Review of Alcohol Licensing Fees

7 Square Footage Based Alcohol Licensing Fee Structure

7.1 This section sets out the key findings in relation to Stakeholder and Licensing Board staff views on a square footage based alcohol licensing fee structure.

Square Footage Based Alcohol Licence Fees

7.2 Licensing Board survey respondents were given a series of questions in relation to a square footage based alcohol licence fee structure and asked to indicate their level of agreement. Questions were posed in relation to both 'on trade' and 'off trade'. The responses are shown in Graph 7.1 and discussed in more detail in subsequent paragraphs.

Graph 7.1

Source: Survey Question 33

7.3 Survey respondents were asked to indicate their agreement with the statement 'An alcohol licensing fee structure based on the square footage of off trade premises would be fair' - 17% agreed (14%) or strongly agreed (3%). When asked to comment on the same statement in relation to on trade premises a slightly lower level of agreement was observed with 14% agreeing (10%) or strongly agreeing (3%).

7.4 When asked whether an alcohol licensing fee structure based on the square footage of off trade premises would be proportionate across all parts of the sector 14% either agreed (10%) or strongly agreed (3%). Slightly more respondents disagreed with this statement in relation to the on trade - with 31% disagreeing (14%) or strongly disagreeing (17%), while 14% agreed (10%) or strongly agreed (3%). This statement attracted most levels of agreement in relation to the turnover based system (24% agreement) followed by the current system (20% agreement) and the square footage based system (14% agreement).

7.5 The statement 'An alcohol licensing fee based on the square footage of off trade premises is the most appropriate structure' showed levels of only 7% agreement or strong agreement. The same statement in relation to on trade premises showed similar results with 38% disagreeing (14% disagreed, 24% strongly disagreed), 55% neither agreed nor disagreed while 7% agreed (3.5%) or strongly agreed (3.5%).

7.6 The statement 'An alcohol licensing fee structure based on the square footage of off trade premises should reflect the alcohol display as a proportion of the total square footage of the premises' received 14% agreement.

7.7 Research participants overall, were not clear if the square footage of the premises should be calculated as the entire footprint of the premises or the square footage designated for the display, sale or consumption of alcohol. Complications were anticipated if it was the former, as premises such as a cinema complex, health club or a large hotel, which had large square footages and where the primary business (and profit) was not alcohol related would fall into the same category as large nightclubs, national supermarkets and public houses whose sales of and profit from alcohol was substantial.

7.8 One stakeholder stated that while they opposed any move to a square footage based system, if such a system were selected, it should use the square footage of the alcohol area as a proportion of the total area rather than the square footage of the alcohol area.

Advantages of a Square Footage Based System

7.9 Licensing Board survey respondents were asked what the advantages of a square footage based alcohol licensing fee structure were; their views can be summarised as follows:

• Lower fees for smaller premises/ higher fees for larger premises;
• Easy to operate;
• Ties in with health objectives;
• Links to quantity of alcohol on display and potentially quantity sold;
• May provide more accurate estimates of the level of alcohol sales than the rateable value of premises.

7.10 One stakeholder thought that this system would have no disadvantages. It was thought that any such system should be based on the absolute square footage of the alcohol section of the store. The size of the alcohol area is already recorded in layout plans; information would not need to be audited and is readily available at present.

Disadvantages of a Square Footage Based System

7.11 Licensing Board survey respondents were asked what the disadvantages of a square footage based alcohol licensing fee structure were; these can be summarised as follows:

• The size of premises do not necessarily equate to the amount of alcohol sold;
• This system does not take turnover into account;
• Over simplistic and unfair;
• Difficulties in calculating square footage - is it linear, cubic, what about mixed use venues?
• Square footage does not necessarily correlate with problems of an anti-social nature;
• Alterations would require recalculation and potential for unauthorised alterations;
• It would create an unfair burden in requirement for new layout plans;
• Larger premises may only have a small alcohol display but pay more.

7.12 One stakeholder stated that a square footage based system would be unfair as this would subsidise smaller stores if it was based on a system of the percentage of the whole store, and that the system should not be about redistribution from large to small operators. Another stakeholder said that calculation of square footage as percentage of the total store would nullify the point of a square footage based system.

7.13 Stakeholders raised issues of the practicality of a square footage based system - in particular if a store were to change the size of off sales displays, it could mean a change of banding whereas at present it would mean a variation application. Additionally supermarkets, corner shops and pubs all charge very different prices for alcohol, and it was not understood how this would be reflected in a square footage based system. It was thought that large premises with low alcohol sales would be unfairly penalised.

7.14 Stakeholders thought that any square footage approach would disadvantage those who only trade at or near capacity for a few hours each week. Other problems were envisaged in determining the fee applicable to nightclubs and entertainment venues which are laid out in a very different way from a pub - would the dance floor or stage be included in the square footage? There are currently no distinctions between Members' Clubs, hotels, and tourist attractions - how would this be tackled under a square footage system?

7.15 Overall, the square footage based system was thought to be administratively very difficult with a lot of data gathering required.

Case Study of Major Supermarket Operator with Outlets across Scotland

The interviewee represented a multi-site retailer operating stores, which range in size from the convenience store (of around 5,000 ft²) to the hypermarket (circa 100,000 ft²). Each store has a Premises Licence and within each store the law requires that there is one Personal Licence Holder. Company policy means that in larger stores there may be 12 to 20 Personal Licence Holders on the premises at any one time with up to 20 Personal Licence Holders within the full staff complement of that store. Every member of staff employed by the supermarket will have received alcohol and age awareness training.

The current system was thought to be clear in how it functioned and the business had set up internal systems to work within this structure. The current system could be improved through greater transparency in terms of fees raised and Licensing Board expenditure. The principle of a cost neutral Licensing System was believed to be correct. There was thought to be a lack of consistency of approach in some areas, including fee levels.

Questions were raised about alternative structures such as square footage and turnover based systems about how they would work in reality. Issues of fairness in relation to total size of store or total turnover compared to alcohol display areas and alcohol turnover were raised. A turnover based system would have operational difficulties for retailers - who would they entrust with highly sensitive turnover information; how would fluctuations in turnover be accommodated; and what impact would the general downward trend in alcohol sales have on cost recovery for the Licensing Board?