LAND VALUE DUTIES.

HC Deb 11 May 1909 vol 4 cc1738-90

"That on and after the thirtieth day of April, nineteen hundred and nine, the following duties be charged in respect of land:—

1. (i) A duty on any increment value accruing after the said date at the rate of one pound for every full five pounds of that value, the duty to be taken on the occasion of the transfer, or the grant of a lease of the land, and on the occasion of the death of any person where the property passing on his death comprises any such land, and in the case of land belonging to a body 1739 corporate or unincorporate on such periodical occasions as Parliament may determine;
2. (ii) A duty on the value of any benefit accruing to a lessor by reason of the determination of a lease at the rate of one pound for every ten pounds of that value;
3. (iii) An annual duty in respect of the capital site value of land which has not been developed for building or other purposes, and the capital value of ungotten minerals, at the rate of one halfpenny for every pound of that value."—[Mr. Lloyd George.]

Mr. JAMES MASON

The Resolution which you have just put from the chair, I think, is a most important one, because it proposes a complete innovation in the system and in the machinery on which our taxation has hitherto been based, and as for any kind of detailed explanation, either in the question of the incidence or in the question of machinery, I think I may safely say we are completely in the dark. No statement, of course, has been made to clear up the very many difficulties which confront us in attempting to understand the way in which this new taxation of land will work. Without attempting to go into the Question of whether the incidence of the tax will fall on the owner or the occupier, we must remember that the Question of that incidence is an all important one in the consideration of the taxation. Nor shall I dwell upon the question as to whether a tax of this kind is likely to make land cheaper. It is hardly to be expected that the taxing of an article like land will make it cheaper or make anybody more anxious to buy it. But, what seems to me the most interesting aspects of the case are those which concern, firstly, the justice of such taxes, that is to say, whether it is right to tax land on a different principle from that which we employ in taxing other forms of property; and, secondly, the possible machinery which you can set up to collect a tax of this kind with fairness to all concerned, and with a moderate prospect of the State getting what it is attempting to get. As regards the general valuation of land for the purpose of the imposition of what is called here the "unearned increment," I acknowledge that by expending a very large amount of money for a considerable time, so far as I can see, such a valuation is possible. But it must be at the very best of an extremely arbitrary and uncertain nature. The whole question of valuation was dealt with very fully by the Royal Commission which sat on the subject of Local Taxation, and reported in 1901. That Royal Commission emphasised and showed most clearly how very uncertain, and how very complicated, the whole question was, and it pointed out that, even at the best, with the utmost skill we could expect, the results would be, to say the least of it, of a very speculative nature. Of course, there are varying factors, which obviously must render it of that nature. There are the character of the surrounding land, the prospective purposes to which such land can be put, and so forth. But, apart from the very speculative and uncertain nature of the results—that is to say, uncertain as to the effect which such taxation can have on various bodies and individuals—there is, of course, besides that, in the first place, the expense which the State must go to in forming a valuation, and, secondly, the enormous expense which is liable to fall on individuals, owing to the amount of litigation and appeals which this valuation will necessitate.

Now, the proposal is to value land apart from buildings or improvements which are upon it. It is quite evident that that in itself forms an almost insuperable difficulty. It is quite evident that in the case of valuing for unearned increment you will have, on the first valuation, the land standing without any improvement or with partial improvement; and at the second stage, on the death of the owner, or when the next occasion comes round for a re-valuation of the ground, you may have buildings, perhaps not the original buildings, upon it. But the difficulty really arises in getting a valuation of any land whatever free from the improvements that stand upon it. The report of the Royal Commission, to which I have already referred, quoted a remark of the late Lord Farrar on this Question. He said:— Valuers will no doubt put a valuation on anything, whether they know anything about it or not, but the question is, what is the real basis they have for valuation? The only ultimate basis is the valuer's knowledge, his experience, and the actual market value if the land and the houses upon it were sold or let together. No such basis can exist for separate valuation of the two things. I admit that you can, although subject to the difficulties I have pointed out, get a valuation of some kind, in so far as land, or the description of land contemplated in this Resolution, is concerned, but when you come to attempting the valuing of un- developed minerals, it seems to me that you are attempting to do something which is far more difficult. Minerals comprise other things besides coal. I entirely fail to see how you are going to get a valuation of minerals which are undeveloped. Minerals are not developed sufficiently to toe valued until the time comes when they are going to be worked. The valuation of minerals is a costly operation, and certainly no one is going to develop minerals sufficiently to enable you to form any kind of valuation whatever before they are going to be worked. If you attempt to guess the value of minerals lying in the ground before any opening up whatever has been made, then, of course, you are entering upon speculative and merely guesswork valuation. I have personal experience of mineral deposits which have been known to exist for centuries, but which, lying in the ground, had no value whatever, because no one saw any profitable way of working them. At a particular moment it was discovered that a process could be adopted which would make these minerals workable. They were opened out, and they have now developed into some of the richest mines in Europe. But during the period they were undeveloped what value could you put upon these undeveloped minerals? Absolutely none. They had no value before. No means was known by which they could be worked. And in the same way, in default of any explanation—of course we have had none of what is contemplated—it seems to me that until you develop these minerals you cannot form any kind of calculation as to what they are, and you will only develop them at a time when they are going to be worked.

I referred just now to the arbitrary nature of the valuation of land. When we come to the proposed ½d. annual tax on the capital value of unused building sites, it seems to me that there we are open to very great uncertainty, and the possibility of unfairness far greater than anything we have hitherto attempted. We know that under the present system rates are based on the assessment of buildings, but even that is subject to very great uncertainty and in many cases injustice. I do not hesitate to say that there are a good many houses in London at the present time assessed at a very different sum to what they could possibly be let at; and If difficulty and uncertainty arise in the case of certain buildings in localities where it is not extremely difficult to assess the value, how much greater is the difficulty in the case of unused building sites on which no building stands. To carry it a step further, you propose to value any site which is not built upon. But if you do that it does not follow that there is a buyer for the land. In many cases there will not be a buyer, and if you place a value for building purposes on the site the owner may be utterly unable to pay the tax, because he has no revenue from it in respect of its value for building purposes, and he is unable to sell it. How is he to raise the tax which you put upon it if it is land for which he can derive only agricultural value? If he has no other property he has no means of paying the tax. It seems to me that if the State means to carry out this very difficult proposal of taxing undeveloped sites, as is contemplated, then the State must be prepared to buy those sites at its own valuation if there is no other buyer in the market, for otherwise, though it is not intended, prejudice must be done to the owners of such sites which are not immediately required for buildings, and for which consequently there is no buyer in the market.

When we come to the question of the justice of the proposals as a whole we find that we have a very good instance in the case of agricultural land all over the country. During last century agricultural land was worth a very great deal more than it is now. We in this country deliberately destroyed our agriculture. I need not go into the question whether it was right or wrong, but we did destroy it by our fiscal system, and that was aggravated, of course, by the decreased cost of transport. In that way we destroyed the value of agricultural land. In many cases it was reduced more than half its value. Now you propose to take from the owners, if ever they have a chance of its coming back to the old value and of recovering what they have lost, one-fifth of such recovery. I do not think that such a proposal as that can be defended on the ground that it is just. I always find when I want evidence, whether it be in favour of our views on the question of licensing or whether it be in favour of our views on such a question as this, that I get very good evidence by studying the speeches of the leaders of the party opposite who have passed away, and who, I think, would turn in their graves if they saw the propositions, which are sometimes put to this House. I have an extract here from a speech of the late Sir William Harcourt, who, I am sure, would be surprised at the proposals now made by the Government. In that speech he said:— I am content to assume that a man's right to land depends upon the same principle as your right to the coat on your back, namely, that you have paid for it. I do not think I want better evidence of what Liberal opinion of the value of property in land was some thirty-five years ago.

We have also Mr. Fawcett's opinion on the question whether land should or should not be treated in the same way as other property. He says: "If we purchase a house, a factory, or a ship, we purchase with the chance of gain, and why with regard to land should the purchaser have all the risk of loss and none of the chance of gain? If thirty years ago £100,000 had been invested in agricultural land, and if at the same time another £100,000 had been invested in such first-class securities as railway, banking or water or gas shares, it can scarcely be doubted that the latter investment, if made with ordinary judgment, would at the present time have a very much larger increment of value than the shares in the land. The increase in the value of the shares would have taken place quite independently of any effort or skill on the part of the owner, and therefore it may be argued why should this unearned increment remain as private property if the unearned increment of the value of land is to be appropriated by the State?" There are innumerable quotations one could make from eminent authority showing the injustice and the absurdity of trying to separate these two forms of property. A tax like this, of course, arises from the idea that there is a monopoly in land, in spite of the fact that there are over a million landowners in England alone, and that land is freely bought and sold every day, and would be more freely bought and sold if it were not for the constant attempts to overtax land and even to impose, as you do in this particular Budget, an increased cost on the transfer and conveyance of land.

But when you get to the question of the injustice you must consider also the anomalous condition in which identical pieces of land are likely to be treated under these proposals. The late Lord Bramwell quoted this as an instance of an injustice which was likely to arise, and I quote it for the purpose of drawing a deduction beyond that which he had in mind. He says: "A man has three pieces of land of the same size, situation and value. On one he builds a house at a cost of £1,000 to live in. On the second he builds a house at a cost of £1,000 and lets it at a rack rent of £65, putting the annual value of the land at £15, the other £50 being the interest on his expenditure. The third he lets to a tenant at £5 a year for 50 years on the terms that the tenant shall lay out £1,000 on building a house. The landowner in this last case gives up £10 a year because he will have the house at the end of the 50 years, and the tenant is willing to build the house and give it up at the end of 50 years, because for those 50 years he will have the land for £5 a year, although it is worth £10 more. Can any human being give a reason why any one of those three houses, or the owners of benefits in respect of them, should pay more taxes or rent than the other?" That is a very striking instance of the injustices that were likely to arise under the proposals which were then in contemplation. But what is likely to arise now? A definite proposal which is contained in the Resolution—the unearned increment in the case of the first house in which the man lives will be based on the amount for which he lets the other two houses, which are identical, for the purposes of our argument.

The first house is let for £65 a year; the site of the second is let for £5 a year on condition that the tenant builds the house. We will assume in both cases that the lease is 50 years, and that they fall in together. In the case of the house which is let at a rack rent the lease falls in, and we will say that he renews the lease of that house, and he is able to let the house for £100. The other site on which the building tenant has erected a house, being in the same condition in every respect, is also let for £100. You have then this position, that in the case of one the rent at which he let3 the site at goes up from £65 to £100, when in the other case the rent goes up from £5 to £100, and then you propose to appropriate for the purposes of the State one-tenth of the increase of the lease. In the one case you will appropriate one-tenth of £35 a year, or the difference between £65 and £100, and in the other case one-tenth of £95, or the difference between £5 and £100. As you will have two plots of land standing side by side identical in every condition, with a house on each of the same value, and yet in the one case you propose to extract from the owner of the property on the renewal of his lease a sum very nearly three times as great as you do from the other property. Surely there is an anomaly which was not con- templated, and which I imagine will form the subject of very considerable explanation.

The ATTORNEY-GENERAL (Sir W. Robson)

May I ask the hon. Member are these conditions existing before the passing of the Act, or after the Act comes into force?

