HC Deb 19 February 1902 vol 103 cc475-545


Order for Second] Reading read.

(12.15.) MR. TREVELYAN (Yorkshire, W.R., Elland)

The Bill which I am introducing today is one somewhat unexciting in its title, but the effect of it will be a fundamental alteration in our system of local taxation and the addition of a source of revenue which hitherto has been largely neglected. It might be objected on the part of some Members that a matter of this kind should be introduced either by Resolution or by a Bill promoted by the Government. We have tried on this side of the House the form of a Resolution, because in the debate on the Queen's Speech in 1899, the junior Member for Devonport moved an Amendment in favour of land taxation. It was opposed by the Government, whose spokesman, however, was not altogether unsympathetic. On that occasion Mr. (now Viscount) Gosehen said— If hon. Members opposite have got a system by which it can he done then let them put their proposals in a Bill and it will give us extreme satisfaction to consider it. But I think the better thing is to await the result of the labours of the Royal Commission. Now, we have done everything which Viscount Goschen asked us to do. We have followed his advice in every respect. We have waited till the Royal Commission reported, and we have drawn up a Bill which we offer to the House.

I should like first to say that although hon. Members opposite may in times past have considered that this proposal of ours was in the category of impossible, revolutionary and impracticable schemes, they can no longer urge that general argument. Although we are proposing a great change in local taxation, we have got on our side, from the Report of the Local Taxation Commission, a Memorandum, a very able and remarkable State Paper, signed by five men whose ability and authority it is impossible to ignore. Lord Balfour of Burleigh, the Chairman of the Local Taxation Commission, who signed that Report, was the only Member of the Conservative Cabinet who had a seat on the Commission, and in signing it he was joined by Sir Edward Hamilton and Sir George Murray, two of the ablest financiers in the Civil Service; by Mr. J. Blair Balfour, whose position as head of the Scottish Bar is a recognition of his pre-eminent ability; and by Mr. Stuart, the only man of whom it can possibly be asserted that he entered on the inquiry with any preliminary political prejudice. It is on this carefully reasoned and elaborated Memorandum that our scheme in this Bill has been based. The details of the clauses are not in any way the cursory compilation of the ingenuity of myself or my friends, but they are drawn from the proposals of this separate Report. I hope whatever decision the Government may come to they will at least give us some expression of their gratitude for having afforded the House this opportunity for the discussion of a Report by one of their colleagues which, apparently, they have found themselves—owing, I suppose, to the pressure of Parliamentary time, under the necessity of consigning to most undeserved oblivion. But it is not merely upon high Conservative and official authority that we depend in asking the House to pass this Bill. We rely also on the crying necessity for dealing with the subject of local taxation in England. At the present time, the complaints of the ratepayer are louder than those of the taxpayer—a remarkable fact in view of the increase of national taxation, although, at the same,, time, a very natural one, seeing that in the last three quarters of a century every statesman of importance has dealt with the question of national taxation, so that the whole system has been remodelled and reorganised to suit our economic necessities. But we have not done that in the case of local taxation, which, in the last 30 years, has been increasing by leaps and bounds in even larger proportion than our national taxation. Let me illustrate this: From 1877 to 1899, the rates have gone up from 16½ millions to 38½millions, an increase of 135 per cent., while in London they have gone up from four to ten millions, an increase of 150 per cent. This indicates that it is in urban districts that the pressure is most severe, and it is these districts with which the Bill proposes to deal. Our rating system, which dates from the time of Queen Elizabeth, has remained unaltered. Is this outcry against the severity of the rates deserved? Ought it to have our attention, or is it merely a spurious and excitable objection on the part of the public who have to pay the rates? I think it will be admitted that great as is the burden of local rates, it cannot be generally asserted that if the burden were on the right shoulders our towns have not got a volume of wealth which would enable them to pay even much heavier rates than they do at the present time.

The complaint we hear is that all taxation falls on one kind of property—real property. In a sense, it must be admitted, that is perfectly true, but people do not go on sufficiently to ask if it falls on all real property. In the term, real property, there are two kinds of possession implied. There is an economic destinction of the most vital kind between the two kinds of real property. The two kinds are different in their origin and in their character, and they are different in the reasons for their increase. There is, first of all, the land value which is created by the general necessity for land and riot by the efforts of the possessor and which exists irrespective of whether there is a house on the land or not. If you swept away a greater part of the houses in London—as was done on the occasion of the Great Fire—it would not do away with the site values. They remained after the Great Fire, and indeed in some cases they increased, for we find Pepys writing in his Diary [December 1st, 1667]— Sir Richard Ford tells me of the common standard now reckoned on between man and man, in places where there is no alteration of circumstances, but only the houses burnt, there the ground, which, with a house on it, did yield £100 a year, is now reputed worth £33 Os. 8d., and that this is the common market price between one man and another, made upon a good and moderate medium. In London, at that time, the mere fact that there was an enormous population waiting to settle on the land created huge land values quite apart from the consideration of the buildings that were to be constructed on it. That is one part of real property. The other part is to be found in the improvements on the buildings on the land which are the result of the labour, capital expenditure, foresight and industry of the population.

Now, Sir, first, I urge on the House that the excessive burdensomeness of the present rates does not fall on the land values, but in so far as it does exist it falls on the buildings, and is a very potent cause of social discomfort and economic disturbance. Land is let off more lightly than it should be. It is assessed at its letting value and not at what it might let for. However valuable a vacant plot of land may be at the present time, it is assessed at its agricultural value and sometimes at no value at all. It is a flagrant fact that all over the country, in all our towns, there are large quantities of land of high value kept vacant, and not in consequence taxed in any way for local purposes. I will only give one recent instance. The London County Council have been buying land for the Strand improvement, For one vacant piece of land in the Strand they paid £11,000, £1,000 of which was for compulsory purchase. That land was bought 22 years ago for £5,000. The man who bought it cleared the buildings from it and kept it unused. He paid no taxes on it, and eventually was able to sell it for more than double what he gave for it. Again, there is a large quantity of land on which inferior buildings are put up so that the assessment on it is very much lower than it would be if it were put to its proper use. Land has another serious advantage which it should not have in the matter of local taxation. There is a scale of deduction in practice when valuations are being made by the Local Authorities by which a reasonable allowance is made for repairs and insurance on buildings. That, so far as the buildings are concerned, is reasonable enough, but then, unfortunately, the scale is also applied to all other property even when it is land in the centre of the town on which there is no expenditure for repairs. These are advantages which enable land to escape part of our local taxation at the present moment.

Now I turn to the buildings and improvements, and I want the House to consider how serious this ever increasing burden of rates is. For every pound of increased value which the builder puts into the house, for every pound which the manager put into his mill, and for every piece of machinery he employs they have to pay in higher taxes. Of course this would be of very much less importance if the rates were only 2s. in the pound. But now they range from 6s. to 8s., and I ask the House to consider what happens in the case of those parts of our urban districts where building is most carried on. Building, remember, is mainly carried on in the outskirts of our towns, where taking a £50 house the land value would probably be £5. All the rest of the burden of taxation falls on the value of the building. It is a direct tax therefore upon building and upon industry of a very serious nature. I am not speaking without my book. I was informed of a recent case in which the London County Council were offered by the beneficence of a gentleman, once a Member of this House, a free gift of thirty acres of land in Edmonton, where the rates are 8s. 6d. in the £, the intention being that the land should be used as a site for working men's dwellings. The County Council made a calculation that if they put up the buildings the rates upon them would amount to £2, 056, and there would be an annual deficiency of £733 to be made up. They consequently had to give up the scheme and hand the land back to the donor. They were absolutely prevented building by the high rates which obtained in Edmonton. And that is what is going on, more or less, all over England. What we want to do is to primarily relieve taxation on buildings, and this is a new Free Trade movement for breaking down the barriers which prevent the expansion of our towns. We want to free buildings from this hugely increased taxation, and we think this should be done if any new conceivable source of revenue can be obtained. Our proposal is that the existing rating assessment shall not be touched, but that there shell be, side by side with it, a new valuation of the site value and that there shall be a separate column in the rating book; and it shall be left to the various municipalities to levy up to 2s. in the £ rate on that new assessment. The purposes for which the money raised by the new rate may be spent are defined in a schedule. This will go in relief of the ordinay rates in so far as they are applicable to ordinary town improvements; and the object with which the schedule has been framed is to provide that the rate shall be applied only to purposes which tend to increase the value of the land upon which the rate is assessed.

The benefits which we expect to flow from this are generally as follows:—First, we think it will bring into the market, by taxing vacant land which is ripe for building, large quantities of land on the holding back of which there is now a premium. In some towns, such as Bootle, Huddersfield and Devonport, there is a land monopoly. It is in the hands of one or two persons who have it absolutely in their power to say that the land shall not be available the moment it is wanted. We hear a lot of talk about American Trusts, where an individual is able to drive out his competitors, create a monopoly, and hold his hand on the throat of the consumer and to force what prices he likes upon him. This is a monopoly of a worse kind, enormously affecting the interests and health of the public. We ought to make it impossible for a man to hold back land when it is wanted, and if vacant land were taxed it would immediately cease to be to his interest to keep it vacant. The second advantage will be in the relief to present rates. If this tax were imposed there would be a very small increase of taxation on property already built upon, but in the outskirts of a town where the chief value is building land there would in every case be a con- siderable relief to the ordinary rates. There might be a small increase on hereditaments in the centre of the town, but we should not mind increase of taxation in such cases where the chief increase of land value has accrued without any effort on the part of the possessors. A calculation has been made as to what the effect of our proposal would be in the case of London. The valuer of the County Council has computed that London's land values amount to something like 15 millions sterling, and a 2s. rate would produce annually as much as the Council now raises for its own special purposes.

With regard to the final objects of the Bill, I should like to quote a passage from the separate Report of the Commissioners on Local Taxation. They say:— While the rating of site value thus concerns the public as an administrative reform, it is of special importance in connection with the urgent problem of providing house accommodation for the working classes. Anything which aggravates the appalling evil of over-crowding does not need to be condemned, and it seems clear to us that the present heavy rates on building, do tend to aggravate those evils and that rating of site values would help to mitigate them. If more of the burden were thrown on sites the portion left to be borne by building would be diminished, and this would weigh with the builder who is hesitating to embark on the erection of new structures. Having dealt with the main principle of the Bill, I want now to say a few words as to the details of the difficulties which it entails. Let me again remind the House that this Bill is based on the recommendations of Lord Balfour of Burleigh so far as its main details are concerned. But there are one or two differences to which I wish to allude. In the first place there is a great discussion as to whether it is possible to value sites separately from buildings. It was once altogether denied that it was possible. I do not know whether the hon. Member who is I understand to move the rejection of the Bill still holds that opinion; if so I think he will find himself in a very small minority. Hardly anyone now will seriously agree that a. separate site assessment cannot be made, indeed the drift of opinion is steadily in the direction that it can be easily done It is true that in the Majority Report of the Local Taxation Commis- sioners they raise objection as to the expense and difficulty of making the new assessment, and no doubt there was a good deal of conflicting evidence before the Committee as to the ease or difficulty of making this site assessment. But I venture to think that much of the testimony was strongly in favour of its being a comparatively simple process. Mr. Barton, the head of the Valuation Department, Ireland, a man well acquainted with the subject, admitted that he valued sites and buildings separately in Ireland, and that the ground rent was taken out as an element of valuation. Then again the Valuer of the London County Council is of opinion that the thing can be done, and cheaply too, at 1s. per hereditament. The bon. Member for Tunbridge is amused, but I would point out that Mr. Harper has convinced the London County Council which is the body that would have to find the money to pay for making the new valuation, and it is not therefore likely to rush into a scheme if it is as some people say likely to involve the expenditure of millions. Then he has also convinced Sir George Murray, with all his experience of the Inland Revenue—a not unimportant fact. Finally. in regard to this subject I may say that many of our Colonies have adopted this system. both for national and for local purposes, and they have never found the least difficulty in assessing a separate site value.

Then there is another important point, and that is, who is to pay the rate? I know there are a certain number of people who attach more importance to this than to the general principle. Our proposal is that the present ratepayer shall pay the rate; that existing contracts shall remain untouched, while as to future contracts, we adopt—in clause 7—the recommendation of Lord Balfour of Burleigh that half the future rate is to be payable by the owner. Lord Balfour of Burleigh is very insistent on this, and I agree with him although there are some Members of this House, and many people in the country, whose sole idea with regard to the taxation on such values is to get at the great landlords. That no doubt is a molt laudable aim, especially as, in the words of Squire Western, "Most of these great estates be in the hands of lords, and I hate the very name of them, mum." But I would remind my hon. friends who hold that view that this "great proprietor" cry has been largely exaggerated and that, as a matter of fact, the greater part of these ground rents and chief rents are held by small investors, and are in the same category as Consols and Corporation or Railway Stock. I would suggest that it is a very serious thing to put a new tax upon this kind of property which is being dealt with in the money market as a fixed investment. There is another consideration which I would like to suggest to the House, and that is, that nearly two-thirds of the towns in England are freehold towns to which this question has no applicability whatever. The same person will pay the new rate as pays the old one, but the essence of this new legislation is to put the tax upon new kind of property and not upon a new person. Then I may finally suggest that the result of a universal land tax for local purposes, a tax which will bring into use a great deal of land which is now vacant, will be that it will be absolutely impossible for the landlord to shift that tax on to his tenant, because the tenant will be constantly able to go to fresh ground. The inner ring of the town will move out the outer rings, and the outer rings will push the population still further outwards.

Sir, I have found it rather difficult to tackle a big question like this, but I have tried to do so with what care I can, and I should like to say a few final words. We are not talking entirely in the air when we are saying that this proposal will work well. I have already alluded to the Colonies, and pointed out that they have tried the system. There are no fewer than five out of the seven of the Australasian Colonies at the present moment which have a national land tax, which amounts, generally speaking, to ld. in the £1 on the capital value. Then there are three of our Colonies (New Zealand, South Australia, and Queensland), which have such a tax for local purposes. The Land Tax in Queensland is compulsory for all municipalities. I should like to quote a letter from Brisbane, dated February 23rd, 1900, sent by the Town Clerk in answer to inquiries made of him. In it he says— The object of the legislation of 1890 was primarily to fix the incidence of taxation more equitably, and that object has, in the main, been secured. The system of taxing improvements is undoubtedly defective, in that it tends to retard true progress. Prior to the adoption of the Bating and Valuation Act of 1890, the owner of land who erected extensive improvements thereon, was, in a sense, penalised for his temerity, while the owners of vacant lands, and lands whose improvements were not in keeping with their surroundings and the situation generally, benefited more or less at his expense. I am of the opinion that the effect of the Act has been to induce greater activity in building operations, and that it is a distinct advance on the previous system, though still open to improvement. In New Zealand it is left to the different municipalities to decide whether or not they will adopt this system. It is gradually being adopted, and only the other day it was adopted at Wellington, and in a letter written the year before last, by Mr. Seddon, he says— The rating on unimproved values for local purposes has proved a success, and the opinion of the Government, which is generally shared throughout the colony is that it should be made compulsory. I have information which I can trust to the effect that it is to be made compulsory very soon. There are some people who fear to follow the forward movements of our Colonies. They think it is dangerously revolutionary to copy our Colonies' example. I hope that most of us are ceasing to entertain that fear. We acknowledge our indebtedness to them for what they have done for us in saving, perhaps, our empire in South Africa, and I hope the time is not far distant when we shall be ready also to acknowledge our indebtedness to their political ideas. Here in England we have to face the same social problems in a worse form than they have, and we have been doing nothing to cope with the evil of overcrowding and similar evils, while our Colonies have been going steadily forward in these matters. I think we want some of the fearless Colonial spirit infused into our legislation in Parliament as we have had into our war in South Africa.

