TIONAL &
MUNIQPAL
FINANCE ^
BY WALTER JONES
UNiVExS^TY C^ CAi:?"C^
AT LOS .-_;;:z:zs
NATIONAL AND MUNICIPAL FINANCE
-â– J. i -*^J-* >
National and Municipal
Finance
SHEWING
That Imperial Taxes are Excessive
And Local Rates Oppressive
Why they are so Burdensome
And how they may be Relieved
BY
WALTER JONES, J.P., m.i.mech.e.
London
FRANK PALMER
RED LION' COURT
^ C C C C
First Edition, 5,000, 1913.
Also issued Cloth Edition, 2/- net.
Limp Leather, 3/- net.
^
DeMcatet)
TO
MEMBERS OF PARLIAMENT
COUNTY COUNCILLORS
MAYORS, ALDERMEN, BURGESSES
BOARDS OF GUARDIANS
AND ALL WHO ARE ENTRUSTED WITH THE
RAISING AND SPENDING OF PUBLIC FUNDS ;
IN THE HOPE THAT BY THEIR
COMBINED WISDOM
THEY WILL DEVISE AND ADOPT MEASURES
FOR THE BETTER
ADMINISTRATION OF RATES AND TAXES
THAT PRESS SO HEAVILY UPON EVERY SECTION
OF THE
COMMUNITY.
iitmG21
CONTENTS.
Chaptei
Page
Introduction ....
•
xi
I.
Municipal Enterprise, Finance, Outline
of Policy ....
I
II.
National Finance, Consols, &c. .
25
III.
Borrowing and Lending
47
IV.
The Ethical and Historical Point
of
View
59
V.
Usury Gonsidetred Chronologically
71
VI.
National Wealth
91
VII.
Waste
99
VIII.
The Argument ....
log
IX.
Evolution or Revolution
121
X.
The Cause ....
131
XI.
The Remedy ....
137
Index
163
VI 1
Introduction.
This Book has been written not for profit but for
service, mostly in the evenings or the small hours,
after days of strenuous exertion in a manufacturing
business, in addition to many public or semi-public
duties.
The Author makes no claim to originality, or to be
better or wiser than his fellows, he has drawn freely
from other sources, and given much time and thought
to ascertain the direction in which the inhabitants of
this great Nation must move for the amelioration, or
the abolition of the existing social diseases. There are
thousands of professional men. Scientists, Clergymen,
Doctors, Architects, Civil and Mechanical Engineers,
Manufacturers, Merchants, Shopkeepers and Trades-
men, who find it increasingly difficult to live honestly
and pay their way. Why ? Because we are so much
engrossed in earning, or trying to earn a living, that
we have forgotten how to live; the trend of all
National and Municipal Legislation appears to be in
the direction of increasing the burdens of existence,
resulting in a maximum of expenditure with a mini-
mum of efficiency and economy.
lyUxury without purpose is a social disease, the
boredom and ennui brought about by abundant
superfluity for the few, has its antithesis in the
terrible pressure of economic poverty for the many,
and between these two extremes the middle and
working classes are ground as between two mill-
stones. Industry is penalised at all points, the
ix.
greater the industry the heavier the tax ; while those
who do little or no useful work are surfeited with
idle luxury, individual selfishness and a lack of
incentive.
A considerable amount of space is necessarily
devoted to the statement of well known and generally
admitted facts, followed by a brief historical survey,
giving the opinions of the greatest teachers. The crux
of the whole business however depends not upon a
statement of facts, but upon the promotion of a con-
structive and comprehensive scheme, and it is for the
reader to judge whether the remedies suggested are
logical, reasonable, sound, and calculated to form a
basis for a practical solution of the most pressing
problems of the twentieth century.
The Author is neither prophet nor seer, he has no
axe to grind, no party to consider, his object is not
to sow dissension, but to serve all, in the humble
capacity of a sign post, simply pointing the direction
in which other more capable men may move to find, —
as they certainly will find if they seek, — a better, a
wiser, and a saner way.
Walter Jones.
Stourbridge, 1913.
X.
Chapter I.
Municipal Enterprise, Finance,
Outline of Policy.
