole century ! Because it will not anywhere run its own 
 fast ships (as it actually once did), it has to put up with 
 whatever charges the capitalist steamship lines think fit to 
 exact.^ Because, unlike the United States and nearly all 
 other big postal administrations, the British Post Office is 
 not allowed to print its own stamps, post-cards, postal notes, 
 money orders, telegraph forms, and innumerable other printed 
 matter — of which it is one of the very largest consumers in 
 the world, spending a quarter of a million a year, with an 
 assured, continuous and regular demand — it has to pay a 
 large unnecessary tribute to profit to the great printing 
 firms, which know, we may easily believe, how not to 
 destroy their own profits by any lack of consultation before 
 sending in their tenders. 
 
 All these obvious improvements, which any business 
 man would suggest, and many others of similar nature, 
 involve a certain amount of capital outlay, which any 
 capitalist undertaking of like magnitude and potentialities 
 would not hesitate to incur for the sake of future increase 
 of profit. The British Post Office appears always to have 
 been hampered in such matters by the practice of the 
 Treasury of insisting that — apart from the telegraph and 
 telephone purchase, and the construction of the new London 
 " tube " — all improvements (not being lands purchased or the 
 erection of buildings) should be paid for out of the Post 
 
 ^ The Italian, Belgian, French, German and Swedish Governments run their 
 own lines of steamers in particular places, their post offices thus making themselves 
 independent of the (largely British) shipowners. It is not suggested that the 
 Post Office should, merely for the sake of the mails, run steamships everywhere ; 
 but only that it should be prepared to run its own line of steamships whenever it 
 cannot get such terms for carrying the mails as it thinks moderate. The Admiralty 
 might (in peace times) possibly lend fast despatch ships for such postal service. 
 
8 
 
 The Development of the Post Office 
 
 Office receipts of the year ; and then of offering resistance 
 to any project which involves a diminution in the Post 
 Office net revenue for the year ! No business would 
 advance if it could not make outlays on capital account, 
 without regard to the immediate effect on net revenue. A 
 wisely adventurous expenditure on Capital Account is 
 indispensable if the British Post Office is to become even as 
 profitable to the Chancellor of the Exchequer, let alone as 
 useful to the public, as it might be.^ 
 
 {c) Developfuent of Special Letter Services 
 
 What the British Post Office rightly keeps mainly in 
 view is the progressive improvement of its popular " general 
 delivery " of letters, which has made it the most profitable 
 Post Office in the world. But there seems no reason why 
 it should not adopt the additional developments — especially 
 those that have been successful in other countries — of 
 special services for those who will gladly pay more than the 
 cost of such extra conveniences. This additional revenue 
 the British Post Office makes very little effort to obtain. 
 For instance, the whole system of Express delivery for a 
 special fee is, in this country, very imperfectly organised, 
 and very inadequately made known to the public. It ought 
 
 * The adhesive postage stamp was a great invention of this country ; but 
 there are signs that we can now improve upon it. It involves no small cost in 
 manufacturing the millions of stamps, and then in cancelling them. It takes 
 one man eight hours merely to cancel the stamps on 5000 newspaper packets — 
 letters are done at a greater rate — and now that "mail matter" has to be 
 handled in millions this becomes a big item. Those having to post large 
 quantities {e.g. of newspapers) and complaining that the Post Office fails to catch 
 the mail trains, will be interested to know that the United States Post Office, 
 in order to avoid the labour and delay of cancelling the stamps, sells to such 
 large customers " precancelled stamps," which are overprinted with two horizontal 
 lines between which is the name of the post office at which alone they will be 
 valid, and valid once only. The New Zealand Post Office actually sells to the 
 public self- registering franking machines, which work very satisfactorily. 
 
 Mechanical franking systems, accessible to the public (on the plan of the 
 *' penny in the slot " machines) will presently enable us to. frank our letters at 
 the moment of posting them. The British Post Office gave them a somewhat 
 perfunctory trial in 191 2, but abandoned them the same year, without explanation 
 being afforded. 
 
 The Post Office as the Common Carrier 9 
 
 to be possible in every populous place for specially stamped 
 letters — at fees adequate to repay, fully, the cost of the 
 several services — to be (i.) immediately conveyed within a 
 certain radius by special bicycling messenger ; (ii.) or sent 
 on specially by first train, and specially delivered at the 
 other end ; (iii.) delivered by special messenger after hours, 
 or in the night, or on Sundays ; (iv.) or accompanied by a 
 notification that the messenger will wait, if desired, for 
 fifteen minutes to take back an answer, which will be 
 specially transmitted back to the sender ; or (v.) for money 
 sent by money order or telegraphic money order to be 
 brought to the recipient's home (useful for invalids and 
 distant places) ; or (vi.) for a messenger to come to receive 
 a letter or parcel for transmission.^ Nearly all these services 
 have actually been started in a few places ; but they have 
 neither been made generally available, nor adequately 
 advertised. It is openly alleged, so far as London is 
 concerned, that the slackness of the Post Office has been 
 due to a tender solicitude for the rival interests of the 
 District Messenger Service Company, Limited, the business 
 of which ought to be taken over at a fair valuation. But it 
 may be that the Post Office has hesitated because it, quite 
 rightly, did not want to enlarge its staff of boys beyond the 
 number that it could eventually absorb into its service as 
 adults. Yet if the public is eager to buy these extra con- 
 veniences at fees that will cover the cost of the employ- 
 ment of grown men or women, there seems no reason why 
 the public should not be given its conveniences, and the 
 Post Office thereby increase its revenue and its profits. 
 
 ^ To name some only of the other conveniences offered elsewhere, (a) in 
 Germany, Austria and Hungary, it is possible to get an express letter delivered 
 to the addressee at any hour in the night, if he authorises it and the sender 
 specially marks the letter ; {b) New Zealand has started a «' Domestic Money 
 Order," in which the cash (up to ^'5) is brought to the house of the recipient 
 and paid over personally, for a fee of fourpence (invaluable to wives and lonely 
 settlers unable to visit the post office) ; (c) the United States issues Money 
 Orders payable at any office instead of merely at one prescribed by the sender. 
 The Dutch Post Office sells foreign postage stamps, greatly to the convenience 
 ot those having to remit a few pence. 
 
lO 
 
 The Development of the Post Office 
 
 ^ 
 
 Sir J. Henniker Heaton used to estimate that a quarter of 
 a million pounds a year could be made by these Special 
 Delivery services alone. When peace comes, and unemploy- 
 ment, it would be a valuable service if the Post Office were 
 able to enlarge its adult staff so as seriously to undertake 
 this work. A suggestion for additional revenue may also 
 be derived from the Italian Post Office, which charges a fee 
 of a halfpenny on every letter addressed to a post office to 
 be called for, this special convenience to the addressee 
 causing extra work to the department. 
 
 {d) Newspaper Delivery in Country Places 
 
 Another extension of the carrying service of the Post 
 Office, which has been extraordinarily successful on the 
 Continent, is that of newspaper delivery. We do not mean 
 the mere transmission through the post of a duly addressed 
 and stamped newspaper, although this service is performed 
 to a much greater extent by nearly every other great postal 
 administration in the world than by that of the United 
 Kingdom. What the Post Office undertakes, in many 
 European countries, is to deliver regularly one copy of any 
 periodical, without wrapper, address or stamp, to each of the 
 subscribers, according to the list of names and addresses 
 supplied. The necessary number of copies are sent in bulk 
 to each postal delivery district, and the delivering postman 
 distributes them from house to house, according to the list 
 that accompanies the parcel. For this service, repeated as 
 it is day by day, or week by week, an astonishingly low 
 charge per annum can be made, and yet an appreciable net 
 profit obtained by the Post Office. Most continental ad- 
 ministrations cut the charge so fine that they are believed 
 to make no profit out of this work. The advantage in the 
 promotion of circulation of all sorts of periodical literature, 
 in out-of-the-way and sparsely-peopled rural districts — to 
 which, in the first instance, the experiment might be confined 
 (leaving the towns to the multiplicity of private newsagents) 
 
 The Post Office as the Common Carrier 1 1 
 
 — will be at once obvious. At present the British Post 
 Office sells no " season tickets " — it makes no reduction in 
 charge for any regularly continuous use of its rural postmen. 
 Such men now go great distances to deliver one halfpenny 
 wrapper. It would surely pay to attract a continuous 
 stream, monthly, weekly or daily, bringing twelve, fifty-two 
 or three hundred payments during the year, even if each is 
 of smaller amount than that for delivery of a single paper. 
 
 {e) Extension of the Parcel Post 
 
 The Parcel Post, started in 1883, is still limited in the 
 United Kingdom to a maximum weight of 1 1 lbs. This 
 is much too low. In the United States (where the Govern- 
 ment does not own the railways) the Post Office now carries 
 up to 50 lbs. : in Germany, Switzerland and other countries 
 (where Government ownership prevails) up to as much as 
 I hundredweight (112 lbs.). 
 
 And the British Postmaster- General, always hindered 
 by the Treasury, has been unduly timid about rates. He 
 charges is. for a parcel of 11 lbs. which the German Post 
 Office will carry from Emden in North-West Germany to 
 Transylvania, at the extreme end of Austria- Hungary — 
 about twice the extreme distance in the British Isles — for 
 just half that sum. Heavier packages are charged for, on 
 the Continent, on a "zone" system, according to distance, 
 but at rates no less moderate. The British rates to other 
 countries are equally excessive. It was actually cheaper 
 (down to the outbreak of war) to send parcels to the United 
 States, and even to some parts of the British Empire, from 
 Germany than from this country. Why should we thus 
 handicap our own export trade ? 
 
 It is difficult to exaggerate the advantage which an 
 extension in weight and a cheapening in rates of the British 
 Parcel Post would bring, not only to the private customer, 
 but also to the agriculturist, the manufacturer and the 
 trader, in town as well as country, in large places as well 
 
12 
 
 The Development of the Post Office 
 
 as small. With an efficient Parcel Post, his remoteness from 
 the railway station ceases to be a drawback ; the distance at 
 which his customer lives is no longer a consideration to him. 
 He is relieved from the costly and utterly uneconomical 
 system of each little producer maintaining his own means 
 of conveyance. He is freed from subjection to a railway 
 company ; he is no longer hampered by " classification " in 
 rates ; he need fear no concession of " preference " to a trade 
 rival. The return of " empties " by rail, and their collection 
 from the distant railway station, is no longer a difficulty or a 
 prohibitive expense. 
 
 It is not that there is any widespread desire to forward 
 large consignments by post, or even to send regularly heavy 
 packages where other means of conveyance are available. 
 Even in Germany and Switzerland, it is reported, only a 
 small proportion of the total Parcel Post-Sunder 5 per cent 
 — is in parcels over about 1 1 lbs. But the convenience, 
 with regard to any ordinary parcel, of not being restricted 
 in weight, of being able to send at all times and seasons, of 
 being able, without question, to consign packages to any 
 place whatsoever, and of being able to rely on security and 
 on punctuality in delivery, are beyond dispute. The small 
 producer or trader, or the dealer not accustomed to export 
 to foreign countries, is relieved from the necessity of 
 discovering how to transmit the occasional parcel ordered 
 from a customer overseas. There is, in fact, an enormous 
 difference in convenience and simplicity between using a 
 State Parcel Post system, accessible at each of the 25,000 
 post offices, and undertaking without special instructions to 
 deliver anything anywhere, at a few definitely prescribed 
 rates, payable by stamps at the adjacent office ; and finding 
 out how to make consignments by railway and steamship, 
 each separate place requiring a different route, different 
 instructions, a different rate or agglomeration of rates, and 
 a payment which it is often as inconvenient to render to a 
 distant office as it is to discover how much it amounts to. 
 It is suggested that no small part of the great development 
 
 The Post Office as the Common Carrier 13 
 
 of German trade has been due to its wisely liberal Parcel 
 Post. The German Post Office cames annually more parcels 
 than all the rest of the European Post Offices {our own 
 included) put together. A large part of this service un- 
 doubtedly represents business that would not otherwise have 
 been transacted. 
 
 It is suggested that the Treasury should no longer 
 refuse leave to the Postmaster -General to decide (a) to 
 extend the limit of weight for parcels, perhaps even to 
 I cwt. ; ib) that whilst the rate charged for those up to 14, 
 or perhaps 28 lbs., should remain uniform for all distances 
 within the British Isles, parcels from 14 or 28 lbs. up to 
 I cwt. should be charged for on a simple zone system ; [c) 
 that the rates should be reduced to the German level of 6d. 
 for II or perhaps 14 lbs., and the others in proportion; 
 id) that it might be stipulated, to begin with, that parcels 
 over the present limit of 1 1 lbs. (which might well be 
 extended to 14 lbs.) ^ would not necessarily be delivered on 
 the day of arrival at the distributing office, but would go, 
 any time within the next two days, by the first carrier- 
 tricycle or postal cart that the office has available ; and that 
 parcels over 11 lbs. (or 14 lbs.) would not necessarily be 
 collected or transmitted by the rural postman on foot 
 journeys, but should either be handed in to a post office or 
 would be collected by carrier-tricycle or postal cart or motor 
 van on notice being given ; {e) that all railway, tramway 
 and motor omnibus administrations within the British Isles 
 be put under definite obligation to carry, when required. 
 Post Office parcels at prescribed rates at least as low as the 
 lowest charged for any articles to the most favoured private 
 customer ; and {f) that the parcel rates to places beyond 
 sea be revised and simplified, so as to be at least as low 
 and convenient as those charged in any other country. 
 
 ^ Thus, there need be no risk of increased delay on parcels within the 
 present limits, and therefore no interference with any trade that has grown up 
 m perishable articles. Experience would soon show whether the new service 
 was equally available for produce of particular kinds. 
 
14 
 
 The Development of the Post Office 
 
 {/) Lower Rates for Local Delivery 
 
 It is often made a ground of reproach to the British 
 Post Office that it does not, like those of France, Switzerland 
 and other countries, charge a lower rate for letters to be 
 delivered within the same city or postal district, which 
 involve nothing beyond sorting and redistribution," without 
 conveyance by rail. In London, at least, such a cheap local 
 service could easily be afforded. But the policy of the 
 British Post Office in sticking to the universal penny rate 
 may be preferable as regards ordinary letters. There is less 
 ground for this uniformity with regard to parcels, especially 
 if the limit of weight is enlarged, and a zone tariff by 
 distance introduced for the larger parcels. The case for a 
 lower rate for parcels merely distributed within the same 
 postal district is very strong. A uniform threepenny charge 
 for parcels up to 14 lbs. posted and delivered within postal 
 London would prove immensely useful, and probably im- 
 mediately profitable — even if the Post Office " took over " 
 the two or three large carriers who do most of this service. 
 
 {£) " Collect on Delivery " 
 
 There is, however, a further reform that would do more 
 than anything else to promote the development of the 
 Parcel Post, and both facilitate trade and add to the 
 convenience of the public. This is the system of collecting, 
 on the delivery of the parcel, the amount marked upon it. 
 At present the British Post Office will deliver a parcel ; 
 unlike every other Post Office in the world, it will not bring 
 back the price ! The refusal of the Government (at the 
 bidding of a few timid shopkeepers, who fear to lose their 
 present advantages) to adopt the system of " C.O.D." 
 (called sometimes " Trade Charges," or " Cash on Delivery," 
 or in India " V.P.P." or "value payable by post") puts a 
 greater limitation on trade than can easily be believed. In 
 
 The Post Office as the Common Carrier 15 
 
 practically all the other nations of Europe, in the United 
 States, in India and nearly all parts of the British Empire, 
 goods can be ordered from a distant trader, whether in the 
 same country or not {except that he must not be residing in 
 this country), without the trouble and cost of sending him in 
 advance the price (the amount of which is often unknown), 
 merely by instructing him to send the parcel " C.O.D." or 
 " V.P.P." The agricultural producer, large or small, can 
 develop, independently of the charges and commissions of 
 the greatly suspected " market," a regular trade in butter and 
 eggs, chickens and ducks, vegetables and fruit, at profitable 
 retail prices ; the manufacturer or trader in any part of the 
 nation can advertise his own speciality to the public, and 
 execute orders direct ; the publisher or bookseller gets into 
 direct touch with his customers all over the world ; the 
 shopkeepers, both in large towns and small, find a profitable 
 new branch of business in the orders that pour in by post. 
 It is said, that throughout the whole world in which post 
 offices exist, it is only the British and the Chinese who are 
 denied these advantages ! To every other Post Office 
 than our own the system appears simple enough : it is 
 indeed no more than a combination of carrying a registered 
 letter or parcel, and taking back a money order for the sum 
 named. Whilst being a profitable addition to the British 
 Post Office remittance business, bringing in a new stream of 
 commission on the amounts remitted, at little increase in the 
 cost of service, the system effects a real economy to the 
 person needing to remit small sums. The steady expansion 
 in the Parcel Post business that it would produce ought to be 
 specially profitable, in that, by opening up new channels of 
 trade, it would tend probably to an increase rather off the 
 present main centres and lines of traffic, and thus raise the 
 load factor. What is even more important is that it would 
 enable innumerable small business transactions to be made that 
 would otherwise, in many instances, not have taken place. The 
 British Post Office not only refuses to us (except from some 
 of our smaller colonies) the advantage of receiving parcels 
 
i6 
 
 The Development of the Post Office 
 
 " C.O.D. " from other countries : with a few exceptions,^ it 
 will not even allow our traders, by sending parcels C.O.D. 
 to their customers abroad, to take advantage of the service 
 in other countries ! This is another serious handicap on 
 British exports. 
 
 But enough has perhaps been said of the opportunities 
 for business neglected by our Chief Common Carrier. We 
 pass to 
 
 III. The Post Office as the Common Banker 
 
 The British Postmaster-General is the biggest banker in 
 the world, but he is also the most cramped in his operations, 
 and the most limited in the services that he renders to his 
 customers. In the Post Office Savings Bank — together 
 with the so-called Trustee Savings Banks, which are now 
 equally under Government supervision and constitute 
 virtually an allied department — there are now over 
 ;f 2 60,000,000 of deposits, repayable on demand, being 
 about one-fifth of all the banking deposits in the whole 
 kingdom.^ This banking business has become extremely 
 profitable to the Government, which gets the use of the 
 huge sum lent by the poorer classes at little over 2 per cent 
 interest, as compared with 4^ or 5 per cent which it now 
 pays to its capitalist creditors. But owing to the jealousy 
 of the capitalist banks, which do not like this Government 
 competitor, the Postmaster-General is checked at every turn 
 
 ^ We are permitted to send parcels C.O.D. to the West Indian Colonies; 
 to Egypt, Cyprus, Gibraltar, Malta, and Morocco ; to Hongkong and Sarawak, 
 to Rhodesia and Nyasaland, to P'iji and the Gambia, to the Straits Settlements 
 and the Seychelles — but not to Australia, New Zealand, Canada, the South 
 African Union or India (although these have the system in force within their own 
 areas) ; nor yet to any Foreign Country — as if to discourage our export trade — 
 although Foreign Countries all develop the system to the utmost. 
 
 2 The Trustee Savings Banks now have 72 millions of deposits, held 
 by two million depositors. The Post Office Savings Bank alone has 190 
 million pounds of deposits, estimated to be held by over nine million separate 
 depositors. The next largest bank in the United Kingdom is the London City 
 and Midland which has 147 million pounds of deposits, which it is estimated 
 are held by fewer than a quarter of a million separate depositors. 
 
 The Post Office as the Common Banker 1 7 
 
 in expanding his business in such a way as to increase the 
 services to the public, and at the same time earn a larger 
 profit. In the bank kept by the Postmaster-General no one 
 is allowed to deposit less than an even shilling. No one 
 (other than a Trade Unipn, Friendly or Charitable Society 
 etc.) is allowed (why?) to deposit more than £^o\n any one 
 year. No one (with similar exceptions) is allowed to 
 increase the balance to his credit above ;£^200. The 
 Postmaster-General himself complains that he is steadily 
 losing business to the extent of ^100,000 a year by 
 transfers to other Savings Banks not subject to this 
 ridiculous limit. (Imagine any other banker arbitrarily 
 limiting the amount deposited with him !) These absurd 
 restrictions have been temporarily suspended for the 
 duration of the war. They should be forthwith definitely 
 abolished.^ 
 
 {a) The Postal Cheque System . 
 
 No one having an account with the Postmaster-General 
 as banker is allowed to draw a cheque upon his account, 
 as he would on a current account with any other banker. 
 Ever since the last century Post Offices elsewhere have 
 given their customers this convenience. In Austria- 
 Hungary, for instance, since 1896, any depositor having a 
 balance of not less than £\ may obtain a cheque-book, by 
 means of which he can draw against his account, and thus 
 pay his bills by cheques for any amount up to ;£^500. 
 Any one wishing to make a payment to him may pay it in 
 
 ^ Moreover, all sorts of restrictions — unknown to an ordinary banker — are 
 placed on what may be paid in. A Money Order will only be accepted as a 
 deposit at the particular post office at which it is made payable, though any other 
 banker will accept it anywhere. Scotch cheques are not accepted in England 
 and Wales (though they are in Ireland). Scotch banknotes (being apparently 
 worse than cheques?) are accepted in Scotland only, and Irish banknotes in 
 Ireland only. Cheques on banks in the Channel Islands and the Isle of Man 
 are accepted only in those places. Cheques on foreign banks are refused every- 
 where. No coupons or dividend warrants are accepted. Bills of Exchange, even 
 if payable on demand or at sight, are refused. Why should not the Postmaster- 
 General accept all these lawful forms of currency for collection," like any other 
 banker? ^ 
 
i8 
 
 The Development of the Post Office 
 
 \ 
 
 to his credit at any post office. He is advised by post of 
 every amount debited and credited to his account. An 
 even cheaper way of making payments is by mere transfer 
 from one account to another. This is effected by filling up 
 a treble transfer card (these are supplied in books at a 
 halfpenny each) ; one part being handed in at any post 
 office ; the second part, which the Post Office stamps, 
 serves as a receipt ; and the third part is available for 
 sending, free of postage, to the person to whom the payment 
 is to be made, as notification that the sum has been placed 
 to his credit. 
 
 But this extended use of the Post Office Savings Bank 
 is even more useful to societies of all kinds, and their 
 members, than it is to individuals. In Austria, Hungary, 
 Bosnia, Herzegovina, Germany, Switzerland, Belgium, 
 Luxemburg and Japan any member of a society allowed by 
 law, such as a Trade Union or Friendly Society, Insurance 
 Office or other association, can pay his subscription, whether 
 large or small, weekly or annually, at any post office in the 
 kingdom, without charge to either society or member. The 
 amount is simply credited to the account of the society ; 
 and the Central Post Office supplies the society daily with a 
 list of the amounts paid in to its credit on the day before 
 yesterday at all the post offices in the kingdom, with the 
 names and addresses of the payers — thus saving all the 
 buying of postal orders, all the despatch of letters, all the 
 burdensome opening and sorting at the head office of 
 thousands of communications, and all the risk of loss and 
 mistake. Such a system would save literally thousands of 
 pounds a year to many of our large Friendly Societies and 
 similar organisations. The Post Office elsewhere gets the 
 profit of handling this constant stream of deposits. Our 
 Post Office refuses it. 
 
 In Austria all societies of every kind, practically all 
 business firms large or small, and many thousands of heads 
 of households, rich or poor, use this Post Office banking 
 system, of which the transactions run into (literally) thousands 
 
 The Post Office as the Common Banker 19 
 
 of millions of pounds annually ; because (unlike any other 
 bank) it puts them all in direct financial communication 
 with practically every other depositor in Austria — ^just as 
 the Government telephone puts us in speaking communica- 
 tion with every other telephone user. The same system 
 has been adopted in Switzerland (1906), Germany (1909) 
 and Belgium (19 13); and an international agreement, 
 concluded in 1914, makes all these countries (in times of 
 peace), for postal cheques and transfers, one country only. 
 Thus, from Geneva to Memel, from Ostend to the last 
 village in Transylvania, the poorest as well as the richest 
 person enjoys the utmost facility for safe, cheap and 
 expeditious remittance. Even distant Japan — more up-to- 
 date than our own country — adopted the same system in 
 1906. In Austria the number of postal cheque accounts 
 open now reaches nearly 150,000, and the numbers in 
 Hungary and Germany are rapidly approaching 100,000 
 each. The Central European Post Offices in alliance for 
 this service, from Ostend to Serajevo, have now altogether 
 some 300,000 holders of current accounts in financial 
 intercommunication, with a yearly turnover of postal 
 cheques aggregating something like six thousand million 
 pounds sterling! This is a national and international 
 convenience, from which this country is excluded. Even 
 during 191 5, a year of war, the German postal cheque 
 business continued to increase, showing an aggregate 
 turnover of 2350 million pounds sterling in the year 
 (47 milliards of marks), being a rise of 26 per cent over 
 1914.1 
 
 It may be said that, by the adoption of the postal 
 cheque system, the British Postmaster- General would 
 
 ^^^ German Post Office receives on its postal cheque service over a 
 million pounds a year in special revenue, and spends just about half of this in 
 special expenses. It is estimated that the charges for the incidental postal 
 services would have amounted to about a third of the revenue, and that the 
 money order commission that would otherwise have been earned may amount to 
 one-seventh thereof. An additional net gain is reported, over and above the 
 additional business secured for the Post Office, of about 5 per cent of the special 
 revenue, equal to about ;^5o,ooo a year. 
 
20 
 
 The Development of the Post Office 
 
 jeopardise and diminish the profit that he now makes on 
 Money Orders and Postal Notes, and even some of the 
 revenue that is derived from stamps on cheques. But the 
 twenty years' experience of Austria, and that of the other 
 countries for shorter periods, show that the Government 
 revenue gains still more by the charges, however trifling, 
 made on the postal cheques, by the increase of the savings 
 bank deposits and by the diminution in working expenses 
 which its simpler system permits. 
 
 {U) Increase in the Rate of Interest 
 
 The Treasury compels the Postmaster-General to take 
 an unfair advantage of the depositor in the Post Office 
 Savings Bank, in refusing to allow any higher interest to 
 be paid than 2\ per cent. (In practice the interest credited 
 amounts on an average only to 2^ per cent, owing to 
 various nibblings.) ^ Such a rate may have been reasonable 
 when Consols paid only 2 J or 3 per cent ; but it has 
 become grossly unfair now that the rate at which the 
 Government borrows has nearly doubled.^ The Postmaster- 
 
 1 No interest is credited on any balance smaller than £ i ; none is credited 
 in respect of any broken calendar month (meaning, in practice, the loss of 
 between one and thirty-one days' interest at each deposit and each withdrawal) ; 
 none is credited for any excess over £200 ; any fraction of a penny is withheld 
 from the depositor. AH these nibblings from the skimpy 2\ per cent result in 
 the aggregate amount credited as interest being only 2J per cent on the average 
 aggregate balance. 
 
 2 It is sometimes objected by financial purists — usually connected with rival 
 interests — that the Post Office Savings Bank is unsound, and would, if expanded, 
 become dangerously unsound, because the Postmaster-General keeps no gold 
 reserve, and could not meet a **run." This objection, as the Post Office 
 experts rightly declare, is demonstrably invalid, alike in theory and practice. 
 The Postmaster-General, far from keeping no reserve, has at his disposal {a) the 
 quite extensive "till money" of his 25,000 post offices; {b) the Government 
 balance at the Bank of England ; (r) the daily receipts of Government revenue 
 from Customs, Excise and Taxes, which could instantly be diverted from the 
 Bank of England ; and {d) in case of need, the unlimited issue of Treasury 
 Notes or Bank of England notes, which are legal tender and have always been 
 willingly accepted even in the worst panics. But there is all the diffiirence in 
 the world between the bank of the British Government and a private capitalist 
 bank. Experience shows, in fact, that the Post Office Savings Bank is little 
 subject to " runs," even in times of panic. Withdrawals in excess of deposits 
 
 The Post Office as the Common Banker 21 
 
 General ought to be permitted to raise the rate of interest 
 to 3, if not to 4 per cent ; to accept deposits of any 
 amount, from a penny upwards ; and to remove all restric- 
 tions as to maximum deposit. 
 
 It may be said that the Post Office Savings Bank 
 allows withdrawals without notice, and (whilst it refuses 
 the convenience of cheques) keeps what are virtually 
 current accounts ; and that capitalist banks do not allow 
 interest on current accounts. It is true that the principal 
 London banks do not (except to important customers) allow 
 interest on current accounts ; but the practice is quite 
 common in provincial towns. In fact, nearly all the prin- 
 cipal London banks allow interest on current accounts of 
 specially powerful customers, and some minor banks in 
 the metropolis, and many others elsewhere, allow it to all 
 customers. Moreover, it would probably be desirable for 
 the Savings Bank to require notice, say of a week, for 
 withdrawals exceeding £^0, and of a month for withdrawals 
 exceeding £iOQQ. Such a regulation would convert the 
 account, so far as any but small sums are concerned, into a 
 deposit account ; and on deposit accounts even the British 
 banks allow interest to the humblest depositors.^ 
 
 are due, not to panic, but almost entirely to a temporary need for more currency 
 (as in the week after the outbreak of war and at normal holiday seasons) ; or 
 for investment (as on the occasion of the Second War Loan). It must be 
 remembered that withdrawals are made without notice only up to £i. For all 
 above that sum, the despatch of the withdrawals form amounts automatically to 
 a couple of days' notice. For sums over £^q a week's notice might, for greater 
 security, be stipulated for — even for sums over ;^iooo, a month's notice — but 
 it would seldom be necessary to enforce it. The introduction of the Postal 
 Cheque and Transfer systems, which would make most withdrawals — in Austria 
 and Switzerland already 60 per cent — mere transfers from one account to another, 
 would still further diminish the need for reserves. 
 
 ^ The British Post Office refuses (in its banking and remittance business, 
 though not in its postal and telegraphic business) to deal in halfpennies ; and (in 
 all departments) in farthings. It is believed to be the only Post Office in the 
 world that thus cheats its customers out of legally authorised coins of the realm. 
 It would be worth enquiry whether the consequent saving in account-keeping is 
 really worth the discredit in which this invidious practice involves the Postmaster- 
 General. The poor Irishwoman who loses two or three farthings out of the 
 money order for a few shillings remitted by her daughter in America, or the 
 man who presents a postal order made up by stamps to is. io|d., has a right to 
 
22 
 
 The Development of the Post Office 
 
 The British Government can now find the safest possible 
 investment, at all times, for practically any amount of 
 Savings Bank money, in steadily redeeming its War Loans, 
 at Ar\ or 5 per cent interest. It is financially to the 
 advantage of the Exchequer to get the largest possible 
 credit balance in the Savings Banks, even if it pays 4 per 
 cent on it. 
 
 (r) Development of the Banking and Remittance Business 
 
 What is wanted, in fact, is to get rid of the notion that 
 there is something special and exceptional in the kind of 
 bank that we choose to call a Savings Bank ; or that the 
 Government is doing any favour to " the poorer classes " in 
 running this extremely profitable business. In the United 
 Kingdom the Post Office Savings Bank, like the public 
 elementary school, was originally started, not as a proper 
 and essential function of Government, but as a work of 
 philanthropy. Like the whole development of the Local 
 Education Authority, the Post Office Savings Bank is still 
 often regarded by persons of the " upper class " as in the 
 nature of " charity," akin to Poor Relief This conception 
 has to be got rid of In other countries every class, the 
 richest as well as the poorest, uses the Post Office Bank, 
 just as it uses the other branches of the Post Office, because 
 of the public service that it renders. Thus, the whole 
 business of remittances by post need to be rehandled, and 
 to be treated not as a facility specially granted as a favour 
 to those wishing to remit small sums, but merely as a profit- 
 able incident of the largest and most widely distributed 
 banking business in the world. The Money Order and 
 the Postal Note have, indeed, already become, to a large 
 extent, merely a form of cheque. About one-fourth of all the 
 Money Orders issued in the United Kingdom, together with 
 
 feel aggrieved when he is robbed of the odd money, and told that "the Post 
 Office does not deal in halfpennies," when, at the same moment, it holds out 
 its hand for a halfpenny for the post-card by means of which the recipient 
 acknowledges receipt ! 
 
 The Post Office as the Common Banker 23 
 
 a steadily growing proportion of the Postal Notes, are now 
 paid through banks, like crossed cheques. Instead of the 
 unnecessary complications of the Money Order and the 
 fixed amounts of the Postal Order, there seems no reason 
 why every Post Office transacting Savings Bank business 
 should not issue on demand, in return for cash down, a Post 
 Office Draft for any amount desired, payable at any other 
 such Post Office in the United Kingdom — ^just as any 
 banker will, at any time, gladly sell such a draft on any 
 of his branches.^ Seeing that the Postmaster - General 
 enjoys in each case the use of the money between the date 
 of obtaining the draft and the date of payment — this being 
 equivalent to the permanent use of an amount equal to the 
 aggregate of such sums in transit on the day of least business 
 — the gain from interest would be certain and considerable ; 
 and probably only a small charge for commission would 
 need to be made, even for drafts payable at sight. But the 
 convenience of the public should be studied. If the remitter 
 is willing to take the draft at seven or fourteen days' date — 
 in many cases such a delay would be quite immaterial — the 
 Post Office, enjoying the use of the money for the longer 
 period, ought to be able to supply the draft at an even 
 lower rate of commission than if it were payable on presenta- 
 tion — perhaps even for the mere cost of a revenue stamp. 
 
 There seems no reason why any limit whatsoever need 
 be set to the amount or to the term of the drafts thus sold 
 for cash ; although it would probably be convenient to 
 limit the offices on which drafts of any considerable amount 
 could be drawn for payment at sight, to those usually having 
 sufficient " till-moi>ey " {e.g, the chief offices in the large 
 towns). Notice of the issue of any draft at sight for an 
 exceptional amount could easily be officially telegraphed ; 
 whilst notification could be made by post of all drafts pay- 
 able only after so many days. 
 
 1 Such a draft could, it need hardly be said, be adequately protected against 
 forgery, or fraudulent alteration of its amount, by use of up-to-date methods of 
 watermarks, perforation etc. 
 
I 
 
 24 
 
 The Development of the Post Office 
 
 The present embryonic system of telegraphic remittances, 
 as yet little known to the public, should be developed on 
 similar lines, without limit of amount or distance. 
 
 (d) The Traveller's Letter of Credit and Circular Notes 
 
 It would be of great convenience to the mass of humble 
 travellers up and down the country, who have not got 
 banking accounts and are exposed to constant risk of 
 losing their journey money, if the Post Office would issue 
 Letters of Credit, just as capitalist banks do for substantial 
 sums. The need is not sufficiently met by the permission 
 to withdraw up to £\ on demand from a Savings Bank 
 account. The German Post Office issues, for cash on 
 demand, a Letter of Credit in the form of a neat stiff- 
 covered booklet, available for four months, entitling the 
 owner, on proof of identity, to obtain payment at any post 
 office within the Empire, of one or more of the ten coupons 
 (which may be for 5 s. each, or for as much as ^^15 each) 
 which the booklet contains. For this convenience the 
 charge is sixpence, together with a penny or two for each 
 coupon cashed. This is found of great use to hawkers and 
 pedlars, to artisans on their travels, to workmen sent to 
 distant jobs, to agents and commercial travellers, and to 
 tourists and holiday-makers. The Italian Post Office started 
 a similar system as long ago as 1873, but has not developed 
 its use. 
 
 IV. The Post Office as Common Debt Collector 
 
 But the ubiquitous Post Office organisation can be 
 equally well used for the collection of sums due, as for the 
 transmission of remittances. If a firm or a society has to 
 collect a hundred or a thousand sums from creditors or 
 members situated all over the kingdom, it is as extravagantly 
 wasteful for the firm or society to make separate application 
 to each of them, whether personally or by letter, as it would 
 
 I 
 
 The Post Office as Common Debt Collector 25 
 
 be for the sender himself to carry the application to them. 
 Yet this is what has to be done in this country ; and, among 
 the great European States, in this country only ! For over a 
 quarter of a century other Post Offices have, to their own 
 exceeding profit, done the public this debt-collecting service 
 and saved them great expense. In 1897 the service was 
 even made reciprocally international — the United Kingdom, 
 Sweden and Denmark, alone among European countries, 
 standing out ! 
 
 We may describe the system as it works in France, 
 where it is called service de recouvretnhits. The trader 
 or doctor who wishes to apply to his customers or clients 
 for the amounts they owe, the society wishing to collect 
 the contributions due from its members, the newspaper or 
 journal desiring to obtain renewal subscriptions, hands in at 
 the nearest Post Office a list of the persons to be applied 
 to, their postal addresses, and the several sums due, together 
 with a receipted invoice for each amount. This invoice is 
 enclosed in a sealed envelope (any number of invoices for 
 sums due from the same person being permitted), for which 
 2|d. must be paid. One account, or any number of accounts, 
 will be thus collected, up to a maximum of 1000 francs 
 (^40), for any one debt. If the debtor is not at home 
 when the postman presents the invoice, it will be presented 
 again. If it is not then paid, the postman deposits it at the 
 local Post Office, where it is held at the disposal of the 
 debtor for forty-eight hours, in case he chooses to call and 
 pay. The sums collected, for which the Government accepts 
 complete responsibility, are remitted back to the Post Office 
 of origin, which transmits the total sum (less the commission) 
 to the trader or doctor, society or newspaper, accompanied 
 by the original form, now marked by the Post Office so as 
 to show which persons have paid, and which have refused 
 (with the receipted invoices returned in the latter cases). 
 The cost is 25 centimes (2|d.) paid in advance for the 
 stamped envelope enclosing the invoice for each person to 
 whom application is to be made, together with a commission 
 
26 
 
 The Development of the Post Office 
 
 I 
 
 deducted from the amount actually recovered at the rate of 
 30 centimes per 20 francs, but in no case more than 50 
 centimes (3d. per i6s., with a maximum of 5d.). Bills of 
 exchange or other accounts payable on a fixed date may be 
 thus presented, if given to the Post Office five days before- 
 hand (a fee of 10 centimes being charged on any bill not 
 honoured on presentation).^ 
 
 We need not dwell on the enormous advantage and 
 economy of such a system to all persons having numerous 
 small debts to collect ; of the great saving it would effect to 
 all kinds of organisations ; of its utility to scientific and 
 other periodicals that now find circulation so difficult ; of 
 the convenience it would be to persons having periodical 
 contributions or subscriptions or premiums to pay ; or on 
 its use in preventing the arrears and defaults, and failures 
 to renew, that are now so common. 
 
 This valuable service is now available to every person, 
 or firm, or newspaper, or society in Europe, for the collection 
 of sums due from persons residing anywhere between the 
 Arctic Circle and the Mediterranean — with the exception, 
 not very creditable to ourselves, of the United Kingdom, 
 together with Sweden and Denmark only. The Danish 
 Post Office, though not having such a service of its own, 
 gladly enables the Danes to make the fullest possible use 
 of the service of other countries, and thus secures great 
 facilities for them in Germany. We are not even allowed, 
 in this country, to make use through our own Post Office 
 of the service de r^couvrements of France, or any other 
 country, for the collection of debts due from persons living 
 in such country, although its postal administration is quite 
 willing to enter into the necessary arrangements. 
 
 * If the service were worked in connection with the Post Office Bank, and 
 with its Remittance business, further economies and facilities could be arranged. 
 The Post Office would save much of the cost of transmitting the sums collected, 
 as they would fit in with its Remittances, and involve only reciprocal credits ; 
 whilst the firm or society getting its debts paid would find the sums credited to 
 its Post Office Bank current account. 
 
 The Post Office as the Common Investing Agency 2 7 
 
 V. The Post Office as the Common Investing 
 
 Agency 
 
 ^ All the capitalist banking concerns offer their customers 
 facilities and conveniences of various kinds, usually without 
 charge, the bank getting its own profit out of the transaction. 
 The Post Office Bank— the bank of the poor man— blindly 
 refuses him these advantages, and thereby diminishes its 
 own profit. 
 
 {a) Safe Custody of Securities 
 
 Thus, any bank will take charge of its customers' 
 securities, keeping them in safety and undertaking to get 
 the coupons, interest or dividends paid at the proper dates, 
 crediting these receipts automatically to the customer's 
 account. There seems no reason, except the inertia of 
 stupidity, and the obsession that a Savings Bank is a charity 
 for the poor, why the Post Office Bank should not do what 
 every other bank does— even if it thought fit to make a 
 special charge for this service— and thus extend to the 
 mass of the people (who have nowhere to keep their bonds 
 or shares or stock certificates safely) the advantages enjoyed 
 by the middle and upper classes. 
 
 Under the stress of war, the Postmaster -General has 
 now agreed to take charge of the new 4! per cent Exchequer 
 Bonds for its Savings Bank customers, but no other securities 
 —not even other securities of the British Government. 
 There seems no reason why this temporary and particular 
 concession should not be made permanent and universal. 
 The French Post Office does it, the Dutch Post Office does 
 it, the Portuguese Post Office does it, even the Indian Post 
 Office does it. The British Post Office not only refuses 
 (except as above) to take care of securities, and credit the 
 dividends as they fall due (a service for which the thrifty 
 Portuguese Post Office charges i per cent on the amount 
 
28 
 
 The Development of the Post Office 
 
 thus collected): it refuses even to let a Savings Bank 
 depositor pay in to his account for collection the coupons 
 which the depositor has himself cut from his own bonds ! 
 This is done by the Austrian, and indeed, by many a foreign 
 Post Office. 
 
 {U) Investments for the People 
 
 Ordinary banks are glad to undertake to buy or sell all 
 Stock Exchange securities for their customers, who thus 
 get the advantage of complete security, and of never having 
 to carry about the documents, whilst they are charged only 
 the regular brokerage rates. The Post Office Bank flatly 
 refuses to do anything of the sort, although the service is 
 one greatly needed in remote country districts, and by the 
 poorer classes. The British Post Office will not even act 
 as an agent for the purchase and sale of British Government 
 securities, except to a limited extent, under special conditions 
 and severe limitations.^ At any Portuguese post office, to 
 name only one example, the public can buy or sell Portuguese 
 Government stock at the price of the day on the Lisbon 
 Stock Exchange. In France every post office puts up 
 each morning the prices at which it will buy or sell the 
 well-known rentes, corresponding to our Consols ; and the 
 transaction is carried through over the counter as a matter 
 of course. From every post office throughout France is 
 telegraphed daily to Paris the amount of rentes locally 
 bought or sold ; and tlie Government broker simply buys or 
 sells on the Paris Stock Exchange the 7iet balance of these 
 innumerable local dealings. Why cannot this be done in 
 the 25,000 post offices of the United Kingdom, with regard, 
 at least, to the War Loan ? 
 
 1 This is done {a) only for Savings Bank depositors ; {b) only in Consols and 
 Annuities, Local Loan and Guaranteed Irish Land Stock and War Loan, not 
 even in other British Government securities such as Local Loans Stock and the 
 Egyptian and Turkish Guaranteed Loans ; {c) only up to ;^200 in any one year 
 (why ?) ; {d) only up to a total amount of ^^500 (why ?). 
 
 The Post Office as the Common Investing Agency 29 
 
 {c) Increased Activity in obtaining Deposits 
 
 Any such development of the Post Office banking 
 business would, of course, be combined with a corresponding 
 increase in the number of Post Offices doing Savings Bank 
 business and in the size of their premises and staffs. At 
 present nearly 10,000 of the 25,000 post offices are not 
 allowed to do banking (or even Money Order) business. 
 There are literally tens of thousands of villages and hamlets 
 
 without any easy access to the Post Office bank the 
 
 children cannot go to the adjacent town to bank their little 
 savings, the wives can seldom go, it is not made easy for 
 the men to save any part of the wages they receive. An 
 extension of popular banking facilities, first to the 15,000 
 post offices at present prevented from undertaking it, and 
 then to the thousands of hamlets and clusters of cottages 
 where there are people but as yet no post office — there are 
 50,000 letter-boxes, at least 10,000 of which are in places 
 without post offices, outside urban areas. In every village 
 in Egypt without a post office the local tax-collector acts as 
 an agent for the Post Office Savings Bank. In the United 
 Kingdom it would be worth considering whether, where 
 there is no post office, use could not be made {a) of the 
 county policeman ; {b) of the elementary school teacher at 
 specified hours ; {c) of the Coastguard station ; {d) of the 
 letter-carrier on his rounds — at any rate to receive deposits 
 which would be promptly acknowledged by post. 
 
 But the Post Office Bank ought to do much more than 
 maintain offices to which people can take their savings : it 
 ought to be supple and alert in its organisation; quick to 
 discover and imagine where new deposits can be attracted ; 
 eager to open a new (perhaps only temporary) office, or to 
 send an official specially to receive the money, whenever a 
 ship's crew is paid off, at every big factory or works outside 
 the window where the men are actually paid, on every 
 rural market-place at which money changes hands, even 
 late at night in the street markets of London and the great 
 
 i^ 1 1 
 

 1 1 
 
 30 
 
 The Development of the Post Office 
 
 towns,^ and on the quay where migratory labourers are 
 embarking ; pressing every Government Department and 
 Local Authority in the kingdom to let it open an account 
 for every public employee, on which he could draw the 
 smallest cheques, and to which his salary should be auto- 
 matically credited month by month ; offering the same 
 facilities to capitalist firms, and thus save them all the cost 
 and trouble and risk of payment in cash ; ^ receiving in 
 lumps and crediting individually in the same way all public 
 educational scholarships ; insisting on every school, and not 
 merely some of them, having its school bank as an auxiliary 
 to the Post Office Bank. Imagine how Selfridge or Harrod 
 would be advertising such a profitable business ! With 
 what energy and resourcefulness it would be pushed by 
 Lipton or Lyons ! 
 
 If the Post Office Bank were run on these lines it may 
 be confidently predicted that the total of deposits would 
 quickly be doubled or trebled in amount ; the Government 
 would find annually lent to it in the cheapest way the many 
 millions of pounds that it will need after the war for 
 redemption of the onerous War Loans ; the number of 
 depositors would come near to that of the census population ; 
 the fact that practically every adult, rich or poor, business 
 man or farmer, wage-earner or landowner, found it easy and 
 
 ^ It is one of the difficulties of the costermonger and street trader, as it is of 
 the small shopkeeper in the " late shopping " streets, and of the licensed victualler, 
 that no bank is open to receive their takings after 4 p.m. in London (now 3 p.m.) 
 — Saturdays i p.m. — and in country places often a much earlier hour. The 
 Postmaster-General might well try the experiment of offices— perhaps travelling 
 vans — in special localities, whether shopping streets or market-places, factory 
 pay offices or shipping quays, open to receive deposits at the abnormal times 
 that the local business demands. 
 
 2 The London County Council (which wisely uses the Post Office Savings 
 Bank as the medium for the payment of all its scholarships) actually sends round 
 clerks in taxicabs to pay all its 20,000 teachers in the elementary schools their 
 monthly salaries in cash — transporting about the streets of London in this way 
 about two millions sterling each year in notes and metallic money — in the 
 twentieth century, in the banking centre of the world, where theie is a branch 
 bank to every two schools ! The Postmaster-General might, at least, press for 
 permission to open current accounts for all these teachers, receive their salaries 
 and give them cheque-books. 
 
 The Post Office as the Common Remittance Market 3 1 
 
 convenient to have a current account at this one ubiquitous 
 bank in which he knew that practically every one with whom 
 he dealt had also an account, would allow of a progressive 
 economy of metallic currency ; the number and amount of 
 Post Office cheques and transfers, of Post Office remittances 
 and debt collections would grow by leaps and bounds ; the 
 business of every shopkeeper and trader would be augmented; 
 the amount and security of the people's savings would be 
 greatly increased ; the circulation of periodical literature of 
 all sorts would be assisted— all to the ever-growing profit of 
 the Post Office revenue. 
 
 VI. The Post Office as the Common Remittance 
 
 Market of the World 
 
 But the remittance business of the Post Office \?> destined 
 to an even greater expansion. One of the most important 
 needs revealed by the outbreak of war is the creation of a 
 Government Currency for International Remittances, in place 
 of the present almost universal dependence on the bills of 
 exchange drawn by private traders of varying and uncertain 
 credit, and on the drafts and finance bills of the capitalist 
 bankers, the amount and price of which are under private 
 control. The present system (i.) enables an unnecessary 
 toll to be levied, and a very large profit to be reaped, by a 
 small number of financial establishments; (ii.) puts the 
 world's trade and finance, as well as the family remittances 
 of millions of poor people, at the mercy of a few hundreds 
 of mdividuals who may occasionally act from political 
 motives, or may combine to manipulate the remittance 
 market for their own greater profit ; and, above all (iii ) by 
 the extensive adoption of the plan of "acceptance on foreign 
 account" by a score of British financial houses, puts the 
 British Government in the position of having, in any great 
 emergency, to find an enormous sum (in August 19 14 it 
 was about ;£" 150,000,000), in order to save the City of 
 
32 
 
 The Development of the Post Office 
 
 London from bankruptcy, not because its financial houses 
 were not really more than solvent, but merely because of 
 the international remittance obligations undertaken on 
 behalf of foreign firms, which suddenly found themselves, 
 owing to the lack of any medium of remittance, literally 
 unable to send money to London to fulfil their obligations. 
 In the first week of August 191 4 it was actually impossible, 
 in many parts of the world, to buy a draft or telegraphic 
 transfer on London for any sum exceeding that of a Money 
 Order, even for money down.^ This will inevitably happen 
 again at any new European convulsion, unless some fresh 
 form of international remittance, independent alike of private 
 commercial credit and of foreign obligations, can be adopted. 
 Just as it is recognised to be an essential function of every 
 Government to provide its people with a Government 
 currency for home use (whether coin or paper), independent 
 of any private capitalist, so, we now suggest, it is an 
 essential function of all the Governments in concert to 
 provide their peoples with an equally independent, and an 
 equally safe and stable currency for international remittances, 
 great or small. 
 
 This is already done to a relatively small extent, as 
 regards inconsiderable amounts only, by all the 103 postal 
 administrations of the world, under arrangements concerted 
 in the International Postal Union. The Post Offices in 
 every country sell on demand Money Orders payable in 
 practically any other country, at rates of exchange which 
 do not fluctuate from day to day, but are revised by mutual 
 consent only at intervals of years. These money orders are 
 
 ^ The same thing happens, occasionally, when it is desired to remit from 
 London. In 1893, when all the Australian banks were temporarily in difficulties, 
 it was for a short time actually impossible to buy in London any means of 
 remittance to any place in Australia. A similar failure of the private remittance 
 market not infrequently occurs with regard to remittances to remote or disturbed 
 localities. Moreover, these remittance facilities are everywhere limited to places 
 where banks exist — a far more limited field than that of the post offices. There 
 may possibly be as many as 100,000 banking branches in the world ; but there 
 are probably over 400,000 post offices in the International Postal Union penetrat- 
 ing into much smaller centres. 
 
 The Post Office as the Common Remittance Market 2iZ 
 
 literally Government Bills of Exchange, independent of the 
 vagaries either of commercial credit or financial manoeuvres.^ 
 But the means of international remittance thus created 
 by the Post Offices of the world— though used to the 
 extent of many million pounds a year in the aggregate- 
 are at present hampered and limited. The British Post 
 Office, for instance, refuses to issue any one foreign Money 
 Order for more than £^0 (though it seems as if there is no 
 regulation to prevent any person from applying simultane- 
 ously for as many as he pleases !). It charges an absurdly 
 high rate of commission on each order— far in excess of the 
 cost of remitting by a banker's draft— and thus penalises 
 the humble folk desiring to send money to relatives over-sea. 
 The Austrian, the Hungarian, the Swiss, the German, the 
 Belgian and the Japanese can remit to each other, by 
 Postal Cheque, such a sum as £a,o for about 8d. The 
 Englishman is charged by his Post Office just about eight 
 times as much I 
 
 Our cumbrous, limited and costly Foreign Money Order 
 system ought to be superseded by a simple arrangement of 
 Government Drafts on the Post Offices of other countries, 
 issued on demand up to any amount, at rates of commission 
 comparable with those which yield a substantial profit to 
 the capitalist banks. 
 
 Why should not the British Post Office take the lead 
 and either include in the Treaty of Peace, or at least lay 
 before the next Congress of the International Postal Union 
 (which has been postponed until after the war), a definite 
 proposal for the creation, by the 103 postal administrations 
 of the world, or by such of them as come into the scheme, 
 of an effective means of unlimited international. remittance 
 on the following lines : 
 
 There is even the tmy beginning of an International Government Bank 
 Mote, m he coupon of the value of 2^d. now issued in nearly all countries, and 
 redeemable withm any other country in local postage stamps of equivalent value. 
 It IS characteristic that at present no less than 20 per cent commission is charged 
 lor this simple service, 100 such stamps worth only^i : o : 10 not being obtain- 
 able under £1 : 5s. {3d. each). ^ 
 
 D 
 
34 
 
 The Development of the Post Office 
 
 it 
 
 {a) Every post office in the world to issue, in return 
 for cash, drafts of any amount, payable in legal tender 
 currency of the paying office at any designated post office 
 in the world. (For practical working, it would doubtless 
 be convenient to restrict the issue of drafts of more than a 
 small amount to post offices of a certain magnitude ; and, 
 at first, at any rate, it would probably be necessary to make 
 any drafts of large amount payable only at the Central 
 Post Office in the capital of the country ; though nothing 
 need prevent that office from announcing that it will 
 exchange such a draft on presentation, without charge, for 
 another on any other post office within the country.) 
 
 {b) The International Postal Union, itself guaranteed 
 by the Governments of all its 103 constituent postal 
 administrations, formally to guarantee the payment of all 
 the drafts thus issued. 
 
 {c) Every postal administration to undertake (relying 
 on the prompt settlement of all balances, and on the 
 above guarantee) to meet in local legal tender currency 
 the drafts thus drawn upon any of its post offices. 
 
 {d) Current accounts to be kept between all the postal 
 administrations, and balanced quarterly, monthly or even 
 daily by the Bureau of the International Postal Union at 
 Berne,^ each postal administration undertaking to telegraph 
 at the appointed time, quarterly, monthly or, for that 
 matter, even daily, the figures necessary for the making 
 up of its account current; and to remit immediately, in 
 gold or its equivalent, any net balance due by it on the 
 ^ggr^g^^^ of its current accounts. 
 
 {e) If, in any momentary excess of drawings on a 
 particular country, its Post Office found itself embarrassed 
 by a lack of currency to meet all the drafts, its Government 
 to undertake to make immediately any necessary issue of 
 Government or other legal tender notes, so as to enable 
 
 1 For the purposes of the world remittance business, it would probably be 
 convenient for a sub-office to be located in London ; or for the Union's banking 
 account to be kept there. 
 
 The Post Office as the Common Remittance Market 35 
 
 the Post Office to meet its obligations in legal tender 
 currency. 
 
 (/) If in any contingency a postal administration, 
 though having received the money locally, found itself 
 unable to make a remittance in gold or its equivalent to 
 the Bureau of the International Postal Union of the amount 
 due on balance by such administration, its Government to 
 undertake, if required, to place it immediately in credit at 
 Berne or London, by floating a loan or otherwise. 
 
 It may be desirable at this point to allude to certain 
 obvious difficulties in this project, and to describe how they 
 could be surmounted. 
 
 One of the obstacles which has prevented international 
 action in the past is the element of time. Any delay in 
 communication would make such a scheme of international 
 remittances onerous and risky. • Between the dates of 
 selling the draft, of being informed of the balance due, of 
 the remittance of the necessary sum by post, and of its 
 
 receipt — if intervals of months, or even of weeks, elapsed 
 
 the whole course of exchange might have seriously altered, 
 and considerable loss might be incurred. But in the 
 twentieth century, with hourly communication all over the 
 world by cable and " wireless," no such delay is necessary, 
 and none should be tolerated. The whole series of 
 transactions can be carried through in a few hours ; and as 
 the balances of the several countries would equally be made 
 up from telegraphic advices, they could be adjusted every 
 week— even if desired every day— as easily as all the 
 hundreds of millions of pounds of transactions of the 
 London Bankers' Clearing House are adjusted every evening. 
 If it is felt that some States are not to be trusted to 
 remit punctually the balances due by them week by week 
 or^ day by day— or, indeed, if it is felt that remittances of 
 this sort, which would be required every day by one or 
 other of the participating administrations, would be 
 troublesome and sometimes costly— it would not be 
 difficult or expensive for every State to be required, as a 
 

 36 The Development of the Post Office 
 
 condition of admission, to put itself, at the outset, in credit 
 in London or Berne, up to an amount well in excess of 
 any probable adverse balance of ordinary character. Such 
 an aggregate deposit, shared in by every participating 
 administration, could be retained by the International 
 Postal Union — not necessarily in the sterile form of an 
 International Gold Reserve, though this might have 
 advantages, but as an investment made in the name of the 
 International Postal Union, on which interest would be 
 earned and credited proportionately to the several States. 
 It might be arranged that such a deposit from each State 
 should be regarded as being in two parts. One would be 
 the irreducible minimum required by way of ultimate 
 guarantee, below which no State should be permitted to 
 let its credit balance fall. The other would be a sum 
 lodged merely to facilitate the daily or weekly adjustment 
 of balances, so as to diminish the frequency of remittances 
 — these being then made only from time to time to adjust 
 any adverse balance of exceptional magnitude. 
 
 Finally, it may be said that the expenses of remitting 
 from London or Berne any ultimate balance due on all 
 the national accounts to creditor countries would need to 
 be somehow provided for. We think that, in normal 
 circumstances, it would not be a serious matter to require 
 such a creditor country to accept payment in gold in London 
 of such an occasional international balance, in fact, by being 
 credited in its deposit account, at any rate up to a prescribed 
 maximum. In nine cases out of ten such a balance would 
 probably be found more useful to it in London than any- 
 where else. But a balance in excess of the prescribed 
 maximum, especially where such a balance was of frequent 
 occurrence, would have to be remitted. The cost, however, 
 would never exceed the cost of shipment of gold from' 
 London, not to the amount of the drafts drawn on the 
 creditor country, but only to the amount of the final 
 international balance between its Post Office and all the 
 others. This expense may have to be met by the 
 
 The Post Office as the Common Remittance Market 
 
 
 International Postal Union as part of the expense of 
 working the scheme, and levied as a quite trifling tax on all 
 the participating administrations in proportion to the volume 
 of their several transactions. Other technical difficulties 
 none of them insurmountable by the application of common- 
 sense, will occur to every banker and every bureaucrat 
 
 Organised upon such a system, the International 
 Remittance business of the Post Offices of the world would 
 It IS suggested, furnish the world with a safe, an independent' 
 and a relatively stable international currency, for the use of 
 which a very low rate of commission need be charged It 
 IS suggested that, in normal times, there would be no need 
 for any daily fluctuations of the rate of exchange, any more 
 than there now is with the money order system. Every 
 transaction would normally be at gold par. It might 
 however, be left to each postal administration-remembering 
 that It has the obligation of remitting any adverse balance 
 in gold or Its equivalent— to make what regulations it 
 chose for its own selling of drafts on other Post Offices as 
 regards a possible premium both to cover the very slight 
 tax levied by the International Postal Union to cover the 
 cost of working the scheme, and in respect of depreciated 
 ocal currency, etc. Information could be instantly 
 telegraphed of any abnormal sales of drafts which seemed 
 ikely to result in an unusual balance of indebtedness at 
 the end of the current period ; and, if necessary, the Post 
 Office concerned might charge a premium to check the 
 rush, and cover the expense of adjusting the account. But 
 we suggest that this adjustment of the net balances at the 
 end of each day, month or quarter, or whatever the period 
 ot account, would, in practice, cause no more trouble to the 
 Governments concerned (which would have, simultaneously, 
 their own huge international transactions to adjust) than 
 IS constantly undertaken in similar contingencies by all the 
 
 .nH K ??''™*'°"' °'" *^" ^°'"''^ °^«^ their Money Orders 
 and other balances ; by those of Austria. Hungary, Germany 
 Belgium and Switzerland in adjusting the btlan es arising 
 
38 
 
 The Development of the Post Office 
 
 from their mutual adoption of the Postal Cheque system ; 
 by practically all Governments (except those of this 
 country, Holland, Belgium, France and the United States) 
 in dealing with foreign indebtedness for interest on the 
 external debt ; by the Russian, Greek and Austrian Govern- 
 ments in the continual financial manipulations to keep 
 the fluctuations of the Foreign Exchanges within bounds ; 
 and even by our own India Office in its very successful 
 regulation of the Indian Exchange. The World Govern- 
 ments' International Remittance Draft can, in fact, be 
 instituted by the International Postal Union, greatly to 
 the profit of all postal administrations, as soon as the 
 British Postmaster-General gives in his adhesion.^ 
 
 VII. The Post Office as the Common Agent 
 
 If once we grasp the idea of the Post Office as an 
 unparalleled ubiquitous network of offices and staffs, stand- 
 ing ready to serve the public in every possible way, oppor- 
 tunities for the profitable extension of its business (and, with 
 the growing range of variety in the business, for a raising 
 of the " load factor ") will be continually occurring. The 
 Government graciously allows any Money Order Office to 
 receive and transmit to the Inland Revenue Department 
 
 1 It may be desirable to make clear that it is not suggested that any Post 
 Office should give credit, or discount bills of exchange. Thus, the common 
 arrangement by which, all over the world, the exporter of produce draws a bill 
 on the consignee, and gets that bill discounted by a local bank, would in no way 
 be interfered with. The exporter from the United Kingdom, who expects to be 
 paid by a draft on London, might perhaps find his debt discharged by one of 
 the new International Postal Drafts ; but the bankers' business in handling 
 credit instruments would not be interfered with. How the British Government 
 can bring under effective control the large special business of accepting bills ** for 
 foreign account," and thus incurring huge London liabilities on behalf of foreign 
 countries, which, whilst a valuable source of profit and financial influence, has 
 the drawback of making it necessary for the Government to come to the rescue, 
 to the extent of advancing many millions sterling, whenever an outbreak of war 
 absolutely stops remittances from the enemy country, is another question. But 
 this question is quite independent of that of creating a means of international 
 remittance that would never be interrupted so far as any but actually belligerent 
 countries are concerned. 
 
 The Post Office as the Common Agent 39 
 
 free of charge any money due in respect of certain taxes 
 and licenses : this convenience might be extended to all 
 payments due to any Government Department ; and (if 
 desired, at a small charge to the receiving authority) to all 
 rates and other payments due to Local Governing Bodies. 
 A feeble effort (scarcely known to the public) has been 
 made to sell the Ordnance Maps through the local post 
 offices. During the war we have learnt how useful the 
 25,000 post offices (and even the pillar boxes) can be made 
 to collect books and magazines for the War Office to 
 distribute to the troops ; and also how serviceable this 
 network of offices can be in bringing within reach of the 
 poorest such an enterprise as the War Loan. This agency 
 business could be enormously developed and made a source 
 not only of utility to the public but also of additional profit 
 to the Postmaster-General. 
 
 {a) Newspaper Subscriptions 
 
 In nearly every European country any post office keeps 
 a list of newspapers and other periodicals, for which it will 
 receive, without charge, the cost of subscription for a year 
 or any other period, covering delivery by post. The Post 
 Office, whether or not it receives a commission on such 
 subscriptions, as it may well do, sees its advantage in 
 facilitating postal business. Foreign Post Offices in this 
 way receive subscriptions, not only for the periodical 
 publications of their own, but also for those of other 
 countries. The German Government (which started this 
 service as long ago as 1823!) now has no fewer than 
 14,500 periodicals on its list, of all kinds, in all languages, 
 published in all countries — nearly 4000 of them, in fact, 
 being published abroad.^ How much will this not have 
 meant, during the past hundred years, in the education of the 
 
 1 The newspaper department of the Berlin Post Office is, for those who know, 
 one of the " sights " of the world. It despatches nearly i^ million copies daily, 
 made up in over fifty thousand consignments— this being one-third of the news- 
 paper traffic of the whole German Empire, and double that of this country ! 
 
V 
 
 1 1 
 
 40 TAe Development of the Post Office 
 
 German people ! In Frankfort-am-Main, just before the war, 
 an English observer found that no fewer than 300 different 
 English periodical publications were being thus subscribed 
 for through the local post office in this one city. Even 
 the Egyptian Post Office renders this service, and has 4218 
 subscribers to the periodical publications of all European 
 countries. The British Post Office, to its own financial loss 
 refuses us this opportunity of enlightenment. 
 
 (b) Maps and Blue Books 
 
 It might certainly be made possible to order at any 
 post office, not only Ordnance Maps, but also all the 
 Government publications of every kind— consulting a list 
 completed by weekly or monthly supplements ; paying down 
 the quoted price, and receiving the desired publication by 
 post within forty-eight hours. It is quite a mistake to say 
 that there is no demand for Blue Books : of the Minority 
 Report of the Poor Law Commission— simply because 
 practical methods were used to make it known to the mass 
 of the people (without any paid advertising)— no fewer than 
 fifty thousand copies were sold in one or other edition. 
 
 {c) Books and Photographs 
 
 Such a service is plainly capable of advantageous and 
 profitable extension, for instance, to books and photographs. 
 It may not be generally known that another Government 
 Department, the South Kensington Museum, keeps accessible 
 to the public a vast book containing specimen copies of 
 photographs of works of art of every description ; against 
 each specimen is marked the price at which copies can be 
 obtained; you pay the money for any photograph you 
 desire, and write down your name and address; within 
 forty-eight hours the desired photograph arrives by post 
 properly packed. This is done by the President of the 
 Board of Education in order to promote Art. The Post- 
 
 The Post Office as the Common Agent 41 
 
 master-General need not be above rendering similar public 
 services in order to increase his revenue. We suggest fo 
 instance, that the really serious problem of how t'o' se'ure 
 
 a c a!sffie"d I'T r"" "' "? '^^'^ "^" "^^ ^^ ^^^^ -til 
 a classified list of new publications, completed by weekly 
 
 supplements,^ is made accessible at every one of the 25 000 
 
 post offices-until it is possible, whether in the remis' 
 
 bSt:d r ''/'' ^^"^''^^^ ^^^" ^" ^^°^^-^'- the mos 
 ben ghted town slum, to pay down, at any post office the 
 
 quoted price of any bool. in the list, and receive it by pos 
 within forty-eight hours. ^ ^ 
 
 {d) Periodical Payments 
 
 But the 25,000 post offices can be used, not merely as 
 agents to receive, but also as agents to pay. It ought to 
 be possible for any one, in any part of the world, having 
 periodical payments to make in any other part of the world 
 
 direct'^th'"" '""^^T^'-^y -— t wherever he is, and' 
 bvl I P^^^^^^b^V"-«nditional payments to be made 
 
 be both ^T 'f " ^"^^ ^" ^^^"^>^ ^--'- would 
 
 be both easy and profitable to the Post Office, and also a 
 
 tTmakTT''"''f f'^' ^'""^ '"^^ ^^'"^^'-^^ P-y^^ents 
 to make— It may be for annuities or allowances to relations 
 
 or dependents ; it may be for contributions, subscriptions or 
 
 1 he Post Office already does it for Old Age and army 
 pensions, and payments under the Insurance Act ; but not 
 for any private customer. 
 
 from lack of space, a vision of the possible expan^on o 
 the telegraph and the telephone.^ A really up-to-da^e 
 
 under ?he CoU^thf lltal'^r" TI' "^'^ "^ '^^"^ ^^^ ^P'- deposited 
 Act, and giveThSithors^nd ^Z'^'^ '''"'' ^'^""^P^ compliance with that 
 impost thu^s levied on them t ^ '""' '"'"" '^ advertisement for the 
 
 over^'^LtrexUellnrhll^ really scandalous apathy and neglect which has, 
 period exceedmg half a century, strangled the development of Post Office 
 
 I I 
 
ill 
 
 42 
 
 The Development of the Post Office 
 
 Post Office would be always discovering new services to 
 render. 
 