Motion made and Question proposed, "That the Bill be now read a second time."

(12.50.) MR. GRIFFITH BOSCAWEN (Kent, Tunbridge)

Like the hon. Member who has just spoken, I also wish to ask the indulgence of the House as I have set myself the task of dealing with a very important and critical subject. I shall endeavour to imitate the temperate manner and tone which the hon. Member adopted, and I will try to compress my remarks within the shortest possible limit. Considering the nature of the proposals he has brought before the House I am prepared to admit that the hon. Member made a very temperate speech, and I also think that his proposals are themselves exceedingly moderate compared with those which have been made on this question in previous years. The hon. Member and his friends have at last arrived at the conclusion that you Cannot break existing contracts, whereas in former years, whenever this question was brought forward, it was proposed by a most confiscatory plan to interfere with existing contracts and to place new taxes upon owners of ground rents and values. I am glad to see that that proposition has disappeared from the present Bill. In the second place, although I do not think the hon. Member laid much stress upon it, the proposal of the Bill so far as it goes is not a very extreme one; in fact the rate is limited to 2s. in the £ The amount is not a very large one, but once you grant the principle of the new site rate it will be easy enough to raise it to any figure you like.

I admit that these proposals have or seem to have the authority of certain eminent people. We are told that they are based on the separate Report signed by people like Sir Edward Hamilton and Sir George Murray, as well as by a certain Cabinet Minister who shall be nameless. The hon. Member was very proud of that Report, but I would point out that this is not a question to be decided by authorities alone. It is a matter which the House of Commons must judge for itself. May I point out also that these eminent gentlemen were themselves in a minority, and that a very large majority of the Royal Commission were against these proposals. Among those who signed the Majority Report were such eminent experts as the hon. Member for the Stretford Division, who is unfortunately not present, Mr. Dalton, who represented the Department which is mainly concerned in the rating question, and Mr. Elliott, who was for many years at the Local Government Board. There was also another gentleman who was a Member of the late Liberal Government, a man of the greatest practical knowledge on rating questions, I mean Sir John Hibbert, and therefore, if we are to be guided by authority, I think I may safely say that we have some weight of authority on our side. That is not all. These proposals made by Sir George Murray, Lord Balfour of Burleigh, and others, were only part of a great general scheme for the reconstruction of our rating system. Both Sir George Murray and Lord Balfour of Burleigh admit that, for in their Report they say— But there is a special circumstance which appears to us to make the present moment specially fitted for the imposition of the proposed rate. Under the proposals which we have severally made, the burden upon ratepayers in connection with onerous expenditure on national services, would be permanently lightened in urban as well as in rural districts. They go on to say that the new charge would be "counterbalanced by the relief proposed to be granted in the shape of increased subventions." What do they propose? Lord Balfour of Burleigh, in so far as he was a member of the majority on other points, pro-proposed the transference to the local authorities of the inhabited house duty, of some part of the income tax, and in his separate Report a special tax upon advertisements. Sir Edward Hamilton and Sir George Murray, in their Minority Report, proposed larger grants from the Exchequer. Thus it is clear that these Gentlemen, in proposing a special tax upon sites, looked also to the fact that there must be a general reconstruction of our rating system. They were willing, apparently, to make this new change affecting real property on the ground that personalty was to be brought in to contribute towards the rates. But what do the hon. Member and his friends propose? They come here with an isolated proposal to put a special tax upon that class of property which bears all the rates now, and they do so without mentioning those other matters which Lord Balfour of Burleigh and his friends admitted were to be a counterbalancing part of the scheme. This Bill really proposes three things. It proposes firstly a new system of valuation-a separate valuation of the site from the valuation of the structure, a new system of assessment and valuation which will be very costly and difficult and quite hypothetical, and which will undoubtedly lead to some re-arrangement and readjustment between the parties, leaving things most likely in the long run very much as they are at the present time. Secondly, it is proposed, for the first time in the history of our country, to put a rate on unoccupied houses.


On unoccupied land.


houses also. It would put a value rate on unoccupied houses.


On the value of the land, and not on the value of the house.


The rating of the site value involves the rating of unoccupied houses, and it is the first time, as far as, I am aware, that a proposal has been made to rate unoccupied houses.


It is already done in Scotland.


I am speaking of the rating system in England, to which this Bill applies.

MR. CORRIEGRANT (Warwickshire, Rugby)

It is already done in the City of London.


The general system is to rate the annual value of houses when occupied not when unoccupied. Thirdly, the Bill proposes to place this special site value rate on vacant building land. Let us look at these proposals. The first is, that you are to divided the site from the Structure, have a separate assessment of each, and cast the burden of the site value rate, in the first instance, on the occupier, and then by a system of deductions, one halt on the owner. The hon. Member told us this was a perfectly easy and possible system, and was apparently much astonished that I should doubt it. I venture to say that, if it be possible, it will be a very difficult, complicated, and costly matter. The. hon. Member told us that the London County Council have been persuaded and that they are the people who will have to pay the bill. But will the London County Council pay the bill? I think the ratepayers of London will pay the bill. It is nonsense to say that because the London County Council have been persuaded, and will pay the bill, the whole matter therefore is settled. As a matter of fact, this is a most difficult question, and it is more than doubtful whether it can be done. I will quote. On the opinion of Lord Farrer, an authority site the hon. Member opposite will recognise. Alluding no doubt to the easy-going optimists like the persuasive Mr. Harper, who appears to have persuaded the London County Council, he said— Valuers will no doubt put a valuation on anything whether they know anything about it or not. The question is what real basis they have for their valuation. The only ultimate basis of a valuer's knowledge is his expericnce of actual market values; and as the land and the houses upon it are sold and let together, no such basis can exist for a separate value of he two things. I will go further. The hon Member told us the London County Council had been persuaded. But some years ago there was appointed by the London County Council a special body called the "Local Government and Taxation Committee," and that body, after a very exhaustive examination, held very different views. On 3rd November, 189l, Lord Hobhouse presented to the Council a Report from that Committee, in which they said— The practical working of the plan depends upon the ease with which separate valuations of the annual value of sites and buildings can be made.…The Land Valuation Committee of this Council appointed in February, 1889, to consider this subject, came to the conclusion that, at least, after a basis had once been laid by professional skill, there would not be much difficulty in making separate valuations.… There was, however, diversity of opinion whether the plan is feasible at all, whether it could ever be worked could except by professional hands, and where its cost would constitute a. in the first instance, on the occupier, serious objection. Then, in a passage which puts the whole question in a nutshell, the Report states— Assuming that it can be done, there must be much difficulty in it. A building and its site are thought of, seen, used, and dealt with in markets, public or private, as one entire thing. The market is the general criterion of value. Assessment Committees work by their local knowledge. They know what rack rents and prices are actually got in the market, on leases and sales of houses and sites combined, in their neighbourhood. Their knowledge does not extend to hypothetical commodities such as a site with a house on it, but supposed to be without one.…A house without a site is inconceivable, is only old materials, and to have any annual value at all it must have a right of continuing to stand where it is. If a site is without a house, the first thing wanted is to build a house on it, and that is a costly operation, which, whether performed by owner or lessee, absorbs the annual value for many years. When able and experienced persons tell us that it is possible to ascertain value of objects, it is not for us to say the contrary. But we suggest that all valuations not subjected to the test of the market must be of a hypothetical and speculative character, that they can hardly be made except by skilled minds, and even then will hardly satisfy the persons directly affected by them. That is the whole question. This thing may be done. You can imagine, if you like, a house suspended in mid-air without a site; or a site, the value of which depends on the house upon it, when that house is removed; but it is a purely speculative and hypothetical matter, and will lead to endless expense, appeals, disaffection and disagreeableness, and will never satisfy the people who are called upon to pay rates in respect of it. I notice that the Majority Report—and after all we ought to have some regard for what the majority say—states— Such a system would certainly be attended with considerable uncertainty, complication, and expense, and in this respect our conclusions are identical with these of the Select Committee on Town Holdings, who reported 'that the scheme is open to very great objection on the ground of the difficulty and uncertainty of the proposed system of valuation. What does the hon. Member propose? He asks us to adopt this most difficult system of valuation, although the majority of the Commission and nearly every surveyor (with the exception of Mr. Harper) who gave evidence before the Commission are against it, and he does not put in his Bill any kind of machinery whereby the valuation is to be made. The matter is left to the local authorities—the Assessment Committees. In every town you will have a purely arbitrary value placed on these sites and buildings by the different Assessment Committees. It will lead to endless trouble and expense, and I do not see what possible object is likely to be gained by it. The lion. Member told us very clearly what he expected to obtain by it. He said there was a source of revenue neglected, that the towns had a great volume of wealth, if the rate was only placed on the proper shoulders. In other words, he seems to think he is going to find sonic great source of wealth, which, at present, is untapped, and that he is going to tap it. But how? In his Bill, existing contracts are respected, therefore, this new tax, until existing leases run out, will fall on the present occupier. ["No."] Of course it will. Is that a new source of wealth? Of course not. You are merely piling Pelion upon Ossa, you are putting new rates on those who already pay. But when the existing leases expire, are you then going to get this great source of untapped wealth?

We come back to the old fallacy which underlies the demand for the taxation of ground rents. The idea is that ground rents escape taxation at present. They do nothing of the kind. Everybody knows that when a man originally let Ins land for building purposes, he accepted less rent or a smaller capital sum as part of I the contract, in view of the fact that the building owner or occupier, whoever he might ultimately be, would pay the rates. The matter was put in a nutshell by Sir Robert Giffen, another great authority, who prepared a most elaborate and I useful paper for the Royal Commission. He said— The idea of the separate rating of ground values arises from a misunderstanding of the real incidence of rates. As the burden falls eb initio on the ground landlord, diminishing the sum of capital or income he is able to obtain front his property, there is really no separate ground value to he assessed. But when the existing lease expires, and a new lease is granted, what under the Bill would happen? As the owner now will have to pay directly a part of your new site value rate, he, of course, will be willing to give only a smaller reduction of rent, in respect of the rates paid by the tenants. It is once more simply a matter of adjustment between owner and occupier, and the only effect of this most complicated — and difficult system of valuation, which the hon. Member proposes, is, that by a more complicated and difficult system of adjustment the same persons will pay the rates in the end. There is no great source of wealth at present untapped. The whole of the original rates fall upon owners now. You may say, however, that when an owner let his land for building, the rates were low, and the builder did not foresee the increase. My reply is that the builder in most cases takes good care to make some allowance with respect of future rates. What happens? So long as the original lease lasts, the building-owner or occupier pay any increased rates, and enjoy the full benefits of those increased rates. The landowner does not enjoy the slightest benefit of those increased rates until the lease expires, and he resumes occupation himself. Then directly he resumes occupation and enjoys the benefit he has to pay the increased rates himself. The only case—the hon. Member did not mention it, but I will make him a present of it—in which the owner may be said to escape payment of a rate which he ought to bear is where a. permanent improvement is made, the cost of which is borne by loan, and where, therefore, a part of the rate goes to the sinking fund to discharge the capital charges of the improvement. I admit that in such a case the owner of the reversion may profit by a permanent improvement. But that is a very small matter, and if you attempt to throw a rate upon him you may work a very grave injustice, because permanent improvements do not benefit all property alike. Some improvements actually depreciate some property. Take, for example, a case given before the Royal Commission—that of the Charing Cross Road improvement. That possibly benefited the owners on the Charing Cross Road and in the immediate neighbourhood, but there was evidence that it depreciated the value of property in St. Martin's Lane and the adjacent streets. Yet by this Bill you would throw this extra rate representing the permanent improvement upon all owners of property, not only those who profited by the improvement, but also those who lost by it. That, I think, would he a most unfair result.

But there is another point. You say that the owner of a reversion profits in the case of permanent improvements and escapes the payment of new rates. You have a schedule in this Bill of permanent improvements to which the new rate may be devoted, but are they really permanent improvements I see that lighting and sewerage are put down; but lighting is not a permanent improvement. It has frequently to be re-constructed. Then you have the water supply, which may have to be put down again in London. Again, you have the streets, and not merely the new streets, but the maintenance of existing streets. Who profits by these? Why, the occupiers and the public, and not the owners. I submit, therefore, that so far as the separation of the value and the imposition of a separate rate is concerned, such a proposition is impracticable and would be very costly. What is more, it would not tap any new source of revenue, and the result would be most inequitable, because it would put the rate on land that was improved and land that was depreciated.

Now I want to say a word or two about the rating of the sites of unoccupied houses. I believe they are rated in the City now, but even if that is so, it is no reason for extending an unfair system to the country generally. Let me give one very strong reason against it. It will operate most severely upon owners of small property. Mr. Howard Martin gave an apt illustration. He pointed to a widow who was the owner of two small houses, bringing in a rental of £70 a year, which represented the whole of her income. One of those houses was vacant for eighteen months; and what does this Bill propose in such a case? It proposes that, while that house stands vacant, it must pay 2s. in the £ as a site value rate, although no income is being received. That is an unfair proposal. If you rate unoccupied houses, which is contrary to the principles of taxation, it is true that the other houses will be rated slightly less, but in the end the community will neither gain nor lose, but you will work a grave injustice upon certain individuals, and make it more difficult for them to borrow money upon buildings. A great many houses are built by speculative builders by means of mortgages, and if you make those who lend on mortgage liable for rates while the houses are unoccupied the only result will be that you will make it more difficult to borrow money for building purposes, you will make the interest higher, and rents will be increased, and instead of solving the over-crowding problem you will make it worse.

As to the rating of vacant building land, I think that here we get to the pith and kernel of the object of this measure. What the promoters of this Bill care about most is to rate vacant land. They think that certain landlords are keeping back their land and causing over-crowding in our cities. We have had the case of Devonport mentioned. I know all about that case; and I know also that the statement made about the property there is quite untrue. Hon. Members opposite think that the more they tax this vacant land the greater will be the tendency to make the landlords build upon it. Here is the case of a man who does not want to build because he sees good reason for not building at once, and you propose to put a tax upon him. I read that in Vienna at one time it was difficult to get men to marry, and so they proposed to put a tax on bachelors in order to compel them to marry. Your tax on landowners to force them to build when they do not want to do so, is just about as equitable as a tax on bachelors. The state of the case in this respect has been altogether exaggerated. In the first place, so far from holding their land back, landowners are only too glad to build upon it. A man may be letting his land at the agricultural value, and if he sees a chance of making a larger income do you not think that he will do so? Of course he will. The Local Government and Taxation Committee of the London County Council in their Report on the incidence of Local Taxation in London say— It is the interest of landowners to bring their land into profitable occupation as quickly as they can; and it is especially the interest of the present possessors of land in settlement or in mortmain. There is no evidence that they do not follow the interest; some of them are only too hasty in doing so. Mr. Vigers tells us that London is overbuilt Periodically every seven years.' I do not believe in this idea that landowners are holding back their land, but I do believe in allowing a man to follow his own interest and build when he thinks he can do so advantageously. To do this is enormously to the advantage of the community. If you tax a man and make him build before his land is ripe, you will only lead to jerry building, and the setting up a bad class of houses, and you will create a low ratable value, whereas if you allow a man to follow his own interest you create a much superior ratable value, and the whole community of ratepayers will profit by it. I cannot understand how it can be seriously contended that any advantages come to the ratepayers by compelling a man to build before the land is really ripe. What reasons are given for this? We are told that it is to prevent over-crowding, and I think the hon. Member opposite said that we do nothing in this country upon the question of housing.


