HC Deb 23 October 1908 vol 194 cc1492-556

Considered in Committee.

(In the Committee.)

[Mr. EMMOTT (Oldham) in the Chair.]

Clause 10:

*MR. JAMES HOPE (Sheffield, Central) moved to omit subsection 1 of the clause, in order to raise the whole question of compensation. He said he should like to see substituted for the plan proposed in the Bill the compensation paid under the 1901 Act, which provided— (1) Where Quarter Sessions refuse the renewal of an existing on-licence under this Act, a sum equal to the difference between the value of the licensed premises (calculated as if the licence were subject to the same conditions of renewal as were applicable immediately before the passing of this Bill, and including in that value the amount of any depreciation of trade fixtures arising by reason of the refusal to renew the licence, and the value which those premises would bear if they were not licensed premises, shall be paid as compensation to the persons interested in the licensed premises. He hoped that the Government would not meet the Amendment with a request that he would say what provisions he would substitute supposing his Amendment were carried. No doubt that would involve a considerable redrafting of the Bill. He wished to take the debate on the broad lines of the compensation under the existing system and that under the plan proposed by the Bill. When the words in the Act of 1904 came to be considered they were interpreted by the Inland Revenue to mean a twenty-five years purchase of what was practically the same as the "annual value" of the licence as defined in this Bill, and finally there came what was known as the Kennedy judgment. The point of that judgment was the rejection of the contention of the Inland Revenue and the substitution for it of the difference between the market value of premises licensed and premises unlicensed. Mr. Justice Kennedy laid down that— The tribunal has to assess the amount of compensation by finding the price of the licensed premises in the open market. … and deducting the price which the premises would fetch in the open market if unlicensed. He went on to say— What is the object of our inquiry? I cannot do better than adopt the language of the interesting Memorandum of Sir Henry Primrose, the Chairman of the Board of Inland Revenue. It is to find the price which the owner of the freehold of the premises might expect to obtain for them qua premises enjoying the privileges of a licence, if sold in the open market. Upon finding that price and taking the difference, compensation was to be awarded. It was constantly argued that that judgment was wrong and that the present Bill would restore the position that the Inland Revenue had maintained. That could not hold water for one moment. The Inland Revenue would give twenty-five years purchase. This Bill would give ten and a half years at most. The new proposals of the Prime Minister did not, he thought, affect the compensation at all. He would like to be clear on the point. The proposal of the Bill was that the reduction period stood at fourteen years, and a new proposal had been made that there should be a further period of seven years, during which the monopoly value should not be charged, although the licensed house might be dealt with at the discretion of the magistrate or by local option. He must not take it, so he understood, that the reduction period extended beyond fourteen years. Under the contention of the Inland Revenue, which the Kennedy judgment disallowed, twenty-five years would have been allowed on the annual value of the assessment, but under this scheme of fourteen years the average would work out only at five and three-quarter years purchase. There was to be no reduction and no compensation in the first year of the reduction period, so that the first compensation paid would be taken at a thirteen years annuity at 4 per cent., and that would work out at some ten years purchase. As the term went on the number of years purchase became less. But taking the average, and supposing the rate of reduction was the same, the period would work out at five and three-quarter years as against twenty-five years, which would have been the case under the Inland Revenue contention before the Kennedy judgment. Even if the Kennedy judgment were wrong, still under the former conditions the licence-holders would have been four or five times better off than under the present Bill. However, the Kennedy judgment was the law, and he ventured to say that it was based on perfectly fair and equitable principles. When it was sought to acquire in the public interest any rights of a valuable consideration, he submitted that the only fair thing to do in the case of compensation was to take the market value. The difference was enormous between the compensation now being paid and the compensation which would be paid under the operation of the Bill. He would take the case of one house, and if the names connected with it were desired they would no doubt be given privately by those who put them forward. It was the case of a beer-house in a town in Essex. The amount of compensation awarded to owners was £1,415, but under this Bill, owing to the improvements in site, the value without the licence was actually greater than with the licence, and therefore no compensation would be taken at all. In another house in the East-end of London, the amount of compensation awarded to owners was £2,200. The amount of compensation that would be awarded under the present Bill was arrived at as follows:—The assessment of the premises as licensed was £45, the estimated assessment unlicensed, £35. The difference to be capitalised amounted only to £10, and therefore, if it were capitalised in the second year it would work out at £100 compensation, as against the £2,200 which it actually obtained under the present Act. Other examples might be taken where there was a much higher difference between the licensed and the unlicensed assessment. He would take a house in the middle of London, where on the same principle the amount of compensation awarded was £4,652, the difference which had to be capitalised amounted to £55, and the most that could be got in that case would be £550. The more a man paid under this scheme the less he would get, and all this time he would be paying a compensation levy. The nearer he came to the end of the reduction period the less compensation he would get; if his house was closed in the last year he would get a mere fractional compensation, but every year he would be paying his levy. On that ground alone, he thought if they looked to the reduction period there was no kind of fairness. If a man lost his licence in the last year of the reduction period he would get a very small fraction of its market value. This, he thought, would induce the licence-holders to try to get their licences taken away as soon as possible, and, although they might take care to keep within the law, it was a distinct temptation to them to use every means in their power, not to be able to carry on their business during those years, but to get compensation at the earliest possible period, and thereby enjoy, so far as they could, the benefit of the money which they would then obtain, and which they would lose had they to wait until the end of the period. The result of these provisions was practically to put all the licence-holders in the position of leaseholders on a term that would expire at the end of fourteen years. At present they enjoyed what he might call a permanent tenure, subject to good behaviour. That, of course, was always the position, even before the 1904 Act, of the old beerhouses, and since that Act it had been the position of both classes of houses. They would be also subject to special taxation all the time. The injustice of the position had only to be stated to appeal to any fair-minded man. He called attention to one peculiarity of the drafting of this section. It began by saying— Where compensation is payable in respect of the extinction of an old on-licence, the amount payable shall be determined by the Commissioners of Inland Revenue. It went on to say that— The actual licence-holders, apart from the owners, may have certain compensation. This provision would work out very curiously in certain instances where, owing to the advancement of site value, the unlicensed value was greater than the licensed value. In those cases no compensation would be payable and nothing would go to the actual managers of the premises. He favoured the suggestion that the draughtsman should be allowed occasionally to give his own explanation to the House. The draughtsman was an exceedingly able and painstaking man, and the result of this clause, he thought, could only be attributed to the fact that he had been harassed by the vacillating purposes or intentions of the Government. He might be told that, arguing on the results of compensation on the basis of the assessments under Schedule A, the assessments were far too low. There were enormous variations in assessments in different parts of the country, and they were often made on no very consistent or uniform plan; but even admitting they were too low, why did the Government take as a basis for compensation a standard which they knew to be wrong? If the assessments were too low why did they adopt them? He thought the answer was that in order to suit their purposes in this Bill they deliberately adopted a standard as a basis of compensation which they knew was not a fair one for the purpose. He would ask the Committee to come back to the only true and fair basis of compensation, which was not an arbitrary assessment, not a hard and fast rule, but a consideration of actual value, as it could only be determined by the conditions of the market at the time. Last week he ventured to accuse hon. Gentlemen opposite of the Manichean heresy; he accused them to-day of Lollardism. As he understood Lollard doctrine it was that unless a man was in grace he had no rights of property. Hon. Members opposite had no right to deny to a licence-holder, who perhaps was out of grace, any right which other citizens enjoyed. When other citizens had their property taken away for the purpose of public improvements the property was fairly valued, and 10 per cent. additional allowed. In this case the amount allowed was only about one-eighth of the fair market value. Although hon. Members opposite might dislike the licensed trade because they believed it was dangerous and liable to abuse, that was no reason why they should not treat those engaged in it, so long as they kept the law, on exactly the same basis as other citizens. It was in order to establish a fair scale of compensation that he moved the Amendment.

Amendment proposed— In page 6, line 14, to leave out subsection (1)."—(Mr. James Hope.)

Question proposed, "That lines 14 and 15 stand part of the Clause."


said he wanted to recall what hon. Members opposite had said in reference to the somewhat difficult and complicated subject of compensation. The mover of the Amendment had told the Committee that the Kennedy judgment gave the fair and natural basis on which compensation should be computed. His first point about that was that he did not believe that that judgment expressed what was intended by the authors of the Act of 1904 as the natural basis for compensation. What they intended was to give compensation on a property basis simply to those who were interested in the premises. Even the tenant was given compensation on that basis, but he was not given any compensation for the loss of his profits. He thought it was plain from the language which the authors of the Act used that they did not intend to give compensation for the loss of wholesale trade profits. He would give some illustrations of this. The then Home Secretary explained that— Compensation was given in respect of on licences, not on the loss of business profits but on depreciation of the premises arising from the fact that the extinction of the licence prevented the house from being used for the purpose for which it was most adapted. The then Solicitor-General said— What was estimated was the depreciation of property, and that was the whole basis and foundation of the Bill. It was said that the bulk of the compensation would go to the owners, who in many cases were brewers. He totally and absolutely denied it. It was obvious, however, on the figures, that only 11 per cent. had gone to the tenants on the average, and as a matter of fact, in many individual cases the tenant had had to put up with a £10 or a £5 note. The compensation which the tenant had actually got had been illogical in origin and capricious in amount, the standard had been anything but uniform, and the bulk of the compensation had gone where the then Solicitor-General said it would not go. He would take this statement of the case made by Mr. Cripps, the author of the standard book on compensation, in the House of Commons during the debates of 1904. He said— It had been argued that when licensed premises were taken for the purpose of public improvements two kinds of compensation were in force. There was a trading compensation and a compensation for a diminution in the value of the premises themselves. As a rule the trade compensation was the larger figure of the two. But in this Bill there was no trade compensation of any kind. They were looking at the difference in the value of the premises as licensed or unlicensed, and this did not bring into consideration what was known as trade compensation at all. Taking together those three quotations, it was plain that the judgment of Mr. Justice Kennedy was not intended by the authors of the Act, though the hon. Member for the Central division of Sheffield thought it was only natural.


My argument was based on the contention of the Inland Revenue prior to the Kennedy judgment. Would the hon. Gentleman accept that as fair, namely, twenty-five years purchase?


thought that the fact that the Kennedy judgment was not foreseen by the Inland Revenue strengthened his contention that that was not the original intention of the Act. As the Committee knew, the Inland Revenue tried to establish a basis which was different from the Kennedy judgment, and personally he thought the basis which was adopted, or attempted to be adopted, by the Inland Revenue was not really so satisfactory as the present scheme of the Bill. What were the real objections to the Kennedy judgment as they found it in actual practice? He thought they would find all over the country the greatest possible dissatisfaction with it on the part of compensation authorities. The compensation authority to which he belonged, estimating the amount which would have been payable before that judgment and directly afterwards in the case of the same houses, found a difference of at least 50 per cent. It raised the compensation payable by at least that amount and sometimes more. The licensing committee of the Liverpool justices found exactly the same experience—the compensation payable was double, and the actual reduction of licences cut down by one-half. Of course, if it was fair there was nothing more to be said; but was it fair? As a matter of fact, the authority to which he belonged, while administering that judgment on a conservative basis, not trying to evade the law, and at the same time trying to act fairly, found in actual practice that it worked out at prices which would not be paid in the market—not likely to be paid even in the time of boom prices. He believed the Kennedy judgment was based on the practice of trade valuers in the boom times. It was not justified at the present time by the actual state of the market.