 VIII. Conditions of Service in a Developed 
 Ministry of Communications 
 
 The conditions of employment in the present Postal and 
 Telegraph service, though much improved of recent years, 
 are still far from ideal ; and it cannot be said that the 
 Postmaster-General, in relation to his 250,000 employees, 
 presides over a contented Department. In spite of success- 
 ive enquiries and partial concessions, there are still not a 
 few cases of substantial grievance in respect of remuneration 
 inadequate (in face of rising prices) to maintain the necessary 
 Standard of Life, and of advancement so long postponed 
 as to exhaust official patience. But there are causes for 
 discontent apart from pay and promotion. Though a 
 considerable measure of recognition has now been accorded 
 to the Trade Unions of postal employees, there is, in the 
 administration, still too much of the autocracy claimed by 
 the capitalist employer ; the humbler grades still enjoy less 
 permanence of tenure and security for continuance of their 
 Standard of Life, not to say also a very different degree of 
 protection from caprice and tyranny, than do, for instance, 
 the clerks in the Secretary's Office ; a large proportion of 
 the business is still done under a system of irresponsible 
 subcontracting, in which many of those who are actually 
 doing the work are excluded from the advantages of 
 co-operation in a public service ; and above all, there is, 
 as yet, only the very minimum of opportunity for the 
 several grades of workers to participate in the management 
 of the service to which they are devoting their lives.^ 
 
 The development of the Post Office into a comprehensive 
 Ministry of Communications ought to be marked by a frank 
 
 Life Assurance. See A State Insurance Department for a proposal to merge 
 this in a new Government Life Assurance Office. 
 
 1 The treatment of the large class of 17,000 "subpostmaster's assistants" is 
 specially bad. 
 
 I 
 
 Service in a Developed Ministry of Communications 43 
 
 adoption, for all grades of its rapidly increasing employees 
 of the fundamental conditions of employment in the public 
 service. Admission to the service in every branch should 
 be governed exclusively by fitness, tested in the best avail- 
 able way, by open competitive examination or otherwise 
 Scales of pay and superannuation, with progressive advance- 
 ment, should be settled for each branch and grade ; on the 
 pnnciple— already adopted for the clerical branches— not 
 of the competitive market rate, but of securing, to every 
 employee, sufficient to maintain the Standard of Life 
 expected of his grade and position in the service Pro- 
 motion should not depend on the will of any one superior 
 but be given always on the advice of a council of superiors' 
 to which, in order to give confidence in the exclusion of 
 favouritism and the elimination of any approach to victimisa- 
 tion, it IS advisable that (as in the service of the French 
 State Railways) representatives of the subordinate grades 
 should be admitted. Moreover, in order both to encourage 
 mitiative, and to satisfy as far as practicable the legitimate 
 aspiration of employees of all grades for some measure of 
 participation in the control over their own working lives it 
 would be very desirable to institute, on the model of the 
 French State Railway Service, a series of Councils of 
 Management. There might, for instance, be a Local 
 Council for each geographical district into which the service 
 IS divided. There might even be such a Local Council 
 perhaps subordinate to the General Local Council, for each 
 main division of the service (General Post, Parcel Post 
 Telegraph, Telephone, Savings Bank, etc.) for dealing with 
 improvement in the local administration. There mi-ht be 
 a Central Council for each of these divisions, for dealing 
 with improvements of national scope, together with others 
 dealing with such general questions as staff conditions, 
 buildings, etc. These Councils should not interfere with 
 the current management, but should have submitted to 
 them, as of course, all projects for new developments and 
 all proposals for important changes on which their opinion 
 
II 
 
 HI 
 
 iHi 
 
 44 The Developnunt of the Post Office 
 
 should be invited, to be taken into consideration before any 
 final decision ,s arrived at. They should, of course also 
 have an independent right to initiate and discuss any new 
 proposal for the improvement of the service within the^ 
 everal spheres, and of forwarding their conclusions for the 
 sho Id'b "" *'; P-^^-'-General. Such Councils 
 
 tal or c 'm "u' °"'^ °^ '^' responsible officials, 
 local or central, but should certainly include also repre 
 sentatives of the lower grades of the official hiera chy 
 whose participation in the deliberations is essential, both il' 
 a means of encouraging initiative and intellectual interest 
 
 share, ,f only to a small extent, in the administration of 
 the service of which they form part' Whether such repre- 
 
 electedT 1 " T'^' '''"'' ^'^°""^ ^^ nominated'or 
 elected by the employees (as in the French State Railway 
 
 Service), or by the Trade Unions formed by such employees 
 
 if the r,> '"7n '^.T''""'"'' °^ '^' ""'°"=" administration 
 of the City of Basle), may be left for subsequent considera- 
 tion. In any case, the salaried officials of these Trade 
 Unions should certainly not be excluded, any more than 
 they are m the City of Basle (where the Secretaries of the 
 employees' Trade Unions always take part) ; or ,n he 
 Supreme Council of the Swiss Government Railways Tn 
 which, in practice, the General Secretary of the Sw ss 
 Railwaymen's Union has a seat ex officio)? 
 
 meets regularly to consider airsu™esHn„/'H ""''Y .S«"etary of State, which 
 to the Minister himsel This Comtin f<™P'^'nts, and to make reports 
 
 different branches of he wlo s«v"cT but Zt "°« °"'^ ""^ heads of the 
 representatives of the Councils of Pa™ knd of ,h., 7' ^'"'""'^ ''"'' ^'P""'^' 
 of Chambers of Commerce and commlr.i^f P^^Pf "ment of the Seine, and 
 
 of employers, and Terpostal emnZ. V™"''T'"' Y ^'=° ^ ""^i" """>l«^ 
 the sorter ank the let°ef carr Lr ThTw ^'k ^'T "^"f"™* e'=«'=^' ^o™ '» 
 simibr Advisory cl"Xr on whic?',h?r^ '^°'''' Administration has a 
 
 Right of the Chancellor to Post Office Profits 45 
 
 At the same time it may be suggested that systematic 
 arrangements should be made for criticisms and suggestions 
 by the public. There might well be Local Advisory 
 Committees on Postal Administration in each administrative 
 province, made up of representatives of County and County 
 Borough Councils, local Chambers of Commerce and 
 traployers Associations, and Trades Councils and Co- 
 operative Societies. Such Local Advisory Committees 
 should have, as their main duty, the discussion of any 
 alleged shortcomings in the local services of the Post Office 
 and the making of suggestions for their improvement An 
 annual Conference of such Local Advisory Committees 
 might deal with suggestions of national scope. But there 
 should be also a standing Central Advisory Committee on 
 Postal Administration representative of national organisa- 
 tions of traders and employers, together with the national 
 organs of the Co-operative and Trade Union movements to 
 make criticisms and suggestions. The advantage of such 
 an organisation of public criticism is now conceded by the 
 establishment of 49 Telephone and Telegraph Advisory 
 Comniittees, What is needed for the telephone is needed 
 for other branches of the work of the Postmaster-General 
 
 IX. The Right of the Chancellor of the 
 Exchequer to the Post Office Profits 
 
 It is sometimes objected that the Post Office ought not 
 to be run as a money-making concern; that even the 
 
 one or other of 21 organisations of the nature of Trade nn;,,n. ti ■ ■ , 
 of these are (i.) the Postmen's Federation, estabished, 80? Id h '"'""'''' 
 
 ttti? - r Cf s-^m^st^^nal sS:tTes,rmeresTon^^:S 
 o London, also exist for such classes as Auxiliary Postmen, Bagmen Eneineer 
 
i I 
 
 I 
 
 
 46 The Development of the Post Office 
 
 present contribution of ;f6,ooo,ooo a year which it brings 
 to the Exchequer is an illegitimate source of national 
 revenue ; and that any surplus should go either to the Post 
 Office employees in higher wages and better conditions of 
 employment, or else to the customers in lower postal charges. 
 Such a^ contention finds no support in economic theory ; 
 and is, in our view, quite unwarranted. 
 
 {a) The Post Office Employees have no Claim to the 
 
 Post Office Profits 
 
 The Post Office employees, like all other persons in the 
 service of the State— like, indeed, those whom we still leave 
 to be employed by private capitalists— ought to be ensured : 
 {a) emoluments adequate to their maintenance in full 
 efficiency, together with equitable retirement or superannua- 
 tion allowances; {b) conditions of service consistent not 
 only with health and comfort but also with proper family 
 life and citizenship ; {c) complete protection against tyranny 
 and complete security against arbitrary or capricious inter- 
 ruption of their livelihood ; and (./) the fullest possible 
 opportunities not only for combination in protection of their 
 Standard of Life, but also for intelligent participation in the 
 administration and direction of the service to which they 
 devote their working lives. But all these conditions must 
 be given equally to the persons employed in the other 
 departments of the public service, whether the utility resulting 
 from their work is sold to the consumers at a price yielding 
 a surplus (like the postal service), or at rates resulting in a 
 money loss (like— as it is alleged— the telegraph service), or 
 given gratuitously for common enjoyment (like the parks, 
 museums and libraries). There can be no argument for 
 giving more than proper wages or conditions to the persons 
 employed in the Post Office, merely because a higher price 
 is charged to the customers ; and for giving less than proper 
 wages and conditions to those employed at the British 
 Museum, merely because the public is admitted to its 
 
 Right of the Chancellor to Post Office Profits 47 
 
 advantages gratuitously. The 250,000 employees of the 
 Post Office have an irresistible claim to proper conditions of 
 employment : they can justify no claim to enjoy the Post 
 Office profits.^ 
 
 In fixing the emoluments and the conditions of service 
 m the Post Office— no more so and no less so than in all 
 the other departments of the National or Municipal Civil 
 Service— we ought to insist on throwing overboard, once 
 for all, the inveterate Treasury habit (which is contrary to 
 the accepted teachings of economic and political science 
 demonstrably detrimental to efficiency, and therefore really 
 unthrifty) of taking as a standard what it believes to be the 
 competitive market rate— which it applies, by the way, most 
 frequently to the most defenceless classes. The House of 
 Commons has repeatedly ordered that the Government shall 
 be not the average, still less the most niggardly, but a 
 "good" employer. It should, irrespective of the lowest 
 price at which it could engage labour, seek in principle to 
 prescribe the conditions under which the work will be best 
 done, and under which its employees will be able to lead 
 the best lives. But so long as less than 10 per cent of the 
 working population are in the public service, national or 
 municipal, it would be unreasonable for the Government 
 and it would not be tolerated by public opinion, to have in 
 prescribing the conditions of the Government service 'no 
 regard whatever for the Standard of Life commonly accepted 
 as suitable and desirable by the nation at large, or— to put 
 the argument in another way— for the Standard of Life 
 which the nation's productive resources allow to be provided 
 for the whole community. The Government, as employer 
 ought constantly to lead all private employers ; but it cannot' 
 in fairness to all the other employees, be too far ahead of 
 the mass. 
 
 shoulrPL!^' °*^'' ^^"'J' '' '' inexcusably illogical that Postmaster-Generals 
 did-that the Post Office was that year making less profit than usual ' 
 
 r \\ 
 
1 I 
 
 V t 
 
 48 The Development of the Post Office 
 
 {b) The Customers of the Post Office have no Claim to 
 
 the Post Office Profits 
 
 Nor have the customers of the Post Office— who are in 
 a very real sense, the entire community-any valid claim' to 
 have the Post Office profits frittered Tway in lower haTg^ 
 to hemselves mdividually. The annual surplus of The 
 Post Office comes largely from its national unity and lec^al 
 monopoly. If it did not exist, and if the services thati 
 renders had to be performed by a crowd of capitaHst c m 
 peftors, workmg against each other for profit, the duplication 
 of nval plants and staffs, and the increased ;ost incfdent on 
 d.v,d.ng the letters to be carried among scores of competitive 
 
 WhaTT' ^ rT'^ ' ""''"y '""''^^ °" ^he customers. 
 What ,s saved by the unity and monopoly, which the 
 
 community as a whole creates, is fairly the property of he 
 community as a whole, not of any individuals within it 
 Moreover, the Post Office surplus is of the nature of a 
 net profit earned by the actual production of utilities, which 
 every purchaser regards as worth at least the price charged 
 for them. Why, by reducing the charge, at a moment when 
 the Government has to find so much money, should we 
 make a free gift to all users of the Post Office not in pro! 
 portion to their means, but-it might almost be ;aid_in the 
 inverse ratio of their means ? The use of the Post Office is- 
 beyond an exceedingly tiny minimum-not only legally but 
 also practically optional. No one is forced, even by circur^ 
 stances, to send more than a few letters a year. There is a 
 case for keeping down postal rates for the commonest services 
 and those used by the poorest, to such popular prices as a 
 penny or a halfpenny. Beyond that point' L onfy P ac i^a! 
 advantage from any reduction would accrue to those who 
 make an extensive use of the postal services, that is to say 
 
 Thus whir" r""" °', ^^"-*°-'^° private person^! 
 Ihus, whilst in fixing postal rates, some regard must of 
 
 maTnr; t t^ ^H^'t '°'' °^ "^^ -rvice'atten'r'has 
 mainly to be directed to the utmost possible increase in the 
 
 What Increase of Revenue can be got by Post Office 49 
 
 amount of service that can be rendered. Broadly speaking 
 postal charges ought to be fixed— without, on the one hand' 
 departing from such uniform popular rates as a halfpenny or 
 a penny, and without, on the other, throwing away a profit- 
 able income— so as to produce the largest possible aggregate 
 net revenue. There is seldom a case in which a change 
 that leads to any considerable increase in aggregate postal 
 receipts does not, within a very short time, result also in an 
 increase of net profit— a net profit which, as every one gets 
 lull value in exchange for his stamps, can hardly be deemed 
 to involve any taxation at all ! 
 
 X. What Increase of Revenue can ise got by the 
 Post Office, and what is the Alternative 
 
 No one can estimate with any accuracy by how much 
 the present Post Office gross receipts of iJs 2,000,000, and 
 Its present net profit of ^6,000,000 could be increased, 
 either promptly or eventually, by the adoption of any or all 
 ot the above reforms. Increase of business involves an 
 increase of staff ; and care would have to be taken not to 
 augment the burden of work on those postal servants whose 
 energies are already fully taxed. In seeking to improve 
 the load factor we must not ignore the human element. 
 iJut making all necessary allowances, it can scarcely be 
 doubted that a considerable development of Post Office 
 revenue is practicable. Twenty years ago the gross receipts 
 of the Post Office were only half what they now are ; and 
 'ts net profit was only half what it is now. We are putting 
 ■t moderately when we suggest that, with very little 
 immediate capital outlay, the present net profit could, in a 
 few years, be doubled-equal to an addition to the capital 
 value of the undertaking of ^100.000,000; and. what is 
 more relevant to the Chancellor of the Exchequer, to an 
 additional annual revenue of ^6,000,000-more than twice 
 
 broulT"". """^ ""^ '''' ^"P"*^'' ^J'^" '' ^«^ first 
 Drought in to meet a deficit. 
 
 E 
 
11 
 
 41 
 
 50 The Development of the Post Office 
 
 There are those who shrink from such an extension of 
 the Post Office services, popular though this would be ; they 
 dislike the competition which they think it would create with 
 those who are at present " getting a living " by imperfectly 
 rendering similar services ; they instinctively resent any new 
 opportunities for profit-making slipping out of private hands. 
 To such persons — including, especially, the bankers and the 
 Stock Exchange — we would say, "Take your choice." Do 
 not rashly be induced to back up those who have obstructed 
 every Post Office reform. The money must be found. 
 There is always the alternative of ptitting another threepence 
 on the Income Tax. Would it not be better, both for you 
 personally and for the nation, to let the Post Office actually 
 " produce " this sum without any person being even a penny 
 the poorer ? 
 
 CHAPTER II 
 
 A PUBLIC SERVICE OF RAILWAY 
 AND CANAL TRANSPORT 
 
 % 
 
 ' 'I 
 
 I 
 
 SI 
 

 Net 
 
 CONTENTS 
 
 I. The Present Position. 
 II. Why we ask now for Nationalisation. 
 III. What are the Railways Worth?: 
 
 (a) Their Assets. 
 
 (b) Their Profit-earning Capacity. 
 
 U) Do the Profits show a Rising or a Falhng Tendency ? 
 \d) How will the coming of Peace affect the Gross and 
 
 Revenues ? 
 (e) Future Capital Expenditure. 
 (/) Can the Management be improved so as to produce Greater 
 
 Profits ? 
 IV. Economies that can be effected by Nationalisation. 
 
 V. Railway Experts' Arguments in favour of Amalgamation : 
 
 Sir Sam Fay (G.C.R.). 
 Sir Charles J. Owens (L. and S.-W.R.). 
 Mr. A. Kaye Butterworth (N.-E.R.). 
 The late Mr. R. Millar (Caledonian R.). 
 Mr. F. H. Dent (S.-E. and Chatham R.). 
 Mr. W. F. Jackson (N.B.R.). 
 
 VI. Closer Alliance with the Post Office. 
 VII. What the Economies might amount to. 
 
 VIII. The Terms of Purchase : 
 {a) The Act of 1844. 
 
 {d) The Precedent of the Indian Railways. 
 {c) The Stock Exchange Value. 
 The Development of the Canals as Subsidiary Lines of 
 
 Transport. 
 The Apportionment of the Net Revenue. 
 The Sharing of the Advantages : 
 
 (a) The Policy of the State Railway Department. ^ . ,, 
 
 (d) What the State Railway Department can achieve for the Users 
 
 of the Railways. 
 {c) Increased Facilities and Simpler Charges. 
 
 New Capital Outlays. 
 
 Conditions of Employment in the State Railway Service. 
 What the Chancellor of the Exchequer would gain by 
 Railway Nationalisation. 
 XV. Summary. 
 
 IX. 
 
 X. 
 XI. 
 
 XII. 
 
 XIII. 
 XIV. 
 
 A PUBLIC SERVICE 
 
 OF 
 
 52 
 
 RAILWAY AND CANAL TRANSPORT 
 
 I. The Present Position 
 
 On the Outbreak of War all the English railway companies 
 (with the exception of the London " tubes " and a few small 
 lines) were, by Order in Council of 5 th August 19 14, issued 
 under Sec. 16 of the Regulation of the Forces Act, 1871, 
 " nationalised," so far as control and supreme administration 
 are concerned. They have since been worked in many 
 respects as a single system under the supervision and control 
 of a single committee of General Managers under the 
 nominal chairmanship of the President of the Board of 
 Trade ; without financial competition, without the stimulus 
 of profit-making, and with a Government guarantee, so that 
 any gain or loss in fares or freight, any increase or decrease 
 in business, and any rise or fall in working expenses, accrues, 
 in effect, to the Exchequer. Experience, it is said, has 
 demonstrated the possibility of economies, even under war 
 conditions, owing to this elimination of rival interests. To 
 cite only one instance, a certain amount of the complicated 
 adjustment of accounts at the Clearing House has been 
 dispensed with, no doubt with some loss of useful informa- 
 tion ; and a considerable part of the staff has been released 
 for other duties. The question now is whether, on the Out- 
 break of Peace, the nation will throw away the advantages 
 of united administration, and allow its railway system to 
 revert to a chaos of competing managements.^ 
 
 * Statistical information as to railways is afforded by the Board of Trade 
 Annual Returns of Railway Statistics, Railway Accidents and Hours of Labour 
 
 53 
 
54 Public Service of Railway and Canal Transport 
 
 It is plain that it is important to put the agriculturists, 
 manufacturers and traders of this country in the best possible 
 position for meeting the severe international competition 
 which they will have to face ; and to provide such a system 
 of transport as will, to the utmost extent that can be devised, 
 enable them to carry on their business with the least expense 
 and delay, and with the greatest possible facilities for the 
 carriage of goods. At the same time it is necessary to 
 secure all the assistance possible in sustaining the burden 
 of the Great War Debt. By completing the process of 
 nationalisation the Government, it is argued, can not only 
 ensure for the whole community the advantage of greater 
 facilities for locomotion and transport, eventually even at 
 lower rates, but also— consistently with giving full com- 
 pensation to the shareholders and other interests affected— 
 relieve the Exchequer from part of the financial load in- 
 volved in the provision for repayment of the War Debt. 
 
 .n Railways- by the Reports and Evidence of the Royal Commission on 
 SlilwayrCd: 4979 i9io. and Viceregal Commission on Irish Railways, Cd 
 ^2l^7 Tgio ; by the Return entitled State Railways (British Possessions and 
 loreVco-triJs) H.C. 287 of 1913, and the Report of the Board oTd 
 fhe Railways of Belgium, France and Italy, Cd. 5106 1910 ; and by the Report 
 of the Board of Trade Railway Conference, Cd. 467?, 1909.. tor the con- 
 troversy's to Nationalisation, see State Ownership and Operatron of Rarl^ays 
 by the Railway Nationalisation Society, 1914, 3^ PP—t^e best summary of the 
 l^^ The Case for Railway Nationalisation, by Emil Davies (Collins 19 1 3. 
 ?s ) • Nationalisation of Railways, by the same (2nd edition, Black 912. s.) ; 
 sit) Purchase of Railways, by the same (Fabian Society, 1910, 2d. ; Roadway 
 ZiorZsZn^^ Clemen! Edwards, M.P. (Methuen, 1907, 2s. 6d ) ; l^rlway 
 %Tto7a sat Z by William Cunningham (1906; sold by the Fabian Society, 
 ^iTtyalJ^aiLys with Uniform Rates, by Whately C. Arnold (Simpkin, 
 TO iV VsT On the other side, see The Case against Railway Natzonahsatton, 
 WEdwin A. Pratt (Collins, 191 3, is-), and various previous books by the sarne ; 
 LMtmicipal and Natio^tal Trading, by Lord Avebury (Macmillan, 1907, 
 On ^^f'^:"^^^^ Regulation of Railway AV.., by Hugh R. Meyer 
 
 ^Macmillan, 1906, 6s. 6d.) See also Railway Nationahsatron, hy Sir George 
 G^bTRoyd Economic Society, 1908, 6d.) ; Elements of Ratlway fonontrcs 
 (Milfo d T905, 2s.), and Raihaays of England (Murray, 1900, los. 6d0, both 
 bv W M Acworth and English Railways, their Development and their Relation 
 )Vthesiatly E. Cleveland- Stevens (Routledge, 1916, 6s. net) For foreign 
 Lmplf see 5^^^^ and Municipal Enterprise (Fabian I^^search Department 
 examples, see bibliography will be found in the Ltst of Pub lu at tons 
 
 ^^ng to Government Ownership of Railways, 1914 (Bureau of Railway 
 Economics). 
 
 Why we ask now for Nationalisation 
 
 II. Why we ask now for Nationalisation 
 
 55 
 
 No attempt is here made to set forth the arguments in 
 favour of a National Ownership and Administration of the 
 railway system — the fact that practically every important 
 country except the United States and the United Kingdom 
 have adopted this policy ; that even in this country the 
 contrary policy of competition among railway companies has 
 perforce been abandoned ; the waste nevertheless caused by 
 the continuance of numerous, distinct and often overlapping 
 railway administrations ; the resulting multiplicity of in- 
 congruous fares and freights ; the dearness of British railway 
 journeys compared with those of nearly every other country ; 
 the lack of any effective public control.^ Nor have the 
 difficulties and drawbacks alleged against any such under- 
 taking been overlooked or disregarded, although space does 
 not permit of their examination in detail. 
 
 In the following observations the question of railway 
 nationalisation is envisaged primarily as a means of creating, 
 for the Chancellor of the Exchequer, new financial resources 
 to meet the War Debt. The facts that cheap transport is 
 of the greatest importance to manufacturers, and, indeed, 
 to the whole community, if we are to make the most of our 
 productive resources or to compete successfully with other 
 countries for the world's trade, and that increased facilities 
 for travel to the mass of the people are equivalent to an in- 
 crease in their effective freedom, have not been lost sight of; 
 nor is the importance of maintaining the Standard of Life 
 and improving the conditions of the workers overlooked ; 
 but, as indicated, the main argument is financial — in other 
 words, to use the commercial phrase, the matter has to be 
 handled as a " business proposition " in which the British 
 nation is a prospective purchaser. 
 
 * These grounds are clearly and succinctly set forth in State Ozvnership and 
 Operation of Raihvays, being the Memorandum presented to the Royal Com- 
 mission of 19 1 4 by the Railway Nationalisation Society (31 Charing Cross, 
 price 2d.). 
 
56 Public Service of Railway and Canal Transport 
 
 III. What are the Railways Worth? 
 
 The questions the prospective purchaser of a business 
 undertaking asks himself are : — 
 
 (i) What is the value of the undertaking {a) as regards 
 its assets and {b) as regards its profit-earning capacity ? 
 
 (2) Do the profits show a rising or a falling tendency? 
 
 (3) How much will require to be spent upon it in the 
 future ? 
 
 (4) Can the management be improved so as to produce 
 greater profits ? 
 
 (5) How much does the present owner want for the 
 concern ? 
 
 (6) How much less will he take ? 
 
 (7) How can the purchase best be financed ? 
 
 (a) Their Assets. 
 
 According to the latest full Railway returns covering the 
 year 191 3, published by the Board of Trade in October 
 191 5, the sum of ;£^ 1,1 79,445,000 stands in the various 
 railway companies' books as the capital expended upon the 
 railway system of the United Kingdom. The aggregate is 
 stated to be made up as follows : — 
 
 Lines open for traffic .... 
 
 ^806,258,000 
 
 Lines not open for traffic .... 
 
 3,342,000 
 
 Lines leased ..... 
 
 1,667,000 
 
 Lines jointly owned .... 
 
 44,543>ooo 
 
 Lines jointly leased .... 
 
 1,485,000 
 
 Rolling stock ..... 
 
 143^701,000 
 
 Lands and Buildings for manufacturing and repair- 
 
 
 ing works ..... 
 
 12,567,000 
 
 Plant and Machinery for manufacturing and repair- 
 
 
 ing works ..... 
 
 6,457,000 
 
 Horses ...... 
 
 269,000 
 
 Road vehicles for conveying passsengers, parcels 
 
 
 and goods ..... 
 
 348,000 
 
 Steamboats . . . ... 
 
 6,781,000 
 
 What are the Railways Worth ? 
 
 Canals 
 
 Docks, harbours and wharves 
 
 Hotels ....]' 
 
 Electric Power Stations . 
 
 • • , 
 
 Land, property, etc. not forming part of the railways 
 Subscriptions to companies other than railway 
 
 companies .... 
 Miscellaneous 
 
 • • • 
 
 Unclassified 
 
 57 
 
 ;£"2 1,079,000 
 
 47,152,000 
 8,153,000 
 4,554,000 
 
 39,817,000 
 
 4,072,000 
 4,580,000 
 9,056,000 
 
 Total 
 
 ;£"!, 163,881,000 
 
 [We omit "Subscriptions to other railway companies" 
 ^15,564,000, as duplications.] 
 
 It is impossible to calculate the present value of these 
 assets. It is often asserted, with what accuracy cannot be 
 tested, that if the whole railway system were now to be con- 
 structed afresh, it could be done for a sum considerably less 
 than the amount at which it stands in the railway companies' 
 books. On the other hand, much of the land in the cities 
 has greatly increased in value ; and some capital has been 
 extinguished on amalgamations. What is known is that, 
 unlike every municipal concern and every properly con- 
 ducted business concern, the British railway companies do 
 nothing in the way of systematically " writing down " out of 
 profits the book value of their assets. They have created 
 no Sinking Fund. In some cases, notably that of the Mid- 
 land Railway Company, they have set aside relatively small 
 reserve funds which seem now to amount to thirty millions ; 
 and in others a certain amount of improvements and 
 increases of rolling stock have been provided out of revenue. 
 On the other hand, various companies have, in some 
 notorious instances, scarcely maintained their enterprises in 
 efficiency. In contrast with the principal American railroad 
 corporations, they have, indeed, in some cases, drawn out 
 more in dividends than has been fairly earned. It will be 
 noticed, however, that in addition to the permanent way, 
 passenger stations, goods sheds and rolling stock, the British 
 
i,; J. 
 
 58 Public Service of Railway and Ca^tal Transport 
 
 railway companies possess a large amount of other property 
 in the shape of manufacturing and repairing plant, live stock, 
 road vehicles, steamships, hotels (fifty-five under the com- 
 panies' own management), land and house property, etc. not 
 forming part of the railway, but figuring in the books for the 
 sum of over ;£^7 5,000,000 ; whilst docks, wharves and 
 harbours standing at ;£'47,i 52,000, and electric power 
 stations (though without legal powers to supply other con- 
 sumers) accounting for i^4, 5 54,000 of these assets, have also 
 a value apart from the railway system itself. 
 
 It would conceivably be possible for expert valuers to 
 determine the present real value of the entire "plant" of 
 the railway system by what may be called a physical valua- 
 tion, without reference either to existing or future profits, or 
 to the amount of capital indebtedness standing in the 
 Companies' books. An attempt is being made in the 
 United States, where matters seem to be drifting towards 
 nationalisation, to have such a valuation made. It would 
 enable the railways to be taken over at their present 
 " objective " value, on " Tramway terms." But it would be 
 a work of years, and extremely costly, running, in fact, into 
 millions of pounds ; and in the present emergency some 
 quicker — and, to the shareholders, more liberal — method 
 seems called for. Such a method is provided by taking the 
 selling vahie of the railways as commercial undertakings on 
 the basis of the net profits actually earned and distributed. 
 
 ib) Their Profit- earning Capacity 
 
 The following table shows the takings and working profits 
 of the railways of the United Kingdom since 1905. 
 
 What are the Railways Worth ? 
 
 59 
 
 [Table 
 
 (For 1 9 14 and 191 5 the accounts are disturbed by the abnormal 
 war conditions, and no adequate statistics are available.) 
 
 It will be seen that, on the whole, the gross receipts and 
 the profits have, during the decade, risen fairly steadily. 
 But the nominal capital of the companies has increased still 
 more rapidly, so that the proportion the profit bears to the 
 capital has shown a declining tendency until two or three 
 years ago, when it rose from 3.55 per cent in 19 12 to 4.05 
 per cent in 191 3. The full amount of "water" in the 
 capital is not known, so far as the early years of the under- 
 takings are concerned ; nor is the nominal increase known 
 that is due to the methods of issuing new stock, which have 
 been sometimes so favourable to existing stockholders as to 
 constitute large extra "bonuses." Making allowance only 
 for the purely nominal additions of recent years, as recorded 
 by the Board of Trade, the average yield in 1 9 1 3 would be 
 4 Jths per cent. 
 
 (0 Do the Profits show a Rising or a Falli7ig Tendency ? 
 
 Down to the outbreak of war it would have been fair 
 to assume that the volume of takings recorded during the 
 past few years was likely to be substantially maintained. 
 But it was already clear that Labour would demand a 
 higher wage and improved conditions, which would increase 
 
 1 
 
m > 
 
 60 Public Service of Railway and Canal Transport 
 
 the working costs ; and that, as the railway companies had 
 been permitted to raise their charges so recently as 191 3, 
 and then only in the teeth of great opposition in Parliament, 
 it was hardly likely that fresh increases — to which, indeed, 
 the shareholders would have no claim — would be granted 
 by Parliament. Though in many cases the rates are below 
 the legal maxima, the difficulty of raising these rates, in face 
 of the competition of other railway companies, and rival 
 methods of transport, has hitherto been found to be consider- 
 able. Apart from the war, therefore, the outlook was for 
 reduced net profits. Now that the war has come the 
 English railways are being temporarily worked, in effect, 
 for the account of the State, and whilst this lasts the share- 
 holders are enjoying a valuable guarantee, which ensures 
 them substantially the same dividends as during 1913;^ 
 and this, by a fortunate coincidence for them, was their 
 boom year. 
 
 ^ The arrangement with the Government provided for the Government making 
 up the net traffic receipts to the aggregate net receipts for the year 191 3, with a 
 proviso that the compensation should be reduced in the same proportion, as such 
 receipts for the first half of 19 14 were less than those for the first half of 191 3. 
 It was subsequently agreed that this proviso should cease to operate as from 
 1st January 1915, in consideration of the companies undertaking to relieve the 
 Government of 25 per cent of the amount of the war bonus granted in February 
 last to employees who come within the railway conciliation scheme, the bonus to 
 other railway employees being borne by the Government by inclusion in the 
 working expenses. When in October 191 5 the bonus was increased to 5s. per 
 week for all employees, except boys, the responsibility for the additional 
 expenditure was accepted by the Government, but owing to the difficulty in 
 allocating the expenditure as between the Government and the companies, it was 
 agreed that the latter should bear 12\ per cent of the whole of the war bonus 
 paid to employees embraced in the conciliation scheme. This it was considered 
 would approximately correspond to the above-mentioned 25 per cent of the 
 original war bonus, which, in its turn, had been regarded as equivalent to the 
 deduction of 2.\ per cent made in respect of the proviso. The companies are 
 now claiming a further allowance in respect of the sums which, in order to release 
 as much labour as possible, they have refrained from spending out of revenue 
 upon maintenance, and which will have presently to be spent to make good 
 arrears. 
 
 The above arrangement does not guarantee absolute identity of dividends, 
 because (i.) the amount of the capital has been varied in some cases ; (ii.) there 
 are variations in "other receipts" apart from traffic {e.g. rents), and, on the 
 other hand, in * ' other charges " ; (iii. ) balances brought in and carried forward 
 and sums placed to reserve or contingent accounts vary from year to year. 
 
 v 
 
 iii 
 
 What are the Railways Worth ? 
 
 61 
 
 {d) How will the coming of Peace affect the Gross and 
 
 Net Revenues ? 
 
 It is probable that, for a short time after the conclusion 
 of peace, much of the trade in the manufacturing countries 
 of Europe will be spasmodically active— that is, while the 
 rebuilding, refitting and restocking of Belgium, Northern 
 France, Poland, South Tyrol, Galicia, Eastern Prussia, 
 Armenia, the Balkans and any fresh districts that may be 
 devastated are in progress. This spurt, which may gw^ the 
 illusion of prosperity, may possibly be followed by a long 
 period of depression throughout Europe, during which the 
 gross takings of the British, as the other railways, are likely 
 to decline, unless some new developments can be made, 
 which do not seem open to competing companies. Nor is 
 it reasonable to suppose that Labour, now more strongly 
 organised than ever, and supported by the economists in 
 denouncing as disastrous any fall in the Standard of Life, 
 will consent to any reduction of wages— unless, indeed, the 
 cost of living should fall considerably, which appears in the 
 highest degree unlikely. Many financial experts, in fact, 
 regard the outlook for British railway companies, from the 
 point of view of net profits, as decidedly bad. This must 
 necessarily be taken into account by the shareholders as 
 prospective sellers and by the State as prospective purchaser. 
 
 {e) Future Capital Expenditure 
 
 Prior to the outbreak of war, the ten principal railway 
 companies of this country are said to have had actually in 
 hand works requiring an expenditure of something like 
 twenty million pounds. With the most drastic slowing 
 down, it is certain that a good many millions will have to 
 be spent during the next decade, merely to maintain each 
 hne in effective rivalry with its competitors. Every million 
 of new capital thus raised would cost the railway share- 
 holders five or ten thousand pounds a year more than it 
 
 
 l! 
 
 I 
 
62 Public Service of Raikvay and Canal Transport 
 
 |i 
 
 would cost the Govermnent. A comparison of yields on 
 market prices for the past few years shows that the best of 
 the railway companies have to pay at least one half of one 
 per cent more for additional capital on debentures, nearly 
 one per cent more on guaranteed and preference stocks, and 
 as much as i^ per cent more on Ordinary Stock than the 
 Government has to pay for its own borrowings ; whilst those 
 companies whose credit is weaker have to pay an even 
 higher rate for capital. The latest issues show that this 
 difference between Company credit and State credit, even 
 during war, continues undiminished. Moreover, whilst a 
 railway company is only permitted to raise a certain pro- 
 portion of its capital in the shape of Debentures and 
 Preference Stocks, and must, therefore, issue Ordinary Stock 
 on which a higher rate of dividend is expected and paid, 
 the State raises the whole of the additional capital it requires 
 in Loan Stock at the minimum ruling rate of interest. 
 Under a State railway system, therefore, all the additional 
 capital required would be raised at the lowest rate, regardless 
 of which part of the United Kingdom it was destined to 
 serve. 
 
 As prospective purchaser of the railway system, there- 
 fore, the State, on the one hand, must consider the need for 
 this future capital expenditure in order to keep the system 
 in efficiency. The shareholders must, on the other hand, 
 consider the necessity in which they will find themselves of 
 raising additional capital on onerous terms, merely to keep 
 tlieir existing enterprises in competitive efficiency with each 
 other, let alone embark on the extensions that they may 
 think profitable ; with the result that, if the railway system 
 is left in their hands, the rate of dividend on their ordinary 
 stocks may not improbably be reduced, whilst the interest 
 on some of the less secure fixed interest-bearing stocks may 
 be endangered. 
 
 What are the Railways Worth ? 
 
 63 
 
 (/) Can the Management be improved so as to produce 
 
 Greater Profits ? 
 
 If the reply to this question were in the negative the 
 financial case for State purchase would fall to the ground. 
 If the present divided administration is continued, we cannot, 
 as has already been indicated, count upon any increase in 
 the companies' net profits for some years to come. Apart 
 from the far-reaching economies of administration which 
 unity would permit, but which are not open even to the 
 ablest General Managers of rival companies, there seems 
 little prospect of reduction in the working expenses. Coal 
 —that tremendous item of expenditure — does not appear 
 likely, under the present capitalist production and distribu- 
 tion, to fall much in price, though the Nationalisation of the 
 Coal Supply would protect a State Railway Department 
 from extortion. A reduction of wages is out of the question ; 
 more probable — and desirable from the national point of 
 view — is a reduction in the hours of labour of certain 
 unduly strained sections. What margin is there, then, for 
 economy? The answer is that, whilst to the companies 
 there is but little, to a State Railway Department there 
 would be a certainly considerable though not precisely 
 calculable margin, as various tentative experiences indicate, 
 through a comprehensive co-ordination, and the abolition of 
 unnecessary and wasteful duplication — yes, even triplication 
 and more — which prevails throughout a large part of the 
 railway service of the United Kingdom. What would be 
 most hopeful would be the reorganisation by one administra- 
 tion, on a scientific basis, of a chaos which has come about 
 as the result of scores of competing systems, each company 
 working for its own ends, and invading the territory or 
 encroaching on the business of another company until the 
 observer stands amazed at the muddle. 
 
 At the outbreak of war national necessity demanded the 
 immediate sweeping away of multiple control. The thirteen 
 hundred railway directors had to be deposed from their 
 
64 Public Service of Railway and Canal Transport 
 
 nominal command, and the supreme control was vested in 
 a single Executive Committee of General Managers under 
 Government orders. The circumstances of the case have 
 prevented anything more than a very partial reorganisation. 
 The couple of hundred Boards of Directors still meet 
 regularly, go through their agenda, eat their luncheons and 
 draw their fees as before. It is indeed reported that, 
 except for the stoppage of projects of extension and improve- 
 ments, the Boards of Directors find as much work to do as 
 they had before the war. Each railway remains normally 
 under its own General Manager. Even the Managers who 
 meet as the supreme Executive Committee bring with them, 
 we may suppose, their feelings as to the lasting separate 
 interests of their respective lines, and it is said that, whilst 
 speeding the War Office trains, they do not forget to 
 " manoeuvre for position " in the competition for traffic and 
 territory that may be resumed when the Government control 
 comes to an end. Of the measure of unified administration 
 actually exercised, of the changes effected owing to running 
 powers being assumed over all lines, of the abandonment 
 of wastefully lengthened trains and duplicate competitive 
 services, of the simplification secured in intercompany 
 accounting, the public has not been informed, and those 
 concerned make no revelations. Yet something is known 
 to those who have " inside " information. What is clear is 
 that, in spite of the heavy reduction in the number of 
 railway workers owing to the enlistment of about one-sixth 
 among the most vigorous of the workers ; in spite of the 
 vast demands placed upon the railways by the military 
 authorities, whose requirements have naturally had to take 
 precedence over everything else ; in spite of the fact that 
 the shortage of tonnage and the extraordinary rise in 
 shipping freights, whilst railway charges have remained un- 
 changed, have driven hundreds of thousands of tons of 
 coasting traffic, ordinarily carried by sea, on to the railways ; 
 — a greatly increased volume of traffic has been handled with 
 a diminished wages bill — handled, it is true, with difficulty. 
 
 What are the Railways worth ? 65 
 
 and with delays and drawbacks which, whilst annoying the 
 customers, do not mean any diminution of work to the staff. 
 The chairman of the London and North- Western Railway' 
 whilst heroically complacent about the large proportion of 
 the staff which had enlisted, informed his shareholders that 
 the aggregate volume of traffic carried has been far greater 
 than in any previous year. The economies to be effected 
 by complete unification of management and of financial 
 mterest are, indeed, not seriously denied. The following 
 extract from the Liverpool Journal of Commerce of 2nd 
 December 191 5, expresses a view now widely held : 
 
 Some of the remarkable results which will come from the 
 Government control of the railways after the war were hinted at 
 yesterday by a prominent railway official, who is on an important 
 Government Transport Committee, in an interview with the London 
 representative of The Journal of Commerce. This gentleman 
 watches the development of transport work between the ports and 
 the trade centres, from the Government side and the railway 
 companies' side. The deductions he gathers are from the inside 
 ihey point to a very smooth working agreement between the 
 railways and the Government. Government control has come about 
 so quietly, owing to the War, that the country is already used to it 
 Ihe question of the nationalisation of railways is, if not practically 
 settled, hurried another twenty years forward. . . . Before the war it 
 was a legitimate matter for argument whether it was better to have 
 private companies or State control, but now there can only be one 
 mmd, and the sooner the Government make a definite pronounce- 
 ment the better. Up to the present, from 15 per cent to 20 per 
 cent of men in the railway service have joined the colours, and as 
 a result the bulk of the present staffs are long- service men who 
 have been trained to think of the particular interests of their own 
 Company first and foremost. ... For the time being there is only 
 one railway company in Great Britain, the management being vested 
 m a central committee at Whitehall, and until a definite statement 
 IS made by the Government the particular interests of individual 
 companies will continue to occupy the minds of railwaymen to the 
 detriment of wider and more important issues. Various far-reaching 
 Changes in railway working have been made during the last year 
 with the object of securing more co-ordination between the various 
 companies m the handling of goods and passengers, but each 
 
 F 
 
66 Public Service of Railway and Canal Tra^tsport 
 
 company still has its own separate board of directors, management 
 staff, engine-shops, repair- shops, stores, cartage, rates, claims and 
 numerous other departments. 
 
 It requires little prescience to realise the saving in many 
 directions which could be effected by merging the various railway 
 companies into one composite body. This process could be accom- 
 plished gradually and without impairing the efficiency of the service. 
 Time and circumstances are opportune for this great change. Will 
 the opportunity be grasped ? 
 
 IV. Economies that can be effected by 
 
 Nationalisation 
 
 In spite of the doubt which some railway managers 
 profess to entertain, there is now a consensus of opinion 
 that the abolition of private wagons and trucks, and the 
 pooling of rolling-stock, would, in itself, result in a large 
 annual saving. The couple of hundred railway companies 
 in the United Kingdom still represent (with all the recent 
 amalgamations and joint agreements for working) about a 
 score of actively competing systems, each fiercely jealous of 
 its nearest neighbours. Hitherto the truck or wagon of 
 one railway company, carrying goods to a station on the 
 lines of another company, has too often returned empty to 
 the owning company, when there were no goods available 
 to load back to that company's line. Think for a moment 
 of the hundreds of thousands of miles of unnecessary haulage 
 of empty trucks and wagons, the wasteful consumption of 
 thousands of tons of coal and innumerable days of labour, 
 the unnecessary wear and tear, and the needless congestion 
 of trafific at particular points involved by this proceeding. 
 Moreover, owing to the inability of each railway company, 
 and of each private firm owning rolling-stock, to use any 
 but the trucks and wagons bearing its name, the extent 
 to which the rolling-stock remains idle in the sidings and 
 depots is greatly increased. The aggregate of wagons and 
 trucks actually "on the move" at any particular moment 
 represents, it is said, an extraordinarily small percentage of 
 
 Economies that can be effected by Nationalisation 67 
 
 the total stock. There is always a popular complaint of a 
 shortage of trucks ; and, at many points, at some seasons 
 ot the year, there is a demonstrable shortage. Yet the 
 companies have, " on the road," nearly 900,000 vehicles of 
 their own, whether coal trucks (186,000), other goods 
 wagons (575,000), passenger coaches (80,000) or dining- 
 cars (543); besides which there are about 600,000 private 
 wagons, mostly for coal, belonging to a thousand or more 
 different colliery companies or other individual owners 
 These million and a half vehicles, drawn by some 25 000 
 locomotives, now make an enormous number of wasted 
 journeys, because they are not organised as one whole It 
 IS not that railway managers fail to see the waste involved 
 nor do they deny that a national economy could be effected' 
 But hitherto each manager has been concerned, not to 
 prevent waste in other railway companies, or on the system 
 as a whole, but merely to get the greatest net profit for his 
 own company. It may well be that some of the managers 
 are correct in their calculations that the present multiplicity 
 of ownership of wagon stock yields to their particular 
 companies larger net profits than they could secure by any 
 change that a?iy individual company could effect That a 
 partial pooling of even the railway companies' own rolling- 
 stock could be profitably effected by a combination of 
 companies is shown by the fact that some of them are now 
 after a whole generation of refusal, at last taking this course.^' 
 
 ^ On 1st January 1916 three companies (G.E.R., G N R anH r r p ^ 
 adopted a scheme for the joint working of their rollingitock for m^neraf't^^^ 
 in order to keep their trucks continuously at work in tead of so m.nl K ' 
 
 «"N?^;/ \ '""l^t ^^ f ^^^ '^ ^^^ dep^trt^wlTi^ th^^ e^eX' 
 l-m^. f :.- , ^' ^ ^-^'^ adopted a similar plan, but only for cerfnJn 
 
 If this is economical of labour, haulage trucks and troir, c^o^^ u 
 
 owCJT l" -?"''' T°"^ "" '^' ~"P=">ies but also among all the privaTe v 
 owned trucks; together with an assimilation of rollin^-stock so as to L.,!, 
 gradual , he adopfon. throughout the entire SystemSoft umYorm tyii'The 
 Best that experience has demonstrated — for each kind of vehirl^ > vif ii 
 differences would remain between vehicles required for differ::, ktds oltZ^Il 
 
68 Public Service of Railway and Canal Transport 
 
 But it is not within the power of any Railway Company to 
 abolish the privately -owned trucks, without which the re- 
 organisation must remain incomplete and imperfect. For 
 the view that complete national " pooling " of all the goods 
 and mineral wagons of the country would effect " a saving 
 of several millions of pounds annually to the companies, and 
 a great acceleration of traffic to traders and the public," we 
 have, at any rate, the authority of a very experienced railway 
 chairman, on the advice of not the least able among the 
 railway managers, after an exhaustive examination of the 
 whole problem.^ 
 
 No less obvious is the saving to be effected on the 
 present duplication and triplication — not, it is true, quite 
 so prevalent as it was a few years ago — of passenger stations, 
 goods depots and receiving offices in the same town. Those 
 who fear that any saving to be effected by nationalisation of 
 
 nobody suggests using coal trucks for fish, or timber trucks for either cattle or 
 dead meat, or even the coal trucks specially built to suit the requirements of the 
 ports of shipment on the North-East Coast as vehicles for the inland distribution 
 of household coal. It is only the separate ownership within each class of vehicle 
 that is a wasteful anomaly. 
 
 1 See the speech by Lord Claud Hamilton at G.E.R. annual meeting nth 
 February 1916. That the promise of an acceleration of traffic is not unwarranted 
 may be seen from a recent report of the Liverpool Steamship Owners' Association. 
 
 "The Association attaches the greatest importance to the adoption of a 
 complete system of the common user of the trucks of the railway com- 
 panies, and to a sufficient number of the trucks of the private owners being 
 brought into such a system. The work of the ports and consequently the dis- 
 charge and loading of the ships is being most seriously hampered and delayed 
 by the want of trucks, and even when there are empty trucks in the ports it 
 constantly happens that those trucks are not available to carry the cargoes to 
 their destinations, as they do not belong to the particular railway company 
 directly concerned with the traffic. Further, an immense amount of time is lost 
 in marshalling the trucks of the different railway companies in the ports before 
 the truck required for a particular journey can be brought alongside the goods 
 to be carried on that journey" (Report in Morning Post ^ l6th February 1916). 
 
 The objections to "pooling" made by some big truck-owners, and voiced 
 by some of the Chambers of Commerce, are almost avowedly based on the plea 
 that some individual concerns whom the present system benefits are afraid that, 
 with a complete " pooling," they may not find themselves better served than the 
 general mass of traders ! Assuming that the funds can be provided for the 
 purchase of the 600,000 private trucks, and for any necessary reconstruction, we 
 believe that no railway expert questions the technical advantage of such a com- 
 plete " pooling " in a unified railway system. 
 
 Experts' Arguments in Favour of Amalgamation 69 
 
 the railway system could only be at the expense of labour 
 should reflect for a moment upon the thousands of railway 
 receivmg and ticket offices in the various towns of the 
 country. In important towns it is no uncommon thing to 
 hnd three or four in one street, almost invariably the best 
 busmess street in the town. Not only is there a duplication 
 here of the staff of clerks who could be much better employed 
 in other branches of the service in order to reduce working 
 hours and thereby contribute to safety and efficiency, but 
 there is, with no corresponding advantage in public con- 
 venience an obvious waste in rents, which go straight into 
 the landlords' pocket. 
 
 There is no need to elaborate the thousand and one 
 economies that could be effected by such unification of 
 management and identity of financial interest as can be 
 brought about only by State ownership and operation We 
 have only to refer to the highest authority possible, the 
 General Managers of the railway companies themselves 
 whose opinions in favour of unification (although they were 
 not usually thinking of State ownership) are expressed in 
 the following extracts, in which the headings alone are ours. 
 
 V. Railway Experts' Arguments in favour of 
 
 Amalgamation 
 
 .^J}^^"" "^ Companies whose geographical position and circum- 
 Tltf "J- '" "" *° determine the desirability of amalgamation 
 n the public interest, apart altogether from financial advantage to 
 the Companies concerned. ^ 
 
 busi^etf I'lf '=°'"P^r' "^ ,^°™P«ti"g for a large volume of 
 traffic T;r ^^ f™^'-^"y.a'-e. by circuitous routes, and hauling 
 hrn;h' 1 ' ^^^ °' '""y """^^ ^^'"her by one route than by 
 urovM^H ' . '°"f ""'« something little short of national waste! 
 provided always that the shorter route is able to deal with the traffic 
 on line and at terminal stations. 
 
 m..fr^"^K, •*'■'''" f ^''^es which could be far better arranged to 
 meet the public needs are duplicated, and cross-country and branch- 
 
 wors/nT! """"T ^'"^ °"' ■""'" "^"'^^ °"'y' ^"<^ 'hat often the 
 worse ot two routes. 
 
<l 
 
 70 Public Service of Railway and Canal Transport 
 
 Where running powers are exercised under such circumstances 
 they are to the detriment of the general train accommodation of the 
 district, often adding to the troubles of an already congested main 
 line, and are duplicates which would be easily avoided under one 
 management. 
 
 In the collection and delivery of merchandise and parcels, the 
 streets are burdened by unnecessary vehicles, due to the employment 
 of two where one would well suffice. 
 
 The availability for traffic generally of receiving and delivery 
 depots of each of such companies would secure to the public 
 additional and often much-needed facilities for shorter and more 
 expeditious, and, consequently, less costly cartage. 
 
 The interchangeability of tickets by such competing routes 
 should not fail to be of great advantage to the travelling public. 
 
 Then there is the financial advantage gained by the fusion of 
 routes, providing thereby alternative ways for the conveyance of 
 traffic between principal centres. The congestion of one route 
 which, in its singleness, could only be met by capital outlay, can be 
 relieved by the alternative route being in the hands of the one con- 
 trolling agent who can use the means of communication at his 
 disposal to the best advantage, and get full economic results from 
 the original capital outlay on the line. 
 
 The expenditure of new capital upon a congested route really 
 amounts to waste when an alternative route, albeit in the hands 
 of a rival Company, sufficiently clear to deal with the traffic, is 
 available. 
 
 The expense of a second executive would also be saved. 
 
 Sir Sam Fay, 
 General Manager^ Great Central Railway. 
 
 (Memorandum to Committee of Board of Trade Railway 
 Conference, 1909.) 
 
 Waste from divided Control 
 
 In the service of cartage, competition leads to expenditure 
 which would be unnecessary if it did not exist. Vans are sent out 
 with light loads in order to secure the earliest delivery, and in many 
 cases, and particularly in the suburbs of larger towns, two or three 
 vans will be engaged in delivering light loads which could easily be 
 conveyed in one. 
 
 Again, the delivery boundaries of the various companies extend 
 
 Experts' Arguments in Favour of Amalgamation 71 
 
 into each other's districts, and thus there is a considerable over- 
 lapping and waste of resources. 
 
 Sir Charles J. Owens, 
 General Manager, London and South-Western Railway, 
 
 (Memorandum to Committee of Board of Trade Railway 
 Conference, 1909.) 
 
 There is -still another economy common to both classes of 
 amalgamation, which deserves careful consideration, and that is the 
 economy which would result from greater uniformity of rolling-stock 
 and railway plant generally. Perhaps no better illustration can be 
 given of this than brakes. It cannot but be disadvantageous that 
 the East Coast route from London to Scotland should be in the 
 hands of three separate companies, two of whom use the Westing- 
 house brake and the other the Vacuum, involving an expenditure in 
 " dual fitting " which would never have been incurred had the route 
 belonged to a single company. 
 
 Mr. A. Kaye Butterworth, 
 General Manager, North-Eastern Railway. 
 
 (Memorandum to Committee of Board of Trade Railway 
 Conference, 1909.) 
 
 There is a number of undertakings (Joint Lines, Joint Stations, 
 etc.) owned jointly by two or more Railway Companies, and the 
 contending interests of the Owning Companies involves the employ- 
 ment of separate staffs for the management and maintenance of 
 these undertakings. 
 
 The exigencies of competition have rendered it necessary for the 
 Companies to maintain at large cost a staff of Canvassers and other 
 Agencies (such as Offices for the reception of goods and for booking 
 passengers) which would otherwise have been unnecessary. 
 
 The late Mr. R. Millar, 
 General Manager, Caledonian Railway. 
 
 (Memorandum to Committee of Board of Trade Railway 
 Conference, 1909.) 
 
 How the Present System handicaps the Managers 
 
 It is not merely that the absence of competition would in itself 
 necessarily put an end to a great deal of unnecessary train or wagon 
 
t\ 
 
 72 Public Service of Railway and Canal Transport 
 
 mileage, but, by freeing the officers of the two companies from the 
 necessity of spending their time in scheming how to secure traffic 
 for their own line, it would enable them to throw their best efforts 
 into what, under an ideal system, would seem to be the proper 
 channel for the efforts of the brain-working on a railway, viz. on the 
 operating side, devising how best to combine economy and efficiency 
 of working, or, in other words, how to give to the public the greatest 
 facilities at the least cost, and, on the commercial side, trying to 
 create and foster new industries and generally to develop to the 
 fullest extent the resources of the district which the Company exists 
 to serve. At present much of the time and energy of the more 
 highly-paid officials of a Railway Company is taken up with work in 
 which the trading community has no interest, and which is only 
 rendered necessary in the interest of the shareholders whom they 
 serve by the keen competition which exists between Companies. 
 
 Mr. A. Kaye Butterworth, 
 General Manager, North-Eastern Railway. 
 
 (Memorandum to Committee of Board of Trade Railway 
 Conference, 1909.) 
 
 Where the State Railway Officer would gain would be in the 
 cessation of questions arising out of the conflicting interests of 
 Railway Companies ; he would not have to be constantly resisting 
 demands of public or Parliament. ... On the whole, he would 
 have more time to devote to the real business of a railway manager 
 or superintendent, i.e. the operation of traffic. 
 
 Mr. F. H. Dent, 
 
 General Manager, South-Eastern and Chatham Railway. 
 
 (Address to Railway Students' Association, reported in Railway 
 Gazette 25th October 191 2.) 
 
 Unification means Vast Economies 
 
 The amalgamations which resulted in the five existing Scottish 
 undertakings simplified the railway arrangements of Scotland, and 
 enabled economies to be effected in working and management, as 
 well as the giving of services and facilities to the traders and the 
 public which would have been quite impossible with a large number 
 of comparatively small railways, and the arrangements which at 
 present exist among the five Companies with regard to routing of 
 
 Closer Alliance with the Post Office 73 
 
 traffic and mutual availability of tickets have done something more 
 m the same direction. There is no reason to believe that a further 
 scheme of amalgamation which would unite in one all the railways 
 of Scotland would not have the same beneficial results as attended 
 the amalgamations which have already taken place. 
 
 There would, by such an amalgamation of the five railways be 
 saying: (i) m the cost of direction, management, and staff generally 
 (2) as a result of the common use of working stock and plant : U\ 
 by the discontinuance of duplicate services and stations ; (4) in the 
 cost of advertising and canvassing at present considered needful for 
 competitive reasons; and (5) in the simplifying of the whole 
 arrangements of the Companies, particularly in connection with 
 joint lines, exchanges of traffic, running powers, etc. 
 
 Mr. W. F. Jackson, 
 General Manager, North British Railway. 
 
 (Memorandum to Committee of Board of Trade Railway 
 Conference, 1909.) ' 
 
 VI. Closer Alliance with the Post Office 
 
 With the railways under the State they could be worked 
 in more profitable conjunction with the Post Office than 
 IS the case to-day. The railway companies, for instance, 
 maintain rival systems of parcels traffic in competition with 
 the Post Office. The Post Office offers its own advantages 
 with which the railways cannot compete. But the railways 
 offer, on the other hand, what the Post Office foolishly 
 refuses, namely, to collect the parcel from the sender to 
 charge the carriage forward, and even, in some cases,' to 
 bring back the price of the goods. The duplication of 
 services is, however, plainly waste. Though the trains are 
 far from being full, the Post Office runs its own services of 
 motor vans on the roads, carrying its parcels hundreds of 
 miles by services that could be wholly dispensed with 
 Any one who has seen the mails arrive at a terminus will 
 have noticed that the railway companies' officials do not 
 touch the baskets and bags, but Post Office servants have 
 
M 
 
 74 Public Service of Railway and Canal Transport 
 
 to meet the trains and transport the mail bags and parcel 
 baskets to the mail vans, or vice versa^ as the case may be. 
 This often involves long periods of waiting, which, in the 
 ^gg^^&^te, must amount to an enormous amount of waste 
 time, whilst the railway staff", which has to be on the spot, 
 could, in most cases, easily handle the traffic. This is merely 
 one of many instances which can be given to show how a 
 closer working between the railways and the Post Office 
 would effect national economies. It would, of course, be 
 unfair to blame the railway companies for the present waste 
 of this needless rivalry. It is not now in the interest of the 
 railway companies to save the State expense, or any advan- 
 tage to the Government to increase the profits of the railway 
 companies. Consequently, the railway stations are not 
 utilised as Post Offices, even where the station master has 
 next to nothing to do ; and the local Post Offices, which 
 might serve as village agencies for the railways, are not 
 allowed to undertake this work. If the production and 
 distribution of coal were nationalised and municipalised, a 
 similar alliance between the State Railway System and the 
 Government Coal Department would be equally advan- 
 tageous to both of them. 
 
 VII. What the Economies might amount to 
 
 It is perhaps a minor point that no small sum is wasted 
 annually on the running of hundreds of thousands of miles 
 of nearly empty first-class passenger coaches because no 
 one company dare shake itself loose from tradition. Observe 
 an ordinary passenger train on any journey. As a general 
 rule it will be noticed that compartment after compartment 
 of the first class is empty, yet the coach is during the 
 evening brilliantly lighted and has to be hauled all those 
 miles without bringing in any revenue. It is known, more- 
 over, that an appreciable proportion of the relatively tiny 
 number of first-class passengers enjoy free passes or privilege 
 
 What the Economies might amount to 75 
 
 tickets.^ This inability to break away from custom, in face 
 of the competition of rivals, accounts for much. When one 
 thinks of the thousands of miles of unnecessary running of 
 empty or almost empty first-class coaches (which yield, on 
 an average, no greater receipts than third class), when a 'few 
 composite carriages having occasional first-class compart- 
 ments would serve the purpose ; when one thinks of the 
 unnecessary duplicate trains running between certain com- 
 petitive points, the thousands of goods wagons on different 
 systems which go without a full load because only a portion 
 of the traffic falls to the owning company, the thousands of 
 miles travelled by goods trucks being returned empty to the 
 particular company whose initials are painted thereon instead 
 of being utilised for other return freight ; the thousands of 
 mspectors and clerks who are employed merely to register 
 the passing of one company's truck or tarpaulin to another 
 company's system, or to work out what proportion of a pas- 
 senger ticket comes to one company and what to another ; 
 when one realises how this needless multiplication of work 
 and costs runs through the greater part of the competing rail- 
 way services of the United Kingdom, we can well believe, 
 with Lord Claud Hamilton, that the economy to be effected 
 by unification would run into several millions of pounds 
 annually. It is perhaps not going too far to say that, in 
 the course of a few years, 10 per cent of the working 
 expenses, equal to eight or nine millions a year, and possibly 
 a great deal more, could be saved to the community. All 
 this concerns the actual working, and is without reference to 
 
 » It is not suggested that the number has been lately increased, or even that 
 It exceeds due proportions. But, in fact, the free first-class passes, either on 
 particular lines or over several lines, or over all lines whatever, run, we are told, 
 into a good many thousands. All the 1300 railway directors, except those of 
 some of the smallest companies, have a universal -gold pass" over all British 
 r^n J," «; ? covering all their journeys, public or private. The number of 
 railway officials (who need to travel a great deal on duty) possessing passes, which 
 they are allowed to use also when travelling on their private concerns, must be 
 bJ^''°"/'^^"'', • Such passes are now given, inter alia, to officials of the 
 Board of Trade and Ministry of Munitions. And there are many other cases 
 
 ..rvrv,'" ?^"^'u^ Managers' offices, in which (even if free passes are neces- 
 sary) they need not be first class. 
 
76 Public Service of Railway and Canal Transport 
 
 any saving in interest owing to the superior credit of the 
 State over that of individual railway companies, both on the 
 existing capital and on future capital requirements. Nor 
 has anything been adduced as to the possibility of increased 
 profits by the provision of additional facilities to the public, 
 costing little or nothing, which more than one General 
 Manager has had in mind, but which the existing chaos of 
 ownership prevents ; such as the very popular Ruiidreise 
 system, or the availability of tickets by alternative routes, or 
 the better distribution of train services throughout the day, 
 or the provision of specially cheap fares for long-distance 
 journeys by night, when the lines are relatively less 
 occupied, all of which a national system could experiment- 
 ally introduce. 
 
 This is not to suggest that the existing General Managers 
 are not running their several enterprises with the utmost 
 ability, or that those who criticise make any pretension to 
 teach them how to make larger net profits for their several 
 co7npanies than are at present obtained. The improvements 
 contemplated, which are those that General Managers them- 
 selves have often privately suggested, are open to them only 
 on condition of getting rid of the present disunity of financial 
 interest and control. Given one united ownership and one 
 unified control, and, in the words of the General Manager 
 of the Midland Railway Company in his Memorandum to 
 the Board of Trade Railway Conference, 1909 : "Advantage 
 to the public might be looked for in greater freedom of 
 action on the part of the manager of a railway where com- 
 petition has been to a great extent eliminated, and so greater 
 power is given him to try experiments." 
 
 VIII. The Terms of Purchase 
 
 Returning to the question with which we prefaced these 
 remarks, we have now to consider the terms on which the 
 State could purchase the railways from their present pro- 
 prietors. The State might impose what terms it pleases, 
 
 The Terms of Purchase 77 
 
 for the railways have to be worked under conditions dictated 
 by It, and a rise in maximum charges, even where it would 
 be profitable to impose it, cannot become operative unless 
 sanctioned by Parliament. Unless, therefore, the State 
 comes to the aid of the stockholders, as it did in 191 3, by 
 enabling them to justify by new evidence a rise in their 
 charges in order to meet the increase in wages that they 
 were then compelled to grant to their workers, they may 
 presently suffer severely, and in some cases dividends may 
 altogether disappear. The railway shareholders will naturally 
 clamour for protection from the State, and will argue that 
 if their dividends fall off, the State should come to their 
 assistance. The State would, however, be entitled to ask 
 whether some more advantageous system of administration 
 than the 200 different boards of directors, in whose hands 
 the control of policy had been placed, could not be found. 
 We are saying no more than is said by general managers 
 themselves when we suggest that the attitude of the directors 
 in past years, in regard to labour, in regard to favouritism in 
 appointments and promotions, and in regard to the adoption 
 of technical improvements, has not always been enlightened. 
 The nation does not forget that Parliament has had more 
 than once actually to force upon the railway companies 
 improvements of all sorts, commencing with the running of 
 trains carrying third-class passengers, and ending quite 
 recently (in spite of the curious opposition of the Board of 
 Trade) with the keeping and publishing of records of their 
 working, which still leave the British railways statistically 
 behind those of every other civilised country. In view of 
 the demands of labour, the growing strength of the railway 
 men's Trade Unions, the increased general cost of working 
 due to higher prices, the importance of taking ever-increasing 
 precautions against accidents to the staff, the necessity fo^ 
 raising millions of additional capital, and the unlikelihood of 
 the directors abolishing even their unnecessary number of 
 separate boards, it is not too much to suggest that the worst 
 thing that could happen to the shareholders would be for 
 
78 Public Service of Railway and Canal Transport 
 
 the British railways simply to revert to the pre-war system 
 of divided ownership and private control. It is at least 
 probable that a serious crisis would soon arise, dividends 
 would dwindle, and the assurance of the payment of the 
 full rate of interest on some of the fixed interest-bearing 
 stocks would presently be gravely endangered. The ardent 
 nationaliser might, indeed, wish for such a consummation. 
 Unfortunately, however, in such an event the shareholders 
 would not be the only sufferers. The nation of producers 
 and consumers would stand to lose also by the decline in 
 efficiency of a bankrupt railway service. It is true that if 
 Parliament would permit all the railway companies to combine 
 in one gigantic system for the benefit of the shareholders, 
 this prospect could be averted. But the Treasury cannot 
 ignore the fact that a union of ownership, with the attendant 
 unification of management, would create a new profit by 
 reason of the economies in working which this unity of 
 financial interest and elimination of competition alone could 
 bring about. This profit, to which the existing stockholders 
 have no claim, it is important to secure for the State. In 
 the present state of the country's finances it would be 
 criminal to neglect any opportunity of adding to the national 
 resources. 
 
