| PUBLIC-HOUSE TRUST COMPANIES
AMONG the Public-House Trust proposals which are before
the country none have claimed so much attention as those
which are associated with the name of Earl Grey. In a letter
dated September 6th, 1900, addressed to the licensing magistrates
in the various Petty Sessional Divisions of Northumberland,
Earl Grey thus describes the circumstance which forced on
his attention the need of a drastic change in the present
method of allotting licences : " Last year, it having
been represented to me that it would be a convenience to
the people of Broomhill if an additional public-house could
be provided, I applied to the licensing authorities, in
my capacity as chief landowner in the district, for the
necessary licence. The magistrates, having decided that
the requirements of the population called for an additional
public-house, granted me the licence. I immediately discovered
that the State, in conferring upon me a monopoly licence,
had also granted me a commercial asset of enormous value.
I was informed that if I would consent to sell my licence
I could, without spending a single sixpence, obtain nearly
£10,000. (In an interview at a later date with
a representative of the London Argus (March 22nd, 1901),
Lord Grey said : " Up till that time I had not thought
out the question, but seeing that by merely obtaining this
licence a sum of, say, £10,000 had been put into my
pocket, it struck me that such a state of affairs was not
in the public interest. . . . There are hundreds of such
cases which I could mention." )
Now, it appears to me that large monopoly values arising
out of the possession of a public licence conferred upon
a private individual by the State ought to belong, not to
any private individual, but to the community. I am, accordingly,
making arrangements by which the surplus profits, after
a dividend of 10 per cent, has been paid per annum (5 per
cent, for interest, and 5 per cent, for redemption of capital),
shall be expended by the trustees, to be appointed, in such
a manner as they may direct, for the benefit of the inhabitants
of Broomhill."
He further asks that the licensing authorities, when they
have decided to create new licences, shall give the refusal
of them to applicants who will undertake to run them on
Scandinavian principles, not for private profit, but in
the interest of the community affected. At first it was
intended that such licences should be worked by the People's
Refreshment-House Association, of which the Bishop of Chester
is the chairman; but in a letter to The Times, dated December
12th, 1900, Earl Grey announced that: " It is intended
to give practical effect to the plan of temperance reform
outlined by the Bishop of Chester in his letter which appeared
in the press of December 3rd, by the. incorporation of Public-house
Trust Companies for London and the provinces."
OBJECTS OF THE PUBLIC-HOUSE TRUST
In this letter the object of the Companies is thus defined
: " The object of these Companies will be to acquire
every new licence which the Licensing Authorities may think
it desirable to create, and to apply to the public-houses
so acquired, and to existing public-houses whenever possible,
a principle of administration which will secure that they
shall be managed as a trust in the interests of the community,
and not for private profit. The two chief objections to
the present system, which allows licensed public-houses
to be conducted for private profit, are :
" 1. There is no security that the best liquor that
can be bought in the open market is supplied to the consumer.
" 2. It is the interest of the publican to push the
sale of intoxicants.
" The principle of management to be adopted by the
Public-House Trust Companies will remove both these evils.
In the houses managed by the Companies:
" 1. Only the best drink that can be obtained in the
open market will be sold.
" 2. It will not be the interest of the manager to
push the sale of intoxicants; he will receive no commission
on the sale of alcoholic liquors, but will be paid a fixed
salary with commission on the sale of food and non-intoxicants,
or a bonus on good management.
"3. The public-houses will be refreshment houses,
and not merely drinking bars. Food and non-intoxicants will
be supplied as readily as intoxicants and during the same
hours.
"4. The surplus profits, after allowing a sufficient
sum for reserve and interest not exceeding 5 per cent, on
invested capital, will be administered by carefully selected
trustees for the benefit of the community."
In a subsequent letter dated January 16th, 1901, the position
taken by the Public-House Trust Association is still further
explained:
" In the first place, let me state that our proposal
does not attack the licensees of public-houses. We do not
ask the licensing authorities to alter their practice with
regard to the renewal of licences. We do not propose to
expropriate existing interests without paying adequate compensation.
We do not ask the Legislature to come to our assistance.
We are content to make the best use of the opportunities
which the law allows us.
" But while we do not attack private interests, we
propose to endeavour to place a limit on their growth. It
is stated by Messrs. Rowntree & Sherwell that the net
profits of public-houses and beer-shops in the United Kingdom
for 1899 were £19,400,000. These figures have not
been challenged, and are believed to be under the mark.
It is undesirable, for many reasons, that this huge liquor
interest should be allowed to grow indefinitely, and we
suggest means which, without robbing or injuring any one,
will provide that new public-houses created to meet the
requirements of new communities shall be brought under the
control of trustees who have at heart the well-being of
the community. We further propose to purchase licences in
the open market, whenever we think such purchase is in the
interests of our Company, and consequently of the community
which it will represent. The scope of our endeavours in
this direction will necessarily be dependent on the financial
support we may receive."
POSSIBILITIES OF THE SYSTEM
Such, then, are the objects and method of the Public-House
Trust Company as explained by its promoters. In view of
the probable wide extension of these companies, it is a
matter of much interest to inquire what are the possibilities
of the experiment, and whether it is likely to accomplish
valuable temperance results. It will have been noticed that
Earl Grey says : " We do not ask the Legislature to
come to our assistance. We are content to make the best
use of the opportunities which the law allows us."
If, then, it should be found that the present law affords
opportunities for action upon a scale sufficiently wide
to secure important national results, full justification
will have been given to Lord Grey's proposals. If, on the
other hand, it should be found that the sphere within which
a Trust Company can advantageously work is, under existing
conditions, narrow, a powerful argument will have been furnished
for a large measure of legislative temperance reform.