One of the most remarkable features of the nineteenth
century was the rapid and wide extension of Muni-
cipal enterprise. The 40,000 local governing bodies
brought into existence in Great Britain, and the
increasing powers with which they are constantly
being invested, clearly indicates that much can be
done by means of the rates for the promotion of the
health, comfort, education, and enjoyment of the
people.
This quickening of civic activity in the direction of
collectively providing utilities impossible of accom-
plishment by the individual, has resulted in an enor-
mous increase of corporate expenditure. This was
inevitable, for communities, no less than individuals,
cannot expect to receive something for nothing.
Local rates and imperial taxes are the penalties we
are called upon to pay for the benefits of civilization :
the value received is in no way commensurate with
the money expended. Instead of conferring benefits,
the present insane system is each year becoming more
and more oppressive, and the ratepayers already
possess the power to relieve this pressure, not by
removing the incidence of taxation, but by the aboli-
tion of the greater portion of it.
However commendable the work of raising the stan-
dard of civic life may be, some of the methods by
which it has been done are open to criticism.
The fact that Municipal indebtedness has more
than doubled in fourteen years, from i:235, 000,000 in
1894 to ;^5i2,ooo,ooo in 1909, affords strong proof
that public authorities are trading too much on credit;
with the consequence that the economic pressure upon
the trading and industrial classes is increasing, result-
ing in a widespread feeling of dissatisfaction and
unrest. The problem is a serious one, and calls for
a simple, speedy, and scientific solution.
That the present system is at fault somewhere is
generally recognised. Of agencies for the distribu-
tion of alms, for doling out charities, for helpmg the
under dog there are more than enough. They are at
best makeshifts, palliatives whose contributions, as
often as not, degrade both the giver and the receiver.
Useful work is the only thing of which one never
tires whereas one speedily tires of doing nothing, and
soon' gets satiated by indulgence in selfish pleasures.
A common sense social system should provide neces-
saries for all, and insist that all who share the
privileges of a social community should also take a
fair share in its responsibilities.
That poverty, destitution, unemployment, vice, and
crime are social diseases, which like most bodily
aihnenta are preventible, is not yet generally recog-
nised; if it were, the proverb, "Prevention is better
than cure," would be accepted as a truth, and acted
upon, whereas it is now a more or less empty phrase.
Our Local Authorities have yet to learn that borrow-
ing leads to sorrowing; that he buys best who pays
cash, and that excessive credit leads to discredit.
The object of this paper is to indicate a method by
which the ratepayers through their local governing
authorities can accomplish their own corporate salva-
tion in a comparatively short term of years.
The best way to help the people is to help them to
help themselves; and to assist them to develop the
capacity to wisely exercise the powers they now
possess.
The method herein proposed for the relief and
ultimate extinction of financial burdens is so simple,
sound, and practical, that it is amazing that its appli-
cation has been so long delayed.
Briefly it is this : Stop borrowing — Redeem exist-
ing public debts — Pay for future improvementi out
of revenue — Live on income, not on credit — Conduct
all Municipal, National, or other public work as you
would an ordinary commercial undertaking, on finan-
cially sound business lines.
It is necessary to discriminate clearly as to what
expenditure is likely to become a burden, and what
might otherwise be termed a soimd investment. An
outlay of one thousand or one million pounds on a gas
undertaking, or some other service of public utility
where assets of equal value are obtained, yielding
a substantial yearly profit, may be perfectly legiti-
mate, and justify extended credit, but where the
repayments are unduly prolonged, or the interest
charges excessive, the prices for gas, etc., are propor-
tionately increased, and the user has to pay the
excess.
There are, however, very many ways in which
huge siuns of public money are squandered, such as
the systematic negotiation of small loans spread over
B
long periods, with the cost of bonds, stamp duties,
and other incidental expenses. Applications for
powers that are never exercised, extension of
boundaries, incorporation, the promotion of abortive
schemes, deputations, litigation between adjacent
authorities; and whatever the decision may be, the
ratepayers have to bear the cost. A good deal of
this may be termed sheer waste.
Once it is clearly demonstrated that the finances
of one Local Authority have been put on a sound
commercial footing by simple methods that are appli-
cable to every town or city, the advantages will be
so apparent that other authorities will quickly follow
the example.