Mr. J. F. MASON

I do not see the difference myself. I should say after the Act comes into force, but it seems to me so far as I can see it would have the same effect in both cases. That may not be the case, but I assume that these houses are built after the passing of the Act; or it applies whether they are built before or after, the Resolution is a duty on the value of any benefit accruing to a lessor by reason of the determination of a lease at the rate of one pound for every £10 of that value. That applies to the renewal of a lease which is current now. Suppose for the sake of my argument the owner of the land had carried out the transaction described 20 years ago, and those leases fell in, in 30 years' time it seems to me that what I have described would take place exactly under the Resolution now before the House. In the one case the State will appropriate one-tenth of £35 a year capitalised, and in the other case one-tenth of £95 a year capitalised for two plots of land identical in value and condition. Of course, I acknowledge we may not well understand exactly what is contemplated, and as the matter is of a novel kind, we naturally require a very considerable amount of explanation to enable us to understand what is really contemplated. I do not think, of course, that the Resolution on the Paper indicates the whole scale, but it seems to me, from what we do know of the proposal, and from what we can judge without any further explanation than we have had, that these proposals are faced immediately by obvious difficulties and injustices, which, if they are to grow, if they are to be law, must necessarily be very serious. I admit that a great deal of the difficulty of this form of taxation, in fact the whole of it, arises from the idea of what I have heard described as the monopoly of land—giving to the land qualities other than those which pertain to other forms of property. So far as I am concerned, I see no reason whatever for contending that there is such a monopoly as is described. There is not the least difficulty in parting with land, other than the fact that legislation is making the conveyance of it more and more difficult every year. I mentioned in the beginning of my remarks the question whether you can make land cheaper.

I have no doubt that all hon. Members, interested in this Question will have read with very great interest the argument put forward by the hon. Member for Preston in the article which he wrote in the "Fortnightly Review" some months ago, in which he showed most conclusively that what stands in the way of building in this country, and in the way of working the Housing Act, is, not the land at all, but capital. If you get capital 1 per cent. cheaper than you do now it would be of far greater importance to the whole building industry and other industries than would be the case if you got the land for nothing, instead of at a high price. Here is capital which stands-in the way of building, which stands in the way of industrial progress, which stands in the way of the progress of this country altogether; and it is the dearness of capital which apparently hon. Gentlemen on that side of the House desire to see carried further and further. If they paid more attention to making capital cheap than to this fantastic suggestion of getting land expropriated for the benefit of the State, I think such a proposal as that of making capital cheaper would do far more for the objects they have in view than any proposals they can put forward on the subject of land taxation.

Mr. DUNDAS WHITE

I listened with very great interest to the views put forward by the hon. Member for Windsor, and I should like to express my thorough agreement in what he said at the commencement of his speech, that this was a complete innovation and a most important step. I would remind him, however, that it is not quite a complete innovation, because something of the same principle was adopted in the Land Values (Scotland) Bill, which was before this House this Session and last Session as well, and in previous Sessions. I notice that a great part of the hon. Member's argument was directed to criticising this Resolution, and to drawing a distinction between land and other forms of property. On that I hope I may be allowed to say just a word or two. The fundamental distinction, I take it, between land—using the word land in its general sense to cover the natural resources of the land—is that the land is there naturally, while other things are more or less the result of industry. I myself do not use the phrase which he adopted about the monopoly of land. It is a phrase which is not very clear to my mind. A peculiar feature of the land is that in any country, upon any given area, the supply of land is a fixed quantity, and the total supply of land cannot be increased. On the other hand, if you take other forms of property they can, in fact, be increased indefinitely. In another part of the hon. Member's argument he said he did not see how, if you tax the land, you would not increase its price in the same way as when you tax other things you will increase their price. May I say how very pleased I am to hear that argument from hon. Members opposite—the recognition that the tax on any produced article will eventually fall on the consumer.

Mr. MASON

I did not sa it would increase the price; I said it would not make it cheaper.

Mr. DUNDAS WHITE

I thought the lion. Member drew no distinction between the two. I myself can draw very little economic distinction between preventing the land becoming cheaper and making it dearer; it seems to me that the one merges into the other. In any case, I quite agree with the hon. Member that if we tax articles of production we increase the cost as they reach the consumer, and so tend to prevent their becoming cheaper, but as a matter of fact make them dearer. If you take the case of land you have rather different circumstances. In the case of other properties the common supply can be increased to meet the demand. In the case of land it cannot. Here is your land a fixed quantity. If this land is taxed on its market value, whether it is used or not, the result will be to bring a considerable quantity of unused land into the market. By doing that we will increase the available supply, and bring the available supply more nearly to the total supply, and, by increasing the supply, the tendency will be to reduce the price rather than to increase it.

The hon. Member spoke of the speculative character of this proposal, and would not anticipate what the results would be. We are not asked to anticipate what the results are to be. The simple question is, What is the market value of the land as it stands? And any purchaser, taking into consideration the market value of that land, simply considers what he will give for it and the possible uses to which it may be put. We have heard about the difficulty of valuing land apart from build- ing. We hear a good deal about that when these proposals are made, but the fact is that has been done for many years in many parts of the world. If you take New Zealand, it is done practically throughout that country; it is done in many parts of the Australian Colonies. We have had a great many suggestions about fiscal reform, and in connection with it we have heard a great deal about Germany. I would point out that this system of valuing to which I refer is in practice in German towns, and now it is proposed to apply it on a wider scale in Germany. In fact, these proposals have more or less a family resemblance to some of the proposals carried into effect in Germany, and I venture to think, whether we are to have the German fiscal system or not, we will do very well to follow her example in this respect. As regards the value of undeveloped minerals, however speculative it may be, I fancy what the Chancellor of the Exchequer has in view is the market value of the undeveloped minerals, and if the conditions are such as have been referred to, and if it be believed that the minerals would not pay to work them, then the market value of the undeveloped mineral land would be nothing at all, and consequently it would have to pay no taxes whatever. I was rather interested to hear the argument about land being put up for building, and that it could not always get purchasers. I would like to ask the hon. Member whether in that case the landowner put on a reserve price or not? A most important point that, because generally when I analyse suggestions of that kind I have always invariably found that there were plenty of purchasers to bid, but that the reserve price was too high, the reserve price being kept up until the respective purchasers would give a larger sum. That is an instance of the holding back of the natural resources which tells disastrously on the whole realm of industry, and that is one of the things which I fancy the Chancellor of the Exchequer hopes by his Budget scheme in some measure to help and prevent.

Something has been said about the cost of valuation. I must say I am surprised at the cost of valuation being objected to. I did not think myself that the cost would be anything very considerable. Those who have objections to this system of land valuation continually give us figures themselves. The hon. Member for Preston has given us figures of what they estimate to be the land value of the United Kingdom. It seemed to me that they always put it far too low. When we who hold different views admit there are no satisfactory data, and want satisfactory data, then the people who have supplied data for their purposes object to that valuation being made. I have never been able to grasp that. I believe a valuation could be made, and made very simply. If I might make a suggestion, the Government might do a great deal worse than follow the example of Scotland in our Valuation Act of 1854, and ask the owner of the land to value the land himself. He never finds any difficulty in fixing the reserve price, and that might help him to arrive at what he considers the market value to mean. I quite sympathise with what was said about the purchasing value. I do not suggest it could be done in the Budget, but in the larger scheme. I would quite fall in with the suggestion of the hon. Member for Windsor, but the other way about. I would suggest that the owner should be asked to state the land value, and that the community should have the power in exercising the right of compulsory purchase of taking it at his own valuation. I think that would be valuable in many ways. I think to no small extent some of the other Budget proposals may act and interact in a somewhat similar way. After careful consideration, I support this Motion, not merely on account of the individual resolution, but as well of the knowledge that they will act and interact with the other. I do not propose to go into the other cases which the hon. Member put forward for this reason, that he seemed to assume that the actual value would betaken. I may possibly be wrong. I took him to suggest that that would be the basis. I do not know whether that will be the basis or not. One cannot go into the question until one sees the precise proposal of the Finance Bill.

I was particularly interested to hear what he said about the late Sir William Harcourt. I would like to remind him that, besides the saying which he quoted, there were other sayings of Sir William Harcourt bearing more directly on the taxation of land values. I believe that Sir William Harcourt expressed the view that, if he had had further opportunities, he would have dealt with the question which has now been dealt with by his successor in office. The suggestion seems to be made that what we want is cheap capital, not cheap land, that land is cheap enough. Anybody who thinks that land is cheap enough can easily assure himself of that delusion by trying to buy some. I may say that cure has been most effective in some of our Scottish localities, where the people are taking a great interest in local self-government. I content myself in giving the hon. Member two cases. The first case is that of a very growing district not far from Glasgow. The population was increasing and wanted some land for a school. They wanted about an acre of land. They got it. I got these figures in the House myself last Session. That land was rated at an annual value of £3 10s., and for that agricultural land, which was rated and taxed as agricultural, they had to pay 920 years' purchase on that annual value. I should like to give him one other instance of a case of Greenock. In the neighbourhood of Greenock land was wanted for a torpedo depot in connection with the torpedo works of the Government. That land, if my memory serves me right, was about 12 acres at a rateable value of £11 8s.

Now Greenock is an overcrowded centre where they cannot expand, because they cannot get land at a price which would make it commercially favourable to build. It is a place where employment has been bad, and where they want fresh opportunities of earning a livelihood. Here the Government was starting a torpedo factory, and how much they had to give for that land? The First Lord of the Admiralty told us they had to give £27,000, or 2,450 years' purchase on the rateable value. It may be the hon. Member does not think the price too high. I do not say the price was too high. Far be it from me to suggest that; but I do say that the valuation was far too low. I think if we adopt this principle of market value that is laid down in this we will see prices and valuations put on a more equitable and juster basis than they are now. There is not merely the difficulty of obtaining land at a fair price, but sometimes the difficulty of obtaining it at all. I know a place where people are crowded, where rents are high, and where they cannot build houses because they cannot get the land to build them on, and there again the reform of the housing system or the rating system must be preceded by some measure which will regulate taxation and the market value of the land. When that is effected we will have got some way to solving the problem.

The hon. Member for Windsor told us how agriculture had been ruined by Free Trade. I do not accept that proposition for a moment. Agriculture has suffered, not because our fiscal system was good, but because our land system was bad. In those days it was even worse than it is now. Security of tenure and an abiding interest in the land for the man who cultivated it were practically unknown. Then, as now, you had the same disadvantages, the difficulty of getting the land, and with every improvement that a man made—be it a farm building, a hay shed, or anything else—up went the rates and taxes, and the more he had to pay. The true way to revive agriculture is not to try and force up the price of agricultural produce by levying taxation, but rather to reform the whole system of rating and taxing landed property, so as, as far as possible, to base rating and taxation on the market value of land alone, and to leave improvements of all kinds rate and tax free. I believe that the future of agriculture lies in the development of Free Trade principles by going behind mere questions of distribution and dealing with questions of production, and I, for one, welcome these proposals in the Budget, because they are the first step towards this great and fundamental reform.

