(1.) As regards rates existing when any contract ismade,it obscures the shifting and diffusion of the burden which without doubt really take place; and the apparent inequality is made a popular grievance.

(2.) As regards increase of rates, and especially increase during the currency of any contract, it unduly narrows the reservoir of taxable capacity which can be readily and immediately drawn upon, and thus causes chronic friction.

On the other hand the danger is obvious that a direct charge of rates upon lessors might lead to extravagance and plunder, since lessors in most cases have no votes as such, and if they had votes would probably have no adequate voting power.

Balancing these considerations one against the other, we are disposed to recommend that under future contracts the site value rate should be charged partly on owners and partly on occupiers. The rate should be collected in the first place from the person at present liable to pay rates, and no deduction should be permitted from rents fixed under existing contracts; but the share of the rate chargeable on owners should be deducted from all rents hereafter fixed, and all agreements to the contrary should be declared of no effect. Strict respect for existing contracts would not be incompatible with the immediate and universal imposition of the tax. For its primary object, which is the readjustment of burden as between different hereditaments and different districts, would in any case be effected at once. It may, of course, be urged that the effect would be to increase the burden upon occupiers. But this is true only to a very limited extent. In the first place, the burden would only be increased in central districts, where site value is high - elsewhere it would be diminished. In the second place, the great majority of ratepaying occupiers have short tenancies, and will be able to throw back the owner's share of the charge at an early date. The mass of compound householders are only concerned in so far as they will benefit indirectly but surely by the lightening of the burden on buildings; while those who hold long leases are really part-owners and in very many cases (especially in central districts) are themselves deriving benefit from the increased value of the site. In the third place, the new charge, even where it falls most heavily, would be counterbalanced by the relief proposed to be granted in the shape of increased subventions.

It may be observed that the effect of the proposal would be in many respects similar to that of the London Equalisation of Rates Act, 1894,1 a measure which appears on the whole to have operated not inequitably.

1 57 & 58 Vict. c. 53.

As regards the different lessors on the other hand it will be seen that as each re-enters upon his property, he will become liable for a direct and visible charge, as well as for the share of the present rates which falls indirectly upon him; and the prospective value of a reversion will be correspondingly diminished.

The problem of deciding which of the several owners ought to be taxed as the owner of site value becomes less important, when the operation of the scheme of deduction is confined to future contracts; and most of the difficulties will, we believe, disappear when it is recognised that, on the grant of a lease, the lessor secures the value of the site as it then exists, less such portion as may have been secured to prior lessors under previous contracts (if any), and that each lessee secures any subsequent increase of that value during the term of the lease.

We have already expressed the opinion that to confer upon occupiers, even indirectly - in their capacity as voters - the power to impose or increase a rate payable by owners is a measure which ought to be accompanied by stringent safeguards.

We accordingly propose that the purposes for which the site value rate might be raised should in the first place be defined by Statute. We are conscious of the difficulty of framing an exact definition or an exhaustive catalogue of such purposes; but speaking generally we are of opinion that they should be strictly limited to expenditure tending to increase directly the value of urban land.

In the next place, although as regards equity of distribution and ultimate incidence, the site value basis is the important matter, and the charge on owner or occupier is a matter of temporary convenience, we recommend that

Necessity of safeguards. Limitation of purposes and amount of rate.

The best plan would be to divide the site value rate half and half one-half of the site value rate should be deducted from the rents payable to owners under all future contracts, and the remaining moiety should be finally charged upon occupiers.1

Lastly we would suggest, that the rate in the £ of the new impost should be strictly limited by Parliament.

The proposal to divide the site value rate half and half between owner and occupier would be consistent with the recommendation of the Town Holdings Committee for the division of rates, except that not all the rates, but only the special site value rate would be thus divided. From the point of view of reasonable conservatism, such a scheme would provide, alongside of the other safeguards, an automatic safeguard against predatory tendencies, because for every penny charged on the owner the occupier would have to pay a penny out of his own pocket. From the reform standpoint, on the other hand, it offers not less attractions, for in reality the substantial reform desired is the imposition of a rate in between owner and occupier.

1 In this connexion we may refer to some remarks made by Mr. Costelloe. He said : "I am inclined to think that, in the long run, the proportion to be borne by different tenements (apart altogether from the question of the direct burden on the owner) will be divided up, not according to the present rateable value so much as according to the present site values. I think you will find that it is quite a possible view that, in the end, the site values column which we propose will come to be, not only the measure of the owner's rate, but also the measure of the occupier's rate. As between tenement and tenement, I think there would be advantages in estimating the assessable value of each tenement, not by the present measure, which is the rent it will bear from year to year, but by the site value measure, that is to say that tenements bearing a high site value, such as tenements in the city, ought to bear, even in the shape of an occupier's rate, a higher proportion than tenements upon the outskirts, which have a practically vanishing site values estimate, but which now bear a considerable proportion ot the rates, because of the building value which is put upon them. I think that the present system, as a matter of fact, tends in a certain way to discourage building on the outskirts, and in a way which is hardly fair to the various interests concerned." (Vol. 11. of Minutes of Evidence C. 9150 of 1899 - 20,274.) respect of site value, and with such safeguards it would indisputably be easy to ask Parliament to sanction a higher maximum rate and a greater elasticity in its application. Moreover, there is a good deal of expenditure which undoubtedly increases the value of sites, but yet concerns the owners, as distinct from the occupiers, only remotely. For such expenditure a site value rate on occupiers appears to be theoretically the most equitable mode of charge.

We are aware that a scheme for taxing site value, but saving existing contracts, may be attacked on one side as ineffective, and on the other as revolutionary. But we entertain a hope on the contrary that some such scheme may commend itself to persons of different opinions. We do not flatter ourselves that the views which we have expressed on the intricate question of the incidence of the present rates will command universal assent. Some persons will continue to think that the occupiers really bear all the burden. We are unable to assent, but we would commend our proposals to such persons as an honest attempt to make the owners of site values contribute fairly to the expenditure from which they derive benefit. Others may continue to hold that all rates fall ab initio on the ground landlord. Again we are unable wholly to agree, but to such persons we would appeal especially to recognise that a scheme which pays absolute regard to contracts can at least work no injustice to ground landlords, while it will do something to remove an apparent grievance which stirs dangerous ill-will.

The desirability of a rate on Site Values does not necessarily depend on any particular view of incidence.