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The Pamphlet Collection of Sir Robert Stout: Volume 62

The Labour Party in New Zealand

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The Labour Party in New Zealand.

Lyon & Blair Wellington

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The Labour Party in New Zealand.*


We, in New Zealand, are in the habit of asserting that our political action of to-day will be imitated in Australia to-morrow and in Great Britain the day after. We can at least point to the appearance of "Labour Members" in the Parliament of New Zealand as the chief cause of the recent "labour triumphs" in New South Wales, Victoria, and South Australia; and the question of "labour representatives" is perhaps the most important of all the problems which the electors of Great Britain will have to consider at the General Election. This problem has come to the front in the Mother Country because the example of New Zealand has been copied in Australia. The success of Labour was, in each case, a surprise to all sections of the community; and it amounted to a peaceful political revolution. It would seem, then, to be appropriate to the time to consider: (1) The composition of the Labour Party in New Zealand; (2) Its achievements; and (3) Its aims.

I.—The four Maori members excluded from the calculation, there are seventy seats in the House of Representatives—the Lower House. At the General Election of December, 1890, immediately after the collapse of the great strike, thirty-four candidates obtained the open support of the Trades Unions; of these, twenty-one were elected and thirteen were defeated. The social position of the candidates varied from that of the rich and fashionable man whose education had been finished in England to that of a bootmaker earning his daily wage. The gentlemen, or educated men, number fifteen (there are four Labour Members in this group: Mr. Reeves, a member of the Cabinet; Mr. Perceval, the new Agent General; Mr. Rees, the Chairman of Committees; and Sir George Grey); the true labour class, that of the working mechanics, amounts to only five (two bootmakers, a tailor, a brassfounder, and a carpenter); the remaining fifty (among whom are twelve Labour members) have begun life in every conceivable position except that of the capitalist who can afford education—they have been, or still are, policemen, diggers, storekeepers, lawyers, journalists, shepherds, drovers, mechanics, shopkeepers, merchants, hawkers, blacksmiths and lamplighters. The term "Labour member" which is applied to four gentlemen, to five mechanics, and to twelve men whose antecedents put them on a par with the majority of the House, obviously refers—not to the social position of a member, but—to the character of the electoral support which has brought him to the front: it designates the nominee of Trades Unionism. Of the twenty-one successful Trades-Unionist nominees, only twelve were new to Parliament. The other nine had found their way to the House before the idea of intervening in political contests had occurred to the page 2 directors of trade organizations. Twelve were the children of Trades Unionism; nine, though supported by the Unions were not created by them; only five were peculiarly representative of the ordinary wage-earner. Thus the significance of the Trades Union successes is much modified.

At the same time, the Government can exist only so long as the Trades Union members are with them: if they lost the support of only half the Labour members, Ministers would have to resign. The result is that our Government (in the words of the Melbourne Argus) is "run by Unionist rings." At the recent bye-election for Wellington, the capital of the Colony, Ministers ventured to take up the cause of the candidate who had been one of the defeated Trades Union nominees at the General Election, without having first consulted the local unions. The Prime Minister, Mr. Ballance, had to expiate this undisciplined outburst by a public and humble apology to the Trades and Labour Council, before a great meeting of Wellington electors. He is now being kept well in hand. When the appointments to the Legislative Council (the Upper House) were in contemplation, the Federated Trades and Labour Council passed a resolution "That the Secretary be instructed to inform the Government that this Council claims the right of the Trade Unions to be consulted in regard to the selection and appointment of Labour representatives to the Legislative Council." Trades Unionism is so confident of its power that it makes no secret of its intention to govern the Colony.

There have not hitherto been any permanent party divisions in New Zealand, nor any political organizations, except the Trades Unions and the Knights of Labour. It is necessary for the safety of Cabinet Ministers that the two sections of their following, the Trades Unionists and the Land-Taxers, should be amalgamated into one party. No expedient for cementing the Union could be more efficacious than the adoption of a general name, nor could any name be more generally popular than the good old name of "Liberal." Trades Unionists were encouraged to come forward at the General Election as members of the "Liberal" Party; and one of the men who received Trade Union nomination, an educated newspaper editor, not new to Parliament, obtained a seat in the Cabinet. It is Mr. Reeves' task to induce Trades Unionists proper (those who are new to Parliament) to sink their Trades Unionism in "Liberalism." So far he has succeeded; and it seems that if, in spite of the strenuous endeavours of ministers to enforce party discipline, defections do arise, they will not come from that section of Government supporters.