The crucial question which at once presents itself is:
In what way can the Trust Company secure licences? The number
of " on " licensed houses in Great Britain is
a diminishing quantity, (Comparing the returns for 1896
with those for 1886, we find that 56 boroughs and 82 Petty
Sessional Divisions show a decrease in the number of "
on" licences during the ten years. One of the most
noteworthy reductions has taken place in London, where (taking
the whole of the licensing divisions) 613 "on"
licences disappeared between 1886 and 1896. ) and in
settled districts the full number of licences likely to
be granted has already been allotted. The following are
the principal ways in which licences may be obtained:
(a) A few patriotic owners of licences may follow the example
of Earl Grey and transfer them to the Trust.
(6) In newly settled districts the Trust may acquire new
licences which the magistrates may deem it necessary to
grant.
(c) The Trust may arrange to take public-houses from town
or county councils who have acquired them for improvements.
(d) The Trust may purchase licences in the open market
or obtain them on lease.
The number of licences which the Trust will obtain under
method (a) will be small. Its main acquisition of licences
will no doubt be in newly settled districts as suggested
in (b). But even if the number so obtained were more considerable
than appears likely, the relation they would bear to the
existing licences of the country must be insignificant.
The national problem to be solved would remain practically
unaffected. In regard to method (c) it is doubtful whether
many licences will be obtained from town or county councils.
If these bodies, having acquired licensed premises through
improvement schemes, etc., decide to carry them on under
public management, they may, as in the recent case of the
Sheffield Corporation, transfer them to a Trust Company
subject to certain specific conditions. But the number of
such licences must in any case be relatively small. Referring
to method (d), no doubt plenty of licenes can be bought
at a price. But the price offered to the existing holder
must be one which will make it better worth his while to
sell than to hold. Such prices will generally be inflated
Tied houses owned by brewers and distillers in order that
they may have a secure outlet for their manufactures, now
constitute probably 75 per cent.(Practical Licencing
Reform, by the Hon. Sidney Peel, p. 22. ) of the "
on" licensed houses of the country. With few exceptions
these houses will only be obtainable at prices which no
prudent Trust Company would pay. If, then, licences are
to be purchased in the open market in such numbers as sensibly
to affect the conditions under which the retail drink traffic
of the country is conducted, the financial transactions
will have to be not only upon an enormous scale, (In
1897, according to the estimate of Mr. E. N. Buxton, a partner
in one of the largest brewery firms in the country, the
aggregate value of the licensed houses in London (including
fully licensed houses, beer-houses, " on " and
" off," and refreshment-houses, but excluding
the large hotels) was, at a low estimate, £60,000,000—a
sum which, divided among the whole of thu public-houses,
beer-shops (" on " and " off "), and
refreshment-houses in the Metropolitan Police area, gives
an average value of between £5,000 and £6,000
per house. The average value of a fully licensed house in
the metropolis (excluding the large hotels) is, of course,
very much higher than this, and amounts, according to Mr.
Buxton, to between £10,000 and £11,000.)
but upon a basis of inflated prices. (The recent experience
of Messrs. Samuel Allsopp & Co., Limited is a striking
warning in this connection.) Public-house profits, especially
in the urban centres, are no doubt very great, and a 5 per
cent, interest would undoubtedly be obtained upon the capital
expended on such urban premises, bought even at an extravagant
price. There is, however, a widespread and growing consensus
of opinion that the ground must be cleared for large reforms
by the enactment of a national time-notice to every licensee.
Prudence would therefore suggest that in the case of every
licence acquired by purchase, a sum far in excess of the
5 per cent, proposed by Earl Grey must each year be set
aside as a redemption fund to secure the Company against
loss when the years of notice have expired.
Looking at these various methods for the acquisition of
licences from the temperance standpoint, no objection can
be taken to method (a). With regard to (b) no application
should be made if in opposition to the wishes of the inhabitants
of the district. And, further, as magistrates do not announce
beforehand that they intend to grant a licence, the Trust
Company will have to exercise care that it does not, by
its application, cause a licence to be granted that would
otherwise have been withheld. To safeguard this point the
Glasgow Trust Company in making an application said : "
We do not press for this licence, but we ask you not to
give it to anyone else." The Glasgow Trust Company
also specifically state that the directors will " be
prepared to surrender the licence at any time if authoritatively
required, without a suggestion of compensation."
With regard to (c)—i.e. the renting to Trust Companies
on special conditions of public-houses which town or county
councils have decided to continue under public management—much
may be said for such a policy.
(The dilemma in which temperance reformers are placed
under the present licensing system is strikingly shown in
the experience of the London County Council. Up to the present
time the Council has abandoned ninety-four licences of premises
acquired for various street improvement and other schemes,
the approximate premium value of such licences having been
estimated at £254,000 in all (Municipal Journal, July
26th, 1901). It cannot be contended that the value of these
licences has been annihilated. Probably the greater part
of it has been transferred to the pockets of neighbouring
publicans.
Lord Grey, in a letter to the Chairman of the Improvements
Committee of the London County Council, dated January 17th,
1901, said : "We are prepared to undertake the management
of as many public-houses as the Council may decide to transfer
to us on the following terms : That the rent paid by us
to the Council shall be a fair commercial rent, without
the element of the licence being taken into consideration
; and in return for this concession we -will agree to spend
the surplus profits realised by the public-houses so transferred
to us, after 5 per cent, has been paid on the capital invested
in them by our Company,and an equivalent amount credited
to the reserve fund, in such a way as the Council may approve,
either (1) for the provision of counter-attractions to the
public-house and objects of public utility not properly
chargeable to the rates, or (2) for the purchase of licences,
or (3) if the Council should so insist, for the repayment
of the sum expended by them for the purchase of the licences
transferred to our Company." This offer has manifestly
much to recommend it, but apparently the members of the
Council feel that the number of licensed houses in London
is already excessive, and are unwilling to continue those
that come into their hands oven if the cost of the policy
of abandonment is great and actually adds to the value of
the neighbouring houses that remain. Surely this is a striking
illustration of the need for a large measure of temperance
reform, so that those who are responsible for the government
of London and other cities shall no longer be placed in
a position in which a reduction of licences can only be
made at the cost of the ratepayers, though the transaction
confers a gift upon existing private licensees.)
