LEGACIES OF THE NINETEENTH CENTURY LAND REFORMERS FROM MELVILLE TO GEORGE
THE HONORABLE RAE ELSE-MITCHELL CMG QC LLB DLitt FRAHS FIPAA FRAIPA FAIUS HonFAIV HonFPIA HonFIMM (20 September 1914—29 June 2006)
JOHN MURTAGH MACROSSAN LECTURE 1974
When Captain Arthur Phillip, with his band of colonists one thousand or more strong, established the first settlement on Australian soil at Sydney Cove in 1788 the title to all the east coast of the continent from the 135th meridian of longitude became vested in the Crown. Sir Francis Forbes, Chief Justice of the Supreme Court of New South Wales, said in 1834:
It is a matter of history that New South Wales was taken possession of, in the name of the King of Great Britain, about fifty-five years ago. This Court is bound to know judicially, that an Act of Parliament passed in the 27th year of King George the Third (cap.2), enabling His Majesty to institute a colony and civil government on the east side of New South Wales. The right of the soil, and of all lands in the Colony, became vested immediately upon its settlement, in His Majesty, in right of his Crown, and as the representative of the British Nation. His Majesty by his prerogatives is enabled to dispose of the lands so vested in the Crown. It is part of the law of England that the prerogatives can only be exercised in a certain definite and legal manner. His Majesty can only alienate Crown lands by means of a record — that is by a grant, by letters patent, duly passed under the Great Seal of the Colony, according to law, and in conformity with his Majesty’s instructions to the Governor.1
These instructions gave the Governor power to make grants of land to “any person or persons upon such terms and under such moderate quit rents, services and acknowledgements to be thereupon reserved” as might be appropriate. 2 The objects of the Crown’s bounty were to be emancipated convicts, military officers and private citizens but the land was, nevertheless, regarded us an economic resource to be disposed of subject to conditions which would ensure its use for productive purposes, since both Governor Phillip and the Colonial authorities envisaged the colony to become self-supporting. Hence the instructions directed that the grantees should reside on the subject land and proceed to its cultivation and improvement free of taxes, fees and quit rents for a space of ten years and thereafter at an annual quit rent to be specified.3
These and later instructions which extended the power to make grants to military personnel and marines took pains to specify the areas which might be granted — 30 acres to every emancipated convict, 100 acres to each non-commissioned officer and 50 acres to each private.4 By means of such grants and the conditions on which they were issued, Phillip hoped for the growth of a hard-working farming class which would, by diligent application to the soil, make the colony self-supporting. In due time, however, he found the ex-convicts and military personnel to be inadequate as farmers and sought the emigration of “intelligent farmers as settlers” who “would do more for the colony than 500 settlers from soldiers or convicts, very few of whom are cultivated for the life they must necessarily lead in this country”.5
A system of land tenure based on grants incorporating conditions of residence and improvement and providing for additional payment of a quit rent would have ensured that the land was used to the best advantage and that it would yield continuing revenue to the Crown in the form of quit rents. Several factors, however, militated against the efficacy of such a system. For one thing, later Governors did not share Phillip’s philosophy and grants were made which did not conform to the conditions he had devised. For another, there was no adequate administrative machinery to ensure compliance with the conditions of residence and improvement; and, furthermore, the collection of quit rents proved a difficult matter.
When Lachlan Macquarie assumed the Governorship of the colony large areas had been granted to free settlers — some by the direction of the colonial authorities in England and others as acts of patronage to public officials, including retiring Governors — the areas of which, on occasions, far exceeded the average granted to ordinary settlers. Little had been done to ensure compliance with the conditions of the grants but during his term attempts were made belatedly to prevent the re-sale by settlers of lands on which the conditions had not been fulfilled. A Government notice was published on 8 June 1811, stating that any sale or disposal within five years of lands granted subject to one of the conditions should be null and void and all persons were “directed to govern themselves accordingly”6 but this threat was ignored and land continued to be sold immediately after being granted. To indicate the measure of disregard by settlers of this ukase, even the Judge Advocate ignored the conditions in a grant made to him and disposed of the land within a short time after the title to it had been issued.7
By the time the colony had acquired its own legislative structure the system of controlled land grants had broken down. In New South Wales the census of 1828 revealed that over three million acres of land had been granted but less than 10 per cent had been cleared.8 In Van Dieman’s Land, which was independently governed, the picture was much the same.9
After the return of Macquarie to England, Governor Brisbane initiated a system for the granting of lands on sale at a fixed price per acre with an annual quit rent payable after the lapse of seven years but redeemable by a capital sum as a means of encouraging the clearing and improvement of the land granted. Subsequently, and because of the influence of Wakefield’s theory, the Ripon Regulations, proclaimed in 1831, brought to an end the system of free grants and substituted a tender system under which a grant in fee simple of land was issued upon payment of the full price and at a nominal quit rent of a peppercorn forever if demanded. At the same time, the practice of imposing conditions of residence and improvement came to an end and, because Lord Ripon had not been impressed with the quit rent as a control device, nor as a means of raising revenue, 10 the practice of reserving a quit rent was abandoned. The cessation of the practice of imposing quit rents in new grants naturally led to pressure for the remission of quit rents payable under earlier grants but some of the perceptive colonial figures questioned the wisdom of such a course, in particular, Sir Francis Forbes, Peter Cunningham and Henry Melville. Cunningham almost prophetically summed up the faults of the system of land disposal pursued in the colony by saying that:
