THE QUARTERLY REVIEW. No. 389.-JANUARY, 1902. Art. I.-LOCAL TAXATION. Reports of H.M. Commissioners appointed to enquire into the subject of Local Taxation, 1899–1901. THERE are signs discernible on the political horizon that finance may ere long become a burning question. Our national expenditure, according to the last return of 'Public Income and Expenditure," has risen from 71,648,2277. in 1880-81, to 94,115,4347. in 1898-99, and, owing to the war, to nearly 170,000,000l. for the year 1900-1901. Our local expenditure, according to a return supplied by Sir Edward Hamilton to the late Commission,† has risen from a little over 38,000,000l. in 1875-6, to over 55,000,000l. in 1895-6, the latest year for which accounts were then available. This is not to be explained as the mere ordinary growth of taxation, it marks a silent revolution of thought which has taken place within the last half century. Fifty years ago the country was beginning to see that expansion of industry and commerce which followed on the adoption of free trade. It has frequently been pointed out, but in our judgment it has never been sufficiently recognised, that the full advantage of the policy of free trade cannot be reaped by a nation which is continually increasing the scale of its expenditure. The abolition of protection is really a very small part of the free-trade policy. Free trade recognised the necessity of taxation for revenue, but it adopted without reservation the *P. Paper, No. 319 of 1901. Vol. 195.-No. 389. B † C. 9528 of 1899, p. 30. maxim of Say-a maxim which in the older treatises it was usual to call golden-that the very best of all plans of finance is to spend little, and the best of all taxes is that which is least in amount.' So early as 1848, two years after the repeal of the Corn Laws, we find Bastiat, Cobden's most distinguished disciple, drawing attention to what he considered the incompleteness of our adoption of free trade.* 'What Cobden heard from Bastiat,' writes Mr Morley, 'made him all the more anxious to bring England round to a more sedate policy. . . . At the very time when Peel consummated the policy of free trade he asked for an extra credit for the army, "as if to proclaim," said Bastiat, "that he had no faith in his own work. . . . I must speak to you in all frankness," Bastiat proceeded in his urgent way. "In adopting free trade, England has not adopted the policy that flows logically from free trade. Will she do so? I cannot doubt it; but when?" " The answer to the French economist's enquiry, after a pause of half a century, is still 'not in our time.' Opposing forces have been too strong. The expectations of Cobden have been delayed, not only by the inherent immobility of things, which was inevitable, but also by a more or less unconscious change in the attitude of the public mind towards the functions of the State. The new ideal is summed up by Bluntschli:† The proper and direct end of the State,' he says, 'is the development of the national capacities, the perfecting of the national life, and finally, its completion.' The public perhaps has not realised this change; and we find Mr Cannan complaining justly enough of the stupidity of those who do not see that, in public estimation, the State is no longer a mere agent for the protection of life and property; but that, by popular acclamation, a much larger responsibility has been thrust upon it. There is probably no remedy for what is called the grievance of the ratepayer; it is his own creation, and is implicitly sanctioned by the mission which he has entrusted to the State. An answer might be made, by those who hold to the * Morley's 'Life of Cobden,' vol. ii, p. 12. Theory of the State,' English translation (Clarendon Press), p. 320. earlier tradition, that Bluntschli's phrase confuses two things which are essentially distinct, Society and the State. The 'perfecting and completion' of human life is to be found, it is true, in Society; but the State is merely a function of Society. The finance of Society is organised, for the most part, on the principle of free exchange, while the finance of the State is taxation, a thing which mankind will always regard as burdensome; and it is the friction and pain of this burden that must ever render unprogressive and inexpansive those services which depend on state regulation. The process of voluntary purchase by which men acquire necessities, conveniences, and luxuries causes no misgiving; but the organisation of life by taxation, notwithstanding the benefits which it confers, is followed by controversy and often ill-will. Mr Cannan, however, is clearly right; the answer suggested may be a good one, but the Bluntschli theory is, for the time being, accepted, and higher expenditure is an inevitable result; and, as this policy crushes out the nascent attempts at an alternative line of action, it is bound, probably, to go forward with increased momentum. In further illustration, let us briefly contrast the spirit in which the problems of local administration have been approached formerly and now. The dominant desire fifty years ago was to restrict, so far as possible, the number and the extent of public services which were entrusted to the monopoly of the State or local authority. With regard to the poor-law, the middle of last century witnessed a most strenuous campaign, of which the purpose was to relieve the community of a large part of