The Essential Reform:
Land Value Taxation
In Theory and Practice
C. H. Chomley and R. L. Outhwaite
[Part 9 of 15]
Among the many restrictions placed upon industry by monopoly there is
none more glaringly detrimental than that which arises from the
private ownership of the mineral-bearing lands. That a nation, whose
industrial prosperity is mainly based upon the mining of its coal and
iron, permits the holders of the land covering those gifts of nature
to determine on what terms they shall be made available, if at all,
can only be because a practical method of immediate reform has not
been made sufficiently clear to the people. Those who have dwelt upon
this glaring injustice have for the most part advocated State
purchase, a measure which is not within the sphere of practical
politics.
We are not concerned with visionary schemes, but with the
presentation of a method of reform that, whilst efficacious, is
capable of immediate adoption, and is one that no House of Lords can
bar. We have seen how the taxation of the monopoly value of town and
country lands will compel the holders those lands to put them to their
most reproductive use or to surrender them to those who will, and
precisely the same results will follow if the same principle be
adopted in regard to mineral-bearing lands. It must be kept in mind
that the private ownership of land not only enables the monopolists to
extort a toll from industry whenever it is applied to the land, but it
also prohibits industry from being applied to the land at all. The
latter result is the one which probably inflicts the greatest injury
upon the community. Now the holding up of some mineral-bearing lands
must result in giving an artificial value to the concession granted in
respect of those being worked, and all mineral-bearing lands being in
the hands of comparatively few people, it is easy for these
monopolists to withhold them from use, in part for this purpose. Or to
look at it in another way. When, for instance, the price of coal tends
to fall, it is customary for some collieries to close down until
prices again have risen, and production is thus checked to maintain
prices, which is equivalent to artificially enhancing them. Or when
prices fall to a point at which the coal-master can no longer make a
profit after paying royalties, dead rent, way-leaves, rates, and
interest on capital and wages, the pit is closed down. Now whether
prices are artificially enhanced by the holding idle of
mineral-bearing lands, or by the closing down of mines because prices
fall so low that profits cannot be obtained to meet the cost of
production and the land-owner's charge, the cause is clearly the
existence of an untrammelled monopoly. But taxation falling upon land
values so assessed as to include the mineral values under the surface
-- that is to say, assessed as the proprietor of any mineral-bearing
land assesses it for sale -- would compel the utilisation of such
areas now held entirely out of use and the continuous working of such
mines as are now being worked, so long as the actual cost of
production did not exceed the price received for the product. A
moment's consideration will show this to be the case, and it is
unnecessary to bring forward again arguments already urged in regard
to the effect of the land values tax in unlocking unutilised town and
country lands. A few illustrations may, however, be given.
A short while ago the Leeds Town Council entered into negotiations
with the proprietor for the purchase of 1000 acres of land for sewage
purposes. The land was being put to no particular use, and been valued
at about £40 an acre by local people. The owner, however,
demanded approximately £240,000 for the surface and £480,000
if the mineral rights were included. The Council determined to
purchase at this price, but their intention was defeated on a poll of
the ratepayers. Now it is quite clear that were a land values tax of
2d. in the pound levied on this land at the owner's valuation, which
would result in his contributing £4000 year to the Treasury in
respect of it, he would either make haste to modify his demands in the
matter of parting with his property, or would be compelled to utilise
not only the surface but also the coal lying beneath it. This incident
shows that the owner of mineral-bearing land is quite capable of
forming an estimate of its value, and is given to illustrate the
effect the tax would have in forcing mineral land into use.
The effect of the tax in compelling the continuous working of mines
may now be illustrated. Let us in the first place consider what is the
position to-day A land-owner has undisputed possession of land and of
the minerals under the land. To him comes a capitalist, who wishes to
produce the coal, and the two bargain.
The land-owner demands his dead rent, payable when the first sod is
turned, and whether the mine be working or not, also his royalty on
every ton produced. The coal-master calculates on the lowest price at
which he is likely to be able to buy labour, and the highest at which
he will be able to sell coal, when considering the land-owner's
demands. There is no force operating to compel the latter to give fair
terms; he can withhold his land indefinitely until labour and capital
are compelled to accept his demands. And so the colliery comes into
operation, and a quarter of a million pounds may be expended, as in
one recorded instance, before the colliery proprietor sells a ton of
coal. And now let us suppose that the colliery proprietor has made a
miscalculation. The price of coal falls below what he anticipated, and
he can no longer get a profit after paying current wages, royalties
and rates. He is loath to close down the pit and pay dead rent and
suffer depreciation of capital expended in machinery; so he first of
all strives to reduce the wages of the miners. A strike takes place
and the pit is closed down, throwing thousands of men out of work and
bringing misery to the community. And all the time the problem could
have been solved by the land-owner reducing his royalty charge. But
though a certain amount of pressure is upon the capitalist to produce,
and the miner has starvation to drive him to work, the land-owner can
look on with complacency. But now let us suppose that taxation were
falling upon his coal values irrespective of whether the coal were
being produced or not, and we can see what a change of circumstance
there would be. We will take the case of a mine, from which a certain
Duke draws £50,000 a year in royalties, which roughly gives a
capital value to his coal of £1,250,000. At 2d. in the pound His
Grace would pay annually £10,000 a year. He owns other coal
values which would make his contribution to the Treasury at least £24,000.
Now a strike taking place would mean that this land-owner would be
receiving no royalties, and would at the same time be paying £2000
per month in land value during its continuation. Obviously there would
now be an inducement for the land-owner to abate his terms, and he
would accept a lower royalty in order to get the men back to work.
