Flat Rate Fees?
23. The licence fee regime is run along similar lines
to business rates. That is, that premises are grouped in five
bands, from A to E, based on their rateable value.[30]
This reflects an attempt by Government to levy fees reflecting
the size and nature of the business. However, as the FSB points
out
"the first bracket of rateable value runs
from £4000 to £33,000. The difference between the two
values is large. To charge the same price for one business with
a rateable value of £4000 and another with a rateable value
of £33,000 is not properly representative or cost-reflective.
To put this into context, firms with 1-2 employees spend 4 per
cent of annual turnover on compliance and businesses with under
20 employees experience compliance costs that are 35 per cent
higher than firms with over 50 staff".[31]
24. Some small businesses are entirely involved in
licensable activities, whereas some need a licence only for peripheral
activities. Many small businesses who do not draw the majority
of their profits from their licensable activities feel that they
are paying disproportionate fees. The FSB told us "[The Government]
has not fully considered the impact on businesses with a very
low rateable value or businesses that do not make the bulk of
their profit from alcohol sales, and this has impacted negatively
on FSB members and others".[32]
Because the fees levied are dependent upon on the banding of the
business rate system, small operators are paying less than larger
ones, but the proportionate effect on smaller businesses can clearly
be greater. This is a difficult problem to address. Some witnesses
suggested that a 'de minimis' system would help small operators
to continue licensable activities. Mr Bish, of the Association
of Licensed Multiple Retailers, said
"we felt that looking at the business rate
system was a good way forward in terms of the banding, but in
fact the Government also put in place small business rate relief
for very small businesses, so if that had also kicked in for the
purposes of the fee system, the fees for the smallest of businesses
could perhaps have been halved".[33]
25. The Minister for Media and Tourism told us it
would require primary legislation to move away from the current
fee levels, and responded to our concerns about flat rate fees:
"you can either have a very simple system
which does not have its own requirement to collect lots and lots
of information, which is what we have gone for, we have used the
proxy of rateable value and the advantage of that is that it is
easy to collect and does not create a lot of extra cost for local
authorities. Or you could go for something much more precise and
targeted which involves collecting lots of information, but that
cost would then have to be recouped from the premises and the
licensees and in effect they might be no better off".[34]
We are not convinced that the gathering of information
in this way would be so expensive, and would be interested to
know how the DCMS arrived at this conclusion. We look forward
to the conclusions of the Elton Review concerning flat rate fees.
26. We note that premises fees are not payable by
church or community halls, which we welcome, although such organisations
are still compelled to have a personal licensee and to go through
the often expensive application process.
27. The fee changes are seen as unfair in another
way. In some cases, the fee will actually have dropped. Large
concerns which previously paid high fees will now pay far less
on the new ratings. Councillor Lewis told us "we have therefore
seen clubs whom we might have charged in excess of £20,000
going down to a few hundred pounds".[35]
28. We are aware that the Elton Review will be
considering the impact of fees on very small businesses and has
received evidence on the subject from some of those who informed
our inquiry. The review has yet to make its opinion known on these
'stakeholder issues' but we hope that the final report of the
review makes the disproportionate impact of fees on small operators
an important part of its recommendations.
Self Funding Regime?
29. The new fees regime is intended to be self-financing.
The principle that the fees paid by licensees will be sufficiently
high to offset the administration and enforcement costs of local
authorities is a good one. We are however unsure whether the system
will actually cover local authority costs. Andrew Fisher of Bolton
Metropolitan Borough Council was not convinced that this would
be possible:
"We have done certain projections in Bolton
and we are very much in the dark as to what the enforcement costs
are likely to be. We are still liaising with our fellow enforcement
bodies. Without saying too much, it looks as though we shall be
there or thereabouts. We could be slightly under, slightly over,
but whether we recover our overall costs will depend upon the
enforcement costs; it is marginal based upon the enforcement costs".[36]
Councillor Lewis of Westminster City Council thought
that her local authority could be drastically under-funded if
larger premises had their fees reduced "because they have
been defined as nightclubs. We cannot see, if we are going to
do anything like the sort of job we are required to do, that we
will not be millions out of pocket unless something very miraculous
occurs".[37]
30. There is no reason why the enforcement of licensing
activities should be subsidised by the public purse. However,
that is no reason to disregard the fact that the current system
may not meet the needs of local authorities. The Elton Review
interim report states:
"the information that was submitted indicated
that as well as a net deficit in 2004/05, many authorities were
also expecting to have a net deficit over the two year period
including 2005/06".[38]
It adds that the long-term likelihood of a gap between
funding and expenditure is something it intends to examine fully
over the next year. We welcome the Elton Review's intention
to examine the implications for local authority finance of the
new licensing regime. Local authorities should not be left out
of pocket by the new fee structure.
25 Q 31 Back
26
Ev 55 Back
27
Ev 25 Back
28
Licensing Act 2003 (Amendment) Bill, HC Deb, 25 October 2005,
col 189 Back
29
Q 79 Back
30
The full fees are set out in the Licensing Act 2003 (Fees) Regulations
2005 (SI 2005/75) Back
31
Ev 22 Back
32
Ev 22 Back
33
Q 4 Back
34
Q 87 Back
35
Q 43 Back
36
Q 43 Back
37
Ibid Back
38
Elton Review para 7.1 Back
