Joseph Hyder: The Case for Land Nationalisation
Chapter XVIII: How to Nationalise the Land
HAVING shown that numerous and serious evils are inherent in the present land system, and having examined the various proposals for mitigating them, all of which proposals are seen to fall far short of what is really needed, we come now to the root remedy, to which all the foregoing arguments and illustrations have pointed; namely, the complete reconstruction of the land system upon a new basis. That basis must be communal ownership instead of private ownership.
The latent sovereignty of the State, which has never been abrogated, must be made a living force, not merely a legal theory which is, for most practical purposes, almost a dead letter. The absolute right of the State to resume possession of the land cannot for a moment be questioned, and the way is made easier by the fact, known to all men, that it is already frequently exercised. No new principle has to be established. No precedent has to be created. All that is needed is to extend the application of an old principle, and the precedents for it are numerous and unmistakeable.
It is not necessary to go so far back as to the time when sovereigns, under the feudal system, treated all the land as their own property, and resumed it at their pleasure. For what was once the prerogative of the sovereign is now the prerogative of the Legislature. The private landlord has never been an absolute owner.
He has never had more than a licence to hold land, and the licence has always been revocable. In the old times it was easily got and easily lost. Everything depended on the caprice of the King.
In modern practice, the power to resume the land has been exercised with less frequency, and with greater consideration, but it is still there. Not arbitrarily, but for good reasons thoroughly debated in Parliament; and not by confiscation, but always with most liberal compensation, the landlord has been reminded again and again that he must surrender the land whenever it is decided by Parliament that it is necessary for him to do so.
If land is needed by the Church of England for a church site, and if it cannot be got by voluntary arrangement, the Church can force the landlord to sell it, under an Act of Parliament which was passed in 1818. No other religious body has that power; but, if it is right for the Established Church to have it, there is no just reason why the same power of compulsory purchase should not be asserted on behalf of other religious denominations, and particularly as all of them need it very much more than the established Church has ever done.
Take the case of the railways. They need capital and they need land, and they have to obtain parliamentary power before they can get either. If the enterprise promises well they never have any difficulty in ensuring capital. Investors are readily found. There is no monopoly of money. If one man won’t invest, another will. Capital, moreover, is fluid, and it can be drawn from any part of the world to make a railway in any particular place. Therefore there never has been, and there never will be, any need for Parliament to force a man to lend money to a railway company. But from the making of the very first public railway, Parliament has always recognised that land stands in a different category from money. Without compulsory powers of acquiring land railways would have been impossible. The landlord has been forced to sell where he was unwilling to sell. His claim to treat the land as his own absolute property has been set aside in every case whenever Parliament was convinced that it was incompatible with public interests. The only right he had was to compensation for dispossession. This has always been religiously respected, and the capital of the railway companies has been swollen by the payment of extravagant compensation that was fair neither to the shareholders, the passengers, the traders, nor the employees. The essential point to notice is that the land itself was taken from him whether he liked it or not.
In matters that are concerned with the national or local administration of the laws, public authorities are in constant need of land. There is not a single public department but needs it for one purpose or another. For manoeuvring grounds, shooting ranges, fortifications, dockyards, aviation camps, and lighthouses, land is the first essential, and compulsory powers are obtainable for its acquirement. Sites for public buildings, land for drainage, water, and housing schemes, land for the making of new streets and the widening of old ones, and land for allotments and small holdings, could only be obtained by means of such powers. In fact, so frequently have they to be used, that in the City of London alone there have been over a thousand instances of land being bought by compulsion. And the principle has been extended to the compulsory hiring of land as well.
From all the above examples it is therefore quite clear that there is no injustice in compulsory expropriation. And if it be right to take a part of a man’s estate, it would not be less right to take it all on the same terms. If an acre can be taken, why not a county, why not the whole country? The one is as equitable as the other; for equity does not depend upon area, but upon conditions. The nationalisation of all land may therefore be accomplished by the simple extension of a practice of the State with which all men are familiar.
