British Gothenburg Experiments

AMONG the Public-House Trust proposals which are before the country none have claimed so much attention as those which are associated with the name of Earl Grey. In a letter dated September 6th, 1900, addressed to the licensing magistrates in the various Petty Sessional Divisions of Northumberland, Earl Grey thus describes the circumstance which forced on his attention the need of a drastic change in the present method of allotting licences : " Last year, it having been represented to me that it would be a convenience to the people of Broomhill if an additional public-house could be provided, I applied to the licensing authorities, in my capacity as chief landowner in the district, for the necessary licence. The magistrates, having decided that the requirements of the population called for an additional public-house, granted me the licence. I immediately discovered that the State, in conferring upon me a monopoly licence, had also granted me a commercial asset of enormous value. I was informed that if I would consent to sell my licence I could, without spending a single sixpence, obtain nearly £10,000. (In an interview at a later date with a representative of the London Argus (March 22nd, 1901), Lord Grey said : " Up till that time I had not thought out the question, but seeing that by merely obtaining this licence a sum of, say, £10,000 had been put into my pocket, it struck me that such a state of affairs was not in the public interest. . . . There are hundreds of such cases which I could mention." )

Now, it appears to me that large monopoly values arising out of the possession of a public licence conferred upon a private individual by the State ought to belong, not to any private individual, but to the community. I am, accordingly, making arrangements by which the surplus profits, after a dividend of 10 per cent, has been paid per annum (5 per cent, for interest, and 5 per cent, for redemption of capital), shall be expended by the trustees, to be appointed, in such a manner as they may direct, for the benefit of the inhabitants of Broomhill."

He further asks that the licensing authorities, when they have decided to create new licences, shall give the refusal of them to applicants who will undertake to run them on Scandinavian principles, not for private profit, but in the interest of the community affected. At first it was intended that such licences should be worked by the People's Refreshment-House Association, of which the Bishop of Chester is the chairman; but in a letter to The Times, dated December 12th, 1900, Earl Grey announced that: " It is intended to give practical effect to the plan of temperance reform outlined by the Bishop of Chester in his letter which appeared in the press of December 3rd, by the. incorporation of Public-house Trust Companies for London and the provinces."

OBJECTS OF THE PUBLIC-HOUSE TRUST

In this letter the object of the Companies is thus defined : " The object of these Companies will be to acquire every new licence which the Licensing Authorities may think it desirable to create, and to apply to the public-houses so acquired, and to existing public-houses whenever possible, a principle of administration which will secure that they shall be managed as a trust in the interests of the community, and not for private profit. The two chief objections to the present system, which allows licensed public-houses to be conducted for private profit, are :

" 1. There is no security that the best liquor that can be bought in the open market is supplied to the consumer.

" 2. It is the interest of the publican to push the sale of intoxicants.

" The principle of management to be adopted by the Public-House Trust Companies will remove both these evils. In the houses managed by the Companies:

" 1. Only the best drink that can be obtained in the open market will be sold.

" 2. It will not be the interest of the manager to push the sale of intoxicants; he will receive no commission on the sale of alcoholic liquors, but will be paid a fixed salary with commission on the sale of food and non-intoxicants, or a bonus on good management.

"3. The public-houses will be refreshment houses, and not merely drinking bars. Food and non-intoxicants will be supplied as readily as intoxicants and during the same hours.

"4. The surplus profits, after allowing a sufficient sum for reserve and interest not exceeding 5 per cent, on invested capital, will be administered by carefully selected trustees for the benefit of the community."

In a subsequent letter dated January 16th, 1901, the position taken by the Public-House Trust Association is still further explained:

" In the first place, let me state that our proposal does not attack the licensees of public-houses. We do not ask the licensing authorities to alter their practice with regard to the renewal of licences. We do not propose to expropriate existing interests without paying adequate compensation. We do not ask the Legislature to come to our assistance. We are content to make the best use of the opportunities which the law allows us.

" But while we do not attack private interests, we propose to endeavour to place a limit on their growth. It is stated by Messrs. Rowntree & Sherwell that the net profits of public-houses and beer-shops in the United Kingdom for 1899 were £19,400,000. These figures have not been challenged, and are believed to be under the mark. It is undesirable, for many reasons, that this huge liquor interest should be allowed to grow indefinitely, and we suggest means which, without robbing or injuring any one, will provide that new public-houses created to meet the requirements of new communities shall be brought under the control of trustees who have at heart the well-being of the community. We further propose to purchase licences in the open market, whenever we think such purchase is in the interests of our Company, and consequently of the community which it will represent. The scope of our endeavours in this direction will necessarily be dependent on the financial support we may receive."

POSSIBILITIES OF THE SYSTEM

Such, then, are the objects and method of the Public-House Trust Company as explained by its promoters. In view of the probable wide extension of these companies, it is a matter of much interest to inquire what are the possibilities of the experiment, and whether it is likely to accomplish valuable temperance results. It will have been noticed that Earl Grey says : " We do not ask the Legislature to come to our assistance. We are content to make the best use of the opportunities which the law allows us." If, then, it should be found that the present law affords opportunities for action upon a scale sufficiently wide to secure important national results, full justification will have been given to Lord Grey's proposals. If, on the other hand, it should be found that the sphere within which a Trust Company can advantageously work is, under existing conditions, narrow, a powerful argument will have been furnished for a large measure of legislative temperance reform.

The crucial question which at once presents itself is: In what way can the Trust Company secure licences? The number of " on " licensed houses in Great Britain is a diminishing quantity, (Comparing the returns for 1896 with those for 1886, we find that 56 boroughs and 82 Petty Sessional Divisions show a decrease in the number of " on" licences during the ten years. One of the most noteworthy reductions has taken place in London, where (taking the whole of the licensing divisions) 613 "on" licences disappeared between 1886 and 1896. ) and in settled districts the full number of licences likely to be granted has already been allotted. The following are the principal ways in which licences may be obtained:

(a) A few patriotic owners of licences may follow the example of Earl Grey and transfer them to the Trust.

