The Parliamentary Crisis in the United Kingdom

Mr. President and Gentlemen,

The Liberal Party in Great Britain appeals to the Electors for support on two main issues: principally, on a cry against the House of Lords; subordinately, upon the Budget; sectionally, upon Home Rule for Ireland. The Liberal-Unionists ask support upon a national policy of Tariff Reform, including protection against foreign importation, and preference to Colonial products. It is the principle rather than the details of such a policy which the public is asked to support, and such details as have been proposed may be regarded rather as illustrations than as planks in a platform. As this subject has been before the public for several years and presents few new features, it is not proposed to discuss it in this paper.

The cry against the House of Lords has a twofold aspect:

1. Denunciation of its conduct in rejecting the Budget proposals of the Government, and,

2. A demand for the reform of its constitution, as being inherently bad.

The latter is, of course, an old cry, but it has been endowed with new vitality by the recent offence which the Lords have given to the Liberals. The cries are essentially different in character; one, practical, that the House of Lords has done a wrong thing, the other, theoretical, that the House of Lords is improperly constituted. The House of Lords represents a class, and therefore is fundamentally opposed to democratic theories, but the question whether class representation should longer be permitted is obviously different from the question whether this particular class representation has done wrong things of which the rejection of the Budget is a specific instance. The theoretical question we pass by today, to permit an inquiry into the grounds upon which the Liberals assail, and the Liberal Unionists defend, the Lords for rejecting the Budget.

The Lords, say the Liberals, acted (1) from self-interest; and (2) unconstitutionally, having no right to reject a money bill. The Budget contained provisions for taxing land values; the Lords include the greatest landlords; ergo, say the Liberals, the Lords were actuated chiefly by a desire to escape taxation. To this, various replies are made

1. That many Lords who voted against the Budget are not great landlords, that the great landlords are few, that the only landlords directly affected by the land taxes are very few, being only those holding urban lands, not rural lands.

2. That the Budget is opposed on principle by many thousands of people who have no land interest, and that the charge of self-interested motives is merely a slander cunningly devised for political motives. It is also said that the Budget framers and supporters are as liable as its opponents to be actuated by self-interest, though not so transparently a target for the charge, since the Budget was framed for the political profit of a party, and is based on confiscation of the property of the few for the benefit of the many. "If we defend our property by our votes," say the Lords, "you seek by your votes to confiscate our property to your profit." The impartial onlooker may sum up the charge and counter-charge in this way--both sides are so situated that self-interest may actuate the conduct of some members of either or both, but that it has in fact actuated either is not, and cannot, be proven. The supporters of each will continue to make the charge against the other without regard to evidence, and in most cases with the self-interest of political favour to their own sides.

The impartial critic may also be permitted to say that while to the question--should the House of Lords be reformed--the fact that it does or does not allow itself to be unduly influenced by class or personal interests is a matter of vital import, and that if it were proven to be so influenced, the need of reformation would be conclusively established; yet the Lords exist under the constitution for the due and proper representation of a class, and the question of motive in rejecting the Budget is not vital to the enquiry did the Lords act constitutionally, and were the Budget proposals worthy of the support of the Electorate? The Lord Chancellor admitted the legal right of the House of Lords to reject a money bill, but denied its constitutional right to do so, meaning, apparently, that nothing in Statute or Common Law forbade such a rejection, but that the practice not to reject, extending over a very long number of years, amounted to a constitutional prohibition against rejection. It was replied that what is legal is constitutional, that if a thing be unconstitutional it is illegal also, and that if rejection has not been practised it has been merely because constitutional practice requires a very strong reason for such conduct by the Lords, and that such reason has not hitherto occurred. The Lords cannot amend a money bill, but they may reject, and whether a case justifying rejection has arisen is a matter of fact which can only be settled in view of all surrounding circumstances when occasion arises. To say that the Lords may never amend or reject a money bill would be equivalent to changing the Constitution of Parliament by providing that the King and Commons may enact money bills, and that the passage of such bills through the Lords is an unnecessary formality. Such a practice might be convenient, but clearly it is not now the Law of the Realm.