 It is sometimes assumed that, whatever may have the 
 financial advantage of Railway Nationalisation when the 
 Government could borrow at 3 or 4 per cent, the opera- 
 tion has become out of the question when the rate of 
 interest has gone up to 5 per cent. This is a fallacy. 
 Whatever financial advantage there is in substituting the 
 credit of the State for the credit of a company remains 
 as great to-day as it was five or ten or twenty years ago. 
 Though Government bonds now pay 5 per cent instead 
 of 4 or 3, the yield required from railway securities, 
 whether Debentures, Preference Shares or Ordinary Stock, 
 has risen for the same reason. In fact, as the rate of 
 interest which the State has to pay determines the rate 
 of interest that investors expect on all other securities, the 
 
 tl 
 
 The Terms of Purchase 79 
 
 selling value of railway stocks, as of others, has fallen in 
 almost exact proportion to the rise in the normal rate of 
 interest. 
 
 It is sometimes objected, moreover, that, even if the 
 Government could have advantageously purchased the 
 railways before the war, such an operation is now out of 
 the question, because no Government could dream of 
 making so large an addition to the National Debt as would 
 be involved, and that the Money Market would no longer 
 stand such an operation. What is forgotten in this objection 
 is that the nation is just as much " in debt " for its railways 
 at present as it would be after the existing shareholders 
 had been transformed into holders of Government stock. 
 There would thus be no real addition to our national in- 
 debtedness by the exchange of one kind of security for 
 another ; on the contrary, as we shall seek to show, there 
 would be an effective diminution of burden. Nor need the 
 Money Market (which has stood considerably greater shocks) 
 be affected. It would not be necessary to raise any Govern- 
 ment loan, or to pay off the railway shareholders in cash. 
 What is suggested is merely the substitution of one printed 
 document for another — the issue to the holders of railway 
 securities of Government stock to the full amount of what- 
 ever price it is agreed to pay to them for their holdings. 
 The Money Market would be entirely untouched ; and the 
 Stock Exchange would find merely more buyers and sellers 
 of Government Stock in place of the present buyers and 
 sellers of railway securities. 
 
 What we have to seek is some basis for the purchase 
 which would be generally recognised as fair to both parties. 
 We cannot, of course, consent to guarantee to the railway 
 stockholders for ever the revenues which they are drawing 
 on the basis of that record year in the history of the railway 
 companies, 191 3. The stockholders can have no claim to 
 get for nothing the guarantee of the State. Such a pro- 
 ceeding would mean giving even the ordinary shareholders 
 the best possible security for ever, in exchange for a second- 
 
8o Public Service of Railway and Canal Transport 
 
 rate and precarious security, fetching much less in the 
 market.^ 
 
 Basis of Purchase 
 
 On what basis should the State buy out the railway 
 proprietors ? Whatever any one ventures to propose will, 
 of course, be immediately torn to pieces by those concerned 
 for the shareholders, as a mere incident in the bargaining. 
 Whatever is suggested by the Government will be fiercely 
 attacked as inadequate. There are over thirty railway 
 directors in the House of Commons alone, and a good many 
 in the House of Lords, without reckoning the railway 
 companies' numerous legal advisers and other supporters ; 
 whilst probably nine-tenths of the legislators are themselves 
 holders of railway securities to a greater or lesser extent. 
 Any Government will therefore have diflficulty enough in 
 carrying through a fair bargain. National necessity may be 
 expected, however, to be a powerful driving force. 
 
 {a) The Act of I S 44 
 
 We must begin by definitely repudiating the conditions 
 upon which, by the Act of 1844, the Government is em- 
 powered to buy out any railway enterprise constructed since 
 its date. The price then contemplated was twenty-five years' 
 purchase of the average divisible profits of each enterprise 
 during the three preceding years. These terms are wholly 
 inapplicable at the present day, because (i.) they do not 
 apply to the 2300 miles of line constructed prior to 1844 — 
 10 per cent of the whole — which form, as a rule, an indis- 
 pensable, and sometimes the most valuable, part of each 
 company's system, and a part which cannot possibly be 
 separated in valuation from the rest of the assets ; (ii.) they 
 
 * The question of whether the Irish railways should be included in the 
 purchase, or left to be separately dealt with ; and the further question of whether, 
 if included in the purchase, they should be placed under a separate administra- 
 tion, sitting at Dublin, and the finances be entirely severed, may be left for 
 separate consideration. All figures relate to the United Kingdom. 
 
 TAe Terms of Purchase 8i 
 
 only apply to companies which make lo per cent on their 
 nommal capital — extremely few in number— whilst all 
 others are left to claim to have their compensation deter- 
 mined simply by arbitration according to the principles 
 which are not defined ; and (iii.) wluct is nearly always for- 
 gotten, the twenty-five years' purchase (equivalent to a 4 
 per cent basis) had reference to a time when the rate of \Z 
 terest on the best securities was only 3 per cent— in the 
 year 1844, 3 per cent Consols actually touched loiJ— 
 whereas it is now 5 per cent. If it was agreed as fair t*hat 
 railway securities should be taken over on a 4 per cent basis 
 when 3 per cent Consols stood at par. the same securities 
 ought to be purchased on a 6| per cent basis— or fifteen 
 years purchase— when Exchequer Bonds at 5 per cent are 
 sold at par. The position has, in fact, entirely changed 
 since 1 844, and calculations based on the terms of the Act 
 of that year (which gave the Government a power, but con- 
 ferred on the companies no rights) are inapplicable. This 
 was jJefinitely laid down by the Pariiamentary Committee 
 
 {b) The Precedent of the Indian Railways 
 
 More recent is the action of the Government of India in 
 
 buying up the lines of sixteen Indian railway companies 
 
 between 1868 and 1906. Nine of these companies, mainly 
 
 small concerns, were purchased practically on agreed terms 
 
 The remaining seven were purchased, so far as the Ordinary 
 
 Stock was concerned, at a sum equal to the mean market 
 
 pnce durrng the three preceding years, the Government simply 
 
 aking over the obligations of the companies in respect of 
 
 loans, debentures and debenture stock which then stood at 
 
 or over par. In the case of four of these companies the 
 
 purchase money was paid by terminable annuities for 
 
 seventy-three or seventy-four years. 
 
82 Public Service of Railway and Canal Transport 
 
 (c) The Stock Exchange Value 
 
 The one fair basis that would appeal to unbiassed busi- 
 ness men would be to buy out all the holders at the current 
 market price of the different railway stocks, including, as 
 this does, an impartial estimate of all prospective gains and 
 losses. What could be a fairer price than that established in 
 the ordinary way of business as between willing buyers and 
 willing sellers? This is what the Stock Exchange prices 
 
 are. 
 
 To prevent manipulation, the market prices of the 
 different railway stocks, on which the purchase scheme was 
 to be based, would have to be those ruling at some date 
 prior to the introduction of the Purchase Bill, and, indeed, 
 prior to the announcement of the Government's intention to 
 buy. A three years' average could not now be taken in 
 view of the convulsions caused by the War. Such a basis 
 would avoid all difficulties arising from the rise in the rate of 
 interest ; investments which are readily negotiable find their 
 own level, and the Stock Exchange quotations of railway 
 stocks reflect exactly the change in the prevalent rates of 
 interest. Thus, in December 191 3. when Consols were 
 quoted at 72 and yielded ;^3 : 9 : 6 per cent, the London 
 & North-Western Railway 3 per cent Debenture Stock 
 was quoted at 7^\ and yielded £l : 19s. per cent. The 
 same Company's Ordinary Stock, receiving dividend at the 
 rate of 7 per cent, was quoted at 129, on which the yield 
 was ;^5:8:6 per cent. At the end of December 191 5, 
 Consols were quoted at 59 ; the London & North-Western 
 Railway 3 per cent Debenture Stock was not dealt in, for 
 Treasury regulations, which came into force before the issue 
 of the 4^ per cent War Loan, prohibited dealings in stocks 
 of this nature below certain artificially fixed prices, which 
 were so preposterously high that they put an end to busi- 
 ness in all the railway Debenture stocks. On the basis of 
 Consols, however, the price on 31st December 191 5 would 
 
 The Terms of Purchase 
 
 H 
 
 have been 6^1, and when the minimum price regulations are 
 removed (which may occur at any time), and prices of rail- 
 way Debenture Stocks fall to their market value, they will 
 certamly fall to something like this figure. In the case 
 of the Ordmary Stocks no minimum prices were fixed, so 
 that these stand at no fictitious level. London & North- 
 Western Ordinary Stock which, at the end of December 
 191 3, was quoted at 129, stood on 31st December 191 5 
 at 1023, and in May 19 16 it sank to little over 100.' 
 
 The fairest basis would be, therefore, to give each holder 
 of British railway securities of any kind Government stock 
 to the amount of the market price of his holding, the 
 Government stock bearing such a rate of interest as would 
 enable it to be sold at par, and thus be equivalent to cash. 
 What the purchase price would amount to on these terms 
 would depend, of course, on actual market values on the 
 date named. All we can do here is to form, on the basis 
 of current market quotations at the end of December 191 5 
 a provisional estimate of the amount that would be required 
 to carry out such an arrangement. Without confusing the 
 reader by a wilderness of figures, we give the calculated 
 value of the three classes of railway securities. 
 
 Debenture Stocks 
 
 Nominal amount of Stock . . . ^338,040,983 
 Amount distributed thereon for 191 3 . r^^ 448 602 = x aV 
 Normal yield for Railway Debentures assumed to be cA 
 
 (being 0.56 % more than the yield on 4J % War Loan at price 
 of 95, this being the actual difference between the yield afforded 
 prior to the war by Consols and by twelve representative Rail- 
 way Debenture Stocks). 
 
 3:4 ^338,040,983 r ^o c o 
 5.3 I =^216,856,480 
 
 The minima were removed on icth Mo^r T/^t^ j 
 
 confirmed this forecast I Tm w P^r^ u ^ ^i^ ' ^""^ P""' ^' °"^^ 
 i^r ''^'^/'"^ forecast. U & N.W.R. Debenture Stock even sank to fin 
 
 ?/pe?c j;.''''"","v,^'r''' ^'^''^ °" "-^ P™"P^' debentures ranged from 5 °; 
 5rt per cent ; on the Guaranteed stocks from 50. to s,>, per cent • and on fh^ 
 Preference issues from sj to jf per cent" (7>vil;,6th May ,916).' ' 
 

 In 
 
 m 
 
 ii 
 
 ij 
 
 ^\ 
 
 84 Public Service of Railway and Canal Transport 
 
 Guaranteed and Preference Stocks 
 
 Nominal amount of Stock . . . ;£468,354,56o 
 
 Amount distributed thereon for 191 3 . y£ 17,239,026 = 3-7 % 
 
 Normal yield for Guaranteed and Preference Stocks (being the 
 present average return from stocks of this class) . . 5-75 /o 
 
 '5-7 ;£468,254,56o ^ , 
 
 ^_t_ X ^i^*—^-^^t'^— = ^301,31 1,630 
 
 5-75 I 
 
 = present Stock Exchange value of the aggregate 
 of such stocks. 
 
 Ordifiary Stocks 
 
 Nominal amount ..... ;£^467,399jI3o 
 Amount distributed thereon for 19 13 . ;£^i 7,704,982 = 3.78 y^ 
 Present market value (approximating to a present average yield on 
 
 Ordinary Stocks of 6.5%) of the aggregate of Ordinary Stocks 
 
 paying any dividend. 
 
 ^.78 ;£467, 399,130 ^ _ 
 6J_ x ^^ ''^^^' ^ =^271,810,570. 
 6.5 I 
 
 Thus, the total market value of all the dividend-paying 
 stocks on 3 1st December 191 5 is estimated at ^790,000,000, 
 on which 46^ millions a year was being distributed, repre- 
 senting an all-round yield of 5.85 per cent, or fust over 
 seventeen years' purchase. To this estimate must be added 
 whatever are worth in the market the various Ordinary 
 Stocks on which no dividend is paid. These are bought 
 and sold virtually as gambling counters ; and a careful 
 estimate of their current prices — including what must be 
 added for like reasons to the stocks of all kinds paying 
 less than the full rate, or otherwise standing at more than 
 their present yield warrants — gives a total, approximately, 
 of ;f 8,000,000. 
 
 The aggregate market value of all the stocks of all 
 the railway companies of the United Kingdom on 31st 
 December 19 15 was therefore about 798 million pounds. 
 To this must be added £1 1,370,953 of loans owing by the 
 
 The Terms of Purchase gr 
 
 companies (the interest on which will be saved \{ thev are 
 paid off) making in all (including a million for compensation 
 to Directors and Auditors) ^ about ;^8 10,000,000 This re 
 presents a shrinkage from the aggregate market value of ten 
 years ago of more than one-fourth ^— a shrinkage which \^ 
 however, no greater than that experienced by other securities' 
 and which corresponds, in fact, substantially to the rise in 
 the current rate of interest on all investments 
 
 We lay no stress on these figures, which are adduced 
 only as an estimate of what the Stock Exchange values 
 actually amount to. What we suggest is that Pariiament 
 should, by statute, summarily vest in the Crown on an 
 Appointed Day," all the assets and liabilities ^ of all the 
 217 Railway Companies owning railway lines in the British 
 Isles ; the Government giving in return, for equitable division 
 among all the different kinds of stockholders, whatever Z 
 be the amount to which the Stock Exchange values work out 
 in Government stock, saleable in the market at par subiect 
 to redemption either by purchase, by periodical dra^in^s of 
 separate series, or by total repayment at any time after 
 1925 ; and with a guarantee of total repayment in or before 
 he year 2000. We suggest that we may fairiy assume thit 
 the Government Railway Stock to be thus issued need no 
 bear a higher rate of interest than 5 per cent, in order to 
 be, after the Peace, saleable at par. It is only 7r[on 
 
 r'^h'lH "?""" ''"' "' '^'^ '^^ ^"- P-y-ble to 'he" 
 stockholders, directors and auditors, to be ;^8 10,000 000 
 
 1 Something must presumably be done to compensate such nftT.ni,'- 
 as are not offered salaried posts in the State Railw.v n! . ^ Chairmen 
 
 Directors and Auditors, in respect oi ^t^r^^ZZ^T"^"""'' ""^ "^^° '^^ 
 The number of Directors is estLated at 1,00 and^h. '^ ''' "°^ '"^^^^^i^S- 
 fees (including those of the couple of hundifd ^halen of'^^^''' ^ '""' '"' 
 ^170.000. At five years' purchase this would mean /Ln onn "^"'^'^ "' ^^^"^ 
 The couple of hundred Auditors would, perhapfhavf ^ nZ/V^'^r^^^""- 
 deprived of this business, of a couple of hundred thousand T'^^/^^™' .^^^ being 
 a million pounds altogether in compensation P°""^'' '""'^^"^ ^^out 
 
 2 Examination of the railway securities in thp Hcf «f .a 
 stocks published by the Bankers^ Mamzine shows hl.K v° ^^P/^^^" Native 
 1905 to 1915 in the ratio of 103 to 75 '^^^ '^"^ ^"^^ ^^"^" ^^o^ 
 
 The Companies' liabilities in connection wJtVi fK^ c 
 etc., would, we assume, si.ply be .ak:n ovTaC Juh .hrr.r'°" '^""'^ 
 
m 
 
 86 Public Service of Railway and Canal Transport 
 
 We recognise that there must be a certain margin of error 
 in this, the best calculation that we can make ; and we shall 
 bring the total figure, in subsequent proposals, up to no less 
 than i^940,ooo,ooo, in order to allow for this contingency, 
 and to cover also the cost of additional purchases and pro- 
 vision for further capital expenditure. The essence of the 
 proposal is purchase at the Stock Exchange price prior to 
 the Government project being made public. 
 
 IX. The Development of the Canals as Sub- 
 sidiary Lines of Transport 
 
 Along with the taking over of the railways should 
 undoubtedly come the absorption into a single national 
 transport system of the canals and inland navigable water- 
 ways still under independent control. Many canals have been 
 acquired by the railway companies during the past seventy- 
 five years ; and acquired not with a view to their develop- 
 ment, but, as the public will never cease to believe, to their 
 extinction as competitors. There are now 1360 miles of 
 inland water-ways included among the property of the 
 railway companies, and 3310 miles (of which 812 miles 
 are open rivers) not so included.^ This aggregate of 4053 
 miles of inland water-ways in England and Wales, together 
 with less than 1000 miles in Scotland and Ireland, are of 
 all sorts and sizes ; they are broken up into hundreds of 
 separate administrations ; those which are still independent 
 of the railway companies do not, to say the least, find their 
 traffic facilitated by favourable arrangements, and any 
 interchange of traffic between the different sections is 
 in many cases quite impracticable. Nevertheless they 
 carried in 1905 (excluding the sea-borne traffic of the 
 Manchester Ship Canal) some 40 million tons, obtained a 
 
 1 For all information as to Canals, see the seven volumes of Report and 
 Evidence of the Royal Commission on Canals and Inland Navigation, especially 
 the Final Report, Cd. 4979, 1909, price 2s. iid. ; see also British Canals: 
 Problems and Potentialities, by J. E. Palmer (Unwin, 1910, 5s. net) : and Canals 
 and Traders, by Edwin A. Pratt (King, 1910, is. net). 
 
 The Canals as Subsidiary Lines of Transport Z^j 
 
 gross revenue from tolls and dues of 2\ millions sterling, 
 and made a net profit of half a million. The Manchester 
 Ship Canal Company now makes a net revenue on all its 
 enterprises of ^66,000. To buy up all these inland 
 water-ways on the same terms as are proposed for the 
 railways would involve an addition to the ;^8 1 0,000,000 of 
 no more than twenty million pounds, whilst a capital outlay 
 of another twenty millions would, according to the expert 
 engineering opinion endorsed by the Royal Commission on 
 Canals, give the nation the nucleus of a reasonably effective 
 system of inland water transport. This could be most 
 advantageously administered as an integral part of a 
 national system of transport by the State Railway Depart- 
 ment. The price of forty millions — not 5 per cent of the 
 cost of the railway system — would be well worth paying, 
 even for a canal system confined to a part only of the 
 kingdom, merely (i.) to afford relief to the railways at the 
 points at which heavy goods traffic is increasing beyond the 
 capacity of the line; (ii.) to supply an alternative route 
 (with regard especially to mineral traffic) in case of any 
 breakdown or other temporary stoppage of rail communica- 
 tion ; (iii.) to give a duplicate line of conveyance when the 
 railways are urgently required for other purposes, as for the 
 transport of troops or war stores; (iv.) to provide more 
 economical transport to and from vessels lying in the 
 Thames or other ports where discharge is by barge; (v.) 
 to obtain a convenient vehicle for minerals and other heavy 
 traffic going to and from mines, farms and factories actually 
 on the canal banks or inconvenient for railway transit ; and 
 (vi.) to serve as a " feeder " to the railway system from such 
 mines, farms and factories. 
 
 Whatever may be the experience of other countries, it 
 IS not suggested that in the United Kingdom any large 
 proportion of the railway traffic is likely to be diverted to 
 water-ways. But the advantages of including the canals and 
 other inland water-ways as a subsidiary part of any national 
 unification of the administration of transport are obvious. 
 
 i i 
 
 
]"■ 
 
 ill 
 
 88 Public Service of Railway and Canal Transport 
 
 X. The Apportionment of the Net Revenue 
 
 It is suggested that, whilst the railway users and the 
 railway employees may have some moral right to share 
 among them the advantages due to economies and improve- 
 ments in railway operation, neither of these classes has any 
 peculiar claim to benefit by the profit made by the mere 
 use of the national credit, which belongs to the community 
 as a whole. The State Railway Department may therefore 
 fairly be charged with the payment to the Exchequer of a 
 fixed and permanent annuity equal to the amount now paid 
 to the debenture and shareholders. This amounted for the 
 railways, in 19 13, the last complete year of peace, to 46^ 
 million pounds, together with about half a million a year on 
 the companies' outstanding loans. To the canal company 
 stockholders of all kinds about one million seems to have 
 been paid, making in all about 48 millions. This is the 
 present annual interest charge on the whole system. To 
 this we must add the equivalent of interest charge on the 
 600,000 privately owned trucks and wagons to be 
 purchased ; and this we take, on the assumed price of 45 
 millions sterling, at 2\ millions a year. This brings the 
 total, for purposes of account, to between 50 and 51 million 
 pounds annually. 
 
 The Exchequer must deal generously with the State 
 Railway Department, and must at the same time put the 
 full and punctual payment of its fixed annuity beyond all 
 risk. It is suggested that the Exchequer should content 
 itself with a fixed inclusive charge of 50 millions, and should, 
 for its own additional security, invest one million annually 
 of this to accumulate in a reserve fund until a sum of ten 
 millions has been provided, to be drawn upon only to make 
 up the absolutely net rent-charge of 49 millions in any year 
 in which the State Railway Department might find it difficult 
 otherwise punctually to fulfil this obligation. 
 
 In return for this fixed annuity of 50 millions the State 
 Railway Department would take over all the assets and 
 
 The Sharing of the Advajttages 89 
 
 liabilities of all the railway companies, yielding in the 
 exceptionally prosperous year 191 3 a net profit of over 
 5 2 millions, to which we may add over half a million for 
 the interest saved on the 1 1 millions of loans paid off. Of 
 this, however, 5 millions was required, partly for sundry 
 charges in the nature of depreciation, items which may be 
 assumed to continue, but partly also, as regards some 
 companies, for reserves for improvements, as to which other 
 and more ample provision will be made. Taking two 
 millions out of the five to be thus available, we deduct three 
 only, leaving a net sum of over 49I millions. To this must 
 be added the net revenue from the canals of about one 
 million, making 50^ millions. There is also the additional 
 revenue to be obtained from the 600,000 hitherto privately 
 owned trucks and wagons, which are popularly supposed to 
 earn, for their owners, as much as ;^i5 per vehicle annually. 
 Taking the extra receipts from this source, however, at no 
 more than ;£"! i : 5s. per truck (based on 300 days at nine- 
 pence), and allowing ^5 per truck for repairs and for the 
 gradual replacement of obsolete trucks, we have to add just 
 upon 4 millions to the revenue. This makes it over 54 
 millions a year, ont of which to meet the gross charge for 
 the benefit of the Exchequer of 50 millions a year (one 
 million a year of this being invested as a reserve). We 
 are leaving, therefore, a good margin for errors and con- 
 tingencies. We cannot, of course, pretend to frame an exact 
 estimate, but it looks as if the State Railway Department 
 could, apart from any economies and readjustments to be 
 effected on reorganisation, start with a clear surplus of at 
 least four millions a year with which to meet contingencies 
 and to experiment in profitable improvements. 
 
 XI. The Sharing of the Advantages 
 
 The advantages to be derived from Railway Nationalisa- 
 tion are, it is clear, of three different kinds ; and it is proposed 
 that they should be divided amongst three different interests. 
 
1 
 
 I 
 
 I 
 
 
 I 
 
 90 Public Service of Railway and Canal Transport 
 
 There is the advantage of getting rid of competitive waste, 
 on the one hand, and of the occasional extortions of a 
 local monopoly on the other ; and the substitution of a 
 unified public service, free from the temptation of profit- 
 making, for the multiplicity of separate systems bent only 
 on extracting "what the traffic will bear." From this 
 profitable substitution, which it will, of course, take some 
 time to realise, but which will be realised more and more as 
 years go on, together with the future " unearned increment " 
 caused by the mere increase of population and trade, will be 
 derived the means for a progressive improvement in the 
 service, to be shared by the users of the railways, on the 
 one hand, in a systematic revision of fares, rates and con- 
 ditions, and, on the other, by the 630,000 employees of the 
 State Railway Department (including canal workers) within 
 a decade in a levelling up of wages and conditions, the total 
 abolition of excessive hours of labour, and a legitimate par- 
 ticipation of all grades in the administration of the service 
 on which their working lives depend. Finally, there is the 
 advantage — more definitely calculable at the outset in terms 
 of money than the advantages above named, but, unlike 
 them, exhausted once for all on the taking over — of the 
 lower rate of interest that will be payable on the railway 
 capital when it is represented by Government stock than 
 has hitherto been paid to the railway stockholders. They 
 will have been bought out at the market price, and will get 
 the interest agreed to. The difference between the 5 per 
 cent that is paid on Government stock, and the 5.85 per 
 cent that British railway securities in the aggregate now yield 
 to purchasers of their stocks at present prices, is merely the 
 result of a substitution of the superior credit of the State 
 for that of the several companies. This is the share — 
 immediately tangible, but without promise of increase in the 
 future — to be claimed by the Chancellor of the Exchequer, 
 as the contribution towards the burden of the Great War 
 Debt to be made by the very substantial part of the national 
 assets that is represented by its railway system. 
 
 The Sharing of the Advantages 9 1 
 
 {a) The Policy of the State Railway Department. 
 
 There are many people who care nothing for the con- 
 troversy between the Individualists who stand up through 
 thick and thin for Company Administration, and the 
 Collectivists who argue for a State Railway Department. 
 What they want to know is, on what policy will the National 
 Service of Transport be administered, and how can its 
 efficiency be secured ? 
 
 We make no pretension to answer these natural enquiries. 
 It will be for the community as a whole, acting on the 
 advice of the railway experts on its Central Railway Council, 
 to settle the policy to be pursued. We suggest that, under 
 the influence of the public, of business men and passengers, 
 what will be demanded will probably be the greatest possible 
 improvement of the facilities for transport consistent with 
 the financial stability of the Department, on which we may 
 be quite sure that the Treasury will insist. We may assume 
 that the Central Railway Council will be put in a position 
 not only to conduct the day-by-day operation of the whole 
 Transport System, but also to report fully to the Minister 
 and the Cabinet upon any new proposals. We shall need 
 a Central Railway Council, formed of the ablest of the 
 present railway administrators, strong enough to govern the 
 whole system, yet wise enough, and sufficiently experienced, 
 not to insist on the excessive centralisation of details from' 
 which, it is said, some of our great Railway Companies are 
 not free. The State Railway Department will presumably 
 be protected (as is, for instance, the Post Office) by the 
 Civil Service Commissioners from all personal interference 
 m making first appointments to the staff, whether attempted 
 by Members of Parliament or by other outsiders of influence. 
 It will certainly no longer be possible for a Chairman or a 
 Director to bring in a friend, or a friend's son, by personal 
 favour, without any thought of this being wrong, as has too 
 often been done under the Company administration of the 
 
 f 
 
IH ! 
 
 92 Public Service of Railway and Canal Transport 
 
 past. There is, in fact, as repeated experience has demon- 
 strated, less chance for nepotism and jobbery as regards 
 first appointments, in a modern Government Department, 
 than in the administration of a Railway or other Joint Stock 
 Company, or a private firm (where, indeed, an appointment 
 due solely to relationship or favouritism is not regarded as 
 jobbery at all !). And the scrutiny of the Controller and 
 Auditor-General, with the expert staff of the Exchequer 
 and Audit Department will, to say the least, be at any rate 
 as effective as that of the Companies' own Auditors in 
 preventing not merely defalcation, but also — what Auditors 
 have not always thought to be within their province — the 
 giving of contracts for coal, for rolling stock or for railway 
 signals, to firms in which those concerned with the decision 
 have a personal interest, or to companies in which they hold 
 shares. 
 
 {b) What the State Railway Department can achieve for 
 
 the Users of the Railways, 
 
 The first duty of the State Railway Department would 
 be to reorganise the whole operations of the railway system 
 (including the inland water-ways) on the lines of unification, 
 the elimination of waste, and the maximum service of the 
 public, whether in the way of improved passenger con- 
 veniencies and facilities or in that of lower rates for goods 
 and minerals. It would naturally take some years to realise 
 all the economies to be obtained from getting rid of the 
 present competitive working, the existing duplication of 
 premises, plant and staff, the unnecessary charging and 
 checking of the companies among themselves, and the delays 
 and wasted haulage to be obviated by the pooling of rolling 
 stock. Probably the whole of the first decade is not too 
 long to allow for this reorganisation. No one can predict 
 what the saving would amount to, but we think that, by the 
 end of ten years, with the new capital outlay provided for, 
 it may be estimated, as we have suggested, at the very least 
 
 The Sharing of the Advantages 
 
 93 
 
 at 10 per cent of the present working expenses, or 8 millions 
 per annum. 
 
 It will be at once seen that some of the elements which 
 make the outlook unpromising for the present railway share- 
 holders, under the existing system of divided management, 
 diversity of financial interest and competitive rivalry, do not 
 affect to anything like the same extent the prospects of a 
 State Railway Department, controlling in a single system of 
 transport all the railways and inland water-ways of the 
 kingdom. We hazard no estimate, and we base nothing on 
 the probability, as to the extent to which, with the consider- 
 able outlay of new capital (the interest on which is provided 
 for), the State Railway Department will be able to counteract 
 the adverse influences affecting the general volume of traffic 
 to which all countries may possibly be exposed in a de- 
 pression of trade. But the State Railway Department will 
 naturally set itself, partly in ways not open to even the most 
 enterprising General Manager of a single company to-day, to 
 increase its gross revenue by endeavouring to foster addi- 
 tional traffic. It is a fact of some significance that the 
 aggregate number of passengers carried by rail in the United 
 Kingdom has, under Company administration, practically 
 ceased to grow even as fast as the population. In the years 
 1909, 191 2 and 191 3 the numbers carried were actually 
 fewer than in the preceding year. This check to a yearly 
 increase of passenger traffic, which railway managers on the 
 Continent of Europe and in the United States are able to 
 take for granted, is not adequately explained by the con- 
 temporary growth of tramway traffic, which is at least as 
 big a factor in Germany, Belgium, Italy and the United 
 States as it is in this country. It would clearly be one of 
 the first duties of the State Railway Department to consider 
 how to bring about both an increase in the number of 
 passengers and an increase in the distances that they are 
 induced to travel. We do not know exactly the " passenger 
 mileage " in the United Kingdom though we may guess at 
 it from the average fare ; and railway experts in other 
 
 iMJ 
 
 "Wk 
 
If 
 
 w ^»«rtr .a aasife^i i W 3^ 
 
 «i I 
 
 94 Ptiblic Service of Railway and Canal Transport 
 
 countries estimate it at much below that of more than one 
 of our rivals. It is certainly instructive to learn that, in the 
 United States, where the distances are no greater than they 
 were, the average distance travelled by each passenger, and 
 with it the average fare, has been, within recent years, nearly 
 doubled. Other railway administrations induce long dis- 
 tance traffic, which they believe increases their net profits as 
 well as their gross receipts, by lower mileage rates. Similar 
 considerations apply to the development of the receipts from 
 agricultural produce, goods and minerals, which with a united 
 policy in rates and the power of gratuitous advertisement 
 which a State Railway Department would command, might 
 reasonably be hoped for. Readjustments with the Post 
 Office (as regards Parcels Post, mutual agency service and 
 what not) would certainly have financially beneficial results, 
 both in increasing receipts and diminishing expenses ; and 
 credit could be taken for these, to whichever Department 
 they might be made to accrue. If the nationalisation of 
 the coal supply is effected, similar arrangements with the 
 Government Coal Department would doubtless be equally 
 possible. 
 
 On the other hand, the State Railway Department 
 would need (as the present companies need) to expend 
 a good many millions in improvements during the next 
 decade, including herein the cost of restoring to full 
 efficiency what has been "let down" or deteriorated by 
 hard use during the War, and the stringent economy that 
 has prevailed. This expenditure for improvements, due, as 
 it largely is, to our recent neglect to keep the system in 
 full efificiency, might, to a great extent, fairiy be charged to 
 gross revenue. But in order to start the State Railway 
 Department with full advantages, in order to cope with 
 the increased traffic to be expected, and in order to facilitate 
 the economies to be made on reorganisation, it is proposed 
 that the State should find this capital : partly in view of 
 the importance of determining its allocation, year by year 
 during the ensuing decade, so far as new works are con- 
 
 m 
 
 The Sharing of the Advantages 95 
 
 cerned, in correspondence with the condition of the Labour 
 Market, so as to maintain the aggregate volume of employ- 
 ment throughout the whole kingdom as far as possible 
 at a stable level, and thus to reduce both cyclical and 
 seasonable unemployment to a minimum. We propose to 
 add a sum of 50 millions to the estimated price pay- 
 able m order to provide, not only for errors and contin- 
 gencies but also for this uncertain amount of new capital 
 outlay. 
 
 In the same way the expenditure of the 20 millions 
 required to transform the canals into a reasonably efficient 
 and inter-connected system, if only covering a part of the 
 kmgdom, in most effective conjunction with the railways 
 would be spread over the ensuing decade, in a similar 
 relation to the aggregate volume of employment throughout 
 the kmgdom. The importance of such a policy of actually 
 preventmg the occurrence of unemployment, in the all- 
 important decade following the conclusion of peace, will be 
 at once apparent. 
 
 {c) Increased Facilities and Si^npler Charges 
 
 The sole object of the State Railway Department would 
 be— subject to (i.) the maintenance of the whole system 
 m full efficiency, (ii.) the provision for the Exchequer of 
 the annual charge of 50 millions (one million of this being 
 put for a decade to special reserve) in lieu of all the present 
 payments to the stockholders ; and (iii.) equitable treatment 
 of all the employees— to serve the public convenience and 
 "maximise" the traffic. To enable the Department to 
 know what the public wants, and to provide machinery for 
 the ventilation of all grievances of customers and the public 
 It IS suggested that there should be a series of Local 
 Advisory Boards— probably one for each of the dozen or 
 the score of sections into which the national system 
 would be geographically divided— and of National Advisory 
 Boards, perhaps a dozen in number, severally representing 
 
ill, 
 
 96 Public Service of Railway and Canal Transport 
 
 great industries or groups of industries. The Local Advisory 
 Boards (on which some of the displaced railway directors 
 might possibly be willing to serve) should be constituted, 
 in the main, of nominees of the County, Borough and 
 District Councils in each locality, together with others 
 nominated by such working - class organisations as Co- 
 operative Societies, Friendly Societies and Trades Councils. 
 The National Advisory Boards would naturally be made up, 
 in the main, of nominees of the several national associa- 
 tions of employers, traders and wage-earners (together with 
 the Parliamentary Committee of the Trades Union Congress) 
 in the industries concerned. A useful feature would probably 
 be an annual conference of all the Boards to discuss their 
 several desires. We see no reason why the unofficial and 
 unsalaried members of these Advisory Boards should not 
 be paid their expenses of attendance ; and we are not 
 claiming, therefore, that any savings will be made under 
 the head of Directors' Fees. The ;t 170,000 now paid 
 remains available for this necessary service. 
 
 The State Railway Department would have very seriously 
 to consider whether it would not be possible to diminish the 
 present multiplicity, both of passenger fares — which vary, 
 for third class, in Great Britain alone, from a penny up to 
 over three pounds — and of goods freights (of which there 
 are literally millions of separate rates). The Department 
 would naturally want to establish not only through passenger 
 fares, but also through goods rates, to and from every part 
 of the kingdom, by rail or canal, or by a combination of 
 both of them. The whole of the parcels traffic, probably 
 extended, as on the Continent, so as to include packages up 
 to I cwt, would presumably be included in the Parcels Post, 
 improved by the special advantages that it might take over 
 from the railway companies' parcels system. 
 
 It would be an immense boon, and one that would 
 almost certainly lead to a great increase of traffic, if — 
 perhaps by the establishment of great geographical zones — 
 any approach could be made on their railways to the uniform 
 
 * 
 
 1 
 
 
 !ti! 
 
 The Sharing of the Advantages 97 
 
 charges, irrespective of distance, that Sir Rowland Hill got 
 adopted, three-quarters of a century ago, in our Postal 
 Service — in the teeth, be it remembered, of the opposition 
 of all the " experts." It is impossible not to be struck by 
 the fact that the average fare per passenger journey on our 
 railways to-day (6d, to 7d.) is practically identical with the 
 average postage per letter in 1838 prior to the introduction 
 of a uniform postage rate. Since the adoption of uniform 
 postal charges irrespective of distance, based on the popular 
 penny, the number of letters per head of population has 
 increased twenty - four fold. Unfortunately the existing 
 railway system could not, without extremely costly recon- 
 struction, accommodate any great increase of traffic, unless 
 this could somehow be more evenly distributed in time and 
 place. On the other hand, a uniform fare sufficient to yield 
 the present income from no more than the present number 
 of travellers — say 6d. each — would be prohibitive of the 
 millions of short distance journeys now characteristic of the 
 Metropolitan area and other populous places. A similar 
 obstacle prevents the universal reduction of the rates for 
 goods and minerals to the present average of three or four 
 shillings per ton. These difficulties may for ever prevent 
 any absolute uniformity of either passenger fares or goods 
 rates, on the lines of our postage rates.^ 
 
 1 It must not be forgotten that there is a marked difference between letters 
 and either goods or passengers, alike in terminal expenses and haulage costs. 
 Multiplication of letters ten- or twenty-fold very slightly increases either of these 
 items — a big sack of letters costs little more to haul or to handle than a small 
 one. On the other hand, whilst the aggregate cost of handling and hauling 
 goods or passengers does not increase quite proportionately to their weight or 
 number, it is much more nearly proportionate thereto than in the case of letters. 
 This is specially so for the haulage cost, which forms a large part of the passenc^er 
 fare and goods rate, whilst it is only an infinitesimal part of the postage charge. 
 
 The rock on which schemes of uniform rates split — notably that proposed 
 by Mr. Whately C. Arnold in his Royal Railway (1914), which proposes uniform 
 penny fares on local trains and uniform shilling fares on expresses non-stopping 
 for 30 miles, and analogous uniform rates for goods — is, they always involve a 
 considerable increase of traffic to make them remunerative, without doing anything 
 to alter the distribution of the traffic among hours and places. Now, on practically 
 all railway lines the traffic at the busiest times of the day and the most frequented 
 parts of the line — the "peak" of the diurnal curve — is already close up to the 
 carrying capacity of the line. Although many stations may be nearly empty, 
 
 H 
 
H 
 
 98 Public Service of Railway and Canal Transport 
 
 Whatever impossibilities there may be in the adoption 
 of uniform fares or rates, whatever difficulties there may 
 be even in the way of the institution of great geographical 
 zones of identical charges, it would clearly be a matter for 
 early consideration to what extent a greater simplification of 
 payments could be profitably adopted by the State Railway 
 Department. Moreover, there must be an attempt to raise 
 the load factor. It is possible that this could be done by 
 making some of the new or reduced rates apply only to 
 the hours of the day and the parts of the line which are 
 capable of carrying additional traffic — leaving existing rates 
 unchanged for the " peak " of the curve. A uniform penny 
 fare during the hours of eleven and five between any stations 
 within the Metropolitan area ; similar arrangements for the 
 slack time on the Clyde, along Tyneside, in the Manchester 
 district, in the Black Country, etc.; a uniform fare of a 
 shilling or two during the night — if that is a time when 
 the costly plant of the passenger service is lying relatively 
 unused — for any distance that a non-stopping train travels ; 
 and the assimilation of the rates for all kinds of goods, 
 irrespective of their character — coal being carried only for 
 the Government Coal Department at some agreed (and 
 possibly uniform) rate per ton — might possibly all be im- 
 mediately profitable reforms. 
 
 « 
 
 XII. New Capital Outlays 
 
 Provision must be made, it will be said, for new capital 
 outlays from time to time. Very substantial capital outlays 
 will, as we have suggested, be required within the first decade ; 
 and no less than 50 millions sterling for the railways and 
 
 and most trains contain numerous vacant seats during much of the day, there 
 are, on nearly all lines, stations and trains which, at certain hours, are thronged 
 to overflowing. Any general reduction of fares, whilst it might profitably fill 
 the vacant places in the dull seasons, would equally augment the crowds at the 
 times and places where the railway could not possibly accommodate the additional 
 traffic. No universal levelling down of fares, and no mere increase in the volume 
 of traffic, can be counted on, in itself^ to improve the load factor. 
 
 iri 
 
 New Capital Outlays 99 
 
 20 millions for the canal system are included in the 
 estimated initial cost to cover this and other capital con- 
 tmgencies. For less than such a sum the whole system can 
 It is believed, be refitted, brought down to date with the 
 latest improvements, and rendered independent for the first 
 decade of any but the normal charges for maintenance and 
 minor improvements which are already provided for in the 
 annual outgoings. 
 
 After the first decade of a national system it will be 
 possible to review the position in the light of actual ex- 
 perience of a completely united administration. Extensions 
 and improvements will, of course, continue to be required • 
 and for these, except in so far as they may be done out of 
 revenue (which is how the railways in the Federated Malay 
 States have been constructed), capital will be found by new 
 State loans, just as the railway companies raise additional 
 capital for such purposes to-day. The difference will be (i ) 
 that the Government will be able to obtain new capital on 
 an average, at about 0.85 per cent less interest than 'the 
 companies would have to pay, saving ^8500 per annum on 
 every million ; (ii.) that the Government, unlike the railway 
 companies, would be annually redeeming its railway capital 
 by a Sinking Fund. But for some of the new capital there 
 would be a further source. It is proposed, as already in- 
 dicated, that out of the fixed State Annuity of 50 million 
 pounds a year to be charged on the State Railway Depart- 
 ment, one million a year should be allowed to accumulate 
 for eight or ten years, in order to provide a Reserve Fund 
 to be drawn upon in the unlikely event of the Department 
 being unable, in any particular year, punctually to pay the 
 Annuity in full. When that Reserve Fund has reached 
 ;6 1 0,000,000 (to be invested in War Loan at 5 percent) 
 and so long as it remains at that figure, the million a year' 
 together with half a million a year from the interest on the 
 accumulated sum, will be available for any purpose of 
 improving the system that may be approved. This will 
 provide an additional annual sum of i\ millions sterling 
 
lOO Ptiblic Service of Railway and Canal Transport 
 
 over and above the not inconsiderable amounts already- 
 charged to revenue by various companies for extensions and 
 other developments, without raising additional capital at all. 
 It may be observed that the average addition for all purposes 
 to the aggregate capital account of all the railway companies 
 between 1909 and 19 14 was only 6|- millions a year ; and 
 that this was entirely obtained by issuing new stock of one 
 or other kind. 
 
 XIII. Conditions of Employment in the State 
 
 Railway Service 
 
 The couple of hundred of railway and canal companies 
 of the United Kingdom have in their service (including their 
 offices, steamships, docks, hotels, and manufacturing estab- 
 lishments) about 630,000 men and women, from the girl at 
 ten shillings per week up to the Chief Locomotive Engineer 
 or General Manager at ^^5000, or, in two or three exceptional 
 cases, even £ 1 0,000 a year. Their aggregate bill for wages 
 and salaries of all kinds amounts to about 47 millions 
 sterling — a sum which is only three times that of the 
 British Post Office, and only half of that to be met by a 
 Government Coal Department which organised our coal 
 
 supply. 
 
 It would, of course, be necessary (and only equitable) to 
 
 guarantee that none of these 630,000 employees should lose 
 
 by their transfer to the State Railway Department. They 
 
 would, in the reorganisation, all be assigned to posts not 
 
 inferior in pay and conditions to those that they held under 
 
 the railway and canal companies. The principle to be 
 
 aimed at should be that none should be dispensed with if 
 
 fit for service. But if any one of any grade, from the newest 
 
 boy porter to the oldest General Manager, were dispensed 
 
 with, he would be compensated for abolition of office on the 
 
 usual generous terms. Whatever was dispensed with in the 
 
 shape of Directors — of whom there are now some 1 300 — 
 
 the State Railway Department would make it a rule (as the 
 
 Conditions of Efuployment on the State Railways loi 
 
 Postmaster-General does) never to dismiss any "established " 
 man merely because there was momentarily, in his particular 
 locality, no employment for him. This may nowadays be 
 done by a railway company ; and some companies (like 
 some Government Departments, which ought to know better) 
 have even at most times a fringe of casual labour, which is 
 irresponsibly taken on or dropped to suit their own con- 
 yenience.1 But in face of the steady and constant growth 
 m the business of the Department as a whole, such dismissals 
 and such a use of casual labour ought never to be necessary 
 in a service worked as a whole. The more extensive the 
 system the less is the need for intermittent employment. 
 The economies in staffing that would be made possible by 
 unification would be made only gradually, and at no greater 
 rate than the increase of traffic permitted all displaced men 
 to be elsewhere absorbed. The railway employees of all 
 grades would therefore gain the practical permanence of 
 employment and security of tenure of the "established" 
 Civil Service. 
 
 An extensive revision of wages, hours, and working 
 conditions would have to be immediately undertaken, in 
 which it should be laid down by Parliament that there 
 should be a general plan of gradual " levelling up," so that 
 in each grade, within the period of ten years from the 
 appointed day, during which the reorganisation will be in 
 progress, no person should be paid less than the best 
 Standard Rate now prevailing, and none worked for longer 
 hours than those current under the best and most considerate 
 company. We might put aside out of the economies as 
 they are realised a sum equal to 5 or 6 per cent of the total 
 wages bill, or, say, three millions a year, as required, within 
 the first ten years of the transfer, for this levelling up of 
 the conditions of the railway service to the highest current 
 Standard. To this initial gain to the employees as a whole 
 
 1 The very strong social and economic objection to reliance on a system of 
 casua labour does not, of course, precludi the engagement, under proper 
 conditions, of an auxiliary staff to meet exceptional seasonal pressure. 
 
 W 
 
"-'rr-."?s,5:^:^-j^S**5^^^w^^^j^sSK':ss^?^ 
 
 m T 
 
 . I||l| 
 
 1 02 Public Service of Railway and Canal Transport 
 
 would be added the enormous boon of a practical security, 
 not only against any general and overt reduction at any 
 time (apart from great national calamity), but also against 
 those evasions of the terms of Awards and " nibblings " at 
 conditions to which they have in the past sometimes been 
 exposed at the instance of too exacting subordinates whose 
 zeal for cutting down expenses General Managers have more 
 than once been compelled to check. 
 
 But something more should be expected from the trans- 
 formation of a capitalist and profit-making enterprise into a 
 national service than an improvement in wages and working 
 conditions, in continuity of employment and in security of 
 tenure. The employees of the State Railway Department 
 will have a legitimate aspiration to participate so far as 
 possible, grade by grade, in the administration of the service 
 to which they give their lives. In France and Switzerland 
 that participation in management is accorded to the State 
 Railway employees in various ways, with, so far as the 
 relations with the staff are concerned, very great success. 
 
 We cannot do more than indicate the kind of national 
 organisation that the State Railway Department might 
 substitute for the scores of separate hierarchies by which 
 our railways are now governed. There would presumably 
 be a Central Railway Council sitting permanently in London, 
 in which — under the Minister for Railways, or for " Com- 
 munications and Transport " — the supreme control would 
 be vested. This Council would be composed of the ablest 
 General Managers and heads of the principal departments, 
 all being whole-time salaried officers of the Department, 
 with probably a representative of the Treasury. To this, 
 we suggest, should be added, as in France, Italy, and 
 Switzerland,^ always two or more representatives of the 
 
 1 The Report of the State Railways administration of France for the year 
 1909 states as follows : "In our Report for 1907 we enumerated the important 
 measures taken to bring about a closer collaboration between the staff and the 
 administration in the management of our common work. On the old State 
 Railways these measures have been in operation since 1908, and in 1909 we 
 extended them to the purchased railway system (Western). The elections took 
 
 
 I 
 
 Conditions of Employment on the State Railways lo 
 
 Trade Union organisation, representing (as will be subse- 
 quently explained) all the six hundred thousand manual 
 working wage-earners in the service.^ But the aim should 
 be, from the outset, to avoid any more than the necessary 
 amount of centralisation. We assume that there would be, 
 in each of the ten or twenty districts into which the national 
 system would be divided for operating purposes (as the 
 Prussian and Austrian systems are divided), a Local 
 Railway Council, composed of the local heads of depart- 
 ments, perhaps under a permanent salaried chairman, an 
 officer specially selected for the purpose by the Central 
 Railway Council. To each Local Railway Council we 
 suggest, following the French example, that there should 
 be added two or more representatives of the local Trade 
 Union organisation of railway employees. But these Local 
 Railway Councils, like the Central Railway Council, would 
 be habitually engaged in the technical details of railway 
 operating, and would neither have time, nor be well adapted, 
 for the redress of grievances felt by individual employees', 
 
 place on Sept. 5 and Nov. 21. Thus the officials and workers on the per- 
 manent staffs of the two systems are now represented in the various committees 
 by delegates chosen from among themselves. . . . They have seats on the 
 District Councils and on the Grades Committee, the duty of which is to prepare 
 reports and the lists of premiums and promotions. They form part of the 
 Council of Inquiry whose duty it is to express an opinion in all important 
 questions relating to the material and the professional interests, both collective 
 and individual, of the officials and workers. Further, they have seats on the 
 Pensions Committee, the Committee of the Co-operative Society, and on the 
 Reform Committee." By the Ministerial Decree of Sept. 24, 191 1, a Supreme 
 Advisory Board was constituted for the State Railway (Conseil de Reseau), con- 
 ^sting of twenty-one members all appointed by the Minister of Public Works 
 These include a number of engineering, financial, and commercial experts and 
 magnates, together with four working railwaymen, who must be chosen from 
 among the men elected to the District Councils (lately these were the head porter 
 at a Pans station, a fireman, a foreman-platelayer, and a driller from the railway 
 workshops). These latter have all the rights of members, and take their full 
 share of work, including membership of all the committees. {State and Municipal 
 Enterprise. Supplement to The New Statesmati, 8th May 19 15.) 
 
 Wn Switzerland it is now an invariable custom for the General Secretary for 
 the time being of the Raihvaymen's Trade Union to be appointed a full member 
 of the small Board of Administration, which is the supreme governing authority 
 of the Swiss railway system. When he retires from office he vacates his seat 
 and his successor is appointed. 
 
 I 
 
1 04 Public Service' of Railway and Canal Transport 
 
 the adjustment of wages or other disputes with particular 
 sections of the very multifarious grades and kinds of workers 
 employed, or the periodical revision of the wage-earners' 
 Standard of Life, in correspondence either with the changing 
 level of prices or with the progressive rise in the Standard 
 of Life of the rest of the community. At present, all this 
 business of dealing with staff grievances, with the perpetual 
 interference of Members of Parliament and other persons of 
 influence on behalf of particular men, is a sore trial to the 
 railway administrator. For all this work we suggest, on the 
 analogy of the wage machinery of the coal-mining industry, 
 that there should be, to the infinite relief of the officials 
 who have at present to bear the brunt of all the grievance- 
 mongering, in each railway district, a Local Joint Board, 
 consisting, on the one hand, of representatives of the local 
 Trade Union organisation of railway employees, these being 
 chosen from among the different wage-earning grades and 
 sections ; and on the other, of an equal number of the 
 superior railway officials appointed by the Local Railway 
 Council. Similarly there should be in London, both to 
 hear appeals from the Local Joint Boards, and to deal with 
 questions affecting the service as a whole, a Central Joint 
 Board, consisting of equal numbers of representatives of the 
 Trade Union organisation of the railway employees chosen 
 as far as possible from among the different grades, and of 
 railway officials appointed by the Central Railway Council. 
 In case of failure to agree, the issue might be referred to 
 any referee to whom both sides could agree to leave the 
 decision, or, failing such agreement, to a standing Council 
 of Conciliation, composed of representative citizens of all 
 classes and all parties, unconnected with the railway service 
 otherwise than as citizens.^ 
 
 1 The railway employees are at present organised in (i.) a great Trade 
 Union, admitting all sections (the National Union of Railwayman), with 306,000 
 members ; (ii.) several other distinctively railway unions, such as the Associated 
 Society of Locomotive Enginemen and Firemen, with 33,000 members ; the 
 Railway Clerks' Association, with 30,000 members ; and three smaller Irish 
 Unions; and (iii.) a number of Trade Unions not distinctively connected with 
 
 I 
 
 1 
 
 Conditions of Employment on the State Railways 105 
 
 It would be desirable, with the elimination of the 
 element of private profit-making, and of all private interest, 
 that there should be established a definite ratio for the 
 allocation of any available surplus on each year's working, 
 after allowing a period of, say, ten years, to get the unifica- 
 tion and initial improvements completely into order. After 
 the first decade at least one half of any annual surplus 
 should, it is suggested, be devoted to an Improvements Fund, 
 out of which there would be executed from time to time the 
 innumerable further improvements of the railway system 
 that will always be required. The remaining half should be 
 shared (with provision for an equitable carrying forward of 
 unallotted balances) between the users of the railway system, 
 on the one hand, taking effect in some general reduction, by 
 a proportionate fraction, of all passenger fares and goods 
 rates ; and the employees of all grades, taking effect, not in 
 any increase in wages or decrease of hours— for these ought 
 to be determined on quite other considerations than the 
 
 fluctuations in the profitableness of the working but 
 
 possibly in the provision of extra amenities and comforts for 
 the whole body of employees, over and above what the State 
 is honourably bound to provide for them whatever the 
 financial result of each year's working. On the other hand, 
 any general increase in the Standard Rates of wages, de- 
 manded of and conceded by the Central Joint Board or the 
 
 the railway service, such as (chiefly in the railway manufacturing and repairing 
 
 estabhshments) those of the engineering and metal trades,.those of the wood 
 
 workmg and furniture trades ; (chiefly among the lower grades) those of the 
 
 general labourers ; and (chiefly in the branches concerned) those of the seamen 
 
 hotel employees, etc. But few of the workers on the canals are in any Trade 
 
 Union On the transformation from a capitalist profit-making business, under 
 
 more than 200 employers, into a national public service under a single State 
 
 L)epartment an attempt should be made to get all the diff-erent Unions concerned 
 
 to agree to form a single organisation, in one or other form (even if limited to 
 
 this one function), to which the State Railway Department could accord the 
 
 fullest recognition, and through which the whole body could secure representation 
 
 on both the Local and Central Railway Councils and Joint Boards. The State 
 
 Railway Department might then even make membership of that organisation— 
 
 to the extent of exercising this '* industrial citizenship "—a condition of 
 
 employment. 
 
 I 
 
io6 Public Service of Railway and Canal Transport 
 
 Council of Conciliation already referred to, would necessarily 
 have to be accompanied, in order to avoid a deficit, by an 
 equivalent proportionate all-round increase of passenger fares 
 and goods charges. 
 
 The question remains, not indeed of " discipline," as it is 
 often called, but of the infliction of disciplinary punishments, 
 whether in the form of fines, refusal of normal increments, 
 explicit withholding of promotion, reduction of status, or 
 dismissal. The nation cannot nowadays concede to the 
 managers or foremen of a national service the arbitrary and 
 uncontrolled summary jurisdiction, which is still claimed in 
 capitalist employment. The protection against the caprice 
 or tyranny of superiors, which is in practice enjoyed by the 
 clerical Civil Service, must in some way be extended to all 
 the manual working employees. The right of instant 
 summary suspension from duty (subject to reinstatement on 
 appeal) by any superior must, indeed, be maintained for all 
 grades, as a necessary condition of efficiency. But we may 
 learn from the Municipality of Lyons, for instance, how to 
 constitute a " Discipline Board," on which there should sit 
 two or three superior officials and two or three representa- 
 tives of the wage-earning employees, one of them {as in the 
 Lyons example) always belonging to the same grade as the 
 man concerned', and no disciplinary punishment should be 
 inflicted except upon the report of this Board.^ A domestic 
 tribunal of this sort, sitting in each locality when required, 
 would be found in practice (as has been proved not only at 
 Lyons but in other places) by no means lacking in severity ; 
 and yet commanding universal respect, and avoiding all the 
 general resentment of injustice that generates strikes. 
 
 Anything like a strike on a National Service of Rail- 
 way and Canal Transport ought, indeed, to be out of the 
 question. With central and local participation in all the 
 
 1 On the New South Wales Government Railways there is a Special Board 
 of Appeal, to which any employee who has been punished may appeal, consisting 
 of five chief officials and one officer . . . elected by a ballot of railway and tram- 
 way employees. There is yet a further appeal to the Chief Railway Commissioner 
 and one Assistant Commissioner. 
 
 11 
 
 What the Chancellor of the Exchequer would Gain 107 
 
 management, with wages questions settled by Central and 
 Local Boards on which the wage-earners are represented in 
 equal numbers with their official superiors, with all the net 
 proceeds shared between the common advantage of the 
 employees as a whole and the users of the railways, with a 
 joint Discipline Board to inflict all disciplinary punishments, 
 and with an impartial Council of Conciliators to decide any 
 intractable conflict of opinion, a general strike on the railways 
 would stand revealed as an attempt to " hold up " the whole 
 community, in order to extort, for a small minority of the 
 manual working class, better terms than the public opinion 
 of the whole class was prepared to concede. Leaving work 
 without the agreed period of notice is, on the railways (as 
 under certain circumstances it ought to be), already a 
 criminal offence. The proper course for any man who con- 
 sidered his services inadequately remunerated would be, as it 
 is with the clerical Civil Service, on the expiration of his 
 contract of service, to resign his appointment and seek a 
 new field of work. 
 
 XIV. What the Chancellor of the Exchequer 
 
 WOULD GAIN BY RAILWAY NATIONALISATION 
 
 The 630,000 employees of the State Railway Depart- 
 ment would gain by nationalisation permanence of employ- 
 ment, security of tenure, protection against caprice and 
 tyranny, full recognition of their Trade Union organisation, 
 rates of wages and hours of labour everywhere levelled up 
 to the best current standard, assurance against either overt 
 reductions or other encroachments on their earnings, par- 
 ticipation in the management, both local and central, and 
 a corporate share in all future increases of net revenue. 
 The 47 millions of railway users — for the entire population 
 consists of railway users, either as passengers or as con- 
 sumers of commodities — would gain all the improvement 
 in the service that unification would permit, the increased 
 opportunity for the remedy of grievances afforded by the 
 
io8 Public Service of Railway and Canal Transport 
 
 Local and Central Advisory Councils in addition to 
 Parliamentary criticism, probably a certain simplification 
 and assimilation of fares and freights, and possibly some 
 approach, perhaps by way of zones, towards the uniform 
 charges, irrespective of distance, that have proved so 
 advantageous in the carriage of postal matter. Where, 
 then, does the Chancellor of the Exchequer come in ? 
 
 On the equitable terms of purchase proposed, the 
 Government would create, in lieu of the heterogeneous mass 
 of existing railway securities of all kinds of the nominal 
 amount of ;^i, 34 1,203,000, together with eleven millions of 
 loans outstanding, about ;£^940,ooo,ooo of new Government 
 Stock probably bearing 5 per cent interest, and redeemable 
 at intervals between 1925 and 2000. This sum will cover 
 the Stock Exchange price of all railway securities, pay off 
 the loans and allow one million for the Directors and 
 Auditors with a liberal margin for errors and contingencies. 
 It will allow, in addition, the expenditure on capital account 
 of a large sum, which may approach fifty millions sterling, 
 in the expenses of reorganisation and in gradual improve- 
 ments during the ensuing decade. It will include also the 
 purchase and improvement of the canal system at the cost 
 of forty millions and the purchase of the privately owned 
 rolling stock for another forty-five millions. This new 
 Government Railway Stock of ;^940,ooo,ooo, if we may 
 assume the rate of interest to be 5 per cent, involves an 
 annual charge of ;£^47,ooo,ooo. 
 
 The State Railway Department, without counting on any 
 increase in traffic^ but partly out of the economies which a 
 reorganised and united administration would permit, and 
 partly as the result of the expenditure of the fifty or seventy 
 millions of additional capital which will have been placed at 
 its disposal, would find itself able gradually to improve the 
 conditions of service of the staff, and to extend increased 
 conveniences and facilities to the users of the railways and 
 canals. It would have, in fact, a margin of three or even 
 four millions a year, after paying the fixed Government 
 
 1 
 
 Summary of Proposals \ 09 
 
 charge hereafter mentioned, with which to meet unforeseen 
 contingencies, and to experiment in improvements. 
 
 On the other hand, the Government would receive from 
 the State Railway Department a fixed Annuity (in lieu of 
 all the interest and dividend hitherto paid to the railway 
 and canal stockholders of every kind) of forty-nine millions 
 per annum net, secured by an additional million a year 
 being accumulated, until ten millions sterling had been thus 
 invested, in a special reserve fund for this purpose. This 
 fixed and well-secured annuity of forty-nine millions would 
 cover, in the first place, the whole forty-seven millions of 
 interest on the new Government Railway Stock. We 
 assume that the Government makes its War Loan, like the 
 new Government Railway Stock, redeemable between 1925 
 and 2000 at frequent intervals, either by purchase or 
 drawings in annual series, or in some other way. Under 
 these conditions, the balance of two millions per annum 
 could be treated as a Sinking Fund earning always 5 per 
 cent for eighty-four years. Such a Sinking Fund would, 
 by the year 2000, redeem, not only all the £940,000,000 
 of Government Railway Debt, but also an additional 1500 
 millions of the Great War Debt} 
 
 XV. Summary of Proposals 
 
 The scheme here outlined may be summarised as follows : 
 The unification of administration of the national system of 
 transport (including both railways and canals), under public 
 control, offers an opportunity for a great improvement in 
 the organisation of the trade of the country. 
 
 Viewed as a financially desirable measure, as well as 
 with regard to incidental advantages that would accrue to 
 national life, trade and industry, it is of the highest import- 
 ance that the railways should not revert to private control 
 after the war, but should be acquired outright by the State. 
 
 1 At eighty-four years and 5 per cent the Sinking Fund to redeem each 
 milhon sterling is ^8oo a year. 
 
I lo Public Service of Railway and Canal Transport 
 
 In fixing the terms of purchase, account should be taken of 
 the fall of capital values and the rise in the rates of interest 
 characteristic of the past decade, and of the fact that, if 
 the railways are left in the hands of the Companies, their 
 net profits are likely to be seriously affected by labour 
 troubles, and the increased cost of fresh capital necessary 
 for works indispensable to keep each line in competitive 
 efficiency ; and that therefore corresponding reductions in 
 dividends, and in some cases the endangering of the interest 
 on fixed-interest-bearing stocks, might result if the purchase 
 
 were not made. 
 
 Further, it is plain that the terms on which the railways 
 are to be acquired should approximate as nearly as possible 
 to the value of each system as a going concern as reflected 
 by the actual Stock Exchange quotations of each of the 
 Companies' various stocks for a reasonable period prior to 
 notice of the introduction of the Government Bill ; and that 
 the amounts credited to each Company by the State should 
 be allocated to each class of stockholder pro rata to the 
 respective market values of their particular holding, payment 
 being effected by Government Stock repayable at par by 
 periodical instalments (or by purchase in the market if 
 quoted under par) in such manner that the entire loan will 
 be extinguished in eighty-four years. Railway stockholders 
 will receive payment of the full market value of their 
 property in a security intrinsically more valuable than their 
 ordinary stock and one which can be at all times much 
 more readily sold in the market than most railway stocks. 
 Should they prefer to continue to receive the same income 
 as at present, they will have no difficulty in doing so by 
 exchanging the Government Stock for other securities, 
 whether governmental, financial or industrial, of this or 
 another country, yielding the same returns as British Railway 
 Debentures, Preference or Ordinary Stock respectively. 
 
 By the substitution of the superior credit of the State 
 for that now enjoyed by the different railway companies — 
 itself worth, it is estimated, 0.85 per cent on the whole 
 
 Summary of Proposals 
 
 III 
 
 capital debt — and by the reduction of the present unnecessary 
 duplication of stations, goods depots, rolling stock, receiving 
 offices, etc., etc., which pervades the whole railway system 
 of the country, such considerable annual savings can be 
 effected as will meet the increased cost of working due to 
 the improvement in the conditions of labour and the 
 enhanced prices — with a margin for errors and contingencies 
 of three or four millions a year — and leave a well-secured 
 annual surplus for the Exchequer. 
 
 This net surplus, even if we put it at no more than two 
 millions a year, would, if applied continuously as a Sinking 
 Fund of a 5 per cent debt, extinguish no less than 2500 
 millions sterling of debt by the year 2000. 
 
 Thus, not only would the entire cost of acquiring the 
 railways and canals be paid off by that date, and the system 
 freed from its charge of fifty million pounds per annum for 
 interest, but also more than 1500 million pounds of the 
 Great War Debt would be redeemed by the year 2000, 
 without calling on the taxpayer to provide anything for this 
 repayment. 
 
 Such tentative estimates can, of course, make no pre- 
 tension to accuracy. But it will be seen that the margin 
 for errors and contingencies is not inconsiderable. We take 
 no credit for possible increases of traffic or passenger mileage. 
 Except that we assume that the expenses incidental to 
 reorganisation will be covered by the savings, we do not 
 call in aid even any of the economies to be made by unifica- 
 tion. On the figures as they stand, there should be a 
 margin over working costs of three or four millions a year, 
 over and above the couple of millions a year which the 
 Chancellor of the Exchequer will be able to claim for his 
 Sinking Fund. 
 
 I'M' 
 
CHAPTER III 
 
 THE NATIONALISATION OF THE 
 
 COAL SUPPLY 
 
 "3 
 
i 
 
 m 
 
 i 
 
 CONTENTS 
 
 I. Introduction. 
 II. How THE Nation now obtains its Coal. 
 
 III. Who gets the Price of the Coal? 
 
 IV. The Nationalisation of Production. 
 
 V. The Elimination of the Private Interests. 
 VI. The Terms of Expropriation of the Colliery Owners. 
 VII. The Conditions of Employment in the National Coal-mining 
 
 Service. 
 VIII. The Nationalisation of Distribution. 
 IX. Why not a Fixed and Uniform National Price for House- 
 
 hold Coal? 
 X. The Terms of Expropriation of the Coal Dealers. 
 XI. Advantages of Nationalisation. 
 XII. The Disposal of the Surplus. 
 XIII. Summary of Proposals. 
 
