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]

(1) PUBLIC PROPERTY (IMPERIAL AND LOCAL):—

(_a_) Imperial Property £550,000,000 (_b_) Local Property 1,370,000,000 -------------- £1,920,000,000 Subtract (1) National Debt (£762,000,000) and (2) Local Loans (£600,000,000) 1,362,000,000 -------------- £558,000,000 ==============

(2) PROPERTY IN THE UNITED KINGDOM OWNED BY PRIVATE INDIVIDUALS:—

(_c_) Agricultural Lands and the Farmhouses, Buildings, Fences, Roads, Ditches, etc., thereof. Profits under Schedule A of Income Tax (1908-9) £52,000,000 capitalized at 20 years' purchase £1,040,000,000

(_d_) Houses, Business Premises, etc., and their Lands. Profits under Schedule A of Income Tax (1908-9) £217,000,000 capitalized at 15 years' purchase 3,255,000,000

(_e_) Other Profits from Land under Schedule A of Income Tax (1908-9) £1,300,000 capitalized at 25 years' purchase 32,000,000

(_f_) Farmers' Capital. Estimated at £6 per acre for 47,000,000 acres under cultivation 282,000,000

(_g_) The National Debt (neglecting the small amount held abroad) 762,000,000

(_h_) Local Debts 600,000,000

(_i_) Capital of Miscellaneous Trades:—

(1) Profits of Miscellaneous Businesses, Professions, etc., taxed under Schedule D of Income Tax in 1908-9 (allowing for profits assumed to escape taxation £60,000,000, see p. 16), and deducting for profits from abroad (£25,000,000, see p. 16), were £444,000,000. One-half of this sum (£222,000,000) assumed to be from capital and capitalized at 10 years' purchase 2,220,000,000

(2) Profits of small traders who are not Income Tax payers are in part derived from capital 100,000,000

(_j_) Railways. Profits taxed under Schedule D 1908-9 = £43,000,000 capitalized at 25 years' purchase 1,075,000,000

(_k_) Mines and Quarries. Profits taxed under Schedule D 1908-9 = £18,000,000 capitalized at 5 years' purchase 90,000,000

(_l_) Gasworks. Profits taxed under Schedule D 1908-9 = £7,800,000 capitalized at 20 years' purchase 156,000,000

(_m_) Ironworks. Profits taxed under Schedule D 1908-9 = £5,100,000 capitalized at 5 years' purchase 25,000,000

(_n_) Waterworks. Profits taxed under Schedule D 1908-9 = £6,200,000 capitalised at 20 years' purchase 124,000,000

(_o_) Canals. Profits taxed under Schedule D 1908-9 = £4,200,000 capitalized at 20 years' purchase 84,000,000

(_p_) Markets, Tolls, Fishings, Cemeteries, etc. Profits taxed under Schedule D 1908-9 = £1,400,000 capitalized at 20 years' purchase 28,000,000

(_q_) Other Interests and Profits taxed under Schedule D 1908-9 = £7,700,000 capitalized at 20 years' purchase 154,000,000

(_r_) Furniture, Works of Art, etc., in Private Houses. Assumed to be one-sixth of the value of "Houses" in Schedule A (see item _d_) 540,000,000 --------------- £10,567,000,000

(3) PROPERTY IN PLACES ABROAD OWNED BY PERSONS IN THE UNITED KINGDOM

(_s_) Interest from Indian, Colonial and Foreign Government Securities taxed under Schedule C 1908-9 = £32,200,000 capitalized at 25 years' purchase £805,000,000

(_t_) Interest from Indian, Colonial and Foreign Securities, including Railways, taxed under Schedule D 1908-9 = £56,600,000 capitalized at 20 years' purchase 1,132,000,000

(_u_) Other Profits from abroad derived from property assumed to have a capital value of about 700,000,000 -------------- £2,637,000,000 ============== SUMMARY

(1) Public Property £558,000,000 (2) Property in the United Kingdom owned by Private Individuals 10,567,000,000 (3) Property in places abroad owned by persons in the United Kingdom 2,637,000,000 --------------- £13,762,000,000 ===============

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.

Item _i_ (1) is an estimate of the amount of capital employed in the miscellaneous trades and professions taxed under Schedule D of the Income Tax. I have assumed that one-half of the estimated profits were derived from capital, and this half I have capitalized at 10 years' purchase. The amount so arrived at—£2,220,000,000—may be regarded as a reasonable estimate, not as an accurate one. In 1908, it may be pointed out, the nominal "paid up" capital of registered joint-stock companies amounted to £2,123,000,000.

Under _i_ (2) £100,000,000 is put down as a rough estimate of the capital employed by small traders whose incomes are less than £160 per annum. I think that £100,000,000 is a liberal estimate, but it should be noted, against this opinion, that in 1885 Sir Robert Giffen's estimate was £335,000,000. In either case the figure is sheer guesswork; there is no proper statistical material.

Items _j_ to _q_ need little comment. I point out, however, that the profits of mines, quarries and ironworks are capitalized at only 4 years' purchase by some authorities in view of their exhaustible character.

Item r relates to furniture, works of art and other movable property. I have estimated this to amount to one-sixth of the item "Houses" (_d_). It is right to point out, however, that this estimate is very much at variance with former ones. Sir Robert Giffen in 1885 took one-half of the value of "Houses," and Mulhall and other statisticians have commonly used this estimate. But is it reasonable? I think not. In the first place the item "Houses" covers a great number of business premises the contents of which are valuable but are already estimated for in item _i_. The item also covers the value of all the land connected with the premises. Deducting for land and for business premises, could we, even as to the balance, assert that the average private dwelling contains furniture and other effects worth 50 per cent. of the cost of the structures? Enquiry has shown me that such an estimate would be only warrantable in the case of rich houses. But rich houses, as we have seen, are comparatively few, and "comfortable" houses not many. Coming to the great bulk of the small dwelling houses of the United Kingdom the furniture and effects are so poor that their value, unfortunately, as compared even with that of the mean houses which shelter them, is small, and in many cases negligible.

In taking one-sixth instead of one-half of item _d_ in arriving at item _r_ therefore, I feel that I am making the most liberal possible estimate. To make the figure about £1,600,000,000, as we should do by taking the traditional one-half of the value of "Houses," would, I submit, be very wide of the mark.

The total value thus estimated of the property in the United Kingdom owned by individuals affords a striking contrast with that owned by the State. It amounts to £10,567,000,000.

We have now to consider the third category: "Property in places abroad owned by persons in the United Kingdom." The items speak for themselves and are capitalized at very reasonable rates. We get the remarkable fact that certain persons in this country own about £2,600,000,000 of property in places abroad.

The grand total of the whole estimate is £13,762,000,000—£300 per head of the population, or say £1,500 per family of five persons.

[Footnote 16: There is also, of course, the value of the trained personnel of both army and navy, which could not be taken at less than £250 per soldier and £400 per sailor, but I confine this estimate to the value of "property" commonly so called.]

[Footnote 17: There are no commons in Ireland and Scotland.]

[Footnote 18: In 1885 Sir Robert Giffen estimated Government and local property at £500,000,000, but I do not know his reasons for naming that figure.]

[Footnote 19: Lord Eversley seems to think that 25 years' purchase meets the conditions of 1905. See discussion in the Royal Statistical Society's Journal for March 1905.]

[Footnote 20: "Estimates of Agricultural Losses." Paper read to the Royal Statistical Society in March 1905.]