The terms upon which the land was granted were either never enforced, or that there were no terms to enforce. By exacting a quit-rent at a given period, you oblige the settler to improve the grant, in order to make it sufficiently valuable to answer the demand of the quit-rent, instead of keeping it as a mere stock-run, or leaving it in a state of nature, until its value should become so much increased by the condensation of population around, as to enable him to dispose of it to greater advantage. This increasing value of land, from increasing population, will often double the value of a grant in the space of a few years, without reference to a single improvement.11
This sort of logical argument did not meet ready or widespread acceptance amongst the settlers and citizens of New South Wales, many of whom saw the land as a commodity which could be converted to a profit by sale, but the philosophy it embraced was invoked time and time again during the ensuing half century in the hope that a rational system of land disposal and land use might be devised. The steps that were taken after 1829 to control settlement within limited areas close to the eastern seaboard and the extension of squatting beyond those limits are well known’ and, in spite of Governor Gipps’ attempts to impose and enforce restrictions on the expansion of settlement, there was a dominant desire on the part of the colonists to be free of the shackles of any control, to get rid of the quit rents and to have every advantage which the grant of estates in fee simple would give. It was, however, not until after the introduction of responsible government that this became possible and the legislation passed in the 1860s, which allowed selection before survey, controlled selection and the acquisition of homesteads, wrought great changes in the pattern of land owning and land occupation, especially in the three eastern colonies.
This was a period of increased immigration and of population growth. In 1851 the total Australian population was 438,000; nine years later it had increased to 1,146,000 and in 1870 by another half million; by 1880 it reached 2,232,000. The gold rushes had resulted in people leaving the land and diverted the attention of many from questions of land settlement until after the alluvial fields were exhausted, when they discovered that the best agricultural and pastoral lands had been alienated and passed into private ownership, free from any quit rent and from any enforceable conditions requiring residence, cultivation or improvement and available for re-sale as soon as the title to the estate in fee simple had been issued. Some holdings were excessive in size by any standards, others were held by absentee owners, large corporations or family groups and by far the great majority were inadequately developed.
These consequences had ensued in spite of the administrative controls which the authors of the free selection scheme had devised but which had no enforceable sanctions. All sorts of questionable practices developed, including dummying and peacocking, and land speculation became rife, selection after selection being sold as soon as the grant was issued and without a sod being turned or a tree being felled. The practices which became evident during the decade after free selection and their consequences stirred the public conscience. Political figure in opposition criticized prevailing legislation as well as the administration, newspapers published leading articles and donated prizes for essays and constructive suggestions about the land question, whilst pamphleteers and publicists rushed into print with proposals to stop the wholesale and profligate alienation of the country’s residual lands and to eliminate the evils which had become commonplace.
The public discontent about the land question cannot perhaps be better captured than by quoting the opening paragraph of a prize essay on “The Future Land Policy of New South Wales”12 written by Samuel Cook in 1870:
In this colony no question has been more largely discussed than that relating to the administration of the public lands. There is none out of which more political capital has been made — none in regard to which cant has been more potent. Men have magnified small grievances, and shrunk from providing a remedy for great ones. They have mourned over others which were merely the creations of fancy or the subterfuges of ambition. Politicians have fought, and the country has suffered. Noise and clamour have often drowned the voice of reason and prudence. The ordinary common sense which marks success in the affairs of everyday life has not presided over our councils. Thus the public estate has been maladministered, and a system has been adopted unsuited to the requirements of a British colony — based on principles inconsistent with sound political economy — in a large degree unfavourable to the preservation and development of those civilising influences which are characteristic of English society, and, in some of its details, vicious in its tendency.
These were the words of but one writer; there were others — too many to mention — and, along with the newspapers and journals, they poured out a stream of criticism, fact and rhetoric at the root of which lay a deep measure of disillusionment about current and past land policies. This atmosphere of disillusionment generated in many quarters an articulate desire to correct the inadequacies of the legislation and rectify the injustices which had militated against the legislative and administrative systems achieving their idealistic objectives. The most serious matters were, of course, the process of wholesale alienation of the residual lands of the Crown, the aggregation of large estates and the fact that no effective sanction existed to ensure the improvement of the lands by the grantees and prevent speculative dealings in lands by selectors. In spite of the strength of criticism of past land policies, restoration of the status quo was hardly practicable because the land had been granted or contracted to be granted in fee simple without enforceable conditions and without the reservation of quit rents, so that the only machinery to recall the estates was their resumption, a costly process and one available as a matter of law in most colonies only where the land was required for public purposes, such as the construction of a highway, railroad or school. Moreover, no Government had any available funds for such expensive projects.