But the case is different with regard to (d)—i.e.
the purchase of licences. It will, we believe, be impossible
for the money of the Trust to be largely expended in the
purchase of licences without the Trust acquiring a great
stake in the drink trade and a dangerous interest in the
maintenance of the present licensing system. The shareholders
will feel that their 5 per cent, interest, and, indeed,
their share capital, are imperilled under the operation
of a time-notice such as Lord Peel has proposed.(The
special and grave objections that attach to the purchase
of licensed premises do not, of course, apply to the renting
of such premises at " a fair commercial rent, without
the element of the licence being taken into consideration,"
as proposed by Earl CJroy in his letter to the London County
Council. )
Under the Norwegian system there is no danger that the
interest of a man as a Samlag shareholder shall conflict
with his interest as a citizen. The explanation of this
is plain. The controlling companies generally rent their
premises (which have no value as licensed houses beyond
that of ordinary commercial premises), and consequently
their capital is exceedingly small. The total paid-up capital
of the fifty-one Norwegian companies in 1892—the year
when the Company System in that country reached its maximum—was
only £33,000. But in the same year the net profits
of the Norwegian Samlags were no less than £88,000,
after paying the £23,700 due to the municipalities
for licence rights. The average profits of four and a half
months would therefore equal the entire capital. A Norwegian
company with its small capital is thus able easily to create
a reserve fund sufficient to pay the shareholders in full
should the Samlag be abolished by a popular vote. The point
to emphasise is that neither the small capital, nor the
high rate of profit, nor the ample reserve funds of the
Norwegian companies would be possible if they paid vast
sums for their licences. It is a matter of history that
in Norway the Company System, so far from setting up opposing
interests, has facilitated temperance reforms. In the proposals
which the present writers have made elsewhere for the formation
of companies in this country, the safeguards suggested are
even more complete than those existing in Norway.
THE
HAMPSHIRE PUBLIC-HOUSE TRUST COMPANY, LIMITED
(It should be noted that the various local public-house
trust companies, although all of them the outcome of Lord
Grey's proposals, are in administration and finance absolutely
independent of each other, each having its own Articles
of Association. In a printed circular dated March 30th,
1901, Lord Grey said: " Local companies, when formed,
will be invited to affiliate themselves to this Association,
and to send a delegate to the meetings which will be convened
from time to time for the purpose of discussing matters
of common interest, and of organising, when desirable, combined
action. Such an Association will, it is hoped, be able to
obtain and give expert advice on all technical and legal
matters connected with the acquisition and management of
Trust houses, and upon all other matters affecting the welfare
and success of the movement.")
An examination of the Articles of Association of the Hampshire
Public-House Trust Company, Limited (" the other companies
will in each case be completed on these lines " - Letter
from the Secretary of the Central Association, dated July
5th, 1901), deepens the conviction that the dangers
in the Trust enterprise will be found to gather round the
proposals for the purchase of licences. Earl Grey and his
colleagues, weary of the delay in securing legislation,
naturally wish to effect the largest possible amount of
present good, and they perceive that if their efforts are
to be limited to the acquisition of licences " which
the licensing authorities may think it desirable to create,"
their efforts will be confined within narrow limits. There
would be an ample field for all these efforts if the ground
were once cleared by legislation, but until then the difficulties
of wise Company action upon an extensive scale are very
great. An illustration of this is afforded by Clause 50,
under the head " Borrowing Powers," which provides
that—" The directors may raise or borrow money
for the purposes of the Company's business, and may secure
the repayment of the same by mortgage or charge upon the
whole or any part of the assets and property of the Company
(present or future), including its uncalled or unissued
capital, and may issue bonds, debentures, or debenture stock,
either charged upon the whole or any part of the assets
and property of the Company or not so charged."
A clause of this kind is often found in the Articles of
Association of Limited Companies, and may have been inserted
as a common form clause, but it is one not likely to lie
dormant if many licences are bought. The demand for capital,
if this policy were adopted, would be great; and to meet
the absorption of capital, recourse would have to be had
on a large scale to the borrowing powers of the Company.
Such an arrangement would be perfectly sound as a commercial
transaction, but what its effect may be upon the temperance
policy of the Board will be seen, by a perusal of Clause
52, which provides that— " The Company may, upon
the issue of any bonds, debentures, debenture stock, or
security, give to the creditors of the Company holding the
same, or to any trustees or other persons on their behalf,
a voice in the management of the Company, whether by giving
to them the right of attending and voting at General Meetings,
or by empowering them to appoint one or more of the directors
of the Company, or otherwise, as may lie agreed." How
considerable may be the influence of a single director thus
appointed for the definite purpose of safeguarding the interests
of the creditors, and who may have little sympathy with
the temperance aims of the Company, is seen from Clause
79 : " The number of the directors shall, until the
ordinary General Meeting to be held in the year 1910, be
determined by the Board of Directors and thereafter by the
Company; provided always that such number shall not in any
event be less than three or more than seven."
The danger would not be removed even though the director
or directors appointed by the creditors had no connection
with the Trade, for such directors could only safeguard
their clients' interests by a policy which would ensure
large profits, and this would necessitate large sales. The
two clauses, named above (50 and 52) are common form clauses,
and their importance may appear to be discounted by this
fact, but they will necessarily become operative if large
transactions in the purchase of licences are embarked upon.
The promoters of the Hampshire Trust are alive to the risk
of a large number of shares passing into the hands of holders
who might be desirous of changing the policy of the Company.
This danger they endeavour to guard against in two ways
: (1) by reserving power to the directors to refuse to register
any transfer if they think fit; and (2) by placing the whole
of the deferred shares in the hands of trustees (It is
to be noted that in the Glasgow and East of Scotland Companies
there are no deferred shares, and trustees are appointed
solely for the administration of the surplus profits.),
it being provided that " The holders of the deferred
shares shall be entitled to the same number of votes as
all the holders of ordinary shares shall for the time being
be entitled to collectively." The Articles of Association
provide that the surplus of the net profits (i.e. after
payment of dividends and providing for a reserve fund and
for depreciation of the Company's properties) shall be paid
to the holders of the deferred shares, to be held by them
as trustees, and to be applied by them, with the approval
of the Council, to such objects as are provided for in the
" Indenture."
