Scottish Government

Regulatory Impact Assessment

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I Title of Proposal

The Licensing (Scotland) Bill

II Purpose and intended effect of measure

(i) The objective

1. To modernise the present licensing regime for the sale of alcohol. Offering a balanced package which reflects the needs of individuals, communities, business and consumers, underlined by a consistent philosophy provided through the licensing objectives. These are:

• preventing crime or disorder;
• securing public safety;
• preventing public nuisance;
• protecting and improving public health; and
• protecting children from harm.

The Bill addresses issues of how, when & where individuals can access alcohol within a framework that ensures alcohol abuse and spin off nuisance and crime are not fuelled by a lax licensing system, enabling Scotland to enjoy its social drinking in a safe, welcoming environment.

(ii) The background

2. In Scotland the sale of alcohol is regulated by the Licensing (Scotland) Act 1976 (the 1976 Act) which transferred the functions of licensing courts to Boards consisting of local councillors. Licensing Boards have quarterly meetings in January, March, June and October. They are empowered to grant seven different types of liquor licence. Subject to some amendments in 1990, 1992, 1993, and 1996, the 1976 Act remains the basis for licensing law and practice in Scotland. Thirty years have now passed since the report of the Clayson Committee upon whose recommendations the 1976 Act was based. In this period much has changed, both in relation to social attitudes to drinking and in how, where and when we buy and consume alcohol.

3. There has been a growing concern in recent years about the health implications of binge drinking on young people of both sexes and about the growth of alcohol related illnesses affecting all ages. The cost imposed upon the NHS in Scotland at 2002/03 prices was £110.5 million, and the total cost to Scottish society was estimated to be £1.1 billion (' Cost to Society of Alcohol Misuse in Scotland' Health Economics Unit, Scottish Executive July 2004 ). Health concerns have been coupled with a concern for public order and, increasingly, the links between over-consumption of alcohol and the commission of crimes, in particular crimes of violence.

4. The law concerning the sale and consumption of alcohol by children is deeply confusing to parents, other members of the public and visitors to this country, and is largely discredited. In particular, the law governing the consumption of alcohol by minors relates only to the area in licensed premises described as the bar area, leaving children at liberty to consume alcohol in other areas of licensed premises.

5. The growth in licences, growing concerns about health and public order, and the perception of fundamental shortcomings and unnecessary complexities in the provisions of the 1976 Act, led, in June 2001, to the formation of the Nicholson Committee. The Committee, chaired by Sheriff Principal Gordon Nicholson, published its review of liquor licensing law in Scotland in August 2003.

6. The Nicholson Committee received over 200 written submissions and held 8 days of oral evidence sessions with representatives from 23 organisations. Publication of the report was followed by a period of public consultation on its 90 recommendations which attracted over 160 responses. In addition, views on off-licences were expressed during the consultation on the Executive's Strategy for Tackling Antisocial Behaviour 'Putting our Communities First'. This led to the establishment of a Working Group chaired by Peter Daniels, Chief Executive of East Renfrewshire Council, which reported on 'Off-sales in the Community' in February 2004.

7. In May 2004, the Scottish Executive published it's response to these reviews in "The Licensing (Scotland) Bill - A Consultation on Liquor Licensing" and announced its intention to implement its proposals by means of primary legislation. A public consultation followed to which over 120 individuals and organisations responded. Few changes were made to the White Paper policy in the light of the consultation since there was a very high degree of support for the proposals. Key changes were:

• duration of Board Policy Statements increased from 2 to 3 years;
• 'any person' to be entitled to object/make representations to a licence application;
• changes to be made to the definition of casual staff, and definition of 'neighbours' for purposes of neighbour notification;
• detailed policy on irresponsible promotions; and
• change in policy on access of children to off-sales.

8. The Licensing Bill is intended to implement the White Paper proposals and will deliver the following:

• personal and premises licences to be issued by local Licensing Boards consisting of local councillors, continuing a system which ensures the regime is democratically accountable to local people;
• a personal licences which allow holders to sell alcohol in the same way that a driving licence permits the driving of any car;
• personal licences issued for ten years to anyone aged 18 years or over without a relevant criminal record following training in licensing law and social responsibility;
• premises licences incorporating operating conditions covering relevant crime and disorder, public safety and public nuisance factors, in accordance with national licence conditions or set locally by Boards on the basis of the balance of operator's requirements, community views and police and fire authority assessments;
• opening hours which are potentially more flexible and awarded by Boards according to the suitability of each individual premises;
• new requirements for licensing the sale of alcohol on boats travelling within Scotland;
• new arrangements for non-profit making "registered" or members clubs which supply alcohol to their members preserve their special status and important traditions;
• fewer licences in antisocial behaviour hot spots - Boards to conduct new overprovision assessments and block licences where there is considered to be saturation;
• easier for local communities to have a say in the grant and continuation of licences through a more inclusive complaints system and consultation on overprovision assessment;
• more flexibility for local Licensing Boards - power for Board to modify licensees operating plan, determine suitable opening hours and apply a wide range of conditions to licence;
• licensees required to 'opt in' to access by children to on sale premises which would be approved by Licensing Boards;
• the sale of alcohol to minors to be made unlawful anywhere and not just in licensed premises;
• no proof no sale policy to apply to all licensed premises in Scotland;
• a consistent national policy to control irresponsible promotions - non-differential pricing approach will require licensees to maintain the same prices for 48 hours together with a ban on specific promotions;
• tough enforcement targeted at both premises and personal licence holders. Range of sanctions for breaches of premises licence from modifying any licence condition including opening hours to suspension or revocation of the licence. Personal licence holders could have their licence endorsed, suspended or revoked;
• it will continue to be an offence to serve someone who is drunk but supplemented with this becoming a 'relevant offence' for purposes of the new scheme. Conviction for a relevant offence will result in the initiation of a licence review and application of sanctions;
• suspension of licence to take effect immediately pending appeal no longer a wait of up to a year for local community until appeals exhausted;
• new liquor licensing standards officers to monitor and enforce new system - no dedicated enforcement at present - will be able to mediate between licensee and community to try to resolve problems.
• abolition of a range of archaic exemptions;
• fees to be set centrally by Scottish Ministers to ensure consistency and fairness and to recover the costs of administration, inspection and enforcement;

(iii) Risk assessment

9. Failure to modernise in this area could inhibit the development of the hospitality, late night refreshment and leisure industries, hindering their attempts to diversify and to become more attractive to families, tourists and to children. Diversification is also important to rural life where village pubs are often the social hub of the area, and more will close if they are unable to use the premises for a wide range of purposes.

10. There has been an increase in antisocial, disorderly and violent behaviour during the evenings and at weekends in town centres where a greater number of licensed premises exist. Analysis carried out on offences which are designated 'alcohol related' in town and city centres by Central Scotland Police found that the number of incidents relating to disorder, nuisance and violence between 1800-0400 hours has risen from 2418 in 2002 to 3350 in 2003 and 4071 in 2004. The nature of these offences has remained constant, with 25% relating to breaches of the peace, and the peak periods for activity are on Friday and Saturday nights between 2300-0300 hours.

11. In Elgin where Grampian Police has the largest concentration of licensed premises for the Moray local command area. The following table details all recorded serious assaults, petty assaults and breaches of the peace in Elgin for the last three calendar years.

Of the 20 charges of Serious Assault recorded in 2004, 50% occurred within licensed premises. The optimum time for the listed offences to occur was between 2200-0400 hours, accounting for 79% of breaches of the peace. The majority of detected offences of this nature on Saturday nights are committed by persons under the influence of alcohol.

