Chapter XL: Where Shall We Stop? 220 (5)

And this is not always the worst, for in many cases landlords for various reasons will not renew at any price, and the tenant has perforce to go the moment his lease expires. A certain Whig duke--and, of course, a zealous defender of "the rights of property"--conceived the idea, upon coming into his estates some years ago, that a village stood too near his park gates. Not brooking that herdsmen and traders should stand between the wind and his nobility, he directed that, as leases fell in, the tenants should be cleared out, graciously, however, offering them other plots some three miles away. And the tenants had to leave the homes in which they had been born and where their parents had lived before them, and to see them tumble down in utter ruin, in order that so mighty a person as a duke should not be shocked by the sight of the common herd. It was one of the thousand cases in life where a man had a right to do that which it was not right for him to perform.

Another fashion in which grievous injustice to the leaseholder can be done is frequently illustrated. It has happened, and happened very recently, that a ground landlord has granted leases for a term of years; that, upon the strength of these agreements, houses have been built; and that upon the landlord's decease it has been discovered by some skilful lawyer that the dead man had had no power, under an entail or settlement, to grant such leases; whereupon the heir has invoked the law to cancel the whole, and has seized everything upon the land. This is legal, but is it commonly honest?

In other ways the leasehold system is an injury not only to individuals but to the community. A west country town, where all the land is held by one man, has been crippled in every attempt to expand and improve by the impossibility of obtaining a freehold plot. What person in his senses would erect a substantial factory or a large concern of any kind upon a comparatively short lease? Men embark upon such enterprises in order that, as year follows year, their property may become more valuable, not that year by year it may become less so by the growing nearness of the time when it will pass to the landlord, who has never contributed a penny or a thought to the success of the concern, the building containing which, at the expiration of the lease, he can call his own.

For all these unfairnesses to individuals, hindrances to trade, and injuries to the community, is proposed the remedy stated--that a leaseholder who has twenty (or, as some suggest, ten or fifteen) years to run, shall be empowered to demand that his land be made freehold upon the payment of its value, as assessed by some specified tribunal.

The first objection is that this would be an undue interference with "the rights of property." But it has already been laid down by Parliament that such "rights" can be set aside in the public interest upon the payment of fair compensation; and what has been done in regard to the making of railways can be done respecting the building or the preserving of houses. The existing system is an injury to the community; and as the price to be paid for its abolition, whether wholly or in part, would be assessed by a tribunal constituted by Parliament, the landlords would have no more reason to complain than they now have when compelled to sell a portion of their property to a railway company.

The next plea is that it would interfere with "freedom of contract." Upon the general question of what that freedom is, how far it now exists, and in how large a degree the State has a right to interfere with it, one need not speak, for in this matter of leases Parliament has already stepped in to "interfere with freedom of contract." It having been found that some landlords were accustomed to insert in leases oppressive provisions for forfeiture in certain conditions, the Legislature empowered the courts to lift from the leaseholders covenants which unduly burdened them. And if a precedent is asked for the particular remedy proposed, the Acts enabling any copyholder to enfranchise his holding should be consulted.

If it be said that, should such a power be granted by law, no one possessing land would let on a long lease, it may be answered that this would be no great evil, seeing how the leasehold system has worked. But as landowners will want in the future as in the past to let or to sell, and as it is not to be supposed that any man will take a lease of less than twenty years and build upon the land, the owners will accommodate themselves to circumstances, and dispose of their property as best they can.

Owners in other countries do so, and why not here? Such a leasehold system as that of England is practically unknown elsewhere. In France, it is true, something of the kind exists, but we seek for it in vain in Germany and Austria, in Russia and Switzerland, or in Spain and Portugal; while in Italy, where no leases for over thirty years are permitted, a tenant can convert his property into freehold by redeeming the rent.

The supporters of leasehold enfranchisement, therefore, have on their side not only the practical evils of the present system, but parliamentary precedent and continental custom. These should suffice to persuade all who study the matter that the time for a change has come, and that the way in which that change is proposed to be effected is just and equitable.

XX.--WHOSE SHOULD BE THE UNEARNED INCREMENT?

There is a school of politicians which reply to all such proposals as have been sketched for practical land reform: "They do not go far enough, for they would merely transfer the unearned increment from the present freeholders to the present leaseholders, and we want it transferred to the community." This "unearned increment" is a matter of which we are likely to hear a deal in the immediate future, for since John Mill stated the theory it has been much talked of, and to-day more than ever. It is sometimes contended, in fact, that, supposing all the projected reforms carried and in full and untrammeled action, "the absorption of the unearned increment by private individuals would perpetuate an evil which would swallow up whatever good those reforms might have a tendency to bring about."