So long ago as 1890, on May 6, the whole of the then Liberal Opposition supported a resolution moved by Mr. R. T. Reid (subsequently Lord Chancellor Loreburn) in the following terms: “That in the opinion of this House, a measure is urgently needed enabling Town Councils and County Councils in England to acquire by agreement or compulsorily, on fair terms and by simple and inexpensive machinery, such land within or adjoining their several districts as may in their judgment be needed for the requirements of the inhabitants”; and the resolution was only defeated by the narrow majority of 16.
Later on in the same year, one of the greatest of British statesmen, Mr. Gladstone, gave it as his opinion that “whenever land is required in the judgment of a competent public authority it should be taken, whether the landlord desire it or not; he is entitled to fair compensation, but he is not entitled to object.”
In 1892 the present Lord Chancellor brought in a Bill to enable local authorities to schedule land that they might need in the future, and to empower them to buy it by compulsion within twenty years at the then value, nothing being given for the additional unearned increment that might have accrued in the meantime. This Bill also received the united support of the party, which is now (1913) in power.
Local authorities themselves are being convinced by their own experience that extended powers of land purchase are needed. In June 1900 the Association of Municipal Corporations met at Dublin and unanimously adopted a resolution to that effect. Since then, at the instance of the Corporations of Sheffield and Brighton, the great municipalities have on different occasions adopted similar resolutions.
In 1912, a private Bill, the Public Authorities (Purchase of Land) Bill, was endorsed by the Government at the second-reading stage, and a very large number of public authorities subsequently adopted resolutions affirming their approval of it.
But, it may be said, this is not land nationalisation. That is true, if by land nationalisation is meant the sweeping abolition of all private property in land by one Act of Parliament. The important point is that the ground is being steadily prepared for larger areas of land to be taken out of private hands and put under public ownership. This is the way of evolution in the first stages of the great change. Powerful vested interests are like great fortifications. They are not captured by the first assault. The outer works have to be carried first, and the sapper and miner must be brought into action. Some of the outer works of the citadel of private property in land were carried by the extended application of the right of State resumption, and by the assertion of the right of the State to fix the rent, as in Ireland and Scotland, by the Fair Rent Courts and the Crofters’ Commission. The process of disintegration has set in, and the way is easier than it was. The time for heroic measures may not be the immediate present, but it is the not distant future. In the meantime there is much to be done, and it is in the very arena of immediate practical politics, by public authorities being empowered to break up the landlord system piecemeal. Nearly 200,000 acres of agricultural land have already been brought under public control under the Small Holdings Act. County Councils are gaining experience every day, which will be invaluable in the future, the practicability of public landownership on a large scale is being demonstrated, and a strong public opinion is steadily growing which will facilitate its extension.
At present local authorities are strictly limited in their powers of land acquisition. They can only acquire land for specific purposes. They cannot acquire it except for their present needs. They have no general powers of land acquisition such as German municipalities possess. They cannot look ahead and provide for future requirements as they can in the provision of water supplies. All this must be altered. The boundaries of their freedom must be enlarged. If the may acquire land for agricultural smallholdings, why should they not be able to acquire it for homesteads, for the benefit of all classes? If they may buy it for housing schemes, why should not towns have the power to buy the belts of undeveloped land that surround them, and thus control all future building, and secure all the future unearned increment?
And here it may be well to deal with the view that is often expressed in favour of land municipalisation as against land nationalisation, as if they were mutually antagonistic rather than mutually complementary, as in fact they are. For although local authorities may rightly be entrusted with the administration of their own areas, and the collection of the land revenue from them, the supreme ownership of all land cannot but be vested in the nation itself. Only by the authority of laws approved by the national Parliament can they acquire land, and only under a national code of regulations should they administer it. As agents for the national owner they should act, not as owners themselves; and they should be assessed for national purposes on the land values, which they would collect. For the unit of ownership must be the nation, not the locality. The enormous value of the land in London is largely due to the fact that it has been chosen to be the seat of the national Government, and, even if on that ground alone, the smallest hamlet in a remote country district is entitled to derive some of the benefit.
