Review of Alcohol Licensing Fees

9 Conclusions

9.1 The aim of the research was to evaluate the current alcohol licensing fees regime and consider the efficacy of other potential structures. The conclusions are presented in relation to the three main research objectives, which were to:

• Establish a factual baseline;
• Evaluate the current fees regime;
• Evaluate potential alternative options for premises licence applications / annual fees.

Establish a Factual Baseline

9.2 Some difficulties in establishing a factual baseline were encountered as, although a 100% response rate to the survey was achieved, four Licensing Boards did not submit meaningful data for any questions, while other responses varied in completeness of data. In relation to the data collection spread sheet, only 18 responses were received, and of these only 15 included expenditure data. The factual baseline was created using the data received.

9.3 Full financial information was supplied by a minority of Licensing Boards and what was supplied appeared in some cases to be of dubious reliability. For example, there were a number of inconsistencies between data returned on the spreadsheet, often completed by local authority accountants, and that returned in the main survey completed by Licensing Board personnel. There are also issues relating to support services and to 'hidden' staff costs. These latter appear to amount to about 42% of the total resources spent on the regime.

9.4 The fees regime is underpinned by the principle of cost recovery. Due to the lack of financial data available, some Boards may not be able to demonstrate that they have appropriately recovered costs.

9.5 The majority of Boards that submitted financial data were not covering their costs with fee income and, based on their data, 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.

9.6 However some large Board areas did not submit responses. Were these areas to be breaking even or making a profit due to economies of scale and more efficient processes their absence may have an impact on the data overall.

9.7 The analysis has shown that the activity most frequently cited as the most resource intensive was Applications for Occasional Licences, which have the lowest fee attached. The second most resource intensive activity was Applications for Major Variations, while the third most resource intensive activity was indicated to be 'Compliance'.

Evaluate the Current Fees Regime

9.8 Using data collected from the survey of Licensing Boards, stakeholder consultation and stakeholder visits the views held on the current fees regime have been summarised.

9.9 Advantages of the current alcohol licensing fee structure were stated to be that it is:

• Fair, reasonable and objective;
• Clear, concise and simple;
• Easy to understand and calculate;
• Easily identifiable through rateable value;
• Offers certainty of application;
• Objective and based on independently assessed rateable value.

9.10 Disadvantages of the current alcohol licensing fee structure were stated to include:

• Inefficiency and ineffectiveness;
• Lack of transparency;
• Lack of consistency of approach;
• Lack of information in relation to Licensing Board costs and expenditure, and therefore the inability to know whether surpluses are being made or costs recovered;
• It is disproportionate for businesses with low alcohol turnover but large premises;
• It lacks sufficient differentiation between large and small premises;
• Fixed fees are set too low - particularly Occasional Licences;
• It lacks flexibility;
• Most Boards are unable fully to recover costs;
• Rateable value does not reflect turnover or profit;
• Fees do not reflect the amount of work required to process;
• Fees take no account of enforcement or mediation.

9.11 Stakeholders' views on whether the current system is 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.

9.12 Licensing Board Survey respondents were asked if they thought any current fees were too low or high considering the amount of work carried out by local authorities. The vast majority (97%) of Licensing Board respondents thought that the Occasional Licence fee was too low and did not reflect costs incurred, 90% 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.

9.13 There are issues with Members' Clubs licences and a number of stakeholders felt that these need to be rethought in order to allow bona fide Members' Clubs to operate, but to have a different system for those Members' Clubs that are operating on a commercial basis.

9.14 The other licence categories were, in the main, thought to be 'about right' in terms of fee levels by the majority of respondents.

9.15 The majority of other stakeholders thought that most fees were about right - with the exception of the highest fee banding in relation to supermarkets, which were thought to pay only marginally more than small convenience stores. From a number of basic data sources and as reported by stakeholders, there has been a clear trend over recent years towards much larger stores and, whilst this has concentrated sales at the top end, this is not sufficiently reflected in the fee structure. Creating additional bands at the top of the scale would reflect this market trend.

9.16 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.

9.17 It should be noted that the central setting of fees, removing all discretion from individual Boards, would make it more difficult for each Board to break even, given the extent of differences between them. Breaking even across the whole of Scotland would be a more reasonable expectation, but this may only be compatible with the European Services Directive, and the principle of cost recovery, if the system as a whole is seen as a National one. Clearly, if fee income is retained centrally but with local administration of the process, Boards would expect reimbursement of their costs.

9.18 Some of the other issues raised, notably the perceived need for regular uprating of fees to cover inflation and the question of whether surpluses and deficits should be ring-fenced, would cease to be local issues for Boards were a national system to be introduced. However, other new issues would be likely to arise, such as how cost reimbursement would operate, and others, such as inconsistencies in operational practices, would not be resolved unless there were also to be operational guidelines for Boards to follow.

Evaluate Potential Alternative Options

9.19 Some stakeholders representing different segments of the licensed trade expressed preferences for one or other of the alternative turnover or square footage based systems but, in each case, they represented a small minority.

9.20 The majority of stakeholders and survey respondents raised valid questions about whether such alternative systems would be workable.

9.21 In respect of a turnover based system, issues of definition, variability, data confidentiality and auditability were highlighted and it was felt that such a system would increase the administrative burden.

9.22 In respect of a square footage based system, there were conflicting views regarding how square footage should be calculated and it was questioned whether the size of a premises could be linked with the volume of alcohol sold. Issues of variability and auditability were also highlighted. Again, it was felt that such a system would increase the administrative burden.

9.23 Overall, a substantial majority of Licensing Board survey respondents and stakeholder interviewees favoured retention of the rateable value based system although it was felt that some refinements may be beneficial as discussed at paragraphs 9.12 to 9.18.