What then is the theory upon which so much may depend? It cannot be better stated than in the words of Mill:--"Suppose that there is a kind of income which constantly tends to increase, without any exertion or sacrifice on the part of the owners: those owners constituting a class in the community, whom the natural course of things progressively enriches, consistently with complete passiveness on their own part. In such a case it would be no violation of the principles on which private property is grounded, if the State should appropriate this increase of wealth, or part of it, as it arises. This would not properly be taking anything from anybody; it would merely be applying an accession of wealth, created by circumstances, to the benefit of society, instead of allowing it to become an unearned appendage to the riches of a particular class. Now this is actually the case with rent."

When Mill's "Principles of Political Economy" was published, this theory of the State absorbing, in whole or in part, the "unearned increment" of the land, was regarded by many as so utopian that it was put aside with a scoff, and was thought to have been settled with a sneer. But it has struck deep root into many a Radical mind, and those who believe in it ask it to be shown how it is either dishonest as a theory or would be impossible in practice.

There need be no attempt to do either, for Mill himself made an important restriction in his definition of what should be done which relieves it from the stigma of dishonesty or impracticability. He believed that "it would be no violation of the principles on which private property is grounded, if the State should appropriate this increase of wealth, _or part of it_, as it arises." It may be agreed that the State could fairly appropriate a part of this increment, and this might be done by means of taxation. But that is a very different matter from taking the whole.

One who argues in favour of the latter plan, submits this contention:--"The area of a county, for purposes of illustration, may be taken as a fixed quantity. Now, the demand for land will increase, and as a corollary the price of land will rise, exactly in proportion to the increase of population. This additional value is not brought about by either independent industry, ingenuity, or the outlay of capital on the part of any private individual: it is a growth entirely due to the increase of the community: it is of enormous value, is extracted from the dire necessities of the whole population, and goes into the pockets of private individuals who have never done anything to create it."

But does the illustration hold good whether applied to such a limited area as a county or to the country at large? It is not the case that the demand for land increases and its price rises exactly in proportion to population; and it is as little the case that its increased value, if any, is "extracted from the dire necessities of the whole population." For while the number of our inhabitants is increasing, the value of such land as ministers directly to their wants in the provision of food and clothing is decreasing. If all the bread that is eaten, beef that is killed, and wool that is worn, were raised within these shores, there would be a semblance of truth in the illustration; but we have left the days when we lived on our own produce far behind, and the British farmer would only be too happy if the picture thus presented were even approximately like reality.

It may be replied that bread and beef and wool do not exhaust the catalogue of men's requirements from the land; and they do not, for we require plots upon which to build, and good houses are just as necessary as cheap food. But even where land is made more valuable by its becoming used for building purposes, is there any justice in either the State or a municipality taking the whole increased value? Let the case be that of a man who thinks that he sees a chance of a town expanding, and who purchases a piece of land which will be of little use to anybody unless his idea proves correct, but which will bring him a good profit if he has skilfully foreseen. Why should he not be as fairly paid for his skill and foresight as if he had bought a house on a similar belief? The reply is, "The quantity of land is limited; that of houses is not;" but that is only true up to a certain and very definite point; and with the reforms which have already been suggested, and with a fairer system of taxing the land, the community would gain all it could fairly ask.

My contention, shortly put, is this--That the State has a right to share in the increased value of all property, landed or otherwise; and that, in the case of land, it has an additional, though limited, claim, because of the conditions upon which that commodity passed into private ownership. Those who work for wages have to pay income tax immediately those wages touch a certain point; as they rise, so does the payment increase; and, after a given amount, the tax is proportionately much heavier. Why should not the same principle be applied to income of every sort from land as to income of every sort from wages, profits, or invested capital?

It is not so at present, as a study of the land tax will show. Nominally that tax is four shillings in the pound on the full annual value, but actually what does it stand at? It was fixed by Parliament in the seventeenth century, the semi-owners of the land, who had held their property under certain weighty conditions of contributing military strength to the King, and who had managed by degrees to slip through their obligations, agreeing thus to tax themselves as a compensation for the burden that had been lifted from them. But in 1798 it was enacted--by a Parliament in which practically only landowners were represented--that the valuation upon which the tax was to be paid should be that of 1692, when on its then conditions it was first levied. And the consequence is that, although this later Act directed that it should be assessed and collected with impartiality, in parts of the country which have stood still the tax now is not far from the original sum, while it amounts in the immediate neighbourhood of such a city as Liverpool to about a fifth of a farthing in the pound. It may not be feasible, because of the manner in which much of the impost has been "redeemed," and it might in some cases be unjust, to raise the land tax at once to four shillings in the pound on the valuation of 1888 instead of 1692; but the same Parliament which put the clock back has the power to bring it up to the proper time; and, at least, something could be done to lessen the loss the State is now made to suffer.