Experience has shown that the powers which it is now urged should be given to local authorities must also be given to a national authority. For various reasons many local authorities would rarely, if ever, exercise large powers of land acquisition if they had them. Even for such comparatively narrow objects as the buying of land for workmen’s houses, or for the creation of allotments and smallholdings, many of them have been woefully and notoriously neglectful of their duty. Constituted as so many of them are, an Act for gradually nationalising the land through their agency would remain a dead letter, and might as well not be passed. And, in the very districts where public ownership of land is most necessary, there would be the least chance of establishing it.
Consequently, we need a Central Authority which can and will act where local authorities fail, an authority which will be free from the domination of local territorial interests, and which can be entrusted with the duty of carrying out a national policy of land resumption. The Crown Lands are already in the hands of such an authority. The Commissioners of Woods and Forests, or the Board of Agriculture, might therefore be the nucleus, as they are the precedent, for a National Land Commission or Land Board, with power to acquire land as a permanent national possession in any part of the country.
Every year great country estates are put into the market, and agents of the National Land Commission, acting incognito for obvious reasons, might often secure them on advantageous terms. In this way a large area might be brought under public ownership in a reasonable time without the need for exercising compulsory powers at all. And the machinery for administering the national estates would gradually and naturally grow as the need arose. Moreover, it would always be possible to put such land under the governance of local authorities whenever they signified their willingness to undertake the responsibility.
The Land Must Not Be Re-Sold
It is of course assumed that when land is once acquired by the State it is acquired in order to be held, not to be re-sold. It must be as inalienable as a public park. It must be dedicated, like an open space, to the use and enjoyment of the people for ever. There must be no parting with it for the sake of a mess of cash pottage. If it is good in the eyes of those who want to buy it, it must be equally good for the community to keep a tight hold on it.
In our American and Australian colonies the people entered into a vast national property of incalculable value, and they at once proceeded to divide it among themselves as the first comers. No greater mistake was ever made, as they are already beginning to discover. The giving of the land, or a selling which was almost tantamount to giving, was not necessary as an encouragement to colonisation. The grant of it rent-free for a term of years would have achieved the purpose as well, and the evils of land speculation would thereby have been entirely prevented.
And so in Ireland. The credit of the whole of the people has been employed to buy out one set of large landlords, simply in order to set up a multitude of Irish farmers as landlords on their own account. All the financial machinery of a great scheme of land nationalisation has been created, and none of its benefits have been secured. The only real benefit which the purchasing farmers have won is the feeling that they are now secure in the tenure of their farms, but that security could quite as easily have been given to them without giving them the freehold. Moreover, they do not get the fullness of the freehold until they have paid back the whole of the purchase money which the State has advanced on their behalf. In most cases their farms are mortgaged to the full value, and it may be between seventy and eighty years before the mortgage is paid off. Not till the second or the third generation will the farmers be free of the State mortgage, and, when that has been paid off, the probability is that, as always happens, many of them will soon become burdened with mortgages to private money-lenders, who are amongst the hardest of all taskmasters.
The right of the Irish people to deal with the land in that way is not in dispute. But, if the national Government had seen fit to withhold the credit of the other three countries in the United Kingdom for so sectional a purpose, it is equally certain that they would have had a right to do so. It is to be hoped that the Irish precedent will not be followed in future dealings with the land of England, Scotland, or Wales, but that, when the big landlords are bought out, their place will be taken by the nation itself in its collective capacity.
The Basis Of State Purchase
Before the public purchase of land can be safely and profitably extended it is absolutely essential that the principles of assessing the compensation payable to its present holders must be put on a proper footing. One of the strongest arguments against such purchase has been the fancy compensation, which, as a general rule, has been paid in the past. Fortunately there is an easy way of preventing this in the future.
Landlords arc entitled to the true value of the land they give up, but to no more than that. And that true value must appear in black and white on the assessment rolls. A landlord has no right to expect more than the sum* upon which he is willing to pay rates and taxes. If any special damage is done to him by the taking of a part of his property he is entitled to compensation for that. If, on the other hand, the part which is taken actually benefits the part which is left (as often happens) the compensation may reasonably be reduced by the amount of such betterment. But the 10 per cent. extra for compulsion has no justification either in law or justice. It has crept into land-purchase transactions as a sort of bribe, but it must be relentlessly cut out. The power of compulsion must take the place of the bribes of fancy prices, which have been still further swollen by such unwarrantable extras.
