§ Order of the Day for the Second Reading read.
THE LORD BISHOP OF OXFORD
My Lords, I hope I shall not he thought presumptuous, or wanting in proper reserve—I do not know what the procedure in the House will be to-day—if I ask to be associated very closely with the feelings which must be in the hearts of many members of this House and to be allowed to express the great sense of our loss in the passing away of that wise counsellor and trusted friend, Lord Balfour of Burlegh. I do this because I knew that I was able to count, and, indeed, should have relied, upon his wise guidance and sympathetic support in that which I am about to attempt this afternoon. When I was Bishop of Southwark, and he was serving in the Duchy of Cornwall, I was brought into close contact will him in approaching the difficult problems which confronted us in that diocese, and I there learned that his rich experience, his wisdom, his large-heartedness, his transparent sincerity, and his example of devotion to public service made his friendship a rare friendship for those who enjoyed it.
I find myself in a very difficult position this afternoon. My difficulty is as great as that in which many of your Lordships find yourselves. I learned, to my dismay, that the Bill which I have had the honour to introduce, and the Second Reading of which I beg to move this afternoon, had reached your hands only a day or two ago, and it might reasonably be argued that it was quite impossible to discuss a measure of this kind at such short notice. Whatever apology is due from me I give without reserve, but I must disown responsibility for the delay, because I understood my own responsibility had been discharged last Monday week when the final draft of the Bill was submitted to the office, and I hope I may be exonerated. But I think 990 I can, to some extent, relieve the situation by saying that from the first it has always been my intention, if the Bill passed a Second Reading, to ask to be allowed to proceed no further for the time being, in order that in the interval there might be an opportunity for discussion and conference with various representatives of the interests concerned upon the different parts of the Bill, and especially upon the point that has been opposed, and also an opportunity to the community at large to understand what the underlying aim is and how the Bill should be made to work. I have always attached real importance to that procedure of giving an opportunity to the community at large to understand what the underlying aim is. I hold that no measure of social reform will be effective unless it gives clear and articulate expression to what society, unconsciously, no doubt, feels ought to be done. We must at least enable the community to have an opportunity of understanding precisely what the proposal is, and no one more than I realises the importance of that being done. Then I desire also to secure an opportunity for conferences and discussions with the various interests concerned, because I hope and believe that by that procedure we shall be able to arrive at an agreed policy, and ultimately to produce an agreed Bill. I know that is a sanguine view to take, and I can assure your Lordships that before entertaining it I had very carefully explored all the forces at work and the question whether, after all, I was merely one of the unenlightened rushing in where others of a superior order of creation fear to tread.
But I believe that I have the right, and it is my duty, to be sanguine, and I will state my reasons as briefly as possible. First of all, it is natural for a person in my position to be impressed by the way in which the challenge, given by the Prime Minister to a deputation to him on the subject, has been taken up. He declared that the Christian churches of our country, when united, are irresistible. We have now a plan of agreement formulating nine distinct points, drawn up and adopted by a General Council representing sixteen Christian bodies. No one can fail to be impressed by the fact that the divisions of opinion and feeling which have for so long distracted the counsels, diverted the energies, and impaired the work of what are called the temperance agencies, have largely been healed. The question is being 991 approached by them on different lines and on a different level. The cardinal point of that plan of agreement is that localities shall determine for themselves the extent to and the mode in which the liquor traffic shall be carried on.
Again, no one can fail to be impressed by the decisive attitude adopted by those who claim to befriend the interests and represent the cause of the manual workers of this country—the British Labour Party. We know how divided their opinions have been on this problem. I believe that they would admit that they have contributed as much as anybody to the confusion of issue and the impotent results which have attended the attempts to promote social welfare in this particular department of our life. We have now, in 1920, defined at the congress at Scarborough the reform policy of that great Party; and the cardinal point of that policy, as stated in their own words, is that the Liquor Trade is a traffic in respect of which people must assert full and unfettered freedom in accordance with local opinion.
Further, I am hopeful of the co-operation and support of the representatives of the trade itself. I always believe in taking men at their word, and judging them at their best. Again and again, friends of my own, who are admittedly some of the most influential representatives of the trade, have assured me that there is nothing that they more heartily desire than the means of conducting the trade in the best interests of the community, and in accordance with its real wishes and the legitimate exercise of free and independent choice; and they assert that they are too often the victims of misrepresentation on the part of extremists, faddists and agitators, through whom pressure is brought to bear against the trade not in accordance with the real wishes of the people, those wishes being, unfortunately, nearly always inarticulate. Clearly, on their own showing, they would gladly co-operate in a measure which will submit the appreciation of their services to the direct judgment of the people themselves, now provided with a proper machinery for articulating their wishes.
Then again—and this perhaps in the long run I should count as most important of all—in spite of much weariness and reaction, and the inevitable tendency to relax all efforts and live on lower levels after a period of supreme tension. there is 992 a widespread desire to count the experience we have gained in the war and the lessons we then learned. I recall many occasions during the war when I was working in South London when it was stated from all sides—workers, business men and borough councillors—that after all the war had only revealed to us the measures we ought to have taken and can take now for promoting social welfare. Yes; but it revealed something better than that; the spirit in which we must, and in which we can, all unite to make these measures effective. We should, indeed, forfeit our self-respect if we turned our backs upon all that, and resigned ourselves to the old deadlock and the mere struggle of interests.
I believe that it is impossible, and for many reasons. Most of the old arguments and controversies are now obsolete in the light of the practical experience we have gained. That experience, no doubt, is imperfect and undeveloped, as yet not wholly secure, but, so far as it goes, it is more convincing and worth more than the anticipations, the apprehensions, the forecastings and the theorising that went on before the war. I say that we are in honour bound to use the experience that has been given to us by the operations of the Board of Control, by the Carlisle experiment, by the procedure taken in the garden city of Letchworth, and by the method adopted now for many years in our own Dominions overseas—Canada, New Zealand, the Commonwealth of Australia, Cape Colony and the Transvaal —which convinces me that the whole logic of events tells us we are now ready to take the next step forward, which is that of establishing the principle of trusting and training the people themselves to decide this question in their own different areas. That is the underlying principle on which the whole Bill rests.