12. In addition, the following possible risks associated with the Bill for individual stakeholder groups have also been identified

Residents and the local community

• some scope for disturbance later into the night than at present;
• alcohol sales on a Sunday/other religious holidays;
• occasional events may cause some disturbance;
• concerns over children having increased access to licensed premises.

Consumers

• failure of licensed premises to take advantage of increased opportunities to admit children and families;
• failure of Boards to take a more flexible approach to opening hours;
• more limited range of promotions on drinks available.

Retail, hospitality and leisure industries

• a more competitive late night environment threatening some businesses (pubs, restaurants and other businesses may begin to operate post-midnight or 1 a.m. in a market currently dominated by nightclubs and casinos);
• increased vulnerability to prosecution and conviction regarding sales to minors;
• greater liability to sanctions because of their graduated nature;
• excessive use by police of powers of closure;
• overly zealous enforcement by local authorities;
• indirect costs associated with licence conditions prove higher than anticipated;
• on sales adversely affected by price promotions by off sales.

Local Government

• insufficient funding to manage efficiently and enforce the licensing regime if licence fees are set too low to allow for full cost recovery;
• undermining of licensing policy by appeal decisions in court;
• cannot impose local conditions at odds with national conditions;
• difficulty of defining 'overprovision'.

The Police

• failure of complementary Scottish Executive policies (e.g. fixed penalty notices) addressing disorder and anti-social behaviour in the streets away from licensed premises;
• failure to work in partnership with the Licensing Standards Officers would weaken the impact of the enforcement regime;

13. The Scottish Executive considers that all of these risks can be controlled and managed through mechanisms incorporated into the Bill, its associated secondary legislation and guidance issued by Scottish Ministers, which Licensing Boards and appeal bodies would be obliged to take into account under the terms of the legislation. All of these risks are therefore considered to be low.

III Options

14. In reviewing the present legislation and in making recommendations for liquor licensing law in Scotland, the Nicholson Committee considered a number of options subsequently reviewed by Scottish Ministers.

(a) Identified options

Option 1

• Leave all the relevant legislation unchanged.

Option 2

• Remove the activity of liquor licensing from local Licensing Boards consisting of councillors and hand it to:

(a) a more representative board of stakeholders;

(b) licensing courts.

Option 3a

• Implement a new regime of two licences (a premises and a personal licence) with strengthened supervision and compliance provisions. Each premises to have an agreed operating plan setting out, for example, the activities to be conducted, opening hours and policy in relation to children.

Option 3b

• Implement the two licence system of a premises and a personal licence without the additional supervision and compliance provisions. In particular, the engagement of new Licensing Standards Officers.

Option 4

• Impose a moratorium on all new licences, maintain the present statutory opening hours and introduce a system of three licences categorised as Off-sales, On-sales and Entertainment.

(b) Summary of option assessments

15. Following a full public consultation, Option 3a was judged by Scottish Ministers to be most beneficial overall and it forms the basis of the Licensing Bill. The assessment of the Options is as follows.

Option 1

16. After nearly thirty years in operation the present system lacked the flexibility or means to deal with the changes in how we choose to consume alcohol or the problems these changes have engendered. It has been unable to take account of health and public order issues relating to misuse of alcohol. Neither does it provide an adequate means for controlling undesirable and irresponsible behaviour on the part of a minority of licensees. Without change, the controls relating to the purchase and consumption of alcohol by minors would remain inadequate. Communities would continue to feel divorced from the licensing process and powerless to influence its decisions. The types of licence available and the statutory hours of opening bear little relevance to how the market is presently operating or is likely to develop. However, if this option was adopted there would be status quo and therefore familiarity for the licensed trade, local government and the police and avoidance of the upheaval associated with the transition to any new arrangements.

Option 2

17. Another option was to replace Licensing Boards with a more representative tribunal composed of a range of bodies or organisations which have an interest in the operation of licensing law. This would include representatives from the licensed trade, local residents' groups, the police and public health bodies. Difficulties would however arise in establishing a representative body. In particular, it may be difficult to determine its membership with any certainty since bodies who were initially omitted may continue to press for representation. It is possible that the actual representatives from constituent bodies might themselves be replaced by others from time to time, adversely prejudicing the continuity of decision-making. Such a tribunal would also run the risk of dividing into competing sectional interests.

18. Licensing was previously carried out by licensing courts before the present legislation. The arguments for change at that time, that licensing is local in nature and a process carried out in the interests of the community and requires a body answerable to the electorate, still stand. Continuing to have local Licensing Boards which are supported by local authorities would prevent the costs of transferring licensing back to a busy court system and enable the new regime to be developed using established experience and expertise. By maintaining the role of local authority councillors, the licensing system remains accessible and democratically accountable to the local electorate who are directly affected by the decisions.

Option 3a

19. Option 3a corresponds with the proposal in the Licensing Bill. The present system of seven licences and registration for members clubs, renewable every three years, has been regarded as unhelpful and confusing. Replacing this with a single premises licence (with an operating plan) which would remain in force indefinitely would introduce much needed flexibility and remove the need for the licence holder to seek renewals and annual extensions to opening hours. It would allow communities to know exactly what will be provided on the premises and enable the Board to more effectively monitor compliance through the use of a Licensing Standards Officer. Businesses could apply for a licence tailored to their specific needs. The personal licence ensures that those who supervise the sale of alcohol have all been trained to a suitable standard and again gives Boards greater but also more measured supervision.

Option 3b

20. Without the proposed Licensing Standards Officers it would be difficult for the system to be effectively monitored, there would be no capacity for intervention through mediation between the public and the licence holder, or for quicker reporting of breaches of licence conditions to the Board. In addition, removal of Licensing Standards Officers would remove a key route for information and guidance to be given to licence holders and prospective licence holders.

Option 4

21. A moratorium on new licences would act as a brake on the introduction of new venues into the market. If the market place is crowded, then providers may resort to irresponsible promotions to maintain their profitability. The introduction of a moratorium would prevent such a situation arising. However, it would not solve the problem in areas where the market may be regarded as already overcrowded both in relation to off-sales and on-sales and would not allow development in areas not presently overprovided for. A moratorium is also likely to lead to an artificial value for those places already holding a licence, imposing a greater cost on those wishing to enter the market place. If no new licences were forthcoming this could encourage those places already holding a licence to apply to enlarge their premises leading to the rise of more high volume vertical drinking establishments compared to smaller bars. A pro-active overprovision assessment by Licensing Boards would enable more focused action to be taken in specific areas where overprovision was causing local problems.

22. The division of licences into three categories (on sales, off sales and entertainment) would be simpler than the seven categories presently in operation. The maintenance of set hours to these categories would provide a uniform approach for all licensed premises to follow. However, this does not solve the definitional problems. There would still be great variation within the three categories with, for example, an on-sales licence being applicable for a café, a public house and a hotel. It also fails to address the growth in hybrid premises, which can be part restaurant, part nightclub, and part bar and have become a feature of the market. In addition, a system of statutory hours would have to be accompanied by the retention of the system of allowing 'extensions' to those hours on application. This system is discredited and needs to be replaced.

23. Maintaining set hours for three licences would curtail pubs from operating in the late night market against nightclubs (an entertainment licence would allow later opening). However, it is not a function of the licensing system to maintain artificial distinctions in the market. The night economy, which has helped in the rejuvenation of many town and city centres, already faces problems in attracting a cross section of society and is becoming the preserve of the young leading to greater competition for a smaller market and, inevitably, encouraging promotions which fuel binge drinking. Although the new system could go hand in hand with a wider range of premises operating at night, it is also specifically designed to ban irresponsible promotions.