*CAPTAIN FABER (Hampshire, Andover)

Will the hon. Gentleman allow me to say they go on the present figures and not on the trade boom figures in my county?


said that his own local experience did not agree. Lancashire had practically thrown over the Kennedy judgment. The hon. Member for Aberdeenshire in his breezy way had said the whole thing was a swindle, but one of the newspapers evidently thought that was too "breezy" an expression to be Parliamentary, and described it as an inequitable arrangement. Well, he knew that in Lancashire they found the prices they offered accepted after throwing over the Kennedy judgment. The authorities never really knew whether they were being "had" or not in this matter. The compensation authorities in administering this fund with fairness to both sides had to give roughly 10s. per barrel, but how was the authority to know that that amount of profit was made? Certainly it was not universally made; although there might be a rise in the price of raw materials, the sum would still in practice be maintained at 10s. He would take the case of the houses just on the margin of existence. What would happen? They would put in a tenant who knew how to work up the trade by the "long pull," and various other customs and methods, and the barrelage might increase, though the profits would suffer. In its essence it was utterly unfair. Under the 1904 Act compensation was not paid for the retail profits of the publican, though he lost them, and could not take away his business to other premises. In the case of the brewer they did pay wholesale profits though he could make them in another house, possibly close by. In the case of the "Crown Inn," Cobham, compensation was based on the wholesale profits made in that house, and it was stated in evidence that there were two houses close by belonging to the same firm of brewers. The amount paid in that case was £1,497, and the greater part of it represented brewery profits, although a large portion of the trade was probably not lost by the brewers in question. The hon. Member who spoke last had given cases of how this system of compensation would work inequitably. He stated that it worked out at only one-eighth of the present scale. One of the things he noticed was that the trade critics of this scheme never agreed amongst themselves as to how the actual scale would work out. The brief of the liquor trade which was supplied to hon. Members put it at one-third, others at a fourth, or a fifth, but the hon. Member put it at one-eighth. He asked the Committee to realise that one fallacy ran through the hon. Gentleman's statement of the case. The hon. Gentleman had taken in every instance the existing Schedule A for income-tax; but under this Bill they were going to have the real Schedule A. He would be exceedingly glad if the hon. Gentleman would furnish him with the names and the full calculations in the cases which he had presented to the committee, because he had always made a real attempt to try and understand the definite argument put before the country in the Press and elsewhere by the trade. The hon. Gentleman would himself admit that there existed a great deal of underassessment in the country, but the actual amount had yet to be ascertained. Let him take one or two instances. In the case of the "Crown Inn," Cobham, which was the subject of Mr. Justice Kennedy's judgment, the compensation was £1,479 10s., with £300 for site and structure; or a total of nearly £1,800. The income-tax assessment under Schedule A was only £19 10s. He did not think the Committee realised how far the robbery had gone. Did the hon. Member really say that the only fair and natural basis for compensation was a basis which worked out at ninety-two years purchase of the assessable value?


That depends upon the profits.


said he would take another case, their old friend, the "Coach and Horses," Portsmouth. They knew its value was £10,000. It was paying rates on a gross assessment of £144, and a net assessment of £120. Did hon. Members opposite think that a fair assessment?

LORD R. CECIL (Marylebone, E.)



said that in that case the hon. Member did not agree with the ordinary practice of the London Assessment Committees, which in such a case would be to take half the licence value for the purpose of assessment. The "Coach and Horses" was valued at £7,500 for the licence, and £2,500 for the site and structure. The right assessment, according to the ordinary practice of the London Assessment Committee, would be £312 instead of £120 made up thus: they would take the value of site and structure £2,500 and half the licensed value £3,750, or a total of £6,250, as the capital value to be assessed at 5 per cent. This worked out at £312. That was not an exaggeration, because two of the greatest living authorities on rating said that the Assessment Committees ought to take two-thirds of the licence-value instead of one-half, which latter figure they said was unfair. He had a return of fifty-six premises in London which had lost their licences under the Compensation Act, with the new valuation which had been made of the premises in use for other purposes. The compensation awarded in these fifty-six cases, the new rateable value of which was £1,765, was £134,000 odd. Taking the ordinary practice, that half the compensation awarded should be taken for the purpose of rating, the value of these fifty-six licences for rating purposes should be taken at £67,200, or an annual value, at 5 per cent., of £3,360, to which must be added the present rateable value of £1,765, giving a total of £5,125. They were actually rated at £3,169, so that there was a loss of rateable value there of £2,000, or 40 per cent. Assuming that the rest of the licensed premises in London were 40 per cent. under-assessed, that meant a loss to the rates of £322,000.

SIR F. BANBURY (City of London)

That is the fault of the assessment committees.


said he was quite certain that the under-assessment in the provinces was considerably more, and the loss from this cause must amount at least to £900,000, so that the total under-assessment, involved a total annual loss to the rates of the country, of at least £1,200,000. But, further, this assessable value was the basis, not merely for rates but also for taxation, the licence duty, and everything else. All the difficulties in this matter arose from the fact that the licence value included all kinds of different elements of value which they wanted to get separated, and, he believed, if they once got clearly in their minds what were these different elements of value, it would be seen that the scheme in the Bill was a fair and just one. The licence—value consisted (1) of the value of the site and structure; (2) the monopoly value attached to the premises because of the licence; (3) the retail profit of the tenant, and (4) the brewer's wholesale profit. For the purpose of rating, what they wanted to get at was the value of the land and buildings as increased by the fact that the premises had a licence attached to them. That they did not get at the present time; that they would get as an indirect result of the working of this clause. The Bill gave an opportunity to the owners of licensed premises to reassess their properties, and he thought they would be well advised to take that opportunity. And when it came to compensation, what they wanted to get at was fair compensation, first, for the loss of the monopoly value due to the licence, and, secondly, the loss of the tenant's trade profits. That was what this clause did. He believed the more the Committee investigated the clause the more they would see that it cleared away all the practical difficulties, all the intricacies, and all the unfairnesses of the Kennedy judgment, and that it had put the compensation on a really fair and just basis.

*MR. BARNARD (Kidderminster)

said that the speech of the hon. Member who had just sat down showed how essential it was that they should have soon a Government Valuation Bill in order to clear away present difficulties. He failed to see why complaints should be made against a publican or any other ratepayer in the country because he did not get his house rated on a higher basis than the one on which it was rated. The complaint should be on the other leg. He would remind the Committee, when, for instance, complaint was made with regard to the rating of the "Coach and Horses," that the Government were ratepayers in Portsmouth; and if there was anything wrong in the rating of that house they could have very well intervened and have asked that it should be put on a proper basis. He came to the point of what the compensation authorities were doing in this country. His experience was not the same as that of the hon. Member for Lincoln; and he had been this week taking part in an annual meeting. What did they do? They had nothing to do with the boom in prices or what people paid for the premises. They had to find what the man inside the house was paying for beer and other commodities, and then they had to find how much he could buy the beer at from somebody else, if he were not "tied." If a man was paying 36s. for beer to the brewer to whom he was "tied," and he could buy beer in the market of similar grade and standard from somebody else at 26s., it was obvious that the person concerned had to deduct 26s. from 36s., and the difference represented the price which was being paid for the house, and that was, he thought, the basis of fair compensation. He came to the celebrated Kennedy judgment. He was very glad to hear, and he welcomed the remark of the hon. Member for Lincoln when he asked if it was fair. Fairness was what some of them were trying to achieve, quite as much as some of his hon. friends who represented temperance. He did not think the question of the Kennedy judgment was in the minds of the Members in the House when they debated the Act of 1904, but he had nothing to do with that. He accepted Mr. Cripps' definition of what compensation was. But the hon. Member for Lincoln, after discussing it, stopped short of wholesale profits. He would have been glad if he had given them the value of his research, in comparing the compensation of the present Bill with the compensation of the 1904 Act. They did not compare in the slightest degree in this respect. Under the 1904 Act there was nothing to do with the monopoly value. The 1904 Act undoubtedly, in extinguishing houses, left the opportunity to the brewers with regard to other houses to get a good share of the trade of the suppressed houses. One could not put forward a comparison of that description in regard to this Bill, when the monopoly value of the suppressed houses went, according to the Bill, to the public exchequer. He put it to the Committee, whether that consideration did not altogether alter the state of affairs. That brought him directly to this question of compensation. He had often heard it said in the House, that if the trade paid, it was pretty immaterial, and could not seriously matter what the amount of compensation was. If that was the case why, it was asked, should there be such a discussion amongst those who did not take the trade view? If the trade expressed its own opinions as to what was the most convenient, legitimate, and easy method, why not attach such compensation to the Bill? He would take one illustration from man which would serve his purpose. Yesterday they were discussing the question of Welsh local option—he would not refer to the point beyond an illustration: if that local option came into force at once, and if the position of affairs was as an eloquent Member put it in his speech last night, what would happen? The Welsh people would be draining this national fund, which the people in England would be paying and they would be getting an enormous advantage. On the question of compensation, as a whole, he understood it to mean that they gave the compensation to a person for the value that they took from him. The things which were bought and sold in the open market, things which undoubtedly commanded a price, to the ordinary thinking mind were matters which well came within the definition of compensation. Let him give three examples: one would be from the very near past, another from the present; and the third from the future. The past illustration he would take was the Water Board, the present the Government Dock Bill, and the future the electricity proposals of last Monday night. What happened before the Water Board was created? They had Lord Cross and his Committee, Lord Llandaff's and Lord Balfour of Burleigh's Commissions, and the London County Council proposals on the Welsh scheme, and what not. They had other things to which he need not allude. What did all that amount to? It amounted to this, that the water companies had had fair warning, and that they well knew what might be expected, and that the public eye was upon them. And yet what occurred? They went to a court—a court created by this House, and consisting of eminent men, who decided that London was to pay to the water companies £47,000,000 sterling to buy them up. It also decided that the directors should receive something like £220,000, because their position was got rid of. He was not finding any great fault about it except this, that, as chairman of the Board, he was troubled enough to obtain the money to pay the interest on the £47,000,000 to-day. But it was recognised that what the companies were to receive was the value of the income which they could show they earned with the usual multiplier of year; applied to it. Then as to the Dock Bill he crossed swords with the Government who were proposing it. In a respectful way he approved of the measure, but they proposed to pay to the dock companies an income undoubtedly of a generous and lavish description. Why? Because in the public interest they thought it desirable that they should get out of the way this impediment to the improvement of the Port of London. Lastly, the electricity proposals which they had had before the House that week. What occurred? It was proposed that the company should have granted to it some rights to trade, and at the same time a time-limit—he wished that some time-limit were in this Bill—was granted to the electricity people under the Bill. That brought him to this provision, and he could not see why they should not, in this clause, endeavour to give such compensation as represented the situation, and try and compensate as far as possible all the existing interests. It could not be denied that when they reached the end of the twenty-one years, or came to the fourteenth year, under that monopoly value the position of the owners of the houses would be ever so much worse, and they would not be able to charge—he did not debate whether they should or should not—the same sum of money which they previously could in connection with the distribution of their commodities. With regard to the security of the tenant, he was very pleased to read in the newspapers that the Government were making some modification in that direction. It appeared to him that they had a right to ask that they should adopt previous custom in this respect. He had mentioned the Water Companies' directors and the Dock Bill, in regard to which it was proposed to give the directors compensation. If they could in every other department of life of the ordinary man, whose living was taken away, give to him, at any rate, a direct compensation as far as possible on business lines, they should do so here. In the case of these tenants they took away their usual occupation. If 30,000 of the tenants, out of 95,000, were got rid of they would not have the opportunity of renewing their occupation under the same conditions. He was, therefore, personally very glad that it should be provided that at any rate they should have one year's certain compensation to themselves. He recognised that it might be that a man had only been in a house for a few months, and, therefore, it would not be reasonable to give him more, but he should like to have a statement from the Government as to what would be the position of and control over these Commissioners. Would they be amenable to Parliament? Would they be amenable to something which was put into this Bill? Would they be a statutory body, or under whose control would they be? If it were provided by the clause, which he should welcome, that the tenant was to have not less than one year's compensation he should like to hear from the Government that their meaning was that the Commissioners should exercise a sympathetic and generous attitude towards the tenant who had been in business for many years and who had been injured. His last point had reference to a class as to whom he had put Amendments on the Paper, which he supposed would never be reached, like those of many other Members. He had tried to draw attention to the effect of the Bill on the home-brew houses. There were not many home-brew houses, but he noticed that at the end of this section they gave protection to fixtures. After all, the old publican who brewed his own beer and had a racketty plant, and from whom was taken away under this Bill a licence to sell the beer, was not in the position of the big brewer, because his plant was left on his hands as a lot of scrap iron, and the value of it would be taken away. He thought under these circumstances it was not an attack upon the scheme of the Bill, and did not interfere with any principle, to ask if the Government could not extend some consideration to these little men, and, either by an addition to the word "fixtures," or in some other way, meet their case so that they would receive adequate compensation to meet their special circumstances. In his constituency there were no less than sixty-three men who had public-house licences brewing their beer. Under a schedule of the Bill 120 licences would be reduced to about fifty, and the result would be to impose upon these little men something which he did not think the Government meant, and which he thought the Temperance Party in the House did not desire, because the position did not touch any of the general principles of the Bill. For these reasons he ventured to put forward these latter questions to the Government, who he hoped would see their way to alter or modify in some form the method of compensation put forward in this Bill.