With the wholesale selection of so much land a decrease in revenue from the sale of land was becoming evident, as also were the revenues from duties of customs. At the same time the extension of settlement had imposed obligations on government to provide public works and facilities, roads, railways and the like, over wide and remote areas of the colonies. In this relatively depressing situation, when there was a landless brigade of unemployed men roaming the coastal and inland areas of the eastern colonies, proposals for reform became commonplace and the spate of pamphleteering, publication and discussion by local figures was added to by the reprinting in Australia of the early works of Henry George, an American newspaper editor. In the first of these, written in 1871 under the title Our Land and Land Policy, George advocated the destruction of land monopoly by the abandonment of all taxes except a tax on land without improvements and a few years later in his better known work Progress and Poverty he developed this argument at greater length.
The conception of a tax on land in its unimproved state was not a novel one in the Australian scene, nor was George an entirely original thinker. Henry Melville, a Hobart newspaper proprietor and publicist, had argued for such a tax in his book The History of Van Dieman‘s Land in 1835 when he criticized the granting away of the public land indiscriminately without reserving any rights to the Crown, a process which he described as resembling the killing of the goose for the golden egg.’ He commented that “of the millions of acres already granted, about 80,000 are in cultivation” 13 but thought it was not yet too late to make regulations to control the position for posterity. To this end he proposed “that the whole of the colonial revenue ought to be chargeable upon the land: by this means the ports of the colony would be free in every sense of the word. By the adoption of a land tax or quit-rent the necessary revenue would fall upon the property — in fact, the revenue ought to be raised by a property tax; and in the establishment of a new Colony such a property tax may well be enforced without any difficulty.” He conceded that there would be opposition to such a course coming from “the large and influential land proprietor — the 10- and 20-thousand acre gentleman who will cry out most lustily against such a tax.”
Melville was a critic of the establishment and his proposals for land taxation received as little support at the time as his other radical comments on leading figures in the Tasmanian political scene one of which resulted in his being gaoled for contempt of court. Maverick though he obviously was, Melville’s imaginative exposition of land taxation as a solution to problems of land settlement which later assumed gigantic proportions warrants for him some recognition as the first leading advocate in Australia of the single tax theory.
How much influence Melville’s writings had is difficult to say. He wrote forty years before any legislation to tax land was introduced in Australia but in that period every conceivable means of redressing the consequences of inept land policies was ventilated and debated. The aggregation of large estates in the hands of wealthy settlers was seen as one of the chief complaints and the levy of a tax on land holdings was a natural way of penalizing the rich landowner and forcing him to subdivide those estates: a tax on rental values or on the produce derived from such land would have little impact for a second complaint was that the wealthy settler kept his extensive holdings idle so that they did not produce an economic return. This, indeed, was the major argument in favour of taxing unimproved values. Whatever the cause, however, in 1875 the premier of Victoria, Graham Berry, introduced the first legislation in Australia to tax land; the bill was rejected but it provided a bench mark for later measures of a like nature in Victoria and the other colonies.20
The idea of taxing land, though radical in the eyes of the large landowner, had a dual appeal; it would provide revenue to assist the ailing colonial treasuries and it would, in the vernacular of the time “burst up the large estates” which had been aggregated during the period of free selection. The particular attraction of the land tax for the landless masses, the unemployed and the under-privileged was the emphasis lent to the conception of its being the only tax, a single tax, and panacea for all social and economic ills. What is more, however, the tax was seen in some quarters as a means of controlling the ownership and use of land in the interests of the community without having to resort to nationalization or resumption.
By the 1880s nationalization had become a serious issue through the writings of Alfred Russell Wallace and Edward Bellamy which were widely read in Australia and Land Nationalization Leagues grew up across the country, their objects including the prevention of further alienation of the national estate and the abolition of all existing methods of raising revenue by the substitution of a tax upon land values.
The movement for reform was not confined to advocates of land nationalization and the single tax. There were rugged individualists like Robert Barbour, a member of the New South Wales Legislative Assembly, who, in spite of having profited by free selection, dummying and land speculation, clearly saw the evils of the land policies which had been followed. Expounding upon them he wrote in 1879, in his booklet The Land Question a little before the publication of Progress and Poverty, of the necessity for practical legislation to deal with the problems which had arisen from those policies. He accused everyone in the community of “assisting to produce a monopoly” by “continuing the alienation of the public estate” and asserted that “we have been fostering an incubus upon our prosperity by permitting and assisting a few to acquire inordinate wealth which seldom increases happiness and is too often the parent of profligacy and idleness”. He asked rhetorically what moral or equitable right there was to alienate any land and warned that the consequences of continuing to do so “must be that a land tax to burst up the large estates will be demanded and an agitation once begun in this direction will be continued until it eventuates in a movement to take away exclusive possession.
In these arguments was manifest again the same philosophic ideals, utilitarian, nationalistic or egalitarian — however you may describe them — as had been expressed thirty or forty years earlier by Cunningham, Melville and others. They were to be repeated even more frequently in ensuing years.