There is another way in which landowners could justly be called upon to pay a portion of the unearned increment to the State, and that is through the taxation of ground-rents. This is a point which keenly touches the towns, and deserves the early attention of Parliament. At present the great ground landlords escape their fair share of the burdens which fall heavily upon those who take their leases. And, so certain are some of them that the taxing time will soon come, that they are already selling a portion of their town estates, so as to "get out from under" before that period arrives.

It may therefore be submitted that, with a fairer land tax and the taxation of ground rents, we should secure to the State the proportion of the "unearned increment" to which she is justly entitled. Those who would go further must be prepared to prove that property in land is so different in every essential from all other kinds that it would be honest for the State to absorb the whole unearned increment of the one, and to levy only an income and property tax on the other.

XXI.--HOW SHOULD LOCAL SELF-GOVERNMENT BE EXTENDED?

It is always consolatory to find amid the welter of party politics some topic upon which all say they agree, and such a topic certainly is that of the reform of local government. Politicians of every shade have long professed their desire for such a reform, and it ought now to be within measurable distance of accomplishment.

Upon the great question of the extension of self-government to Ireland I have already spoken; and in regard to the purely domestic affairs of all the four divisions of the kingdom--England, Scotland, and Wales, as well as Ireland--it need only here be added that the solution of much of the difficulty which springs from an overburdened Parliament will be found in devolving upon a special authority for each the right of dealing with its own local concerns. But, as to three of the four divisions, it is not so pressing a question as that which is commonly known as the reform of local government, and the main proposition touching which is summed up in the demand for county councils.

This is a matter which more intimately touches the country districts than the towns, for in all the latter of any size there are popularly elected municipal councils, which exercise much power over local affairs. The only exception is the greatest town of all, for London was specifically exempted (by the action of the House of Lords) from the reform effected in all other cities and boroughs by the Municipal Corporations Act of 1835. There is a Corporation of the City of London; but this body, against which a very great deal can be said, has authority only over one square mile of ground, the remaining 119 square miles upon which the metropolis stands being governed by vestries, trustee boards, and district boards of works, all connected with and subject to the Metropolitan Board of Works--or Board of Words, as it was once irreverently but truly called--which is not chosen directly by the ratepayers, but is selected by the vestries, who themselves are elected by handfuls of people, the general public paying them no heed. And thus it comes to pass that the greatest and wealthiest city in the world is worse governed than the smallest of our municipal boroughs, for nine out of ten ratepayers take not the least interest in electing the vestries, and not one ratepayer in a hundred could tell the name of his district representative on the Metropolitan Board of Works, now proposed, by even a Conservative Administration, to be abolished.

It is not a small concern, this of reforming the government of London, for it affects four millions of people--a number not far short of the population of Ireland; but politicians in the mass, as even the keenest metropolitan municipal reformer will admit, are more interested in the general question of local government.

Speaking broadly, the defects of the system proposed to be reformed are that of the popularly elected bodies there are too many, and that the great governing body is not elected at all. In a certain town of 3000 inhabitants, there are at this moment a Town Council, a School Board, a Burial Board, and (because under the Public Health Act an adjoining parish was tacked on) a Local Board of Health; while, notwithstanding that it sends representatives to a Board of Guardians for the whole Union, it had until recently, and in addition to the other bodies, a Local Board of Guardians, chosen under a special Act. And, beyond all these, a Highway Board meets within its borders, which has to be consulted and negotiated with whenever a road leading into the town needs to be re-metalled or an additional brick is required for a neighbouring bridge.

As if all these boards were not sufficient to keep the district in good order, there is the Court of Quarter Sessions, which has jurisdiction in various details that the multitude of small bodies cannot touch. These latter have one justification, however, that the former cannot claim, and that is that, despite there being magistrates who are members of the boards of guardians by virtue of their office, and although the more property one possesses the more votes one can give for certain of the local bodies, these in the main are popularly elected, and are, therefore, directly responsible to the ratepayers for the manner in which their trust is used.

It is quite otherwise with the Court of Quarter Sessions. This consists only of magistrates, such magistrates being appointed by the Lords-Lieutenant of counties, and the appointments being made mainly on political grounds. As a rule, the holders of that distinguished position are Tories, and they take good care that the magistrates shall be Tories also. It is not long since it would have been impossible to find a single Liberal on the commission of the peace for Huntingdonshire; and when comparatively recently it was pointed out to the Lord-Lieutenant of Essex that an almost exactly similar state of things prevailed in that shire, he replied he did not consider there was a Liberal in the whole county who was socially qualified for the magisterial bench. The idea of making a banker or a merchant a justice of the peace was too shocking; and thus the commercial classes and a good half of the population (giving the other half to the Tories) were completely unrepresented, not merely on the bench, but in the Court of Quarter Sessions, which governed the affairs and spent the money of the county.