 THE NATIONALISATION 
 
 OF THE 
 
 114 
 
 COAL SUPPLY 
 
 I. Introduction 
 
 When we turn from the economical uniformity of the 
 Post Office, and from the advantageous temporary unity 
 which the war has brought to the British Railway Service, 
 to the equally essential industry of the Coal Supply/ we 
 find ourselves in the realm of private ownership' and 
 competitive rivalry, with all its overlapping and waste, its 
 divided counsels and lack of systematic provision for 'the 
 national requirements; modified, here and there, by com- 
 binations and " arrangements," avowed or secret, by means 
 of which an unnecessary tribute is exacted from the 
 consumer. So obvious is the wastefulness of the present 
 capitalistic anarchy in coal-mining, with new mines being 
 opened here and abandoned there, irrespective of the 
 aggregate supply and demand— here worked to the utmost, 
 and there only the easier seams developed, according to 
 local or personal circumstances, without regard to the needs 
 of the nation— that repeated suggestions have been made 
 by coalowners themselves for a unification of management. 
 Thus, in 1893 Sir George Elliott,^ himself a leading coal- 
 owner of South Wales, worked out a scheme for a National 
 
 7^ ' ^po^^^f ^iption of the whole industry will be found in T/ie British Coal 
 irade, by H Stanley Jevons, 1915. For the coalfields and the methods of 
 ZTa^'^\T^ ^^''J^'ffi'^ds of Great Britain, by E. W. Hull, 5th edition, 1905 ; 
 ^v.^ Textbook of Coalmining, by H. W. Hughes, 5th edition, 1904. 
 bee his letter to The Times, 20th September 1893. 
 
r" 
 
 \. 
 
 f II 
 
 III 
 
 1 1 6 T/ie Nationalisation of the Coal Supply 
 
 Trust for all coal-mines, to operate under public supervision 
 and control. In Durham (1895), i^^ Lancashire and York- 
 shire (1894), in East Fife, and especially in South Wales 
 (from 1870 to 1909) attempts at local regulation of output 
 and price have been made,^ The rivalry among a dozen 
 different coalfields of Great Britain, even more than the 
 more or less strenuous competition among the scores or 
 hundreds of coalovvners within each coalfield, has always 
 prevented the realisation of these proposals for a profitable 
 reorganisation of the industry. Yet from time to time it 
 seems (although it is difficult to prove the fact) as if more 
 or less concerted action were taken upon each coalfield to stop 
 what the coalowners describe as "cut -throat competition," 
 and the distant consumers as a conspiracy to raise prices. 
 So serious became the imposition on the public in 191 5 
 that the Government was driven to the very imperfect 
 remedy of the Coal Mines (Restriction of Prices) Act by 
 which Parliament attempted to limit the price charged for 
 coal at the pithead to not more than 4s. per ton in excess 
 of that of the preceding year. At the same time the 
 export of coal was permitted only by special licence in each 
 case ; and the coal merchants and dealers in London and 
 some other cities were induced by the Government to adopt 
 uniform prices. The danger of interruption in the supply 
 of the coal imperatively required by the Admiralty has led 
 to the purchase by that Department of coal-mines (as of oil- 
 fields) being very seriously considered. There is at present 
 
 1 Perhaps the earliest form of these combinations, and one which in one or 
 other form has frequently recurred in this or that locality, is that known as the 
 " Limitation of the Vend." This voluntary regulation of the output and price 
 of the coal marketed in Newcastle beginning as early as 1665, was in operation 
 from 1 77 1 to 1844, See House of Commons Committees on the Coal Trade, 
 1800, 1830, 1836, 1 87 1, 1873, etc. ; Treatise on the Coal Trade, by Robert 
 Edington, 181 3 ; The Coal Trade of the North of England, by M. Dunn, 1844 ; 
 article by Professor Cohn in Economic Journal, vol. v. p. 550; Monopoly and 
 Competition by Hermann Levy, 1911, pp. 106- 142, 1 56- 170; The Trust Move- 
 ment in British Industry, by IL Macrosty ; Trusts, Pools and Corners, by 
 T. S. Jeans, 1894; The Tendency towards Industrial Combination, by G. R. 
 Carter, 1914 ; The British Coal Trade, by H. Stanley Jevons, 191 5 ; "^he Life 
 of John Nixon^ by J. E. Vincent, 1900. 
 
 How the Nation now obtains its Coal 1 1 7 
 
 nothing to prevent the most indispensable mines passing 
 into the ownership of aliens, or into foreign control— indeed, 
 there has been one notorious case of an avowedly German 
 company acquiring English mines.^ But the holder-up is 
 not always an alien enemy. The ever- increasing depend- 
 ence on the continuity in the coal supply, not only of 
 the railways and tramways, and of the greater part of our 
 systematic heating and lighting, but also of practically every 
 trade, makes it imperative to place this industry outside the 
 control of private individuals or separate classes whose interests 
 are not necessarily identical with those of the community as 
 a whole. We, for these reasons, suggest that the time has 
 anyhow come for the Nationalisation of the Coal Supply. 
 And, as there is money in it for the Chancellor of the 
 Exchequer, he should take the opportunity of making it 
 help to pay for the war. 
 
 II. How THE Nation now obtains its Coal 
 
 The nation's annual coal supply (which we may take 
 in round numbers, as 189 million tons for home consumption 
 and 98 million tons for the bunker coal of our shipping and 
 for export) 2 is obtained, at present, from about 3300 distinct 
 pits or mines, scattered over a dozen disconnected coalfields, 
 organised in twenty- two separate districts, and belonging 
 to about 1500 owners, which are nearly all joint-stock 
 
 1 The President of the Board of Trade (Mr. Runciman) declared in the 
 
 ^cuZ u TT f *'^' ^"""^ ^"' '^^^^"'^ ^" '^^ Midlands which had 
 actually been held up by a German who was trading under an English title a 
 registered company which itself was doing nothing, and was preventing others 
 explomng coal. That could not go on after the war." ( Times, 24th December 
 
 nrJ ^}^ ^f T ^'"' '^'^' '^^ ^^'^ complete year of peace, show the record 
 production of 287,430,473 tons, valued at the pithead at ^145,535,669 (average 
 
 fud '.-'006 HT^ ' '"d t° l'^ "^T? '""l'"' (-^^-d-gtk'e'fn'i mL^/frcS 
 uel 3,906 436 tons, and bunker coal for shipping in foreign trade, 21,031 ceo 
 
 tons) of 98,338,104 tons. This output was produced by 1,127 890 nersons 
 working under the Coal Mines Acts of 191 1 and 1912. ^ 
 
 and Wal« •- '"^ ^^^^""^ ^° ^^ ^^^ ^^^^^^ ^^'^^'^ """"'^"^ companies in England 
 
III 
 
 1 1 8 The Nationalisation of the Coal Supply 
 
 companies.^ The coal is extracted by an army of more 
 than a miUion men and boys, engaged as hewers, hauliers, 
 ponymen, repairers, timbermen, labourers, enginemen, stokers, 
 pumpsmen, bankmen, mechanics, overmen, viewers, pit 
 managers, clerks, etc., each colliery being under a colliery 
 agent. The coal is carried away to the principal inland 
 distributing centres (road and canal traction being now 
 unimportant) by long trains of trucks — these being partly 
 owned by the several collieries and partly by the railway 
 companies concerned, the variety of ownership causing a 
 frequent shortage of trucks at particular collieries, and 
 adding to the difficulties of getting the coal continuously 
 away from the congested pithead. The coasting steamers, 
 so far as home distribution is concerned, relieve the railways 
 only to a comparatively small extent ; but a steadily 
 increasing quantity and proportion, actually more than one- 
 third of the total output, is now shipped either as bunker 
 coal or for export. The colliery owners, in order to ensure 
 sufficient continuity of demand to enable the pits to be 
 worked uninterruptedly, always dispose of a certain pro- 
 
 Ocean Coal and Wilsons 
 
 Pease and Partners 
 
 Consolidated Cambrian 
 
 Powell Duffryn . 
 
 Rhymney . 
 
 Horden 
 
 Denaby and Cadeby Main 
 
 Tredegar 
 
 Pearson & Knowles . 
 
 D. Davies & Son 
 
 Sheepbridge 
 
 United National . 
 
 1 The almost universal resor 
 
 Nominal Capital. 
 
 4,685,508 
 1,825,000 
 1,791,211 
 1,780,015 
 1,476,590 
 1,100,000 
 1,030,050 
 1,016,455 
 1,000,000 
 962,500 
 
 931,795 
 884,705 
 
 Output. 
 Tons. 
 
 2,500,000 
 
 ? 
 3,000,000 
 4,000,000 
 1,300,000 
 1,300,000 
 1,500,000 
 2,650,000 
 
 ? 
 1,750,000 
 1,200,000 
 1,750,000 
 
 to limited companies obscures the ownership, 
 but among the few individual colliery owners are the Duke of Buccleuch, the 
 Marquises of Bute and Londonderry, the Earls of Bradford, Carnarvon, Dudley, 
 EUesmere, Lathom and Shrewsbury, and Earls Fitzwilliam and Waldegrave ; 
 and Lords St. Oswald and Vernon. 
 
 In the Forest of Dean only, where the freeholder is the Crown, is the system 
 in force, of "free-mining" under lease from the Government. By ancient custom 
 the " Free Miners of the Forest " have a right to leases which are granted by the 
 •* Gaveller " on behalf of the Commissioners of Woods and Forests. 
 
 How the Nation now obtains its Coal 1 19 
 
 portion of the expected output, after much skilled higgling 
 and bargaining, by contracts for future deliveries, which 
 may sometimes (as when prices are expected either to rise 
 or to fall substantially) extend over a few months only, 
 but are generally for a whole year, and occasionally (when 
 trade conditions are thought to be stable) for two or three 
 years. The proportion of the total output thus disposed of 
 by contract varies from about half in the Midlands and 
 Yorkshire, where the contracts are made about June, mainly 
 for the consumption of factories and the domestic consumer 
 in London and elsewhere,^ up to as much as four-fifths in 
 South Wales, where the contracts are made in the autumn, 
 principally for the export trade. The balance, the so-called 
 " free coal," is sold in lots of a few hundred tons up to a 
 few thousand tons, for prompt delivery to meet current 
 requirements, at prices often differing considerably from the 
 " contract " prices and determined by the day-to-day relation 
 of supply and demand. From the pithead the coal passes 
 into the hands of a comparatively small circle of merchants 
 or factors and export agents, and from the merchants or 
 factors to a multiplicity of local dealers, shopkeeping retailers, 
 and perambulating hawkers ; amongst each grade of whom, 
 in each locality, there are said to be, from time to time, the 
 inevitable " understandings " and " concerted arrangements " 
 as to the price to be charged. The export trade is managed 
 principally from Cardiff, Newcastle, Hull and Leith ; though 
 the actual shipments are made, not only from these centres 
 and their minor adjacent ports (which together export 
 95 per cent of the total),^ but also from the Clyde and 
 
 1 A recently introduced practice— said to be now almost universal— of the 
 Midland, Yorkshire and other collieries selling for the London market, is to 
 stipulate for a share in any additional price that may be obtained from the 
 London consumer, at the rate, usually, of an additional sixpence to the colliery 
 owner out of every additional shilling to which the London Coal Exchange can 
 within the term of the contract, carry the price. This is said to have been due 
 to the coalowners having noticed the extortionate profits made by the middleman, 
 in which they considered that they were entitled to participate. 
 
 2 Under Cardiff are the Bristol Channel ports, doing 41 per cent of all our 
 coal exports (Cardiff, Barry, Newport, Swansea, Port Talbot and Llanelly). 
 Under Newcastle are the North-Eastern ports, doing 32 per cent (Newcastle 
 
■It 
 
 m 
 
 1 20 T/ie Nationalisation of the Coal Supply 
 
 Ayrshire ports and those of Lancashire and Lincolnshire. 
 The " sea-borne " coal for the metropolitan area, coming to 
 the Thames principally from the Tyne, Wear and Humber 
 ports, and amounting to nine million tons, is now principally 
 for the supply of the metropolitan gas companies, and is 
 often carried in their own steamships, only a tiny proportion 
 being now household coal. But from the Bristol Channel 
 and Mersey ports, together with those of Cumberland, nearly 
 five million tons are sea-borne to Ireland, the Isle of Man 
 and the southern and western coast towns ; whilst both 
 eastern and western Scotland are thus supplied to the 
 extent of three million tons, principally from the Ayrshire, 
 Clyde and Firth of Forth ports. At least seven-eighths of 
 the whole of the coal consumed in the United Kingdom is 
 now, however, conveyed by rail (the bulk of it by a dozen 
 of the companies).^ Less than 4 per cent travels by canal ; 
 and nearly all of this is on the four big canals that have 
 not fallen into the hands of the railway companies.^ 
 
 On the railways the coal travels in the seven or eight 
 hundred thousand trucks built for this service, normally 
 holding 10 tons each, and costing £jo or ;^8o. Only 
 1 80,000 of these trucks belong to the railway companies, 
 
 South and North Shields, Blyth, Sunderland, West Hartlepool, Seaham and 
 Amble). Under Leith come the East Scottish ports, doing 1 1 per cent (Methil, 
 Leith, Grangemouth, Burntisland, Borrowstounness or Bo'ness, Alloa, Granton and 
 Kirkcaldy). Under Hull come the Humber ports, doing also ii per cent (Hull, 
 Immingham, Goole and Grimsby). The largest single trade is from Cardiff to 
 Italy, which alone amounts to one-twentieth of all our coal exports. The only 
 other exporting ports (shipping over 100,000 tons) are Glasgow, Liverpool, 
 Manchester, Boston, King's Lynn, and Troon ; these put together do not make 
 up 5 per cent of the total. Nearly half the whole export goes to France, Spain, 
 and the Mediterranean ; three-sevenths to Northern and Central Europe ; one- 
 tenth to South America ; and relatively inconsiderable quantities to West, East 
 and South Africa, India and the Far East, and North America. It should be 
 added that a few other ports, such as Gloucester, Maryport (with Whitehaven 
 and Workington) and Preston, have a certain importance in shipments of coal 
 coastwise. 
 
 1 The N.E. Railway, Midland, L. & N.W. Railway, N.B. Railway, Taff 
 Vale, G.C. Railway, Caledonian, Lanes. & Yorks., G.N. Railway, North Staffs., 
 G. & S.W. and Hull & Barnsley. 
 
 2 Principally the Birmingham Canal Navigation and the Aire and Calder 
 Navigation, but also the Leeds and Liverpool Canal and the Manchester Ship 
 Canal. 
 
 ill 
 
 tl 
 
 How the Nation now obtains its Coal 121 
 
 and these are divided among a dozen different companies. 
 Between 500,000 and 700,000 — the number does not 
 seem to be accurately known — belong to over a thousand 
 different colliery proprietors, coal merchants and factors, 
 large industrial consumers and, in a few cases, wagon - 
 hiring companies. This bewildering chaos of separately- 
 owned trucks cannot be used just as required. Each truck 
 can be loaded only in the service of its particular owner ; 
 and if no load of his is available, whatever may be the 
 shortage of trucks, this truck must be hauled back empty. 
 The confusion and cost of the traffic is increased by the 
 total lack of system. The distribution of coal over the 
 country takes place, in the main, by innumerable separate 
 consignments of tiny quantities, each merchant or trader 
 ordering just what he needs for the moment, and expecting 
 his truck-load of coal to be specially forwarded at once, 
 without regard for traffic requirements. At most country 
 railway stations nearly all the consignments are single 
 truck-loads. In 1909 it could be said by a distinguished 
 railway manager " that over 80 per cent of the coal traffic 
 on the London & North- Western Railway averaged less than 
 20 tons per consignment"^ — a system obviously costly to 
 the community as a whole. 
 
 Each town or village has its little circle of local dealers 
 or retailers of coal, who share among them the custom of the 
 neighbourhood. At Birmingham, Cardiff, Newport, Swansea, 
 Glasgow, Goole, Grimsby, Hull, Liverpool, Manchester, 
 Newcastle-on-Tyne and Sunderland, as well as in London, 
 there are wholesale merchants or factors who meet the 
 selling agents of the collieries in more or less definitely 
 recognised Coal Exchanges. 
 
 The supply of the London householder and manufacturer, 
 like that of the L.C.C., the Government Departments and 
 other large consumers, amounting to about eight million tons 
 annually, is now almost entirely rail-borne. Some 450 coal 
 
 ^ The late Sir James Inglis, General Manager of G.W.R. (Report of Royal 
 Commission on Canals). 
 
122 The Nationalisation of the Coal Supply 
 
 merchants, who among them control all the indispensable 
 railway sidings and depots, purport to supply the seven 
 million persons of the Metropolitan area. But this 
 seemingly wide distribution of the trade is apparent only. 
 It is the custom for many of the firms to trade under 
 different names — in one notorious case the firm (Cameron) 
 had no fewer than forty-seven aliases — and nearly all the 
 coal consigned for sale in London (apart from that purchased 
 by the four largest gas-companies, and a few other large 
 buyers) is acquired by a dozen firms of coal merchants or 
 factors. The largest of these, that of W. Cory & Son, 
 resulting from amalgamations of a dozen competitors in 
 1896 and 1899, and now including Rickett Cockerell & Co. 
 and Herbert Clarke, alone sells annually six million tons 
 out of a total rail-borne supply of about eight million tons, 
 and thus controls probably considerably more than half the 
 supply for the domestic consumer. 
 
 The needs of the 800,000 wage-earning families in the 
 Metropolis, who have no storage for more than a hundred- 
 weight or so of coal, are supplied, partly by thousands of 
 little shopkeepers (whose principal business is in green- 
 grocery, fruit or household stores), partly by the " trolleyman," 
 a peripatetic hawker who sells by the sack of a hundred- 
 weight or half a hundredweight at a rate per ton often 
 double that at which the L.C.C. is getting its good household 
 coal actually delivered to its 1500 schools. The trolley 
 system of distribution, introduced about thirty-six years ago 
 by the firm which still carries it on most extensively (Brewis), 
 brought the coal to the little customer's door, but lent itself 
 easily to fraudulent dealings with regard to weight, which 
 were gradually stopped, between 1890 and 1900, by the 
 vigilance of the inspectors of the L.C.C. Since then the little 
 shopkeepers have apparently recovered much of their coal 
 business. 
 
 It is impossible to escape the conviction that, at every 
 stage from the pithead to the domestic cellar, the cost is 
 unnecessarily raised by the overlapping and waste resulting 
 
 How the Nation now obtains its Coal 123 
 
 from the multiplicity of private interests, the very imperfect 
 provision of mechanical appliances, and the lack of any 
 systematic adaptation at each time and place of the total 
 supply to the ascertained demand. This, indeed, applies all 
 along the line. Pits stand idle, to the great loss of the 
 miners and to the increase in the annual cost of produc- 
 tion, because of a temporary shortage of trucks, whilst 
 heaps of trucks are also standing idle in the railway 
 sidings but, as belonging to another colliery, cannot be used ; 
 or because of a momentary failure of orders at a time when 
 other pits are unable to turn out as much as is demanded. 
 Indeed, though the aggregate national requirements are 
 known and are continuous throughout the year, each pit 
 is now subject to interruption of working and consequent 
 raising of the cost of production — together with the resultant 
 loss of wages and discontinuity of income to the miners 
 concerned — owing to the failure of any one colliery company 
 to secure a perfect continuity of orders for its product and of 
 daily deliveries from the pithead. Moreover, at particular 
 ports, at particular times, ships wait idly for cargoes ; mean- 
 while coal accumulates elsewhere in heaps because there 
 is, for the moment, insufficient tonnage at the disposal of a 
 particular firm at a particular port. 
 
 Most of the transfers or shiftings of place from pithead 
 to truck, from truck to ship, from railway siding to coal yard, 
 from coal yard to cart or trolley, and from them to the 
 domestic cellar, involve loading or unloading, and most of 
 them, with the transfer of ownership, also re-weighing — 
 operations which, except at a few of the export quays, are 
 performed almost entirely by manual labour ; and a certain 
 amount of this repeated rehandling of the coal could be 
 saved by a more systematised distribution. Every such 
 rehandling of coal, we are told, involves a loss in quantity 
 and an expense in wages which are put at 10 per cent of 
 the price. In London and other large centres the " visible 
 supply " is at one time below, at another time above the 
 local demand — each firm ordering according to its own 
 
Ill 
 
 124 The Nationalisation of the Coal Supply 
 
 estimate of the future, without any common ascertainment 
 of the facts or knowledge of what its competitors are doing. 
 At one moment "free coal" is in demand, because the 
 deliveries individually contracted for prove, in the aggregate, 
 insufficient. Presently more " free coal " is offered than the 
 merchants are disposed to buy, and its price falls below the 
 contract rates. And every such momentary variation in 
 supply, like every oscillation in local demand, marked by a 
 rise or fall in the price of " free coal," is made the occasion 
 for a profitable operation on the price charged to the public 
 for both " free " and " contract " coal. Those who manage 
 the coal trade, in fact, play on the mind of the consumer as 
 . on a pipe : as winter approaches, or on the occasion of a 
 cold snap or a fall of snow, the public is psychologically 
 prepared for a rise in price, and the coal merchant or 
 " trolleyman " reaps an added profit. The idea that, because 
 the thermometer falls several degrees, the whole populace 
 should pay additional tribute to a small number of firms is 
 so preposterous that it is surprising it has been so tamely 
 acquiesced in. The only additional cost, in the event of a 
 fall of snow, may be a penny or twopence per ton for 
 cartage. Yet the price is immediately raised is. or more. 
 No other trade shows anything like it. 
 
 To what extent the price is affected by combinations 
 and concerted action among those concerned has never been 
 ascertained, and has, indeed, never been made the subject 
 of scientific investigation. The existence of any " ring " or 
 " cartel," either among colliery proprietors or local merchants, 
 is always vehemently denied ; but it seems that this denial 
 applies specifically to the idea that there exists any formal 
 agreement not to sell below a certain price, enforced by 
 penalties for breach. Nearly every coalfield has an associa- 
 tion of colliery proprietors, and whilst these do not include 
 any fixing of prices among the specified objects of their 
 society, it has often been admitted that their members 
 periodically meet and discuss what prices should be insisted 
 on. The procedure differs. The Lancashire and Cheshire 
 
 How the Nation now obtains its Coal 125 
 
 Coal Sales Association agrees upon the retail price to be 
 charged to the public, and then upon the discount to be 
 allowed to the local dealers. Others, such as the South 
 Yorkshire Colliery Owners' Association, the Warwickshire 
 Coalowners' Association and the West Yorkshire Coalowners' 
 Association, discuss among themselves the wholesale price 
 that they will instruct their selling agents in London to 
 demand, and the conditions to be inserted in the contract. 
 
 This principal home market is of course the Metropolitan 
 area, with its seven millions population, taking one-eleventh 
 of the whole internal consumption. The Coal Exchange in 
 Lower Thames Street, unlike the Stock Exchange, is open 
 to the public, and there is no official mechanism for fixing 
 prices. There is no formal " ring," but it is admitted that 
 there are informal arrangements as to price movements. 
 The " concert " as to prices is indeed obvious enough, the 
 so-called "public price" of coal being habitually varied 
 simultaneously by the dozen firms that control practically 
 the whole supply. The selling agents of the colliery 
 companies who attend the London Coal Exchange— about 
 150 in number — have an Association of their own (the 
 Inland Collieries' Subscription Room); but what settles 
 whether the price shall be advanced, and by how much, is 
 the agreement reached by the half-a-dozen leading firms' of 
 merchants or factors " in No. 8 Room," which is the office of 
 the London Coal Merchants' Society. It would, however, 
 be quite unwarranted to describe either that society, or the 
 still older Coal Factors' Society, as constituting a ring or 
 cartel. All that happens is a series of transient agreements 
 among the half-a-dozen leading firms, to which no one is 
 bound to conform, but which do, in fact, govern the market. 
 Reviewing the whole process of coal supply, from the 
 hewing at the face to the delivery to cellar, no one can 
 regard it as ideal. It is safe to say that, if the problem 
 were a new one — if we had suddenly to organise the 
 extraction of 287 million tons a year of a new commodity, 
 and its distribution throughout the kingdom — no one in 
 
126 The Nationalisation of the Coal Supply 
 
 his senses would advocate such an unco-ordinated and 
 unsystematic proceeding. We cannot escape the inference 
 that, owing partly to the unnecessary costliness of convey- 
 ance of small consignments hither and thither, partly to the 
 lack of any systematic organisation or unity of control of 
 the service, and partly, at least, to the profits earned by the 
 numerous grades of middlemen between the hewer and the 
 consumer, the price at the pithead of 9s. to 12s. per 
 ton becomes doubled, trebled, and occasionally, in some 
 places, even quadrupled when the private customer pays his 
 coal bill. The tax thus levied on the public is enormous. 
 Each additional shilling on the price of coal per ton amounts 
 to a charge on the whole home consumption of nearly ten 
 million pounds sterling (which is four times the whole 
 proceeds of the Supertax as at first imposed). Between 
 1903—6, when the four years' average was 15s. 6d., and 
 1 91 2— 13, when the two years' average was 21s. per ton, 
 the wholesale price in London, delivered to barge in the 
 Thames, rose by no less than 5s. 6d. per ton. Assuming 
 the rise in other districts to have been anything like the 
 same, even if the rise in the wholesale price was not 
 aggravated by a still greater rise in the retail price, this 
 represented an increased charge on the home consumers of 
 more than fifty million pounds a year, or nearly equal to the 
 whole yield of the Income Tax at eighteenpence in the 
 pound ! 
 
 Since 1 9 1 3 the price of coal has, of course, soared even 
 higher. 
 
 III. Who gets the Price of the Coal? 
 
 No one can account very clearly either for the variations 
 in the price charged for coal to the consumer, or for the 
 gigantic total sum that is every year paid for this necessary 
 of life. Coal is sold at all prices, from the few shillings per 
 ton charged for " slack " in the immediate neighbourhood 
 of the pit up to the 50s. per ton exacted from the 
 
 Who gets the Price of the Coal ? 127 
 
 labourer's wife by the trolleyman in Woolwich streets at 
 times of scarcity. The average "pithead" price of all 
 grades in 191 3 was los. i^d. per ton.^ The average price 
 paid for the whole two hundred and eighty-seven million tons 
 by the consumer, large or small, industrial or domestic, and 
 by the exporter for delivery on board the ship — varying, as 
 it does, from iis. to i6s. "free on board," and from 20s. 
 to 35 s. or even occasionally 50s. on the trolley or delivered 
 to cellar — is put at anything between i6s. and 20s. per ton. 
 It is clear that we pay for our coal, in the aggregate, at 
 least two hundred and thirty millions sterling. It is the 
 nation's biggest single purchase. It is more than we pay 
 for bread or for house rent. It amounts to more than the 
 whole cost of our national Government. Out of this huge 
 total the wages paid to the eleven hundred thousand men 
 and boys employed in and about the mines come to no 
 more than about ninety millions sterling ; ^ the other 
 
 1 The average price at the pit's mouth during 1913 was in England 
 9s. lod., in Wales lis. 9d., and in Scotland 9s. 8d. per ton. The average 
 values per ton at the principal shipping ports varied from under 12s. at Methil 
 and Leith ; between 12s. and 14s. at Newcastle, Sunderland, Hull, Grange- 
 mouth and Glasgow ; and between 14s. and i6s. at Liverpool, Grimsby, Cardiff 
 Newport and Swansea. The average price of sea-borne coal delivered from ship 
 to barge m the Thames was 21s. per ton. (Mines Report, Cd. 7741, 19 14, vol iii 
 p. 226). The greater part of the home supply goes for industrial use at from 
 I2S. to i8s. per ton. 
 
 The retail price charged to the consumer in different parts of London for 
 different grades and qualities ranged in that year from 28s. to 35s. per ton 
 whilst the price in the Potteries and the Black Country was lower than in London 
 by as much as one-third. 
 
 2 Much misapprehension exists as to the miner's earnings. Of the eleven 
 hundred thousand persons employed, nearly seven thousand are women surface 
 workers, whilst over fifty thousand underground and twenty thousand above 
 ground are boys under 16. These eighty thousand receive, on an average 
 less than /40 a year each. Of the million of males over 16, at least ^o 
 per cent are « datal " men, paid by the day or week, at wages from 20s. to 50s 
 per week. About a third are youths between 16 and 21 who receive 
 less than the wages of the adults. Not a few, moreover, are old men, who also 
 get lesser amounts. The best - paid class, the hewers between 21 and 
 50, do not make up a third of the whole. Their standard minima, which it 
 was a real boon to secure to them by law, vary from 5s. to 8s. per day 
 of eight hours work underground, at piece-work intensity. Even this legal 
 minimum is inoperative in cases in which the hewer (who often lives in a house 
 belonging to his employer, and does not wish to move) puts up with a quite 
 msufficient allowance rather than risk making himself unpleasant. The high 
 
 !!«; 
 
 4 
 
[1 
 
 1 28 TAe Nationalisation of the Coal Supply 
 
 expenses of colliery working, including management and 
 repairs, may be put as a maximum at 40 per cent of the 
 wage-bill, or thirty-six millions — these two items making up 
 the one hundred and twenty-six million pounds that the 
 getting of our coal really costs. The sum paid for royalties, 
 way-leaves, etc. on coal may be put at six millions,^ but this 
 is included in the annual profits of the debenture and share- 
 holders of the colliery companies, and the profits of other 
 
 earnings that we sometimes hear of-'* five pounds a week or more,"— even when 
 correctly reported, will be found on examination (i.) to mclude the work of 
 more than one man, the hewer having himself to pay a man or boy to assist him, 
 sometimes two other persons ; (ii.) to be subject, except in South Wales, to various 
 deductions for lamps, fuses, explosives, etc. ; (iii.) to represent the earnings of 
 a week at an exceptionally "good place," which are offset by the chance of an 
 equally "bad place" at a later date, where the earnings will sink below the 
 statutory minimum. Moreover, the hewer's earnings are not continuous. Few 
 pits draw coal on an average on more than 270 days in the year, even when 
 there are no stoppages ; and the miner also loses, on an average, at least a 
 fortnight a year, or twice the common amount, from sickness disabling him 
 from hewing. All these considerations bring down the total wage-bill of the 
 collieries to ;^90,ooo,ooo, making the average income of the eleven hundred 
 thousand wage -earners employed (including young and old, male and female, 
 datal hands and piece-workers) not more than ;^8o for the year. 
 
 1 In Great Britain coal is almost invariably worked (outside the Forest of 
 Dean), not by the landowner (the mineral proprietor beneath whose land it is 
 found)', but by capitalist companies or firms (the so-called coalowners), who 
 acquire from him the right to mine on lease for twenty, thirty or sixty years, 
 subject to the payment of a "royalty" of so much per ton of coal extracted, a 
 fixed minimum payment per annum, varying from one-seventh to one-half of the 
 estimated total, being stipulated for (the so-called " dead rent »). The terms of 
 such a mineral lease are not prescribed or regulated by any statute, and depend 
 entirely on voluntary agreement. Landowners may and often do refuse to lease 
 their minerals for exploitation, and, if they consent, may stipulate for whatever 
 conditions they can get agreed to. It is often necessary or convenient to make 
 use of the property of other landlords, who similarly lease at a fixed rate of a 
 few pence (sometimes an agreed proportion of the pithead price per ton of coal 
 passing), such privileges as "underground way-leave" (for passage by tunnel 
 beneath the surface), "shaftage" (for the right to sink a shaft and bring the coal 
 up) and " surface way-leave " (for passage above ground, including, occasionally, 
 the' right to construct and work a private line of railway). Such payments, 
 which are exacted principally in Durham, Northumberland and South Wales, 
 amount in the aggregate only to about 5 per cent of the royalties. For all this, 
 the great source of authentic information is the Report of the Royal Commission 
 on Mining Royalties, 1893, which is ably analysed, amplified and discussed, m 
 the interest of the mineral proprietors, by their legal adviser m the enquiry, 
 C Ashworth James, in his Mining Royalties, their Practical Operation and 
 Effect, 1893. See also Mining Royalties and the Iron and Coal Trades, by 
 W. r! Sorley, 1889. 
 
 The Nationalisation of Production 
 
 129 
 
 capitalist proprietors, as returned for Income Tax, which 
 are given, on a five years' average, as no more than nineteen 
 millions, of which only seven-eighths, or sixteen and a half 
 millions, are for coal. The sums received by the railway 
 companies in 191 3 for coal conveyance (including coke and 
 patent fuel, and the companies' truck hire as well as haulage 
 rates) amounted to ;f 22,903,000, and the shipping and 
 canal freight of the twenty-six million tons that are water- 
 borne to perhaps two and a half millions more. Cartage 
 for delivery at an average of three shillings per ton, even if 
 reckoned on the entire home consumption, would add only 
 ;^29, 000,000. This leaves a large sum — thirty millions or 
 more — unaccounted for. It seems as if a considerable 
 proportion of the total retail price is frittered away in the 
 waste and expenses of handling by a succession of middle- 
 men, and in the opportunities for profit thus afforded. It is 
 difficult to believe that much could not be saved here by 
 deliberate and systematic adjustment of supply and demand. 
 
 IV. The Nationalisation of Production 
 
 The first step is plainly a systematisation of production, 
 by bringing to an end the diverse and haphazard administra- 
 tion of the 3300 collieries by the 1500 different owners. 
 An Act of Parliament should establish a Ministry of Mines, 
 with appropriate powers, and should vest, on the appointed 
 day, in the Minister for Mines in his corporate capacity — 
 
 " Every colliery and coal-mine, whether in actual work 
 or discontinued, or exhausted, or abandoned, and every 
 shaft, pit, level, or inclined plane in course of being made 
 or driven for commencing or opening any such colliery or 
 coal-mine, including every patent fuel plant, coke oven, coal 
 washery, railway rolling-stock, and all other works belonging 
 to or connected with such coal-mine (all of which are herein 
 included in the expression * coal-mine ') " ^ ; together with 
 
 ^ The Nationalisation of Mines and Minerals Bill, by H. H. Slesser (Fabian 
 Tract, No. 171). 
 
 K 
 
ii 
 
 ' I 
 
 if 
 
 1 30 The Nationalisation of the Coal Supply 
 
 all the other assets of all the coal-owning companies and 
 firms to be expropriated as working under the Coal Mines 
 Acts of 191 1 and 191 2. The object in taking over the 
 administration would naturally be to substitute a deliberate 
 organisation, based on an ascertainment of the demand of 
 each district, and of each section of consumers, with a 
 sufficient margin for maintaining everywhere a proper store, 
 which in view of possible national and other emergencies 
 might well be kept up to a whole year's supply, to meet 
 unforeseen requirements or tide over unexpected stoppages. 
 The quantity to be raised being thus determined, according 
 to kind of coal as well as locality, and the working costs of 
 each part of each colliery being known, the aggregate pro- 
 duction required would be afforded by instructing each pit 
 to work only up to the point of a common " margin of 
 cultivation," so as to incur no more expense in working 
 difficult seams or pits than is needed to maintain the required 
 total output.^ Leaving, at the outset, the actual manage- 
 ment of each colliery under its own colliery agent and 
 pit managers, each of the twenty-two coal districts would 
 naturally be placed under a single united administration — a 
 Local Council of Management drawn from the ablest men 
 in the trade, with due representation of the Miners' Federa- 
 tion and the National Coal Board — all the districts being 
 controlled and instructed as to output and deliveries by a 
 united national management. We may visualise the several 
 distinct parts of the supply service being each supervised by 
 a separate statistical department of the administration ; 
 such, for instance, as (i.) the export trades (including bunker 
 coal) taking ninety - eight million tons, or a third of the 
 whole output, no longer governed by the local rivalries of 
 Leith, Newcastle, Hull and Cardiff ; (ii.) the supply for the 
 
 1 It may be said that this constant choice of the least costly workings implies 
 that the community will the sooner be compelled to work the more costly seams. 
 But apprehension of being one day compelled to work the more costly seams 
 affords no ground for unnecessarily resorting to them now. We may reasonably 
 expect the means of working to continue to improve, as they have hitherto done, 
 so that it is better to defer the most costly seams to the future. 
 
 m 
 
 The Elimination of the Private Interests 131 
 
 metallurgical industries, etc. taking thirty million tons, all 
 raised from the most convenient pits ; (iii.) the supply of 
 the municipal and private gas works and electricity works, 
 coke ovens, etc., taking from thirty to forty million tons, 
 and drawing in each case from the best available source ; 
 (iv.) the supply of the railways, taking fifteen million tons 
 just where they were most handy ; (v.) the supply of factories 
 and industrial enterprise of all sorts, requiring about sixty 
 million tons ; and (vi.) the supply of the ten million private 
 households, absorbing only 13 per cent of the output, or 
 about thirty-five to forty million tons, these two latter 
 requirements, amounting to a little over a third of the 
 whole, being so organised that each locality exhausted first 
 all that the nearest coalfield could provide before drawing 
 for the balance on more distant or more costly sources. At 
 present all these six separate demands are directly or in- 
 directly contributed to, more or less, by nearly all the 1500 
 rival administrations of the 3300 collieries, each large buyer 
 seeking to play off one source of supply against another, as 
 the only way, in a system of private enterprise, of keeping 
 down prices.^ 
 
 V. The Elimination of the Private Interests 
 
 The private interests to be eliminated in the raising of 
 coal are those of (i.) the shareholders and partners in the 
 1500 companies and firms working collieries, over 90 per 
 cent of them in output and value being joint-stock companies, 
 of which the accounts, annually audited by public accountants, 
 are already in the possession of the Inland Revenue ; (ii.) 
 the 8000 recipients of royalties, way-leaves, etc., who now 
 
 1 Incidental to the extraction of coal, the 3300 pits working under the Coal 
 Mines Act produce also other minerals, principally (in 1913) 7,709,624 tons of 
 ironstone, mostly in Yorkshire; 3,280,143 tons of oil shale, practically all 
 between Linlithgow and Edinburgh ; 2,585,763 tons of fireclay; together with 
 ganister (the silicious clay used for lining furnaces), various useful sandstone clays 
 and shales, limestone, iron pyrites, barium compounds, etc. These would naturally 
 continue to be produced by the Government Coal Department, and to be marketed 
 as at present. 
 
 . 
 
rr 
 
 Wi 
 
 132 TAe Nationalisation of the Coal Supply 
 
 all make returns to the Inland Revenue of their exact 
 incomes from this source, and pay the Mineral Rights Duty 
 of IS. in the pound thereon.^ It may be assumed that, at 
 any rate at the outset, the services of all the active managers 
 or directors of the 1500 concerns (like those of the colliery 
 agents and pit managers themselves, with their subordinate 
 staffs) would be retained by the Government at salaries not 
 less than they have hitherto been enjoying ; their activities 
 being merely redistributed among the National Coal Board 
 and the Local Councils of Management. In due course, as 
 the system gets into its stride, and as vacancies occur, their 
 number may doubtless be gradually reduced. 
 
 VI. The Terms of Expropriation 
 
 There can be no justice in penalising the share- and 
 debenture-holders in coal-mining companies more than those 
 
 1 In Scotland exact returns of royalties, way-leaves, etc., have also been made 
 since 1855 to the County Assessors for Local Taxation purposes (17 & 18 Vic. 
 c. 91). The large number of recipients of the income from this source — more 
 than five times as many as the coalowners — is explicable by the fact that a single 
 coal-owning company may have leases from, and pay way-leaves to, several land- 
 owners (the Wigan Coal and Iron Company in 1891 worked its 13 acres under 
 no fewer than 1 7 1 separate agreements). 
 
 It is suggested that the State is not called upon to purchase the coal un- 
 connected with any existing colliery workings and not included in the property 
 of any colliery company, that may exist beneath the soil of landowners who have 
 not yet opened it up ; nor need the State trouble to reassert the ancient Crown 
 right to all minerals which is elsewhere (except in the United States) nearly 
 always vested in the Government, but which in this country was let slip (except 
 as to gold and silver) in the sixteenth century. The Government Coal Depart- 
 ment would have, of course, to purchase additional coal-bearing lands, or acquire 
 mining rights or way-leaves, whenever it needed more coal, just as a colliery 
 company does at present. Any landowner now digging for coal or opening a 
 new pit does so at his own risk, in competition with all the 3300 other pits. 
 We may leave him this right theoretically unaffected — he would, in future, have 
 to compete only with a single colliery enterprise ! It may be noted that, apart 
 from the Forest of Dean and other coal-pits on Crown Lands, the Government 
 owns also the coal under the sea below low-water mark. This is already 
 extensively worked on Crown leases, and can undoubtedly be much developed 
 by the Government Coal Department, notably along the whole north - east 
 coast from Amble to Hartlepool ; on the north - west coast from Maryport 
 to St. Bees Head ; under the Firth of Forth from Musselburgh to Leven ; in 
 the Channel from Ramsgate to Dover ; and possibly in Carmarthen and 
 Swansea Bays. 
 
 The Terms of Expropriation 
 
 "^ZZ 
 
 in other capitalist enterprises that we leave unexpropriated ; 
 and there is little warrant for treating those legally in enjoy- 
 ment of royalties or way-leaves differently from the recipients 
 of other forms of rent.^ 
 
 The Chancellor of the Exchequer will therefore doubtless 
 propose to buy out, on liberal terms, both the 1500 coal- 
 owning companies and firms, which are big concerns, 
 averaging in output no less than 186,000 tons per annum, 
 and also the 8000 recipients of coal royalties, etc., averaging 
 in income only £^^0 each. 
 
 The annual gross profits of coal and other mines 
 
 (including royalties, etc.) as returned for Income Tax were. 
 
 m 191 2-1 3, on an average of the five preceding years, 
 
 ^19,068,927, and of this seven-eighths is from coal-mines, 
 
 or, say, 1 6\ millions. Coal-mines are very risky speculations, 
 
 with a hazardous and terminating life ; and particular mines 
 
 are often sold for only a few years' purchase of the profits. 
 
 But the 16^ millions, which were proved to be the average 
 
 profits of the five years preceding 191 3, include incomes of 
 
 differing values, which must be taken separately. The 
 
 royalties (including way-leaves and dead-rents), now drawn by 
 
 8000 separate owners, though fluctuating and terminating, 
 
 are better secured than the colliery owner's net profits. The 
 
 annual receipts from ** mineral rights" were, in 191 3-14, 
 
 ;^7,036,440, of which seven-eighths came from coal-mines. 
 
 Such incomes (less the special tax of 5 per cent levied upon 
 
 them) may sell for thirteen or fourteen years' purchase. At 
 
 this estimate the capital value of the coal royalties, etc. would 
 
 be about eighty millions sterling. 
 
 ^ In the Nationalisation Bill introduced into the House of Commons in 1913 
 at the instance of the Miners' Federation of Great Britain such a distinction was 
 drawn. Whilst proposing to purchase on reasonable terms the mines and plant 
 no compensation was to be awarded for mining royalties and way-leaves, which 
 were to be summarily brought to an end (see the Bill printed in Fabian Tract, 
 No. 171. The Nationalisation of Mines and Minerals Bill, by H. H. Slesser). 
 
 It must be said that a precedent for some such differential treatment is 
 afforded by the Mineral Rights Duty, which since 1909 subjects the owners ot 
 this particular form of rent to an additional Income Tax of a shilling in the pound 
 (producing ^350,000 a year, of which probably seven-eighths is in respect of 
 coal). 
 
* ', I 
 
 I 
 
 i 
 
 i 
 
 134 The Nationalisation of the Coal Supply 
 
 We have to assume that the remaining \o\ millions a 
 year represented, in 191 3-14, the average profits of the 
 colliery owners (including the value of the service of the 
 coal-trucks owned by them), subject to provision for exhaus- 
 tion of the pits and renewal of plant, in excess of what the 
 Inland Revenue authorities may have allowed for depreciation 
 in the Income Tax returns. Taking these profits as equiva- 
 lent to a net income of nine millions at ten years' purchase, 
 we get an estimate of the selling value of the collieries, 
 subject to the royalties, amounting to about ;^90,ooo,ooo ; 
 or, with the royalties included, about ;^ 170,000,000.^ 
 
 Another common way of reckoning the capital value of 
 collieries is to assess it at so much per ton of their output. 
 Thus Sir George Elliott, in his unification plan of 1893, Pro- 
 posed that all the collieries in the kingdom, with all their 
 assets, should be merged at a valuation of fifteen shillings 
 per ton of output. This was not a valuation for sale, but 
 merely for a basis of friendly amalgamation ; and we may 
 well believe the critics who said that it was much too high, 
 amounting in fact to an extensive " watering of the stock " of 
 the proposed Trust. The Miners' Federation of Great Britain 
 proposed, in their Bill of 191 3, a maximum of ten, or in 
 some cases twelve shillings per ton. Taking the output at 
 287 million tons, the capital value at ten shillings per ton 
 would be i^ 1 43,500,000. This is ignoring the property of 
 the royalty owner. 
 
 A third means of valuation is afforded by the Stock 
 Exchange values of the principal mining securities that are 
 quoted in the market. This it is not easy for any private 
 person to compute. The capital of the principal colliery 
 companies is commonly divided among Debentures bearing 
 interest at the rate of 5 per cent, or occasionally 4^ per 
 
 * Mr. Stamp, reviewing all previous estimates, puts the capital value of all 
 mines at one hundred and seventy-nine millions, of which only one hundred and 
 fifty-four millions would be for coal-mines {^British Incomes and Property ^ by J. 
 C. Stamp, 1 9 16, p. 404). According to this authority it may be as little as one 
 hundred and forty millions, or as much as one hundred and seventy-three 
 millions. 
 
 The Terms of Expropriation 135 
 
 cent ; Preference Shares at 6 per cent, or occasionally at 5 
 per cent; and Ordinary Shares usually of £\ each, but 
 occasionally of ^5 or £\o. The Debentures (which are 
 sometimes redeemable at par at the company's option), and 
 the Preference Shares, are now sold to yield a return of 
 between sf and 6\ per cent. In most of the companies the 
 price of the Ordinary Shares fluctuates violently from year 
 to year, according to the dividends declared and expected, 
 and the market price ranges at from nine to thirteen years' 
 purchase of the current dividends. At present the Ordinary 
 stock, on which dividends from 5 to 25 per cent are being 
 paid, stands at a premium ; the price possibly averaging 
 25 s. per £\ share all round. 
 
 Taking ten of the very largest companies, with a nominal 
 capital of fifteen millions sterling, of which the figures are 
 known, and which produce among them twenty-one million 
 tons annually, or between one-thirteenth and one-fourteenth 
 of the national output, we find that about one-third of their 
 capital is in Debentures or Preference Shares, the market 
 value of which is 10 to 20 per cent under par, and two- 
 thirds is in Ordinary Shares, of which the market value at 
 the present inflated prices of coal is about £\2^ per ;^ 100 ; 
 or a total of nearly seventeen millions sterling. But the 
 smaller collieries neither make such large profits nor 
 command on the Stock Exchange such high prices as the 
 leviathan amalgamations. Taking these small concerns as 
 yielding on an average only one-eighth less profit on their 
 Ordinary Shares, and these as selling for two years' less 
 purchase, the total of the capital value of these smaller con- 
 cerns would be one hundred and sixty-five millions ; and the 
 aggregate Stock Exchange value for all the mines would 
 stand at about ;£"! 82,000,000. It is believed that the 
 exhaustive analysis of all Stock Exchange prices (which 
 would have, of course, to be made) would yield something 
 like this result. To this the price payable to the royalty 
 owners would have to be added.^ 
 
 1 The royalties derived from other minerals (principally ironstone and iron 
 
 
I 
 
 i 
 
 III 
 
 1 36 The Nationalisation of the Coal Supply 
 
 The total compensation on expropriation would there- 
 fore have to be anything from ;6^ 1 60,000,000 to 
 ^260,000,000, according to the view taken of the principles 
 on which this compensation should be reckoned. From 
 such a total, however, considerable deductions might be 
 made. Not a few collieries now belong to companies or 
 firms existing principally for the sake of carrying on other 
 businesses, principally iron and steel production and copper- 
 smelting. It is suggested that these need not be taken over, 
 provided that the output of coal is either entirely used in the 
 business, or, as to any surplus, is placed at an agreed price 
 at the disposal of the Government Coal Department More- 
 over, it may be decided to omit the Irish mines. The value 
 of the 600,000 coal trucks belonging mainly to the colliery 
 companies, which would be included in the purchase of their 
 assets, together with the others to be acquired from coal 
 merchants and others — amounting, perhaps, to forty-five 
 millions sterling — would presumably be refunded by the 
 State Railway Department, or other unified railway 
 administration, to which it is imperative that all the railway 
 vehicles should belong. Thus, whatever principles of 
 valuation are adopted, the total sum payable for all the 
 property of the coal companies, all the collieries in the hands 
 of individuals, and all existing royalties and way-leaves on 
 coal would be probably much the same as the sum that the 
 home consumers and exporters actually pay for their coal 
 supply in a single year ! ^ 
 
 Whatever is the aggregate sum awarded, the amount 
 might be made payable in special Government Coal Bonds or 
 Stock, repayable at par at the Government option, either by 
 periodical drawings, or by stated fractions of each holding, 
 
 ore, and to a much smaller extent, copper, tin, lead, zinc and gold) — amounting 
 to about a million pounds in all — need not be interfered with, any more than 
 those on slate, chalk and building stone. 
 
 ^ To repay ;^i by a sinking fund for eighty-five years at 5 per cent needs 
 only ;^o. 000803 per annum ; or less than a fifth of a penny. The power to get 
 5 per cent interest is provided, at any rate from 1925 onward, by the right to re- 
 deem portions of the 5 per cent debt. 
 
 Conditions of Employment in Coal-mining Service 137 
 
 or altogether, any time between 1925 and 2000 ; by which 
 latter date, in view of the then approaching exhaustion of 
 the more easily worked seams, and our utter inability to 
 foresee what will be the future source of heat and power, 
 the nation ought certainly to have extinguished the debt 
 charge on its coal production. 
 
 The interest charge at 5 per cent upon ;f 160,000,000 
 would be ^8,000,000 ; that upon ;{^2 60,000,000 would 
 be ;£" 1 3,000,000. The sinking fund for repaying even 
 ^260,000,000 at the end of eighty-four years would be, at 
 the same rate of interest, much less than a quarter of a 
 million annually. The payment for interest and sinking 
 fund, whether nine or thirteen millions, would thus be from 
 three to seven millions a year less than is now paid to the 
 coalowners and royalty receivers (16^ millions). There 
 would thus be, on production alone, an available surplus — 
 due entirely to the superior credit of the State as compared 
 with that of any individual coalowner, and to its permanence 
 and certainty as compared with the restricted life and 
 fluctuating profits of any one colliery, and apart altogether 
 from the advantages to be expected from a reorganisation 
 of the production on the basis of national unity — of any- 
 thing between three and seven millions a year, according to 
 the price at which the property was purchased. 
 
 VII. The Conditions of Employment in the 
 National Coal-mining Service 
 
 One important benefit of the Nationalisation of the 
 Coal Supply would be to take this fundamental national 
 service out of the arena of perpetual strife between Labour 
 and Capital. At present coalowners and miners avowedly 
 regard themselves as opponents struggling to enlarge their 
 several shares of a common fund of profit, which will any- 
 how be extracted from the public. The miners are aware 
 of no more reason for ceding a larger share to the coal- 
 owners than the coalowners find for ceding a larger share 
 
 ill 
 
P! 
 
 m 
 
 
 138 TAe Nationalisation of the Coal Supply 
 
 to the miners. The quarrels are unfortunately bound up 
 with a mischievous confusion between the cost of production 
 (which it is nationally important to keep as low as possible, 
 by means of economy in working, improvements in processes 
 and increased efficiency of organisation) and the propor- 
 tion of the pit-head price which the coalowner finds that he 
 has to spend in order to get the coal. This latter depends 
 on many other items in addition to the real cost of produc- 
 tion. Thus the coalowner (and still more his colliery agent 
 and pit manager) deems it quite legitimate, and, indeed, a 
 bounden duty, to reduce his own outlay to the lowest 
 possible sum per ton of output, by keeping down the rates 
 for working particular seams or places, refusing allowances 
 of one sort or another, making various deductions from the 
 weight of coal gotten, seeking to lengthen the working time, 
 introducing double or treble shifts without regard to the 
 domestic inconveniences thereby caused, failing to provide 
 proper housing accommodation, reducing the wages of the 
 datal men and boys, and struggling to keep as low as possible 
 the " County Average " or other standard of earnings.^ 
 None of these things effect any reduction in the real cost of 
 production to the nation ; they are merely expedients for 
 increasing the coalowner's share of the profit at the expense 
 of the workman. The miner, on the other hand, realising 
 that the retail price of coal is put up or down with very 
 little reference to the nominal rate at which he is paid per 
 
 ^ A competent official observer, interested neither in colliery management 
 nor in Trade Unionism, writes as follows: "There is no exaggeration in the 
 description of the devices used by mine managers to increase coalowners' profits. 
 Almost every miner has to do a certain amount of 'dead work,' such as clearing 
 away falls of roof or sides in his roadway, cutting bottom and ripping top to get 
 sufficient light, erecting double timber and sometimes unloading rubbish. These 
 items are a source of constant haggling and disagreement. Some officials are 
 very fair in their measurements : others are not so. The miner has practically 
 to accept their decisions. For instance, a layer of rubbish varying in thickness 
 from three to twenty inches may be extracted with the coal, and the hewer is 
 paid for stowing this rubbish according to its thickness. The measurement is 
 made once a week, and it is quite within the power of a sharp official to measure 
 at the thinnest end, and so deprive the workman of perhaps five shillings on the 
 week's work. The allowances in respect of abnormal places are notoriously 
 often insufficient." 
 
 Conditions of Employ 7nent in Coal-mining Service 139 
 
 ton, still less to the amount of his average earnings, not 
 only maintains a continual fight against the above-mentioned 
 profit-making expedients of the coalowners, but also sees 
 no advantage even in real economies in working or improve- 
 ments of processes ; and does not scruple, in his embittered 
 warfare over the sharing of the spoils, to use every device of 
 stint or strike, even to the extent of holding up the whole 
 industry, without regard for the injury to the nation at large. 
 The result is a perpetual state of " unrest," flaring up 
 periodically into costly and inconvenient stoppages. It is 
 of vital importance to the nation to put this essentially 
 national service on a better footing. 
 
 Here we have the real answer to those Members of 
 Parliament, and other timid objectors, who shrink back 
 appalled at the idea of the Government, as an employer, 
 having to deal directly with the Miners' Federation of Great 
 Britain, representing the combined strength of the whole 
 eleven hundred thousand miners. We do not, merely by 
 Government officials and Members of Parliament avoiding 
 taking any trouble over the matter, get rid either of the 
 present continual loss caused by the existing friction between 
 coalowners and miners, or of the enormous occasional injury 
 which is inflicted on the rest of the community when this 
 friction results in a widespread stoppage. We do not even 
 avoid the political influence which the mining electorate, 
 concentrated in about twenty constituencies, can exercise 
 upon Parliament. It is suggested that the transformation 
 of the miners from wage-earners struggling in the competitive 
 labour market into Government employees discussing their 
 terms of service, would really be to the advantage of all 
 parties. 
 
 The eleven hundred thousand miners of all grades and 
 sections would, it must be said, gain a good deal. They 
 would be promptly freed from a host of petty aggressions 
 and injustices and the incessant nibblings at wages — even, 
 sometimes, actual cheating or breaches of contract — each 
 affecting, it may be, only a few individuals, by which pit 
 
m 
 
 i 
 
 1 40 T/ie Nationalisation of the Coal Supply 
 
 managers and under-managers are perpetually striving to 
 keep down what they regard as costs per ton. These profit- 
 making devices (which do not reduce the real cost of pro- 
 duction), though they may be deemed legitimate in a 
 capitalist system, receive no sanction from Political Economy 
 and would not now be tolerated in any public service, and 
 therefore could not be resorted to by a Government depart- 
 ment under the supervision of a House of Commons, in 
 which a vigilant Labour party, including a dozen miners' 
 representatives, could make its voice heard. The miners, 
 moreover, would no longer need to fear the reductions of 
 wages that are at present forced upon them in any district 
 in which they happen to be strategically weak ; on the 
 occasion of every local falling-off in orders, congestion at 
 the pit-head or accumulation of stocks ; and whenever prices 
 are seriously reduced. They might expect, on the contrary, 
 to get their working conditions and their average earnings 
 levelled up and simplified, so as to make the lot of the 
 employees of the Government Coal Department, grade by 
 grade, in all the twenty-two districts, as nearly as possible 
 equal to that of the best district. And whilst they would 
 be virtually guaranteed (apart from national calamity) 
 against any reduction in their present average earnings, 
 they would have full opportunity to urge upon the public 
 opinion of the community their claim to progressive increases 
 with every advance in the common Standard of Life. What 
 is of even more importance than a rise in wage rates to the 
 real interests of the million mining households (in which — 
 as we do not always remember — more than one-tenth of 
 all the nation's children are being reared) would be the 
 provision of decent healthy homes. The scandal of the 
 appalling overcrowding and insanitary housing of so many 
 of the mining villages could not fail to secure prompt 
 attention if the miners were employees of the State. A 
 Miners' Housing Fund, if only as part of a National Housing 
 Scheme, would become imperative. No less important to 
 family life would be the fact that the miners would all be 
 
 Conditions of Employment in Coal-mining Service 141 
 
 v* 
 
 assured absolute continuity and regularity of employment. 
 At present they are liable to be put off, or even to have the 
 whole pit stopped, whenever it suits the coalowner 
 temporarily to reduce production. A single colliery cannot 
 always get a continuous flow of orders ; from lack of its 
 own trucks or from momentary deficiency of tonnage at a 
 particular port, or from accidental congestion of a particular 
 railway, or even a particular siding, it cannot always 
 maintain continuous daily deliveries from the pit-head ; from 
 want of storage facilities and uncertainty as to the future 
 course of prices it cannot go far in accumulating stock. 
 But the Government Coal Department would have, in the 
 ^gg^egate, an absolutely continuous stream of orders ; it 
 would have all the nation's trucks at its disposal ; at one or 
 other port, to which supplies could be diverted by telegraph, 
 there would always be tonnage available ; there would be, 
 for a long time to come, an absolute necessity, and at all 
 times the possibility, of an accumulation of a large national 
 stock of every kind and grade of coal in ample and widely 
 distributed storage places. It should, therefore, be a funda- 
 mental principle of the Government Coal Department, both 
 for the sake of reducing the average cost of production, and 
 of affording absolutely uninterrupted employment to the 
 miners themselves, that the working of all the 3300 pits in 
 operation should, except for the rare stoppages due to 
 breakdown of machinery, be continuous throughout the 
 whole of each year. 
 
 Taking into account the reduction in the average cost 
 per ton resulting from {a) this hitherto unknown continuity of 
 working, {b) the absence of strikes, and {c) the systematic 
 organisation of production made possible by a national 
 unity of administration, it would probably be found that 
 (i.) the relinquishing by the Government Coal Department 
 of all the petty injustices and aggressions on the workmen, 
 and the nibblings at their wages, that are now so common ; 
 (ii.) the abandonment of the present constant attempts at 
 reduction of wages wherever and whenever the miners are 
 
II 
 
 i 
 
 I 
 
 142 The Nationalisation of the Coal Supply 
 
 strategically weak ; and (iii.) the levelling-up and simplifica- 
 tion of the Minimum Wage Rates and conditions of service 
 so as to equalise the terms in all districts, had not resulted 
 in any net increase in the aggregate wages bill per ton of 
 the whole output. The workmen would have, in the best 
 way, received more, yet the community would have paid no 
 more for the getting of its coal. An intelligent reorganisa- 
 tion of the industry would have increased both the yearly 
 incomes and the amenity of life of the million miners' 
 households without increasing the expense to the nation. 
 In any case the net increase in the wage bill per ton due 
 to these very great improvements in employment would 
 certainly be trifling. 
 
 There remains the question of the fixing, and, as we 
 must assume, along with a progressive rise in the common 
 Standard of Life of the mass of the nation, the periodical 
 raising, of the Miners' Standard Rate itself, together with 
 such fundamental national conditions of employment as 
 the length of the working day. The coal-mining industry 
 is already distinguished above all others in the extent to 
 which these terms are decided, not by the autocratic fiat 
 of the employer, nor by the choice of the individual workman, 
 but by highly organised Collective Bargaining and authori- 
 tative regulation by Act of Parliament.^ It will not be 
 difficult to provide for the continuance of this elaborate 
 machinery ; for its adaptation to the requirements of a 
 Government Service ; and for the admission of the workmen, 
 organised in their own Trade Unions, to that participation 
 in the direction of the industr)^ that absorbs their working 
 lives to which they are now beginning legitimately to aspire. 
 
 We may, for instance, visualise, as already indicated, 
 
 * These arrangements have often been described — see The Labour Question 
 in Great Britain y by P. de Rousiers, 1896; Le Trade Unionisme en Angleterre, 
 by P. de Rousiers and others, 1897 ; Industrial Democracy, by S. and B. Webb, 
 1898 ; The Adjustment of IVages, by W. J. Ashley, 1903 ; History of the 
 Durham Miners'' Association^ by J. Wilson, 1907 ; A Great Labour Leader : 
 Life of Thomas Burt, by A. Watson, 1908; Memories oj a Labour Member: 
 Autobiography of J, Wilson^ 19 lo; The British Coal Trade^ by H. Stanley 
 Jevons, 191 5. 
 
 Conditions of Employment in Coal-mining Service 143 
 
 the direction of all the collieries in each coalfield or coal 
 district by a Local Council of Management, made up of 
 the most experienced managers or directors of the neigh- 
 bourhood, together with at least one representative of the 
 National Coal Board, who might be appointed Chairman, 
 all of them being, of course, salaried officers of the 
 Government Coal Department. There should certainly be 
 accorded seats on this Local Council of Management to 
 representatives of the miners, who would naturally be 
 nominated by the local Trade Union. But this Local 
 Council would be occupied principally with questions of 
 the technical administration of the extraction and delivery 
 of the coal, under the direction of what we may call the 
 National Coal Board, and it would probably be better for 
 all questions affecting the earnings, hours or other conditions 
 of employment to be relegated to a Standing Joint 
 Committee dealing exclusively with such issues, on which 
 a certain number of the members of the Local Council of 
 Management would meet an equal number of representatives 
 appointed by the local Trade Union. 
 
 The Local Councils of Management would, however, 
 deal only with local administration according to the direc- 
 tions from time to time received from the National Coal 
 Board ; and the Standing Joint Committees for the several 
 districts would equally have to confine themselves to the 
 work — extremely important work it would be — of interpret- 
 ing to the local circumstances and applying to particular 
 cases the Standard Rates and other national conditions laid 
 down for the time being. Experience shows that such a 
 work of interpretation and application of a fully accepted 
 Standard Rate by expert representatives not personally 
 interested, and both alike concerned only in the maintenance 
 of equality between case and case^ presents no intractable 
 difficulties ; and disagreements would be unlikely.^ The 
 decisions as to national administration would be taken day 
 
 ^ There need, however, be no objection, in this sphere ^ to reference to an 
 Umpire. 
 
H"/ 
 
 I 
 
 1 44 T/ie Nationalisation of the Coal Stipply 
 
 by day in the National Coal Board, a council sitting 
 probably in London, and consisting of the ablest and most 
 experienced heads of the several branches into which the 
 Department would naturally be divided, together with a 
 representative of the Treasury. Here, tob, seats should 
 certainly be accorded to representatives of the Miners' 
 Federation of Great Britain, in order that the workmen's 
 leaders may become cognisant of, and may share responsi- 
 bility for, the government of the industry. But here again 
 it would probably be preferable to relegate any such question 
 as an alteration in the Standard Rate or the Hours of 
 Labour for the whole kingdom to a National Joint 
 Committee, in which a certain number of official adminis- 
 trators from the National Coal Board sat side by side with 
 an equal number of representatives of the Miners' Federation. 
 With the elimination of the private employer, and the 
 unification of the industry under a public administration in 
 which the necessity for the co-operation of the whole body 
 of workmen is recognised, there would, it is clear, be no 
 longer any question of incomplete or partial Trade Unionism. 
 In order not only to secure a genuinely representative 
 organisation, but also to obtain from every workman his 
 co-operation in the common control of his industry, the 
 State would necessarily be led to make membership of the 
 Miners' Federation of Great Britain, through its constituent 
 Unions for the several coalfields, a condition of employment.^ 
 
 ^ So nearly coextensive with the industry has the Miners' Federation 
 become that — beyond the very important gain of avoiding numerous little 
 strikes against tiny handfuls of non-unionists — little would be changed by making 
 membership obligatory on all employed. It has actually been done in South 
 Wales, where the coalowners agreed in 191 6 to require all men at the pits, 
 except officials, to be members either of the South Wales Miners' Federation or 
 of the Associations of Colliery Enginemen or Winding-men. The Federation 
 now includes about 800,000 members, out of a total (in 1913) of 909,834 of all 
 grades employed underground, and of 218,056 above ground. It consists 
 (including the Cleveland ironstone miners) of eighteen District Associations, two 
 of these being themselves federal bodies comprising respectively the eight local 
 Trade Unions of Scotland and the seven of the Midland coalfields. Its hold is 
 strongest on the hewers and other underground workers, but its organisation is 
 framed so as to include all who work in or about a coal mine. The colliery 
 officials, deputies, overmen, mechanics, enginemen, firemen, cokemen, surface- 
 
 Conditions of Employment in Coal-mining Service 145 
 
 It is instructive to notice that the State already requires 
 this universality of " Industrial Citizenship " in the small 
 fraction of the administration of the pit in which the 
 workmen at present participate. Thus, by the Coal Mines 
 Act, whenever (on a vote of a majority of the men at work 
 in a pit) a checkweigher is appointed, the appointment has 
 to be made by vote of the whole body of men or of the 
 committee whom they elect for the purpose, and the check- 
 weigher's salary is found by compulsory deduction from the 
 earnings of all the men in the pit, whether or not they have 
 individually agreed to the appointment being made, to the 
 candidate chosen, or to the payment.^ The constant 
 participation of the Trade Union, thus transformed into 
 the legalised representative organisation of the manual 
 working wage-earners in the industry, is, it need nowadays 
 hardly be explained, really indispensable to the smooth 
 working and efficiency of the administration. How 
 otherwise than through the local Trade Union can the 
 individual workmen secure attention to the innumerable 
 petty grievances that are always arising, get a hearing for 
 their perpetual complaints, or even be made to understand 
 the meaning of the regulations under which they must 
 work, and the somewhat complicated terms according to 
 which their earnings are calculated ? It is only by prompt 
 and continuous attention to all these opportunities for 
 friction, and the immediate removal not only of real hard- 
 ships but also of the inevitable misunderstandings that are 
 
 men, and day- wage men generally, have also about seventy societies of their own 
 nearly all local and mostly very small. Some of these are already included in 
 the Miners' Federation by their membership of the district federal bodies ; and 
 there ought to be no great difficulty, with proper arrangements for the due 
 representation of sectional interests, and the elimination of the coalowners' 
 constant desire to play off one against another, in including the rest of them. 
 
 1 Another instance is the right given to the whole body of miners in each 
 colliery to choose their own examiners, to whom Parliament entrusts part of the 
 duty of mspection of the mine to ensure its safety. Yet another is the statutory 
 right given to the whole body of miners in each colliery to have pit-head baths 
 provided, by a two-thirds majority vote, one-half of the cost being levied, by 
 deduction from earnings, on all the men in the collier)', whether or not they 
 voted for the measure. 
 
iii 
 
 i 
 
 II 
 
 146 The Nationalisation of the Coal Supply 
 
 constantly occurring, that any high degree of industrial 
 efficiency is maintained. 
 