I must tax your patience a little further in order to explain how that can be made to work. The first question, obviously, is—What choices will the people in the different areas be called upon to make? Time answer is supplied by the whole course of the controversy and issues that have been raised for many years past. There is the choice of leaving the system in that area, as a system, untouched. There is the choice of prohibiting altogether the issue of licences. There is the choice of taking the ownership and management 993 of the trade wholly out of the range of private enterprise, and entrusting it to what Lord Shaw's Committee describe as "disinterested management." Those are the three choices laid down to be offered in the Bill. Disinterested management is there described, merely for the sake of being definite, as State Purchase.
I am well aware that that sounds ominous. State ownership and State control at this moment are not basking in the sunshine of general approval. But we. must riot be like children, carried away with every wind of doctrine. Because State ownership and State control along certain lines and departments has so far proved disappointing or discreditable, the fact does not prove that along other lines and other departments it may not make for success. We have to remember that there is a real difference of principle between nationalisation, in any form, of the liquor trade, and nationalisation of industries like mines or railways. The liquor traffic in this country has been for hundreds of years, in fact and in principle, a State monopoly. The licensing justices have perfect power to limit the number of licences issued, and, therefore, the amount of competition. That monopoly, as a matter of fact, has been farmed out to brewers arid licence holders, and it is only a difference of degree, not of principle when the State decides to work the whole of that monopoly itself. There is also another difference. It may well be argued that in many industries private ownership and enterprise provide a stimulus for the better conduct of the business, and produce better results, when the main, if not the only, object is to increase output. Does any one seriously contend that our main object is to increase the output of drink?
Having described the choices that are offered 10 localities I come now to the question as to how you are going to elicit these choices in a practical way. The answer, of course, is to constitute polling areas, and they are to be determined by the Secretary of State, who is given some discretion in the matter. It is important that these areas should be sufficiently large—not a parish or a ward, but a political division or town, or even groups of these—and the electors are to be those persons entitled to vote as local government electors. I ask your Lordships to notice that provision has been expressly 994 made for allowing discretion to time Secretary of State to constitute as separate areas those areas in which there have been growing up, under the Housing Acts, a large number of houses, not fewer than 1,500, with the object of not allowing the areas to be compromised with vested interests until the people themselves have had an opportunity of deciding.
The next step will be to submit to the different areas, so constituted, the question which of these courses they will adopt. Occasion will be given for that, in the first instance, in the fourth year after the passing of the Act, and, again, in the eighth year after the passing of the Act. Every four years afterwards a specific question will be put; that is to say, the original question will be presented in a modified form. In the fourth year after the passing of the Act, an area will have submitted to it the choice of No Change, No Licence, and State Purchase. In the eighth year, if it has been decided to make no change, the question will he again repeated in this form. If it has already been decided to adopt State Purchase, the area will be given an opportunity of deciding whether it shall continue the system of State Purchase or adopt that of No Licence. If, again, in the fourth year, an area has decided upon No Licence, it will have the opportunity of choosing whether it shall continue under the system of No Licence or adopt the system of State Purchase. Clause 3 describes the way in which votes should be given, and what the effect of the voting is. Clause 6, which concludes Part I of the Bill, describes the procedure at an election, the time for holding the election, namely, October—not the months of July, August and September—and how provision should be made for the expenses of the elections.
I now come to Part II of the Bill, which describes the machinery to be devised and the organisation to be set up to carry out this particular method of disinterested management, which we have called State Purchase. I should like to say here, as perhaps I ought to have said when I was speaking about this particular form of disinterested management, that if, in the course of conferences and discussions with various representative bodies, it could be shown that there were more effective and better methods of providing disinterested management, I am quite certain that I and those who are with me would be 995 fully prepared to consider whether it would be expedient to adopt them The machinery for providing this particular form of disinterested management is, first of all, the creation of a Liquor. Management Board, appointed by the Secretary of State and consisting of persons who are not capable of sitting in the House of Commons. They are paid out of money provided by Parliament, and they, of course, appoint their own servants and fix the salaries of the servants, with the approval of the Treasury. Their business is to produce and to distribute exclusively for the areas which have decided upon that particular form of disinterested management.
Next we have, assisting them, a Central Advisory Committee. This body is also appointed by the Secretary of State; its members serve for three years, one-third of the Committee retiring every year. Two-thirds of its members are representative of the various interests concerned. I need not take up your Lordships' time by specifying its constitution more precisely. Your Lordships will notice further on in the Bill, when it comes to explain how State Purchase is to be carried out, that those two bodies are, for the purpose of State Purchase, assisted by a local advisory committee, three-quarters of its members being distinctly representative of the various interests concerned in the locality; the remaining quarter would, I imagine, be co-opted in consultation with the Central Advisory Committee. I think this would be an extraordinarily useful and valuable body for advising both the Liquor Management Board and the Central Advisory Committee upon the particular conditions in the locality which has decided upon this form of disinterested management. They would advise, for instance, as to the reduction of licences in the locality, the best kind of buildings to erect, and the structural improvements and alterations which should be carried out.
In the fourth place there is a very important body indeed, with extremely responsible duties, the Judicial Tribunal, consisting of three Commissioners appointed by His Majesty, one an expert in the knowledge of the law, another an expert in the knowledge of the valuation of property connected with the sale and distribution of liquor, and the third a member of the Institute of Chartered Accountants. I do not propose now to summarise under heads what their 996 specific duties would be, but in the course of the explanation which I now propose to give your Lordships with regard to the financial arrangements connected both with the State Purchase scheme and the No Licence scheme, the responsible duties which are laid upon them will be made clear in the natural course of things. I need not detain your Lordships by-speaking of Part III of the Bill which summarises the effect of the Resolutions.
