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cheapen just the particular things which happen to come conveniently within the domain of municipal enterprise. These things—with the exception of water, which is likely to leave the domain of municipal enterprise and enter that of the ordinary work of the municipality-these things are neither things of first necessity, nor things consumed only by virtuous persons. What particular claim have the consumers of gas or electric light, or, it may be, the users of telephones, to have their pockets relieved at the risk always, and every now and then at the actual cost, of the whole body of ratepayers? The consumers of oil may be both a more necessitous and a more deserving body of persons. The demand that the risk of loss should be taken in the production of certain commodities, while all gain should be foregone, obviously amounts to a bounty on the production of those particular commodities, and bounties, we have very properly been taught to believe, are uneconomic in their operation.

To overthrow these arguments in favour of profit-making, strong reasons ought to be brought forward. But where are they? The opponents of profit-making are usually content to be dogmatic : they say that profit should not be made, but give no reasons. Some of them are antiquated socialists, who hold that all profit is wicked and that the local authority ought not to touch the unclean thing. They forget that the kind of profit they ought to object to is the interest paid to the public creditor who supplies the capital, and not any profit beyond this acquired by the local authority; and they do not know that it is now very well understood that even interest on capital would have tn. appear in the book-keeping of a purely communistic state. Others may have regarded municipal enterprise as akin to distributive co-operation, where the profits are divided among the consumers. But this, too, is a false analogy, for it is the ratepayers in general, and not the consumers of the commodity or service provided by the municipal enterprise, who are banding themselves together to work the enterprise. In more than one case (that of Liverpool docks, of course, being by far the most important) harbours or docks which were once municipal enterprises have been turned into that kind of co-operative institution which is called a harbour or dock trust. But here the municipality is relieved of all liability to loss, as well as all prospect of gain. It is one thing to ask the municipality to give up an enterprise altogether, and another to ask it to take all the risk of loss and none of the chance of gain. Finally, a considerable number of the opponents of profit-making have assumed that municipal enterprises should be confined to works of general utility, and have then inferred that it was to the general advantage that the services rendered should be as cheap as possible. But there does not appear to be any ground whatever for the cool assumption that municipal enterprise should be confined to works of general utility. As we have seen, the very thing that makes an undertaking rank as a municipal enterprise is that the service rendered is not of sufficiently general utility to be paid for out of the general rates. The reason for any particular service being rendered by the municipality surely is that it can be best rendered by the municipality, not that it is of general utility. The question of its being or not being of general utility arises only when we have to consider whether it shall be a municipal enterprise or part of the ordinary work of the municipality paid for by the general rates.

I think, then, that we ought to deny unhesitatingly and uncompromisingly the doctrine that municipal enterprise ought not, where possible, to yield a profit in aid of rates.

This leaves us, of course, still to face the question : what limits, if any, are there to the profits which may be made ? Where there is no monopoly there is clearly no reason why the profit should be restricted by anything except competition or the

ese days we are always exaggerating of particular enterprises. We must monopolies compete with each other,

the electric light supply are in one

vith the Standard Oil Trust, and very likely before long they will have to compete with new illuminants. The tramway monopoly is a good deal tempered by the competition not only of the antiquated ’bus, but also by that of the bicycle and the motor-car and the railway : even the telephone has to drive out the messenger. Moreover, the competition need not be within the place, but may be between place and place. Nowhere have the anti-profit doctrinaires, aided by strong private interest, been stronger than in relation to docks and harbours, but in view of the enormous subsidies to docks which have been given by the general ratepayers in Preston, Manchester, and Bristol, the only important places where the docks are in municipal ownership, what can be more absurd than the taking away of the Mersey docks from the Liverpool Corporation for fear the town should batten on the trade of Lancashire and England generally ? It will usually be found that a cheap price to the consumer is also the price which brings in the biggest aggregate

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net profit to the municipality. If we examine the accounts of English corporations we shall find that there is no connection between high prices and large profits.

On the whole, I conclude that all restrictions placed by government departments and Parliament on the profits of municipal enterprise should be removed. It is possible that here and there a local authority may charge more than is economically desirable, but the damage must be much greater to the locality than to the nation at large; so the locality should be allowed to find out its own mistake and take the consequences.

EDWIN CANNAN.

IS THE ENGLISH SYSTEM OF TAXATION FAIR?

1

In a recent article in the Yale Review 1 an estimate was made by the present writer of the amount of the public burdens borne by the working classes and the rest of the nation in the United Kingdom, but no conclusion was drawn as to the fairness or unfairness of the system which led to the results there stated. Those results will now be discussed in relation to the chief theoretical principles which have been suggested for our guidance in the matter.

Some preliminary requisites for any good system of taxation may first be stated. It is clear that any system of taxation which is not productive is a failure. The object of taxes is to raise money. If a tax does not raise money in considerable quantities it is a bad tax-at any rate if we consider it merely as a tax neglecting any moral or economic advantages that may be obtained by it. It is also clear that so far as possible “indifference" should be a property of any system of taxation. That is, people should not be taxed on account of any extraneous quality not connected with their wealth or their manner of acquiring or spending it. It would be absurd to put a poll tax on all persons more than six feet high.

In like manner the last three of Adam Smith's famous maxims—that a tax should be certain and not arbitrary, be levied at the most convenient time and be inexpensive to collect-are generally accepted by experts and men of plain sense. The system of taxation in the United Kingdom does not offend very grossly against any of these rules, so that we are at liberty to approach the main question at once and to consider whether, and judged by what criterion, the system is fair. It would be unreasonable to expect that occasional injustice is not done not only to special individuals, but also to special limited classes, by any system of taxation however excellent, or that any special tax (except perhaps a very cunningly devised income or property tax) should not press with undue harshness upon some class of the community. It is therefore both reasonable and necessary to consider the effect of the public burdens as a whole and to consider their effect upon large classes of the community. In the article above referred to estimates of the incidence of the public burdens upon the two most important classes into which any community may be divided have been given, and these estimates will be used here as a convenient basis for discussion. They are summed up in the following table (the first three lines of figures are in millions of English £ and the fourth line is in millions) :

1 February, 1898.

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In addition to these figures we require estimates of the incomes of the working classes and the rest of the community. Such estimates are very difficult to make, and the figures given by such eminent statisticians as Sir Robert Giffen and Mr. Bowley · are clearly liable to a very large error. The following very rough estimate will be taken here. The first line is in millions of £):

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In this the average income for the working classes appears rather high, but this is partly due to the fact that the average size of a family is probably rather less than five. It must

1 Mr. Bowley's figures for the year 1891 are (in million £).

Total wages

Total income subject to income-tax,
Income not wages or subject to income tax ..

699
782
130

Total national income

1,611

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