Four main problems have to be faced before any adequate scheme of licensing reform can be formulated. They are: (1) compensation; (2) of whom shall the licensing bodies consist? (3) what is to be done with the clubs? (4) shall “tied houses” be permitted?

Compensation.—This has been for many years the main block to reform. Are publicans, when deprived of their licences through no fault of their own, entitled to compensation or not? For long there was considerable doubt as to the legal aspects of the matter. One party argued that as the publican has his licence granted for one year alone, and as the magistrates have power to refuse to renew such a licence, therefore the drink seller has no vested interest in its continuance, nor the slightest claim to compensation if its renewal is refused. On the other hand, it was said that while the justices have nominally the power of refusing the renewal of old licences, it is a strictly limited power that they never put into force except for wrong-doing on the part of the licensees; and that the custom has so long prevailed of regularly renewing the certificates of all publicans who behave properly, that an expectation of renewal has become universal; and that by virtue of custom they have a vested interest, and are entitled to compensation if renewal is refused.

The legal aspects of the matter were finally cleared up in 1891 by the decision of the House of Lords in the well-known case of “Sharp v. Wakefield”. The magistrates of the Kendal division of Westmoreland refused, in September, 1887, to renew the licence of an inn at Kentmere on the grounds of the remoteness of the premises from police supervision, and the character and necessities of the locality. The owner of the house, Susannah Sharp, appealed to the Quarter Sessions, but that body upheld the magistrates. It was resolved by the drink interest to make this case a test one. Their argument was that for the renewal of an existing licence the justices are not entitled to inquire into the character and wants of the neighbourhood, or to refuse a licence on the grounds that there is no longer a necessity for a licensed house there.

The case was taken from court to court, and everywhere the decision of the magistrates was upheld. Finally it came before the House of Lords in January, 1891; and the judgment of their lordships was given in the following March. The five law-lords were unanimously of opinion that justices have the right to refuse the renewal of a licence if the circumstances of the neighbourhood or any other sufficient cause render it desirable. The Legislature, their lordships stated, gave the magistrates an absolute discretion both for granting and renewing licences: and such discretion is to be exercised (to quote the Lord Chancellor) “according to the rules of reason and justice, within the limits to which an honest man, competent to the discharge of his office, ought to confine himself”.

This decision was a serious blow to the owners of licensed premises. It at once and for ever swept away all claims of a legal right to compensation, and showed that vested interests in licences are absolutely nonexistent.

But the question still remains whether, although the publican has no legal claim to compensation, he is not morally entitled (under ordinary circumstances) to some consideration, if suddenly and through no fault of his own he is deprived of what he was for long encouraged to look upon as his right. It is felt by many that it would be a hardship to take from a well-behaved licensed victualler his means of livelihood without some consideration. Whether this sentiment is right or not the writer of this book does not propose to discuss; but it undoubtedly exists, and the temperance party will gain nothing by shutting its eyes to it.

On the one hand we have the claim of prohibitionists that no publican should have a penny from public funds as recompense for dispossession; on the other hand, there is the plea of the “trade” advocates, that he ought to have the full difference between the “trade” value of his house and its value as ordinary premises. The first of these seems rather harsh, and the second is certainly unreasonable. Is there no via media?The unreasonableness of the second proposition may best be seen from the fact that in many towns a very large proportion of the public-houses do not pay their way. Yet every one of these places is valued at a price far above its value as an ordinary business house; consequently, if the authorities were to pay the terms asked by the owners on closing them, they would actually be giving considerable sums for losing concerns.