I said very little.


Well, I do not think you will do much more upon this plan, and you would certainly prevent landowners making roads and helping on buildings in the manner which they do now when they are developing their estates. Then the mover of this Bill said his proposal would widen the area of taxation. Of course, if you put a tax on vacant building land, you will do this, but I do not think it would be a fair proposal. The hon. Member contends that the landowners who hold their land back are profiting enormously by the rates, to which they are contributing nothing. [Opposition cries of "Hear, hear."] I deny that altogether. I deny that rates benefit vacant land, but what does benefit it is the presence of the community. [An HON. MEMBER: Expenditure does.] How on earth does expenditure benefit vacant land? What are rates used for? They are used for lighting or drainage, and you do not either light or drain vacant land. You spend rates upon the police, education, hospitals, and cemeteries, but building land does not profit by these things in the least so long as it remains vacant, and directly the land is covered with houses, it has to pay its share of the rates. The man who benefits and receives the increased value ought to contribute, but it is most unfair for a man only receiving possibly …2 an acre or less, to have to pay rates not on Ids income but upon a fictitious value, which might possibly amount to more than the rent he is receiving. Let the landowner follow his own interest, and when he builds his house let him pay the full share of the rates which fall upon his property.

I think you will find it almost impossible to define what vacant building land really is and there is absolutely nothing in this Bill to tell us. These local bodies are apparently without any guidance whatever to ascertain what land is capable of being let for building. If you force laud into the market, I daresay you can get some sort of price for it. But are you going to do that I You have also to decide what land is not capable of being let. I never heard of a more extraordinary proposition. Here is laud in an urban district not capable of being sold for building, and yet that land which is being used for another purpose altogether is to be rated as if it were capable of having houses built upon it. [Cries of "No, no."] Yes, it is to have a site value put upon it just as if it were capable of being built upon. That is a most extraordinary proposition, which the hon. Member opposite cannot expect this House to agree to. One other objection which I have to tins measure is that if you do this you will throw into the building market at once practically every open space in the Metropolis, and other towns, which does not happen to be in the hands of the public. All those lands—open spaces, squares, and private parks—will immediately, on account of this tax, be thrown into the building market Does the hon. Member think that will be a benefit to the community? I venture to think it will be a great disadvantage. It will take away one of the things which in our large towns make life more comfortable.

Now, Sir, I know that I have been dealing with a very difficult and complicated subject. I could say a great deal more, but there are other speakers to follow, who are more capable than I am of pointing out the defects of the Bill, and therefore I will not detain the House. I believe the Bill to he most unjust in principle. I believe its effects will not be in the least what its promoters expect, and so far from stopping overcrowding, you will create a worse class of buildings. In the long run you will merely throw an additional burden on those who are paying rates now. A Bill of this sort ought not to be introduced by private Members. It ought not to be introduced as a mere isolated item in the general reconstruction of our rating system, but should form part of a general scheme. For these reasons I ask the House to reject the Second Reading of the Bill.

(1.33.) MR. WHITE RIDLEY (Stalybridge)

I desire to say a few words in support of the argument of my hon. friend the Member for the Tunbridge Division. While this Bill has a great many objects with which I entirely sympathise, such as those which hon. Members have advanced in regard to the facilitating of building, and relieving to some extent, the difficulty of the housing of the working classes. I believe the only result would lie to vastly increase the complexity of our system of taxation, and, at the same time, to create no new source of revenue for the local taxes. There are two points of view, however, from which I can conceive hon. Members supporting the Bill. I can conceive hon. Members wishing to re-distribute our system of taxation. This is the view held by Members who agree with the recommendations of Lord Balfour's Report that the effect of taxing site values would be to locally reduce the burden of taxation. I can also conceive of Members seeing, as they think, a large source of revenue open to them, and which they believe has not hitherto been tapped. But I cannot see that in either case the objects they wish to attain will be satisfied. The simple fact is that, according to the hon. Members themselves, a new class of ratepayers will not be touched and the present ratepayers will be made practically to pay the tax you propose to put upon them. It is proposed to levy this new tax upon values alongside the existing rates. I am aware that it is argued from the recommendation in Lord Bal four's Report that, notwithstanding the fact that you are levying a tax alongside the existing rates, the owner would not be taxed twice over for the same purpose, for, of course, the Report says that, if the charge for him were different from the site value rate the ordinary rates would be relieved from that charge. It is no doubt true that the objects which the schedule defines as the purposes to which the money may be devoted are objects, some of which are at present paid for out of the rates as at present constituted; but I would like to call the attention of the House to the character of the purposes mentioned in this schedule, and especially to the first one—town improvements, new streets, bridges, parks, markets, and the like. It gives you many other objects. Is it contended that the new rate is going to pay entirely for every one of these objects in the schedule? If it is contended I think the promoters are hoping for more money than they can get out of it. I do not think it is going to pay for every one of the purposes mentioned in the schedule, and, if it does not, then the taxpayers will be taxed twice over for the same purposes.

Further, it is surely somewhat a temptation to existing bodies to have a schedule like this giving them power to levy large sums of money for all these purposes. The process of rating in England so far has not shown a disposition to reduce rates. I am not quarrelling with that, but I say that is a very sufficient reason why any proposal which gives local authorities a very large opportunity of drawing upon the ratepayers for more money, should not be advanced without a great deal more consideration than has been given to the subject by the promoters of this Bill. The incidence of taxation will not fall more upon land than it does at the present moment. It is admitted both by the Majority Report of the Commission and by Lord Balfour's Report that the incidence of the rates ' falls both upon the lessor and the lessee, and that it is impossible accurately to define how far, and in what proportion, the rates ought to be divided between them. Under this new arrangement which the hon. Member proposes, the rate will be divided equally between owner and occupier, with the sole exception that under existing tenancies occupiers will have to pay the whole. I must say that, speaking only in respect of one class of ratepayers who have bought their houses subject to a rating annual value, surely it is a most unjust thing to propose that they should be by this Bill compelled to pay 2s. in the £1 for ground rent. They bought their houses without any knowledge whatever that the rate would be imposed. Further, the object of the Bill is not to get more money out of the occupiers, but to get more out of the ground landlord. I do not see how in that important particular the object can be attained. [An HON. MEMBER: That is excepted by a clause now in the Bill.] The Memorandum explanatory of the Bill distinctly says that no such reduction will be permitted under existing tenancies. That is to say, you have to pay the whole of the site value rate under existing tenancies. I maintain that that is in the present Bill. In my opinion this Bill does not accurately represent the Report drawn up by Lord Balfour and the eminent gentlemen who were on the Commission with In one important respect they have not followed that Report, and that was the point to which the hon. Member for the Tunbridge Division alluded. Lord Balfour's Report distinctly contemplated when the law was passed to tax site values, that it should be accompanied by subventions to certain districts. I am not quarrelling with the hon. Member for introducing the Bill and ventilating the subject, but I think if he was going to bring in a Bill for the taxation of site values, he should, at any rate, have drawn up a clause which would carry out that important recommendation of the Report with regard to subventions to local districts.


I am not the Chancellor of the Exchequer.


I am not quarrelling with the hon. Member for bringing in the Bill, but I say it is a distinct argument against the Bill. I beg to second the Motion for the rejection of the Bill.

Amendment proposed— To leave out the word 'now,' and at the end of the Question to add the words 'upon this day six nionths."—(Mr. Griffith Boscawen.)

Question proposed, "That the word 'now' stand part of the Question."

(1.4.3.) MR. HALDANEx (Haddingtonshire)

The hon. Members who moved and seconded the rejection of the Bill have objected to it on the grounds both of procedure and substance. As regards procedure they have said that this is dealing with an isolated point in the whole rating question, and also that the Bill ought to be introduced by responsible ministers. Well, it seems to me, coming from the hon. Member for Tunbridge who, if I remember rightly, took a most prominent part not only in the Agricultural Rating Bill, but also in the Tithe Rent Charge Rating Bill, that is a very odd objection. If ever there were instances of isolated dealing with the subject, and of piecemeal treatment of a great topic, they are to be found in these two Bills which were introduced from his own side of the House.


They were both Government Bills.


The hon. Member seems to fix the reproach he has endeavoured to cast against us on the backs of his own leaders. The second objection is that the Government ought to bring in this Bill. In the eloquent speech made by the hon. Member, where do we find the least trace that they will bring in a Bill of this kind? I do not perceive any manifestation. The truth is that the attitude of the Unionist Party towards this Bill illustrates what is a very patent fact, that, whatever differences there are on other points on the Benches on this side of the House, on social questions, and on the treatment of grave questions such as land, there is a great gulf fixed between Parties. There is a great difference in the spirit in which these things are approached which marks the distinction between the two sides of the House on social questions that cannot be ignored or obliterated. I remember well the history of this question. I remember that years ago there was the enfranchisement of the leaseholders for the purpose of dealing with ads very question—the question of getting at the proper position as regards local taxation of the owner of the fee simple of the land. That was a long time ago, and there has been no approach made on the part of hon. Members sitting on the opposite side to treat this question of the taxation of land for local purposes in the way which we think it ought to be dealt with. Therefore, my hon. friend who sits beside rue, so far from being reproached for introducing this Bill, has, I maintain, rendered a great service in doing so.

Proceeding to the substance of the contention of the hon. Member opposite, there is one observation I want to make. This is not merely a question of putting a tax on individuals or on the owners of property. It is a question of remedying a very great injustice which obtains in our large towns. The principle of the Bill is founded on the view of Lord Balfour of Burleigh, and the dissentient Commissioners—that the site value is something which is due, not to the exertions of the owner of the land, but to the movement of the population, and, therefore, it is a proper subject for just and equitable treatment in the way of adjusting the burdens it ought to bear. The principle of the Bill, founded on that view, is to separate the site value from the building value, and to put on the site value a rate of moderate amount, under the control of Parliament, which is to be paid by whoever happens to be in occupation of the land. The principle of the Bill is to put the incidence of the rate upon the person who has got the site value, avoiding all interference with existing contracts. That is a very simple principle, arrived at by five very distinguished men, all of them authorities in one way or another in this matter. Why the hon. Member for Tunbridge should have shrunk from the name of the distinguished Cabinet Minister who assented to that principle, I do not know. We recognise Lord Balfour as a man who, although we differ from him on certain political points, has most enlightened economic views, and we consider that he has rendered a great service in showing that this question is approved of by not one section only of the political world.

The hon. Member opposite spoke of this matter as one which was directed against a particular class of owners of property. I will show to the House that that is not so, and that there is in regard to every great city a very great injustice which involves for its remedy the separation of the site value from building value. In Mayfair the site value is very high; in some parts of Islington it is very low. Take two tenements, each rated at £500 a year. Possibly the Islington house is much larger than the one in Mayfair, but of the whole rental of the Mayfair house £300 is due to the site value alone, whereas in the case of the Islington house only £100 of the rental is due to site value, the remaining £400 being due to building value. In assessing the rates, a deduction is allowed for repairs, generally amounting to 20 per cent; but because there is not this separation between site and building value, an absolute Injustice is inflicted on the owner of the house in Islington as compared with the owner of the house in Mayfair. One of the essential features of the separation of the site from building value is to get rid of that injustice. The principle of the Bill is something like the Equalisation of Rates Act, which operates in London, and according to which one locality is by adjustment put on an equitable footing with another and so prevents the throwing of the burden of the rates too heavily on one part, and too lightly on another. That is one ground on which this Bill is justified. I think I am right in saying that every expert witness who was examined before the Royal Commission admitted the flagrant injustice of allowing deductions from the gross value, although the bulk of that gross value may represent site value which is not the subject of repairs at all. But there are other considerations which seem to me equally important. My hon. friend put with great force the case of unoccupied land, and said how unjust it would be if the site value is going to be separated from the building value. That would not be an anomaly, even as regards rates; and, after all, what is justice in one case is justice in another. Will the hon. Gentleman tell me of a case in which the landlord puts a clause in his contract that he is not to get any ground rent? The truth is that the very essence of this scheme is that you are imposing a rate, not in respect of occupation, but in respect of site value. This site rate is a contribution in the way of rent, if you like to call it so, which the site owner is to pay to the community for the great increment in the value of his land, due to the movement of population. That disposes of the difficulty raised by the hon. Gentleman opposite. Some criticisms have been made on the schedule which sets forth the purposes on which the site value fund may be expended, viz., town improvements (new streets, bridges, parks, markets, and the like); lighting maintenance, cleansing, and improvement of streets and roads; water supply; sewerage and drainage; provision of hospitals, cemeteries, and mortuaries. The object of inserting these purposes in the schedule is to distinguish between services which are national and services which are merely local. I quite agree that when you come to certain words in the schedule, there are matters such as lighting and cleansing the streets, which it may be quite right for the Committee to eliminate, and confine the purposes on which the site value fund may be expended to works of permanent value.

This question is a very difficult one, and has troubled people for a very long time past; but I think that in this Bill, and in the Report on which it is based, we have made a distinct advance towards the solution of the problem. It is a very moderate Bill, and founded on the very moderate Report. I quite agree that it does not go so far as some people would desire; but it goes as far as moderate men whose minds are open on this subject wish to go. I have often thought that the Report bears the same relation to the land question, as Lord Peel's Report bears to the drink traffic; and the Bill which is founded on the Report seems to me the first practical proposal which has been made for a long time past, and is well worth the attention of the House. We cannot ignore this question. It is one which has taken the deepest hold on the minds and imagination of the people. I quite agree that there are many erroneous opinions abroad in regard to it, and that many propositions have been put forward which will not bear close inspection and scrutiny. But on the present occasion, as it seems to me, we have got a proposition which fulfils all the requirements, and comes up to all the tests; and holding that view, I feel that my hon. friend has done a real service in bringing this Bill before the House.

(1.58.) MR. CRIPPS (Lancashire, Stretford)

From my point of view, as having been a member of the Royal Commission, I think this is not a matter which can be dealt with without careful consideration. I should say that the Minority Report of the Commission is not such that a Bill could be framed to consistently carry out any fair form of the taxation of site value. Let me deal with two collateral matters which have been referred to. So far as the question of deductions is concerned there is no necessity for site valuation in order to deal with it. At present these deductions are made by surveyors in order to arrive at what they call the rateable value, as distinct from the gross value, and are made by rule of thumb. The report of the majority itself pointed out that these deductions ought not to be made on this principle, but in greater detail, in accordance with the excellent suggestions submitted to the Royal Commission. That is, however, an incidental point. There is one other incidental point, and that is the question of unoccupied land, and of course whether unoccupied land should be rated or not is a very fair matter for discussion, There are different views upon it, but the taxation of site values is not involved in it at all. You may consider that unoccupied land ought to be rated, on what may be called its probable use, but I am not going to enter into either the argument of deductions or the argument of the rating of unoccupied land in connection with this Bill.

