The objections to municipal enterprise on a Socialist basis are twofold:
(1) That it increases the rates and the municipal debt, and therefore the rent of houses and lodgings;
(2) That it is, on the whole, unprofitable, being undertaken without due regard to sound finance, efficiency, and economy.
Socialists intend to "tax the rich out of existence." Therefore they endeavour to increase as much as possible not only the Imperial taxation but also the rates. Owners of house property are used to a certain income. If the rates are put up, they put up the rent. Therefore every increase in the rates leads, as a rule, automatically to an equivalent increase in the rent. The fact that a rise in the rates leads to a rise in the rent of houses and lodgings, and that the Socialist policy of waste and squander falls therefore most heavily not on the capitalist but on the working man, is boldly denied. "Generally speaking, the reduction of rates is of no benefit whatever to the working class. Rates are levied upon property.—Q. Do not the working class pay the rates and taxes? A. No. Rates and taxes are paid out of the surplus value taken from the workers by their exploiters. As already explained, the return to the workers, their wages, is determined by their cost of subsistence, regulated by competition in the labour market; consequently they have nothing wherewith to pay taxes, and whether these be high or low, or whoever has to pay them directly, the position of the worker remains the same. He gets, on the average, his subsistence, that is all."[677]
Unfortunately, many working men know to their cost that the arguments given above are absolutely untrue. Whilst their wages have remained stationary, their expenditure for rent has greatly increased owing to municipal enterprise carried on by Socialists regardless of expense, which has greatly increased rates. At West Ham "Local government was to be carried on in a way regardless of expense, and under the compounding system the vast majority of the electors were not to realise that there were such things as rates at all. One member of the Socialist party publicly declared that it did not matter to the working men of the borough how high the rates were. But the 'people' got to see in course of time that there were drawbacks, even for them, in unrestricted Socialism. They found that, because of the increased rates, house rents were going up twelve and a half to twenty per cent., notwithstanding the threats of the Socialists that every landlord who raised his rents should have his assessments increased."[678]
Owing to municipal enterprise directed by Socialists, "The sum-total of the rates, which stood at 6s. in the pound in 1890 and at 8s. 1d. in 1896, rose to 8s. 10-1/2d. in the pound in 1900 and 9s. 5-1/2d. in the pound in 1901. From that figure it advanced to 9s. 8d. in the pound,"[679] and to 10s. 8d. a little later. It is an impudent misstatement of fact when Socialist leaders tell the workers, "We are not killed by rates, we are killed by rent."[680] "The whole of our municipal expenditure is only a paltry 110 millions a year. What do we pay in rent? Two hundred and seventy-five millions!"[681] After all, people in other countries, where the blessings of Socialist local government are unknown, and where poverty is much rarer than in Great Britain, also pay rent. On an average the rates are 150 per cent. higher in Great Britain than in Germany.[682]
Whilst the national Government endeavours to diminish the dead weight and the heavy yearly charge of national indebtedness, Socialist local authorities vie with each other in piling up local indebtedness as fast as possible with a reckless disregard of the future. The increase of the municipal debt, the increase of local taxation, like the increase of national taxation, has no terrors for Socialists. On the contrary, "Municipal debt is not a burden. It is a splendid investment. We 'owe' 370 millions. Do we 'own' nothing? The municipalities own all the roads, drains, sewers, public buildings, parks, libraries, a thousand waterworks, two hundred and sixty gasworks, three hundred and thirty-four electricity undertakings, one hundred and sixty-two tramways, two or three hundred markets, a hundred and fifty cemeteries, forty-three harbours, piers, and docks, numerous baths, washhouses, and working-class dwellings, thousands of schools, and thousands of acres of land."[683] Since these words were written local indebtedness has increased. "We owe" now 470 millions.
Unfortunately, many of the splendid assets enumerated possess no realisable value whatever, and many municipal enterprises are run without an adequate profit or with a loss.
The Socialist views and aims regarding local indebtedness are well summed up as follows by Suthers: "The 'municipal debt' argument is a bogey. The greater the municipal debt, the less private enterprise there will be. The greater the municipal debt, the cheaper and better the public services will be. The less private capital, the less profits going into a few pockets, the richer the general public will be. Up, then, with municipal debt."[684] These are principles which threaten to make Great Britain bankrupt. "The annual report of the work of the Local Government Board for 1907 shows that the local debt of England and Wales, from being 17 per cent. of the National Debt in 1879-80, has grown to 58.5 per cent. of the National Debt in 1904-5. The National and Local debts have grown as follows:
| 1879-80 | 1904-5 | Increase | |
| National Debt | £770,604,774 | £796,736,491 | £26,131,717 |
| Local Debt | 136,934,070 | 466,459,269 | 329,525,199"[685] |