*MR. SHERWELL (Huddersfield)

said that it was almost inevitable that the argument in connection with this Amendment should turn on the interpretation of what was market value. He sympathised with the plea that if the principle of compensation was to be recognised in a statute the basis of that compensation should be strictly fair and just. It was only in the extension that hon. Members gave to what they called market value that he found himself in serious disagreement with them. When the definition came to be expanded it always turned on an endorsement of what had become known as the Kennedy judgment. His first objection to the acceptance of that judgment was that it appeared to violate the express intention of the framers of the Act of 1904, which that judgment was supposed to have interpreted. The principle underlying the compensation provisions of that Act was that compensation was to be given on the assumption that the Act had not passed, or, in the words suggested by the present Lord Chancellor, as if the licence were liable in respect of renewal to all the contingencies to which it was liable prior to the passing of the Act. As he read the Kennedy judgment that clear and explicit intention of the Parliament of 1904 received altogether inadequate consideration. This was apparent in the distinction laid down in that judgment between the ordinary public-house and the ante-1869 beer-house. The ante-1869 beer-house had a statutory right to renewal, and therefore stood in a far stronger position as regards security of tenure than a fully-licensed house prior to 1904. Yet in Mr. Justice Kennedy's judgment only one year's extra profits were sanctioned in the case of the beer-house. Another consideration which prevented him from accepting the Kennedy judgment as a satisfactory basis of compensation was that it did not take into account the actual character of the licence. The central factor in the judgment was the brewer's and not the retailer's profits. He admitted that in the internal administration of the drink traffic in recent years the statutory distinction between the brewer and the retailer had been largely lost sight of. But, after all, the retailer's business or profit was one thing and the brewer's business or profit was another, and no basis of compensation could be satisfactory which did not observe the explicit distinction between the two. But his most serious objection to the judgment was that it recognised compensation for enhanced value resulting from the reduction of competition in the trade itself. He could not sanction the idea that when such enhancement took place as the clear result of State action the licensees of the remaining premises should receive additional compensation. Even the Government proposal did not get rid of that defect. Under the clause as it now stood every licence-holder would get compensation on the basis of the enhanced value of his licence resulting from reduced competition. Indeed the evil instead of being removed was actually intensified, because the Bill accelerated the rate of reduction and by so much accelerated the rate of enhancement of value. It might be urged that the surviving licensees paid for their enhanced value in the compensation levies, but if so, what became of the familiar plea that those levies were really insurance premiums paid for security of tenure during the reduction period? They could not have it both ways: either the compensation levy was to be the equivalent for the enhanced value accruing from State action or it was an insurance premium pure and simple. It could not be both. He invited hon. Members opposite to choose which horn of the dilemma they would elect to be impaled upon. The plea was a strange one in view of the great inequalities of incidence in the burden of the compensation levies imposed. Obviously, the largest and most prosperous houses were to be found in London and the big cities, but under the schedule of the Bill a publican in London paid a levy at the rate of 9.7 per cent. of the annual rateable value of his premises, a publican in a city of over 500,000 inhabitants paid at the rate of 12.7 per cent., but in small urban districts of less than 5,000 population the compensation levy represented not 9.7 per cent. as was the case in London, but over i6 per cent. of the annual rateable value of the premises. He might be told that this was not so unfair as it seemed, because the poorer and smaller houses would be the first to be suppressed under the Act, but it was not a good argument to say that because a man was doomed to speedy extinction he should be called upon to pay more than a man to whom a long life was assured. The inversion of the law of equity could hardly be carried so far. It was clear that the intention of the framers of the Act of 1904 was that compensation value should not include any enhanced value that would result from the passing of the Act. The late Home Secretary, speaking in support of the Bill on 20th April, 1904, in this House, said— The next point we have to consider is the amount of compensation to be awarded to the licensee [not the owner or the brewer, but the licensee], and we have decided that the fair measure of compensation which ought to be afforded is the difference between the value of the licensed promises and the value of the premises without a licence. Of course, that will be calculated as if the Act had not been passed. The right hon. Gentleman defended that by a reference to the Majority Report of the Royal Commission. The matter was put in an equally clear form by the right hon. Member for St. George's, Hanover Square. Speaking in this House on 9th May, 1904, the right hon. Gentleman said, … The hon. Member [for Spen Valley] says they will get an increased value by reason of the extinction of other licences, and he declares that they would be in a position to get better compensation by reason of that. The House should take note of the important clause in the Bill which provides that compensation payable for the extinction of a licence is to be calculated as before the passing of the measure. It should not be forgotten that this moment of time is taken to deal with the principle of compensation and, therefore, the undue appreciation which will result to the value of the licence feared by the hon. Member seems to me to be unfounded. … Against, that perfectly sincere anticipation they had to put the historic fact that under the Kennedy judgment the appreciation which the right hon. Gentleman anticipated would not take place had actually taken place, and was being made the subject of compensation to the dispossessed publican at the present time. It might be urged that, while it was true that reduction enhanced the value of the remaining licences, the community automatically received the benefit of such enhancement in the shape of enhanced annual values. That might be so if they had uniform and precise methods of valuation, but nobody could contend that our present assessments were satisfactory or adequate, or that they secured to the community the benefits of enhancement resulting from State action. During the last twenty-five years the number of public-houses in England and Wales had declined by over 2,700. In the same period the population had increased by 9,000,000, while the aggregate consumption of alcohol had also greatly increased. Nevertheless the average cost of a publican's licence was only £4 more than it was twenty-five years ago. That figure showed conclusively that under the quinquennial reassessments of rateable values the community did not receive its share of enhanced values created by its own methods of restriction. What was wanted and what he had endeavoured to secure by an Amendment, which unfortunately would not be reached, was a uniform, and adequate reassessment of licensed properties by the Inland Revenue authorities which would furnish it a definitive valuation for purposes of compensation. He knew that it would be contended that such a valuation if adopted as the basis of compensation, would stereotype the compensation value, and would therefore work unfairly. But apart from the fact that that objection ignored the intention of the sponsors of the Act of 1904, he would remind hon. Members opposite that if they had a uniform and fixed basis of compensation it would really cut both ways. They were often reminded that public-house property was declining in value. If that was so, it was obvious that a fixed basis of compensation that would be independent of any decline in trade would work to the advantage of the licence-holder. The right hon. Gentleman the Leader of the Opposition asked the House a few days previously whether a man ought to be taxed on one basis and dispossessed on another. He would answer that question by asking the right hon. Gentleman whether a man ought to be taxed on one basis and compensated on another. The late Home Secretary justified the compensation provisions of the Act of 1904 on the ground that he was carrying out the recommendations of the Royal Commission; but the Majority Report distinctly recommenced that the compensation basis should have no regard to inflated values, and expressly proposed that the basis of taxation and compensation alike should be the declared value of the licence. He sincerely hoped that the Government would be able to make some proposal by which a uniform basis of I taxation, which would also be the basis of compensation, could be arrived at.

*MR. G. D. FABER (York)

pointed out that although the consequences which would arise out of this clause if the Bill became law would be far reaching the arguments lay in a very narrow compass. The Government had made up their minds that the largest measure of compensation the members of the trade were to be allowed to pay to each other was one of fourteen years. The question was what was the proper method of arriving at the compensation when a licence was taken away. Was it the basis established by the Act of 1904, or should it be the entirely fallacious basis which the framers of this Bill had placed in Clause 10. According to the Act of 1904 where the Quarter Sessions refused to renew an existing "on-licence" the value of compensation to be paid was the difference between the value of the premises as licensed premises and the value of those same premises if they were not licensed. That was the method by which the Act of 1904 laid it down that compensation should be arrived at. That was the question that Lord Justice Kennedy (then Mr. Justice Kennedy) set himself to decide in the Ashby Brewery case. Lord Justice Kennedy put the matter of compensation in this way. He said the measure of compensation must be the price which the licensed premises would fetch if sold in the open market, and as among the possible purchasers in the open market would be the brewers, the price which they would be willing to pay would depend upon the profits. It was therefore material to inquire into the quality and quantity of the trade previously done by the house under normal conditions, quite apart from the popularity of the owner or the proximity of the brewery. Lord Justice Kennedy in his judgment referred to the case of Page v. Ratciffe, in which Mr. Justice Stirling laid down the position very clearly. Mr. Justice Stirling in that case said the value to the brewer was first the rent and, secondly, the profit derived from the sale of the beer; that those estimates, having been obtained, the Court would take both into consideration in arriving at the value. Lord Justice Kennedy then laid down the elements which the Court ought to take into consideration in arriving at the market value. It was to be on the basis of ten years purchase of the brewers' profits on the sale of beer and spirits to the licensee. Secondly, eighteen years purchase of the rental of the house, and thirdly, a small sum for depreciation of trade fixtures. At the time that this judgment was given everybody considered it to be good law. The Inland Revenue who initiated the proceedings were content, and never appealed against it. It was never taken to the House of Lords, and all lawyers knew that on a case of such magnitude, if the proposition laid down in the Kennedy judgment had been impugned by the Inland Revenue Commissioners, the case would have gone to the House of Lords as a matter of course. There was no appeal, and the matter was left to rest there. Only recently, in a Liverpool case, the present Lord Chief Justice, in giving judgment, expressed the opinion, as an obiter dictum, that the basis laid down for arriving at the measure of compensation in the Kennedy judgment was, in his opinion, sound and incontrovertible. Thus, then, they had this curious and novel state of things, that although the soundness of the Kennedy judgment had never been impugned in the Law Courts, the Government of the day had determined to override it in this Bill. And how did they propose to override it? The Bill said that the annual value of a licence was to be ascertained under Schedule A of the Income-Tax Act. But Schedule A did not dispose of the whole matter. It only assessed the tax upon the rack rent of the house; it took no note at all of the profits or goodwill. These were assessed under Schedule D of the Income-Tax Act. It was not that the Executive intended to let oft the licensed house for the purpose of taxation, but they taxed under two heads. Under Schedule A they assessed the rent, and under Schedule D the profits made from the house. Now, the Prime Minister entirely omitted the profits from his calculation of value. He based his compensation upon one leg instead of upon two legs. Schedule A in no measure exhausted the value of the house. The two schedules had to be taken together.

Attention called to the fact that forty members were not present. House counted; and, forty members being found present—


, resuming his observations, said that for the purpose of his argument he would put out of his view altogether the time-limit. He put it more broadly, and simply based his argument on the value of the house without any time-limit at all. Treating the retailer as the owner of the house, the desire was to ascertain what was its value, supposing, for instance, that it was sought to take it away for the purpose of some public improvement. The Prime Minister in Clause 10 laid down his method of arriving at the value. He supposed that, under that method, they would take the amount for which the property was assessed to income-tax, and then he imagined they would multiply that by so many years purchase—say twenty-five years purchase.


Does the hon. Member assume that it is a freehold?


said he was assuming it for the purpose of his argument, and he multiplied the sum at which it was assessed by twenty-five years purchase. The Prime Minister said that in that way they would arrive at the true value. But if he might give a case, he thought that they would see at once that by that method they could by no possibility arrive at the true value, because they were eliminating the profits on the trade of the house. He could not cite a better instance than that of the celebrated "Coach and Horses." It served as an illustration as well as any other instance which he could adduce. It would illustrate his argument in a concrete arithmetical manner. The reserve price put upon the "Coach and Horses" by the War Office, the then owners, was £10,000. The house was assessed to income-tax under Schedule A at £144 a year. If they multiplied that £144 by twenty five years' purchase they arrive at the figure, not of £10,000, the reserved price fixed, but £3,600. This showed an actual deficiency of £6,400; so that the War Office had put the property at much too high a value if they took the Government's method of arriving at it. If every member of the Committee threshed this matter out he must agree with him that the method adopted by the Government brought out a figure which was absolutely under the fair and proper measure of value. Still pursuing his inquiry in regard to the "Coach and Horses," they found that £10,000 was the reserve price put upon, the property by the Government as the proper value, and was the price actually paid for it. How had the War Office arrived at the sum of £10,000? They could not have arrived at it by proceeding upon the Government method, namely, assessment for income-tax purposes, and mutiplying the assessed sum by so many years' purchase. The War Office must have proceeded on entirely different lines. They might up to a certain point have multiplied the sum assessed to income-tax by so many years' purchase, but they must have also taken into account the value of the premises for the purpose of trade, and this was how the difference was made up between the sum of £3,600 on the Government basis of calculation, and the £10,000 on the War Office method of ascertaining the value. The actual capitalised value of the trade done in the house meant in round figures the difference between £3,600 and £10,000, in other words £6,400. By that means and by that means only, had the War Office arrived at the reserve price of £10,000 which they had put upon the property.


