Licensing Trusts were born out of the prohibition of alcohol era, partly as a reaction to the excesses of New Zealand’s pioneering times, but also as a major social experiment. Invercargill Licensing Trust was the first Trust established in 1944.
The uniqueness of Licensing Trusts revolves around:
- A primary responsibility to enhance the well-being of their defined community;
- The distribution of (surplus) profits back to their communities;
- The provision of good, ‘model’ facilities for the sale of alcohol, the provision of accommodation and meals, and gaming;
- Accountability back to the communities who own them.
In addition, there is an inherent responsibility to efficiently operate commercial businesses profitably.
Licensing Trusts belong to the family of community enterprises that are part of the third sector, a hybrid form of organisation that crosses over sectors, a mixture of market orientation and solidarity (community support). They may be defined as businesses whose primary goals are to support the well-being of their community principally through reinvesting profits generated from their trading activities either in the business and/or in support of community activities, rather than being driven to maximise profits.
The establishment of Licensing Trusts must be seen against the background of the early 1900s. Even in 1940 New Zealand was a young country, barely 100 years old when measured against the Treaty of Waitangi which is traditionally seen as the pivotal event establishing the modern nation. Much of the pioneering spirit or its aftermath remained.
In the early history of New Zealand, living conditions were often of hardship and deprivation. Hard drinking and the often consequential drunkenness can be seen as a reaction to the times. Abuses, which were common during the nineteenth century, inevitably brought increasing restrictions through legislation.
These abuses gave rise in the 1880s and 1890s to the prohibition movement.
In 1893 the Alcohol Liquor Sales Control Act was passed by Parliament. This gave the people of a particular district greater control over the granting and refusal of licences to sell alcohol. What resulted was that a number of areas voted for a prohibition on alcohol sales. Clutha was the first in 1894, Ashburton and Mataura followed in 1902, Invercargill, Oamaru, and Grey Lynn in 1905, and Bruce, Wellington South, Wellington suburbs, Masterton, Ohinemuri and Eden in 1908. 1911 saw the peak of the prohibition movement when it failed by only 20,000 votes to carry national prohibition. Thereafter the strength of the prohibition movement faded. But it was to be 40 years and more before those areas that voted dry carried restoration of liquor licensing.
Even though there was a desire to have alcohol available, there was wide spread concern that the abuses of the past were not resurrected. The birth of Licensing Trusts arose out of this conservative concern. But while the search for a better system arose from these concerns, there was also a genuine desire to find a better way.
The early 1940s were much dominated by the second world war but it was a time too of high ideals and much social experiment. Thus, there was a climate for trying something new.
The Architect Of Licensing Trusts Henry Greathead Rex Mason KC CMG
All great ideas have champions. There is usually someone who sows the seed, and then supports it to fruition. Who then was the originator of the licensing trust concept?
It is folklore amongst licensing trusts that they were based on the Carlisle scheme that had been established during the first world war on the Scottish border. The New Zealand parliamentary debates during the introduction of the first licensing trust legislation certainly suggests so. But the licensing trusts legislation was greenfields’ law and not part of the ruling Labour Party’s election manifesto. The Carlisle Scheme was also significantly different in key areas from the licensing trust legislation. There had to be a guiding force, a deep thinker who thought through concepts and ideals.
H.G.R.Mason was Minister of Justice from 1935 to 1949 (and again from 1957 to 1960). As such, he was responsible for the licensing legislation and thus shepherded the licensing trusts acts through Parliament. He is now regarded as making ‘possibly the greatest contribution of any politician to law reform in New Zealand in the twentieth century’. Among his many reforms, he reorganised and modernised New Zealand law in the major Law Reform Act of 1936, established the Law Reform Commission in 1937 and through his persistent efforts over many years, established decimal currency in 1967.
That Mason as Minister of Justice had the strength of character to pursue a radical experiment, can not be doubted. Undoubtedly he was a most remarkable man. Strongly principled and determined, there is an impression from the little that is written about him, that he was intense and dedicated.
There is other evidence too that Mason was strongly committed to the concept of licensing trusts: the Hansard parliamentary debates, his visits to Masterton at the time of the establishment of that Trust in 1947 and his ordering of the ballot paper, and his personal papers.
While not all Licensing Trusts have survived, the 19 that continue to actively trade and be involved in their communities, held assets in 2008 of NZ$313million, generated revenue of $357m, profits of $42m, and donated support to their community of $33m.
Were he alive today, Mason could be forgiven if he took some pride in what his advocacy produced.