IV Benefits

24. Broadly, the measures in the Bill should produce the following beneficial and measurable outputs and anticipated outcomes:

• reductions in reports of drink-related disorder and in arrests for related offences; reductions in binge drinking and related drunkenness on the streets;
• increased competition in the late night economy;
• a decrease in levels of underage drinking for 11 - 15 year olds by ending the exempted places where the purchase and consumption of alcohol by young people is presently permitted;
• an increase in the number of foreign visitors and families using licensed premises;
• a reduction in legal costs incurred by individual businesses related to applications for licence renewals and extensions;
• a reduction in the administrative costs associated with processing licence applications.

25. The Licensing Bill should also provide the following benefits for the important stakeholders described below:

Residents and the local community

• greater clarity and transparency on becoming involved and on the operating conditions of individual premises;
• more targeted protection for the young and vulnerable;
• reduced underage drinking and associated disturbance;
• more power to a wider range of people to make views known on new applications and where problems arise on existing licences;
• more scope for intermediate sanctions to tackle problem premises, including mediation with community;
• better planned and more attractive town and city centres;
• benefits of an improved tourist economy, including local investment and employment;

Consumers

• greater diversity and choice within the late night economy providing wider attractions for wider age group;
• premises opening late operating to a high general standard, improving public safety;
• more facilities for family entertainment;
• greater clarity on laws for parents and accompanying children;
• better facilities and attractions for people on holiday;
• a safer environment when leaving licensed premises;
• opportunity to purchase off sales at more flexible times.

Retail, hospitality and leisure industries

• reduced bureaucracy and reduction in numbers of applications that have to be made;
• reduced hearings, time away from business and associated legal costs;
• greater clarity and transparency on what's legal;
• more assured professional standards;
• improved standardisation and consistency across Licensing Board areas;
• greater flexibility to deliver what the consumer wants;
• reduction in losses arising from trade in smuggled goods;
• fair and consistent fee setting;

Local Government

• better control of the licensing of premises selling alcohol though operating plans and licence conditions;
• greater scope to integrate licensing policies with strategies on crime prevention, public protection, planning, transport and culture;
• greater scope to meet the concerns of local communities;
• safer and more attractive town and city centres, and ability to attract more tourist income;

The Police

• powers to close premises down instantly for up to 24 hours for public safety reasons;
• greater leverage to bring problem premises into line through graduated system of sanctions;
• power to seek a review at any time of any licence on grounds of the need to prevent crime and disorder and to seek changes to licence conditions or its revocation.

V Costs

Background to the businesses affected

26. There is no individual business which can properly be described as typical of the retail, hospitality and leisure sectors affected because the new licensing regime would cover a wide-range of business outlets.

27. The licensed trade can be divided into a number of sectors. The simplest divide is between those who sell alcohol to be consumed on the premises (on-sale) and those who sell for consumption elsewhere (off-sale). Within this division there are a diverse number of sectors. By way of example on-sales include the independent public house and national chains of varying sizes which may be run by a manager and conform to a certain brand. Other public houses are owned by property companies known as pubcos who then lease the pub to a tenant. There are also Hotels, café's, restaurants which may be independent concerns or again part of national chains. Members clubs who may be a single institution or affiliated to a national association. Other leisure and entertainment outlets are such as cinema's, bowling alleys, theatres, night clubs and disco's all of who sell alcohol to drink on their premises although this may not be their main activity. Off-sales also contain a number of different constituents, from wholesalers, dedicated off-licences, supermarkets, convenience stores, to tourist shops selling miniatures and on-sale premises which also provide an off-sale service.

28. In Scotland, there are currently 17,048 liquor licences in force. Over a third of these licences are for off-sales premises and a further 30 per cent for public houses. The distribution of licences by type of premises varies across the country. For example, over 40 per cent of licences in Glasgow are held by public houses, while in the more rural areas of the island councils and Highland, the proportion held by public houses is between 12 and 17 per cent. The number of off-sales licences rose from 4,899 in 1980 to 6,104 in 2003, an increase of 25 per cent. The great majority of off-sales licences are accounted for by shops (75 per cent) and supermarkets (14 per cent) although such information was not available for 31% of all off-sales licences.

Table 1: Liquor Licences including registered clubs in force in Scotland at 31 December 2003

Source, Scottish Executive Statistical Bulletin, Liquor Licensing in Scotland, 1999-2003

Table 2: Liquor licences in force at 31 December 2003 in Scotland, by council area and type of premises

Source, Scottish Executive Statistical Bulletin, Liquor Licensing in Scotland, 1999-2003

Table 3: Off-sales liquor licences in force at 31 December 2003 in Scotland, by council area and type of premises

Source, Scottish Executive Statistical Bulletin, Liquor Licensing in Scotland, 1999-2003

29. Licensed businesses and clubs enjoy 'core' permitted hours within which they trade. With the exception of off-sales, these are between 11 am and 11 pm (Monday to Saturday) and from 12.30 pm to 2.30 pm and 6.30 pm to 11 pm on a Sunday. Off-sales permitted hours are 8 am to 10 pm except Sunday which is 12.30 pm to 10 pm. The present legislation includes a provision for the extension of trading hours except for off-sales. These extensions were originally intended to happen infrequently, for example in certain holiday resorts at peak holiday periods. The reality today, is that regular and lengthy extensions to statutory permitted hours are so widespread that the whole concept of permitted hours has very largely been eroded. The table below shows that the majority of public houses, hotels and registered clubs apply yearly at a cost of £86 for a regular extension certificate.

Table 4: Number of certain licensed premises in Scotland with regular extensions at 31 December 2003

Source, Scottish Executive Statistical Bulletin, Liquor Licensing in Scotland, 1999-2003

30. For many areas, this has produced trading times which look rather different to the statutory permitted opening hours. Latest closing times tend to be as follows:-

31. During 2003, Licensing Boards considered a total of 806 new applications. Of these 754 applications were granted. Three per cent of applications for on-sales were refused, compared with 11 per cent of those for off-sales.

32. The licences and certificates so far discussed concern premises where alcohol is sold or supplied on a regular basis. Licence holders may also apply for 'occasional licences' to sell alcohol outwith their licensed premises for special events. In addition, a number of voluntary organisations each year seek "occasional permissions" from Licensing Boards for a fee of £10 to sell alcohol temporarily at premises which are normally unlicensed. These organisations include, for example, charities, schools and local community groups.

33. The "beer and pub" sector including pubs, hotels and clubs in Scotland is an important employer. It is estimated that some 127,000 people are employed, which is ahead of the financial, agriculture and construction sectors. The off-sales retail sector also employs very large numbers but not all of these staff (for example, in a supermarket) are engaged in the sale of alcohol. In Scotland, the last 30 years has seen the off sales share of the overall alcohol market move from around 9.6 per cent to 33 per cent. The UK spends over £38 billion per annum on alcohol that generates over £13 billion in Duty and VAT revenue.

34. Scotland benefits not only from the opportunities created in the retail sector of the hospitality industry, but also from the employment opportunities and economic benefits of brewing and distilling. Around 41,000 Scottish jobs depended on the production of Scotch Whisky, accounting for almost 2% of all jobs in Scotland. It is Scotland's second largest export earning industry and whisky exports have totalled £2 billion for each of the past seven years. Over 70% of the UK's gin and vodka is now produced in Scotland. One third of the UK spirits market is gin and vodka which is now the largest sector by volume. Over 70% of UK produced gin and 30% of vodka is exported to over 200 countries. The value of exports of Scottish produced gin and vodka is £140M.

Current compliance cost

35. Alcohol licence fees are set centrally by Scottish Ministers. An alcohol licence, valid for three years, now costs £172 with renewal for a further three years being £86. Associated legal fees can average between £500 (uncontested) and £5000 (contested). The costs arising from a contested case will vary depending on its length and complexity and not all applicants will seek the support of a solicitor in front of the Licensing Board.