The position taken by the Trades Unionists towards the other sections, or parties, in Parliament, is a matter of immense importance. In New South Wales—where, as in New Zealand, the Trades Unionists hold the balance of power—they have cried "A plague o' both your houses," and yet have become split up into two distinct sections of the two great parties. The cause of this collapse is instructive. The collapse has been due to the jealousies which always become accentuated in a party which has no accredited leader, and to the inability of the party to hold together on the fiscal issue, which is the cause of a defined party division in New South Wales. If they were united, and well led, they would turn out Free-traders and Protectionists in turn, and so obtain control over Parliament. They are ruining their influence by allowing their forces to separate and become merged in the two party streams.

The attitude to be assumed in Great Britain by the two old parties on the one hand and the Labour party on the other is clearly marked out by Australasian experience. The Liberals and the Conservatives must each endeavour to get Labour candidates to come forward as Liberals or as Conservatives. On the other hand, the Labour candidates should stand page 3 aloof from both parties: should get into Parliament by refusing to "accept the ticket" of either side, and thus split the votes, for in such case there would necessarily be three candidates: and then they would be able to compel one of the two parties, in Parliament, to accede to their demands. If after establishing a distinct party in Parliament they still fail, it will be due to the unwillingness of a body of Parliamentary novices to appoint a leader, and then to follow that leader loyally. In New Zealand the party has a leader with a seat in the Cabinet; it seems to be the staunchest section of the Government's supporters; and, as a reward, it rules the Government and the country.

II.—The great achievement of these Trade Unionist Parliamentary novices has been in the twist they have given to our direct taxation.

The property tax, a tax on all property, real or personal, producing income or profitless, was condemned at the General Election. An "ordinary" tax on land values, a graduated tax on land values, and an income tax have been substituted. From the ordinary tax owners of bare land worth not more than £2,500 may make certain deductions not exceeding £500; also, unexhausted improvements to the value of £3,000, and all registered mortgages, may be deducted. The graduated tax falls on estates the bare land of which exceeds £5,000 in value after the value of all unexhausted improvements has been deducted; but mortgages may not be deducted for the purposes of this tax. The rate of the ordinary tax will be determined every year, varying according to the state of the public treasury: this year it will probably be one penny in the pound. The rate of the graduated tax is fixed: estates liable to the tax in respect of from £5,000 to £10,000 worth of bare land are to pay one-eighth of a penny, the rate rising by eighths of a penny until the highest rate 1¾d., which is payable on an estate of over £200,000 of taxable land value, is reached. A common error of both Australian and British commentators is to forget that farm stock is entirely exempt from taxation.

The income tax is not payable on incomes derived from land, or from the use or the produce of land, or from mortgages on land; except in the case of public companies, all incomes of £300 a year are exempt, while £300 may be deducted from any income above that sum, the tax being payable on the remainder only. Incomes derived from shares in companies also are exempt, the company paying the tax. The rate is not yet fixed; but probably sixpence in the pound will be levied on incomes derived from a business in which capital is employed up to incomes of £1,000 a year, and a shilling on larger incomes, while a lesser rate will be exacted from incomes which are derived from salaries or professions. On his death, it is argued, the merchant leaves his business, with the capital employed in it, as a valuable asset to his son or widow, whereas the income of the clerk dies with him.

The bulk of the farming class will pay a little less than they did under the property tax; clerks and professional men will pay some income tax where they paid nothing before; and the large landed estates will be very severely punished. Take the case of an estate worth for bare land, £300,000 (with improvements to the value of £50,000), and live stock worth £50,000, with a mortgage on it of £200,000 at 6 per cent. Under the property tax that estate would pay on £400,000 less the mortgage of £200,000, or a penny on £200,000, which is £833 6s. 8d. In future it will be liable to ordinary land tax on £350,000, less £3,000 for improvements; that is, £347,000, less £200,000 for the mortgage=£147,000, which amounts, at a penny, to £612 10s. On account of graduated tax it will pay on £300,000 (farm stock and all improvements exempt, but not the page 4 mortgage) at or £2,187 10s.; making a total, under the new system, of £2,800, as against the £833 6s. 8d. demanded by the property tax—three and a half times as much. Now, a large estate of this kind will probably not return an income of more than £5 per cent, on its value of £400,000, or £20,000 a year; of this the mortgage of £200,000 at 6 per cent, absorbs £12,000 a year, leaving the owner £8,000 a year, out of which £2,800, or more than one third, goes in land tax. This is equivalent to an income tax of seven shillings in the pound. If the owner has been absent from the colony for three years he pays 20 per cent, more graduated tax. Such an absentee would pay—
  • £612 10s. ordinary tax.
  • £2,187 10s. graduated tax.
  • £437 10s. absentee tax.