On 25 September 1943 the voters of Invercargill, by 8,015 votes to 6,342, restored the sale of liquor within the Borough. Prohibition had existed for 38 years and the voting, on the face of it, was apparently a clear indication there was a mood for change. But controversy immediately arose. The 60% threshold necessary to achieve change had only been achieved with the overwhelming support (81.5%) of the soldiers’ votes overseas. The ‘domestic’ vote had been similar to the previous triennial polls at 56.8%. There were suggestions that the voting papers of the soldiers should be returned to New Zealand and recounted. But it was found they had been destroyed in the Middle East. While a good deal of inferences were thrown about, and the Prime Minister, Peter Fraser, offered explanations and a report to Parliament, there was no evidence that what had occurred in destroying the papers was anything other than a misunderstanding. Given the circumstances of the soldiers, it was entirely reasonable that they would give overwhelming support.
In Invercargill there was a mood of enthusiasm to start anew. But there were also considerable concerns. In the end because the community could not make up its mind, the Government decided. On 27 March 1944 the Government announced that they intended to pursue legislation that would set up a Trust that would be ‘…a body corporate, for the purpose of providing for the establishment of model hotels in the Invercargill licensing district …in the interests of the public well-being, and of providing for the sale of intoxicating liquor in the district and to provide for the distribution of the profits for public purposes.’ The Invercargill Licensing Trust Act 1944 came into force on 17 April 1944. The Masterton Licensing Trust Act followed in December 1947, and the Licensing Act in 1949.
Trusts Established, and Demised
28 Licensing Trusts were established, 19 remain active today:
- Invercargill 1944
- Masterton 1947
- Ashburton 1949
- Geraldine 1949
- Mount Wellington 1952
- Cheviot 1954
- Mataura 1955
- Clutha 1955
- Porirua 1955
- Hornby 1958 (no longer exists)
- Oamaru 1961
- Birkenhead 1967
- Wainuiomata (no longer exists)
- Te Kauwhata 1968
- Johnsonville 1969 (no longer exists)
- Otara 1969 (no longer exists)
- Wiri 1969
- Parakai 1969
- Hawarden 1970
- Orewa 1970 (no longer exists)
- Rimutaka 1970
- Otumoetai 1971 (no longer exists)
- Stokes Valley 1971 (no longer exists)
- Portage 1972
- Waitakere 1972
- Wellington South 1972 (no longer exists)
- Terawhiti 1975 (no longer exists)
- Flaxmere 1975
Throughout its history New Zealand has had a love affair with community enterprises. In the nature of love affairs, at times the relationship has been close; at others, distant. At times during the years since the Treaty of Waitangi (1840) these forms of organisations have been turned to as a first choice to address an institutional need. At others, the public policy climate has been less than welcoming. Yet throughout those years they have survived both as a concept and a reality.
The oldest surviving community enterprise in New Zealand is probably the TSB Bank formed in 1850. Electricity supply was often provided by community owned enterprises. Over the years, communities have sought to protect their interests by forming such diverse entities as health, local hospitals, education and forestry trusts.
Community ownership is well suited to the sale and governance of sensitive products like alcohol and gaming. Licensing Trusts were moderating the use of alcohol in their communities long before harm minimisation procedures became the national vogue. Accountability back to the community through the known and easy access of elected trustees has been a powerful mechanism for moderation.
Community ownership, as exampled in Licensing Trusts, has endured and endeared itself as a concept because it embodies a complex interaction between:
- A Sense of Self – community association begins with individual needs that ‘have’ to be met.
- The need for community association which offers inclusion, a sense of belonging, and by extension, the notion of the common good and the concept of community well-being.
- The pursuit of solidarity which embodies both self-interest (the act of giving benefits also the giver) and a caring for others. The ‘paradox’ of the gift is the ‘obligation’ created, which in turn potentially and practically lessens alienation and• ffers avenues for inclusion.
- The necessity for enterprise which encompasses initiative and resourcefulness, all those attributes essential for success: enthusiasm, commitment, talent, management and personal disciplines, profit, return on investment, and people skills (for example, leadership, and the ability to relate/communicate).
Performance and Results: Footprint Today
There is a view, broadly called the privatisation debate, that public bodies are inefficient as a structure in owning and operating businesses; and that private enterprise is the most efficient way to do so. Privatisation as a policy, while ‘widely unpopular’ because of real and perceived benefit distribution inequity (Birdsall and Nellis, 2002:13), has generally been successful, at least as an efficiency tool, in that in 66% - 80% of the circumstances (Megginson and Netter, 2001:355-56) where privatisation has occurred, improved economic performance has resulted. Thus the evidence suggests that, subject to a number of important qualifications, private enterprise is the most efficient business structure in most circumstances. But the literature also clearly supports the assertion that non private enterprise structures (such as community or social enterprises) can successfully operate a business so as to generate wealth to meet its prime objectives.