 Particularly in the coal-mining industry, with its necessity 
 for a continual translation of the Standard Rate per day 
 into the special tonnage rates and working conditions re- 
 quired by the circumstances of particular seams or work- 
 places, does the Trade Union find plenty to do apart from 
 the more serious but also less frequent changes in the 
 Standard Rate. But this, too, must be susceptible of change. 
 It would, of course, be to the interest of the miners to enjoy 
 ever-rising Standard Rates and more and more comfortable 
 conditions of work. On the other hand, after the capitalist 
 employers and private recipients of royalties have been 
 eliminated, it will be, not any private speculator but the 
 community itself that will be put to increased cost by any 
 rise in the expenses of coal production. It is therefore 
 suggested — to provide for the not improbable case of a 
 divergence of view on the National Standing Joint Committee, 
 between the higher employees of the Government Coal 
 Department and the representatives of the rank and file — 
 that any such difference should stand automatically referred 
 to a Standing Council of Mediation, composed of universally 
 known and respected citizens of distinction unconnected with 
 coal production. This is not Compulsory Arbitration, to 
 which neither the miners nor the nation would be prepared 
 to agree. It is not suggested that the Council of Mediation 
 should do more than examine the issue, hear the arguments, 
 and make a public report for everybody's information. The 
 decision on a matter so directly affecting the national pocket 
 as an alteration in the National Standard Rate of a million 
 of State employees — representing, it might well be, a charge 
 on the common pocket, equal to nearly as much as the present 
 Supertax — can be finally decided only by Parliament itself^ 
 And, in order that the point at issue between the representa- 
 tives of the miners and the representatives of the people at 
 
 ^ Parliament now keeps in its own hands the fixing even of the postage 
 rates for letters. 
 
 Conditions of Employment hi Coal-mining Service 147 
 
 large may not be obscured, if the proposal hereafter described 
 of a uniform National Price for Household Coal is adopted, 
 it ought to be enacted, once for all, that any alteration in 
 the National Standard Rate of Wages must always be 
 accompanied by an exactly equivalent alteration in the 
 National Price of Household Coal, and corresponding 
 additions to the prices for other coal supplied for home 
 consumption — the sales for export, in which price is less 
 easy to control, remaining unchanged. If the basis was a 
 normal wage - rate of 8s. per day for hewers, when the 
 National Price of Household Coal had been fixed at a 
 shilling per hundredweight, each rise of 2 per cent on the 
 wage-rate, involving an increased wage-cost on the whole 
 output of ;^ 1, 800,000, would take effect in an addition to 
 the retail price of household coal and coal for other British 
 uses of about 3 per cent, or say sevenpence per ton on 
 household coal. 
 
 To this rule, however, there might, it is suggested, be 
 one exception. It might be desirable to give all the million 
 employees of the Government Coal Department, from the 
 highest to the lowest, a direct pecuniary interest in effecting 
 a new reduction in the real Cost of Production of the 
 aggregate output, whether by economy in working, improve- 
 ment of processes or superiority of organisation (apart from 
 ^:he wage-rate on the one hand, and the interest and sinking 
 fund on the Coal Debt on the other). For this purpose the 
 most minute account would need to be kept of every item of 
 the cost of working, not only of the output as a whole, but 
 also of each coal district and each pit ; and these should be 
 regularly considered, not only by the National Coal Board 
 and the Local Councils of Management, but also by the 
 Trade Unions concerned, to whom they should be periodically 
 communicated with a request for suggestions and criticisms. 
 The utmost attention would have to be concentrated on 
 effecting genuine economies in the cost, as distinguished 
 from changes in the rates of remuneration of the persons 
 concerned. After making due provision for any additional 
 
iliiHii 
 
 
 tfl 
 
 148 T^e Nationalisation of the Coal Supply 
 
 capital that had been required, the amount saved in the 
 year by any lowering of the net cost of production per ton 
 of the entire output might, it has been suggested, be divided 
 between the whole nation of consumers and all those who 
 co-operate in extracting the nation's coal — the employees' 
 half being shared among the entire staff, from the highest to 
 the lowest, in a proportionate addition of so much per cent 
 to their salaries and wage-rates for the year next ensuing, 
 and the consumers' share taking effect in an exactly 
 equivalent reduction in the National Price of Household 
 Coal ; any balance undistributed being carried forward to 
 the credit of next year's account for re-division in the same 
 way. On the other hand, there are objections to the very 
 principle of "Profit-sharing," to which this "Bonus on 
 Economy in Cost of Production " would bear an outward 
 resemblance ; and the individual hewer or haulier could not 
 be expected to see much connection, in so gigantic a service, 
 between his particular acts of economy and the trifling 
 addition that might come, long afterwards, to his weekly 
 earnings. It might be better to lay it down, from the 
 outset, that anything to be obtained for the men from this 
 source should be devoted to making extra provision for 
 amenities in their work, or additional provision for the 
 widows and orphans. 
 
 VIII. The Nationalisation of Distribution 
 
 It would be a great gain to unify the management, 
 systematically organise the production, secure unbroken 
 continuity of delivery from the pit-head, and centralise the 
 contract sales of the whole national output of coal, even 
 if the local retail distribution were left undisturbed in the 
 hands of the existing multiplicity of factors, dealers, shop- 
 keepers and trolleymen. It would be quite practicable for 
 the Government Coal Department to organise only the 
 production, selling at deliberately fixed pit-head prices ; and 
 leaving the whole horde scrambling among themselves in 
 
 The Nationalisation of Distribution 149 
 
 their assumed service of the public, at one moment cutting 
 prices one against another, at another (and, we may expect, 
 more usually) entering into more or less formal mutual 
 arrangements to concert prices. But the full advantage of 
 the reorganisation of the industry and the complete 
 protection of the consumers would not be attained without 
 the taking over, also, of the distributive business. 
 
 This, it is suggested, should be shared between the 
 National Government and the Local Authorities on the 
 following lines. The Government Coal Department, whilst 
 determining the total national output at such a figure as 
 would permit of the unbroken regularity of employment and 
 the gradual accumulation of a sufficient national reserve, 
 would necessarily have to undertake also considerably more 
 than one half of the distribution, namely : — 
 
 (i.) The whole provision required for the Admiralty, the 
 War Office, and, in fact, all the Government Departments ; 
 
 (ii.) The whole of the sales for export and the bunker 
 coal for shipping ; 
 
 (iii.) The supply of the railways (whether or not under 
 Government administration) ; and 
 
 (iv.) The supply of such enterprises as gas, water and 
 electricity works (whether or not in municipal hands), of the 
 coke ovens and the manufacture of patent fuel, and of other 
 industrial undertakings taking more than a certain minimum 
 quantity, or needing kinds of coal drawn from non-local or 
 from various different sources, — perhaps leaving it to the 
 option of the customer in each such case to deal either with 
 the National or the Municipal Coal Department. These 
 large orders, in most cases of known and stable quantities, 
 from not more than a few thousand separate customers, 
 many of them of public character, would probably account 
 for more than three-quarters of the total output. 
 
 The other quarter of the aggregate demand, comprising 
 the supply of the nine millions of British households, and of 
 many of the smaller industrial users, ought, it is suggested, 
 to be undertaken in each locality by the elected Local 
 
 WMhflhtMaMtfctallfaaMMiiilflatoafijg 
 
I 
 
 II 
 
 1)1 
 
 150 The Nationalisation of the Coal Supply 
 
 Government Authority (over more than a prescribed minimum 
 of population) ; in London by the London County Council ; 
 in other town areas by the Borough or Urban District 
 Council ; and in the country, either by the County Council 
 or by the Rural District Council, as may be arranged 
 between them. The Local Government Authorities ^ 
 already supply their constituents with water (in over 1600 
 cases), with gas (in 342 cases), and with electricity (in 
 some hundreds of cases). They run their own tramways in 
 some hundreds of cases ; they administer docks and harbours 
 in several dozen cases ; they have their own lines of ferry 
 steamers in several cases ; and one of them, at least, runs a 
 not unimportant local canal. With these and many other 
 enterprises — not to speak of the needs of their schools and 
 other institutions — the Local Government Authorities are, 
 in the aggregate, among the very largest consumers of coal 
 in the country. The Glasgow Town Council alone buys a 
 million tons a year for the use of its several departments, 
 or probably as much as its million inhabitants buy for their 
 domestic consumption. The total annual purchases of the 
 Local Governing bodies of Great Britain are estimated at 
 not less than fifteen million tons. The buying of these large 
 supplies in a competitive market, in which the sellers have 
 the advantage of superior technical knowledge and bargaining 
 skill, is, at present, a task of difficulty and financial risk, 
 from which the Local Authorities resorting to the Govern- 
 ment Coal Department, with its fixed prices and public 
 dealings, would be freed. What these Authorities have 
 
 1 In Scotland, the duty might be undertaken by such Burghs over a certain 
 population as chose ; and elsewhere by the County Councils. Port and Harbour 
 Authorities, Water, Hospital and Drainage Boards, etc., might all be allowed 
 similarly to deal directly with the Government Coal Department for such supplies 
 of coal as they required. Such great port authorities as those of the Thames, 
 the Mersey, the Clyde, the Tyne, the Avon, etc., might themselves undertake the 
 supply of bunker coal to shipping (as is already done by the United States 
 Government at the Panama Canal). 
 
 Whether the trivial coal production of Ireland (82,521 tons in 1913) and the 
 supply of the Irish consumers (perhaps 6 million tons) should be taken over by 
 the Government Coal Department of Great Britain, or by that of Ireland, or left 
 as it is, demands separate consideration. 
 
 Why not a Uniform Price for Household Coal? 151 
 
 now to add is (i.) a " coal order " business for the service of 
 the domestic consumers, and, it may be, also the smaller 
 industrial enterprises within their respective districts ; (ii.) 
 the necessary number of coal depots, usually at the local 
 railway stations, for the retail supply of the smaller 
 customers ; and (iii.) a local cartage and delivery service — 
 the whole business often amounting, in the Boroughs, to 
 no more than a relatively small addition to the coal that the 
 Town Council already buys for its own use ; and being 
 immensely facilitated by getting rid, once for all, of the 
 difficulties and dangers of purchasing in a speculative capitalist 
 market, always rigged against the buyer. 
 
 IX. Why not a Fixed and Uniform National 
 Price for Household Coal? 
 
 One vast improvement on the present arrangements, 
 and one which ought not to be impossible, would be the 
 fixing of a " National Price " — a stable retail price for coal 
 for each of a few standard kinds or qualities, which should 
 be changed by Order in Council only at very infrequent 
 intervals. There seems no insuperable difficulty in making 
 such prices uniform over great zones of the country — perhaps 
 over the whole of England and Wales and Scotland re- 
 spectively, or even over Great Britain as a whole. With 
 production systematically organised throughout the whole 
 kingdom, working everywhere up to a common " margin of 
 cultivation," there would be every justification for fixing 
 uniform pit-head prices at all collieries for equivalent grades 
 of coal, whilst there would be great advantage in recognis- 
 ing, by gradations of price, only two or three grades. With 
 distribution also nationally organised, each locality being 
 supplied, in the main, from the most convenient coalfield — 
 coal being actually raised in fifteen out of the forty counties 
 of England, four out of the twelve counties of Wales, and 
 fifteen out of the thirty-three counties of Scotland — it would 
 not be difficult to arrive at a uniform rate per ton that 
 

 
 It! 
 
 I 
 
 i 
 
 1 5 2 T/ie Natmtalisation of the Coal Supply 
 
 would cover the agg:regate cost of conveyance of the whole 
 output in full truck-loads, from pit-head to any railway station 
 in the kingdom, where it would stand at the dispositibn of 
 the Local Authority. Each County or Borough Council 
 could, in the same way, at any rate after a brief experience, 
 calculate the additional charge per ton which would be 
 required to pay for retailing in smaller quantities than a 
 truck-load, and bringing the coal from railway depots to 
 each customer's cellar (unless the customer preferred to 
 arrange himself to fetch the coal from the railway station, 
 and thus be freed from the municipal delivery charge). To 
 stimulate municipal economy, as well as municipal enterprise 
 m organisation, the Government Coal Department might 
 even fix and publish an inclusive retail rate per ton for 
 household coal, applicable uniformly to the whole country, 
 and covering {a) pit-head price ; {b) national conveyance by 
 rail, canal, or coasting steamer to any railway station ; {c) 
 municipal retailing at the local depot ; and {d) municipal 
 delivery into every consumer's cellar; and then allow the 
 Local Authority to retain for itself, out of its sales at this 
 maximum price, a fixed sum per ton, out of which the Local 
 Authority could pay for its own part of the service, with 
 liberty to apply to its own purposes, practically in relief of 
 the local rates, all the profit that it could make by good 
 administration and skilful local management (though not by 
 raising the price to the consumer). 
 
 The possibility, in practice, of establishing such a uniform 
 " National Price " for household coal to the private customer 
 depends on whether it could be fixed at such a figure as 
 would not involve a serious rise in the price now paid by 
 any large section of the population. The eleven hundred 
 thousand workers in and about the pits could, of course, be 
 allowed to retain their present privilege of taking away their 
 own household coal either free or at a low rate. Nor need 
 anything more than pit-head price be charged for any coal 
 supplied from the pit-mouth to local residents ; or, in fact, to 
 any one who conveyed away the coal for his own consumption, 
 
 Why not a Uniform Price for Household Coal? 153 
 
 without availing himself of railway, canal or coasting steamer, 
 the use of which the price would include. The export 
 trade, and the supply of bunker coal ; the requirements of 
 the railways, the gas and electricity works and the coke 
 ovens ; the demands of the iron, steel, tinplate, copper and 
 similar works, the textile manufactures and other industrial 
 enterprises, like the needs of the Government Departments 
 and the Local Authorities themselves, would be specially 
 dealt with. The industrial demand, which is not for house- 
 hold coal, would in fact be outside the scope of the National 
 Price. Moreover, in order to reassure the timid, it might be 
 provided that any person or Local Authority, if such there 
 should be, who had been during the preceding year actually 
 supplied with household coal under contract at a figure 
 lower than that fixed for the National Price, might be 
 allowed to retain, for seven or fourteen years, the privilege 
 of contracting with the Government Coal Department, for 
 his own consumption exclusively, at a corresponding reduc- 
 tion. But subject to such exceptions as the above it would, 
 we think, be found that practically all the domestic consumers 
 of coal, even those in coal-producing counties outside a narrow 
 radius from the pit-mouth, have latterly been paying not 
 less than a shilling per hundredweight for their coal in retail 
 deliveries, and usually a great deal more.^ A fixed National 
 Price for the best grades of household coal, delivered to 
 cellar, of one shilling per hundredweight, and one pound per 
 ton, free from the risk of a rise when the cold weather 
 
 ^ In 1912 it was found that "broadly, prices were lowest, averaging about 
 IS. to IS. id. per cwt., in the Northern Counties, Yorkshire, Lancashire and the 
 Midlands ; they were at an intermediate level, averaging about is. 2d. to is. 3d. 
 per cwt., in the Eastern and East Midland Counties, Wales and Scotland ; and 
 were highest, averaging about is. 4d. per cwt., in the Southern Counties of 
 England and in Ireland. . . . The extreme variations were from lod.'to ild. 
 per cwt. at Nottingham, Wallsall and Wolverhampton, to is. 6d. per cwt. at 
 Dover, Southampton and Lim.erick. . . . There were 27 towns in which the 
 mean predominant price did not exceed is. per cwt." (Report on Working 
 Class Rents and Retail Prices, Cd. 6955, P- xxxv). The tendency is to a 
 levelling up of the low-priced districts. The 19 12 prices represented an 
 increase since 1905 of from 13 to 27 per cent, the greatest increases being in the 
 Northern, Eastern and East Midland Counties. This tendency has continued in 
 the subsequent rise of prices. 
 
r 
 
 154 The Nationalisation of the Coal Supply 
 
 approaches, or on any other excuse (with a reduction of 
 I 5 per cent to those who prefer to fetch their coal from the 
 municipal depot at the local railway station), would, after the 
 experiences of the last year or two, be hailed by millions of 
 families as a boon.^ Such a National Price — assuming an 
 agreed all-round rate of 2s. per ton for railway, canal or 
 steamship freight (which is more than was paid in 191 3), a 
 municipal retailing allowance of 2s. 6d. per ton, and a 
 municipal cartage charge of 3s. per ton for those who wish 
 delivery to residence — would leave an average yield of 
 I2s. 6d. per ton at the pit-head for household coal, and 
 ought not to be beyond the reach of efficient national 
 organisation of a public service. 
 
 X. The Terms of Expropriation of the 
 
 Coal Dealers 
 
 The public does not love those who make a profit out 
 of dealing in coal ; but if the Government Coal Department 
 thus reorganised distribution as well as production, it would 
 have to make equitable arrangements with the distributive 
 trade. Where what has to be dealt with is principally the 
 interest of many thousands of persons — those in all grades 
 who actually do the work — not in property but in the 
 continuity of their respective livelihoods, and only to a 
 minor degree the transfer of material wealth, the customary 
 procedure under the Lands Clauses Consolidation Acts 
 would, it is suggested, be neither equitable nor expedient. 
 In the vast majority of cases, numerically, the persons 
 concerned would but exchange a more or less uncertain and 
 
 1 What should be done about grading must be left for expert consideration. 
 There would be a great advantage in simplicity, and in ignoring distinctions 
 which have arisen only from local fancies and the desire of dealers to confuse 
 the consumers. It is suggested that only two grades of Household Coal need 
 be recognised, one, the normal article, including all the fancy grades (such as 
 Wallsend, Silkstone, etc.) down to and including Derby Brights or Nuts. A 
 discount of 10 per cent might be allowed on Second Grade or "Kitchen" coal, 
 including what is known as " Steam " or " Cobbles." Anything of lower quality, 
 including "slack " or dust, cannot be said to pay for rail carriage, and should be 
 treated at the colliery. 
 
 The Terms of Expropriation of the Coal Dealers 155 
 
 discontinuous employment, paid at varying rates which are 
 frequently of a '' sweating " character, for an absolutely 
 continuous, certain and salaried service, with considerate 
 conditions of hours, holidays, sick leave and superannuation. 
 The Government Coal Department would need to organise 
 its own staff for attending to the various public services, 
 the shipping trade, the railways, and the other industrial 
 enterprises that would be supplied under the direction of 
 the central office. The various Local Authorities would 
 need to organise their own staffs and to provide their own 
 depots for local storage, retailing and house delivery. For 
 all these purposes we ought to draw, to a very large extent, 
 on the premises and plant, and on the managerial and 
 operative staffs, from the merchants and dealers down to 
 the coal porters and trolleymen at present engaged in the 
 trade. What ought to take place, in fact, would be a 
 general readjustment, all the present resources in premises, 
 plant, horses and men, like the local stocks of coal, being 
 taken over — except in so far as they were found unsuitable 
 — and absorbed into the service either of the Government 
 Coal Department or of the Local Authorities. It may be 
 worth notice, in this connection, that the War Office will 
 have 30,000 motor lorries to dispose of after the War. 
 Could not these be converted into coal lorries, and handed 
 over to the Local Authorities for their Coal Delivery Service ? 
 A small Executive Commission, with peripatetic sub- 
 commissioners, should be appointed to make the required 
 readjustment, in consultation, on the one hand, with the 
 Local Authorities, which would specify and select what 
 they severally required for their new services, and, on the 
 other, with the existing staffs engaged in coal distribution, 
 from proprietors and managers down to boys and labourers, 
 for whom either suitable situations or else equitable com- 
 pensation for disturbance of livelihood would have to be 
 provided. Not much consideration need be shown to any 
 person actively engaged in the trade, to whom a suitable 
 situation was offered, at not less than his former earnings 
 
156 The Nationalisation of the Coal Supply 
 
 for work done, and who chose to refuse such an offer. Such 
 a person would be free to seek other employment. There 
 would remain, to be paid for in a lump sum, the elements 
 of rent, interest and profit, apart from the earnings of work 
 or management — represented partly by the capital value of 
 the premises, horses and stock and any other tangible assets 
 taken over, and partly by what would probably have been 
 called the " good will " of the various businesses. For the 
 former items, at any rate, even though the Local Authorities 
 had no need of them, it would be in accordance with our 
 custom to pay substantial compensation. But the com- 
 munity ought not to be called upon to pay a capital sum 
 down in respect of the assumed future profits (over and 
 above rental value of premises, interest on cost of plant, 
 and suitable salaries for all the work done) that some of the 
 coal merchants might have made out of the needs and 
 helplessness of the public. No one has a vested right in 
 the continuance of the present organisation of industry. 
 
 What the total sum reasonably payable to the distributive 
 trade would amount to it is, in the absence of the necessary 
 statistics, difficult to compute ; but a liberal estimate of 
 what the items are worth in the market, apart from the 
 assumed taking over at salaries of all the persons actively 
 engaged in the business, puts the total at no more than 
 thirty or thirty-five millions sterling. Such a sum would 
 involve, for the same eighty-four years' term, and the same 
 rate of interest at 5 per cent as for the purchase of the 
 coal-mines, an annual payment for interest and Sinking 
 Fund of less than two millions a year ; or (on the whole 
 supply of 287 million tons) not much above one penny per 
 ton. If the total compensation came to twice that sum, or 
 ^70,000,000, it would involve a charge of only 3d. per ton. 
 This charge might be borne by the Local Authorities to the 
 extent of the value of the premises and plant actually taken 
 over by each of them ; and, as regards the balance, by the 
 Government Coal Department itself as an addition to the 
 cost of buying up the mines and royalties. 
 
 Advantages of Nationalisation 
 
 XL Advantages of Nationalisation 
 
 ^S7 
 
 
 Enough has been said incidentally of the very great 
 advantages of a Nationalisation of the Coal Supply in the 
 economies due merely to a public unification of administration, 
 such as (i.) the lowering of average working costs to be 
 secured by an absolute continuity of operation of each pit 
 at its full output ; (ii.) the further reduction to be produced 
 by deliberately adjusting the working of each colliery, and 
 even of each pit and each seam, up to a common " margin 
 of cultivation," so as to produce, at the lowest expense, the 
 predetermined aggregate national output for the year ; (iii.) 
 the saving to be effected by getting rid of the present 
 needless multiplicity of separate proprietors, partners, boards 
 of directors, merchants, dealers, agents and factors, and their 
 unnecessary duplication of offices and clerical and managerial 
 staffs ; and (iv.) the annual surplus to be realised by the 
 substitution, for the profits and royalties of a hazardous 
 and fluctuating business, of the much smaller fixed interest 
 and sinking fund that would be required when the credit, 
 continuity and permanence of the British Government can 
 be relied on. Enough, too, has been said in the preceding 
 pages of the very substantial benefits that Nationalisation 
 would bring to the one-tenth of the whole community that 
 works in the mines ; in (i.) the securing to them of absolute 
 continuity of employment and full payment of the agreed 
 earnings, free from nibblings from wages or attempted 
 reductions of rate; (ii.) the assurance that all grievances 
 would be effectively brought to notice, and remedied by an 
 administration without pecuniary interest in reducing the 
 miners' earnings, and responsible to public opinion ; (iii.) the 
 satisfaction of sharing by the elected officials of the Miners' 
 Federation, henceforth completely inclusive of the workers 
 employed, in both the local and the central administration of 
 the service ; and (iv.) the promise that any savings effected by 
 improvements in production or economy in working should 
 be divided equally between the miners' advantages and 
 
n ■- 
 
 158 . The Nationalisation of the Coal Stipply 
 
 a reduction in the price of coal to the consumer. And 
 enough, also, has been suggested of the boon to both the 
 industrial users of coal and to the nine million British 
 households in (i.) being protected against either a temporary 
 shortage of coal or speculative rises in the price of a 
 necessary of all industry as well as of domestic life ; (ii.) 
 being guaranteed a constant supply of household coal at the 
 fixed and uniform National Price of a pound per ton delivered 
 to cellar ; and (iii.) being secured the prospective advantage 
 of half of all future economies in the cost of production. 
 But there are other public gains implicit in Nationalisation 
 on which a few words must be said. 
 
 {a) Husbanding the Nation's Coal 
 
 We cannot replace the coal that is consumed, nor make 
 good the huge annual wastage. Though there is coal in 
 sight for the needs of several centuries,^ the seams that can 
 be worked at anything like the present cost per ton are 
 steadily approaching exhaustion, and it behoves us to 
 husband our stock. Some kinds of coal, in particular, like 
 the famous almost smokeless steam coal of South Wales, 
 which exists in like quality nowhere else in the world and is 
 invaluable to our ships of war, ought to be monopolised by 
 our own Admiralty, so as not to give away to alien Govern- 
 ments — who may at any moment become our enemies — 
 what is really a potent instrument of naval warfare. Just 
 before the outbreak of the present war, the German Govern- 
 ment, it is said, took extensive deliveries of Welsh coal, in 
 order to supply the needs of the German fleet. Under a 
 
 ^ As to the probable date of exhaustion of our coal, the issue raised half a 
 century ago by Stanley Jevons in The Coal Question in 1865 (3rd edition, 1905), 
 and by John Stuart Mill in the House of Commons, the latest view is given in 
 The British Coal Trade, by H. Stanley Jevons (the son), 19 15. Two Royal 
 Commissions, of 1871 and 1903-5 respectively, exhaustively investigated the 
 question ; and their conclusions are given conveniently in the fifth edition of Our 
 Coal Resej-ves, by Professor E. Hull, 1905. As to the world's supply, see the 
 report made for the Twelfth International Geological Congress, 191 3 (3 vols.). 
 
 Advantages of Nationalisation 
 
 159 
 
 system of private ownership and capitalist exploitation of our 
 coal-mines, such an export in times of peace cannot be pre- 
 vented. The Government Coal Department would probably 
 reserve all this coal for the use of the British navy, and dole 
 it out carefully, in times of war, only to our allies. There 
 is, moreover, a grave risk of the restricted area of the 
 anthracite coalfield in South Wales — producing practically 
 all the anthracite coal not only for the United Kingdom but 
 also for Europe — being converted into a monopoly in the 
 hands of a single trust or amalgamated company, as has 
 several times been attempted. It is of great importance to 
 husband this supply, and to ensure that it shall be always 
 available for the purposes for which it is essential. 
 
 {b) Maintenance of a National Reserve of Coal 
 
 The uninterrupted daily delivery of coal all over the 
 kingdom has become essential, not only to the comfort of ten 
 million households in the United Kingdom, but also to the 
 maintenance of our system of conveyance and transit, and to 
 the continued employment of our people in industry. At 
 present there is nowhere any considerable store of coal. 
 The Admiralty has, at any moment, only a few weeks' supply 
 for the navy ; the railway, gas and electricity works, whether 
 private or municipal, keep only a small reserve ; the textile 
 and hardware manufacturers rely, for the running of their 
 works, on being able to replenish their stocks every week 
 or two ; up and down the country the coal merchants keep 
 only a few hundred tons in their yards ; the railway sidings 
 that supply the factories and domestic coal cellars of the 
 seven million inhabitants of the Metropolitan area would be 
 emptied by a month's interruption of the couple of thousand 
 trucks that nightly arrive from the north and west, whilst the 
 Metropolitan gas and electricity works would be brought to 
 a standstill by a fortnight's stoppage of the half-a-dozen 
 colliers that daily reach the Thames. Such a method of 
 living from hand to mouth in the matter of so indispensable 
 
if 
 
 
 If 
 
 Hi) 
 
 1 60 T/ie Nationalisation of the Coal Supply 
 
 a means of industrial life is improvident.^ As soon as war 
 breaks out, the whole success of our arms is seen to depend 
 on our coal-miners working continuously at high speed ; 
 and we are driven to stop recruiting among them. It be- 
 comes of such vital importance to maintain the mineral 
 traffic on the railways that the rush of railway workers to 
 enlist has to be checked. The Admiralty is driven to release 
 shipping tonnage that it needs elsewhere, because the London 
 gas and electricity works must be kept continuously supplied 
 with sea-borne coal. Even \x\ peace time the absence of any 
 considerable stock of coal anywhere in the Kingdom puts us 
 all at the mercy of any temporary ring of capitalists, and 
 of any failure of colliery owners and miners to agree upon 
 the terms of employment, because at all hazards the daily 
 production of coal must not be interrupted. What is of 
 more frequent occurrence is the hurried rise of price, to the 
 unnecessary taxation of the community, whenever the sudden 
 setting in of cold weather or the blocking of communications 
 through snow or the breakdown of the railway line allows 
 it to be said that the stock of coal in any locality is becom- 
 ing exhausted, and enables the coal-merchants to play upon 
 the fears of the public. 
 
 Coal does not appreciably deteriorate by keeping under 
 cover for a few months, even if it does by prolonged exposure 
 to the weather ; ^ and it costs little to keep. At present, 
 however, the perpetual fluctuations in price, and the risk of 
 
 1 During the past two decades, since the great coal strike of 1893, most of 
 the railway companies have increased their stock of coal, and a few of the com- 
 panies may now have enough for two or three months. But as regards the 
 majority of the companies, even a fortnight's stoppage would lead to a great re- 
 striction of train service. 
 
 The usual stock in the Metropolitan area apparently varies from 90,000 to 
 230,000 tons of household coal, and from 50,000 to 100,000 tons of other coal ; 
 or from three to five weeks' supply of the domestic consumer, and even less for 
 industrial consumption. 
 
 2 Long-continued exposure to all weathers apparently lowers the fuel value 
 of coal ; and it is said that the mountains of coal stored at Reading by the G. W. 
 Rly., after the coal strike of 1893, were found, when used in 1912, to have de- 
 teriorated by 60 per cent. But storing for a year or two, without exposure to sun 
 or frost, seems to have no appreciable effect. Storage under water is also being 
 tried, with great promise of success. 
 
 Advantages of Nationalisation 
 
 161 
 
 having to sell at a season of slump, prevents any private 
 person from accumulating any considerable stock. The 
 capitalist sees no profit to himself m allaying the public 
 alarm, in preventing the present panic rises of price, in saving 
 the miners in particular collieries from periods of unemploy- 
 ment, or in increasing our national safety, at the cost to him- 
 self of losing the interest on the capital value of a coal stock. 
 The Government Coal Department would, it is suggested, 
 at once proceed to take steps to accumulate gradually a 
 National Reserve of coal, stored in suitable places all over 
 the kingdom, so as to ensure the Admiralty, the railways, 
 the gas and electricity works, the innumerable factories that 
 depend on coal for their power, and every one of our ten 
 million households against any risk of interruption in their 
 coal supply. It is not suggested that this vast hoard of coal 
 should be, in any sense, '* put away " in permanent storage. 
 Each depot should be constantly delivering from its oldest 
 coal, but should continually be so replenished as to have 
 always the prescribed stock in hand. To the annually rising 
 quantity that is expected to be consumed at home during 
 the year, and purchased for export — say two hundred and 
 eighty - seven million tons, — should be added a certain 
 amount, say 10 per cent, making up the total output to be 
 arranged for to three hundred and ten or three hundred and 
 twenty million tons. The working plans of all the 3300 
 pits should then be settled on the basis of having to produce 
 exactly this amount. This fixed quantity of coal should be 
 extracted, irrespective of the fluctuations during the year of 
 the home or foreign demand ; and the surplus, whatever it 
 is, should be put to the National Reserve. One of the objects 
 aimed at being the absolute continuity of working of the pits, 
 and of employment for the miners, the surplus produced for 
 the National Reserve would be actually increased whenever 
 the home or export demand fell off, and whenever the miners 
 were in danger of having to stand idle and wageless.^ Some 
 
 ^ When the present armies are disbanded, and 200,000 miners return to the 
 pits, it will be of the highest importance to put them all at once to work. This 
 
 M 
 
 ■.M rff -ii •°> .3MaiiMtia-'-^ '-'-^ -t 111 ihll-iii ii'i t-^ iiintr ■ i fiiiT' 
 
v 
 
 III 
 
 162 
 
 The Nationalisation of the Coal Supply 
 
 such surplus should continue to be produced until there is at 
 least a year's supply of every necessary grade of coal, stored 
 in universally accessible places, and thus constituting a 
 National Reserve. The fixing of advance of the annual 
 output, and the maintenance of a continuous level of em- 
 ployment should, even then, continue to be the policy of the 
 Government Coal Department, though the amount of the 
 output would gradually be approximated to that of the 
 expected requirements of the year, which would by that time 
 have increased. 
 
 {c) Prevention of Accidents 
 
 Though the number of lives lost per million tons of coal 
 extracted has, during the past half-century, been steadily 
 if slowly, reduced, there are still far too many accidents in 
 and about our coal-mines.^ Some accidents, it must be 
 recognised, there must always be. But it is scarcely credit- 
 able, either to our science or else to our humanity, that the 
 coal-miner's occupation should be two or three times as 
 hazardous as that of the community at large, and that we 
 should, after more than a century of experience, get our 
 annual supply of coal at the cost of 160,000 to 180,000 
 casualties— many more than our army suffered in the whole 
 course of the Boer War ! London uses, it is computed 
 about seventeen million tons of coal annually. This means 
 that every week at least 250 miners are gravely injured 
 and about two are killed, in order to supply London alone. ' 
 The casualties among miners occur principally from {a) 
 
 ..rWI '^"7'""^ under the Coal Mines Act there were, in 1913, no fewer than 
 178,621, and m 1914 160,081 casualties-each year more than a 1 that occurred 
 in the disastrous expedition to the Dardanelles in 1915 ! The death in ^or. 
 were 1219 and the disablements lasting more than seven lays we e 1,8 862^ 
 
 T^his'''' :h%"T ^"' "T'^^^' ^^ "^^"y - ^753. and th Tjured ifefos 
 Th.s was the highest casualty list ever known. The actual number of casualti!; 
 shows no decrease for half a century, but the proportion to the personf emlved 
 and per m.lhon tons raised, has greatly fallen, the deaths by a£ut one haff ^ ' 
 
 Advantages of Nationalisation 
 
 163 
 
 explosions of fire-damp or coal-dust, happening only every 
 few weeks in the whole kingdom, but occasionally killing 
 men by hundreds ; {b) falls of side or roof, principally at 
 the working face — these occur, to somebody's grave hurt, at 
 the rate of nearly two hundred a day throughout the year^ 
 accounting for 600 deaths and 62,000 serious injuries each 
 year ; and {c) shaft accidents, which take place two a day, 
 killing on an average a couple of men a day, and gravely 
 injuring two or three others. In addition, more than 25,000 
 men and boys are maimed or crushed annually (and over 
 200 killed) by being run over underground by trams or 
 tubs, and over 75,000 more suffer injuries incapacitating 
 them for over seven days (some 200 being killed) by 
 accidents classed only as " miscellaneous." The liability 
 to accident in the different coalfields varies considerably — 
 partly, no doubt, by reason of differences in the character of 
 the coal and the adjacent strata, but partly also, it cannot 
 be disputed, by reason of differences in methods of working, 
 in the precautions taken, and in the vigilance of the inspec- 
 tion. The South Wales coalfield has by far the worst 
 record, not only for accidents from explosions and those 
 from falls of side or roof, for which there may be some 
 excuse,^ but also for those from being run over by trams or 
 tubs ; the Yorkshire coalfield disputes the bad eminence of 
 South Wales in the number of accidents from falls of side 
 or roof; the Scottish coalfields vie with that of Yorkshire in 
 being the worst for shaft accidents ; whilst the Northern 
 coalfield, which for geological reasons suffers least from falls 
 of roof, comes out best at all points. Places of greater risk 
 ought to be places of greater precaution. If all the coal- 
 fields of the kingdom could be made only as safe as those 
 of Northumberland and Durham, the nation would save 
 
 1 The hewer in South Wales has been aptly described as " having a tool in 
 one hand and a prop in the other." At the working face he can rarely excavate 
 two or three feet of coal without having then and there to put in a prop, whilst 
 in his roadway he has to erect double timbers. In Northumberland, on the 
 other hand, the hewer may usually do a whole day's work without erecting 
 timber, leaving this to be done by another set of men in a following shift. 
 

 1 64 'The Nationalisation of the Coal Supply 
 
 annually three or four hundred miners from death, and prob- 
 ably thirty or forty thousand from serious injury. 
 
 Such a reduction of accidents in coal-mines ought to be 
 one of the principal objects of the Government Coal Depart- 
 ment. For the evidence proves that a large proportion of 
 the casualties are not due to accidents in the strict sense of 
 the word. Doubtless a large proportion are due to the 
 carelessness of the miners, but this, itself, often means that 
 the managerial supervision which should ensure the observ- 
 ance of the rules is far from being sufficient. The Govern- 
 ment inspectorate— only 90 men of all grades to oversee 
 3 3 00 mines— is far from adequate. The preventive measures 
 required by the regulations under the Coal Mines Act are 
 in many cases, not universally taken, very often because 
 they would involve thought and cost money. At the 
 Senghenydd Colliery, in Glamorganshire, there occurred in 
 1913, the greatest disaster, in point of loss of life in the 
 whole history of British mining. An explosion underground 
 causing 439 deaths was found at the official enquiry to have 
 been made possible, or at least greatly aggravated, by quite 
 Illegal accumulations of highly inflammable coal-dust the 
 expense of removal of which had been saved. The owners 
 agent and manager were prosecuted for numerous breaches 
 of the Act and Regulations, but ver>' inadequate fines were 
 inflicted- amounting to less than fourteenpence for each life 
 lost— largely on the plea that these particular men were no 
 more guilty than the owners and officials of other collieries 
 where no such disastrous accident had happened to occur! 
 Altogether not more than between one and two hundred 
 prosecutions of owners, agents and managers take place 
 annually, the average fine imposed being about £2\'^ 
 
 The fact is, that, with coal-mines run for private profit 
 with 1500 separate undertakings actively competing one 
 
 R.n' f ^f '^r °^'^^^ ^'P'^'f °" ^^' Senghenydd Colliery accident, Cd. 7346 • 
 Report of a Committee on Accidents from Falls of Ground, Cd. 4821 ; the five' 
 Reports of the Committee on Coal-Dust Explosions, especia ly the Fifth Report 
 Cd 7132; and the Mines and Quarries General Report for"^ 1913, Cd 772 ' 
 
 Advantages of Nationalisation 
 
 165 
 
 with another for the market, and with colliery agents, pit 
 managers and deputies or overlookers keenly aware that the 
 working costs must be kept down, it is impossible to secure 
 sufficient thought or care, and sufficient expenditure on the 
 stricter supervision and more adequate precautions that 
 would prevent a large proportion of the casualties. The 
 enormous number of accidents caused by insufficient use of 
 pit-props to prevent falls of side or roof is very significant. 
 Such mechanical appliances as automatic contrivances to 
 prevent over-winding, detaching hooks and cage gates, are 
 still not universal. The legally required clear spaces and 
 refuge holes (for escape from being run over by trams or 
 tubs) are still sufficient neither in number nor in width. 
 There is still, in many collieries, nothing that can be called 
 a systematic removal of the coal-dust now recognised as a 
 serious cause of explosions : such systematic removal is, 
 indeed, not always an easy matter, but there is still too 
 great a shrinking from incurring an expense which would 
 make for safety. The trams, too small for security, are 
 habitually piled up with coal one foot or even two feet above 
 the level of the top of the tram, which then scatters pieces 
 and dust. 
 
 One of the first reforms introduced by the Government 
 Coal Department would probably be the appointment, for 
 every mine, of a special Safety Manager, free from any other 
 preoccupations and duties than that of seeing that the pre- 
 cautions required by the Coal Mines Act were actually 
 taken, and charged to make suggestions from time to time 
 for a further prevention of accidents. If anything like the 
 same proportion of casualties continued to occur under the 
 administration of the Government — if 160,000 miners con- 
 tinued to be injured or killed each year, — if it was proved 
 that, whether owing to failure to provide the means or failure 
 to insist on their being applied by the men, the legally 
 required precautions were not being taken — it may be 
 supposed that the House of Commons would soon insist on 
 improvement ! 
 
¥■ 
 
 1 66 TAe Nationalisation of the Coal Supply 
 
 {d) Revival of Canal and Coastwise Transit 
 
 At present the railway companies, to which the transport 
 of coal brings nearly ;f 2 3,000,000 a year, or one-sixth of all 
 their gross receipts, naturally do all in their power to dis- 
 courage the use of any alternative means of transport It 
 would however, be to the advantage of the Government 
 Loal Department, for more reasons than one, to free itself, 
 as far as practicable, from dependence on any one line 
 of conveyance. Moreover, its policy of accumulating a 
 National Reserve, and of working, at all times, on a pre- 
 determined plan, without waiting for urgent local demands 
 would render the duration of any one journey of the coal in 
 many cases of little moment. We may, therefore, expect 
 as an incidental result of Nationalisation of the Coal Supply' 
 on the one hand, and of the Railways and Canals on the 
 other some revival of the use, both of the canal system 
 which ought, in the widest national interests, to be put once 
 more in working order ; and of the coastwise traffic to and 
 from the smaller ports, which has of recent years so much 
 decayed. There would be more than financial reasons to 
 cause the Government Coal Department to revive, and keep 
 m going order, every alternative means of transport to as 
 many as possible different points of distribution. When 
 war comes, as we now see, it is of great importance to be 
 able to ease the strain on our railways ; and even in peace 
 the possibility of stoppages owing either to accidents or to 
 other causes cannot be left out of account. 
 
 ie) Technical Improvements 
 
 One of the most important branches of the Government 
 Coal Department would naturally be that for Scientific Inven- 
 tion and Discovery, and the Improvement of Processes At 
 present whilst some of our newest collieries are admirably 
 equipped, and many of our ablest managers are scientifically 
 educated and resourceful, a large part of our coal production 
 
 Advantages of Nationalisation 
 
 167 
 
 is still carried on by methods not much improved from those 
 of a generation — sometimes even those of half a century — 
 ago. The ignorance or apathy of those concerned, their lack 
 of enterprise or of capital, and, above all, the difficulties with 
 the workmen that are apprehended, greatly delay the 
 adoption of up-to-date processes. Thus, only in about 
 one-fourth of the collieries (626 in 191 2 and 676 in 191 3) 
 have any coal-cutting machines yet been introduced, to be 
 worked by compressed air or by electricity ; and nine-tenths 
 of all the coal we extract is still laboriously hewn by hand, 
 just as it was a century ago. Yet, except for very soft coal, 
 and in seams of high inclination, the use of coal-cutting 
 machines appears to be commercially practicable wherever 
 the roof and floor are solid or properly protected \ with the 
 advantage of not only sparing labour but also increasing the 
 safety of the miners and greatly lessening the cost of 
 working.^ Once the coal is hewn or cut the method of 
 hauling it from the face to the pit-bottom is usually as 
 primitive as the method of hewing. In nearly all collieries 
 the trams are still pushed some distance by the manual 
 labour of pullers or trammers, at any rate from the stalls 
 to the collecting sidings. Ponies — sometimes very cruelly 
 treated — have been largely substituted for human traction. 
 But in the best-equipped mines this secondary haulage is 
 done by small engines driven by electricity or compressed 
 air, and there seems no reason why this beneficial substitu- 
 tion should not be almost universally made. The main 
 haulage from collecting siding to pit-bottom is now nearly 
 everywhere done mechanically, by single rope, by endless 
 chain, or by main and tail rope. Yet only very excep- 
 tionally in this country are compressed-air locomotives at 
 present used for this main haulage, or electric locomotives 
 taking their current from overhead trollies, though both are 
 common in American and German mines. If the best 
 scientific knowledge, now available only for the largest and 
 best-equipped mines, were universally applied to the varying 
 
 ^ Report of Royal Commission on Coal Supplies, 1905. 
 
 »f 
 
V' 
 
 r68 
 
 The Nationalisation of the Coal Supply 
 
 weri r JT " °""' *''" '^'"g'^°'"- ^"d if the miners 
 we e a sured that .mproved processes would deprive no man 
 
 nL T r.'^P °r'"' ^' ''^^ Standard Rate, it is difficult 
 not to beheve that a Government Coal Department could, 
 
 half o7t/'"'n''""""'°"'''' '•^^ P^°«^^^« °f *« backward 
 
 CO u ! i^ T' ^"'^ ''^"^* ^ ^^'^"'="°" alike in working 
 
 costs and m casualties. 
 
 When the coal is brought to the surface, it needs-as 
 the most successful collieries have discovered - to be 
 elaborately prepared for the market, so as to get the highest 
 
 U^eatment, wh.ch ,s everywhere adopted in the German 
 mmes an enormous proportion of the output has, in the 
 awl; or" IT^- ^"'^^ -a^te-typified by the throwing 
 
 burnt L ^tK.'"°""'^'"^ °f ^""a" <=°^'. to be eventually 
 bu nt as rubb.sh-,s still going on in the more backward 
 
 h be'tf , " r"^' "'^ '''' "^^*^'""' habit of working 
 the better classes of coal only, leaving behind in the pits a 
 
 vast amount of coal (estimated at 25 per cent of the output), 
 ^h.T. 1? \ T P'""^* P"" *°" "^""''l be obtained than upon 
 
 could, by suitable treatment, be made available for fuel • and 
 .n View of the importance of husbanding the nation's store 
 of energy, an attempt should be made to utilise what is now 
 a waste product. If the elaborate preparation of the coal 
 for market, already profitably carried on by the best, newest 
 
 l"Ar^T ,"'"''' ^"'^ *'^°P'^'l by all of them, we should 
 see the whole output, by ingenious mechanical appliances, (i) 
 
 remove all d,r, stone and refuse, and produce a dustless 
 coal. The coal-dust and small coal can be most advantage- 
 ously turned mto coke and the far more valuable tar 
 ammon.acal liquors, benzol and coke oven gas by means of 
 
 in'ltXd ■'' '■"'"'"■'^ °''"'' ^'"■* ^'^ °"'y ^^"-y ^'°^'y being 
 installed m connection with the collieries in this country 
 
 and number only half of those at work in the United States 
 
 and Germany. Down to the end of 19.5 only three 
 
 The Disposal of the Surplus 
 
 169 
 
 quarters of the coal was carbonised in these bye-product 
 recovery ovens, and 5,000,000 tons in the wasteful " beehive " 
 ovens, which have long ago been abandoned in Germany, 
 and ought to be promptly replaced by the more productive 
 processes. The coal-dust can be made into " briquettes " or 
 patent fuel, which finds a ready market abroad (Germany 
 makes ten times as much as Great Britain), but is hardly yet 
 in use at home. The economical use of coal-dust and small 
 coal is destined, said the Royal Commission of 1905, to 
 render the working far more profitable than at present.^ 
 
 When the coal begins its long and frequently interrupted 
 journey to the consumer's coal-yard or cellar, it is amazing 
 to note how seldom it is yet handled, at the various stages 
 in its progress, by any but antiquated methods. Only at a 
 few of the largest export quays do we find up-to-date cranes, 
 and the means of transferring coal in bulk, without breakage 
 and loss by dust, etc., and without laboriously shovelling 
 through the whole mass, and lifting or carrying each piece 
 by hand. The perpetual re -weighing or re -measuring 
 necessitated by the present repeated changes of ownership 
 involves, in itself, no small loss and expense. There is 
 plainly much room, practically at all stages from the face to 
 the cellar, for considerable economies and improvements in 
 processes, even if the Government Coal Department effected 
 no more, during its first decade, than to get adopted, for all 
 the output, the processes and expedients of which the most 
 successful men in the trade have already proved the 
 profitableness. 
 
 XII. The Disposal of the Surplus 
 
 It will be seen that the disposable financial surplus to be 
 derived from the Nationalisation of the Coal Supply arises 
 principally — at the outset probably entirely — from the 
 unification of administration and the reduction of the tribute 
 payable to the present capitalist owners of the coal, made 
 
 * Royal Commission on Coal Supply, 1905. 
 
170 
 
 The Nationalisation of the Coal Supply 
 
 possible only by the intervention of the State. The saving 
 to be effected on the cost of distribution will, it is suggested 
 accrue gradually to the Local Government Authorities that 
 organise and manage the local retailing and delivery The 
 advantage to the miners will come in the form of a 
 guaranteed regularity of employment, the improved housing 
 that must certainly be provided for employees of the State, 
 participation in the administration of the industry by which 
 they live, and the payment in full of earnings according to 
 a uniform National Standard Rate at the highest level, which 
 IS never likely to be lowered and which will progressively 
 increase with the rise in the Standard of Life of the 
 community. The boon to the public will be the assurance 
 of an uninterrupted supply of coal for industrial purposes 
 free from any risk of stoppage or rises in prices and of 
 household coal at the fixed National Price. What the 
 Chancellor of the Exchequer has a right to retain, for the 
 profit of the State, is the surplus gained by the substitu- 
 tion of the Government for the coalowners. The case 
 IS therefore essentially similar, as regards this disposable 
 surplus, to that of the profits of the Post Office, to which it 
 IS argued that neither the public of consumers nor the 
 employees have any valid claim. 
 
 What will be the financial position of the Government 
 Coal Department? The data at our disposal do not 
 permit of more than a tentative and hypothetical statement 
 of receipts and expenditure. Among the outgoings the 
 largest item will naturally be the cost of getting the coal 
 and administering the mines. In 191 3, as we have seen, 
 this amounted to about ninety millions for wages and 
 thirty-six millions for administration, including management, 
 repairs and such provision for depreciation and expenditure 
 on new plant as was included in the expenditure allowed 
 in the Income Tax returns. To this sum we have to add 
 the extra expense involved in an increase of production by 
 10 per cent in order to begin the accumulation of a National 
 Reserve of coal. Taking this at 10 per cent of the present 
 
 The Disposal of the Surplus 
 
 171 
 
 cost, we raise the latter to one hundred and thirty-eight 
 millions. We do not add anything for the increases to be 
 made to the wages, in consequence of the general levelling 
 up of rates and conditions to those of the best now in force, 
 and for the cessation of all nibblings at wages, because we 
 may fairly assume a certain economy of expense as the 
 result of unification, especially through absolute continuity 
 of working ; and we think we are justified, tentatively and 
 hypothetically, in setting off the one against the other. 
 What we have to add is the cost of the National Coal 
 Board and the central administration of its department ; 
 the cost of the present mines inspectorate, to be transferred 
 from the Home Office ; and the cost of the immediately 
 necessary improvements to secure greater safety of working. 
 Putting this all speculatively at one million a year, we raise 
 the total cost of getting the coal to one hundred and thirty- 
 nine millions. 
 
 We must allow something — it is impossible to compute 
 how much — for the maintenance of the offices for export 
 sales, and the necessary expenses incidental to shipment ; 
 although these charges, as well as the cost of dealing with 
 the orders from the industrial consumers at home, might be 
 deemed to be covered by the million reckoned for central 
 administration. But let us, to be more than sure, add a 
 couple of millions a year by way of margin for unforeseen 
 contingencies, making the total one hundred and forty-one 
 millions a year. To this we may add five millions a year 
 for the Miners' Housing Fund, giving an outside aggregate, 
 for outgoings at the colliery, of one hundred and forty-six 
 millions. We have next to pay for the conveyance of the 
 increased output of coal to its varied destination, part to the 
 ports for shipment, part to the railways and the industrial 
 users, part to the different departments of the National 
 Government ; and the remainder to the Local Authorities 
 for their own use and for retail distribution. This con- 
 veyance costs at present, by rail, canal and sea, between 
 twenty -five and twenty-six millions. The Government 
 
-ry 
 
 m 
 
 It 
 
 ^i'' 
 
 172 TAe Nationalisation of the Coal Supply 
 
 Coal Department would doubtless make a single agreement 
 with the State Railway Department for a single uniform 
 rate per ton on the entire output by rail, canal or coasting 
 steamer (including not only the conveyance of the 10 per 
 cent proposed increase, but also the provision of trucks for 
 the whole instead of only a fourth of the load) ; and this 
 might well work out at thirty-five millions. 
 
 As seams are constantly being " worked out," and new 
 p.ts and new workings are always being required, besides 
 renewals of plant and improvements of machinery, etc we 
 set asrde five millions a year— equal to 40 per cent of' the 
 ne profits of the present colliery owners— for these new 
 outlays of the nature of capital, this being, we are told, 
 more than twice as much as is annually invested in such 
 works, even in years of " boom." ' 
 
 Finally, we have to provide for the annual charge for 
 interest and sinking fund on the cost of expropriating all 
 the present private interests in the production and distribu- 
 tion of our coal. We have seen that the capital cost may 
 vary, including compensation to every one concerned from 
 the royalty owner and the colliery proprietor to the coal 
 merchant and local dealer, from something like iqi; 
 millions up to something like 330 millions. Some con- 
 siderable capital e.xpenditure will be required to provide 
 the necessary increased depot and office accommodation at 
 all the railway stations, so as to permit of the storage of a 
 years supply, and the transaction of the municipal dis- 
 tributive business ; and we must assume that unification of 
 administration will demand some initial capital outlay 
 We therefore take the amount of National Coal Debt to 
 be incurred at the hypothetical figure, not of 195 or 330 
 but of 400 million pounds, and on this the interest and 
 sinking fund for redemption in eighty-four years, both at 
 5 per cent, would be less than 2oi millions per annum. 
 
 morl '^^L'^fTT '■""' ^""''^"'' '" P"-="'<i"g i!^ ^"7 carefully estimated at no 
 more than ^2 000,000 per annum ; but to this something, perhaos 10 ner c2< 
 
 tZ^^lTc t P"''-\''»"<'-g^ --J machinery' £^rrr:,r; 
 i-ropertyy by J. C. Stamp, 1916, pp. 194, 203). 
 
 The Disposal of the Surplus 
 
 -^n 
 
 We get, therefore, total outgoings, making the most liberal 
 allowance for contingencies, of about 206 million pounds 
 a year. 
 
 On the other side stand the receipts for the coal. We 
 take these, except for the household coal, at the prices for 
 19 1 3, the last complete year of peace. The 'jj million 
 tons sold for export, at from 5 s. to 17s. 6d. per ton, were 
 valued, we are officially told, at an aggregate of /^5 3,6 5 9,660 ; 
 and the 2 i million tons of bunker coal at the same average 
 price would be ;^i 1,268,5 16 — say, together, 65 million 
 pounds. 
 
 The supplies to the railways, the Government Depart- 
 ments, the Local Authorities, the gas and electricity works, 
 the coke ovens, the metallurgical plants, and all the various 
 factories and other industrial users amount to about 150 
 million tons ; and these must continue to be supplied 
 without increase of price. What they have been paying 
 it is difficult to compute ; but taking them all together 
 the average appears to be something like 15 s. per ton. 
 Let us take it, to be on the safe side, at no more than 
 I2s. 6d. per ton, delivered to nearest railway station or 
 siding, making 94 millions a year. 
 
 There remains the household coal for domestic con- 
 sumption, which we put at between 35 and 40 million 
 tons. Taking it, however, at a minimum of 36 million 
 tons — thus allowing something for " free coal " and other 
 direct pithead deliveries — and adopting the suggested 
 National Price of 15 s. delivered to any railway station 
 (leaving 5 s. for municipal retailing and cartage), we get a 
 net receipt of 54 millions. Thus the aggregate price 
 realised for all the 287 million tons of the 19 1 3 output 
 would, on these calculations, be 213 million pounds — less, 
 we suspect, than the price actually paid in that year by 
 the consumers by at least 1 7 million pounds — against 
 an outside aggregate cost of about 206 millions. The 
 Government Coal Department ought, even after saving 
 the consumers some 1 7 millions on the last " peace prices," 
 
H 
 
 174 TAe Nationalisation of the Coal Supply 
 
 to start with an assured annual surplus Of at least 7 million 
 pounds. 
 
 We do not pretend that the amount of the net surplus 
 can be accurately calculated on the data available to us 
 But whether the private interests in the production and 
 distnbut.on of coal are bought out for iTigs.ooo.ooo or 
 X, 3 3 0,000,000 ; and whether the necessary additional capital 
 for effectmg the reorganisation of the industry is put at 
 ^ 50,000,000 or half as much again, it certainly does seem 
 as If the Government Coal Department could guarantee fair 
 and considerate treatment of the entire working staff fixed 
 and moderate prices to all industrial users of coal, and a 
 uniform National Price of a shilling per hundredweight for 
 Household Coal, and yet contribute enough to the War 
 Loan Smking Fund to pay off, by the year 2000, without 
 
 w °"'t^\*°i ^^^ '^'^P^yer- at least a large proportion of the 
 War Debt.' 
 
 XIII. Summary of Proposals 
 
 It has been shown that the present arrangements by 
 which the nation obtains its coal are neither systematically 
 organised nor economically worked. The scramble of i 500 
 separate colliery companies and many hundreds of merchants 
 factors and dealers for individual profit does not result either 
 in the most wisely regulated extraction of coal, or in its 
 transport and distribution at the lowest cost— still less in 
 the protection of the public against interruption of the 
 supply or extortionate increases of price. If a new product 
 
 ' No nation has yet nationalised all its coal-mines or all its coal-dealin? 
 There are many precedents for Government coal-mining and coal-retamL Th; 
 
 n.ine all the coal that the city n^eedl. oVheS^ni i '^^^^^^^ 
 
 (SefReTo ro7FX'n R:J'\''n"^"^' '^^'^^' '^'^^^"' Russia/and HolS 
 1915 pricris ) Department on S^a^e and Afuma:pa/ £n^ey/>nse. 
 
 Summary of Proposals 
 
 175 
 
 were discovered, of which two hundred and eighty -seven 
 million tons had to be extracted and distributed to every 
 factory and household in the kingdom, it is inconceivable 
 that we should not make a better arrangement. 
 
 To buy out, on the basis of Stock Exchange values, all 
 private interests in coal, from the royalty owner and colliery 
 proprietor down to the little retailer and hawker, would cost 
 no more, as a capital sum, than the consumers now pay for 
 a single year's supply of coal. 
 
 A Government Coal Department, working through Local 
 Councils of management and the present expert adminis- 
 trators of each pit, could organise production according to 
 the ascertained requirements of the whole community for all 
 purposes, together with the demand for export. But in 
 order to ensure absolute continuity of working and provide 
 against any possible interruption of supply, production 
 would be arranged of at least lo per cent in excess of the 
 aggregate demand, until a whole year's supply had been 
 accumulated in local storage. 
 
 Nationalisation of the production would be practicable 
 without nationalisation of distribution, but such a measure 
 would leave the public unprotected. It is therefore 
 suggested that the Government Coal Department should 
 organise the whole service — itself delivering the coal required 
 for the Government Departments, for export, and for indus- 
 trial purposes, at prices no higher than were being paid 
 prior to the war. The distribution to the domestic con- 
 sumer would be organised by the County and Borough 
 Councils, to whose depots at all the railway stations the 
 Government Coal Department would deliver at a fixed rate. 
 It is proposed that there should be a fixed and uniform 
 national price for household coal of is. per hundredweight 
 delivered to cellar, subject to a reduction of 1 5 per cent 
 if the consumer prefers to fetch it from the Municipal 
 Depot. 
 
 The Government Coal Department would, by agreement 
 with the State Railway Department, deliver household coal 
 
w 
 
 17^ The Nationalisation of the Coal Supply 
 
 to any railway station in Great Britain for 15 s. per ton, and 
 thus leave to the Local Authority a fixed allowance of 2s. 
 per ton for the expenses and loss involved in retailing and 
 3s. per ton for cartage. 
 
 It is estimated that the Government Coal Department 
 would expend, including interest and sinking fund, not 
 much more than two hundred million pounds a year, and 
 certainly not over two hundred and six millions ; whereas 
 its receipts, on the basis of the year before the war, would 
 amount to at least two hundred and thirteen millions, which 
 would enable a considerable amount of the war debt to be 
 redeemed from the profits. 
 
 APPENDIX TO THE NATIONALISATION 
 OF THE COAL SUPPLY 
 
 BIBLIOGRAPHY 
 
 Apart from the mass of literature on Coal and Coal-mining all over 
 the world, it is not easy to find works dealing expressly with 
 "nationalisation." The following list of works bearing on Coal 
 Monopolies, Mining Royalties and the Nationalisation of the Coal 
 Supply is the best that it has been found possible to compile. 
 There is an American Bibliography, by P. M. Pearson, on the 
 Government Ownership of Coal Mines (Intercollegiate Debates, 
 435-57; Hinds, 1909, U.S.A.), a copy of which is in the British 
 Library of Political Science (London School of Economics), Clare 
 Market, W.C. 
 
 Alfassa, M. La Greve Noire et revolution des syndicats en Angleterre 
 (in Bulletin de la Sociite cT encouragement de rindust7'ie natiotiale^ 
 January 191 3). 
 
 Anti-Socialist Union. The Speaker's Handbook. 191 1. (Pages 
 137-143.) 
 
 Awards under the Coal Mines (Minimum Wage) Act, 19 13. Colliery 
 Guardian Office. 19 13. 195 pp. 
 
 Annales de la Regie Directe (Geneva, Switzerland). Note on 
 La Nationalisation des Mines de Houille en Hongroie (No. 3, 1909). 
 Recommendations of the Commission des Mines de la Chambre des 
 Deputes (France) in favour of nationalising all mines (No. 10, 
 1 9 1 o). Government Ownership of Coal Mines in Servia ( Yovanovitch, 
 No. 15, 1 9 10). 
 
 Augagneur. The Miners' Strike (in Graride Revue, loth April 191 2). 
 
 Bernstein, E. The Miners' Strike and the Minimum Wage (in 
 
 Sosialdemokratische Mo7iatshefte, nth May 19 12). 
 BOSENICK, A. Der Steinkohlenbergbau in Preussen. 114 pp. 
 
 Zeitschrift fiir die gesa7nmte Staatswissenschaft. Erganzungsheft 19. 
 Brace, W. The Mining Industry of Great Britain (in Contemporary 
 
 Revieiv, April 19 12). 
 Brooksbank, J. The Nationalisation of Coal Mines (in Socialist 
 
 Review, February 19 13). 
 
 177 N 
 
 I 
 
Ill' 
 
 1 78 The Nationalisation of the Coal Supply 
 
 Coal Age. Co-operative Mining in Illinois (loth July 1916) 
 Colliery Guardian. The Nationalisation of Coal Mines (nth 
 October 191 2). ^ 
 
 Taxation of Mines in Various Countries (31st January 19 13) 
 
 Mining Economics (17th April 19 14). 
 
 -—A Colliers' Syndicate : History of the Associated Colliers of Rive- 
 
 de-Gier (loth December 1897, from Les Annates des Mines). 
 
 Co-ownership of Coal Mines (i6th October 1896). 
 
 Co-operative Coal-mining in Queensland (15th June 1900). 
 
 ——The Government Acquisition of the Westphalian Mines (28th 
 
 l-ebruary 1902). ^ 
 
 Commission des Mines de la Chambre des Deputes (France). Report 
 of Recommendations of. In Favour of Nationalisation of French 
 Coal Mines. 19 10. 
 
 Dale, Hylton B. Coal and the London Coal Trade. 191 2 
 Defuisseaux, Alfred. Mr. Emile Lewy's scheme for the Inter- 
 national Regulation of the Output of Coal. 1 896. 
 
 Elliot, Sir George. Letter ... in Times of 20th September 1893 
 
 i^LY, R. T. Outlines of Economics. 1900. (Ch. vii.) 
 
 Engineer. The Nationalisation of Mines (9th May 191 3) 
 
 Wages and Profits in the Coal Trade 1890-1910 (9th February 
 
 Fabian News. Municipalisation of Coal Supply. October 1 9 1 o. 
 
 G^zi^CAT^^ Die geplante Verstaatlichung der Bergwerke. Gesell- 
 schaft Hibernia, Preussen (13th August 1904). 
 
 Hardie, J. Keir. The Miners' Strike and the Minimum Wa-e (in 
 Socialist Review^ May 1 9 1 2). ** 
 
 James, C. A. Mining Royalties. 277 pp. 1893. 
 Jeans, J. S. Trusts, Pools and Corners. Methuen, 1894 
 Jenkenson, a. J. Reflections on " The Miners' Next Step » (Economic 
 
 RemeWy July 191 2). 
 JEVONS, H. Stanley. The British Coal Trade 19 16 
 JEVONS, W. S. The Coal Question. 467 pp. 1906. 
 Jones, Daniel. Legislation and Ownership of Coal Properties (in 
 
 Cotliery Guardian^ 6th June 191 2). 
 Jones, T. I. Mardy. Mining Royalties and all about them. 1908. 
 
 Kennedy, R. Coal and the Nation (in Engtish Review, April 1912). 
 
 Large, F. D. The Coal Strike. Economic Journat, March 1894. 
 
 Laur, F. La Mine aux Mineurs. 142 pp. 1887. 
 
 Levy, Hermann. Monopoly and Competition. Macmillan, 1911. 
 
 Bibliography 
 
 179 
 
 Lewy, E. a Scheme for the Regulation of the Output of Coal by 
 
 International Agreement. 115 pp. 1896. 
 International Regulation of the Output of Coal in Western 
 
 Europe. 16 pp. Giard et Briere (Paris), 1912-13. 
 Diplomates et Mineurs, 1899. 
 
 Louis, Prof. H. The Nationalisation of Mines and Minerals, in Iron 
 and Coat Trades Review, 6th March 1914. 
 
 Macrosty, H. W. The Trust Movement in British Industry. Long- 
 mans, 1907. 
 
 Markham, Sir Arthur B. The Miners' Strike and the Minimum 
 Wage (in Quarterly Review, April 19 12). 
 
 Miners' Next Step, the, 1911. 
 
 Myers, Tom. The State and the Coal Mines. 19 11. 
 
 " Myner Collier." Miners and Poverty. Forward Publishing 
 Company (Glasgow), 19 11. 
 
 Nieder, L. Die Arbeitsleistung der Saar-Bergleute in den k. 
 preussischen Steinkohlgruben bei Saarbrucken zeit dem Jahre 1888. 
 97 pp. 1909. Miinchener votkswirtschafttiche Studiefu Bd. 90. 
 
 Olivier, Sir Sydney. The Miners' Battle— and after. Contemporary 
 Review, November 1893. 
 
 Reports by H.M. Representatives Abroad on Mining Rents and 
 
 Royalties. 1887. 
 Report of the Departmental Committee on the Organisation of the 
 
 Coal Mining Industry, 2 parts, 1 914-15. 
 
 Reports of the Royal Commission on Mines, with evidence, etc. 
 
 (1907-13). 
 
 Richardson, Thomas, M.P., and Walbank, John A. Profits and 
 Wages in the British Coal Trade (1898 to 1910), 96 pp. New- 
 castle, 1 9 II . 
 
 Royal Commission on Mining Royalties; Report and Evidence of 
 1890-93. 
 
 Sabini, C. Economic Enquiry into the Coal Industry (Report 
 presented to the Italian Minister of Public Works on the Coal 
 Industry in Germany). Newcastle, 1901. 
 
 Sagot. The Miners' Strike (in Mouve7nent socialiste. May 191 2). 
 
 Seligman, E. R. a. Principles of Economics. 1906. 
 
 Sichel, W. The Miners' Strike (in Fortnightly Review, May 191 2). 
 
 Slesser, H. H. The Nationalisation of Mines Bill (Fabian Tract, 
 No. 171). 16 pp. 1 91 3. 
 
 Socialists and State Ownership in New Belgian Coalfields. 
 
 Econoinic Journal, 1903, p. 641. 
 Socialist Year Book, 191 3. 
 
■|H 
 
 1 80 The Nationalisation of the Coal Supply 
 
 Snowden, Philip. How to Nationalise the Coal Mines. 1909. 
 SORLEY, W. R. Mining Royalties and the Iron and Coal Trades 
 ^ 39 pp. 1889. 
 
 Staul und Eisen. Der staatliche Bergbaii in Preussen (i8th May 
 191 1, et seq.). 
 
 Taylor, Benjamin. The Burden of Coal {Nmeteenl/i Century, 
 September 19 10). 
 