Whether or not it is proper, at this point in history, to assign the credit to Henry George’s writings or to the emergence of an indigenous attitude about land disposition and land use by the levy of taxation, legislation was passed in more than one of the colonies to tax land in the period after George’s writings first began to capture the public imagination. Following the rejection in 1875 of Berry’s land revenue measure, a Landed Estates Act was passed in Victoria in 1877 which levied a tax according to sheep-carrying capacity on landed estates of more than 640 acres and of a value in excess of £2,500. In the following year New Zealand levied what is probably the first tax on unimproved land values in Australasia and although the tax had a short life the conception of assessing land values on an unimproved basis for the purpose of the levy of rates and taxes was adopted in Queensland legislation (the Divisional Boards Act of 1879) soon afterwards. In 1884 South Australia passed into law the Taxation Act which explicitly imposed a tax on all land in South Australia with certain exceptions and declared that the taxable value should be the unimproved value of the land, namely “the actual value of the land less the amount of the value of all improvements, if any, on such land”. The colony of New South Wales was the next to take the course of seeking to tax land on the basis of unimproved value if that value exceeded a minimum sum but the bill, though passed by the lower House in 1884, was rejected by the Legislative Council and another attempt to pass the bill into law was rejected two years later.
Shortly after this Queensland began to feel the pressure of economic adversity and in 1890 close debate centred upon the means whereby additional revenues could be raised. J. M. Macrossan had declared himself against a land tax as far back as 1887 but the Morehead Government, of which he was a member, felt obliged to impose such a tax in order to solve its fiscal problems. It was defeated on this issue in 1890 but the Griffith-McIlwraith Government which came into office at once passed the Valuation and Rating Act of 1890 to replace the earlier legislation of 1879 (which had been consolidated in 1887) and to get rid of municipal endowments; this expressly required local authorities to levy rates on unimproved values.
There is little doubt that by this time George’s influence had made a considerable impact. His name and views were quoted in the debates in the Queensland Parliament and, amongst other things, Griffith, himself an advocate of the single tax, emphasized that the principle of the bill was that “no matter how highly a man may improve his land he pays no more taxation than his neighbour who lets the land remain idle and increase in value by other people’s exertions”.21
It is important to observe that at this stage early in 1890 Henry George had visited Australia and had been accorded a tumultuous reception wherever he went. His written works were well known before his visit, some of them having been reprinted in Australia after publication in the United States of America and his masterpiece Progress and Poverty took on some of the qualities of a book of gospel. Stories are told of copies being handed around in the outback and being thumbed and worn as a result of reading by shearers and itinerant workers and many of the theories and solutions it advanced were embraced almost as religious beliefs. Not the least of the instruments which spread his views were the Victorian Review and the Bulletin, though in the course of time the latter journal ceased to be an active supporter of Henry George’s single tax theory.
George was an eloquent speaker who captured the public imagination; he was indeed a spellbinder and in the words of George Reid, later premier of New South Wales, his name had become a household word in Australia. This reputation he had earned, said Reid, “as a thinker . . . as a writer and . . . as an orator”.22 George had an emotional attachment for Australia; he had earlier married a Sydney girl and had observed with interest and obvious satisfaction the emergence of a movement in favour of land reform and the progress of bodies like the Land Tenure Reform League of Victoria. During his visit he devoted himself assiduously to the propagation of his ideas and, as one writer records it:
For three and a half months George toured the island continent in a strenuous campaign of lectures, and every-where he was received with an enthusiasm greater than anything he had experienced before — not even Ireland had welcomed him with such an outburst of popular acclaim. He was feted and banqueted, and the constant round of speeches and official dinners proved later to have been too great a drain upon his strength; he spoke every evening and sometimes twice a day during his entire stay in Australia.23
It is easy to attribute too much weight to George’s writings and personal influence. Even though he was not an original thinker and his views did not survive critical examination, he was a catalyst who galvanized into activity the diffuse opinions of many land reformers, dissentient minds and fringe adherents of the land nationalization leagues which had sprung up around the country, all of whom saw the need for some major reform of the land laws. These included “many of the best brains in the country”24, people of widely differing backgrounds — political figures, lawyers, churchmen and even landowners, amongst whom were Charles St. Julian, Dr. John Quick, the Reverend J. S. White, James Ashton, Frank Cotton, A. B. Paterson, C. H. Spence and many others. This was the age of the pamphleteer and the collections of tracts and pamphlets in the Mitchell, Latrobe and State libraries on this topic are eloquent witnesses of the importance which the public assigned to problems of land disposal and control. At the risk of undue embellishment, the comments of two of these writers are worth quoting. Quick, an erudite lawyer, said that there was no question more important than the future disposal of the remaining acres of Victorian soil . . . the wholesale alienation of the public lands and their stealthy but rapid absorption into large estates is a crime and a calamity which can only be adverted by the steady, intelligent and irresistible opposition of the people of Victoria to a policy at once demoralising and destructive.25
Paterson, also a lawyer, wrote of the “absurd and unjust” system of disposing of land which “enables some people to get a lot of benefit from the community to which they have no right”. He saw fee simple tenure as the evil, causing good land to be locked up and observed that:
The great key-note of the reform must be to let men hold lands to use, and not to look at. We must try and devise some means whereby the productive lands of the country shall be available for use by individuals, under the most favourable circumstances for themselves and for the community; we must devise some means whereby no one can hold land idle and unproductive while others are anxious to use it, and whereby all value created by the State will go to the State.26