There is no necessity to prove that these courts have spent the county monies wantonly or with conscious impropriety in order to show this condition of things to be wrong. In imperial affairs, the doctrine that taxation without representation is tyranny has been asserted to the full; in municipal matters, since the Act of 1835, the same has prevailed; but in county concerns it has been non-existent. The magistrates represent no one but themselves, their party, and their own class; they are necessarily swayed by the passions and prejudices that party and class possess; and, seeing that the English people long ago refused power over the national purse to an unrepresentative body like the House of Lords, it is surprising they have until now allowed power over the local purse to be in the hands of such equally unrepresentative bodies as the courts of quarter sessions.

The line which the immediate reform of local government must take is, therefore, the creation of a directly-elected body to deal with county affairs, and the federation of such of the smaller boards as have to do with the more purely district concerns, both of which points the Cabinet of Lord Salisbury appear disposed to concede. But upon the former point Liberals will claim that the whole--and not merely three-fourths--of the County Councils shall be directly elected, for the system of aldermen, included in the Municipal Reform Act by the House of Lords, has been used for partisan purposes, as it was intended to be, and the same effect will follow in the case of the counties if the same cause is provided.

Any system, in fact, which involves "double election" tends to make the body concerned hidebound and cliquish. A county alderman once chosen, especially if he were a squire, as he most likely would be, would have to behave himself in most outrageous fashion ever to lose his post. The ratepayers might grumble, but it would be difficult in the extreme to dislodge him, for he would be removed from their direct control, and the Council would consider it ungracious to get rid of an "old servant." If one wants to know how this double election operates, let him ask some clear-sighted Londoner who is acquainted with the manner in which his own city is ruled. He will be answered that for scandalous and wanton expenditure not many bodies can equal the Metropolitan Asylums Board, the members of which are mainly chosen by the various boards of guardians; while for jobbery and general mismanagement it is even beaten by the Metropolitan Board of Works, which is elected by the several vestries. And he will add that this chiefly arises from the fact that the ratepayers have no direct control over either of these bodies, and that the good result of such direct control was shown by this fact--that when the metropolitan ratepayers considered that the School Board, which is directly elected, was practising extravagance, they placed at the bottom of the poll those responsible for the policy, with the effect that considerable savings were speedily effected.

And therefore now, when County Councils are being established, all Liberals will have very carefully to watch the points upon which the Tories and Whigs may combine in an attempt to give the country a semblance without the reality of representative local self-government. What must be insisted upon is--(1) That the Councils shall be entirely elective; (2) that the ratepayers shall directly elect; (3) that there shall be no property qualification for membership; (4) that the voting shall be by household suffrage--one householder one vote; and (5) that women ratepayers shall have the same right of voting for county as for town councils.

With such a Council in each county, or, in the case of Lancashire and Yorkshire, in each great division of a county, we should have a central local organization, to which highway boards, local boards of health, village school boards, and other small bodies could be affiliated; and it is not impossible that, as a development of the system, the various bodies controlling the destinies of our lesser towns could be federated to save friction, trouble, and expense; while, above all, it must be insisted that the representatives of the ratepayers shall have full control over the police.

It is a truism that without good citizens the best of governments must fail; but our experience of the House of Commons and of the many town councils has shown that the improvement of the machinery and the handing over of control to the great body of the people have brought public-spirited men to the front to do the duties required. As it has been at Westminster and in the towns, so will it be in the counties. England has become greater and freer, our towns have expanded and benefited, owing to the whole of the inhabitants having a direct voice in the rule; and the counties will correspondingly improve when the same is applied.

XXII.--HOW IS LOCAL OPTION TO BE EFFECTED?

Intimately connected with the question of county government is that of local option; and the problem of transferring the licensing power from an irresponsible bench of magistrates to a specially elected body, or to a direct vote of the ratepayers, has ripened towards settlement in a remarkable degree since the day--just twenty years since--when Mr. Gladstone wrote to the United Kingdom Alliance that his disposition was "to let in the principle of local option wherever it is likely to be found satisfactory," and thus used in relation to this question for the first time, as far as is known, a phrase which has become famous.

No leading politician to-day disputes that some form of local option must speedily be provided; but, as a body, they have been shy of touching a problem that presents a host of difficulties, and the attempt to settle which could not fail to arouse a number of enemies. What those, therefore, who wished for local option have had to do was to show the body of electors that it was reasonable and just, and to trust that their appreciation of these two qualities would lead them to its support.

As to its being reasonable, the very fact that the granting of licences even now is in the hands of the magistrates, and not in those of a Government department, indicates that it is intended that local feeling shall be consulted. This, in fact, was specifically stated in an Act of 1729, which, after reciting that "inconveniences have arisen in consequence of licences being granted to alehouse-keepers by justices living at a distance, and, therefore, not truly informed of the occasion or want of ale-houses in the neighbourhood, or the character of those who apply for licences," enacted that "no licences shall in future be granted but at a general meeting of the magistrates acting in the division in which the applicant dwells."