The Prime Minister, Mr. Asquith, has been forced into an attitude of hostility to the exercise by the House of Lords of the function hitherto attributed to it. Yet in a speech a few years ago he said: "The functions which are claimed for the House of Lords are merely these-first of all, that it should act as a revising authority over the details of legislation; and, in the next place, where there is a reasonable doubt whether, upon any question, the House of Commons is representing the majority of the electorate, the House of Lords should have the power of interposing such delay as will enable that doubt to be authoritatively resolved." The business of the House of Lords, he continued, is "to correct slovenly and check precipitate legislation." "The House must be keen to watch and careful to follow the steady set as distinguished from the transient trend of national sentiment." The House that did these things and was also "ready to defer to the clear manifestation of the popular will is an ideal House of Lords."

In justification of their exercise of the power of rejection the Lords say that the Budget contained proposals that had no mandate of the people behind them, wherefore rejection merely acts as a referendum to the popular vote; and it is very clear that if the Budget be sustained at the polls it will, when again presented to the Lords, be passed unanimously. The Lords say, "We do not oppose a class interest to the mass interest; we afford, on the contrary, an opportunity to the masses for a direct expression of their will." It is also alleged by the Lords that the so-called Budget Bill had other measures tacked to it, contrary to sound parliamentary practice, viz., a liquor licensing bill, and a land bill, and that these measures should have been included in separate bills, their right to amend or reject which would have been beyond all question.

New Taxes. It is proposed to graduate the income tax for a second time and the death duties for a third time, and the effect is to increase very largely the amount of capital confiscated by the State. It is objected that the income tax was instituted as a war tax, and is now made a peace tax, and that the effect is to confiscate the capital of the country to meet current expenditure, thereby seriously endangering public prosperity as well as doing gross injustice to individuals. These, say opponents, are not merely wrong in principle, but have become onerous class burdens. As the principle, or lack of it, shown in these taxes is not new, and only the rate is in question, I shall not deal with them now.

Liquor Licenses, etc. In 1906-7 Excise and Customs' duties on spirits, wine and beer, and licenses of publicans, yielded £38,628,000. The new proposals are expected to produce £4,200,000 extra, viz., Imported spirits, £400,000; Domestic spirits, £1,200,000; and liquor licenses, £2,6oo,ooo. As the amount received in 1906-7 from publicans was £1,720,000 the increase from licenses amounts to 150 percent more than the total amount received in 1906-7. In 1907-8 the revenue derived from brewers licenses was £4800. Under the new proposals the amount expected is £420,000. Distillers: licenses which have paid £1,940 are expected to pay £20,000. Hitherto the license duty on fully licensed houses varied from £4, 10s. where the premises were of less than ten pounds annual value, and £60 on premises of £700 and upwards. The new proposals are designed to impose a license duty on fully licensed houses at a uniform rate of fifty percent of the annual value, but in areas having a population between ten and fifty thousand the uniform rate is not less than £20. In a town containing a population of 100,000 the minimum rates will be £35. It is admitted that the effect of these minimum rates will be to extinguish many of the smaller licenses throughout the country. The duties on brewers' licenses and liquor licenses are tremendously increased, and with reference to liquor licenses the Chancellor of the Exchequer said in his Budget speech: "I propose to take the opportunity of revising the whole system of Excise liquor licenses, a system which is at present full of confusion, and anomalies both in law and practice, and to place it upon a simple and economical basis." It is this object, not collecting taxation merely, but of changing a system, which makes it possible for the Lords to say, "You are tacking a licensing bill to a money bill, and thus justifying our rejection of the whole bill, for a Licensing measure would clearly be open to amendment by this House."

Land Value Taxes. The new land value taxes excite the most support and opposition. Twenty percent of the unearned increment of land is to be taken by the State, beginning with a valuation to be taken at once. There is to be a tax of one-half penny in the pound on the capital value of undeveloped land, and there is to be a ten percent reversion duty upon any benefit accruing to a lessor from the determination of a lease. On the enactment of the proposals all the land in the Kingdom is to be valued. By undeveloped land is meant land not built upon, or in bona fide use in some business, trade or industry other than agriculture, the value of minerals in the land not being included in the value of the land. Land in use for agricultural purposes is not to be taxed on its value for such purposes, but if it have a higher value for other purposes the excess would be taxable; a market garden near a city, for instance; if more valuable for a building site than a market garden would pay on the excess value. Parks, gardens, etc., open to the public pay no tax, nor is there any tax on one acre attached to a dwelling house, but large pleasure grounds would be taxable. The expression "agriculture" includes the use of land as meadow or pasture land or woodland, or for market gardens, nursery grounds, or allotments, and the expression "agricultural land" shall be construed accordingly.