Sir PHILIP MAGNUS

I feel that I owe some apology to the Committee for intruding in this Debate, but I cannot say that I am an expert on land value, nor, indeed, am I one of those large land owners against whom I believe these Resolutions are levelled. At the same time, the Resolutions involve economic principles of so much importance, and are so difficult to apply to an old country like Great Britain, that it may not be altogether out of place, even for those who are not experts on the Question, to give their opinion as to the probable consequences of their adoption. The last speaker has referred to the fact that these Resolutions are a great innovation on anything which has been done hitherto in regard to taxation. I regret that we have not been able, as was suggested, to take these Resolutions seriatim, as they refer to very different matters; but I propose to limit what I have to say to the first of the three. That alone involves a number of propositions of considerable importance. It proposes: "A duty on any increment value accruing after the said date at the rate of £1 for every full £5 of that value, the duty to be taken on the occasion of the transfer, or the grant of a lease of the land, and on the occasion of the death of any person where the property passing on his death comprises any such land." Another important proposition is contained in the Resolution, namely, that this duty shall be levied "in the case of land belonging to a body corporate or incorporate on such periodical occasions as Parliament may determine." There is no indication in the Resolution as to how often Parliament may determine that, or how frequently valuation of the land may be required to be made in order that this tax may be levied. One would have thought that some further statement might have been included in the Resolution, in order to indicate how often Parliament might determine that this tax is to be levied. The last speaker referred to this measure as a great innovation. It certainly seems to me to merit that description. During the last five or six years we have heard a great deal about fiscal reform, but I think that my right hon. Friend below me, if he were in the position of Chancellor of the Exchequer, would not be likely to introduce any measure of fiscal reform so radical in its tendency, or so different from anything that has been carried out in this country in former times, as this proposal with regard to land values. This Budget, in respect of its proposals for the taxation of land, has been considered by so many persons holding on fiscal questions the same view as hon. Members opposite as leading to the necessity of some other fiscal proposals, that I cannot help expressing some surprise that it should have been brought forward by a Free Trade Government. I had a letter only the day before yesterday from a very strong Free Trader, which concluded with these words: "What a Budget! The oppression of the weak by the strong—it has killed Free Trade." I need scarcely say that the Socialistic legislation included in this Budget and in other Acts of the present Government has so impressed that well-known Free Trade journal, "The Spectator," that it has stated over and over again that the Government by their policy have betrayed the trust they were elected to defend. But it may be said that that is not my business nor the business of the party on this side of the House. I merely wished to express my surprise that Resolutions such as these should have been brought forward by a Government devoted to Free Trade.

As regards this particular land tax, it seems to me to be a very real innovation. At present no substantial reason has been given why land should be subjected to a special duty different from other property. The hon. Member for Dumbartonshire said that there was no difficulty in assigning reasons for that special treatment, and he remarked that land was natural while other property had to be created. I really cannot see why, because land is natural, and other property has to be created, a difference of this kind should be introduced in the Budget proposals. Why, on that account, are you to take 20 per cent. of a man's property in land and not of his property of other descriptions? What you have to show is some connection between the natural character of land and the duty of the State to tax it, and the artificial character of other property and its right to be free from taxation. The hon. Member only stated the difference without attempting to show any connection between the difference which he described and the difference of treatment to which the Government propose to subject it. The hon. Member for Windsor referred to one of the arguments generally adduced, namely, that this tax is to be imposed on what is called "unearned increment," on the man who has done nothing whatever to help forward the increase in the value of the land, part of which value the Government propose to take. I would ask those who are defending this Resolution to state whether land is the only property that has unearned increment, and whether there are not numerous other kinds of property which equally increase in value without any effort on the part of the owner? Take pictures, works of art, old silver, and all sorts of property of that kind. Do we not find that they go on and increase in value while they lie in the cupboard of their owner without any effort on his part? There is no endeavour in this Budget to raise a tax on unearned increment of that kind. But let me take a more striking instance, referred to by my hon. Friend the Member for Windsor. What difference can there be shown between these two cases: the man who invests his money in railway shares, which treble in value in the course of a few years, or the man who invests his money in land, which probably will not reach the same position in the same time? We are told that the land is improved owing to external efforts, social changes, to improvements in general conditions. Why is it that Argentine railway stock in the last three or four years is five times as valuable as it was? It certainly is not in any way due to any effort on the part of the fortunate purchaser of the stock. But if a man buys land, and it happens to increase in value owing to causes exactly the same as make other stock increase in value, the Government comes down and says: "We are entitled to take one-fifth of the increment, because we want money"; whereas in the other case they make no such proposals. Supposing the Government is entitled to take that one-fifth of the value, surely everyone must see the injustice of taking a one-fifth portion of one man's property and leaving other people's property of a slightly different kind to go without taxation.

What I complain of, therefore, in this Resolution is not so much that money or that property is going to be taken by the Government, as the fact that they differentiate between different properties, saying we will take one man's property and leave another man's property alone. That seems to me a grossly unjust measure. The first principle—one of the principles of taxation—is that the burden should fall equally upon all persons. I have referred to one reason. I will refer to others presently. I have referred to one reason assigned for this differential treatment. The last speaker referred to another. He told us he would not use the words "monopoly value." But he told us that land was strictly limited in quantity, whilst other kinds of property could be produced indefinitely. ["Hear, hear."] Hear, hear. Well, the Chancellor of the Exchequer has shown us particularly his use of the word "monopoly." He said somewhere in his Budget speech that land and licences should be considered together. They were both monopolies; they both had monopoly value. I do not go into the relationship, which is very difficult to see, between land and licences, but at any rate they are supposed to be closely associated by the fact that they are both at monopoly value. There is nothing simpler for the ordinary economist to observe than the fact that the amount of land in this world is certainly limited in quantity. It does not need any great perspicuity to recognise that. But there is a little fallacy underlying the statement. When we speak of land or any other commodity being limited in quantity, what we mean is that the quantity of that property which is available in the market is limited, and not the quantity of the property itself. Numbers of other things which are created are limited in quantity. Corn at certain times is limited as to the amount which can be put into the market, and its price is consequently kept up. It is in that sense, and in that sense only, that land is limited The quantity of land which is available louse in this world is by no means limited in the sense in which we are always using the word. There is plenty of land.

Some ten or twenty thousand years hence that argument may be of some value. It it not at the present time. I venture to think that we are a very long way yet from having reached that position that it can be said that there is any failure in the supply of available land. There is another fallacy underlying this general argument. I am quite willing to admit that the supply of special sites cannot be obtained in as great a quantity as the public might desire. Everybody in the world would like the best site possible. We would all like to live in Park Lane. [Loud cries of "No, no."] The quantity of land in Park Lane is undoubtedly limited. That also applies to other property. The supply of certain sheep is limited, of oxen, horses, and a variety of other things. If it was not limited, one would not pay for one sheep so much as one does—£70 or £80. [An HON. MEMBER: "Or more than that."] Or more than that. All property in that sense is limited. Take the case of old silver. That, of course, is very limited in quantity. We cannot all have old silver on our tables. I might pursue this matter further, but I have no desire to occupy the time of the Committee with this kind of abstract argument in order to show that the arguments on which these Resolutions are based are, to my mind, altogether false. These fallacies ought not to be made the foundation of an important system of taxation. Let me give one very clear reason why land is chosen, and is considered of exceptional importance. It is this—land is visible and accessible. The Chancellor of the Exchequer wants more money and sees parcels of land which have increased tremendously in value. His imagination is inflamed. One hears of cases where land is purchased for a very small sum of money. After a time some railway coming near, or something of that sort, it enormously increases in value. Exceptional cases of this kind exist, but you cannot legislate with regard to exceptional cases of that kind. The reason the Chancellor of the Exchequer has made this differential treatment is not on account of any abstract reason of considering land as different from any other property, but because, as I have said, land is visible and available. Other forms of property to which I refer also illustrate the unearned increment, no less than that of land, which is visible and accessible. It is not easy, however, to find out whether a man's stock or railway shares have increased in value. Therefore, the simplest thing to do was, so to speak, to take possession of portion of the goods in the shop window, because you cannot so readily get the hidden ones behind the counter. And that is the main reason why the Chancellor of the Exchequer has taken land as the particular property on which to put a tax, but there is just one other reason why the Chancellor of the Exchequer has been induced to make this differential treatment in land. He has noticed, as we all have noticed, wherever our great landowners who let their land in parcels for building that these have enormously increased in value.

I must own I always feel a little grateful to those great landowners in London, who are the particular objects, I take it, of the tax of the Chancellor of the Exchequer. I often feel when I look at Russell-square, at Bedford-square, Hanover-square, Grosvenor-square, and all those great open places in London that if our land had been dealt with as Members of the other side of the House would wish it, that is, cut it up into little parcels, we never should have had those fine open spaces which are left us owing to the generous way of building pursued by those great landowners 80 or 90 years ago. I think, therefore, we have every reason to be grateful to those large landowners who parcelled out their property upon this generous plan, giving those open spaces, which I do not believe even Gentlemen on the other side of the House would now desire to cover in by small buildings. But what the Chancellor has not seen is this: that in his endeavour to strike at these big landowners he is hitting at the same time hundreds and thousands of small landowners. There are numbers of small landowners who have bought little bits of land and who have invested their savings in little pieces of land which have gone up in value, and it is these small landowners' increments upon their purchases which are to be hit by the Chancellor. Some of the speakers who preceded him dwelt upon certain hard cases which must arise if this Resolution becomes part of the Budget. It is particularly easy indeed to refer to these hard cases. Members who are in favour of this system of taxation are always pointing out such cases as this to which I referred, where a man having made a lucky speculation and obtained land which has greatly increased in value. I would like to put before the Chancellor of the Exchequer a few cases such as this. Take the case of two men, one man has invested his money in deferred shares on a railway, upon which no dividends have been received for many years, and another man, judging by careful observation that a town is likely to be developed in a certain direction, invests his money in a piece of land which increases in value as that town expands. Now, in the one case a man gets the whole of the profit upon his speculation, the other man gets the profit after a certain time; yet from one man's profit one-fifth of the whole is taken, while the other gets off quite free.

Let me take one other case. There are plenty of land speculators; they buy land and they buy other property with a view to selling it. Is one-fifth of their profit on that land to be taken every time a sale is made? It seems to me that in this case the State is going to enter into a partnership with the land speculator, taking one-fifth of the profit when they succeed, and leaving them to bear the whole loss when they do not succeed. Everyone must know all land speculation does not succeed. One man, as I said, buys a piece of land at one end of the town, thinking that the town is likely to grow in that particular direction; another man, less wise or less thoughtful, buys a piece of land in another direction, believing the town will extend towards his side. One makes a profit and the other makes a loss. If you take 20 per cent. from the man who makes a profit, surely you ought to give something to the man who has made a loss! I mention these cases as indicating the particular unfairness of this proposal. I cannot help thinking that they have not been sufficiently and carefully thought out. I almost venture to think that that scientific thought with which one Member of the Cabinet is very eminently endowed has not been applied to this proposal, and, whilst I thoroughly recognise that in some way or other this money which is required should be found, I think it should so be found as to create no greater injustice or greater anomalies than are present under our existing taxation. There is only one other point I would like to make, and that is with reference to something said by the last speaker. He said we were very fond of imitating Germany, and he advised us to imitate the German system of taxation. I should like to know whether the hon. Gentleman is quite certain as to the taxation of the increment value of land adopted in Ger- many. The Chancellor of the Exchequer also referred to it. I know the Chancellor has been lately travelling in Germany and making very important investigations. We rather wish in this connection that investigations should precede legislation in certain respects rather than follow after. As regards this taxation of land value he made certain investigations. Could he tell, us, or could the hon. Gentleman who spoke last tell us, what is the exact system of taxation of land in existence in Germany? If so, I think it would be found very different from what the hon. Gentleman supposed. The Chancellor of the Exchequer led us to believe in his speech that the taxation of land values was one of the means of increasing Imperial taxation, but it is nothing of the kind, and, so far as I could ascertain, it is a local rate only.

Mr. LLOYD-GEORGE

That is not what I said, if I may be allowed to correct the hon. Member. What I said was that the Conservative party in Germany proposed the increment taxation as an alternative to the proposal of the Government for Imperial taxation. I am quite aware that at the present moment it is only used for local taxation, and, as I say, the Conservative party in Germany proposed it as an alternative for Imperial taxation.