(6) In newly settled districts the Trust may acquire new licences which the magistrates may deem it necessary to grant.

(c) The Trust may arrange to take public-houses from town or county councils who have acquired them for improvements.

(d) The Trust may purchase licences in the open market or obtain them on lease.

The number of licences which the Trust will obtain under method (a) will be small. Its main acquisition of licences will no doubt be in newly settled districts as suggested in (b). But even if the number so obtained were more considerable than appears likely, the relation they would bear to the existing licences of the country must be insignificant. The national problem to be solved would remain practically unaffected. In regard to method (c) it is doubtful whether many licences will be obtained from town or county councils. If these bodies, having acquired licensed premises through improvement schemes, etc., decide to carry them on under public management, they may, as in the recent case of the Sheffield Corporation, transfer them to a Trust Company subject to certain specific conditions. But the number of such licences must in any case be relatively small. Referring to method (d), no doubt plenty of licenes can be bought at a price. But the price offered to the existing holder must be one which will make it better worth his while to sell than to hold. Such prices will generally be inflated Tied houses owned by brewers and distillers in order that they may have a secure outlet for their manufactures, now constitute probably 75 per cent.(Practical Licencing Reform, by the Hon. Sidney Peel, p. 22. ) of the " on" licensed houses of the country. With few exceptions these houses will only be obtainable at prices which no prudent Trust Company would pay. If, then, licences are to be purchased in the open market in such numbers as sensibly to affect the conditions under which the retail drink traffic of the country is conducted, the financial transactions will have to be not only upon an enormous scale, (In 1897, according to the estimate of Mr. E. N. Buxton, a partner in one of the largest brewery firms in the country, the aggregate value of the licensed houses in London (including fully licensed houses, beer-houses, " on " and " off," and refreshment-houses, but excluding the large hotels) was, at a low estimate, £60,000,000—a sum which, divided among the whole of thu public-houses, beer-shops (" on " and " off "), and refreshment-houses in the Metropolitan Police area, gives an average value of between £5,000 and £6,000 per house. The average value of a fully licensed house in the metropolis (excluding the large hotels) is, of course, very much higher than this, and amounts, according to Mr. Buxton, to between £10,000 and £11,000.) but upon a basis of inflated prices. (The recent experience of Messrs. Samuel Allsopp & Co., Limited is a striking warning in this connection.) Public-house profits, especially in the urban centres, are no doubt very great, and a 5 per cent, interest would undoubtedly be obtained upon the capital expended on such urban premises, bought even at an extravagant price. There is, however, a widespread and growing consensus of opinion that the ground must be cleared for large reforms by the enactment of a national time-notice to every licensee. Prudence would therefore suggest that in the case of every licence acquired by purchase, a sum far in excess of the 5 per cent, proposed by Earl Grey must each year be set aside as a redemption fund to secure the Company against loss when the years of notice have expired.

Looking at these various methods for the acquisition of licences from the temperance standpoint, no objection can be taken to method (a). With regard to (b) no application should be made if in opposition to the wishes of the inhabitants of the district. And, further, as magistrates do not announce beforehand that they intend to grant a licence, the Trust Company will have to exercise care that it does not, by its application, cause a licence to be granted that would otherwise have been withheld. To safeguard this point the Glasgow Trust Company in making an application said : " We do not press for this licence, but we ask you not to give it to anyone else." The Glasgow Trust Company also specifically state that the directors will " be prepared to surrender the licence at any time if authoritatively required, without a suggestion of compensation."

With regard to (c)—i.e. the renting to Trust Companies on special conditions of public-houses which town or county councils have decided to continue under public management—much may be said for such a policy.

(The dilemma in which temperance reformers are placed under the present licensing system is strikingly shown in the experience of the London County Council. Up to the present time the Council has abandoned ninety-four licences of premises acquired for various street improvement and other schemes, the approximate premium value of such licences having been estimated at £254,000 in all (Municipal Journal, July 26th, 1901). It cannot be contended that the value of these licences has been annihilated. Probably the greater part of it has been transferred to the pockets of neighbouring publicans.

Lord Grey, in a letter to the Chairman of the Improvements Committee of the London County Council, dated January 17th, 1901, said : "We are prepared to undertake the management of as many public-houses as the Council may decide to transfer to us on the following terms : That the rent paid by us to the Council shall be a fair commercial rent, without the element of the licence being taken into consideration ; and in return for this concession we -will agree to spend the surplus profits realised by the public-houses so transferred to us, after 5 per cent, has been paid on the capital invested in them by our Company,and an equivalent amount credited to the reserve fund, in such a way as the Council may approve, either (1) for the provision of counter-attractions to the public-house and objects of public utility not properly chargeable to the rates, or (2) for the purchase of licences, or (3) if the Council should so insist, for the repayment of the sum expended by them for the purchase of the licences transferred to our Company." This offer has manifestly much to recommend it, but apparently the members of the Council feel that the number of licensed houses in London is already excessive, and are unwilling to continue those that come into their hands oven if the cost of the policy of abandonment is great and actually adds to the value of the neighbouring houses that remain. Surely this is a striking illustration of the need for a large measure of temperance reform, so that those who are responsible for the government of London and other cities shall no longer be placed in a position in which a reduction of licences can only be made at the cost of the ratepayers, though the transaction confers a gift upon existing private licensees.)