36. There are, however, other permissions that may have to be sought during that 3 year period which generally involve some variation, either temporary or permanent, of the licence. Some may be needed several times each year while others may be required rarely. These range in costs from £86 to £17. The most frequent will be the "regular extension of permitted hours". As previously stated, nearly all public houses, hotels and registered clubs apply for such extensions. The extension certificate is renewable every year and costs £86. The other certificate most likely to be sought will be the "children's certificate", incurring a fee of £86. It runs concurrently with the liquor licence for three years. The conditions attached to the grant of a children's certificate by Licensing Boards do, however, produce a range of hidden compliance costs. Examples we are aware of include specialist children's menus, low level urinals and play areas. As a result, few children's certificates are issued. Another minor cost affects those licensed premises which are part of national chains and have a frequent turnover in managers. They are required to notify the Licensing Board to substitute in the licence the name of the new employee, attracting a charge of £17. For a public house or Off-licence belonging to a major chain, such changes could on average arise up to four times over a period of ten years.

37. Over a ten year period the cost in terms of basic fees for any licensed premises would be £344. An average public house over a ten year period with a regular extension and children's certificate, including associated legal fees, could be facing a cost of between £6,548 and £51,548 depending on whether any decision made by the Licensing Board was contested. For a major operator owning 100 pubs, the figures would be between £660,000 and £1.5 million. These cost estimates do not include the unquantifiable costs of time spent by licensees and managers attending Licensing Board hearings in respect of applications, renewals and extensions. These costs are unquantifiable because Board practice varies, with some requiring attendance by the applicant and others accepting applications in certain circumstances.

38. Details of current alcohol licensing fees are given in Table 5 below.

39. Registered clubs are charged a fee of £170 when they register at the Sheriff's Court and registration lasts for 3 years. This can be renewed at a cost of £50 for further 3 year periods. Should a registered club wish to extend the permitted hours when their bar can serve alcohol they must apply to their local Licensing Board for a regular extension, for which a fee of £86 will be charged annually.

40. Pleasure boats providing alcohol to passengers on inland or coastal waters while travelling within Scotland are currently exempt from alcohol licensing. Although they may operate as floating pubs or nightclubs, they incur no costs whatsoever arising from alcohol licensing.

41. Wholesalers are currently exempt from alcohol licensing as long as they sell 9 litres of wine or spirits or 20 litres of beer in a single transaction. Those selling smaller quantities are subject to the costs of the licensing system.

42. The Licensing regime is a function carried out at local authority level by Licensing Boards. Due to geographical differences in the concentration and spread of licensed premises, Licensing Boards do not deal with a uniform number of applications. Licensing Boards currently process applications during statutory quarterly meetings and in the year up to 31 December 2003, dealt with approximately 15,921 applications and requests for extensions to licensing hours. Indications from some Licensing Boards are that the present fee levels do not adequately cover costs. We have estimated from figures supplied by a sample of Boards that, on average, 42% of costs may not be met by the direct payment of the current level of fees. The tables below show the growth of liquor licences in force in Scotland since 1945 and the corresponding fee increases over a similar period. From 1953 to 1977 the fee stayed the same until the Licensing (Scotland) Act 1976 came into force and licensing was transferred to local authorities. Since 1977, in consultation with Cosla and the licensed trade, the Executive has increased fees by the cost of inflation only.

Table 6: Number of liquor licences in force in Scotland

Table 7: Fee increases since 1953

43. The adverse effects of alcohol cost the Criminal Justice system and emergency Services an estimated £270 million. (' Cost to Society of Alcohol Misuse in Scotland' Health Economics Unit, Scottish Executive July 2004) The police play the major role in enforcing alcohol licensing law. However, it is difficult to calculate police costs because they are indivisible from their general role of policing the community, particularly at night. Associated police costs mainly arise from the policing of the streets after customers leave the controlled environment of licensed premises. Large numbers of people, who may be intoxicated, queuing for fast food and for transport in congested circumstances can lead to friction and dispute. This puts the police under serious resource pressures. The police also incur costs associated with Licensing Board and court attendance in respect of applications, renewals and extensions of alcohol licences and of course, in respect of related prosecutions. However, it must be recognised that the business sectors affected contribute to the costs of police enforcement already. Duty and VAT of sales on alcohol in the UK exceed £13 billion annually. In addition, other taxes and business rates contribute towards policing costs, as does the income tax of the customers of licensed premises, who expect to be kept safe when visiting town and city centres in their leisure time.

44. There are also costs to society generally from the failure of the existing licensing regime to achieve its original purpose and aim. The problems of disorder associated with some licensed premises produces costs for the National Health Service, particularly in respect of the pressure on Accident and Emergency Departments. The annual cost of alcohol misuse for the NHS in Scotland is estimated at £110.5 million with £10.5 million of this being attributed to attendances at A&E. (' Cost to Society of Alcohol Misuse in Scotland' Health Economics Unit, Scottish Executive July 2004.)

45. The failure of alcohol licensing laws to do more to prevent the sale to and consumption by minors of alcohol has a wide-ranging impact. Underage purchase and consumption of alcohol has been shown to do long term damage in terms of educational attainment, poor health, job prospects, and the propensity to commit crime.

46. Statistics are available through the Scottish Schools and Adolescent Lifestyle and Substance Use Survey (SALSUS) National Report, produced for the Scottish Executive by the University of Edinburgh. This report, published in November 2003, looks at smoking, drinking and drug use among 13 and 15 year olds in Scotland in 2002 and shows that:

• 88% of 15 year olds and 69% of 13 year olds have had a "proper alcoholic drink";
• there has been a 60% increase in reported drinking among 15 year olds and more than a 100% rise in drinking among 13 year olds over the last 12 years;
• 44% of 15 year olds and 24% of 13 year olds reported drinking once a week, or more often;
• although it is illegal to sell alcohol to under-18s (and for under-18s to buy or attempt to buy alcohol), shops and off-licences were the most frequently reported source of alcohol for 15 year olds. 31% reported buying alcohol from shops and supermarkets and 23% reported buying from off-licences. It is worth noting, however, that 30% reported that they never buy alcohol;
• 35% of 15 year olds reported that their most common location of drinking was outdoors (street, park, or other outdoor area).

47. The SALSUS National Report also obtained information for the first time on both drunkenness and the harmful effects of drinking alcohol (vomiting, fighting, injury, absence from school, use of drugs, unprotected sex). Over 75% of 15 year olds and over 50% of 13 year olds reported having been drunk at least once in the previous 30 days. 39% of 15 year olds and 60% of 13 year olds had not experienced any of the harmful effects listed. However, 21% of 15 year olds and 9% of 13 year olds had experienced 3 or more effects.

48. No sensible estimate can be made of the income the industry derives from the unlawful sale of alcohol to minors. Existing penalties on conviction are a fine up to a level 3 (£1,000); and the Licensing Board has the power to revoke the Licence.

Estimated compliance costs for a typical business under the new regime

49. Under the new system we would seek to introduce 2 types of licence: the premises licence and the personal licence. The former would be held by the owner or manager of the premises and the latter could be held either by an owner or by employees such as managers and supervisors. The main costs of running the system would be recouped through the premises licence fee.