Sir PHILIP MAGNUS

I am much obliged for the explanation given by the right hon. Gentleman. The essential difference between this system of taxation as it exists in Germany, and as it will exist under these proposals, is that it is in Germany a local rate levied by the local, authority for the purposes of the locality, whereas the Government proposals we are discussing suggest that the money should be taken from the locality and applied to Imperial taxation I shall have a further opportunity of referring to the other two Resolutions included in these proposals at some other time. On this occasion I have limited my remarks to this Resolution, and I have not referred to hundreds of cases of hardship that occur to everybody which will be inflicted by this tax. It is important in imposing a new tax that one does not increase existing anomalies, and it would be better to still further increase the income tax than levy a tax which must create new anomalies and new hardships. No one can deny that very many hardships will be created under these proposals. A person who buys a reversion and pays a certain sum in the hope of securing it ten or 15 years hence with an increased value has to pay a sum equivalent to the reversionary value, and yet by these proposals he will be taxed to the extent of one-fifth part. Unless the Bill which we have not seen contains proposals to remove all these anomalies to which I have referred I shall feel it my duty to vote against it.

Mr. JAMES TOMKINSON

I have carefully considered the proposals contained in this Resolution, and after calm consideration I have concluded that they are of a very moderate, just, and equitable character. What is the extent of the tax which the right hon. Gentleman proposes to put upon undeveloped land in urban districts in the case of land withheld from the public use? He proposes to impose a tax of one halfpenny in the pound, which, in the case of land worth £500 an acre, comes to exactly £1 0s. 10d. Surely in the case of land which originally had only an agricultural value, and which has risen by no effort of the owner to such a value as £500, to ask for a sum of £1 0s. 10d. each year cannot be called a very drastic or an unjust proposal. I have had experience of land in the neighbourhood of towns. Hon. Members know what enormous advantage is given to a town by throwing the surrounding land upon the market, more especially when the owner makes roads and streets, and puts the land up to auction, not upon lease, but as freeholds. I cordially support the proposal to put a tax upon undeveloped land. I have in my hand a printed circular from the Dulwich College Estate governors, but I think that the fears of the authors of this circular are unfounded. The fourth paragraph of the circular states that the land differs from the land which the Chancellor of the Exchequer has in mind, because, far from being withheld from the market, it is advertised as being available for building purposes. I imagine these proposals will not apply to that land. [An OPPOSITION MEMBER: "Will the Chancellor of the Exchequer say so?"]

With regard to the tax upon ungotten minerals, I do not think a great deal will be gained out of that, because it will be an extremely difficult thing to assess. Moreover, there is not the same inducement by a tax to push forward the development of existing minerals as there is to bring land into the market for public use. I do not think there is the same inducement or the same good results to be obtained by stimulating undeveloped minerals as by bringing land into the market. Owners of minerals are glad to have those minerals worked, and we are working out our coal at the rate of one million tons every day for five days in the week. The hon. Member who has just spoken deprecated the idea that land could be differentiated from other kinds of property in regard to unearned increment. Surely it is recognised that land differs from other kinds of property. Pictures and old silver are property which is not a necessity to anyone, and society is not injured by their being held by other people, but to hold land which is wanted in the market is a distinct injury to society. Can any hon. Member support the principle which obtains in the instance given by my hon. Friend, in which fabulous sums were exacted for land which had previously only an agricultural value. I remember a case given last year of a small piece of land amounting to three-quarters of an acre, situated not even in a village but in the country between two villages, and this particular piece of land was wanted for a school because it was the most convenient place to serve both villages. It was part of the estate of an immensely large proprietor, and its value was 30s. per acre; and yet, when that three-quarters of an acre was required for a village school, the price asked for it was £730.

Is it not obvious either that the land was grossly underrated or grossly overpriced? If this valuation should show that there should be a very drastic change in the rating value the result would be the best that could possibly be imagined? I have always held that the weakest part in the land question is the possession of estates in which the unearned increment has grown to a large extent. It surely cannot be to the interests of landlords to hold to their utmost rights. There is a strip of land in the most valuable part of London some three miles long and one mile wide, which is practically owned by three or four landlords. It is not in their own interests that great landlords should object to this tax. They should voluntarily welcome a change in the law, and that would be to their own interests. What does the State do for them? It gives them peaceable possession of their land. It legalises their contracts and enforces them when necessary, and secures their devolution after death. Surely the State which secures to the landlords these advantages has the right to impose a tax on the land when they are alive or when they pass away. I think it is extremely unwise for the landlords to resist the moderate reform which is proposed by the Budget.

Sir HENRY CRAIK

I noticed with what deep sympathy the hon. Gentleman who has just sat down spoke of the difficulty of Dulwich College. He trusted that all would be well with that institution. It was easy for the hon. Member to say that that great educational institution, which deals well with its tenants and with the public, and which is a liberal landlord, should be satisfied with his easy expression that he trusted that the proposals of the Budget would not be quite as ill as the authorities of the college showed in a printed paper in our hands that they would be. Evidently the hon. Gentleman himself is trampled upon in some respects by this Budget. He finds perhaps that the taxation on ungotten minerals is not quite to his advantage, and he hopes that the Chancellor of the Exchequer will reconsider his proposals with regard to ungotten minerals. He then went on to say that the great landowners of this country—those who have held the land for generations—would do well to pay a ransom. I must confess that I never owned or never hope to hold a single share in a brewery or a single yard of land. I think I shall never pay a super-tax on my income, and I believe that my death duties will be a negligible quantity; but I hate this Budget as heartily as anybody hates it. I ask you only to look first of all at the process by which this Budget has been carried out. For two or three Sessions we have heard a great deal about a Land Valuation Bill. We have been told that it did not mean that there was to be further taxation on land, but that it was desirable to learn the rateable value of land. It meant simply that the rateable value of land was to be ascertained. It was defended in various points by the Members of the Treasury Bench and by Members of the Administration in another place. They were all ready to sail in that stream, over which the Lord Chancellor and the Lord Advocate were divided as to the way in which the current had flown. Indeed, the proposals of the Lord Advocate were designated by the Lord Chancellor as unnecessary and as amounting to an insult to the Government. There is no Land Valuation Bill. What was a necessary preliminary has been abandoned. The cart has been put before the horse, and we are asked to put a tax on land values before we know what the valuation of land is, while the different Members of the Government have diametrically altered their opinions, which they expressed before Parliament, as to the objects which will be ultimately obtained by this Land Bill. We have the present proposal of the Government. It is a triumph for that crusade which the Lord Advocate has separately carried out. He has brought the Cabinet to be his followers. I am surprised that the right hon. Gentleman is not here to utter that theory, which he has propounded all over the country, but that he is obliged to go to the sacrosanct in Scotland, when amid prayers, the singing of hymns, and the reading of Scriptures he can proceed to set forth his political opinions with respect to land. The right hon. Gentlemen and his colleagues may like that method of advancing their political views, but in me and in many hon. Members of this House I am sure it creates nothing but a feeling of profound loathing.

How do you propose that your valuation, the Bill for which you have abandoned, is to be carried out? The right hon. Gentleman says you are to leave the valuation to the owner himself. No one knows better than the right hon. Gentleman that he is placing upon the owner a task of almost unexampled difficulty. I know myself, from long experience, how difficult it has been to value the proper amount to be paid for sites to be acquired under compulsory powers for schools. I know how the verdicts of experts upon that question have differed. But we are to leave it entirely to the owner, with all the thousand and one doubts and difficulties that will spring up around his feet to lay this assessment upon himself. And, remember, the right hon. Gentleman tells us there is to be a sword of Damocles hanging over the owner, as if the inspector or emissary of the right hon. Gentleman who is to follow afterwards comes to a different conclusion, and finds that some element of value has not been included, if he finds that possibly a larger selling value could be obtained for the land, then the arrears are to be payable, and although the owner may have used his best judgment and even obtained the best expert advice before fixing the valuation, he may be called upon to pay arrears for years, and in the end may find himself in the bankruptcy court. Is that justice? Is that sound finance? Is it even commonsense in business? Take another step in the process of the right hon. Gentleman. I am not a Member for Glasgow, but I happen to be a native of that city, and to be a good deal connected with it. I have followed with interest the agitation for the rating of land values from its inception. Be it remembered it was in the City Council of Glasgow that it was first brought forward. I thought the council were mistaken in their action. I fought and opposed them, but what does the City Council now find? Under this proposal of the right hon. Gentleman not only is the rateable value to be taken away from Glasgow—that is absurd enough—but behind all that it is to be snatched into the pockets of the right hon. Gentleman for his henroost schemes. Those municipalities which invented the tax, which performed the missionary work of spreading this enlightened tax throughout the country, are now to be the only people taxed, while the rest of the country is to be free. They are to contribute the money to Imperial taxation, while the whole of the land outside their boundaries is to be perfectly free from the necessity of finding a source of rating which is to relieve all those who have erected buildings on the land. They are now to be placed in a position of inferiority to the rest of the country. They are to substitute the rating of land values for a rate on the buildings, and they are to find that they have a new tax laid upon them on building values from which the rest of the country is to escape. What is the financial basis of the right hon. Gentleman's scheme? Was there ever such a mad financial scheme invented? Surely the first principle of taxation is that you shall provide a broad, certain, regular, and continuous foundation. But what are you doing in this case? You are depending on a thousand and one casual things—on death, transfer of property, termination of leases, and various other things—the merest casualties and contingencies which you cannot count upon from year to year. That is to be the basis of this great new movement! That is to be the beginning of the new fiscal movement for which the right hon. Gentleman is making himself responsible!

