HE Drink Trade 
 
 ND 
 
 TATE Purchase. 
 
 By the 
 Rt. Hon. Sir T. P. WHITTAKER, M.P. 
 
 [pnuted by permission from The Contemporary Review, June, 1915). 
 
 lished for THE TEMPERANCE LEGISLATION LEAGUE, - - 
 
 [iament Mansions.Victoria St., London, S. W.,£r405, Produce Exchange, Manchester, 
 
 By 
 IS. KING 8L SON, Ltd., ORCHARD HOUSE, WESTMINSTER. 
 
 Price Id., or 6s. per 100 nett. 
 
% 
 
 
THE DRINK TRADE 
 AND . . . . 
 STATE PURCHASE. 
 
 FROM the Parliamentary point of view what is known as 
 the Drink Problem is notoriously one of the most 
 difficult and dangerous questions that any Government 
 -can touch. The truth of this has been exemplified during the 
 last few weeks. In a period of political truce, when all parties 
 in the House have patriotically supported the Government in 
 passing any legislation which the Executive deemed necessary 
 to enable them to prosecute the war successfully and guard 
 -against the difficulties which followed in its train, this question 
 of drink has alone proved to be an apple of discord, and with 
 regard to it alone have the Government been obliged to 
 abandon the proposals which they considered the welfare of 
 the country required them to make. The spectacle was a 
 pitiable and humiliating one. 
 
 The Problem. 
 
 What is the lesson to be learnt from it ? Surely it is that 
 the problem of dealing with the great evil which is our 
 national discredit, would be enormously simplified if we were 
 to eliminate from it the widespread influence — political and 
 social, national and local — which personal financial interest in 
 the trade creates and exercises against every effort to secure 
 substantial reform. The difficulty of interfering effectively 
 with the daily personal habits and social customs of a large 
 number of people will always be sufficiently great without 
 adding to it the organised and organising opposition of 
 hundreds of thousands of persons who, as publicans or other 
 jetailers of intoxicants, or as brewers or distillers, or as "allied 
 
 336533 
 
trades," or as employees of any of these, or as shareholders in 
 any of their undertakings, have a direct personal interest in 
 preventing anything being done that would reduce the sale of 
 those intoxicants upon w^hich their livelihood and income 
 more or less depend. That they should find themselves in this 
 unenviable position is inevitable. It is asking too much of 
 human nature to expect that people who are engaged in a 
 business, or are deriving an income from it, will support or 
 even acquiesce in measures which are designed seriously to 
 curtail its profits. 
 
 That there is a great evil is unquestionable. Fifteen years 
 ago the Majority Report of the Peel Commission, which was 
 signed by the eight members of that Commission who, as 
 brewers, distillers, wine merchants, or publicans were personally 
 engaged in the liquor trade, declared that "a gigantic evil 
 remained to be remedied," and everyone who has any practical 
 acquaintance with our social and industrial conditions knows 
 that the evil which still remains is very real and extremely 
 serious. 
 
 Local Veto. 
 
 Prohibition of the retail sale of all intoxicating drinks is 
 the policy advocated by practically all active temperance 
 organisations in all parts of the world. Undoubtedly it is the 
 simplest and most effective remedy where it can be enacted 
 and enforced. Experience has taught that, as it can only be 
 effectively enforced when local opinion and the local authorities 
 are in its favour, the most prudent and practicable policy is to- 
 press for the enactment of the power of Local Veto, and to rely 
 upon that until it has been very widely exercised. That is the 
 policy of the Temperance party in this country, and in my 
 judgment it is sound and wise. 
 
 But prohibition, even by local vote, can only be a remedy 
 for intemperance when Parliament has been induced to give 
 the people the power to veto the sale of drink and when the 
 people, in their respective localities, use the power thus 
 conferred upon them. At present neither of these conditions 
 obtains except in Scotland, where Parliament has taken the 
 first step. When Parliament has conferred the power on the 
 
people of England and Wales, as it undoubtedly will one of 
 these days, there will be, under present conditions, a lengthy 
 time notice, and when that has expired it will be a long time 
 before the veto power will be used in the greater part of the 
 most populous and important areas. 
 