But the case is different with regard to (d)—i.e. the purchase of licences. It will, we believe, be impossible for the money of the Trust to be largely expended in the purchase of licences without the Trust acquiring a great stake in the drink trade and a dangerous interest in the maintenance of the present licensing system. The shareholders will feel that their 5 per cent, interest, and, indeed, their share capital, are imperilled under the operation of a time-notice such as Lord Peel has proposed.(The special and grave objections that attach to the purchase of licensed premises do not, of course, apply to the renting of such premises at " a fair commercial rent, without the element of the licence being taken into consideration," as proposed by Earl CJroy in his letter to the London County Council. )

Under the Norwegian system there is no danger that the interest of a man as a Samlag shareholder shall conflict with his interest as a citizen. The explanation of this is plain. The controlling companies generally rent their premises (which have no value as licensed houses beyond that of ordinary commercial premises), and consequently their capital is exceedingly small. The total paid-up capital of the fifty-one Norwegian companies in 1892—the year when the Company System in that country reached its maximum—was only £33,000. But in the same year the net profits of the Norwegian Samlags were no less than £88,000, after paying the £23,700 due to the municipalities for licence rights. The average profits of four and a half months would therefore equal the entire capital. A Norwegian company with its small capital is thus able easily to create a reserve fund sufficient to pay the shareholders in full should the Samlag be abolished by a popular vote. The point to emphasise is that neither the small capital, nor the high rate of profit, nor the ample reserve funds of the Norwegian companies would be possible if they paid vast sums for their licences. It is a matter of history that in Norway the Company System, so far from setting up opposing interests, has facilitated temperance reforms. In the proposals which the present writers have made elsewhere for the formation of companies in this country, the safeguards suggested are even more complete than those existing in Norway.

THE HAMPSHIRE PUBLIC-HOUSE TRUST COMPANY, LIMITED

(It should be noted that the various local public-house trust companies, although all of them the outcome of Lord Grey's proposals, are in administration and finance absolutely independent of each other, each having its own Articles of Association. In a printed circular dated March 30th, 1901, Lord Grey said: " Local companies, when formed, will be invited to affiliate themselves to this Association, and to send a delegate to the meetings which will be convened from time to time for the purpose of discussing matters of common interest, and of organising, when desirable, combined action. Such an Association will, it is hoped, be able to obtain and give expert advice on all technical and legal matters connected with the acquisition and management of Trust houses, and upon all other matters affecting the welfare and success of the movement.")

An examination of the Articles of Association of the Hampshire Public-House Trust Company, Limited (" the other companies will in each case be completed on these lines " - Letter from the Secretary of the Central Association, dated July 5th, 1901), deepens the conviction that the dangers in the Trust enterprise will be found to gather round the proposals for the purchase of licences. Earl Grey and his colleagues, weary of the delay in securing legislation, naturally wish to effect the largest possible amount of present good, and they perceive that if their efforts are to be limited to the acquisition of licences " which the licensing authorities may think it desirable to create," their efforts will be confined within narrow limits. There would be an ample field for all these efforts if the ground were once cleared by legislation, but until then the difficulties of wise Company action upon an extensive scale are very great. An illustration of this is afforded by Clause 50, under the head " Borrowing Powers," which provides that—" The directors may raise or borrow money for the purposes of the Company's business, and may secure the repayment of the same by mortgage or charge upon the whole or any part of the assets and property of the Company (present or future), including its uncalled or unissued capital, and may issue bonds, debentures, or debenture stock, either charged upon the whole or any part of the assets and property of the Company or not so charged."

A clause of this kind is often found in the Articles of Association of Limited Companies, and may have been inserted as a common form clause, but it is one not likely to lie dormant if many licences are bought. The demand for capital, if this policy were adopted, would be great; and to meet the absorption of capital, recourse would have to be had on a large scale to the borrowing powers of the Company. Such an arrangement would be perfectly sound as a commercial transaction, but what its effect may be upon the temperance policy of the Board will be seen, by a perusal of Clause 52, which provides that— " The Company may, upon the issue of any bonds, debentures, debenture stock, or security, give to the creditors of the Company holding the same, or to any trustees or other persons on their behalf, a voice in the management of the Company, whether by giving to them the right of attending and voting at General Meetings, or by empowering them to appoint one or more of the directors of the Company, or otherwise, as may lie agreed." How considerable may be the influence of a single director thus appointed for the definite purpose of safeguarding the interests of the creditors, and who may have little sympathy with the temperance aims of the Company, is seen from Clause 79 : " The number of the directors shall, until the ordinary General Meeting to be held in the year 1910, be determined by the Board of Directors and thereafter by the Company; provided always that such number shall not in any event be less than three or more than seven."

The danger would not be removed even though the director or directors appointed by the creditors had no connection with the Trade, for such directors could only safeguard their clients' interests by a policy which would ensure large profits, and this would necessitate large sales. The two clauses, named above (50 and 52) are common form clauses, and their importance may appear to be discounted by this fact, but they will necessarily become operative if large transactions in the purchase of licences are embarked upon.

The promoters of the Hampshire Trust are alive to the risk of a large number of shares passing into the hands of holders who might be desirous of changing the policy of the Company. This danger they endeavour to guard against in two ways : (1) by reserving power to the directors to refuse to register any transfer if they think fit; and (2) by placing the whole of the deferred shares in the hands of trustees (It is to be noted that in the Glasgow and East of Scotland Companies there are no deferred shares, and trustees are appointed solely for the administration of the surplus profits.), it being provided that " The holders of the deferred shares shall be entitled to the same number of votes as all the holders of ordinary shares shall for the time being be entitled to collectively." The Articles of Association provide that the surplus of the net profits (i.e. after payment of dividends and providing for a reserve fund and for depreciation of the Company's properties) shall be paid to the holders of the deferred shares, to be held by them as trustees, and to be applied by them, with the approval of the Council, to such objects as are provided for in the " Indenture."