I should like, however, with your Lordships' permission, to take Parts IV and V together. Part IV deals particularly with State Purchase and Part V with the financial arrangements and compensation. I take the two together because I am trying to economise your Lordships' time and to summarise as briefly as possible what will be precisely the arrangements made where a decision has been taken in favour of State Purchase or No Licence. I would say, before I embark upon that question, that I do not propose to raise the previous question, whether or not we admit the principle of compensation. It seems to me that if we are really going to make a practical effort to handle this problem, whatever we decide, it is idle to plough that old furrow in debate.
I observe from the Report of the Departmental Committee appointed to consider upon what terms the interests in Scotland concerned in the supply and sale of liquor shall be acquired, that the Committee, after investigating the vital differences of the problem as it is presented in England from the form in which it presents itself in Scotland, stated that, since the decision in the case of Sharp v. Wakefield, the Statute of 1904 enacted provisions, the subject of much discussion and controversy, which admitted the principle of compensation pro vided out of funds provided by the trade. I presume that no one would think of going back upon the principle of the time limit and of due notice; and that, after all, is only another way of recognising the policy of due consideration and compensation. Apart from that, however, I should indeed regret deeply if this measure were considered, or were adopted, and then carried with it any sense of hardship or sharp practice in the minds of any of those concerned. I desire above all things that the problem should be considered, and that this measure should be considered and brought into effect, as the common contribution made 997 by all the parties concerned, with mutual understanding and good will, after full discussion, for the better ordering of our social life. Therefore I appeal to, and I rely upon, the temper of sweet reasonableness.
When I conic to Parts IV and V of the Bill I conic to what, of course, is much the most complicated portion of the measure, which is likely to arouse the largest number of questions, and on which I feel that both myself in speaking about it, and possibly those who take part in the discussion which may follow, are very likely to be led away upon side issues. I have, therefore, ventured to prepare a very careful statement, chiefly in order to keep myself within limits, and, I hope also, to conduce to a clear grasp of this part of the measure. It is impossible, of course, at this stage, nor, indeed, do I believe it would be in order, to discuss all the details—some of them very minute details—connected with the financial provisions for compensating the interests affected. I will, however, say that both I and others have given the matter most careful thought, with the object of making the Bill cover the ground as adequately as we could. In preparing this statement I have done my best to cover the ground fully, because I am so anxious to secure an opportunity for conferences and discussions upon all the complications and points of detail. There is no doubt that many questions of detail will have to be discussed, and certainly I myself, and those with whom I act, will be most ready to discuss the issues with all those concerned, and, where it is thought expedient, to accept amendments.
But, broadly speaking, all this part of the Bill is founded upon the recommendations of the Committee on State Purchase for England and Wales which sat under the chairmanship of Lord Sumner. It is true that in certain instances the recommendations of that Committee have been departed from, but in departing from them the object has been to adapt those recommendations to rather a different problem. Their problem was the problem of State Purchase applied universally and at one blow over the whole country. Our problem is the problem of applying State Purchase to individual areas, with repeated opportunities of voting for State Purchase—opportunities given over a long period of years; it may be, indefinitely. But the 998 Bill does particularly follow the recommendations of the Committee—and it will be apparent to anyone who knows the Report of that Committee, and who studies this measure, how deeply we are indebted to the Committee—in leaving a very large amount of elasticity in the application of the terms of purchase to particular and individual concerns.
You will never be able to devise a hard and fast formula for these financial arrangements for compensation, which you can apply to all concerns indiscriminately. The object of the Bill, as it was the object before the Committee, is to establish normal standards applicable to normal cases, leaving power for those standards to be varied, either by agreement between the purchasing authorities and the vendors, or, in' default of agreement, by the Judicial Tribunal; that is to say, the three Commissioners whose business it is to settle these disputes.
In proceeding to consider how to carry out these financial arrangements in an orderly way, we have to remember that the unit which has really to be considered is not the individual licensed house but the brewing concern, with the cluster of tied houses belonging to it. Therefore, administrative convenience will be enormously promoted if the Home Secretary, ill exercising his power of determining the voting areas, arranges them so as to cover the areas covered by a given group of breweries. We shall find those areas in some eases larger than the local government units, and it is mainly for that reason that power is given to the Home Secretary to group several of such local government units together. It will then be asked, naturally: What will really happen in a given area? The majority of the licensed houses in that area will belong to local breweries, and a local brewery is a brewery which does more than 50 per cent. of its business with its tied houses in that particular area. It is possible that the local breweries concerned with the tied houses in the area will also have a few tied houses outside the area. Those houses, like those in the area, will become the property of the Liquor Management Board, which will proceed to dispose of them by sale or tenancy, according as they are advised.
Then, as to the terms of purchase. They will be based upon so many years' purchase of the true net annual profit, capitalised by a multiplier which begins at twelve 999 years' purchase at the first option. It descends to nine years' purchase at the second option, to six years' purchase at the third option, and to three years' purchase at the fourth, or any subsequent, option. You will see that we have observed there the principle of the time limit as being a reasonable and fair principle to adopt, in order to avoid what would, I think, be a very legitimate hardship. Now the capital sum at which you so arrive represents the value of all the properties of the brewery in fee simple, and you consequently have constituted a corpus. That corpus has to be divided between the reversionary owners of ally property which the brewery may hold on lease or tenancy, the owners or the shareholders in the brewery concerned, and the lessees or tenants of the breweries, if any, such lessee or tenant is in enjoyment of a beneficial lease—that is to say a lease, the capital value of the rent of which, payable for the unexpired term, is less than the amount the lessee would obtain for the unexpired term in the open market. The division of that capital sum, or corpus, is to be settled by agreement or, if agreement fails, by the three Commissioners, or by one of them.