50. Fees for a premises licence would need to increase to a more sustainable level to support the costs of the new system. To ensure that the system can be self financing, the Scottish Executive is commissioning a fee review. The review's remit would encompass quantifying the administrative costs of the liquor licensing regime for local authorities, considering the impact on the licensed trade of increased fees, and devising a model which would enable the regime to be adequately funded through its fee collection. We expect the fee review to indicate what fee levels should be and to suggest a model based on graduated fees which will take into account the need to avoid unduly penalising small businesses. A 'retention fee' charged annually is also likely to be a necessary feature since premises licences under the new system would be open ended. This would help to ensure that there is a continuing income stream.

51. The following model is therefore likely:

52. All those who presently retail alcohol, whether by on or off-sales, would need to obtain a premises licence to allow them to continue to sell alcohol in future. In addition, the manager of the premises would be expected to hold a personal licence. One designated personal licence holder per premises would be required but some premises may decide to employ more than one personal licence holder.

Premises Licence

53. The premises licence would cover any premises for the sale of alcohol. No renewals would be involved and if an operating plan was well prepared, only very rare variations should be necessary. The premises licence fee would need to cover administration and a hearing as well as inspection costs and some enforcement costs. As the premises licence would be valid for the life of the business, an annual charge would be needed to maintain a revenue stream, to cover continuing inspection and enforcement. We think that these charges should also be graduated. Where a business changes hands due to death, bankruptcy, incapacity or sale, an application for transfer would be required to the Licensing Board, with a set fee for the registration. Similarly, notification of a new designated personal licence holder would attract an expected minimum set fee. Where a licence variation is required, a set fee is likely to be charged. A larger fee would be applicable to 'minor' variations, such as a change of name or address. 'Major' variations would have a higher fee to carry the costs of advertising the application, administration and a hearing. Legal costs are likely to be between nothing (uncontested) and £5,000 (contested) in the first year, but costs should be relatively small in subsequent years.

54. Some businesses may face additional costs in implementing standard national licence conditions or further conditions placed on them by the Licensing Board. For example, the pool of conditions proposed for on-sales premises opening after midnight suggests that the installation of CCTV may be required for some premises. The British Entertainment and Dance Association (BEDA) estimates that the average fitting cost for a nightclub CCTV system would be around £5000 per premises. However, the use of such conditions was a regular feature of the previous system. Such requirements are expected to be necessary for some premises catering for a late night market, particularly in city centres, where public safety is paramount.

55. In restricting the use of alcohol promotions to curb binge drinking, some on-sales businesses may face a change in costs related to how they market or promote themselves. They may also in some cases face a reduction in profits due to the removal of happy hours. This may apply to producers as well as retailers. We are unable to quantify these costs. However we are targeting those promotions that we believe encourage binge drinking, increasing the medical and public order problems faced by the police and NHS. Reducing the occurrence of binge drinking should enable the emergency services to redirect their resources. It would still be possible for on sales to run with lower prices provided these are maintained for a minimum of 48 hours. This would still allow, for example, lower prices to be charged mid week when premises are traditionally quieter. In other words, although those promotions that encourage binge drinking would be banned, other promotional activities may continue.

Personal Licence

56. Personal licence applications are likely to be subject to a fixed fee. No renewals would be required within a period of ten years. Personal licence holders would be required to undertake accredited training before application and refresher training every 5 years. Training will be devised in conjunction with the National Licensing Forum but is expected to be modelled on existing training such as Servewise Plus at a cost of around £85 per person or the British Institute of Innkeeping's Scottish Licensee Course at around £150 per person.

57. With 17,048 liquor licences in operation at present, as a minimum the same number of applicants would require Personal licences together with a majority of existing registered clubs. The number of other people who might want to obtain a personal licence is uncertain. Some may choose to obtain such a licence merely to include it on their curriculum vitae for career purposes. However, around 800 new alcohol licences are granted each year and this provides a useful guide to the throughput over time.

58. Registered Clubs would come into the new licensing regime, requiring them to comply with the requirement for both premises and personal licences. However very small clubs with limited resources would not be required to have a designated personal licence holder. The level of exemption to the personal licence will be set out in later regulations following the fee review but could, for example, be based on bar turnover.

Training

59. All permanent staff serving alcohol would require training and this would entail some additional expenditure for business. Training will be discussed with the National Licensing Forum and nationally accredited. It is our intention that employers would have 2 options:

For many in the trade there would be a need to pay their staff for the time spent attending the course and they may also have to pay for someone to cover the shift. However, as training for all servers of alcohol becomes the norm, more and more staff would be going to employers having already completed their training. Exemptions will be allowed for casual staff who have worked in the trade for less than 4 months.

Other Costs

60. Wholesalers would no longer be able to sell to the public unless they obtain a personal and premises licence in line with other retailers. Previously if wholesalers sold more than 12 bottles in a single transaction, they were not obliged to obtain a licence. Wholesalers selling exclusively to the trade would continue to benefit from a licence exemption but this would not be the case if they wished to sell to the public.

61. Passenger Ships or Boats who ply their trade between ports in Scotland or on Scotland's lochs and waterways will be obliged to obtain a premises licence and to have a personal licence holder on board at all times when the vessel is serving alcohol for consumption on board. Previously such craft have been excluded from the licensing regime if they only served alcohol when the craft had left its berth. The Boat's operators would therefore be faced with the additional costs of obtaining a premises licence and in ensuring a member of the crew held a personal licence. Unlike other licensed premises, which do not require the designated personal licence holder to always be on the premises, passenger ships or boats who wish to sell alcohol will always be required to carry a qualified member of staff. This may entail additional costs for some operators as they may need to ensure each vessel has two crew members holding personal licences to cover such situations as holidays and sickness. According to figures provided by the Maritime and Coastguard Agency, there are around 130 passenger ships in Scotland ranging from the Northlink ships, through CalMac to boats on the Forth and Clyde Canal.

62. Petrol station forecourt shops which are not on the motorway will in future be unable to obtain a premises licence. The exception to this will be where the attached store supplies a necessary amenity to the community which otherwise would not exist. There are at present over 165 petrol station forecourt shops which hold an off-sales licence. A number of these have been granted by Licensing Boards on the basis that they provide an amenity in their community area.

Costs associated with the Consequences of Disorder

63. It has been a requirement of licensing legislation that licensees should not allow their premises to fall into disorder. It is also an existing offence to allow drunkenness on licensed premises, and it is unlawful to sell alcohol to a person who is drunk. Licensees who allow this will be failing to comply with the terms, restrictions and conditions of their licences and with licensing law generally. The Bill would introduce new police powers to close down any disorderly premises instantly for up to 24 hours. In most cases, early closure of premises by sensible licensees would be taken on a voluntary basis in co-operation with the police. Where the proposed police powers were used, the business affected would incur commercial losses relative to the period of closure. This could be less than an hour or take up much of the next day's opening hours in extreme cases. Accordingly, potential losses could range from £100 (closure for less than one hour in a small public house) to £50,000 (closure of a 2,000 capacity "superpub" for a period of 24 hours at a weekend). The licence holder may also incur legal costs if he is required to appear before the Licensing Board. Additional legal costs could arise out of criminal proceedings, which might be taken against the licence holder. In extreme cases, where the licensee is found by the Licensing Board to have acted against the licensing objectives, the licence can be revoked, which can involve the loss of livelihood.

64. The new regime would provide for immediate closure where the Licensing Board decides that licence suspension or revocation is the correct sanction. The immediate suspension of a licence would have an obvious impact on a public house or a dedicated off-sales where the majority of their trade concerned the sale of alcohol. Other businesses where the sale of alcohol is not the main concern, however, would also face an economic cost. One example presented to the Executive concerned a chain of licensed convenience stores whose licences were not renewed by the Licensing Board for a four week period. The shops experienced a 40 % drop in turnover during this period, 30% was attributable to alcohol sales the other 10% accounted for lost sales in non alcohol commodities. This reduction in turnover resulted in the removal of the lottery terminal and it took another 3 weeks before the businesses returned to their normal turnover following a local marketing campaign.

