Price of pub market distortion made clear

In Co Monaghan there are 139 people per pub. In Blanchardstown there are 13,000

In Co Monaghan there are 139 people per pub. In Blanchardstown there are 13,000. In Mayo there are 179, while Co Dublin averages 1,119.

Dublin licensed premises not only have more people per outlet, they also have a much higher turnover. Some 14.7 per cent of Dublin pubs have an annual turnover of more than £1 million compared to 0.5 per cent of pubs elsewhere.

The restriction on new licences is killing the whole tradition of the small, intimate local. Instead, Dublin pubs are becoming monstrous barn-like structures designed to pack in as many drinkers as possible. As a 96-year-old law restricts the number of licences, the size of the pubs is growing instead.

Throughout the city-centre, small pubs have added extensions in recent years or even been knocked down and replaced by much larger premises. In what the report calls the "vastly under-pubbed" new suburbs the increase in pub size is most obvious.

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As Mr William Prasifka, the main author of the Competition Authority's interim report on its study of the liquor licensing laws, said yesterday: "If you believe people in Dublin should all drink in a crowd while people in the country should drink alone, then it makes sense."

Rural licences can be bought for about £45,000, while Dublin licences cost from £150,000 to £500,000, depending on the location. The total value of pub licences is more than £500 million.

The present irrational situation is based on the Licensing (Ireland) Act 1902, which introduced limits on the issue of new licences. It provided that no new licences could be issued except where narrowly-defined circumstances were met. As a result, the number of licences in the State has declined by 26 per cent to 9,970 in the last 100 years.

The licences are also attached to specific premises and are not transferable from them, save in certain circumstances whereby an existing licence is extinguished and a new one is granted. In general, however, licences are transferable only with the premises.

New licences can be granted only through the extinction of one or more licences. In rural areas, two licences must be extinguished to allow for one new licence, and the new licensed premises cannot be within a mile of any existing licensed premises. For every new urban licence, an urban licence must be extinguished.

The ability to move licences from rural to urban areas is therefore very limited. The one exception allows hoteliers in an urban area to operate a public bar if they obtain and extinguish a licence from anywhere in the State.

There is also the plethora of restrictions and regulations on the sale of alcohol in restaurants.

The 1902 Act catered for Ireland in 1902, and is now completely out of date. Since the introduction of the Act the number of people per pub in the State has risen from 248 in 1896 to 362 in 1996. In 12 counties the numbers per pub have fallen, while Co Dublin has experienced a 190 per cent increase in the number per pub. The rise is repeated in neighbouring counties including Kildare (127 per cent), Louth (87 per cent), Meath (91 per cent) and Wicklow (87 per cent).

In addition, the report points out, women now frequent pubs in large numbers, whereas in 1902 a woman was a rare sight in a pub. This, together with greater affluence in Dublin and greater tourism, has created an explosion in demand while the number of licences has remained static.

The effect of the restrictive licensing laws on the retail drinks market was analysed for the authority by Mr Colm Harmon and Mr Anthony Murphy, of the Department of Economics at UCD. "All things being equal," they concluded, "residency in Dublin and a higher income will increase an individual's demand for alcohol."

The price of the pint of stout in Dublin pubs was 6 per cent higher on average than elsewhere, and the gap was growing, they discovered. The price gap is higher for spirits (7-9 per cent), foreign lagers and beers (10 per cent) and lagers (10-12 per cent). The implication is that, with a shortage of pubs in Dublin and limited competition, pub owners can raise prices without losing trade.

Conversely, Dublin off-licence prices were cheaper than elsewhere, due to the number, size and nature of off-licences and greater competition in that market, they conclude.

The report bluntly recommends the removal of barriers to entry to the pub market. Anyone wishing to operate a pub should be allowed to do so as long as they fulfil basic criteria of suitability of the licence-holder and premises and compliance with fire, safety, health and planning regulations, the report says.

Unsurprisingly, representatives of pub owners who benefit from the present regime rejected the report yesterday.

The report dismisses the publicans' concern as being the pub owners' problem rather than that of the authority. However, political reality will dictate that this issue must be addressed more seriously if these new proposals are ever to be accepted and implemented.