There exists in the minds of most Councillors a
fallacy so mischievous and so costly that it must be
removed at all hazards. One frequently hears such
questions as, — "Why should we study posterity?"
— "What has posterity done for us?" — "Why pay
out of revenue?" — "Spread the payment over 40,
or 60 years, and so lighten the burden."
The people who use such expressions would not
think of buying their own clothes or furniture on the
three years principle, and yet when spending public
money they freely advocate buying on 40 or 60 years
credit, and instead of lightening the burden, they and
their children are heavily burdened by such a
disastrous policy.
Our predecessors provided for our use good roads,
paved footpaths, well lighted streets, drainage, sani-
tation and other public utilities; hence it is our duty
to provide for posterity also, but not by piling up
huge debts.
We are posterity. The debts of last year, and each
preceding year, with ever increasing credit charges
for same press heavily upon us, and the full brunt
falls upon the commercial and industrial section of
the community.
The situation is facetiously described thus : —
Customer. — " How much for that suit of clothes for
prompt cash?"
Tailor.—" Four Pounds."
Customer. — "How much if I take credit?"
Tailor.—" Eight Pounds,— half of it down."
Ridiculous as this may appear, it is precisely what
our Parliamentary representatives have done, and are
still doing with our National Debt, and also what
Local Authorities have done, and are still doing with
our Municipal debts. How long is this folly to be
permitted ?
There is a subtle attraction in this tendency to
borrow that public representatives find hard to resist;
there is a fascination in the idea that burdens are
thus lightened, whereas they become heavier each
year. Quite unwittingly they saddle themselves with-
out counting the ultimate cost, until they become
obsessed with the idea that borrowing is a necessity,
whereas it should be resorted to only in extreme cases,
and even then for short periods.
So long as Credit is kept at a premium, so in
mathematical proportion will mental and physical
labour remain at a discount.
There is an impression — amounting almost to
conviction — in the minds of Councillors and others,
when dealing with public expenditure, that it is just
and expedient to spread the repayments over a long
6
period of years. Theoretically this may appear per-
fectly sound, and if the repayments represented
merely the amount of the loan, and would benefit
posterity, it would be perfectly justifiable, but when
each year the loans contracted exceed the amount
repaid for redemption of previous loans, the effect is
to add to a chain of debt— already much too heavy—
a few extra links that drag down and enslave the
borrower, until the theoretical and problematical
benefit becomes a serious and ever-increasing burden.
Add to this the repayment by instalments of other
millions previously borrowed, with interest charges
thereon, and the theory becomes in actual practice
unsound and oppressive.
The most amazing fact is that men who would
scorn to resort to such methods in their own private
business, fail to see any injustice in the system when
applied to public funds. The principle is unsound,
the results are suicidal; and the remedy which is
perfectly simple is in their own hands, they have the
power if they will only have the courage to exercise
it. The provision of a reserve fund sufficient to pay
for all ordinary improvements out of revenue would
result in an enormous saving, it would enable them to
receive full value for outlay, and would put a whole-
some check upon every form of extravagance. ^
There are many men who will say that it is im-
possible, that the rates are already so high, that they
cannot afford to pay out of revenue, or to increase the
rates even temporarily; any man who holds ^ these
views should retire from public life— the application
of this narrow policy has doubled the rates without
any compensating benefits. Any Council who can
pay ;£5jOOo or ;£50o,ooo each year for interest on
loans, can afford to pay the same amount each year
for improvements out of revenue, the only diflSculty
is the transition stage from dealing on credit, to pay-
ments on the cash system; they have only to levy a
special rate, suspend heavy or exceptional expendi-
ture, or stop borrovv^ing for a few years until they
have a sufficient reserve fund, after which there will
be no necessity to borrow for any ordinary work,
and for exceptional outlay the period for repayment
might be considerably shortened.
Corporate bodies might with advantage study the
sage advice given by the historical Mr. Micawber to
David Copperfield : "Annual income twenty pounds,
annual expenditure, nineteen nineteen six, result
happiness. Annual income twenty pounds, annual
expenditure twenlty pounds ought and six, result
misery." The application of this principle whether
the income be twenty pounds, twenty thousands, or
twenty millions is equally sound; if the expenditure
is in excess of the income the result will be disastrous.