Estimated Cost Savings

Business

65. Savings would be made on the following (although offset against a higher initial fee and annual fee under the new system):

• removal of licence renewals every 3 years;
• removal of need to obtain a regular annual extension to hours; and
• removal of need to obtain a children's certificate.

66. Licence applicants would, under the new system, obtain access to a wider range of information on which to base their application. Licensing Boards would be required to publish policy statements and overprovision assessments. The former would provide a range of information about the Board's approach to its duties under the Licensing system. The latter would provide information on areas within which there would be a presumption that no new licences, or no new licences covering certain operating activities, would be granted. Advice would also be available from the new Licensing Standards Officers, part of whose role would be to provide information and guidance on the new system. The early availability of this information should enable businesses to prepare applications in line with Board policy which are therefore more likely to be approved by the Board. Where a licence holder wished to modify his business operation he would apply for a minor or major variation of his licence. Lower fees are likely to be charged for a minor variation, which would be dealt with under delegated powers arrangements. However, in general, the requirement for applicants to submit comprehensive operating plans with their initial application should reduce the need for future licence variations.

Local communities

67. Communities throughout Scotland have a real concern that some licensed premises can affect the quality of life in their neighbourhood. The new regime would ensure that people had a real voice in the decisions affecting their community. Local Licensing Forums, which would play a key role in keeping Licensing Boards informed of the effects of their policies, would include representation from the community. A wider range of people will be able to object or comment on a licensing application. However, it is envisaged that the Licensing Standards Officers, employed to supervise and monitor the system's operation, would provide a route for mediation between local communities and licence holders, addressing any local difficulties directly and working to resolve them. The result of this involvement should be a reduced need for formal complaints and therefore associated time (for communities) and costs (for business).

Police

68. If the overall aims of the new system to assist in reducing binge drinking and under age drinking are met, then the associated social consequences of antisocial behaviour, vandalism and crime might also be expected to reduce over time. Ultimately this system should help to reduce the pressure on police time caused by this behaviour which has come to blight the evening economies of towns and cities, especially at the weekend.

The National Health Service

69. Alcohol misuse attendances at A&E cost £10.5 million for the year 2002/03. This factor is one of the reasons that the Scottish Executive wishes to see a licensing system in place that can support the wider action the Health Department is taking to deal with the consequences of misuse of alcohol. Ultimately, the proposed changes to licensing, particularly the planned action to tackle irresponsible drinks promotions, should lead to a reduced cost on the NHS.

VI Equity & Fairness

70. How the different options could affect key groups is set out below.

Option 1

71. While this would maintain the present status quo with regards to costs for the trade, Licensing Boards ability to control rogue operators would not increase. Communities would not gain a greater involvement and issues such as underage drinking, binge drinking and the attached antisocial behaviour could not be tackled as effectively. Associated costs to the Police, Criminal Justice system and NHS would not be reduced.

Option 2

72. Option 2 could not guarantee proper representation of all stakeholders. It would lead to the loss of the democratic accountability which is afforded by local councillors as Licensing Board members. This would be to the detriment of local communities.

Option 3

73. Option 3a is likely to increase fees for the trade, due to the requirements for training and the funding of the Licensing Standards Officers. Option 3b, which would not introduce the additional supervision and compliance provisions, would benefit rogue traders and lessen the effectiveness of Boards in tackling those who failed to take proper responsibility for the way in which alcohol is sold. It would also affect communities, as Licensing Boards ability to deal with unsuitable licence holders would not increase and there would be no mediation route available. The latter could in fact increase costs for business.

Option 4

74. A moratorium would severely restrict new entrants to the market and increase costs. Certain sectors of the trade would be restricted in their business development by fixed licence categories. Set hours could restrict consumer choice and areas of growth with regard to tourism.

VII Small and Micro Business Test

75. Organisations who represent small businesses within the Licensed trade have been represented on all the working groups. The Scottish Licensed Trade Association (SLTA) was represented on the Nicholson Committee. The SLTA and the Scottish Grocers Federation were both members of the Working Group on Off-sales in the Community and on the Expert Working Group which has continued to inform the development of policy. Both organisations submitted representations to the different consultations.

76. Further consultation with these and other organisations will take place as regulations are developed, ensuring the views of the small Business sector are taken into account. We set out our views below on how the different options would affect small businesses.

Option 1

77. Business generally would continue to need to apply for a licence every 3 years and an annual extension to their hours. This represents bureaucracy for small businesses. In addition, many off sales are small businesses and would have no opportunity for any flexibility in the current standard opening hours. Smaller local pubs would have no opportunity to increase profit share by opening later in the evening where there is a consumer demand. Licensing Boards would not gain a graduated sanctions system, leaving suspension and revocation of the licence Boards only recourse.

Option 2

78. Option 2 could enable small businesses to have representation on the Licensing Tribunal. However, there would be no guarantee that all small business sectors would receive representation or how much influence they would be able to exercise.

Option 3

79. Option 3a would entail more initial costs due to the requirement for personal licence holders and staff to undertake training. Although over time there will be a greater pool of applicants who have undertaken such training, the provision of training could place a burden on small business compared to larger chains who may have internal training programmes in place. However, the new one-off application for a premises licence would be a reduction in costs and paperwork for small businesses and a removal of the risks of forgetting to renew the licence i.e. being unable to trade until the next quarterly meeting of the Board. Option 3a offers a graduated penalty scheme, enabling Licensing Boards to place more appropriate penalties on a licence holder than the present options of do nothing or revoke the licence. Although a Board may also pursue a penalty of Immediate closure, this would only come into play after the licensee had been given an opportunity to remedy an emerging problem.

80. While Option 3b would lower the costs, as there would be no need to support the cost of a licensing standards officer. However, this would remove the mediation/guidance role these officers would offer. This is likely to lead to a greater cost for businesses in the longer term if problems cannot be remedied at a local level.

Option 4

81. This option would prevent small business from entering the market unless they purchased another holders licence. It would also restrict the ability to innovate, for example in developing a hybrid premises. The flexibility offered through the new policy on opening hours would not be available.

VIII "Test Run" of Business Forms

82. At present local Licensing Boards require licensing applications to be made on each Board's specific licensing forms. The Bill would bring in a consistent format to be followed across Scotland, which would eventually be available on line. The format for the forms will be set out in Ministerial guidance or regulations following advice from Licensing Boards, the licensed trade and the National Licensing Forum. The Forum is likely to include some representatives from the different sections of the licensed trade together with representatives from Licensing Boards. The Executive will also undertake the production and publication of two leaflets:

• a basic guide to liquor licensing containing relevant information for both applicants and objectors;
• a guide for premises and personal licence holders.

83. We intend to discuss further with Licensing Boards whether a pilot run could be made of any proposed forms with sectors of the licensed trade. We think this would be beneficial.

IX Competition Assessment

The Competition Filter Test

84. We considered the effect of the Licensing (Scotland) Bill on the market against the following nine questions which form the competition filter test. Each 'yes' answer indicates a possible competition concern. In the rest of this section we provide an assessment of the competition impact for each option.

85. The competition impacts for each option are:

Option 1

86. Maintaining the present position would not increase the availability of suitable licensed premises for families whether permitted by independent pubs or national chains. This would continue to be perceived as over regulated, a position reinforced by the small number of applications for Children's certificates. Nor would it encourage the development of the night time economy into new areas including, e.g. promoting a wider range of services for other age groups. However, competition for the nightclub sector would not increase and pubs and nightclubs would retain a separate market share.

