CONCLUSION
Progress in 40 years 330
Some items in material progress, 1867-1903 332
What Dudley Baxter wrote in 1867 333
The poor within our borders to-day are as large in number as
the entire population in 1867 338
The employer the effective schoolmaster 340
A poor government is a weak government 341
Sir Robert Giffen on taxation 341
We must have regard to both palliatives and remedies 342
Public ownership of capital must replace private ownership 343
The substitution of the public shareholder for the private
shareholder not difficult 344
The uplifting of work through the reduction of toil 345
The statesman must take up the tools of the scientist 346
The appeal to the few 348
The appeal to the people 348
INDEX 351
RICHES AND POVERTY
BOOK I
THE ERROR OF DISTRIBUTION
CHAPTER I
THOUGHTS ARISING OUT OF A GREAT CONTROVERSY
During recent years a considerable share of the thoughts of men has been
devoted to the consideration of one part of our fiscal policy,—that part
which is concerned with Customs duties. In public and in private, on
hundreds of platforms and in thousands of homes, the ancient issue has
been debated between those who hold that Customs duties should be
imposed for revenue purposes only and those who contend that Customs
duties may be used as instruments with which to direct wisely the
agricultural, industrial and commercial development of a nation. In the
arguments which have been adduced by both sides in this controversy a
large part has been taken by evidence of the prosperity or want of
prosperity of the United Kingdom, as though Customs policy were the sole
factor in determining the wealth and progress of a people. Blind to the
fact that a wise Customs policy can at best enable a nation to make the
most of its natural advantages, extreme disputants have been engaged on
the one side in piling up incontestable evidences of British wealth and
on the other side in producing equally incontestable evidences of
British poverty. The Free Trader has revelled in import and export,
shipping, banking and revenue statistics, while the Protectionist has
reminded us of the existence of millions on the verge of hunger, of
hundreds of thousands of paupers, and of tens if not hundreds of
thousands of unemployed. The Free Trader has demonstrated that, as a
whole, we are a wealthy and a prosperous people. The Protectionist has
been able to throw doubt upon that wealth and prosperity chiefly because
it is an indisputable fact that, whatever may be true of our accumulated
wealth and total income, every British city has its slums, its paupers
and its out-of-works. The Protectionist has been unable to resist the
Free Trade evidence as to the magnificence of our commerce and shipping
and the increasing national income recorded by the Inland Revenue
Commissioners. The Free Trader has had reluctantly to admit the
existence, in our wealthy country, of social disorders and masses of
extreme poverty which are terrible blots upon our prosperity. If one
side has dwelt almost exclusively upon signs of wealth and the other
side almost exclusively upon evidences of poverty, what else could be
expected when a highly complicated problem became the shuttlecock of
faction? Even honest politicians become afraid to make statements which
may be treated as "admissions" when party feeling runs high. The more
should we welcome the notable utterance of Sir Henry Campbell-Bannerman
at Perth on June 5th, 1903:
"But I take it (the Chamberlain policy of 'Preference') as confined to
food, and it amounts to this, that the cost of the necessaries of daily
life is to be raised to the people of this country in order that the
Colonial producer may do more business, make larger profit, and the
landowner get better rents. Now the pinch of this does not fall upon the
well-to-do. It may be an inconvenience to a great number of people, but
the real pinch of it falls upon a needier class altogether, who are
sadly large among us. What is the population of the Colonies which I
have named? About thirteen millions. This is the population who will
share more or less the benefit of this new arrangement. In this country
we know, thanks to the patience and accurate scientific investigations
of Mr Rowntree and Mr Charles Booth, that there is about 30 per cent. of
our population underfed, on the verge of hunger. Thirty per cent. of 41
millions comes to something over 12 millions—almost identical as you see
with the whole population of the Colonies. So that it comes to this,
that for every man in the Colonies who is benefited, one head is shoved
under water in this country. I think I might set down that fact as
almost enough of itself to condemn any scheme, however plausible. Surely
the fact that about 30 per cent. of the population is living in the grip
of perpetual poverty is, or ought to be, a sufficient answer to the
Prime Minister's complacent suggestion that we can now afford to try
experiments which fifty years ago were not to be thought of."
These words have been widely used as a reply to the assertion that we
are a prosperous people. Their true meaning is, that while we have
acquired great wealth, and enjoy a considerable national income, that
wealth and that income are not so distributed as to give a sufficiency
of material things to all our population. As for their use as an
"argument" for Protection, we have but to turn to that land favoured of
nature, the United States of America, to find records of poverty fully
as distressing as our own.
Mr Robert Hunter, the American sociologist, thus summarises the poverty
of the United States of America: "There are probably in fairly
prosperous years no less than 10,000,000 persons in poverty; that is to
say, underfed, underclothed, and poorly housed. Of these about 4,000,000
persons are public paupers. Over 2,000,000 working men are unemployed
from four to six months in the year. About 500,000 male immigrants
arrive yearly and seek work in the very districts where unemployment is
greatest. Nearly half of the families in the country are propertyless.
Over 1,700,000 little children are forced to become wage-earners when
they should still be in school. About 5,000,000 women find it necessary
to work, and about 2,000,000 are employed in factories, mills, etc.
Probably no less than 1,000,000 workers are injured or killed each year
while doing their work, and about 10,000,000 of the persons now living
will, if the present ratio is kept up, die of the preventable disease,
tuberculosis."
We have, then, to thank the fiscal controversy for this: In the belief
that evidence of prosperity, or the reverse of prosperity, is a proof or
disproof, as the case may be, of the wisdom of a particular Customs
policy, we have been reminded at once of our riches and of our poverty.
Through the controversy over that absurd phrase the "balance of trade,"
worthy landsmen have been reminded that the United Kingdom possesses
half the world's seagoing ships, and poor clerks have learned with
astonishment that our oversea investments produce over £100,000,000 of
profits per annum. The unemployed workman, drawing from his beneficent
trade union the small allowance with which his own thrift has provided
him, and which barely keeps the wolf from his door, has learned that our
imports of food—"chiefly from foreign countries"—are worth £200,000,000
per annum. Millions—other people's millions—have become common objects
of the newspaper column, and it is probable that a great part of our
population is now acquainted with the fact that the gross income brought
under the review of the Income Tax Commissioners is about £1,000,000,000
per annum. It has also, alas, become familiar that our Poor Law
expenditure reaches £17,000,000 a year, and that, even in our best years
of trade, many of our skilled workmen are denied the means of earning
their livelihood. While demonstrating our prosperity the good Free
Trader has paused to write a cheque for a West Ham Distress Fund, or
subscribed some shillings for a children's slum party.
The object of these pages is to help the reader to form an accurate idea
of the distribution of the wealth which results from our industries and
commerce. 44,000,000 people in the United Kingdom work to produce
certain commodities, and a part of this output is exchanged for
commodities produced in other lands. We produce, we export, and we
import, and our home production increased by our imports and decreased
by our exports constitutes a great income which is divided up amongst us
in such manner that some of us are rich and some of us are poor. Let us
endeavour to make concrete our ideas on the subject of riches and
poverty, that we make quite sure what we mean when we speak of the
wealth and prosperity of the United Kingdom.
CHAPTER II
THE NATIONAL INCOME
In considering and estimating the national income it is necessary to
remind ourselves, in the first place, that our production, our exports
and our imports, alike consist of both goods and services. The processes
of thought and action result in the conception, production, distribution
and use of ponderable and imponderable commodities. In an advanced
community the greater part of the material and immaterial productions
which are the expressions of its various activities becomes the subject
of exchange. The many exchanges are made by reference to a common
standard, and thus we are enabled to measure, in terms of money, the
greater part of the national income. There remains a not inconsiderable
production of ponderable and imponderable things which it is difficult
or impossible to measure in terms of money, but upon which largely
depends the happiness of a people. The material produce which does not
become the subject of exchange, includes several very important items,
amongst which may be mentioned the produce of the gardens or allotments
of many agricultural labourers, and the production of clothing and the
cooking of food by the women of the middle and lower classes. The
immaterial things which do not come into the market are exceedingly
important, especially to the poor. The household work of a poor woman
with a husband and several children, if it could be measured in terms of
money, would be worth a considerable sum. The imponderable part, the
managing, the careful buying, the arranging, the cleaning, the serving,
added to the manufacturing part, the cooking and the stitching, go often
to make a sixteen-hours' working day, and who shall place a market price
upon each of the sixteen hours? In the well-to-do household we also find
the woman active for some fourteen or sixteen hours a day, but the
product of the hours is more often immaterial than in the poor man's
home. Thus the care of servants has been known to cause the expenditure
of much time and anxiety by women of large income. A rich woman who has
studied under Marchesi may exercise in private, to solace her father or
lover, a soprano worth one shilling per note in the public concert-room.
It is worth no less in the drawing-room, but in estimating the national
income we have to neglect its market value just as we must neglect that
of the poor woman's apple-pie.
With this reminder as to the production of unexchanged commodities,
which, while important, are yet but an exceedingly small part of the
product of the entire activities of our people, I proceed to an
examination of the money value of that greater part of the product which
is bought and sold.
The collection of the Income Tax makes a more or less complete
inquisition into the profits or salaries received or earned by those
whose incomes exceed £160 per annum. Below that limit income tax is not
payable, but a small amount of the income of persons with less than this
£3 per week does actually come under the review of the Commissioners.
If we take the figures of the latest period of which we have record, we
find that in the financial year 1908-9 (_i.e._ the twelve months ended
March 31st, 1909) the following particulars of gross incomes were
ascertained by the Inland Revenue Officials (fifty-third Report of the
Commissioners of Inland Revenue, Cd. 5308, p. 105):—
GROSS AMOUNT OF INCOME BROUGHT UNDER REVIEW IN 1908-9
Schedule A. Profits from the ownership of
lands, houses, railways, mines, etc. £269,900,000
Schedule B. Profits from the occupation
of lands (Farmers' Tax) 17,400,000
Schedule C. Profits from British, Indian,
Colonial and Foreign Government
Securities 47,500,000
Schedule D. Profits from Businesses, Concerns,
Professions, Employments, etc.,
including certain profits from places
abroad 565,600,000
Schedule E. Salaries of Government,
Corporation, and Public Company
Officials 109,600,000
--------------
£1,010,000,000
--------------
The following table shows the growth of the aggregate during the past
fifteen years:—
GROSS PROFITS ASSESSED TO INCOME TAX
(_From Inland Revenue Report_)
1893-4 £673,700,000
1894-5 657,100,000
1895-6 677,800,000
1896-7 704,700,000
1897-8 734,500,000
1898-9 762,700,000
1899-1900 791,700,000
1900-1 833,300,000
1901-2 867,000,000
1902-3 879,600,000[1]
1903-4 902,800,000[2]
1904-5 912,100,000
1905-6 925,200,000
1906-7 943,700,000
1907-8 980,100,000
1908-9 1,010,000,000
It should be observed that these figures are for gross income, and some
adjustments have to be made before we can arrive at the total income of
that part of the nation which has the mingled pleasure and pain of
paying Income Tax.
From the £1,010,000,000 brought under review in 1908-9, the Inland
Revenue authorities allowed the following deductions before arriving at
taxable incomes:—
(_a_) Exemptions in respect of incomes
under £160 per annum £58,400,000
(_b_) Abatements on incomes ranging from
£160 per annum to £700 per annum 120,300,000
(_c_) Life Insurance Premiums 10,500,000
(_d_) Charities, Hospitals, Friendly
Societies, etc. 11,800,000
(_e_) Repairs to Lands and Houses 40,100,000
(_f_) Wear and tear of Machinery and Plant 22,900,000
(_g_) Other Allowances 52,700,000
------------
Total Deductions £316,700,000
============
So that Income Tax in 1908-9 was actually collected not upon
£1,010,000,000 but upon £693,300,000.
