….Now, what is going to happen in the future? In future those landlords will have to contribute to the taxation of the country on the basis of the real value – only one halfpenny in the pound! Only a halfpenny! And that is what all the howling is about. But there is another little tax called the increment tax. For the future what will happen? We mean to value all the land in the kingdom. And here you can draw no distinction between agricultural land and other land, for the simple reason that East and West Ham was agricultural land a few years ago! And if land goes up in the future by hundreds and thousands an acre through the efforts of the community, the community will get 20 per cent. of that increment. Ah! What a misfortune it is that there was not a Chancellor of the Exchequer who did this thirty years ago. Only thirty years ago, and we should now be enjoying an abundant revenue from this source.
Now I have given you West Ham. Let me give you a few more cases. Take cases like Golders Green and other cases of similar kind where the value of land has gone up in the course, perhaps, of a couple of years through a new tramway or a new railway being opened. Golders Green is a case in point. A few years ago there was a plot of land there which was sold at £160. Last year I went and opened a Tube railway there.
What was the result? This year that very piece of land has been sold for £2,100 – £160 before the railway was opened – before I was there – £2,100 now. I am entitled to 20 per cent. Now there are many cases where landlords take advantage of the exigencies of commerce and of industry – take advantage of the needs of municipalities and even of national needs and of the monopoly which they have got in land in a particular neighbourhood in order to demand extortionate prices. Take the very well known case of the Duke of Northumberland when a County Council wanted to buy a small plot of land as a site for a school to train the children, who in due course would become the men labouring on his property. The rent was quite an insignificant thing.
His contribution to the rates – I forget – I think it was on the basis of 30s. an acre. What did he demand for it for a school? £900 an acre. All we say is this – Mr Buxton and I say – if it is worth £900, let him pay taxes on £900…’
Rothschild was incensed and resisted the move to tax but in the end had to accept the inevitable.
The Sun Sets over the Peers
Finally, the whole controversy over the budget and the Parliament Act contributed powerfully to the steady decline of the House of Lords and the peerage in the British system of government. In 1911 the Conservatives claimed that Asquith had virtually created one-chamber government and they therefore promised a complete reform of the composition as well as the powers of the upper chamber which would have involved some modification of the hereditary principle. Indeed, as the preamble to the Act indicated, even the Liberals regarded their reform as an interim measure not a final solution. Yet, significantly the Tory leaders failed to redeem their promise despite rank and file pressure to do so even during the inter-war period. Tacitly they accepted the marginalisation of the House of Lords and, thus, of peers in general. This was underlined in 1923 when, following the resignation of the Conservative prime minister, Andrew Bonar Law, the obvious successor, Lord Curzon, was turned down because of his membership of the upper house. Never again would a peer become prime minister, though in 1963 Lord Home achieved the impossible by renouncing his peerage and returning to the House of Commons.
Financial and Social Consequences of the Budget
Finally, it remains to assess the long-term significance of the budget for British national finance. This can best be done by looking back into the Victorian period and forward into the twentieth century. It is sobering to think that since its introduction to cope with the costs of the French Revolutionary wars the income tax had been regarded as a temporary expedient. As late as the 1870s Gladstone had proposed to abolish it. He never quite succeeded, and in the 1880s and 1890s the rate rose to eight (old) pence in the pound. By 1914 Lloyd George had pushed the standard rate up to one shilling and four pence. By the end of the First World War it stood at six shillings. During the 1920s and 1930s despite enormous political pressure, income tax was only modestly reduced to four shillings. In short, all governments came to rely heavily on income tax as the central element in national finance. Even the government of Mrs Thatcher managed totrim income tax only to 25 (new) pence, equivalent to five shillings, which was historically a high rate.
The only aspect of the 1909 budget which failed to survive was Lloyd George’s famous land taxes. The laborious process of land valuation went ahead up to 1914. But during the war his involvement in the coalition government put the whole enterprise in jeopardy. Although Lloyd George remained prime minister until 1922 he was too dependent on his Conservative colleagues to resurrect the land taxes; by 1920 they had been abandoned.
In spite of this setback, the social consequences of the Edwardian reforms were enduring. The effect of a graduated system of taxation combined with social welfare measures was to begin the process of redistributing national income from the rich to the poor, albeit slightly. This process continued in each succeeding decade regardless of changing circumstances and political parties. Not until after 1979 was the trend finally checked by reductions in taxation for very high earners and a shift to taxes on consumption paid by the poor and those on average incomes. (www.users.globalnet.co.uk/~semp/budget.htm)
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