It is hardly worth while occupying the time of the Committee by dwelling upon the endless absurdities that are bound to arise, but I should like to ask the right hon. Gentleman's attention to one particular point. In Scotland we have as a common method of land tenure 19 years' leases. Suppose in the course of such a lease the value of the land rapidly rises, as it is very likely to do, it being probably market garden land. The owner cannot get one penny more for the land during the continuation of the lease. His interest in it may be only a life interest, and it may come to an end before the expiration of the lease. Who, I should like to know, is to pay the ½d. upon the capital value which is found to have increased during the continuance of the lease? The owner, as I have said, gets no value, and his interest may expire before the end of the lease. The leaseholder pays his rent, and he gets no value at the end of it. How, then, is the right hon. Gentleman going to collect a tax from parties who cannot derive the smallest possible benefit from the increased value of the land? The right hon. Gentleman is making much of the revenue of the country dependent on the accident of the existence of leases! This is a specimen of the financial basis and of the fairness on which this Budget depends. What is the justice upon which this taxation rests? What is the principle upon which you can defend the distinction between land and other properties? The right hon. Gentleman the President of the Board of Trade said there was a complete distinction between the profits made on lands and profits made on railway shares, and therefore that they should not pay the same tax. Really, was ever such an argument put forward by a rational man? Do hon. Members fancy when they put £100 into the Canadian Pacific Railway, they themselves are not making their way over rocky mountains, or through icy regions, or that when they invest in the mines in South Africa they are not descending into the bowels of the earth and endeavouring to get the riches of the soil! We all of us, whether we put our money in lands or shares, are equally passive agents, and we have no more control in the one case than in the other. I say that we have a right to our profits in both cases, but not in one case more than another. The right hon. Gentleman and his colleagues the other day were the guests of the Royal Academy, within whose walls some of their presentments are hung. Supposing my right hon. Friend, or some of his colleagues, detected nascent genius in some of the pictures there and treated them as an investment. Suppose they found that they were correct in detecting this nascent genius, and found within a few years that the prices of the pictures produced by it had risen to a very high price. Would they be prepared to surrender those profits to the Exchequer or to a future Chancellor of Exchequer. Take, also, the case of a publisher, who has invested a considerable sum of money in the masterpieces of some of the right hon. Gentleman's colleagues on the Treasury Bench. Supposing he found that copyright had risen in value, although it might have fallen, and the publisher might find himself a loser. But, supposing the publisher found himself a gainer by this happy discernment of the genius of the right hon. Gentleman's colleagues, would he say that he must be prepared to surrender one-fifth of his profit? Would he not think that the discernment which enabled him to foresee this rise in price was money which he had a fair right to be paid, just as a man who succeeds in developing land by his ability and foresight, which enables him to appreciate the value of it, is entitled to his profits? The real reason of the right hon. Gentleman's action is perfectly plain, and it ought to be stated. The real reason is this: that land is a property which cannot escape from you, and which you can lay hold of most easily, and which is most open to your predatory instincts. The principle upon which the right hon. Gentleman has based his Budget is a very simple one, and it is exactly the principle upon which the huntsman bloods his hounds. You have aroused the instinct of these hunters. Do you think it will stop simply with the taking away of large portions of that part of the property of the country which is most closely connected with its traditions, with its history, and with all the responsibilities attaching to it? You will soon come to the turn of the small investors, who have gained their savings by hard thrift, and who will in turn be the object of these hounds which the right hon. Gentleman has blooded. I remember that during the inquiry as to old age pensions, I brought before the President of the Board of Trade the case of a couple who held between them £1,030 in Consols, but who were not deemed eligible for a pension. If that couple had invested their £1,030 in land and it had happened to rise, instead of it being a question of giving them a pension, you would have taken one-fifth part of that profit away. Is that reason, is it common-sense, is it based upon ordinary principles of justice? We have heard of the hardship that would be done to many educational endowments doing good work by the incidence of this taxation, but I wish to call attention to a much larger aspect of this question. This Budget is not merely to raise money, it is to produce a vast social change. ["Hear, hear."] Hon. Members opposite cheer that doctrine, and accept it, and we have had some expression of opinion as to that from these Benches and from those. The hon. Member for Blackburn and the hon. Member for Salford both referred to history as a defence for this. The hon. Member for Salford told us that he was prepared to defend the basis of the Budget upon history and to find an example and a sound foundation for it in history. He wanted us to take it upon his ipse dixit, but I must confess that the mere declaration of the hon. Member is not quite enough. I do not read history in exactly the same way as he does, but if we are to appeal to history is it not just as well that the appeal should be sustained? The hon. Member for Salford told us that history would justify all that was in this Budget of the right hon. Gentleman and that there were plenty of precedents upon which its justice might be defended. The hon. Member for Blackburn, on the other hand, told us that all the wrongs had been done by history, and that the right hon. Gentleman's Budget was the one which was paying a debt of some 400 millions which had been rolled up by the landowners. Therefore that rather goes against the contention of the hon. Member for Salford. But the hon. Member for Salford said something more. He told us that this Budget was going to be the correction of the present system of government, which was a plutocracy. On what ground he advanced that I do not know, but apparently a plutocracy is a very good thing for the hon. Member for Salford, because he told us that it forced him to live according to the methods of the much richer men with whom he was bound to associate. I am sorry for the hon. Gentleman if he descends to that level of humanity. I should have thought that it was not a proud boast for a literary man of the present day to say that he was bound to emulate the practice of snobbery by living according to the dictates and customs of richer men.

But is this particular part of the Budget going to help you destroy the plutocracy? There was nothing that struck me more in the whole course of this Debate than some words uttered this afternoon by the hon. and learned Member for Louth. He said this is a capitalists' Budget. You will not tax those who have vast sums of money who can escape from you, and who can elude your grasp, and who will look with contempt upon the small diminution that you can make. This Budget is, on the contrary, fixing its fangs chiefly on that part of property which is entwined with the history of England, which is closely connected with the traditions of England, and which to anyone who has studied the history of her country appears most surely as that part of property which has recognised, on the whole, its responsibility better than any other. I know there have been erring, faulty, selfish, grasping landowners. In what corner of society, in what part of the nation, will you not find such men? But any man who maintains that on the whole the landowners of England have not done their duty to the country, have not risen to their responsibility, and have not as an actual matter of business obtained a smaller return from their property than any other class, is either wilfully prejudiced or is ignorant of the history of the social economy of his country. You are doing in this Budget—I speak as one with no possible interest whatever or connection with the land—the worst evil you could to the general interests of the country, and many of the poorer classes. You are seizing upon that part of property which cannot escape from you, and which is most subject to your depredation. You are demanding your pound of flesh, but you are demanding it without any of those conditions which Portia laid upon Shylock, and when you have drawn that blood, do you think plutocracy will not be all the stronger in this country, and will not ride rough-shod over the poorer classes of the country? Whom are you replacing for the great landowners? You are putting yourselves in the power of speculative builders.

Mr. E. G. PRETYMAN

A fortnight nearly has now elapsed since the Chancellor of the Exchequer laid these proposals for entirely novel taxes before the House, and I had rather hoped that this discussion might have been avoided by the right hon. Gentleman telling us that he had found these proposals impracticable, because so far as I have been able to discover amongst practical men—I say advisedly amongst practical men—so far as the discussions on this question of land values in all its aspects is concerned both inside the House and out of it, I think I am not wrong in describing them as academic discussions, and many very important principles have been raised which are extremely difficult to follow, and which deal with various classes of property in various aspects, and which no doubt are extremely interesting from the social and philosophic point of view; but here we have to deal with a definite, concrete proposal for imposing taxation in the Budget of the year which will affect an enormous amount of valuable property by no means all possessed by rich men upon whom you can afford to make experiments. I quite admit it might be legitimate to make a doubtful experiment on some one whom you felt sure you could not hurt, but the real burden of this land taxation is not going to fall upon the great properties which have such resources in different directions that the mere varying of a halfpenny in the pound or paying some of these new taxes will comparatively easily be borne by their owners. It is really going to fall on those people who have land and have no other resources, and who will have to pay the tax before they realise the value of their land, and who may have no resources whatever to meet it. I do not believe it to be possible even at this stage for the Committee to adequately debate these most important and entirely novel suggestions until we have had a great deal more information on them than we have now. We really do not know where we stand.

I should like to say a few words on the question which has been referred to in every speech on both sides of the House on this Resolution, namely, the difference which is suggested as between land and licences and other forms of property. We are told that land and licences differ from other forms of property in that they are a monopoly. I think if the right hon. Gentleman's proposals are all carried they will have a monopoly of taxation, or very nearly. Do hon. Members who talk about the position of land as differing from other forms of property take into account the taxation which land bears already and the different forms of taxes which it bears? I think perhaps it will not be wasting the time of the Committee if I enumerate them. You have the land tax, which, remember, lies upon the land only, but was originally assessed upon all other forms of personal property, all of which have escaped from it, and which now falls upon the land, and land only. Therefore in that sense land differs from all other property in that it is alone bearing a tax which was originally assessed on property of all forms and kinds. Then we have the increment property tax, in itself a heavy burden, which has arisen out of the discussion the other night, and as was admitted, and I acknow- ledge that the right hon. Gentleman has shown a great desire to consider this question on the actual income than upon land, and to try and meet us upon it—but it is admitted that the income tax upon land does fall much more heavily proportionately on the actual income than upon other forms of property in many cases, and on agricultural land practically always. Then we have the death duties, which are levied upon the same assessment as the income tax, and, therefore, fall in the same proportion upon land as they do upon other forms of property, and with this added hardship that the land is not divisible to pay the duty. You cannot pay the duty out of the land without realising it at ruinous loss. Then it is admitted on all hands that the burden of rates falls upon the owners of land more heavily than upon any other class of property and upon the occupiers of land in all forms. Then we have the conveyance duty, the mortgage duty, the reconveyance stamp, and the house duty. I have enumerated six or eight taxes, all of which come upon land, and which, where they fall on other classes of property as well, fall less heavily than on land. Now, the right hon. Gentleman comes and proposes to add four more forms of taxation to fall only on land, apparently on the principle that it is not taxed enough.

I say that from the purely practical standpoint, apart from the theoretical standpoint, when a man has money to spend and is going to use that money to his own advantage in any commercial purpose land is dealt with in the market like any other commodity. There may be a theoretical difference, but there is no practical difference whatever, and we are dealing here with a practical matter, namely, the imposition of a tax. The right hon. Gentleman's proposed taxes are all based on a valuation, and I wish to put one question to him which goes to the root of the whole matter. I wish to ask him—what is his unit of valuation? Unless he can tell us that it is absolutely impossible for anybody who has got land which is to be valued, and which is to be subject to this increment tax in particular, to know how the tax is going to fall upon him. Is the unit of value ownership? Is it the estate? If it is the estate, what follows? A man has a large estate of, say, 5,000 acres—I am giving now what the right hon. Gentleman told us when he introduced the Budget—and on that estate there are two or three hundred acres of building land adjoining a town. But the whole value of the estate, including the building land, is much below £50 per acre. I understood the right hon. Gentleman to say that where the value of the land is less than £50 per acre it is not to be subject to this tax. If you take as the unit of ownership for valuation the estate in the aggregate is worth less than £50 per acre over all, so that the estate will not be subject to this tax at all. [Cries of "No."] Yes, that is so, if the unit is ownership. That is incontestible. But take two suppositions: If the unit of ownership is to be the unit, and if the right hon. Gentleman's limit of £50 per acre is to obtain, then the big man who has a large estate with some building land in the corner will never be touched at all, but the small man who has bought two or three acres of land out of his savings which is all building land will be hit heavily under the unit of ownership. Then are you going to take the unit of the parish? If you do that, you will get into the same difficulty. In many parishes just a corner of the land is building land.

Are you going to take occupation as the unit? If so, the same difficulty will arise in connection with occupation, and your average value over the whole area will be less than £50 in the case of large occupation, but small occupation will be hit. Supposing you take the smallest unit you can imagine, the unit of the field. Let us suppose a 20-acre field of building land adjoining a town, and let us suppose that it is agreed by the right hon. Gentleman, the valuer, and everybody concerned that the value is £300 per acre. On one side of that field, as almost invariably happens in such cases, there is a road, and that is the part which will be sold first. It may be 10 or 12 years before the whole of the 20 acres will be sold, but a small piece, amounting to a quarter of an acre in the corner is sold, say, at £600 per acre. On what basis does the right hon. Gentleman propose to proceed? That does not show that the whole value of the field is more or less than £300 per acre. The fact is that on this basis of valuation the value you put on a hereditament which is owned by one person to-day is one unit, and you are proposing to value it not when it passes at death, but when it is broken up in pieces not at the will of the sellers but at the will of the purchaser. With due deference to hon. Gentlemen who say that land is different from everything else, I say that the owner of building sites is in the same position as a draper who has a piece of cloth to sell. He cuts off the piece his customer requires. The price is regulated by the demand, and the owner sells what the customer asks for, and until you know what your customer is going to ask for you do not know what the unit of valuation will be. There is no possible means of knowing what your unit of valuation is going to be until you bring the value to the test which I have indicated. The right hon. Gentleman's basis is that when a piece of land is sold to-morrow, it is that price which is to be compared with the value to-day. By what process does the right hon. Gentleman propose to arrive to-day at the value of a piece of land which is going to be sold in the future and of which he does not know the area? If he cannot make that clear I think the whole case falls to the ground, not on the ground of equity, but on the ground of practicability, because it is quite impossible to impose a tax in that form. Another very important point arises in this connection out of an interruption which was made by the Attorney-General when my hon. Friend the Member for Windsor was addressing the Committee. My hon. Friend was giving an instance of the hardship which would occur in the case of two leases falling in under different conditions. One would be liable to the increment tax and the other would not. The hon. and learned Gentleman interrupted, and asked whether in the case in point my hon. Friend was considering a lease created before the passing of the Finance Bill or after it. That was rather a curious interruption. Does that indicate that the Chancellor of the Exchequer does not propose to impose this tax on reversions in the case of leases granted prior to the passing of the Finance Bill, because that is a very important point? The right hon. Gentleman has not indicated whether the tax touches such leases or not, but the answer to that question affects the argument a great deal.