Let us now take a specific instance of the closing down of a mine. In
the Glasgow Herald of June 7, 1905, there was reported the
closing down of the Bardykes colliery owing to the land-owners having
demanded higher royalties than the coal-masters, Messrs. Merry &
Cunninghame, would pay, after having worked the colliery several years
at a heavy loss. Some seven hundred miners were thrown out of work,
and they held a demonstration of protest at Blantyre. But without
avail, for it was not until May 1, 1908, that the following appeared
in the same paper: --
"At a time when unemployment is causing so much
concern in the country, the intimation that the Summerlee Iron
Company, Coatbridge, will shortly re-open the large colliery which
is situated on the estate of Bardykes will be welcomed by the mining
community of mid -Lanark, and more particularly in the districts
immediately interested -- Uddingston, Blantyre, and Cambuslang. It
may be recalled that the colliery, which was sunk nearly thirty
years ago by the Clyde Coal Company, was shut down a few years ago
and completely dismantled as the result of a regrettable dispute
between the lessees, Messrs. Merry & Cunninghame, coal-masters,
and the proprietor regarding the payment of mining royalties. From
six to seven hundred miners were at that time thrown out of
employment and the village of Bardykes was demolished. …The
shafts are sunk to a depth of 224 fathoms, and there is sufficient
coal in the workings to keep the colliery going steadily for at
least the next thirty years, and the daily output will exceed 1000
tons per day."
Now had a land values tax been in operation, the proprietor would not
have found it profitable to close down the mine for three years,
demolish the village, and drive the miners to starvation He would have
had a potent reason for coming to terms not existent at present, when
he can wait in undisturbed possession. Take again conditions by Mr.
Forsyth as existing in mining district in 1885: --
"Out of the eighty blast-furnaces in Cumberland,
forty are at this moment standing idle, and the others are but
partially employed. There are many causes which might have the
effect of keeping these forty blast-furnaces idle. They might be
idle for want of capital; they might be idle for want of men willing
to work. Well, the Cumberland furnaces are put out, not because of
any lack of capital, for only within the last week or two a company
of employers there were willing to sink £20,000 in raising iron
ore, and were only prevented from doing so by the landlord's
ultimatum that he would not reduce his royalty of 2s. 6d. a ton on
the ore which might be raised. The company found that with this
charge they could not raise ore as cheaply as it could be imported
from Spain, and they therefore abandoned their project. At the same
time there were thousands of willing men unemployed and in want."
Or to come to a more recent date. In his annual report not long ago
the Secretary of the Cleveland and South Durham Federation of
Blast-furnace-men wrote: --
"During the last six months six furnaces were either
damped down or blown out, and displaced at least 300
blast-furnace-men. Most of the works are handicapped to the extent
of about 8s. a ton compared with their foreign rivals, and the 8s.
found its way into the pocket of the royalty owner and the railway
company. At the present selling-price of iron the cost of material
makes it almost impossible for hematite makers on the west coast to
carry on their works at a profit. At a total cost of £2, 18s.
6d. per ton of pig iron, the ore costs £1, 9s., coke £1,
2s., limestone is 6d., labour 3s., and standing charges 3s. The cost
of labour is so small that if furnace-men worked for nothing it
would not help manufacturers much. The royalty-owner, who seizes
almost double as much per ton of pig iron as the whole staff of
furnace-men, and the railway monopolist, who charges the British
manufacturer in many cases more than double what they carry the
goods of the foreigner for, must be 'held up.' The distance from the
Durham coke-yards to the west coast is 80 miles, and the cost of
transporting coke there is 7s. per ton. In England the cost is 7s.
6d. per 109 miles, in Gernany 35. 8d., Belgium 2s. 10d., and America
is. 8d."
Here we have monopoly checking industry and laying it under tribute
all along the line. Or for another example let us take the case of
Lord Penrhyn, who closed down his Bethesda quarry for years in order
to coerce the workers, spreading misery amongst thousands of families
and ruin on every side. Having done this, the County Council reduced
his assessment for rates by £14,000 a year. With a land values
tax at 2d. he would have had to pay a very large sum irrespective of
whether the quarry was being worked or not, and this would have been
an inducement to him to speedily come to terms with his men.
So it is clear that the taxation of land values, including the value
of minerals, will have the following results.
It will open up the mineral resources of the country to capital and
labour. By stimulating the demand for labour and undermining the power
of monopoly to hold mineral lands out of use, or close mines, it will
lead to an enhancement of the wage rate. By stimulating production and
operating to reduce royalties, it will, at the expense of the
monopolist, cheapen the commodity produced. It will furnish the State
with revenue with which to unburden industry. Finally, it may be
suggested that, were a substantial land values tax imposed, and the
burden of such rates as those for Education and Poor Relief financed
from its proceeds by the State, the forcing of mineral-bearing lands
into use and the relief of industry would at one and the same time be
achieved.
The hon. member for the Mansfield Division wrote a letter to The
Times some time ago in which he said: "The colliery with
which I am connected in England raised 846,642 tons of coal last year.
The landlord received £17,453 in royalties. He paid in respect of
these royalties income-tax of 1s. in the pound -- £872, 13s. --
whilst my company paid in local taxation £5613, 14s. 5d."
Capitalising the royalties at 4 per cent., we get a monopoly value of
£425,000. A tax of 2d. in the pound levied on this capital value
would produce £3541, and such an impost would have those economic
results that have been indicated, and place the State in a position to
substantially relieve the mining industry of present rate burdens,
thus giving a further stimulus to legitimate enterprise.
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