The People's Budget: Speech Introducing the Finance Bill (1909)

Editorial note

On April 29, 1909, David Lloyd George — then Chancellor of the Exchequer in Asquith's Liberal government — introduced what became known as the People's Budget. It was the most radical fiscal proposal in British history to that point, and its land value provisions drew on explicitly Georgist reasoning. The budget proposed:

• A Land Value Duty of 1/2d in the pound (about 0.2%) on the capital value of undeveloped land
• An Undeveloped Land Duty on land held out of use
• An Increment Value Duty of 20% on the increase in land value whenever land was sold or changed hands

The budget also proposed new valuations of all land in the United Kingdom, separating the value of land from the value of improvements — a necessary precondition for any land value tax.

The House of Lords rejected the budget — an unprecedented constitutional crisis that ultimately led to the Parliament Act 1911. The land valuations proceeded, but the land duties were repealed in 1920 before they had been fully implemented.

The speech draws a sustained contrast between agricultural landlords, who Lloyd George says generally reinvest in their tenants' buildings and repairs, and urban and mineral-royalty landlords, who "recognise no such obligations" while collecting value created entirely by "the energy and the enterprise of the community." The land value duties that followed — the increment value duty, the undeveloped land duty, and the reversion duty — are each explained and costed in the passages below, along with the case for a nationwide land valuation separating land value from the value of improvements.

Public domain status: Parliamentary speech, 1909; David Lloyd George died 1945, but Hansard is Crown copyright for 50 years, and the 1909 speech is now fully public domain. The passages below are transcribed verbatim from the official Historic Hansard record (see provenance).

The People's Budget — the land value taxation provisions

House of Commons, 29 April 1909, HC Deb vol. 4

— David Lloyd George, Chancellor of the Exchequer

Budget Statement (opening, cc472-3)

The Chancellor of the Exchequer rose, at six minutes after Three of the clock, to submit the Annual Financial Statement. [...] This is a War Budget. It is for raising money to wage implacable warfare against poverty and squalidness. I cannot help hoping and believing that before this generation has passed away we shall have advanced a great step towards that good time when poverty, and the wretchedness and human degradation which always follow in its camp, will be as remote to the people of this country as the wolves which once infested its forests.

[Editorial note: this "War Budget" passage is the speech's single most quoted line and is widely attested in secondary literature; it falls within the "Financial Outlook" portion of the same speech (cc477-84) rather than in the "Budget Statement" section proper. It is included here for context; the land-tax passages that follow are transcribed directly from the "Taxation of Land" through "Valuation of Real Property" sections, cc532-543.]

Taxation of Land (cc532-6)

Now I come to the question of land. The first conviction that is borne in upon the Chancellor of the Exchequer who examines land as a subject for taxation is this: that in order to do justice he must draw a broad distinction between land whose value is purely agricultural in its character and composition, and land which has a special value attached to it owing either to the fact of its covering marketable mineral deposits or because of its proximity to any concentration of people. Agricultural land has not, during the past 20 or 30 years, appreciated in value in this country. In some parts it has probably gone down. I know parts of the country where the value has gone up. But there has been an enormous increase in the value of urban land and of mineral property. And a still more important and relevant consideration in examining the respective merits of these two or three classes of claimants to taxation is this. The growth in the value, more especially of urban sites, is due to no expenditure of capital or thought on the part of the ground owner, but entirely owing to the energy and the enterprise of the community. [Cries of "Oh."] Where it is not due to that cause, and where it is due to any expenditure by the urban owner himself, full credit ought to be given to him in taxation, and full credit will be given to him in taxation. I am dealing with cases which are due to the growth of the community, and not to anything done by the urban proprietor. It is undoubtedly one of the worst evils of our present system of land tenure that instead of reaping the benefit of the common endeavour of its citizens a community has always to pay a heavy penalty to its ground landlords for putting up the value of their land.