The Council referred to consists of (a) the trustees mentioned above, (6) the holders for the time being of the offices of Lord Lieutenant for the county of Hampshire, and Bishop of the diocese, and (c) not less than one or more than six other persons to be appointed by the directors.

The present Council consists of:

The Rt. Hon. the Earl of Northbrook, Lord-Lieutenant (ex-officio).
The Rt. Rev. the Bishop of Winchester (ex-officio).
The Rt. Hon. Evelyn Ashley.
Sir Wyndham Portal, Bart.
The Very Rev. the Dean of Winchester.

The obvious aim of these arrangements is to guard against the risk of change in the policy of a Company by placing great voting power in the hands of men occupying high social positions or public office of recognised responsibility, and it is probable that anything in the nature of a serious departure from the aims and policy of the promoters will in this way be prevented. But it is well to remember that it is upon the directors, who have the detailed administration of the Company in their hands, that the actual success of the Company as a temperance instrument will ultimately depend, and that the influence of a directorate in favour of temperance does not turn upon the acceptance or rejection of any single act, but rather upon wise, tactful, and persistent effort exercised in regard to a number of details whose practical importance can only be known to those who are responsible for the daily management of the business. The provision giving directors power to decline to register transfers would indicate that the promoters of the Trusts were alive to the danger of having upon their list of shareholders those who are interested in the drink traffic. On the other hand, many will have read with apprehension the passage in Lord Grey's letter to The Times of January 16th, 1901, in which he says: " In Norway and Sweden persons connected with the liquor trade are prohibited by law from holding shares in the Bolags (This is not strictly accurate, but other safeguards exist in Norway. ), but our proposal (ie. the one giving great voting power to the holders of the deferred shares.) appears to me to render unnecessary an offensive prohibition which ostracises one class from a movement which aims at the well-being of all." If one of the main objects of a Trust Company be to lessen the consumption of drink, it is surely imprudent to invite the co-operation of those whose interest as traders is to increase its sale. While it may be well to guard, by special provisions, against dangerous developments within the Trust Companies, it is better still to guard against their introduction.

RECREATIVE FEATURES

In an article upon the Public-House Trust Association, which recently ( May 22nd, 1901) appeared in the Westminster Gazette, the writer says: " The second great principle of the movement is that it proposes to improve, and even to idealise, the public-house. . . . The Public-House Trust Association proposes to supply every variety of refreshment, to give facilities for games and recreations, and, in a word, to make the refreshment-house something more nearly approaching to a club, or at least to a cafe as known in France. The exact details as to the arrangement of the houses for this purpose have yet to be settled, but it is proposed, we understand, to keep the alcoholic and non-alcoholic sides of the house entirely separate."

With the proposal to give facilities for games and recreations the present writers are in full accord, but they strongly hold that the drinking and recreative centres must be separated by a wider distance than the two sides of a public-house. Subsequent observation has led them in no way to depart from the view they have elsewhere urged (The Temperance Problems and Social Reform), that the proposal to associate recreation with the sale of intoxicants is not only opposed to the express recommendations of several Parliamentary Committees, but is clearly prejudicial to the best interests of the community, and calculated to hinder, rather than to facilitate, the object it seeks to attain. Its importance can be illustrated by a single consideration. Practically all disinterested citizens are agreed that the consumption of intoxicants in the United Kingdom is at present so excessive as to be dangerous to morality, prosperity, and health. Temperance workers, realising this, and knowing how hard it is to break an established habit, have tried to save the children frotn acquiring the habit of drinking. It is stated that in 1897 the Bands of Hope and other juvenile temperance associations in the United Kingdom had a total membership of nearly three millions (2,800,000), and that in addition to the ordinary work done by these societies, lectures on the subject of temperance were delivered to no less than 403,320 children in public elementary schools. Do we want these boys and girls when they leave school, with no acquired fondness for drink, and the young men and women in shops and factories, to be attracted to rooms in which games, music, and newspapers are directly associated with the sale and consumption of intoxicants? Do we not rather want, by a strong and decided change in our national arrangements, to break the continuity of the drinking habit, and so reduce to reasonable limits our present stupendous consumption of alcohol ? If we do wish this, what could be more ill-judged than deliberately to attract young men and women to places where, in seeking recreation, they will perpetually have before them an example which we desire they should not imitate ?

PAYMENT OF MANAGING DIRECTORS ACCORDING TO FINANCIAL RESULTS

In reading the Articles of Association of the Hampshire Trust Company one occasionally comes upon clauses which suggest that those responsible for the drafting had overlooked the altogether exceptional objects for which the Trust Companies exist. This is particularly the case in Article 100, which runs: " The directors may from time to time appoint one or more of their body to be a managing director or managing directors of the Company, and may fix his or their remuneration, either by way of salary or commission, or by giving a right to participation in the profits of the Company, or by a combination of two or more of those modes." Such a clause might rightly be included in the Articles of almost any commercial undertaking, but it is in direct opposition to the avowed purposes for which the Public-House Trust Companies are formed. In his letter to The Times of December 12th, 1900, Earl Grey says: "In the houses managed by the Companies it u/ill not be the interest of the manager to push the sale of intoxicants: he will receive no commission on the sale of alcoholic liquors, but will be paid a fixed salary with commission on the sale of food and non-intoxicants, or a bonus on good management." As is well known, by far the larger proportion of the profits in the houses worked upon " Gothenburg" lines arises, not from the sale of food or mineral waters, but from the sale of alcoholic drink. The more drink sold, the larger will be the profits upon which it is provided that the managing director may have a commission, or in which he may have a right to participate. It is well to provide that the local managers and the actual dispensers of the drink shall be paid only by a fixed salary; but the benefits of the provision may be entirely neutralised if the managing director, upon whose reports and advice subordinate appointments and advances in salary will depend, has a direct interest in the sale of alcoholic drinks.