Option 2

87. There is no specific impact on competition of following option 2. However, there could be a risk of certain stakeholder group controlling the decision making process.

Option 3

88. Option 3a is the option corresponding to the present Licensing Bill. It should increase competition in two areas. Firstly, within the night time economy, where the effects of current licensing law have been to create a late night market dominated by discotheques and nightclubs catering mainly for people aged between 18 and 30. The Bill should provide a level playing field for all styles of venue within the hospitality, entertainment and leisure sectors of industry. For example, public houses, bars and restaurants will be free to compete in the post-midnight market according to the suitability of the area and the needs of consumers. It should be possible to open later to provide a venue where people of any age can drink alcohol or eat without the need for music and dancing. High volume vertical drinking establishments are likely to compete more directly with the traditional nightclubs.

89. Secondly, within the area of family trade, the hospitality, leisure, and broader domestic tourism market, are inhibited by the current licensing laws. Due to the restrictive nature of the alcohol laws with regard to children, business has frequently been unable to compete for family trade. This has either fallen to businesses which do not supply alcohol or has become an opportunity missed altogether. For example, when families visit the islands in the summer, many families disembarking from the ferry cannot obtain an evening meal. This is because a meal is most likely to be available in the bar of a public house which children may not enter after 8pm. These restrictions undermine efforts by the tourism industry and are confusing and unattractive to visitors to this country. The Bill, whilst ensuring children are protected from environments which are wholly unsuitable, will enable Boards to support on-sale businesses which wish to encourage an environment where families can socialise safely together. Many types of business, national or independent, may wish to diversify into this area.

90. The Bill would also affect how some on-sales businesses compete in the market, due to the provisions to curtail irresponsible promotions. These provisions do not prevent firms from using promotions, they will however stop the use of promotions which encourage high volume drinking within short timescales. Such promotions are a factor in binge drinking with its associated public order problems. The resulting crime and antisocial behaviour discourages many customers who do not fall within the young adult market (and some who do) from partaking in the night time economy.

91. The policy on irresponsible promotions set out in the Bill is twofold - price restrictions are impressed by requiring licensees to maintain their pricelist for a minimum 48 hour period and certain individual promotions are banned. Whilst this represents a significant restriction of competition, we believe it is justified as a measure to reduce binge drinking. Outlining this policy clearly in legislation also ensures that there is no room for doubt over the powers Licensing Boards have to impose these controls. This policy is, for the present, directed only at the on-sale sector.

92. It could be argued that this policy could therefore improve the competitiveness of off-sales, who can still offer promotions, against potentially higher prices in on-sales. It could also be argued that larger on-sales companies, such as national chains, may be better placed to offer 48-hour price reductions than smaller individually run or managed premises. Conversely though some national chains who rely on promotions may require to make more radical changes across all their outlets with no differential benefit compared to smaller businesses.

93. While option 3b offers the same market advantages as 3a it would be less effective in tackling binge-drinking and antisocial behaviour problems. The continuation of these problems will as noted above prevent a broadening of appeal (and therefore of competition) within the nigh time economy.

Option 4

94. Access into the market would be severely restricted by a moratorium on new licences. Such restricted access could arise firstly due to the unavailability of licenses and secondly through increased costs needed to purchase an existing licence. Such a system would impose an artificial value on existing licences, especially those in busy urban areas. Such restricted access could prevent a convenience store establishing itself in a community where such amenities are seldom accessible. It could also prevent the development of areas which wish to attract more tourists.

95. It should be noted that a growth area of new licences, which is continuing to expand, is the refreshment licence and the restaurant licence. From 1980 to 2003 there was a 19-fold increase in the number of refreshment licences, mainly obtained by café type premises, from 34 to 642 and a 60 per cent increase in the number of restaurant licences from 921 to 1,474. A moratorium would prevent the growth of a sector which appears to be less encumbered by the problems of binge drinking and the attendant antisocial behaviour which can be associated with some high volume vertical drinking establishments.

96. Fixed hours and licence types also act as a brake in enabling sectors of the market to develop in response to consumer demand i.e. by developing innovative means of satisfying consumer demand.

X Enforcement and Sanctions

Enforcement

97. The new licensing regime would improve the position of the Police with regard to enforcement. The Police would remain responsible for acting against licence holders who commit criminal offences but would work in co-operation with Licensing Standards Officers. Police powers would be increased in the following areas:

• The Police would be able at any time to enter and inspect any premises in respect of which a premises licence is in force;

• A senior police officer would be able to order the immediate closure of any licensed premises where the Police believe that there is, or there is an imminent likelihood of disorder on or in the vicinity of the premises and that closure is necessary in the interests of public safety. The Closure Order takes effect for a period not exceeding 24 hours and may be extended for a further period of 24 hours.
• The Police would be able to request an order from the Licensing Board closing a premises for a period not exceeding 24 hours where disorder is expected and this may be extended for a further period of 24 hours.
• The Police will also be able to seek an order from the courts to prevent alcohol sales on certain train lines which are a persistent source of nuisance and disorder. This could relate to all trains running between specified towns between specified times. The order would remain in force until rescinded by the courts.

98. The new regime would give Licensing Boards a much more pro-active role than they had in the past. It is in the public interest that there should be a means, and a procedure, whereby the operation of a new licensing system can be regularly monitored, with Licensing Boards having power to take appropriate action in cases where licence conditions are not being properly observed. To achieve this it is necessary to have a means of monitoring personal and premises licence holders, and in particular premises managers, to ensure they are carrying out their duties in a responsible manner.

99. The new Licensing Standards Officer (LSO) will fulfil this role. Local authorities will have a duty to appoint and employ this officer, whose function will be to supervise and monitor the operation of the licensing system in a Board's area. The LSO's remit will be as follows:

• Guidance - Power to act as a source of advice and guidance for licence holders and for the community;
• Mediation - Power to mediate between communities and the trade or between any two parties where there is a need to resolve a local problem and develop a local solution;
• Complaints - Power to report complaints to the Board, recommending an oral hearing where mediation, guidance and support have failed to resolve a problem or where there has been a serious or continuing breach of a licence.

100. To enable them to carry out their role, these officers will have a statutory right of entry to all licensed premises. They would not replace the Police but would be expected to inform the Police of relevant offences and liaise with the Police and other relevant officials (such as environmental health and building control officers) to ensure that the licensing objectives are adhered to.

Sanctions

101. In line with the more pro-active role assigned to Licensing Boards and the employment of Licensing Standards Officers, the sanction options have been improved. At present the only option available to a Licensing Board are to suspend a licence for a period not exceeding one year or to revoke a licence. A suspension does not come into effect until all appeal mechanisms have been followed through. Licensing Boards needed more options than the current legislation provides. The present situation is to the detriment of everyone working within the licensing system both for licensees, who should be entitled to a warning in some circumstances and for communities, who have a right to expect that effective action is taken in response to the breach of a licence.

The Premises Licence

102. The sanctions structure proposed for Premises Licence holders would be as follows (not all stages would necessarily be followed in all cases):-

• mediation and guidance carried out by the Licensing Standards Officer;
• written warning from LSO;
• written warning from the Licensing Board. This sanction would carry an implicit warning that should the behaviour complained of be repeated, some more serious sanction could very well be applied;
• modify premises licence conditions, including opening hours;
• suspend premises licence for a defined period; and
• revoke the premises licence.

103. Where a sanction of closure for any period is imposed it would take immediate effect. The Licence holder would be able to apply for an interim suspension of the closure pending disposal of the appeal . We are discussing this procedure with the Sheriffs Principal and anticipate that this hearing would take place within 2 weeks. Suspension of a licence for any length of time could adversely affect a business especially a small one. However this decision would not be taken lightly by the Licensing Board. The new regime would require the Licensing Board to give reasons for the decision and act in a proportional manner. It would require Boards to follow procedures which should give licence holders the opportunity to remedy an emerging problem before suspension or revocation became an option.

