Review of Alcohol Licensing Fees

1 Introduction

1.1 The Scottish Government commissioned this review of alcohol licensing fees 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.

1.2 The overall aim of the research was to inform policy decisions over whether and how to reform the alcohol licensing fee regime.

Origin of the Alcohol Licensing Fees

1.3 The Licensing (Scotland) Act 2005 s136 enabled Scottish Ministers to make provision for the charging of alcohol licensing fees by Licensing Boards in a range of situations such as applying for premises licences/paying annual fees, applying for personal licences, occasional licences, and transfer or variation of licences.

1.4 Licensing Boards are empowered to set their own fees as long as they do not exceed the maximum limits outlined in the Licensing (Fees) (Scotland) Regulations 2007. The fees are intended to reflect the Scottish Government's intention to make the system self-funding i.e. to cover both direct and indirect costs incurred by Licensing Boards. As stated in the Licensing (Fees) (Scotland) Regulations 2007 s13:

"a Board is to have regard to the desirability of ensuring that the total fees payable under these Regulations to that Board in respect of any period are likely to be broadly equivalent to the expenses incurred by the Board and the council for the area of that Board, in administering the Act generally during that period."

1.5 Most of these fees, such as those charged for occasional licences or variations, are the same for all licensees regardless of the size of their business. Premises applications/annual fees are linked to the business's rateable value, with a number of exceptions such as Members' Clubs, visitor attractions etc., detailed in the Licensing (Fees) (Scotland) Regulations 2007 s4.

1.6 In addition to the initial payment for premises licence applications, personal licence holder qualification etc., it is a mandatory condition of the premises licence that holders pay an annual fee to ensure that the system is sufficiently resourced. Licensing Boards are empowered to set their own annual fees for premises licences, as long as they do not exceed the maximum limits outlined in the Licensing (Fees) (Scotland) Regulations 2007.

Issues with the Alcohol Licensing Fees Regime

1.7 Since the fees regime came into effect, in 2009, a number of concerns have been raised by stakeholders who questioned how proportionate and fair the fees regime is. It has been suggested by some stakeholders that small and medium sized premises pay disproportionately high fees relative to larger premises. However, others have proposed that the size of the premises should not impact on the premises licence fee, as applications arguably take a similar amount of resources to process regardless of the size of the premises.

1.8 In 2010, the Regulatory Review Group (RRG)^[1] carried out a review of the Licensing (Scotland) Act 2005, which focused on fees and the cost of applications. One of the recommendations in this report was that the Scottish Government review whether a fees regime based on rateable value is the best scaling factor for the banding structure used for calculation of licensing fees for premises licences/annual fees, as well as consider other options that may be more suitable.

Review of the Alcohol Licensing Fees Regime

1.9 In response to these stakeholder concerns and the RRG recommendations, in October 2011, the Cabinet Secretary for Justice announced plans for an independent review of alcohol licensing fees. This research project was commissioned to provide independent analysis to support this review.

1.10 The remit of this research project was set by a steering group made up of representatives from the on and off trade as well as local authorities. The group's role is to set the parameters for research to be carried out by an independent contractor, to act as an advisory group to the contractors, and, based on the findings, to make recommendations to Scottish Ministers about the fees system and the level of fees.

1.11 The aim of the research was to evaluate the current alcohol licensing fees regime and consider the efficacy of other potential structures to inform the Scottish Government's proposed reform of the fees regime. The research had three main objectives:

Establish a factual baseline

How much income do Licensing Boards currently receive from the range of alcohol licensing fees? How much does it cost Licensing Boards to run the licensing regime? Do the boards achieve full cost recovery of direct and indirect costs? If additional funds are made, are these finances ring-fenced?

Evaluate the current fees regime

Do stakeholders feel that the current system is fair and proportionate to all sections of the trade? Which of the current fees are most/least appropriate? What are the advantages and disadvantages of the system?

Evaluate these potential alternative options for premises licence applications / annual fees

Are the proposed alternatives below workable? Do stakeholders feel that they are fair and proportionate to all sections of the trade? What are the advantages and disadvantages of the alternatives?

• A turnover-based system
• A system based on square footage of the premises (as well as considering whether this should reflect the size of the alcohol display area as a proportion of the total square footage of the premises)
• Revision 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.

Report Structure

1.12 The remainder of the report presents the study findings in the following chapters:

• Methodology;
• Legislative Review;
• Factual Baseline and views on the current system;
• Views on a Turnover Based Alcohol Licensing Fees System;
• Views on a Square Footage Based Alcohol Licensing Fees System;
• Views on the Alternative Alcohol Licensing Fees Systems;
• Conclusions.