1. On the transfer on sale of land; 2. On a lease for seven years or more; 3. On the death of the owner of land; there is proposed to be placed a duty called the Increment value duty, amounting to one-fifth part by which the value of the land has increased beyond its value at the time when the general valuation was made, or when it was last valued for duty. In the case of land held by corporate bodies a fresh valuation is to be made, and duty paid in 1914, and every fifteen years thereafter. The duty is assessed on the site value of the land, i.e., not on the value of any structure on the land, or any improvements by the owner. The principle aimed at, apparently, is that the State shall share in the increase in the value of land not ascribable to the efforts of the owner, but to the growth of the country and locality in or about which the land is situated.

It is well to remark here that, contrary to general impression, the new land duties do not seem to be aimed at forcing a distribution of the land of monopolists into the hands of peasant proprietors, for agricultural land is not to be taxed. It should also be noted that the new land taxes are not levied at the Lords as such, or at landlords, as such, but merely at landlords of undeveloped lands, suitable for building purposes, and more valuable for that than for agricultural purposes. The essence of the objection made to them is not that they tax landlords as a class, or that they tax the wealthy as a class, but that they attack a particular class of landlord, who may or may not be a wealthy man, and a particular kind of investment, unfairly as compared with other investments. When making his Budget speech, Mr. Lloyd-George said

The first conviction that is borne in upon the Chancellor of the Exchequer who examines the land as a subject for 'taxation, is that in order to do justice he must draw a strong distinction between purely agricultural land and land which has a special value attaching to it owing to its nearness to an urban centre. In some parts of the country agricultural land has gone up, but taken all round it has not appreciated. The growth in value of urban sites is due to no expenditure of capital or thought on the part of the ground owner, but is entirely owing to the enterprising energy of the community. Where it is due to any expenditure by the urban owner himself, full credit will be given him in taxation. One of the worst evils of the system is that instead of reaping the benefit of the common endeavour, the community has to pay heavy penalties to the ground landlords for putting up the value of their land. There are other differences between these two classes of property which have a real bearing on the problem. There is a remarkable contrast between the attitude and policy adopted by a landlord towards his urban property and that which he generally assumes towards his agricultural property. On agricultural estates a considerable proportion of the rents is put back to fructify and improve the soil, or in the way of repairs. Urban owners recognise no such obligation. They spend nothing in building, in improving or in repairing, and are free from the ordinary social obligations which are acknowledged by every good agricultural landowner towards his tenants. The worst rural landlord in this respect is better than the best urban landowner. The urban landowner has no personal relations with his tenants such as the agricultural owner has. What agricultural landowner would think of letting his land for a term of years on the condition that the tenant should pay a rent four or five times the value of the soil; that the tenant should then be compelled to build a house at his own expense in a certain way; that at the end of the term the tenant should have to hand over that house in good tenantable repair, free from all encumbrances to the landlord who has never spent a penny? There is not a landlord who would dream of imposing such outrageous terms on agricultural tenants. Yet these are the conditions imposed on people who have little choice in the matter. This is by no means an imaginary picture.

Speaking in London on June 24th, the Prime Minister said: "These land taxes are a toll levied by the community only on the added values which accrue to land, or rather to the owner of land, not through his own effort, enterprise or expenditure, but from social causes for which the community alone is responsible. They are not, therefore, taxes upon land; they are taxes upon the communal value which has been added to land by the existence and exertions of the State . . . . What is the objection in point of principle? Is there any? I have followed these debates with interest and attention, and I have only heard two. The first one is that this item or ingredient of unearned increase in value is to be found in other forms of property, as Mr. Balfour, in a burst of Socialism, declared the other night. That is the first argument, and the second argument is that if for national purposes you take, in the shape of taxes, that part, or some part at any rate, of the increment which is due to social causes you ought, as a matter of justice, when such a case arises, to compensate the owner of the property for the decrement due to like circumstances. I believe that those are the only two arguments which have been used in opposition to the principle and they can be each of them disposed of in one sentence. As regards the first, even if it be a fact, and I admit it is to some extent and in some cases a fact that there is an element of unearned value in other forms of property besides land, that is an argument not against taxing the unearned value when you find it there, but an argument in favour of taxing it in other cases also. As regards the second argument--the argument based on what is called the decrement--has any one ever heard of any system of taxation which is run upon those lines? You tax the man on his profits. If he does not make any profit there is nothing for you to tax, but have you ever heard a claim seriously put forward on the part of an income tax payer who has done well in years gone by, who suddenly says that the State should compensate him when he is losing?"