It may be asked why, if such houses do not clear their expenses, their proprietors keep them open year after year. The reasons are twofold: First, the houses are usually owned by brewers, who fear that if they abandon the licences, rival brewers may persuade the magistrates to grant additional licences in other parts of the place. Secondly, the establishments are often used as traps for depriving the inexperienced of their stock of money. The process is very simple. A house owned by a brewer goes to the bad, custom falls off, and the receipts fail to cover the outgoings. Thereupon the tenant is given notice to quit; and a salaried manager, skilled in the art of drawing custom, is placed in charge of it. This manager is usually a man well known in the neighbourhood, and with plenty of friends. He belongs to nearly all the friendly societies in the place, Buffaloes, Oddfellows, and the rest; he can give a tip on the coming race with any man, and he is “hail fellow, well met” with every Tom, Dick and Harry. All his friends, of course, flock to patronise him; the brewer is careful to supply specially good drink; a pull over is given for every one’s measure; and soon the takings of the house are increased enormously. Then the place is advertised, and a novice is attracted by it. The brewer’s agent shows him the books, and is able to prove that the business is going up by leaps and bounds; and so the novice is persuaded to pay, say £100 in cash for the good-will, and take over the house. The manager who has drawn all the custom leaves; and his friends leave with him. The poor new publican soon finds that he is losing money every week, and before long he begins to get in debt to the brewer. This goes on until his debt amounts to the price he paid for the good-will. Then the agent visits him, explains that as he is evidently not suited for the trade he had better go. The brewer will kindly allow the £100 paid as good-will to go to cancel the debt; and the tenant must leave as quickly as possible. The house is then used for the fleecing of another novice; and so on.

If any reader doubts the truth of this, let him consult some experienced publican who is not afraid to speak the truth, or let him notice in any moderate-sized town how often many of the smaller licensed houses are advertised as being “under new management”.

Now, it cannot be said that the owners of such houses as these mentioned have the slightest equitable claim to any consideration. The only way to avoid paying money to such would be to base any scheme of pecuniary compensation not on the artificial trade value of the house, but on the actual profits gained, as shown by the books and vouchers of the place and by the publican’s income-tax returns.A second limit to any scheme of compensation should be that no one, save the licence holder himself, should be entitled to any consideration. Big brewing firms that have bought up large numbers of licences are well acquainted with the risks attaching to them. The British public may be anxious to treat the poor licensed victualler generously; but it will hardly sanction the appropriation by wealthy wholesale firms, that thrive by fostering public misery, of large sums of public money. This is the opinion of many by no means opposed to any compensation. Mr. Gladstone, in the House of Commons (15th May, 1890), in speaking of this matter, declared: “This I must say, I cannot conceive any state of things in which the State authority would have the smallest duty or the smallest warrant for looking to anybody in these transactions, except the man with whom it deals—that is to say, the man to whom the licence is issued, and on whom it imposes its responsibility”.

In any plan of compensation the money should be raised from the publicans themselves. Those remaining benefit by the closing of other houses; for there are fewer shops selling drink, and therefore those left get more custom. This has already been done successfully in Victoria by means of increased licence fees, etc.

As the publicans have no legal claim to consideration it cannot be expected that any scheme for their compensation will be permanent. It will rather provide for a softening to them of a time of transition.

Within these limits, surely some practicable scheme can be formulated. The following, while dealing liberally with the keepers of licensed houses, would yet be an advance on the present position. Let it be arranged that for ten years the men at present holding licences shall be allowed to retain them; and if during those years the authorities wish to close any public-houses they shall pay the holders compensation based on the following scale: during the first two years, five years’ purchase, reckoned on the average profits of the previous three years; during the third and fourth years, four years’ profits; during the fifth and sixth years, three years’ profits, and so on till at the end of the tenth year no compensation would be payable. The funds for such payments to be raised by increased licensing fees and an extra tax on liquor. No money to be paid to any person but the licence holder himself. At the end of the ten years the number of houses could be reduced to a fixed scale, say one for every 500 or 1000 of population.

The principal objectors to such a compromise would probably be the teetotalers. But they would do well to consider whether it will not hasten forward the coming of that sober England for which we all long if some method can be found of breaking through the present intolerable deadlock. There is nothing opposed to temperance in granting compensation. It is merely a matter of policy, not of principle: though, to hear some reformers talk, it might be imagined that the idea of partly recompensing licence holders for their loss involves some terrible wrong.Both Sir Wilfrid Lawson and Mr. Caine have in the past admitted that a compromise about compensation might be worth considering. In the House of Commons (5th March, 1880) Sir W. Lawson said: “Honourable members tell me that there ought to be something about compensation in my resolution. If I would only do that they would find it in their hearts to vote for me. Now I do not want to condemn compensation, but this is not the question which is before the House. The question is, whether it is right to force these houses upon an unwilling neighbourhood; and if it cannot be done without compensation, let us have compensation. I am very sure that if ever my resolution is crystallised into an Act of Parliament this House will never refuse a fair demand from any body of men.”

