Memorandum submitted by The Tourism Alliance

 

 

1.0 Introduction

The Tourism Alliance was established in 2001 as the voice of the UK tourism industry. It comprises 49 Tourism Industry Associations that together represent some 200,000 business of all sizes throughout the UK. The Tourism Alliance's mandate is to work with government on issues relevant to the growth and development of tourism and its contribution to the economy. It is therefore responding to this inquiry in that capacity.

 

 

2.0 Effects of the Licensing Act 2003

The Tourism Alliance has always been broadly supportive of the Licensing Act 2003 and the principles on which the licensing fees are based (i.e., they are set centrally at a level that provides for cost recovery for the licensing authority while not distorting the market).

 

The Alliance is also generally pleased with the impact that the Licensing Act has had on the ability of many licensed premises to vary their operating hours under the Act to better fit with the needs of their customers.

 

However, the Tourism Alliance has always considered that there are a number of circumstances where, instead of providing financial savings and reducing the regulatory burden on businesses, the legislation has increased the cost of licenses and the time and resources that businesses dedicate to complying with Act

 

This increase in cost alone (from 30 every three years to around 300 per annum) resulted in a large number of small tourism businesses with low alcohol sales deciding that it was no longer economic to apply for the new licenses when they were introduced in 2006.

 

The three main areas of concern that the Tourism Alliance had with the pricing structure for the new licenses were;

 

i. Businesses with Low Alcohol Sales

There are a large number of small businesses such as guesthouses and B&Bs where alcohol sales are provided more as a service to customers than as a revenue generator. Typically, this involves providing guests with a drink to accompany their meal or including a bottle of wine as part of a weekend break package (eg., the provision of a bottle of champagne as part of a Valentine's Day special). In many cases the revenue generated by this activity amounts to less than 1000 per annum. As a result, having to pay around 150 per annum for a licence makes these sales uneconomic.

 

 

ii. Businesses with High Rateable Values

In addition to the large number of small businesses affected by the cost of a licence, there are also a large number of businesses with properties that have high rateable values but low alcohol sales. Examples of businesses in this category include visitor attractions and holiday parks where alcohol sales are incidental to the core business activity. Again, the provision of alcohol is more a customer service that an income generator.

 

At the time of the change-over to the new licenses, the BH&HPA undertook a survey of their members and found that, of 16 surveyed members, half have decided to withdraw from selling liquor on the grounds of prohibitive cost and /or administrative burden in obtaining a licence. Equally concerning is that a further two did not renew their liquor licence the following year, indicating that the impact is ongoing.

 

 

iii. Businesses that Hold Temporary Large-Scale Events

Thirdly, when the fee structure for Temporary Large-Scale Events was developed, it was acknowledged that the fees were "somewhat arbitrary". There is now evidence that the fees being charged for licensing these events are far higher than the actual licensing costs and, as a result, are distorting the market and having a detrimental impact on the funding of many historic estates.

 

A pertinent example is Knebworth House, a location famous for holding outdoor concerts. The cost of licensing an event has risen from 13,000 per event to 64,000. This large increase is causing them to increase their charges for staging events, making it difficult for them to compete with large purpose build venues that have premises licences.

 

As a result, large events are starting to concentrate on a relatively small number of permanent sites such as Wembley which are able to defray the cost with an annual license for their full capacity. This results in unfair competition which runs counter to Government policies of encouraging diversification and economic activity in rural areas. It is also impacting on the tourist policies of regions such as the East of England, where there are no major all year round venues.

 

A further issue related to temporary events is that many venues such as attractions and historic houses host small charity and fundraising events such as dinners and recitals. As all the money goes to charity, the venue hosting these events often receives no recompense and yet has to use one of their valuable 12 annual TEN notices. Using TENs in this way limits the ability of venues to stage the commercial events they require to finance their business. The result is detrimental to charities who now find that venues that do not have permanent licenses are less willing to host events.

 

A simple remedy for this situation would be for non-commercial events that require TENs not to be included as part of the 12 TENs available to businesses each year. The number of non-commercial TENs could even be limited to ensure that this facility was not overused.

 

 

3.0 The Elton Review Recommendations

In 2005 and 2006, the Tourism Alliance provided the Elton Review on Licensing Fee Levels with a wealth of evidence on these issues as well as the impact of the Act on sporting and social clubs. This evidence included statements from over 50 businesses that were not renewing their alcohol licenses as they deemed it no longer economic to do so. There was also considerable evidence presented by historic houses and attractions on how the new fees would impact the viability of hosting summer events such as fetes, shows and concerts which are crucial to their finances.