There is an important point to bring out, and to safeguard here. When that apportionment takes place debenture holders will not necessarily receive 20s. in the £ on the nominal value of their holdings, although the corpus itself might be quite sufficient to pay 20s. in the £. It is considered that, as brewery debentures stand, and have been standing for some time past, at a substantial discount below par, it would be an injustice to the other shareholders to pay the debenture holders as if those debentures stood at par. The majority of the present brewery debentures were issued at a time when rates for money were, I suppose, 2 per cent. less than they are now. ff, therefore, the debenture holder were now paid £100, and he could re-invest his £ 100 at 6 per cent. or 7 per cent. with equal security, whereas the yield he expected when he bought the brewery debenture was perhaps 4 per cent. or 5 per cent., to pay the debenture holders at par would be to confer upon them a substantial present at the expense of the other shareholders of the company. Therefore it is that the Bill provides that in this apportionment the debenture holder's share is to be determined on the basis of the average income obtained from the deben- 1000 tures by reference to their market value, to the terms of redemption, and to other factors which affect their security.
In addition to this corpus, or capital sum so obtained, representing the value of the property of the local breweries, the tenants of licensed property in a State Purchase area are to receive compensation in respect of their personal good will. That compensation is ascertained by capitalising their net annual profits, according to the methods provided in the Bill, at a rate not exceeding two years purchase; and, besides this compensation for good will, tenants will receive the value of the wet and the dry stocks, as ascertained by inventory, with valuation at the current prices.
In addition to the tied houses in the area belonging to the local breweries, there will be a certain proportion of licensed houses which are either free, or which are tied to non-local breweries, that is to say, to breweries which do less than 50 per cent. of their total trade inside the State Purchase area. Such licensed houses, if they are on-licences, will be acquired on a freehold basis, along the same lines as are applied to the purchase of the brewery —so many years' purchase of the net annual profit derived from the house itself, and apportioned as I have just stated in the case of the brewery. But supposing they are off-licences, no interest in the bricks and mortar will be acquired and their licences only will be extinguished, and compensation amounting to not more than three years' purchase of their annual profits will be paid. This matter has been gone into carefully, and the conclusion arrived at was that it was really unnecessary to vest in the Liquor Management Board any property in off-licences. The bulk of that "off" trade can easily be done from the on-licence premises, which vest in the Liquor Management Board, and, so far as it may be necessary to provide premises in which to carry on an "off" trade only, it would be possible to devote one or more redundant on-licence premises, at which the on-licences will be discontinued under the Liquor Management Board, for the purpose of off-licensed premises.
We now come to the question, with which we have to deal, of hotels, restaurants (other than those belonging to the local breweries) and railway refreshment rooms. They will not be acquired; they will 1001 remain in private hands, and the owners will be at liberty to carry on their business in intoxicating liquor, as incidental to all their other business, subject to compliance with certain conditions which may be imposed by the Liquor Management Board. The objects of these conditions are, first of all, to secure that such premises as do remain in private hands are conducted in a lawful and orderly manner; and, secondly, to secure that unfair competition against the Liquor Management Board, either by "cutting prices or selling liquor of injuriously high strength, or in any other way, is prevented. And it will be noticed that the vaults which are commonly attached to hotels used wholly or mainly as ordinary public bars will be acquired by the State, and paid for on the same basis as a free on-licence in a State Purchase area.
I hesitated for sonic time whether I should be encroaching too far upon your Lordships' forbearance if I were to deal with one or two separate cases which, I have no doubt, are in the minds of some of those who have studied this question—cases which have to be distinctly faced. I will take one or two instances. You have a brewery concern which does over 50 per cent. of its trade inside a State Purchase area; that is to say, what is defined strictly as a local brewery, but the brewery itself is situated outside the area. In this ease, the Bill provides that the whole concern will be acquired. The tied house outside will be sold or leased, or otherwise disposed of by the Liquor Management Board, and the Management Board may use the brewery for brewing or not, as it thinks fit, or as it is advised.
Another instance is a brewery concern which has a brewery inside the area, but which has over 50 per cent. of its trade outside the area. The brewery itself is local, but as a concern it is a non-local brewery. In this case, any tied houses belonging to the brewery which are situated inside the area will be acquired as if they were free houses, and not tied houses, while the brewery itself and the houses outside the area will not be acquired.
Then there is the question of wholesale, licences, with which we have to deal. I do not know whether I need remind your Lordships that a wholesale licence is not limited to cases where the holder of the licence is engaged in selling exclusively to retailers for the purposes of that trade. The wholesale dealer may sell to a private 1002 consumer also, provided that he does not at any one transaction sell less than one dozen reputed quart bottles of wine or spirits, or two dozen reputed quart bottles, or four and a-half gallons, of beer. Where a wholesale dealer has his licensed premises inside a State Purchase area, the Liquor Management Board grants him the requisite authority to renew his licence, and he will be at liberty to sell, as a wholesale dealer, to hotels, restaurants, clubs and so on, inside the State Purchase area, and to the trade and private customers alike outside the area. All that he loses is the right to sell to private customers inside the area, and for that loss he will be compensated as may be agreed or determined by the Commissioners.
Lastly, clubs in the State Purchase area are treated in the same manner as hotels and restaurants, except that they are not required to sell to the State any part of their premises, even if they may be used, wholly or mainly, for drinking purposes. Therefore no question of compensation arises, the Liquor Management Board attaching exactly the same conditions, with the same object in view, as are applied in regard to hotels and restaurants.
I need say no more, at this stage, of the working of the financial arrangements connected with the State Purchase area, but I am bound to speak of what happens in a No Licence area. Supposing an area has decided that it will prohibit, at any rate for the next four years, the issue of licences altogether, the leading principle in this case is that the State acquires only the extra values which attach to the licensed premises from the fact that they possess a licence. The owners of such premises retain the bricks and mortar of their premises and give up only their licences. Two rather important and interesting consequences follow from that principle. It is reasonable to hold that the extra values which arise from the possession of a licence are values which are entirely created by the State, and, therefore, it would be very hard and unjust if the State, after having given not only de jure but also de facto recognition to a vested property interest in licences for a large number of years, were suddenly to change its mind and decide to cancel at one stroke of the pen all such vested interests.
