UK: Home Office Consultation On Locally-Set Fees Under The Licensing Act 2003

Last Updated: 27 March 2014
Article by Philip Somarakis

On 13 February 2014, the Home Office began a six week consultation on the introduction of locally-set fees under the Licensing Act 2003 in England and Wales.

As part of the Government's proposals to "rebalance" the Licensing Act in favour of local communities, leading to the introduction of the late night levy, Early Morning Alcohol Restriction Orders (EMROs), and other strengthened licensing powers, views are now sought on proposals for licensing fees to be set locally, on a costs-recovery basis.

Davenport Lyons encourages any interested party to respond to the Consultation and Impact Assessment, by the deadline of 10 April 2014.

Current licensing fees were set nationally with the implementation of the Licensing Act 2003 in November 2005, and have not changed since.  Enabled by the Police Reform and Social Responsibility Act 2011, the Government now intends to introduce regulations to prescribe that fee levels be set instead by individual licensing authorities, rather than nationally, to enable the recovery of local costs. 

The Home Office consultation now seeks views on important aspects of such regulations.  These include:

  • Variability of fee amounts, according to class or type of fee payer;
  • National caps on fees;
  • Transparency and efficiency of licensing authorities; and
  • A single national payment date for annual fees.

Variable fee amounts

At present, fee amounts vary according to the class or type of fee payer.  In relation to premises licences or club premises certificates, fees for new applications, full variations, and annual fees (the "main fees") are determined by the national non-domestic rateable (NNDR) band of the premises.  However, a Home Office study has shown that the level of costs incurred by the licensing authority cannot be significantly linked to a premises' NNDR banding.

The Government therefore proposes to abandon NNDR as a criterion for variable fee amounts.  It seeks instead to provide the licensing authorities with discretion to classify premises, where there is evidence that such classes are linked to the local authority's costs. 

Proposed classification criteria are whether premises are:

  1. Authorised to provide licensable activities until a late terminal hour (a locally-set time between midnight and 6am); and/or
  2. Used exclusively or primarily for the sale of alcohol for consumption on the premises.

It is proposed to give licensing authorities flexibility in applying these criteria, including discretion to apply higher fees only where both criteria apply, and/or to exclude certain types of premises from the higher fee amount, if they are not associated with higher costs.  The Home Office also invites alternative proposals for determining variable fee amounts.

Fee caps

The Government has committed to set caps for each fee category.  The consultation invites views on the levels of such caps.

For the most part, the caps proposed by the consultation are significantly higher than current maximum fees.  For example the proposed fee cap for a premises licence application or variation is £2,400: 26% higher than the current maximum fee (and 24 times higher than the current lowest fee).  The proposed cap for variation of the designation premises supervisor is £105: 4.6 times higher than the current fee (£23).  However, it is clearly stated that the proposed caps are significantly higher than the estimated average future fee levels, and that actual fee amounts must be based on evidence of local cost recovery.

In relation to Temporary Event Notices (TENs), the Government proposes a cap of £100, and indicates that the average TENs fee will be approximately £80 - a four-fold increase from the current fee of £21.  It is anticipated that the increased fee may deter operators from giving a TEN when aware that it may receive an objection, and therefore be wasted.

It is notable, however, that the cap to the annual fee payable by a premises licence holder is proposed at £740, some 30% lower than the maximum current annual fee.  Given that the cap is calculated to exceed the cost recovery-based fee level in most areas, annual fees look set to shrink significantly.  In addition, the level of each cap will be subject to periodic review.

Transparency and efficiency

The Government recommends licensing authorities be required to publish proposed fees, the basis upon which they have been calculated, and measures taken to keep costs down, and invite comments from interested parties - before the implementation of locally-set fees.  The present consultation contains no recommendation as to whether/how licensing authorities must consider any comments received.  However in addition to local consultation, current mechanisms of democratic accountability, judicial review, external audit, and freedom of information would remain available.

The Government aims to encourage "innovation and best practice in securing economy and efficiency" in the delivery of licensing functions, and asks respondents what practical steps may secure such efficiency.  Steps could include changes to authorities' processes and procedures, sharing of back-office functions, and mediation to avoid hearings or reviews.  Fee levels should be reviewed and revised regularly, to take into account changes including efficiencies achieved or planned.  The consultation also asks for views on activities that may present particular risk of excessive costs or "gold-plating" (activities that go beyond the duties of the Licensing Act 2003 and are not proportionately justified).

Single national payment date for annual fees

At present, annual fees are paid on the anniversary of the date the licence or certificate was granted.  The Government seeks views on whether there should instead be a single national payment date for annual fees.

A single national payment date would likely provide efficiency for operators holding multiple licences; however efficiency may be diminished by the effect of widely-varying fee amounts for premises in different local authority areas.  In addition, it may create a peak work period around the renewal date; some licensing authorities consider that this may increase their costs, which would be passed on to fee payers.

Limitations

The impact of the proposals is very difficult to calculate; but it is estimated that achievement of cost recovery would result in a net change in fee income of 27%, £14.5m, paid by the overall population of fee payers. 

However, the Home Office is emphatic that the proposals are based on estimates of licensing authority costs.  These derive in part from a small initial survey on the relationship between costs and income – of 20 licensing authorities out of 350 in England and Wales – and a number of assumptions and estimates have been made. Further, levels of income and costs have been based on 2006 and 2011/2012 figures, respectively, and may have been overestimated or underestimated.

The Government recognises the wide disparity between licensing authorities in terms of their costs, and the limitations of their current estimates.  As a result, running alongside the consultation is a further survey of licensing authority costs.

The difficulty for stakeholders is assessing the impact of locally-set fees, including anticipating areas that will incur higher fees and how this may affect their business.  Whilst locally-determinable factors such as capital expenditure on property and wage levels may provide some indication, it is not currently possible to assess the efficiency and cost-effectiveness of different authorities, and how this will impact fees.

Local public consultation on each authority's proposed fees, the basis upon which they have been calculated, and the measure they have taken to keep costs down, will therefore likely prove a very useful step - if this recommendation is implemented.

Responding to the consultation

Davenport Lyons encourages any interested party to respond by the deadline of 10 April 2014.  Have your voice heard: respond directly to the consultation here

For the full text of the consultation and Impact Assessment, please see the Home Office website.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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