Transcriber's Note:

Obvious printer errors have been corrected. Hyphenation has been rationalised.

Wider tables have been split into two.

BRITISH INCOMES IN 1908-9

RICHES AND POVERTY

(1910)

BY
L. G. CHIOZZA MONEY, M.P.

ELEVENTH EDITION

METHUEN & CO. LTD.
36 ESSEX STREET W.C.
LONDON

TO MY WIFE

PREFACE TO THE TENTH (REVISED) EDITION, 1910

THE present edition of "Riches and Poverty" revises my estimates of the distribution of the wealth of the United Kingdom down to the year 1908. The effect of the revision is to show that in the five years that have elapsed since this work was first published, the distribution of wealth has grown even more unequal. The comparative stationariness of money wages of late years is a fact upon which the labourers themselves, and not less the nation of which they form by far the greater part, are to be commiserated. I write at a time when a great deal of discontent is becoming evident amongst large masses of the population; it may be well for those, and they are many, who have written in condemnation of that discontent, to ponder the following pages, and in particular to compare the profits recorded by the Inland Revenue Commissioners with the evidence as to wages collected by the Labour Department of the Board of Trade.

My own view of the subject is, that the massing of capital in large units has so considerably strengthened the hand of capital in its dealings with labour that in recent years Trade Unions have comparatively lost much ground. To-day the masters in many of our industries can exercise collective powers much more effectively than Trade Unions. Combination amongst employers in some trades has reached a point at which it has become possible to rule alike the price of products and the price of labour.

While since 1900 nominal or money wages have been at a standstill, the cost of living has continued to rise. The retail cost of food in London rose 9 per cent. in 1900-1908. Therefore British real or commodity wages have fallen heavily since 1900. A London platelayer, when he has the privilege of working seven days a week, can earn 21s. a week in 1910 as in 1900, but the real value of the 21s. has fallen by about 9 per cent.; in effect, that is, he earns 1s. 10d. a week less than in 1900. Now 19s. 2d. is not a just wage for a London platelayer.

The statements which were made in the 1905 edition of "Riches and Poverty" proved to be uncomfortable reading for many, and I have now a great many books on my shelves in which they have been discussed. The attempts to refute them have entirely failed. It is now generally accepted that the number of Income Tax payers is approximately what I stated it to be, and the increase of Income Tax assessments indicates that my estimates of the income of the rich did not err on the side of liberality.

Work such as is attempted in these pages ought, of course, to be entrusted to the hands of a permanent Census Department, empowered to collect information, and instructed to analyse and diffuse it. In the absence of such a Department, and in the lamentable condition of our national statistical records, the conclusions of a private investigator are only too likely to be called in question by those who do not stomach what he has to say. It may be said that the disagreeable estimates I have presented in the frontispiece of this volume rest upon private authority, and that they cannot be accepted without great reservation. I should like to direct attention, therefore, to a series of facts which are official, which cannot be denied, and which rest upon the basis that they represent masses of property actually taxed.

I refer to the estates which pass at death in the United Kingdom year by year, and which are valued for the purposes of the death duties. The following facts, to which I called attention for the first time in "Riches and Poverty," can be easily memorized, and every one ought to know them.

Year by year, as regularly as the seasons, properties pass at death in the United Kingdom, free of all debts, absolutely net, to the value of, in round figures, £300,000,000. Of this £300,000,000, the aggregate of approximately 80,000 separate estates, as much as £200,000,000, or thereabouts, is left by about FOUR THOUSAND (4000) PERSONS.

I repeat that these figures are not my estimates, but the official figures ascertained and published by the Inland Revenue Commissioners. They can be verified by any reader of this book by reference to the latest Official Report of the Commissioners of His Majesty's Inland Revenue (Cd. 4868. Price 1s. 7d.).

Those who are acquainted with the facts know, as Mr Balfour recognized in reply to me in a debate in the House of Commons on September 13th, 1909, that the official figures I have quoted would be larger but for the passing of property inter vivos in avoidance of the death duties. But, to take the figures as they are, an under statement of the wealth of the rich, I put this question to those who come to consider the estimates I have made:

If, in the United Kingdom, out of £300,000,000 a year passing at death, as much as £200,000,000, or two-thirds of the whole, is left by only 4000 persons, does it not follow, as the night the day, that the distribution of the national income must necessarily proceed on some such lines as those estimated in the frontispiece to this volume?

And with that question I once more issue these pages to the public.

L. G. CHIOZZA MONEY

Chaldon, Surrey

October 1910

CONTENTS

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

The following table shows the growth of the aggregate during the past fifteen years:—

GROSS PROFITS ASSESSED TO INCOME TAX
(From Inland Revenue Report)[1]

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:—

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.:—

Deducting these items we get:—

GROSS ASSESSMENTS TO INCOME TAX CORRECTED[3]

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

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

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

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

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

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)

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:—

* 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

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.

[1] Figures examined in "Riches and Poverty" (1905), Chapter 2.

[2] In "Riches and Poverty" (1905), Chapter 2, I estimated this figure at £900,600,000.

[3] It has been too freely assumed in calculating the national income that the gross assessments represent actual income.

[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.

[5] "National Income." R. Dudley Baxter. Macmillan & Co. 1868.

[6] "The National Income," Dudley Baxter.

[7] "Economic Journal," Sept. 1904. Page 458.

[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.

[9] "Economic Journal," September 1904.

[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.

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

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:

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

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)

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

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)

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)

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)

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

DISTRIBUTION OF THE NATIONAL INCOME AS BETWEEN
THOSE WITH MORE AND THOSE WITH LESS
THAN £160 PER ANNUM (1908-9)

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

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

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.

[11] For a fuller explanation of these Schedules reference should be made to Chapter 21.

[12] See Chapter 21.

[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.

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

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:—

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.

(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 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

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.

[14] Finance Act, 1894 (57 & 58 Vict. c. 30).

[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]

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.