An individual may be perfectly happy on an
income of twenty shillings per week, indififerently
happy on twenty pounds, and absolutely miserable
with an income of twenty thousand pounds per
week. As with individuals, so it is with communi-
ties, the comfort and well being depend not upon
lavish expenditure or vulgar display. In our greatest
and most expensively governed cities are usually
found the worst forms of slumdom, and the vilest
descriptions of squalor We must not forget these
things are preventible. Suppose we consider how
this can be done.
8
What is Capital? The Plant, Stock, Accessories,
or tools used for the conduct of business; its legitimate
use is for service, for economising labour. Its use
has, however, degenerated into speculation, and is
dominated mostly by selfishness, for the exploitation
of labour and the acquisition of more wealth for the
capitalist. Capital of itself can neither produce,
increase, or create; as a tool it is useful for, and
should be subservient to, labour. At present it— or
rather they who own or control it— dominate labour,
and take toll for its use out of all proportion to the
service it renders.
What is Labour? Work, toil, exertion, an act of
the brain, or muscle, or both, the one thing that pro-
duces, increases, or creates necessaries and luxuries
of every description. Under existing conditions all
labour is inadequately paid because of the exactions
made for credit.
Work and its rewards are most unevenly distri-
buted; the few, animated by purely selfish motives,
accumulate enormous wealth by the oppression of the
many; the wealthy lose the capacity, and the poor
the opportunity for pure enjoyment.
The enormous amount of time, energy, and money
expended on unimportant matters is simply appalling.
The ultimate object of labour, theologically, is a
species of curse. " By the sweat of thy brow shalt
thou eat bread." Ethically, it is a law against eating
unearned bread. " If a man will not work, neither
shall he eat." Physiologically, it is nature's law for
the preservation of health, and socially, it may be
aptly described as service to others.
As Sir William Earnshaw Cooper, C.I.E., says, in
his powerfully written and virile book, Spiritual
Science, " Service and Love are the foundations of
the Eternal, and man's stepping stones from earth
to heaven. In various forms and from many direc-
tions does the goodwill of man to his fellow men
proceed on its errand of voluntary service, and so the
vast structure, wherein will eventually dwell the
Brotherhood of Love is being reared day by day by
man himself."
The present system of levying rates and taxes is
defective in principle; it discourages progress, and
penalises industry; the greater the enterprise the
heavier the penalty; whereas inducements are freely
offered to the lethargic non-producers, who live on
investments, ground rents, and other unearned incre-
ments.
Can any justification be found for a system that
starves the inventor, sweats the producer and claims
for the tool — Capital — or its owner, from one-third
to one-half of the total earnings of all the industrious
members of the community ? So long as this is
permitted, so long will the mental and physical pro-
ducers be kept in a state of servitude and bondage.
What is Government ? The dictionary will tell you
that it is administrating, controlling, managing,
ruling; but in reality it is simply a matter of Finance;
if this be eliminated what is there left to control or
manage ? Sound finance is the basic foundation of
all good government, it is the one thing that should
receive the greatest possible attention, and that
receives the least.
Politicians appear to vie with each other as to who
shall spend the most money, and levy the greatest
lO
amount of taxation, quite regardless of the value
received; the needs of the many are subservient to the
wants of the few. Is it not time that some check be
put upon extravagance and luxury, and that means
be devised whereby wholesome food, plain clothing
and decent housing accommodation should be assured
to every child born mto this great country ? A strong
sturdy self-reliant race is the best asset that any
nation can possess. In this direction lies ample
scope for true statesmanship and soimd finance.
I hav'e read somewhere that a Statesman is one
who does something for the community . A Politician
is one who expects the community to do something
for him.
Politicians are plentiful. Statesmen are sorely
needed who will curb and elimin'ite all forms of
waste or extravagance, and initiate schemes whereby
the expenditure can be reduced, and do everything
possible for peace, retrenchment and reform, clear ofif
the heavy load of debt, put a wholesome check on all
spending departments, and abolish the ruinous system
of trading on credit.
