Review of Alcohol Licensing Fees

Executive Summary

Background

The Licensing (Scotland) Act 2005 s136 enabled Scottish Ministers to make provision for the charging of alcohol licensing fees by Licensing Boards. Since the fees regime came into effect, in 2009, a number of concerns have been raised by stakeholders who feel that the regime should be made fairer and that smaller businesses currently pay disproportionately large fees.

In 2010, the Regulatory Review Group (RRG) carried out a review of the Licensing (Scotland) Act 2005, which focused on fees and the cost of applications. One of the RRG's recommendations was that the Scottish Government review whether a fees regime based on rateable value was the best approach for calculating licensing fees for premises licences/annual fees, as well as consider other options that may be more suitable.

This research was commissioned by the Scottish Government to establish the current fees collected and costs incurred by Local Authorities, evaluate the current fees regime as well as potential alternative options, and consider stakeholder views on the current fee structures and possible other options, with the overall aim of informing policy decisions over whether and how to reform the alcohol licensing fee regime.

Methodology

The methodology involved legislative and document review, a survey of numerical and financial data collection from Licensing Boards, stakeholder consultation, and case study visits.

Responses to the survey were received from all 32 Licensing Boards, but in four cases only very minimal information was provided. The factual baseline was created using the data received.

Factual Baseline

There were 13,609 Premises Licences reported to be held as at 31st March 2012 in the areas of the 28 Boards that provided responses - this figure comprised 5,536 Off Sales Premises Licences; 6,571 On Sales Premises Licences and 1,502 Members' Clubs Premises Licences.

A total of 31,812 Personal Licences were reported as having been issued by the 28 responding Boards up to 31 March 2010.

A financial data collection spread sheet was issued in conjunction with the online survey. 18 respondents completed the income spreadsheet but only 15 completed the expenditure spread sheet, and the financial information supplied appeared in some cases to be unreliable.

The majority of Boards that submitted financial data were not covering their costs with fee income, and based on their data, which excludes some large Boards, the total deficit across the whole of Scotland was estimated to be in the order of £2.6m, in the context of an estimated total spend of £9.5m. This represents recovery through fee income of about 72% of costs.

Findings

Individual Fees

The analysis has shown that the activity most frequently cited as the most resource intensive was Applications for Occasional Licences, which had the lowest fee attached. The vast majority (30 out of 31) of Licensing Board respondents thought that the Occasional Licence fee was too low and did not reflect costs incurred.

90% of Licensing Board respondents thought the Extended Hours Licence fee was too low, 77% thought the Minor Variation fee was too low, and 57% thought the Major Variation fee was too low. The other licence categories were thought to be 'about right' in terms of fee levels by the majority of respondents.

Stakeholder Views

The majority of stakeholders thought that most fees were about right. Stakeholders' views on whether the current system was fair and proportionate to all sections of the trade varied depending on stakeholder type. Within the current bands there was perceived unfairness and lack of proportionality especially where large supermarkets paid only notionally more than convenience stores.

There has been a trend over recent years towards much larger stores, and, whilst this has concentrated sales at the top end of the market, there was a view that this was not sufficiently reflected in the fee structure and that creating additional bands at the top of the scale would reflect this market trend.

Issues were identified with Members' Clubs licences, and a number of stakeholders felt that these needed to be rethought in order to allow bona fide Members' Clubs to operate, but to have a different system for those Members' Clubs that were operating on a commercial basis.

There was said to be a lack of consistency across the Licensing Boards - this led to frustration among multi-site businesses dealing with different systems in each area. A number of interviewees expressed support for a central administration or the central setting of fees and operational systems/processes. In particular, it was suggested that the administration of Personal Licences would benefit from centralisation.

Potential Alternative Fees Regimes

The research team considered three alternative fees options suggested by the steering group:

• A turnover based system
• A system based on the square footage of the premises
• Modification of the existing system by, for example, adding extra bands, adjusting the existing bands, introducing potential discounts for some licensees such as small businesses/tourist attractions, etc.

Some stakeholders were in favour of the turnover based system and the square footage based system, however both of these approaches were considered to be problematic and received more arguments against than in favour of their use.

The turnover based system was considered to be the fairest as it linked fees directly with sales, however this approach would increase the administrative burden both for Boards, who may not have appropriate staff to administer such a regime, and for premises, particularly off-sales businesses who were not currently obliged to gather this data. Furthermore, premises were reluctant to disclose commercially sensitive information.

The square footage based system was thought to be more proportionate and fairer to smaller businesses, however a system based on square footage was considered to be difficult for Licensing Boards to administer, while not necessarily equating to the amount of alcohol sold e.g. in the case of department stores.

Overall, a substantial majority of Licensing Board survey respondents and stakeholder interviewees favoured modification of the existing system based on rateable value.