It is perhaps pertinent to observe that these sentiments were expressed in a booklet written by Paterson under the title Australia for the Australians: A Political Pamphlet Showing the Necessity for Land Reform Combined with Protection. Putting aside the question whether it was the writings of Henry George and the pamphleteers and reformers which resulted in the enactment of unimproved land-taxing measures, there can be little doubt that George’s theories impressed radical minds sufficiently for the trade union movement and the Labor party to adopt the land tax as fundamental policy.27 In 1888 the fifth inter-colonial trade union congress resolved that “a simple yet sovereign remedy which will raise wages, increase and give remunerative employment, abolish poverty, extirpate pauperism, lessen crime, elevate moral tastes and intelligence, purify government and carry civilization to a yet nobler height, is to abolish all taxation save that on land values”.28 This, of course, was a forthright subscription to the single tax, a fact which gave rise to controversy at a later date, but when the Labor party formulated its initial platform in 1891 it adopted a modified conception of the land tax by recognizing in the thirteenth plank of its platform the natural and inalienable rights of the whole community to the land — upon which all must live, and from which by Labour all wealth is produced by the taxation of that value which accrues to the land by the presence and needs of the community, irrespective of improvements effected by human exertion.29
The same platform also embraced local government and decentralization; extension of the principle of the Government as an employer, through the medium of local self-governing bodies; and the abolition of our present unjust and injurious method of raising municipal revenue by the taxation of improvements effected by labour.30
In spite of the split in the Labor party which followed from different interpretations of these planks of its platform, the levy of rates for local government purposes on unimproved land values came to be adopted generally across Australia by the early years of this century, though in some of the States an option to rate improved or rental values was retained. In some measure the philosophy of the Labor party influenced the decisions of the State Legislatures, but in others the rating of such values was seen as a means, quite divorced from any political philosophy, of compelling the development and improvement of land. In this sense, of course, the rating system was being used to extract some of the unearned increment which attached to land as a result of community developments.
The approach made by each State to the levy of rates and taxes of land varied: in New South Wales, for instance, the State itself vacated the land tax field in 1906 contemporaneously with granting local government the power to impose rates on unimproved values. In other States, such as Queensland, Victoria and South Australia, land tax was levied on unimproved values concurrently with the levy of rates by local governing authorities, the basis for which was expressly or optionally the unimproved value.
From time to time in the ensuing half-century the question of the most equitable basis for the levy of local government rates has been re-agitated before Royal Commissions, committees of inquiry and by local government associations in every State and on more than one occasion, but the unimproved or site value has remained the primary rating basis and governments of all political colours have declined to reverse the trend by prescribing improved values as the exclusive or even optional basis for the raising of local government revenues. Options there still are in some States but by and large it may be said that the conception of imposing rates upon the value of land in its unimproved state or exclusive of buildings has become an established principle of local finance across the continent. The general recognition of taxes and rates on unimproved land values as a means of raising revenue for State or local government purposes was reinforced by the Commonwealth’s entry into the same field in 1910. In that year the Labor party came to power in the national Parliament with policies which would entail considerable expenditure on old age pensions, maternity allowances, the Navy and other matters. The Government needed revenue to finance these projects and it saw the levy of a progressive land tax as a convenient means and one which, at the same time, would burst up the large estates which had been aggregated in the period since free selection a half-century before.
The frank assertion that in conformity with the platform of the Labor party the land tax had this object resulted in its validity being attacked on constitutional grounds. It was not, said the challengers, an Act imposing taxation within the relevant constitutional power but an Act the real purpose of which was to prevent the holding of large quantities of land by a single person. The issue of constitutional validity became a critical one and many leaders in the law openly expressed the view that the tax was invalid but the High Court of Australia rejected the attack, the chief justice, Sir Samuel Griffith, a former advocate of the single tax, saying that the indirect consequences which might ensue from the imposition of taxation were irrelevant to the competency to impose the tax. In the expression of this view he was supported by the other four members of the Court.32
The Commonwealth land tax at first had a serious impact on the owners of large land holdings and especially absentee owners and a wealth of litigation ensued with the collecting authorities concerning the values assigned to land and the method by which they were deduced but during the first thirty years after the tax was introduced the revenue barely doubled though, even when the Commonwealth decided to vacate the field of land taxation, it was far in excess of the total revenue derived by all the States from the same source. In the year 1952 the Commonwealth repealed its Land Tax Assessment Act and retired from that field of taxation in favour of the states. Land taxes then became a major item in the revenue structures of the States but they later were the subject of a wealth of criticism from various quarters, especially primary producers, city retailers and, ultimately, home owners who, in spite of the exemptions that were provided at the lower end of the scale, found that with escalating values small areas of land that were devoted to personal residence became the subject of tax burdens which were quite considerable. Thus began a process of erosion — the creation of concessions or exemptions in favour of primary producers of certain categories, some collective owners and home owners conforming to prescribed criteria. The revenue from the State land taxes in this way has not reflected the increases in land values which have been evident throughout Australia over the last twenty years but no political party now seems anxious to allow the land tax to operate as a means of taking from the landowner any part of the value of the land as an unearned increment or for that tax to produce the effect of compelling owners of large or valuable holdings to dispose of or subdivide them. At the best, of course, a progressive land tax was but a blunt instrument to achieve these purposes and one which did not pay regard to some of the refinements or differences in the nature of land-holding of individual proprietors or the purposes for which their land was used. Even so, the conceptions of bursting up the large land estates and taking from the landowner some of the unearned increment remained influential forces in the political affairs of the States. Land taxes were recommended as a means of forcing land on to the open market in times of scarcity to prevent escalation of prices and values.33 Positive legislation was passed (though later repealed) to appropriate to the State a percentage of the increase in land values on re-sale after a change of use;34 ‘ and a tax on the ownership of large estates in land was imposed in one State expressly to discourage aggregation.35 These and other measures initiated by the States stand quite apart from the steps taken or proposed by the Commonwealth.
