Thursday, 8 March 2018

State purchse

The brewing industry was very worried during WW I that the government might extend the State Management Scheme in Carlisle and other locations to the whole of the country.

The apparent success of that scheme led some members the Central Control Board to press for full nationalisation. While there was some sympathy for the proposal withing the governement, practical considerations rule out such a move. Though there were committees set up to look into the possibility.

THE discussion of proposals for the State purchase of the Liquor Trade first began in the early days of the Great War, and in 1915 the Government appointed Advisory Committees, that for England and Wales being under the chairmanship of Mr. Herbert Samuel. The reports of both Committees were published as White Papers (Cd. 8283 and Cd. 8319, price 1d. each) in the following summer. In the case of the English report the proposals, stated briefly, were that breweries and their licensed properties should be expropriated, the State by means of the issue of 4 per cent. stock to pay an amount based on the average Stock Exchange price of each company's securities as recorded during the three years ended June 30 1914. The reports were abortive because, acting on the advice of their financial experts, the Government were forced to the conclusion that the occasion was inopportune.

A year later, however, in June 1917, the Government set up Committees for England and Wales, Scotland, and Ireland to consider the financial aspects of control and purchase of the liquor trade by tho State. Lord Sumner was appointed chairman of the English Committee, Lord Shaw of Dumfermline of the Scottish Committee, and Mr. Justice Gordon of the Irish Committee. All three Committees examined witnesses without delay and all presented reports within the next six or eight months, though those reports were not published until May 1918. They were then issued in one document (Cd. 9092, price 9d. net). The proposals for England, briefly summarised, were that payment for breweries and their properties should be based on 15 years' purchase of the profits from 1910 to 1914, less depreciation due to the war down to the time of purchase. The stock in payment was to bear 5 per cent. interest, but was to be issued at pre-war values. Thus £1,000 payable would be satisfied by an actual payment of about £715 new stock, and the estimate of total cost, put by the Committee at £350,000,000, would in fact be reduced by over 25 per cent. Moreover the prior rights of debenture and preference shareholders would be in great measure taken away from them. From the example set out in the report it is made clear how the interest or dividend received by an investor would be reduced. Thus a holder of £1,000 5 per cent, debentures, well secured and at present yielding £50 a year, would be cut down to £33 or less. The yield on £1,000 6.5 per cent. preference shares, at present £65, would be reduced to less than £45. The holder of ordinary shares, who had been receiving a dividend of 5 per cent., would be lucky apparently if he continued to receive any dividend at all, while certainly he could not look to receive more than 1.75 per cent, or 2 per cent. And all these yields would of course be subject to deduction of income tax. At the same time as it is contended that the State would make a profit on the transaction, no one can deny that the terms proposed to be offered mean an absolute loss to individuals.

By the time the reports were published tho whole question had ceased to be a matter within the region of practical politics, the then critical position of the Great War absorbing the whole energies of the nation. Mr. Asquith on Nov. 14 1918 declared that "State Purchase was financially unsound," and "on every ground he was opposed to it."
Brewers' Almanack 1922, pages 83 - 84.

Basing the purchase price on the profits in the years 1910 to 1914 was pretty cynical. 1909 to 1914 were very poor years for brewing, with few breweries making much in the way of a profit. Using those years as the basis would effectively had meant the government getting a knockdown price.

Similarly, using pre-war values for the stock would also unfairly reduce the price. It looks as if brewery investors would have got a very bad deal. It would have been pretty frustrating, seeing as the war had finally returned most breweries to profit. To have your dividends reduced by state purchase just when they were starting to pay again would have been a bitter pill to swallow.

Of course, serious proposals for complete nationalisation of brewing were never put forward. Though after the war the Labour party was in favour, as were some Liberals. Things were too tight financially after the war for it ever to be on the cards. Carlisle, however, continued to have state control until the 1970s.

The Labour government voted in at the end of WW II briefly toyed with the idea of nationalising brewing but it never resulted in anything concrete. Had it gone ahead eitehr after WW I or WW II, the most likely result would have been a massive reduction in the number of breweries, as in Carlisle, where only one of the four breweries remained open.


John said...

The thought of nationalised breweries fills me with dread. Beer designed by committee; Austin Allegro beer, anyone? Brrrrr... shudder. On a brighter note, bit if a cheeky ask but you don't actually happen to have any Hewitts recipes kicking about, do you Ron? I was 15/20 years too young to have had a chance to sample them, but remember their branding still adorning various pubs in Grimsby and Clee.

Ron Pattinson said...


some of the best beer I ever drank came from nationalised breweries.

I don't have any Hewitts, unfortunately I wish I did.

Anonymous said...

Some Hofbräu or Weihenstephaner, anyone?