Mr. Caine, in talking to a Pall Mall Gazette interviewer, said, when dealing with the compensation proposals of the Church Temperance Society: “The time plan would work in this way: You might give to all old licences a definite lease of life, ten years being the utmost limit conceivable.... At the close of the ten years’ term licences would be granted for one year only, and no compensation whatever would be granted in case of extinction.... (It) would present to temperance reformers the attractive and important feature of finality. It certainly demands most careful consideration on all hands.”

Mr. Chamberlain, in 1876, proposed terms very similar to these. His idea, when discussing the buying up of licensed premises in order to commence municipal public-houses, was that compensation should be paid to the licence holder alone at the rate of five years’ profit, based on the average profits of the previous three years.

Truth compels the admission, however, that Mr. Chamberlain’s views on this point have greatly altered in recent years. In writing to me in April, 1894, he said:—“Further consideration has convinced me that the method of compensation proposed by me in 1876 would not be the best guide to a fair settlement, and that it would be impossible to ignore the interests of other persons besides the licensed holder. I think now that the best way would be to submit all claims to an official arbitrator, who would be instructed to give for the property such sum as would be given by a willing buyer to a willing seller in the open market—in other words, the fair market price.”

Licensing Bodies.—Of whom should the licensing bodies consist? There are three different kinds of bodies proposed: (a) The magistrates, as at present; (b) county and town councils; (c) elective boards ad hoc. The magistrates have for long carried out the necessary duties; and in the country parts they have done as well as could be expected. In towns, more particularly in small boroughs, their rule has not worked quite so satisfactorily. Occasional charges of being influenced by pecuniary considerations in the performance of their duties have been brought against them; but such charges are so very rare that direct bribery may be said to be practically unknown. But magistrates in small boroughs are often influenced by some very extra-judicial considerations. Many of them are small tradesmen, appointed for political reasons. They are well acquainted with the brewer who is at the back of the application for a licence, and possibly have business transactions with him: naturally they do not care to offend him, and so a licence is often granted when it ought not to be.

The licensing authority is altogether outside the usual province of the magistrate’s duties, which should be purely judicial. It has never been found satisfactory to unite judicial and executive functions in one body; and jurists are agreed that this should be avoided; yet while they are the licensing authority the magistrates are both administrators and judges. But the principal objection to magistrates is that they are not in the least representative, and can do as they please entirely irrespective of the public.

A proposal favoured by many statesmen is that of taking the duty of issuing licences from the magistrates and placing it in the hands of county and borough councils. A representative body would thus be secured; but the result of this would simply be to ruin many of the councils. The liquor question would swallow up every other in public estimation, like a veritable Joseph’s rod. Men would be elected solely because of their views on licensing reform. The publicans would appoint their candidates, and the teetotalers theirs; and both parties would have a pitched battle at almost every election. Many good administrators, rather than face such contests, would remain outside, and the whole tone of the councils would be lowered.

The most practicable plan of securing a popular licensing authority seems to be the election of Boards specially for this one purpose, as School Boards are elected for the management of elementary schools. The area which such Boards control should not be too small and particular care would have to be taken to prevent those pecuniarily interested in the traffic getting on them.

But it must be remembered that no change in the personnel of the licensing authority will effect much, and it is possible that any change may do harm. A representative body will be more liable to be influenced by outside consideration than are the justices; and the Boards in some places will favour the drink sellers more than the magistrates do now. This consideration has induced some reformers to advocate leaving the administration in the hands of the present authorities, but limiting their power by a direct popular control over the issuance of new licences.