It is not so bad an argument as Mr. Asquith suggests that freedom from taxation of a portion of the people is a reason for not taxing the other portion, for surely we are justified in resisting taxation upon the ground that it bears upon a section or class only, and is not general and impartial in its application. His argument against allowance for decrement drawn from an illustration from the income-tax is unsound, for the income-tax is paid yearly on the actual income, not on a fixed maximum. Speaking at Bletchley Park, on August 14th, Mr. Asquith said

"In the first place we have set up at the cost of the State an elaborate system of valuation, the ultimate expenditure upon which will probably be much less than two millions sterling, and which consists, as far as our skill and foresight can go, of machinery which we believe will adequately protect every interest concerned, and which will throw upon those, the representatives of the State, the Commissioners of the Inland Revenue who are seeking to tax owners of land which continues to be properly subject to the tax, will throw upon them the burden of proving that it is land which falls within one of those taxable categories. Now, in the next place, we have supplemented that machinery of valuation by what I think everybody now agrees is a carefully-thought-out system of appeal. The original referee is a man appointed by a perfectly independent body, and from his decision--whether it be a decision upon a point of law or upon a question of fact--there shall be an appeal to the ordinary courts."

Objections to the Land Value Taxes. The time at my disposal will permit of an enumeration of some of the objections only to these land tax proposals

Lord Rothschild: "The whole principle is vicious. The Ministers wish to establish the principles of Socialism and collectivism. The execution of the scheme is left to a secret irresponsible tribunal."

Lord Avebury: "Why is the land to be treated with such exceptional severity? It is already taxed more heavily than other property. Income derived from land pays more income tax than other income. Land bears heavy rates which do not fall on personal property; and yet it is treated in this Budget with exceptional and excessive severity. I cannot, indeed, believe that the Government realize how ruinous their proposals will be. My first objection is that the whole of the land will have to be valued involving several millions of valuations, on very complicated systems, and which will impose an enormous initial expense on owners of land, before anything accrues to Government. But, in the second place, if the Government officials are not satisfied, they are authorized to put any value they please on the land; there is to be no independent authority and no appeal; there is to be a new bureaucracy with absolutely arbitrary powers of taxation. Owners of land are to be taxed not by Parliament, but by an army of petty autocrats, In the second place though, no doubt, land must contribute, the proposals in the Budgets are most unequal. Some land will be almost unaffected; most will be heavily taxed; as regards some the whole revenue will be taken by Government, and nothing left to the present owner. Many a family will be ruined; the value of mortgages will be severely affected, and their security greatly diminished. Take again the question of the unearned increment. It is surely very unjust to take a portion of the increase if the value rises, and not to bear any part of the loss if the value falls. Why is this to be done in the case of land? Why is land to be exceptionally treated? Such a proposal would be generally recognized as intolerable in the case of any other property."

Mr. Austen Chamberlain: "I turn to the increment value duties, and again I have to note the failure of the Chancellor of the Exchequer to redeem, what I thought was a promise--that he would protect the purchaser of land whose land had subsequently fallen in value against being charged increment duty on any recovery in value Within the original price. That does not appear in the Bill. The Right Hon. gentleman confines the protection, such as it is, to property purchased within 20 years before the passing of the Act. Why before the passing of the Act? It is this kind of confusion of thought which seems to me to lie at the root of all this taxation. The Government appear to think, that the recent fall in value has been a wholly abnormal circumstance, never likely to recur. It is a daily and a yearly occurrence in one part of the country or another. It is not confined to twenty years before the passing of the Act; it will recur twenty years or two hundred years after the passing of the Act. Why limit it to twenty years before the passing of the Act? Why not have thirty years? If there is any argument on the subject that the longer a man has been out of his money the worse the speculation has been, the stronger the argument for relief. In assessment of land for taxation you make no allowance for loss of interest. But that is the first element of a business transaction which an investor in this class of property has to consider. He has to say to himself: 'If I purchase this property I shall have to accept an annual return for my money less than I should obtain from Consols or other first class security-one percent or two percent for an indefinite number of years--but I shall recoup myself in the first place by the absolute security which I hold, and, in the second place, by the prospect of a rise in the capital value when my land is ripe for development.' How do you beat him? You rob him of his security and then of one-fifth of the increased capital value. You call the rise in capital value 'unearned increment,' and having given a dog a bad name you proceed to hang him. It is not unearned increment but deferred interest as much a part of the consideration which the man bought as the land itself, or as any marketable security. That is not all. It was understood I think from the Budget speech that this tax was a tax upon ground landlords, a small and unpopular class, one of the minorities which the Chief Secretary for Ireland (Mr. Birrell) cheerfully says must suffer. The Bill taxes the same thing twice over; not merely the ground landlord, but the leaseholder, and it taxes him on the same increment on which it taxes the ground landlord. Indeed, it taxes it three times over, for it puts the same value again on death duties and assesses the death duties upon it without any allowance. Is that taxing fairly with clue regard for justice? To me it seems that to use taxation in this way is to forge out of your Budget the fiercest weapon of oppression."

