The Licensing Act 2003: post-legislative scrutiny Contents

Chapter 12: Fees and Fee Multipliers

Licensing fees

554.When applications are made for the grant, renewal or variation of a premises licence or club premises certificate, the applicant must pay a fee to the licensing authority. The intention is that the fee should cover the cost of administering the licensing function. The Home Office told us that “licensing fees are levied on the basis of cost recovery, as set out in HM Treasury’s Managing Public Money”.523

555.The fees local councils may charge are set nationally by the Licensing Act 2003 (Fees) Regulations 2005 (the Fees Regulations).524 They have not seen any increase since 2005, and most respondents who broached this subject believed some increase was now due. However, there were significant differences of opinion as to whether the power to set fees should remain with central government or whether, as with the Gambling Act 2005, the Scrap Metal Act 2013, and taxi and private hire vehicle regulations, the power should be devolved to local councils.525

556.Section 121 of the Police Reform and Social Responsibility Act 2011, which has not yet been brought into force, will make amendments to the Licensing Act 2003, adding two new sections 197A and 197B which will allow the Secretary of State, in making Fees Regulations, to devolve the power to set licence fees to licensing authorities. The Fees Regulations would then also be able to “specify constraints on the licensing authority’s power to determine the amount of the fee”526 by, for example, setting minimum and maximum amounts that may be charged. The Home Office said that they were open to the idea of locally-set fees, but that the previous Government had consulted local authorities on the matter, and given the “quite low” level of response, “the Government were unable to make a decision about whether to commence the legislation or not”.527 This, no doubt, is one reason why they have not brought into force section 121 of the 2011 Act.

557.Most businesses and the organisations that represent them are strongly against devolving the setting of licence fees to local authorities. Some, such as the youth hostel chain Beds & Bars, told us that “nationally set fees allows for a better understanding of the likely costs to a business such as ours, of changes within our estate in the short to medium-term”. They feared that allowing locally-set fees “would add to our administrative costs and would create uncertainty”.528 This was re-iterated by the Association of Licensed Multiple Retailers (ALMR), who suggested that “you do not have to be a very big business before you are trading across two local authority districts and you have inconsistencies and different fee levels which impose burdens just to keep on top of it”.529

558.Beds & Bars, along with several other businesses who wanted fee-setting power to remain with central government, also conceded that they were “concerned that fees would then significantly escalate, unnecessarily so in our view”.530 Pinsent Masons LLP, who represent many licensees, shared this view, noting that “the main issue that operators are concerned about would be the rise in the level of fees, should individual areas have greater powers to set this then it may lead to higher prices in certain areas”.531

559.There was also some opposition to the idea from a small number of local councils, who were concerned that requiring locally-set fees might add to the administrative burdens of smaller councils. Sedgemoor District Council, for example, stated that “as a smaller authority, however, the process of setting fees from scratch is a complicated process and one that takes up valuable resources”.532  They also pointed to the risk that “should the level of fees be challenged successfully, reparation costs are potentially payable over a lengthy period of time”. Waverley Borough Council made similar points, noting that the precedent of locally-set taxi licensing fees showed that it could lead to “wasted man hours and costs in setting, advertising, supporting and defending them”.533 Brighton and Hove Council argued that national fees avoid “potential political and financial risks” for cities like theirs, which are economically dependent on the leisure industry.534

560.Most local councils were however of the opinion that licensing fees are currently far below the level of cost-recovery, and that local authorities are being expected to subsidise the licensing system through money raised from general taxation. They argued that only if fees were set locally would councils be able to adjust fees to a level appropriate to their own particular enforcement requirements. Councillor Richards of Stratford-upon-Avon argued that:

“As things stand, the fees associated with licences limit the amount of enforcement that we can conduct. If we could lift those fees or raise them, we might be able to reduce the issues that we experience … one of the benefits of the Licensing Act is its flexibility and the fact that councils can make decisions based on their own local context. Similarly, being able to do that for fees would be very beneficial.”535

561.Others such as Ashford Borough Council noted that various other licensing fees, including those for gambling premises, taxis and street trading, are already set locally, and believed that it was unfair and anomalous that alcohol licensing fees should still be set nationally.536 However, they also agreed with Greenwich Borough Council, who said that guidance and regulations “must be clear about the legitimate inclusion of licensing compliance costs within the cost-recovery process as failure to do so could undermine the entire licensing system”.537

562.The LGA and a number of councils also highlighted the considerable regional variability in the costs of enforcing the Licensing Act 2003. A recent survey on licensing fees conducted by the LGA showed that while the annual net deficit across all licensing authorities in England and Wales was around £10.3 million, this was spread very unevenly across the country. 52% of the 102 licensing authorities that responded reported operating in deficit, and these were most likely to be London boroughs, metropolitan districts and district councils, whereas English and Welsh unitary authorities were most likely to operate in surplus. The licensing authority with the largest surplus was an English unitary authority (£0.265 million), while a London borough recorded the largest deficit (-£1.4 million).538