But we have not to make all the above deductions in arriving at the
actual income of the income tax paying class. We have only to deduct
those items which are not the real income of that class, viz.:—
(_a_) Exemptions in respect of incomes
under £160 £58,400,000
(_d_) Charities, Hospitals, etc. 11,800,000
(_e_) Repairs to Lands and Houses 40,100,000
(_f_) Wear and tear of Machinery 22,900,000
(_g_) Other Allowances 52,700,000
------------
£185,900,000
============
Deducting these items we get:—
GROSS ASSESSMENTS TO INCOME TAX
CORRECTED[3]
Gross Assessments 1908-9 £1,010,000,000
Less Deductions as above 185,900,000
--------------
£824,100,000
==============
This figure may be compared with the £719,500,000 given on page 11 of
"Riches and Poverty" (1905) for the fiscal year 1902-3. The increase is
no less than £104,600,000 in five years, and this increase is especially
commended to the notice of those critics who have worked so hard to
whittle away a little from my estimates of 1903-4. The onward sweep of
the figures has been magnificent; and accomplished facts now provide the
apologists of the rich with the task of explaining away another
£100,000,000 or so per annum.
To resume, the £824,100,000 arrived at above, handsome figure as it is,
is certainly not complete. There is unquestionably still a considerable
amount of evasion under Schedule D of the Income Tax. The landlords of
Schedule A cannot escape assessment because the tax is paid by occupiers
and deducted from rent, but there is a certain amount of
under-assessment. Under Schedules B, C and E evasion is, for the most
part, difficult or impossible. Under Schedule D,[4] however, a large
number of incomes are understated and many which ought to be assessed
escape altogether. It is almost as true to-day as it was in 1861 that,
in the words of Mr Lowe's Draft Report to the Income Tax Committee of
that year, "Schedule D depends on the conscience of the tax-payer who
often, it is to be feared, returns hundreds instead of thousands, and
who is certain to decide any question that he can persuade himself to
think doubtful, in his own favour." It is recorded by the Income Tax
Commissioners in their Twenty-Eighth Annual Report that when, in 1803,
taxation at source was substituted for self-assessment in the case of
all income but business profits, the effect was to make the produce of
the tax at 5 per cent. in 1803 almost equal to that of 10 per cent. in
1799, showing that in the earlier year those who assessed themselves
unaccountably overlooked one-half of their incomes. Dudley Baxter
reminds us in his classical paper on the National Income[5] that in his
Budget Speech in 1853 Mr Gladstone quoted a remarkable instance of
evasion. When Cannon Street Station was constructed, twenty-eight
persons claimed compensation for the loss of annual profits which they
estimated at £48,000. The jury, after considering their case, awarded
them £27,000. They had returned their profits to the Income Tax
Commissioners at £9,000! In recent years the formation of limited
liability companies has frequently revealed profits far in excess of
those previously stated under Schedule D. Whatever figure we allow for
such evasion must, in the nature of the case, be conjectural. In "Riches
and Poverty" (1905), p. 13, I estimated evasion and avoidance as 20 per
cent. of the declared profits. Twenty per cent. of £365,000,000 (the
profits of "Businesses, Professions, etc," assessed under Schedule D) in
1902-3 was £73,000,000. We have since had remarkable proof of the
reasonableness of this estimate. In 1907-8 the gross assessments to
Income Tax rose by £36,000,000 (see p. 11). There is little doubt that
part of the rise was due to Mr Asquith's enactment (Finance Act, 1907,
Clause 19) differentiating between earned and unearned incomes _on the
condition that earned or partly earned incomes up to £2,000 a year were
declared by their owners_. For the financial year 1907-8 does not
include the profits of the good year 1907 which (see Chap. 21) were not
assessed under our averaging system until 1908-9. It was the new
personal declarations which led to the revelation of income hitherto
escaping tax, and part of the £36,000,000 rise in assessments in 1907-8
is undoubtedly part also of the estimate of £73,000,000 escaping tax
which I made in "Riches and Poverty" (1905). For 1908-9, therefore, I
reduce my estimate of income escaping tax accordingly. I now take it as
£60,000,000 in 1908-9.
Another point for consideration is the amount of profit received by
persons in this country from places abroad. It is exceedingly difficult
to tax the whole of such profits. In 1908-9, £88,800,000, made up as
follows, was ear-marked by the Commissioners as profit received from
abroad:—
ASSESSED PROFITS EAR-MARKED AS
RECEIVED FROM ABROAD, 1908-9
(1) India Government Stocks, Loans }
and Guaranteed Railways } £9,000,000
(2) Colonial or Foreign Government }
Securities } 23,200,000
(3) Colonial or Foreign Securities,
other than Government, Coupons,
and Oversea Railways other
than those in (1) 56,600,000
-----------
£88,800,000
===========
The total profit received or receivable yearly in this country from
oversea investments it is impossible to estimate precisely, but there is
good reason to believe that it is not less than £140,000,000. It should
not be imagined, however, that the whole of the difference between this
sum and that ear-marked by the Commissioners escapes assessment.
Undoubtedly some of it eludes taxation, but a considerable sum, it
should be remembered, is included with ordinary business profits under
Schedule D. A few illustrations will make this clear. Messrs Armstrong,
Whitworth & Co. have a shipyard in Italy the profits of which are
received in this country, but are not distinguished from the ordinary
profits of the company in the income-tax assessment. The same is true of
such a firm as Lipton Ld. which owns extensive tea plantations in
Ceylon. The profits made in Ceylon and remitted to this country are
included in and assessed with the general profits of the business. There
are a large number of firms which similarly own foreign or colonial
property or branches which are organic parts of their businesses and are
often the sources of their materials. When allowance is made for these
facts it is probable that some £115,000,000 of oversea profits
(including the nearly £90,000,000 or so actually ear-marked) are
assessed to income tax, leaving but about £25,000,000 unassessed.
Accepting these figures, we arrive at the following estimate of the
total income enjoyed by those persons who have over £3 per week:—
INCOME OF PERSONS ENJOYING OVER £160
PER ANNUM, 1908-9
Gross Assessments to Income Tax Schedules
A, B, C, D, and E £1,010,000,000
_Deduct_
Items not representing real income, etc.
(see page 12) 185,900,000
--------------
£824,100,000
_Add_
(_a_) For under-assessment under
Schedule D 60,000,000
(_b_) Foreign profits escaping tax 25,000,000
------------
£909,100,000
============
The foregoing figures relate to the fiscal year ended March 31st, 1909,
the latest period for which detailed figures are available.
It is necessary to point out again that while this fiscal year 1908-9
covered the assessment of the calendar year 1907, which was a year of
great profit-making, it did not fully assess the profits of that boom
year. Under Schedule D of the Income Tax the profits assessed in 1908-9
were the profits of the three years 1905, 1906, and 1907. That is to
say, the figures just arrived at, £909,100,000, _are an understatement
of the true aggregate incomes of those having upwards of £160 a year in
1907_. The actual income of the income tax payers in 1907 greatly
exceeded £909,000,000.
In "Riches and Poverty" (1905) my equally conservative estimate of the
income tax payers' aggregate income for 1903-4 was £830,000,000. We
therefore get the following comparison:—
GROWTH OF AGGREGATE INCOME OF PERSONS
ENJOYING OVER £160 A YEAR
1903-4. Estimate of "Riches and }
Poverty" (1905) } £830,000,000
1908-9. Estimate of this Edition }
(1910) } 909,000,000
------------
Increase £79,000,000
============
And this remarkable growth in five years is shown in spite of the fact
that I have allowed for £13,000,000 of income tax assessment as being
due to increased severity of collection, for I have assumed that
£13,000,000 more of existing home profits were revealed in 1908-9 than
in 1903-4.
Now let us turn to the incomes which do not exceed £160 a year, and
which, therefore, are not assessable to income tax.
First of all, we have the class of small incomes which lie between the
manual workers and the income tax payers. We cannot hope, in view of the
poverty of the information which our present Census methods place at our
disposal, to estimate this part of the national income with any degree
of confidence, and we can at best arrive at a rough approximation. I
estimate that in 1908, of our "occupied" population, about 3,100,000
were neither income tax payers on the one hand nor manual labourers on
the other hand. That is to say, they were petty tradesmen, civil
servants, clerks, shopmen, travellers, canvassers, agents, teachers,
farmers, inn-keepers, lodging-house-keepers, pensioners, and so forth,
whose profits or salaries are below £3 per week. At what rate can we
estimate their average income?
The total includes a very considerable number of young persons between
10 and 20 years of age. The teachers, some 250,000 in number, include
pupil teachers of both sexes whose remuneration begins at a few
shillings per week, and as a whole the teaching profession is wretchedly
paid. The commercial and law clerks, some 500,000 in number, include
juniors, office boys, and poorly paid girl typists. As to shopkeepers,
there is an exceedingly large number of these distributing agents whose
incomes are of the slenderest dimensions. Unfortunately we do not know
how many shops in the United Kingdom have an annual value of less than
£20, but their number must be very great, and the petty tradesmen who
keep them have to work hard for poor returns. We have also to remember
the quite considerable number of shops which are branches of great
distributive firms and managed by shopmen with small salaries. As to
shop assistants in general, their salaries are exceedingly small. I am
informed by the National Amalgamated Union of Shop Assistants,
Warehousemen and Clerks that the average male assistant "living in" gets
from £25 to £30 per annum plus "premiums" and board and lodging, while
"living out" the average is about £74. Grocery and boot salesmen in the
shops of big distributing companies, who often are not required to "live
in," get from 20s. to 30s. per week. The wages of the "managers" of
shops are sometimes as low as 25s. per week. As for the value of the
"living in," this may be illustrated by the fact that in a certain West
of London house, where "living in" is the rule, a man applied for
permission to "live out." He was told that he could do so, but that only
£5 per annum extra could be allowed him. In a return to the Board of
Trade for the purpose of statistics, the same employer would doubtless
value the same "truck" at £30 or £40 per annum. I have before me the
wages paid to the young women who work for a great multiple shop firm
with 200 shops; they range from 3s. to 11s. per week!
Passing to the class of commercial travellers and canvassers, there is
perhaps no calling in which earnings vary so greatly. While there are a
number in the income-tax class, there are thousands of men included in
the class we are now considering who live on "commission only," and
thousands more who are paid by generous employers 15s. to 25s. per week
plus a small commission. Advertisement and book canvassers are engaged
upon widely varying terms, and many of them have a very precarious
livelihood.
In "Riches and Poverty," edition 1905, I wrote: "Nearly the whole of the
farmers of the United Kingdom earn less than £160 per annum. Out of a
total profit of £17,500,000 as much as £11,000,000 is excused on the
ground that income is below £160. This £17,500,000 is the annual income
of an uncertain number of the larger farmers, probably as many as
300,000, which gives an average income of about £60 per annum! In
1902-3, 302 farmers elected to have their actual profits assessed under
Schedule D. They were assessed at £10,974, which gives an average of
only £37 per annum. These 302 farmers paid an aggregate rental of
£116,259!"
These remarks did not take sufficient account of the under-assessment of
farmers' profits under Schedule B. It would probably have been nearer
the mark to take one-half of the rental paid rather than the official
one-third as representing farmers' profits. If we did so, the profits of
300,000 farmers would come out at say £26,000,000 instead of
£17,500,000, and the average profit would run to £87 per annum. Even
this correction, however, would leave the great majority of our farmers
under the £160 income tax line.
These notes on some of the largest classes of persons which go to make
up the order of incomes immediately under consideration will serve to
show that we are dealing with working men and working women whose
earnings are exceedingly small. It should also be remembered that many
of them are subject to losses from terms of unemployment. Clerks and the
poorer travellers have little security of tenure, and at any given time
there are many out of work. Hundreds of applications are commonly
received in reply to single advertisements for clerks and travellers. To
the petty tradesman bad trade does not spell "unemployment," but it
often spells keeping a shop which does not keep its proprietor for many
months.
Taking everything into consideration, and remembering that no large
incomes are introduced to weight the average, the upper limit being as
low as £160 per annum, I do not think we can estimate the average income
of the 3,100,000 persons at more than £75 per annum, and I should put
the figure lower if I did not assume that a certain amount of interest
is drawn by some members of the group. This estimate gives £232,000,000
as the annual income of those who are not "manual" workers, but whose
incomes are not assessed to income tax because they are less than £3 per
week.
I have thus assigned to these members of the lower middle classes no
greater earning power than they possessed in 1903. I think I am well
advised in this. As will be seen later, wages have been almost
stationary of late, and there is no reason to believe that clerks,
commission men, etc., have fared better. Even as I write there comes to
me a letter from a man whom I employed when editing a newspaper some
years ago. He says (August 1910), "My present wage is 25s. per week,
with no allowance for lodging out when doing country work. It is easily
understood that this is not a sum which allows of luxuries for the
present or provision for the future." He is now a directory canvasser,
one of thousands in the employ of a large firm of publishers.