The pressure for reform of the land laws towards the end of last century and the Reports of Royal Commissions and committees of inquiry36 also led to the abolition of the systems of free selection, selection without survey and the like which had been the subject of so much abuse in the 1860s and 1870s. New tenures, some in fee simple bearing novel names like the homestead grant of New South Wales, were devised which were conditional upon personal residence and upon improvements being undertaken. Leasehold titles were substituted for purchases of the fee simple and holders were restricted to limited areas, not more than adequate to provide a living for a single family — the home maintenance area. The introduction of these changes showed that the lessons of prodigal disposal had been learned but, of necessity, they could only apply to the residual lands of the Crown not already disposed of or to such areas as were resumed by the Government for closer settlement or re-disposal under some similar scheme.
The resort to resumption of land already alienated and the adoption of new tenures of a conditional or leasehold character was not exclusive to the Labor Governments. The fact that land could be the subject of exploitation or speculation by private interests on the one hand or a source of income for government agencies on the other was well understood by political figures towards the end of the nineteenth century. It was not surprising, therefore, that some of the delegates at the 1897 and 1898 Constitutional Conventions urged the inclusion in the draft Commonwealth Constitution of a provision to compel the adoption of leasehold tenure in the new Federal Capital Territory which was to be created after federation.37 These moves were rejected but almost immediately after the establishment of the Commonwealth in 1901 Edmund Barton, the first Prime Minister, publicly proposed that the ownership of all land within the new Federal Capital Territory, when its site was determined, should be acquired by the Commonwealth and the ownership retained by it and not sold off as land had been half a century or more before. Barton’s plans to this end were stated in an election speech at Maitland in January 1901, when he said: “So far as the law of the land allows land within the federal area will not be sold. Its ownership will be retained in the Commonwealth. The land will be let for considerable terms but with periodical re-appraisement so that the revenues thus obtained will assist the cost of creating the Commonwealth Capital.”38 He added that he put these views forward not as a land nationalizer but as a matter of business. After the first elected Government took office, and for some years thereafter, little departure from Barton’s proposals was evident. King O’Malley repeated them in the House of Representatives and other members of that House of vastly different political convictions supported the view that the land in the federal capital should not be disposed of under freehold tenure but should be the subject of restricted leaseholds. Discussion and bickering about the site of the Capital Territory temporarily diverted attention from the question of land tenure but when at length the site of Canberra was agreed upon and appropriate legislation passed by the New South Wales and Commonwealth Parliaments there was little dispute that the land in the Territory should be acquired and ownership retained by the Government and that it should be disposed of on leasehold tenure. To this end the Seat of Government (Administration) Act 1910 declared categorically:
No crown lands in the Territory shall be sold or disposed of for any estate of freehold. This, as has been pointed out by Frank Brennan, was not the product of the philosophy of any one political party. The simple truth was that “before and during the early years of federation there was a widespread belief in the need for Government ownership of all the land within the proposed Federal Territory” and “the demand that this ownership should be obtained was probably more universal than any public demand in Australia has ever been”.39
The system of tenure which was introduced after the development of the national capital had begun provided for long-term leases at rents representing 5 per cent of the unimproved value of the land and the re-appraisement of those rents every twenty years. At the time the wisdom of selecting such a long period for re-appraisement was questioned but moves to reduce the period, by Parliamentarians who were strong followers of Henry George, ultimately failed.
It seems not open to question that so long as there was reasonable stability in land prices and values a system of leasehold tenure based on long-term re-appraisal of rents would be workable but it became vulnerable when land prices began to increase dramatically at about the same time as a large number of early leases became due for their second re-appraisement in the l960s. Fears were expressed that the rise of land values would cause Crown rents to be increased to a hardship level so as to warrant the abolition of the leasehold system and this claim was reinforced by assertions of the administrative difficulties of the system. Coincidentally, political motives led the Government of the day to decide against the continuance of land rent reappraisment and in 1971, by an amendment to the relevant ordinances, the rent under Canberra leaseholds was reduced to five cents per annum.
