Review of Alcohol Licensing Fees - Steering Group: Recommendations to Scottish Ministers

Research - Findings

Licensing Board Finances

18. Responses to the qualitative survey were received from all 32 Local Authorities, however only 18 respondents completed the income spreadsheet and only 15 provided details of costs incurred administering the licensing regime. With 15 sets of cost data, 4-consulting were unable to produce robust data on the overall picture across Scotland and could not say whether most Boards were achieving cost recovery or were making a surplus or a deficit.

19. The Licensing (Scotland) Act 2005 provides that licensing fees be based on cost recovery. If Boards do not have reliable up-to-date data on their income and expenditure, it is not possible to state whether they are currently doing so.

20. The recent Hemming vs Westminster City Council judgement, while not having precedence in Scotland, makes clear that local authorities must be able to justify fees and demonstrate that they operate on a cost recovery basis.

21. Of the 15 Boards that submitted financial data, the majority did not cover their costs with fee income. On average, fee income covered about 72% of expenditure. If the data from these Boards is extrapolated across the whole of Scotland then the deficit is estimated to be approximately £2.6m.

22. Most of the Boards who participated in the research do not make future projections of workload so have not taken into account the costs of the upcoming personal licence refresher process.

23. It should be noted that this dataset does not include some large Boards. Were these areas to be breaking even or making a profit due to economies of scale and more efficient processes, their absence would have an impact on the data overall.

24. There is a perception amongst the trade that all Boards charge maximum fees, however the research showed that around a third of Boards charged less than this. Of the seven Boards that did not charge the maximum for application fees and/or annual fees, six made a deficit and one made a surplus. It is not known why these Boards do not raise their fees, although they may be operating at a loss intentionally to create a business-friendly environment or, alternatively, may be unaware that they are operating at a loss and have the option to address this by adjusting fees.

Individual Fees

25. Licensing Board respondents stated that their most resource intensive activity related to the administration of applications for occasional licences, this was because there were so many of these. This had the lowest fee attached (£10) and the vast majority of Licensing Board respondents stated that the Occasional Licence fee was too low and did not reflect the costs incurred.

26. 90% of Licensing Board respondents thought the Extended Hours Licence fee was too low (£10), 77% thought the Minor Variation fee was too low (£20/ £31), and 57% thought the Major Variation fee was too low (determined by individual Boards with no upper limit although they should be based on cost recovery). The other fee levels were thought to be 'about right' by the majority of respondents.

Stakeholder Views

27. The majority of stakeholders thought that most fees were about right. Views on whether the current system was fair and proportionate to all sections of the trade varied depending on stakeholder type.

28. In recent years there has been a trend towards much larger stores. This has concentrated sales at the top end of the market. However there is a view that this is not sufficiently reflected in the fee structure. It was felt by some stakeholders that small businesses paid disproportionately high fees and that large premises should have been paying more.

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

30. Under the current fees system, members clubsMembers' Clubs are automatically assigned into category one and therefore pay the cheapest application fees and annual fees. MembersMembers' Cclubs pay reduced rates to recognise the important social role that they play in communities throughout Scotland. There is a perception that some members clubsMembers' Clubs effectively operate on a commercial basis and therefore granting them special privileges is unfair to other licensed premises. Consequently there is a view that the status of members clubsMembers' Clubs should be reconsidered.

Potential Alternative Fees Regimes

31. 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.

32. 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.

33. The turnover based system was considered to be the fairest because 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 that were not currently obliged to gather this data. Furthermore, premises were reluctant to disclose commercially sensitive information.

34. 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.

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