Just a hundred years later, Parliament thought fit to withdraw from the magistrates--who, at the least, knew something of "the occasion or want of alehouses in the neighbourhood, or the characters of those who apply for licences"--the power over applications for beerhouse licences; and the result showed that even the most modified form of local option was better than none. The Act of 1830, "to permit the general sale of beer and cider by retail in England," provided that "any householder desirous of selling malt liquor by retail in any house" might obtain a licence from the Excise without leave from the magistrates. Within five years another Act had to be passed demanding better guarantees for the character of those applying for such licences, the preamble declaring this to be necessary because "much evil had arisen from the management of houses" created by the previous statute. Other amending Acts followed, and in 1882 the magistrates were once more given complete jurisdiction over beer off-licences, with the result that in the borough of Over Darwen alone the renewal was at once refused of 34 out of 72 licences of the kind, a decision which, it is important to note as bearing upon a point yet to be raised, was upheld by the Queen's Bench on appeal.

It is not merely a matter of historical interest, but it has very distinctly to do with the argument in favour of local option, to show that the magistrates for four centuries have had committed to them the duty of seeing that the needs of the district were no more than satisfied. In 1496, a statute directed "against vacabounds and beggers" empowered two justices of the peace "to rejecte and put awey comen ale-selling in tounes and places where they shall think convenyent;" and in 1552 another Act confirmed this exercise of authority. In 1622, the Privy Council peremptorily directed the local justices to suppress "unnecessary alehouses;" and in 1635 the Lord Keeper, in his charge to the judges in the Star Chamber previous to their going circuit, denounced alehouses as "the greatest pests in the kingdom," and added this significant hint: "In many places they swarm by default of the justices of the peace, that set up too many; but if the justices will not obey your charge therein, certify their default and names, and I assure you they shall be discharged. I once did discharge two justices for setting up one alehouse, and shall be glad to do the like again upon the same occasion."

These facts show that the theory upon which our licensing system has grown up is that the wants of a locality shall be strictly borne in mind, and of late years the wishes of a locality have more and more been considered. No one would deny that magistrates as a whole pay greater attention to those wishes to-day than they were accustomed to do even as recently as fifteen years ago; and when new licences are applied for memorials against their grant, signed by the inhabitants, are allowed to have considerable weight with the bench. But that, after all, is only the result of indirect and irregular pressure. What Local Optionists desire is that the pressure shall be made direct and customary.

The reasonableness of demanding that local wishes shall control the issue of licences is proved by the facts adduced, and the justice is equally capable of being shown. If a locality determines that no fresh licences shall be granted, or that certain old ones shall be taken away, no more injustice will be done than if the magistrates under the present system did the like. No compensation has ever been granted to the holder of a licence the renewal of which a bench has refused; and although the majority of such refusals has been because of ill-conduct, there have been many cases (and those at Over Darwen were among them) where the magistrates have not renewed because they did not think the house was required. The fact stands that a publican's tenure is in its nature precarious; he holds his licence from year to year at the pleasure of the magistrates; he would hold it in the same fashion were Local Option secured. And the fact that the power of refusal to renew a licence would pass from an irresponsible bench to either the whole of the ratepayers or a body specially elected by them for the duty, would not entitle him to demand a compensation then that does not exist for him now.

A great difficulty of the problem lies in consideration of the manner in which the popular power shall be exercised. "Local Option" is a somewhat elastic phrase, adopted by many who have never troubled to think what it may involve. Broadly speaking, there are three methods by which it might be carried into effect: (1) By placing the power of licensing in the hands of the Town Councils or the proposed County Councils; (2) in those of specially-elected licensing boards; or (3) in those of the ratepayers, who would exercise by ballot a "direct veto."

It is the first plan that finds favour with most of our statesmen. It was prepared to be adopted by the last Liberal Ministry, and is by no means so novel as many suppose. The Municipal Corporations Act of 1835, as originally drawn, contained a clause giving the Town Councils the power of granting alehouse licences, but the proposition was abandoned. The Local Government Bill of Lord Salisbury's Administration has a similar provision, giving the licensing to the County Councils; but to this has been urged the objection that these bodies will have sufficient business to attend to without having the public-houses placed on their shoulders. When our system of popular education was fixed upon its present basis, it was resolved that the work should be done by specially chosen school boards. Mr. Forster at first proposed that these boards should in the towns be selected by the Municipal Councils; but it was felt by the House of Commons that so special a function demanded direct election, and direct election was provided, with the best results. And if the licensing power is to be vested in a representative assembly and local option is to be anything but a sham, it must be placed in the hands of those elected by the ratepayers for that special purpose, so that no bye-issues of waterworks, or paving, or the increase of rates shall affect the one distinct question of the public-house.