 

When the Elton review was published in December 2006, it contained a series of recommendations that recognised and supported the issues raised in the Tourism Alliance's submission. These recommendations included;

 

1. "that the future fees regime should be de minimis for certain premises types where alcohol activity is peripheral to overall activity .... We do not believe that these fee payers should be captured by the new licensing regime until their alcohol trade/activity reaches a certain level."

 

2. "that DCMS should undertake further work to determine what that (reasonable) level should be, and that a suitable definition reflects that alcohol sales are purely incidental to the main purpose of the premises activity."

 

3. "that the DCMS proposal to remove the DPS requirement from community and village halls that have a full licence should be implemented by the department at the first opportunity."

 

4. "that licensing authorities should be given discretion to set the level of fee for large events in their areas based on cost recovery, reasonableness and risk. To reinforce this, we also recommend that LACORS should provide guidance for licensing authorities which sets out what might and might not need to be considered in making their assessment of the level of fee charged for an event."

 

Unfortunately, mainly due to the apportionment of the addition administration and enforcement costs associated with the Act, little has happened over the last 20 months to resolve these issues. Only the recommendation to remove the DPS requirement from community and village halls has been advanced. The rest of the recommendations are awaiting resolution and, while this occurs, the economic viability of holding a licence is marginal for many tourism-related businesses. This situation is expected to deteriorate as businesses come under increased pressure due to the economic slowdown.

 

Indeed, a recent survey, the Yorkshire Tourist Board found that approximately half of their members had dropped their licences since the change in the licensing regime. While it should be stressed that this was not a robust survey, it does give an indication of how what regulators would think of as being minor increases in cost have a significant impact on tourism businesses that already have very tight operating margins.

 

The Tourism Alliance would therefore like one of the recommendations of this Inquiry to be that increased urgency and, if necessary, additional resources are used to take forward and implement the recommendations of the Elton Review. This will reduce a significant financial and regulatory burden on many small businesses.

 

 

4.0 Implementation of the Act

One area of particular concern to Tourism Alliance members has been local authorities interpreting and implementing the Act differently. This has resulted in considerable time and effort having to be expended by businesses providing accurate advice to their managers when they have branches in different areas where the licensing authorities and, indeed, the officers have very different approaches to licensing. It has also meant that businesses that organise and stage events around the country have had to expend more effort understanding and complying with local interpretations of the licensing laws as they move events around different regions.

 

While DCMS's Licensing Division has been helpful in issuing guidance to reduce the level of inconsistent application of the Act, this problem nevertheless still exists. It is not unheard-of for businesses to be offered conflicting advice from different officers within the same licensing authority.

 

The Licensing Act, 2003 was meant to 'apply a light touch' to regulation, only applying conditions where they are necessary. This was confirmed in the recent case of Daniel Thwaites plc v Wirral Borough Magistrates' Court. The Act should work primarily through the process of complaint, rather than, what is too often the case, through over-protection.

 

Again, further resources are required to reduce the inconsistent local interpretation and implementation of the Act so as to reduce the burden on businesses of having to renegotiate activities with different licensing authorities.

 

 

 

5.0 Reducing the Financial and Regulatory Burden

The recent British Beer and Pub Association report, A Wake-Up for Westminster, shows that alcohol sales on licensed premises are declining at an unprecedented rate (at present 5 pubs per day are closing). The high rate of closure is of particular concern to the tourism industry in rural locations where villages and nearby attractions depend upon pubs to provide a core component of the overnight and day-visitor experience that is important to the local economy. While the closure of pubs is due to a range of factors, the problem is that in these rural areas the small businesses such as B&Bs, the holiday parks, the attractions the historic houses and pubs are all under pressure at the same time which could result in the local tourism offering being substantially reduced.

 

The considerable financial pressure on the pub industry also shows that any adjustment on the pricing of licences for small businesses and attractions cannot be done at the expense of increasing the cost of licenses for pubs which are a core component of the UK tourism offering.

 

Therefore, rather than merely shifting costs from one area to another or onto the local authorities, the Tourism Alliance would like to see a review of enforcement requirements in an attempt to reduce the overall cost of licensing. By introducing a de minimis approach (thereby reducing enforcement costs associated with these businesses) and reducing the frequency of enforcement for premises where no complaints have been received, it should be possible to reduce costs without reducing the ability of licensing authorities to effectively control licensed premises.

 

The focus should be to concentrate compliance and enforcement efforts on the few problem areas for alcohol-associated anti-social behaviour, thereby reducing the regulatory burden (and therefore cost) for businesses that are good community citizens.

 

 

September 2008