The evidence on the performance of Licensing Trusts again supports that assertion. The collective results of the Trusts were presented to the Law Commission in October 2009 as part of a submission. The Table below summarises the financial results for the year ended 31 March 2008:
|TOTAL RESULTS||LARGEST TRUST||SMALLEST TRUST|
|Return on Equity||17.98%||68.82%||1.01%|
|Community Support Donations||$33.444m||$10.196m||$45,000|
Today Licensing Trusts operate 133 licensed premises which include hotels totalling 890 accommodation units, and such diverse activities as supermarkets, a housing estate, a hydro-electric power scheme, and property portfolios.
Elections and Accountability
Trustees for each Licensing Trust are elected by the community every three years at the triennial local government elections. Generally six Trustees are elected, but some Trusts with a ward system may have up to nine.
The elective nature of governance provides a direct link to the community, and accountability thereto.
Community Support Donations
The original Licensing Trust legislation provided an enabling clause to donate moneys back to their communities in support of the promotion, advancement, or encouragement of education, science, literature, art, physical welfare, and any other cultural and recreational purposes;…(and) any other philanthropic purposes> .
This now extensive activity is undoubtedly what endears Licensing Trusts most to their communities. Their annual reports example a very wide range of recipients across the broad spectrum of community life. The elected nature of Trusts delivers Trustees representative of the community with a wide knowledge of its needs. Each Trust Board decides what community organisations and events shall be supported, and donations are many and varied as exampled:
- Henley Lake Masterton
- In 1968, the then Mayor of Masterton advocated to the Masterton Licensing Trust that wasteland on the edge of the town, bordered by two rivers, be converted into a recreational lake and parklands. Over the years since, the Trust has supported the scheme with many donations totalling hundreds of thousand dollars so that today, a lake of 14 hectares, parklands with walking and running tracks, wildlife reserves, and public facilities (for example, a Men’s Shed) support activities generating many hundreds of visitors daily. (See www.library.mstn.govt.nz/history/HenleyLake.html)
- In the past 10 years, Trust House, the trading arm of the Masterton Licensing Trust, has distributed $31.150million to its communities.
- Mataura Licensing Trust
- For 56 years, the Mataura Licensing Trust has been investing in its community, returning profits to its customers and creating jobs. It has been instrumental in future-proofing sporting amenities, as well as supporting the arts, education and destination events, all of which directly or indirectly bolster the local economy. Gore’s multi-sports complex is the flag ship of its endeavours – a venue featuring the latest water-turf technology for hockey, a four-court event centre, a short-course Olympic ice skating rink and a two-pool aquatic centre established in partnership with local Government and sports groups. The complex has hosted national tournaments and events, such as the Young Farmer of the Year, and made Gore the envy of many.
- Several years ago, the Trust, working with all Invercargill school Principals, established a goal to pursue initiatives that would lead to Invercargill schools being recognised as leaders in education in New Zealand. A number have since been implemented, supported by Trust funding:
- Interactive Whiteboard Project (IWB)
- Since 2005 the Trust has funded and installed 355 IWBs in Invercargill classrooms at a cost of $4.5million, revolutionising teaching methods and setting the City apart.
- Gifted and Talented Kids Programme
- The Trust have fully funded the establishment of an Excellence and Innovation Centre for all Invercargill primary school children. The Centre has a dual function of teaching gifted and talented children, as well as hosting classes so that pupils can experience the most up-to-date technology.
- Teachers Professional Development
- Since 2005 the Trust has provided $2.5million for teachers to access innovative learning opportunities both within New Zealand and internationally, including attracting world class speakers to Invercargill.
- Tertiary Education Scholarships
- 185 Scholarships have been funded to Invercargill secondary school students at $2000 a year for a three-year period.
- Learn to Swim Classes
- Annually, the Trust funds free swimming lessons, including transport to and from, for children aged between 5 and 12.
- Portage And Waitakere Licensing Trusts: West Auckland
- If you play any kind of sport in West Auckland, you have probably made use of one of The Trusts most significant investments in that community – The Trusts Stadium. Not only can you now play the sport in an internationally renowned facility, you can see sporting superstars and headline music acts from around the world. The Stadium attracts events from fashion shows to rock concerts, community gatherings to local sporting competitions. The venue has enjoyed several million visitors since opening in September 2004. It attracts 600,000 visitors a year, making it one of the most accessible stadiums in New Zealand. (See www.thetrustsstadium.co.nz. )
- The Trusts Stadium has been extensively supported by the Waitakere and Portage Licensing Trusts since its inception. Their grants were the backbone of the $28million spent on the project.