* Less the capitalisation of expenses of management and taxation.
The present method of arriving at the amount of compensation payable to expropriated owners is absurdly unjust, grotesquely inaccurate, and extravagantly costly. It has been wittily said that there are two kinds of liars; ordinary liars, and expert witnesses. Certainly the extraordinary differences between different valuations of the same property are enough to cause them to be distrusted, and are calculated to give the impression that the evidence of valuers is very often affected according to the side by which they are engaged. The purchase by the Manchester Ship Canal Company of a hundred acres of land belonging to the Trafford Racecourse Company is a case in point. The expert valuations put in on behalf of the vendors ranged from £670,000 to no less than £1,500,000; an extraordinary discrepancy which speaks for itself. The arbitrator showed by his award that he regarded even the lowest of those valuations as 250 per cent. too high, and it is well known that arbitrators do not usually err on the side of awarding too little.
Besides the expense of the land itself the system of Private Bills adds enormously to the costs, which are legitimate and necessary. The Lord Mayor of Dublin told the Association of Municipal Corporations that the city of Dublin had had to pay £40,000 in promoting a Bill for the extension of its boundaries; that a small municipality had to pay £10,000 in promotion expenses for a main drainage scheme which was estimated to cost only £50,000, and that another town, with an annual valuation of only £30,000, had had to pay £16,000 in promotion expenses. The Sheffield Corporation had to pay £20,000 in Parliamentary expenses in connection with a water scheme ten years ago, and the Derby Corporation paid £30,000 in connection with their Waterworks Bill, besides their own Town Clerk’s charges. The greater part of all these burdens might be avoided if the public acquisition of land were made as simple as it ought to be.
How necessary it is to establish a proper basis of compensation is also shown by the experience of London in the creation of the Metropolitan Water Board. The arbitration costs alone were nearly £90,000, and, but for the power of taxing them, they would have been higher still. The New River Company put in a claim for £36,863, but it was taxed down to £21,115.
The taking over of the property of the National Telephone Company revealed the same conscienceless disposition to bleed the taxpayer. In one part of their claim alone they asked £3,292,966 for that which was proved to the Court to be worth no more than £2,055,468.
An excellent principle was acted upon by the German Government when they established themselves at Kiautchou in China. At the first sign of public land purchase the value of land goes up with a bound. But Germany arbitrarily, and quite justly, ignored this artificial increment, and paid for the land the value, which had naturally arisen before its entry. The increment was due to its own action, and it was only right that it should decline to pay more than the proper price for the land on that account. In the acquisition of land for the new capital of India, at Delhi, the Indian government announced its intention of similarly protecting the Indian taxpayers from the extortion of those who happened to own the sites, which would be required.
The Tax-And-Buy Principle
But the surest way of getting land at a fair price is to take it at its taxable value, subject to such minor modifications as have already been referred to. The national valuation must be the basis for either taxing land or buying it, at the discretion of the public authorities. If that valuation is not fair it must be made fair. And nothing will act so powerfully to make it fair as this optional public power of purchase or taxation. No landlord will desire that his property should be valued at more than it is worth, because of the taxes he will have to pay so long as he keeps it; nor that it should be assessed on a low valuation, because of the risk of having it bought for less than it is really worth. As soon as this principle is established it will become perfectly safe to nationalise (or municipalise) as much land as may be considered necessary. For every pound paid there will be a pound’s worth of land to show for it.
On April 10, 1907, the House of Commons approved this principle. In 1912 the Government endorsed Mr Harvey’s Land Acquisition Bill, which embodies it; and, as has been said, it has since received the imprimatur of a large number of Public Authorities.