The extreme temperance section argue that even such Licensing Boards--directly elected by the ratepayers for the specific purpose--would not meet the requirements of the case, and that nothing short of a popular vote can be accepted. But why should the representative system be abolished and a direct vote established in this case, any more than in the equally burning questions settled every day by Parliament, and the lesser but still important matters decided by town councils and school boards? We in England long ago made up our minds that the most excellent way to get public work done is to choose the best men, give them the requisite authority, and then allow them to do the duty to which they are called. And if we can disestablish a church, revolutionize the land system, or reform our institutions from top to bottom through our representatives, without a direct vote of the people, the question of renewing public-house licences can scarcely demand so exceptional a process as is by some suggested.

My answer, therefore, to the question, "How is Local Option to be worked?" as well as to the kindred temperance question, "How is Sunday closing to be settled?" is, "By means of licensing boards, directly elected by the ratepayers." And if this solution be adopted, our licensing system will be placed upon a basis at once more safe and more free from friction or the likelihood of injustice than any other that has been proposed.

XXIII.--WHY AND HOW ARE WE TAXED?

Taxes are the price we pay for being governed: they defray interest upon money borrowed and wages for protection and service. The fact that they are called by a name which is to many obnoxious, or that they are handed to the State instead of to an individual, ought not to blind us to their real nature--that they are the price of services rendered. The name is nothing. In churches the money we pay is called a pew-rent or an offertory; in clubs it is a subscription; to doctors or lawyers a fee; to tradesmen a price; to railway companies a fare; for personal services wages; for the loan of a house rent; for life or fire insurance a premium; and for water a rate. All are in a measure taxes; and if it be answered that the difference is that these payments are voluntary, may not the same be said of much that is called "indirect taxation"?

When the subject is considered, there are three questions which naturally demand reply.

1. Why are we taxed?
2. How are we taxed? and
3. How ought we to be taxed?

To the first question some answer has already been given. Put in the simplest fashion, the reply would be that it is cheaper to pay taxes and be taken care of than not to pay them and have to take care of ourselves. As members of an organized society, we have to provide for external protection and internal service--for the army and navy as a safeguard against enemies from without, for the officers of the law as a safeguard against depredators within, for the means of government, for education, and for a large number of other matters designed for the security of our persons and property and for the welfare and advancement of the community. We have further to pay the interest upon the National Debt--money borrowed by the State at times of emergency to prosecute such wars as Parliament had sanctioned.

In point of fact, taxes are a substitution for personal service. The State in England once compelled this as a means of raising an army; and, though this form of personal service was long ago commuted by the payment of a sufficient sum through taxation for the maintenance of a standing force, the State has only waived, not abrogated, the right. Even as lately as the last century people in our country districts had to give six days in the year to the repair of such highways as were under the management of the justices of the peace. In the one case the personal service has been commuted into a tax, in the other into a rate--the difference being that a tax is imperially and a rate locally levied--it being found that forced labour of the kind indicated is more wasteful and less efficacious than hired labour; and, if any want to know how wasteful and how inefficient, they can find abundant illustrations in the history of the old _regime_ in France, or that of the Egyptian fellaheen.

There has been indicated the difference between imperial and local taxation--the one being a tax imposed by the State and the other a rate levied by a local authority. The object in each case is similar; but, while the cost of the central administration, the army and navy, and the superior courts of justice, with the interest on the National Debt, is paid by taxes, that of lighting, draining, and other purely local matters is defrayed by rates, and that of the police, the poor, the highways, and education comes out of taxes and rates combined.

So much for the _why_ of being taxed; let us now consider the _how_. At present the receipts of the State are derived from direct and indirect taxation, together with a form which may be said to come under both these heads. The most familiar mode of direct taxation is the Income Tax; of indirect, the Customs and Excise; and of that which savours of both, the stamp duties and the profits from the Post Office.

These methods of taxation are, as far as England is concerned, comparatively modern. In the earlier days of settled government in this country, the mode of taxing was different and somewhat fitful, causing much trouble in the collection, and sometimes forming the pretext for revolt. "Aids" to the King were a frequent means of oppression long ago; and as far back as the time of John they were felt as a grievance, Magna Charta providing that the King should take no aids without the consent of Parliament, except those for knighting the lord's eldest son, for marrying his eldest daughter, and for ransoming the lord from captivity (the lord, it being remembered, holding at that time his land direct from the sovereign). "Benevolences"--a charming name for an unpleasing idea--were also in vogue in the Middle Ages, and, although specifically declared by an Act of Richard III. to be illegal, were levied in a fashion which caused much discontent. "Loans" were another form of raising money which the nation resented, as Charles I. found to his cost; while a "Poll Tax," as all men know, drove Wat Tyler into rebellion. "Subsidies" and "Tenths" and other taxing devices equally failed in the long run to answer the desired purpose of filling the National Exchequer; and after the Restoration all such gave place to a system by which the Customs, the Excise, and the Land Tax provided most of the money required.

