Mr. LLOYD-GEORGE [resuming at 23 minutes past six of the clock]: I am exceedingly obliged to you, Sir, and to the House for the indulgence extended to me. I now come to the question of licences. I think I may fairly say that further taxation of licences has been anticipated for some time. It has been generally felt that the State has not received a fair return for the valuable monopoly which it has granted to the trade. If a comparison is instituted with the amount charged for this privilege in a community like that of the United States, one cannot help feeling amazed that the trade has been let off so lightly in this country. Land and licences have this in common, that where they have a value at all it is a monopoly value. No one would pay rent for a plot of land if he could secure an equally valuable piece of ground in the same neighbourhood for nothing; nor would anyone give the slightest consideration for an existing licence if a new licence could be got for the asking. The State for reasons of public utility limits the number of licences in a given neighbourhood, with the result that the holder of one of the licences is able to enjoy the exceptional rate of profit which the possession of the privilege permits him to earn. This point was very effectively put in the able circular issued by the brewers themselves during the passage of the Licensing Bill through this House. I shall quote the
words they use, as argument could not have been more forcibly or more fairly put. These are the words which the brewers used in stating their case:—
Now, with the exception of that portion of the trade which is done by delivery to private houses and clubs, and that which is done through off-licences, the only channel through which the consumption of excisable liquor can take place is through the licensed houses. Parliament has provided that it shall not be sold in any other way, and as a consequence the existing licensed houses, being in possession of a practical monopoly, have acquired a very high value.
That is the statement of the case of the brewers themselves. As to the extent of that value I shall be able to afford the Committee some statistical enlightenment in the course of a few minutes, but I should like to premise that during recent years there have been two or three elements which have added very considerably to the value of this monopoly. The first is the growing disinclination of benches of magistrates to issue fresh licences and the steady effort made by benches of magistrates rather to reduce the numbers. The reduction which has been made under the Bill of the right hon. Gentleman in 1904 has undoubtedly contributed to the increase in the value of licences. All this has endowed old licences with a special value, which did not attach to them in the days when new licences were more readily granted. The second element in the enhancement of value has undoubtedly been the tied-house system; and the third has been the conversion of what was an annual licence, determinable by the magistrates on evidence as to the necessities of the neighbourhood, into an interest—I will not call it a freehold—determinable only on misconduct.
By the Act of 1904 a valuable public right or property was parted with without any commensurate return being obtained. Is the market value of this privilege conferred by the State a sufficiently substantial one to justify a considerable increase in the very light licence duties which are now levied on these houses? Fortunately, we are not left to conjecture in appraising the money worth of this privilege. We have three important tests of its value. The first is that claimed by the trade itself. The trade has repeatedly assured the House of Commons through its well authenticated spokesmen that it assesses the value of the monopoly thus conferred upon it by the State at the enormous sum of 150 millions. I am not sure that this does not apply to licences in England and Wales alone, and that Scotland and Ireland are left out of account in the computation. At 10 years 522 purchase this would mean the annual value of 15 millions conferred by a State monopoly. In return for this the public receive by way of licence duties upon public-houses, beer-houses, and hotels in the United Kingdom, an annual rent of £1,809,000. If all the freeholds of the Kingdom were farmed out on these light and easy terms what fortunes our farmers and farm labourers would divide between them. A farmer's profits are assessed for income-tax purposes at a third of his rent. One ready proof of the difference which the granting of this privilege of exclusive trading makes in the value of a business is to be found in the fact that an ordinary business is generally bought and sold at two and three years' purchase of the profits, whereas the value of a public-house licence is always appraised at from 10 to 12 years' purchase, the difference being attributable entirely to the greater certainty, both as regards turnover and rate of profit, which arises from the restriction upon competition afforded by the licensing system. Another test of value has been supplied by the working of the Act of 1904, where compensation is afforded to the owner of the licence when it is forcibly withdrawn by the action of the magistrates. These houses do not afford, perhaps, the best criterion of the real value of a prosperous public-house. Licences are generally withdrawn from the poorer type of public-house because the licensing magistrates have come to the conclusion that they are not required, and therefore, if the value of a house of that kind is high, what must be the price which would be put upon a house which is required by the neighbourhood, and which is, therefore, doing a good trade. However, let us take this, the least favourable illustration which is available, and here again I quote from the brewers' circular. It gives the cases of 126 houses of this kind spread over London, Essex, and Hertfordshire, and we are assured that these houses must be taken as a fair sample of the whole of the houses valued for compensation in that district. The result, according to this document, was that in these 126 cases the total value of the premises with a licence was £280,870; the value of the premises without the licence was £59,071, or, in other words, the value of the premises without the licence amounted only to 21 per cent. of the value of the same premises with a licence. So much for the value of a licence in a house which is not required by a neighbourhood, a thoroughly pernicious and poisonous influence as a 523 rule, which ought not to be tolerated a single day after its superfluous character has become evident to the authorities.
§ Now let us take the case of the thriving house, or rather of the house whose trade proves that it is required by its neighbours. I have had before me a list of 141 licensed premises which have been acquired by the London County Council in connection with street and other improvements between March, 1889, and February, 1907. The total premium value attaching to the sites by reason of the licences has been estimated at £344,550, or an average of £2,443 per site. The acquisition of such sites in connection with the Kings-way and Aldwych has been estimated to have cost the Council in respect of the premium value attaching to the sites of the public-houses acquired, a sum of £132,300. In another instance, the premium value of a public-house site required for the improvement of the northern approach to the Tower Bridge is estimated at £20,000. I might multiply these instances, but I think I have furnished the House with sufficient evidence of the enormous value which this monopoly has created. Anyone who impartially investigates the figures may come to the conclusion that the rent or toll exacted by the public is ludicrously inadequate, and that in the interests of good management of public property that rent ought to be brought up to a figure which, without reaching anything like the proportions of a rack rent, will at any rate be commensurate with that which would be charged by a fair-minded and tolerant landlord, who, without doing himself a gross injustice, still at the same time wishes to afford his tenant not only a reasonable but even a generous margin within which to make a living out of his trade. And when a country requires revenue to provide for the defence of its shores and to supply the urgent social need of its people, that seems to be just the moment when, before imposing fresh taxes on its citizens, it ought to look round and see whether it has farmed its property to the best advantage.