Let me put—I think I will put it quite fairly—what I understand to be the grounds for such a Bill as this, because we must consider the grounds for a Bill of this character before one proceeds to consider the details, The advocates of the taxa- tion of site values have in some form or another argued always that there is an element in site values which comes either from unearned increment or from the action of the community, apart from the efforts of the individual owner, and their point is that as regards that increment there ought to be some special form of taxation. I hope I have put that perfectly fairly. But the Minority Report, or rather the argument founded on it, does not support that point of view at all. So far as unearned increment is concerned, the Minority Report agrees with the conclusion arrived at by the majority of the Commissioners, namely (1), that it is not true universally that we have this unearned increment, and (2), if we have it that it is not limited to land, but extends to various other properties, such as tolls and so on, which also share in the principle of unearned increment. Therefore both the Majority and the Minority Reports agree that you cannot put a tax of this kind on what is known as the unearned increment as regards urban site values. The Minority Report has, no doubt, brought forward certain methods of taxing site values. I differ, with all respect, from the eminent experts who have signed that Report. They say there are special classes of expenditure made by the community which tend to increase site values as distinct from the combined value of the site and the building, and having come to that conclusion they point out what are the classes of expenditure which in their opinion may have that influence and result. They are, for instance, lighting, drainage, and so on, some of which may be properly applicable to the owner and some to the occupier. I am taking the same illustration as is taken in the Minority Report, and I join issue on that. I am afraid it is rather a technical point, but it must be discussed technically in order to have any firm basis. The advantage of lighting and drainage you get on occupied land. It is not so as regards site value. You cannot separate for this purpose the site value from the building value. You get land occupied for a living purpose, for a community purpose, and, if you like, the value is enhanced by lighting, drainage, sewerage, and so on of both building and site. That is the point between the Majority and the Minority Reports. If you could separate the two values and show that a particular expenditure affects the land apart from anyone living on it, I think logically there is a great deal to be said for the Minority Report; but you cannot say that drainage, etc., affects land except as used for occupation in towns—for living purposes. I challenge the view that, for instance, drainage improves a site value until you utilise it for building purposes. Then, both site and building are improved, hut that does not justify a special rate in the site value as against the site and building combined, That is extremely important, and that is the only basis in which the Minority Report suggests a special site value valuation for the purpose of taxation.

Take the other side of the story. In addition to a desire to put a special tax on land—and, for my part, I can see no difference between urban and rural land in a question of this kind—there is undoubtedly a desire, expressed more than once in this House, to put a special tax on the owner as apart from the occupier. It is said we ought to get at the owner because the owner is the person who ought to be rated as regards particular purposes. What is said in the Minority Report on which this Bill is founded? This Bill is in effect throwing a new burden on the occupier, which most certainly he ought not to be called on to bear. What do the minority of the Committee say? They do not believe in the necessity of putting increased taxation on the owner for this reason. They say they are convinced that when new contracts are made from time to time existing taxation is thrown upon the owner as a matter of fact, and that during the lease or tenancy the right person to bear the risk is the occupier. That is the whole position of the Minority Report. I cannot appreciate the view of the right hon. Gentlemen opposite who aim at taxing the owner, and who support this Bill, which is founded on the Minority Report of the Royal Commission. because they deny altogether that it is right or proper or just to use the expression of the hon. and learned Gentleman the Member for Haddingtonshire, to seek to put any special taxation on the owner at all. The Minority Commissioners go further than that, on what they call the principle of maintaining contracts. If you are going to maintain contracts under a system of this kind, you must inevitably—and tins is the point of the Majority Report—get the most unfair system of taxation you can possibly imagine. Let us see how that works meantime. I will not take the case of a new tenancy, because in a new tenancy they simply propose half and half as between owner and occupier. I will take the case of an existing tenancy. Some one—the owner of the house—builds. He is the occupier, and he pays his landlord say £40 a year. According to the theory of the Minority Report the £40 is adjusted in. such a way that the real incidence of local taxation is borne by the owner. When we come to that point, what is proposed to be done under the Minority Report, and what is proposed to be done by this Bill? It is proposed to put a new tax on what is called rite value. Who would you put it on? The occupier. Can there be a more unfair suggestion? I agree that if a system of this kind is to be introduced, hon. Members ought to have the courage of their convictions. The minority of the Commissioners say that they think that what was brought forward by the County Council and by the hon. Member for Launceston, was neither workable nor equitable; but I think it was far more workable and equitable than this hybrid suggestion, which gives the go-by to every principle on which bona fide suggestions ought to be based, and which throws a most unfair charge on the occupier himself. That is what the majority of the Commissioners point out—that if you start with the preface, there is no special reason for taxing land, because there is no unearned increment to be specially taxed, and if you start with the view of not putting any special taxation on the owner, you cannot have two more destructive premises against the whole principle of site value taxation from top to bottom, and when you have thrown over these two principles and attempt to introduce a hybrid proposal such as we have in the Minority Report, and in the Bill before the House, you bring about this ridiculous result, that an additional heavy burden is thrown on the occupier in respect of an interest specially vested in the owner and in respect of which the owner ought to be charged, if any additional charge he made at all. That is the result of the proposals embodied in a Bill; the result of proposals brought forward on the Report of a minority of the Committee. They do not argue what they say is right on economic grounds, they say we put this proposal forward on "political and sentimental grounds." I am using their own expression, but I think in the somewhat dry province of local taxation, it is as well to put politics and sentiment on one side, and work out the logical basis upon which taxation is founded, and see what is the result at which you arrive.

Now I say at once if I thought there was this unearned increment, in respect of which a special charge ought to be put upon the owner, then some such scheme as was proposed by the London County Council or the hon. Member for Launceston would be the direction in which a Bill ought to go. But, denying those two premisses, I cannot conceive how you can frame a Bill, or that any one can consider at the present moment that such a Bill could have any foundation. I think the suggestion of the Majority Report is right, and that this Resolution to put a tax on site values is wrong and unjust. Every one admits that the site value is rated at the present time on the whole hereditament which consists partly of the building and partly of the land on which it is built. If that is so, if you have already rated the site value with the other property, what necessity is there for putting an exceptional burden upon it? You can only justify it on this doctrine of unearned increment and, if that doctrine is to prevail, you might as well put a special burden on railway stock, in the case of a line deriving its prosperity from the growth of two great towns which it connected, because those towns had a large and growing population, from which the Company received the increment, or on the interest on debentures as compared with ordinary stock. As we do not recognise this principle anywhere else, we ought not to introduce it in the first place in the case of land. There is something to be said for the rating of capitalised land, although we do not do it in this country. There is no reason shown why this special form of property should be penalised. One word more, I repudiate altogether the notion that the owner should be rated rather than the occupier. It is the occupier who is interested in economy in the expenditure of rates from day to day—and immediately interested.


The owner ought to be.


The occupier is the person in possession of the premises, and who is interested in proper lighting, sewage arrangements, and so forth. He gets the benefit from day to day of the expenditure, and it is for him to determine whether he is to go to that expenditure or not. What is the reason for trying to "get at" the owner? It is because lie is not represented in Local Government. If you are going to attack the owner, and make him pay double the rates, you must give him representation. That is the principle of Mr. Goschen, who proposed a very large scheme of representation. Where is there any suggestion of that sort in the Bill? The Minority Commissioners themselves point out how unfair it is to throw a burden on a man who has no voice on the authority. In conclusion, I may say I only wanted to deal with general principles. It is idle to go into matters of detail. The Bill, although properly drafted, evades the real issue, and its authors, having destroyed the whole basis of taxation in the way I have shown, are not justified in pressing it forward on political and sentimental grounds. (2.23.)

(2.53.) MR. McCRAE (Edinburgh, E.)

The hon. Member who last addressed the House made a speech, characterised by force of argument, which carries weight on account of his previous experience and from his position as a member of the Commission which sat on Local Taxation. Before dealing with the other argu- ments which have been submitted by the hon. Member for Stretford, let me deal with one other matter, namely, the statement that to make a system of deductions from the valuation equitable there was no necessity for having such a Bill as that which my hon. friend has introduced. Let me put this before the House, that before you can have an equitable system of deductions you must have a site value, and really that is at the basis of an equitable assessment so far as local taxation is concerned. This question of the rating of site values has two aspects, and those who have had anything to do with Municipal Government feel that large as the importance of this question may be as a Rating Question, it is much more important as to its bearing upon the housing problem. Before dealing with this particular question, let me say that this subject has ripened very much recently as far as opinion in the country is concerned. It has been brought repeatedly before this House, and the House of Commons has made deliverances and expressed opinions on the equitable nature of the taxation of site values.

In the year 1899, in Scotland, at least two by-elections were won on this very question, and the consequence is that public opinion in Scotland has developed so much that at the last General Election there was hardly a Unionist candidate who stood for a Scotch constituency who did not commit himself to the principle of the rating of site values. No doubt the views of those hon. Members with regard to any scheme are somewhat vague, but as far as the principle is concerned they committed themselves to it root and branch. [Ministerial cries of "No, no!"] Much has been done to ripen opinion upon this question, but I make bold to say that this Minority Report of the Royal Commission has done much to bring the matter within the sphere of practical politics. I wish to emphasise the point made with regard to the composition of the Minority who signed the Minority Report. There was the Chairman, Mr. Blair Balfour, and there is nothing revolutionary about him. Then there were the Treasury Officials, who have had great experience with regard to taxation and revenue, and who, as a rule, possess an official mind impervious to new ideas, and not particularly receptive. Those men were so convinced with the justice of the claim that was put forward that they committed themselves to this Report and they said that— A careful consideration of the circumstance of urban local taxation has led us to the conclusion that a moderate rate proportioned to the site value ought to be imposed. I do not think we can estimate the far reaching effect of such a deliverance backed by such authority. Unfortunately, there are instances in that Report of halting adherence to the principle laid down. There is also some economic heresy and illogical reasoning, and I am bound to say that this is reproduced in the Bill now before the House. I regret that my hon. friend, no doubt for tactical reasons, has emanated himself to some principles, which I think are unsound, merely for the sake of gaining an advantage against the Government.


No, no.


Well, that may not be the reason, but whatever the reason is I regret that this course has been followed. I think the lion. Member for Stretford has made the only really effective criticism against this Bill on the other side of the House. I think upon this question of the rating of site values we ought to deal with it from an economic and not a political standpoint. This is one of the questions which ought to be removed as far as possible from the sea of Party politics. I think also that the taxation of site values ought to be considered from the higher standpoint of mere expediency. We can take a higher ground and go to fast principles. Mr. Disraeli once said lie was "on the side of the angels," but we do not take up that high ground, although I think those in favour of taxing site values can say that they are on the side of the economist. I think we ought to get a foundation. As a start I will quote the opinion of an old economist—Adam Smith—with regard to the taxing of ground rents. I think there is a good deal of confusion between the taxing of ground rents and land values. Land value is a much wider and more comprehensive term than ground rent. Adam Smith says— Ground rents are a still more proper subject of taxation than the rent of houses. It would fall altogether upon the owner of the ground, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of the ground. Again he says— Nothing can be more reasonable than that a fund which owes its existence to the good government of the State should be taxed peculiarly, or should contribute something more than other funds towards the support of that Government. These views were expressed before the evils affecting the modern conditions of life were apparent. He was quite sure that had Adam Smith lived now, he would have added to "the good government of the State." The increase to the well-being of the community which is contributed by municipal expenditure.

The hon. Member for the Stretford Division made a point that the unearned increment was a matter which was considered as not being within the sphere of taxation. Let me say that whatever is included in the site value, certainly any unearned increment which has accrued is. There is no question that the unearned increment does accrue, and must be calculated in that value. We have very high authority not only for saying that there is unearned increment, but that it ought to be rated. John Stuart Mill says— A kind of income which constantly tends to increase without any exertion or sacrifice on the part of the owners. He also says— It would be no violation of the principles on which private property is based, if the State should appropriate the whole or part of this increase of wealth as it accrues. In, fact John Stuart Mill went so far as to say that not only land values, and especially the unearned increment should be rated, but that the whole of it should be appropriated for the public good, so that as far as the economists are concerned, we say that we are in a sound position, and that we are maintaining sound economic policy in supporting this proposal for the rating of site values. I am not going to quote the various opinions in the Report of the Local Taxation Commission, but I wish to quote how it strikes a stranger—Pro- fessor Seligman, one of the Continental economists. He says— Even in England, where so many reforms have been made in the National Revenue, the whole system with its exemption of nonproductive realty or land held for speculative purposes, and its imposition, in the first instance, on the occupier means the relative overburdening of tile poorer classes. I maintain that our position is economically sound, and that a rate should be on land which improves in value, and that the building which depreciates in value should be to that extent relieved. Anyone who has given the slightest attention to the question of taxation admits that land does not bear its fair share of taxation. [Cries of "No."] Well, I refer those Members who object to the Report of Mr. Goschen's Committee in 1870, which not only showed that land was lightly rated, but that it was more lightly rated in this country than in any country in Europe. That is where you will get the foundation, and I do not hesitate to say that there is no Report on the question more valuable as giving a basis for the principles which ought to guide us in dealing with local taxation. But take the Report of 1893 which was submitted by the right hon. Gentleman the Member for East Wolverhampton, and you will find there the same principle that was laid down by Viscount Goschen in his Report in 1870. In the Report of 1893 it is shown that the proportion of local rates borne by lands and houses were as follows: In 1817 lands paid 66.66 and houses 33.33 per cent.; in 1868 the proportion had entirely changed, lands bearing 33.33 and houses 66.66 per cent.; in 1891 lands bore 15.31, and houses 84.69 per cent. Under the definition of houses all the land built upon is included. I agree with the hon. Member for Stretford when he says that so far the land value is rated in the rent of the houses, but he did not deal with the question of unbuilt land, and this is dealt with in the Bill of my hon. friend. Here it is that I think there is a great advantage given by such a proposal not only as a rating reform, but as a solution of the housing question.

I may say that on this point I speak from some experience in one of our. large municipalities, namely, the city of Edinburgh, which is not a commercial town, and which ought to be a more favoured place than some of the denser manufacturing centres. Still there the difficulty which confronts us is the question of land. At present the owner of unfeued land which ought to be in the market, but which he has the power he certainly exercises to withhold, pays no local rates on that land while it is developing. After it has developed he sells it, and although he receives a large annual income from it he still pays no local rates. In fact we come back to the old principle of Adam Smith, that the owner of land is a monopolist, and the phrase "free contract" in this aspect of the question has still no meaning. We have heard of a corner in wheat. We have in this country at the present time a corner in land, and one of the main reasons which I think can be adduced for the proposal that land ought to be rated is that the rate would force more land into the market, and, therefore, cheapen its price. Those who say this would increase the rent of houses are giving utterance to an argument which is an utter fallacy and bespeaks a want of knowledge of political economy. I would like to tell the House what the rating of unfeued land would mean to the city of Edinburgh. I am dealing only with one aspect of the quest on, leaving aside the advantages which would follow the imposition of a general rate. I take the year 1900. In that year the rental of the city of Edinburgh was £2,648,000, and the area was 8,800 acres. The unfeued land amounted to 2,300 areas, another value only amounted to £10,394. What was the result on the assessment The total assessment of the city for the year was, roughly speaking, £300,000, and the proportion of the assessment borne by the unfeued land amounted to the small sum of £325. I have made a calculation as to what a rate would produce if the land was taken at its market value—at half the ordinary rate which is received at the present time per acre for land in the city, and I find that instead of producing £325 to the rates, it would produce £29,000, and that would mean a reduction in the rates over the whole city of 3d. in the £1. There is a practical example of a rating reform which would be attained by the introduction of such a proposal as that before the House to-day. Let me give another instance in regard to the ratable value of land. A year or two ago powers were obtained by the city of Edinburgh to acquire land for a public purpose, and it was proposed to buy it onside of the city boundary. The land extended to 45 acres, and the rental of it was £3 5s. per acre per annum. Thirty years purchase on that, which is a fairly good price, would have been £97 10s. per acre. I believe that the sum originally asked was a very large one, but I had an opportunity yesterday of seeing a letter which is now a public document to the Edinburgh and District Water Trust, where the proprietor says that although he considered it a very inadequate sum, he was willing now to take £20,000 for that land which is equal to 136 years purchase of the price on which the rating is at present paid. One other instance I will give as to ground in the city of Edinburgh. This ground was not entirely unbuilt on, but it extended to 105 acres, and was rated at £5 10s. per acre. The Edinburgh Gas Company wished to purchase it for public purposes, and they had to come to an agreement as to the price, which amounted to £124,000, equal to £1,180 an acre, or 212 years purchase.