The Council referred to consists of (a) the trustees mentioned
above, (6) the holders for the time being of the offices
of Lord Lieutenant for the county of Hampshire, and Bishop
of the diocese, and (c) not less than one or more than six
other persons to be appointed by the directors.
The present Council consists of:
The Rt. Hon. the Earl of Northbrook, Lord-Lieutenant (ex-officio).
The Rt. Rev. the Bishop of Winchester (ex-officio).
The Rt. Hon. Evelyn Ashley.
Sir Wyndham Portal, Bart.
The Very Rev. the Dean of Winchester.
The obvious aim of these arrangements is to guard against
the risk of change in the policy of a Company by placing
great voting power in the hands of men occupying high social
positions or public office of recognised responsibility,
and it is probable that anything in the nature of a serious
departure from the aims and policy of the promoters will
in this way be prevented. But it is well to remember that
it is upon the directors, who have the detailed administration
of the Company in their hands, that the actual success of
the Company as a temperance instrument will ultimately depend,
and that the influence of a directorate in favour of temperance
does not turn upon the acceptance or rejection of any single
act, but rather upon wise, tactful, and persistent effort
exercised in regard to a number of details whose practical
importance can only be known to those who are responsible
for the daily management of the business. The provision
giving directors power to decline to register transfers
would indicate that the promoters of the Trusts were alive
to the danger of having upon their list of shareholders
those who are interested in the drink traffic. On the other
hand, many will have read with apprehension the passage
in Lord Grey's letter to The Times of January 16th, 1901,
in which he says: " In Norway and Sweden persons connected
with the liquor trade are prohibited by law from holding
shares in the Bolags (This is not strictly accurate,
but other safeguards exist in Norway. ), but our proposal
(ie. the one giving great voting power to the holders
of the deferred shares.) appears to me to render unnecessary
an offensive prohibition which ostracises one class from
a movement which aims at the well-being of all." If
one of the main objects of a Trust Company be to lessen
the consumption of drink, it is surely imprudent to invite
the co-operation of those whose interest as traders is to
increase its sale. While it may be well to guard, by special
provisions, against dangerous developments within the Trust
Companies, it is better still to guard against their introduction.
RECREATIVE FEATURES
In an article upon the Public-House Trust Association,
which recently ( May 22nd, 1901) appeared in the
Westminster Gazette, the writer says: " The second
great principle of the movement is that it proposes to improve,
and even to idealise, the public-house. . . . The Public-House
Trust Association proposes to supply every variety of refreshment,
to give facilities for games and recreations, and, in a
word, to make the refreshment-house something more nearly
approaching to a club, or at least to a cafe as known in
France. The exact details as to the arrangement of the houses
for this purpose have yet to be settled, but it is proposed,
we understand, to keep the alcoholic and non-alcoholic sides
of the house entirely separate."
With the proposal to give facilities for games and recreations
the present writers are in full accord, but they strongly
hold that the drinking and recreative centres must be separated
by a wider distance than the two sides of a public-house.
Subsequent observation has led them in no way to depart
from the view they have elsewhere urged (The Temperance
Problems and Social Reform), that the proposal to associate
recreation with the sale of intoxicants is not only opposed
to the express recommendations of several Parliamentary
Committees, but is clearly prejudicial to the best interests
of the community, and calculated to hinder, rather than
to facilitate, the object it seeks to attain. Its importance
can be illustrated by a single consideration. Practically
all disinterested citizens are agreed that the consumption
of intoxicants in the United Kingdom is at present so excessive
as to be dangerous to morality, prosperity, and health.
Temperance workers, realising this, and knowing how hard
it is to break an established habit, have tried to save
the children frotn acquiring the habit of drinking. It is
stated that in 1897 the Bands of Hope and other juvenile
temperance associations in the United Kingdom had a total
membership of nearly three millions (2,800,000), and that
in addition to the ordinary work done by these societies,
lectures on the subject of temperance were delivered to
no less than 403,320 children in public elementary schools.
Do we want these boys and girls when they leave school,
with no acquired fondness for drink, and the young men and
women in shops and factories, to be attracted to rooms in
which games, music, and newspapers are directly associated
with the sale and consumption of intoxicants? Do we not
rather want, by a strong and decided change in our national
arrangements, to break the continuity of the drinking habit,
and so reduce to reasonable limits our present stupendous
consumption of alcohol ? If we do wish this, what could
be more ill-judged than deliberately to attract young men
and women to places where, in seeking recreation, they will
perpetually have before them an example which we desire
they should not imitate ?
PAYMENT OF MANAGING DIRECTORS ACCORDING TO
FINANCIAL RESULTS
In reading the Articles of Association of the Hampshire
Trust Company one occasionally comes upon clauses which
suggest that those responsible for the drafting had overlooked
the altogether exceptional objects for which the Trust Companies
exist. This is particularly the case in Article 100, which
runs: " The directors may from time to time appoint
one or more of their body to be a managing director or managing
directors of the Company, and may fix his or their remuneration,
either by way of salary or commission, or by giving a right
to participation in the profits of the Company, or by a
combination of two or more of those modes." Such a
clause might rightly be included in the Articles of almost
any commercial undertaking, but it is in direct opposition
to the avowed purposes for which the Public-House Trust
Companies are formed. In his letter to The Times of December
12th, 1900, Earl Grey says: "In the houses managed
by the Companies it u/ill not be the interest of the manager
to push the sale of intoxicants: he will receive no commission
on the sale of alcoholic liquors, but will be paid a fixed
salary with commission on the sale of food and non-intoxicants,
or a bonus on good management." As is well known, by
far the larger proportion of the profits in the houses worked
upon " Gothenburg" lines arises, not from the
sale of food or mineral waters, but from the sale of alcoholic
drink. The more drink sold, the larger will be the profits
upon which it is provided that the managing director may
have a commission, or in which he may have a right to participate.