But if reasonably long notice of the intention to cancel is given by the State 1003 so as to enable proper provision to be made against such a contingency by insurance or otherwise, the State is acting perfectly within its right to discontinue the recognition of this particular vested interest. Therefore, the Bill provides that compensation for the destruction of licences shall be paid during the first sixteen years of the operation of the Act—that is practically a time limit of sixteen years—but, after the fifth option, the effect of a No Licence Resolution shall be to cancel such licences without compensation. Until the time limit has been reached provision is made for compensation for the licences suppressed under a No Licence Resolution, though the number of years' purchase allowed becomes smaller at each vote, until the time limit has been reached.
Just the same principle of a descending scale in the number of years' purchase allowed becomes applicable, and for the same reason, to the compensation payable under State Purchase Resolutions, but with this difference—that under a State Purchase Resolution the State acquires not only the licence but also the bricks and mortar values, so that under a State Purchase Resolution some payment will always have to be made to compensate for the purchase of the bricks and mortar, whereas under a No Licence Resolution you will eventually reach a point where no payment has to be made. The second consequence of the fact that under a No Licence Resolution only the values of the licence have to be taken into consideration and paid for, is that the profit which you have to capitalise in order to arrive at the compensation shall not be the total profit derivable from the licence plus the bricks and mortar, hut only the profit derivable from the licence itself. How is that to be calculated? It is believed that in the normal case about two-thirds of the total profits may be regarded as attributable to the licence itself and, accordingly, that proportion has been inserted in the Bill as the standard. But, of course, it will always be variable by agreement or by the determination of the Commissioners, if the purchasing authority can show in any particular case that less than two-thirds of the profits should be regarded as attributable to the licence, or if the vendor can show that more than two-thirds can be attributable to the licence.
In addition, in the event of a No Licence Resolution being passed, provision is made for the compensation of hotels and similar 1004 properties which remain free to sell drink under private ownership in a State Purchase area, but they are required to give up the sale of drink if the area in which they are situated votes in favour of No Licence. The closing of redundant breweries and public houses may have the effect of throwing out of work a certain number of persons employed in them, and Clause 29 of the Bill provides for such persons being compensated. I wish to point out, as briefly as I can, that the Bill has been so drawn in order to reduce to a minimum the calls on the Exchequer in providing the necessary amount of money for compensation.
As regards the payment of compensation under a State Purchase Resolution, the capital sums, ascertained as I have already described, are to be converted on the 5 per cent. table into terminable annuities to redeem the capital sum in a period of twelve to fifteen years. I must explain that there is a mistake in the Bill, and that where it refers to "6 per cent." terminable annuities, it should read "5 per cent." It is believed that in the majority of cases the annual profits which the Liquor Management Board will earn from its conduct of the business will suffice for paying these annuities, and that means that the Liquor Management Board, instead of having to borrow large capital sums from the Exchequer and gradually repaying the Exchequer for the sums so borrowed, will discharge its obligations for compensation direct to the persons who are entitled to it.
Besides that, the Liquor Management Board, under a State Purchase Resolution, is required to earmark any surplus profits accruing to it, after paying the annuities in any area, for the purpose of financing its compensation obligations in future years. This it does by paying the whole of such surplus profits into a Central Fund, which is available to meet any compensation obligations which exceed the income which t he Liquor Management Board receives in future years. Therefore, it is only if the income in any year, plus the balance to the credit of the Central Fund, is insufficient to meet compensation obligations that the Exchequer is called upon for any compensation in respect of State Purchase Resolutions.
As regards the No Licence Resolutions, the Bill doubles the present rate of Compensation Levy to which the trade is subject under the Act of 1904, and pays the whole of the proceeds into the Central 1005 Fund. The Central Fund has to pay compensation for No-Licence Resolutions, and it is only if it is inadequate for that purpose in any year that the Exchequer is called upon for any compensation in respect of such Resolution. I am quite aware of what may easily be urged about the principle of providing compensation from funds supplied by the trade itself, but the appropriation of the Trade Levy to the Compensation Fund becomes, in effect, under this measure, a State-guaranteed insurance on the part of the trade against a No Licence Resolution.
The sources of income of the Central Fund, therefore, are—first, the surplus profits of the Liquor Management Board in State Purchase areas where they are managing the business themselves; secondly, the Trade Levy; and thirdly, the proceeds realised by the Central Fund from the sale of redundant properties. It seems probable that the Central Fund will be adequate to all the demands made upon it, and the contingency of the Exchequer being called upon to make good its guarantees may be regarded, I think, quite legitimately as remote. Of course, it has been impossible in the present uncertain times to calculate the actual actuarial value of the risks to the Central Fund, but experience will enable those to be measured fairly accurately as time goes on, and, provided that we can get a fairly firm basis, the statutory provisions as to the income which it is necessary to secure to the Fund can be modified by later legislation.
There are only two further points upon which I think it my duty to detain your Lordships. The first I am anxious about, because the Bill does divert to the Central Compensation Fund the proceeds of the Compensation Levy which was established by the Act of 1901, and therefore the gradual process of eliminating redundant licences, at the combined discretion of the licensing justices and the compensating authorities, gradually comes to an end. I know that many persons would regret that, but the answer is that if the voters in any locality desire the retention of licences they have the matter entirely in their own hands by establishing this principle of disinterested management, and making it a State Purchase area. The real change effected by the Bill with regard to the reduction of the number of licences is, I am convinced, a wholeome change. It is desirable to transfer 1006 the initiative for such reduction from the appointed justices, and to leave it to the people themselves to decide.
The other point is one upon which I wish to say a word because of the misconceptions that exist on the subject. The number of years' purchase under the Bill for the acquisition of a brewery concern starts at twelve years, and descends by successive stages. Lord Sumner's Committee, so popular opinion seems to think, said about fifteen years, but- —the noble and learned Lord will correct me if I am wrong in what. I am going to say—as I read that Committee's Report it did not say fifteen years; it said fifteen years would have been the right number of years to fix if purchase had been effected in the year immediately preceding the war, but., having regard to the fall in capital values since 1914, the fifteen years' purchase should be scaled down proportionately to the ratio between capital values in 1911 and capital values at the date of purchase. If you compare capital values to-day with capital values in 1914, which I have taken the trouble to do, you will find that the ratio is something like twelve to fifteen— twelve now, but fifteen in 1914. As a matter of fact, therefore, the Bill says exactly what Lord Sumner's Committee says.