Since these pages went to the printer, a Committee of the British
Association has issued a Report (1910) on the group of incomes just
referred to which largely confirms the conclusions I presented in 1905.
The Committee arrive at an average earned income of £71 against the £75
which I consider to cover both earned and unearned incomes. They treat
of 4,000,000 people where I treat of 3,100,000, but that is because,
while I exclude manual labourers as a class, the Committee include many
manual labourers. Thus the Committee include sweeps in this intermediate
class, while I include them with the manual workers whose earnings we
shall next consider.
We now come to the largest class of the working population, the "manual
workers" commonly so called.
Including persons of both sexes and all ages, I estimate from the census
returns the number of manual workers in our population of 44,500,000 at
15,500,000. This number includes, in addition to all those engaged in
industrial, agricultural, and domestic service, soldiers, sailors,
policemen, and postmen.
In 1886 the Board of Trade conducted the only Census of Wages made in
the United Kingdom prior to 1907. (We have not yet had a report on the
later Census.) Sir Robert Giffen, who in his then capacity as Assistant
Secretary of the Board of Trade in charge of the Commercial Department,
directed the Census, describes in his General Report issued in 1893 (C.
6889) the method adopted. Schedules were sent out to employers, after
careful consideration of the circumstances of each industry, specifying
the various occupations of each trade and asking for details as to rates
of wages, the numbers employed at each rate, the hours of labour, and so
forth.
As to industrial employment generally the following trades were
investigated: Cotton, woollen, worsted, linen, jute, hemp, silk, carpet,
hosiery and lace manufacture, smallwares, flock and shoddy manufacture,
coal and iron mines, metalliferous mines, paraffin oil works, slate
mines and quarries, granite quarries and works, stone quarries, china
clay works, police, construction and care of roads, pavements and
sewers, gasworks, waterworks, pig-iron manufacture, general engineering,
iron and brass foundries, iron and steel, shipbuilding (iron and wood),
tin plate manufacture, saw mills, brass and metal wares, cooperage
works, coach and carriage building, boot and shoe making, breweries,
distilleries, brick and tile making, chemical manure manufacture, and
railway carriage and wagon building.
The details obtained related to 355,838 men, 80,253 boys, 151,263 women
and 48,772 girls, and were considered by Sir Robert Giffen to be
"representative of, perhaps, three-fourths of the manual labour classes
of the United Kingdom." He also expressed the opinion that the "broad
results shown by the census summary would not be sensibly modified by
including the great mass of other employments not comprised in that
summary."
In the following table the Board of Trade summarised the proportion of
men, women, boys and girls working at various rates of wages, in 1886,
in the industries which I have mentioned:—
WAGES IN 1886. THE BOARD OF TRADE SUMMARY OF RATES OF WAGES (NOT ACTUAL
EARNINGS) DERIVED FROM THE DETAILED EXAMINATION OF 38 SELECTED
INDUSTRIAL OCCUPATIONS
Men. Women. Boys. Girls.
Per Cent. Per Cent. Per Cent. Per Cent.
Half Timers -- -- 11.9 27.2
Under 10s. per week 0.1 26.0 49.7 62.5
10s. to 15s. " 2.4 50.0 32.5 8.9
15s. to 20s. " 21.5 18.5 5.8 1.4
20s. to 25s. " 33.6 5.4 0.1 --
25s. to 30s. " 24.2 0.1 -- --
30s. to 35s. " 11.6 -- -- --
35s. to 40s. " 4.2 -- -- --
Above 40s. " 2.4 -- -- --
----- ----- ----- -----
Total 100.0 100.0 100.0 100.0
----- ----- ----- -----
Average Rate of _s._ _d._ _s._ _d._ _s._ _d._ _s._ _d._
wages 24 9 12 11 9 2 6 5
It will be seen that the average rate of men's wages came out at 24s.
9d. per week or, say, £64 per annum in a year of constant occupation.
The weighted average rate for both sexes and all ages comes out at 17s.
6d. per week or, counting 52 weeks' work in the year, £45. 10s. per
annum.
The Board of Trade also investigated the rates of wages in other
occupations, and the following table compares the £64 of the adult males
in general industries with the rates of wages paid to adult males in (1)
railway service, (2) building, (3) mercantile marine, (4) Royal Navy,
(5) Army, (6) domestic service, (7) asylums, (8) hospitals (in 1886
unless another date is given):—
AVERAGE RATES OF WAGES (NOT ACTUAL
EARNINGS) FOR MEN IN 1886
Per Annum
Average of Wage Census (38 Industrial occupations) £64
Railways (for 1891) 60
Building Trades (for 1891) 73
Seamen: Mercantile Marine, including estimated }
value of food and berths } 65
Royal Navy, including value of food, etc. 65
Army (Non-Coms, and men). Including value }
of food, etc. } 48
Domestic Servants (large households). Including }
value of food, etc. } 68
Employees in Lunatic Asylums. Including value }
of food, etc. } 60
Employees in Hospitals and Infirmaries. Including }
value of food, etc. } 61
---
Unweighted Average £62
---
In his report already referred to, Sir Robert Giffen, after detailing
the average rates of the above table, says (p. xxxiii): "Thus in nearly
all these trades the average rates are about the same as the average
rate in the Census of Wages Summary." But the table does not include the
badly paid agricultural labourer, the largest group of all, and the
figures for seamen, etc., are, it should be observed, swollen by
estimates of the value of board and lodging.
Finally, Sir Robert Giffen arrived at the general conclusion that "the
broad results shown by the census summary would not be sensibly modified
by including the great mass of other employments not comprised in that
summary."
In January 1893 Sir Robert Giffen gave evidence before the Labour
Commission and submitted the facts I have detailed. He prepared a
general estimate of the proportion of the national income then taken by
the wage-earning classes, and his evidence on this point (questions 6909
to 6914) is summarized in the following table:—
EARNINGS OF MANUAL LABOURERS IN 1886
(Sir Robert Giffen's estimate for the Labour Commission)
Number. Annual Average Aggregate Earnings.
per Wage-Earner.
Men 7,300,000 £60 0 0 £439,000,000
Women 2,900,000 40 0 0 118,000,000
Boys 1,700,000 23 8 0 46,000,000
Girls 1,260,000 23 0 0 29,000,000
---------- --------- ------------
13,200,000 £48 0 0 £633,000,000
---------- --------- ------------
There can be no question that this estimate of Sir Robert Giffen's
somewhat exaggerated the actual earnings of manual labourers as a whole.
In the first place, it was too much to assume that the 24s. 9d. per week
or £64 per annum was representative of the whole of adult male labour.
Without introducing agricultural labourers (the largest group in the
country), general labourers, postmen, and other ill-paid workers, the
unweighted average of the table on page 24 is £62. If £60 per annum had
been given as the average _rate of wages_ of all the adult male workers
in 1886 it would probably have been an exaggeration. It was not given as
a rate of wages, however, but as the actual earnings of the men after
all allowance made for short time, unemployment, sickness, accidents,
strikes, lockouts, stress of weather, etc. Sir Robert Giffen appears to
have assumed that all the adult male workers of the United Kingdom were
employed on the average about 50 weeks out of 52, and were paid at the
average rate of £64 per annum!
In 1866 Leone Levi, in estimating the manual workers' earnings, assumed
that four weeks per annum were lost. Dudley Baxter in 1867 pointed out,
in criticism of Leone Levi, that if four weeks' "play" were all that
need be allowed "England would be a perfect Paradise for working
men."[6] Dudley Baxter, in view of the circumstances of his day, allowed
ten weeks for "play" in making his estimate, and there can be no
question that he was nearer the truth than Levi. At the present day the
level of employment is very much the same as it has been for the past
forty years, while sickness, accidents, and the weather are still with
us. We need not wonder, then, if Professor A. L. Bowley, who has given
the subject of wages so much attention, bases his estimates upon the
loss of six weeks' work per annum through sickness and holidays, and
makes an additional allowance for unemployment, while also assuming that
10 per cent. of the working population only get casual or irregular
work, bringing them in about half the amount shown in the Wage Census.[7]
If the estimate given to the Labour Commission had allowed for six
weeks' "play," the average earnings of men, women, boys and girls would
have come out at £40. 5s. per annum instead of £48, and the aggregate
earnings, therefore, at much less than £633,000,000. Leone Levi's
estimate for 1884, allowing for only four weeks' play in the year, was
£521,000,000. This figure is too large, but it is over £100,000,000 less
than that of Sir Robert Giffen.
I now take the Wage Census figure of 1886 as a basis and correct it for
the upward movement of wages since that date by the wage index numbers
of the Board of Trade (Cd. 4954, which slightly corrects the index
numbers of Cd. 1761, used in "Riches and Poverty," 1905 edition, p. 24),
which are based on the mean of over 150 rates:—
Average Wage
(Men, Women, and Board of Trade
Year. Children) per Index Number
Week. 1900 = 100.*
_s._ _d._
1886 (Wage Census figure) 17 6 82.86
1900 " " 21 1 100.00
1908 " " 21 3 101.02
* The meaning of this column is that, if the average wage of 1900 be
represented by 100, the average wage of 1886 is represented by 82·86 and
that of 1908 by 101·02.
We thus arrive at 21s. 3d. as the average weekly wage of the manual
workers in 1908. There is much reason to believe that this estimate errs
on the side of liberality. It is unfortunate that we have not a
compulsory wage census, and the method of estimation used here can
pretend to no more than approximation. It neglects the important fact
that between 1886 and 1908 the ranks of women and child workers have
swollen at the expense of adult male workers. The 15,500,000 (estimated)
manual workers of 1908 consisted as to a larger proportion of women and
children than the 13,200,000 (estimated) manual workers of 1886. I
regard the 21s. 3d., therefore, as the most liberal figure that can be
put forward as the average earnings of the men and women and child
workers of the United Kingdom in 1908.
We have now to decide what allowances should be made (1) for the great
army of casual, incompetent, and aged or ageing workers who figure in
the census returns as following definite occupations, and (2) for the
loss of time through unemployment, sickness, accidents, stress of
weather, strikes, lockouts, "bank" and other holidays, etc., in the case
of the remaining workers.
With regard to the first item, I do not think we are justified in
estimating the incompetents and casuals at less than 1,000,000 out of
the 15,500,000. For the purposes of the present estimate, I assume that
these 1,000,000 workers earn, on the average, £25 per head per annum, or
an aggregate of £25,000,000. My view is that this is a liberal estimate
of the earnings of what may be termed the camp-followers of the
industrial army.
With regard to the remaining 14,500,000, we have to form an estimate of
the amount of time lost per annum through voluntary or enforced leisure.
No certain information exists, and the widest differences of opinion
have been expressed on the subject. As I have said above, Dudley Baxter
took ten weeks; Leone Levi took four weeks; Mr A. L. Bowley takes six
weeks plus a further allowance for unemployment.
The Board of Trade, in their recent examination of fluctuations in
employment, made an analysis from the records of the Amalgamated Society
of Engineers, combined with information supplied by employers, of the
time lost in the engineering trade. They came to the conclusion that, in
an average year, perhaps 8 per cent. of working time was lost from all
causes, and expressed the opinion that in a good year the loss might
fall to 4 per cent. and in a bad year rise to 15 per cent. or more (Cd.
2337, p. 101). This would mean, for the engineering trade only, a loss
of time varying from only two weeks in the year to as much as eight
weeks or more.
In other employments the widest variations exist. There are the quite
regular employments, such as the army, the navy, the postal service, the
police service, and, for the greater part, the railway service. There
are violently fluctuating employments, such as the building trades and
the shipbuilding trades. In all alike, sickness takes its toll, and
unemployment arises from accidents, from disputes, from "drink," and
from seasonal influences and depression, while, on the other hand,
overtime occasionally goes to swell the aggregate earnings.
I make the assumption that the average working year of the 14,500,000
remaining wage-earners consists of 44 weeks. Applying the average wage
already arrived at (21s. 3d. per week), we get an average annual earning
of, say, £46. 15s., which gives us £678,000,000 as the probable
aggregate earnings of the 14,500,000 workers. Adding the £25,000,000
assumed to be earned by the remaining 1,000,000, we arrive at
£703,000,000 as the total earnings of the manual labourers in 1908.