It is well to provide that the local managers and the actual
dispensers of the drink shall be paid only by a fixed salary;
but the benefits of the provision may be entirely neutralised
if the managing director, upon whose reports and advice
subordinate appointments and advances in salary will depend,
has a direct interest in the sale of alcoholic drinks.
VOTING POWER OF SHAREHOLDERS
In the Hampshire Public-House Trust, as in the Bishop of
Chester's Association, the dividend is limited to 5 per
cent (In the Bishop of Chester's Association and in the
Hampshire Public-House Trust Company the dividend is not
cumulative. It is, however, cumulative in the Northumberland
Trust Company. ). In the Bishop of Chester's Association
each shareholder is entitled upon a poll to one vote only,
irrespective of the extent of his holding, following in
this the example of some of the best of the Norwegian companies.
In the Public-House Trust Association each ordinary share
carries a vote. In a purely commercial undertaking the voting
power rightly goes with the number of shares, but in bodies
which exist for public purposes plurality of voting should
not be found. Seeing that these Trust Companies have for
their primary object "to promote sobriety and diminish
drunkenness," there would seem to be no reason why
the holder of many shares should have a more potent voice
in determining the policy of the Company than the holder
of one share (In a general way it may be said that no
one should hold so many shares in a Company that the financial
success of the undertaking would thereby become a matter
of real moment to him).
APPROPRIATION OF SURPLUS PROFITS
This important question is provided for in the Hampshire
Trust in an " Indenture," which, among other things,
sets forth the objects to which the trustees may apply the
surplus profits. We give in extenso the clause relating
to this point :
" (i) Making donations or subscriptions to any society
institution trust organisation or charity now existing or
hereafter to exist.
" (ii) In acquiring sites for and building and restoring
altering enlarging maintaining and endowing churches chapels
whether intended to be consecrated or not churchyards burial-grounds
hospitals colleges schools school-houses houses of residence
for any purpose mission-halls parish-rooms institutes almshouses
libraries baths wash-houses theatres music halls restaurants
coffee-taverns eating houses cabmen's shelters and houses
for the working classes and the like.
" (iii) Providing maintaining extending and testing
by examination or otherwise education and religious and
technical instruction. " (iv) Doing all such things
as may to them in their uncontrolled discretion appear to
be incidental or conducive to the purposes aforesaid or
any of them and for that purpose to form any new society
institution trust organisation or charity.
" Provided always that such property and money shall
not be expended or disbursed for or towards the direct relief
of rates taxes or assessments unless in exceptional circumstances
it is deemed expedient or for the benefit of the Company
so to expend or disburse the same or some part thereof."
In cases where the drink trade is taken out of private
hands and put under some form of public control there are,
broadly speaking, two ways in which the surplus profits
may be appropriated (Mention is here made of local appropriations
only. As we have elsewhere shown (see. p. 144) the most
satisfactory method of appropriation is that which, after
allowing for the maintenance of efficient " counter-attractions,"
provides that the residue of the profits shall be handed
over to the State Treasury). The one is to make use
of these profits in the provision of counteracting agencies,
the aim. of which shall be to weaken and restrict the trade;
the other method is to make use of the profits to enrich
the municipal treasury, or to swell the incomes of public
institutions and private charities. These methods are not
only absolutely distinct, but in their scope and tendency
are in direct opposition to one another. For while the first
method weakens the hold of the trade, the other gives the
ratepayers, or the committees of the institutions helped,
a distinct interest in the maintenance, if not in the extension
of the traffic. The former plan is meeting with wide and
growing acceptance from the churches, from temperance and
social reformers, and from men and women representative
of the most varied schools of thought. The latter plan is
that which has been adopted in the city of Gothenburg, and,
generally speaking, throughout Sweden (Prior to the passing
of the Act of 1894 the appropriation of the profits in Norway
was a union of the two methods, and the change effected
by the Act of 1894 was due to a recognition of its defects).
It is also the one which, unfortunately as we believe,
has been adopted by the Hampshire Public-House Trust. We
regard the choice as unfortunate, because (1) it diverts
the profits from the sphere in which they are imperatively
needed for temperance purposes, and (2) the proposed appropriation
is in itself full of danger. So far as the first of these
two points is concerned it must be remembered that the conditions
under which so many of our fellow-countrymen live create
an urgent need for healthy recreation and for satisfying
the social instincts apart from the sale of drink. The first
call upon the profits of the trade is for the establishment
and maintenance upon a national scale of recreative centres.
It will have been seen, however, that the proposals of the
Public-House Trust Company given above provide for "making
donations or subscriptions to any society institution trust
organisation or charity now existing or hereafter to exist,"
while the following section, among other things, proposes
that the profits shall be in part applied " in acquiring
sites for and building and restoring altering enlarging
maintaining and endowing churches chapels whether intended
to be consecrated or not," and also towards colleges,
schools, school-houses, etc.
Now religion and education ought to provide much of the
moral force needed in the struggle against intemperance,
and hardly any scheme could be devised more unfortunate
than that of giving the churches and the schools an interest
in the drink trade by making their incomes dependent in
part upon the traffic. The gift which " blindeth the
wise" would exercise its ancient and familiar power.
A deadening influence would inevitably pass upon those who
should be the guardians of the moral forces. To aid the
rates, as in Gothenburg, out of the profits of the trade
is admittedly dangerous, and the Trust Companies, recognising
this, provide that their profits shall not I e so expended.
But the proposals under consideration might easily inflict
a deeper injury upon the true life of the nation than actual
contributions in relief of rates. It is true that, at the
end of Section II., certain counteracting agencies are named,
but these would stand a poor chance of effective support
if brought into competition with public institutions and
private charities. The objection is less obvious to making
contributions from the drink profits in support of hospitals,
but those who have served upon the committees of such institutions,
and have realised how much could be accomplished with ampler
funds—often so difficult to obtain—will question
the wisdom of making the maintenance of the income of these
institutions dependent upon an undiminished drink traffic.