I have to thank your Lordships for your forbearance and patience in listening to me, and to what, I am afraid, has been a very lame, unsatisfactory and inadequate account of a measure which it is not easy, at any rate for me, to elucidate. I have only one more word to say. I observe in discussions that proposals are often misunderstood, and attention is diverted to other mid unsatisfactory issues because it is suspected from the first that there is some motive underlying the measure proposed other than the motive which appears on the surface wish to say with perfect frankness that I have absolutely no motive except the motive which is prompted by a real hope that we have at last reached a stage in our experience when we are able to go forward upon an agreed line of policy, and to accept certain agreed principles.
I attack no interests and no particular system. I desire only to see our system developed and adjusted according to the circumstances and the spirit of the age in which we live. The problem of social reform and betterment which besets us in 1007 these days at every turn is, when reduced to its simplest terms, the problem of how we are all going to live together, and how we are all going to make the best and the most of one another; and it is because I am honestly convinced that a measure embodying these principles will enable us to make the most and the best of ourselves as a people that I beg leave to move that this Bill be read a second time.
§ Moved, That the Bill be now read 2ª—(The Lord Bishop of Oxford.)
THE PARLIAMENTARY SECRETARY OF THE MINISTRY OF HEALTH (THE EARL OF ONSLOW)
My Lords, this very important Bill raises a number of new and important issues, some of them of a very highly controversial nature, and in these circumstances I do not think that your Lordships will expect the Government to form an opinion as to the acceptability, or even the practicability, of the measure until considerably more time has been at their disposal to consider it thoroughly and adequately. Therefore, your Lordships will, I think, excuse me if I do not discuss the proposals in the Bill this afternoon. The right rev. Prelate told us that it is through no fault whatever of the promoters that it reached your Lordships' hands only yesterday morning. Time for its perusal and consideration has been extremely limited. The right rev. Prelate has also told us—and he was good enough to write to me yesterday to that effect—that he does not intend to take the Bill beyond its Second Reading stage, and, on that understanding, I am glad, on behalf of the Government, to be able to welcome the opportunity of obtaining a further ventilation and discussion of this most important, and in some respects highly controversial, proposal, both within your Lordships' House and outside it.
As your Lordships are aware, the Government have long been anxious to deal comprehensively with the liquor question, but hitherto they have been prevented from doing so by the overwhelming pressure of Parliamentary business and other difficulties, but ventilation of that portion of the liquor problem which is covered by this Bill will not prejudice any proposal arising out of the Conference recently held at the House of Commons, which the Government mar be able to bring forward upon the immediate problem of adapting to peace time the experience gained by the Central Control 1008 Board during the war. Many points of great importance arise upon this Bill, and we shall no doubt have the advantage of a full discussion on this subject in your Lordships' House, and outside it, before the Bill reappears in Parliament with any prospect of making progress.
§ VISCOUNT HALDANE
My Lords, I am glad that the Government have at least taken up an attitude that is not unfriendly, although it is non-committal. In Scotland we have had an Act which embodies sonic features, at any rate, closely analogous to those in this Bill, and we have had experience which has led us to conclude—what sonic of us expected to find before—that the democracy is very safely to he trusted with powers of this kind. Its action in Scotland has been of a highly conservative character, and I do not doubt that the action of the democracy in England, were this Bill to become law, would be equally careful and meticulous. I do not think that there is anything to be feared from that part of the Bill which gives the three options, nor do I think the setting up of such powers of control as are dealt with in another Part of the Bill would be very likely to lead to danger. The Carlisle experiment has satisfied many of us that steps in that direction may be taken with great advantage.
I feel that the whole question of this Bill, and of every Bill of this kind—as, indeed, the right rev. Prelate said—depends on this question—Are you going to leave these things to the public itself to regulate? If you are, I do not think you need be afraid of anything violent, and, on the other hand, the advantage is very great, because those engaged in the conduct of the liquor traffic at once become apprehensive of public opinion and proceed to raise the conduct of their business to a higher standard. That is going on everywhere, and the fact that these large powers are now being discussed has led those in the trade to take a good deal of pains to make it more conformable to the standards that are desired. In Scotland it has been so. On that ground alone I should welcome some such proposals as appear in the Bill. I recognise that the Government are right in saying that a measure so far-reaching should not be rushed through, and probably the right rev. Prelate takes no exception to the proposition that a short time should elapse before further consideration of the Bill is taken,
§ LORD SUMNER
My Lords, it is only the fact, that the right rev. Prelate made some reference to a Committee of which I had the honour to be Chairman, and whose Report has come to be described by my name, that leads me to intervene at all in this debate. I have had no opportunity of considering the details of this Bill for the reason which has been explained, and which, I take it, makes it impossible for your Lordships to pretend to exercise any judgment on the scheme to-day. I should have thought it was wholly impossible to take the Second Reading of a complicated measure like this after the contretemps which has led to the Bill being in your hands for but a short time. It is really rather surprising even that your Lordships should be asked to give a benevolent Second Reading to a complicated measure which, admittedly, no one has Lad an opportunity of fully considering.
I only desired to avoid any misunderstanding by reason of the reference that has been made to the Report of that Committee. It was appointed during the war, in the year, I believe, 1916, and with a very limited reference. As I and all my colleagues read the terms of reference it had absolutely nothing whatever to do with the policy of State Purchase. It, was confined strictly to considering whether a scheme of State Purchase, capable of being carried out without gross injustice, could be devised, and to ascertain what the cost of State Purchase at that time might be were not taken into the confidence of the Government as to the motives for considering such a matter at that stage of the war. I may be doing the Government some injustice, and I have not looked at that Report for a long time, but, speaking generally, the idea was that the Government restrictions on beer had watered it down so much that the compensation which would have to be paid to the brewers might be more than the price of buying out the whole thing.
