Hypothecation

Hypothecation has also been used recently to name a system by which part of tax revenue is allocated beforehand to certain spending purposes, with which it has some link.

For example, in the UK all increases in motor fuel tax beyond the overall increase in the retail price index (RPI) are reserved to the improvement of roads and public transport. Similarly, rises in excise duty on tobacco above the RPI are allocated to the health budget.

A more radical form of hypothecation has been proposed by the Liberal Democrats among others, in which taxpayers can declare a part of their tax to go to their choice of government functions. Obviously there has to be a limit to this (the LDs are suggesting 1% or so) or too many people would opt out of defence entirely in favour of popular causes like health, social security, and environment: though it might be interesting to see what changes happened if it was tried for a year or two. I am reminded me of the old slogan wishing for the day when the army had to hold fêtes and raffles to buy their missiles.

Hy*poth`e*ca"tion (?), n. [LL. hypothecatio.]

1. Civ.Law

The act or contract by which property is hypothecated; a right which a creditor has in or to the property of his debtor, in virtue of which he may cause it to be sold and the price appropriated in payment of his debt. This is a right in the thing, or jus in re.

Pothier. B. R. Curtis.

There are but few cases, if any, in our law, where an hypothecation, in the strict sense of the Roman law, exists; that is a pledge without possession by the pledgee. Story.

⇒ In the modern civil law, this contract has no application to movable property, not even to ships, to which and their cargoes it is most frequently applied in England and America. See Hypothecate.

B. R. Curtis. Domat.

2. Lawof Shipping

A contract whereby, in consideration of money advanced for the necessities of the ship, the vessel, freight, or cargo is made liable for its repayment, provided the ship arrives in safety. It is usually effected by a bottomry bond. See Bottomry.

⇒ This term is often applied to mortgages of ships.

 

© Webster 1913.