563.Some councils argued that locally-set fees would allow them much greater flexibility to account for local circumstances. Westminster City Council, for example, were against linking fees to rateable values, as Westminster had various unusual circumstances which could lead to outcomes they felt were unfair to particular kinds of businesses. They described how a “nightclub licensed until 3am with a capacity of 1,050 currently pays £350 while a local pub in Pimlico that closes at 00:00 with a capacity of less than 50 people is charged £1,050”.539 They also have “parks and open spaces which have no rateable value but do have Premises Licences”. They concluded that “local conditions could be better managed and such irregularities ironed out fairly, if decisions on licence fee levels were made at a local rather than national level”.540

564.In 2016, a further survey was conducted by the Home Office to ascertain current interest by local authorities in locally-set licensing fees. We were told:

“The survey is now closed and we have had some initial discussions with the [Local Government] association about some of the headline figures. It is currently in the process of going through the information to do some more detailed analysis. No decision has been made on what to do about licensing fees pending the discussions that we are about to have with it.”541

565.We have heard evidence both for and against locally-set fees. The fees are supposed to cover the cost of administering the Licensing Act 2003, and this varies from place to place, and between local authorities. It is, we believe, logical that fees be set locally to reflect this. We recommend that section 121 of the Police Reform and Social Responsibility Act 2011 be brought into force, and new Fees Regulations made requiring licensing authorities to set licensing fees.

Fee multipliers

566.The Schedules to the Fees Regulations include tables dividing properties into “bands”—the term “band” in this context relates exclusively to the Fee Regulations table and is not equivalent to council tax bands or any other banding system. The fee bands are calculated on the basis of the “rateable value” of the property the subject of the application. “Rateable value” is a reference to business rates, as calculated by the Valuation Office Agency (VOA). The lowest rateable values fall into band A (£4300 and below), and the highest into Band E (£125,001 and above).

567.The fees which, as we have said, are unchanged since 2005, are set out in these Tables:

Table 2: Application Fees

Rateable Value

Premises Value



No rateable value up to £4,300



£4,301 to £33,000



£33,001 to £87,000



£87,001 to £125,000



£125,001 and above


D primarily alcohol

2 x multiplier


E primarily alcohol

3 x multiplier


Table 3: Annual Charges

Rateable Value

Premises Value



No rateable value up to £4,300



£4,301 to £33,000



£33,001 to £87,000



£87,001 to £125,000



£125,001 and above


D primarily alcohol

2 x multiplier


E primarily alcohol

3 x multiplier


Thus the largest and/or most valuable properties on the market pay the highest business rates and, accordingly, the highest licensing fees; the intention was to ensure that fees were fair and proportionate in respect of licence and certificate holders operating in different ways and on different scales.

568.The Fees Regulations make a special provision regarding premises licences (but not clubs) where the premises will be used exclusively or primarily for the supply of alcohol for consumption on the premises (the “on-trade”). Some of these licences are liable for an extra fee—also called a “multiplier”—to reflect the fact that the consumption of alcohol will take place on the premises. The multiplier effectively doubles or triples the fee being paid, depending upon fee band.

569.In 2005, when the concept of multipliers was first introduced, their purpose and the logic behind exempting particular kinds of premises was debated in this House. Lord McIntosh of Haringey, the then Parliamentary Under-Secretary of State, Department for Culture, Media and Sport, stated:

“It has been argued that it was an error to apply the multiplier only to pubs and not to nightclubs because customers coming out of nightclubs cause just as much trouble on the streets … But that misunderstands the function of licence fees. The policing of the behaviour of customers after they leave premises is a matter for general taxation, which is a quite separate debate.

Fees can legitimately cover only the costs of carrying out licensing functions and enforcing licensing offences on the premises themselves, not outside … My answer to the noble Lord, Lord Clement-Jones, is categorical: no, we do not propose to make nightclubs pay the multiplier that applies to pubs”.542

570.While this debate focused on the exemption of nightclubs from fee multipliers, it did highlight the supposed logic behind both multipliers and their exemptions; namely, that they related to a highly constrained definition of ‘enforcement’ as relating only to on-premises enforcement of licensing offences. Following this logic, the cost of resulting impacts, such as additional policing costs resulting from alcohol-related crimes, were not to be factored in to licensing fees. Additionally, as Lord McIntosh of Haringey noted at the time, fees should have “nothing to do with what any individual, business or club can afford to pay”, nor “what anyone should pay, based on moral ground”.

571.However, we have heard evidence arguing that it is unfair that pubs with high rateable values are required to pay a multiplier of licensing fees, doubling or tripling the fees they must pay, while supermarkets with the same rateable values, selling very high volumes of alcohol, are not. CAMRA claimed that it is “inequitable that pubs with high rateable values are required to pay a multiplier of standard licensing fees whilst supermarkets with the same rateable values are not”, and argued that the exemption for larger supermarkets which fall in Bands D and E should end.543 This would increase the fees for supermarkets in line with Tables 2 and 3.