There is a remarkable contrast between the attitude adopted by a landowner towards his urban and mineral properties, and that which he generally assumes towards the tenants of his agricultural property. Any man who is acquainted with the balance-sheets of a great estate must know that the gross receipts do not represent anything like the real net income enjoyed by the landowner. On the contrary, a considerable proportion of those receipts are put back into the land in the shape of fructifying improvements and in maintaining and keeping in good repair structures erected by them which are essential to the proper conduct of the agricultural business upon which rents depend. Urban landlords recognise no obligation of that kind, nor do mineral royalty owners. They spend nothing in building, in improving, in repairing or in upkeep of structures essential to the proper conduct of the business of the occupiers. The urban landowner, as a rule, recognises no such obligations. [...] The urban landlord and the mineral royalty owner are invariably rack-renters. They extort the highest and the heaviest ground rent or royalty they can obtain on the sternest commercial principles.

There was the case of the Festiniog quarrymen, who had to build on rocks which could not feed a goat, and upon swamps for which the landlord could not, and did not, receive more than, sometimes, 2s. an acre, and, at the outside, 7s. 6d. an acre. These were let to the quarrymen for building purposes at rents that amounted to £50 an acre. Leases were given for 60 years. All the improvements were effected either by the quarrymen themselves or by the local authority to whom they paid their rates.

Land Kept Out of Market (cc536-7)

There is no doubt that the spirit of greed is unconsciously much more dominant and unrestrained in [the urban landlord's] case. One disastrous result of this is that land which is essential to the free and healthy development of towns is being kept out of the market in order to enhance its value, and that towns are cramped and their people become overcrowded in dwellings which are costly without being comfortable. You have only to buy an ordnance survey map and put together the sheets which include some town of your acquaintance and the land in its immediate vicinity, and you will see at once what I mean. You will find, as a rule, your town or village huddled in one corner of the map, dwellings jammed together as near as the law of the land will permit, with an occasional courtyard, into which the sunshine rarely creeps, but with nothing that would justify the title of "garden." For it is the interest of the landlord to pile together on the land every scrap of bricks and mortar that the law will allow. And yet outside square miles of land unoccupied, or at least unbuilt upon; land in the town seems to let by the grain, as if it were radium.

Unearned Increment (cc537-9)

My present proposals are proposals both for taxation and for valuation. Although very moderate in character, they will produce an appreciable revenue in the present year and more in future years. [...] First, it is proposed to levy a tax on the increment of value accruing to land from the enterprise of the community or the landowner's neighbours. We do not propose to make this tax retrospective. It is to apply to future appreciation in value only, and will not touch any increment already accrued. We begin therefore with a valuation of all land at the price which it may be expected to realise at the present time, and we propose to charge the duty only upon the additional value which the land may hereafter acquire. The valuations upon the difference between which the tax will be chargeable will be valuations of the land itself — apart from buildings and other improvements — and of this difference, the strictly unearned increment, we propose to take one-fifth, or 20 per cent., for the State.

We start with the valuation of the present moment. No increment that has accrued before the date of the valuation will count. We value the land at its present value, and then count the increment from that point. You get the increment on two bases. You get at it when the land is sold. [...] It would be also made on the passing of the property upon death, so that there will be an increment of estate duty; and if there is any increment which is not due to expenditure by the landowner himself on improvements, but is due merely to the appreciation of land in the neighbourhood owing to the growth of population or some other cause, then the same charge would be made on that increment. [...] As the standard of comparison is the value of the land at the present date, and the tax will be levied only upon the increment subsequently accruing, the yield in the first year will necessarily be small, and I do not think it safe to estimate for more than £50,000 in 1909–10. The amount will increase steadily in future years, and ultimately become a fruitful source of revenue.

Duty on Undeveloped Land (cc539-40)

The second proposal relating to land is the imposition of a tax on the capital value of all land which is not used to the best advantage. The owner of valuable land which is required or likely in the near future to be required for building purposes, who contents himself with an income therefrom wholly incommensurate with the capital value of the land in the hope of recouping himself ultimately in the shape of an increased price, is in a similar position to the investor in securities who re-invests the greater part of his dividends; but while the latter is required to pay income tax both upon the portion of the dividends enjoyed and also upon the portion re-invested, the former escapes taxation upon his accumulating capital altogether, and this although the latter by his self-denial is increasing the wealth of the community, while the former, by withholding from the market land which is required for housing or industry, is creating a speculative inflation of values which is socially mischievous.

