Eabian (i)ract The Fabian Municipal Program THE "UNEARNED INCREMENT." What is Meant by lt. THE "Unearned Increment" from land is the amount added to its selling value by the mere increase of the community in population and productive power. Thus John Stuart Mill said: " The ordinary progress of a society which increases in wealth, is at all times "tending to augment the incomes of landlords; to give them both a greater"amount and a greater proportion of the wealth of the commuruty, independently of "any trouble or outlay incurred by themselves. They grow richer, as it were, in "their sleep, without working, risking or economizing: What claim have they on the "general principle of social justice, to this accession of riches ?"-Principles of "Political Economy. Book v. Chap. ii. § 5 (p. 492 of 1865 Edition). And Professor Thorold Rogers added : "Every permanent improvement of the soil, every railway and road, every "bettering of the general condition of society, every facility given for production, "every stimulus supplied to consumption, raises rent. The landowner sleeps, but "thrives. He alone, among all the recipients in the distribution of products, owes " everything to the labour of others, contributes nothing oi his own. He inherits "part of the fruits of present industry, and has appropriated the lion's share of "accumulated intelligence."-Foltticat Economy. Oh. xii. How to Calculate lt. We must distinguish between the value added to land merely bythe increase in population, and that due to artificial improvements. The latter, in a sense, is not "unearned" increment, from the point of view of the community, because it is caused directly by the labour of those who have worked on the land. But even this may be really "unearned" as regards the landlord, if he has himself contributed no labor in return. The annual rental of the metropolitan area at the revaluation in 1891 was nearly £40,000,000, representing a saleable value, if only 15 years' purchase be taken, of £600.()00,000. In 1870 the annual rental was about £22,000,000, equal uo a saleable value of £330,000,000. The total increment during those 21 years was, therefore, n~::a.rly eighteen millions a year rent, representing a growth in saleable value of no less than £210 000,000. A large part of this increased value was, however, caused by expenditure on new buildmgs. 'l'he suburban districts have been filling up; and the central districts have been extensively rebuilt. Fortunately the annual revision of the valuation list enables us to distinguish between new buildings (together with any structural alterations to old ones) and the rise in rent of unaltered land and buildings. We are thus abltl to ascertain separately, from official figures, the annual growth from this cause in all years except those of the quinquennial revaluation. As those periods have no influence on the building trades, 1t is fair to assume that the average of the other years applies also to them ; and thus 2 The " Unearned Increment." we have the total growth in rental caused by building operations very accurately ascert.ainE:d. Errors of valuation no doubt occur; but these may be assumed to balance each other ; and no one can pretend that London is, on the whole, even now over-assessed. Any.additional growth must have been due to intensified demand for existing buildings, caused by increasing population, by the advance of London as an industrial centre, and by the helpless condition of the London poor. All landlords do not benefit equally, and the increase is, moreover, divided between freeholders, copyholders, leaseholders, tenants in " beneficial occupation " and other varieties of the landlord class ; but from the point of view of the community at large this annual net increa<>e is a real " unearned increment." How much it amounts to, the table given below, compiled from official :figures, will shew. Table showing the g1·oss valuation of the Metropolis from 1870 to 1891, with the increase each year, distinguishing between that caused by new buildings and that d1te to rise in value. Compiledfrom Local Government Boa1·d for 1891, c-6460, and Cmmty Conncil Report. On 6th April. 18;o ISjt l8j2 1873 r8;-l r8;5r8;u 1877 1878 1879 x8tso 1881 1882 I883 1884 I88S 1886 1887 1888 1889 1890 1891 T otal ....•. Total Gross Increase. Valuation. (Annual Rental.) ' £ £ .. .. 22,142,706 24,103,083 r ,960,377 24,388,ooo 284.917 3u8,7II 24,7 56,71 r 391 ·322 25,148,033 420,333 25,574.366 2,028,283 27,602,649 862, 18+ 28,464,833 562,902 29,027,795 29,682,269 654.474 738,802 30,421,071 2,963,780 33·384,851 471,066 33,855,917 6!4,808 34.470,j25 35,1oo,;o4 629,979 588,s4o 35.689,244 I I 1,338,282 37.027,516 37.361,895 334.379 368,405 37,730,300 298,206 I 38,o28,5o6 38,462,493 433.987 1,3731207 39,835.700 I £17,693,004 ---Increase of x6 ordiuary years .... Increase of 5 quinquennial periods . 8,029,075 9.663,929 £17,693!004 Increase due to new buildings (annual rental). £ .... •501,8 17 28.f .9 17 36b,jl[ 391,322 4 26,333 0 501,817 862,184 502,962 654.474 738,802 *501,817 47x,o66 6r4,8o8 629.979 588 5-lO • 501,817 33+.379 3&8,405 298,zo6 433.987 • sox ,817 £ro,538, 16o • Estimated at average ofthe !6 ordinary years. 11 Unearned increment" of annual rental. £ .... r,458,5Go .... .. .... .... 1,52{>,466 .... .... .... .... 2,461,963 .... .... .... .... 836.465 .... .... .... .... 