Mr. Bonar Law: "Capital is being driven abroad not only on account of the Income Tax or death duties. In other countries a higher rate of interest can be obtained, but until the advent of this Government British citizens preferred to invest at home because they thought the security was greater. The Government are not only driving it away by the Income tax and the death duties, but by other parts of the Budget they are making the security of property of every kind less than it is in any civilized country of the world. The Budget is doing one good thing. It is driving capital out of the United Kingdom, but at least it is benefiting our Colonies. Canada is receiving a great deal of it. That is a great democratic country, but it is a sane country. It is a country of which Lord Rosebery said the other day, 'It is not yet a crime to accumulate wealth.' In Canada there is no income tax, and they are doing everything they can to attract capital, while this Government are doing everything they can to drive it out of the country."

In the debate on the Budget Mr. Redmond, Leader of the Irish Party, said: "From the Irish point of view this Budget is bad, unjust and oppressive. That case of Ireland has never been considered. In Ireland by reason of the extreme poverty of the country there is no way to raise money except by taxing the necessities of the people. So far from removing the injustice from which Ireland suffers under the existing financial relations this Budget intensifies it by the new whiskey taxes. The Government are discriminating in favour of England as against Ireland, for they are not taxing beer. They can only do financial justice to Ireland by exempting her from the operation of the whiskey taxes, and license duties." Mr. Bonar Law said: "I agree with the Honourable and learned member who has just spoken that the new spirit tax is unfair entirely to Ireland and Scotland, and that the principle on which it is based is entirely wrong." In a letter by Mr. Chamberlain, September gist, it was said: "Mr. Asquith admits that Tariff Reform is the only alternative; it is, therefore, between the Budget and Tariff Reform that you have to choose--Tariff Reform which assists trade, increases employment, and secure a fair contribution to our revenue from foreigners using our market for the sale of their goods, and the Budget which exempts the foreigner from all contributions while casting fresh burdens on our own trade, hampering our industries, and taxing the commonest comforts of the people."

In conclusion, there seems little reason to hope that the result of the approaching elections will in any event amount to even a measurably intelligent and unprejudiced expression of opinion by the electorate on either the Budget proposals or Tariff Reform. The Irish Home Rulers who oppose the Budget proposals will support the Liberal party in return for a measure of Home Rule for Ireland, and logically so, perhaps, since not only will they thereby get that they most desire, but possibly it may include the liberty to make their own taxation, and Ireland therefore would not be affected by subsequent land taxation. Many who would otherwise vote against the Budget will vote Liberal because they wish "to down the Lords." Writing with reference to Nonconformists and the coming election, the British Weekly says: "Above all, we must know no question in the coming days save the question of the House of Lords, and we must be ready to vote with the candidate who supports us in that, even if in other things we cannot wholly go with him." Mr. John E. Redmond, speaking at the Nationalist demonstration in Dublin, said that for the first time in a century they had the greatest opportunity ever offered them to tear up and trample under foot the Act of Union.

On the other hand Tariff Reform may receive the support of many as an escape from the Budget, and the Socialism it seems to presage. It seems certain, however, that the chances for such victory are poorer than if the Lords had passed the Budget. "Down with the Lords" is an attractive cry to many, but it means many different things, and Premier Asquith has already declared that to his Government it means mending, not marring; reform, not abolition; though reform in his opinion implies a scheme whereby the House of Lords shall be subordinate, ultimately, to the Commons. Many will consider that abolition would be less costly, and not more fraught with danger. It may be well doubted if the Motherland has ever faced a greater crisis than the present, with four mighty issues tumbled together in one throw of the dice: Home Rule for Ireland; Abolition or Reform of the Lords: The Budget Proposals, and Tariff Reform.

"Lord God of Hosts, be with us yet, Lest we forget, lest we forget."