Some years ago ex-Lord Chancellor Loreburn was good enough to favour the writer with some valuable notes on this aspect of the land question, and the following is an extract from them:
“Almost all the difficulty and expense (beyond actual price) attendant upon such public land purchase, is due to two causes:
- The cumbrous system of conveyancing with secret deeds of title, and
- The absence of any valuation of lands, etc., for rating purposes, which might dispense with the necessity of a lawsuit each time a public body desires to acquire land compulsorily.
“For these reasons land-reformers ought to urge:
- A system of compulsory registration of title (not of deeds) such as exists in Australia, where land is transferred at the Register Office, at little or no expense, and without the intervention of lawyers.
“The recent act passed for England is good so far as it goes, but it requires amendment, and it should be made universal and compulsory.
- A system of rating on capital values instead of on supposed annual value, whereby the owner should be at liberty to value his own land, and have to pay rates on that value, while the Local Authority should have the right of buying at that value.
“This would not only secure that some land should not be undervalued (thus unfairly adding to the burden of other landowners), but it should also fix automatically the price at which a Local Authority could buy, and enable them to frame their schemes with almost exact knowledge of what they would have to pay for the land.
“Were these two simple and just reforms obtained, we might expect County Councils and Town Councils to undertake with infinitely more zeal and confidence the duty of coping with the formidable evil of our crowded cities.”
On the same occasion the present Lord Chancellor, Lord Haldane, also wrote, “The only right of the individual owner is to the value of the land, as distinguished from a right, capable of being asserted in opposition to the public interest, to the specific thing itself.”
“There is a very easy and equitable test,” said The Timeson May 14, 1908. “Of the real value conferred by the proximity of the town. Let the rating authority offer to the landlord theprice, which in its opinion represents the rateable value. If the landlord refuse the offer, then let him be rated upon the annual value of the capital sum which he declines to take.”
It is, in fact, impossible to imagine a single sound argument, which can be advanced against so reasonable a proposition as that there should be one standard valuation of land available either for its taxation or its acquisition.
The Method of State Purchase
We come now to the crux of the problem, the question of financing the public purchase of land on a large scale, or even the nationalisation of the whole of the land under a single operation. It being decided that the land ought to be made public property, and the price being agreed as the value upon which the landlords are content to pay taxes, the question arises, how can so large a sum of money be raised? At first sight the difficulty seems insuperable, but it vanishes upon examination, as difficulties often do.
A small amount of land could be paid for out of the annual revenues of the State or Local Authorities, but it would be so small that it may be left out of account. A considerable area of land could be bought by means of loans, but it would take too long to nationalise the whole land by such means. For the amount of money, which can be raised by loans is strictly limited, and the money market would be seriously affected if an attempt were made to raise very much in that way. Fortunately there is another way by which the land can be acquired without the medium of loans at all, except, possibly, to a very slight extent, and for a special purpose which will be referred to hereafter.
It is obvious that it is impossible to nationalise the land by the payment of cash, for there is not enough cash in the whole country for so huge a transaction. Nevertheless it is quite possible to pay for it with something, which is equally good. For consider what it is that landlords now possess. They have the lordship of certain land, worth so much in the market. By virtue of that lordship they collect an annual rent from a tenant, and can realise the capital value of that rent, or of still greater rental potentialities in the case of under-developed or undeveloped land, whenever they choose to find a buyer. And the sole authority upon which they can either take the annual rent, or realise its capital value, is the possession of a parchment title deed, either actually in existence, or presumed to exist by reason of their unchallenged rights of ownership exercised for a certain term of years.
In an ordinary business company the different owners possess certain bits of ordinary paper, not parchment, specifying the number of the shares they hold, and their denomination, whether preference or ordinary shares, and so on. And they paid for those paper share certificates with certain other bits of paper called cheques. Possessing those paper certificates of ownership, they receive their dividends, which again are paid to them in the form of paper cheques. None of these things are cash, but they are as good as cash.