87 Io390 £7,15+,844 The " Unearned Increment." What it Amounts to. The total " unearned increment " during this period is thus seen to have been £7,154,844 in annual rental, representing a saleable value of over ONE HUNDRED AND TEN MILLIONS STERLING. It amounts to over one-sixth of the total saleable value of London. This is what we have deliberately allowed the London landlords to receive, over and above their former annual tribute, during the short space of 25 years. This is the princely gift of the London worker to the London landlord. And it still goes on. Although now less than before in the centre of London, it is larger than ever in the suburbs. What We Might Have Done With lt. Let us see what we might have done with it if we had listened to the political economists, who warned us that it would happen. If the existing land tax of four shillings in the pound had, in 1870, been levied on the landlord at the current valuation (instead of uponthat of 1692) it would hardly have deprived him of any of his then income; his total payments would have been only slightly in excess of the unearned increase brought to him by London's growth. During the last 25 years about £110,000,000 bas been levied in London by rates. If the landlord had been compelled to pay everyfarthing of these rates (in addition to anything be may now indirectly bear) be would be as well off now as be was 25 years ago. What We Might Now Do With lt. The average rise of London valuation (on unimproved buildings) is seen to have been about one per cent. on the average valuation. Even allowing for increased accuracy in assessment, this annual rise in rent represents an annual addition to the saleable value of the property of about £4,000,000. This is our annual "New Year's Gift" (in addition to the £40,000,000 annual tribute of rent) to those who do us the favour to own London. The total rates levied annuaJly amount now to over £7,500,000, and must inevitablyincreao;e with the growth of social compunction, and the extension of corporate activity. Would it be anything but bare justice to absorb, in order to meet this deficit, the whole of the £4,000,000 annually added to the value of London? If, to begin with, the rates were divided between owner and tenant, the resulting landlord's rate of half-a-crown in the pound on the " rateable value " would realise about this amount. It should be deductible from the rent in the manner in which the "property tax" (Income Tax, Schedule A) is now deducted, " any agreement to the contrary notwithstanding." The " Unearned Increment." London's Ground Rent. One suggestion may be added. If the £17,693,000 total increase in London's rental value during 25 years of enormous building operations is divided so that £10,538,160 is due to them and £7,154,844 to "unearned increment," we may hypothetically infer that a similar proportion holds good of the total rental value. In that case, out of the annual rental of £40,000,000, we may estimate that £24.,000,000 is for buildings, and some £16,000,000 FOR GROUND RENT ONLY. This amount, which comes to about eight shillings per week per family, is what we pay for permission to use the low hills and marshes by the Thames on which London is built. How much were these worth before London grew there ? A " Municipal Death Duty " of only ten per cent. upon the value of the real estate in London, whenever transferred by death, would yiP-ld three millions a year; more than enough to pay all the expenses of the London School Board and County Council puttogether without the need of any rates at all for these authorities. THE FABIAN SOCIETY. T T HE FABIAN SOCIETY consists of Socialists. A statement of its Rules, etc., can be obtained from the Secretary, at the Fabian Oftice, 276, Strand, London, W .C. Also the following publications: "FABIAN ESSAYS IN SOCIALISM." Library Edition, 6s.; or direct from the Secretary for Cash, 4/6 (postage, 4~d. Cheap Edition, published by Walter Scott, Paper Cover, ls. Cloth, 2s. At ;,ll booksellers, or post free from the Secretary for ls. and 2s. respectively. FABIAN TRACTS. No. I, Why are the many Poor? No. I2, Practicable Land Nationalisation. No."· What Socialism Is. No. I6, A Plea for an Eight Hours Blil. No. Ig, What the Farm Labourer W ants. No. 20, Questions for Poor Law Guardians. No. 22, The Truth about Leasehold Enfranchisement. No. 24, Questions for Parliamentary Candidates. No. 25, Questions for School Board Candidates No. 26, Questions tor London CountyCouncillors. No. 27, Questions for Town Conncillors. Each 4 pp., 6 for I d., or I/-per IOO. Tracts No. s, Facts for Socialists. No. 7, Capital and Land. No. g, An Eight Hours Bill. No. n , The Workers' Political Programme. No. I4, The New Reform Bill. No. IS, English Progress towards Social Democracy. No. I?, Reform of the Poor Law. No. 23, The Case for an Eight Hours Bill. Each I6 pp. or 20 pp., I d. each, or gd. per dozen. No, 29, What to Read, a list of Books for Social Reformers. 3d. each, or 2/3 pe< dozen. THE FABIAN JJfUNICIPAL PROGRAM No. I (tract No. 30) The Unearned Increment. No.2 (Tract No. 3I) London's HeritageIn the City Guilds. No. 3 (Tract No. 32) Municipalisatlon of the Gas Supply. No. 4 (Tract No, 33) Municipal Tramways. No. 5 (Tract No. 34) London's Water Tribute. No. 6 (Tract No. 35) Municipalisation of the Docks. No. 7 (Tract No. 36) The Scandal of London's Markets. No. 8 (Tract No. 37) A Labor Policy for Public Authorities. Each 4 pp., the etght for I d., or IS. per Ioo. Also (Tract No. 8) Facts for Londoners, 6d. each ; or, 3s. per dozen. (Tract No. 10) Figures for Londoners, 6 for td.; or, I S. per 100. ~The whole Set Post Free for Two Shillings. Gi!:ono:E: S·rANDR: NG, Printer, 7 & 9, FiDsbury Streu Londou, E.