104. Should a premises licence holder be convicted of a relevant offence, the Licensing Board could hold a hearing in order to review the premises licence. Relevant offences will be designated by Scottish Ministers in regulations. Should the Board consider it necessary for the promotion of the licensing objectives it would be able to impose any of the sanctions previously listed for a Board conducting a hearing.

The Personal Licence

105. Licensing Boards would be able to hold personal licence holders to account, in particular those designated as being in charge of operations in particular premises. These individuals must carry out their duties in a responsible manner. Should a personal licence holder be convicted of a relevant offence, the Licensing Board would hold a hearing in order to determine whether the personal licence should continue in force. Relevant offences will be designated by Scottish Ministers in regulations and will be a range of offences which will result in a licence review. Should the Board consider it necessary for the promotion of the licensing objectives it would be able to:

• revoke the licence; or
• suspend the licence for a period not exceeding six months.

106. Where a personal licence holder has not been convicted of a relevant offence but is found by the Licensing Board to have failed to carry out his duties in an acceptable manner consistent with the licensing objectives, the Board would be entitled to:

• revoke the licence;
• suspend of the licence for a period not exceeding six months;
• endorse the personal licence. This will be noted on the physical licence in the same way as a driving licence.

107. Any endorsement would be capable of being taken into account by the Licensing Board in the event of it having to consider any subsequent failure on the part of the licence holder. An endorsement would no longer be capable of being taken into account after the expiry of a period of 5 years. Should a personal licence holder gain 3 current endorsements, the Licensing Board would be required to hold a hearing. At the hearing, the Licensing Board may, if it considers it necessary suspend the licence for a period not exceeding 6 months or revoke the licence.

108. The legislation sets out a number of criminal offences which could be committed with regard to the sale of alcohol. However it would not impose criminal sanctions for non compliance with the licensing regime.

XI Monitoring and Review

109. At a Scotland wide level, Ministers will establish a National Licensing Forum. The Forum would give Ministers independent expert advice on the new licensing system and contribute to the development of statutory guidance. This would include guidance on:

• overprovision;
• exemptions to 24 hour opening;
• training;
• role and job description of Licensing Standards Officers; and
• reducing intimidation at Licensing Board hearings.

It is anticipated that the forum would have an ongoing role in keeping licensing law and practice under constant review. In this capacity it would be able to offer advice as to ways of dealing with emerging problems or difficulties and help to formulate additional guidance to Boards as the need arose.

110. At a local level, monitoring of a Licensing Board's policy would be undertaken by the local licensing forum. Although some informal local licensing fora already exist, the Bill would place such fora on a statutory footing and would require one for every Licensing Board area. These local licensing fora would enhance their local Board's awareness of both the beneficial and detrimental impact of the Board's policies on the local community and on local trade. They should also act as an effective mechanism for members of local communities to make both formal and informal views known within the system. Each Licensing Board would be under a statutory obligation to have regard to the local forum's views and to present its reasons when a different route has been followed. However, the local licensing forum would only comment on the Board's policy and the impact of that policy and not on individual applications. There would, as a minimum, be one formal annual meeting between the Licensing Board and the local forum.

111. To ensure local fora suit their individual localities, there would be a degree of flexibility in how each local forum functions, including where it derives its membership. In some areas the full range of suggested members may not be available. Membership should include a representative range of people with an interest in licensing, including:

• the police;
• the different sectors of the licensed trade;
• community council or other groups representing local people;
• health service representatives:
• local Drug and Alcohol Action Team (which is responsible for developing local alcohol action plans to reduce alcohol related harm);
• young people, eg through youth for a representatives;
• Licensing Standards Officers.

The Forum would be independent from the Board but the Board Chair or members may be invited to attend meetings to ensure close co-operation exists between the two bodies.

112. Where the indications are that the Bill, following enactment and transition, is less effective than envisaged in delivering any of the outputs and outcomes described above, the Executive will retain two key means of influencing change. The first is through national guidance to the Licensing Boards, which those Boards would be required to take into account when forming their licensing policies, when carrying out any of their licensing functions or when making any licensing decision. The second is through regulation. Scottish Ministers would be empowered to change regulations governing licensing procedures and processes and, for example, licensing fees if this was necessary.

113. The Finance and Central Services Department of the Scottish Executive will, in line with Scottish Ministers' commitment will take to carry out a review of the legislation and the corresponding Regulatory Impact Assessment within 10 years of this coming into force.

XII Consultation

i) Within government

114. The Licensing (Scotland) Bill is part of the Scottish Executive's response to the problems posed by misuse of alcohol. Therefore, there has been close contact with the Health Department as they take forward the 'Plan for Action on Alcohol Problems'. The introduction of a new licensing regime for England & Wales (the Licensing Act 2003) has already taken place and the Executive has been in contact with the Department for Culture, Media & Sport (DCMS). Discussions have been held with the Home Office about irresponsible promotions. The Office of Fair Trading has also been consulted with regards to irresponsible promotions and price restrictions.

ii) Public Consultation

115. In June 2001, the Nicholson Committee was established by the Scottish Executive to undertake an independent review of Scotland's liquor licensing law. The Committee received over 200 written submissions and held 8 days of oral evidence sessions with representatives from 23 organisations. Their report was published in August 2003 and followed by a period of public consultation concerning its 90 recommendations which attracted over 160 responses. In May 2004, the Scottish Executive published it's response to the Nicholson review and to the subsequent work of the Daniels Committee in "The Licensing (Scotland) Bill - A Consultation on Liquor Licensing". A public consultation followed to which over 120 individuals and organisations responded.

116. Whilst developing the policy the Executive has met with a very wide range of people including the representative licensed trade organisations the Scottish Licensed Trade Association (SLTA), The Scottish Beer & Pub Association (SBPA), the Bar, Entertainment and Dance Association (BEDA), the Scottish Retail Consortium (SRC), the Scottish Grocers Federation (SGF), the Association of Convenience Stores, and the Scottish Wholesalers Association. We have also met with representatives of Licensing Boards, Members Clubs, Cinemas, Voluntary Organisations, the Churches, CAMRA the Police and Alcohol Focus Scotland. Both the Nicholson and Daniels Committees included representatives from a range of interested parties who took an active part in arriving at the respective reports recommendations.

117. The inclusion of licensed trade organisations, Licensing Boards, the police, health and community representatives has continued with the establishment of an Expert Reference Group who have offered their specialist expertise as the proposed regime has been developed. The minutes of the Expert Group meetings have been published on the Scottish Executive website enabling those not directly involved to follow progress.

118. On the specific question of irresponsible promotions, the Scottish Executive jointly hosted with Alcohol Focus Scotland a conference to which producers, the trade, Licensing Boards, police and health bodies were invited to discuss the issue and possible courses of action.

XIII Summary and Recommendation

119. Option 3a was judged by Scottish Ministers to be most beneficial overall and it forms the basis of the Licensing Bill.

XIV Declaration

I have read the regulatory impact assessment and I am satisfied that the benefits justify the costs

Signed ……………………………..

Date:

Tavish Scott MSP,

Deputy Minister For Finance, Public Service Reform and Parliamentary Business

Contact point

Tony Rednall, Local Governance and Licensing Division, FCSD, Area 3H, Victoria Quay

Edinburgh, EH6 6QQ

TEL: 0131 244 4533
E-mail: Tony.rednall@scotland.gsi.gov.uk