 Meanwhile ? 
 
 In the meantime, as the trade in drink exists and is likely 
 to continue, what is to be done ? Surely the practical problem 
 is how to render it as little injurious as possible. Not only is 
 the direct financial interest which so many thousands of 
 persons have in the trade the great barrier to legislative 
 reform, but it is the great obstacle in the way of the effective 
 administration of the law when it has been enacted. The 
 retailer chafes at the restrictions which are put upon him, and 
 continually exercises his ingenuity to avoid and evade them. 
 It is his business to sell drink, and he resents anything that 
 interferes with him in so doing. The brewer and distiller, the 
 shareholder and the allied trader, are in the same boat. They 
 are actuated by similar motives, and they cherish similar 
 feelings. The whole weight of their ingenuity and influence is 
 thrown against the effective administration of the licensing 
 laws. At Parliamentary elections they are the warmest and 
 most energetic supporters of the candidates who are most 
 opposed or least favourable to licensing reform. When the 
 question of appointing magistrates arises, every imaginable 
 effort is made and every conceivable wire is pulled in order to 
 secure the selection of men favourable to their trade, and the 
 exclusion of others who would be likely to support a strict 
 enforcement of the law. In municipal boroughs where the 
 Watch Committees control the police, they are particularly 
 active at local elections, and they spare no effort to secure the 
 appointment of their friends on the Watch Committees, in 
 order that they may thereby influence and largely paralyse the 
 action of the police in all matters affecting licensed premises. 
 The publican follows this up with gentle attentions to the 
 police and discreet contributions to testimonial funds and the 
 like. The brewers frequently complete the defensive wire 
 entanglements by employing as their solicitors the firm of 
 which the Clerk to the Justices is a member. Then all kinds 
 
of devices are resorted to to push the sale of drink — goose 
 clubs, games, competitions, hawking, giving credit, snugs, 
 partitions and screens in public-houses : clubs are financed, 
 shows and gatherings for sports are promoted, and advertise- 
 ments of drink abound. The trade exists to sell as much 
 drink as possible, and the whole of its organisation and 
 arrangements have that object in view. Its aim is not to 
 restrict drinking, but to extend it. 
 
 A Striking Proposal. 
 
 Clearly it would be an enormous gain if the direct personal 
 financial interest of the liquor trader were eliminated, and all 
 pushing of the sale of drink and all inducements to the seller 
 to evade the law were abolished. That can only be done by 
 taking the trade out of the hands of those who now conduct it 
 and placing it under the control of persons whose only object 
 would be to promote the public well-being, and who would 
 have no interest in pushing the sale or conniving at breaches 
 of the law : that is to say, by placing it under disinterested 
 management. There are more ways than one of doing this. 
 One proposal has quite recently attracted attention, because it 
 is known that it had the support of the Chancellor of the 
 Exchequer, and was submitted by him to the Cabinet, not 
 only as the best way of dealing with the immediate and 
 pressing difficulty in which the country found itself with 
 regard to the drinking habits of the people and the prosecution 
 of the war, but also as a means of taking a great step 
 forward towards the solution of one of the most, if not 
 indeed the most, difficult of our social and political problems. 
 The suggestion was that the Government should buy up the 
 liquor trade in Great Britain, and carry it on under public 
 control. The proposal was a startling one, and it required a 
 Minister of the exceptional courage and imagination of Mr. 
 Lloyd George to entertain it and endeavour to put it into 
 practical shape. 
 
 From the Point of View of the Trade. 
 