Mr. LLOYD-GEORGE

I do not think it would be possible for me to carry on a discussion by means of question and answer across the Table in regard to a matter or this kind. I have taken a note of the hon. Gentleman's question, and I will give an answer, but I think it would be very difficult to put it in the form of a short reply across the Table.

Mr. PRETYMAN

I do not wish for a moment to press the hon. Gentleman for a reply now, but I asked the question as I did not wish to waste the time of the Com- mittee in dealing with a hardship which would immediately disappear if the right hon. Gentleman said that he did not propose to apply the tax in the case of reversions of lease where leases were granted prior to the passing of this particular Bill. But in the absence of any guidance on that point I suppose I am bound to assume that there is nothing whatever in the words of this Resolution which indicates that there is going to be any exception of that kind at all. Therefore I am bound to assume that these particular cases, whether the lease was granted prior to this Act or not, would be subject to this tax. I can imagine no greater hardship, because it is known, and I am quite certain that the right hon. Gentleman must have had the obvious fact put before him by his advisers, that there has been a very large fall, amounting in many cases to 30 or 40 per cent. in the value of urban property, particularly around London, in the course of the last 20 or 30 years.

That is an acknowledged fact. I can give a concrete case, which is one merely illustrating innumerable others. It is the case of a man who purchased a long lease of a house in Elvaston-place. He paid £4,400 for the lease in the year 1888. He purchased the freehold some years later for £320, and spent £1,500 on landlord's improvements to the house. That brings the total purchase price to him to something over £6,000. He used to let that house for £325. It is now let at £175, and the owner is told that if he desires to sell it, as he does, that the most he can hope to get is £2,700 or £2,800. But at present he cannot get a purchaser, and I do not think anyone is likely to get a purchaser for real property until the matter of taxes of the right hon. Gentleman is cleared up. The whole estate market is disorganised, and the value of property is decreased all over the country. The particular hardship is this. Here is a man who bought property at a certain value. For 20 or 30 years that property declines in value, and he finds himself with a property worth half what he gave for it. Then the right hon. Gentleman says: "This is the 30th of April, 1909, I am going to take the value of your property now, and if your property increases in value to something approaching what you gave for it 30 years ago, I am going to have one-fifth of that increase." Is that justice or equity in any sense? We think that the right hon. Gentleman desires to do justice, but if he tries to give exemption from these taxes in all cases in which we can show that there is injustice then the whole case will fall to the ground, and there will be so many exceptions that all you will get out of these taxes will be a mere fraction of the lot, and a disturbance of trade will be caused throughout the country for the minimum result to the Chancellor of the Exchequer, and you will require an army of officials to investigate the cases. Is the Treasury to set up a department, which is to go inquiring into the morality and equity of every private transaction in regard to realty from one end of the country to the other, and refer the result of the investigation to the Chancellor of the Exchequer, who is then to consider whether there is or is not in this particular case any moral ground for exacting the tax on the full value which has been fixed by this House? We cannot have taxes raised on that basis.

Again, I will take another case—there is nothing like concrete cases—a case which actually exists in regard to this proposal as to mines. In this case there is a poor clergyman whose total income is £140 a year. His wife has a one-seventh share in a coal mine with a mortgage upon it of £10,000, and she is just able, out of the proceeds of the coal mine, and only just able by pinching and saving in every possible particular, to pay the interest on the mortgage with absolutely nothing to spare. She has gone on doing so for this reason, that there is below the seam which is now being worked, two other seams which are not being worked, but which there is a prospect of being worked very shortly. For years the poor owner of that seventh share has been pinching and saving in the hope that there will be provision for her children when these two seams are worked. But she has absolutely no resources whatever to meet the heavy tax which the right hon. Gentleman now proposes to put upon those minerals because they are un-gotten. She is only too anxious that those minerals should be gotten; and it is not her fault that they are not gotten. If this tax is imposed in the form suggested, she will therefore be forced to go into the market and sell that seventh share, and it will not sell probably for the £10,000 mortgage upon it. Her property is so small that it is exempted from all the other taxes which have existed for years, yet the right hon. Gentleman, under these proposals, would force this lady to sell her property, and she would not have one penny of provision for her children. That cannot be a fair tax which has incidence of this description.

Mr. LLOYD-GEORGE

Is she lessee?

Mr. PRETYMAN

No; she is the freehold owner of a seventh share, with a mortgage of £10,000 upon it. I can give the right hon. Gentleman all the particulars.

Mr. LLOYD-GEORGE

I will take it from you. I only wanted to know.

Mr. PRETYMAN

There is another aspect of the question in regard to the municipalities. It has been pointed out several times what the position of the municipalities would be when the valuations on which they may levy a rate are to be given as the valuation on which the tax is to be taken away from the district for the Imperial Exchequer. I want to add this point: It is obvious that the tax is to be taken on realty, on all land both built upon and unbuilt upon, and I take it that the land is to be valued apart from the buildings upon it, and the land immediately adjoining the town and the land built upon in the town, are both to bear this tax which is to be drawn from the town and brought to the Imperial Exchequer. It is obvious that the assessment of the value of property in the town will be decreased at least by the amount which is withdrawn from the communities for the benefit of the Imperial Exchequer. The assessments will fall, and therefore the municipalities instead of getting a benefit will actually have their rateable value reduced, and each of these communities will find their resources less than they were before. I do not believe that even at this moment practical men who are intimately connected, and have been intimately connected all their lives, with land in the form of urban land can yet foresee all the consequences of this proposed taxation on a great novel principle like this. We have hon. Gentlemen on the other side who tell us that this principle is adopted by Germany and by other countries. We have not yet had any evidence before us, and so far as I know there is no documentary evidence to show us a single tax that has ever been proposed in any country exactly in the form of the taxes proposed by the right hon. Gentleman. We have rating taxes and we have local rates imposed upon land, but that is a wholly different matter. But there is a proposal in Germany, and a proposal only; and I think it is a proposal which rather lends itself to our argument than that of the hon. Gentleman opposite. What is it for? It is a proposal in lieu of death duties.

I notice a certain tendency in hon. Gentlemen on the other side of the House. Here we have eight different forms of land taxes, which I have enumerated, different forms of imposts on land. Hon Gentlemen opposite take out all of these and deal with each of them as if they were the only tax on land. They hunt round the universe and find in one country somewhere, anywhere, that particular tax which is often the only tax imposed on land in that country, and that happens to be a little higher than that particular tax in this country. They therefore claim that occupiers of land in this country are become a smaller burden than somewhere else. They not only do that, but they proceed to redress the grievance by levelling up the tax to the higher figure. The consequence is that we who own land in this country will find ourselves in the delightful position of having about eight different land taxes, each on a higher scale than any similar taxes in any other country in the world. That is a burden which cannot be borne.

From the financial standpoint the right hon. Gentleman has to raise a great revenue, and so far as I am aware in all history, I do not profess to be such a deep student of finance as the right hon. Gentleman, but, so far as I have any acquaintance with the history of finance, it has been that all the right hon. Gentleman's predecessors acted on the principle good work by the incidence of this taxa-posing taxes for which you hope to obtain a present and increasing revenue you will not impose those taxes upon failing industries. Here we have two industries specially singled out for taxation, licensing and land, the liquor trade and land, both of which, speaking purely on financial grounds, are declining industries. [HON. MEMBERS: "No, no."] Hon. Gentlemen say no, but which do they refer to? [HON. MEMBERS: "Land."] They say the land. That is the matter we are debating.

I suppose hon. Gentlemen are of opinion that the land, that the value of the land in this country and the income derived from land in this country is increasing the income in proportion to that derived from other forms of property in this country. [HON. MEMBERS: "No, no."] Oh, they are not, then my contention is correct. That is all that I claim. Here we are pro- posing to raise taxes for Imperial purposes, for old age pensions and the Navy on these suggested two industries. Here we have a great industrial community. We have a community whose population has grown enormously and of which the enormously greater proportion is engaged in industry and commerce. The soldiers of industries are all to be given old age pensions, at which we rejoice, but two trades, and two failing trades, are picked out to pay the pensions for the whole of the rest of the community.

Mr. PHILIP MORRELL

Would the hon. Gentleman contend that the ownership of land is an industry?

Mr. PRETYMAN

If he did my day's work sometimes he would admit it. I can assure the hon. Gentleman from personal experience, if I may venture to say so, that the ownership of land, if the owner attends to his duties and responsibilities, is certainly an industry, and an industry requiring as much close attention and, I think, requiring as many business qualities and as much capacity as any other industry in the country. I really should hardly have supposed that the hon. Gentleman could ask such a question. This tax, which is to be imposed for Imperial purposes, is to be placed upon an industry, the income derived from which is steadily falling in proportion to the whole income of the country. The percentage which the income derived from rent bore to the gross income of the country was in 1814 34 per cent., in 1851 18¼ per cent., in 1880 12 per cent., and in 1906 5¾ per cent., so that there you have an industry the profits from which are falling continuously in proportion to the wealth of the community, and in the interests of the community as a whole—that is, the industry selected upon which to pile four new taxes, in addition to the heavy burdens it already bears. These particular taxes are so novel, so intricate, so difficult, and the consequences may be so serious, that I feel that the right hon. Gentleman would have been far wiser if he had confined himself in the first instance to one tax in a tentative form, and had seen the effect of it before he proceeded further.

Mr. LLOYD-GEORGE

Which?

Mr. PRETYMAN

They are all so dangerous, I do not like any of them. I think the right hon. Gentleman might have invented something which would have been less mischievous than any of them. There is another new principle involved in this proposal, and a very important one, namely, that you are to take a particular owner of property and tax his property before there is any realised value whatever to tax. The inwardness of that is that that is where you get the poor man. If the owner is a rich man, with great and varied resources, and you tax one particular portion of his possessions before he has realised anything from it, he will be able from his other resources to find the money to pay the tax, and he will be able to continue to hold the property. But if you apply the principle to a poor man who owns only the particuler class of property from which the tax is demanded, having no other resource from which he can meet your exactions, what can he do except be ruined or part with the property? And to whom would he part with it? To the rich man. [An HON. MEMBER: "Hear, hear."] Is that the object of hon. Gentlemen opposite? I know the hon. Member who says "Hear, hear" knows something about the subject, and he understands what this proposal will mean.

What will be the position, under these taxes, of land associations? If there is one agency which, perhaps excepting the great friendly societies, has done more than any other for the working men and artisans in our great towns, it is the agency of building and freehold land societies. They have purchased hundreds of thousands of acres which they have divided up among their numbers, and upon which each member has a habit of building a pair of houses. The theory I have heard expressed by hon. Gentlemen below the Gangway is that of a citizen purchasing a piece of land from a building society, of building a house upon it and living in it. That is not quite the fact. I have some experience of the matter. It invariably happens that an artisan who happens to be of a saving disposition, a hard working man, who saves up £300 or £400, and buys a bit of land, does not build one house. [LABOUR cries of dissent.] Yes, almost invariably. It is a fact. [Cries of "No, no."] It is a fact well known to me. I hope hon. Gentlemen will not contradict me if they do not know it to be a fact, because I know it to be done. I can point right hon. Gentlemen and hon. Gentlemen below the Gangway to hundreds of pairs of houses. I find that working men are just as good business men as others. They know perfectly well that it is far cheaper to build a pair of houses than a single house. That is almost invariable. The working man builds a pair of houses. He lives in the one and lets the other. There are thousands—tens of thousands of such cases. These men will, I suppose, escape realty for the house they live in, and be taxed in the case of the other house.