Clubs.—No licensing reform, however complete the restraints it places on public-houses, will accomplish much unless at the same time it deals with the club evil. In the ordinary drinking club we have something far more dangerous to society than the worst-conducted public-house. Reformers were for long so absorbed in fighting the open drink shop, that they had no time for attending to anything else; and statesmen of all parties dreaded arousing against themselves the opposition which they knew would follow the curtailing of any of the privileges of club-land. The result is that there is to-day in every large town a considerable and rapidly increasing number of drinking dens, subject to no control, paying no fees, requiring no licences, and allowed to keep open all day and every day, Sunday and week-day alike. With the genuine club no one wishes to meddle; but the majority of places which go under this name are nothing but drinking and gambling hells, and are usually financed by, and run for the profit of, some brewer. Within ten years their number has increased almost tenfold, and from all parts of the land comes the same tale of the mischief they are doing. Some months ago, the Dublin Corporation sent a petition to the Government in which it said: “We view with alarm and dismay the rapid increase of bogus drinking clubs in all parts of the city; in our opinion these clubs are a prolific source of poverty, crime, and disorder; they are instrumental in depreciating the ratable value of property wherever they are established; and the laws which allow, without let or hindrance, their degrading operations at all hours of the night and of the day, are a disgrace to civilisation.” The Corporation urged the Government to introduce a measure “that will be effective in grappling with this degrading and pestiferous evil”. At Cardiff the notorious “Field Clubs,” formed solely and avowedly for the purpose of supplying their members with ale on Sundays, and so setting the Sunday Closing Act at defiance, were able to carry on business for some time without any hindrance from the police. A case which shows even more clearly than this how our licensing system is being reduced to little better than a mere farce, was mentioned last year in the House of Commons. The licence of a certain village public-house had been taken away because of the misconduct of the publican, and because the place was not required. Thereupon the brewer who owned the building opened it as a club, making the former publican manager. The rules were carefully drawn up, with the aid of counsel, to keep the house open to as many as possible; an entrance fee of a few pence was fixed; and the club was in a position to accommodate almost all its old customers. It had not to observe any of the regulations imposed on the regular drink shops, and consequently did twice as much business as before its licence was taken away.

Such instances might be multiplied indefinitely, but there is no need; for to all who know anything of the inner life of our great cities these things are commonplaces. How to deal with these bogus establishments, and yet not at the same time to unduly interfere with genuine clubs, has become an urgent and serious question. The Royal Commission on the Sunday Closing (Wales) Act recommended that all clubs where intoxicating liquors are sold should be registered with the local authority, and that the register should be open for the inspection of the police. The Commission was also strongly of opinion that “clubs which exist only for the purpose of supplying drink, or only colourably for some other purpose, should be declared absolutely illegal”. When Lord Randolph Churchill brought his licensing scheme before the House of Commons, he incorporated with it clauses for the registration and taxation of clubs, as has already been described in the previous chapter. The Bishop of London’s Bill in 1893 contained similar clauses, but neither measure ever got beyond the initial stages. The Clubs Registration Bill, as amended by a Select Committee of the House of Commons last year, provided (1) that every club (with certain strictly defined exceptions) selling intoxicating liquors on unlicensed premises must be registered; (2) that it shall only be managed in accordance with its registered constitution; and (3) that an annual return shall be made of the members of the club. There were further provisions forbidding the sale of any drink to be taken from the club premises, preventing any person under eighteen years old becoming a member of the club, and limiting the number of honorary members to one for every twenty ordinary members. The Bill applied only to England, and was admitted by its supporters to be miserably inadequate; but it would have been a great improvement, had it passed into law, on the present state of affairs. However, it went the usual way of Bills in that barren Session.

Happily our colonies can teach us something on this matter. During the last nine years there has been an extremely simple yet very practical clause in the Victorian licensing law dealing with clubs. It provides that every bonÂ-fide association that was formed before the passing of the Act should be regarded as a club; but that any club established afterwards must, in order to obtain the right to supply its members with intoxicants, consist of “not less than fifty members, united for the purpose of providing accommodation for and conferring privileges and advantages upon the members thereof”. Such accommodation has to be provided from the funds of the club, and no person is allowed to get any benefit from the club which may not be shared equally by every member. All clubs have to be registered, and their certificates may be withdrawn at any time by the Licensing Board.