 It is understood that the suggestion was made to the 
 Chancellor by representative brewers when he interviewed 
 
them with a view to obtaining their co-operation in 
 connection with' the proposals he desired to make in 
 response to the complaints which had been made concerning 
 the output and transport of munitions of war. That such a 
 proposal should be made was not unnatural. For some time 
 past the position of brewers and others who are largely 
 interested in, and closely identified with, the liquor trade has 
 been anything but an easy and pleasant one. It is far from 
 being a comfortable and agreeable one now, and it is likely to 
 become less and less enviable as time goes by. The tide of 
 public opinion is steadily rising against the trade. It is a 
 business into which it is almost impossible to induce anyone 
 to go if he is not already connected with it, and the great 
 majority of those who are in it would gladly get out of it if 
 they could conveniently do so. They are continually being 
 harassed by legislation, and proposals for legislation, of a more 
 and more restrictive character, while of recent years the 
 increases in the taxation levied upon them have been large. 
 Nor is the outlook for the future any brighter. Hitherto the 
 House of Lords has saved them from some of the legislation 
 which they have feared most. Now the power of that 
 assembly to protect them has been very materially curtailed 
 by the Parliament Act. Further, it was not pleasant for them 
 to hear the nation told by the Government that their trade is 
 a serious hindrance to the success of their country in the life- 
 and-death struggle in which it is engaged : and the prospect 
 that the action that would be taken in relation thereto would 
 still further disturb their business and reduce their profits was 
 not a comforting one. There were substantial reasons on their 
 side, therefore, why they should be willing to enter upon a 
 deal and accept reasonable terms. 
 
 From the Public Point of View. 
 
 On the other hand, were there not weighty reasons why the 
 representatives of the nation should consider the suggestion ? 
 In the first place, the circumstances were unique and unlikely 
 to recur. Parliament is working under a political truce. If, 
 under that truce, the thorniest and most difficult and, I think 
 I may add, the most unpleasant of all subjects of party 
 
8- 
 
 controversy could be dealt with by something like general 
 agreement, the gain to the nation as a whole, and to all the 
 political parties in it, would be great. The difBculty of 
 attempting to deal with the drink problem under the ordinary 
 conditions of party controversy, when so much party capital 
 can be made out of it, and the supporters and opponents of 
 other proposals on other questions are only too ready to enlist 
 its partisans under their banner, has been experienced too 
 often not to be well known. Consequently, if an opportunity 
 presented itself for dealing with the problem under favourable 
 conditions, it was clearly a pity to miss it, even in the midst of 
 such disconcerting preoccupations and surroundings as we are 
 now immersed in. 
 
 The Terms Suggested. 
 
 Of course, everything would turn upon the terms on which 
 the transaction could be carried through. It would be useless 
 to put before Parliament and the country anything that 
 appeared to be extortionate or unreasonable. Anything that 
 savoured of the scandal of ordinary arbitration proceedings 
 with the extravagant farce of expert witnesses and an arbitrator 
 and counsel whose fees pile up in proportion to the length of 
 time over which they spin out the proceedings, which usually 
 end in something like a splitting of the difference between the 
 two most extreme valuations, would, very properly, be rejected 
 with scorn. So would any talk of an addition of lo per cent, 
 for compulsory purchase. The days for that sort of thing in 
 circumstances like these have gone, and gone for ever. When 
 the Chancellor of the Exchequer had ascertained that the 
 leaders of the Unionist Party were prepared to consider the 
 proposal he appointed two committees to consider the basis on 
 which the terms of purchase should be arrived at, and the 
 financial arrangements that would have to be made, should it 
 be decided that the State should acquire the breweries in Great 
 Britain, together with the interests in licensed premises and 
 the control of other branches of the retail liquor trade. The 
 Committee to which the problem of England and Wales was 
 referred was a very representative one, and it made a unanimous 
 report, the outstanding points of which have been made known 
 and were : — 
 
I. — That the average prices for the three years ending 
 June 30th, 1914, should be taken as the value of 
 those securities which were quoted on London or 
 provincial stock exchanges ; that where the securities 
 were not quoted, or the undertakings were privately 
 owned, the number of years' purchase of the average 
 annual net profits at which the value should be fixed 
 should be based upon the number of years' purchase 
 of the annual net profits which the prices of quoted 
 securities represent; that the values thus arrived at 
 would be subject to adjustment if the quoted prices 
 had been unduly affected during the three years by 
 special circumstances, or if, in cases where there 
 were no quotations, there were assets which were not 
 reasonably represented in the profits. 
 