VOTING POWER OF SHAREHOLDERS

In the Hampshire Public-House Trust, as in the Bishop of Chester's Association, the dividend is limited to 5 per cent (In the Bishop of Chester's Association and in the Hampshire Public-House Trust Company the dividend is not cumulative. It is, however, cumulative in the Northumberland Trust Company. ). In the Bishop of Chester's Association each shareholder is entitled upon a poll to one vote only, irrespective of the extent of his holding, following in this the example of some of the best of the Norwegian companies. In the Public-House Trust Association each ordinary share carries a vote. In a purely commercial undertaking the voting power rightly goes with the number of shares, but in bodies which exist for public purposes plurality of voting should not be found. Seeing that these Trust Companies have for their primary object "to promote sobriety and diminish drunkenness," there would seem to be no reason why the holder of many shares should have a more potent voice in determining the policy of the Company than the holder of one share (In a general way it may be said that no one should hold so many shares in a Company that the financial success of the undertaking would thereby become a matter of real moment to him).

APPROPRIATION OF SURPLUS PROFITS

This important question is provided for in the Hampshire Trust in an " Indenture," which, among other things, sets forth the objects to which the trustees may apply the surplus profits. We give in extenso the clause relating to this point :

" (i) Making donations or subscriptions to any society institution trust organisation or charity now existing or hereafter to exist.

" (ii) In acquiring sites for and building and restoring altering enlarging maintaining and endowing churches chapels whether intended to be consecrated or not churchyards burial-grounds hospitals colleges schools school-houses houses of residence for any purpose mission-halls parish-rooms institutes almshouses libraries baths wash-houses theatres music halls restaurants coffee-taverns eating houses cabmen's shelters and houses for the working classes and the like.

" (iii) Providing maintaining extending and testing by examination or otherwise education and religious and technical instruction. " (iv) Doing all such things as may to them in their uncontrolled discretion appear to be incidental or conducive to the purposes aforesaid or any of them and for that purpose to form any new society institution trust organisation or charity.

" Provided always that such property and money shall not be expended or disbursed for or towards the direct relief of rates taxes or assessments unless in exceptional circumstances it is deemed expedient or for the benefit of the Company so to expend or disburse the same or some part thereof."

In cases where the drink trade is taken out of private hands and put under some form of public control there are, broadly speaking, two ways in which the surplus profits may be appropriated (Mention is here made of local appropriations only. As we have elsewhere shown (see. p. 144) the most satisfactory method of appropriation is that which, after allowing for the maintenance of efficient " counter-attractions," provides that the residue of the profits shall be handed over to the State Treasury). The one is to make use of these profits in the provision of counteracting agencies, the aim. of which shall be to weaken and restrict the trade; the other method is to make use of the profits to enrich the municipal treasury, or to swell the incomes of public institutions and private charities. These methods are not only absolutely distinct, but in their scope and tendency are in direct opposition to one another. For while the first method weakens the hold of the trade, the other gives the ratepayers, or the committees of the institutions helped, a distinct interest in the maintenance, if not in the extension of the traffic. The former plan is meeting with wide and growing acceptance from the churches, from temperance and social reformers, and from men and women representative of the most varied schools of thought. The latter plan is that which has been adopted in the city of Gothenburg, and, generally speaking, throughout Sweden (Prior to the passing of the Act of 1894 the appropriation of the profits in Norway was a union of the two methods, and the change effected by the Act of 1894 was due to a recognition of its defects). It is also the one which, unfortunately as we believe, has been adopted by the Hampshire Public-House Trust. We regard the choice as unfortunate, because (1) it diverts the profits from the sphere in which they are imperatively needed for temperance purposes, and (2) the proposed appropriation is in itself full of danger. So far as the first of these two points is concerned it must be remembered that the conditions under which so many of our fellow-countrymen live create an urgent need for healthy recreation and for satisfying the social instincts apart from the sale of drink. The first call upon the profits of the trade is for the establishment and maintenance upon a national scale of recreative centres. It will have been seen, however, that the proposals of the Public-House Trust Company given above provide for "making donations or subscriptions to any society institution trust organisation or charity now existing or hereafter to exist," while the following section, among other things, proposes that the profits shall be in part applied " in acquiring sites for and building and restoring altering enlarging maintaining and endowing churches chapels whether intended to be consecrated or not," and also towards colleges, schools, school-houses, etc.

Now religion and education ought to provide much of the moral force needed in the struggle against intemperance, and hardly any scheme could be devised more unfortunate than that of giving the churches and the schools an interest in the drink trade by making their incomes dependent in part upon the traffic. The gift which " blindeth the wise" would exercise its ancient and familiar power. A deadening influence would inevitably pass upon those who should be the guardians of the moral forces. To aid the rates, as in Gothenburg, out of the profits of the trade is admittedly dangerous, and the Trust Companies, recognising this, provide that their profits shall not I e so expended. But the proposals under consideration might easily inflict a deeper injury upon the true life of the nation than actual contributions in relief of rates. It is true that, at the end of Section II., certain counteracting agencies are named, but these would stand a poor chance of effective support if brought into competition with public institutions and private charities. The objection is less obvious to making contributions from the drink profits in support of hospitals, but those who have served upon the committees of such institutions, and have realised how much could be accomplished with ampler funds—often so difficult to obtain—will question the wisdom of making the maintenance of the income of these institutions dependent upon an undiminished drink traffic.