It is probable that this calculation does not take sufficient account
either of the changes of occupations since 1886, or, as has been already
pointed out, of the changes in the respective proportions of men, women
and children employed. The average wage of the 1886 Census, taken as the
basis of the calculation, was, it is necessary to insist, exaggerated by
the omission of the most ill-paid workmen, while the returns upon which
it was based, framed as they were by employers, are only too likely in a
proportion of cases to have put the wages paid in the most favourable
light. The employers again, who filled in the forms, were only some 75
per cent. of the firms applied to by the Board of Trade, and it is a
fair inference that those who neglected to reply had no excessive pride
in the records of their wage-sheets. I submit, therefore, that as the
1886 average wage figure is a liberal estimate,[8] the figure which I
have deduced from it does not, in all probability, err on the side of
under-estimation.
Professor Bowley estimates the total paid in wages in 1901 as
£705,000,000,[9] and the Board of Trade in the Fiscal Blue Book of 1903
(Cd. 1761) say:—
"From investigations based on the Board of Trade Census of Wages (1886)
combined with the recorded changes of wages since that date and the
distribution of the working population among various industries as shown
in the census returns, the total wages bill of the United Kingdom has
been estimated at between £700,000,000 and £750,000,000, according to
the state of employment."
The estimate which I have given, therefore, differs but little from
those of Professor Bowley and the Board of Trade.[10] I prefer to use
the smaller figures on several grounds. In the first place, the
allowance for "play" is a conservative one. In the second place, I have
the gravest doubts as to the propriety of including in the estimates of
the wages of domestic servants, sailors, and others, an allowance for
the value of "lodging," as is done in the figures used. To include so
many shillings a week for the accommodation afforded by a seaman's bunk
or a general servant's fraction of an attic is to flatter "earnings" out
of all resemblance to the truth. The free cottages and other allowances
to agricultural labourers are often of a scarcely marketable character.
We may be justified in valuing an unhealthy hovel at 1s. 6d. per week,
in view of the fact that the labourer, if he had it not, would need to
pay rent elsewhere, but in too many cases the "cottage" is fit not for
inhabitation but for demolition. In the third place, no allowance is
made for the excessive rents paid by workmen in London and other large
towns. These rents are really part of the working expenses of the wage
earners, and there is as good ground for making deductions on account of
them as there is for deducting wear and tear of machinery in the case of
income-tax incomes.
We can now arrive at an approximate estimate of the National Income as a
whole in 1908-9 (say 1908).
THE NATIONAL INCOME IN 1908
(1) Persons with incomes which exceed
£160 per annum £909,000,000
(2) Persons with incomes below £160 per
annum:—
(_a_) Persons earning small salaries,
petty tradesmen, etc. 232,000,000
(_b_) The wage-earning classes 703,000,000
--------------
£1,844,000,000
==============
It will be seen that _the income tax exemption limit of £160 per annum
splits the national income into two almost equal parts_. Of a total
income amounting to £1,844,000,000 in 1908, those with over £160 per
annum took £909,000,000, while those with less than £160 per annum took
£935,000,000.
[Footnote 1: Figures examined in "Riches and Poverty" (1905), Chapter 2.]
[Footnote 2: In "Riches and Poverty" (1905), Chapter 2, I estimated this
figure at £900,600,000.]
[Footnote 3: It has been too freely assumed in calculating the national
income that the gross assessments represent actual income.]
[Footnote 4: As Schedule D is an exceedingly important gauge of national
prosperity, it may be well to remind the reader of its precise
application. It is a tax upon all income derived from trades, industries
and professions, and from all sources not specified under the other four
Schedules. Profits from businesses established in places abroad are
assessable under it. The assessments are made annually, and are
generally based upon the mean of the income received during the
preceding three years. Fuller particulars will be found in Chapter 21.]
[Footnote 5: "National Income." R. Dudley Baxter. Macmillan & Co. 1868.]
[Footnote 6: "The National Income," Dudley Baxter.]
[Footnote 7: "Economic Journal," Sept. 1904. Page 458.]
[Footnote 8: Take, for example, the boot and shoe trade. The Wage Census
for 1886 (Cd. 6889, p. xiii.) gives the average earnings in boot and
shoe factories (both sexes and all ages) as £48 per annum. In 1908, more
than twenty years after, the Board of Trade "Labour Gazette" shows, from
employers' returns, that (in a July week) 60,337 boot workers took only
£58,147 in wages, which is about 19s. per week or £49, 8s. in a year of
52 such weeks. With regard to this trade, it is clear that either the
1886 estimate was too liberal, or that earnings have been practically
stationary in the twenty years.]
[Footnote 9: "Economic Journal," September 1904.]
[Footnote 10: If, however, the reader prefers to rely upon the larger
estimates he will find that the general conclusions of this and the
following chapter remain practically unaltered.]
CHAPTER III
DISTRIBUTION OF THE NATIONAL INCOME
Taking the population of the United Kingdom, 1908, at 44,500,000, and
the total income at £1,844,000,000, we get an average income per head of
about £40.
Thus, if the income of the nation were equally distributed amongst its
inhabitants, a family of five persons would enjoy an income of about
£200 per annum.
But how is the £1,840,000,000 actually divided amongst our people?
Contrasts between great riches and extreme poverty are every day
presented to our eyes. Can we do anything to reduce to a definite shape
our vague conceptions of riches and poverty?
Investigation of the material at our disposal has convinced me that it
is hopeless to do very much in the way of detailed classification of
incomes. Our census methods are ridiculously inadequate, and our
inquisition into individual incomes is but partial. It is possible,
however, to depict the subject of distribution in broad outlines with
considerable accuracy.
As we have already noticed, the £160 line at which assessment to income
tax begins, divides the national income into two almost equal parts.
Those persons who have more than £160 per annum enjoy an aggregate
income of £909,000,000. Those persons who have less than £160 per annum
enjoy an aggregate income of £935,000,000.
Let us endeavour to discover how many persons have an income of £160 and
upwards.
A certain amount of confused light is thrown on the subject by the
returns of the Inland Revenue Department. Under Schedules D and E, which
relate to profits from "Businesses, Concerns, Professions, Employment,
etc.," to use the official language,[11] the commissioners give us a
record of the number of individual assessments which are made. A summary
of these is as follows:—
INCOME TAX. SCHEDULES D AND E.
PROFITS FROM BUSINESSES, CONCERNS, EMPLOYMENTS, ETC.
Number of Gross Income
Assessments. Assessed.
(_a_) Persons not employees 416,661 £109,900,000
(_b_) Firms (number of partners
not known) 53,663 80,500,000
(_c_) Public Companies (number
of shareholders unknown) 37,937 291,000,000
(_d_) Local Authorities 11,985 24,000,000
(_e_) Bankers, Coupon dealers,
etc., deducting tax on
behalf of the Revenue not available 33,100,000
(_f_) Employees (Schedule D) 114,074 27,100,000
(_g_) Employees (Schedule E) 471,564 109,600,000
--------- ------------
1,105,884 £675,200,000
========= ============
We have thus a record of 1,100,000 _assessments_, but these assessments
do not always correspond to individual tax-payers.
Item _a_, "Persons not employees," gives us the fact that 416,661
individuals are taxed in respect of trading or professional profits.
Item _b_ reveals the existence of 53,663 firms with an unknown number of
partners. Item _c_ covers a great many large and small shareholders.
Item _d_ covers a large number of investors who have lent money to local
bodies. Item _e_ similarly covers many persons of property deriving
interest from various securities which are taxed "at the source." In
items _f_ and _g_ each assessment refers to an individual.
Further, these 1,100,000 assessments are made under Schedules D and E
only, which cover but £675,000,000 out of a total gross assessment to
income tax of £1,010,000,000 in 1908-9. There remain to consider
Schedules A, B, and C.
A moment's reflection will show that from these three schedules, which
deal respectively with realty, farmers' profits, and government
securities, we can expect little assistance. The assessments under
Schedule A are made upon tenants, who in the majority of cases are not
the actual and ultimate tax-payers. The number of assessments is
enormous; we do not know it, but it would not help us if we did, for it
has no relation whatever to the number of property owners. Under
Schedule B, as is explained elsewhere,[12] there are few income tax
payers. Under Schedule C certain interest from home and foreign
government securities is taxed, but not by assessment on the actual
tax-payers.
To sum up, the number of assessments to income tax is not known, and, if
it were known, it would be very much greater than the number of
individual tax-payers. Two-thirds of the income tax is collected, not
directly from the persons who owe the tax, but indirectly or "at the
source." It is possible for an individual tax-payer to appear more than
once in each schedule. With delightful humour the Inland Revenue
Commissioners give a hypothetical case of a composite income of £5000
per annum, made up as follows:—
HYPOTHETICAL COMPOSITE INCOME
Schedule. Amount.
A Profits from the Ownership of Lands, Houses, etc. £500
B " from the Occupation of Lands 200
C " from Government Securities 200
D " as an Author 100
D " as a Solicitor (partner in a firm the
total profits of which are £5000) 2,500
D " from Investments in a Public Company
(total profits of the Company,
£55,000) 500
D " Investment in Municipal Stock 100
D " from Investments in Foreign Bonds
(payable by coupons cashed in the
United Kingdom) 100
D " Salary as a Land-Agent 500
E " Salary as a Borough Auditor 300
------
£5,000
======
This hypothetical gentleman, who is at once a landlord, a farmer, a
fundholder, a man of letters, a lawyer, a shareholder, an investor in
foreign bonds, a land-agent, and a borough auditor, does great credit to
the sense of humour of the Inland Revenue authorities, and may be called
an extreme case. There are, however, tens of thousands of fortunate or
unfortunate persons who are at once business men, investors, and
landlords or houselords, and it is clear that if we are to arrive at the
actual number of individuals who earn or receive incomes of £160 per
annum or upwards we must proceed by other methods.
Before leaving the table on page 33, however, the reader should take
note of the low range of incomes it reveals, so far as individuals can
be detected in the list:
Per Annum.
(_a_) The 416,661 persons not employees have an
average income of £260
(_f_) The 114,074 employees taxed under
Schedule D have an average income of 230
(_g_) The 471,564 employees taxed under
Schedule E have an average income of 230
Many of these individuals have other sources of income beside their
earnings, but the low mean income of each class remains remarkable when
that fact is taken into account. Classes _f_ and _g_ cannot possibly
deceive the Income Tax Commissioners as to their incomes, for the law
compels employers to tell the authorities exactly what their employees
earn. With an average as low as £230 it is clear that the majority of
salaries lie between the exemption limit of £160 and £200 a year. The
under payment of the middle class stands revealed.
If the reader takes note of these facts he will be less surprised by the
results of the analysis to which we will now proceed.
We now turn to what information is available upon the subject of
individual incomes. So far as the poorer classes of income tax payers
are concerned, some clear light is afforded by the Income Tax
Commissioners in a table showing the number of persons claiming
abatements. This table, which is of great importance, is given on page
37.
These abatements are claimed by certain individuals who satisfy the
Commissioners that their entire incomes, _from every source_, lie
between £160 and £700 per annum. Thus we get definite information that
in 1908-9, 779,552 individuals declared their incomes to be within these
limits.
The record of the number of abatements is worth particular attention. In
1893-4 the limit of exemption was £150. In the following year the
exemption limit was raised £10 to £160, and for the first time an
abatement was allowed upon incomes up to £500. In 1898-9 abatements were
introduced on incomes up to £700.