- The Trusts also support many other clubs, associations and groups across arts, culture, social services and sport to enhance West Auckland’s vibrant and diverse community. $85million has been donated in the last eight years.
- Ashburton Trust Event Centre
- 10 years ago when the Ashburton community recognised the need for an all encompassing performing arts centre, the Licensing Trust supported the project, and over the years has contributed $1.6million to feasibility studies, planning, development and establishment.
- The events centre receives around 45,000 visitors annually through shows, conferences and award ceremonies, many from outside the district, thus enhancing economic growth as well as cultural diversity.
- Rimutaka Licensing Trust
- In 2002, this small Trust which operates a one Tavern outlet on the fringe of Upper Hutt City, took responsibility to build a sound shell stage in Harcourt Park. The $281,250 stage was then given to the City and the people of Upper Hutt. Rimutaka schools have also benefitted from major donations over the past decade.
- In the 10 years between 2001 and 2010, the Trust has supported its community with donations of $4.6million.
- Flaxmere Licensing Trust
- The Flaxmere Trust was the last of the licensing trusts established in 1975 and over the years has supported its low income community with wide ranging grants to education in this village of Hastings. During the last 20 years, the Trust has $4.7 million to the Flaxmere community.
- Mt Wellington Charitable Trust
- Mt Wellington Charitable Trust was formed in 1964. The Trust focuses on assisting a wide variety of charitable, educational, cultural and sporting organisations located in the local areas of Mt Wellington, Panmure, Glen Innes, Ellerslie and Otahuhu. The average annual allocation of donations exceeds $1 million per annum.
- The first major project the Trust embarked upon was the establishment of Swimarama, the local swimming pool complex in 1968.
- More recent major projects involve provision of technical equipment to lower decile schools in the area; establishment at Bill McKinley Park of artificial turf for soccer and other community sporting activities, and assistance in developing the Auckland Netball Courts over the past five years which is now one of the largest sporting facilities in Auckland.
- Some Trusts have broadened their business interests from the original alcohol-related activities. Supermarkets, housing, energy generation and property landlords are some of the ‘modern’ businesses. Gaming, a ‘sensitive’ product like alcohol, was added in the early 1990s. Sensitive in this sense means a service that should be provided with controls.
- The market economy, non-market economy where the principle of redistribution is governed by the welfare state, and the civil and solidarity-based economy are generally regarded as the three sectors. The latter has a number of names: the civil society, the non-profit sector, the social/solidarity based economy…
- For a definitive treatment of the scheme see Olive Seabury (2007), The Carlisle State Management Scheme. Bookcase.
- Derek Round (2001) Henry Greathead Rex Mason KC CMG An Outstanding Law Reformer. Waikato Law Review.
- But the failure rate, at the worst of the measurement methodology used, has been no more adverse than that of private enterprise companies.
- Alcohol in Our Lives Issues Paper; Submission by 19 Licensing Trusts in New Zealand. 27 October 2009.
- Now section 189 of the Sale of Liquor Act 1989.
Teahan, Bernard (2007) Community Enterprises: Enduring Institutions for a Newer World. Doctoral Thesis, Victoria University of Wellington.
Teahan, Bernard (1990) Licensing Trusts in New Zealand: A Unique Social Mandate. Masters Thesis, Massey University of Palmerston North.
Teahan, Bernard (2009) Alcohol in Our Lives Issues Paper. Submitted to the New Zealand Law Commission.
Lind, Clive (1994) Pubs, Pints and People: 50 years of the Invercargill Licensing Trust. Invercargill Licensing Trust.
Masterton Licensing Trust (1997). A Matter of Trust: Masterton Licensing Trust 1947 – 1997. Masterton Licensing Trust.
Seabury, Olive (2007) The Carlisle State Management Scheme. Bookcase.
Round, Derek (2001) Henry Greathead Rex Mason KC CMG: An Outstanding Law Reformer. Waikato Law Review.
Birdsall, Nancy and John Nellis (2002) Winners and Losers: Assessing the distributional impact of privatization. Center for Global Development, working paper number 6.
Megginson, William L. and Jeffrey M. Netter (2001) From State to Market: A Survey of Empirical Studies on Privatization. Journal of Economic Literature, vol. 39, no.2.