£8,237 10s. altogether, which is equivalent to an income tax of eight shillings in the pound.

A company escapes absentee tax; but a land company issuing debentures in Great Britain is hit in another way. Suppose that the estate last spoken of was owned by a company, and that instead of a mortgage of £200,000 the company had issued debentures to that amount at 4½ per cent., the remaining £200,000 being subscribed by shareholders. The company would pay:—
£ s. d.
Ordinary tax on £847,000 at 1d. 1,445 16 8
Graduated tax on £300,000 at 1¾d. 2,187 10 0
Income tax on interest of the debentures at 1s. in the pound. 450 0 0
4,082 6 8

which, again, is equivalent to an income tax of eight shillings in the pound.

The Act, which puts an income-tax upon the interest a company pays upon its debentures, declares that such company "shall be entitled to deduct in each year from any instalment of interest payable by it upon the amount of such debentures so paid, whether coupons for such interest have been issued with such debentures or not." It is absurd to suppose that any company would be so foolish as to attempt to act upon the suggestion that it should repudiate part of the interest it has contracted to pay to British debenture-holders; it is equally absurd to suppose that the law courts would, if appealed to, allow such a repudiation. Where an Act containing provisions of such a character has passed by a large majority in Parliament, it is not surprising to find that a prominent member of that Parliament who has since been appointed to the position of Chairman of Committees, should have suggested that the Government should deduct income tax from the interest payable to holders of New Zealand inscribed stock. Knowing now what our Government is capable of doing, we reflect with pleasure that no countenance was given to Mr. W. L. Rees's proposal, even although it was backed up by Sir George Grey. New Zealanders must always be thankful that the Government had not the pluck themselves to carry out a policy which they pretend to think a public company may properly adopt.

Special provisions are made in the case of banks, loan companies, building societies, and life insurance companies; but these provisions, while difficult to understand, do not appear to be guided by any ascertainable general principle. Even in New Zealand probably no Act of Parliament has been so obscure, anomalous and incomprehensible as this one. In reply to inquiries, the Taxation Department have declared that they claim from a loan company (1) a penny in the pound on registered mortgages on land, (2) income tax of one shilling in the pound on debentures, (3) income tax of one shilling page 5 in the pound on net profits. This is triplicate taxation. The Prime Minister was called upon by a Government supporter to deny that the Act is properly construed by Government officials. All he could say was, "There is some doubt as to the meaning of the foreign debenture holders' clause." Of course much doubt was expressed, when the Bill was in Committee, both in Parliament and in the Press; but an uneducated majority pays little heed to criticism which comes from a hostile source; the sounder the criticism, the more convinced are men of little mental capacity that its apparent justice is due to the cleverness of political tricksters. Thus has an Act been passed which is so unintelligible that Government supporters, and the Ministry themselves, have learned to defend it by pointing to its obscurity.

All criticism is harmless, they say, because no human being can understand the Act. The Prime Minister himself does not conceal his ignorance of its meaning. It is a product of the wisdom of the people, and must therefore have virtues, howsoever mysterious, which it would be impertinent to pry into. It is some consolation to know that an amending Act will certainly be introduced next Session, and that no taxes will be collected under the new system until after that Session.