INDIVIDUAL INCOMES BETWEEN £160 AND £700
Defined by claims for abatements
----------+--------------------------------------------------------------+
| ABATEMENTS. |
+----------+---------+-----------+---------+---------+---------+
| | £160 on | £100 on | £150 on | £120 on | £70 on |
| £120 on | incomes | incomes | incomes | incomes | incomes |
|incomes of|exceeding| exceeding |exceeding|exceeding|exceeding|
Year. | £150 and |£160 but | £400 but |£400 but |£500 but |£600 but |
| under | not | not | not | not | not |
| £400. |exceeding| exceeding |exceeding|exceeding|exceeding|
| | £400. | £500. | £500. | £600. | £700. |
----------+----------+---------+-----------+---------+---------+---------+
1893-4 | 509,397 | | | | | |
1894-5 |} | 436,325 | 13,010 | | | |
1895-6 |} | 449,003 | 20,375 | | | |
1896-7 |} | 464,017 | 23,492 | | | |
1897-8 |} | 481,306 | 26,056 | | | |
1898-9 |}Exemption| 495,791 |} | 31,669 | 11,115 | 3,940 |
1899-1900|}limit and| 515,680 |} | 38,055 | 16,861 | 6,714 |
1900-1 |}abatement| 530,014 |}Abatements| 42,123 | 20,520 | 8,647 |
1901-2 |}altered--| 554,727 |}extended--| 46,967 | 23,899 | 10,490 |
1902-3 |}see next | 575,444 |} see | 49,610 | 26,737 | 11,982 |
1903-4 |} column | 603,338 |}following | 51,922 | 27,777 | 12,879 |
1904-5 |} | 612,548 |} columns. | 53,384 | 29,227 | 13,483 |
1905-6 |} | 622,437 |} | 56,305 | 31,100 | 14,886 |
1906-7 |} | 628,818 |} | 58,704 | 33,150 | 16,607 |
1907-8 |} | 638,482 |} | 64,560 | 39,166 | 22,272 |
1908-9 |} | 648,310 |} | 66,523 | 40,721 | 23,998 |
----------+----------+---------+-----------+---------+---------+---------+
----------+---------+----------+--------
| | |
| | |
| | Annual | Rate of
| Total | Increase | Income
|Abatement|in No. of | Tax.
Year. |Granted. |Abatements|Pence in
| | Granted. | the £.
| | |
| | |
----------+---------+----------+--------
1893-4 | 509,397 | | 7
1894-5 | 449,335 | | 8
1895-6 | 469,378 | 20,043 | 8
1896-7 | 487,509 | 18,131 | 8
1897-8 | 507,362 | 19,853 | 8
1898-9 | 542,515 | 35,153 | 8
1899-1900| 577,310 | 34,795 | 8
1900-1 | 601,304 | 23,994 | 12
1901-2 | 636,083 | 34,779 | 14
1902-3 | 663,773 | 27,690 | 15
1903-4 | 695,916 | 32,143 | 12
1904-5 | 708,642 | 12,726 | 12
1905-6 | 724,728 | 16,086 | 12
1906-7 | 737,279 | 12,551 | 12
1907-8 | 764,480 | 27,201 |9 to 12
1908-9 | 779,552 | 15,072 |9 to 12
----------+---------+----------+--------
It will be seen that since 1897-8 there has been a rapid increase in the
number of abated incomes. This has been caused not by the sudden growth
of incomes of this class, but by (1) the abatements being better
understood, and (2) heavier taxation making it better worth while for
individuals to claim the abatements. With the income tax at 1s. and 1s.
3d. it became worth while to fill up the form. We have, then, to thank
the late war, and the increased taxation which followed it, for putting
at our disposal a fairly complete record of the number of individual
incomes between £160 and £700. Probably the record is still incomplete,
and we must make an allowance for the fact. It is probable also that a
certain number of persons of small income who ought to pay tax escape
assessment. Both counts, however, are certainly well covered by adding a
small percentage to the number of individual incomes revealed by the
claimed abatements. In "Riches and Poverty," edition 1905, with the
actual claims made standing at about 700,000, I suggested that 50,000
would be a fair estimate of the number not claiming abatements or who
escaped taxation. But in five years some 80,000 new claims have been
made. Over 27,000 of these were made in 1907-8; this was probably due to
the clause in the Finance Act of 1907 compelling all employers, and not
companies alone, to divulge their employees' incomes, thus bringing to
light non-assessed incomes and causing claims for abatements by their
owners. My estimate of 50,000 I should, in view of this further
information, raise to 90,000 or 100,000, and at the present time I am
inclined to think that some 40,000 incomes between £160 and £700 must
still be regarded as either escaping tax or as being not reviewed in the
abatements table. We thus arrive at, in round figures, 820,000 as a near
approximation to the number of individuals who possess between £160 and
£700 per annum.
The aggregate income of the 779,000 persons granted abatements in 1908-9
is not given in the report. We can, however, estimate it closely, and
this is done in the following table, figures being added for the 40,000
persons whom we have assumed either to neglect to claim abatements or to
escape taxation altogether:—
INDIVIDUAL INCOMES BETWEEN £160 AND £700 (1908)
Estimated
Aggregates.
648,000 Incomes between £160 and £400.
Average assumed to be £300 £194,400,000
67,000 Incomes between £400 and £500.
Average assumed to be £450 30,150,000
41,000 Incomes between £500 and £600.
Average assumed to be £550 22,550,000
24,000 Incomes between £600 and £700.
Average assumed to be £650 15,600,000
40,000 (balance of estimated total of
820,000) Incomes of persons who
either neglect to claim abatements or
altogether escape taxation. Average
assumed to be £300 12,000,000
------------
820,000 Incomes aggregate £274,700,000
To proceed, we see that some 820,000 persons enjoy an estimated
aggregate income of £274,700,000 per annum. But the total income of the
income tax paying classes we have already seen to be £909,000,000. There
remains therefore, to form an estimate of the number of persons who
enjoy the balance of £634,000,000.
Our best clue to these persons, who individually possess incomes
exceeding £700 a year, is to be found in the number of rich men's houses
in the United Kingdom.
In Great Britain an Inhabited House Duty is levied upon the occupiers of
all houses and residential business premises of an annual value
exceeding £20. The duty being graduated, we obtain records of the houses
of Great Britain classified according to their rentals. The duty is not
levied in Ireland.
The Inland Revenue report gives us the following interesting record.
GREAT BRITAIN ONLY: PRIVATE DWELLING-HOUSES OF £20 AND UPWARDS:
1908-9
Class of House. Number of Class of House. Number of
Houses. Houses.
£ 20 and under £25 384,583 | £ 20 and over 1,473,214
25 " 30 256,906 | 25 " 1,088,631
30 " 41 414,663 | 30 " 831,725
41 " 50 104,949 | 41 " 417,062
50 " 61 125,051 | 50 " 312,113
61 " 80 61,498 | 61 " 187,062
80 " 100 38,898 | 80 " 125,564
100 " 150 44,953 | 100 " 86,666
150 " 200 16,563 | 150 " 41,713
200 " 300 13,649 | 200 " 25,150
300 " 400 5,207 | 300 " 11,501
400 " 500 2,416 | 400 " 6,294
500 " 600 1,187 | 500 " 3,878
600 " 700 723 | 600 " 2,691
700 " 800 472 | 700 " 1,968
800 " 900 323 | 800 " 1,496
900 " 1000 176 | 900 " 1,173
1000 and over 997 | 1000 " 997
The figures refer to Great Britain only, but the number of income tax
payers in Ireland is small, the payment of income tax in that country,
in 1908, being but £996,000 out of £31,860,000 paid by the United
Kingdom as a whole.
If there were a constant ratio between incomes and rentals, and if every
private house contained but one family, the record of houses would be a
sufficient clue to the number of income tax payers; but there is no such
correspondence, and a considerable proportion of the houses are let in
tenements.
In London persons with an income over £160 a year rarely pay a rental
less than £30. In the provinces a rental as low as £25 may sometimes
represent an income tax payer. Many £25, £30, and even £40, and more
houses in London and elsewhere are tenement dwellings. Some notorious
London slums consist of houses of about £30 annual value. In West London
6s. a week, £15, 12s. a year, commands two poor rooms.
Some residential shops, etc., not included in the above list, house
income tax payers, but usually the well-to-do shopkeeper lives away from
his shop, the upper part of which is let to poorer persons.
These considerations make it impossible to deduce the aggregate of
income tax payers from the house record, but it is a suggestive fact
that in Great Britain there were in 1908 only 1,088,631 private houses
of £25 and over. It is clear that the number of persons with incomes
exceeding £160 a year cannot much exceed that figure, even when
allowance is made for the Irish houses not included in the record.
As we have ascertained from the income tax abatement claims the
approximate number of income tax payers between £160 and £700 a year, we
are enabled to neglect the difficult relation of small rentals to
incomes, and to concentrate our attention upon a simpler and more
satisfactory problem, the number of houses likely to be in the
occupation of persons with upwards of £700 a year.
It is submitted that persons in the Metropolis possessing an income of
over £700 per annum are unlikely to occupy private dwelling-houses of an
annual value below £60. Indeed, London householders with incomes below
£700 sometimes pay higher rentals than £60. Against this fact we must,
however, place the existence of many blocks of flats of high rentals
which pay Inhabited House Duty, not per flat, but per block. I think we
may balance the one consideration against the other, and assume that the
private dwelling-houses in London exceeding £60 in annual value roughly
correspond to the number of persons with £700 per annum and upwards.
In the provinces and Scotland rentals are lower, and I think we may
safely draw the line at £50, in view of the fact that we are excluding,
as in London, all residential shops, public houses, etc.
The number of houses in Great Britain of the classes referred to is as
follows:—
PRIVATE DWELLING-HOUSES IN GREAT BRITAIN LIKELY TO BE IN THE OCCUPATION
OF PERSONS WITH £700 PER ANNUM AND UPWARDS (1908-9)
Annual Value. Metropolis. Rest of England. Scotland.
£50 to £61 76,141 10,739
61 " 80 18,502 37,075 5,921
80 " 100 10,033 24,875 3,988
100 " 150 12,593 28,411 3,949
150 " 200 5,110 10,075 1,378
200 " 300 5,541 7,427 681
300 " 400 2,645 2,437 125
400 " 500 1,408 960 48
500 " 600 748 424 15
600 " 700 504 210 9
700 " 1000 746 212 13
£1000 and over 826 145 26
------ ------- ------
58,656 188,392 26,892
====== ======= ======
If the reader has not before examined the subject he will probably be
exceedingly surprised to find that there are so few rich men's houses,
and therefore so few rich men, in Great Britain. In England and Wales
there are 247,048 houses and in Scotland only 26,892 houses likely to
contain persons with incomes exceeding £700 per annum. There are nine
times as many such houses in England as in Scotland. This corresponds
closely to the income tax assessments. The yield of the income tax in
Scotland is but one-ninth or one-tenth of the yield in England.
We have to add an estimate for Ireland. The yield of the income tax in
Ireland is very small, about one-third of the yield of Scotland. If,
then, we add 9000 houses for Ireland, we shall probably be near the
truth.
We thus get the following figures for the whole of the United Kingdom,
making our figures round:
PRIVATE DWELLING-HOUSES IN THE UNITED KINGDOM PROBABLY CORRESPONDING
TO INCOME TAX PAYERS WITH £700 AND UPWARDS PER ANNUM (1908-9)
Number.
London 58,700
Rest of England and Wales 188,400
Scotland 27,000
Ireland 9,000
-------
Total 283,100
=======
We can now arrive at an estimate of the total number of income tax
payers. It is as follows:
INCOME TAX PAYERS OF THE UNITED KINGDOM (1908-9)
Incomes. Number.
Between £160 and £700 820,000
Exceeding £700 280,000
---------
Total 1,100,000
=========
I think that this estimate of 1,100,000 may be accepted with confidence
as a near approximation to the actual number of individual incomes which
exceeded £160 per annum in 1908-9.
Taking 1,100,000 as a trustworthy figure, we are in a position to show
how the population of the United Kingdom is divided by the line of
income tax exemption. If we assume that each of the 1,100,000 persons is
the head of a family of five persons, we get, by obvious
calculation, the following result:
THE EQUATOR of BRITISH INCOMES
+----------------------------------+
| |
| £909,000,000 per annum |
| taken by |
| 5,500,000 people |
|having Incomes of £160 and upwards|
| per annum |
| |
+----------------------------------+
| |
| £935,000,000 per annum |
| taken by |
| 39,000,000 people |
| having Incomes below £160 |
| per annum |
| |
+----------------------------------+
_In 1908 the Income Tax Exemption limit of £160 per annum divided the
National Income into two almost equal parts._
DISTRIBUTION OF THE NATIONAL INCOME AS BETWEEN THOSE WITH MORE AND
THOSE WITH LESS THAN £160 PER ANNUM (1908-9)
Number. Income.
Persons with incomes of
over £160 and their
families (1,100,000 × 5) 5,500,000 £909,000,000
Persons with incomes of less
than £160 and their
families (total population
less 5,500,000) 39,000,000 935,000,000
---------- -----------
44,500,000 £1,844,000,000
========== ==============
These striking facts are expressed in diagrammatic form on page 45.