In the Licensed Victuallers’ Amendment Act, brought before the South Australian Parliament in 1890, more elaborate provisions were made for meeting the club difficulty. Clubs numbering not less than fifty members in Adelaide, or not less than twenty-five in other parts, are exempt from the ordinary Licensing Act, so far as selling to their own members goes, provided the following conditions exist:—

1. The club must be established upon premises of which such association or company are the bonÂ-fide occupiers, and maintained from the joint funds of the club; and no persons must be entitled under its rules to derive any benefit or profit from the club or for the sale of liquors which is not shared equally by every other member.2. It must have been proved to the satisfaction of the licensing bench at an annual or quarterly meeting that the club is such an association or company as in this section is defined, and that the premises of the club are suitable for the purpose.

3. It must be proved to the satisfaction of the licensing bench that such club has a committee of management, and that some person has been appointed by them steward or manager.

The club is obliged to pay an annual registration fee of £5, and to obtain a certificate from the clerk of the licensing district; such certificate being withdrawable if any of the conditions under which it is issued are broken.

On some such lines as these we must look for the solution of the club problem in England. Any measure to be really effective must provide, first, that proprietary clubs and clubs financed by those interested in the sale of drink shall be treated exactly the same as public-houses. The various regulations given in The Clubs Registration Bill should be retained, but the certificate of registration should only be obtainable after the licensing justices are satisfied as to the genuine character of the association, and have ascertained that it is established primarily for some other purpose than the supply of intoxicants. As clubs cause a decided diminution in the revenue obtained from licensed houses, it seems reasonable that they should be subject to a special excise tax, graduated somewhat after the manner provided in Lord Randolph Churchill’s Bill.Tied Houses.—During recent years it has become more and more common for brewers to own public-houses, and to make the holders of the licences nominees of their own, dismissable at will. In many towns over four-fifths of the drink shops are either owned or controlled by brewers or wholesale spirit merchants. Year by year the wholesale firms are driven by competition to purchase more and more houses; and soon it will be difficult to find establishments in which the nominal publican is master of his own business. It was manifestly the intention of Parliament, in passing the various licensing Acts, to make the managers of licensed houses responsible persons, who would have some stake in the business, and to whose interest it would be to strictly observe the law; but by the “tied-house” system all this is changed. Through it the licensee is but little better than a man of straw, and the real controller is the brewer.

There are two principal ways in which the wholesale firms “tie” a house. The first is as follows: A man with a small amount of capital wishes to take a public-house. The price of the good-will, stock and fittings of the place is, say, £1500. The would-be publican has only £300, but a brewer agrees to lend him £800, and a spirit merchant £400, on condition that he binds himself to deal solely off them for his liquors. This is the least objectionable method. The other way is for the brewer to be the owner of the public-house, and the publican his tenant. The latter pays a certain amount, varying according to the value of the house, as good-will; and it is stipulated that he shall deal off the brewer for all his malt liquors. He is usually liable to dismissal at a very short notice; and it is an understood thing that if the trade of the house drops at all he will have to leave. He must push his business at any cost and by any means. Most of the breaches of the law committed by publicans are due to this; for the unhappy licensed victualler has often no choice except between fostering his trade by illegal methods or getting notice to quit.

It might be thought that it is hardly to the interest of the brewers to risk losing the licences in order to do a somewhat larger trade; but those who argue thus are not acquainted with the working of the law. Let us suppose a case typical of many. A publican is convicted before the magistrates on some very serious charge, say that of harbouring improper characters; and his licence is endorsed. It may be mentioned, in passing, that most magistrates refuse to endorse a licence except an offence is very grave or frequently repeated. At the next licensing sessions the case comes on, and the justices demur at renewing the certificate. The lawyer for the owners then addresses them somewhat in this way. “The house in question,” he says, “is owned by the well-known firm of Messrs. Grey & Black. They had not the slightest idea that their tenant was guilty of such conduct as was unhappily proved, and they greatly regret it. It is their wish to keep their houses respectable, and they do all in their power to accomplish this. In this case, immediately the licence holder was convicted they gave him notice to quit. The good-will of the house has been sold to Mr. Tom Brown for a substantial consideration, and the old tenant who was convicted has no longer any interest in the place. Mr. Brown is a most respectable man; and I can bring forward unimpeachable witnesses, gentlemen well known to you, who will testify to this fact. Now, gentlemen, I cannot deny that you have the power to refuse the licence if you wish; but I would venture to point out to you that by doing so you would punish, not the man whose wrongdoing we all condemn, but Messrs. Grey & Black who own the premises, and Mr. Tom Brown who has bought the good-will. Mr. Brown, though he has done nothing wrong, will be the loser of a very considerable sum by such a refusal. You will, perhaps, permit me to say, gentlemen, with all deference to your judgment, that such a course would not be in accordance with justice, nor with the honourable traditions that have always distinguished this bench.”