The spirit and intention of the Act are, however, clear enough. It is an attack upon the large estates. "I think those large estates," Mr. Reeves has said in Parliament, "are represented by those who ought to be the very last class which should dare call upon the State for consideration. I think these estates, whether partly or almost entirely unimproved, are a social pest, an industrial obstacle, and a bar to progress. I say the Party we represent do not want large estates, and this graduated tax is a finger of warning held up to remind them that the colony does not want these large estates. This graduated tax is not so large a thing in itself; but it is the assertion of a great principle. Those large estates are not wanted. . . . I positively stand aghast at our moderation in dealing with this matter now." Mr. John Mackenzie, Minister of Lands, speaking of the estate of one of the four Members of Parliament who will be touched by the graduated tax, said:—"It is at the present moment past the power of the people of the Colony to get that land for settlement; but it remains with this House—with our Colonists—to have it back again, and then perhaps the estate of the Honourable Member for Wairarapa may be seized upon to settle people upon it." Other times, other manners. When these estates were sold by the Government of the day, the purchasers were looked upon as benefactors of the community, whose ready cash was the mainstay of the public finances. Now they are "social pests" of so abhorrent a character that they must be considered, with criminals, to form a class who "dare not" expect any consideration from the State: a class subjected to a sudden and unexpected pounce upon one third (or even more) of their incomes. They are so intolerable that it is quite decent and proper that a Cabinet Minister should openly exult in Parliament over the prospect of "seizing" the estate of a political opponent. At the present time the Governments of Queensland and Western Australia are endeavouring to obtain purchasers for large tracts of land at cheap rates. Why is this land being offered so cheap? Because the life of the purchaser must be an unenviable one. He has to convert a wilderness, or a forest, into a cultivated district; he has to live in solitude and discomfort, out of the reach of friends, or society, or medical attendance; he has to face the hostility of savages, to put up with unwholesome food, to get on as he may without roads or bridges or convenient access to his property. The solitude of such a life has alone been sufficient to produce insanity. If his ability, industry, and self-denial, extending over a period of twenty or thirty years, ultimately bring their reward, the page 6 end of it all will probably be that, as in New Zealand, the Legislature will declare him to be a social pest who has done an injury to his fellow-men, and will confiscate from him, in his old age, the fruits of his exertions. Men who volunteer for a forlorn hope, and survive, have hitherto been praised for their efforts. In future they are to be treated as social pariahs, who must not expect the consideration which is meted out to other citizens. When this is once understood—when the vindictive spirit which animates the failures in life towards the successful has been thoroughly realised—Governments may advertise their inaccessible lands for sale; but even the most enterprising man will prefer to remain in a town, lending his money, in ease and comfort, at high rates of interest.

Any stick is good enough to beat a dog with. It is argued, on behalf of the Government policy of bursting up the large estates, that these estates have become valuable owing to Government expenditure on public works. But the small estates have benefited from loan expenditure much more than the large ones. If a graduated tax were levied on all the lands of the colony in proportion to the benefit they had received from public expenditure, nearly the whole of the tax would come from the small estates. One would suppose, from the vicious severity of the attack on the large estates, that the bulk of the lands of the colony were held in large areas for speculative purposes, and that the demand for land for settlement far exceeds the supply.

The facts are all on the other side. There is no country in the world where the proportion of freeholders to the adult male population is so great as it is in New Zealand; in this colony, the land is divided among more owners than land is anywhere else. Then it would be very foolish to hold a large area of land for speculative purposes. It is a losing game to wait for the unearned increment. Suppose that instead of putting £10,000 into an inaccessible forest one of the pioneers who are now being publicly whipped had lent that sum on mortgage. He would have an average interest of 10 per cent, over a period of thirty years, and at the end of that time his £10,000 would have increased to £80,000. A speculator must be very wild who imagines that he can make certain of a larger rise in value of land than an increase eightfold in thirty years. With regard to the supposed difficulty in getting land: The Government alone has 3,000,000 acres of fair or good land to dispose of, besides which there is always a very large amount of land on offer for sale by private owners. The Maoris, too, hold about 8,000,000 acres which are not yet settled upon. These considerations, however, have little weight with a body of men who show by their speeches that they are actuated primarily by hatred of success, and not at all by concern for the public welfare.

III.—Before we turn to consider the aims of the Labour Party, the exceptional position of labour in New Zealand should be noted. The eight-hours principle is universally recognized here, though not by Act of Parliament. Unskilled labour of the humblest kind earns 5s. to 6s. in the eight hours; a commoner rate is 8s.—a shilling an hour. Skilled labour gets much more, of course. A good shearer will earn £1 a day, and even more. Mutton costs 2½d. to 3d. a pound retail; beef, 4d. to 6d.; bread, 3d. the half quartern loaf. The climate is healthy and sunny; few days' work are lost by sickness, and a very little money suffices for fuel. House rent and clothes are on much the same scale as in Great Britain. The aggregate result is that poverty as understood in the Mother Country is unknown here. If a healthy man is poverty-stricken the fault is—not with the labour market but—with the man. Politically labour is equally favoured. Every male adult has a vote, and no man has two votes. Parliaments are triennial. Education is free. The direct taxes do not touch labour. Most page 7 Members of Parliament are sprung from different sections of the labour class, and Labour has long been the unquestioned master of Parliament. There is much ground for the assertion that labour is, in New Zealand, both materially and politically, in a better position than it is in any other country in the world.