Broadly speaking, it is shown that _one-half of the entire income of the
United Kingdom is enjoyed by about 12 per cent. of its population_.
But a still more extraordinary conclusion emerges from the facts we have
examined. Of the 1,100,000 income tax payers, 820,000 are persons with
incomes over £160 and not exceeding £700. The aggregate income of these
820,000 persons we estimated at £275,000,000 (page 39), and the estimate
is a liberal one. By subtraction from the total income of the income tax
classes (£909,000,000) we see that the 280,000 rich persons with over
£700 per annum possess an aggregate income of £634,000,000 per annum.
The facts are clearly shown in the following table and in the diagram
which forms the frontispiece of this volume:
RICHES, COMFORT, AND POVERTY, 1908
Distribution of the National Income as between (1) those with £700 per
annum and upwards; (2) those with £160 to £700 per annum; and (3) those
with not more than £160 per annum.
Number. Income.
RICHES
Persons with Incomes of
£700 per annum and
upwards and their
families, 280,000 × 5 1,400,000 £634,000,000
COMFORT
Persons with Incomes
between £160 and £700
per annum and their
families, 820,000 × 5
4,100,000 275,000,000
POVERTY
Persons with Incomes of
less than £160 per
annum and their
families 39,100,000 935,000,000
---------- --------------
44,500,000 £1,844,000,000
========== ==============
Thus, to the conclusion that one-half of the entire income of the nation
is enjoyed by but about 12 per cent. of its population, we must add
another even more remarkable, viz.: that _more than one-third of the
entire income of the United Kingdom is enjoyed by less than
one-thirtieth of its people_.
The broad outlines thus drawn I shall not attempt to amplify, for, as
will be gathered from the nature of the available material, such
amplification would be of little value. Nor would any useful purpose be
served by any arbitrary division of our population into "upper,"
"middle," and "working" classes. The three divisions of population at
which we have arrived, although arbitrary, have naturally arisen in the
course of our inquiry, and with some propriety we may term them
respectively the Rich Classes, the Comfortable Classes and the Poor
Classes.
The great fact emerges that the enormous annual income of the United
Kingdom is so badly distributed amongst us that, out of a population of
44,500,000, 39,000,000 are "poor" in the sense that their incomes do not
exceed £160 a year. It is no longer incredible that in a population of
44,500,000 people, enjoying an aggregate income of £1,844,000,000, there
exist "30 per cent. living in the grip of perpetual poverty." When we
realize that 39,000,000 out of our 44,500,000 are poor, measured by a
very modest standard of income, the statistics of Booth and Rowntree
cease to surprise us. In analysis, the United Kingdom is seen to contain
a great multitude of poor people, veneered with a thin layer of the
comfortable and the rich.
It will be of interest to compare the above statistics with those which
appeared in "Riches and Poverty," edition 1905. The statement then
presented was based on the Inland Revenue figures of 1903-4, and the
frontispiece bore the heading "British Incomes in 1904." For the
purposes of comparison, the 1905 edition figures may be attributed to
1903, since the fiscal year 1903-4 is as to nine months in 1903.
Similarly, the figures arrived at in the above pages may be dated 1908,
an interval of five years separating the two investigations.
The following is the comparison arrived at, after adjustment of the
earlier figures by raising the estimated number of income tax payers in
1903 from 1,000,000 to 1,050,000, for the reasons given on page 38.
DISTRIBUTION OF BRITISH INCOMES
---------------------------+-----------------------+---------------------
| 1903 | 1908
|Figures of "Riches |
| and Poverty," 1905 |
| edition, adjusted[13]|
| by raising estimate |
RANGE OF INCOME. | of Income |
| Tax payers from |
| 1,000,000 to |
| 1,050,000. |
+------------+----------+------------+--------
| Number of | | Number of |
| Persons. | Income. | Persons. | Income.
---------------------------+------------+----------+------------+--------
Persons with over £700 | | Million£ | |Million£
a year and their families| 1,250,000 | 570 | 1,400,000 | 634
| | | |
Persons with over £160, | | | |
but not over £700, and | | | |
their families | 4,000,000 | 260 | 4,100,000 | 275
| | | |
Persons with not more | | | |
than £160 and their | | | |
families | 37,250,000 | 880 | 39,000,000 | 935
---------------------------+------------+----------+------------+--------
Totals | 42,500,000 | 1710 | 44,500,000 | 1844
---------------------------+------------+----------+------------+--------
The result is to show that, in the five years, the wealthy classes have
increased their share of the national dividend, both actually and
relatively. We shall later find this conclusion confirmed by a
comparison of the respective growths of taxed incomes and wage rates.
The stationariness of wages is a fact which closely demands the
attention of the nation.
[Footnote 11: For a fuller explanation of these Schedules reference
should be made to Chapter 21.]
[Footnote 12: See Chapter 21.]
[Footnote 13: The change in the proportions through the adjustment is
insignificant and negligible, as will be seen by reference to the
original estimate.]
CHAPTER IV
THE ESTATES OF RICH AND POOR
Our review of the extraordinary facts relating to what has been called
with grim humour the "National" income, prepares us for an examination
of the estates of rich and poor.
Legal distribution of the property of deceased persons can only be made
upon payment of certain taxes, commonly called death duties, and legally
known as the Estate, Legacy and Succession duties. The nature and extent
of these duties I shall discuss in a later chapter. At this point I am
only concerned with the facts which are brought to light in the
collection of the chief death duty, the Estate duty, as since varied, of
the great 1894 Budget[14] of the late Sir William Harcourt.
The principle of graduation was very properly applied to this duty, and
accordingly we obtain, through the reports of the Inland Revenue
Commissioners, an exceedingly valuable record, not only of the total
value of the property which is "left"—it is a suggestive term—by the
deceased, but of the classification of that property in large and small
estates.[15]
The Estate Duty is payable upon all estates which exceed £100 net (net,
that is, after the discharge of all debts due by the deceased) and the
Inland Revenue authorities undoubtedly pass under review the greater
part of the property which is thus legally taxable. There must be a
certain leakage, of course, for such heritages as household furniture,
cash in money or notes, bearer bonds, and so forth, are sometimes
divided up amongst the relatives of a departed property owner without
account to the State, and it is difficult properly to assess unquoted
securities, goodwills, trade stocks, furniture, etc. Moreover, large
sums pass _inter vivos_. How much property thus escapes official
observation we do not know, but it is probably a considerable amount.
PROPERTY LEFT AT DEATH IN THE UNITED KINGDOM. NUMBERS AND VALUES OF
ESTATES BROUGHT TO THE NOTICE OF THE INLAND REVENUE COMMISSIONERS IN THE
FIVE YEARS 1904-5 TO 1908-9.
------------------------------------------+----------------+----------------+
| | |
CLASS OF ESTATE. | 1904-5. | 1905-6. |
| | |
------------------------------------------+-------+--------+-------+--------+
| | Value. | | Value. |
|Number.|Mill. £.|Number.|Mill. £.|
A. _Estates not Dutiable_: | | | | |
Bankrupt Estates | 1,628| | 1,552| |
Estates not exceeding £100 net | 15,931| 0.9 | 15,462| 0.9 |
+-------+--------+-------+--------+
Total A | 17,559| 0.9 | 17,014| 0.9 |
+-------+--------+-------+--------+
B. _Estates Liable to Duty_: | | | | |
Small Estates:— | | | | |
(1) Not exceeding £300 gross | 18,505| 3.5 | 18,262| 3.5 |
(2) Between £300 and £500 gross | 8,846| 3.6 | 8,907| 3.6 |
_Net Capital Values_:— | | | | |
Exceeding £100 but not over £500 | 5,853| 2.5 | 5,728| 2.5 |
" 500 " 1,000 | 10,098| 8.4 | 9,894| 8.1 |
" 1,000 " 10,000 | 16,704| 60.4 | 16,130| 58.8 |
" 10,000 " 25,000 | 2,295| 41.8 | 2,254| 40.4 |
" 25,000 " 50,000 | 883| 34.6 | 931| 36.4 |
" 50,000 " 75,000 | 288| 18.9 | 277| 19.5 |
" 75,000 " 100,000 | 161| 15.0 | 139| 12.1 |
" 100,000 " 150,000 | 128| 14.0 | 133| 18.2 |
" 150,000 " 250,000 | 89| 21.6 | 91| 18.6 |
" 250,000 " 500,000 | 44| 17.6 | 70| 23.9 |
" 500,000 " 1,000,000 | 23| 17.2 | 21| 13.1 |
" 1,000,000 " 2,000,000 |} | | | |
" 2,000,000 " 3,000,000 |} 1| 5.9 | 8| 13.5 |
" 3,000,000 |} | | | |
+-------+--------+-------+--------+
Total B | 63,918| 265.1 | 62,845| 272.2 |
+-------+--------+-------+--------+
_Total Estates_ | 81,477| 266.0 | 79,859| 273.1 |
------------------------------------------+-------+--------+-------+--------+
+----------------+----------------+----------------+----------------
| | | | Average of
| 1906-7. | 1907-8. | 1908-9. | 1904-5 to
| | | | 1908-9.
+-------+--------+-------+--------+-------+--------+-------+--------
| | Value. | | Value. | | Value. | | Value.
|Number.|Mill. £.|Number.|Mill. £.|Number.|Mill. £.|Number.|Mill. £.
| | | | | | | |
| 1,704| | 1,663| | 1,802| | 1,670|
| 16,039| 0.9 | 16,475| 0.9 | 15,875| 0.9 | 15,956| 0.9
+-------+--------+-------+--------+-------+--------+-------+--------
| 17,743| 0.9 | 18,138| 0.9 | 17,677| 0.9 | 17,626| 0.9
+-------+--------+-------+--------+-------+--------+-------+--------
| | | | | | | |
| | | | | | | |
| 18,995| 3.7 | 19,340| 3.7 | 19,481| 3.7 | 18,917| 3.6
| 9,311| 3.7 | 9,736| 3.9 | 9,640| 3.8 | 9,288| 3.7
| | | | | | | |
| 5,990| 2.6 | 6,374| 3.0 | 6,422| 2.9 | 6,074| 2.7
| 10,516| 8.6 | 10,782| 9.1 | 10,729| 9.1 | 10,404| 8.6
| 17,098| 61.6 | 17,356| 65.4 | 17,266| 64.5 | 16,910| 62.1
| 2,473| 42.5 | 2,341| 40.3 | 2,328| 40.4 | 2,338| 41.0
| 909| 34.9 | 908| 35.5 | 918| 34.4 | 910| 35.1
| 314| 19.6 | 278| 19.8 | 297| 19.5 | 291| 19.4
| 127| 11.3 | 144| 14.0 | 155| 13.9 | 145| 13.2
| 159| 19.2 | 109| 16.4 | 136| 16.8 | 133| 16.9
| 104| 22.4 | 90| 18.7 | 78| 17.3 | 90| 19.7
| 58| 21.3 | 51| 20.1 | 50| 20.1 | 54| 20.6
| 18| 12.9 | 17| 16.6 | 15| 8.3 | 19| 13.6
| | | { 4| 4.6 | 6| 9.2 | } |
| 10| 34.1 | { 1| 2.6 | 1| 2.2 | } 7| 18.1
| | | { 2| 8.6 | 2| 5.0 | } |
+-------+--------+-------+--------+-------+--------+-------+--------
| 66,082| 298.5 | 67,533| 282.3 | 67,524| 270.9 | 65,580| 278.3
+-------+--------+-------+--------+-------+--------+-------+--------
| 83,825| 299.4 | 85,671| 283.2 | 85,201| 271.8 | 83,206| 279.2
+-------+--------+-------+--------+-------+--------+-------+--------
Before setting out particulars of the numbers and values of the estates
revealed through the operation of the Estate Duty, it will be well to
remind the reader of the number of deaths per annum in the United
Kingdom. In the years 1899 to 1903, the figures were as follows:—
DEATHS IN UNITED KINGDOM
Year. Deaths.
1904 707,000
1905 670,000
1906 681,000
1907 679,000
1908 677,000
Average Deaths per annum 1904-1908 = 683,000.
We see that the mean number of deaths in the five years 1904-8 was just
over 680,000 per annum.