Now, these are some of the injustices, apart front its effect upon the question of housing, which the present system entails. It is a special injustice to the labouring classes, because a rate on their rent, although we look upon it as a tax upon property, is a tax upon their income. The working classes are compelled to pay from a third to an eighth of their whole income on the rent of their houses and taxes, compared to which the income tax of 1s. 2d. in the £1, which some people consider so high at the present time, is a mere bagatelle. I would quote the Minority Report in regard to the effect which this proposal would have on the housing question. That Report says— It seems clear to us that the present heavy rate on buildings do tend to aggravate those evils, and that the rating of site values would help to mitigate them. I have shown first, that this proposal is economically sound, and secondly, that it is just; and now, in a word, let us consider whether it is practical. I maintain that no one who has had any experience of arbitrations in connection with public improvements will deny that a discrimination between site value and building value is quite a simple proposal. The Royal Commission in its Minority Report has stated— A valuation sufficiently accurate for the purpose and not inferior to the present valuation, could be made without undue labour and expense. I put it to any one who has had experience of the arbitrations I have mentioned, whether he does not, from his own knowledge, subscribe to that doctrine.

Before I sit down, Sir, I wish to point out two defects in this Bill, which have already been referred to by the hon. Member for Stretford, and which I think would hamper its operation, and are rather illogical. The first is, that existing contracts are exempted. I agree with the hon. and learned Member for Stretford, that if you exempt existing contracts, you at once get into a difficulty. Any one who has studied the land question, not only in Ireland, but in the United Kingdom, must admit that it is impossible to deal justly with this question, without interfering with existing contracts. It is a singular fact that it is only when we have to increase the burden of the rates, that we hear of the sacredness of existing contracts. But when it is a proposal to give a dole to the landlords, or to a privileged class, say, by the Rating Relief Bill, at the urban ratepayer's expense, this doctrine of the sacredness of existing contracts is allowed to lapse. I think this is a matter which we ought to face. The other part is in regard to the imposition of a rate, half on owners, and half on occupiers. This is a most illogical proposal, because the rate on site value is to be strictly limited to expenditure tending to increase directly the value of urban land. I say that if the rate is to be confined to that purpose, it is utterly preposterous to rate the occupier to the extent of one half. It would be better to keep to the law as it at present stands, and I hope if the Bill gets the length of Committee, my hon. friend in charge of it will put that matter right. The purposes to which the rate is to be devoted set forth in the Schedule of the Bill are wider than those contained in the Minority Report, and I would point out that the occupier already pays rates, and will continue to pay rates for these very purposes. I conclude by saying that, notwithstanding these two defects, the principle of this Bill is a right one and I hope this House will consider it favourably, and pass its Second Reading.

(3.22.) MR. LLOYD WHARTON (Yorkshire. W.R., Ripon)

I was a member of the Royal Commission and signed the Majority Report. I think those who have been here from the beginning of the debate will admit that it has been conducted most admirably and with great ability, starting with the excellent speech of the mover of the Second Reading of the Bill, carried on by the hon. Member for Tunbridge, and by those two shining legal lights, the Member for Haddingtonshire and the Member for Stretford, the latter of whom came down to the House under the pressure of ill-health. So far as I am concerned, I am only prepared to deal with the matter from a layman's point of view, and to put my reasons before the House why I am for the rejection of the Bill which, as I think, deals most unfairly with a certain class of property. The system of English rating at the present time is one by which the annual lettable value of a hereditament is fixed, to be let to a hypothetical tenant from year to year, and by which is levied on that assessed amount an annual contribution from the occupier for certain specified local purposes. Now, is there any one of this House who will say that any hereditament at the present time, both site value and house on the site value, is not assessed to its full value, and is not paying its rate for services rendered by the local authority. The proposition of the Bill is that, for the first time in English history, you were going to tax the same thing twice over. Surely that is most inequatable. In years gone by we heard a good deal about taxation of ground rents; we hear nothing about it now, it ha sheen dropped like a hot potato. All we hear about now is the taxation of site value which is a very different thing.

We are told in the Memorandum attached to the Bill that it has been drawn in accordance with the Report of my noble friend the Chairman of the Royal Commission, Lord Balfour of Burleigh. I think if hon. Members would take the trouble to read that Report and this Bill they would find that it is not altogether an accurate description of the Bill. When you come to the question of disturbance of contracts, I do not think that the proposals of the Bill and of the Report are on all-fours. I agree with the last speaker that if you do have disturbance of existing contracts it will simplify matters very much; but I believe that most people will think twice and thrice before disturbing existing contracts, which, however, might be a very good thing for the lawyers. If you do not deal with existing contracts you would doubly rate certain hereditaments while letting others equally or more valuable escape altogether. I do not think that will be favourably entertained by certain localities, and it would be destined to absolute failure. The Bill deals with two separate matters-the rating of occupied land, and the rating of unoccupied land. Under the present system there is no difficulty of dealing with occupied land, but there is undoubtedly a great deal more to be said for the rating of unoccupied land than there is for the Bill as a whole. The difficulties of dealing with the rating of unoccupied land are, however, great. What is the substance of the present law? It is that the ratepayer pays to the Local Authority a certain sum of money for services rendered to him in the local area in the way of police, lighting, cleansing, etc. But when you come to a piece of unoccupied or absolutely derelict land the owner of which has no beneficial occupation whatever, it is not rated. I take it that it is proposed to ascertain the capital value of that unoccupied land, and to levy a percentage upon it en the ground that the owner is holding it for the purpose of getting a higher value in the future. That may not invariably be the case. The owner of the land may be unable to sell it. It may be that trustees in whose hands it is, are unable to sell, and that therefore the land is not left in that condition from a motive of securing in the future a higher value for it than at present.

For my own part, I admit that during the earlier deliberations of the Royal Commission, which sat for five years, I was very much struck with the idea that there might be some fairness in getting some contribution to local expenditure from derelict land in some of the busiest parts of a town. The hon. Gentleman who moved the Second Reading of the Bill said that his desire was in making the proposals in the Bill to prevent over-crowding, but I think every witness we had before us said that the natural consequence of putting a ratable value on derelict land would be, not to prevent overcrowding, but to throw the land into the market when it would fall into the hands of the jerry builder, who would build large numbers of workmens' houses on it, and so increase overcrowding, while at the same time shutting up a lung which was beneficial, from a health point of view, to the locality. Two of the most able members of the Royal Commission were the Town Clerks of Liverpool and Birmingham, who were thoroughly acquainted with all questions relating to urban rating. Now, the names of these two gentlemen were not attached to the Minority Report, but to the Majority Report. Surely if they had had any object in view it would have been for the benefit of the ratepayers in those large centres of population; but both absolutely dissented from the Report of my noble friend Lord Balfour. If the House will allow me I shall read a few words from a Memorandum of one of these gentleman on the taxation of ground values. He says— I believe on the whole the taxation of ground values will sooner or later fall with the greatest severity on the working classes who occupy compound property, and the rates for which are paid by the owners. A substantial increase in the rates payable by such owners will, no doubt, result either in increased rents being demanded, or in less money being spent in keeping the properties in repair. In some way or other the owners will get the increased rate out of the tenant. These are words of the Town Clerk of one of the largest cities in the Kingdom, and I think they ought to have weight with Members of the House of Commons. I do not wish to detain the House at any great length, as I know that there are others far more competent than I am, who desire to speak. But I oppose this Bill because it is absolutely opposed to the principles of English law at the present time. To vote for it would be to vote for a novel proceeding, utterly subversive of and contrary to the law of England as it has hitherto existed, and I maintain that this House has no sufficient ground for taking such a course.

(3.31.) MR. MOULTON (Cornwall, Launceston)

It is with mixed feelings that I join in this debate. On the one hand, I am delighted to see the enormous advance which this question—which has been a special study of my own for many years—has made. When we first proposed the taxation of ground values—and I may say that in proposing it we made no other claim for our plan except that it was the logical and necessary working out of a series of principles which we definitely enumerated—I believe every authority was against it. In what position is it now? A most able Commission has sat on the question of urban rating for five years, and more than a third of that Commission—six members out of fifteen, comprising some of the ablest men on the Commission—have practically accepted every one of the principles which we put forward. It is no matter to me whether they have been willing to accept all the logical consequences. The acceptance of the principles must ultimately compel them to accept the consequences. In support of my statement I would call attention to two or three of the findings in the Minority Report. One is— That site and structure, which are now combined for rating purposes, differ so esentially in character, that they one lit to be separately valued. Another is— That when separated from structure, site is capable of hearing somewhat heavier taxation, and should Le made to bear it, subject, however, to strict respect for existing contracts. A third is— That the differential treatment should take the form of a special site value rate, payable in part by means of a deduction from rent on the Income Tax method, and that thus a part of the burden should visibly fall on those who have interests superior to those of time occupier. Another finding is— That subject to the conditions which we have specified the special site value rate should be charged in respect of unoccupied property and uncovered land. Now I believe those findings comprise substantially all the principles which we put forward so many years ago, and for the acceptance of which we were condemned. This Bill, which has been most properly brought forward in order to test the opinion of the House on so weighty a Report, is therefore a subject of deep satisfaction to me, but I am bound to say that there is another side to it, and that is that the minority, in the practical recommendations embodied in their Report abandon these principles, and propose a plan which I think I shall show to the House is not only diametrically opposed to the opinions they accepted, but is one which would do great injustice to present occupiers. I am not going over the arguments in favour of the taxation of land values. I will not even be tempted to answer the speech of the hon. Member who has just spoken, and who thinks that overcrowding is greatly aggravated by an increase in the number of houses. I only want to deal with the new and difficult point which arises by reason of the recommendation of the Commission that during existing contracts these site value rates should be paid by the occupier. In order to deal with that, let me at once say that I certainly have never put forward the taxation of land values as in any way a confiscatory measure or even as a piece of ransom. I have always put it forward as based on the strictest rules of justice. My view has been that we have not only discovered that sites in towns reap largely and exceptionally the benefit of municipal expenditure, but that we have also realized that land has been let off too lightly, that its value has been increasing rapidly, not by way of an unearned increment, except in the sense that the landlords have not earned it, but by increment due to actual municipal expenditure. It has increased in value in consequence of that expenditure, just as the value of an estate would be increased if you introduced irrigation and brought water to it from miles away. Everyone knows that the increased value of that estate would be earned in the sense of being a return for money spent. In exactly the same way the increase in the value of urban sites is due to expenditure on it, but it is not due to money spent by the landlord, but to money spent by the municipality. What we contend for is that lands should bear their fair share.

For the purposes of my argument I will ask you to assume that it is right to say that extra taxation ought to be put on the value of land. I am entitled to ask you to assume this because I am not going to deal with the general question, but I am going to deal with the question as to whom this taxation should fall on during existing contracts. It cannot be said I am not fairly facing the problem with which I have to deal. In the first place I want to lay down this principle. This Parliament has not only a right to impose any just taxation, but also to decide what the incidence of that taxation is to be. Let me give an example. You taxed coal in the selling price last year. Supposing the Chancellor of the Exchequer this year comes to the conclusion that there ought to be a tax on coal royalties of, we will say, ten per cent., to be paid by those who receive them. No one would say that was an unjust tax, if on the whole the House was of opinion that it was the best way of raising money, and it would probably be collected from those who pay the royalty. Now, if the contract between the parties is that 10d. is to be paid for every ton of coal won, after that Act is passed 9d. will be paid to the landlord and ld. to the State. Who would say that was an interference with existing contracts? It would merely be saying that a certain revenue intended to be paid by the collier to the owner should bear its share of taxation, and whether you got it from the owner who received it, or the collier who paid it, made no difference. This illustrates the principle that the State has a right to decide not only what taxation should be imposed, but what the incidence of that taxation should be. The case of landlords under existing leases is precisely analogous. At present the landlord receives a net payment subject to the property tax. Suppose the State decides that persons in that position who receive net payments should bear a tax, let me assume for a moment that it is for Imperial purposes. Suppose it is decided, for instance, that those who derive incomes from land should pay ten per cent. The landlords would find the income from their leases diminished to the extent of ten per cent., but that would be no interference with contracts. It would merely be saying that they should contribute such and such a portion of their wealth to help to bear the national burdens, and it does not matter whether it is for imperial or municipal purposes. So far, therefore, as the tax on ground values is additional taxation, we have a perfect right to say not only that it shall be paid, but also in what way it shall be paid. I quite agree that if there is no additional taxation, other considerations come in, but so far as additional taxation is concerned, it is no interference with existing contracts; it is merely the imposition of a new tax on property; and property by contract is not a bit more sacred than property in possession, and is not any more shielded from the action of the Legislature.

It is on these grounds that I have always argued that in so far as t his tax is an additional one, we have a perfect right to decide that it should be paid by the landlord, and that our doing so is no interference with existing contracts. But the very arguments that justify the imposition of the tax go to demonstrate the unfairness of making the House will patience, I will put a case before it in figures. Let us suppose that the rent of a piece of land £100, and that the rate at the time that the contract was made and during the the whole contract is £25. The man who makes the contract and who takes that land sees that he has got to pay £125 in rent plus rates, and, to use the hypothesis of the old political economists, the land is worth to him £125 a year more than land which is no value at all. We think that an extra £10 in rates should be paid. What would have been the contract in that case? The man would only pay £125 for the total value of the land, because it would not be worth more to him, but now £35 would be paid in rates, and the contract would be £90 rent and £35 rates, and if the contract were made over again that £10 would be thrown on the landlord, and even at the end of the contract it will have to be considered in this light by the landlord in fixing his new rent. Therefore there is no possible justice in putting this extra taxation on the occupier during the period of his tenancy. You make him pay more in rent and lutes than he ever considered he would have to pay and would ever have agreed to pay. The only logical way is to look upon it as an extra tax intentionally placed by the Legislature as a drawback to the value of the land, because that land is not adequately paying for the services it receives from the municipality, and if we view it in that light it is a tax which must and ought to be borne by the landlord.

I am not going into the general question. None of us have ever denied that the landlord bears a certain amount of taxation, but we say it is not enough. What I want to impress on hon. Members, and especially on hon. Members who do not generally agree with our political views, is that there is nothing which would so calm the agitation against town landlords as their paying visibly that which they allege they pay invisibly. If you accept this system, you can easily come to some proper arrangements with regard to existing contracts. Why should town landlords bring on themselves the odium of being supposed to lie in wait for towns getting richer and more prosperous, and then taking possession of the value that they have abstained from contributing to? If you honestly believe that landlords do pay rates on the ground values, you must admit that it is best for them that they should pay openly.