Earl Grey, in dealing with the question of the disposal of the profits, says: " It is desirable that different experiments should be tried." This is true if the experiments are conducted within clearly defined lines and on principles which experience has now established. But to disregard experiments conducted on a large scale and over a long term of years, and to put the whole question afresh into the crucible, cannot be wise.

Happily these proposals for the disposal of the surplus profits form no integral part of the general scheme of the Public-House Trust movement. As will be seen in a subsequent section of this chapter, the proposals of the Glasgow Trust Company under this head are admirable. It will be for promoters of the various local schemes to see that the arrangements for the disposal of profits are in each case similarly safeguarded.

THE NORTHUMBERLAND PUBLIC-HOUSE TRUST COMPANY, LIMITED

The general scheme of this Company is similar to that of the Hampshire Trust, but in such matters as the constitution and government of the Trust, and the safeguards devised to prevent abuse, there are differences that call for brief mention.

The government of the Company may be considered under two broad divisions, the first having reference to the work of administration and management, while the second comprises the checks and safeguards that have been provided to secure that the original intention of the promoters shall be adhered to.

The ordinary administration of the Company is carried on by directors who are appointed by the shareholders, and to them belong virtually all matters of ordinary administration and working other than the appropriation of the surplus profits.

The scheme for safeguarding the policy of the Company is based upon the power given to the trustees as holders of the deferred shares. This power can be exercised in two ways. First, the holders of the deferred shares, as members of the General Meeting of the Company, have a voting power equal to that of all the ordinary shareholders, and so can exercise an enormous influence in determining the broad lines of policy to which the directors must adhere. Secondly, the appropriation of the whole of the surplus profits of the Company rests with the holders of the deferred shares acting under the instructions of the Council. The constitution of the Council is therefore a matter of vital importance. As in the case of the Hampshire Trust, it consists of ex-officio and of elected members. The elected members are not, however, chosen either by the shareholders or by the directors, but are virtually self-elected, the ex officio and the elected members uniting to fill up any vacancy that may occur in the ranks of the latter.

Each elected member upon being elected, and each ex-officio member, is required to sign, and is not entitled to act until he has signed, an undertaking to observe the provisions and the bye-laws for the time being in force for the management of the Trust.

The " Deed of Foundation " provides that the following shall be the Council:

(a) Ex-officio:

The Lord-Lieutenant for the time being of the County of Northumberland.
The Chairman for the time being of the Northumberland County Council.
The Chairman of the Standing Joint Committee of the County of Northumberland.
The Mayor for the time being of the City and County of Newcastle-upon-Tyne.
The Principal for the time being of the College of Science, Newcastle-upon-Tyne.
The President of the Northumberland Miners' Association.
The Chairman for the time being of the Wholesale Cooperative Society, Newcastle-upon-Tyne.

(6) Elected:

Viscount Ridley, Blagdon, Northumberland.
Sir Andrew Noble, K.C.B., Jesmond Dene House, Newcastle-upon-Tyne.
Sir Edward Grey, Bart., M.P., Falloden, Northumberland.
Sir B. C. Browne, Westacres, Newcastle-upon-Tyne.
Sir W. H. Stephenson, Elswick House, Newcastle-upori-Tyne.
C. W. C. Henderson, Esq., The Riding, Hexham.
C. W. Mitchell, Esq., Jesmond Towers, Newcastle-upon-Tyne.
Robert Knight, Esq., Highbury, Newcastle-upon-Tyne.

This arrangement, giving great voting power to the holders of the deferred shares, will be valuable as a safeguard against any serious departure from the intention and policy of the promoters, especially when it is remembered that the trustees, as members of the shareholders' meeting, will have a powerful influence in determining the choice of directors. (In the case of the directors an additional safeguard is furnished in the provision that, " The office of a director shall be vacated if he becomes directly interested in the carrying on of the manufacture or sale of intoxicating liquors, but so that no person shall be disqualified from being a director by reason only of his being interested in a Company or undertaking having similar or partly similar objects to those of this Company, or in a railway or other company carrying on the manufacture or sale of intoxicating liquors as an incident of its principal business." )

APPROPRIATION OF SURPLUS PROFITS

The objectionable features in the clauses governing the appropriation of surplus profits which appear in the Articles of the Hampshire Trust Company are modified in the case of the Northumberland Trust Company. Section I. is the same in both, but Section II. in the Northumberland Articles is as follows:

" In acquiring sites for and building restoring altering enlarging maintaining and endowing hospitals infirmaries colleges schools school-houses clubs institutes museums picture and other art galleries libraries reading-rooms public baths gymnasiums parks gardens open spaces and other lands and buildings dedicated or intended to be dedicated to the public."

Section III. provides for the furnishing and equipping of the above, while Section IV. reads:

" Generally in the uncontrolled discretion of the Council in the establishment maintenance and furtherance of objects of public utility education amusement recreation or charity either local or general in character."

Many of the objects enumerated above may justly be regarded as direct counter-attractions to the public-house; but there are others concerning which considerable misgiving will be felt.

BORROWING POWERS

The borrowing powers of the Northumberland Trust are substantially the same as those of the Hampshire Trust, and the clause under which provision is made for the direct representation of the creditors of the Company upon the directorate also reappears. These clauses will be necessary if extensive purchases of licences are made, but the dangers implicit in them have already been pointed out.

REMUNERATION OF DIRECTORS

Article 82 provides that the directors' remuneration shall be fixed by the shareholders in General Meeting.

GLASGOW PUBLIC-HOUSE TRUST, LIMITED

One of the most interesting and promising of the Company experiments about to be made is that of the Glasgow Public-House Trust, incorporated March, 1901. Its capital of £25,000 is divided into 25,000 shares of £1 each. The dividend, which is cumulative, is limited to 4 per cent, per annum. The chairman and directors are influential Glasgow citizens, and the secretary of the Company is Mr. John Mann, junior, who for many years has been a careful student of the Company system: it is probable that the provisions of the Glasgow Trust owe much to his full knowledge of the question.