Where labour is so splendidly placed, and many outlets for capital are closed by the high rate of wages, the Labour Party have set themselves to invoke State interference in favour of the poorer against the richer class. They have found that a strike of Labour against Capital is serious for the winners and disastrous for the losers. For the moment, depressed by the failure of their great strike, and still suffering from its effects, they can appreciate the mutual dependence of Labour and Capital in matters of trade. But experience has not yet taught them that political action which staggers Capital must have much the same effect that a trade dispute has.

Their ideals are State-Socialism, and Communism. To achieve their aims they are struggling to capture the State machinery, to increase its power, and to use it against Capital. The large employers of labour are to be either bought out by the State or taxed out of existence. The land is to be nationalized. Coal mines are to be State property. The fleet of the Union Steam-ship Company of New Zealand is to be taken over by the State. The Railway Commissioners are not to be reappointed when their five years of office have expired; but the management of the railways is then to be once more under State control. The people are educated, free, by the State; in future, when they are educated, the State is to provide employment. The Government have established "labour bureaus," whose function is to obtain, or to create, work for the unemployed; they have recognised it as their duty to provide relief works, if others fail. Of course, such a policy defeats its aim. It attracts casuals from the other colonies, and thus increases the congestion of the labour market. But the principle is accepted. Capital is to be taxed in order that loafers without limit may be employed by the State on unnecessary relief works. The next step is inevitable. Labour is already demanding a return to the glorious old era of big loans and large public-works expenditure. How long the demand can be resisted it would be rash to predict.

Trades-Unionism, being Protectionist in spirit, is opposed to all modes of free competition. Free trade is detested by Trades Unionists. Free labour is their natural enemy. The State is to abolish private competition by controlling all the avenues of trade and production.

From State-Socialism to Communism the grade is easy. State-Socialism attacks the right of an individual to the free use of his capacities. Communism is levelled at the right of an individual to the ownership of that which is the result of the free use of his capacities—property. The direction which has been given to the labour bureaus is a move towards State-Socialism; the graduated tax is a move towards Communism. According to Mr. Ballance, the graduated tax is but "the thin end of the wedge." In the words of Mr. Beeves, it is "not so large a thing in itself," but "the assertion of a groat principle." It was long ago observed by De Tocqueville that in a democracy equality is preferred to liberty. That preference is the "great principle" which underlies the confiscatory legislation directed against the large landed estates. The punitive taxation about to be imposed is justified by the transparently absurd plea that large landed estates form the only kind of property which has risen in value by unearned increment. This is the outer excuse; the inner cause is the desire of those who have not for the wealth of those who have—a desire much stronger than any hankering after liberty. Universal suffrage was at one time considered a charter for liberty. But a vote is now esteemed of little advantage to a man page 8 unless, by its use, he can lift himself into a position of material equality with other men. The poor, therefore, will always vote against the rich; they will always prefer tyranny and prosperity to liberty and poverty. The result of the recent bye-election for Wellington was described by the successful labour candidate as a triumph of "workers" over "black coats and stovepipe hats." We are all workers in New Zealand—there is no idle class here. But the election was indeed a mere class fight—a struggle between the poorer and the less poor. What matter to the victors that they were restricting their own freedom by invoking legislative interference with the two modes of liberty—liberty of action and liberty of ownership? Their interests lay in higher wages and less work. They voted for the plausible demagogues who promised these things.

In other lands we see a similar trend of public feeling. Some of the Australian colonies have begun to follow the example of New Zealand in discarding liberty and assailing property. The Mother Country, meanwhile, watches the experiments of her venturesome children with an interest which is an indication of the attractiveness of the new departure. Perhaps we are justified in declaring that we shall not have long to wait for the sincerest form of flattery.

Gentlemen, I remain,

Yours faithfully,

Norwood Young.

Wellington, New Zealand, .

Lyon & Blair, Printers, Wellington.

* With the exception of the heading this article is reproduced verbatim from "The National Review," where it originally appeared under the heading "What the Labour Party may achieve."