We now inquire, as to these 680,000 persons who die in the United
Kingdom in a year, how many leave property of sufficient value to be
brought under the notice of the tax-gatherers, and what is the value of
the property left by them.
These questions are answered in considerable detail by the table on
pages 52 and 53, which shows, for each of the last five financial years
of which we have record, the numbers and values of the estates reviewed.
It will be seen that, taking the average of these five years, we get the
following summary facts:—
Deaths per annum 683,000
Sworn Estates per annum, number 83,206
Estates of less value than £100 net each per annum 17,626
Estates exceeding £100 net each per annum 65,580
Net value of Dutiable Estates per annum £278,300,000
The question now arises, what is the average value of the tiny estates
which are not the subject of affidavits? What is the amount of property
per head left by the poor people who form the great majority of the
inhabitants of our rich country? There are the few humble sticks of
furniture, and the small sums invested in savings banks, friendly
societies, trade unions, building societies, etc., What are these worth?
The Chief Registrar of Friendly Societies, Mr Stuart Sim, in his latest
Report (No. 105 of 1909), p. 44, gives us the Summary of Registered
Provident Societies and Thrift Institutions, which appears on page 56.
The total funds, £439,000,000, represent the savings of some millions of
people, but the total number of "members," nearly 34,000,000, must not
be taken to stand for so many individuals. There is, of course, much
duplication in the membership, one individual being sometimes member of
two, three, four, or more societies or clubs. A carpenter, earning 30s.
a week, may be a member of his trade union, member of two friendly
societies, have a few pounds in the Post Office Savings Bank, and be a
depositor in a building society, thus figuring as "five members" in the
list.
The list is not complete, for it does not cover the industrial insurance
companies, which waste in costly management so large a part of the sums
paid them, and unregistered friendly societies and slate clubs.
THRIFT INSTITUTIONS: SUMMARY OF REGISTERED PROVIDENT SOCIETIES
AND CERTIFIED AND POST OFFICE SAVINGS BANKS AT DEC. 31st, 1907.
--------------------------------------+--------+-----------+-----------
NATURE OF INSTITUTION. | No. of | No. of | Funds.
|Returns.| Members. |
--------------------------------------+--------+-----------+-----------
Building Societies: | | | £
Incorporated Societies | 1,852 | 565,047| 57,300,118
Unincorporated Societies | 58 | 58,000| 15,989,111
+--------+-----------+-----------
| 1,910 | 623,047| 73,289,229
+========+===========+===========
Friendly Societies, etc.: | | |
Ordinary Friendly Societies | 6,563 | 3,416,869| 19,346,567
Societies having Branches | 20,640 | 2,710,437| 25,610,365
Collecting Friendly Societies | 55 | 9,010,574| 9,946,447
Benevolent Societies | 73 | 29,716| 337,393
Working Men's Clubs | 1,036 | 272,847| 381,463
Specially Authorised Societies | 162 | 70,980| 532,717
Specially Authorised Loan Societies | 618 | 141,850| 897,784
Medical Societies | 96 | 313,755| 65,513
Cattle Insurance Societies | 60 | 4,029| 8,570
Shop Clubs | 7 | 12,207| 1,349
+--------+-----------+-----------
| 29,310 | 15,983,264| 57,128,168
+========+===========+===========
Co-operative Societies: | | |
Industries and Trades | 2,267 | 2,461,028| 53,788,917
Businesses | 399 | 108,550| 984,680
Land Societies | 146 | 18,631| 1,619,716
+--------+-----------+-----------
| 2,812 | 2,588,209| 56,393,313
+========+===========+===========
Trade Unions | 652 | 1,973,560| 6,424,176
+--------+-----------+-----------
Workmen's Compensation Schemes (1) | 59 | 99,371| 164,560
+--------+-----------+-----------
Friends of Labour Loan Societies | 248 | 33,576| 260,905
+--------+-----------+-----------
Total Registered Provident Societies| 34,991 | 21,301,027|193,660,351
+========+===========+===========
| Banks. |Depositors.| Deposits.
Railway Savings Banks | 18 | 64,126| 5,865,072
Trustee Savings Banks (including | | |
Investments in Stock) | 222 | 1,780,214| 61,729,588
Post Office Savings Bank (including | | |
Investments in Stock) | 15,166 | 10,692,555|178,033,974
+--------+-----------+-----------
Total Certified and Post Office | | |
Savings Banks | 15,406 | 12,536,895|245,628,634
+========+===========+===========
Grand Total | 50,397 | 33,837,922|439,288,985
--------------------------------------+--------+-----------+-----------
(1) The figures given include 64,700 members, and £105,475 funds
undistributed, at 31st December 1907, in respect of Schemes whose
Certificates had expired or were revoked at that date.
_Note._—Where Returns are made to a date other than 31st December the
particulars at the nearest date available are given.
On the other hand, it would be a profound mistake to regard the sum
shown—£439,000,000—as belonging entirely to manual workers. No small
part of the funds of building societies, savings banks, etc., belong to
the middle classes, and even professional men do not disdain to purchase
houses through building societies.
Additions must be made for the tiny stocks of little shopkeepers and the
"furniture" in poor houses, but on the latter account those who know
what the furniture of the poor usually consists of will make modest
estimates of its value. Its exchange value is almost negligible, and its
value in use is that it is a factor in the sordid discomfort of the poor
home, being in that respect not unworthy of the ugly walls which enclose
it.
Altogether it is probable that we may estimate the total property of the
poor at less than £500,000,000 in 1908, and regard this sum as belonging
chiefly to a great mass of people, forming by far the greater part of
the 39,000,000 persons under the line of Income Tax exemption. Probably
about £15,000,000 of this sum passes at death per annum, and only a
small part of it, chiefly the house property, comes under review by
Somerset House.
With the facts we have reviewed we are in a position to arrive at a just
idea of the respective proportions of rich and poor estates. On page 59
will be found a table which shows the nature of those proportions. I
have taken the averages of the past five years arrived at in the tables
on pages 52-53, and have made a rough division between rich and poor by
drawing the line at the possession of property worth £1,000 net capital
value.
To give a true idea of the division of deaths in the two classes, it is
necessary to make allowance in the rich class for the deaths of the
children of the well-to-do. It may be taken that, in addition to the
20,000 adults who die every year possessed of estates worth upwards of
£1,000, 7,500 children and young persons die in well-to-do homes. I then
place in the upper part of the table the number of deaths remaining
after deduction from 683,000 of all the other figures in the table.
In arriving at the amount of property left by the poor I have assumed
that of the £15,000,000 of savings estimated as passing at death per
annum, £5,000,000 does actually come under review in the first few lines
of the table on pages 52-53. The balance, £10,000,000, I have brought
into the account as corresponding to the 592,294 deaths in the first
line of the table on p. 59.
With these explanations the table will speak for itself, and its tale is
a startling one. We see that, drawing the line between the rich and poor
arbitrarily at the possession of £1,000, of the 683,000 persons who die
in a year, 28,397 die rich or very rich, leaving £259,700,000, while
654,603 die poor or very poor, leaving between them only £29,500,000.
The figures over £10,000 are worth special attention:—
FORTUNES OVER £10,000 EACH (NET)
Year. Number. Value.
1904-5 3,912 £186,600,000
1905-6 3,924 195,700,000
1906-7 4,172 218,200,000
1907-8 3,945 197,200,000
1908-9 3,986 187,100,000
_Year by year, with the regularity of the seasons, about four thousand
persons die leaving between them about £200,000,000 out of total estates
declared to be worth about £300,000,000._
PROPERTY LEFT BY 683,000 PERSONS
Average of 1904-5 to 1908-9
_POOR AND VERY POOR_
Deaths. Property Left.
Died with so little property
that no affidavit was sworn
(Property estimated at
£10,000,000, see p. 58) 592,294 £10,000,000
Died Bankrupt 1,670
Died leaving less than £100
net 15,956 900,000
Died leaving between £100
and £500 net 34,279 10,000,000
Died leaving between £500
and £1,000 net 10,404 8,600,000
------- -----------
Total Poor and Very Poor 654,603 £29,500,000
_RICH AND VERY RICH_
Died under age without
property 7,500
Died leaving between £1,000
net and £10,000 net 16,910 62,100,000
Died leaving between £10,000
net and £1,000,000 net 3,980 179,500,000
Died millionaires 7 18,100,000
------- ------------
Total Rich and Very Rich 28,397 £259,700,000
------- ------------
TOTAL RICH AND POOR 683,000 £292,500,000
======= ============
170 persons per annum die worth £150,000 each; 80 die worth over
£250,000 each; 26 die worth over £500,000 each; and 7 die worth about
£2,500,000 each.
Thus, in an average year, 26 persons die leaving between them far more
than is possessed by 654,000 poor persons who die in one year. Again, in
a single average year, the wealth left by the few rich people who die
approaches in amount the aggregate property possessed by the whole of
the living poor.
[Footnote 14: Finance Act, 1894 (57 & 58 Vict. c. 30).]
[Footnote 15: It was in the first edition of this work that attention
was first drawn to this new source of information.]
CHAPTER V
THE NATIONAL ACCUMULATIONS
We pass from the consideration of the property which is left at death in
a single year to the estimation of the value of the total capital stock
of the United Kingdom.
We can proceed by two different methods. We can argue from the property
left by those who die in a single year to the property possessed by the
living, or we can capitalize that part of the national income which is
derived from property. The former method was used as long ago as the
'fifties by Porter in his "Progress of the Nation." The second method
has been employed by many statisticians, notably by Sir Robert Giffen.
In the following table I have formed an estimate of the accumulated
wealth of the nation at the present time, dividing it into three
categories:—
(1) "National" property in the proper sense, i.e. property in the
possession of the Imperial Government or Local Authorities.
(2) Land and Capital Stock within the United Kingdom owned by private
individuals, and
(3) Property in foreign countries and British Possessions owned by
persons in the United Kingdom.
ACCUMULATED WEALTH OF THE UNITED KINGDOM: 1908
[This table should not be quoted without the context]
(1) PUBLIC PROPERTY (IMPERIAL AND LOCAL):—
(_a_) Imperial Property £550,000,000
(_b_) Local Property 1,370,000,000
--------------
£1,920,000,000
Subtract (1) National Debt
(£762,000,000) and (2) Local
Loans (£600,000,000) 1,362,000,000
--------------
£558,000,000
==============
(2) PROPERTY IN THE UNITED KINGDOM OWNED BY PRIVATE INDIVIDUALS:—
(_c_) Agricultural Lands and the Farmhouses,
Buildings, Fences, Roads,
Ditches, etc., thereof. Profits
under Schedule A of Income
Tax (1908-9) £52,000,000
capitalized at 20 years' purchase £1,040,000,000
(_d_) Houses, Business Premises, etc.,
and their Lands. Profits under
Schedule A of Income Tax
(1908-9) £217,000,000 capitalized
at 15 years' purchase 3,255,000,000
(_e_) Other Profits from Land under
Schedule A of Income Tax
(1908-9) £1,300,000 capitalized
at 25 years' purchase 32,000,000
(_f_) Farmers' Capital. Estimated at
£6 per acre for 47,000,000 acres
under cultivation 282,000,000
(_g_) The National Debt (neglecting
the small amount held abroad) 762,000,000
(_h_) Local Debts 600,000,000
(_i_) Capital of Miscellaneous Trades:—
(1) Profits of Miscellaneous
Businesses, Professions, etc.,
taxed under Schedule D of
Income Tax in 1908-9 (allowing
for profits assumed to
escape taxation £60,000,000,
see p. 16), and deducting
for profits from abroad
(£25,000,000, see p. 16), were
£444,000,000. One-half of
this sum (£222,000,000)
assumed to be from capital
and capitalized at 10 years'
purchase 2,220,000,000
(2) Profits of small traders who
are not Income Tax payers
are in part derived from
capital 100,000,000
(_j_) Railways. Profits taxed under
Schedule D 1908-9 =
£43,000,000 capitalized at 25
years' purchase 1,075,000,000
(_k_) Mines and Quarries. Profits taxed
under Schedule D 1908-9 =
£18,000,000 capitalized at 5
years' purchase 90,000,000
(_l_) Gasworks. Profits taxed under
Schedule D 1908-9 = £7,800,000
capitalized at 20 years' purchase 156,000,000
(_m_) Ironworks. Profits taxed under
Schedule D 1908-9 = £5,100,000
capitalized at 5 years' purchase 25,000,000
(_n_) Waterworks. Profits taxed under
Schedule D 1908-9 = £6,200,000
capitalised at 20 years' purchase 124,000,000
(_o_) Canals. Profits taxed under
Schedule D 1908-9 = £4,200,000
capitalized at 20 years' purchase 84,000,000
(_p_) Markets, Tolls, Fishings, Cemeteries,
etc. Profits taxed under
Schedule D 1908-9 = £1,400,000
capitalized at 20 years' purchase 28,000,000
(_q_) Other Interests and Profits taxed
under Schedule D 1908-9 =
£7,700,000 capitalized at 20
years' purchase 154,000,000
(_r_) Furniture, Works of Art, etc., in
Private Houses. Assumed to be
one-sixth of the value of "Houses"
in Schedule A (see item _d_) 540,000,000
---------------
£10,567,000,000
(3) PROPERTY IN PLACES ABROAD OWNED BY PERSONS IN THE UNITED KINGDOM
(_s_) Interest from Indian, Colonial and
Foreign Government Securities
taxed under Schedule C 1908-9
= £32,200,000 capitalized at
25 years' purchase £805,000,000
(_t_) Interest from Indian, Colonial and
Foreign Securities, including
Railways, taxed under Schedule D
1908-9 = £56,600,000
capitalized at 20 years' purchase 1,132,000,000
(_u_) Other Profits from abroad derived
from property assumed to have
a capital value of about 700,000,000
--------------
£2,637,000,000
==============
SUMMARY
(1) Public Property £558,000,000
(2) Property in the United Kingdom
owned by Private Individuals 10,567,000,000
(3) Property in places abroad owned by
persons in the United Kingdom 2,637,000,000
---------------
£13,762,000,000
===============
To the explanations given in the table itself some further notes may be
added. For the greater part, the estimates are based, it will be seen,
upon Income Tax statistics. The items thus arrived at are near
approximations to the truth. The table also contains some necessarily
rough estimates of uncertain items.