(3.53.) MR. VICARY GIBBS (Hertfordshire, St. Albans)

I freely admit that this is a very moderate measure very moderately introduced, and in the main very moderately supported. But I should like to point out that Bills of this kind are based on an economic fallacy, and so far as they are honest, just so far are they futile. I am thoroughly borne out in that argument by the remarks of the hon. and learned Member. No man has studied this question more closely than he has, though the result of his study has led him to take a different view of the matter from that which I take. He is recognised as an authority by hon. Gentlemen opposite, and he says practically what I say, that the principles which he advocates are the logical and necessary consequences of a Bill of this kind. He complains of this measure because it does not go as far as he would wish. The hon. and learned Member says that it is open to the House to make new taxation, and that the fact that land bears a certain amount of taxation is no reason why the State should not put more upon it. But take the case of a man who says, "I desire a small, safe, and certain income, and I will give up my property to you on condition that I receive it, free from any extra charges the State may consider necessary to put upon it." A great deal of talk in connection with these proposals is aimed against the rich man, but as a matter of fact, if we admit that sort of Robin Hood doctrine of robbing the rich man, whom should we be really robbing? It would be the building societies, the widow, and the small investor. One certain effect of this Bill would be to destroy the certainty of the return of investments in land. It would make investments in ground rents to have a varying return, and would injure that most important security. We have heard a great dea of the Minority Report, but very little of the Majority Report. May I just quote a few words from the former— A system of direct taxation on owners is desirable, at any rate, on political and sentimental grounds, however little effect such a change may have on the real incidence of taxation. What an extraordinary defence for such a startling proposition as that which we are asked to accept today. Surely if there is one thing that should be approached in the cold, dry light of economic law, it is a question such as this.

The Minority Report also says that the real ultimate incidence of the site value rate would be upon the owners of the site value in any case, even if it were simply charged on the occupiers, as the present rates are. Yet Hon. Members are not, in fact, going to shift this burden from the occupier; they are only going to do it in appearance. All they are really going to do is to take away the resentment which the over-burdened occupier feels against the enormous rise in rates which has taken place. How did I he hon. Member illustrate this? He said that certain land in Edmonton was offered as a gift to the County Council by a generous donor for the purpose of working-men's houses being erected thereon, but the County Council looked into the matter and found that the rates were so very high that they could not accept it. I suppose the whole object of this story was to show that this Bill would alter that position of affairs. Here is land which, as it stands, is worth nothing to the County Council even if given to them, but it is to be most valuable for building sites if you put an extra 2s. in t on it ! I fully recognise the ability of the lion. Member, but was any assembly of educated men ever asked to listen to such a ludicrous proposition I Then there was the anecdote of the man in the Strand, who for 22 years held land, for which he originally paid £5,000, and then, at the end of that period, sold if for £11,000 to the County Council. One of the great advantages claimed for this Bill is that it will stop a man doing such a thing as that. But good gracious ! as any one can calculate, at any ordinary rate of interest, that man actually lost by the transaction.


He paid no income tax.


Even if he paid no income tax, rates, or anything else, he wont into a bad business. Is it necessary for us to legislate against men doing things by which they lose money? Surely that will cure itself. Any common-sense business man knows how long it takes money at three per cent. compound interest to double itself, and he will not be such a fool as to put his money into a site which he will have to hold 22 years to achieve that end.

One of my great objections to the Bill is that it is not comprehensive enough; it does not deal with the whole question. It is quite legitimate for the hon. Member to say that it is impossible for a private Member to deal with the whole question on a Wednesday afternoon. But when you tackle a question of this kind, you must look at the thing as a whole. As Lord Salisbury said— There is no such crying injustice in this country as the system which puts on the owners of land and houses the support of the poor, and, where there are School Boards, the education of the poor. These are matters to which all classes of property ought to contribute. This Bill does not touch the real rating grievance; it makes no attempt to deal with the exemption of personalty in this matter. Moreover, it does not get at the ground landlord, whom, apparently, everybody desires to attack. The Bill does not break existing contracts. The ground landlord takes land for ninety-nine years; during that period you cannot touch him. The moment any lease expires, you can levy this rate, and you put it on to the occupier, who has, perhaps, another year or two to run. When you come down on this man with your 2s. rate, he can recover one half of it from his immediate landlord, but that man, in his turn, 'cannot go a step further back and recover from the ground landlord. There' fore, this new 2s. rate, which may be running for ninety years on the occupier or the owner of the house as distinguished from the ground landlord, is to be, if you please, a relief to the occupier ! That is a correction of the injustice which at present, according to lion. Members opposite, enables ground landlords to escape the incidence of taxation.

This Bill and similar measures have been defended on two separate grounds; first, the benefit the ground landlord gets out of the rates; and, secondly, the fact that an unfair and unexpected burden has been cast on the occupier. Let us take the benefit. After looking at this schedule, I entirely- agree with my hon. friends behind me that a lot of these benefits do not and cannot possibly accrue during the currency of any lease. But I want particularly to deal with the question of the burden. It is said that the occupier has an unfair and unexpected burden cast on him. It is said, and this may be perfectly true, that though the man entered into a contract with the ground landlord, he did not do so with his eyes open; he could not foresee the extravagance and folly of local bodies, the fancy wages they would pay to certain persons, the free libraries they would introduce, and the all sorts of expensive experiments they would go in for. We were told that all this expense would be borne by the County Council. I wish to goodness it would be; we should then have much less reason to complain. But it has to be borne by the wretched ratepayer; he is the man on whom this will fall, and he is the man who is kicking at this tax, which is put, as he thinks, upon him—and, indeed, primarily it is, but ultimately it falls on the ground landlord. You desire to relieve him of this burden. But is it just that because B has an unjust burden laid upon him, you should put it upon A? No, it ought to be placed on all the other letters of the alphabet, and my point is that you are putting this fresh burden upon one—that is to say, the owner of the land—but you are not touching the owners of personalty all over the country, who profit just as much from all the general expenditure on education, the support of the poor, and so on. The owner of personalty ought to be charged just as much for these things as the owner of land. The hon. Member for East Edinburgh started the unearned increment story again. That was scrupulously omitted by the mover of the Bill. If there has been an unearned increment, surely it is by the very man who is to escape under this Bill; it is the man who made the bargain long ago. He did not foresee all this magnificent expenditure which, according to the hon. Gentlemen opposite, was going to be made for his benefit, and of which he was to reap the advantage. As the hon. Member for East Edinburgh said, he is going to get off scot free under this Bill, and the occupier who has had the unexpected burden is not to be relieved. The Bill especially excludes the latter from all relief. It says, "A great many years ago you entered into a bargain of which you could not foresee the consequences, and we will riot relieve you. But suppose you enter into a new bargain, when you must foresee all the consequences, when they have all been pointed out to you, when the rates have gone up, then we will take steps to relieve you." Is that just, reasonable, or logical? Does it commend itself to the House? It cannot. It is said that contracts are to be respected in order to conciliate feeling in this House. I think many Members who advocate the Bill would much prefer that it should break contracts. You say that is a very dishonest thing to do. I think it is. But then you get something for it, whereas from this proposal you get nothing except a further complication of the rating system. Nobody is to be allowed to exclude himself at all. The man who enters into ground rents without any beneficial interest whatever—as is often done—is not to be allowed to exclude himself from these rates. The one idea of this Liberal Bill is to prevent two free men, with their eyes open, making a free bargain from which the State suffers not the slightest injury. However convenient it may be to the two parties that one should bear the rates and the other accept a lower remuneration in consequence, they are not to be allowed to make such an arrangement. I recognise that it may be necessary in certain cases to interfere with fr,l'edom of contract, but the grounds ought to be very good, and more reason ought certainly to be advanced than has been advanced, before you prevent men entering into such bargains as that.

Now let me turn to the vacant land question, which, although it is not the most important matter, is that which interests hon. Members more than any other. It is the most interesting and the most specious; it is the one on which, on public platforms, when endeavouring to win seats in this House, Gentlemen would naturally dwell. There is the picture of the greedy speculator, the man who does not mind whether people are overcrowded or not, who does not care how the poor suffer, who simply sits still, completely protected from all charges or rates; there he sits, waiting for the time when he will be able to swoop down and take a great profit. But the same attacks, because he was a bad or selfish man, might equally be made on anybody else. Hon. Members must not muddle up in their heads the questions of morals and taxation: the two things have nothing whatever to do with one another. [Laughter.] I mean the question of the morals of the person taxed. {"Ah!"] No doubt I do not express myself as well as the hon. Member who laughs, and in the heat of debate it is very easy to use words which may be misinterpreted. Those two matters have nothing to do with each other, and the House should keep that clearly in their minds. The fact that people behave badly is no reason for taxing them unless they are going to get some benefit from the taxation, or unless they put some charge or inconvenience on the community, for which the, community has a right to be recompensed. This land earns nothing and pays nothing. Are you prepared to pick these people out, because you dislike them and subject them to this tax? You are going to tax them on a capital value, and yet you are not prepared to take capital value as the basis of your system of taxation. I say you ought to do so.

As to the great argument that this Bill will relieve overcrowding, I do not believe it for an instant. Take the case of vacant land in thickly populated parts. Can anyone deny that that is the common playground of the children? I remember that my first game of cricket, as a boy, was played under these circumstances. It is argued that this Bill will force people to build as quickly as possible, but the result will be that your small suburban cricket grounds, and your market gardens and allotments will go. These things cannot be maintained against the charge which the income of a man does not justify. The small picturesque old house which does not exhaust the value of the land will also go. What has this valuer provided for in the Bill to do? He will look at an interesting old house, and he will say, "It is very pretty, but I calculate that the land on which this house stands will carry ten storeys, and will let for so much; therefore, I am going to rate you and everybody else in this area, not merely as if you were a building speculator, but as if you were a successful building speculator." The assumption that speculative builders are all successful is contrary to experience, for such building is a very difficult business, upon which a man may very easily go wrong. If you are going to. make a valuation based not upon fact, but upon opinion—I may say even upon guesswork—the man will have no guide when he starts valuing. If you are going to give this power to the various local authorities then you are going to do an immense injustice to the ratepayers of one district, as against the ratepayers of another district. In every part of England the Borough Councils are to be the authority, and in London the County Council is to have that power. I read all through the inside of this Bill very carefully to see if there was any justification for that distinction between London and other great cities. I could not find any justification for it inside the Bill, but the moment I looked at the outside of the Bill I found the explanation at once, when I saw the list of names upon it. Very often in these matters an ounce of practice is worth a pound of theory, and we have had a great deal of argument addressed to the fact that this taxing of vacant land would cheapen land, and throw it into the market. Upon this point, however, let me read the evidence of Dr. A. R. Wallace, the President of the Land Nationalisation Society, and that title does not indicate a man of my opinions; so I think that I may very fairly call him as a witness as to America, where there is a tax on the full selling value of land. He says— It increases speculation and changes of ownership, and tends to drive up values; and we find the land cut up into smaller strips than in England, and the houses are built more closely together. Does that suggest a remedy for overcrowding? At the present time land is held by all sorts of people, and this is not a question, according to what we have heard in this debate, of the great landlords only. This is really a question affecting all sorts of people holding bits of land. What will happen if you make it impossible to hold land in this way? You will force land to be taken up by large wealthy syndicates, and you will compel the poor man to throw his land into the market when it is not ripe. In this way you will encourage syndicates to hold the land when it is over-ripe in order to make enormous profits and for the sake of recovering the very charges which you now propose to put upon it. I do not believe for an instant that the effect of this Bill will be to decrease overcrowding. I sympathise with the object which lion. Members have in advancing this Bill, but I do not think it will result in what they desire. I think tins measure in its essence is an unjust Bill, and I believe it proceeds upon an economic fallacy. It is on these grounds that I hope this House will resist a measure of this kind and throw it out by a very large majority.

(4.25.) SIR EDWARD GREY (Northumberland, Berwick)

I thoroughly and cordially concur with the comments which have been made by more than one speaker as to the exceedingly favourable tone and judicial temper in which this debate has been conducted. Per haps that may be partly due to the great difficulties of the question, which exercise a certain restraint upon epithets and looseness of talk. But, Sir, when we are told that this Bill differs in some respects from any Bill or Resolution which has been previously proposed to the House, I agree that it does differ—in being an extremely moderate and carefully thought-out proposal. It has had, however, one curious effect upon the debate, for it has resulted, I think, in a considerable straining, and a certain confusion, in the arguments on the other side of the House which have been produced against it. It does not occur to me after having listened to the opposition to tins Bill whether that opposition rests upon what this Bill proposes to do or whether it rests upon the great amount which the Bill will not do. We have heard one argument at any rate which I think is entirely novel corning from the other side of the House, and that is that an objection to this Bill is drawn from the fact that it does not propose to break existing contracts. I never expected to hear that argument from the other side of the House, but it is a fact that it has been put forward by the last speaker.


No, no.


Then the hon. Member for St. Albans does not advocate that to break existing contracts is a good thing except for the purposes of this Bill. I understood the hon. Member to say that, if this Bill did break existing contracts, there would be more to be said for it from the point of view of those who wish to produce a great effect.


I said that from a moral point of view. By doing this you lose the only possible advantage that could come out of the Bill.


I understood the hon. Member to say that he did not intend to mix up morality and taxation. We are now being brought into a moral question. His point was that if this Bill did break existing contracts there would be more to be said for it from the point of view of morality. Of course, if the Bill had proposed to break existing contracts, the moral argument would have been brought forward from the other side of the House, and the Bill would have been far more strongly opposed. I regard it as a testimony to the moderation and reasonableness of the Bill that it is framed on its present lines.

I cannot agree with the last speaker that the Bill will have no effect on overcrowding. It seems to me that the Minority Report has clearly proved that it will have some effect; how much effect it is, of course, impossible to measure; but that it will have any effect at all is so much to the good. Some time ago Mr. Mill wrote that it was impossible to raise by a house tax alone the greatest part of the revenue of Great Britain without producing very objectionable overcrowding in the population, through the strong motive which persons would have to avoid the tax by restricting their house accommodation. That was written when rates were £7,500,000, and now they are £38,500,000. Nothing has been done to modify that apprehension of Mr. Mill as to the principle on which rates are collected. The site value, it is admitted by everybody, forms part of the ratable value of the whole hereditament, sometimes it may be half, or more; if we lumped the whole together, we are putting a premium on inferior houses, or discouraging building. The lion. Member for St. Albans comments on the fact that the successful specula- tive builder is so comparatively rare that he does not appear in this House. Is it not possible that building is made extremely difficult under our present rating system, and that a Bill of this kind may have some effect in removing the discouragement to the builder, the existence of which the hon. Member, for the purposes of argument, seems to admit? The effect of this Bill must be, supposing there is a separate site valuation and a separate tax is imposed on site values, in great cities to relieve the pressure at the centre by tending to promote building in the outskirts, thus relieving overcrowding. Therefore, in the absence of any other suggestion, I say that this proposal does touch the housing question, and will continue to touch it in a progressive degree. On that ground alone I think the Bill deserves the most favourable consideration of the House.

