Licensing trusts: Glass half full or empty?
A recently released book tells a story of social and political idealism that often collided disastrously with commercial realities. reports.
It probably comes as a surprise to many people to learn there are still places in New Zealand where it’s not possible to buy wine or beer in supermarkets.
Invercargill is one such place. West Auckland is another.
These are not ‘‘dry’’ areas, where local voters have chosen to remain liquor-free. New Zealand lost the last of those in 1999.
They are, however, a lingering hangover – although that may not be the most appropriate word – from an era when anti-liquor fervour caused legislators to look for a balance between total prohibition and an open-slather alcohol regime where the much-vilified booze barons would hold sway.
As prohibitionist sentiment abated from the early 20th century onwards, and areas that had previously been dry chose to go ‘‘wet’’, voters were given a choice: they could either allow ownership of liquor outlets by private enterprise, or they could opt for community control.
Under the community control model, voters would elect licensing trusts to run local hotels, taverns and bottle stores.
Each trust would enjoy a monopoly on liquor sales within its area, and profits would be ploughed back into the community.
In a country that remained deeply suspicious of the privately owned liquor trade, the trust option seemed an ideal ‘‘third way’’. People would have access to alcohol but its sale would be controlled by community representatives who would ensure it was managed responsibly for the community’s benefit.
The first licensing trust was established in Invercargill in 1944, after 38 years as a ‘‘dry’’ city.
The Invercargill trust still enjoys a virtual monopoly on liquor sales in that city because, apparently, that’s what the community wants.
Three other trusts – Mataura (Southland) and Portage and Waitakere (both in West Auckland) – have retained similar monopoly rights, which explains why mystified visitors to those areas can’t find wine or beer in local supermarkets.
But in all other areas where licensing trusts have survived, voters – often frustrated by lack of choice or disheartened by the trusts’ poor performance – have taken advantage of ‘‘competition polls’’ to strip them of their monopolies. Hence in places like Masterton, trusts are still active in the local liquor trade but must now compete with privately owned bars and liquor outlets, including supermarkets.
The patchy history of the trusts is told in the recently published book A Great Social Experiment, by Bernard Teahan. It’s a story of social and political idealism that often collided disastrously with commercial realities.
Licensing trusts grew out of dissatisfaction with widespread drunkenness, primitive drinking conditions and distrust of powerful brewing interests. Rex Mason, the reformist justice minister in the Labour government of the 1930s and 40s, threw his weight behind the idea and so did prime minister Peter Fraser, who saw trusts as a way of eliminating profit as the sole motivator of liquor sales.
Masterton followed Invercargill’s lead in 1947 and other trusts were established in quick succession, including one in Porirua in 1955. Between 1947 and 1975, voters in 57 areas backed the creation of trusts, although only 30 became operational. Nineteen are still functioning today.
Teahan records that brewery companies, which effectively controlled the hotel industry, opposed the trust concept every step of the way. The National Party showed little enthusiasm either.
Ironically, as trusts struggled to get established because of inadequate capital and the crippling cost of loan finance, many ended up depending on supportive arrangements with the big two brewery companies – in effect, sleeping with the enemy.
The last functioning trust, Flaxmere (Hastings), was established in 1975. By then the flaws in the trust model were becoming obvious. Even with a monopoly, many were unable to stay afloat.
The enthusiasm and good intentions of the elected boards that controlled trusts were all too rarely matched by the necessary business skills or funding. Many trusts tested the patience of their communities by taking years to open their first outlets.
One, the Stokes Valley Licensing Trust in Lower Hutt, failed spectacularly after only a year because the Licensing Control Commission required it to provide hotel accommodation where there was no demand for it.
Others incurred massive debt to build grandiose premises on the basis of wildly over-optimistic business projections.
In their desperation to prove themselves, a few trusts resorted to dodgy management and financial practices – such as borrowing money without approval – which attracted the attention of the Auditor-General.
Poor service, substandard facilities and problems with violence and lawlessness are other factors cited by Teahan as harmful to the image of the trust movement. The Porirua trust’s first tavern was known locally as the Flying Jug because of the frequency with which brawls erupted. This was not what the architects of the trust movement had envisaged.
Even Teahan, a true believer in the trust model (he spent most of his career in trust management), acknowledges that trust boards and managers were often not up to the job.
By the 1980s, the great social experiment was in peril. A few of the longer-established trusts, having had decades in which to build up a solid base, were strongly embedded in their communities and trading profitably. But changing social expectations and a more sophisticated drinking environment placed demands on the newer trusts that they were hopelessly ill-equipped to meet.
Teahan says the trust model fell out of favour because ‘‘the market philosophy became the all-powerful belief’’. But in fact most of the ‘‘demised’’ trusts, to use his own euphemistic terminology, were undone by their inability to live up to their idealistic vision.
Addressing a licensing trusts conference in 1990, former prime minister David Lange described trusts as a bizarre experiment and said they were an endangered species.
He was almost right. Four trusts in the Wellington area subsequently failed after years of governance so muddleheaded it was almost painful to watch.
The demise of weaker trusts was hastened by competition polls – usually initiated by supermarket chains chafing at their inability to sell wine and beer – which stripped away their monopolies.
Yet, the better-managed trusts survive, and a few strugglers have been saved by being brought under the control of successful operators.
At least one trust has moved far beyond its original remit. What was originally the Masterton trust (which Teahan managed) is now Trust House, which operates licensed premises on behalf of several trusts and also has substantial investments in social housing, aged care and even supermarkets.
The mother ship, the Invercargill trust, is still flying and seems to enjoy solid support from its community. According to Teahan, Invercargill supermarkets haven’t bothered to push for a competition poll because they don’t think they could win.
Teahan points out that successful trusts return millions of dollars to their communities: nearly $27 million nationwide in 2014. But much of the money invested in community assets comes from gaming profits which, under law, private hotel and bar owners with gaming facilities must also return to the community.
Teahan retains an almost evangelistic faith in the trust concept, despite its many failures. The irony is that his book serves as a crushing indictment of the concept because it can’t avoid acknowledging the many ways in which it was flawed.
The mother ship, the Invercargill trust, is still flying and seems to enjoy solid support from its community.
A Great Social Experiment: The Story of Licensing Trusts in New Zealand, by Bernard Teahan (Fraser Books, $39.50).