In nineteen cases out of twenty the magistrates agree that it would be rather hard on Brown to refuse; and accordingly they grant the renewal. The risks of losing a licence are so small that they are hardly worth taking into consideration. First of all, there is very little probability of the police proceeding against a house, except when compelled by outside pressure. Then, when the police do proceed and secure a conviction, the licence is not usually endorsed. Even after endorsement, a judicious change of tenants can be made; and so the licence retained.The system of “tied houses” is bad for every one except the brewer. It is bad for the publican, for it reduces him from master of his own house to a servant of the wholesale firms. He has to take such liquor as they please, and pay the price they demand for it. It is a recognised custom in the trade for some if not all of the brewers to charge their “tied” customers more than they do the free.

The plan is bad for the public. In place of the main business of the publican being to satisfy his customers, it is to retain the good-will of the owner of the house. In a district where one firm controls all the houses, there is no longer competition between the different publicans as to which shall sell the best drink, for all sell the same; and the brewer is able to palm off his worst brews on the people there.

Last, but chief of all, it is bad for good order and for the general well-being. The licensed victualler, being placed in such a position, is too often willing to adopt risky methods for attracting custom, which he would not venture to employ had he a substantial stake in the house. By this he not only injures the character of his own premises, but compels his rivals, who own free houses, to imitate him in order that they may not lose their trade. And so the whole method of conducting business in the neighbourhood is lowered.

The Times cannot be accused of teetotal bias; and an utterance by it on this matter will command weight. “The natural tendency of a brewer is simply to push the sale of his beer,” said that journal in a leading article on 12th September, 1892. “Provided no forfeiture of the licence be incurred, the especial manner in which the business is conducted does not matter much to him. His main desire is that the neighbourhood shall drink as much as possible. His servant, the publican, who has little or no property invested in the premises, has no strong personal motive for caution. He wishes to ingratiate himself with his employer by promoting a liberal consumption. The fear of risking the licence affects him far less than if it meant for him positive commercial ruin. From the point of view even of the customers, it has been felt that a spread of the monopoly of brewers is inconvenient. When a brewer is absolute master of a house he can, unchallenged, supply it with bad or unwholesome liquors.... Practical experience, at all events, has created a keen jealousy of the system of tied houses, and a determination to make a stand against its unlimited predominance.... Where the function of a court is the commission to certain persons to conduct a trade under its supervision, its manifest duty is to see that its delegates are free agents. A publican who can be ejected at once, or be subjected to ruinous penalties, if he exercise the least liberty of choice of his stock, and unless he accept any trash a brewer consigns to him, is a cipher.”

A remedy lies all ready in the hands of the licensing justices, if they would only use it. Nothing would be easier than for them to demand the production of all agreements under which the publicans are occupiers of their houses, and to refuse (after due notice) to grant the renewal of the licence of any house in which the tenant is not a bonÂ-fide free agent. But there is little prospect of the licensing justices doing this until they are compelled. The most practicable remedy seems to be a short Act of Parliament, providing that in no case is a licensed victualler to enter into any contracts which will make him responsible to any but the licensing authority for the conduct of his house; and that it shall be illegal for him to bind himself to purchase his stock in whole or part from any particular firm or firms. It should be forbidden for brewers or wholesale spirit merchants to own all or part of any public-houses. It might be further provided that the licensing authority is to satisfy itself that the publican is genuinely a free agent before granting or renewing his licence.

Such an Act would no doubt receive considerable opposition from many brewers, though even to some of them it would not be unwelcome. The present method compels them to sink a vast amount of capital in buying up licences, and gives the small brewer (who possibly produces better drink than his wealthier rivals) little chance of competing against the great firms. To the majority of publicans such a law would be acceptable, for it would raise their position and increase their profits. And the gain to public order would be greater than that which is likely to result from many more ambitious schemes.