OBJECTS OF THE TRUST

In their prospectus the directors say that they " will enter into the work prompted by a sense of public duty, and deeply impressed by the dangers inherent in this disagreeable but lucrative trade, and in the rapidly growing monopoly of the traders." This passage strikes the keynote of the policy of the Company as laid down in their Memorandum and Articles of Association.

ITS NON-COMMERCIAL CHARACTER

While the directors state that they " are co-operating with those who are organising similar companies throughout Scotland and England, with the object of working upon a common basis and constitution," their enterprise has certain satisfactory features which are peculiar to itself. Thus the dividend upon the shares is a dividend of 4 per cent.,(With Scotch caution the directors have, however, made the proviso thus explained in their prospectus: " To meet any difficulty, should it arise, in obtaining money at 4 per cent., and to avoid the stoppage of a good work for want of capital, the directors have thought it prudent not to make it impossible to offer 5 per cent., should changes in the value of money or different circumstances require the payment of this rate. Accordingly, the Memorandum of Association authorises a maximum of 5 per cent., but tins power can only be exercised by a majority of three-fourths of an extraordinary meeting of shareholders." ) while in most other Trust Companies it is 5 per cent. Again, by Clause 79 of the Articles of Association it is provided that " the directors shall receive no remuneration," while in other Trust Companies provision for their remuneration is usually made. This last point is perhaps of more importance than may at first appear. Men are not paid for services upon a town council, or upon a school board, or upon a board of guardians. The sacrifice of time and labour involved is regarded as a public duty. In Norway, with, we believe, the exception of two companies, the Samlag directors are not paid. In the long run men of high social ideals are, we think, more likely to be found upon the directorate of a controlling company when the office carries no remuneration than when it does.

METHOD OF ACQUIRING LICENCES

The Glasgow Trust " offers to take up and manage new licences which the authorities may deem it necessary to grant." To quote again from the prospectus, " the directors of the Trust say in effect to the authorities, ' If you grant a licence in this district at all, we ask that it be granted to us in the public interest, to be managed as a public trust. (Referring to the application by the Glasgow Public-House Trust for a licence for Anniesland, the Kev. t). M. Ross, D.D., writing to the Glasgoiv Herald under date April 9th, 1901, says : " It seems to me unfair to suggest that Mr. Mann and his directors are trying to foist a licence upon a protesting community. As Mr. Mann has explicitly said, ' We do not press for this licence, but we ask you not to give it to anyone else.") We shall hold the profits at the disposal of the trustees, and we shall be prepared to surrender the licence at any time if authoritatively required, without a suggestion of compensation.'" The Trust " may also acquire existing licences, if obtainable on reasonable terms." So far as the occupancy by the Trust of new ground which otherwise would be occupied by the private trader is concerned, the position of the Company is clear and strong. But in the Glasgow as in the Hampshire Trust, dangers gather around the proposals for the purchase of licences. The large sums that may be involved in such transactions, together with the demand for capital that would ensue, necessarily lead to the adoption of Articles for the protection of the creditors identical with those which appear in the Articles of the Hampshire Trust, and which have been discussed on a previous page. It is, however, to be noted that in the Glasgow Articles no restriction is placed upon the number of ordinary directors who may be appointed.

APPROPRIATION OF PROFITS

The scheme for the destination ot surplus profits is so excellent that with perhaps the omission of a few words it might well serve as a model for other Associations. Clause 108 of the Articles of Association provides in respect of the surplus profits: " (1) that no portion thereof shall be applied in direct relief of the rates; (2) that the trustees, while not disregarding other objects which they may consider of benefit to the public, shall have special regard to such means of rational recreation and entertainment as shall tend to diminish in the community the undue consumption of alcoholic liquors; and (3) that the trustees may pay over part or the whole of the profits into the national exchequer if they deem it expedient."

The Glasgow Company hands over the administration of the surplus profits to a body of trustees (The duty of the trustees in the Glasgow Trust Company is confined to the administration of the surplus profits; they havo not the special voting power of the trustees in the Hampshire and Northumberland Trust Companies). The Articles provide that the first trustees shall be appointed by the directors, and shall hold office until the Ordinary General Meeting of the Company in 1904. Prior to that time the trustees, together with the directors for the time being, are to "prepare a scheme containing full provisions as to the method of election or nomination of a body of trustees ... it being understood, however, that any such scheme shall be settled on the basis that at least half of the trustees acting under it shall be appointed by the Company or its directors, and that no alteration shall be made by it in the destination of the surplus profits hereinbefore set forth." The names under the first appointment are as under:

Trustees
(For administration of surplus profits)

Sir John Stirling-Maxwell, Bart., M.P.
Sir James King, Bart.
Sir John Neilson Cuthbertson.
J. G. A. Baird, Esq., M.P.
Charles Douglas, Esq., M.P.
J. Parker Smith, Esq., M.P.
M. H. Shaw-Stewart, Esq., M.P.
John Inglis, Esq., LL.D.
J. 0. Mitchell, Esq., LL.D.
John Ure, Esq., LL.D.
Hugh Steven, Esq.

Whether it is expedient to withdraw from the directors the responsible and interesting duty of administering the surplus profits may be doubted. The best men are wanted as directors, and such are not likely to look with favour upon an arrangement under which important duties are removed from their care and placed in the hands of an outside body.