It was contended in some quarters that this decision did not entail any departure from the principles of the leasehold system which had been universally accepted and approved for the Capital Territory since federation, but such a contention overlooked the foundations on which the system had been built. A corollary of the abolition of the land rent was that the lease or disposal of newly serviced parcels of land would not be subject to a rent but to the payment of a single capital sum and not the least of the consequences of the two steps was a considerable appreciation in the value of existing leases and a substantial increase in the prices which were offered in the market for both new leasehold lands and those which had been acquired or alienated at an earlier time. What, perhaps, is more important for present purposes is that the decisions taken by the Government and they only needed an amending ordinance for their implementation — constituted an abandonment of the philosophic principles which had influenced the formulation of the new land policies at the end of the Nineteenth Century and led to the early federal legislators agreeing on a leasehold system of tenure for the national capital after 1 901. It should, perhaps, be added that the Labor party, probably for both political and ideological reasons, opposed the amendments but a move to disallow the amending ordinances in the Senate failed by a small majority. Less than two years had elapsed from the decisions to alter the leasehold tenure system in the Australian Capital Territory before the Labor party came to power in the national Parliament in 1972 after being out of office for more than twenty years. It had a ready policy to deal with problems of city growth and urbanization and was determined to undertake a review of the system of leasehold tenure in the Australian Capital Territory with a view to restoring, if possible, the rental re-appraisement system. Aside from its general objectives relating to urban growth and housing, its stated policy was:
to retain all land now vested in the States or Commonwealth in public ownership and when it is to be developed to do so on a leasehold basis. Where possible all new development in urban areas, especially on their fringe, to be undertaken by creating development commissions having the power to acquire the necessary land, hold it in public ownership and develop it on a leasehold basis.
As one step in the implementation of this policy, the Government appointed a Royal Commission of Inquiry to report on the principles and machinery of systems of leasehold tenure for land acquired by public authorities and, as well, upon the land tenure systems in force in the Australian Capital Territory and the Northern Territory. The First Report of this Commission of Inquiry recognized the weight of public opinion in support of security of tenure for land owners and recommended that lands for residential purposes should not be disposed of on leasehold terms. It nevertheless saw the necessity, for measures to secure the return to the Crown or State of some of the unearned increment and profit arising from increases in land values as a result of community decisions about land use.
Two major steps were envisaged: first, wherever possible the disposal of lands for commercial, industrial and public purposes should be on leasehold terms at rents which could be re-appraised from time to time where the lands were used for profit-making purposes; secondly, the reservation to the Crown of all development rights, that is the rights to change the use of land to a higher or more profitable use, so as to deny to the owner the prospect of adventitious or windfall profits from community decisions about land use. The Commission, however, saw no practicable prospect of a return to the system of land rents which had prevailed in the Australian Capital Territory before 1971.
The recommendations of the Commission of Inquiry were not based on political philosophy but upon stated objectives and goals and upon the same basic principles and theories that influenced the nineteenth century land reformers who saw that speculation in land was a costly evil which could produce hardship and impair the community’s fiscal capacity to undertake the developments necessary to meet current problems of urban growth. It pointed out, however, that trends in the United Kingdom and the United States of America now favoured the same sort of approach to land development and disposal as had been generally agreed upon when the future of the national capital was being debated early this century.
Some steps have been taken to implement the recommendations of the Commission of Inquiry in areas designated by governments as new towns or growth centres in some of the States and a capital gains tax has recently been proposed to skim off the unearned increment in land values in some of the situations referred to in the Commission’s Report. It is pretty clear, however, that a wholesale adoption of the major recommendations in the foreseeable future is improbable. Nevertheless, as the Commission’s First Report indicated, a new mood concerning the use of land was emerged in many parts of the world in quite recent times; this has entailed a questioning of traditional assumptions about development and has involved an acceptance of some of the propositions embraced by the land reformers of the Nineteenth Century, especially the notion that land is not a consumable asset but a national resource of finite extent. This mood, if translated into proprietary rights, would mean that only rights of user in land should be recognized and that such rights should be subject to control in the interests of the community needs.
Perhaps there is nothing novel or revolutionary in such a principle and perhaps it will come to be recognized in due time by the “nomad society” with the “throw-away” philosophy of which recent authors like Alvin Toffler have written. It may be that the origin of the principle truly lies in the Mosaic laws relating to the use and cultivation of the soil and that Leviticus is as significant in the evolution of the theory of economic rent as Ricardo, Mill or George.
This, however, is not the occasion to seek for origins but simply one to identify the influence of those I have called the Nineteenth Century land reformers. That, indeed, is the object of this lecture.