The War Office were bound to adopt that valuation because of the Kennedy judgment.


Surely the War Office were not bound to do anything of the kind. They were the owners of the property, and they could adopt any system of valuation they pleased. Why were they bound to follow the Kennedy judgment?


As a proposition of law.


said that surely the War Office were under no restriction or compulsion. All they had to do was to the best of their ability to arrive at the value of the "Coach and Horses." It might be that there was some flaw in his argument, but he could not see it. He thought that a great fallacy underlay the proposition contained in Clause 4. They were now eliminating from their calculation of the value any trade done in the house. It did not matter to him, for the purpose of his argument, whether it was the holder of the licence who was owner of the property, or whether it was a case of a tied house. The principle was the same whether it was the retail owner or whether it was the tenant plus the tie to the brewer. In assessing compensation under this clause, they were ignoring altogether the value of the trade done in the house. There was no getting away from that, as he understood the proposition. That was why he ventured to say the Act of 1904 and the Kennedy judgment which followed it were sound. All they had now tried to establish was the value of the licensed property in the open market. What the Government seemed to desire to ascertain was part of the value of the property, ignoring altogether the trade done in the house. Some Members on the other side had been impressed by the gravamen of that criticism, because they had tried to avoid it by saying that the principle of the Bill was perfectly sound—it assessed at so many years' purchase under Schedule A for the purpose of income-tax—and that it was no fault of the owner of the licensed property if the assessment had been too low. But all licensed houses were assessed, whether for taxes or rates, by a public authority, and it seemed to him in no way to meet the argument to say that because a licensed house was assessed too low, it served the owner of the house perfectly right if compensation was assessed at so many years' purchase, and the amount came to an insufficient sum. Great and flagrant as the injustice was by taking the measure of compensation adopted by the Bill, it became all the more flagrant when they considered that all that the Government proposed to give was an annuity for a certain number of years, based on this wholly unsound method of assessing the value. In the case of the "Coach and Horses," £10,000 had been given for the property; £7,500 was established by competent valuers to be the value of the licence, and £2,500 to be the value of the bricks and mortar and the ground. The Government, in assessing this annuity—the maximum annuity being for thirteen years—would do it in this way: The assessment for purposes of income-tax with the licence was £144; without the licence, £104, and, therefore, the sum they would give to the present owners of the "Coach and Horses" would be a principal sum, which would represent a thirteen years' annuity of £40. That, according to the tables would come to £400. The £2,500, representing the bricks and mortar and the ground, added to the £400, amounted to £2,900. So in exchange for property sold only the other day by a great Government Department for £10,000, all the purchasers would get under this clause would be £2,900. As far as the condensation period was concerned, no doubt it was past argument and past praying for, now that the earlier clauses of the Bill had been carried. But what he hoped was not past argument, not past praying for, was that, at any lace in assessing the beggarly compensation for the compensation period, the House would proceed on a sound basis, and not on a wholly slippery and fallacious one. He could not understand how and why the Government could possibly have arrived at such an inequitable basis. It surely could not be that they desired to strip the owner of licensed property of almost everything for which he had paid full value. It could not be mere spite, mere animosity—he hoped not—against the owner of the property. Surely equity and fair dealing ought still to hold force, notwithstanding what the private opinions of members on the other side might be. He ventured to put it otherwise, and to think that in this case the Government without intention to inflict this irreparable injury on those interested in licensed houses, had innocently gone astray; had by mistake lost sight altogether of the vital factor of the case, viz., that the greater part of the value of a licensed house lay not in its assessed value for purposes of income-tax under Schedule A, but in the trade done in the house. The Government ought not to have it both ways. When extracting taxation from the licence-owner, they taxed him under two heads, under Schedule A and Schedule D; when assessing him for death-duties they assessed him at the full market value of the property. Now, when they proposed to give him what they called compensation, they eliminated altogether the consideration of profits, and simply considered the bare assessment value of the property for income-tax purposes and nothing more.

*MR. DICKINSON (St. Pancras, N.)

said the hon. Member had made an eloquent appeal based upon the idea that all they had to consider on this occasion was—what was fair to the public-house interest and to the public. Of course, that must always be an important consideration, but at the same time there was another consideration which they must bear in mind—that which arose from the peculiar condition of affairs in 1904. They were entitled to say that the Act of 1904 was the result of what was more or less a Parliamentary contract. The public-house trade had obtained a very important concession, security of tenure, which was most valuable to them, and in return for that they had obtained amongst other things these clauses which entitled them to compensation in the event of their being disturbed. The terms and conditions of that contract were very clearly discussed and set out in the debates in 1904, and at the risk even of repeating some of the observations of the hon. Member for Lincoln, he should like to call the attention of the House still further to what was actually said then, and what was the intention of the House. There could be no doubt that after those debates the public-house interests thoroughly understood what was the position then. They, of course, knew precisely the basis on which the Kennedy decision was arrived at. As Mr. Justice Kennedy then said, after pointing out that the price of the licence would ordinarily depend on brewers' competition— This will depend upon the amount of profit which the brewer owner can fairly he expected to make. The evidence must be of profit made ordinarily and normally in the brewing trade. There could be no doubt that that idea at any rate was not held by anyone in 1904, and especially was that the case if they looked at the observations of Mr. C. A. Cripps, whose knowledge of the law of arbitration, of course, was perfectly unique. There were one or two quotations from his speeches which were of importance. He said the Bill was not based on the principle of compensation for trade at all, otherwise the amount of compensation might be very large indeed, and the suppression of a large number of public-houses rendered practically impossible. That was precisely what had occurred under the Kennedy judgment. He said— Further, they could not have anything in the nature of compensation of a more moderate and restricted form than that in the Bill. In the Bill there was no trade compensation of any kind. Even if Mr. Cripps could not be quoted as speaking for the Government, they had a very important declaration by the right hon. Gentleman the Member for Dublin University, in which, when the hon. Member for Mansfield said if the matter went to arbitration the question would be left to the Commissioners of Inland Revenue, who based their valuation on the takings of the house, the right hon. Gentleman interrupted, and said— That is not so. It was perfectly clear that the valuation would not be based on the takings of the house, and he believed that view wa3 accepted by the trade. The trade had several compensation cases tested before the Kennedy judgment, and they were at that moment satisfied with the decision of the Board of Inland Revenue and did not quarrel. When the Kennedy judgment was given no one was more surprised at the legal position than the representatives of the brewing interest. If that view had not been held in 1904, he ventured to think that these proposals would have been dismissed in a very summary way. If the Government had had to admit that the system of compensation would be, in the words of Mr. Cripps, "such as would render practically impossible any large reduction of public-houses," he did not think the Government would have adhered to their clause. The decision of Lord Justice Kennedy had materially influenced the operations of the magistrates with regard to compensation. There was a case in Chelsea, where there were three public-houses situated all together. Two of these were in the ownership of one firm of brewers, and on closing one of them that firm might have full compensation on the basis of its wholesale profits, whereas it would probably continue to sell in the remaining house as much beer as it had hitherto sold in the two houses. Such cases rendered it extremely difficult for the magistrates to carry out the law. They had had two or three instances given with reference to the assessed value of public-houses upon which the compensation was to be based. He had taken the opportunity of looking into the question of "The Crown," which was one of the public-houses that formed the subject matter of the Kennedy judgment. The compensation payable under the Bill in this case had been stated to be £52. He had, however, tested this figure by means of the information appearing in the report of the case. The assessed value was £23, and he was informed by one of the most eminent and experienced men in regard to assessments in London that it certainly ought to have been valued at £50. The result of that was that if they deducted from those two figures the value of the house which was unlicensed, which was given in the Kennedy judgment as being £18, taking the difference not between £18 and £23, but the difference between £18 and £50, instead of the compensation being £52, as stated in this House on the Second Reading of the Bill, the compensation would be £350, or three times the amount estimated. From that point of view, if the assessment was properly raised, as it should be, there could be little doubt that the displaced publican would see it was a fair compensation. The only point that remained was whether or not this raising of the assessment would take place. It had been pointed out to the Government that the Bill as at present drafted would not ensure this. He thought that so far, at any rate as concerned the particular clause which dealt with the assessment of London, that would have to be amended if they were to carry into effect the scheme of the Government—a scheme whereby the public-houses would be assessed up to their full value.

*MR. YOUNGER (Ayr Burghs)

said he was sure the Committee did not desire that any section of the community should be led to think that they could not obtain justice from the present House of Commons. The whole point of the opposition was that the scheme of compensation in this clause was one which in itself was not fair, just, or equitable to the interests which were being assailed by it, particularly having regard to the fact that the money to be provided for the compensation was provided by themselves and not by the State. They had heard a great deal of the question of under-assessment of public-houses. He protested against the brewers being blamed for that; if there was a fault, he thought it lay entirely with Parliament. If they had been lax in not seeing that their valuation laws were good, it was the fault not of the brewers but of the Government. In Scotland the assessments in the main had for a long period been made by independent valuators from Somerset House, and it was a puzzle to him why that had not been done in England. He assured English hon. Members that if they had the chance of discussing a Licensing Bill for Scotland, which he hoped they would not have, they would not be able to say that the public-houses there were not assessed up to the full amount of their monopoly value. He agreed with the hon. Member for Kidderminster in saying that at all events if the brewers had submitted to underassessment, as most people did, the Government had been equal sinners. They had submitted to the alleged under-assessment of the "Coach and Horses," and nobody heard that they went with their caps in their hands to ask for the valuation to be raised. The Royal Commission appointed on this question was more thorough in its proposals than the present Government. They began by saying that their scheme included in its operation all retail licences—that was, off-licences as well as on-licences—both as contributories to the compensation fund, and as liable to suppression, which they said appeared "both desirable and necessary for the working of the proposal." In discussing the question as to how compensation should be framed, they dealt with the question of basing it on annual value, and said it way tolerably certain that goodwill would not in that case be considered at all. They took the declaratory value, the value of the premises without a licence and the value of the premises with, and they provided that the declaratory value should be taken every seventh year. He wished the advisers of the Government in this matter had really understood the exact position of this matter when advising them. In a pamphlet the right hon. Member for the Spen Valley said— The Act of 1904 does not say anything about paying compensation for goodwill. What it provides is that the amount to be paid should be a sum equal to the difference between the value of the licensed premises and the value which these premises would bear if they were not licensed premises. But, as had been pointed out, this difference in value practically did include it. What they wanted to get at was the market value. He asked, Was it the intention of the Government, in taking away these licences, merely to pay compensation for the monopoly value, and not for the market value? The Government were, he understood, only proposing to pay the monopoly value. The monopoly value, of course, existed, but what would be the value of the monopoly if it were not for the house and the money put into that house to work the business? There would be no value. It only got its value from the fact that somebody provided capital with which to work it. If they only compensated for monopoly they compensated insufficiently, ignoring altogether the question of goodwill and the profits made. It would be derisory compensation if the amount of monopoly value were alone to be considered. It was said that there seemed to be no very great increase of values in recent years. That arose largely from the alleged inefficient state of the valuation law. An important feature, namely, the greatly increased competition which had taken place by the establishment of clubs, had been ignored altogether. There was also at the present time a more severe and acute competition between on-licences and grocers' licences in the spirit trade, and these two factors as well as the weakness of the valuation system had a great deal to do with the somewhat interesting and startling figures which had been adduced in this particular. His complaint was that the compensation proposed to be given was totally insufficient. He believed that in many cases no compensation would be given at all. There were many cases in which the rateable value for income-tax was less than what it would be if the premises were not licensed at all. That seemed to him, therefore, as it seemed to the Commissioners, a perfectly impossible basis on which to found any accurate or fair system for compensating public-houses. The Prime Minister had said that in the case of the sale of one of their houses the Government were obliged to adopt the attitude of Lord Justice Kennedy. He thought the right hon. Gentleman was quite right; he was dealing with public property, and he had to get the best price he could for the public. He did not find any fault with that, but he did find fault that they refused to adopt the system of the Inland Revenue authorities, whose action had been frequently alluded to in this connection. The Chancellor of the Exchequer made a long speech the other night on the valuation of licensed property for the purpose of the death duties. He was interested to notice that on the day after a solicitor in Tunbridge Wells stated that he had recently had occasion in the interest of a client to settle the value of a public-house with the Inland Revenue authorities for death duties, and acting upon the speech of the Chancellor of the Exchequer he suggested that fourteen years purchase was all to which they were entitled. The Inland Revenue authorities laughed at him, and the house was ultimately valued at twenty-seven years purchase. It appeared, therefore, that the Inland Revenue Commissioners had not adopted the scheme of valuation which was so much commended by hon. Members on the other side. On the contrary, they followed a method which at all events produced for the State in the way of death duties a value far above what any one who was to be dispossessed under this Bill had asked to be paid. He hoped this debate would lead the Government to see that some further serious consideration required to be given to this question of compensation. They were proposing to place an extremely unfair burden on certain parties, and that largely from the fact that they were establishing a national fund instead of a local fund. The conditions which justified the 1904 proposals did not exist here, and he hoped that in this matter the Government would change their minds for the better as they had changed their minds for the worse in other parts of the Bill.