What about their building society? What is the practical method of operation of these building societies? They go to an adjoining owner of land and they buy, say, 20 or 30 acres of land, which they gradually dispose of, a few acres at a time, among their members. Their great object, and the means by which they live, is this increment value. Now the right hon. Gentleman is coming down upon them, and he will say: I value that land at £500 an acre; but when they come to sell that land in the course of the next five or six years, if they sell it to their members, above that price of £500, I shall come down and take one-fifth of the increment value. I do not think that proposal will be popular among the saving working men of the country. The whole process of taxation would be so monstrously unfair that there will be perpetual cases of properties identical in value dealt with according to the whim of the purchaser in different ways. Few building leases are bought outright. There are many ways in which real property is dealt with in this country—by carrying approximately in one form or another, an equal division, or an approximately equal division, of value between owner and occupier, lessor and lessee. The right hon. Gentleman comes down and proposes an arbitrary form of taxation, which in some cases will strike the property, and in other cases will not. There is no reasoned proposal before us. We are not told why the man who leases his property should be taxed, and the man who sells it should not be.

Another point is this: That these different means of dealing with realty vary enormously in different parts of the country. You have a fashion in one district for selling outright. You have a fashion in Scotland of feu. You have another fashion in another district. It all comes more or less to the same in the end. There is very little difference in the actual result to lessor or lessee. But you will find the house in one case leasehold; in the other freehold. In the one case the right hon. Gentleman proposes to come down and exact a big tax; in the other case there will be no tax at all. It is a pure lottery. Really it is impossible—absolutely impossible—for us to debate these matters. They may be lightly debated from an ethical and social point of view by this House, but they are matters which largely concern tens of thousands of the people of this country.

We must have as soon as possible some clear statement which will remove the uncertainties and anxieties which are evidenced by the innumerable letters we receive. I do not know who advised the right hon. Gentleman in this matter, but I am quite certain of this, that as far as I can judge no responsible business firm which deals in land and which understands land would support the proposals which the right hon. Gentleman is making. Surely his advisers when dealing with such complicated matters as the ownership of land, involving such enormous interests so far-reaching and so delicate, and with which the whole investment of capital in this country is bound up, it is obvious ought, before proposals of this kind were introduced into this House, to have given them most careful and complete consideration. They ought to have been thoroughly digested, and they ought to have borne evidence of having been thought out in every particular. I venture to add that in a case of this kind they ought to have been preceded by a written statement, showing exactly what these proposals were and their effects upon different kinds of property. They ought to have borne evidence of that clear thinking in advance of which the right hon. Gentleman the Secretary of State for War is so fond. I am quite sure the Chancellor of the Exchequer would have done well to have consulted the Secretary of State for War, and if he had done so I am convinced the right hon. Gentleman, with his great knowledge of land transactions, would have advised him that it would have been better for the estate market if before these proposals were launched some definite, clear statement such as I have suggested was issued. I hope what the right hon. Gentleman states to-night will take the place of such a statement and will give us some clear explanation of those fantastic proposals which are so alarming the country.

The SECRETARY of STATE for WAR (Mr. Haldane)

After the compliment which the hon. and gallant Member has paid me, I feel I cannot but rise if only for a few minutes. I should have been glad to have pursued matters at once into those clear regions to which the hon. and gallant Member has alluded, but he has acted upon the advice of the Eastern sage, and he had "muddied the wells of inquiry with the stick of precaution." He has con- jured up so many difficulties, so many imaginary cases. [OPPOSITION cries of "Oh!"] I have got to make good what I am staying—that it is almost impossible to bring the Debate back to the point at which it should be kept, if we are to make any progress. I listened with the greatest pleasure to the speech of the hon. and gallant Gentleman. He is always acute, and he has always a way of putting things which is his own. I am not unfamiliar with the case he has made. There was a time once before when it was my duty not exactly to stand beside but to stand up to defend a Chancellor of the Exchequer, and the hon. and gallant Member then made a speech almost exactly the same upon the death duties, and upon the Bill brought in by Lord St. Aldwyn to amend the law when he was Chancellor of the Exchequer. The hon. and gallant Member was one of Lord St. Aldwyn's principal assailants, as I was one of his defenders. I could reconstruct the speech of the hon. and gallant Member on that occasion. We had the same phrases, the same bogies, the same things conjured up, and indeed, matters were carried a little further, because the hon. and gallant Member assailed another Conservative Chancellor of the Exchequer, and complained of the way taxation was laid on in the form of income tax on agricultural land. He assailed the measure associated with the name of Sir Robert Peel, but we are remote from all this now that the death duties are an accomplished fact, and the right hon. Gentleman was absorbed into a Government which took full advantage of the death duties while they existed. Really the hon. and gallant Member in his speeches ought not to take quite so comprehensive a line. If we had listened to what he said to-night we should have had no death duties, and we should go back a good deal upon Sir Robert Peel's income tax. But my right hon. Friend is not proposing to aggravate that state of things under Sir Robert Peel's Act. I have always thought that the owner of agricultural land was a person very hardly dealt with. I know there are great deductions which have to come from his nominal income before he puts anything into his pocket, and so far as I have been able to observe it is rarely, if he is a really good landlord, that he puts much into his pocket at all. But we are not dealing with agricultural land. My right hon. Friend has made it plain that we are dealing with quite another kind of land. We are dealing with land, the revenue from which arises as the result of congestion or movement of the population, and with the demands which the vicinity of great communities create. That is the main case which is dealt with by these resolutions.

Let me just test one or two of the propositions of my hon. and gallant Friend. He said that at the beginning of this century the proportion which the rate on land bears to the rest of the national revenue from property was 34 per cent., and that it had diminished now to something like 5¾ per cent. Well, has it diminished? Surely everybody knows that the explanation of the figures of the hon. and gallant Member is the enormous increase in other kinds of wealth in this country, and everybody must realise that if you take urban values—I am not talking of anything that may be affected by the price of corn, but of the values due to increased population and the pressure of population upon the land in or about the vicinity of great cities—they have enormously increased during the last century. For instance, can anyone say that the land on which London stands is not of enormously more value than it was years ago?

Mr. PRETYMAN

I have the actual figures of the gross capital value of realty subject to estate duty in 1901, and it was £105,996,000; and in 1907–8 it was £85,100,000 on more estates.

Mr. HALDANE

That does not explain the variation between the proportion of 5¾ per cent.

Mr. PRETYMAN

It is an actual fall.

Mr. HALDANE

The hon. and gallant Member is taking a period, and a very recent period, with an interval of two or three years, and five years hence, perhaps, under the beneficent influence of Tariff Reform, the value of land may have risen, and then where will the hon. and gallant Member be? If taxes upon corn bring up the value of land, what will be the position of the hon. and gallant Member when he has to explain what he has said this evening? But what I wish to deal with is not the generalities which the hon. and gallant Gentleman has indulged in, but the taxes indicated in the Resolution. Let me ask the attention of the Committee to what we are doing. We are not adopting a Bill, but certain very general Resolutions which are necessary to allow us to bring in the Bill.

The Resolutions do not go into details. They cannot do. They are merely the authority to bring in a change in a Bill of this kind. It is quite true, as the hon. and gallant Member says, and I entirely agree with him, that it is difficult to debate this Question in matters so general. We can on the second reading of the Bill deal with the proposals which are embodied in the three Resolutions on the Paper. One Resolution is in three parts. What are the three proposals? What are the objections which the hon. and gallant Member has made? The first objection was that we have not answered the question, What is the unit of value? The second was that the proposal was one of which we had no experience in regard to its working, and the third had reference to ungotten minerals. Let me point out to the Committee what the principle is which underlies these three propositions. It is to levy a duty on what we believe the estate would realise. It is not a duty on what the owners have not got, but on what they have got. Bearing that in mind, let me turn to the objections—made in good faith, but with a want of attention to the fact that we are only dealing with resolutions to enable the Bill to be brought in, embodying these propositions. I should be inclined to accept the criticism that there was something in the Resolutions that was inconsistent with the language itself, but the duty is payable only when the increment value is realised. In every one of these cases what is taken is the duty on property actually received in cash or upon estates which pass on death. The valuation takes place as it does today for the purpose of death duties, and no one has made a more minute study of the subject than the hon. and gallant Member himself. What I ask is: If there is any injustice in taking a percentage on a piece of land the value of which is due to a rise in the price of land? What I ask is this, Is there any injustice in taking a percentage on that class of property? The hon. and gallant Member says this is a new thing. I am astonished at his making that statement. The system has been a great success, and it is familiar in other parts of the world.

Sir P. MAGNUS

Is it not a rate rather than a tax abroad?

Mr. HALDANE

My hon. Friend knows as well as I do that on the Continent the distinction between rates and taxes is not the same as in this country, and that the revenue is collected in a different fashion. There are taxes or rates—accordingly as you choose to label them—collected in areas which are much larger than our ordinary areas of taxation for purposes which with us would be purposes of Imperial taxation. They are collected in large districts for purposes which in this country would be provided for by Imperial taxation. I quite agree that they are not collected over the whole country and that they are collected locally, and in many cases by municipalities, but I read in a paper only the other day that a foreign Government was considering with great satisfaction the good prospects which these taxes afforded of an extension of Imperial revenue. I have shown that in the case of transfer, or what is the same thing, the grant of a lease for a consideration, you are simply taking the proposed duty out of the profit made. If there is no profit you do not take any duty.

Mr. AUSTEN CHAMBERLAIN

But the right hon. Gentleman said he was taking it on realised profit. What is the realised profit when an estate changes hands on death and has to pay death duty?

Mr. HALDANE

I divided the case into two, and I said that in the case of property passing on death the principle was exactly and precisely the same as the principle of the death duties, which were in full force under the right hon. Gentleman himself as Chancellor of the Exchequer, and constituted a cherished instrument in the hands of the Conservative party. In the other two cases—the transfer or grant of a lease—you take it on the profit received. Has the hon. Member never heard of a fine paid on the grant of a lease, or increased rent? Does he suppose that in 999 cases out of 1,000 the landlord grants the lease from motives of benevolence? The principle we are going upon is, no profit or no increment, no tax. [An HON. MEMBER: "What about a loss?"]

I come now to the second principle, which is that the duty shall be levied on the value of any benefit accruing to a lessor by reason of the termination of a lease. There again the intention is to levy the duty simply upon profit, and when the Bill is printed and circulated hon. Members will see the machinery by which that is to be worked out. But as I have stated the principle is: No profit, no tax. I come to the third case, which is the annual duty on capital site value, and the question of the hon. and gallant Gentle- man does not arise. That is a duty which is levied generally without respect to who is the owner of the land. It is perfectly plain what it is in the case of sale; it is perfectly plain what it is in the case of death duties. [What is the unit?"] Really, when you are transferring a piece of land surely that transaction itself furnishes the unit, and you see what you transfer by your deed.

Mr. PRETYMAN

My point was the increment value not in the case of passing by death, but in the case of passing by sale, when what was sold was only part of the original unit value, and where there was no uniform value over the whole unit.