Gradually the proceeds of the Land Tax dwindled, and direct taxation was almost extinct when, in the throes of the great war with France, which lasted, with slight intervals, for twenty-two years, the younger Pitt revived it in an Income Tax, the form in which it is now mainly known. With the end of the war this ceased, and the proceeds of indirect taxation were again chiefly those upon which the State relied. What the result was, how in every direction trade was hampered and public comfort destroyed, has been summed up for all time in one of Sydney Smith's essays; and the quotation is worth re-perusal by everybody interested in the subject, and especially by those who to-day are wishing to get rid of the main form of direct taxation we possess--the Income Tax, as revived by Sir Robert Peel.

Uttering, in 1820, a warning to the United States to avoid that spirit which we now call "Jingoism," Sydney Smith wrote--"We can inform Jonathan what are the inevitable consequences of being too fond of glory--TAXES upon every article which enters into the mouth, or covers the back, or is placed under the foot; taxes upon everything which it is pleasant to see, hear, feel, smell, or taste; taxes upon warmth, light, and locomotion; taxes on everything on earth and the waters under the earth--on everything that comes from abroad or is grown at home; taxes on the raw material; taxes on every fresh value that is added to it by the industry of man; taxes on the sauce which pampers man's appetite, and the drug that restores him to health; on the ermine which decorates the judge, and the rope which hangs the criminal; on the poor man's salt, and the rich man's spice; on the brass nails of the coffin, and the ribands of the bride--at bed or board, couchant or levant, we must pay. The schoolboy whips his taxed top; the beardless youth manages his taxed horse, with a taxed bridle, on a taxed road; and the dying Englishman, pouring his medicine, which has paid 7 per cent., into a spoon that has paid 15 per cent., flings himself back upon his chintz bed, which has paid 22 per cent., and expires in the arms of an apothecary who has paid a licence of a hundred pounds for the privilege of putting him to death. His whole property is then immediately taxed from 2 to 10 per cent. Besides the probate, large fees are demanded for burying him in the chancel; his virtues are handed down to posterity on taxed marble; and he is then gathered to his fathers--to be taxed no more."

Ludicrous as the picture seems, it was correctly painted for the time it depicted; and it is first to Sir Robert Peel and next to his greatest pupil, Mr. Gladstone, that we owe the change from the harassing indirect taxation of the past to the comparatively innocuous forms of it we have to-day. But it is still from indirect taxation that most of our revenue is derived. The heads of that revenue, as given officially, are--(1) Customs, (2) Excise, (3) Stamps, (4) Land Tax, (5) House Duty, (6) Income Tax, (7) Post Office, (8) Telegraph Service, (9) Crown Lands, (10) Interest on Advances for Local Works and Purchase Money of Suez Canal shares, and (11) Miscellaneous. Of all these, Excise stands first by several millions, while Customs are far ahead of any of the rest, Stamps and Income Tax being the next best paying sources of revenue. And, in some form or other, every one among us--the peer who smokes a cigarette, the peasant who drinks a pint of beer, and the very pauper who sends a letter to a friend--has indirectly to contribute his quota to the Exchequer, while all who earn more than L150 a year have to pay Income Tax; and those who inherit property, probate, legacy, or succession duty.

XXIV.--HOW OUGHT WE TO BE TAXED?

It being certain that, as long as we are citizens of any sort of State, we shall be called upon to pay for its maintenance, the question "How ought we to be taxed?" is one of considerable moment to all. Grumble we may, but pay we must.

Some think they would solve the problem at a stroke by substituting direct for indirect taxation. They argue that people should know exactly what they are paying for the service of the State; and that direct taxation is not only a more logical but a more economic method of raising the revenue. They show that the consumer of duty-bearing articles pays not only the duty but a percentage upon it as interest to the middleman; and a striking instance of this was afforded in the fact that when, in 1865, Mr. Gladstone, as Chancellor of the Exchequer, took sixpence a pound off the tax on tea, the retail price of that article immediately fell eightpence.

But it may be feared that those who argue in favour of entirely direct taxation make small allowance for the weaknesses of human nature. I may prove to demonstration to the first person I meet that he is paying more than he ought to do because of the working of the indirect system, and that to this wastefulness is added the sin of ignorance as to what he actually does pay; but the chances are ten to one that he will reply that, hating all taxation as the natural man does, he would rather not know to what extent he was being mulcted, and that, if the whole amount were annually and in a lump sum presented to his view, he would never find it in his heart or his pocket to pay it.