MR. LUPTON (Lincolnshire, Sleaford)

said the Committee had heard a great many appeals from the opposite side for justice in regard to the amount of compensation to be paid for public-houses. Justice was a very fine thing, but it was not always pleasant to the recipient. He was reminded of what th.3 great dramatist had said— Use every man after his desert, and who should 'scape whipping? Therefore, in dealing with this matter he did not wish the Committee to apply strict justice to licence-holders. He thought the Committee ought rather to consider what the licence-holders themselves desired, and what the Committee could liberally, he did not say generously, give in order that this business might be settled. Having heard all the arguments for and against this particular scheme of compensation, he had come to the conclusion that there was no use trying to settle the question by any process of proof as to what the exact rate of compensation should be. They had to consider what was the compensation which the parties to be compensated would accept, so long as the demand made was not too large. He thought words should be inserted in this clause which would have the effect of giving the owner of the licensed premises the market value. The scheme of compensation according to Schedule A had a great many advantages. It should be combined with arrangements for the raising of the assessments, and in that way it would be a good thing for the revenue of the Exchequer and of the local authorities. If it were found that an assessment under Schedule A was insufficient, the owner of the house should be penalised by having the amount payable for compensation reduced accordingly. That would make licence-holders careful to see that they were properly assessed, with the result that the rating authorities would get the advantage of fair assessments on the premises according to their value. The object of the Bill was to bring about a great result for the good of the community, and it would be a great pity if they did anything which would cause enmity between different classes. It would not pay, from the point of view of the Liberal Party, to set the liquor trade against them, He did not see why they should fight over the amount of compensation to be paid at all so long as those engaged in the trade were willing to pay a larger amount than that proposed. The drink traffic represented the stomach of the nation, and was far more powerful than the head. He presumed that the trade only wanted their money back, and with ordinary business prudence the Treasury Bench ought to be able to devise a satisfactory scheme of settlement between this and the Report stage. At the same time he wished to warn the brewers that the less they cried for justice, the better it would be for them in the end.

SIR F. BANBURY (City of London)

said that if temperance reformers desired to take away the property of brewers in order to advance the cause of temperance, that could be done by paying fair compensation. He understood the hon. Member opposite to say that the brewers did not anticipate the Kennedy judgment would be what it was. He was not himself a brewer and he had no means of knowing what they anticipated, but he would point out that the Kennedy judgment should have as much weight as the judgment in the case of Sharpe v. Wakefield, of which they heard so much from hon. Gentlemen on the other side of the House. The Kennedy judgment did not suit them; they said that the brewers did not expect it, that the late Government did not intend it, and they argued consequently that no attention should be paid to it. It appeared to him that the Kennedy judgment was in accordance with ordinary justice and common sense, and that it ought to be carried out. If the Government were going to take away a man's business, they ought not to apply a hard-and-fast rule, but should investigate each case upon its merits, and give judgment accordingly. He had the honour of being a Member of this House at the time the 1904 Act was passed. He voted for it with the hope that a judgment similar to the Kennedy judgment would be given. He did not know whether there was any difference between restaurants and public-houses under the Bill. Perhaps the hon. Gentleman opposite would tell him.


They will not be compulsorily reduced. It is in the discretion of the magistrates.


said he did not think that the Under-Secretary was quite clear on the subject; but he presumed that restaurants would be treated in the same way as ordinary on-licences. He would take the following case, the accuracy of which he could guarantee. A house in London was let at £3,000 a year as offices. Alterations were made upon it to adapt it for a restaurant; and it was thereafter let on lease for sixty years with a licence transferred from a licensed house in the same street, belonging to the same freeholder, at £4,000 a year. The annual value of the property without licence was, therefore, clearly £3,000 a year. The lease was granted ten years ago. If therefore the licence was taken away at the end of fourteen years from now the leaseholder would have to lose £1,000 a year for thirty-six years. If the licence was taken away in a year's time the compensation would only be such a sum as was the value of the difference between the annual value with the licence and the annual value without the licence, so that he would get no compensation, for the loss of his business; he would only be recouped the loss in rent for thirteen years; and would then still have to lose £1,000 a year for thirty-six years. Here was another case. A licensed victualler had a house on lease with an unexpired term of thirty-two years. He invested of his own money in that house £16,000, and in addition £6,500 which he obtained on loan from the bank. On the Second Reading of this Bill the bank called in the loan of £6,500, and an old friend of the family lent the man £6,500 to replace the loan called in by the bank. The whole amount of money in that house was therefore £22,500; and the compensation under the Bill would only amount to £5,800. He did not want to make a point of the assessment, because he failed to see what assessment had to do with the matter at all. They all knew that in London assessments were conducted in a business-like and proper manner, but that was not the case in the country. He knew of a case in which the overseers had kept on assessing a house which had been pulled down for twenty years. What then had that to do with the brewer? It was no fault of the brewer. He would ask the Committee to think seriously before passing this particular clause. It might be right or it might be wrong to abolish licences; but in any case it must be a self-evident proposition that if they were going to abolish licences in the interests of the country, the country ought to see that clear compensation was given to the brewer. He himself would go further; he thought the compensation should come from the public who were going to be benefited by the Bill, according to the argument of hon. Members opposite. As, however, it was impossible for the public to pay the compensation, he thought provision ought at least to be made whereby the brewers by themselves might arrange a fair compensation in the event of a fairly conducted business being closed.

*MR. RIDSDALE (Brighton)

said he should like to discuss this subsection from a point of view which had not yet been put before the Committee; that was to say from the point of view of machinery rather than that of the basis of compensation. Any licence that was suppressed during the first year of the reduction period would be compensated according to the term of the reduction period still unexpired, so that the holder would get thirteen years compensation. If they followed that up all the series of years during the reduction period they finally came to the case at the end of it in which the licensee who was reduced during the last year of the period of fourteen years got no compensation at all. That was obviously an inequitable proposition, and he was perfectly certain it must have occurred to the Government that this subsection must be recast, because they had introduced into Clause 3 a new principle. Under Clause 3 as drafted the reduction, period and the time-limit were coterminous, but the Prime Minister had given the House to understand that at the expiration of the reduction period there would be a time of grace of seven years before any attempt would be made to exact the monopoly value out of the licensees who remained. Let the Committee look at the position of a man who was suppressed in the last year. He would get nothing, but the man who was perhaps very little better than himself so far as the needs of the neighbourhood were concerned succeeded in lasting over the reduction period, and got into that seven years of grace. His compensation levy stopped, and he was subjected only to the ordinary demands which a licensee had to pay at the present time and he got a probable seven years run of his business. Surely they could not say that there was any equitable treatment in those two cases. The man who was suppressed in the first year of the reduction, period, who got thirteen years compensation, was admittedly a man who had set up a house and run a business which had been a redundant business carried on to the detriment of his neighbours, for those responsible for framing the scheme of reduction had selected him as the man to be suppressed at the earliest possible moment. Surely they were not going to give him thirteen years compensation and give the man, whose licence was suppressed at the end of the period, having set up a house that served the needs of his immediate neighbours—who on the whole had conferred good rather than evil on those neighbours—no compensation at all. He really submitted that that part of the scheme required redrafting, and he had put down an Amendment to meet that case. It was quite a simple plan which could be adopted, without cutting at the scheme of the Bill, because happily the Prime Minister had instituted a seven years period of grace which was an integral part of the reduction period. Therefore if they adopted a sliding scale and conferred on the licensee who was suppressed in addition to the amount of money he would get proportionate to the term of years unexpired, an amount equivalent to half the number of years which his tenancy had already run, they would get a graduated scheme which was fair and equitable. He would give a couple of instances. Take a case in which the licence was suppressed after two years with twelve years of the reduction period still unexpired. Under the Government's scheme that man would get twelve years compensation. He suggested that he should get twelve years compensation plus two periods of six months in respect of the two years licence he had already enjoyed. That would give him thirteen years compensation altogether. If a man had eight years of the reduction period expired and six years still to run, under the Government scheme he would get six years compensation. He suggested that he should get six years compensation plus eight periods of six months or four years, making ten years compensation in all. Take the case of a man who had thirteen years expired and one year to run. Under the Government scheme he would get only one year's compensation. He suggested that he should have one year's compensation plus thirteen periods of six mouths or six and a half years, which would give him seven and a half years compensation in all. Take the last case of all, the man whose whole fourteen years had run, who had been paying the compensation levy the whole time, and whose licence was suppressed, but who had just failed to enter the period of seven years grace. Under the Government Bill he got nothing, but under his suggested Amendment he would get seven years compensation. He very humbly submitted that if the Government could see their way to introduce that principle into their clause it would make the Bill much more equitable and fair all round.

MR. LYTTELTON (St. George's, Hanover Square)

said he would press most strongly upon the Under-Secretary the absolute necessity of meeting the arguments which had been directed against the clause unless the Bill were to be a palpable absurdity. It was manifestly absurd that at the end of fourteen years a man who in all likelihood was a deserving man, who had paid the compensation levy for fourteen years, and whose house by hypothesis was more desirable than another, should receive nothing; whereas a man whose licence was suppressed at the beginning of the fourteen years, whose house probably was undesirable and clearly redundant, should receive substantial compensation. The arguments that day on the other side of the House, with the exception of the Member who had last spoken, had been somewhat of a technical character. He wanted to remind the Committee, in the first instance, that whatever the basis of the compensation was, it was the trade that had to pay it. It was clear that the reason for the alteration in the compensation scale levy was not that it was an unjust levy, but that it was the policy of hon. Members opposite to accelerate the speed of reduction in the number of public-houses. That might be the policy. But if it was the policy of hon. Members to accelerate the speed of reduction, surely that ought to be done upon just and fair terms. He believed the Committee were almost throughout agreeable to that. Therefore, apart from technicalities, let them go to the heart and substance of the matter, and ask themselves whether this was a true, honest, and fair way of ascertaining the compensation due to those whose licences were reduced without misconduct. Supposing any hon. Member was called upon to value property. Take the simplest case of valuing not a public-house, but an ordinary house. Obviously, the way he would proceed would be to ascertain its rental; whether it was in a good neighbourhood; whether it was in a town which was likely to maintain its position; and according as these questions were answered affirmatively or negatively he would apply a low or a high rate of purchase. If it was a very good property he would apply twenty or twenty-five years purchase; if it was a bad property it would come down to as low as nine or eight. That particular method of ascertaining value, and what it would be fair to pay to an owner if he were dispossessed, was not open to a valuer of "tied" houses, because in those cases the rental was compounded of two things, a money payment and an onerous obligation into which the tenant entered to buy his beer from a certain brewer at a certain price. Therefore, the owner who was a brewer, in that case received for the house which was his property, a rental in money and a covenant to buy from him an article from which he made a substantial profit. The true compensation in that case, therefore, and no one could deny it—there was no escape from it—was first the cash value, and next the value to the brewer of the retail trade which he sold to the publican, which, of course, was a very much larger sum than the rental itself. What hon. Members desired to do in this case was to get rid of that second element of value altogether, but really it was not arguable. They desired to say that where a publican had a price of £100 to pay, and where he had under the terms of the "tied" covenant to pay £200 a year more—that was to say, where the total value of the premises to him was £300 a year—they were going to say and, as he understood the Government proposal was, that the value should be £100 a year instead of £300. That really was a proposal which he ventured to think was preposterous, and he could not think that hon. Members understood it before they made it. It was perfectly true that Lord Justice Kennedy himself had said that in the absence of rental for premises such as this, he had found it absolutely impossible to arrive definitely at the value of the house. But when they had a figure, very often a very small figure for the rental, and a large figure for "tie," he said they must take both those figures before they could arrive at what the true value of the property was, either to the publican or to the brewer. He should like to say that that was an uncontestable proposal. He had taken part in very many arbitration cases, and it had never been and never could be disputed that when they had to deal with first the property consisting of bricks and mortar and land, and then a trade carried on on the property, to which that property was peculiarly adapted, they must have regard to the property as a whole as enhanced by the trade carried on before they could ascertain what the value was or might be to the owner or tenant. The hon. Members for Lincoln and Huddersfield, to whose speeches he had listened with great interest, impeached, as he understood, the very simple principles which he had been venturing to submit to the House, not upon the authority of the Kennedy judgment but upon the authority of universal practice which that judgment did not go beyond How had the hon. Members sought to impugn these conclusions which seemed to him to be so clear? They had said that such a construction as this of the 1904 compensation clause was clearly against the intention of the authors of the Act. It would have been expected that to have established and maintained such a proposal as that they would at least have been able to quote some words from the late Prime Minister bearing out any such intention. No such words had been submitted, and he would only say that he would himself protest against the idea that anybody except the Prime Minister and the Member actually in charge of the Bill could be considered an authority as to what the intentions of the Bill were. Since his right hon. friend the late Home Secretary had been quoted in connection with the proposition laid down, he would read his answer to the present Minister for Education. The latter right hon. Gentleman asked whether steps would be taken to introduce in another place an. Amendment to the Licensing Bill granting to the licensee compensation for goodwill. The late Home Secretary having answered that Question, the present Minister of Education inquired— Is there a provision in the Bill giving compensation for goodwill? And Mr. Akers-Douglas replied— It must be an element in the question which the Committee have to consider. And how could one possibly consider the question of goodwill without this element? There they had the whole matter as he thought. How could they possibly consider the value of the goodwill of a person carrying on business, without some regard to the profits he had earned?