In the case of land the owner’s share certificate is his title deed. Suppose the land to which it refers is worth £1,000, and suppose, further, that he is called upon to surrender the land to a Public Authority, and is given a Government-guaranteed Land Bond worth £1,000 in exchange for it. And suppose that every landlord were dealt with in the same way. The State would step in as the landlord step out, and would exercise all the rights of ownership hitherto exercised by him. Henceforth it would receive the rent, and with them it would pay the interest on the Compensation Bonds. Thus the landlord would lose no income to which they were entitled, but only a power of choosing tenants and of determining the use to which land shall be put, a power to which they are not entitled, and which ought not to be in private hands at all.
Contrast this with the method of paying for land with borrowed money. The Public Authority pays cash for the land it thus acquires. But how does it pay for the cash? Simply by issuing Bonds to the investor. If, therefore, the investor is satisfied with a Public Bond in exchange for the cash he advances, why should not the landlord be satisfied with a Public Bond for the land he sells? The Bond is merely a promise to pay a certain specified interest, and at a given date to redeem it at its full face value. On the security of such promises, made by honest and solvent authorities, many millions of pounds are advanced every year. If, then, the community can buy cash with such promises, why should it not buy land with them? Why invoke the aid of the investor at all? Why not deal direct with the property-owner himself without the intervention of a third party?
Surely a Government-guaranteed Bond is as good as a Bank of England Note. A £5 bank note has no intrinsic value. It is worth £5, only because it is a promise on the part of the National Bank to pay on demand five golden sovereigns for it. It is always worth that sum, no more, and no less. And the Bank of England can legally and safely issue as many notes as it finds necessary so long as it has enough gold in its vaults to meet all possible calls. In the same way either the National Government, or a County Council, or a Town Council, could safely issue as many Land Bonds as it thought necessary so long as they did not exceed the value of the land which they represent, and which would then have become public property.
Timid people are often frightened by the mere mention of the huge figures which would be involved either by the nationalisation of all land, or by the public acquisition of any large part of it. They forget that the financial soundness of a transaction is not affected by its magnitude. It entirely depends upon the relation that exists between assets and liabilities. What the total market value of the land of the British Isles now is no one can yet say. Those who seek to minimise the amount put it at 3,000 millions sterling, and there are others who say it is worth more than 6,000 millions. The exact figure does not matter, provided that it represents true values, not fictitious values. It would be as easy to acquire it on the basis of the higher figures as upon that of the lower. The Government could issue Bonds to the full amount, whatever it was, and the rent payable to the State would suffice to pay the interest on them, with the exception of such of them, a small percentage of the whole, as represent prospective as distinguished from actual realised values. The interest on that small percentage of the whole issue could be raised in another way, which will be presently explained.
It will be said that the State would be creating a new debt of unprecedented magnitude. But would it not also enter into possession of new assets equally vast? Which of us would hesitate about incurring a new debt of a million pound, if, at the same time he took over a new property worth as much? That would be the position of the State under land nationalisation, and it is such that the most nervous-minded need not hesitate about it. For there is no parallel between the present National Debt and the one that would be created by the State assuming the ownership of land, either wholly or only in part.
The present National Debt does not represent tangible property, except to a small extent, but the cost of wars waged for Imperial defence and extensions. The hundreds of millions, which the South African war cost the nation, were devoted, not to buying territory, but to asserting our power and sovereignty. They enlarged our over-sea dominions, but they did not add an inch to our national property. They were a dead cost, and the interest on the money which was borrowed for that war, as for all other wars, has to be raised by taxation. Between a debt of that kind and the debt that would be created under land nationalisation there is a great gulf fixed. It is as wide as the difference between darkness and light. For every pound of debt there would be a pound’s worth of land to set against it, and the revenue from the new property would pay the interest on the new liability. It is also necessary to remember that the nation is already under the burden of a great debt to the landlords. As a landless people, they are now under the heavy liability of having to pay an annual rent to the lords of the soil for the bare permission to live in their own country. It is not a corporate debt, but it is a debt none the less on that account. It is a debt from which the great majority of men cannot escape. Here and there a man may get rid of his rental liabilities by buying the freehold, but only the minority are able to do so. This debt of annual rent, moreover, tends ever upwards. It may, therefore, be described as a debt that is annual, interminable, and increasing, and as one that is owed, not by the nation as such, but by the aggregate body of rent-payers in their individual capacity. Land nationalisation would convert this existing debt into a capital sum, terminable, and fixed in amount, and owed collectively, by the whole people, including the present landlords. For while, as ex-owners, they would receive compensation, as tenants of the State they would themselves help to pay it.