To the sternly logical this attitude will appear sad, if not absolutely sinful; but we have to take man as we find him, and it is of little use attempting to run straight athwart his deepest prepossessions for so small a result as even the substitution of direct for indirect taxation would attain. But there is a further point, which even the political logician must bear in mind, and that is what the practical effect would be of sweeping away all duties of Customs and Excise.

If we could secure a "free breakfast table" by liberating from toll tea, coffee, cocoa, currants, raisins, and other articles of domestic consumption, all would rejoice--though, in the present state of our finances, no Chancellor of the Exchequer is likely to sacrifice the five millions of revenue now raised from those commodities. But the English people will think a good many times before striking tobacco, spirits, and wine off the Customs list, with the more than 13 millions they produce, or spirits and beer off the list of the Excise, with the 13 millions in the one case and the 81/2 millions in the other that we now receive from them. Even if any one can imagine for a moment that the 27 millions here involved could be made up by some new direct tax, it does not need an extensive acquaintance with our social history to be aware that the result of removing the duties from the various intoxicants would be widespread national demoralization.

The taxation of the future, therefore, as of the past, will certainly include Customs and Excise. Some items may be struck off both; that a free breakfast table can be secured should be no dream; and it may be fairly hoped that the hindrances to trade involved in such licences as those for auctioneers and hawkers--who ought no more to be fined by the Government for practising their employment than butchers, bakers, or other traders--will soon be swept away. But upon beer, wine, spirits, and tobacco--their importation, manufacture, and sale--the tax-gatherer will continue, and rightly continue, to lay his hand.

Similarly, there will be no disposition to abolish the probate, legacy, and succession duties, but every disposition to strengthen them, and especially the last of them. The "Death duties" at present are inequitably levied; great fortunes do not pay as large a proportion as, relatively to small ones, they ought to do: and landed property is lightly let off compared with other forms.

But it is a comparative few who will be touched even by this much-needed reform; and taxation, to be fair, must touch all round. The Income Tax, obnoxious as from some aspects all will admit it to be, has almost infinite capacities of being made useful to the State; and the question which practical statesmen will soon have to consider is the direction in which that usefulness can best be developed.

As at present levied, this tax does not affect those whose incomes are below L150; if their incomes are between that sum and L400, the tax is paid upon L120 less than the correct figure; while if they exceed L400 the full tax is levied.

Now these regulations act unfairly in various directions. In the first place, the tax starts at too high a figure. Until a few years ago it began at an income of L100--a deduction of L80 being allowed--and there is no reason why it should not begin at L50, so that every man earning a pound a week in wages should be made to see as by a barometer how the national expenditure was rising or falling--though it never falls. And, however little he might be called upon to pay, there would be a distinct gain in so many additional capable citizens knowing from experience what an extra penny on the Income Tax means, for they would thereby be taught more closely to watch how the national money is got rid of, and their pockets consequently made the lighter.

In the next place, the regulations now in force make no distinction between a precarious and a settled income, causing the tradesman or professional man, whose revenue dies with him, to pay as heavily as his neighbour who has inherited or acquired property, of which those dependent upon him will not be deprived by his decease. As the point was put in a motion made many years ago in the House of Commons by Mr. Hubbard (now Lord Addington), "the incidence of an Income Tax touching the products of invested property should fall upon net income, and the net amounts of industrial earnings should, previous to assessment, be subject to such an abatement as may equitably adjust the burden thrown upon intelligence and skill as compared with property." Upon this point, it is true, Mr. Gladstone has been antagonistic to the view here held; he opposed this very motion, and years before it was introduced he declared that it was not possible for him to conceive a plan which would secure the desired end. But it is also true that more than thirty years ago, and in his very first Budget speech, he intimated that "the public feeling that relief should be given to intelligence and skill as compared with property ought to be met, and may be met"; and that as plans he could not conceive in 1853 have become realized achievements with him before 1888, this concerning a differentiated Income Tax may yet be added to the number.

The words of Cobden upon the point are as true to-day as when they were uttered. Speaking upon the Budget of 1848, he dwelt upon the inequalities of the Income Tax, which was then still talked of by Chancellors of the Exchequer as a temporary measure. "Make your tax just," he said, "in order that it may be permanent. It is ridiculous to deny the broad distinction that exists between incomes derived from trades and professions, and those drawn from land. Take the case of a tradesman with L10,000 of capital; he gets L500 a year interest, and L500 more for his skill and industry. Is this man's L1000 a year to be mulcted in the same amount with L1000 a year derived from a real property capital of L25,000? So with the cases of professional men, who literally live by the waste of their brains. The plain fair dealing of the country revolts at an equal levy on such different sorts of property. Professional men and men in business put in motion the wheels of the social system. It is their industry and enterprise that mainly give to realized property the value that it bears; to them, therefore, the State first owes sympathy and support."