May I ask the right hon. Gentleman one question. Is he referring to the goodwill of the brewer or manufacturer or the goodwill of the retailer?


I am referring to the goodwill of both. The proposal of the hon. Member for Lincoln was that the intention of the authors of the Act was to exclude the elements of profit altogether.


I am sorry to interrupt but that was not my meaning. What I did mean was that I thought it was the intention of the authors of the Act to exclude consideration of the wholesale profits of the brewer except in so far as the monopoly profits derived from the licence increased the real rent which a hypothetical tenant would pay. That is the only way in which the wholesale profits should be taken into account.


said he only desired to arrive at the hon. Gentleman's real meaning, but when they had to consider, as they had to consider here, what the value of the licensed premises was to the owner as well an to the tenant, how could they possibly, in common sense apart from the law, divorce the worth to the owner measured by the "tie" covenant in the deed between the parties. The hon. Member knew as well as he did that the brewer was perfectly ready to take £25 rent, looking at the £200 or £250 a year profit which he might make upon the beer. If they had to consider that question, and it was admitted that they had in order to estimate the value of the premises to the owner, was it possible to exclude the item, and how was it possible to exclude the consideration of the profits which lay at the root of the whole matter? Then the hon. Member for Huddersfield impeached this judgment on the ground that Lord Justice Kennedy had failed to distinguish between what the hon. Member called the precarious property—which was subject to the will of the justices not to be renewed—and the more assured property of the ante-1869 beer-house, and he said a distinction of only one year's purchase was made between the two. The hon. Member would forgive him for saying, however, that if he had had more experience in this matter he would have known that very often the ante-1869 beer-houses were of the poorest and most miserable class of property. They were scarcely worth a year's purchase of their profits. Others were worth more because they did a good trade. But those who did a bad trade were not worth more than one year's purchase as compared with the ordinary public-house. But the hon. Member sought to derive from that argument an inference that Lord Justice Kennedy had treated the ordinary public-houses as if they were freehold; but no such deduction could, he thought, be made. He should like to call attention to the fact that there was a passage in the 1904 Act, the general effect of which was that nothing that ensued from the passage of that Act should be deemed to enhance the value of the licensed property after its passing. They had, therefore, it was said, when they were following up those words for the purposes of compensation, to consider the pre-1904 period. He accepted that, but did not see how that had really anything to do with the present case. It was perfectly obvious that the temperance party was quite sufficiently energetic and wealthy to make that clear in a Court of law if it was not clear now. He thought it was perfectly clear. He did not think there could be any argument in regard to it under the Act. He thought that the hon. Member, whose great knowledge on this subject everybody cheerfully recognised, would agree that it had no bearing on this case. Nobody except a few persons on the other side of the House would wish to do injustice to those whom they reduced during the fourteen years, and that feeling which ought to commend itself to all was surely rendered more palatable to those who entertained a strong temperance opinion by the fact that the justice to be given to them would be paid for by the trade to which they belonged. There were only two other arguments to which he would very briefly refer in conclusion. Of course there were certain differences of opinion as to the amount of variance between the Government proposals and the 1904 proposals, as to the compensation which would be payable. He thought it ranged from one-third to one-eighth, but great as was the zeal of the hon. Member, he did not dispute that at least one-third would be the difference. There was one other objection raised against the present basis, and that was its inconsistency with assessments. That was dealt with most fully by his hon. friend the Member for Ayr, who said that the Majority Report of the Royal Commission showed that the assessments for rateable purposes had nothing to do with the question of compensation at all—that such a contention was inadmissible. Anybody who had had anything to do with compensation law knew that perfectly well. It was a sort of last resource for a counsel in a desperate position to set up, but every arbitrator in the Kingdom knew that the argument was totally irrelevant and ignorant. The passage to which he referred was to be found at page 53 of the Report of the Royal Commission of which Lord Peel was the Chairman, in which it was proposed that the taxation of licensed premises should be on the basis of assessment. He had now, he thought, disposed of, or he had endeavoured to dispose of, the whole of the five objections raised by the hon. Member opposite. The real fact was that the Government were attempting to accelerate the reduction of licences by paying very much less than the interests were worth. They were proposing to pay merely for the value, not of the trader's interest in the premises or of the premises themselves, but of the exclusive right which his licence gave him. A moment's consideration would show that that was to give him much less than his due. Take a place in which there was only one public-house, in which there was room for only one public-house, and take it that that public-house was carried on by an excellent man in an excellent way. In the course of thirty years he had established, as everybody would admit, a strong claim for goodwill—there was the strongest presumption that the old customer would resort to the old place which was worth, let them say, £500. What was the value of the exclusive power which his licence gave him? It was probably worth nothing, because nobody would be fool enough to come into such a place with a man so entrenched against him, there being, by hypothesis, no room for more than One public-house. In that position of things, under the Government's proposals, as he read them, they would not pay this man for his trade interest nor for his goodwill. They would pay him only for that which was, as he thought, without value—the power of excluding others, for no others would come.


The speech to which we have just listened from the right hon. Gentleman is an indictment of the whole of this clause and a plea for its elimination from the Bill. It must be conceded at once that hon. and right hon. Members opposite have a perfect right to say: "Granted you are proposing to alter the licensing law, and you are going to acclerate the reductions, why cannot you leave the present system of compensation untouched? Why have Clause 10 at all, seeing that the trade pays the compensation levy and is satisfied with the system of compensation as it is?" That is a question that ought to receive a full reply. We regard the sums which are now being paid, under what is colloquially known as the Kennedy judgment, as grossly excessive. That judgment was received by the whole of the liquor trade with, I venture to say, mingled gratification and surprise, and with equal dismay by licensing benches throughout the country. Those hon. Members who have served as licensing justices know what a blow that judgment was to the attempts they were making to secure a proper reduction of licensed houses. Not only was it unexpected by them, but I venture to reassert and emphasise the argument, so strongly put by the hon. Member for Lincoln in his able speech, that compensation on this basis was wholly unexpected by the framers of the Act of 1904. The basis of compensation awarded by Mr. Justice Kennedy included an element of brewers' profits which was no part of the system contemplated by them. So far as the actual value of the licences is concerned, the sums now paid are in excess of those which were quoted in the House by the then Ministers as the probable values of the houses to be suppressed. The right hon. Gentleman who has just sat down, then the Secretary of State for the Colonies, when it was asserted by the then Opposition that the compensation levied would be only sufficient to pay for a small number of houses, and that the licensed value of those houses must be taken at a higher figure, said that the hon. Member for the Spen Valley in taking the figure at £1,000 in the towns and £600 in the country had taken a figure which was preposterously large. What has been the result? Taking the whole of the country, town and country together, in the first year after the Act of 1904 the average sum paid for licences was £614. In 1906, in the summer of which year the Kennedy judgment was delivered, the average amount paid was £698. But in 1907, when the Kennedy judgment was having its full effect, the average amount paid had risen from £614, which it was in 1905, to £921. In the towns, of course, it was far higher than that. The right hon. Gentleman also said, in the same debate, that— For example, Liverpool estimates that the sum for its contribution will be £35,000 a year, and that, the value of the licences likely to be extinguished would be £500. As a matter of fact, the sums which the licensing magistrates of Liverpool had to pay, owing to the Kennedy judgment, last year averaged, on thirty-six houses, £1,068, a sum which the right hon. Gentleman in 1904 declared was preposterously large. Other Gentlemen supporting the then Government gave estimates of a similar kind. One Gentleman, then one of the Members for York, who was well known as one of the inspirers of the Act of 1904, Mr. Butcher, asserted that the figure of £1,000, which had been suggested for Birmingham, was absurdly large—that £500 would be nearer the mark as the average sum payable for compensation in Birmingham. I have had the figures for Birmingham taken out, and I find that last year, on an average of twenty-six houses, the sum which had to be paid was not £500 but £1,679. Mr. Lloyd Wharton, then a Member of the House and a leading supporter of the party opposite, also put £500 as a reasonable sum. In another place, Lord Lansdowne stated that the sum available would be £1,200,000, and that that would be sufficient, it was estimated, to suppress between 1,500 and 2,000 licences, which showed that he estimated a sum of between £600 and £800 per licence, while Lord Salisbury put the estimate still lower—at about £400 per licence to begin with. Comparing these figures with those which had actually to be paid under the Kennedy judgment, we are entitled to say that the valuation of licences is far in excess of that which the House was led to anticipate would be the sums payable under the Act of 1904. But it is said, supposing that the owners of these houses are getting more than the real value, why should this House take the trouble to interfere. The trade pays and the trade is satisfied. Why not leave it alone? The answer is simple. We hold with both the Majority and Minority Reports of the Royal Commission that a large reduction in the number of licences is essential in the public interest. That cannot be effected unless we can increase the compensation levy, which we are unwilling to do, or else pay compensation on the fair value of the licence and not on the valuation which is now paid, and which we assert to be an inflated valuation. That is the reason why we cannot leave it alone simply on the ground that the trade paid and the trade alone suffered. I come to the question of the assessment of the value itself. The question of valuation is an intricate one. There are three elements to be considered; first there is the basis of valuation, the annual licence value, how are you to assess that? Then there is the number of years purchase; and, thirdly, the position of the tenant which ought to be considered—the allocation of the compensation, whatever it may be that is to be paid, among to the several parties interested. As to the annual licence value, the subject of compensation is the value of the premises as a place of retail trade, and not the value of the premises as an outlet for wholesale trade. If the licence is suppressed it is probable that some of the trade will be diverted into other channels, though we hope and believe not the whole of it. To put the case very simply, if the licence of a free house which is being supplied by different brewery companies is suppressed by the action of the law, ought the compensation to be paid include the loss which would fall upon the brewers which have previously been supplying it?


The brewer has nothing to do with it. The tenant there has the power of letting to another tenant and selling to him the right of retailing, and that right would always be enhanced in value by the fact that the brewers would bid against him for the possession of the house, and as such would make up the market value.


The first part of the right hon. Gentleman's reply fully answers my question. Nobody would propose—certainly it cannot be read into the Kennedy judgment—that where a free house is suppressed the brewer has any right to receive any compensation at all. The question is: How much should be paid in the case of a tied house? The right hon. Gentleman says it is an incontestable proposition that the rental of such a house does not represent the value of the licence. Nobody would contest that for a moment, and if one only considered the rent in arriving at the basis of compensation, one would obviously be committing an injustice. But we are not doing that. We are taking the Schedule A value of the house, which is a very different thing. The Commissioners of Income-Tax would never accept the rental value of a tied house as representing the Schedule A value of that house unless they were convinced that the rent was the only consideration for the lease. Where there is a further consideration as there is in the case of a tied house—namely, that the lessee shall buy his beer at a certain price of a certain brewer—there is another element to take into consideration; and the Inland Revenue Commissioners would take that consideration into account, and, in assessing the house to Schedule A, would value it at a figure considerably above the rental. That completely answers the question as to rental. The question then arises whether the Schedule A value as so defined is a fair representation of the licence value of the house. If that is disputed, if it is said that the income-tax value is not the real value, the argument must lead inevitably to the conclusion that the house is paying too little to the income-tax. I assert hon. Members opposite are on the horns of a dilemma; either they must admit that the income-tax valuation is a fair one, or if they do not it leads to the inevitable conclusion that publicans and brewers pay less than their share of taxation.