The conversion of the perpetual claims, which landlords now possess, into terminable claims, is of the very highest importance. The whole idea of perpetual claims, no matter with what justice they may have been originally created, is utterly indefensible. They are, in fact, the main cause of the continuance of poverty, in spite of the enormous strides, which mankind has made in the arts of production, and, so long as they exist, poverty is bound to continue. If, by some great discovery, the production of wealth could suddenly be multiplied tenfold, the poor would still be with us, unless a corresponding improvement were made in the processes of wealth distribution.
The services which men like Caxton, Arkwright, Watt, and Stephenson rendered to humanity were incalculable, and future generations, to the end of time, will benefit by their labours. But in all such cases a limit was put to the period during which they could claim a monopoly in the processes they discovered. It could not have been otherwise. For it is scarcely possible to picture the evils that would have arisen if their descendants had been given the right to draw tribute for ever from all subsequent applications and extensions of the discoveries they had the genius to make. Yet, in the case of land, we recognise to-day the rights of the descendants, or successors in title, of men who made no discovery and rendered no service to mankind, but who simply got themselves established many centuries ago as the legal masters of the one thing that is indispensable to man and unmakeable by him. In the name of common sense, and for the sake of the most elementary justice, claims of that character cannot be allowed to go on for ever.
Under land nationalisation either complete or peace-meal, and whether carried out by a National Authority or by Local Authorities, the land will be bought for what it is actually worth at the time of the transfer. The debt can never be increased. Even if the Bonds were never redeemed the nation would therefore gain in two ways; first, by having the control of ownership, and second, by being able to apply all the future unearned increment to the public service. But it is very desirable, not merely that the debt should not be increased, but that it should be reduced, and ultimately extinguished altogether. Therefore provision must be made for the extinction of the Bonds.
There are two ways of doing this. They may be extinguished by process of time, or by redemption. In the first case the State would undertake to pay the agreed interest upon them (out of the rents) for a certain definite term of years or lives. If for lives, the period would extend to the end of the second generation. The present landlords would receive the annuities till they die, and their present expectant heirs would receive it thereafter. In strict abstract justice the duty of the State extends no further. Every landlord, and all those dependent upon him, or having rights of succession to him, would be cared for. Their claims would not die out till the end of the second generation. Their descendants, at present unborn, would come into the world with all the rights that the rest of the people had, but with no privileges, which the others did not enjoy.
But there are practical difficulties in the way of such a plan, for the compensation would cease much sooner in some cases than in others, and the saleable value of the Annuity Bonds would therefore vary. For this reason it would probably be preferable to issue the Bonds for a term of years rather than of lives.
Now the principle underlying terminable annuities is already in operation under the leasehold system. We there see that landlords themselves have considered it to be perfectly just to allow to a tenant possession of his own property for a limited term only. Under the oldest building leases the tenant had to surrender the house he had built at the end of twenty-one years, and on no settled estate could a longer period be granted. Until the middle of the last century no lease longer than for forty years could be granted on any of the vast estates of the Church. Leases are longer now, but seventy-five and eighty years are very common periods, and leases for three existing lives have been frequent too.
Applying this principle to the Annuity Land Bonds, it would be quite fair to make them terminable in (say) seventy-five or eighty years. At any rate the period would need to be long enough in order to be just to the expropriated landlords, and short enough in order to be just to the community itself. In the clash of the two interests there need be no fear that the former would suffer. The danger is the other way. But the nation could well afford to be generous in order to achieve its purpose with a minimum of friction and resistance.