CHECKS AND SAFEGUARDS

The question may be asked: In what way does the Glasgow Trust Company guard against its capture at some future time by the Trade? (It may be said that the experience of Norway shows the danger of such capture to be unreal, but in that country all the licences in a town are given to one company, and if it abused its trust the licensing authorities would at the next issue transfer the licences to another company. ) It has none of the machinery for this end elaborated by Earl Grey of deferred shares carrying great voting power and held by occupants for the time being of high official positions in the district. We should judge that reliance is placed upon the objects of the Company as clearly set forth in the Articles of Association, and more particularly upon Clause 19, which runs: "The directors may, in their absolute discretion, without assigning any reason, decline to register the transfer of any share, whether wholly or partly paid up, to any person not approved of by them, and in the event of any such refusal at any time, the person to whose transfer such refusal relates shall have no right or cause of action of any kind in respect thereof."

Experience alone can show whether these safeguards are sufficient. An additional safeguard might be found by adding to the list of disqualifications of directors a rule similar to that of the Northumberland Trust, which provides that the office of a director shall be vacated if he acquires a direct interest in the manufacture or sale of alcoholic drinks.

APPOINTMENT OF LOCAL COMMITTEES

An arrangement of practical value remains to be noticed in the power given to the directors " to appoint local committees, not necessarily members or directors of the Company, with such powers and duties as the directors may think proper." The right conduct of the counter-attractions will require much time and thought, and probably many would gladly share in this duty who would be unwilling to take part in the direct management of the Company houses.

THE EAST OF SCOTLAND PUBLIC-HOUSE TRUST, LIMITED

This Trust Company was incorporated in April, 1901. Its capital of £50,000 is divided into 50,000 shares of £1 each. The dividend, which is cumulative, is limited to 5 per cent, per annum. The Articles of Association provide that the remuneration of the directors shall be fixed by the Company in General Meeting. The " Methods of Management," as set forth in the prospectus, are as follows:

" The methods of management adopted by the Company must necessarily be subject to such modifications as experience and a fuller knowledge of the districts in which its operations are conducted suggest, but the general objects at which the management will aim will include the following:

1. In each house a carefully selected manager will be placed, and, where considered advisable, local boards or committees will be appointed to supervise the management in different local areas.
2. Food and a variety of non-alcoholic beverages will be provided, and every means will be taken to encourage their consumption. The greatest care will be taken that everything supplied is of the best quality obtainable.
3. The manager will be paid a fixed salary, with a commission on all trade in food and nonalcoholic liquors. No commission will be allowed on the sale of alcoholic beverages.
4. In selecting managers, every endeavour will be used to obtain men who will be in hearty sympathy with the policy of the Company, and who will assist in carrying out (in the spirit as well as in the letter) the licensing laws enacted by Parliament for the regulation of public-houses and the promotion of temperance."

As in the case of the Glasgow Trust Company, the surplus profits of the undertaking, after payment of dividend and "after making provision for depreciation, for reserve funds, for loss arising from extinction of licences and for other contingencies . . . will be paid over to trustees, to be applied by them to such objects of public utility and well-being as may be determined, special regard being had to such means of rational recreation and entertainment as shall tend to the diminution of intemperance."

The provision governing the appointment of trustees is the same as in the Glasgow Trust.

The first trustees for the administration of surplus profits are:

Sir Ralph Anstruther, Bart., of Balcaskie, Pittenweem.
Sir T. D. Gibson Carmichael, Bart., of Castlecraig, Dolphinton.
Professor John Chiene, C.B., F.E.C.S.E., 26, Charlotte Square, Edinburgh.
T. S. Clouston, M.D., F.B.C.P., Tipperlinn Hoase, Morningside, Edinburgh.
Sir Mitchell Thomson, Bart., 6, Charlotte Square, Edinburgh.
J. P. Wood, W.S., 16, Buckingham Terrace, Edinburgh.

The Articles of Association contain the wholesome provision, the substance of which is incorporated in the Articles of other Public-House Trust Companies, that " The directors may, in their absolute discretion, without assigning any reason, decline to register the transfer of any share, whether wholly or partly paid up, to any person not approved of by them."

The elements of danger in this Trust Company, as in the others, lurk in the provisions which are designed to meet contingencies that may arise from the proposed purchase of licences.

It is impossible to study in detail the proposals of the promoters of the Public-House Trusts without being impressed by the careful thought and seriousness of aim that have been brought to bear upon the schemes. The criticisms that the present writers have ventured to offer are necessarily based upon the statement of policy in the prospectus of each company, and upon the provisions for giving effect to such policy in the Articles of Association. Inasmuch as the companies have not yet begun actual operations there is not, as in the case of the experiments discussed in the earlier chapters of this book, any experience to which to appeal. It may well be that when such experience has been acquired it will be found that we have underestimated the advantages, or overestimated the dangers, of certain provisions. But it needs no experience to show that such a policy as the purchase upon a large scale of licences will give the Trust Companies vested interests that must necessarily conflict with their efficiency as instruments of reform. Examination appears to show that under the existing law the serviceable sphere of such companies must be of a restricted character. Their chief value would appear to be experimental, and, if carefully conducted, they will be useful in educating and ripening public opinion for further legislation. It is therefore of great importance that nothing shall be done for the sake of extended operations that will impair the value of the object-lesson. It is of even greater moment that no policy shall be entered upon which, owing to insufficient safeguards or inherent defects, is likely actually to prejudice the principle of public management by obscuring the possibilities of the system when wisely conducted and controlled.

There are probably few earnest citizens who will not sympathise with the eager desire of the promoters to avail themselves of such opportunity for effecting reform as exists under the present law; but one fact that stands out clearly from the foregoing pages is the relatively small result, in comparison with the problem that claims attention, that the Trust Companies can hope to achieve. Even under the dangerous policy of purchase the number of houses they can hope to acquire will be but a very small proportion of the total number of licensed premises in the country. The attempt, therefore, earnest as it is, only serves to emphasise the urgent need of legislation which will make substantial results possible.