 The Coal Problem (in Fortnii^htly Review, February 19 10). 
 
 Thomas, D. A. Some Notes on the Present State of the Coal Trade 
 85 pp. Cardiff, 1896. 
 
 United States. Reports of Census Office on Mines and Quarries, 
 1902; of Commission on the Anthracite Coal Strike of 1902; of 
 Committee on Discriminations and Monopolies in Coal and Oil, 
 1907 ; of the Interstate Commerce Commission for 1901, 1907-9. 
 
 Walker, F. A. Monopolistic Combinations in the German Coal 
 Industry. 334 pp. (American Economic Association, 1904.) 
 
 Walker, G. B. The Strike and After (in Nineteenth Century^ April 
 1912). ^' ^ 
 
 Webb, Sidney and Beatrice. State and Municipal Enterprise 
 (Fabian Research Department Report, 191 5). 
 
 See also — 
 
 Annual Report on State Mines of Victoria. 
 
 The New Zealand Year Book, for Government Mines in that country. 
 Annual Report on Government Coal Mines in Prussia. 
 Various pamphlets published by the Colliery Guardian Company, 30 
 and 3 1 Furnival Street, E.C. 
 
 The statistics as to coal-mines in the United Kingdom are 
 published in the "Coal Tables." Fuller particulars are given in 
 the Home Office Reports on Mines and Quarries, published 
 annually. Particulars of income from (all sorts of) mines, of the 
 capital value passing at death each year of (all) interests in (all sorts 
 of) mines, and of the annual income from rights to work (royalties) 
 and way-leaves will be found in House of Commons Returns 
 on Inland Revenue, Nos. 190 and 317 of 191 2, and the Annual 
 Reports of the Commissioners of Inland Revenue. See also 
 British Incomes and Property, by J. C. Stamp, 191 6. 
 
 CHAPTER IV 
 
 A STATE INSURANCE DEPARTMENT 
 
 181 
 
i, J. ' I 
 
 ^m ™ 
 
 I 
 
 IL 
 III 
 
 IV. 
 V. 
 
 VI. 
 
 VII. 
 VIII. 
 
 IX. 
 X. 
 
 XI. 
 XII. 
 
 CONTENTS 
 
 • 
 
 . Why a State Insurance Department is now called for. 
 How the Nation now obtains its Life Assurance. 
 What the Chancellor of the Exchequer would gain by the 
 
 Nationalisation of Life Assurance. 
 The State Insurance Department as Public Creditor. 
 The Advantages of Nationalisation: 
 
 {a) The Waste of Competition. 
 
 (*) The Evils of Industrial Insurance. 
 The Conditions of Nationalisation : 
 
 (a) The Offices and Staffs. 
 
 {6) The Policyholders. 
 
 {c) New Policies. 
 
 The Abolition of the Industrial Branch. 
 
 What the State Insurance Department would start with. 
 
 The Position of the Insurance Agent. 
 
 Life Assurance will always be required. 
 
 Why continue the Fund? 
 
 Summary of Proposals. 
 
 182 
 
 A STATE INSURANCE 
 DEPARTMENT 
 
 I. Why a State Insurance Department is now 
 
 CALLED FOR 
 
 The Life Assurance system of the United Kingdom, in 
 what is called the " Ordinary Branch," excites the admira- 
 tion of the world. In a century and a half of experience 
 the Companies have gradually built up an organisation 
 which, for honesty and soundness of administration, and 
 for adaptation to the needs of the middle and upper classes 
 of this country, stands absolutely unrivalled. At a time 
 when the individual found open to him no safe and con- 
 venient investment for his savings but Consols and mort- 
 gages, the Insurance Offices devised for him a means of 
 thrift, and a form of provision for his dependants which still 
 stand second to none in their manifold advantageousness. 
 In one respect, in particular. Life Assurance forms a bright 
 spot in the history of British commercial enterprise. It has 
 never ignored its intellectual basis. By their incessant and 
 disinterested exploration of the scientific foundations of their 
 business, the British Insurance Offices have both created and 
 endowed the actuarial science which has spread to all parts 
 of the civilised world. In no branch of British Enterprise 
 have those responsible for its management earned and 
 deserved more praise and gratitude. The legislative settle- 
 ment of 1870, with its combination of "Freedom with 
 Publicity," has permitted the British Insurance Offices to 
 pioneer, and to adapt themselves to new conditions, whilst 
 keeping them free, for nearly half a century, from any 
 
 183 
 
,,.-.r 
 
 1 84 A State Insurance Department 
 
 serious scandal. If, i„ the financial crisis brought about by 
 he war, we turn for help to a State Insurance Department^ 
 h.s .s not because the Companies have failed in their task! 
 It is, mdeed, their very success— the very strength of their 
 orgamsafon-that enables them, as we shall seek to show 
 o come most effectually to the help of the State, and puts 
 them m the enviable position of being free-without any- 
 thmg ,n the nature of confiscation, without loss to the 
 shareholders, and with nothing but gain to the policy- 
 holders-to render inestimable service to the Government 
 m^prov.dmg for the future disposition of the Great War 
 
 nf I'^T T' ^' ^^ '•'''" '^'' "^^'Shty arguments in favour 
 of the transformation of Life Assurance from a profit-making 
 busmess mto a branch of National Service. By taking over 
 on equitable terms of compensation, the existing Life' 
 Assurance offices, the Government would not only be able 
 
 nor'T,^ ^°'""""'''y some expense, relieve existing 
 policyholders of their anxiety as to the safety of their 
 bonuses, and give both present and future policyholders the 
 advantage of improved (and, indeed, of the most perfect) 
 security ; but could also organise satisfactory arrangement 
 for making Funeral Benefit universal, and solve, in the most 
 effective way the somewhat serious social problems connected 
 with the widespread system of Industrial Insurance. But 
 what makes the matter urgent is the need for calling in aid 
 the Insurance Offices to deal with the unparalleled burden of 
 national indebtedness. 
 
 II. How THE Nation now obtains its Life 
 
 Assurance ' 
 
 What is called Life Assurance-the issue, in return for 
 one or more payments (called premiums), of contracts (called 
 
 round in .he Insurance nu.bt? of r^^'^^.f^-.h^Dec'^is)! "CLZ of 
 
 How the Nation now obtains its Life Assurance 185 
 
 policies) covenanting for the payment of a sum of money, 
 either at death or at some fixed date — is scarcely two 
 centuries old, but it has become, all over the civilised world, 
 not only an indispensable form of saving, but also, to the 
 ever-increasing proportion of all classes of the population 
 demanding financial security for the future, almost a necessity 
 of life. And it has ceased to be the monopoly of any social 
 class. In the United Kingdom nearly every family house- 
 hold in the land, from the richest to the poorest, now 
 voluntarily subjects itself, at one time or other, to a payment 
 varying from a few pence per week up to several thousands 
 of pounds a year for premiums for Life Assurance. The 
 yearly revenue from these premiums (including sums paid 
 for annuities) now exceeds fifty millions sterling, being more 
 than the nation spends on boots and shoes ; nearly as much 
 as it spends in railway fares, and in excess of the whole 
 cost of education from kindergarten to university. In 
 conjunction with the closely allied grant of annuities, Life 
 Assurance thus supplies the social machinery for certain 
 popular forms of saving and investment, viz. {a) the 
 provision of the expenses incident on death, from burial up 
 to Death Duties ; {U) the provision of maintenance for 
 survivors {e.g. widows and orphans) ; and ic) the provision 
 for the insurer's own future, either by accumulation of an 
 endowment or by the creation of an annuity.^ 
 
 the separate companies are best given in The Post Magazine Almanack^ and 
 Bourne's Insurance Directory. The history may be sought in The History of 
 Life Assurance in Great Britain, by J. C. Macmillan, 1896, or The Insurance 
 Guide and Handbook, by Cornelius Walford, 3rd edition, 1900. The Catalogue 
 of the Library of the Institute of Actuaries serves as a convenient bibliography. 
 For Industrial Insurance, see the Report of the Fabian Research Department, 
 1914, price IS. (25 Tothill Street, Westminster). 
 
 ^ Life Assurance in this country is officially classified as '* Ordinary " and 
 "Industrial." The "Ordinary Branch" includes the issue of policies, nearly 
 always for ;^'loo or more, whether payable at death or at the expiration of a 
 term of years, in return for premiums payable at intervals of not less than once a 
 quarter, without being personally called for by collectors ; together with all the 
 annuity business. The •* Industrial Branch" (subjected to special restrictions by 
 the Collecting Societies and Industi-ial Insurance Companies Act of 1896) includes 
 the assurances of less than ;[^20, in return for premiums payable more frequently 
 than once in two months, and received by means of collectors operating at a 
 
i86 
 
 A State Insurance Department 
 
 This social function, which has been regulated by a 
 series of statutes, is now conducted as a profitable business 
 in the United Kingdom by upwards of a hundred and thirty 
 joint stock companies and " Collecting Friendly Societies." ^ 
 Many of these companies and societies are proprietary, and 
 whilst they cede the greater part of their profit to the policy- 
 holders in one form or another, enough remains to render 
 them, as a rule, very profitable to their shareholders. Most 
 of them have no shareholders, and are run entirely for the 
 benefit of the policyholders, present and future. But owing 
 to their large numbers, their wide dispersion, and the absence 
 of any knowledge of each other, the existing policyholders 
 are quite unable to exercise any control over what is nomi- 
 nally their own enterprise ; and such *' mutual " societies 
 and companies are, in fact, entirely in the hands of the 
 little knot of paid Directors (who virtually reappoint them- 
 selves and fill vacancies by co-option) and the managing 
 officials. In practice, a policyholder finds no difference 
 
 greater distance than lo miles from the registered office. Taking the figures as 
 the end of 1915 as compiled by The Statist (i8th Dec. 1915), thf total amoun? 
 insured m the Ordinary Branch by the British Offices is no less han eight hundred 
 and seventy-two millions, for which the annual premiums paid exceed thtty two 
 millions per annum, and the total annual charge for management and collection 
 expenses is just over four millions sterling The total number of policies n force 
 (several on the same life) is over 3,194,000, and it is believed that at leas 7c 
 
 women" to°/tH '^^^^ ^^ ^^ ^^^ "PP-^ and middle classes, and Lny 
 women (together with an increasing proportion of the lower middle and artisan 
 classes) have thus made some provision for their families at their deaths The 
 total amount msured in the Industrial Branch is three hundred and sixty-three 
 
 tTe toTa'l ch " V' '"""'^ ""P"' ^" ^''^'^^' '' -gh^-- millions, and 
 the total charge for management and collection expenses is just under eight 
 
 millions The total number of policies in force is over^hirty-eight millions (often 
 
 several for the same person); but lapses are numerous. It may be estima eS 
 
 that, whilst the total paid annually in annuities, death claims, Ld surrenders 
 
 exceeds orty-one millions sterling, including all ages, and bolh Ordinary and 
 
 Industrial Branches, only about two persons out of every three died cover^ed by 
 
 any kind of Life Assurance and that three out of four of the claims so payable 
 
 do no more than cover the funeral expenses, making no provision for surWs 
 
 » We leave out of account here the work of ordinary Friendly Societies and 
 
 Trade Unions which as an adjunct to their work in providing Sickness Un 
 
 employment and other Benefits, often also provide Funeral Benefit. These 
 
 Funeral Benefits by such Friendly Societies are not commonly regarded as 
 
 Life Assurance, and do not come within the terms of the Act of 1896 because 
 
 collectors are not employed ; and they need not be interfered with 
 
 What the Chancellor would gain by Nationalisation 187 
 
 in premium or in benefits, in honesty and economy of 
 administration, or in fair dealing, between a joint stock and 
 a " Mutual " Insurance Office. 
 
 III. What the Chancellor of the Exchequer 
 would gain by the nationalisation of life 
 Assurance. 
 
 The advantage to the Chancellor of the Exchequer of 
 the Nationalisation of Life Assurance would lie, not in any 
 annual revenue to be derived from the sei'vice (though this 
 might well come with increasing business) but in securing 
 control — at the cost of a Government guarantee that every 
 individual policyholder, now or hereafter, shall be punctually 
 paid, to the uttermost farthing, everything that he has con- 
 tracted to receive — of several hundred million pounds' worth 
 of good securities, together with the additional sum to be 
 annually entrusted to him by the State Insurance Depart- 
 ment for investment, a sum which may be expected steadily 
 to increase. 
 
 What could be done with the assistance of these sums, 
 without depriving any single policyholder of anything due 
 to him, in the way of placing the burden of the War Debt 
 in such a way as not to hamper either future borrowing or 
 private trade ? It would be unsound insurance finance, and 
 would outrage the feelings of all the actuaries, and possibly 
 disturb the minds of some of the policyholders — in view of 
 the ever-increasing burden of claims on the policies now 
 existing (notably the rapidly increasing proportion of 
 Endowment Policies) which must be met as they mature 
 without relying on " new business " — not to credit the 
 account of the State Insurance Department with interest on 
 the accumulated funds year by year, even if a sum equal to 
 the whole amount of such interest, and even more than that 
 amount, should presently be annually handed back to the 
 Government for re-investment. Let it be made clear, 
 
''f! 
 
 i88 
 
 A State Insurance Department 
 
 L:. 
 
 
 therefore, once for all, that full interest will be paid— and 
 paid, moreover, at a rate which can be guaranteed to be, 
 right up to the year 2000, not less than 5 per cent. 
 
 What might be done will be best realised by those in 
 touch with banking operations on a large scale. We must 
 visualise the formation of a strong State Insurance Invest- 
 ment Branch, under the control of the Treasury, but directed 
 by the ablest of the investment experts of the Insurance 
 World. It must not be supposed, however, that the assets 
 that would be handed over-standing in the balance-sheets 
 at over 550 million pounds — would be to any great extent 
 immediately realisable by the Government. We may put 
 aside 30 millions at once (though the amount could be 
 reduced by unification) as representing working capital, 
 agents' balances, etc. But in addition there is some 1 1^ 
 millions invested in life interests and reversions, 48 million! 
 in land and house property, no less than 114 millions in 
 mortgages and ^i millions in loans to persons and public 
 authorities. All this, accounting for nearly half the total, 
 may be counted as not conveniently realisable. There 
 remain about 280 millions of Government and Municipal 
 securities, and debentures and shares of joint stock com- 
 panies, most of which are saleable on the various Stock Ex- 
 changes on the world— it has been estimated that whereas 
 in 1870 only 26 per cent of the Insurance Fund was in 
 "Stock Exchange securities," the proportion is now over 56 
 per cent— though only a very small proportion could con- 
 veniently be realised otherwise than very gradually, or in- 
 deed until after the War.^ Among them, however— not- 
 withstanding the recent large sales of American securities in 
 order to help the exchange— there are some that it would 
 be possible for the Government to realise, in order to pay 
 for the War, either immediately or gradually, as favourable 
 opportunities occur. In return for every sum so realised, 
 
 » Possibly thhty or forty millions are already in British Government securities. 
 The Insurance Offices, which had already six millions in British Government 
 securities, are reported to have taken up eighteen millions of War Loan, and they 
 have since exchanged many of their American securities for Government Bonds 
 
 
 What the Chancellor would gain by Nationalisation 189 
 
 the Chancellor of the Exchequer would give Government 
 Stock bearing 5 per cent interest. He would similarly give 
 Government Stock, bearing such a rate of interest, for all the 
 sums — probably 12 or 15 millions per annum — entrusted 
 to him by the State Insurance Investment Branch. He 
 would use both the sums realised by the sale of part of the 
 existing securities, and the new moneys annually entrusted 
 to him, to redeem the War Loan in the hands of the public. 
 The result would be that, within 20 years, a very large sum, 
 probably five hundred and possibly one thousand millions 
 of War Loan, could thus be withdrawn from the private 
 creditors of the State, and would be held immobilised by 
 the State Insurance Department, which would, moreover, be 
 continuing to absorb the War Loan then remaining in the 
 hands of the public at the rate of 20 or 30 millions a year, 
 or even more. 
 
 The Government has, in fact, the opportunity of offering 
 a unique investment to its State Insurance Department, 
 without trouble, without risk, and without demanding that 
 ability in wisely investing the annually accruing funds which 
 is, at present, one of the chief needs of an Insurance Office. 
 The Great War Loan to be issued to the public, for which 
 the Government will have to pay 5 per cent interest, can be 
 made redeemable at par in definite quantities, annually or 
 every few years, from, say 1925 to 2000, in such a way as 
 to provide an ideal investment, at 5 per cent, for the annually 
 accruing accumulations of the State Insurance Department, 
 or of the Sinking Funds of other Government enterprises. 
 
 A further consideration of no little importance is that of 
 the probable continuance, at least for many years to come, 
 of the Income Tax at a relatively high level. In the present 
 year, at the rate of 5s. in the pound, the existing Insurance 
 Fund, with its income from interest of nearly eighteen 
 millions sterling, is mulcted of 4^ millions, or actually much 
 more than all the dividends to the shareholders arid all the 
 bonuses to the policyholders put together ! The State 
 Insurance Department would be free of Income Tax. The 
 
■I 
 
 I 
 
 190 A State Insurance Department 
 
 Chancellor of the Exchequer would need to make up by 
 general taxation for this loss of revenue; but the result 
 would be. not only a considerable addition to the amount 
 annually earned by the State Insurance Fund, and— what is 
 of some moment— the removal from the actuaries and policy- 
 holders of their fear that a really drastic Income Tax—say 
 one of ten shillings in the pound, continued for a series 
 of years— might reduce their offices to insolvency. The 
 Chancellor of the Exchequer would find his compensation 
 for the loss of tax revenue on the income from the Insurance 
 I^und m {a) the advantage of getting a free hand in increasing 
 the Income Tax, unhampered by the danger of causing a 
 widespread default of the insurance offices ; {b) in seeing so 
 much o. the War Debt taken out of the hands of the public 
 and immobilised in a State Department. 
 
 IV. The State Insurance Department as 
 
 Public Creditor 
 
 of th?w"^'i°" "7 '^^ '"'"' ^1"^"™'ty the gradual transfer 
 of the War Loan from the individual investor (who will be 
 paid off at par in accordance with the contract) to the State 
 insurance Department ; because (whilst this excellent invest- 
 ment secures the policyholders) there is no likelihood of 
 repayment of the capital sum being required at any period 
 that we can foresee. During the past hundred years the 
 aggregate Insurance Fund has gone on steadily increasing- 
 and atterly the annual rise has been greater than ever. !n 
 1S95 the total sum insured in the Ordinary Branch was 
 only 529 millions; by 1905 it had risen to 697 millions 
 or by an average of over .6 millions a year. Another 
 decade has brought the total to no less than 872 millions 
 showing an average increase (notwithstanding the competi- 
 tion of the Industrial Branch which has also been growing 
 by leaps and bounds) of over 17! millions a year' Life 
 
 State Insurance Department as Public Creditor 191 
 
 Assurance has been growing, in fact, during the whole 
 decade, at between three and four times the rate at which 
 the population has been increasing. During the last twenty- 
 years the accumulated funds have more than doubled ; 
 during the last thirty years, indeed, they have more than 
 trebled. 
 
 It may, we suggest, be confidently predicted that this 
 increase will continue. A rate of growth during the next 
 thirty years equal only to that of the past thirty years would 
 raise the total premium income from 50^ millions in 191 5 
 to no less than 162 millions in 1945. Life Assurance 
 stands, indeed, only at an early stage in its development. 
 Apart from the mere provision of " Burial Money " — which 
 is practically all that Industrial Insurance has, in its remark- 
 able sixty years' growth, effected — Life Assurance, in the 
 sense of any real provision for survivors, is still mainly a 
 habit of the upper and middle classes. By the efforts 
 of the Prudential, Pearl, Refuge, and other companies a 
 beginning has been made in inducing the millions below the 
 Income Tax level to take out policies of ;£^50 or ;f 100. Yet 
 it is estimated that altogether only i\ millions of persons 
 hold policies in the Ordinary Branch. With the cessation 
 of Industrial Insurance which we hereinafter propose, the 
 setting free of no less than 1 8 millions a year hitherto paid 
 in Industrial premiums, and the concentration of the army 
 of insurance agents on canvassing for this new work, the 
 business in small " Ordinary " policies would certainly receive 
 an immense accession. There is every reason to suppose 
 that — with the steady rise in the Standard of Life of all but 
 the humblest classes, their increasing providence and thrift, 
 
 in 19 1 5, whilst their total income has risen from twenty-one millions to fifty 
 millions. Their outgoings have similarly risen from fourteen millions for claims, 
 cash bonuses, surrenders, and annuities in 1889 to thirty-three millions for the 
 same items in 191 5. Commission has risen in the same quarter of a century 
 from ;^67i,975, or 4.95 per cent of the premium income, to ;^r, 640,905 or 5.4 
 per cent of the premium income ; whilst management expenses have risen from 
 ;^ 1, 376,4 1 3 to ;^2, 555,854, which is a decline from about 10 per cent of the 
 premium income to less than 8 per cent. 
 
192 A State Insurance Depart^nent 
 
 and their steadily improving education— the Insurance habit 
 will continue to spread. This will be promoted by the 
 exemption from Income Tax (up to one-sixth of the income) 
 of the sums paid for Life Assurance— an exemption which 
 will certainly be continued, and will become increasingly im- 
 portant with a high rate of Income Tax and the sweeping 
 in of an additional million or more of Income Tax payers 
 by lowering the Exemption Limit from ;^i6o to £1^0^ 
 It IS, indeed, remarkable that as yet (apart from Industrial 
 Insurance) not more than li million persons— only about 
 three-fifths of the present Income Tax payers— out of the 
 24 million adults in the United Kingdom are insured in 
 the Ordinary Branch; and these (with 3,194,000 separate 
 policies) for an average of less than £600 each. If all 
 the 20 million persons whom the census finds ''gainfully 
 employed" were to insure only for a minimum of ;^ioo— 
 even if all the 1 1 million families would take out only one 
 such policy each as a minimum— the total sum insured 
 would be more than doubled. By the year 2000 — only 
 84 years hence— it may confidently be prophesied that a 
 population within these Islands of 70 to 80 millions— this 
 is the best estimate that can be framed in view of the 
 slackening rate of increase— will have its lives insured for an 
 aggregate of at least ten times as much as the present aggre- 
 gate in the Ordinary Branch of 872 millions— indeed, for 
 probably not less than 10,000 millions sterling. This colossal 
 sum of 10,000 millions sterling would mean only an average 
 of one policy of ;f 500 for each of 20 million families— by no 
 means an excessive provision for survivors in any decently 
 assured community. The accumulated Insurance Fund on 
 such an aggregate of policies would be, not 551 millions 
 sterling as on the present sum assured, but much more like 
 7000 millions sterling. It is towards this latter sum that 
 we may expect the Insurance Fund during the ensuing 
 
 ^ An altogether new field will be opened for the operation of this inducement 
 when (as is the case in various States) the same Allowance for Life Assurance 
 IS allowed on premiums paid for insurance of the taxpayer's children 
 
 The Advantages of Nationalisation 
 
 193 
 
 eighty-four years steadily to mount. We need therefore 
 have no fear that the total invested with the State will fall 
 off, or of any realisation of securities by the State Insurance 
 Investment Branch being necessary. Yet, to satisfy the 
 claims of strict finance, it would be desirable for the Govern- 
 ment to arrange for paying off its own debt to the State 
 Insurance Department, as to its other creditors. This it 
 should do by providing an annual Sinking Fund payment, 
 which on 500 millions need be, at the outset, only half a 
 million sterling^ — a sum which the Chancellor of the Ex- 
 chequer would, for this as for the rest of the public debt, 
 find from annual taxation. 
 
 V. The Advantages of Nationalisation 
 
 Can this ambitious and far-reaching scheme be realised ? 
 Let us notice, first, that — excellently as the British Insurance 
 offices have served the community — there would be great 
 advantages in their being all merged in a single State 
 Insurance Department. 
 
 {a) The Waste of Competition 
 
 We have here, in fact, one of the most glaring examples 
 of the waste due to competition. The hundred and thirty 
 companies and societies compete strenuously with each other 
 for new insurers. They maintain extensive offices and 
 staffs ; they expend vast amounts in advertising and other 
 expenses ; with the exception of four companies, they pay 
 out large sums in commission on new business ; they keep 
 in the field something like a hundred thousand agents 
 (perhaps three-quarters of them "full time"), all in order, 
 really, to induce people to pay their premiums to this office 
 
 1 An annual payment of ;^8oo for 84 years at 5 per cent extinguishes a 
 million pounds of debt in the year 2000. It would, moreover, probably be found 
 expedient for the Government to give the State Insurance Branch fixed annuities 
 terminating at different dates for each of its annual investments of surplus. Thus 
 the State would create no permanent indebtedness. 
 
 •i 
 
' 
 
 194 A State Insurance Department 
 
 rather than to that ! It is true that the effect of this com- 
 petitive advertising and solicitation is also to make a large 
 number of people insure who would not otherwise do so at 
 the time, and perhaps not at all ; but much of this "forced 
 business " is of very doubtful social value— in fact, seven out 
 of every ten of the new policies thus obtained (principally 
 those for the smallest amounts) are actually allowed to lapse ' 
 And though competition among the offices reduces their net 
 profits to a point at which the life business is often said to 
 be scarcely remunerative, it is not at all so effective in keep- 
 ing down the price charged to the insurer. So intricate are 
 the calculations and so varied are the conditions of the 
 policies that the ordinary person is unable intelligently to 
 compare one offer with another. Several hundred different 
 hfe policies lie open to the choice of any would-be insurer 
 in the United Kingdom, and are actually being sold every 
 day at varying prices for their incomprehensibly varying 
 advantages. To a skilled actuary the best of these offers 
 seems to differ from the least advantageous to the extent of 
 at least 30 per cent for "without profit" policies, and by as 
 much as 50 per cent in the extreme range of policies "with 
 profits." The continuance of business at such varying 
 premiums proves that competition does not secure to the 
 customer the cutting down of prices to the lowest possible 
 figure. 
 
 The total cost of " Management," that is, of (i.) getting 
 in the 50 million pounds of premiums, (ii.) of issuing some 
 10 or 12 millions of new policies annually, (iii.) of making 
 the necessary investments, and (iv.) of paying fewer than one 
 million claims, amounts to 12 million pounds a year This 
 —in comparison with the cost of the work done by the 
 Inland Revenue or the Post Office-is an enormous sum. 
 Calculated on the aggregate of the total receipts on the 
 total annual investments, and on the total payments for 
 claims, amounting altogether to about 100 millions, it comes 
 to something like 12 per cent on the cash transactions It 
 is much more than all the working expenses of our vastly 
 
 The Advantages of Nationalisation 
 
 195 
 
 greater banking system, with its 10,000 branches in the 
 United Kingdom. Out of every pound paid in Life Assur- 
 ance premiums, no less than four shillings and ninepence 
 disappears in expenses. There ought here to be an oppor- 
 tunity for a substantial national saving. 
 
 It is sometimes said that it is the eighty-four companies 
 and societies doing what is called Industrial Insurance that 
 have the heavy expenses ; and it is true that, out of 1 8 
 millions a year paid in premiums in the Industrial Branch, 
 8 millions goes in charges of one sort or other, which is, 
 relatively to the amount of premium income, three times as 
 much as in the Ordinary Branch. But it is the method of 
 solicitation and of collection of premiums in the Industrial 
 Branch that is so extravagantly costly, not the administra- 
 tion. In the Industrial Branch the premiums are collected 
 personally at the insurer's own home, mainly in pence, by 
 a canvassing collector who calls weekly. In the Ordinary 
 Branch the premiums are, for the most part, remitted to the 
 office by the insurer himself, either quarterly or yearly, 
 mainly by cheque. 
 
 But seeing that the business of managing the funds and 
 making the investments is identical in both branches of Life 
 Assurance, it is really the seventy British Offices doing 
 business in the Ordinary Branch that seem open to most 
 criticism for the amount of their expenses.^ If we regard 
 the business (after providing a reasonable sum per million 
 pounds for managing the investments) simply as one in 
 which so many separate payments have to be obtained from 
 insurers, so many separate policies issued, and so many 
 separate claims paid, we shall find that the Industrial Branch, 
 which has, in the aggregate, nearly three thousand millions 
 of such transactions annually, handles each of them, on an 
 average, at a cost of less than one penny. The companies 
 and societies doing Life Assurance in the Ordinary Branch, 
 which have fifty or sixty million such transactions every 
 
 ^ A score of offices carry on both branches of Life Assurance, but the accounts 
 have to be kept entirely separate. 
 
 !f 
 
1 96 A State Insurance Department 
 
 year, are spending, on each of them, on an average, more 
 than a shilh'ng— which appears, by comparison, an absurdly 
 high figure. The very heavy cost thus imposed on the 
 " ordinary " insurer is due 
 
 (a) Partly to the large amounts paid (in all but four ex- 
 ceptional offices) to solicitors, bank officials, and other agents 
 as commission, both on new business and on renewals- 
 commission which, in face of the competition, no Insurance 
 Office dares to reduce ; ^ 
 
 ib) Partly to the dispersion of the business among 
 different staffs, to the extensive multiplication of office 
 premises, and to the embarking on expensive advertising 
 in all sorts of ways ; 
 
 {c) Partly to the fees taken by a quite unnecessary pro- 
 fusion of Directors— over 1500 in number— amounting, it 
 is estimated, to something like a quarter of a million sterling 
 annually, and to the salaries paid to the officers of the need- 
 lessly numerous separate staffs—^// these items being greatly 
 swollen by the competition among so many companies and 
 societies ; and 
 
 {d) Partly to the handsome dividends in the com- 
 paratively iQ^w shareholders' concerns, which are taken by 
 the little knots of proprietors to whom they belong. 
 
 {b) The Evils of Industrial Insurance 
 
 A more serious question is the urgent necessity for 
 putting a stop to the evils connected with the whole system 
 
 » A solicitor, bank manager or insurance agent through whose hands passes 
 a new insurance pohcy. say for ^5000. involving an annual premium of peTap 
 ^ 1 30 would receive a commission of at least ^50 down (i per cent of the sum 
 assurec )-sometimes as much as ^75 or ^100 being paid-and would moreove^ 
 get a further sum of about £z : iss. per annum (being 2* per cem) for evj; 
 afterwards, as long as the premiums continued to be paidf even if the policy 
 holder pays them direct It should be stated that, in an increasing numC of 
 cases, the new policyholder insists on getting the commission himself (and 7f he 
 stands out, can nearly always extort it from the company under the threat of 
 resorting to another office). In these cases it becomes' a Lt of discount-the 
 reward of sharpness and persistence ! The four British companies pavine no 
 commission are the Clergy Mutual, Equitable, Metropolitan, and London Life 
 
 The Advantages of Nationalisation 197 
 
 • 
 
 of Industrial Insurance. At present the great mass of the 
 wage-earners (usually the wage-earners' wives) are persuaded, 
 by the army of plausible agents, to pay 1 8 million pounds 
 a year for insurance, almost entirely for " Burial Money." 
 This heavy tax — twice as much as the wage-earners pay to 
 the State for all the benefits of the National Health Insur- 
 ance Scheme ; more than is levied in Germany on all the 
 parties concerned for a universal provision for sickness, 
 accident, maternity, invalidity, old age and widowhood — is 
 very largely consumed in costs. In round numbers, eight 
 millions goes in expenses, three-quarters of a million in 
 dividends to shareholders, and eight millions in claims ; 
 whilst the balance goes to increase the Insurance Fund, 
 which provides for meeting future claims. The poor people 
 are willing enough to insure, but they misunderstand the 
 contracts into which they are persuaded to enter. Four- 
 fifths of all the policies lapse in less than five years, without 
 becoming claims. Though 10 or 11 millions of new policies 
 are taken out each year, the number in force rises only by 
 less than one million annually, and, though practically every 
 person in the wage-earning class is insured at some point in 
 life, at least 30 per cent of the deaths among that class are 
 uninsured at death. Nor is there any possibility of pre- 
 venting this huge cost, these incessant lapses, and this high 
 proportion of deaths without " Burial Money " — still less any 
 prospect of securing any proper provision for widows and 
 orphans — so long as the matter is left to anarchical private 
 enterprise and the tender mercies of the Industrial Insurance 
 Companies and Societies. In the face of incessant competi- 
 tion they simply cannot dispense with their extravagantly 
 costly method of personal canvassing and collection. The 
 only possible remedy for the evils of Industrial Insurance is 
 to bring in the power and the organisation of the State. 
 This can hardly be done for Industrial Insurance alone. 
 
 H 
 
II 
 
 1 9S A State Insurance Department 
 
 » 
 
 VI. The Conditions of Nationalisation 
 
 What is suggested, therefore, is that the Government 
 should take over compulsorily, by Act of Parliament, the 
 whole busmess of Life Assurance, and conduct it, as a public 
 service, by a State Insurance Department. Apart from 
 various insurance schemes in connection with the postal 
 service such a State Insurance Department has been carried 
 on with considerable success, actually in the severest com- 
 petition with the companies, by the New Zealand Govern- 
 
 TAl ^^SJ^^'"' ^""^ ^^' J"'^ been started by the State 
 ot Ohio. The Government of Italy, going further, has made 
 Life Assurance a State Monopoly, and the Government of 
 Uruguay has followed its example. 
 
 (a) The Offices and Staffs 
 
 Life Assurance is combined, in many of the offices, with 
 other kinds of insurance (such as fire, accident, employers' 
 liability, marine, fidelity, plate-glass, motor-car, burglary 
 sickness, etc.) ; but the life accounts and life funds are in 
 all cases required to be kept entirely distinct. If as is 
 suggested, all the other kinds of insurance are left untouched 
 It would be easy for the offices {a) to transfer to the State 
 only the Life Assurances and Annuity business and funds • 
 (^) to arrange for the transfer of part only of their premises' 
 and staffs, and part only of their general reserve funds 
 
 The Government would, of course, compensate fairly all 
 Uiose whose interests were adversely affected by the change 
 To the shareholders in the various joint stock companies 
 might be paid (in Government Stock) the full market value 
 of their shares. As the total sum drawn in dividends in 
 19 1 5 was a million and a quarter, an average of 20 years' 
 purchase would amount to about 25 millions, which would 
 be more than the holdings would fetch in the market 
 (Most of the shares of Life Assurance Companies can be 
 bought, when they come on the market, to pay from 6 to 
 
 The Conditions of Nationalisation 
 
 199 
 
 I o per cent.) All the staffs of the societies and companies, 
 other than those retained for carrying on all the other 
 branches of Insurance (which are, as a matter of fact, those 
 which the Insurance Offices find most profitable), including 
 the Directors, Managers, Clerks, Superintendents, Agents, 
 etc., from the highest to the lowest, could be guaranteed 
 either situations in the State Insurance Department, not less 
 advantageous than those they are now holding, or else full 
 compensation for loss of income on the usual liberal scale. 
 The staffs would, of course, continue at first to carry out 
 their existing duties, under the directions of their immediate 
 superiors, just as at present. Reorganisation would come 
 only gradually ; and it may well be that actual reductions 
 in the staff would be made, principally, as vacancies occur.^ 
 
 {U) The Policyholders 
 
 The Government would thus take over all the existing 
 Life Assurance and annuity funds and revenues ; and would, 
 of course, at once become responsible for meeting all the 
 obligations of the policies and annuities. This would be an 
 immense gain to the policyholders, who would, without any 
 new cost to themselves, obtain for ever the most perfect 
 guarantee. They would continue to pay only their existing 
 premiums, and would get, in return, a better security. 
 
 It would be possible to continue as a " closed fund " 
 each of the Insurance Funds taken over from the several 
 
 1 Besides the British companies and societies, there are 15 foreign or 
 colonial offices doing Life Assurance business in this country. The amount of 
 ««new business" done by these offices in the United Kingdom during 1913 was 
 small, amounting to only 3 million pounds "sums assured" (or less than 6 per 
 cent of the whole new business). The total premium income during 19 13, on 
 business within the U.K., was only ;^i, 744,384. which is less than 6 per cent of 
 the whole of the premiums paid in the U.K. They do a larger proportion of 
 the annuity business, of which they have nearly one-fourth. 
 
 If a State Insurance Department were established, these "foreign" offices 
 might be given (as was done in Italy) a period of grace {e.g. 10 years), after 
 which they might be forbidden to solicit or advertise for business in this country, 
 or to maintain offices here ; though it would be unnecessary actually to prohibit 
 or make void any contract that might be made with them. 
 
 J,. 
 
■a 
 
 200 
 
 A State Insurance Department 
 
 offices— not admitting any new participants, crediting the 
 fund with whatever interest was earned on its own invest- 
 ments, and changing the circumstances only by substituting 
 a fixed and uniform percentage charge for management, 
 which would be appreciably lower than the expenses hereto- 
 fore incurred by each office. As a set-off, however, for this 
 saving, the policyholders interested in each fund would have 
 to consent to be merged in a general fund at a date by 
 which It can be foreseen that the survivors of some of the 
 funds will have become too few for effective application of 
 the principles of insurance. And it would not be otherwise 
 than reasonable that, at a further date, the whole fund should 
 be wound up, and the balance transferred to the State 
 Insurance Department, the interests of the few ultimate 
 survivors (subject to a reasonable maximum of bonus) being 
 otherwise provided for. 
 
 The necessity of keeping distinct, for many years to 
 come, all the separate Insurance Funds of all the existing 
 Life Offices— required if the rights of the " with profits " 
 policyholders are not to be varied— would be a serious clog 
 on the future management of the State Insurance Depart- 
 ment, and it ought to be avoided. An alternative plan 
 permitting an immediate merging of all the funds, would be 
 to commute the right of all the "with profits" policy- 
 holders for a fixed scale of future bonuses so long as each 
 policy continues. Policyholders are at present very uneasy 
 in their minds as to what (under the stress of depreciation in 
 the market value of the securities of the several offices, the 
 heavy war claims and the enormous taxation in prospect) is 
 going to happen to their bonuses. They would usually 
 welcome a definite Government guarantee of fixed bonuses 
 for the future. 
 
 Another and perhaps preferable form of this alternative 
 would be to convert all the policies issued on the "with 
 profits " system— and thus entitled to a periodical " bonus " 
 dependent on the profits of their several offices— into policies 
 on the *' without profits " system. This would be a matter 
 
 The Conditions of Nationalisation 
 
 201 
 
 for expert actuarial valuation in each case such as is not 
 infrequently performed, the exact equivalent being given to 
 each policyholder by an increase, once for all, in the amount 
 of his policy, without alteration of premium. The Govern- 
 ment would then be liable for this increased amount, in lieu 
 of all future bonuses.^ 
 
 if) New Policies 
 
 Whatever is done about existing policies (which must, in 
 one or other way, be absolutely maintained and guaranteed), 
 all future policies should be issued by the State Insurance 
 Department on its own revised conditions and scales of 
 premium. What is suggested is not necessarily any reduc- 
 tion of premium below the lowest now prevailing, but an 
 assimilation and simplification of rates and conditions. We 
 may contemplate that, before the " appointed day " for the 
 transfer of the business, there would have been issued a 
 statement of these conditions and premiums, identical for all 
 parts of the United Kingdom, in all the kinds of policies 
 proved by experience to be desired by insurers ; except that 
 the new State policies would all be " without profits." The 
 bewildering diversity of conditions and premiums now pre- 
 vailing among the competing offices would disappear. The 
 great gain of uniform conditions, including all the improve- 
 ments and advantages now offered by the most progressive 
 offices, would be secured. A new scale of premiums, based 
 on the lowest rates now existing — taking advantage of the 
 latest improved mortality statistics, and the present prospects 
 as to the future rate of interest, — would be worked out. At 
 
 1 About a score of the British offices (chiefly the Gresham, Standard, Norwich 
 Union, London and Lancashire, Star, Commercial Union, Royal and North 
 British) do new business abroad (apart from trifling exceptional cases), exclusively 
 in the Ordinary Branch, to the extent of about 8 million pounds " sums assured " 
 each year, the total premium income on such P'oreign and Colonial business being 
 less than 3J millions, which is under 1 1 per cent of the total premium incomes. 
 
 It is suggested that the State Insurance Department should take over this 
 existing business along with the rest, but that new business should no longer be 
 sought abroad. 
 
 
 
202 
 
 A Stale Insurance Department 
 
 
 the same time, all the varieties of policy which now commend 
 themselves to different sections of the community could be 
 continued. With all these advantageous proposals, backed 
 by the power of the existing agency staffs of the Industrial 
 Branch (who would be freed from both collecting and 
 canvassing for Industrial policies, reorganised so as to avoid 
 the present overlapping, and concentrated exclusively on the 
 Ordmary Branch), with the enormous relief that would be 
 afforded to nearly all working-class households in being freed 
 (as heremafter explained) from their present burden of over 
 three hundred thousand pounds a week (i8 millions a year) 
 for Industrial premiums— with the additional attraction of 
 unquestionable Government security, and the incalculable 
 advertisement that Nationalisation would ^xv^, and which all 
 the resources of the Post Office, the schools and colleges and 
 other public departments could be used to promote— we 
 may fairly expect a tremendous rush of new business— not 
 merely a continuance of the present rate of recruiting in 
 the Ordinary Branch, but a great and progressive annual 
 mcrease. 
 
 VII. The AbolitiOxN of the Industrial Branch 
 
 It will be seen that it is suggested that the whole 
 system of Industrial Insurance, with its house-to-house 
 collection of weekly premiums for policies not exceeding 
 ^20, should be abandoned and definitely abolished We 
 need not dilate upon its manifold drawbacks.^ It is sufficient 
 to say that no State Insurance Department could possibly 
 justify or continue a system in which eight million pounds 
 IS spent annually in obtaining and managing a premium 
 revenue of eighteen million pounds, and in which seven out 
 of every eight policies lapse without becoming claims • 
 especially when it can be shown that a cheaper, better and 
 more popular method of provision for the expenses of funerals 
 
 1 See the Report on Industrial Insurance, by the Fabian Research Deoart- 
 ment, 19 1 5 (25 Tothill Street, Westminster, price is.). ^ 
 
 The Abolition of the Industrial Branch 203 
 
 IS open to the State. To close up the existing system, the 
 whole thirty-eight millions of Industrial policies should be 
 individually exchanged (as is now done in hundreds of 
 thousands of cases annually by some of the larger Industrial 
 Offices) for fully paid - up policies, necessarily of vastly 
 smaller nominal amount, but of exactly equivalent actuarial 
 value. The sums thus assured without the necessity of 
 continuing any premiums would be, in most cases, quite 
 trivial ; and some more adequate provision for Burial 
 Expenses must simultaneously be made. We propose that 
 this should be done in the most economical way ; namely, 
 by the addition of Funeral Benefit to the Benefits now given 
 under the National Insurance Act, to be administered by 
 the same machinery. This was intended by Mr. Lloyd 
 George, and was originally included in his scheme ; but he 
 was driven to abandon any form of Benefit payable at death 
 by the determined opposition of the Industrial Insurance 
 Offices, which did not want their business competed with. 
 If they are now bought out, their objection disappears. At 
 the same time (analogous to the universal provision in most 
 counties for the sufferers from tuberculosis by Sanatorium 
 Benefit), the Local Insurance Committees should be required, 
 on the application of parent, husband, wife, child or house- 
 holder actually arranging for burial, to pay the same Funeral 
 Benefit in respect of the death of any person within the area 
 who had not come within the compulsory range of the 
 National Insurance Act. The total cost of such a universal 
 Funeral Benefit — say at rates varying from £2 for an infant 
 to ;^20 for an adult — for the whole 650,000 deaths in the 
 United Kingdom, would be about six millions annually, 
 whilst the cost of administration, as a mere additional 
 benefit worked by machinery already in existence, would be 
 very small — certainly not as much as 5 per cent on the 
 cash paid out, or only ;£^300,ooo per annum. 
 
 At the same time, the State Insurance Department, 
 reorganising for this purpose the whole force of the exist- 
 ing 70,000 agents of the Industrial Insurance Offices (who 
 
r) 
 
 204 A State Insurance Department 
 
 already obtain more than half in number of the new poh'cies 
 annually issued in the Ordinary Branch by all the British 
 Offices put together), would push its new policies for ^100, 
 A 50 and possibly even smaller amounts. The existing 
 Post Office Insurance Department, which, owing to its 
 inability to employ canvassing agents, has never had a 
 chance of success, would be simply merged in the new State 
 Insurance Department. But we may contemplate that this 
 new Department would have, for its social function, the 
 organisation of a widespread popular " Thrift Campaign " in 
 all parts of the Kingdom, in alliance with the Co-operative 
 and Friendly Societies and the Trade Unions ; and would 
 have at its disposal, in addition to its own machinery and 
 that of the tens of thousands of Societies, Lodges, Tents 
 and Branches of those organisations, also all the assistance 
 that the ubiquitous Post Office could afford, such as the 
 receipt of premiums by postage stamps, by automatic transfer 
 from Savings Bank accounts, by a Post Office Debt Collect- 
 ing service (like the French service de recouvrements) by 
 sums being paid in without charge at any Money Order 
 Office to the credit of the State Insurance Department (as 
 now for taxes)— and all the gratuitous advertisement that 
 the hundreds of Labour Exchanges and Mercantile Marine 
 Offices, the 25,000 Post Offices and the hundred thousand 
 State-aided schools and colleges could afford. The one 
 thing that the State Insurance Department could not do 
 would be to incur the huge and wasteful expense involved 
 in a weekly domiciliary collection. It may be said that 
 experience indicates that only by this weekly domiciliary 
 collection can the great mass of wage-earning families be 
 got to insure. Whether or not this is true the future will 
 show. But the immediate answer is that such of them as 
 will insure only in this way will insure only to the extent 
 of Funeral Benefit, and that only in a form which is often 
 illusory and always extravagantly costly, whilst a more 
 economical and complete method of providing Funeral 
 Benefit can be found for them. 
 
 What the State Department would start with 205 
 VIII. What the State Insurance Department 
 
 WOULD START WITH 
 
 Assuming that Nationalisation took the form of either 
 commuting future bonuses for fixed sums, or else converting 
 all existing obligations into " without profits " policies, the 
 State Insurance Department would take over an annual 
 revenue from premiums on existing policies in the Ordinary 
 Branch of 32^ millions, and receipts for Annuities of nearly 
 2 millions. The net interest derived from the accumulated 
 funds of all the companies and societies in 191 5 amounted 
 to 17^ millions, and the Income Tax that was then deducted 
 from it to over a couple of millions. Including miscellaneous 
 receipts the total revenue on the opening day would therefore 
 approach 53 millions sterling. On the other side would 
 stand the claims and surrenders payable annually on the 
 existing policies in the Ordinary Branch, say 30^ millions, 
 together with 2f millions for Annuities, or 33 millions in 
 all. There would be payable on the fully paid-up policies 
 substituted for the existing policies in the Industrial Branch 
 a sum which it is difficult to calculate without inside informa- 
 tion, but one well within the amount of the funds taken over 
 from the Industrial offices — beginning, presumably, at some- 
 thing very much less than 8 millions in the first year (being 
 the amount now payable for a year's claims and surrenders) 
 and rapidly diminishing in succeeding years, when the 
 present number of Industrial policies and total sum assured 
 are no longer maintained by the annual issue of something 
 like 10 million new policies. At the same time the existing 
 extensive indoor and outdoor staff of the Industrial offices 
 would have to be guaranteed their present emoluments of 
 about 5 millions, nearly the whole of which might be ex- 
 pected to be provided by the commission on the increased 
 rush of new policies in the Ordinary Branch that this staff 
 would bring in, when relieved of their Industrial business, 
 and concentrated exclusively on this work, for which they 
 
•I •■ 
 
 *ll 
 
 206 
 
 A State Insurance Department 
 
 have already shown so much aptitude. Moreover, their 
 services would be available for other public duties to be 
 hereafter indicated. The interest and sinking fund on the 
 cost of compensating the shareholders, and also such of the 
 directors and other officers as might be dispensed with, may 
 be put at between one and two millions a year. The expenses 
 of management of the new State Insurance Department, 
 mcluding such commission as might continue to be paid on 
 the existing policies— allowing for some immediate saving 
 m advertising and premises, an economy which it ought to 
 be possible to increase as vacancies occur in the staff— may 
 perhaps be estimated at 4 millions. In this way, a total 
 revenue of 53 millions, plus an uncertain sum for premiums 
 on the new Ordinary policies, would more than meet total 
 outgoings which could not exceed 50 millions in the first 
 year, and would (except for the claims on the new business) 
 be considerably less in future years. 
 
 With regard to the six or seven millions a year required 
 to pay for the new Funeral Benefit to be added to the 
 National Insurance Scheme, as the only way of freeing the 
 nation of its present incubus of Industrial Insurance, further 
 consideration is required. This, of course, is a new Benefit, 
 of universal application, for which the policyholders cannot 
 be made responsible. How far this charge (equal to an 
 average of a little over 2d. per week on the insured popu- 
 lation) could be met by an increase in the weekly stamp 
 revenue now raised from employers and wage-earners— how 
 far it could be otherwise provided for in the now imperative 
 overhauling of the National Health Insurance Scheme, which 
 may result in disburdening that scheme of its present inade- 
 quate provision for Maternity, Tuberculosis and Venereal 
 Disease— how far, on the other hand, it might be made, in 
 part, a charge on the profits of the State Insurance Depart- 
 ment we cannot now determine. 
 
 The Position of the Insurance Agent 207 
 
 IX. The Position of the Insurance Agent 
 
 What the State Insurance Department may probably do 
 is to discontinue the present extravagant commission arrange- 
 ments with solicitors, accountants, bank managers and other 
 persons — who are now paid, in substance, merely for leading 
 willing insurers to choose one office rather than another, — 
 but to retain and organise into a single non-competing staff 
 all the existing full-time insurance agents, possibly 75,000 
 in number, with their existing Superintendents, Assistants, 
 Inspectors and Managers. The present costly system by 
 which a dozen rival insurance agents, each concerned only 
 to get proposals for his own company or society, may meet 
 in a single street, and may wear themselves out by over- 
 lapping journeys in the same area, will presumably be 
 brought as quickly as possible to an end. The immediate 
 abandonment of the whole Industrial business, and the 
 substitution, for all the existing policies, of a fully paid-up 
 policy for a small sum, together with an absolute right to 
 Funeral Benefit in connection with the National Insurance 
 Act, will afford ground for a visit of explanation to all the 
 families on the books of each agent. This profitable and 
 quite exceptional opportunity for canvassing for the new 
 State policies among his own clientele should clearly be left 
 to each agent. But after that has been done, we may 
 assume that there will be a systematic rearrangement and 
 reorganisation of the entire staff, so that each provincial 
 Manager has his own provincial or county area, each 
 Superintendent his own district, and each Agent his own 
 " block " of families, whom he only will visit for insurance 
 purposes. Assuming that all the 70,000 full-time agents 
 are thus taken over, and redistributed on the " Block 
 System," which the Prudential and other companies are 
 finding so successful, each would be solely and exclusively 
 responsible for between 150 and 200 families, nine-tenths of 
 whom would not yet be holding any policy in the Ordinary 
 
208 
 
 A State Insurance Department 
 
 Branch. The great majority of these would have been 
 paying their weekly pence for Industrial policies, and with 
 the cessation of that payment, and the concession of addi- 
 tional facilities for the premiums, there can be little doubt 
 that the agents would immediately place a large number of 
 the new State policies. It is, we think, not generally 
 realised that already more than half of all the new 
 Ordinary Branch policies at present issued in the United 
 Kingdom— largely, of course, for sums of £t^o, £ioo and 
 £200 — are placed by these so-called Industrial Agents. It 
 should, we suggest, be stipulated that some guarantee must 
 be afforded to the agents during the first or transitional 
 year, that their present incomes should not be allowed to 
 suffer, and also that compensation should be provided for 
 each of them in respect of the cost involved in his removal 
 to the new block assigned to him. How extensive should 
 be each " block " after the first few years ; how many of the 
 , existing agents will be dispensed with as vacancies occur; 
 on the other hand, what other duties are likely to be found 
 for such a valuable public officer in daily connection with 
 a definite group of households, and what prospective advance- 
 ment in the public service he may obtain are questions that 
 we must leave to future experience to decide. It may be 
 that a responsible public officer in constant touch with every 
 200 families would be a valuable adjunct to the Registrar- 
 General in the registration of births and deaths (the exist- 
 ing imperfect organisation being merged).^ It may be that 
 such an officer would be useful to the Board of Education 
 and the Local Education Authorities, in the more systematic 
 registration of the non- adult population, throughout the 
 years, not only of compulsory school attendance, but also of 
 continuation school, apprenticeship and physical training, to 
 which the nation must now inevitably give increased atten- 
 tion. It may be that such a geographically dispersed staff 
 
 1 It is extraordinary that this country should be without an " Etat Civil » of 
 Its population— probably the only European State outside the Balkans without 
 such a department. 
 
 Life Assurance will always be required 209 
 
 of public officers is just what is needed in the impending 
 reconstruction of the machinery of the National Insurance 
 Act (in the administration of which, for Approved Societies, 
 about half of the Industrial Agents are already employed). 
 We may even see each " block " of families provided with the 
 assistance and assigned to the care of a competent public 
 officer, as regards the various branches of Social Insurance 
 now being unsystematically supplied, including not merely 
 the provision for sickness and death, but also that for 
 industrial accidents and diseases under the Workmen's 
 Compensation Act, and that for Old Age under the Old 
 Age Pensions Act. 
 
 X. Life Assurance will always be required 
 
 The believer in a Utopian Socialism will ask whether 
 Life Assurance is not merely a temporary incident of a 
 competitive society, rooted in inequality of wealth, destined 
 to pass away. This is a mistake. It can be shown from 
 the Socialist standpoint that Life Assurance will continue 
 for all time to be required to satisfy human desires and 
 social needs, even in the fully developed Socialist State. 
 Mainly through national or supernational, provincial or 
 municipal government, but partly also through the demo- 
 cratically organised voluntary associations of consumers 
 such a State would doubtless ensure for all its citizens 
 whatever provision was commonly required at each of the 
 contingencies of life. There would be, so far, no need for 
 any payment of insurance premiums for the customary 
 expenses of birth or sickness, accident or death, if we 
 assume the cost to be borne by the general funds of the 
 State, provided either from the profits of its own productive 
 departments or by general taxation. We may equally 
 assume that appropriate provision would be secured in the 
 same way for all widows and orphans, and for old age. 
 Yet so long as we are in the realm of Socialism as dis- 
 

 mm 
 
 n 
 
 2IO 
 
 A State Insurance Department 
 
 Why continue the Fund? 
 
 211 
 
 tinguished from Communism, with the very valuable freedom 
 of personal expenditure that this implies, it must always be 
 permissible for individuals to forgo immediate consumption 
 of part of their incomes in order to be able to utilise this 
 part in the future. The personal accumulation of a reason- 
 able amount, not only in what may be called the 
 Paraphernalia of the Home but also in a reserve for con- 
 tingencies that may be termed the Hoard, is not excluded 
 by the Socialist forecast. Such future use may be either for 
 the savers themselves or for others in whom they are 
 interested ; and whilst inheritance will doubtless be very 
 narrowly restricted in amount, it is difficult to imagine that 
 (subject to Death Duties rising steeply so as to intercept 
 any bequest beyond the specified maximum) either the 
 Hoard or the Paraphernalia of the Home will not be de- 
 visable by will. Thus, whether for personal saving or for 
 transmission to surviving relations, Life Assurance (includ- 
 ing Endowments and Annuities) will remain a convenient 
 method, and a useful social function. We may assume, 
 however, that it will be entered into only for purposes for 
 which full public provision is not otherwise made, or for 
 some desired addition or alternative to such provision. 
 
 That it will in each individual case be limited in amount 
 
 there will certainly be no policies for a quarter of a million 
 or so, as when torday a Rothschild dies — may safely be 
 anticipated ; but, on the other hand, it will, with other 
 opportunities for the private investor closed, in a population 
 substantially equalised in education, wealth and culture, be 
 practically universal. If every head of a family in the 
 United Kingdom to-day left, at death (apart from the 
 Paraphernalia of the Home), a Hoard, on an average, of no 
 more than ^^200, this would permit of the total sum insured 
 being 2000 million pounds, or more than tivice the present 
 total in the Ordinary Branch. But even a Hoard of i^ 1000 " 
 may be not unreasonable, still less a socially injurious ac- 
 cumulation for the average head of a family ; and such a 
 sum would, even in our present population, imply a total 
 
 insured of no less than 10,000 millions sterling. There will 
 accordingly be, as it can be inferred, certainly no less scope 
 for Life Assurance in a Socialist State than there is at 
 present ; but the aggregate volume of business, which is 
 likely to be greatly increased, will be made up, not as at 
 present, of a relatively small number of policies of large 
 amount, but of practically universal policies of substantially 
 equal amounts. As a mere matter of social economy, it is 
 clear that the future of Insurance in the State of to-morrow 
 will inevitably be that of a unified, State -guaranteed and 
 publicly controlled department, free from the toll of the 
 private shareholder. 
 
 XI. Why continue the Fund? 
 
 The question will be asked by some, why is it necessary 
 to maintain the Insurance Fund at so high a figure, and to 
 continue to pay interest upon it, when no payment from the 
 Fund is ever required, and, on the contrary, year after year 
 sees millions added for investment. 
 
 To answer this question, it is necessary to explain to 
 those outside the Insurance world the nature of the 
 Insurance Fund. In order to be able to fix a level annual 
 premium throughout life, the new insurer (at any age above 
 thirteen) is charged more than is required to meet the claims 
 accruing annually from deaths of persons at that age. The 
 surplus is accumulated at interest, in order to enable the 
 claims to be met in the later years, when the annual 
 premiums, though unnecessarily high at the entering age, 
 become insufficient to provide for the rapidly increasing 
 proportion of deaths as the age rises. Thus, the Insurance 
 Fund is really only the accumulation of the unnecessarily 
 high premiums charged during the early years of insurance, 
 in order to avoid the prohibitive premiums that would other- 
 wise be required in the later years. In the case of each 
 policyholder, on an average, all that has been saved up for 
 him will be required, with the compound interest calculated 
 
212 
 
 A State Insurance Department 
 
 Why continue the Fu7id? 
 
 213 
 
 on, to enable the amount of his poh'cy to be paid when it 
 matures. 
 
 The opposite plan— of charging for each year exactly 
 the premium which that year's deaths require— is termed 
 the "natural premium basis," and involves what the Insurance 
 world denounces as the " vice of assessmentism." It has 
 been repeatedly tried, and has (wherever insurance is 
 voluntary) always broken down. The policyholders always 
 refuse to go on when they find the premiums rising ; the 
 healthy let their policies lapse ; and " young lives " begin 
 to shun the office that is depending on their premiums to 
 postpone its inevitable insolvency. 
 
 Hence the present proposal of the Nationalisation of 
 Life Assurance— leaving, as it does, Life Assurance entirely 
 optional, allowing the voluntary lapsing of policies, and 
 dependent on the individual decision of each policyholder 
 to insure and to continue in insurance — in no way dispenses 
 with an actuarially complete Insurance Fund. 
 
 It may be said, indeed, that some offices have got from 
 
 their Insurance Funds incidental advantages that a State 
 
 Insurance Department would not require. An Insurance 
 
 Company wants to convince us of its solvency. To the 
 
 man or woman who parts with a lump sum in return for 
 
 the promise of an annuity, it is vital that the Insurance 
 
 Office should certainly continue to be able to pay its debts. 
 
 To the person taking out a Life Assurance or Endowment 
 
 policy, it is essential that when the policy becomes a claim, 
 
 the Insurance Office should still be in existence, and able to 
 
 meet its obligations. Many disastrous failures of Insurance 
 
 Companies and Societies in past years — some revelations of 
 
 reckless dealings with insurance funds even in our own time 
 
 — have left a feeling of painful suspicion. It is partly in 
 
 order to overcome that suspicion and to give the necessary 
 
 security that every Insurance Company or Society makes 
 
 parade of its imposing accumulation of funds, which (although 
 
 the figures afford no real indication of its financial position) 
 
 it advertises as affi)rding a substantial reason for the trust 
 
 that it invites us to place in its solvency. The funds thus 
 accumulated are not wasted, because the interest earned on 
 such investments swells the annual revenue. Yet it may be, 
 that in order to keep up with competing offices, the fund 
 becomes a fetich, and is, by ultra-cautious valuations and 
 hidden resources, piled higher and higher in this endeavour 
 to impress the public. To the extent to which unnecessary 
 accumulations are made with the object of producing an 
 impression of solvency, the withdrawal of sums that would 
 otherwise have remained with the policyholders is equivalent 
 to an unnecessary expense, due solely to the private nature 
 of the enterprise and incurred only because we cannot trust 
 a joint-stock company or society of private individuals not 
 to go bankrupt. The Government can give the most perfect 
 security without making the same parade of accumulations. 
 British Government annuities, whether Consols or Post Office, 
 have no collateral investments behind them ; they stand ex- 
 clusively on the faith in the issuing department : yet their 
 security is esteemed more highly than those granted by the 
 wealthiest joint-stock Insurance Company. 
 
 There is a second reason why a multitude of competing 
 Life Assurance Companies and Societies have to accumulate 
 rather larger reserves than a single Government Insurance 
 Department would find necessary. In any given country, 
 with a population becoming steadily more provident, and 
 with a death-rate continually falling owing to improved 
 hygiene, the total receipts from premiums year by year con- 
 stantly exceed the total payments in expenses and claims. 
 A Government Insurance Department can take advantage of 
 this fact, and — whilst it would, as a matter of book-keeping, 
 keep a separate Insurance Fund, with its own easily realisable 
 investments to meet any sudden excess of claims — it would 
 find it unnecessary either to provide so much working 
 capital, in proportion to its liabilities, or such an extensive 
 reserve to meet an exceptional rush of claims. It is far less 
 likely to have to realise any of its investments than any 
 one company. The hundred and thirty competing companies 
 
 ) m 
 
214 
 
 A State Insurance Depart^nent 
 
 and societies in the United Kingdom, are perpetually striving 
 to deprive each other of business. In fact, no one of them 
 can have any assurance that it will continue to get new busi- 
 ness at all. And seeing that a large proportion of policies 
 are taken out on level premiums, at relatively healthy ages, 
 and that, after age thirteen, the chances of death increase 
 year by year, every private Insurance Office (dealing, as it 
 does, only with a small and uncertain fraction of the 
 community) finds it necessary to keep its investments in such 
 a form that it can realise a proportion of them at any time, 
 to provide for the contingency of its having to meet, actually 
 out of the Insurance Fund accumulated for that purpose, the 
 claims of its steadily ageing policyholders, at a time when 
 there has been a cessation of new business, and therefore a 
 lack of new accumulations to be added to the Fund. 
 
 XII. Summary of Proposals 
 
 The objects with which the Nationalisation of Life 
 Insurance is here proposed are diverse and of varying weight 
 and urgency. 
 
 At present the business is carried on, alike in the 
 Ordinary and in the Industrial Branch, at a heavy cost for 
 commission and management, which is unnecessarily in- 
 creased as a result of the rivalry of a hundred and thirty 
 competing offices. The Industrial Branch has evils of its 
 own, which call for the abandonment of this form of business, 
 and the substitution, on the one hand, of a universal Funeral 
 Benefit, and, on the other, of a general effort to get taken up 
 policies, securing a real provision for the survivors. This 
 can only be effected by the State taking over the whole 
 business. 
 
 The position of all the Insurance Offices is somewhat 
 critical, not in view of the war claims and the depreciation 
 of securities, both of which can be met, even if with some 
 sacrifice of bonus and some impairment of shareholders' 
 dividends ; but in view of the probable need for a much 
 
 Summary of Proposals 
 
 215 
 
 higher rate of Income Tax, which might presently sweep 
 away half their income from investments. The Chancellor of 
 the Exchequer to-day finds himself impeded in dealing with 
 the Income Tax, as an indispensable source of revenue, by 
 consideration of possible disastrous results of the solvency of 
 the Insurance Offices. 
 
 The taking over of all the Life Assurance business of all 
 the British Offices, with complete guarantee to all policy- 
 holders and full compensation to the shareholders, would in- 
 volve no payment of cash, or Government loan. The new 
 State Insurance Department would start, even after drop- 
 ping the whole Industrial Branch, with a revenue of 53 
 millions a year, with which to meet outgoings which would 
 certainly fall short of that sum ; and would take over 550 
 millions of cash and securities, which is increasing at the 
 rate of at least a million a month. 
 
 The State Insurance Department would convert all 
 existing "with profit" policies into actuarially equivalent 
 "without profit" policies, but would otherwise continue 
 them unchanged. New policies would be issued on 
 simplified terms, equal to the best of the offers of the 
 superseded Companies. 
 
 The Industrial Branch would, in view of its unsatis- 
 factory nature, be simply abandoned and the business 
 prohibited for the future, all existing Industrial policies 
 being converted into their exact actuarial equivalents in 
 fully paid up, non-participating policies. The much smaller 
 sums assured by such policies, on which no future premiums 
 would be payable, would serve only as trifling supplements 
 to a universal Funeral Benefit of from £2 to ;^20, according 
 to age, which would be added to the Benefits payable under 
 the National Insurance Act. 
 
 The entire staff of full-time Agents (including Managers, 
 Superintendents, Assistants, Inspectors, etc.) would be re- 
 organised as a unified, non-competing hierarchy, each agent 
 being exclusively responsible for a group of between 150 
 and 200 families, and concerned, at the outset, merely with 
 
r^ 
 
 216 
 
 A State Insurance Department 
 
 Swnmary of Proposals 
 
 217 
 
 canvassing for the new "Ordinary" policies of the State 
 Insurance Department, the payment of the premiums being 
 facihtated by extensive developments of the machinery of 
 the Post Office and otherwise. 
 
 Every existing Insurance official, from Director or 
 Manager down to the youngest clerk or agent, would be 
 guaranteed either a situation on the staff of the new State 
 Insurance Department, which would aim at taking over the 
 whole of the present staffs, and finding them places not less 
 advantageous than those now enjoyed ; or else liberal com- 
 pensation for loss of office or impairment of income. The 
 extensive staff of the new Department would probably be 
 used for other public services, and might possibly become 
 the nucleus of a reorganised and consolidated system of 
 Social Insurance generally. 
 
 The Government, in taking over the assets and liabilities 
 of the Insurance Offices, would find itself in possession of 
 over 550 million pounds worth of investments, about half of 
 which could gradually be realised on the Stock Exchanges 
 of the world. It might also expect to receive annually for 
 investment a steadily rising sum, representing the yearly 
 increase of the Insurance Fund For these sums it would 
 give its own securities, thus gradually withdrawing from 
 individual holders the Great War Loan, the periodical 
 redemption of which by annual or other instalments will, it 
 is assumed, be provided for. Thus, within a few decades, 
 practically the whole of the greatly swollen Insurance Fund 
 would be invested in British Government securities. It 
 may be assumed that, besides paying interest, the Govern- 
 ment will set aside from general taxation a Sinking Fund 
 for the eventual redemption of the National Debt. 
 
 What the existing policyholders would gain — and that 
 without cost to themselves — would be the raising of their 
 policies to the most perfect and best possible security, the 
 unconditional guarantee of the British Government. 
 