The Report of that Committee was, I think, unusual in any discussion connected with the liquor trade. It was an unanimous Report; a circumstance which, if you look at the names of those composing the Committee, proves that we were not considering anything but a purely financial matter. Personally, I never, from the beginning, considered myself at all likely to be in favour of a scheme of State Purchase. The more I saw of it the more convinced 1010 I was that it was not likely to be a success. My reason, quite briefly, is this. It is a profound disbelief in that merit of human nature which seems to have animated the right rev. Prelate so much in the course of his address.
I was satisfied that if you had the whole liquor trade of the country in the hands of the Government you would find the Government perpetually under a triple pressure. It would be pressed by the total abstinence people, who would say: "Touch not the accursed thing. Conduct your trade so as to sell as little drink as you can. "It would be pressed by the people employed in the trade, a large number, who would say: "We are the servants of the State; let us be paid accordingly." And their wages would go up. It would be pressed by the numerous others who, I believe, would still continue to desire drink, who would say: "What is the good of having a State public house unless the price of beer goes down?" I was perfectly satisfied then, and I remain satisfied now, that having paid between £300,000,000 sterling and £400,000,000 sterling, which was the price we thought would be necessary to purchase this gigantic property, we should soon find that under political pressure there were no profits to be made, and that before long there would be an annual loss on the trade.
I want your Lordships to understand that the scheme contained in that Report had nothing whatever to do with any Local Option system. It was a scheme for a national purchase of the whole thing, whereas this scheme, as far as I have understood it, is that it should be possible for a particular area to vote that the liquor trade, within that area, should be purchased by the State at the expense of the State. See what the result of that would be. If you could depend on the liquor trade in a particular area being carried on without loss, or even at a profit, it might be tolerable for that area to vote that the Exchequer should spend a few millions to buy it, because they wished to get rid of it. But you have to face the possibility that, having bought out the trade in that area, it would thereafter be carried on at a loss and most of the money would be thrown away. I contend that it is quite intolerable that a single county, or a smaller area, should be allowed to vote away public money on a local investment which is likely to 1011 result in a loss. It is contrary to every principle of sound finance that the money of the Exchequer should be voted away by voters in a local area upon a limited issue like this. For that reason, I wish it to be understood that in my view the Report of that Committee has nothing to do with the scheme of the Bill, and affords no support other than what may be derived from incidental references to matters such as the rights of debenture holders, and so on.
I will not detain your Lordships with any discussion of the details of the measure, having had no opportunity of acquainting myself with them. I do, however, venture to say, first of all, that a measure of this kind ought, in my humble opinion, to be introduced by the Government of the day, and not by any private association of individuals, however representative or however devoted they may be. Secondly, this is essentially a financial matter, and, much as I desire to see legislation initiated in this House, it seems to me to be, of all measures, one which ought to be introduced in another place. The third point which I wish to impress upon your Lordships is that, at a time when even the authorities of the Treasury say that taxation can go no further, at a time when hardly anybody seriously supposes that the debit and credit sides of this year's account can be made to balance, it would be criminal to contemplate incurring any further expense on the top of our present obligations. This is no time, even for the highest and holiest causes, to contemplate a measure which will result in a purchase of property on a large scale and at an enormous further expenditure by the State.
THE EARL OF PLYMOUTH
My Lords, I will venture to make an appeal to the right rev. Prelate, and to ask him whether he cannot see his way not to press the Second Reading now. We are placed in the position—I, like most of your Lordships—that we first saw this Bill only forty-eight hours ago. The right rev. Prelate explained and apologised for the accident, and I recognise that it was not his fault; but the fact remains that we have not been able to consider the Bill. It is a very far-reaching and complicated measure. The right rev. Prelate's own explanation of it was very lucid, but, when he came to the latter part, I confess that I was unable to follow very closely. It is a very intricate matter. In that case, is it fair to ask the 1012 House to give a Second Reading, committing us, to a certain extent, to the principle of a Bill to which, for my part, I am bound to say that I think I am opposed? I do not think local option is the proper way of dealing with this difficult question. I will not pursue that argument any further, because I do not wish to discuss the details of the Bill, but I would appeal to the right rev. Prelate to be content with having introduced it into this House, and with having had it printed, so that it is within the knowledge of the people generally, and can, no doubt, be referred to whenever this question is discussed in a large manner with the desire, which all of us share, that all interests should he consulted, and that we should, if possible, arrive at an agreement.
§ VISCOUNT CHAPLIN
My Lords, if I might intervene for a single moment, may I say that there can be no doubt about one point, and that is that this is a Bill of very great importance. Notwithstanding the most able and painstaking explanation which was offered by the right rev. Prelate in support of his measure, I am bound to add that I have not been able to find from more than one member of your Lordships' House that any noble Lord has had an opportunity of reading this Bill with the care for which it undoubtedly calls. So far as I am concerned, I had never even seen it until I came into the House, and took a copy from the case close by this Table. In these circumstances, I agree entirely with the speech of the noble Lord, Lord Sumner, and with my noble friend who has just resumed his seat. I hope that the right rev. Prelate will not ask the House of Lords to commit itself to the principle of this Bill. It is impossible for the majority of your Lordships to have reached a thorough understanding of it, and I hope the Second Reading will not be pressed.
THE LORD ARCHBISHOP OF CANTERBURY
My Lords, I do not think that anyone who has listened to the discussion can feel that the request that has been made, that we should not be asked to give a Second Reading to this Bill to-day, is an unreasonable one. It seems to me a perfectly fair and right thing to demand. The Bill has not been long in your Lordships' hands, and, even if it had been, I can imagine that it might have been a little difficult to have arrived readily at a judgment upon a matter of such very great importance. Everyone 1013 who is interested in this subject will desire to study the extremely lucid exposition of the Bill which has been given by my right rev. brother this afternoon. In the circumstances, I think the wisest course would be to adjourn the debate. If we do so, we shall not have committed ourselves to the Second Reading. The Bishop of Oxford has already stated that it was not his intention to go beyond the S000nd Reading, if he obtained it, during the present session of Parliament. In any case, I imagine that, if we agreed to the Second Reading to-night, it would be an unreal thing, because it would be passed by those who have not had an opportunity to read and consider the Bill as they ought, owing to the accident to which I have referred. I beg to move the adjournment of the debate.