I say, therefore, that the Bill is desirable. Now, Sir, is it practicable? Well, an objection has been brought against this Bill, because it touches the rating question in a piecemeal manner. The hon. Member who moved the Amendment to the Bill put that point. He said the Minority Report recommended practically what is proposed in this Bill as part of the whole scheme, and that this Bill was only taking the Minority Report and nut the whole scheme. I shall not comment, like my hon. and learned friend the Member for Haddingtonshire, on the surprise with which we receive objections to piecemeal legislation, in view of very recent history. It has also been stated on the other side that this Bill ought not to be introduced by a private Member. Supposing it had been a Bill professing to deal with the whole scheme with how much more force would they have urged the contention that it should not be introduced by a private Member. I fully admit that if we had any prospect of Government legislation I should infinitely prefer, at any rate, to see the Government legislation, because, if it was favourable, it would have a much better chance of passing than that of a private Member. But, in the absence of any prospect held out to us from the Government of this subject being dealt with as a whole, with all the authority they possess, I think my hon. friend has rendered a great service in introducing this Bill. It is true that the Commission appointed by the Government reported that the rating question should be dealt with, but the Report of one of their own Commissions has ceased to be any guarantee whatever that they intend to deal with the question. I think they have rarely acted hitherto upon the reports of their own Commissions, except in such instances as the Commissions have reported that nothing should be done. This may be a piecemeal measure, but it is practicable. The main difficulty urged against it is on the ground of it being practically impossible to separate the house and site value. But that is no more difficult than the obligation which hon. Members opposite impose under the Agricultural Rates Relief Act of separating farm buildings from the land on which they are built. I am sure that it is easier to separate the value of an inhabited house from the site value of it than it is to separate the value of farm buildings from the land on which they are erected; and what does strike us as strange is that these difficulties of piecemeal legislation and of the separation of values, which disappear absolutely when it is a question of giving relief to the burdens on land, should now start up again and be declared to be absolutely insuperable when it is a question of readjusting the burdens on land.

I consider that the Bill is practicable, and I believe the rate proposed by my hon. friend to be just. I believe there is a misapprehension upon this point on the other side of the House. My right hon. friend the Member for the Ripon Division spoke of this Bill as causing people to pay twice over for improvements carried out by the Borough Council. There is no necessity for any person to pay twice over, for it is not necessarily a new burden on towns at all. It is a redistribution of existing burdens. The Bill proposes formally a new rate, but it does not necessarily add to the amount of the rates at all. What would actually be the operation of the Bill? Supposing it was passed tomorrow and a Borough Council which did not propose to increase the annual expenditure acted upon it, the result to the Borough would be that on the outskirts, people would not only not be asked to pay twice over, but they would possibly be relieved of some of their burdens. Then there would be the average people to whom there would be no difference, because what they paid on site values they would receive back on the existing rates they paid before. But supposing, encouraged by this Bill, a Borough Council decided to launch into fresh expenditure which had not been entered upon before, there would be an increase of the rates. But would that be harder than the increase of the old rate? There would be the addition of the new rate imposed, but not a greater addition than there would have been if the fresh expenditure had been carried out under the old taxation. I cannot see that the new rate would be a hardship. It is only alleged to be a hardship because the new rate would fall on the existing tenant, or the existing tenant under an existing contract. Yes, but so would the increase of the old rate under an existing contract. As to unoccupied land, I fully admit that there should be safeguards with regard to open spaces necessary for the public health in the centre of towns. But I think that when toy right hon. friend the Member for the Ripon Division spoke of the taxation of unoccupied land leading to overcrowding, he was really not taking into account what the real intention of the Bill is. The object of the Bill is not so much to deal with unoccupied land held in the centre of towns, which is comparatively rare, as unoccupied land on the outskirts, which is far more common. But take my right hon. friend's apprehension. Supposing there was unoccupied land in the centre and tins Bill caused that land to be used for building purposes and houses were built upon it. That would not necessarily lead to overcrowding unless it brought a fresh population.


All that I meant was that you would do away with a lung of that town. You would do away with an open space which had hitherto been a lung of the town when you build houses upon it.


Where there is an open space which it is desirable should be kept, let it be kept, but let it be kept for ever. There are, however,. certain unoccupied spaces in the centre of towns ripening for future building. A lung of that kind ought to be preserved, and ought never to be allowed to ripen at all. In so far as it is to be used for building, I do not see any objection to its being brought into the market at once. It will not contribute to overcrowding unless it brings a new population. If there is overcrowding already the local authority should see to it by requiring a higher standard with respect to the sanitary arrangements. Then with regard to the outskirts more buildings would relieve the congestion. My hon. friend the Member for East Edinburgh mentioned a case in that city where land which, if built upon, would produce to the rates £29,000, and from which at present they only raised £325. He stated that this would mean a reduction on the rates of the city of 3d. per £1. That would be a great act of justice in itself. I have heard it alleged, and I think great ingenuity has been shown on the other side in trying to prove that, under this Bill, there would be here and there injustice or hardship under existing peculiar contracts. We have to bear in mind that the greatest injustice of all is not to remedy those which have grown up under the existing system. You cannot in these old overcrowded cities do anything without treading on somebody's toes, and injustices get greater if they are left alone. The hon. Member for St. Albans twitted some of us on this side of the House with seeking to defend economic fallacies in order to gain seats. I would retort that there is something worse than defending economic fallacies, and that is doing your utmost to perpetuate economic wrongs. I suppose there is hardly a Member present who has not in some degree or other indulged a little in the pursuit of the unearned increment. It is very difficult to catch the unearned increment, I admit. I fully admit the force of the illustration given by an hon. Member opposite that unearned increment does not accrue only on land, but on many other things as well; and I understood the argument to be that we could not touch it on land and still leave the unearned increment on other things, such as railways, to go free. That does not strike me as a conclusive argument. I should like to see unearned increment pursued and caught by local authorities. The fact that it is very difficult to get hold of unearned increment, and that unearned increment is exceedingly widespread, seems to me a very great reason for placing it within the power of local authorities to get hold of it where it is fixed and can be rated. I regret many of the the wild schemes which have been ventilated in this country with regard to land mostly for this reason—that it seems to me that reform is required, and that the propagation of wild schemes put back the hands of the clock. That is why I welcome this Bill. Although the hon. Member opposite says there is no such thing as unearned increment, I know that there is a deeply-rooted and widespread popular belief that a good deal of unearned increment does, in crowded centres, attach to land; and I welcome any chance of making progress not with wild schemes, but with a Bill of this kind framed on moderate principle. It is because the Bill is so moderate and easy and shows how difficulties many people think insuperable may be overcome that it should find a welcome not confined to this side of the House. I wish to see some progress made before the demand becomes more violent. I would rather proceed step by step than have a sweeping measure attempted; I would rather see the necessity for dealing with the question removed by degrees. It is just because the Bill has taken a step forward, with a moderate and ever-increasing effect, that I think that even in the present House of Commons and from the Government themselves it should receive sympathetic consideration.


said that the hon. Members who support this Bill congratulate themselves on having captured to their views no less a person than the Secretary for Scotland. That he did not object to, for it was strictly in accordance with the rules of political warfare. But what he did object to was, that they would not recognise in the names on the back of the Bill political disciples of his noble friend the Secretary for Scotland. He would ask the House for a moment to look at those names. The first was that of the hon. Member for Elland, who always expressed his views with moderation in this House. The second was that of the hon. Member for Battersea, who had often frankly expressed his views and was known to be not in favour of what might be called halting measures. The hon. Member would go much further than the Bill went, and, though he joined in this turning movement, he was associated with the hon. Member for North Camberwell, whose name was also on the Bill, in a much more direct attack by another Bill entitled "The Housing of the Working Classes and Rating Bill.

It would not be in order to discuss the provisions of the Bill, but he would refer lion. Members to it as showing what were the aims of these Gentlemen. If the Bill under discussion was founded, as had been alleged, on Unionist principles or on principles favourable to Unionism, he would like to know why it was that there was not the name of a Unionist Member on the back of it. If this Bill was not founded on socialist and Land Nationalisation doctrines, why did the Members for Battersea and North Camberwell put their names to it? These names should be a warning as to the real aim and objects of the promoters, and the Bill should be regarded as a first step in the direction in which those hon. Members wished to travel, and which Unionists held to be in the direction of repudiation of contracts, spoliation of minorities, and general chaos. He begged the House to beware of the first step in this direction, even though it was accompanied by the old excuse that it was a very little one. He would be very sorry to wound the Secretary for Scotland accidentally. He had the greatest respect for his noble friend's opinions on local taxation, and appreciated his Report as a marvel of ingenuity, though there were passages in it with which he could not entirely agree. There was no justification for saying that the Secretary for Scotland was the father of this Bill, in which there were features that would lead him to repudiate the paternity. Though it was said that the Bill was intended to carry out the recommendations of the Minority Report, it seemed to him that the draftsman had given free play to his fancy to make the Bill more palatable to those who were to support it. There were wide differences in many respects between the Report and the Bill—in the purposes for which the rate was to be levied, in the men and the land upon which it was to be levied—and there was difference in the time and reasons for levying the rate at all. Throughout the Report the principle was maintained that the purposes of the rate should be strictly limited to expenditure tending to increase directly the value of urban land. The scheduled purposes in the Bill included: — Town improvements (new streets, bridges, parks, markets, and the like): maintenance, cleansing, and improvement of streets and roads, and other temporary purposes which benefitted the occupier, not the reversioner. The Report proposed a rate on uncovered land intended to be let, or which could be let with covenant for immediate building, but this was accompanied by a safeguard not mentioned in the Bill. The sub-section said that the site value of land on which no building was erected should be valued for other than for building purposes. That land would be very likely used for farming operations, and this] rate was to be levied alongside the other rates, so that if a farm happened to be within the bounds of an urban district or within the bounds of a borough, it would be rated first at its full value as a farm, and, secondly, as a site for a farm. Could anything be more ridiculous?

The Report suggested that the pill of special taxation should be richly sugared with relief of rates, but this Bill on the contrary proposed to give the pill in all its native nastiness without any sugar at all. Hon. Gentlemen opposite had had the great advantage in this matter of taking their speeches very largely out of the Report, because, the Report having been long in their hands, the Government had had a long time to prepare answers to the speeches made had they kept within the. Report. The third section of the, second clause of the Bill went far beyond the recommendation in the Report. By enumerating the points of difference between the Report and the Bill he removed the Secretary for Scot- land from the range of his criticism directed against the Bill. Members with great experience of the law of rating in England had told the House why they differed from the conclusions arrived at by the Secretary for Scotland, a country to which the Bill did not apply, and their analysis had left the Bill in a pulverised condition. It was necessary to have clearly in mind the principles of English rating. The present principle of rating was to assess the annual value to an ordinary tenant of the occupation of a complete hereditament. That was a very simple and honest, and fair law, but there were three principles in the Bill before the House entirely different and novel. The first was that of taking one part of a complete hereditament by itself, and ascertaining the annual value of the occupation of that part irrespective of the other part without which it could not be occupied at all. The second was that of attaching some annual value to the site of a vacant house, although the site had really no value at all by itself, and could not be used even as a chicken-run because the house was there. The third was that of declaring that land which was not, and might never be, covered with buildings had a certain annual value now because it was assumed that at some future time it would be so covered. Examining these principles separately, he maintained, first, that they never could arrive at a satisfactory estimate of what the land would be worth if the house which was there was not there. [An HON. MEMBER: Ground rent—is dealt with separately.] Ground rent was calculated not only on the value of the land but also on the value of the building upon it. The question was, could a satisfactory estimate be made, not of what a site was worth, but what it would be worth if the house upon it was not there. That would be a problem for the future. There could be no more baseless calculation than that which depended on what a thing would be worth if it were not what it actually was. Let him take one illustration to show what a tangle they would get into if once they taxed things not as they were but as they might have been but for the intervention of what actually happened. A man had to value a piece of ground on which a house had been built. Although that man might be endowed with so much faith that he could remove a house by the efforts of his imagination from the land on which it stood, he could not remove the restrictive covenants which went with the plot or the rights which had been acquired over that plot. There were such covenants in the case of nearly every house in every district. Was the valuer to consider the restrictive covenants or not? If he was, how was he to find them out, seeing that they were contained in documents to which he had no access? If, on the other hand, he was not to consider them, what grave injustice would be done! A man was to be taxed, not on the annual value of what lie had, but on the annual value of what he could never use because of the restrictive covenants upon it.

This extraordinary proposal introduced a fresh hypothetical commodity; it introduced not only a hypothetical tenant, but a hypothetical house. It was said by the hon. Member who introduced the Bill that a valuation could be made, but how was that to be done? At present the valuers had guides. They had their actual experience of actual transactions which they came across where complete hereditaments were taken as a whole, and they had the test of the markets to guide their experience, but in the future they would have neither experience nor the test of the market. Nobody ever heard of a man being taxed for a piece of land on which a house stood as if the house did not stand there at all. The plot of ground on which this debating Chamber stood had many advantages. It was centrally situated in a salubrious district, and in close proximity to the river; but he did not believe any man would be foolish enough to give even a chilling a year for the annual value of the land unless he had right to enter into this Chamber itself and stand upon the plot. He thought he was right in saying, that apart from the building, the plot on which this building stood had no annual value whatever. ["Oh, oh."] It was so. Hon. Members must not confuse capital value with annual value, and the whole basis of rating was annual value. It was true that so much for the building and so much for the site was sometimes estimated at present, but only when the object was to arrive at a total, so that in such cases exactitude in the division was not material. The estimate for separate valuation would be a serious matter, and the cost of such a separate valuation of every plot of building ground would be enormous. It would lead besides to interminable litigation.

Coming to the second principle, that of attaching value to the site of a vacant house, he maintained in the first place that this would discourage building, and would relieve the burdens of those whose houses happened to be full, at the expense of those whose houses happened to be empty. That was taking from the poor to give to the rich, and the effect would be immediately apparent. The small owner would be pushed out, and the houses he could not hold, because of the charges on them while they were vacant, would fall into the hands of the larger owner, who would get them more or less on his own terms, who would further charge a higher rent in order that the houses which were occupied should cover his losses on those which were empty. He thought that that part of the Bill was ridiculous. But, before the author of the Bill got to the end of his measure, he repented of his ways and inserted a clause to exempt an occupier from site value rate if he was exempt from poor-rate. Because it was obvious that when a house was empty it was exempt from the poor-rate. The third principle was to come into operation in the case of land near a town, which was to be assumed to have annual value for some purposes for which it was not now used. If it could be let for a purpose which would give it greater value why was it not so let? He did not know those plots of land held off the market to which reference had been made. The principle was admitted in Prussia, apparently, because he came across the other day, in the Foreign Office, a report from one of our representatives abroad, in which it was stated that in Prussia the expense of collecting a tax of this sort was found to be so great that it was decided to abolish the tax altogether, and that was what would happen when such a proposal as this was put in force.

There were one or two proposals in this Bill he wished to deal with. It was assumed that this Bill if passed would largely increase the rates in towns and relieve the rates in the outskirts of towns. Did anybody suppose that houses in towns were not rated high enough or irrespective of the position in which they stood? Was it to be suggested that houses in Belgravia and Bethnal Green of equal size should be rated at the same annual value? Houses in towns were not rated irrespective of their position. On the contrary, their position very often was a considerable clement in the amount at which they were rated. Therefore he did not think there was any necessity for this further imposition. He could not understand why the owner of a valuable site should pay a higher tax because of some possible advantage that might accrue, not to him, but to the reversioner. There were a great many peculiarities in this proposal with which he would have been glad to deal if he had had more time; but lie would only say in conclusion that the Bill was so drawn that it was quite impossible to put it into effect in any way. For instance, the Bill declared that the money was to be spent by the County Council for certain purposes for which they had no right to spend anything at all. If the Bill could be put into effect, it would bring about a state of things which would be satisfactory only to the valuers and lawyers, and would lead to an interminable amount of litigation. But, if the Bill was as sound in principle as it was unsound, he would still say it was not a suitable Bill to give a Second Reading to. The question of rating was too important to be dealt with as a plaything in a private Member's Bill on a Wednesday afternoon. The Bill did not go near touching the crux of the problem of local taxation, which was, how could local burdens be better distributed according to the ability to bear them. If the question was to be touched, it ought to be touched by the Government, and the Government would deal with it. He was not at liberty to say how the Government would deal with it, but he was perfectly certain that there would not be found in any Government measure any proposal to deal with things, not as they were, but as they might be, or to take such a solid and substantial thing as a house and say it was to be regarded as if it were not where it stood.