The men I have called the Nineteenth Century land reformers came from all classes, followed a variety of vocations and were of all political colours; they had a feeling for the land and recognized its economic importance, especially in a burgeoning community or nation as nineteenth century Australia was; they believed that the soil of this continent was, as the law declared, the exclusive property of the Crown and that the Crown had a duty to future generations to prevent the wholesale granting away of its estate: they asserted that, in spite of its apparent plenitude, the land — and good land especially — was an asset of finite extent which should not be allowed to become the subject of speculation nor the property exclusively of a limited class. These men were not concerned about the philosophies they embraced, which today would be designated by some characteristic “ism”, but with the application of the land to productive purposes in the interests of the nation and they saw the policies which had been pursued and the aggregation of vast estates in the hands of a small number of owners — some absentees — as inhibiting factors in the profitable use of the land and the development of a prosperous nation. In general, they agreed that the free disposal of land which had marked early land policy and become a scandal in the I 860s should be stopped and that the residual lands of the Crown should be the subject of leases or of grants of restricted titles subject to conditions to ensure profitable use and prevent speculation. Their remedies for dealing with the vast areas already alienated and in private hands ranged from the nationalization of existing titles to the levy of a land tax, either as the sole means of raising revenue — the single tax — or as an instrument of economic coercion; and through the formation of leagues, associations, clubs and by public lectures, pamphleteering and political pressure they fought with emotional conviction for acceptance of their proposals for reform. In advocating these measures of reform they were more successful than their counterparts abroad and achieved practical results which far exceeded anything which had been accomplished in the United States of America or the United Kingdom. In the former country even today no tax is levied by any State or the United States itself upon unimproved values or site values of land and in the United Kingdom, in spite of Winston Churchill’s resounding condemnation of land monopoly over fifty years ago, the position is the same. In neither country does local government derive any revenue from the levying of rates on such values and in neither country has there been developed a system of land tenures akin to the restricted freehold grants subject to conditions such as were adopted in the Australian colonies towards the end of the nineteenth century. In both countries it is true that there are capital gains taxes but they treat the land in the same way as any other asset and no special levy is imposed to recapture the unearned increment which accrues to land from community developments. Finally, and in spite of the changes made in 1971, the leasehold system in the Australian Capital Territory must rank highly as a pioneering experiment in land tenures and land use control.
The various features of our several systems of tenure relating to the disposal of lands of the Crown, the general adoption of unimproved values or site values as the basis for land taxing and the levy of rates for local government purposes, the Canberra experiment in controlled leasehold tenures, the application of leasehold tenures to new towns and growth centres and current proposals for the reservation of development rights or the taxation of capital gains derived from changes in land use represent innovations in the law which may fairly be categorized as legacies of the land reformers of the Nineteenth Century.
- 1. King v. Steel I Legge’s Reports 68—69.
- 2. Historical Records of Australia, Series 1, 1:7
- 3. Ibid., 1:14 15
- 4. Ibid., 1:124.
- 5. Ibid., 1:338.
- 6. Historical Records of New South Wales, 7:542—43.
- 7. Historical Records of Australia, Series I, 8:393—94.
- 8 T. M. Perry, Australia’s First Frontier, 130—31.
- 9. J. West, History of Tasmania p.15 et seq.
- 10. Historical Records of Australia, Series 1, 16:20.
- 11. Ibid., Series 4, 1:693 94.
- 12. P. Cunningham, Two Years in New South Wales, 258, 275.
- 13. H. Melville, The History of the island of Van Diemen‘s Land, 15 et seq.
- 14. Two Years in New South Wales, p.25 8.
- 15 See generally W. Epps, Land Systems of Australia, (1894); 5. H. Roberts, History of Australian Land Settlement (1924, 1968); A. G. Lang. Crown Land in New South Wales (1973).
- 16 Promoted by the Wagga Wagga Advertiser.
- 17. P.148.
- 18 P.150.
- 19. P.151.
- 20. J. M. Powell, “The Land Debate in Victoria, 1872—1884”, Royal Australian Historical Society Journal 56:263.
- 21. Queensland Parliamentary Debates (1890), 61:870.
- 22. Daily Telegraph, 2 June 1890.
- 23. A. R. Geiger, The Philosophy of Henry George (1933), p.71.
- 24. M. Barnard, History of Australia, p.417.
- 25. he History of Land Tenure in the Colony of Victoria, (1883), p.2.
- 26. Australia for the Australians (1889), p.23.
- 27. L. G. Churchward, “The American Influence on the Australian Labor Movement”, Historical Studies, 5, p.258.
- 28. Barnard, History of Australia, p.417.
- 29. Fifty Years of Labor, 1890—1941, p.7; R.N. Ebbels, The Australian Labor Movement, 1850 1907, p.121.
- 30. Ebbels, Australian Labor Movement, p. 121.
- 31. F. Picard, “Henry George and the Labor Split of 1891,” Historical Studies 6:45.
- 32. Osborne v. The Commonwealth, 12, Commonwealth Law Reports, p.321; G. Sawer, Australian Federal Politics and Law, 190] 1929, pp. 88,96, 110.
- 33. Land Taxation and Land Prices in Western Australia: The McCarry Report (1968).
- 34. Land Development Contribution Management Act, 1970 (N.S.W.).
- 35. Land Aggregation Tax Management Act, 1971 (N.S.W.).
- 36. Report of the Royal Commission on Crown Lands (1883) (N.S.W.); Reports of Select Committees (1878, 1 879—80) (Vie.); Report of Select Committee on Schemes for Assisting Land Settlement (1892) (Qld.); Report of the Royal Commission on Land Settlement (1897) (Qld.); Report on Disposal of Crown Land (1890) (South Australia).
- 37. Brennan, Canberra in Crisis, pp.19 20.
- 38. Ibid., p.20.
- 39. Ibid., p.35.