It is said that the question of goodwill must be taken into consideration, and the right hon. Gentleman has instanced the case of a public-house which was the only one in a certain place, where the publican by his energy and civility has built up a valuable business. The illustration is not a fortunate one, for, if it is the only public-house in the place, it certainly will not be suppressed.


suggested that it might be suppressed in Wales.


That is, I admit, conceivable, but I did not think the right hon. Gentleman limited his illustration to the case of Wales. In dealing with goodwill you must define what you mean by goodwill. Goodwill may be of different kinds. It may be personal goodwill or what may be called local goodwill. It may attach to the person managing the business, or it may attach to the premises as being peculiarly suited to the particular business carried on there. With regard to personal goodwill, we contend that that is covered by the extra compensation—to which the right hon. Gentleman made no reference—payable to the tenant of the house—the actual licence-holder. Personal goodwill does not belong to the owner of the house. It is the creation of the tenant, and he will receive compensation under the provisions of the clause. The local goodwill attaching to the premises is unquestionably included in the Schedule A valuation. The right hon. Gentleman the former Home Secretary was quite right in saying that the Act of 1904, whether as interpreted by the Inland Revenue Commissioners or by Mr. Justice Kennedy, in either case included an element of goodwill, and the contention of the Government is that it is included in the Bill. Whether you look at it from the point of view of goodwill or any other, the Government assumes that, in the case of a tied house, the Schedule A valuation is a fair and reasonable basis for compensation, and that was the view of the Inland Revenue Commissioners, on whom is placed by the Act of 1904 the duty of interpreting the terms of that Act. The proposal in the Bill is the very proposal adopted by the Commissioners under the Act of 1904, as is shown by the memorandum issued by them upon this question. It was altered by Mr. Justice Kennedy, who placed a different interpretation upon the somewhat obscure words of the section. I now come to the second point. Having fixed the annual licence value, how many years purchase is a fair sum to pay? When the licence value is regarded practically as a freehold, as it was under the Act of 1904, of course freehold value had to be paid, and the period of twenty-five years purchase was not altogether unreasonable.


Not of the licence.


Of the whole value of the premises under Schedule A. Here again we have to ask ourselves what it is that has to be compensated. Under the operation of the time-limit clause the subject of compensation is the monopoly value which the licence-holder would retain if his licence were not suppressed but allowed to run on until the monopoly value was taken from him. If the licence is taken at the beginning of the period, he will be entitled to a considerable amount, because the licence would have had a long time to run; if taken at the end of the period, the compensation ought to be very much less. Hon. Members say that it is very hard on a man whose licence is taken away at the end of the period, after he has paid the compensation levy all those years, that the more he has paid the less he should get in the end. That is a complete misunderstanding of the position of the licence-holder under the operation of the time-limit clause. He was in a similar position to that of a leaseholder paying rent for a given number of years. Let us suppose it is a fourteen years lease. If his lease is taken away for any reason at the beginning of the fourteen years he is entitled to a considerable sum in compensation, but if it runs on for ten years and he has paid rent all the time he will only get compensation for the four years that remain which will be much less. Then I take another illustration from insurance. A man who has insured himself against accident and has paid year after year without having any accident receives nothing. He is paying for his neighbour who suffers from any accident, and at the end of twenty years he might die of disease and get nothing from his accident insurance. We have been asked to-day by more than one hon. Member whether the extension of the time-limit by seven years does not necessitate an alteration in the provisions of this clause. The right hon. Gentleman opposite has said that it would be obviously unjust in the case of a man compensated in the fourteenth year only to pay him one year's purchase, while in the case of a man who ran over the fourteen years he would be allowed in all probability to go on for a further seven years and without his paying the monopoly value. There is that injustice in the Bill if the clause remains as it is, but it is the intention of the Government on the Report stage to move certain alterations consequential on the addition of the seven years—[Ironical OPPOSITION cheers]—we could not possibly insert them at the present stage, for the simple reason that the proposal for the seven years extension has not yet been embodied in the Bill.

MR. AUSTEN CHAMRERLAIN (Worcestershire, E.)

Can the hon. Gentleman indicate roughly what will be the consequential Amendment of which he has spoken?


An additional number of years purchase for those licences which are suppressed.


To run during the subsequent seven years?


That does not arise at all. We are dealing with those houses that are suppressed as part of the reduction during the reduction period. It is compensation with regard to those houses that we are now considering.


In order to get the matter clear, do I understand that a man who is suppressed at the beginning of the time-limit will be compensated on the basis that his licence has fourteen plus seven years to run? When a man's licence is taken away at the end of fourteen years, is there no compensation at all, or is his proportion of the seven years extension added to the time-limit?


No licence will be taken away as part of the reduction scheme after the fourteen years, but during the fourteenth year a man will get compensation in respect of what he loses, which is not merely his monopoly value for one year, but the prospect of seven years free from monopoly charge. It is only just and equitable that he should receive a sum in respect of that. I now turn to the last point upon this matter and that is the licensee's share of the compensation money. The Act of 1904 provides that having determined what is the fair licence value of the premises to the owner it is to be divided between the owner and the licensee. That has always seemed to me to be unfair to both parties; it is unfair to the owner, because if the award is the fair value of the premises to the owner it ought to go to him; and it is unjust to the licensee, because there might be a case in which the owner's value was comparatively small, while the licensee might be making a very fair living. The sum at the disposal of the compensating authority for the benefit of the licensee, would, in that case, be exceedingly small. Under the present law the compensation paid to the licence-holder is frequently most inadequate. This class of man who has to take this special risk and who is represented by hon. Members opposite to have a special claim on such compensation as ought to be provided, has been somewhat unfairly treated by the Act of 1904. We propose that the sum payable to the licence-holder shall be a completely separate charge on the compensation fund, that what is assessed as being the fair value to the owner should be paid to the owner, and that separately the Inland Revenue Commissioners shall be required to assess the actual loss sustained by the licence-holder by the loss of his business. There appears on the Amendment Paper one or two comparatively small Amendments in the name of my hon. and learned friend the Solicitor-General relating to this provision. It is intended that in no case shall the licence-holder receive less than a year's profit for his business. The Act of 1904 provided that in no case should the tenant receive less than this one year's purchase. That was not originally inserted in this Bill because it was thought to be superfluous, but since some doubt has arisen on the point we have determined to ask the Committee to insert words making it clear that in no case should the publican receive less than one year's purchase. It has been pointed out also that the words of the clause might not be held to include a paid manager who lost his employment; to make it clear that he is equally entitled to compensation with other licence-holders my hon. and learned friend will insert words to that effect. Thirdly, a burdensome agreement might be required from publicans, contracting themselves out of the intention of this clause that they should receive separate compensation. We shall insert words to the effect that a tenant shall receive the compensation the law intends him to have, any agreement to the contrary notwithstanding. I come now to the special case of the ante-1869 beerhouses. We are told that whatever we may say with regard to ordinary public-houses, we have no right to impose these conditions on the ante-1869 beerhouses that had a statutory security. They, at all events, are not working under Sharpe v. Wakefield conditions, but have a right to their licences which we are now taking away at the end of the period without any compensation and with only a diminishing compensation during the period. What are the facts? The Act of 1869 did not confer a privilege on these houses, but limited a privilege already existing. Under the Act of 1830 Parliament rashly threw open the beer trade to any one who chose to pay for an Excise licence at the cost of two guineas, free from all control by the justices. Six months after the passing of that Act 24,000 beerhouses were opened, and in eight years 45,000 were opened. There was an immense increase in the consumption of drink, and this was indeed one of the most striking instances of the degree to which facilities for drinking give rise to intemperance. Many attempts were made in Parliament to undo this blunder, but not until 1869 was an Act passed which, not completely, but partially, for the first time, brought these houses under the control of the justices. It said that they might be suppressed for the misconduct of the licence-holder or on account of the unsuitability of the promises, but were not to be suppressed for other reasons. If hon. Members say that the Government has no right to put these houses into their scheme on the same footing as other houses, I ask what right had Parliament in 1869 to bring under the control of the justices licences which in 1830 were granted free from all control. The next incident in the history of these houses was in 1879, when a Committee of the House of Lords, considering the drink question, recommended that they should be assimilated to other public-houses for all purposes without compensation. As I have said in a previous debate that was not the resolution of any revolutionary or confiscatory tribunal. In 1882 a Bill was introduced by the then Mr. Ritchie, who was no enemy of the trade, bringing under the complete control of the justices for all purposes the ante-1869 "off" beerhouses. If it is a monstrous breach of Parliamentary guarantee for the Government to bring them under this Bill, how can they defend the action of Mr. Ritchie and the Parliament of that day in doing that very thing? The next and, up to this year, the last chapter in the history was the Act of 1904, which for the purpose of reduction assimilated these houses to the other public-houses and repealed the section of the Act of 1869 which preserved to them a part of their ancient privileges. These beerhouses did not in 1904 run any risk of suppression by the magistrates except for misconduct or unsuitability of premises, yet the right hon. Gentleman required them to pay the same compensation levy as other houses. [Mr. A. J. BALFOUR dissented.] Surely that was the effect of the Act of 1904? The right hon. Gentleman gave the justices the power to suppress them—with compensation certainly, but he required these houses to pay a compensation levy to protect themselves against the risk he imposed upon them, and which they had never previously run. If the Government's proposal is a breach of a Parliamentary guarantee, surely the right hon. Gentleman's proposal was equally so, and is equally to be condemned? It will not be until the year 1930, until the twenty-one years has run out, that full control will be obtained over the ante-1869 houses, and it will have taken 100 years to undo the error committed by Parliament in 1830. Surely it cannot be said that an act once done by Parliament is never to be undone, and that the State is never to have control over these houses. My last point is this. We have had in connection with these compensation proposals innumerable sets of figures sent to Members of Parliament and issued in the Press, showing what will be the compensation payable under this Bill in contrast with the estimated market value of the licences. We have had long sets of tables estimating the market value at, £1,000, £2,000, or £3,000, or whatever it may be, and the compensation payable under the Bill at £50, £60, £70, or whatever figure the fancy of the compilers may suggest. There are three reasons why those figures are all totally unreliable. In the first place they cannot be accepted because no statement is made as to the method by which the estimated value of the licences is arrived at. We do not know whether they merely represent the cost value of the licence—a notoriously unsafe system to go on; and we are never told who has estimated the value and by what process the figures are arrived at. Secondly, all these figures with regard to the compensation payable under the Bill presume that compensation will be paid on the basis of the present income-tax assessment of these houses. As we all know, the present income-tax assessment is often much too low. The hon. Member for the Ayr Burghs with that candour which always characterises him did not deny there are cases and perhaps numerous cases in which the income-tax assessment is too low.


I was careful to say in England and not Scotland


This Bill only applies to England. It is a remarkable thing that the assessment is often put at a very different figure when a man has to receive on it from the figure at which it is put when he has to pay on it, and I have no doubt that when the Bill comes into operation the assessments will gradually, but certainly, rise to their fair and proper figures, and an incidental and adventitious, but none the less desirable, result will be that the Revenue will correspondingly gain. The figures laid before the country make no allowance for that. They do not embody the probable increase in the Schedule A valuations which will follow the passage of this Bill. Thirdly, and perhaps this is the most important point of all, these figures make no reference whatever to the most important words in Clause 10 which provide that to the ordinary valuation based upon the Schedule A value of the house, such sum as the Commissioners of Inland Revenue think just shall be added for the value of the premises to the actual holder of the licence. When all these considerations are taken into account, I think we may disregard in toto these long tables of figures. With the Amendments already announced and foreshadowed in this, clause, the Government adheres to it as a reasonable and equitable solution of the problem with which it deals.