its responsibility for the maintenance of the poor. The controversy has been kept up till the present day with varying fortune. At the present time we are distinctly on a reactionary tack. Recent circulars from the Local Government Board have practically reversed the policy with regard to outdoor relief, which for sixty years we have been accustomed to expect from the central authority. Politicians on both sides of the House have committed themselves to projects for making the maintenance of old age a public and no longer a private responsibility; and there are signs everywhere apparent that the medical treatment of the poor is becoming, tacitly and without protest, a public charge. While this is the general temper of the time, it is no matter for wonder that current administration follows the same course, and that pauperism, in spite of higher wages and prosperous trade, does not decrease, has become generally constant, and in some places even tends to grow. The cost, it may be added, of maintaining pauperism is largely on the increase. With regard to the dwellings of the poor-another pressing subject of contemporary controversy-the same drift of public policy is apparent. On Mr Disraeli's motion for an enquiry into agricultural distress, February 19th, 1850, in reply to reactionary proposals, Sir Robert Peel, whose attitude represents the unwilling but inevitable acceptance of free-trade doctrines by this country, not only for that time but for all time, declared that the situation must be met by more free trade; parochial settlement was an unjust infringement of the freedom of labour; and he also commented on the impolicy of the duty on bricks. A simplification of land title and transfer, a stern repression of immoderate expenditure, together with a confidence in the equitable and enabling economy of the law of demand and supply, gave to the reformer of that day a solid hope of progressive and permanent improvement. The policy is well summed up in the title of a contemporary pamphlet, 'Do not Tax, but Untax the Dwellings of the Poor.' By common consent the problem which we have to face today is that the high cost of providing additional house room for the poor has restricted supply and condemned many to pay excessive rents for overcrowded and insanitary dwellings. When it is further remembered that from a third to a quarter of the yearly price of house-room in the ordinary market is represented by rates, it is impossible to deny that the reformers of that day were attacking a fundamental aspect of the subject. The obstacles, however, to that policy appear, in local as well as national affairs, to have proved insuperable. At the very opening of the scene we find the local authority with a practically unlimited power to levy rates on houses and land. The assumption that the public authority (as representative of the State) was bound to carry out a constructive policy, inspired it with many new ambitions. The advantage of national education, costly systems of sewerage, improved poor-law establishments, baths and wash-houses, public parks, and all the objects compassed by spirited local and municipal government, is admitted; but the question remains whether this method of development is not providing luxuries at the expense of that very necessary elementary want, a good house. If in towns all these admirable things are provided by throwing a burden on houses, it is easy to see how the present difficulty has been created. There now arises a display of what is somewhat superciliously called 'an ignorant impatience of taxation'; and a Royal Commission is appointed to discover a remedy for this and other grievances. The proposal to 'untax' is not admissible. Taxes on luxuries and superfluities of income not being sufficiently productive to finance the present large operations of local administration, we must base our levy of revenue on some common necessary of life. As already hinted, there is probably no remedy; and, while we adhere to our present conception of the duties of the State, it is stupid to complain that the effect of statebuilding in one direction is unbuilding in another. Our object in this article, however, is expository and not controversial. At the same time this preliminary and theoretical presentation of these remoter issues appears to us to be absolutely necessary, for they are really more fundamental than those submitted to the Commission. The problem before the Commission was not, Can this policy of spirited local administration be reversed? but, given this administration, what is the best method of providing the necessary funds? Until taxation can be rendered popular, which is tantamount to saying, ' or ever your pots be made hot with thorns,' so long is taxation likely to vex us even as a thing that is raw.' The Commission therefore had a difficult task, which is further complicated by the great uncertainty as to the incidence of taxation. A distinguished authority, Professor Seligman, has told us that, with regard to this question, 'there have been almost as many views as writers.' That rates and taxes ⚫ remain where they are imposed, that all taxes are shifted to the landowner, that they are shifted to the trader, that they rest on the labourer, that they rest on the rich consumer, that 6 * Incidence of Taxation,' p. 90; quoted by Lord Avebury in Presidential Address to Statistical Society, November 19th, 1901, |