§ Moved, That the debate be now adjourned.——(The Lord Archbishop of Canterbury.)
§ VISCOUNT ASTOR
My Lords, the right rev. Prelate, in moving the Second Reading of this Bill, told us at the outset that he was bringing it forward in order to stimulate public discussion. He also Kidd that he thought it was essential that we should not lose the gains which we have obtained during the war. Perhaps your Lordships will allow me to add a few words upon the Bill, as having been one of the original members of the Liquor Control Board. Like most bodies that helped to win the war, from the Liquor Control Board to the War Cabinet, that particular body has been the subject of a considerable amount of criticism and misrepresentation recently. I think, however, that all who have followed its proceedings will agree that it; did an enormous amount to increase the efficiency of the country, and, therefore, to bring about the successful prosecution of the war.
I suppose that I was put on that body because I was not committed to any particular group of the Temperance Party, and because I had not any preconceived ideas as to how this very difficult and still unsolved problem should be tackled. It seems to me that it is just as necessary now for us to obtain the maximum amount of efficiency, as well as to have the largest amount of national economy, as it was during the war. We are not going to retain our world markets, or to gain new markets, if we relax and lose all the gains 1014 that we made during the war; if, for instance, we accept the advice, which is being offered to us at the present moment, to increase the night life of London. I cannot imagine anyone who is interested in the efficiency of the country, who is really concerned in reducing waste, being able to advocate seriously an increase in the night life of London and the other great cities, with all that it means.
The noble and learned Lord, Lord Sumner, said just now that he thought that only the Government should bring forward a licensing Bill. It seems to me that the Government failed signally, during the last two years, to bring forward any licensing and, therefore, that they and everybody else should be grateful to anybody who brings forward a reasonable and clear proposal for solving this very difficult question. I understand from the noble Earl who spoke on behalf of the Government that this particular Bill does not in any way cover the ground of the anticipated Government Bill, which is going to be based on the recommendations of the Licensing Committee.
THE EARL OF ONSLOW
I beg the noble Lord's pardon; I did not anticipate any future announcement as to the terms of the Government Bill.
§ VISCOUNT ASTOR
In any case, I understand from the public Press that the Licensing Bill is going to be based on the Report of the Commons Committee, and is to deal mainly, if not entirely, with certain Regulations and restrictions of the Liquor Control Board. I gather that it is not going to contain any new Regulations or restrictions, but is to continue the policy of relaxation which has been going on ever since the Armistice. That is to say, that if that Bill is carried into law, if a certain number of Regulations are made statutory and permanent, we shall have less restriction and regulation than we had in December, 1916.
I will explain why it is that I give that particular date. In December, 1916, the Liquor Control Board reported unanimously to the Cabinet that they had been in existence something like eighteen months, and that they had enormously improved national efficiency by their restrictive Regulations, hut that the successful prosecution of the war was still being impeded by inefficiency caused by 1015 drink, and that in their opinion it was impossible to get the maximum of efficiency consistent with the consumption of alcohol, so long as the liquor traffic was in private hands. It was because of that that the Liquor Control Board recommended State Purchase, which they had tried at Carlisle. It had been an enormous success there. We had been able to have more public content and more efficiency in that locality than had been possible for us even with more drastic Regulations and restrictions.
But the policy of national State Purchase was not adopted in 1917, very largely because of the activity of the German submarines. Your Lordships will remember the seriousness of the submarine menace, when this country at one time really was threatened with starvation. Accordingly, it became essential to economise in all food stuffs, and, because of that, the amount of grain used in brewing was reduced by half, and the output of spirits was correspondingly less. National efficiency increased because there was a less amount of alcoholic drink available for consumption, and the whole of that momentum, which would have enabled the Government to put forward and carry a measure so important, was lost. We are, therefore, back to where we were in December, 1916, when, in the unanimous opinion of the people who had been deputed by the Government to consider the whole question of inefficiency due to the consumption of alcohol, the progress of the country was seriously impeded by what is called the drink problem.
The Liquor Control Board reported that it was impossible really to control the drink trade while it was in private hands. It is, in fact, impossible to reconcile national interests with private ownership in liquor. Your Lordships will agree that it is not in the national interest to have the maximum consumption of alcohol. Yet it is impossible to say to an investor that he shall not try to get the maximum dividend or profit out of the money which he has invested in the industry. Accordingly, you have a perpetual and irreconcilable conflict between the national interest, which aims at reducing or checking the consumption of alcohol, and the private interest, which is hound to stimulate consumption.
May I point out that the noble Viscount is not speaking 1016 on the question before the House, but on the Bill?
§ VISCOUNT MILNER
May I make a suggestion? I should very greatly regret if this House had not an opportunity of considering this measure, and perhaps even more, of considering the policy of which this measure seems to me to be a somewhat inadequate expression, more carefully than we can to-day. We have not really had a fair chance, as the right rev. Prelate admits, of considering the Bill. I am, therefore, in favour of the adjournment, but I am in favour of the adjournment only if it means that this Bill is to have further consideration, and not if it means that this Bill is to be dropped and forgotten. If there was any danger of that I should feel very reluctantly compelled to vote against the adjournment and in favour of the Second Reading. I do not wish to do that, but I want the matter to be much more thoroughly considered than it would be, or perhaps could be, to-day. It occurs to me that I should like to hear the argument of Lord Astor, which I believe is not by any means exhausted, on a more suitable occasion. I really think he may be out of order now, because the Motion before the House is for the adjournment of the debate. I venture to press upon your Lordships that the best thing would be to adjourn the debate, but only if we get an undertaking from some one—perhaps the Archbishop of Canterbury will give us such an undertaking—that the discussion will really be resumed, and the matter thoroughly thrashed out, during the present session.
§ On Question, Motion for the adjournment of the debate agreed to.