Such a plan would be equivalent to the giving of a financial notice-to-quit, so long ahead of it being acted upon that there would be no hardship in it except of an insubstantial and sentimental kind. It may be said, however, that the landlord has a perpetuity now, and an annuity is not an equivalent. That objection has been met in advance by the contention that perpetual claims have no foundation in justice. There is no need to give an exact equivalent. The landlords must lose something if the nation is to gain anything. They must lose their power over the land itself at the very beginning of a scheme of land nationalisation, and their profits of ownership must also cease at the end of a reasonable length of time, and, seeing how they themselves have applied the principle of terminable ownership in the case of the property of their own leasehold tenants, they should be the last persons in the world to object to it being applied to their own tenancy (not ownership) of the land itself.
But, besides the method of terminating the Bonds by the lapse of time, they should be terminable by redemption at the option of the State. They could at any time be bought up at their current market value, and it might be well to apply a part of the future unearned increment, which is as certain as the sunrise, to this object. This would be a good investment of such funds, for in proportion to the reduction of the capital debt there would be a corresponding reduction in the annual interest payable, and the final extinction of the whole of the Bonds might thus be materially hastened. While, however, the unearned increment might advantageously be so applied, at least in part, it is necessary to emphasise the fact that the success of the scheme does not depend upon it. Even if land values were quite stationary, they would practically pay the annual interest, and the lapse of time would of itself extinguish the debt. But with an improved land system, and the continuous growth of the population, the unearned increment would be a certainty.
Compensation for Prospective Values
In the case of most land the Compensation Bonds would represent the simple capitalisation of the present net rent. But, in the case of land near growing towns, they would represent this and something more. Where land has a prospective value the actual rent received would not be sufficient to pay interest on the Bonds.
How then is the deficiency to be made good? For answer, let us see what happens now.
A man buys a piece of land for £1,000, (say) 4 acres in extent. It is near a town, and is likely to be wanted for building purposes in the near future. Meanwhile it is let for grazing or market-garden purposes at a rent of only £3 an acre. The speculator withdraws the purchase money from an investment which is yielding him 4 per cent., or £40 per annum. From his new investment he receives only £12. He is content to forego £28 per annum in the present because he expects to sell the land at a considerable profit later on. In ten years he will have lost £280 in income, but if he sells the land for £1,300 he will have made good his loss. Now, if the State acquires that land at the beginning for £1,000, it also would find that its present income would fall short of its annual payments, but the difference would be made up when the land came to be developed. If, therefore, it is safe and profitable for an individual to buy such land, it would be equally profitable for the State to do so. The present deficiency would only be temporary, and it would be justifiable to incur it for the sake of the future benefits. It is a speculation in which there is no real risk.
The interest on the Bonds that represent prospective values would, therefore, have to be paid out of taxation for a time, probably only a few years; or it might be raised by the issue of 31/3 per cent. Loan Bonds each year, repayable when the increment had actually accrued. In that case the only sum that would have to be found out of taxation would be the interest on such special Bonds. If the total amount of the prospective values were (say) £30,000,000, an annual loan of £1,000,000 would be necessary, and the interest on this would only be £33,333 In the second year the Loan Bonds would amount to £2,000,000, and the interest £66,666, and so on. But every year, as land was developed, the prospective values, which had been bought would be actualised, and would be applied to the extinction of the loans which had been raised to cover the temporary deficiency.
An objection may be made that the issue of so vast an amount in Annuity Bonds would depreciate their value. Why should it? The interest on them would be absolutely guaranteed by the State. They would be backed by the greatest of all securities, the land itself. The money that is now invested in land would then be invested in the Bonds, which represent land. They would represent a great revenue-yielding property. What better investment could a man have? The income from them would be as safe as the rent of land ever was, and it would be collected with less trouble, difficulty, and expense. And if a man wanted to realise their capital value he could do so with greater ease and certainty than a landlord can raise money now by the mortgaging or sale of his estate.
Without injustice the land may, therefore, be nationalised, either gradually or completely, and either by the agency of a National Authority or of Local Authorities. It is not a Utopia, good in theory but incapable of realisation. It is practical politics as soon as the people decide that it shall be carried out. It offers no real difficulty, and it is the only way by which the natural resources of the country can be made to subserve the highest interests of the whole community, and by which every man can be secured in his rights as a part proprietor of his native country. And it is, moreover, the line of least resistance and maximum advantage.