We propose to redress this anomaly by charging an annual duty of ½d. in the £ on the capital value of undeveloped land. The same principle applies to ungotten minerals, which we propose similarly to tax at ½d. in the £, calculated upon the price which the mining rights might be expected to realise if sold in open market at the date of valuation. The tax on undeveloped land will be charged upon un-built-on land only, and all land of which the capital value does not exceed £50 an acre will be exempted, as also any land exceeding that value with respect to which it can be shown to the satisfaction of the Commissioners of Inland Revenue that no part of the value is due to the capability of the land for use for building purposes. Under these provisions all land having a purely agricultural value will be exempt. [...] I therefore feel justified in estimating that the duty of ½d. in the pound on undeveloped land and ungotten minerals will produce not less than £350,000 in the current financial year.

Reversion Duty (cc540-2)

My third proposal under the head of land is a 10 per cent. reversion duty upon any benefit accruing to a lessor from the determination of a lease, the value of the benefit to be taken to be the amount (if any) by which the total value of the land at the time the lease falls in exceeds the value of the consideration for the grant of the lease, due regard being had, however, for the case of the reversioner whose interest is less than a freehold. The reversion at the end of a long building lease having no appreciable market value at the time the lease is granted is, when the lease falls in, of the nature of a windfall, and can be made to bear a reasonable tax without hardship. [...] On the whole, I do not think that I can in the present year rely on a larger revenue than £100,000 from this source, and I propose, therefore, to estimate the yield of the three land taxes for the current year at £500,000, an amount which, however, must not be regarded as any indication of the revenue they will ultimately produce.

Valuation of Real Property (cc542-3)

These proposals necessarily involve a complete reconstruction of the method of valuing property. The existing taxes upon real property are levied upon the annual value of such property as a whole without distinguishing between the value which resides in the land itself and that which has been added to it by the enterprise of the owner in erecting buildings or effecting other improvements. [...] It now becomes necessary for the purposes both of the increment value duty and of the undeveloped land duty to distinguish between the two elements in the value of real property, while, as the increment value duty and the reversion duty will both of them have to be collected from the particular interests to which those accretions respectively accrue, a complete register of the owners and other persons interested in land, with full details of the various interests, will ultimately be required. [...] It will therefore be necessary to provide machinery for a complete valuation on a capital basis of the whole of the land in the United Kingdom.

— David Lloyd George, House of Commons, 29 April 1909

See Also

• David Lloyd George — the Chancellor who delivered it
• The 1909 People's Budget — the budget this speech introduced
• The Limehouse Speech (1909) — his mass-meeting speech defending the same land taxes three months later
• Unearned Increment — the concept at the center of the increment value duty
• Land Value Tax — the modern instrument this budget's land duties anticipated

Sources

1. David Lloyd George, Budget Statement, HC Deb 29 April 1909, vol. 4, cc472-3. Official Historic Hansard record: api.parliament.uk/historic-hansard/commons/1909/apr/29/budget-statement — used for the "War Budget" opening.
2. David Lloyd George, "Taxation of Land," HC Deb 29 April 1909, vol. 4, cc532-6: .../taxation-of-land — used for the agricultural-vs-urban landlord passage and the Festiniog quarrymen case.
3. "Land Kept Out of Market," cc536-7: .../land-kept-out-of-market — used for the ordnance-survey-map passage.
4. "Unearned Increment," cc537-9: .../unearned-increment — used for the increment value duty mechanics and 20%/£50,000 figures.
5. "Duty on Undeveloped Land," cc539-40: .../duty-on-undeveloped-land — used for the undeveloped land duty and its exemptions.
6. "Reversion Duty," cc540-2: .../reversion-duty — used for the reversion duty mechanics and revenue estimate.
7. "Valuation of Real Property," cc542-3: .../valuation-of-real-property — used for the case for a nationwide capital valuation of land.