The matter of public property is an exceedingly difficult one to deal
with. In item _a_ I have estimated that our warships and stores of naval
and military material, Imperial shipyards, dockyards and arsenals,
public offices, galleries, museums and their contents, government
factories and workshops and their plant, post office, telegraph and
telephone capital, etc., are worth £550,000,000 at a conservative
estimate. The capital value of all our ships, allowing for depreciation,
cannot be less than £150,000,000, and naval works and material must be
worth fully £80,000,000. Army material and military works are of less
value, but can scarcely be estimated at less than £120,000,000. The
value of the post office, telegraph and telephone businesses at only 15
years' purchase of the profits would be £60,000,000. The Suez Canal
shares are worth £28,000,000. Thus £550,000,000 as an estimate of the
total value of all Imperial property is not an excessive figure.[16]
The public property in the care of local authorities, as trustees for
the nation, is exceedingly great. It is convenient to consider common
lands in this connexion. Probably there are some 2,000,000 acres of
common lands in England and Wales—all that remains unfilched of full
many times that area.[17] If we value these commons at an average of £25
per acre—some of the commons, as in Surrey, are worth from £200 to
£2,000 an acre, valued at present market rates—we get £50,000,000.
Roads are an important item in the national valuation—they are almost
all that is left to the nation of the nation's area. There are about
22,000 miles of main roads and about 97,000 miles of minor roads. These
have value as land and value as highways, but if we value land and
construction together at an average of only £5,000 per mile we arrive at
about £600,000,000 as a conservative estimate of the value of the roads
of the United Kingdom.
There remain to consider the values of the parks and other land,
buildings (including offices, houses, schools, markets, asylums and
workhouses), bridges, sewers, lighting systems, gasworks, electric light
and power undertakings, tramways, waterworks, reservoirs, etc.
The outstanding debts of the local authorities of the United Kingdom are
now about £600,000,000. The whole of this amount has been spent upon the
objects referred to and they are worth considerably more. I submit that
it is a very conservative estimate to value local government property at
20 per cent. more than the amount of the outstanding loans or say
£720,000,000.
We thus arrive at £1,370,000,000 as a rough but reasonable estimate of
the value of the local property. Adding it to the £550,000,000 of
Imperial property we get £1,920,000,000 as a valuation of that portion
of the accumulated wealth of the United Kingdom which is in the
collective ownership of the nation.[18]
But, against the possession of these large amounts of property we have
to set the mortgages upon the public assets which are represented by the
National Debt and Local Debts. These, of course, are not directly
secured upon Imperial and Local Government property, but upon the
Imperial and local revenues. It is convenient, however, to regard them
as mortgages, and to deduct them as I have done in the table. Making
this deduction, I am able properly to include the amount of the national
debt and local debts in my estimate of the value of private property
(see items _g_ and _h_). This gives a true view of the subject. The
people of the United Kingdom collectively own relatively little
property. In the time to come this will be remedied, for local
authorities are rapidly acquiring reproductive undertakings. Until they
are paid for, however, by the discharge of the loans raised to acquire
or equip them, we do well to remember that they are mortgaged to
individuals. Therefore, in deducting the debts from the valuation of
public property and in adding them to the private property I submit that
I am presenting an accurate picture of the actual position.
To sum up this part of the subject, the people of the United Kingdom
collectively possess property worth £1,920,000,000 and are collectively
indebted to a few of their number in the sum of £1,362,000,000. Thus,
all that they may be said to own collectively is property worth the
comparatively insignificant sum of £558,000,000.
I pass to the private property which is commonly called "national"
wealth.
In item _c_ agricultural lands and the farmhouses and other buildings
thereon are valued at £1,040,000,000. In 1898 the Royal Commission on
Agriculture arrived at the value of lands by taking 18 years' purchase
of the profits of 1893. The value of agricultural land is now rising
with the appreciation in the price of food.[19]
Item _d_ "Houses," it should be clearly understood, covers not only
dwelling-houses, but factories, workshops, offices, and all other
premises save farmhouses. It also includes, as is so often overlooked,
both house value and land value. In capitalizing at 15 years' purchase,
the market value of the property is certainly not overstated. The
£3,255,000,000 so arrived at is a handsome sum and by far the most
considerable item in the list. It includes, in the value of factories
and other business premises, a considerable amount of trade capital.
It should not be forgotten that we are speaking of economic valuation,
not of intrinsic value. Houses which rank for no small part of the
£3,255,000,000 are of small intrinsic value, their economic value being
only produced by the sheer necessities of those whose needs must find a
roof. London contains great areas of filthy brick-work which are worthy
to be destroyed, but worth many millions to the houselords who draw
rents from them.
Item _f_ deals with farmers' capital. Here I have used the figure
arrived at in 1905 by R. H. Inglis Palgrave.[20] After careful
examination of the amounts of capital per acre employed in various parts
of the country, Mr Palgrave considers £6 an acre an excessive estimate,
but Major Craigie, who has given the subject much attention, is inclined
to think it too low.
Items _g_ and _h_ have been already referred to.
Item _i_ (1) is an estimate of the amount of capital employed in the
miscellaneous trades and professions taxed under Schedule D of the
Income Tax. I have assumed that one-half of the estimated profits were
derived from capital, and this half I have capitalized at 10 years'
purchase. The amount so arrived at—£2,220,000,000—may be regarded as a
reasonable estimate, not as an accurate one. In 1908, it may be pointed
out, the nominal "paid up" capital of registered joint-stock companies
amounted to £2,123,000,000.
Under _i_ (2) £100,000,000 is put down as a rough estimate of the
capital employed by small traders whose incomes are less than £160 per
annum. I think that £100,000,000 is a liberal estimate, but it should be
noted, against this opinion, that in 1885 Sir Robert Giffen's estimate
was £335,000,000. In either case the figure is sheer guesswork; there is
no proper statistical material.
Items _j_ to _q_ need little comment. I point out, however, that the
profits of mines, quarries and ironworks are capitalized at only 4
years' purchase by some authorities in view of their exhaustible
character.
Item r relates to furniture, works of art and other movable property. I
have estimated this to amount to one-sixth of the item "Houses" (_d_).
It is right to point out, however, that this estimate is very much at
variance with former ones. Sir Robert Giffen in 1885 took one-half of
the value of "Houses," and Mulhall and other statisticians have commonly
used this estimate. But is it reasonable? I think not. In the first
place the item "Houses" covers a great number of business premises the
contents of which are valuable but are already estimated for in item
_i_. The item also covers the value of all the land connected with the
premises. Deducting for land and for business premises, could we, even
as to the balance, assert that the average private dwelling contains
furniture and other effects worth 50 per cent. of the cost of the
structures? Enquiry has shown me that such an estimate would be only
warrantable in the case of rich houses. But rich houses, as we have
seen, are comparatively few, and "comfortable" houses not many. Coming
to the great bulk of the small dwelling houses of the United Kingdom the
furniture and effects are so poor that their value, unfortunately, as
compared even with that of the mean houses which shelter them, is small,
and in many cases negligible.
In taking one-sixth instead of one-half of item _d_ in arriving at item
_r_ therefore, I feel that I am making the most liberal possible
estimate. To make the figure about £1,600,000,000, as we should do by
taking the traditional one-half of the value of "Houses," would, I
submit, be very wide of the mark.
The total value thus estimated of the property in the United Kingdom
owned by individuals affords a striking contrast with that owned by the
State. It amounts to £10,567,000,000.
We have now to consider the third category: "Property in places abroad
owned by persons in the United Kingdom." The items speak for themselves
and are capitalized at very reasonable rates. We get the remarkable fact
that certain persons in this country own about £2,600,000,000 of
property in places abroad.
The grand total of the whole estimate is £13,762,000,000—£300 per head
of the population, or say £1,500 per family of five persons.
[Footnote 16: There is also, of course, the value of the trained
personnel of both army and navy, which could not be taken at less than
£250 per soldier and £400 per sailor, but I confine this estimate to the
value of "property" commonly so called.]
[Footnote 17: There are no commons in Ireland and Scotland.]
[Footnote 18: In 1885 Sir Robert Giffen estimated Government and local
property at £500,000,000, but I do not know his reasons for naming that
figure.]
[Footnote 19: Lord Eversley seems to think that 25 years' purchase meets
the conditions of 1905. See discussion in the Royal Statistical
Society's Journal for March 1905.]
[Footnote 20: "Estimates of Agricultural Losses." Paper read to the
Royal Statistical Society in March 1905.]
CHAPTER VI
THE MONOPOLY OF CAPITAL
In view of the facts as to rich and poor estates which we examined in
Chapter 4, it is obvious that to state that the accumulated wealth of
the United Kingdom probably amounts to £300 per head of the population,
or £1,500 per family of five persons, is to mask in averages a great
inequality of distribution.
Reverting to the Death Duty records, it is possible, by means of them,
to give a true idea of the manner of distribution amongst our people of
the greater part of the nearly £14,000,000,000 of capital.
I again direct attention to the tables on pages 52 and 53. Year after
year, with extraordinary constancy, a certain amount of money passes in
each class of estate. So small are the variations in relation to the
magnitude of the totals that it is hardly necessary to average the five
years in working at the figures.
If about 65,000 persons die every year leaving about £279,000,000, what
is the ratio to these figures of the numbers and property of the living?
The question thus raised is an exceedingly interesting one. Porter in
his "Progress of the Nation" seems to have assumed a ratio of 45 to 1,
but I do not think that the true figure can be so high as this.
The British Crown, since Queen Anne, has passed at the following dates:
Anne, 1702
George I., 1714
George II., 1727
George III., 1760
George IV., 1820
William IV., 1830
Victoria, 1837
Edward VII., 1901
George V., 1910
Thus, in 208 years, the Crown has passed eight times, or, on the
average, once in about 26 years.
I have investigated the dates at which a considerable number of
well-known estates have passed at death during two centuries and have
found the most remarkable variations in different families. The Earldom
of Suffolk has passed at average intervals of 16.7 years between 1731
and 1898. The Earldom of Coventry has passed at intervals of 22 years
between 1712 and 1843. These are intervals which are well under the
average, while above the mean are cases quite as remarkable. The Earldom
of Essex, between 1709 and 1892, has passed only four times, giving an
average of 45.7 years. The Earldom of Bathurst, again, between 1775 and
1892, passed only five times, giving an average of 43.4 years.