Licensing (Scotland) Act 2005 - consultation on draft regulations

Licensing (Scotland) Act 2005 - consultation on draft regulations - fees and vessels

Summary of Research Findings

The research report

The analysis of the proposed fees for the new licensing system suggests that the following should apply:-
- Personal licences £42
- Premises licences £460
- Annual fee for premises licences £155

Remit was to define a system:

Execution of the research

Very thorough piece of work
Used data from 31 of 32 local authorities
Includes input from the licensed trade
Able to benefit from knowledge gained from similar work in England and Wales
Provides a sound basis for defining a suitable system based on a 5% sample of rateable values across Scotland

Current Costs for Licensing Boards

The total current annual costs are estimated at £4.5m
The total current annual revenue is £2.85m
Which represents an average recovery rate of 63% - which significant variation across local authorities
This implies that local authorities are failing to achieve cost recovery with a deficit of £1.6m - equivalent to more than one third of what is required to fully recover the costs of the system
The trade are generally aware of this, and the fact that application fees will have to rise

Future costs for Licensing Boards

For the 18 month transition period, to achieve cost recovery the estimated costs will be £9.9m
Thereafter to achieve cost recovery from new premises and annual fees annual costs are estimated at £3.4m
For simplicity, standard unit costs have been applied across all local authorities (whereas there will be significant variations in reality).

Full Cost Recovery

The proposed system of a higher initial charge, and a lower level annual charge fits reasonably well with the estimated level and pattern of costs for the new system.

The average proposed charges for premises licences are an initial charge of £460 and an annual charge of £155.

Use of Rateable Values

The proposed system used Rateable Values as the basis for calculating fees. This has been adopted as the most suitable basis for the following reasons:-
- Provides a measure of business size
- Takes location into account
- Regular reviews take place
A system of 'banding' would be used to calculate fees. The model uses a special band for Members Clubs ( i.e. - British legion, sports clubs, miners' welfare etc) and 5 further bands for commercial premises.
The proposed band widths are designed to minimise the impact on small businesses and to ensure a fair and equal distribution. For example, under the new system 82% of licensed premises fall into the two lowest bands, so there is scope to set a level of licence fee which would be seen to be fair for the vast majority of SMEs.
Although there is scope to change the band widths or level of fees for each band in the model, the consultants believe this is the fairest distribution of charges.

Issues for Licensing Boards

The consultants carried out case studies involving a representative sample of 5 local authorities, using the proposed model it was established that 4 out of 5 would achieve cost recovery.
Nevertheless further consideration of the one case where there may potentially be less than full cost recovery shows that their unit costs per licence are likely to be less than the national average; and therefore that full cost recovery would be likely.

Issues for the trade

The report realistically concludes that use of Rateable Values is the best basis for graduating charges. It takes into account business size, turnover and location and is reviewed on a regular basis.
The suggested scales are such that initial charges for licensed premises would range from £400 to £1,000; and the annual charges would range from £110 to £450.
Members' clubs would be charged an initial fee of £100 and an annual fee of £90.
The proposed system of having a lower set of charges for clubs; and a graduated scale of charges based on 5 rateable value bands means that SMEs will have relatively low charges - 82% of licensed premises fall into the lowest 2 bands for charges.
The Trade's associated costs will follow a similar pattern; i.e. additional costs to prepare for transition; but lower costs for retaining ongoing licences.
Using the system of graduated rateable values, licensed premises with a high turnover, but a relatively low proportion of their business in sales of alcohol ( e.g. department stores or cinemas) may have grounds for concern. However, most businesses of this size should not suffer unduly in having to pay the proposed maximum application fee of £1,000 and a maximum annual fee of £450.

Further points to note

The running costs of the new system are higher for transition, at £9.9m but will be lower going forward, due to the streamlining of the licensing system to £3.4m
The new regime requiring an annual cost of £3.4m versus £4.5m with the current system.
The proposed model allows significant flexibility to reallocate fees at different levels across Rateable Value bands - so different pricing levels can be assessed.
One of the advantages of the model is it is likely that revenues will generally exceed costs as the new system becomes fully implemented, from around year 2 onwards.
Consequently there may be an opportunity to suggest a review by the Accounts Commission at some point in the future.
The research has indicated that the processes and IT systems currently in place are generally outdated and inefficient. An appropriate means of using any surpluses in the short to medium terms would be to fund initiatives such as web-based systems for processing licence applications. This could be expected to allow for even larger reductions in charges in the longer term.