Rating Reform and Unemployment
THERE can be no doubt that the Government's scheme of rating reform, of which the Finance Bill and the Rating (Valuation) Bill constitute the first and second stages, is the most promising remedy for unemployment that has yet been devised. Under our party system the two Bills are being vigorously criticized for not doing what they are not intended to do, and especially for not distributing Exchequer doles most liberally to the most distressed industries. It would be a pity if such criticism were to mislead the public, for the critics themselves are well aware of the exceptional value of the Government's scheme and only fear that Mr. Baldwin and his colleagues Will acquire too much merit in the eyes of the electors when the full programme of local government reform is- unveiled- next Session, in time for the General Election of 1929.
Unemployment in Great Britain is mainly due to a decline in the demand for our products at the prices below which we cannot afford to sell them. Our coal, our ships, our engines and machinery, our cotton and woollen goods are too dear, in the opinion of our foreign customers. They buy elsewhere, or go without, and our coalowners, shipbuilders and manufacturers have to reduce their staffs or close down, throwing tens and hundreds of thousands of men on to the State unemployment insurance or the Poor Law. If our producers could offer their goods more cheaply, they would regain their lost foreign markets and be able to employ more workmen. Cheapness of production is partly to be attained by better organization, by the amalgamation of small enterprises under one control, by improved plant and machinery, by more modern selling methods. But production may also be cheapened if the producer's fixed charges• are lessened. Of these charges, local rates are unquestionably among the most onerous. It may or may not be true, as the Colwyn Commission affirmed, that income tax and super--tax- are not a burden on industry inasmuch as they are levied only on profits—the surplus after costs of production have been met. But everyone agrees that rates are a burden because they are levied on every factory or pit, whether it is thriving or on the verge of bank- ruptcy. Therefore, if the assessment on the factory or coalpit is lightened, the manufacturer or coalowner should be able to produce at a lovier cost by the amount which he saves in rates. To that extent he will be able to compete on more favourable terms in overseas markets, o- r even in our own hothe market with his foreign rivalS. To that extent he will be assisted to maintain his work- men in full employment and to increase their number as he recovers his foreign customers and re-establishes his old trade connexions. Inasmuch as the Government proposes to relieve the manufacturer of three-fourths of his -rates, the• scheme promises to afford very substantial assistance to productive industry, and to enable it to find employment for a great number of -people.
• It will be seen at once that this method- of dealing with unemployment is more scientific and more likely to yield permanent results than the method of direct or -indirect grants or doles which has been so loudly advocated for . years past and too - often adopted. The coal industry did not benefit in the least when the Government granted it a huge dole of £23,000,000 in aid of wages. The industry was dislocated, the miners were dissatisfied, and the strike which followed upset our whole trade so completely that we have not yet fully recovered. Similar results would follow if-this disastrous policy were followed in the ease of other:trades. Outside interference of this sort, however well intentioned, upsets the nice balance of demand and supply on the maintenance of which the welfare of the industrial world depends. But the Govern- ment proposals do nothing of the sort. The individual employer is to be relieved of three-quarters of the rates ore his factory so that he may be able to compete more effectively. Whether he does or does not do so must depend on his own intelligence and hard work. The Government cannot guarantee that the rating relief will save declining businesses from ruin. But all- capable' employers will stand a better chance than at present of maintaining and extending their circle of customers, and therefore of giving and increasing employment: They will be able to look ahead with confidence, knowing that the burden of rates has been lifted for good from their shoulders : whereas if they were granted a temporary subsidy, they would be always obsessed by the fear that it might cease after a change of Government. The definite character of the proposed reform recommends it to the manufacturer no less powerfully than the actual saving of money involved.
It has been objected that the distinction between pro- ductive and distributive industry made by the Rating (Valuation) Bill is somewhat loose and artificial, and that there will be many border-line cases of small tradesmen who produce and also retail. But viewed from the standpoint of employment, it is obvious that all the concerns which are likely to employ more persons because of the rating relief to be afforded will come under the Exemptions defined by the Bill. The small employers on the border-line will not engage additional workpeople because they are each going to save a few pounds a year. It is only the large firms whose savings will run into thousands which can materially lessen the terribly large numbers of the unemployed. The skilful politician can, of course, make out a case against these and other features of-the scheme. But the problem of unemployment is so vast and so alarming that we must not split hairs when we are shown a practical method of dealing with it. Let us remember that the Government's object is not to put money into any citizen's pocket, but rather, by a readjustment of local taxation, to enable him to find more employment for his fellows. The scheme must be judged by that standard, and as a connected whole.
It remains to be seen how the local authorities are to be controlled in their spending, now that, an even larger • proportion of their revenue is to come not from the ratepayers but from the taxpayers. If the control of Whitehall is to be even more minute and detailed than at present, it will be a matter for regret to those who have looked rather for an increase in the 'power and responsi- - bility of our county and borough councilS, so that More of our best citizens should take a 'pleasure in serving on those bodies. But this question can be thrashed out later. It is agreed that our system of local. taxation, which has grown up through the centuries and has been patched now and then, needs a thorough overhauling because it is throttling industry and promoting unern- plogment. That is the., immediate problem, and it is good to see the determination and forethought which the Government display in their proposals for a solution. When once the wheels of industry. begin to turn more briskly, and the numbers of the unemployed are steadily " falling, the- home- and foreign trade will irnproVe, profits . will grow, and any apparent loss that the Exchequer • may -stistnin increased- grants to local authorities will be More than recompensed by the increase in_the national revenue.
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