 2. — That the purchase price should be paid in 4 per cent. 
 Government stock at par, redeemable at par at the 
 option of the Government any time after seven years. 
 
 Some Financial Considerations. 
 
 When considering the financial aspects of such a transaction 
 as this there are many important matters to be borne in mind. 
 Not the least of them is the revenue now derived from licence 
 duties and the taxes on beer, spirits, wine, etc. A payment 
 corresponding to what these would have amounted to, according 
 to the quantity of drink sold, if the trade had remained in 
 private hands w^ould, of course, have to be made to the revenue 
 out of the receipts from sales. 
 
 The price to be paid for the whole of the liquor trade to be 
 acquired in England and Wales on the basis suggested would 
 probably have been something between £250,000,000 and 
 ;f300, 000,000. The average annual net profits ma.de by the 
 trade in these companies which have a Stock Exchange 
 quotation for their securities are about 7 per cent, on the 
 capital value represented by these quotations. It may, there- 
 fore, be assumed that the purchase of the whole of the trade, 
 on the average, would have been on a 7 per cent, basis. As the 
 payment would have been made in 4 per cent. Government 
 Stock, there would have been a margin of 3 per cent, to work 
 
, lO 
 
 upon. This would have amounted to something like ^7,500,000 
 to ;fg, 000,000 a year, according to the capital value as 
 ascertained. 
 
 Buy a Declining Trade? 
 
 It may at once be said: "Yes, but you would be buying 
 a declining trade, and your object in acquiring it would be to 
 destroy or very materially diminish it." The reply is, that 
 while it is true that the consumption of drink per head of the 
 population tends downward, the consumption per brewery or 
 per licensed house, taken over terms of years, does not seriously 
 diminish. Of course, there are peaks of boom and depths of 
 depression in the drink trade as in all others, and if a period 
 of low consumption be compared with one of a high demand a 
 great falling off per head will be shown ; but in total, and 
 especially per house, the reduction in sales has not been so 
 great as many people imagine. Nor is it likely to be, unless 
 and until we have much more stringent legislation effectively 
 in force than we now possess. It is also true that it is the 
 desire of the community generally to reduce very largely the 
 consumption of drink, and that many of us desire to prohibit 
 its sale altogether wherever public opinion will support so 
 doing. But at best these results will only be obtained gradually 
 and after the lapse of a very considerable period of time. 
 Meanwhile, other consequences of national control would be 
 making themselves felt in the financial position. A very large 
 proportion of the breweries, probably something like three- 
 fourths of them, would be closed, and a very large saving 
 thereby made in standing charges and management expenses. 
 An enormous number of licensed premises would at once be 
 regarded as redundant and would be closed, and a corresponding 
 saving in rents, rates, and working expenses would result from 
 this concentration of the trade. If the licensed houses were 
 reduced to one-half their present number, as they soon would 
 be, the consumption of drink would not, as the result of that 
 closing, be reduced to one-half. It might be reduced by one- 
 fourth. That would mean that, on the average, each remaining 
 house would do 50 per cent, more trade than it did before. 
 As the working expenses would be increased very little and in 
 many cases not at all, the net profit per house would be 
 
II 
 
 considerably larger. The sale of the brewery premises and 
 licensed houses which were not required would realise a large 
 sum, which would at once be devoted to reducing the capital 
 account and consequently the amount of interest annually 
 payable on it. All the very large outlay now incurred in 
 pushing the trade by means of advertisements in newspapers 
 and magazines, posters on hoardings, circulars by post, 
 enamelled plates on railways, and the like would cease and be 
 saved. Nor would it be necessary to retain the most costly 
 sites at the corners of streets. Equally commodious but far 
 less expensive premises in the vicinity would answer every 
 purpose. No compensation levies would be payable, no 
 commercial travellers would be required ; and the sale of 
 lighter beers would show a larger margin of profit. A very 
 substantial reduction in consumption could be effected before 
 these large savings and gains wer^ counter-balanced by it. 
 Meanwhile, a considerable annual sinking fund payment would 
 be at work steadily reducing the capital account. 
 