Earl Grey, in dealing with the question of the disposal
of the profits, says: " It is desirable that different
experiments should be tried." This is true if the experiments
are conducted within clearly defined lines and on principles
which experience has now established. But to disregard experiments
conducted on a large scale and over a long term of years,
and to put the whole question afresh into the crucible,
cannot be wise.
Happily these proposals for the disposal of the surplus
profits form no integral part of the general scheme of the
Public-House Trust movement. As will be seen in a subsequent
section of this chapter, the proposals of the Glasgow Trust
Company under this head are admirable. It will be for promoters
of the various local schemes to see that the arrangements
for the disposal of profits are in each case similarly safeguarded.
THE NORTHUMBERLAND PUBLIC-HOUSE TRUST COMPANY,
LIMITED
The general scheme of this Company is similar to that of
the Hampshire Trust, but in such matters as the constitution
and government of the Trust, and the safeguards devised
to prevent abuse, there are differences that call for brief
mention.
The government of the Company may be considered under two
broad divisions, the first having reference to the work
of administration and management, while the second comprises
the checks and safeguards that have been provided to secure
that the original intention of the promoters shall be adhered
to.
The ordinary administration of the Company is carried on
by directors who are appointed by the shareholders, and
to them belong virtually all matters of ordinary administration
and working other than the appropriation of the surplus
profits.
The scheme for safeguarding the policy of the Company is
based upon the power given to the trustees as holders of
the deferred shares. This power can be exercised in two
ways. First, the holders of the deferred shares, as members
of the General Meeting of the Company, have a voting power
equal to that of all the ordinary shareholders, and so can
exercise an enormous influence in determining the broad
lines of policy to which the directors must adhere. Secondly,
the appropriation of the whole of the surplus profits of
the Company rests with the holders of the deferred shares
acting under the instructions of the Council. The constitution
of the Council is therefore a matter of vital importance.
As in the case of the Hampshire Trust, it consists of ex-officio
and of elected members. The elected members are not, however,
chosen either by the shareholders or by the directors, but
are virtually self-elected, the ex officio and the elected
members uniting to fill up any vacancy that may occur in
the ranks of the latter.
Each elected member upon being elected, and each ex-officio
member, is required to sign, and is not entitled to act
until he has signed, an undertaking to observe the provisions
and the bye-laws for the time being in force for the management
of the Trust.
The " Deed of Foundation " provides that the
following shall be the Council:
(a) Ex-officio:
The Lord-Lieutenant for the time being of the County of
Northumberland.
The Chairman for the time being of the Northumberland County
Council.
The Chairman of the Standing Joint Committee of the County
of Northumberland.
The Mayor for the time being of the City and County of Newcastle-upon-Tyne.
The Principal for the time being of the College of Science,
Newcastle-upon-Tyne.
The President of the Northumberland Miners' Association.
The Chairman for the time being of the Wholesale Cooperative
Society, Newcastle-upon-Tyne.
(6) Elected:
Viscount Ridley, Blagdon, Northumberland.
Sir Andrew Noble, K.C.B., Jesmond Dene House, Newcastle-upon-Tyne.
Sir Edward Grey, Bart., M.P., Falloden, Northumberland.
Sir B. C. Browne, Westacres, Newcastle-upon-Tyne.
Sir W. H. Stephenson, Elswick House, Newcastle-upori-Tyne.
C. W. C. Henderson, Esq., The Riding, Hexham.
C. W. Mitchell, Esq., Jesmond Towers, Newcastle-upon-Tyne.
Robert Knight, Esq., Highbury, Newcastle-upon-Tyne.
This arrangement, giving great voting power to the holders
of the deferred shares, will be valuable as a safeguard
against any serious departure from the intention and policy
of the promoters, especially when it is remembered that
the trustees, as members of the shareholders' meeting, will
have a powerful influence in determining the choice of directors.
(In the case of the directors an additional safeguard
is furnished in the provision that, " The office of
a director shall be vacated if he becomes directly interested
in the carrying on of the manufacture or sale of intoxicating
liquors, but so that no person shall be disqualified from
being a director by reason only of his being interested
in a Company or undertaking having similar or partly similar
objects to those of this Company, or in a railway or other
company carrying on the manufacture or sale of intoxicating
liquors as an incident of its principal business."
)
APPROPRIATION OF SURPLUS PROFITS
The objectionable features in the clauses governing the
appropriation of surplus profits which appear in the Articles
of the Hampshire Trust Company are modified in the case
of the Northumberland Trust Company. Section I. is the same
in both, but Section II. in the Northumberland Articles
is as follows:
" In acquiring sites for and building restoring altering
enlarging maintaining and endowing hospitals infirmaries
colleges schools school-houses clubs institutes museums
picture and other art galleries libraries reading-rooms
public baths gymnasiums parks gardens open spaces and other
lands and buildings dedicated or intended to be dedicated
to the public."
Section III. provides for the furnishing and equipping
of the above, while Section IV. reads:
" Generally in the uncontrolled discretion of the
Council in the establishment maintenance and furtherance
of objects of public utility education amusement recreation
or charity either local or general in character."
Many of the objects enumerated above may justly be regarded
as direct counter-attractions to the public-house; but there
are others concerning which considerable misgiving will
be felt.
BORROWING POWERS
The borrowing powers of the Northumberland Trust are substantially
the same as those of the Hampshire Trust, and the clause
under which provision is made for the direct representation
of the creditors of the Company upon the directorate also
reappears. These clauses will be necessary if extensive
purchases of licences are made, but the dangers implicit
in them have already been pointed out.
REMUNERATION OF DIRECTORS
Article 82 provides that the directors' remuneration shall
be fixed by the shareholders in General Meeting.
GLASGOW PUBLIC-HOUSE TRUST, LIMITED
One of the most interesting and promising of the Company
experiments about to be made is that of the Glasgow Public-House
Trust, incorporated March, 1901. Its capital of £25,000
is divided into 25,000 shares of £1 each. The dividend,
which is cumulative, is limited to 4 per cent, per annum.