MR. BOWLES (Lambeth, Norwood)

said the conditions under which they had been discussing the Bill were such as, in his opinion, were likely to render the Blouse of Commons ridiculous in the eyes of the country. They were certainly such as had prevented them from discussing, as they ought to have discussed, many vital points in the machinery of the Bill. The Committee was therefore very much to be congratulated on the fact that by the arrangement to which they had consented they had at least been able to make some real inquiry into the true meaning and effect of the Government's proposals so far as they regarded compensation. The Amendment raised a question of very great importance, because upon it they were really able to gauge in what spirit and with what underlying motive hon. Gentlemen opposite were supporting the Bill. The question here was not a question of politics or even of temperance; the main pillars, of the Bill—the compulsory reduction of licences, local option, and the time-limit—had been passed, and the sole question of considerable importance which remained was in what spirit and temper the Government and hon. Gentlemen opposite intended to deal with the interests of those affected by the measure. So far as he had been able to observe all through the debate everyone, with one or two exceptions, who had spoken had agreed for various reasons and on different grounds that the subsection as it stood needed and must receive very serious consideration; and for his part, having carefully considered the matter, he did not see how it could be seriously denied that it was unjust and unfair. The question was a simple one. It was whether, in assessing the compensation to be paid they ought to proceed upon the market value of the interests destroyed or upon a more or less arbitrary—and, as he thought, events would prove a very arbitrary—assessment by public officials. The section proceeded purely upon an arbitrary assessment. The thing to be taken into consideration was not the real or market value of the property which they destroyed. That was carefully excluded from consideration, and the rental value of the premises as assessed under Schedule A of the income-tax was alone to be considered. The rental value of the premises which it was assumed the same brewers would have if the licence were withdrawn was to be deducted, and the difference was to be capitalised into a sum which would purchase an annuity at 4 percent. interest for the remainder of the reduction period. The method of ascertaining the value of a house was an unreal, unjust, and a false method. There was only one way to arrive at a just value, and that was to find out as nearly as one possibly could the value of the licensed house they were about to extinguish in the open market, if the property were put up for sale. The Under-Secretary said the figures which had been supplied by hon. Members on both sides of the House and which went to show the really gross and serious injustice which would be occasioned under this subsection, were not to be relied upon because they omitted certain important particularsas to how the value of the licence had been arrived at, such as statements as to trade, and so on. Under the Act of 1904 they got, or might get as nearly as could be, the real market value, and certainly if that valuation was anything like honourably and reasonably carried out, then it was certain that the compensation proposed under this Bill was grossly and seriously unfair, and they could not expect any body of traders to submit to it as final, if indeed at all. He had some figures as to the compensation actually paid under the Act of 1904, audit was a mere matter of arithmetic to work out what that compensation would have been if made under this subsection. The result was so startling that he made no apology for submitting it to the House. Here were fourteen cases of licences extinguished during the last two years under the Act of 1904. The total sum paid in respect of these fourteen, extinguished licences was £15,070, or an average per licence of £1,076. If these same licences, for which these sums had actually been paid in cash, were extinguished year by year during each year of the reduction period, under the proposals contemplated by this subsection, the total amount of compensation for the fourteen licences would be not £15,070 but only £973 all told, or an average per licence of £69 10s. Even if it were said that the valuation under the Act of 1904 was excessive, and grossly excessive, it was impossible for hon. Gentlemen opposite to persuade their fellow countrymen that it had been so grossly excessive as to account for the difference which resulted between the two methods of compensation. It was not reasonable to suppose that under any circumstances licences were worth only £69 10s., which had been compensated for at the average rate of £1,076. Was this reasonable? It was an overwhelming reduction in the scale of compensation to be granted. But they had been told several times by hon. Gentlemen opposite and in clear terms by the Under-Secretary that the result would not be so, because, if this subsection were allowed to come into operation, the trade all over the country would increase their assessments to income-tax under Schedule A. And that appeared to be regarded as a very fair and reasonable proposal. They were to single out a class of traders in the country who would have to increase their assessments under Schedule A. It was not denied that there were great numbers of persons up and down the country, other than holders of licensed property, who were under-assessed. But it was not proposed to deal with them in any way. The Government singled out the licence-holder, and forced him by their legislation to tax himself at a higher rate than he would be called upon to do if he were engaged in some other trade. The object of an assessment to income-tax was not to indicate the value of a property; it was nothing more than a conventional form to raise taxation. They singled out a locality, and from that locality they had to raise a certain total amount, and, so long as they kept the proportion true between the various interests concerned, it did not matter whether the amount was £100 or £1,000, and the idea that the assessment of a building necessarily or inevitably represented its real rateable value was quite a novelty which had no basis either in theory or in practice. This scheme of compensation certainly seemed to be a great injustice. As had been pointed out, every year as they went on reducing the licences the value of the remaining licences round about would be increased. This increase of value was through the Government's own action in reducing the number of licences; yet at the end of the reduction period they would pay less in point of compensation. Take a public-house which was assessed under Schedule A at a rent of £100, and suppose that its rent unlicensed was taken to be £50, then the remaining £50 was the basis on which compensation would be calculated under this Bill. If that licence were destroyed at the beginning of the reduction period the Commissioners would have to multiply that £50 by 10.563, which was an actuarial figure, and the compensation would be £528, together with an allowance, which was immaterial for the purpose of the argument, for fixtures and disturbance. But should the licence not betaken away until the end of the reduction period, then each year of that reduction period it became more valuable by reason of the reduction of the number of licences round about: yet, instead of its being paid £528, as it would have been if taken in the first year, they would compensate—though it was worth more by the very operation of the Act—at the rate of something under £50, or rather less than one year's estimate, revenue from the house without a licence. That appeared to be a grotesque system of compensation which could not be seriously defended in any quarter of the House. The Under-Secretary had referred to the matter of the tenant's interest and had professed great solicitude for the tenant in a licensed house. Unless the whole information he had been able to gather end the whole set of statements which had been made on behalf of the trade were grossly and ludicrously wrong, if the whole compensation to be granted under the clauses were to be given to the tenant solid, he would still be worse off than he was now under the Act of 1904, and it was idle for hon. Gentlemen opposite to pretend that the interest of the tenant under, the Bill was going to be better safeguarded.


I do not think the hon. Member quite appreciates that the tenants' compensation has nothing whatever to do with Schedule A value. It is additional and beyond that.


asked where it came from. The only compensation was Schedule A, except such a sum as the Commissioners of Inland Revenue might think it just to add as compensation for the licence-holders' loss of business. Was it likely that the Commissioners of Inland Revenue, who had not the faintest conceivable interest in the matter of the licence-holders' loss of business, were likely to take any particular pains to deal with the matter in a way that was really commensurate with the loss inflicted? If the hon. Gentleman really meant to compensate the tenant he ought to make some genuine proposals in the Bill which would show on what sort of scale that compensation was to take place. Merely to say that it should be left to the discretion of the Board of Inland Revenue might mean anything or nothing. The real objection felt opposite to real and genuine compensation on the market value at the moment to the man whose property was violently taken away against his will, was that, although that would be the just, and the only just way of dealing with the matter, it might interfere with that tremendous and progressive scheme of destruction which they regarded as essential to their temperance principles. He could well understand hon. Gentlemen maintaining that reduction was an important matter in the public interest, but fair and equal justice on the part of the State to every class of its citizens was of far greater importance, and would be found to be so as time went on, because he believed the compensation clauses of this Bill would inflict genuine and real hardship upon both the tenant and the licence-holder. So far no answer whatever had been Liven to those who held that if they were going for a public purpose to deprive any man of a business which he was currying on lawfully and without misconduct, they were bound to pay, not some sum to be decided in a back room in somebody's house and dependent upon a perfectly valueless basis of assessment to income-tax, but the real and actual value in the market at the moment of extinction of the business.

MR. MOND (Chester)

, who was indistinctly heard, said it appeared to him that their opponents must have a bad case when they put forward the remarkable argument that the Commissioners of Inland Revenue, who had the duty cast upon them of assessing compensation, would not do it. Under the Act of 1904 the whole of this matter, in default of agreement, was left to the Commissioners of Inland Revenue, though, he admitted, with an appeal to the High Court. If they were only allowed to speak their minds, tenants and managers would soon say that they would rather commit themselves to the care of the Commissioners than to the tender mercies of the brewers. It was perfectly ridiculous to tell them, that this provision of the Bill was not welcomed by the tied house tenants throughout the country. All the statistics put forward by the trade had been vitiated by the same mistake—they all went on the present assessment) They had made the trade a very fair proposition. They were to assess themselves at what compensation they wanted. This was a domestic arrangement. If the trade wanted to get more in the form of compensation, let them raise their assessment. But very likely it would suit them better to take less compensation, and at the same time, to pay less income-tax. They could arrange it that way if they liked. Why was it so immensely unfair? What seemed to him very unfair was that they who did not own licensed premises, had to pay income-tax on their profits and were not allowed to escape that assessment in the easy wav in which gentlemen who owned licensed houses seemed to have escaped so far. They were not assessed in a fancy way. They were assessed on their balance sheets.


The hon. Member is confusing Schedule A and Schedule D.


said he was not confusing Schedule A with Schedule D. He did not see why under Schedule A they should escape their fair share of taxation any more than under Schedule D. They made their assessment at what they would like the compensation to be. It might be a bad or a good arrangement, he was not expressing an opinion on that subject, but it was quite useless to take the present assessment as a basis. The right hon. Gentleman the Member for St. George's, Hanover Square, spoke with very great authority on compensation and arbitration cases, but like some others who had had very large experience, in these cases their real commonsense judgment had gone for a walk. The weakness of the Kennedy—judgment he spoke with all deference of a Judge—was that it included in the valuation of licensed premises the wholesale profits of the brewer, on the assumption that if the houses were closed he would sell less beer. But that might not be the case. The brewer might sell the beer somewhere else. Take an analagous case. If they were assessing for town improvement a baker's shop and the shop was owned by a flour-miller, would any arbitrator take the profit made by the miller into consideration or merely the retail profit made by the baker as a baker? The miller obviously would not lose his sale of flour because the shop was taken away. He might sell the same amount to a shop in the next road. As a matter of fact he believed it was not the common practice in making valuations for public improvements to take in the wholesale profits at all. If it had been, there would never have been any necessity to go to Mr. Justice Kennedy and ask him what it meant. Who went to Mr. Justice Kennedy? The Law Officers of the Crown, instructed by the Inland Revenue Commissioners, who did not know what the Act meant, who evidently thought it meant something very different from what Mr. Justice Kennedy decided, and who for two years previously had decided a large number of cases on a different basis. The experience of the Act of 1904 showed that market value was not easy to define. The Government had adopted an infinitely easier method of dealing with the matter, and they had heard no argument from the other side to show that it was unfair. They were ready to listen to argument, and there was no idea of vindictiveness in this measure. No; the Member for Walton laughed, but the hon. Member would not accuse him of being vindictive or of wishing to desire to rob the Member for York or anybody else.


Merely for political reasons.


said that politically it was very foolish to be vindictive.


assured the hon. Member that he would not rob him because he was not interested in the trade.


said he was very glad to near it for the hon. Member's sake. There was no desire to inflict injustice on any section of the community. The supporters of the Bill had been accused of being confiscators, spoliators, and thieves.


So you are.


said they never yet had had any statement showing what the clause would actually do. The hon. Member for Walton himself had given them some figures which suffered from exactly the same vice as the others he had been criticising. How could they be asked as business men to accept the figures of a trade which could not even take the trouble to read carefully the clause, and base its estimates on the clause as it stood and not on a clause in their own wild imagination? With regard to the future, compensation and monopoly value had gone hand in hand under the Act of 1904, and they would naturally go hand in hand again under any new Act. It would be really worth while to consider this question carefully. The larger the amount of compensation the larger the amount of monopoly value in the future, and the smaller the amount of compensation the smaller the amount of monopoly value in the future. Would they prefer a larger compensation levy, and the same amount of compensation? Obviously what the right hon. Gentleman's Government wanted to do was to reduce licences more rapidly than they were being reduced to-day. They thought their Act would lead to a reduction of 2,500 a year. That figure had not and could not be reached on the present assessment scale and compensation levy. What was wanted was a reduction of licences, and the question of compensation was really a domestic question for the trade itself. Did the trade prefer the present scale of compensation and a higher compensation levy, or did they prefer a lower scale of compensation and the present compensation levy?

*MR. CAVE (Surrey, Kingstor)

asked whether the hon. Member had authority to offer the former alternative?


said he had not. He was asking for information, and if they got the information it would facilitate discussion of a question which all reasonable people would like to see settled in a manner satisfactory to all parties.

And, it being Five of the Clock, the Chairman left the Chair to make his Report to the House.

Committee report Progress; to sit again upon Tuesday next.

House adjourned at Five o'clock.