 It will be said that Government management will never be 
 so efficient and profitable as private enterprise. That is true ; 
 and if the object were to do as much business as possible the 
 objection would be a sound one, but as that is not the case the 
 objection loses much of its force, although it does represent a 
 set-off which must not be overlooked. When all allowance 
 has been made, and the transaction is looked at from the 
 purely financial point of view, there is no reason to think that 
 it would have involved any serious risk and responsibility. 
 
 What would be Gained ? 
 
 What advantages would be gained ? Some of them may 
 be summarised thus : — 
 
 I. — The direct personal financial interest of individuals 
 deriving an income from the trade would be 
 enormously reduced and largely changed. 
 
 2. — The local and national, political and social influence, 
 which is now so great a barrier to effective legislation 
 and to the efficient administration of the laws which 
 have been enacted, would practically disappear. 
 
12 
 
 3- — The number of licensed premises would be enormously 
 reduced. 
 
 4. — Grocers' licences would probably speedily disappear. 
 
 5- — Shortening of the hours of sale, closing on Sundays, 
 earlier closing on Saturday nights, the abolition of 
 snugs and screens, back doors and side entrances, the 
 stopping of credit and of hawking drink in casks and 
 bottles, and many other minor but important reforms 
 would at once be rendered practicable and easy, and 
 could be carried out by the simple process of an 
 administrative order. 
 
 6. — Inducements to attempt unduly to influence and 
 corrupt the police and pack our benches of magis- 
 trates and Watch Committees would cease to exist. 
 
 7. — There would be an end of such contentious questions 
 as compensation and a time limit. 
 
 8. — The wa}^ would not only be clear for giving the people 
 in their respective localities a wide power of local 
 option, including local veto, but the ability to use 
 the power would be largely increased because the 
 opposition to it would be much reduced and be far 
 less active and vigorous. There would not be any 
 wealthy and organised liquor trade to fight. 
 
 An Objection on "Principle." 
 
 I am aware that there are many well-meaning people who 
 object, on what they consider to be ''principle," to the 
 Government engaging in this trade and thereby making them 
 as citizens participators in it. Their position is an inconsistent 
 one. They are participators in the trade now. The com- 
 munity receives from it some 50 or 60 million pounds a year 
 as a contribution to its rates and taxes, and I have never met 
 a single person who has declined to have his contribution to 
 the national and local exchequers reduced by his share of the 
 payment made by the liquor trade. In so far as they would 
 be responsible as members of the community for the action of 
 
13 
 
 the Government in carrying on the liquor trade, they are now 
 similarly responsible for empowering justices to authorise 
 publicans and other licensed persons to carry on the same 
 trade. The difference between the community carrying on a 
 trade itself and year by year definitely authorising a number of 
 other people to carry it on, and taking from them an exceed- 
 ingly large proportion of the profits which result therefrom, is 
 far too fine and thin to be regarded as a principle. To plain- 
 minded people it is difficult to distinguish the so-called 
 principle from a hair-splitting quibble. If the trade now 
 makes a profit of some 70 or 80 millions a year before licence 
 duties and liquor taxes are paid, and we take 50 or 60 millions 
 of that profit for national purposes, no fundamental and 
 entirely new departure in principle would be involved if the 
 State decided to acquire the remaining 20 millions a year. 
 The only point really raised would be one of expediency. 
 
 A Difficulty which is not New. 
 
 If it be said that in the event of the State purchasing the 
 liquor trade the direct interest of the authorities and the 
 community in so running it as to produce the largest profit 
 would be so great that restriction and reduction would be 
 rendered extremely difficult, and prohibition would be impos- 
 sible, the reply is, first, that we have the recent example of 
 Russia to the contrary ; and second, that we are directly 
 interested now in so promoting the trade in drink as to derive 
 the largest possible revenue from it. The truth is that so far 
 as difficulty arises from the fact that the community derives a 
 large revenue from the sale of drink and may, therefore, be 
 said to be directly interested in the maintenance and growth 
 of the trade, that difficulty will remain with us so long as the 
 trade continues, whatever system of controlling and restricting 
 it may be adopted. The difficulty arises from the fact that 
 intoxicating liquors and the sale of them are taxed. No 
 responsible person has yet been foolish enough to suggest that 
 they should not be taxed, and any attempt to repeal those 
 taxes and thus make drink vastly cheaper would be resisted by 
 no one more vigorously than by those who oppose the proposal 
 we are now considering. 
 