Mr. HALDANE

The principle of the Bill is that whatever you chose to sell if you make a profit the duty is levied on the profit. The hon. and gallant Gentleman will find that there is machinery to deal with all the cases of hardship of which he speaks in the Bill itself, but the principle is perfectly clear as a general proposition that when you sell anything the duty is levied on the profit. Difficult cases are bound to arise, and upon the hypothesis that these may arise, we have put provisions to deal with them in the Bill itself, and it is impossible to discuss a matter of this kind without putting before the hon. Members the clause in which that machinery is embodied. We are not discussing the legislation, but asking for leave to bring in a Bill. I believe we are really very much at one. Hon. Members opposite say, "We cannot understand your proposal because we have not seen the Bill," and we reply, "Very well, then, let us bring in the Bill." I do not think I have put the case which is the real case between us in an unreasonable way, and I hope that before long the House will let us proceed a step further towards the sensible course of bringing in the Bill.

Mr. AUSTEN CHAMBERLAIN

Will the right hon. Gentleman give us the information about the leaseholder? I thought the Chancellor of the Exchequer himself was going to reply to my hon. and gallant Friend, who put a case about leases granted before the passing of the Act. I understood the Chancellor of the Exchequer to say that the reply could not be given across the Table, but that a reply should be given to my hon. and gallant Friend. The hon. and gallant Gentleman also put the case of minerals.

Mr. KEIR HARDIE

The hon. and gallant Gentleman, the Member for Chelmsford, referred to the case of building societies and endeavoured to make it appear that it was customary for members of those societies to build two or more houses, one of which they inhabited personally, and the other of which they let. By way of proof of that he pointed to the undoubted fact that it was seldom that a single cottage was built by these societies. But he forgot that whilst building societies build these houses in pairs they are sold singly to individual members, who live side by side. Then he also told us that one hundred years ago the income for rent in this country bore the proportion of 34 per cent. to the total income, whereas now the proportion of income due to rent had fallen to 5¾ per cent. I presume in both cases the hon. and gallant Gentleman was referring to rent from agricultural land?

Mr. PRETYMAN

From all land.

Mr. KEIR HARDIE

How can the hon. and gallant Gentleman distinguish the income from urban land from the building upon it? I want to know on what he bases his statement?

Mr. PRETYMAN

The rents on all land, urban and rural, the whole of the rents under Schedule A of the land of the country.

Mr. KEIR HARDIE

I am afraid the hon. and gallant Gentleman has not examined the schedules as carefully as he ought. May I point out that in those days—that is, in 1817—the total amount of the taxes paid by the landed interests represented 70 per cent. of the whole, whereas in 1891 the percentage had gone down to less than 15 per cent., so that the proportion of the tax now being paid by the landed interest bears a smaller relation to the whole than it did at the period to which the hon. and gallant Gentleman referred.

VISCOUNT HELMSLEY

Was that all agricultural land or all land?

Mr. KEIR HARDIE

All land. The later figures I have not got, but there is no reason to assume that the reduction which has been steadily going on for 100 years, and the proportion of taxes paid for land is not still continuing, and when we remember that under the auspices of the party on this side when in office a relief of nearly £2,000,000 a year was given to land under the provisions of the Agricul- tural Eating Act, I think my argument is sound and substantial.

Then the hon. Member for the University of London endeavoured to draw a parallel between the increase in value of old pictures, old silver and similar articles, but he forgot that the increase in the value of these objects is not due to anything for which the community is responsible. It is mainly due to the vanity of American millionaires who, having accumulated at the expense of the community more money than they know how to dispose of, seek to outbid each other in acquiring articles concerning the artistic value of which they have not the faintest appreciation. They simply seek to gratify their vanity. The value of the unearned increment of land—and here I join issue with my hon. Friend the Member for Preston, and with the right hon. Gentleman the Leader of the Opposition—differs from the unearned increment accruing to all other sections of the community. As I understood my hon. Friend opposite in his former speeches, and the right hon. Gentleman the Leader of the Opposition in his speech on the Budget on the opening day, their argument amounted to this, that every section of the community is receiving some unearned advantage. The agricultural labourer whose wages have gone up is to that extent benefiting, not as the result of his own labours, but as the result of the general improvement accruing to the community. That, I submit, is a case of a totally different kind from that of the unearned increment accruing to landlords. The labourer is performing his share of the nation's work. The landlord qua landlord may be contributing nothing whatever to the usefulness of the community, but his share accrues to him just the same as if he did. The hon. and gallant Gentleman who represents Chelmsford spoke of land owning as a profession. [An HON. MEMBER: "An industry."] Yes, an industry. I am afraid, if I may say so without disrespect, that he was confounding the ownership of land with the management of land. They are not the same thing, and there is no actual relationship between the one and the other. For every landlord who manages his own land and acts as his own estate agent there must be a score who hire others to perform those duties, and the gentlemen themselves occupy no higher position in life than that described by Carlyle long ago as mere receivers of rent. It is these men whom the Budget will hit most heavily. Where it can be shown that any increment in the value of land accrues from the expenditure of either labour or capital on the part of the landlord, this tax does not fall upon him, but where the increment is due either to public improvements, to the accumulation of population, or to the establishment of new industries—matters to which the landlord qua landlord has contributed nothing beyond allowing the use of his land—then the tax will fall, and the tax should fall.

It is said that the case of Germany is different from our own—that there the tax upon values is a rate, and not a tax. If that will make it any more sweet to the landlords I am sure that the Government will be only too glad to make arrangements to suit their convenience. In Germany the municipalities, and to some extent the State, tax land values. In the Reichstag, as has been pointed out, it has been suggested that a land tax—presumably on the lands where a tax is already imposed for local purposes—should be imposed, and, therefore, the difference between Germany and ourselves in this respect appears to be that whilst we begin with the National Exchequer and will ultimately work down towards local rates, they commence from the local rates and are working up towards the National Exchequer. If hon. Gentlemen on this side assume that this is the last they are going to hear of it, either for national or for local rating purposes, they have sadly misread the signs of the times. One thing that has accrued from this Debate has given myself and my colleagues a great deal of satisfaction. We are told that this Budget represents Socialism, and because it represents Socialism therefore it must be condemned. All this talk about Socialism in connection with the Budget is tending to rob that term of many of its terrors. It is popularising the use of the word. When the nation realises that Socialism means putting a tax upon surplus wealth, and thereby relieving the poverty of the poor, a good many will support Socialism who are to-day doubtful about it, as you shall find out. The hon. Member for Aberdeen University waxed very indignant because the Lord Advocate (from the pulpit of a Nonconformist chapel) had dared to support these land taxes. But evidently, in his indignation, the hon. Gentleman forgot that the Lord Advocate, like himself, is a Scotchman, and is therefore familiar with his Bible, and it is possible that the text he preached from was the one so often quoted, in which the prophet declared, speaking in the name of the Lord, "The land is mine, and shall not be sold for ever." If the land of the country had all along borne its proportion of taxation, the burden, both upon industry and upon labour, would have been much lighter than it is to-day. Let me give one concrete illustration of how the tax referred to in paragraph 1 of the Resolution would operate in London. The figures I am going to quote are from the report of a speech of a former Member of this House, Mr. White, delivered at the annual meeting of the London Reform Union. In the year 1876 the rating value of London was £20,000,000. But in 1906 it had increased to £43,000,000—a rise of £23,000,000 in rating value in 30 years. The value of the land during those 20 years had increased, according to my authority, by about £9,000,000, and the value of buildings and other improvements by £14,000,000. Had this tax been in operation from 1870 to 1906 the land upon which alone London is built would have been contributing £1,800,000 a year towards either local or Imperial taxes. It is said that this is Socialism, and therefore predatory. May I remind those who make that assumption that nearly the whole of this increase of the rateable value of land, presumably its letting value, is due to municipal sources, the making of roads, the making of streets, improving the drainage, running out municipal trams, providing public parks and open spaces, and generally improving the amenities of the City, all of which is done at the public cost by the municipality, and is therefore a form of Socialism. The increment in value is due to these works and improvements, and when it is proposed that part of this increment, namely, 20 per cent. of it, shall be acquired for the benefit of those whose expenditure has created it, then it is called Socialism. But there is one point of the Resolution upon which I desire some special information from the Chancellor of the Exchequer, or whoever speaks next, on behalf of the Government. In part III. of the Resolution it sets forth that an annual duty is to be paid at the rate of ½d. per £ of the value in the case of land for buildings or other purposes, not being developed, and on the capital value of the ungotten minerals. This is one of the points on which I hope the Budget Bill, when it sees the light, will afford us more explanation than the Resolution does at the present time. I confess that as the Resolution is worded it looks as though it might operate in a way that would be seriously injurious to persons who have capital invested in existing mines, as well as to the great body of working miners. If the tax is to be levied on unleased and on ungotten minerals, the tendency will be to force a sale on the part of poor landlords. In so far as that may be necessary for the public good, as undoubtedly in the case of building societies, it is a matter for grave consideration whether it would work out advantageously in the case of minerals.

Let me put the Committee in possession of one or two facts bearing upon this Question. Assume that the tax upon minerals will cause development of the coal fields now lying unworked. That would mean the employment of considerable extra capital. It would also mean the employment of a large number of extra miners. [An HON. MEMBER: "Hear, hear."] An hon. Gentleman opposite says "Hear, hear." He has not followed out the argument to its logical conclusion. What would be the result? At the present time there are more mines sunk and more miners employed at work than employment can be found for. That is to say, the demand for coal at the present time falls far short of the potential supply. If you multiply the means of mining you multiply the possibility of an increased output, and you increase the competition and make it more difficult for existing mines to pay, and increase the difficulty of colliers getting their pay. The effect, therefore, it may have, does not hit me. I am trying to point out that without any advantage a great deal of injury might be done if this tax operates in the way I fear it will. If the Chancellor of the Exchequer wants revenue then a tax upon leased minerals will achieve his object. One halfpenny on the ton on all output will provide him with a sum equal to what he will obtain in the operation of this tax. Tax all minerals leased. There are dead rents, way leaves, heir leaves, water leaves, and so on. Tax them by all means. I know the case that could be made out showing the necessity of those taxes as a means of compelling landowners to make mineral fields that are now being held back for a rise in the market productive. I do not say that as a final word on the subject. I put it forward for consideration. I hope that the Bill when we see it will show that some provision has been made for meeting the special set of facts to which I have referred.

So far as the general principle of this Resolution is concerned it is difficult to conceive how so much apparent indigna- tion and opposition has been worked up towards it. We on these Benches are often accused of seeking to legislate in the interests of one class of the community. We are often accused of it and we do not deny it. If anything could justify class legislation it surely is the poverty of the very poor. It is for those who seek special legislation, but the special pleas that are now being put forward are not for the relief of poverty nor for the uplifting of those who are downtrodden, but for the preservation of class interest and of unearned wealth which is the product of the toil and the expenditure of the brain and muscle of the general community. All that is being claimed is that a comparatively small proportion of that which accrues and which is not due to any exertions of their own, or any risks they have undertaken shall be secured for the use of the community. Because of that, we on these Benches will support the Resolution before the House, hoping, believing, and expecting that it is the forerunner of many similar Resolutions which will come before the House in days to come. If this Budget had done nothing else than unmask the Tariff Reform movement, and compel it to face the public in its true character, that in itself would have been of great value. Hitherto Tariff Reform has been for the protection of trade. That is dropped. It is no longer for the protection of trade; it is for the production of revenue. Tariff Reform is now standing out in all its nakedness as a device to extort more from the labouring poor in order to protect the interests of the rich.

Whereupon Motion made, and Question, "That the Chairman do report progress, and ask leave to sit again"—[Mr. Harold Cox]—put, and agreed to.

Resolutions to be reported to-morrow; Committee also report progress; to sit again to-morrow.

And, it being after half-past Eleven of the clock, Mr. Speaker adjourned the House without Question put, in pursuance of the Standing Order.

The House adjourned at Twenty-four minutes before Twelve o'clock.