Public bodies lack imagination or incentive; they
have no ideals, no continuity of piu-pose, and very
little constructive ability. A few individual mem-
bers who possess one or other of these qualities take
the initiative in some constructive or legislative work;
and whether this be progressive or retrogressive in
character, the ordinary rank and file will follow much
the same as a flock of sheep follow the leader, and
almost as blindly; it is useless to blame them for not
exercising gifts they do not possess; the pioneer work
is usually done by the few who are capable, and
II
when a Council is particularly weak, it is essential
that their officers should be decisive, forceful, and
sufficiently strong to give the lead in the right
direction.
Whether the rates be 2/- or 10/- in the pound is a
matter of degree, the essential and all important
point is to see that whatever the amount expended,
the best value be obtained for the outlay, and this
point is frequently ignored; not that the Councillors
are intentionally extravagant, but they do not take
the trouble to investigate the actual cause of the
trouble — extended credit — they feel the effects —
high rates — and so long as public authorities continue
to pay 40/- or 60/- for 20/- actual value, the rates
will inevitably increase.
The borrowing of capital or credit for the purchase
of remunerative commercial undertakings may be
justifiable, even when the price appears to be exces-
sive, providing the returns meet the working expenses,
the cost of upkeep, depreciation of plant, and
redemption of the debt in a reasonable time; but the
aim of all public authorities should be to provide for
public use and convenience rather than for profits.
If sixpence is taken off the rates by charging six-
pence extra for gas, water or other public service,
where is the benefit ? In either case the user has to
find the sixpence. Neither does it follow that because
the purchase of a remunerative trading concern
justifies the charges for extended credit, that loans
for unremunerative undertakings should be spread
over long periods, with heavy interest charges there-
on. A good deal of discrimination is needed to enable
one to decide whether a loan will prove a benefit or
12
a burden, and it is for want of this discrimination
that the rates have become so absolutely oppressive.
What is Money? Money, wealth, riches and
capital are frequently used as synonymous terms,
but they are not. Money is neither wealth, riches
nor capital, it may represent either, or all three.
Money is a commodity, a convenience, a Measure of
Value, denoting a certificate of service rendered to
the community, and incidentally the value of that
service expressed in £. s. d. It is also a Medium
of Exchange, entitling the owner to obtain goods,
or other commodities in exchange. In ancient times
it consisted of cattle, sheep, shells, beads, tea, dried
fish, tobacco, soap, grain, or iron; but as civilization
advanced, some more convenient medium became
necessary, and coined money was introduced for
greater convenience.
The coins were originally crude, having rough
edges, which were frequently clipped or cut, thus
depreciating their value, and in 1696 coins were
stamped with milled edges to prevent the clipping
practised prior to that date.
The enormous developments of Trade and Com-
merce led to the introduction of Bank Notes, prom-
ises to pay, Cheques, and other forms of Credit
Notes; this is worthy of special note, because many
people who do not trouble to think, or who do so
in a slovenly manner, imagine that there must be
enough money in existence to purchase any and
every commodity, and it is necessary to correct this
very erroneous impression.
The paper Credit Notes (in one form or other) in
Great Britain probably exceed 20,000 Million Pounds,
13
the actual coinage is less than 200 Million Pounds,
hence there is only about one pound available in cash
to redeem every ;{iioo value of actual capital or credit
now in existence.
Take an illustration. The Bankers Clearing House
Records for 191 2, in Bills, Cheques, and other instru-
ments of payment (not in coined money) amounted to
;i(;i5,96i,773,ooo, all on paper, in other words. Credit
Notes.
Another illustration. Suppose that the Govern-
ment decided to purchase and Nationalise the Rail-
ways of Great Britain with the whole of the rolling
stock, Plant &c., estimated to be worth some ;£i,30o,
000,000. How could they find the money if it is not
in existence ? The whole transaction would be
effected on paper, by simply transferring the rights
and privileges from the various Railway Companies
to the State for a specified amount; the Security for
the repayment would be the Credit, the Honour, and
the future Labour of every Taxpayer in Great Britain,
until the debt, with Interest thereon had been fully
redeemed, and no Government who came into power,
whether Liberal, Unionist, or Labour, dare repudiate
that debt, the people would not permit it.
The chief point to be considered is that whether the
total repayments amounted to double or treble the
;i{^i,300,ooo,ooo originally borrowed or pledged, it