Experience Elsewhere. 
 
 The experiment of disinterested management has been tried 
 in Norway and Sweden for many years under very Hmited and 
 more or less unsatisfactory conditions. The results, even 
 under those conditions, have been remarkable. The temptations 
 to drink have been enormously reduced, and many temperance 
 reforms, for which we have long vainly striven here, have been 
 obtained there with the greatest ease. The adoption of the 
 system in the towns of those countries has nowhere proved to 
 be a rival of or an obstacle to the adoption of more stringent 
 measures. On the contrary, it has again and again prepared 
 the way for, and proved to be a stepping-stone to, more drastic 
 action. No friend of temperance in either of those countries 
 ever dreams of advocating the abandonment of disinterested 
 management in order to return to any system of licence and 
 private ownership. I am aware that these facts are contested 
 by a band of active and earnest but, for the most part, often 
 impracticable temperance people in this country. Considerations 
 of space forbid that I should here and now enter upon a 
 detailed discussion of the points at issue. I must content 
 myself with saying that many of the statements made by these 
 critics of the company-management systems of Norway and 
 Sweden are not only grossly inaccurate and misleading, but are 
 such ingenious perversions of facts and quotations as to render 
 it charitable to adopt the conclusion that the authors of them 
 are either astoundingly incompetent or completely blinded by 
 prejudice. 
 
 The War and the Financial Problem. 
 
 When the suggestion was made that the Government 
 should ask Parliament to grapple with the difficulty with 
 which the country was confronted in regard to the output of 
 ships and munitions of war and the transport of men and 
 supplies, and at the same time lift an extremely difficult and 
 important political and social problem out of the ruts of party 
 controversy by purchase of the trade, one objection that was 
 raised was that the issue of a large amount of Government 
 stock at the present time would have an unfavourable effect on 
 Government credit and the raising of the necessary funds for 
 
15 
 
 the war. It is true that any considerable further issue of 
 Government stock at any time affects the market value of all 
 existing Government securities. But when the issue does not 
 take money off the market, but is issued in exchange for other 
 securities and investments and for the purchase of a revenue- 
 producing undertaking, the effect of that issue is likely to be 
 reduced to a minimum. A large amount of the particular 
 issue that was contemplated would undoubtedly have been 
 permanently held by those to whom it was issued, and the 
 effect of any widespread attempt to sell by those who wished 
 to realise could have been almost entirely counteracted by 
 providing that for, say, one or two or three years after the war 
 quotations for this particular issue should not be allowed on 
 any Stock Exchange. That would not have prevented holders 
 from selling privately or from obtaining advances from their 
 bankers in cases of necessity. 
 
 On the whole, I regret that it was not found possible to 
 carry the proposal further. I agree with the Chancellor of the 
 Exchequer in thinking that a great opportunity was missed, 
 and I hope that the seed which his courage has sown will so 
 develop as to render possible in the near future the taking of a 
 step which appears to me to be likely to take us far in the 
 direction of the solution of one of the most difficult of our 
 national problems. It would probably simplify the trans- 
 action and ease some Parliamentary difficulties that might 
 arise if it were confined to England and Wales. Scotland has 
 got its Temperance Act, and might desire to work out its own 
 salvation on its own lines. Ireland might be left to deal with 
 its problem in its own way in its own Parliament. 
 
 Thos. p. Whittaker. 
 
Cole & Co., 
 
 Wkstminster Printing Works, 
 
 92-96, Vauxhall Bridge Road, 
 
 London, S.W. 
 
HV6'(J 6 2 
 
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