 What the Chancellor of the Exchequer would gain 
 would be the gradual absorption by the ever-growing 
 
 Insurance Fund of more and more of the Great War Loan, 
 the whole unredeemed portion of which would probably, 
 within the next few decades, be completely immobilised in 
 the hands of the State Insurance Department, and be thus 
 taken off the market, setting the individual investor wholly 
 free to put his capital back into industrial development or 
 to subscribe to a new loan should a national emergency 
 require it. 
 
CHAPTER V 
 
 A REVOLUTION IN THE INCOME TAX 
 
 219 
 
'■ii 
 
 CONTENTS 
 
 I. Introduction. 
 II. The Yield of the Income Tax. 
 
 III. Objections to the Ta.x : 
 
 {a) Its Inequality. 
 
 {<5) Is it a Premium on Dishonesty ? 
 
 (c) Where the Tax is still defective. 
 
 IV. "Half our Incomes." 
 
 V. The Recognition of Family Responsibilities; 
 {a) The Penalising of Marriage. 
 (^) The Penalising of Parentage. 
 (^) Why not Family Incomes ? 
 
 {d) The Practical Extension of the Exemption Limit. 
 {e) An Alternative Method. 
 
 VI. The Slightness and Unevenness of the Graduation. 
 
 VII. The Prevention of Evasion : 
 
 (a) Investments Abroad. 
 
 (3) Income not brought to this Country. 
 
 (c) Selling Securities - Cum-dividend » and buying - Ex-dividend " 
 (a) Treasury Bills. 
 
 (g) Realised Accessions of Capital Value. 
 (/) Deposit Interest. 
 (^) Persons who escape Assessment. 
 (A) Foreign Agencies in the United Kingdom. 
 {/) Methods of Prevention. 
 VIII. The Capital Tax and the Citizen Tax. 
 IX. Will such Taxation cripple Industry, or drive Capital out 
 of the Country? 
 
 A REVOLUTION 
 
 IN 
 
 220 
 
 THE INCOME TAX 
 
 I. Introduction 
 
 " The Income Tax," observed the Chancellor of the Ex- 
 chequer in 1909, "intended originally as a temporary 
 expedient, is now in reality the centre and sheet-anchor 
 of the National Budget." ^ As his predecessor had said 
 in 1907, "It must now be regarded as an integral and 
 permanent part of our financial system." ^ 
 
 To an ever greater reliance on the Income Tax all 
 
 ^ Hansard, 1909, vol. 4, p. 506. 
 
 2 /did. 1907, vol. 172, p. I198. 
 
 The facts as to the Income Tax (including Supertax) are best found in the 
 Annual Reports of the Commissioners of Inland Revenue (a full history of the 
 past in the 28th Report, 1885); the latest report is Cd. 846 of 1915. These 
 should henceforth never be used or cited without recourse to the valuable work, 
 British Incomes and Property ^ by J. C. Stamp, 191 6, in which all the pitfalls 
 for the unwary are described. See also the Reports and Evidence of the Depart- 
 mental Committee on Income Tax, 1905 (Cd. 2575) ; of the Select Committee 
 on Income Tax, 1906 (H.C. 183 of 1906) ; of the Foreign Office on Local 
 Taxation of Personalty abroad, 1904 (Cd. 2004), and on Graduated Income 
 Taxes, 1905 (F.O. Misc. No. 2), and 1913 (Cd. 7100); and of the Colonial 
 Office on Graduated Income Taxes, 1905 (H.C. 196), with which should be 
 read the article by S. E. Minnis on "The Income Taxes of the Self-Government 
 Dominions" (in Journal of Comparative Legislation, January 1916). An 
 elaborate history of taxes on income in all countries, with extensive national 
 bibliographies, is given in The Income Tax, by Edwin R. A. Seligman, Mac- 
 millan, 19 11. See also the same author's Essays in Taxation, 1895; and 
 Progressive Taxation, 2nd edition, 1908 ; and for the budget changes since 1862 
 the trilogy, Twenty Years of Financial Policy, by Sir S. Northcote (Lord 
 Iddesleigh), 1862 ; Finance and Politics, by Sydney Buxton (Viscount Buxton), 
 1887 ; and British Budgets, i88y to igi2, by Bernard Mallet, 19 13. The 
 Nature and First Principle of Taxation, by Robert Jones, 19 14, gives other 
 information. For the case-law and practice on points of doubt see Guide to 
 Income Tax Practice, by A. Murray and R. Carter (6th edition, 19 ii). 
 
 221 
 
222 
 
 A Revolution in the Income Tax 
 
 Objections to the Tax 
 
 223 
 
 
 political parties have, in fact, by financial necessity, been 
 driven. However superficially attractive may be other 
 taxes, however much they may for other than fiscal reasons 
 be desired, successive Chancellors of the Exchequer have 
 been compelled, sorely against their inclination, to depend 
 more and more on direct taxation, and in particular upon 
 the direct taxation of income,^ whenever they needed any 
 really substantial increase of revenue. They have been 
 forced to put their faith in the Income Tax as Napoleon 
 did in his Finance Minister " le bon Mollien," on the ground 
 that where others produced projects and excuses he yielded 
 solid cash. In the financial stress that will continue long 
 after the conclusion of Peace, when the annual revenue of 
 the State will have to be more than twice what it was 
 before the war, it is as clear as the sun at noon that— make 
 what excursions we may into " fancy " taxes— nothing will 
 serve, in the main, to rake in a sufficient sum except a 
 stupendous Income Tax (including Supertax). 
 
 II. 
 
 The Yield of the Income Tax 
 
 So vast is the income of the United Kingdom, and so 
 highly perfected has become the machinery of assessment 
 that the Income Tax already yields, to use the words of 
 the Departmental Committee of 1905, with "a minimum of 
 friction and a maximum of result " ^--at a trifling percentage 
 of cost and with no more hardship or complaint than any 
 other impost— a prodigious annual revenue. The following 
 are the statistics for the past decade : 
 
 •, Even the Death Duties, of late years so productive, have, through the 
 widespread habit of Life Assurance covering the sum payable, to a large extent 
 become, in effect, an additional annual tax on the incomes derived from property 
 —thus, m substance, removing the objection that used to be made against the 
 unfairness of chargmg such temporary incomes as those from annuities leaseholds 
 mines and other - wasting" property at the same rate to Income Tax as incomes 
 from permanent investments. 
 2 Cd. 2575 of 1905. 
 
 Statistics of Income Tax (including Supertax) from 1904-5 
 TO 1914-15, WITH Estimates for 1915-16 and 1916-17 
 
 
 Nominal 
 
 Net Produce 
 
 Net Receipts 
 
 Total Net Produce 
 
 Year. 
 
 rate 
 
 :per 
 
 of the Year's 
 
 from Supertax 
 
 of Income Tax 
 
 
 i: 
 
 Income Tax. 
 
 in the Year. 
 
 and Supertax. 
 
 
 s. 
 
 d. 
 
 £ 
 
 £ 
 
 £ 
 
 I904-S 
 
 
 
 
 30,966,404 
 
 • • • 
 
 30,966,404 
 
 1905-6 
 
 
 
 
 31,601,237 
 
 • • • 
 
 31,601,237 
 
 1906-7 
 
 
 
 
 32,002,412 
 
 • • • 
 
 32,002,412 
 
 1907-8 
 
 
 
 
 32,380,000 
 
 9 * % 
 
 32,380,000 
 
 1908-9 
 
 
 
 
 33,408,754 
 
 .•• 
 
 33,408,754 
 
 1909-10 
 
 
 2 
 
 37,679,902 
 
 • • • 
 
 37,679,902 
 
 I910-II 
 
 
 2 
 
 38,344,767 
 
 2,891,345 
 
 41,236,112 
 
 1911-I2 
 
 
 2 
 
 39,631,630 
 
 3,018,388 
 
 42,650,018 
 
 I912-13 
 
 
 2 
 
 41,574,277 
 
 3,599,706 
 
 45,173,983 
 
 1913-I4 
 
 
 2 
 
 43,523,345 
 
 3,399,008 
 
 46,862,353 
 
 I914-15 
 
 
 8 
 
 59,423,831 * 
 
 10,121,023 
 
 69,544,854 
 
 1915-16 
 
 3 
 
 
 
 • ■ • 
 
 • • • 
 
 128,320,000 1 
 
 1916-17 
 
 5 
 
 
 
 « • • 
 
 • • • 
 
 195,000,000! 
 
 * Net receipt in the year : produce of assessment of the year not yet published. 
 
 t Budget Estimates (approximate). 
 
 In addition, we ought to include as Income Tax the 
 additional Mineral Rights Duty, yielding a third of a million 
 annually, and also the strictly temporary Excess Profits 
 Tax which scarcely began in 191 5-16, but is estimated to 
 yield (together with the sums handed over by Controlled 
 Establishments) no less than 86 millions in 19 16— 17, 
 making a total of no less than 281 millions sterling. No 
 single tax in any country at any time has ever produced 
 anything like so great an amount. Yet we have only just 
 begun to use it for getting really large sums. 
 
 III. Objections to the Tax 
 
 Looking back over the voluminous literature of de- 
 nunciation of the Income Tax ^ since its first imposition by 
 Pitt in 1798, when it lasted only until 18 16, or since its 
 revival by Sir Robert Peel in 1842, — though we object 
 nearly as vehemently as ever to taxation as such — it is 
 
 ^ Professor Seligman's volume, The Income Tax, affords a graphic summary. 
 
224 
 
 A Revolution in the Income Tax 
 
 
 remarkable to what an extent the special objections to this 
 particular impost above all others have dwindled away. We 
 see that it has not, as was once feared, led to any meticulous 
 control over our lives by a tyrannous bureaucracy. Though 
 we still strive to conceal the amount of our incomes from 
 our neighbours as a primitive savage hides his real name, 
 we are no longer impressed by the childish objections to 
 revelation to a discreet official. We realise now that a tax 
 on income is no more (and also no less) " confiscation " than 
 any other form of taxation of equal severity. We still 
 dislike actually paying money to the tax-collector, even if 
 we realise that indirect taxation involves a larger though 
 a less noticeable contribution ; but this dislike of visibly 
 parting with money applies no more, pound for pound, to 
 the Income Tax than to the Inhabited House Duty or the 
 Land Tax, or the Taxes on Male Servants, Carriages, 
 Armorial Bearings or Dogs. On the other hand, we realise 
 — it is noticeable how much this reflection does to reconcile 
 us — that, only by means of the Income Tax (including as 
 it now does the Supertax) can our richer neighbour, who 
 is manifestly a much more fit subject for taxation' than 
 ourselves, be made annually to contribute to the Exchequer 
 anything like proportionately to his undeserved wealth ! 
 
 (a) Its Inequality 
 
 A more serious objection used to be the flagrant inequality 
 of an ostensibly equal demand — the unfairness of exacting 
 an equal poundage rate, from large incomes and from small, 
 from fathers of families and from the childless, from those 
 with precarious incomes dependent on continuous work and 
 from others enjoying incomes of permanence and security 
 independent of life, health or employment. No economic 
 sophistry can make the sacrifice of ;^iooo, out of a bachelor's 
 income of ;^2 0,000 a year derived from urban ground rents, 
 seem at all commensurate with that of ^10 out of the ;£"200 
 salary of the consumptive clerk who is the father of a young 
 
 Objections to the Tax 
 
 225 
 
 family. This objection still retains some of its force. But 
 its validity has been greatly diminished by {a) the develop- 
 ment of the system of Abatements up to ;^7oo ; {b) the 
 allowance as a deduction of Life Assurance premiums up to 
 one-sixth of the income ; (r) the allowances for children of 
 £2^ a year each ; id) the concession of a lower rate, up to 
 ;£^2 500 a year, for "earned" than for "unearned" incomes 
 (" differentiation ") ; {e) the recently introduced concession 
 of lower rates on unearned incomes under ;^2000 ; and, 
 above all, (/) the graduation effected by the addition of 
 the Supertax for all incomes over ^^3000 at rates now 
 rising, but only very slowly, and only up to ;fio,0OO, 
 according to the total amount of the income. 
 
 {U) Is it a Premium on Dishonesty ? 
 
 Most objectionable of all, to John Stuart Mill and other 
 moralists, was the feature that made the Income Tax, as 
 they feared, a " premium on dishonesty." When the assess- 
 ment was dependent, in the main, on the contributor's own 
 statement of what his income was — a statement which the 
 great mass of little agriculturalists, jobbing craftsmen and 
 small shopkeepers are still usually incapable of correctly 
 computing — the procedure put a strain upon veracity and 
 honesty, under which ordinary human nature gave way. 
 This is the rock on which most of the systems of direct 
 taxation — notably the property taxes of the United States — 
 have come lamentably to grief, so as to be now, among 
 economists, a byeword and a reproach. It is not to be 
 denied that the British Income Tax is still, to some extent, 
 open to this criticism. But most of those who make it the 
 basis of their objection are apparently unaware of the extent 
 to which the ground has, by a steady perfecting of the 
 machinery of assessment, already been cut away beneath 
 them. By the adoption, as the basic principle, of " stoppage 
 at the source," practically all opportunity for dishonesty is 
 removed from the ordinary contributor, so far as concerns 
 
 Q 
 
226 
 
 A Revolution in the Income Tax 
 
 Objections to the Tax 
 
 227 
 
 the vast mass of " unearned income," such as rents, mortgage 
 and debenture interest, dividends and annuities of all kinds, 
 together with salaries and pensions payable by the Govern- 
 ment or other public authorities. The rapid transformation 
 during the past generation of private businesses into joint- 
 stock companies, of which there are now no fewer than 
 50,466 assessed, where the profits are distributed as dividends, 
 has greatly extended the area over which stoppage at the 
 source prevails, independently of any statement or return by 
 the contributor himself In fact, it is computed that not 
 less than three-fourths of all the British Income Tax is thus 
 automatically deducted before ever reaching the taxpayer. 
 At the same time, this growth of joint-stock companies, the 
 contemporaneous increase in size and complexity of most 
 businesses, and the elaboration of partnerships, have led, 
 to an ever - increasing extent, to a greater publicity, to 
 the preparation of the accounts by independent Public 
 Accountants, and frequently to independent audit. All this 
 has not only tended to relieve individual contributors from 
 the invidious task of themselves declaring the amount on 
 which they are to be taxed, but has also made more difficult 
 any " misunderstanding " or deliberate deceit.^ In the case 
 of the agriculturalist, the device of accepting a proportion 
 of the rental value of his farm as the measure of his profits 
 saves him alike from book-keeping and from temptation ; 
 and now that the whole rental value is so taken instead of 
 only one-third, it is supposed that, on an average of years, 
 rough justice is done. The temptation to make a dishonest 
 return applies, in fact, almost wholly to a relatively small 
 part of Schedule D, which is itself only one out of the five 
 
 1 Under Schedules D and E, where there was most scope for dishonest returns, 
 no less than 350 million pounds out of a total of 816 millions income assessed 
 in 1913-14 was that of Public Companies, whilst twenty-eight millions was that of 
 Local Authorities, and 177 millions that of employees, whose salaries are either 
 taxed by deduction or else have to be independently reported by their employers. 
 Over fifty millions was deducted on payment of coupons. Onlv 120 millions is 
 left to be returned by individual traders, great and small, and ninety-two millions 
 by private firms ; and of these totals at least a third is returned by concerns of 
 magnitude, whose accounts are elaborately kept and independently audited 
 
 schedules under which the tax is collected. The small 
 shopkeepers and other independent profit-makers are now 
 very closely scrutinised by the Surveyor of Taxes, who has 
 his own auxiliary sources of information, and who is able to 
 form a fairly accurate presumption as to the usual income 
 of each family from its Standard of Life as regards house 
 accommodation, etc. What has been of the greatest assist- 
 ance is that practically all persons with incomes under £joo 
 a year (that is to say, more than three-fourths of all the 
 Income Tax payers) — together with the greater number of 
 those between ;^7oo and ^^2500 a year — nowadays voluntarily 
 come to the Surveyor of Taxes, prepared to be cross-examined 
 as to their means, owing to their desire to be allowed either 
 an Abatement, or the Allowance for Children, or that for 
 Life Assurance, or the concession of the lower rate on some 
 part, whether " earned " or " unearned," of their total receipts. 
 At the other end of the scale the forty or fifty thousand 
 persons whose incomes are suspected to exceed ;f2 50o a 
 year, find, owing to the diligent scrutiny of the Special 
 Commissioners at the centre (who are independently informed 
 by the Death Duty returns, by the rental value of residences, 
 and by the publicity of nearly all large salaries), exact 
 statements insisted on of all their sources of income, in order 
 that the 30,000 of them who are discovered to be enjoying 
 ;^3000 a year and upwards may be precisely assessed to 
 the minutely graduated Supertax. The result is that the 
 British Income Tax now combines, with extraordinary 
 success, the two apparently opposite principles of " stoppage 
 at the source," by which three-fourths of the whole yield 
 is automatically obtained ; and the scrutiny and separate 
 official assessment of each individual income, to which more 
 than nineteen twentieths of the taxpayers, including all the 
 smaller ones, and on the other hand, all the larger ones, and 
 among them those most liable to make a defective return, 
 now have to subject themselves. This individual scrutiny 
 and separate official assessment of each person's liability, 
 ought now to be made absolutely universal. We ought all 
 
 
ii "''l 
 
 228 
 
 A Revohition in the Income Tax 
 
 % 
 
 " Half our Incomes 
 
 n 
 
 229 
 
 
 »•! 
 
 to pay an annual visit to the Surveyor of Taxes, as a matter 
 of course, for exact adjustment of our Income Tax, as 
 some people do to their doctor or dentist ! 
 
 There is still evasion of the British Income Tax, but it 
 can be shown to be confined to a very small class, to be 
 mostly less than is popularly supposed ; and to be, in all 
 probability, not proportionately more than in the case of 
 any other tax.^ These evasions ought to be prevented, as 
 so many others have been, and we shall make suggestions 
 to this end. But to object nowadays to the Income Tax 
 because it is sometimes evaded is like objecting to railway 
 travelling because of the jolts. 
 
 {c) Where the Income Tax is still Defective 
 
 Now that we have to rely on the Income Tax as a per- 
 manent part of our financial system, and must contemplate 
 its not only remaining indefinitely at something like the 
 present high rate, but also being actually increased, it 
 becomes of much greater importance than ever to get rid of 
 the last of its defects. A maladjustment which at three- 
 pence or sixpence in the pound was only an annoyance, 
 becomes, at five or ten shillings in the pound, an intolerable 
 hardship. The outstanding defects of the British Income 
 Tax to-day, notwithstanding all the recent improvements, 
 are (i.) its unfair inequality of incidence as between the single 
 and the married, and between the childless and those who 
 have their quiver full, together with the anomalies to which 
 these inequalities, and the closely allied refusal, still only 
 slightly mitigated, to recognise a wife as a person give rise ; 
 (ii.) the uneven and inadequate steepness of the graduation 
 resulting from the haphazard combination of Abatements, 
 Allowances, the concession of Lower Rates and the Super- 
 
 1 It must be remembered that, in a large number of the cases in which people 
 wholly or partially avoid payment in one way or other, they equally fail to eet 
 allowed to them one or other of the deductions, abatements, allowances, or con- 
 cessions of lower rate to which they would have been entitled on full assessment 
 so that their gam, and the Government's loss, is far less than is supposed 
 
 tax ; (iii.) the failure to prevent both lawful avoidance and 
 unlawful evasion by foreign investments and accumulation, 
 bankers' deposit interest, discount on Treasury Bills, the use 
 of Endowment Policies and the purchase of reversions as 
 tax-free investments, the profitable redemptions of securities 
 at a premium, profits disguised as sales of capital assets, 
 " in and out " dealings in stocks so as to avoid drawing the 
 taxed dividends, etc. — avoidances and evasions varied and 
 interesting, but far less than is commonly supposed. 
 
 For these and other defects remedies will be subsequently 
 suggested. 
 
 IV. " Half our Incomes " 
 
 Meanwhile we have to contemplate taxation that will 
 sweep away, as the Secretary to the Treasury (Mr. Edwin 
 Montagu) has significantly intimated, something like half 
 our incomes. We cannot here go into the details, even 
 speculatively, of the first or, possibly still more important, 
 the second or third " Peace Budget." We cannot yet know 
 either the expenditure to be met or what other sources of 
 revenue can be found. But it is altogether too optimistic 
 to suppose that the huge Government expenditure can be 
 suddenly reduced down to a Peace level, even if the War 
 were to stop during 19 17. We can, in fact, already see 
 that the nation will have to face (i.) a fixed annual charge 
 for debt increased from little more than 20 millions in 191 3— 
 191 4 to probably 200 millions by the end of 19 17— 18; 
 (ii.) the necessity (in order not to be financially defenceless 
 should we be again attacked) of beginning at once to pay 
 off this debt at the rate of, possibly, 100 millions a year; 
 (iii.) new charges for war pensions possibly amounting to 30 
 millions a year ; (iv.) an increased annual expenditure on 
 defensive armaments which can hardly fail to amount to at 
 least 50 millions a year. Towards this we may perhaps 
 count on 50 millions for interest on loans to our Allies. 
 Even if the War is over sometime in 19 17, the Chancellor 
 
230 A Revolution in the Income Tax 
 
 of the Exchequer for 191 8-19 ought to raise, by one or 
 other device (zn addition to the 200 millions obtained in 
 1913-14), certainly 300 and possibly 350 millions sterling • 
 and will be able to look for no diminution of the annual' 
 burden for many years to come. Peace, in fact, will call for 
 a revenue of two and a half times the pre-war figure. Such 
 a staggering amount cannot be obtained from any one 
 source The temporary aid of the Excess Profits Tax will 
 be withdrawn. The long-standing controversy of Direct 
 yersus Indirect Taxation will seem even ludicrously obsolete. 
 Both forms of taxation will need to be resorted to in a 
 manner and to a degree never yet contemplated. We make 
 no attempt here to discuss the manner or the amount of the 
 Indirect Taxation to which we may be driven. When the 
 Chancellor has taxed every commodity and service, every 
 aste and habit, that he can profitably reach, to the extent 
 that It can possibly bear without causing the resultant 
 revenue actually to decline, he will still find yawning before 
 him the gulf of a colossal deficit. Nothing can meet the 
 need but the maintenance at a rate heretofore regarded as 
 impossible of the direct tax on incomes.^ Lord Courtney 
 of Penwith has already warned the House of Lords that the 
 wealthier among them may have to ^^^^^ up to the State 80 
 per cent of their incomes. 
 
 Let us tentatively proceed on the assumption— unfortun- 
 ately only too likely to be well founded— that the Chan- 
 cellor of the Exchequer, after putting on all the specific taxes 
 he can think of, will still require from the Income Tax some- 
 thing like two hundred and fifty millions sterling. He may 
 then very likely need, as we shall find, an Income Tax at 
 twice the nominal rate fixed for 19 16-17, or what we shall 
 caJl ten shillings in the pound. We may assume that the 
 Abatements and Allowances will remain unchanged, and 
 
 on L^' "''''' be remembered that taxes on " land " or mining royalties (meaning 
 on the ownership of land), or on -capital" (meaning all investmentsT or on 
 
 Tf res'sinta^r'""^ °" ^'"^ P°"^"^"^ j^^^"^^^) '- essentia^ o/y ^rs 
 selected or taxl^nn'' ^"n''~."^''-^''' of bringing into assessment "l he income 
 selected for taxation, and of graduating or differentiating the levy. 
 
 " Half our Incomes " 
 
 231 
 
 that the present concession of lower rates for earned incomes 
 up to ;^2 500 and for unearned incomes up to ;f2000 a year 
 will be continued ; also that these will be in corresponding 
 proportion — thus, when the tax is nominally los. in the 
 pound, that on earned incomes not exceeding ^^2500 will 
 vary from 4s. 6d. to 8s. 8d. in the pound, and that on un- 
 earned incomes not exceeding i^2000 from 6s. to 9s. in the 
 pound. We will take the Supertax, regarded as a mere 
 addition to the Income Tax payable on the higher incomes, 
 at substantially its present rates but with an extension 
 and regraduation subsequently to be described. The real 
 incidence of the combined tax would then vary, from a little 
 over 4^d. in the pound on an earned income of ^^131, up to 
 just short of 1 6s. in the pound on an income of i^ 100,000 a 
 year — or nearly the 80 per cent asked for by Lord Courtney 
 of Penwith ! The amount payable by the man with an 
 earned income of ;fi3i would be (apart from allowances 
 for children and life assurance) £2 :g\6 ) that by him with 
 ;f 1 00,000 a year would be (apart from allowance for life 
 assurance) ^^78,107 — leaving the latter still with nearly 
 ^22,000 a year to live on. Such a tax, if we could assume 
 it to be assessed in the same way as at present, on a total 
 assessment remaining unchanged, with exactly the same 
 exemptions, abatements and allowances, might at first sight 
 be expected to yield nearly three times the amount derived 
 from the three-and-sixpenny tax of 191 5-16, or twice the 
 five shillings tax of 1916-17, which would be much more 
 than the two hundred and fifty millions that we assume to 
 be required. 
 
 Such a prospect is, however, delusive. To begin with, 
 no such unprecedented Income Tax could be imposed with- 
 out remedying or mitigating the existing unfairnesses ; ^ and 
 
 1 The Chancellor of the Exchequer (Mr. M'Kenna) gave this inequitable 
 basis as the one reason against a substantial raising of the Income Tax. On ist 
 March 19 16 he said : 
 
 " Our income tax must be taken at an equitable rate from people who enjoy 
 incomes of the same size. The law can hardly discriminate nicely between the 
 different charges of different individuals. While one man can pay two, three, 
 
n 
 
 232 A Revolution in the Income Tax 
 
 r'e^ucZT^w" '"m'^' ^^ "^ ^'^^" ^^^' ^ considerable 
 reduction of what would otherwise be its total yield. 
 
 V. The Recognition of Family Responsibilities 
 
 The grossest unfairness in the Income Tax as at present 
 assessed ,s the penalising of the married as against the 
 s.ngle, and of the childless as against those who afe parents 
 
 («) The Penalising of Marriage 
 
 the M^nr^*^''' '^' '"°"'^'''' '■"^"'^'■"g f'"'" "-^^ ^efu^al of 
 of th. M 7T^' ""^^'f'^t-nding nearly half a century 
 of he Marned Women's Property Acts, to recognise the wife 
 .n.vmg with her husband, as a separate person. For Income 
 
 and' to"?"" . ' "'\'" ^'"^^^ ''^^" *° — 'he husband' 
 and to deem h.m to be possessed of his wife's income as 
 
 well as h.s own. And the Income Tax authorities can take 
 
 account only of legally valid marriages. Thus, if a man and 
 
 woman, each enjoying an income from investments of exactly 
 
 ^130 a year, decide to combine their housekeeping without 
 
 ™ torn' I "' "r°"^°' "^^"^^^' ^'^^^^ ^"''^ --^" 
 
 exempt from Income Tax. The Surveyor of Taxes has no 
 concern about their domestic arrangements, if o.:^; they do 
 
 It ..ffi^^'r "f ""°"^- '' '""'^ S^' married-in Scotknd 
 .t uffices for them to give themselves out as married with- 
 
 T.-T7 rt '"^ """°">'' °'- ^^- -ff^cting any 
 registration of what, to persons without legal impediment 
 duly domiciled in Scotland, constitutes a ifgal marrilge!!: 
 
 A cynical comment would be that Ihe wealthy f J n. 1 l^ five-sh.Umgs rate, 
 
 on the middle class in order to Ive off a hfgh " ra TVut'thTrr ",?^^^^' 
 the Exchequer pledged himself in Anril in ^7 c , ^^^ Chancellor of 
 
 Income Tax after the V\^r ' ^ ^916, to a full enquiry into the whole 
 
 The Recognition of Family Responsibilities 233 
 
 they are, this year, immediately fined (with the Income Tax 
 at 5s. in the pound) no less than ;f20 : 12 : 6 between them, 
 or nearly 8 per cent of their joint means ; and this fine will 
 be repeated year by year as long as they live together, that 
 is to say, until they get divorced or judicially separated, or 
 until one of them chooses to desert the other and dwell 
 apart. With an Income Tax nominally at los. in the 
 pound, the fine would be <£'4i : 5s. a year, or nearly one- 
 sixth of their joint income. Legal matrimony would become 
 prohibitive. A substantial premium would even be put on 
 desertion. 
 
 The refusal of the Inland Revenue to recognise the wife's 
 separate existence leads to other anomalies. If a little 
 shopkeeper, making ;^I30 net profit from his shop, has a 
 woman manager whom he pays wages of £2 a week, he 
 and she will both be exempt from Income Tax. It will be 
 the same if they live together as man and wife. But if they 
 go through the ceremony of marriage they will have to pay 
 to the Inland Revenue (nominally at 5s. in the pound) 
 £12:16:6 per annum for the privilege, this annual fine 
 continuing all the rest of their lives. With a los. in the 
 pound Income Tax, the fine w^ould be £2^: 13s. per 
 annum — a sum which many small shopkeepers would find 
 too high for domestic legality. If the man deserted the 
 woman he had married and took another to live with him^ he 
 would save this amount annually. 
 
 If a married couple set up a little business, the wife 
 co-operating with the husband, and if their joint efforts 
 manage to make as much as ;£"2 5o a year profit, down 
 comes the Inland Revenue upon them for ^^14:12:6 
 annually. If, however, the wife is engaged as assistant at 
 ^2: I OS. a week by a neighbouring shopkeeper in like 
 circumstances, and his wife similarly goes as assistant at 
 £2 : los. a week to the former one, no money need pass, 
 but neither couple will then be liable to Income Tax, and 
 each couple will save £\^ :12:6a year. With an Income 
 Tax at I OS. in the pound such exchanges of wives by 
 
-'I '..■- 
 
 234 
 
 A Revolution in the Income Tax 
 
 i "I 
 
 :;|i 
 
 small shopkeepers would become financially twice as ad- 
 vantageous.i 
 
 With the extension of professional employment among 
 married women the anomalous position of the wife's income 
 for Income Tax purposes has become steadily more glaring. 
 If, as IS not uncommon, two doctors marry, and carry on 
 their practice in partnership, whilst earning ;^6oo a year 
 each, they suddenly find theiflselves liable for an increased 
 Income Tax to the extent of ;f 5 5 merely by reason of their 
 committing the imprudence of marriage, which deprives 
 them of both the Abatements to which they had been 
 severally entitled, and makes them pay an extra sixpence 
 m the pound. If the two doctors do not make between 
 them more than ;£'7oo a year, they will, by going through 
 the marriage ceremony, lose one of these two Abatements, 
 and also have to pay threepence more on every pound of 
 their joint incomes. It is hard to understand what the 
 Bishops are about, and the leaders of all religious denomina- 
 tions, to permit such a deliberate penalising of lawful 
 matrimony.^ 
 
 {b) The Penalising of Parentage 
 
 Even more important is the penalising of parentage. It 
 did not occur to Sir Robert Peel— it never entered Gladstone's 
 head — to make any distinction between those who were 
 
 1 In 1897 a very partial mitigation was afforded, upon a claim for 
 exemption relief, or abatement, by permitting the wife to claim separately in 
 respect of her own earned income, and the husband to claim separately in respect 
 of the rest of the total income-and even this only (i.) where the combined 
 income is under ^500, (ii.) where both husband and wife carry on business un- 
 connected with each other, and (iii.) where application is made before 6th May 
 in each year. ^ 
 
 2 In the Income Taxes of other countries some concession to married couples 
 (apart from concessions in respect of children) is now very general, either by way 
 of Abatement m respect of the wife, or by a higher Exemption Limit for married 
 couples than for single taxpayers, or by relegation to a lower class in graduation 
 ot the rate. Such concessions to the married find a place in the Income Tax 
 systems of most of the Swiss Cantons and many German States, in that of 
 Austria, and in what may be considered the most highly perfected model, the 
 Wisconsin Income Tax Law of 191 1. See Cd. 7100 of 191 3 
 
 The Recognition of Family Responsibilities 235 
 
 childless and those who had ever so many children.^ Both 
 were assumed to be equitably liable to bear the Income Tax 
 in exact proportion to their incomes. It seemed equally 
 fair, if a curate or clerk had ;f 200 a year, to make him pay, 
 say, £2 to the State, whether he was unmarried, a childless 
 husband, or the father of half-a-dozen boys and girls. Yet 
 the sacrifice in these three cases is manifestly far from equal. 
 Nor is the case essentially different when the income is as 
 high as one or two thousands a year, as between the bachelor 
 in London Society and the professional man strugglirjg to send 
 all his sons and daughters to good and unfortunately terribly 
 expensive schools, until they can, at still greater cost, pro- 
 ceed to the Universities, or compete for army commissions. 
 Whilst the British statesmen continued to ignore the question, 
 the Abatement for Children, or some equivalent concession, 
 was being introduced into nearly all the Income Taxes of 
 Europe.^ Not until 1909 (when the fall in the birth-rate had 
 already been continuous for thirty-three years !) does it seem 
 to have come home to the British Government that this penal- 
 ising of parentage by taxation was not only unfair but also 
 distinctly " dysgenic." In that year an allowance from the 
 income was permitted, but only oi £10 in respect of each 
 living child under 16. Even this was limited to parents 
 whose combined incomes from all sources did not exceed 
 ;^500. In 19 14-15 the allowance was increased to ^20, 
 
 1 AH the arguments by which in 1853 Gladstone justified the Allowance for 
 Life Assurance, up to a maximum of one-sixth of the income, apply equally to 
 the insurance of the children's lives ; yet the allowance was not made on their 
 insurance. At that time, however, the insurance of the lives of children was not 
 common. At present there are probably as many policies in existence on children 
 as on married men, though nearly always for much smaller sums. Yet this 
 country recognises, as being savings, only the insurance on the taxpayer's own 
 life, or on that of his wife (including Accident Insurance if fatal accidents are 
 covered), to the exclusion of other dependents. In Prussia and Austria, and 
 nearly everywhere else that an Allowance for Life Assurance is made, policies on 
 the lives of any members of the taxpayer's household are eligible. In Australia 
 and South Africa it is usual not only to concede the Allowance on life assur- 
 ances on any member of the household, but also on accident or sickness insurance, 
 and occasionally on payments to any Friendly Society ; and even (in Western 
 Australia) on "other provision for wife and children." 
 
 2 See Cd. 7100 of 1913. 
 
 

 
 236 A Revolution in the Income Tax 
 
 and in 1915-16 to ^25, but subject to the same limitation.' 
 Tliese allowances are, of course, in no way commensurate 
 with the expense necessarily and properly incurred in respect 
 of children under 16. Moreover, no concession has, even 
 now, been made in respect of children remaining dependent 
 over 16— just when the need for a wide extension of 
 secondary and University education, and of superior voca- 
 tional training, is more than ever manifest— and none at all 
 m respect of children of any age, to parents having over 
 ^500 a year.2 And this is what we call statesmanship! 
 I he fall in the birth-rate still continues. The « dysgenic " 
 mfluences are still at work. 
 
 {c) Why not Family Incomes ? 
 
 The question inevitably arises whether, if we are to have 
 high rates of Income Tax, the time has not come to sweep 
 away the unfairness of treating alike, as equally able to bear 
 a given tax, the single and the married, the childless and the 
 parent. We need imperatively, as a community, both to be 
 rearing more children, and to be spending on the rising 
 generation in nurture and education a larger and not a 
 smaller proportion of the national income. It is consequently 
 the height of folly, as well as the depth of unfairness, to 
 
 ment was allowed, viz. 828,959. As the number of children claimed for ha.: 
 increased year by year since .909, it is probable that the riaht toTrAllow.n^^ 
 
 chM under 7fi f„ T ^^ 1' "'''= ^ * P'°''^'''= "'''^'^^ f«™«e one living 
 ch,ld under 16 for each income brought into assessment. ^ 
 
 in cast In' whic^''',he" "' "f '-^gnised, nor yet illegitimate children (except 
 
 ^.h'^gh ■;;. t L'd'inTi^i„t:.mttiLrinr diiL^d 'rr' t- 
 Children r:i[y—: XnX"c«r:rrt:L,7eti„rar^^^^^ 
 
 Bavanaitis continued for children above .5 whilst preparinTZ^fr'.f^li"^ 
 ;:ecrder""^ """"^ ""'" '" "■= ^-^ ^^ -* pre^pa^ttlon^f S 
 
 The Recognition of Family Responsibilities 237 
 
 penalise either those who marry, or those who become 
 parents, or those who by a prudent expenditure strive to do 
 the best for their children. The essential inequity, and the 
 fatally " dysgenic " influence, of taxing parents as heavily as 
 those who remain single — let alone the evil consequences of 
 penalising matrimony as such — cannot be cured by any 
 limited concession of petty allowances for the children of the 
 lower middle class. What is required is a frank and full 
 recognition of the essential difference between the income of 
 the single man or woman, and that of the head of a family. 
 The one is normally at the owner's own disposal, to expend 
 as his tastes direct. The other inevitably becomes the more or 
 less definitely allocated budget of the little community which 
 it has to maintain ; and its disposition properly passes to a 
 very large extent out of the sphere of the personal tastes of 
 its nominal owner. The " free margin available for taxation," 
 of which the economists speak, can hardly fail to differ 
 enormously from the one case to the other. 
 
 What is suggested is that, so far as incomes not exceeding 
 ;f2 500 a year are concerned, whether earned or unearned, 
 it should be open to any person assessed to ask that all the 
 taxable receipts of all the members of his family, living in 
 the same household with him and sharing in its expenses, or 
 maintained elsewhere wholly or partially at his expense, 
 should be aggregated for assessment as a Family Income ; 
 and that Family Incomes so arrived at should, for Income 
 Tax purposes, be divided by the number of members of the 
 family (husband, wife, children, stepchildren, father and 
 mother or grandparents only) actually maintained therefrom} 
 
 1 Illegitimate children, or adopted children, if actually maintained, should 
 
 not be excluded. 
 
 It may be said that, by allowing children to count for as much as adults, 
 whereas usually much less is spent on their maintenance, an undue favour would 
 be shown to parents, as compared with the unmarried or the childless. This is 
 deliberately suggested, partly in order to encourage parentage and to discourage 
 both celibacy and childlessness ; and partly in order to encourage the expenditure, 
 on the children's proper nurture and training, of a much larger proportion of the 
 Family Income than is at present usual. But it would be quite practicable, if 
 desired, to let two children under 14 count only as one person. 
 
238 A Revolution in the Income Tax 
 
 There could then be allowed from the combined Family 
 Income m respect of each of the persons maintained th^e^ 
 
 would justify if ,t were that of one person only 
 
 The result would be that a bachelor or spinster living 
 .ndependently and apart from his or her near r laUons 
 would normally pay Income Tax as at present A rna Wed 
 couple without children might apply to haye their combined 
 
 hese halves below ^700 each, they would be entitled to 
 
 Sherof f'^'r^'Tr^ ^""^^'^ °" -^'^ incomes Tl^: 
 father of a family of four children might apply in the same 
 
 way, aggregating all the incomes of himself his w^fe.nHr 
 chiMrpn or.^ ^; -J- .1 ^"iiiicii, nis wne and his 
 
 hfr 'A '^'"^ ^^^ '"" ^y ''^- This might brine 
 
 h.m SIX Abatements instead of one (or possibly none) if 
 the extreme case a Family Income of Z500 miVht 
 «>nceiyaby be allowed as many as sixteen Abatemel'o 
 i.i20 If as many as sixteen members of the family were 
 ?act IsT^'" *''"^^— ■■" «-tly the same wa; n 
 
 m mb r of' the "f" 7" 'T'I^ '"''"^'^ ^'"""S =»" '^ese 
 members of the family, and they had to make separate 
 
 returns for taxation. Possibly a prudent Chancellor of the 
 Exchequer might put a maximum to the number of Abate 
 
 t^s yirjit Mhf ■' '"^"' 'r'' ■' ^"^ ™-^'^^ -" -? 
 
 this vary with the income; allowing perhaps a maximum of 
 SIX Abatements to Family Incomes under ;^'ooo a yea" and 
 a maximum of four Abatements to those over that^r;;<;unt' 
 
 only l':^rit:i::Jt'::i zzTct 'rt'^ ^-t^^ ^'"'»*^^' -<" 
 
 Wisconsin Law of ,9.1 and nThe newly estabHh'edF"''l' ,'"" '''° '" ""^ "'^ 
 French " loi de finances " of , c.h lurv^igfr r o^ ?-^ /"'°'"" ■^="'- ^he 
 printed In /ournai ^es Ao.o,J,ls ulmXVl6 ^J"^ V'^'^t "^"""^ '9'^^' 
 a family shall be chargeable in resoerrZ ' ' fT"^" ''•' ">"' ^^<^'> ''^^d of 
 those of his wife and ?.her rem W of w °?'^ ° ';'^°"" '"">"''' b"" also of 
 deductions shall be allowed, (a) of .^.ofral'cT'j; rl"" T'^ J^™ ' '"•» 'h^' 
 .000 francs in respect of each pLon Znt^ned in ZT °, '"' '""'' '** "' 
 five ; (c) of 1500 francs in resoecf of ^T^K I u . """'>' "P '" ^ '"'"l of 
 
 this purpose arl all ascenL f b „ / eTher /o vr/rold''''"^ five (allowed for 
 descendants or adopted children be^g Ider J" ^ars old'o I '""'T' '"' ^" 
 these deductions bring the taxable income be ow 5*0^0 francs tola? ' ™ ' " 
 allowed. •> "" Jrancs, total exemption is 
 
 TJie Recognition of Family Responsibilities 239 
 
 Official opinion has always resisted any consideration of 
 the needs of the household as likely to create insuperable 
 difficulties in assessment and collection. But these difficulties, 
 it is submitted, would not be found by the plan now proposed 
 of taking for assessment the Family Income if {a) it is made 
 dependent on being claimed in each case ; {b) if the liability 
 to individual assessment of other members of the family 
 remains unaffected unless and until their incomes are 
 specifically aggregated in a Family Income ; {c) if the tax 
 in respect of all the incomes so aggregated is made payable 
 by the head of the household making the claim. It would, 
 of course, be necessary to give to the head of the household 
 thus paying the tax a legal right to recover a definite 
 proportionate sum from members of the family enjoying 
 independent incomes which had been aggregated for this 
 purpose. The Inland Revenue would incidentally even 
 make a slight gain as a set off to the additional Abatements 
 by {a) the diminution in the number of separate assessments 
 and collections ; and {U) the bringing into taxation, by 
 aggregation in the Family Income, of the small incomes of 
 children and other members of the household which would 
 otherwise have been under the Exemption Limit 
 
 [d) The Practical Extension of the Exemption Limit 
 
 The adoption of any such conception of Family Incomes 
 would, especially if it were allowed to confer total exemption 
 when the quotient was below £\'^o, result in many more 
 people than at present paying nothing at all in Income Tax 
 — a consequence which calls for consideration. We have, 
 indeed, to a small extent ever since 1853, in the Allowance 
 for Life Assurance, and to a very great extent since 1909, 
 in the Allowance for Children, enlarged the practical limit of 
 exemption.^ Thus, taking first only the combination of 
 
 1 Technically neither of these Allowances ever brings Exemption — herein 
 differing from the new French Income Tax Law — but the contributor, though 
 charged with the Tax, is credited with the Allowance ; and may thus pay 
 nothing. The French (and many of the German and Swiss) laws logically allow 
 the concession to constitute exemption. 
 
H' 
 
 $!t 
 
 240 A Revolution in the Income Tax 
 
 cMd'eTor 1' H^^m""'"" '"' ^'''■''^^^"' '"^^ father of 
 Children or stepchildren under 16 is to-day excused .11 
 
 ea?ned"a °d h'"'^°"' ''''' '' ^''^'"'^ °- child'h^Tcomet 
 earned and does not exceed /r^f . ;f /u • ^^^nic is 
 
 it does not exceed 1, To if rl ' ^ u""^^ '^° "^''"'^''^") 
 
 ";,t^ rsetz -:st " '■■* ■■""' " - •'•» 
 
 :> lur i^iie Assurance continuingr unaltered thfQ 
 
 practical enlargement of the Exemption Li'mit wou d for a 
 
 wLlsTheh'r,'"' "°'"^"' ""' '^^^"^^ --h urthe 
 Wh^ls the bachelor or spinster begins to pay Income Tax 
 
 at A131 a year a married but childless couple would oav 
 
 nothing up to ^240; with one child nothing upTo/,|o 
 
 wit te^ children nothing up to £.,,o; or ff "a' maximum 
 
 / no^ premiums are paid, even conceivably up to 
 
 ^1000. ,n a case in which six or more members of the 
 family are maintained, and the full amount of one-sixth of 
 the income is spent in Life Assurance 
 
 of caTni!* T'!! '^""^ ''^'°" ^°' '^^'"S' f'-°'" the shoulders 
 of parents of moderate means, the burden of taxation which 
 
 be en tret fri'* 7'" ? """^ P^^^°"^ ^' «* P-^ent should 
 be entirely freed from the payment of Income Tax, though 
 
 of a small sum only. The assessment of their incomes and 
 
 .0 single pers'ons ; and o^a^^nai;" highef Ei'l^r't *"" 
 
 children. ^ nigner iLxempUon Limit to widows with 
 
 T/^e Recognition of Family Responsibilities 241 
 
 the examination of their claims involves a very considerable 
 expense, which is now immensely swollen by doubling the 
 numbers brought under review, owing to the reduction of the 
 Exemption Limit to ;^I30. Moreover, there is undoubtedly 
 value in enforcing some direct payment to the State on as 
 large a proportion of the citizens as it is practicable to reach. 
 We suggest, therefore, that all Abatements and Allowances, 
 whether old or new, that are made to the Income Tax payer, 
 should be subject to the proviso that nothing in them should 
 be allowed to reduce the tax actually payable below the 
 minimum of, say, a penny in the pound on the income prior 
 to the deduction of any Abatement or Allowance. Thus 
 the man with ^^131 a year would anyhow pay a minimum 
 of I OS. I id.; one with ^^500 a minimum of 41s. 8d., how- 
 ever many in family he counted, or whatever premium he 
 paid for Life Assurance.^ 
 
 It is difficult, without statistical data known only to the 
 Inland Revenue, to estimate, with any accuracy, what would 
 be the amount of the concession to married couples and to 
 parents that this plan of Family Incomes would involve. 
 The best estimate within our power puts the total income 
 that it would excuse from tax, at rather more than twice 
 the sum of the Abatements and Allowances for Children in 
 1915-16.^ This is the measure of the new encouragement 
 
 1 Such a system of Minimum Payment exists in various European Income 
 Tax systems, alongside of liberal and varied Abatements and Allowances. Thus, 
 in Neuchatel and other Swiss Cantons, no person gets off with a payment of less 
 than a franc or two — usually charged on each adult — however many Abatements 
 and Allowances he may be entitled to claim. In Tasmania in no case must the 
 amount payable be reduced below half-a-crown. 
 
 2 It may be estimated that the total number of incomes over ;i^i6o but not 
 exceeding ^^2500 is about 1,100,000, of which 907,506 were actually allowed 
 Abatement in 1913-14 as being under ^700. The reduction of the Exemption 
 limit to ;i^i30 may make the total number brought into assessment between ;^i3o 
 and ;^2500 well over two millions, of which all but a couple of hundred thousand 
 will be entitled to ^Abatement as being under ;^7oo. Taking (i. ) the children 
 under 16 as averaging a little under one per assessment, and (ii.) wives, dependent 
 children over 16 and other actually dependent members of the family as averaging 
 between one and two per family, we may estimate the number of Abatements 
 that the plan of Family Incomes would involve as averaging possibly nearly three 
 per Family Income dealt with, or approximately six millions ; in lieu of 907,506 
 Abatements in 1913-14, and probably nearly two millions in 19 15-16, besides 
 
 R 
 
242 
 
 A Revolution in the Income Tax 
 
 
 11 
 
 
 to marriage and parentage. The Chancellor of the Ex- 
 chequer will, of course, not like to " lose " the tax on so 
 large an amount But it would not really be any " loss " to 
 the Exchequer. The basis of assessment would merely have 
 been changed, so that any desired amount of revenue would 
 be obtamed only by an increased nominal rate in the pound 
 Moreover, if this measure of fairness in assessment to married 
 couples as compared with bachelors and spinsters, and to 
 parents as compared with the childless, is, as Mr. M'Kenna 
 has himself suggested, the only practical way of getting the 
 Income Tax up to los. in the pound, and so raking in many 
 additional millions, it will prove that justice is also profitable 
 expediency. 
 
 ie) An Alternative Method 
 
 An alternative method, less logical but possibly more 
 easily practicable, is not to supersede but merely to extend 
 the system of Allowances for Children introduced in 1907 
 This needs to be made (i.) to include the wife,^ in order at 
 least to mitigate the present severe penalty on marriage • 
 (11.) to include sons and daughters up to 21, provided that 
 their education is being continued, and possibly other de- 
 pendent members of the family, such as parents of either 
 husband or wife, if actually forming part of the household • 
 (ni.) applicable to incomes up to ;^ 15 00 or £2^00, instead 
 of as at present only to those not exceeding ;^5oo • and (iv ) 
 larger in amount, that is, raised from ^25 to at least £^0 
 On the other hand, in contrast with the practice for the 
 present Allowance, there seems no reason why the Allowance 
 should not be limited (as it is in Australia and New Zealand) 
 to children or other members of the family who are actually 
 being wholly or partially maintained out of the income under 
 review; and why the separ ate incomes of all the said 
 
 fn '^Q^iTfe!'''''"''' ^""^ '^^^'^'''" '"" '^'^"'^ ""^ P'""^"^^>' ^ "^^"i°" ^"d a half 
 
 .n/J^^ concession of an Abatement in respect of the wife is made in France 
 and Wisconsm, Hamburg and Wurtemberg, and many of the Swiss Cantons. 
 
 The S lightness and Unevenness of the Graduation 243 
 
 members of the family, however minute, should not be 
 brought into review, and, if they would otherwise have 
 been exempt, subjected to taxation as part of the family 
 aggregate. 
 
 What seems clear is that some such effective mitigation 
 of the present severe incidence of the Income Tax on the 
 parents of children, as well as some such alleviation of its 
 present effect in penalising marriage, will become imperative 
 if the tax-rate is to be increased, or even maintained at its 
 present high level. 
 
 VI. The Slightness and Unevenness of 
 
 THE Graduation 
 
 The next difficulty in the way of raising the nominal 
 rate of the Income Tax is the slightness and unevenness 
 of the present graduation according to the amount of the 
 income. At present our nominally uniform poundage rate 
 is graduated by (i.) the varied Abatements allowed when 
 the total income is under ;£^400, ;£^6oo or ;^700 respectively ; 
 (ii.) the Allowance of ^25 for each living child under 16 
 being confined to incomes not exceeding ^500 ; (iii.) the 
 specific graduation of the tax on unearned incomes when 
 the total income does not exceed ;^300, £^0Q, i^iooo and 
 ;^2000 respectively, and on earned incomes when the total 
 income does not exceed ^^500, ^1000, ;£^i5oo, ;^2000 
 and ;£^2 500 respectively, at between 6d. and 2s. pd. in the 
 pound less than higher incomes ; and (iv.) by the addition of 
 a Supertax on incomes over ^3000 a year, at rates varying 
 from lod. in the pound on the first ;£^5oo in excess of 
 ;^2 5oo, up to 3s. 6d. on every pound over ^10,000.^ These 
 complicated and not entirely consistent methods of treating 
 incomes of different amounts result in a graduation which 
 
 * A further graduation is incidentally produced, not strictly as between 
 particular incomes, but substantially between the great mass of incomes not 
 exceeding ;i^2 5oo and those above that amount, by the differentiation in rate 
 between earned and unearned incomes, and particularly by this differentiation 
 being confined to incomes not exceeding ;[{^2500. 
 
fti 
 
 Hi 
 
 244 ^ Revolution in the Income Tax 
 
 rises (with the 19,6-17 tax of 5s. in .the pound) from a 
 vrtual rate of 2.3d. in the pound on an income of JT J 
 ent^ely earned, up to one of 99.7d. in the pound on 'ai 
 ncome of ^100,000. The graduation is so far progressive 
 that (except as regards the differentiation between earned 
 and unearned income), at no point in the scale does anv 
 .ncome pay at a higher poundage rate than an income of 
 supenor amount. But there are at some points skTpT and 
 jumps and at others long "rests" in the progress of the 
 vrtual poundage rate. For the smaller incoLs^Ws Wrtual 
 poundage nses very steeply-for instance, more than doub'g 
 Itself for earned mcomes between £1^1 and £i^o- a<.ain 
 doubhng itself between ^,50 and .^'00; jumZ' by o 
 
 between ^350 and ^400. On the other hand for lart^e 
 .ncomes the rise is very slow-from £6000 all he way fo 
 ^10,000 the rate increases by less than 13 per cent all 
 the way from ^20,000 to .^Tioo.ooo by leL'^than "V pe 
 rali! °" """™'^ '"'"""^ '"'■°'" ^^°°' t° ^3000 not 
 The practical objection to any systematic and direct 
 graduation of the Income Tax has always been its apparen 
 .ncompat,b,lity with the principle of" stoppage at the source » 
 wh,ch must at all costs be adhered to, as fhe very ess nee 
 of the effectiveness of the system. But now thaf 99 per 
 
 evtw r'd ; '"°T^ r -^-''-"t'y -der se'para e 
 assessment, th.s objection is seen to be without weight. It 
 
 exceeding ^asoo. and to unearned in olesCt exceedTn: ^Vn'^T k"u°'"'' ""' 
 tales a return of total income wherever any mrt of,, ^^ ^ ', "*"* """*'• 
 Allowance for Life Assurance beingfirej^ ! on si^.h":^' L'/ •'• '^ '"^ 
 necess,tatmg a return of total income wherever it Ts 1 m^ r - 11 '""■"'' 
 ments necessitatine returns of to,»1 ."""^^"^ " 'f/l^'raed ! (iv. by the Abate- 
 
 The only incomes Line "vidua lybrourrnH" '^" "/' """=^"2 ^^oo. 
 assessment, are (i 1 those deHvL, , I '"'""^ ^""^ ""«'« '^e subject of 
 between ^200' and T^^Tlli Z\"'""^ ''""^ investments, amounting to 
 
 .he Uves of themseltfHel^TJkf :„T,';f,'ZrdeH:d°f''"'^ "°' '"''"' 
 of any amount under ^3000 a yea, ii whicrii:^,:::enrs'::'AlZares: oTthe 
 
 TAe S lightness and Unevenness of the Graduation 245 
 
 is quite possible, as the last few years have shown, to combine 
 a complete maintenance of " stoppage at the source " with a 
 separate survey and an individual assessment of each income. 
 Out of the two million and a half incomes that will probably 
 be brought into assessment for 191 6-1 7, all but a few tens 
 of thousands will have to be separately dealt with by the Inland 
 Revenue authorities. It is high time that the practice was 
 rendered universal. It should be made the duty of every 
 person enjoying an er.rned income above the Exemption 
 Limit, and of every person in receipt of even the smallest 
 dividends, to report once a year to the Surveyor of Taxes — 
 if only to ensure on the one hand that all sources of income 
 are brought into assessment, and, on the other, that all 
 proper Abatements and Allowances are made. If all un- 
 earned incomes were thus passed individually under review 
 and were made the subjects of separate assessments, and if 
 due adjustment were effected in each case between the 
 amount stopped at the source and the total tax due, it 
 ought to be possible, not only to ensure that every taxpayer 
 was assessed for every item of his income, whatever the 
 source, and that every one got the benefit of all the 
 Abatements and Allowances and Concessions of Lower 
 Rates that were legally due to him,^ but also to levy the 
 
 concession of the lower rate on any separately assessed earned income, to which 
 they are entitled, are not, in fact, claimed. It is believed that these two classes 
 probably do not include as many as 20,000 incomes, out of a total which now 
 approaches 2,500,000. 
 
 ^ At present the taxpayer in innumerable cases loses these Abatements and 
 Allowances through ignorance, and through neglect to claim. It has been 
 estimated that in the current year, with the number of taxpayers doubled, at 
 least 50,000 Abatements will be unclaimed ; that only half those entitled to the 
 Allowance for Life Assurance claim it ; that there are probably over 200,000 
 children for whom the Allowance of the tax on £2^ is due, but for whom it is 
 not claimed. Even at 5s. in the pound these losses (largely by the smaller tax- 
 payers) come to four or five millions sterling. With the tax at los. in the 
 pound they would be eight or ten millions ; and it should be the duty of the 
 Government to prevent, even to its own loss, so considerable a hardship. It is, 
 of course, not really profitable to the Government for its taxpayers to suffer loss, 
 even by their own neglect. 
 
 Mr. Stamp estimates the unclaimed Abatements in 1903-4 to have numbered* 
 83,000, but that these had been reduced in 1911-12 to 20,000 {British 
 Incomes and Property, by J. C. Stamp, 1 9 16, p. 301). To this figure must be 
 
246 A Revolution in the Income Tax 
 
 tax upon him at whatever rate was appropriate to his par- 
 ticular income. 
 
 We do not perhaps need to be so pedantic as to insist 
 on the rate of graduation rising evenly at all points in the 
 scale. We have become so accustomed to the system of 
 Abatements (which dates from 1864), and Allowances (which 
 dates from 1853), that we may leave undisturbed the exist- 
 ing graduation that they effect as regards the 2+ millions 
 of incomes not exceeding ^700 a year. Nor need we -o 
 back on the existing differentiation between the rates on 
 unearned and earned incomes not exceeding ;^2 5oo a year 
 or the extra graduation introduced for unearned incomes 
 not exceeding p{:2000 and for earned incomes not exceeding 
 1^2 500. But the total arrest of graduation on unearned 
 incomes between ^2001 and ;^3ooo, together with the 
 extremely slow rise in the rate on incomes above ;^20,ooo 
 cal urgently for remedy. There is much to be said for the 
 inclusion in the Supertax of all incomes over ;^iooo a year 
 —which might add i^fty or sixty thousand to the thirty 
 thousand incomes now dealt with in this way— at the rate 
 of 3d. on the last ^300 up to .^1000, 6d. on the next 
 ;tiooo and pd. on the next ;fiooo. At the same time 
 the graduation should be continued beyond its present limit 
 of ;6 1 o 000. Thus, a more equitable scale for the Supertax 
 of the future would be something like the following • 
 
 All incomes in excess of ;f 1000 from all sources to be 
 liable to Supertax at the following rates : 
 
 For the first ^^700 nil. 
 
 „ next 300 3d. in the £. 
 1,000 6d. 
 
 )> 
 
 »» 
 
 »> 
 
 ») 
 
 1,000 
 
 3,000 
 
 9d. 
 
 J> 
 
 » 
 
 added those from the m.lhon and a quarter persons newly brought into Income 
 
 .Tax by the reduction of the Exemption Limit from /-leo to /fTo wLh ii 
 
 presumably l>e high for the first few years. °™ ^ »^o to ^6 130, which will 
 
 1 This has been strongly urged, however, by Sir Leo Chiozza Money. 
 
 The Prevention of Evasion 
 
 247 
 
 For the next 
 
 1,000 
 
 IS. 
 
 in th 
 
 e^. 
 
 )} 
 
 
 1,000 
 
 IS. 
 
 6d. 
 
 
 » 
 
 
 1,000 
 
 23. 
 
 od. 
 
 
 >» 
 
 
 1,000 
 
 25. 
 
 6d. 
 
 
 » 
 
 
 1,000 
 
 3s. 
 
 od. 
 
 
 » 
 
 
 1,000 
 
 3s. 
 
 6d. 
 
 
 >f 
 
 
 1,000 
 
 4s. 
 
 od. 
 
 
 
 10,000 
 
 
 )) 
 
 j> 
 
 10,000 
 
 4s. 
 
 6d. 
 
 )> 
 
 n 
 
 1) 
 
 10,000 
 
 5s. 
 
 od. 
 
 >) 
 
 i> 
 
 j> 
 
 10,000 
 
 5s. 
 
 6d. 
 
 jj 
 
 »» 
 
 » 
 
 10,000 
 
 6s. 
 
 od. 
 
 )> 
 
 50,000 
 
 and for every £\ over ;£^5 0,000 6s. 8d. in the pound. 
 
 With an Income Tax nominally at lOs. in the pound, a 
 Supertax at the above rates would make the actual rates 
 of taxation on unearned incomes from ;^200i to ;£^ 10,000 
 (which now, with an Income Tax at 5s., rise only from 6od. 
 to 78.7d. in the £) rise more evenly from 123d. to 14 2d. 
 in the £. On incomes from ^10,000 to /^ 100,000 the 
 actual rate (which now, with Income Tax at 5s. in the £, 
 rises only from 78.7d. to 99. 7d.) would rise very steadily 
 from I42d. to iS/d. in the £ or just short of the 80 per 
 cent urged by Lord Courtney of Pcnwith. 
 
 VII. The Prevention of Evasion 
 
 One of the results of any considerable increase in the 
 Income Tax is to stimulate evasion. It is therefore essential, 
 in making so great a jump as from 5s. to los. in the pound, 
 to stop up the last remaining loopholes. 
 
 {a) Investments abroad 
 
 By far the largest amount of income now escaping 
 assessment is believed to be that remitted to this country 
 
248 A Revolution in the Income Tax 
 
 L'cfuTnrii^f f r^"^^°" ^^^^ ^*"^^^^--^^ — s, 
 
 Tee Ts^o H ? . ^%" '"^ ''' ^^^""^^ ^^^^^ (where 
 there s no deduction of Income Tax), all the British 
 
 possessions, the United States, Central and South Am ca 
 countries The amount actually assessed for Income Tax 
 
 increased (from 44 niilhons m 18S6-7 to 118 millions in 
 19 1 3-1 4 . It IS often argued that the fact that our oversea 
 
 certainly 200 millions a year, proves in itself that a large 
 portion escapes assessment. This is a fallacy. What Is 
 forgotten IS that much of the estimated income of 00 
 milhons IS already included in the returns under Schedule 
 D in respect of concerns having their seat of manage^n 
 Is mLT"''"' Z administered partly in this countrfcTuch 
 tTonTof tfr"^ waterworks, tramways, breweries, planta- 
 
 Sn^) toll" T^?^"' '^^'^^^P^ ^^b^- and ship, 
 ping ) , together with the investments (in real estate 
 
 TaSl '"'.^r^^ ^' '^"'^' insurance companiead 
 financ^l firms duly assessed for all their profits. Neverthe- 
 less, though the bulk of the 200 millions derived f^om over- 
 seas investments is undoubtedly now taxed, some not in- 
 considerable portion still escapes 
 
 the^InrT the easiest way of violating the law and escaping 
 the Income Tax for wealthy persons is to invest in 
 securities, whether mortgages or landed property or stocks 
 and shares on which the interest is payable'abroad and to 
 have It paid regularly into a current account at a locll bank 
 
 the same way Cheques drawn in London on the growing 
 balance in such a bank are readily negotiable in this Lur^ 
 It has always been a violation of the law, and a fraud on 
 
 n.in;nJcL;T^^^^^^^ f the rubber, tea, oi, and 
 
 1916, p. 232). , ^ '^''^ ^'''''''" ^'^'^ Property, by J. C. Stamp, 
 
 The Prevention of Evasion 
 
 249 
 
 the Inland Revenue, not to make a return for assessment 
 of income thus brought to this country without deduction of 
 tax ; but it is to be feared that such a return is not always 
 made. The number of firms or persons domiciled in this 
 country having also accounts at banks in New York, Paris, 
 Buenos Ayres, etc., must run into many hundreds. An even 
 simpler device is to cash coupons on bearer-bonds on a visit 
 to France, Belgium, Holland or America.^ 
 
 But such undeclared income from foreign securities does 
 not always escape the Income Tax. When returns of all 
 property have (in order to secure transfer of title) to be made 
 for Death Duties, securities abroad (though not necessarily 
 bearer-bonds) are revealed. For a long time the Inland 
 Revenue authorities made no use, for Income Tax purposes, 
 of the information actually in the hands of another branch 
 of their own office, but this has been done for a quarter of a 
 century. Enquiry is now made in each case as to whether 
 Income Tax has been paid on such foreign investments ; and 
 if this has not been done, a demand for arrears is made on 
 the Executors. A slight change of practice would make 
 this check even more effective than at present. Though 
 the " Probate " of a will or the Letters of Administration 
 disclose the amount at which the estate has been " proved," 
 and on which the Death Duties have been duly paid, no 
 schedule of the separate investments tnaking up the total is {in 
 England and Wales) attached to the Probate or Letters. On 
 circulation of the Probate or Letters among all the companies 
 
 ^ The common practice of investing in unregistered bearer-bonds, the coupons 
 on which are cashed without enquiry on presentation, has long presented 
 a serious difficulty to foreign Finance Ministers. Such incomes very largely 
 escape the Continental Income Taxes and Death Duties. The difficulty is less 
 felt in this country, as {a) any authority or company domiciled here, which issues 
 such securities, is itself taxed on the whole of the coupons that it pays, and left 
 to recover it from the persons presenting the coupons ; {h) any person purchasing 
 such coupons, or paying them in this countiy as agent, is now required by law to 
 make a return of the sums so paid, is assessed upon the total, and is therefore 
 careful to deduct the tax. Evasion of the Income Tax is practicable only by 
 obtaining payment abroad, as mentioned above. Evasion of the Death Duties 
 on bearer-bonds, which is of course illegal, remains theoretically practicable, 
 either by gift inter vivos, or by seizure after death, without inclusion in the 
 Estate Duty accounts. It is believed not to amount to much in this country. 
 
 il 
 

 it; 
 
 III 
 
 250 A Revolution in the Income Tax 
 
 all tSThe" ■'" r'"' "' '^^^^^^' P^^^°" J^^d investments, 
 all that the secretary or registrar has to see to is that the 
 sum transferred in the ca<!P r.f w,. 
 within fh» . ! I , r ^'^ company or authority is 
 
 TothiL ar > " °' *'" '''^''- There is accordingly 
 
 securtL h K^K '° P''"""' ^''^ ^'•^"^'■^^ °f -gistefed 
 secunt.es wh.ch have not been included in the affidavit It 
 
 .s suggested that the Probate or the Letters oughlto be 
 accompanied (as the corresponding Inventoo^ is in Sco Ld) 
 by a complete schedule of all the securities; and the 
 obl.gat,on put on companies or authorities not o transf« 
 anythmg not therein specified. transler 
 
 {b) Income not brought to this Country 
 
 Down to 1 914 Income Tax was not chargeable on in- 
 come from mvestments outside the United Kingdom which 
 was not brought to this country regularly as Lome It 
 was therefore lawful for persons domiciled here to rLve 
 such mcome abroad, and let it accumulate there, or promptly 
 
 [n th r r a^umulafons of tax-free income were made 
 
 Lfh ;"^r.j'y '"^"■•«"« companies, financial firms and 
 wealthy md.vxduals. Since 19 14 all such income accruing 
 
 brou'^hTto t?" "''' '■" ^'^ """^'^ Kingdom, whethef 
 brought to this country or not, has, by law, to be returned 
 
 for assessment. But it is to be feared that this is not always 
 
 done ; and we do not see the Inland Revenue authorities 
 
 sumg for penalties. In the case of firms, which do not dfe 
 
 there ,s not even the ultimate check afforded by the return 
 
 of property made for the purpose of Death Duties,^ In 1 914 
 
 pro;e.^1„'Arana tTe l^iZ tt ET ^ 'f^'^''' ^'^ -" 
 be remedied. Australia, Canada and other ounVr" cannoTbeT """f .""-"'^ 
 up thetr right to tax incomes produced there least of .Hh -P''"'' '° S'™ 
 
 "absentees." This countrv will n^Tf' ■'. I because it is owned by 
 
 here, wherever theL p o^rcrlry b lr„:,:d"''Vh: ''^''' l-"™! ^^-iie^ 
 taxation or the sameXm: .^■Xe7ir.rcX^ frwl^Kl:^^^ 
 
 TAe Prevention of Evasion 
 
 251 
 
 the income thus reinvested abroad was officially estimated 
 at 20 millions a year. 
 