(5.18.) Sin WILLIAM HARCOURT (Monmouthshire, W.)

I do not wish to occupy the time of the House by arguing this matter in detail. The hon. Member has spoken on this subject as one unsuitable to be dealt with in a private Member's Bill on a Wednesday afternoon. For my own part, I think we could not have a better illustration of the use of these Wednesday afternoon discussions. Until the speech of the hon. Member was delivered, the debate was calm and dispassionate, and there was no attempt to introduce prejudice by referring to the names on the back of the Bill. But there is at least some advantage to be gained by the declaration of the hon. Member. He declared war against the principle of the Bill, and he talked of the Government one of these days dealing with this principle. Whether it is this Government or any other Government, they will have to deal with the principle. There is a strong feeling in the country that land which derives immense advantage from the outlay of the ratepayers shall contribute to their burdens. The hon. Member will never get rid of that conviction, which is a just conviction. But the hon. Member made it perfectly plain that the Government would not deal with this principle. I understood the Secretary to the Local Government Board to refuse to accept the principle that there was to be some contribution to local taxation by those who derived considerable advantage from the outlay of the ratepayers. The House understand exactly what the position is, but the Government will find it difficult to persuade the country that this is a Socialistic principle when it is recognised by Lord Balfour of Burleigh and Mr. Stuart, two experienced members of the Legislature. That is the situation of this question, and this is not the last that will be heard of it. In my opinion, it is a just principle in the reform of local taxation, and one which I feel confident will ultimately be accepted.

(5.22.) Question put.

The House divided: Ayes, 158; Noes, 229. (Division List, No. 37.)

Abraham, Wm. (Cork, N.E.) Fuller, J. M. F. O'Connor, T. P.(Liverpool
Abraham, William (Rhondda) Gilhooly, James O'Doherty, William
Allan, William (Gateshead) Goddard, Daniel Ford O'Donnell, T. (Kerry, W.)
Allen, Chas. P. (Glouc. Stroud Grant, Corrie O'Kelly, James (Rose' mm'n,N.
Ambrose, Robert Grey, Sir Edward (Berwick) O'Malley, William
Asher, Alexander Haldane, Richard Burdon O'Mara, James
Asquith, Rt. Hon. Herbt. Hy. Hammond, John O'Shaughnessy, P. J.
Atherly-Jones, L. Harcourt,Rt. Hon. Sir William O'Shee, James John
Barry, E. (Cork, S.) Hardie,J.Keir (Merthyr Tydvil Pease, J. A. (Saffron Walden)
Beaumont, Wentworth, C. B. Harwood, George Peel, Hn. Wm. Robert Wellesly
Bell, Richard Hay, Hon. Claude George Pemberton, John S. G.
Bignold, Arthur Hayne, Rt. Hn. Charles Seale- Philipps, John Wynford
Blake, Edward Helme, Norval Watson Power, Patrick Joseph
Boland, John Hemphill, Rt. Hon. Charles H. Price, Robert John
Bolton, Thomas Dolling Holland, William Henry Rea, Russell
Bousfield, William Robert Hutton, Alfred E. (Morley) Reddy, M.
Brand, Hon. Arthur G. Jacoby, James Alfred Redmond, John E. (Waterford
Brown, George M. (Edinburgh Jones, D. Brynmor (Swansea) Reid, Sir R. Threshie (Dumfries
Bryce, Rt. Hon. James Jones, William(Carnarvonshire Roche, John
Burns, John Jordan, Jeremiah Runciman, Walter
Buxton, Sydney Charles Joyce, Michael Russell, T. W.
Caldwell, James Kearlev. Hudson E. Samuel, S. M. (Whitechapel)
Cameron, Robert Kennedy, Patrick James Schwann, Charles E.
Carew, James Laurence Kenyon, James (Lancs., Bury) Sheehan, Daniel Daniel
Cogan, Denis J. Kinlock, Sir John G. Smyth Sinclair, John (Forfarshire)
Condon, Thomas Joseph Labouchere, Henry Soares, Ernest J.
Corbett, T. L. (Down, North) Lambert, George Spear, John Ward
Craig, Robert Hunter Layland-Barratt, Francis Spencer,Rt.Hn.C. R.(N'rth'nts
Crean, Eugene Leese, Sir J. F. (Accrington) Stevenson, Francis S.
Cremer, William Randal Leigh, Sir Joseph Stirling-Maxwell, Sir John M.
Crombie, John William Lundon, W. Sullivan, Donal
Cullinan, J. MacDonnell, Dr. Mark A. Tennant, Harold John
Cust, Henry John C. Macnamara, Dr. Thomas J. Thomas, Abel (Carmarthen E.
Davies Alfred (Carmarthen) Macneill, John Gordon Swift Thomas, Alfred (Glamorgan E
Delany, William M'Crae, George Thomas, David Alf. (Merthyr)
Denny, Colonel M'Fadden, Edward Thompson,Dr.EC(Monagh'nN
Dewar, John A. (Inverness-sh. M'Govern, T. Thomson, F. W. (York, W.R.)
Dickson-Poynder, Sir John P. M'Hugh, Patrick A. Trevelyan, Charles Philips
Dilke, Rt. Hon. Sir Charles M'Killop, W. (Sligo,, North) Ure, Alexander
Dillon, John Markham, Arthur Basil Wallace, Robert
Donelan, Captain A. Mellor, Rt. Hn. John William Walton, Joseph (Barnsley)
Doogan, P. C. Morgan, J. Lloyd (Carm'rthen Warner, Thomas Courtenay T
Duncan, J. Hastings Morley, Charles (Breconshire) Wason, Eugene (Clackmannan
Edwards, Frank Murphy, John Whiteley, George (York, W. R.
Emmott, Alfred Nannetti, Joseph P. Whitley, J. H. (Halifax)
Esmonde, Sir Thomas Nolan, Col. John P.(Galway,N Whittaker, Thomas Palmer
Evans,Sir Francis H.(Maidst'ne Nolan, Joseph (Louth, South) Wilson, John (Durham, Mid.)
Evans, Samuel T. (Glamorgan Norman, Henry Wilson, J. W. (Worcestersh. N
Farquharson, Dr. Robert Norton, Capt. Cecil William Woodhouse,SirJT(H'dd'rsdfi'd
Fenwick, Charles O'Brien, James F. X. (Cork) Young, Samuel
Ferguson, R. C. Munro (Leith) O'Brien, Kendal (Tipperary Mid
Efrench, Peter, O'Brien, Patrick (Kilkenny) TELLERS FOR THE AYES—
Field, William O'Brien, P. J. (Tipperary, N) Mr. Herbert Gladstone
Flynn, James Christopher O'Connor, James (Wicklow, W and Mr. Causton.
Acland-Hood, Capt. Sir Alex.F. Banbury, Frederick George Cautley, Henry Strother
Agg-Gardner, James Tynte Bartley, George C. T. Cavendish, R. F. (N. Lancs.)
Agnew, Sir Andrew Noel Beach,Rt.Hn.SirMichaelHicks Cavendish, V. C. W.(Derbyshire)
Allsopp, Hon. George Bentinck, Lord Henry C. Cecil, Evelyn (Aston Manor)
Anson, Sir William Reynell Bigwood, James Chamberlain,Rt.Hn.J.(Birm.,
Arnold-Forster, Hugh O. Bill, Charles Chamberlain,J. Austen(Worc'r
Arrol, Sir William Blundell, Colonel Henry Chaplin, Rt. Hon. Henry
Atkinson, Rt. Hn. John Boscawen, Arthur Griffith- Chapman, Edward
Bagot, Capt, Josceline FitzRoy Bowles,T.Gibson (King's Lynn Charrington, Spencer
Bailey, James (Walworth) Brodrick, Rt. Hn. St. John Churchill, Winston Spencer
Baird, John George Alexander Brookfield, Colonel Montagu Clive, Captain Percy A.
Balcarres, Lord Brymer, William Ernest Cohen, Benjamin Louis
Baldwin, Alfred Bull, William James Collings, Rt. Hon. Jesse
Balfour, Rt. Hn. A. J.(Manch'r Bullard, Sir Harry Colomb, Sir John Chas. Ready
Balfour,Rt Hn Gerald W.(Leeds Burdett-Coutts, W. Cook, Sir Frederick Lucas
Balfour, Kenneth R. (Christch. Campbell,Rt.Hn.J.A.(Glasgow Corbett, A Cameron (Glasgow)
Cox, Irwin Edward Bainbridge Jackson, Rt. Hn. Wm. Lawies Rasch, Major Frederic Carne
Cranborne, Viscount Jessel, Captain Herbert Merton Ratcliff, R. F.
Cross, Herb. Shepherd (Bolton) Johnston, William (Belfast) Rattigan, Sir William Henry
Cubitt, Hon. Henry Johnstone, Heywood (Sussex) Reid, James (Greenock)
Dalkeith, Earl of Kennaway, Rt. Hn. Sir John H. Remnant, James Farquharson
Dalrymple, Sir Charles Kenyon, Hon. Geo T. (Denbigh) Renshaw, Charles Bine
Dewar, T. R. (T'rH'mlets,S. Geo. Kenyon-Slaney, Col. W. (Salop.) Renwick, George
Digby, John K. D. Wingfield- King, Sir Henry Seymour Ridley, Hon. M. W. (Stalybridge
Dimsdale, Sir Joseph Cockfield Knowles, Lees Ridley, S. Forde (Bethnal Green
Disraeli, Coningsby Ralph Lambton, Hn. Frederick Wm. Ritchie, Rt. Hn. Chas. Thomson
Dixon-Hartland, Sir Fred Dixon Law, Andrew Bonar Robertson, Herbert (Hackney)
Dorington, Sir John Edward Lawson, John Grant Rothschild, Hn. Lionel Walter
Douglas, Rt. Hon. A. Akers- Lecky, Rt. Hn. William Edwd.H Round, James
Doxford, Sir William Theodore Lee, Arthur H.(Hants, Fareham Sackville, Col. S. G. Stopford-
Durning-Lawrence, Sir Edwin Lees, Sir Elliott (Birkenhead) Sadler, Col. Samuel Alexander
Dyke, Rt. Hn. Sir William Hart Legge, Col. Hon. Heneage Samuel, Harry S. (Limehouse)
Fellowes, Hon. Ailwyn Edward Leigh-Bennett, Henry Currie Sandys, Lieut.-Col. Thos. Myles
Fergusson, Rt Hn Sir J.(Manc'r Leveson-Gower, Frederick N. S. Sassoon, Sir Edward Albert
Finch, George H. Llewellyn, Evan Henry Seely, Maj. J. E. B. (Isle of Wight
Fisher, William Hayes Lockwood, Lt.-Col. A. R. Seton-Karr, Henry
Fison, Frederick William Long, Col. Charles W (Evesham Sharpe, William Edward T.
Fitz Gerald, Sir Robert Penrose- Long, Rt. Hn. Walter (Bristol, S. Shaw-Stewart, M. H. (Renfrtw)
Fitzroy, Hon. Edward Algernon Lonsdale, John Brownlee Simeon, Sir Barrington
Flower, Ernest Lowther, Rt. Hn. James (Kent) Sinclair, Souls (Romford)
Forster, Henry William Lucas, Col. Francis (Lowestoft) Smith, Abel H. (Hertford, E.)
Foster, Sir Michael (Lond. Univ.) Lucas, Reginald J. (Portsmouth Smith, Hon W. F. D. (Strand)
Foster, Philip S. (Warwick, S. W. Macartney, Rt Hn. W. G. Ellison Spencer, Sir E. (W. Bromwich
Galloway, William Johnson Maedona, John Cumming Stewart, Sir Mark J. M'Taggart
Gardner, Ernest Maconochie, A. W. Stock, James Henry
Gibbs, Hn. A. G. H (City of Lond. M'Calmont, Col. J. (Antrim, E.) Stone, Sir Benjamin
Gibbs, Hn. Vicary (St Albans) M'Iver, Sir Lewis (Edinburgh W Sturt, Hon. Humphry Napier
Godson, Sir Augustus Fred'rick M'Killop, James (Stirlingshire) Talbot, Lord E. (Chichester)
Gordon, Hn. J. E. (Elgin & Nairn Majendie, James A. H. Talbot, Rt. Hn. J. G. (Oxf'd Univ
Gordon, Maj Evans-(T'r H'mlets Manners, Lord Cecil Thorburn, Sir Walter
Gore, Hn G. R C. Ormsby-(Salop Maxwell, W. J H (Dumfriesshire Thornton, Percy M.
Gore, Hn. S. F. Ormsby-(Linc.) Meysey-Thompson, Sir H. M. Tollemache, Henry James
Gorst, Rt. Hon. Sir John Eldon Milner, Rt. Hn. Sir Frederick G. Tomlinson, Wm. Edw. Murray
Goulding, Edward Alfred Molesworth, Sir Lewis Tritton, Charles Ernest
Graham, Henry Robert Montagu, G. (Huntingdon) Valentia, Viscount
Green, Walford D (Weduesbury Montagu, Hn. J. Scott (Hants.) Vincent, Col. Sir C. EH (Sheffield
Greene, Sir E. W (B'ry SEdm'nds Moon, Edward Robert Pacy Walker, Col. William Hall
Greene, Henry D.(Shrewsbury) More, Robt. Jasper (Shropshire) Warr, Augustus Frederick
Greene, W. Raymond-(Cambs.) Morgand, Hn. Fred. (Monm'thsh. Wason, John Catheart (Orkn'y
Gretton, John Morrell, George Herbert Welby, Sir Charles G. E. (Notts)
Greville, Hon. Ronald Morton, Arthur H. A, (Deptford Wentworth, Bruce C. Vernon-
Groves, James Grimble Murray, RtHn A Graham (Bute Wharton, Rt. Hn. John Lloyd
Hall, Edward Marshall Murray, Charles J. (Coventry) Whitmore, Charles Algernon
Halsey, Thomas Frederick Myers, William Henry Williams, Col. R. (Dorset)
Hamilton, Marq of (L'nd'nderry Nicholson, William Graham Williams, RtHnJ Powell-(Birm.
Handy, Laurence (Kent, Ashf'rd Nicol, Donald Ninian Willox, Sir John Archibald
Hare, Thomas Leigh Pease, Sir Joseph W. (Durham Wilson, A. Stanley (York, E. R.
Harris, Frederick Leverton Penn, John Wilson, John (Glasgow)
Haslam, Sir Alfred S. Percy, Earl Wilson-Todd, Wm. H. (Yorks)
Hatch, Ernest Frederick George Pilkington, Lieut.-Col. Richard Wodehouse, Rt. Hn. E. R. (Bath)
Heath, Arthur Howard (Hanley Platt-Higgins, Frederick Wortley, Rt. Hn. C. B. (Stuart-
Heath, James (Staffords. N. W.) Plummer, Walter R. Wylie, Alexander
Heaton, John Henniker Powell, Sir Francis Sharp Yerburgh, Robert Armstrong
Henderson, Alexander Pretyman, Ernest George
Higginbottom, S. W. Pryce-Jones, Lt.-Col. Edward TELLERS FOR THE NOES—
Hogg, Lindsay Purvis, Robert Sir William Walrond and
Hoult, Joseph Randles, John S. Mr. Anstruther.
Hozier, Hn. James Henry Cecil Rankin, Sir James

Words added.

Main Question, as amended, put, and agreed to.

Second Reading put off for six months.

Forward to