The chairman and directors are influential Glasgow citizens,
and the secretary of the Company is Mr. John Mann, junior,
who for many years has been a careful student of the Company
system: it is probable that the provisions of the Glasgow
Trust owe much to his full knowledge of the question.
OBJECTS OF THE TRUST
In their prospectus the directors say that they "
will enter into the work prompted by a sense of public duty,
and deeply impressed by the dangers inherent in this disagreeable
but lucrative trade, and in the rapidly growing monopoly
of the traders." This passage strikes the keynote of
the policy of the Company as laid down in their Memorandum
and Articles of Association.
ITS NON-COMMERCIAL CHARACTER
While the directors state that they " are co-operating
with those who are organising similar companies throughout
Scotland and England, with the object of working upon a
common basis and constitution," their enterprise has
certain satisfactory features which are peculiar to itself.
Thus the dividend upon the shares is a dividend of 4 per
cent.,(With Scotch caution the directors have, however,
made the proviso thus explained in their prospectus: "
To meet any difficulty, should it arise, in obtaining money
at 4 per cent., and to avoid the stoppage of a good work
for want of capital, the directors have thought it prudent
not to make it impossible to offer 5 per cent., should changes
in the value of money or different circumstances require
the payment of this rate. Accordingly, the Memorandum of
Association authorises a maximum of 5 per cent., but tins
power can only be exercised by a majority of three-fourths
of an extraordinary meeting of shareholders." )
while in most other Trust Companies it is 5 per cent. Again,
by Clause 79 of the Articles of Association it is provided
that " the directors shall receive no remuneration,"
while in other Trust Companies provision for their remuneration
is usually made. This last point is perhaps of more importance
than may at first appear. Men are not paid for services
upon a town council, or upon a school board, or upon a board
of guardians. The sacrifice of time and labour involved
is regarded as a public duty. In Norway, with, we believe,
the exception of two companies, the Samlag directors are
not paid. In the long run men of high social ideals are,
we think, more likely to be found upon the directorate of
a controlling company when the office carries no remuneration
than when it does.
METHOD OF ACQUIRING LICENCES
The Glasgow Trust " offers to take up and manage new
licences which the authorities may deem it necessary to
grant." To quote again from the prospectus, "
the directors of the Trust say in effect to the authorities,
' If you grant a licence in this district at all, we ask
that it be granted to us in the public interest, to be managed
as a public trust. (Referring to the application by the
Glasgow Public-House Trust for a licence for Anniesland,
the Kev. t). M. Ross, D.D., writing to the Glasgoiv Herald
under date April 9th, 1901, says : " It seems to me
unfair to suggest that Mr. Mann and his directors are trying
to foist a licence upon a protesting community. As Mr. Mann
has explicitly said, ' We do not press for this licence,
but we ask you not to give it to anyone else.")
We shall hold the profits at the disposal of the trustees,
and we shall be prepared to surrender the licence at any
time if authoritatively required, without a suggestion of
compensation.'" The Trust " may also acquire existing
licences, if obtainable on reasonable terms." So far
as the occupancy by the Trust of new ground which otherwise
would be occupied by the private trader is concerned, the
position of the Company is clear and strong. But in the
Glasgow as in the Hampshire Trust, dangers gather around
the proposals for the purchase of licences. The large sums
that may be involved in such transactions, together with
the demand for capital that would ensue, necessarily lead
to the adoption of Articles for the protection of the creditors
identical with those which appear in the Articles of the
Hampshire Trust, and which have been discussed on a previous
page. It is, however, to be noted that in the Glasgow
Articles no restriction is placed upon the number of ordinary
directors who may be appointed.
APPROPRIATION OF PROFITS
The scheme for the destination ot surplus profits is so
excellent that with perhaps the omission of a few words
it might well serve as a model for other Associations. Clause
108 of the Articles of Association provides in respect of
the surplus profits: " (1) that no portion thereof
shall be applied in direct relief of the rates; (2) that
the trustees, while not disregarding other objects which
they may consider of benefit to the public, shall have special
regard to such means of rational recreation and entertainment
as shall tend to diminish in the community the undue consumption
of alcoholic liquors; and (3) that the trustees may pay
over part or the whole of the profits into the national
exchequer if they deem it expedient."
The Glasgow Company hands over the administration of the
surplus profits to a body of trustees (The duty of the
trustees in the Glasgow Trust Company is confined to the
administration of the surplus profits; they havo not the
special voting power of the trustees in the Hampshire and
Northumberland Trust Companies). The Articles provide
that the first trustees shall be appointed by the directors,
and shall hold office until the Ordinary General Meeting
of the Company in 1904. Prior to that time the trustees,
together with the directors for the time being, are to "prepare
a scheme containing full provisions as to the method of
election or nomination of a body of trustees ... it being
understood, however, that any such scheme shall be settled
on the basis that at least half of the trustees acting under
it shall be appointed by the Company or its directors, and
that no alteration shall be made by it in the destination
of the surplus profits hereinbefore set forth." The
names under the first appointment are as under:
Trustees
(For administration of surplus profits)
Sir John Stirling-Maxwell, Bart., M.P.
Sir James King, Bart.
Sir John Neilson Cuthbertson.
J. G. A. Baird, Esq., M.P.
Charles Douglas, Esq., M.P.
J. Parker Smith, Esq., M.P.
M. H. Shaw-Stewart, Esq., M.P.
John Inglis, Esq., LL.D.
J. 0. Mitchell, Esq., LL.D.
John Ure, Esq., LL.D.
Hugh Steven, Esq.
Whether it is expedient to withdraw from the directors
the responsible and interesting duty of administering the
surplus profits may be doubted. The best men are wanted
as directors, and such are not likely to look with favour
upon an arrangement under which important duties are removed
from their care and placed in the hands of an outside body.