 (c) Selling Securities " Cum-dividend " and buying 
 
 *' Ex-dividend " 
 
 The evasions so far described are contrary to law, and 
 involve a liability to legal penalty. Those now to be 
 described (which should be termed avoidances rather than 
 evasions) are. not illegal, and need statutory remedy. One 
 hazardous and troublesome device to escape the tax is that 
 of avoiding the receipt of a dividend — this being subjected 
 to tax deduction — by selling out stock just before the divi- 
 dend date, when the price is " full of dividend," and buying 
 in again *' ex-dividend " a few days later. With securities 
 of international character, having coupons or dividends pay- 
 able also in Paris or New York, the price is (other conditions 
 remaining unchanged) apt to vary by the full amount of the 
 untaxed coupon or dividend. The Inland Revenue loses 
 nothing, as the tax is duly deducted from the dividend ; but 
 speculators believe that they can themselves escape bearing 
 the tax. There is the brokerage to pay, and the jobber's 
 turn or profit, besides the risk of prices changing considerably 
 
 and to claim repayment to the extent of the lesser of the two taxes — this being 
 strictly confined to taxes specifically on incomes, not imposts on land, shipping, 
 inhabited houses, etc. The cost of making the refund should be shared between 
 the two administrations concerned, in some equitable proportion, perhaps each 
 losing proportionately to the amount of its tax in the particular case. 
 
 Hitherto the Treasury has turned a deaf ear to the complaint, explaining its 
 reasons by reference to a letter to the Royal Colonial Institute of 27th May 1906, 
 which argued (i.) that all incomes coming to this country must be taxed ; (ii.) 
 that it was only reasonable that incomes spent and enjoyed here should be taxed 
 here; (iii, ) that there was nothing inequitable in a person who obtained pro- 
 tection from two administrations being compelled to support them both ; (iv.) 
 that any concession would be unfair as between incomes derived from different 
 countries, each having its own duly balanced system of taxation, in which a tax 
 on income might or might not form part; and (v.) that the concession would 
 cost this country half a million a year ! 
 
 In April 1916, however, Mr. M'Kenna so far recognised the need for con- 
 cession as to provide that no additional tax would be levied (in respect of the 
 increase from 3s. 6d. to Ss.) on any taxpayer who showed that his income was 
 subjected to double taxation within the British Empire. 
 
%l 
 
 I 
 
 1 1 
 
 252 A Revolution in the Income Tax 
 
 {d) Treasury Bilts 
 
 Bili,t S^n'o In'tT T""^ '■"^^^'"'^"^ - ^ Treasury 
 
 discount Indlrghrroira 0"^ ^ll^f " '^^"^'^ ^' ^ 
 according to the period tha 'the IT^L ^Z^ ''T' 
 now the Governmenf ic r.. • /^^^^^^s still to run. Just 
 
 of over thirt;S:L'? ^r^o: tIIsuTS" "h '"^^^^^ 
 come Tax is (or could be) secured on .K" ' ^"'^ "° ^"- 
 process of deduction. The theorv of .1 rT°""' ^^^ ""^ 
 authorities is that these iSk 1 ^ , .' '"'""'^ ^^^«""e 
 other finance houses which Tf"^ ''" ''>' ''^"'^^ ^^ 
 through deah-ngTn W :t B^f '"'"'^ '''""^ ^^■■- 
 
 change) in theif geneTlfrSn!' ptfiL" "p'rTvat '' °' ^^■ 
 holding Treasury Bills ouffht if ^ "''• V ^'^ investors 
 their returns whatever nrofit' h '"^r''^' *° '"'^'"'^^ "" 
 them, although, as they Ire not'"' " . '"" '^^""^ '" 
 profit they make by occasional deal '"'?. '° '"^'"'^ ^"^^ 
 a return is not alwavs orrhT f '" °'^^'' ^^'=""ti«, such 
 not always, perhaps not even usually, made. 
 
 (e) Realised Accessions of Capital Value 
 
 to the profit of the owner-when a"^ patenl h" "'°'' ^'' 
 invention for a lumo sum i \ Patentee disposes of an 
 
 one or other of the .er.ed co^pa^nies r^^l^ZS, 
 
 amount on the argument that he can turnTff l^h ^° ^"^ ^"'"'"^ ^^^ °" ^hf 
 2575 of 190S. An isolated transact oT of thlrf''' '""'"^ ' '^^ ^^• 
 the profession or vocation of author or ardstJoi^M* ^ ''' P'''^" "°^ following 
 as not being in the nature of an annual gl^n '^^'^'"''^ "°^ ^^ chargeable^ 
 
 7">^^ Prevention of Evasion 
 
 253 
 
 increment of value — when stocks are redeemed at par after 
 being issued at a lower price, or after sinking to a lower 
 price in the market, — these incidental accretions are not 
 charged with Income or any other Tax,^ although they may, 
 in some cases (as with an inventor's sales of patents), 
 constitute a recurring source of income, and in others (as 
 with securities redeemable at a fixed date) are regularly 
 counted on as a periodical surplus, justifying acceptance of 
 a lower rate of interest. 
 
 One of the oldest ways of evading the Usury Laws was, 
 not to charge interest for a loan but to receive, when it was 
 repaid, a gratification or present. The purchase of rever- 
 sionary interests, the advance of a small sum on a promise 
 that a larger sum will be repaid at a future date, the taking 
 out of an Endowment Policy securing payment of a fixed 
 amount some years hence — all these practices are already 
 largely resorted to, partly with the object of lawfully 
 avoiding the Income Tax, and would be still more frequently 
 adopted if the tax were further increased. 
 
 In the case of land similar accessions are, since 191 1, 
 chargeable with a special " Increment Value Duty," assessed 
 whenever the windfall is realised, either on transfer, or on a 
 change of lease, or on passing by death. In 19 14-15 such 
 duty was assessed in 9937 cases, and ^^9 5,607 was actually 
 collected. In 19 16 the principle was further recognised by 
 making liable to Income Tax the profit derived from the 
 sale of capital assets (exclusively ships). The premiums on 
 debentures redeemed above the price of issue are already 
 charged with Stamp Duty. There seems room for a general 
 " Accession Duty " in the cases in which — as in the sale of 
 patents, securities redeemed above the price of issue or 
 previous market value, the falling in of reversions or Endow- 
 
 ^ Profit on sales of capital is, however, now chargeable to Income Tax, if 
 (as in the case of a land company or mining syndicate) the making of profit on 
 such sales is the very business of the concern. A person who habitually buys 
 land, securities, ships, antiquities, pictures, etc., with a view to making a profit 
 by reselling them, is, even now, legally liable to Income Tax on the profits thus 
 made. It is suggested that all such realised profits should be chargeable. 
 
'r- 
 
 
 254 ^ Revolution in the Income Tax 
 
 ment Policies and the shares of companies augmented in 
 value by amalgamation-nothing is obtained foTJncom" 
 
 mi^nt be made by requiring a declaration whenever anv 
 
 lZ7:''Zt T"^'-'"' '°- ''^ recipient"::; fZ 
 payer , and by making a separate assessment in each case. 
 
 (/) Deposit Interest 
 
 A large amount of interest is paid or credited bv bank, 
 bu. d,ng and co-operative societies, and many other concets 
 
 shopsTSr"^ °" 1fP°""* ^'■"^•"'^'"^ --« large retai 
 shops . The mterest thus paid, amounting each year prob 
 
 compel deduction in ,9:5 was successfully resisted by' tl^^ 
 
 bus L XatTh"'' '"' ^'^° '^^'"'"-*=^' *° their 
 Dusmess (<^) that the greater part was credited to financial 
 
 and business firms who might be assumed to include it in 
 
 acce'ss^°nraV?„3e.'""S T^Zl ttt ^" ''"'\ *'"<'^''"^- ^ °--- 
 (being excess of price over originaT cos? ol^fnn' ^°' '"'"""'' "^^ P'oK'^ 
 of even isolated kus of ships o lid or nhV^^ """' expended on the property) 
 
 the Canton of Basle City e^ven increases ^v'^'^^'r'^ "' '"'" ^ '"»■»«• I" 
 securities or land, are asLsed and tl'l ^3 inct^e ""'""^ ""' ^'""' ^'■^"'er 
 
 stakes wo"n'af ho^rse rt^.'p^S o^rrtiTe" o7f f' T '''' ^'''^^ '" '---. 
 of years, fines or premiums' on the Print oM-l' '"^r'""''" "'""" " '""■ 
 received under En'down,ent PoL'es'Tr in orr^'u^a^fon' o^'"""^^^ "' ^""^ 
 gratuities on retirement, may be taxed as inroT.T.TL r P"^"''""'. <" as 
 Self.Governing Dominions "bvS E Minn' / * ^^ '"'=°'"<= ^axes of the 
 
 'ion, January ,9,6.) ^ E- Mmnis, in /ournal of Comparative Legisla- 
 
 " The number of assessments on " Other infer^« " ; 
 
 .900-, ,0 46,87. in ,906-7; and then, a a clnse'u e ce oTthe "^ ^^'"" '" 
 earned income, and the new inducement to declare alT.oul'r "'"<=«^'°n °" 
 many as 102,361 in 1910-11. I„ snite of a ri^l' ,1 °' '"™"'^' "> "^ 
 
 amount assessed increased only from A sLVn^ ■ '" ^' '"'" °' '"'"'''' ">« 
 .910-. I (BrMsi Jruo,„es anjJ^Tfeffy'Zfc V'°°~' '°/^.35..048 in 
 eating a sweeping in „f fifty „, sixty^o^kn'd L's' avr^ig'^fitf '^^^^f '"<''• 
 
 The Prevention of Evasion 
 
 255 
 
 their profits ; and {c) that another large part, comprising the 
 numerical majority of the transactions, was credited to small 
 depositors who were frequently below the Exemption Limit, 
 or were at any rate entitled to Abatement. Such reasons 
 — really the power of the banking community over the 
 Chancellor of the Exchequer — may continue to prevent the 
 enforcement in these cases of the principle of " stoppage at 
 the source." But they appear to afford no sufficient justifi- 
 cation for exempting those who pay such interest from the 
 obligation of making a report to the Inland Revenue every 
 half year of the names and addresses of the persons to whom 
 it is paid. Such a periodical report would enable the 
 Surveyors of Taxes to satisfy themselves that the amounts 
 were duly included in assessment ; and would, it is suggested, 
 reveal no small amount of petty evasion.^ 
 
 {g) Persons who escape Assessment 
 
 There may be still a few people who escape assessment 
 altogether, but these must be very few. It is often supposed 
 that people living in hotels and boarding-houses, or constantly 
 travelling about, or residing habitually abroad, evade the 
 tax. This, however, is for the most part, a mistake. Their 
 incomes are, in practically all cases, taxed at the source, by 
 assessment at its head office of the business in the profits of 
 which they participate, or by deduction from the interest or 
 
 '^ We make a supplementary suggestion of some importance. Without 
 putting any credence in "hidden millions," we urge as a plain measure of public 
 security, that all banks, co-operative societies, building societies, and Friendly 
 Societies (together with all persons with whom any analogous deposit has been 
 made) should be required to transfer to the Public Trustee (i. ) any balances of 
 current or deposit accounts on which there has been no transaction for five years ; 
 (ii.) any securities left for safe custody, of which the owner has not been heard from' 
 for ten years; (iii.) any box or package as to which no instructions have been 
 received for twenty years. The Public Trustee might enquire and advertise, and 
 after a certain interval transfer unclaimed property to the National Debt Com- 
 missioners, subject to liability to repay at any time to a claimant establishing his 
 right. A similar obligation should be put upon all joint-stock companies or 
 building societies in respect of debentures or shares on which the interest or 
 dividends have been neither paid nor claimed over a long period ; and on all 
 offices paying annuities for terms of years which remain unclaimed. 
 

 25^ A Revolution in the Income Tax 
 
 dividends that they receive. Those who escape must be 
 people who are actually themselves making or receiving an 
 income m the United Kingdom, but who are not salaried 
 employees of firms or persons in this country (whose names 
 have to be reported by their employers), and have no office 
 or busmess address, as well as no settled residence • or 
 people whose income, derived from abroad, is paid to their 
 credit abroad in the way already described, and drawn by 
 them to this country. There' may be among them some 
 habitual operators on the Stock Exchange, who frequent 
 City clubs and their stockbrokers' offices; there may be 
 gamblers of other descriptions ; there may be among them 
 part-time employees getting salaries (each under the Exemp- 
 tion Limit) from several firms, or paid entirely by commission ; 
 there may be some salaried agents of firms or persons outside 
 this country, or of foreign governments (whose recognised 
 diploniatic staffs in this country are legally exempt). There 
 are (obtaining incomes of very different nature and amount) 
 a certain number of novelists and other writers ; here and 
 there a vvorker in the Fine Arts; and possibly even an 
 occasional practitioner in the professions. The "earned 
 incomes " thus altogether escaping assessment are, however 
 for the most part small, and they would usually be entitled 
 to Abatements. More important may be the incomes drawn 
 from abroad in the manner already described, and, to a 
 smaller extent, interest on money lent, and deposit interest 
 It would not be difficult to require every hotel and boarding- 
 house keeper to make, when required by the local Surveyor 
 of Taxes, a return of inmates of his house ; and for the 
 Surveyor of Taxes then and there to require each person 
 thus reported to make a return of his income from all sources. 
 
 (//) Foreign Agencies in the United Kingdom 
 
 A growing form of evasion is seen in the habit of foreign 
 manufacturers who maintain a branch in this country for the 
 sale of their produce. This now takes the form, so far as 
 
 The Prevention of Evasion 
 
 257 
 
 the accounts are concerned, of a mere agency, to which the 
 goods are invoiced at little below the price at which they 
 are sold, affording no more "profit" in this country than 
 suffices to pay the working expenses. It is difficult to 
 impose any tax in these cases, as the foreign producer is 
 really in the same position as if he were supplying the 
 British Market through a mere commission agent, as he is 
 quite entitled to do. The only remedy would be a special 
 tax on the turnover of agencies importing goods for sale 
 in this country. This is open to some objections. 
 
 (?) Methods of Prevention 
 
 Evasion has already been very largely stopped by the 
 closer scrutiny of the Surveyor of Taxes, made possible by 
 a progressive enlargement of staff. For a long time after 
 1874 — really down to the close of the nineteenth century, 
 marked by the Boer War — the Treasury seems to have 
 cherished an idea that the Income Tax was destined to be 
 only a temporary impost, and to have grudged any accession 
 to this branch of the Inland Revenue staff. This has, during 
 the past decade, been remedied, and a far more stringent 
 administration is now established. Statutory changes have 
 brought into assessment a much larger amount of incomes 
 from abroad, and the systematic use of the Estate Duty 
 Accounts has revealed much more. The most experienced 
 Income Tax officials do not believe that unlawful evasion 
 applies to as much as i per cent of the whole taxable income. 
 Mr. Stamp demonstrates that it must anyhow be much less 
 than seventeen millions a year.^ Personal knowledge of a 
 few cases (and these exaggerated) produces an undue impres- 
 sion of magnitude. Even if 10,000 people in the United 
 Kingdom escaped assessment, this would not be as many 
 as one-half of i per cent of the total number of taxpayers — 
 implying probably a much smaller proportion of leakage 
 
 * British Incomes and Property^ by J. C. Stamp, 191 6, p. 324. 
 

 
 258 A Revolution in the Income Tax 
 
 than that involved in smuggling. Yet, large or small the 
 leakage ought to be stopped. ' 
 
 We ought, to begin with, to make it both lefrallv and 
 
 i3^p.o;ed at a Z^^ ^ "ZlZTt:^ ^ 
 
 soft or h" . " '""^"^ °" =* ''"^'"^^^ - profession of any 
 dends ho "J. ■"^^^'"'^"f^ yielding interest or div.^ 
 
 dends however small in amount, or who has an income from 
 any other sources whatever of as much as .^.00 a yea to 
 make a return of his income once a year. At present Ihis 
 
 £ dXed' for 'rr' °"'^ ^'^^" *^- '-^ any'LTome t 
 t^ declared for taxation; and it is said that two-thirds of 
 
 the yellow forms that the Surveyor of Taxes sends out .1 
 
 ^z :res'°"-°''^.^ ^'•^^^'-'- -^ otVerSbned 
 
 im tted rom :::;s:me°nf I '° T"" ''''"''' ^"''^^"*^">' 
 Tf • u/ , ^^^^^^"^^"t> are not even returned to him 
 
 Loflo '• '^ "^'^ ^''""■^^'^ °''''S-'-y ° e Ty 
 mi2\ ^ '""r' ^ '^°™ '° ^^'"™ '■' fi'led "p. This 
 
 e™ated\'Tosetutf w-t^"' ^'''Z '""''^''^^ '^^ 
 that th. r P'^^^^^^e, with success, whenever they prove 
 
 turlft/Tem'^^Ar least t^'' ^"''.*^- "^ ^-" - 
 recipient to prove tht' he if 'nJun TLfr^' '' °" ^'^ 
 
 income' is'nof. '° T'T "'^ '^"'"^ "? ^^ ^-^^ - to 
 Ihn. V ".°^^"°"gh. Nearly all the methods of evasion 
 
 above descnbed-together with others that would doubtlesJ 
 
 obligatioaofemXyer.orel'rn'jr'' "^ ''IT" ^'™S-' enforcement of .he 
 and this should beTade r'ndude ,".>"Ill "''"'"^^^ ""'^ -lary of their employees^ 
 in order that enquiry may 4 tade a tl ^T' ""'"'"^ ""^ '^'°°^ >"=="• 
 agents and other emplo/ees Torkin" for °">" i""^""" " ; (*) all travellers 
 any remuneration is paid 7n The foL of T'' •''•" ™' "'"> " '° "'•'om 
 and building societies returi the nlmTs t !""""?"• '^''™ "'^ ^^"^^'^ 
 n would not be unreasonable to iTouhnI. ''' ^^ ^^f°''' '"'"est, 
 authors to whom thev have ^,1^. publishers to return the names of the 
 
 but successfully resisted bv the „ hr T^""™? " ""'' """^ attempted in ,05 
 the dramatists'for w lose ^1 J. fhe 't- "^ "?"'' '° """"''" "'"'^^ ° 
 stockbrokers the names of thosl To wh """.l P^^"™'"? "ghts, and even the 
 speculative operations .' No onTou.ht toT l7 ''T-P"''' "differences" on 
 should be kept in ignorance o? Ms^ss' b.y tL^bl: ^el;™ "'^' '"^ "°~- 
 
 Zl^^ Prevention of Evasion 
 
 259 
 
 be invented if the Income Tax were doubled — depend for 
 their success principally on the secrecy in which we allow 
 everybody to envelop, not only his income, but also the 
 nature of his investments. That secrecy may be respected, 
 so far as the inquisitiveness of neighbours or the newspapers 
 is concerned. But just as we have come to realise that we 
 must reveal our income to a Government official, so we may 
 as well submit to reveal in the same way the sources of our 
 income. We do so now, incidentally, in most of our returns 
 for Income Tax and Supertax. We do so, specifically and 
 completely, whenever we have to make up the Estate Duty 
 Returns on any death. What is now suggested is that we 
 should be required to do so annually, as a matter of course, 
 in connection with all the Income Tax returns. There would 
 be no harm, and much incidental advantage, if every person 
 under an obligation to make a return under the Income 
 Tax Acts, and every one actually making any return of 
 income, were required, once a year,^ to reveal, in confidence, 
 all the property that he possesses apart from his furniture, 
 clothes and other " paraphernalia of the Home " (real estate, 
 mortgages or other loans, deposits, securities of every kind, 
 and every other capital or investment yielding interest or 
 profit). From such annual returns of capital the Inland 
 Revenue authorities should compile a universal register of 
 property ownership, classified by persons, localities and 
 
 ^ The present system of charging the tax on incomes under Schedule D (in- 
 cluding most salaries, but not salaries under Schedule E) upon the average of 
 the three preceding years — in the case of mining profits, of the five preceding 
 years — should be abolished ; and each year's income should bear its own tax (or 
 rather the tax on the income of the last completed "year). On the whole this 
 might not increase the aggregate received by the Exchequer, but (i.) it would 
 prevent many anomalies; (ii.) remove the illogical difference made between 
 salaries charged under Schedules D and E; (iii. ) obviate much discontent 
 among taxpayers who find themselves required to pay on more than they are 
 actually receiving {Income Tax Anomalies^ by T. Hallett Fry, 1903). The 
 *' three years' average" — almost unknown on the Continent of Europe — was 
 adopted for the South Australian Income Tax in 1884, but was abandoned in 
 the very next year ("The Income Taxes of the Self-Governing Dominions," 
 by S. E. Minnis, \x\ Journal of Comparative Legislation^ January 19 16). Its 
 abandonment in the United Kingdom was tentatively recommended by the 
 Departmental Committee of 1905 (Cd. 2575 of 1905). 
 
H 
 
 
 260 
 
 A Revolution in the Income Tax 
 
 .■nvestments. Such a universal register would be a useful 
 check on the periodical Death Duty returns (which are now 
 
 ss;:e;^£2 ""'r- '"'- ^^-)' -^^ -■' ^e ^tsTf 
 
 periodically verified and corrected from these. The annual 
 aeslmed to be eventually checked by the Estate Duty returns 
 
 t^Jrf' ""'"^'''^ "'""'''^ auto,„atlcally reJeal pZ'^y 
 Md abroad znvestments known not to be taxed at the source 
 and securu.es or loans yielding interest not included Tth'e 
 Income Tax returns. If an income-yielding seclritv dis 
 
 Zirbe "/;' "'"■■" " ^ '"^"^^ >'^-' fhe con rLt; 
 
 accMental T • '° '\P'"" "'^^'''^^ '"^^ ^^ merely an 
 accidental omission, whether the investment had been 
 
 changed, or whether its capital value had been spent or 
 
 g.ven away. By the universal register made up from such 
 
 wo iTb^ obr^'J k"\'"^^^""^"^^' ^^-^ -eful informad^n 
 Tere held in thi ^ '^" Government as to what securities 
 were held in this country, and by what classes. And such 
 annual returns of property, together with the rVturn of 
 .ncome to be periodically required from hoarding house 
 esidents and other transients, would, it is suggested lo a 
 long way, in practice, to stop all the more important of "he 
 present evasions of the Income Tax.' 
 
 VIII. The Capital Tax and the Citizen Tax 
 
 But even an Income Tax at ten shillings in the pound- 
 even ,f augmented by every kind of indirect taxaSon that 
 the ingenuity of the Chancellor of the Exchequer can devise 
 -may possibly not suffice to make both ends meet in thit 
 momentous first or second Budget of Peace. Such 1 mass 
 
 guardians; (ii.) the inclusion, aLngprofirHableoT"""^ ""'"'"; P"^"'^ " 
 habitual operators on the Sfn^t P^Xk^ ,, °. ^««^™ent, of the gains of 
 
 of horses ^nd gamblers aftrL! or ofh '""""^ ^"^ stockjobbers, of backers 
 
 perhaps only so^ far aTth:se'Tu^:u.Ts l^l^^' fJ^^^Ia ^^ ^^"^r^ 
 of prizes won in otteries and «:wPPr.ctaboc u '""^^^a , (ni.) the inclusion 
 
 the stakes and pr.es wonThL\"Sfa:dln:X""Lr""^^' ^^ "' 
 
 The Capital Tax and the Citizen Tax 261 
 
 of new and additional indirect taxation — producing, it may 
 be, fifty or even a hundred millions sterling — and such an 
 Income Tax, which would, when amended as is here 
 proposed, yield more than a couple of hundred millions — 
 may perhaps suffice to meet the heavy debt charge ; the war 
 pensions ; the inevitable growth in our civil expenditure on 
 Maternity and Infancy, Education and Vocational Training, 
 Housing and Public Health generally ; and the necessary 
 increase in our defensive armaments. But not even this 
 unprecedented taxation, using, as some may think to the 
 uttermost, the resources both of direct and of indirect 
 taxation, may prove adequate to our needs. With a public 
 debt raised to the hitherto unthinkable total of nearly 
 4000 millions, involving an annual charge for interest alone 
 of not far short of 200 millions a year, it is imperative for 
 national safety that a very large amount should be repaid 
 within a few years. We cannot, unfortunately, regard 
 ourselves as safe against another great war, within a decade 
 or two, in which the very existence of the Empire would be 
 at stake. We cannot afford to have such a war sprung 
 upon us whilst saddled with a National Debt of 4000 
 millions. We shall have drained dry during this war nearly 
 all the money loanable to the Government in an emergency ; 
 and though we may hope that the springs of industry and 
 saving will quickly be flowing abundantly for the replenish- 
 ment of this reservoir of private wealth, we must compel 
 sufficient retrenchment of private expenditure to enable the 
 Government, not only to meet its current expenditure, but 
 also to pay off a large part of its debt within a decade. We 
 venture on the opinion that not less than 1200 millions 
 sterling — this being probably under a third of the whole — 
 must, for financial security, be discharged at once. How 
 can this be done? 
 
 We have seen that all the known sources of revenue will 
 have to be strained to the utmost to meet merely the annual 
 charges. War would therefore throw back the Government 
 on the loan market. But, as already suggested, we cannot 
 
1) . 
 
 262 
 
 A Revolution in the Income Tax 
 
 hope, without early repayment of a large part of what the 
 Government has absorbed, that the reservoir, from which the 
 Government would need again to draw huge sums in sudden 
 loans, can, within the next few years, yield enough for 
 another great war. This is essential for national security, 
 not merely as a measure of finance. A perfectly herculean 
 repayment of debt is literally a part of National Defence— 
 actually a measure of security for the life and property of 
 every citizen of the United Kingdom. We must regard 
 such a repayment not as a tax, but as an insurance premium 
 as something that we must defray from whatever resources 
 we have, as a means of preserving the remainder from 
 destruction. 
 
 At first sight it may seem that we might look to the 
 Death Duties, taxes on capital from which the Government 
 now obtains 30 millions a year, as the appropriate source 
 from which to raise additional funds to discharge a capital 
 liability. The total value of the property passing by death 
 each year, and made subject to these taxes is now over 300 
 millions, so that the State already takes, on an average, 
 nearly one - tenth as its share.^ Even to quadruple the 
 existing Death Duties, so as to take, on an average, four- 
 tenths of the whole estate, would scarcely produce as much 
 as is required. Such a stupendous increase would be felt to 
 be an intolerable hardship. Moreover, as what is needed is 
 a special effort during the next ten years, it would be unfair 
 to make this quite exceptional burden fall on those families 
 only — probably only one-third of the whole — in which the 
 property-owner happens to die within this particular decade. 
 Such an arbitrary limitation of the necessary levy to a small 
 
 1 The 300 millions worth of property of afl kinds that usually passes by death 
 each year, and is subjected to Death Duties, is held by about 75,000 persons 
 of whom 33,000 leave estates worth less than ;^5oo each and totalling nine 
 millions ; 38,000 estates from ;^5oo to ;^io,ooo, totalling 90 millions ; and 
 4500 estates over ;6^io,ooo, totalling about 210 millions. Of these vast sums 
 land and houses stood for less than 90 millions; stocks and shares for 130 
 millions ; loans and mortgages 20 millions ; trade stock, etc., 17 millions ; insur- 
 ance policies 13 millions; furniture and clothes 8 millions; cash in house and 
 bank 20 millions. 
 
 The Capital Tax ajtd the Citizen Tax 263 
 
 section of the property-owners would be in the last degree 
 inequitable. 
 
 Similar considerations of equity negative any proposal to 
 get the necessary funds by any tax falling exclusively on 
 the owners of land, whether yielding agricultural or building 
 rents ; or by confiscating the railways or the coal-mines. 
 We must not, in this great emergency, cast any heavier 
 burden on the owners of one kind of property than on the 
 owners of other kinds. 
 
 We suggest that, if so heroic a measure of prompt re- 
 demption is thought necessary, as an entirely exceptional 
 measure, not to be repeated, all the property-owners of the 
 United Kingdom having as much as ;^ioo, on the one 
 hand ; and (exempting only the poorest) all the adult in- 
 habitants who are not to this extent property-owners, on the 
 other, should be called upon to provide a special repayment 
 of War Debt to the extent of 1200 million sterling, in order 
 that the whole nation may obtain financial security. What 
 would be required would be, once for all, a lump sum con- 
 tribution — -2i Special War Levy — of 10 per cent of the 
 capital value of all private property.^ Deducting the 
 property of various kinds belonging to the different depart- 
 ments of Government and Local Authorities, and to recog- 
 nised corporate charities, and omitting all furniture, clothes 
 and other '* paraphernalia of the Home " (perhaps up to a 
 maximum of one or two thousand pounds in each case), the 
 capital value of all the property in the hands of private in- 
 dividuals, at the present much depreciated valuations, may 
 be estimated as worth in the market between eight or ten 
 thousand million pounds. We must ask the owners to cede 
 10 per cent of this capital value in order to secure the rest 
 
 ^ The German Government in 191 3-14 raised a special " Defence Levy" in 
 this way, in order to put the army in a higher state of efficiency. In making this 
 levy, the German Government, although always extremely rigorous towards 
 evasion of tax, announced '* a general pardon " in respect of previous evasions, 
 provided that people revealed all their if)ossessions, but intimated that it would 
 deal most severely with any failure to disclose these fully. The result was to 
 reveal the existence of a much greater amount of taxable property than had been 
 estimated. Our Inland Revenue administrators may here find a useful hint. 
 
204 A Revolution in the Income Tax 
 
 against being held to ransom by a conqueror, not to say 
 looted by an mvader. It may prove to be that there is no 
 other way. Every owner of property in excess of some 
 small mmimum-say^ioo-must then be called upon to 
 make a statement of all his property, and to realise one- 
 tenth of Its value for the State, whether by selling such 
 portion of It, or by finding the equivalent out of his already 
 severely taxed income, in return for the concession of bein^ 
 allowed to retain his lands, houses or securities intact. We 
 may well make this colossal sacrifice as easy as we can by 
 calling up only i per cent in each of the ten years ; and on 
 the other hand, by allowing a discount of the full ? per 
 cent per annum that the Government will save in interest 
 charges m return for prepayment of the whole or any 
 portion earlier than the due dates. But one-tenth of 
 the value of all private property the Government must 
 ^ IS suggested, appropriate within the first decade after 
 -Peace comes for this supreme national purpose, if this is 
 the Tef "^""^"'^'^ '"" ''''^^' ^"^ ^^ ^^^^ effectively to protect 
 
 It would, of course, be invidious to put the burden on 
 ^e property-owners alone. Every inhabitant of the United 
 Kingdom has the same interest in National Defence, lest he 
 and his be exposed to the fate of the Belgians, the Poles and 
 the Serbians. Just as we ask the property-owner for one- 
 tenth of his wealth, so we might fairly ask every man and 
 woman registered as electors and not possessing (and there- 
 fore not paying the Capital Tax on) £ioo worth of property 
 to contribute for these ten years a special Citizen Tax to be 
 devoted exclusively to the same purpose of freeing the State 
 from one-third of its debt-say, a poll-tax of ten shillings 
 per head per annum. There must, in practice, be a limit 
 be ow which such a tax could not be collected without 
 actually impinging on the means of life itself The very 
 existence of such low earnings is a national disgrace and 
 disaster which we ought to remedy as quickly as possible. 
 Meanwhile, we must, in order not to create more liability 
 
 Will such Taxation cripple Industry ? 265 
 
 than we discharge, limit the Citizen Tax to adults earning 
 not less than, say, thirty shillings per w^eek. 
 
 Such a Capital Tax, assuming it to be paid by equal 
 instalments throughout ten years, accompanied by some such 
 Citizen Tax, would yield about 100 millions a year; and 
 such a sum continued for a decade would extinguish 1200 
 millions sterling of debt.^ 
 
 IX. Will such Taxation cripple Industry, or 
 DRIVE Capital out of the Country? 
 
 ' Any proposals for taxation, whatever they are, will 
 always be met by two stock objections. It is invariably 
 said that the tax will destroy or cripple the industry of the 
 country, or some part of it. It is alleged with almost equal 
 persistence, that the tax will drive out of the country the 
 capital without which industry cannot be carried on. These 
 charges are certain to be brought against the heavy taxation 
 now required. 
 
 With regard to the allegation of crippling industry, it 
 must be pointed out that — whatever may be said of taxes 
 on particular commodities, on particular tastes or habits, or 
 on particular imports — the Income Tax has no crippling or 
 injurious effect on industry. Unlike taxes on commodities, 
 it does not raise the cost of production of any article. 
 Unlike Excise Duties, it in no way hampers or interferes 
 with the process of manufacture or the course of trade. 
 Unlike taxes in proportion to the output of industrial 
 concerns, whether by stamps or on wages, it does not fall 
 on the man who is making a loss, or who is just struggling 
 to pay his way. Unlike any system of licences, it prevents 
 no one from starting a new business, or from extending an 
 old one. Unlike duties on raw materials or components, 
 or excise on products, it involves no increase of capital, and 
 demands no advance before a profit accrues. It comes in 
 
 ^ See a paper in The Economic Journal for December 191 5, by Mr. A. 
 Hook, making much the same suggestion. 
 
266 
 
 in 
 
 'iff 
 
 A Revolution in the Income Tax 
 
 merely after the business has been done, after the product 
 has been paid for, after the profits have been made. More- 
 over, it is less than any other known tax liable to being 
 " passed on " to employees or customers. What the Income 
 Tax does (and this is really why we dislike it) is to intercept, 
 after it is made, a portion of the income that we were intend- 
 ing to spend for our own purposes, in order to divert this 
 portion to the service of the State. No method of taxation 
 can possibly be more free than the Income Tax from the 
 accusation that it cripples or hampers industry. 
 
 The proposed additional levy, within the next ten years, 
 to be made on the capital of all property at the rate of 
 10 per cent once for all (which, however, might be payable 
 at the rate of i per cent a year), has the same advantages 
 as the Income Tax. But it may have the drawback, in 
 the case of persons engaged in manufacture or trade, of 
 compelling them to encroach on the capital necessary for 
 the conduct of their business. It may be observed that this 
 part of the value of property is not very great. Out of the 
 300 millions taxed each year on passing by death, only 17 
 millions were represented by " Trade Assets, i.e. Book debts, 
 Stock, Goodwill, etc.," and only 20 millions (much necessarily 
 belonging to non-traders) by "cash in the House and in 
 Bank." It does not seem as if as much as one-tenth of 
 the Capital Tax would fall on the liquid business capital 
 on which it is specially inconvenient to encroach. Moreover, 
 this would not be encroached on so long as its owner had 
 any other property that he could realise or mortgage ; and 
 few business men could not find enough money invested in 
 securities to enable them, by realising, to pay a i per cent 
 tax annually for ten years. It is true that, in so far as the 
 Capital Tax renders it necessary to realise by sale some 
 portion of the property, this will take place in a bad market, 
 at a time when many others are selling. But this is part of 
 the burden of the levy, not to be helped. Moreover, in 
 the great majority of such cases owners would be led to 
 economise in order to avoid the necessity of selling in 
 
 Will such Taxation cripple Industry ? 267 
 
 itself a good thing ; and, if the worst came to the worst, 
 the sales would be spread over a whole decade. Finally, 
 it is objected that any tax on Capital is economically 
 objectionable — including the existing Death Duties — because 
 it may involve a using up of the national capital as income. 
 This objection does not apply to the case, such as that 
 now contemplated, in which the Government will be using 
 the whole of the Capital Tax, and more, for essentially 
 " Capital " purposes, namely the repayment of National Debt. 
 
 It is a very different objection that taxation of the 
 magnitude now proposed will " drive Capital out of the 
 Country." Doubtless the idea will cross the minds of some 
 property-owners of the possibility of escaping the increased 
 taxation by transferring their property or themselves to 
 other lands. But they will find this in nearly all cases 
 impracticable. 
 
 To begin with, no transfer of capital to other lands, no 
 diversion of investments to American, or South American, or 
 Polynesian securities or plantations will avail to escape taxa- 
 tion so long as the owner is domiciled in this country. The 
 Income Tax and the Capital Tax, like the Death Duties, 
 will be levied just as inexorably and collected as inevitably 
 on capital thus " sent out of the country " as on that invested 
 in the United Kingdom. The much-feared diversion to 
 other countries of the fluid investments of the British 
 capitalists is not influenced by the severity of British taxa- 
 tion, because they have to bear it equally wherever they invest 
 their money. 
 
 But the capitalists may flee from this heavily taxed 
 country, and take their wealth with them ? They certainly 
 may, if they like, abandon their domicile in this country ; 
 sell off their houses and parks ; and go to live elsewhere, as 
 happened in 1 9 1 5 in one notorious case of a merchant and 
 shipowner, engaged in the international dead-meat trade. 
 But where will they go to live ? All over Europe and the 
 colonies and dependencies of the European countries they 
 will find similarly heavy taxation. It may be in the United 
 
268 A Revolution in the Income Tax 
 
 States that they will take refuge (where, by the way, there 
 IS already an Income Tax). But it must be remembered 
 that ^"f" Property that they retain in the United Kingdom 
 hey vvdl still be hable for taxation. The land and houses, 
 the railways and factories, the machinery and plant of this 
 coun ry-which represent four-fifths of its wealth-cannot 
 be taken away. At most, only such capital as is represented 
 by overseas mvestments, and only such fraction of that as be- 
 longs to persons who chose actually to expatriate themselves 
 could possibly escape British taxation. The one case in 
 which there is any appreciable danger of specially heavy 
 direct taxation injuriously affecting the profits accruing to 
 this country (and this is not, strictly speaking, a case of 
 driving capital out of the country ") is that of the merchant 
 or shipowner doing business not in England at all. but in or 
 between other countries, where the "capital" employed is 
 already out of England, but where the head office of the 
 management happens to be in London, or the owner to be 
 domiciled in this country. In this instance, it may be 
 admitted, if the capitalist chooses to expatriate himself, and 
 to give up the advantages that caused him to centre in 
 London the management of his overseas business, he may 
 migrate, and thus exchange the British taxation for that of 
 the country to which he expatriates himself. An analogous 
 case ,s that of a doctor or musician, who might choose to 
 migrate to New York, where his professional earnings would 
 perhaps not be so highly taxed. The danger, in fact, is not 
 so much in driving away "capital," as in inducing a migra- 
 tion of men obtaining exceptional incomes from their own 
 exertions, whether in business or otherwise. To the extent 
 howjver, that these men consume, by way of personal ex ' 
 penditure of themselves and their families, the economic 
 equivalent of what by their skill they produce— and this is 
 to no small degree the case-the actual economic loss to 
 this country of any such diversion of their activities is 
 lessened. This country did not gain by what they consumed 
 and would not lose by their consuming it elsewhere It 
 
 Will such Taxation cripple Industry ? 269 
 
 gained by what they saved and usefully invested in this 
 country ; and our financial loss by their migration would be 
 practically limited to the extent that it caused them to 
 divert more of their savings to investments elsewhere than in 
 this country. 
 
 To sum up, there is nothing in heavy taxation of income 
 or capital that can be shown to " drive capital out of the 
 country," except possibly to the limited extent in which, not 
 capital in this country, but overseas investments, or businesses 
 conducted in or between other countries are concerned ; and 
 then only when the owners of such capital (which is already 
 " out of the country ") elect to expatriate themselves. This 
 they might equally do from fear of taxation of the same degree 
 of severity if it were levied in any other way. 
 
 There is, however, another objection to heavy taxation, 
 which is often used as an argument against any serious 
 Income Tax, namely that it prevents saving among the 
 rich, and thus restricts the creation and profitable investment 
 of new capital, which is advantageous to the community. 
 We are asked, in effect, to leave untaxed the big incomes of 
 our landlords and capitalists, on the plea that these big 
 incomes are the source from which comes the greater part 
 of the new capital on which a borrowing Government or 
 company pays interest, or out of which our additional ships 
 and new mills are constructed, our yearly increment of 
 dwelling-houses are built, and our tramways and electricity 
 works are extended. Now, it may at once be admitted that 
 all heavy taxation, whatever its form, tends to restrict the 
 margin available for saving, and (though to not quite the 
 same extent) to lessen the actual saving. We may go 
 further, and admit that taxation falling severely on the 
 incomes of the wealthy, like a graduated Income Tax, is 
 likely specially to lessen the large proportion of the creation 
 of new capita^, that arises from the almost automatic savings 
 and investments of the Rothschilds and the Grosvenors, 
 and all the others whose incomes actually surpass their 
 spending capacities. This is, as things are now organised, 
 
ii 
 
 270 A Revolution in the Income Tax 
 
 undoubtedly part of the evil result of having to levy such 
 heavy taxation. But when heavy taxation becomes necessary 
 the use of th>s argument by or on behalf of the wealthy 
 amounts to a plea that the poorer members of the communhy 
 may be compelled to pay heavier taxes than would otherwti 
 need to be unposed on them, in order that the wealthy my 
 be reheved of a portion of the burden. There is good 
 ground ,n abstract theory, for exempting from Income Tax 
 any portion of the mcome devoted to public objects. There 
 |s even an argument for confining assessment for Income 
 Tax to such part of the income as is not saved and perma! 
 nentlym vested as new capital. But seeing that such 
 exemptions are (with the exception of the amount spent on 
 
 are d^nTedT'l "°' /°""f administratively practicable, and 
 are denied to the relatively poor as well as to the wealthy 
 there is something rather mean in the wealthy claiming to 
 have the whole of their vast incomes lightly dealt with 
 on the plea that many of them (but not all) save a llrge 
 portion of these incomes, whilst still expending hugely 
 more than the average citizen on their household expenses 
 and amusements. The.saving that comes from abstinence 
 remains in fact, far more easily open to the rich man 
 even a ter he has been supertaxed' than it do^s to th ' 
 K K I u' °".^ ^""^ '''^'"S out Of surplus income (for 
 which he has hitherto been able to get the " reward o 
 abstinence"!) that the rich man fears may be impractic 
 able to him, if taxation be further graduated against him. 
 It does not seem profitable to forgo any equitaWe taxation 
 on the ncomes of the wealthy-involving, as this would, an 
 
 lr""l t ''^'"^'^" °" '""^^ P--- fellow-citizens 
 —merely m the hope (not always realised) that the wealthy 
 will save, and usefully invest a part of these incomes. Such 
 large savings by a wealthy class have an inherent evil • they 
 .ncrease and perpetuate a functionless, tribute-levying class 
 
 Mate. If there proves to be any substantial check on 
 saving, and if the supply of additional new capital falls short 
 
 Will such Taxation cripple Industry ? 271 
 
 of our requirements, the State itself can supply the capital 
 (as is already done by nearly all foreign and most colonial 
 governments) for investments held to be in the public interest 
 (such as agricultural development, housing, new scientific 
 applications to industry, etc.), obtaining it by loans, or by 
 Death Duties or other taxing — to that extent, in fact, making 
 saving compulsory on the taxpayer. More immediately 
 relevant, perhaps, is the consideration that the form of 
 " saving " and the particular " investment " which is of the 
 greatest importance to any community — the devotion of a 
 larger portion of the annual product to the nurture and 
 training of the rising generation — is at present hampered 
 and restricted by the present unfair incidence of the Income 
 Tax. We should, in this way, do more to promote the 
 form of " saving " that is of the greatest importance to the 
 State by having a ten shillings Income Tax, assessed on 
 Family Incomes as herein suggested, than by limiting the 
 Income Tax to five shillings or even to half-a-crown in the 
 pound, and assessing it in the present way, now so penalising 
 to parents. The former might interfere more with the auto- 
 matic accumulations of the great financiers, but the latter 
 stands in the way of a better education for hundreds of 
 thousands of young men and women on whom the future 
 production will depend. 
 
 Finally, those who think such an Income and Property 
 Tax as is here proposed to be very objectionable, are invited 
 to produce any other form of taxation, less open to objec- 
 tion, that would yield the required amount. 
 

 It 
 
 INDEX 
 
 Abatement for small incomes, 225, 
 
 240, 241, 242, 245 ; for children, 
 
 235. 236, 238, 239, 240, 241, 245 ; 
 
 for wife, 238, 242 
 Accessions, Income Tax on, 252-254 
 Accidents, prevention of, in coal- 
 mining, 162-165 
 Actuaries, Institute of, 185 
 Acworth, W. M., 54 
 Admiralty, coal for, 116, 149, 158, 
 
 161 
 Advisory Boards for Post Office, 45 ; 
 
 for railways, 95-96 
 Agent, the Post Office as the Common, 
 
 38-42 
 Agents, Insurance, 193, 195, 197, 199, 
 
 202-204, 207-209, 215-216 
 Aliens and coal supply, 117 
 Allowance for children, see Children ; 
 
 for Life Assurance, see Life Assurance 
 Annales de la rigie directe, I'j'j 
 Annuities, Life, 185-186, 199, 205, 210, 
 
 212-213 
 Anthracite, 159 
 Arnold, Whately C, 54, 97 
 Ashley, W. J., 142 
 Assessmentism, the vice of, 212 
 Associated Society of Locomotive 
 
 Engineers and Firemen, 104 
 Association of Colliery Enginemen, 144 
 Association of Post Office Clerks 
 
 (Ireland), 45 
 Assurance, see Life Assurance 
 Auditors, railway, compensation of, 85 
 Australia, postal advantages of, 14-16 ; 
 
 Income Taxes in, 241-250, 254, 259 
 Austria, postal advantages of, 9, 1 1, 17- 
 
 20, 21, 24-26, 28, 33 ; Income Tax 
 
 in, 235 ; railways in, 103 
 Automatic machines in Post Office 
 
 service, 5-6 
 Avebury, Lord, 54 
 
 Banker, Post Office as, 16-38; its 
 Savings Bank statistics, 16 ; restric- 
 tions of, 17 ; postal cheque system ; 
 17-20; safety of, 20-21; interest 
 allowed by, 20-22 ; development of 
 business as, 20-38 
 
 Banks, interest paid by, 21, 254-255, 
 258 ; unclaimed deposits in, 255 ; 
 failure of, in international remittance, 
 31-32 
 
 Baths, pithead, 145 
 
 Bearer-bonds escaping taxation, 249 
 
 Belgium, postal advantages of, 7, 18-20, 
 .24-26, 33 ; railways of, 54 
 
 Bibliography of Coal Nationalisation, 
 177-180 
 
 Birth registration, 208 
 
 Blue-books by post, 40 
 
 Books to be sold by Post Office, 40-41 
 
 Bosnia, postal advantages of, 18 
 
 Boys in Post Office, 9 ; in coal-mines, 
 127 
 
 Brakes, variety in, 71 
 
 Buildings, Post Office, 5-6 
 
 Burial Money, see Funeral Benefit 
 
 Burt, Thomas, 142 
 
 Butterworth, A. K., 71, 72 
 
 Buxton, Viscount, 221 
 
 Bye-product recovery ovens, 168-169 
 
 Canals, Nationalisation of, 5 1 - 1 1 1 ; coal 
 traffic by, 120, 166 
 
 Capital of the Post Office, 3 ; of the 
 railways, 56-58 ; of the canals, 86-87 ; 
 of the coal-owners, 131-137 ; of the 
 coal-dealers, 156; of the insurance 
 companies, 198-199; effect of Income 
 Tax on accumulation of, 269-271 
 
 Capital Tax, the, 260-265 
 
 Carrier, Post Office as Common, 4-16 
 
 Carter, R., 221 
 
 Casual labour, 100 
 
 273 
 

 274 
 
 /fow to Pay for the War 
 
 Checkweighmen, 145 
 Cheques on Post Office Bank, 17-20 
 Children, allowance for, 225, 227, 
 234-236, 238-239, 241-243, 245 ; in 
 other countries, 235-236, 238-239 
 Chiozza-Money, Sir Leo, 246 
 Circular Notes, 24 
 Citizen Tax, the, 264-265 
 Clergy Mutual Life Assurance Com- 
 pany, 196 
 Coal, grades of, 154; prices of, 127, 
 153; ports of export of, 119-120; 
 see Coal- miners 
 Coal-miners, classes of, 118; earnings 
 of, 127-128 ; grievances of, 137-139; 
 advantages of Natif)nalisation to, 
 139-148; Trade Umonism among, 
 144-145; housing of, 140, 171 ; 
 accidents among, 162-165 
 Coal Mines (Restriction of Prices) Act, 
 1915. 116 
 
 Supply,^ Nationalisation of the, 
 
 113- 180; in other countries, 174; 
 bibliography of, 177-180 ; finance of, 
 169-174; statistics of, 117-118 
 Collecting Friendly Societies, 186 
 " Collect on Delivery," 14-16 
 Commission in Life Assurance, 196; 
 
 on international remittances, 31 
 Compensation, see Expropriation 
 Conditions of service in Post Office, 
 42-45 ; in railway service, 54-55 ; in 
 coal-mines, 127-128, 139-148 
 Controlled Establishments, payments 
 
 by, 223 
 Copyright, Income Tax on, 252 
 County Average, 138 
 Coupons, evasion of Income Tax on, 
 
 248-249 
 Courtney, Lord, 230, 231, 247 
 Cunningham, W., 54 
 
 Davies, Emil, 54 
 
 Dead-rent, see Royalties 
 
 Dean, Forest of, 128, 132 
 
 Death Duties, the, 222, 249, 259, 262 
 
 registration, 208 
 
 Debt-collecting by Post Office, 24-26 
 Debt, National, repayment of, v, vi, xi, 
 
 xiii, 184, 188-193, 216-217 
 Denmark, postal advantages of, 24-26 
 Dent, F. H.,72 
 Deposit interest escaping Income Tax, 
 
 254, 258 
 Development of the Post Office, 1-50 
 Directors, railway, compensation of, 
 
 Dishonesty, how far encouraged by 
 
 Income Tax, 225-228 
 District Messenger Service Company, 9 
 Dividends, Income Tax on, 251 252; 
 
 not collected by Savings Bank, 27- 
 
 28 ; amount of railway and canal, 
 
 59, 82-84, 87, no 
 Domestic Money Order, 9 
 Double Income Tax, 250-251 
 Drafts to be sold by Post Office, 23-24, 
 
 31-38 
 " Driving Capital out of the Country," 
 
 267-269 
 
 Durham, coal trade in, 116, 118-121, 163 
 Miners' Association, 142 
 
 Economic Journal, 265 
 Edwards, Clement, 54 
 Kgypt, postal advantages of, 16, 29, 
 
 39-40 
 Elliott, Sir George, 115, 134, 178 
 Endowment Policies, 187 
 
 ■ Policies and Income Tax, 253 
 
 Equitable Life Assurance Company, 
 
 Estate Duty Accounts and Income 
 
 Tax, 249-250 
 " Etat Civil," lack of in U.K., 208 
 P:vasion of Income Tax, 247-260 
 Excess Profits Tax as special Income 
 
 Tax, 223, 230 
 Exchange, the London Coal, 125 
 Exemption limit for Income Tax, 232, 
 234, 238-239, 240-241, 246 ; higher 
 for married couples and widows, 240 
 Export trade in coal, 11 7- 120 
 Expropriation, terms of, for railways, 
 82-86 ; for canals, 86-87 ; for coal- 
 mines, 132-137; for coal-distributing 
 plant, 154-156; for Life Assurance 
 Companies, 198-199 
 
 Family Incomes, Assessment to Income 
 
 Tax of, 236-243 
 Farthings, Post Office refusal of, 21 
 Fawcett Association, 45 
 Fay, Sir Sam, 70 
 
 Federated Malay States Railway, 99 
 Fireclay, 131 
 
 First-class coaches, waste of, 74-75 
 Foreign agencies escaping Income 
 
 Tax, 256-257 
 
 Exchanges, regulated by Post 
 
 Office, 31-38 
 
 Investments and Income Tax, 
 
 247-251, 256, 267 
 
 postage stamps, 9 
 
 Index 
 
 275 
 
 France, Income Tax law in, 236, 238- 
 239 ; postal advantages of, 14, 24- 
 26, 27-28, 43-44; railways of, 54, 
 102-103 
 Free passes on railways, 75 
 Fry, T. Hallett, 259 
 Fund, the Insurance, 211-214 
 Funeral benefit, 191, 197, 202-204, 
 206-207, 214-215 
 
 Gambling gains escape Income Tax, 
 
 254, 256, 260 
 Canister, 131 
 Germany, Government coal-mines in, 
 
 174-180; scientific coal-mining in, 
 
 167-169; postal advantages of, 9, 
 
 II-13, 18-20, 24-26, II, 39-40 
 Gibb, Sir Cjcorge, 54 
 Gladstone, VV. E., 234-235 
 Glasgow, export of coal from, 120; 
 
 coal supply of, 150 
 Gold pass, directors', 75 
 Government ownership of coal, 132 ; 
 
 in other countries, 132, 174 
 Graduation of Income Tax, 221, 225, 
 
 227, 243-247 
 
 ** Half our Incomes," 229 
 Halfpence, Post Office refusal of, 21 
 Hamilton, Lord Claud, 68, 75 
 Heaton, Sir J. Henniker, 5, 10 
 Herzegovina, postal advantages of, 18-20 
 Holland, postal advantages of, 9, 24- 
 
 26, 27-28 
 Hook, A., 265 
 
 Hotels of railway companies, 58 
 Hughes, H. W., 115 
 Hull, E. W., 115, 158 
 Hungary, special advantages of, 9, ii, 
 
 18-20, 24-26, 33 
 
 Iddesleigh, Earl of, 221 
 
 Income Tax, the effect on Life As- 
 surance funds, 189-190, 215, 219- 
 271 ; list of works as to, 221 ; yield 
 of, 223 ; objections to, 223-229 ; in- 
 equality of, 224-225 ; a premium on 
 dishonesty, 225-228 ; defects of, 228- 
 229 ; penalising of marriage, 232- 
 234 ; penalising of parentage, 234- 
 236 ; family incomes to be assessed 
 to, 236-239 ; graduation of, 243-247 ; 
 evasions of, 247-260 ; as crippling 
 industry, 265-266 ; as driving capital 
 abroad, 266 - 269 ; as preventing 
 saving, 269-271 
 
 Income Taxes in other countries, 221, 
 234, 239-243, 250-259, 263, 268 
 
 in Australasia, 241, 250, 254, 259 
 
 in Austria, 235 
 
 in France, 236, 238, 239, 242 
 
 in Germany, 234, 239, 240, 242, 
 
 254, 263 
 in Scandinavia, 240 
 
 in South Africa, 235 
 
 in Switzerland, 234, 239, 240, 
 
 241, 254 
 
 — in United States, 234, 238, 268 
 in Wisconsin, 234, 238, 242 
 
 Increment Value Duty, 253 
 
 India, postal advantages of, 15, 16 ; 
 
 railways of, 81 
 Industrial Life Assurance, 185-186, 
 
 195-197, 202-204, 215 
 Inequality of Income Tax, 224-225 
 Inland Revenue, Reports of Commis- 
 sioners of, 221 
 Insurance, see Life Assurance 
 Insurance Directory, Bourne's, 185 
 Interest in Savings Bank, 20-22 ; paid 
 
 by bankers, 21, 254-255, 258; rise 
 
 in current rate of, 20, 78, 81 
 International Bank Note, the Post 
 
 Office, 33 
 
 Postal Union, 32-38 
 
 Remittances by Post Office, 31-38 
 
 Investment by Post Office, 27-28 
 Investments abroad escaping Income 
 
 Tax, 247-251, 256, 267 
 Ireland, coal supply of, 120, 136, 150; 
 
 railways of, 54, 75, 80 
 Ironstone, 13 1 
 Italy, postal advantages of, 7, 10, 24- 
 
 26 ; railways of, 54 ; State Insurance 
 
 in, 198-199 
 
 Jackson, W. F., 73 
 James, C. Ash worth, 128, 178 
 Japan, postal advantages of, 18-20, 33 
 Jevons, H. Stanley, 115, 116, 142, 158, 
 
 178 
 Jevons, W. Stanley, 158, 178 
 Jones, Robert, 221 
 Journal of Comparative Legislation, 
 
 221, 254-259 
 
 Land, taxes on, 230 
 
 Lapses in Life Assurance, 186, 194, 197, 
 
 202, 212 
 Letters, carriage of, 4-16; rates for, 
 
 5-16 ; underground tubes for, 5 ; 
 
 franking machines for, 8 ; special 
 
 services for, 8-10 ; express, 9 
 
H': 
 
 276 
 
 //ow to Pay for the War 
 
 Index 
 
 Letters of Credit, 24 
 Life Assurance, Nationalisation of, 180- 
 217; excellence of in U.K., 183-184; 
 present organisation of, 184-187- 
 statistics of, 186, 199, 201, 205; 
 funds of, 188, 211-214; probable 
 growth of, 190-193; competition in, 
 193-196; expenses of, 194-196; evils 
 of Industrial Branch, 196- 197, 202 ; 
 permanence of, 209-211 ; the allow- 
 ance for, from Income Tax, 222, 225, 
 .227, 235, 239, 240, 244, 245, 270 '; 
 introduction of allowance for, 235, 
 244-245 ; on life of wife, 235 ; on 
 lives of children, 235 ; allowances for 
 in other countries, 235 
 Limitation of the Vend, 116 
 Liverpool Steamship Owners Associa- 
 tion, 68 
 
 Local Authorities, coal supply of, 150; 
 distribution of coal by, 149-154; pay- 
 ment of rates to, through Post Office. 
 39 
 
 London coal supply, 121-122, 125, ico. 
 162 "'^ 
 
 County Council, use of Post Office 
 
 by, 30 
 
 Life Assurance Company, 196 
 
 Luxemburg, postal advantages of, 18-20 
 Lyons, discipline board at, 106 
 
 M'Kenna, Reginald, 221, 231, 2^2 
 
 242, 251 
 Macmillan, J. C, 185 
 Macrosty, H. W., 116, 179 
 Mallet, Bernard, 221 
 Management, cost of in Life Assurance, 
 
 194-196; reduction in, 191 
 Manchester Ship Canal, 86-87, 120 
 Maps by post, 39-40 
 Marriage, penalising of, 232-234 
 Married Women's Property Acts, 232 
 Maternity Benefit, 206 
 
 Metropolitan Life Assurance Company 
 
 196 
 Meyer, Hugh R., 54 
 Midland Railway, reserve fund of, 57 ; 
 
 coal traffic on, 120; manager of 
 
 desires unity, 76 
 Mill, John Stuart, 158, 225 
 Millar, R., 71 
 Mineral Rights Duty, 132-133; as 
 
 special Income Tax, 223 
 Miners, see Coal-miners 
 Miners' Federation of Great Britain, 
 
 133-134, 139, 144-145 
 Minimum Payment in Income Tax, 241 
 
 277 
 
 Minnis, S. E., 221, 254, 259 
 Mollien, 222 
 
 Money Order system, 22-23, 31-38 
 Montagu, Edwin, 229 
 
 Motor-lorries, use for those discarded 
 
 by army, 155 
 Murray, A., 221 
 
 National Health Insurance Scheme, 
 I97» 203, 206, 209 
 
 National Price of Household Coal, 147 
 151-154 
 
 National Union of Railwaymen, 104 
 
 New South Wales railways, 106 
 
 New Zealand, Government coal-mines 
 in, 174, 180 ; Government Life 
 Assurance Department in, 198 ; 
 Income Tax in, 254; postal ad- 
 vantages of, 8, 9, 16 
 
 Newspaper delivery in country places, 
 lo-ii ; subscriptions received, 39-40; 
 debts collected, 25-27 
 
 Notes, Circular, 24 
 
 Ohio, State Insurance in, 198 
 Oil shale, 131 
 Owens, Sir Charles, 71 
 
 Parcels Post, 6-7; 11 -16 
 Parentage, penalising of, 234-236 
 Patents, Income Tax on, 232, 233 
 Pearl Assurance Company, 191 
 Peel, Sir Robert, 223, 234 
 Periodical payments by Post Office, 41 
 Photographs, sold by Minister of 
 Education, 40; why not by Post 
 Office?, 40 
 
 Pitt, William, 223 
 
 Policies, Life Assurance, 184-186, 190- 
 196, 199-202, 209-211, 215 
 
 '• Pooling " of rolling stock, 66-68 
 
 Portugal, postal advantages of, 27-28 
 
 Postage stamps, 6 
 
 Postal and Telegraph Clerks Associa- 
 tion, 45 
 
 Postal cheque system, 17-20 
 Postal rates, revision of, 5, 9, 11-14 
 Post Magazine Almanack, 185 
 Postmen's Federation, 44 
 Post Office Amalgamated Engineering 
 and Stores Association, 45 
 
 and railways, alliance between. 
 
 74. 94 
 
 Development of, 1-50; as Com- 
 mon Carrier, 4-16; as the Common 
 Banker, 16-27; as the Common 
 Debt Collector, 24-26 ; as the Com- 
 
 mon Investing Agency, 27-31 ; as 
 the Common Remittance Market of 
 the World, 31-38 ; as the Common 
 Agent, 38-42 ; capital of the British, 
 3 ; conditions of service in, 42-45 
 
 Pratt, Edwin A., 54, 86 
 
 Pre-cancelled stamps, 6 
 
 Premiums for Life Assurance, 184-186, 
 190-193, 196-197 
 
 Printing, British Post Office does none, 
 
 7 . 
 
 Profits, insurance policies participating 
 
 in, 186, 199-201 
 of Post Office not of the nature of 
 
 taxes, 3 ; do not belong to employees, 
 
 46-47 ; nor to customers, 48-49 ; but 
 
 to the Exchequer, 49-50 
 Prudential Assurance Company, 191, 
 
 207 
 Production, increase of, vii-x, 4, 175 
 Public Trustee, unclaimed funds to go 
 
 to, 255 
 
 Railway Act of 1844, 80-81 
 
 Clearing House, 53 
 
 Clerks Association, 104 
 
 Nationalisation Society, 54-55 
 
 Railways, Nationalisation of, 51-111 
 Refuge Assurance Company, 191 
 Reserve of coal, 159-162 
 Rolling stock of railways, 56, 66-69, 
 
 75. 
 Rousiers, P. de, 142 
 
 Royal Commission on Canals, 86-87 » 
 on Coal Mines, 158, 167, 169, 179; 
 on Railways, 54 
 
 Royalties, 128, 133 
 
 Runciman, W., 117 
 
 Rundreise tickets, 76 
 
 Saving, effect of Income Tax on, 269- 
 
 271 
 Savings Bank, 16-31; eleemosynary 
 
 origin of, 22 ; restrictions of, 22-31 
 Scientific improvements in coal-mining, 
 
 166-169 
 Scotland, coal distribution in, 150; 
 
 coal exports from, 119- 121; coal 
 
 prices in, 127, 153; oil-shale mining 
 
 in, 131 ; royalties in, 132 
 Securities, custody of, 26-27 
 Seligman, E. R. A., 221, 223 
 Senghenydd Colliery explosion, 164 
 Service de r^couvrements, 25-26 ; in 
 
 Life Assurance, 204 
 Slesser, H. H., 129, 133, 179 
 Snowden, Philip, 180 
 
 Socialism and Life Assurance, 209-211 
 
 Sorley, W. R., 128, 180 
 
 South Wales, coal industry of, 116, 
 
 118-119, 127-128, 144, 159, 163-164 
 
 Miners' Federation, 144 
 
 Special Services, development of by 
 
 Post Office, 8-10 
 Stamp, J. C, 134, 172, 221, 245, 248, 
 
 254, 257 
 Stamps, postage, 5-6 
 State Insurance Department, 180-217 ; 
 
 in other countries, 198 
 Statist, The, 184 
 Stock Exchange prices of railways, 82- 
 
 85 ; of canals, ^J ; of coal-mines, 135 ; 
 
 of Life Assurance Companies, 198 
 Stoppage at the source, 225-228, 244- 
 
 245, 251, 255 
 Subpostmaster's assistants, 42 
 Supertax, the, 222, 224-225, 227, 231, 
 
 243 - 247 ; new scale suggested for, 
 
 246-247 
 Sweden, postal advantages of, 7, 25, 
 
 26 
 Switzerland, postal advantages of, 11, 
 
 14, 19-20, 21, 24-26, 33 ; railways 
 
 of, 103 
 
 Taxes by post, 39 
 
 Terms of assumption by Government 
 
 of control over railways, 60 
 Thomas, D. A., 180 
 Three Years' Average for Income Tax, 
 
 259 
 Trade Unionism among coal -miners, 
 
 137-149; among postal officials, 44- 
 
 45 ; among railway workers, 100-107 
 Traveller's Letter of Credit, 24 
 Treasury Bills, no Income Tax on, 252 
 Trolley coal, 122 
 Trucks, coal, 67-68, 89, 120- 121, 123, 
 
 136 
 Trustee Savings Banks, 16 
 Tuberculosis Benefit, 203, 206 
 
 Unclaimed funds, 255 
 
 Unearned Incomes, differential taxation 
 of, 243 
 
 Unification of railways, 63-73 ; of coal 
 production, 129 -131; of coal dis- 
 tribution, 148-154; of Life Assurance, 
 193-196, 204-209, 214-217 
 
 Uniform railway rates, impracticability 
 of, 96-98 
 
 United States, postal advantages of, 7, 
 8, 9, II, 15 
 
 Uruguay, State Insurance in, 198 
 
Wr 
 
 278 
 
 //ow to Pay for the War 
 
 "Value payable by post," 14-16 
 Vend, Limitation of the, 116 
 Victoria Government coal-mines 
 174. 180 
 
 in, 
 
 Wage-adjustment among coal-miners, 
 142-148; among postal officials, 42- 
 
 w'^f' ^""""g^ '■^ilway workers, 100-106 
 
 Walford, Cornelius, i8>: 
 
 Walpole, Sir R., xi 
 
 •'Water" in railway capital, 59 
 
 Wife, not recognised as a person, 232- 
 
 234 ; income of, merged in Family 
 Income 236-239; new abatement 
 for, 238, 242; Life Assurance of, 
 
 Wigan Coal and Iron Company, 1^52 
 Wisconsin, Income Tax law of, 2:54 
 238, 242 ' •^^' 
 
 WUrtemburg, postal advantages of, 44 
 
 Yorkshire, coal trade in, 116, 1 18-120, 
 125, 127, 131, 153; mining accidents 
 in, 163 
 
 THE END 
 
 Printed by R. & R. Clark, Limited, Edinburgh. 
 
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 At the Fabian Bookshop v 
 
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 Vll 
 
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