CHECKS AND SAFEGUARDS
The question may be asked: In what way does the Glasgow
Trust Company guard against its capture at some future time
by the Trade? (It may be said that the experience of
Norway shows the danger of such capture to be unreal, but
in that country all the licences in a town are given to
one company, and if it abused its trust the licensing authorities
would at the next issue transfer the licences to another
company. ) It has none of the machinery for this end
elaborated by Earl Grey of deferred shares carrying great
voting power and held by occupants for the time being of
high official positions in the district. We should judge
that reliance is placed upon the objects of the Company
as clearly set forth in the Articles of Association, and
more particularly upon Clause 19, which runs: "The
directors may, in their absolute discretion, without assigning
any reason, decline to register the transfer of any share,
whether wholly or partly paid up, to any person not approved
of by them, and in the event of any such refusal at any
time, the person to whose transfer such refusal relates
shall have no right or cause of action of any kind in respect
thereof."
Experience alone can show whether these safeguards are
sufficient. An additional safeguard might be found by adding
to the list of disqualifications of directors a rule similar
to that of the Northumberland Trust, which provides that
the office of a director shall be vacated if he acquires
a direct interest in the manufacture or sale of alcoholic
drinks.
APPOINTMENT OF LOCAL COMMITTEES
An arrangement of practical value remains to be noticed
in the power given to the directors " to appoint local
committees, not necessarily members or directors of the
Company, with such powers and duties as the directors may
think proper." The right conduct of the counter-attractions
will require much time and thought, and probably many would
gladly share in this duty who would be unwilling to take
part in the direct management of the Company houses.
THE EAST OF SCOTLAND PUBLIC-HOUSE TRUST,
LIMITED
This Trust Company was incorporated in April, 1901. Its
capital of £50,000 is divided into 50,000 shares of
£1 each. The dividend, which is cumulative, is limited
to 5 per cent, per annum. The Articles of Association provide
that the remuneration of the directors shall be fixed by
the Company in General Meeting. The " Methods of Management,"
as set forth in the prospectus, are as follows:
" The methods of management adopted by the Company
must necessarily be subject to such modifications as experience
and a fuller knowledge of the districts in which its operations
are conducted suggest, but the general objects at which
the management will aim will include the following:
- In each house a carefully selected manager will be
placed, and, where considered advisable, local boards
or committees will be appointed to supervise the management
in different local areas.
- Food and a variety of non-alcoholic beverages will
be provided, and every means will be taken to encourage
their consumption. The greatest care will be taken that
everything supplied is of the best quality obtainable.
- The manager will be paid a fixed salary, with a commission
on all trade in food and nonalcoholic liquors. No commission
will be allowed on the sale of alcoholic beverages.
- In selecting managers, every endeavour will be used
to obtain men who will be in hearty sympathy with the
policy of the Company, and who will assist in carrying
out (in the spirit as well as in the letter) the licensing
laws enacted by Parliament for the regulation of public-houses
and the promotion of temperance."
As in the case of the Glasgow Trust Company, the surplus
profits of the undertaking, after payment of dividend and
"after making provision for depreciation, for reserve
funds, for loss arising from extinction of licences and
for other contingencies . . . will be paid over to trustees,
to be applied by them to such objects of public utility
and well-being as may be determined, special regard being
had to such means of rational recreation and entertainment
as shall tend to the diminution of intemperance."
The provision governing the appointment of trustees is
the same as in the Glasgow Trust.
The first trustees for the administration of surplus profits
are:
Sir Ralph Anstruther, Bart., of Balcaskie, Pittenweem.
Sir T. D. Gibson Carmichael, Bart., of Castlecraig, Dolphinton.
Professor John Chiene, C.B., F.E.C.S.E., 26, Charlotte Square,
Edinburgh.
T. S. Clouston, M.D., F.B.C.P., Tipperlinn Hoase, Morningside,
Edinburgh.
Sir Mitchell Thomson, Bart., 6, Charlotte Square, Edinburgh.
J. P. Wood, W.S., 16, Buckingham Terrace, Edinburgh.
The Articles of Association contain the wholesome provision,
the substance of which is incorporated in the Articles of
other Public-House Trust Companies, that " The directors
may, in their absolute discretion, without assigning any
reason, decline to register the transfer of any share, whether
wholly or partly paid up, to any person not approved of
by them."
The elements of danger in this Trust Company, as in the
others, lurk in the provisions which are designed to meet
contingencies that may arise from the proposed purchase
of licences.
It is impossible to study in detail the proposals of the
promoters of the Public-House Trusts without being impressed
by the careful thought and seriousness of aim that have
been brought to bear upon the schemes. The criticisms that
the present writers have ventured to offer are necessarily
based upon the statement of policy in the prospectus of
each company, and upon the provisions for giving effect
to such policy in the Articles of Association. Inasmuch
as the companies have not yet begun actual operations there
is not, as in the case of the experiments discussed in the
earlier chapters of this book, any experience to which to
appeal. It may well be that when such experience has been
acquired it will be found that we have underestimated the
advantages, or overestimated the dangers, of certain provisions.
But it needs no experience to show that such a policy as
the purchase upon a large scale of licences will give the
Trust Companies vested interests that must necessarily conflict
with their efficiency as instruments of reform. Examination
appears to show that under the existing law the serviceable
sphere of such companies must be of a restricted character.
Their chief value would appear to be experimental, and,
if carefully conducted, they will be useful in educating
and ripening public opinion for further legislation. It
is therefore of great importance that nothing shall be done
for the sake of extended operations that will impair the
value of the object-lesson. It is of even greater moment
that no policy shall be entered upon which, owing to insufficient
safeguards or inherent defects, is likely actually to prejudice
the principle of public management by obscuring the possibilities
of the system when wisely conducted and controlled.
There are probably few earnest citizens who will not sympathise
with the eager desire of the promoters to avail themselves
of such opportunity for effecting reform as exists under
the present law; but one fact that stands out clearly from
the foregoing pages is the relatively small result, in comparison
with the problem that claims attention, that the Trust Companies
can hope to achieve. Even under the dangerous policy of
purchase the number of houses they can hope to acquire will
be but a very small proportion of the total number of licensed
premises in the country. The attempt, therefore, earnest
as it is, only serves to emphasise the urgent need of legislation
which will make substantial results possible.
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