572.We have every sympathy with the view that it is unfair that pubs with high rateable values should be required to pay a substantial multiplier, while supermarkets should not, on the ground that “policing of the behaviour of customers after they leave premises is a matter for general taxation”. We considered recommending that the multiplier should be extended to apply to supermarkets and other off-licences of an appropriate rateable value. There is however a further consideration.

The EU Services Directive

573.On 12 December 2006 the European Parliament and the Council adopted Directive 2006/123/EC on services in the internal market.544 Article 13(2) of the Directive reads:

“Authorisation procedures and formalities shall not be dissuasive and shall not unduly complicate or delay the provision of the service. They shall be easily accessible and any charges which the applicants may incur from their application shall be reasonable and proportionate to the cost of the authorisation procedures in question and shall not exceed the cost of the procedures.”

This provision is not directly applicable, but is implemented in the UK by Regulation 18 of the Provision of Services Regulations 2009545 which came into force on 28 December 2009, and which is in almost identical terms.

574.There has not been, and is not, any doubt that the fee paid by an applicant can and should cover the cost to the authority of processing the application—described in the Directive as “authorisation procedures and formalities”—whether or not the application is successful. Nor has there, until recently, been any doubt that the fee could also cover the cost to the authority of running and enforcing the licensing scheme. The lawfulness of this second element of the fee has however now been put in doubt in the case of Hemming546.

575.The claimant in that case challenged the fee set by Westminster City Council on a number of grounds.547 The Supreme Court did not itself throw doubt on the lawfulness of the enforcement fee, holding (after very little argument) that a scheme which involved requiring a successful applicant to pay “a further fee to cover the costs of the running and enforcement of the licensing scheme … would be consistent with regulation 18 of the Regulations and article 13(2) of the Directive.” What the Supreme Court was doubtful about was whether a scheme involving the payment of an enforcement fee by a claimant whose application had yet to be processed was consistent with the Directive, even though this element of the fee would be refunded if the application was unsuccessful. The Court accordingly referred this question, and only this question, to the Court of Justice of the European Union (CJEU), which decided on 16 November 2016 that such a scheme would be unlawful.548

576.The CJEU was not asked, and did not answer, the question whether an enforcement fee would be lawful in any circumstances. However their judgment was preceded on 28 July 2016 by the Opinion of the Advocate-General549 who, although this question had not been put to him, stated his view that Article 13(2) of the Services Directive precluded a local authority, when calculating the fee due for the grant or renewal of an authorisation, from taking into account the cost of managing and enforcing the authorisation scheme.550 His Opinion does not form part of the ruling of the CJEU which will be considered by the Supreme Court. But it is possible that in future litigation reliance will be placed on the Advocate-General’s Opinion, and if a UK court follows it, such an element of a fee will become unlawful. There must therefore be considerable doubt about the legality of this element of the fee.

577.The former Department for Business, Innovation and Skills (BIS), which was the responsible department during the negotiation of the Services Directive, seems from the outset to have had no doubt that this element of the fee would be unlawful. In The European Services Directive: Guidance for Local Authorities551 it wrote: “Local Authorities must set fees that are proportionate to the effective cost of the procedure dealt with. As costs vary from region to region, central advice on the level of fees will not be appropriate. Local Authorities will need to bear in mind the threat of a legal challenge should a service provider feel that the levels of fee are being used as an economic deterrent or to raise funds for Local Authorities. Enforcement Costs should not be assimilated with the application fee.” The Department’s corresponding Guidance for Business on the Provision of Services Regulations552 states: “Under regulation 18, fees charged in relation to authorisations must be proportionate to the effective cost of the process, e.g. to cover the actual cost of the application process. Fees should not be used as an economic deterrent to certain activities or to raise funds. As now, if you believe the fee to be disproportionate, you can contest it with the authority concerned.”

578.Westminster City Council, the appellants in the Hemming case, stated in their written evidence to us that the Government’s failure to bring into force the provisions of the Police Reform and Social Responsibility Act 2011, allowing locally set fees to recover the full costs of local authorities, related to the Hemming case, but “any such reservations should have now been laid to rest by the decision of the Supreme Court made in April 2015.”553 Their evidence was plainly written without their being aware of the Opinion which Advocate-General Wathelet had just given.

579.Westminster City Council also told us that they had long argued that “it is not possible to recover the cost of the resources that we channel into administering and managing the licensing regime.” They add:

“The LGA have previously estimated that the current system results in local authorities and local taxpayers subsidising the licensed trade by up to £1.5m per month as a result of the current, nationally-set system. CIPFA recently undertook a survey of participating local authorities which further suggests that the national system does not allow for cost recovery with the country-wise deficit estimated at between £9.2m and £11.4m p.a. In Westminster, we understand that our own local deficit is approximately £1.387m per annum, based purely on the costs of administering the system without any wider consideration of costs incurred.”

580.We are all too well aware that a strict application of the Services Directive to licensing fees may result in all the other associated costs of licensing authorities having to be met out of other funds.554 These are certainly matters which the LGA will wish to discuss with the Home Office and other Government departments.

581.The Opinion of the Advocate-General in the case of Hemming has cast doubt on the legality of any element of a licensing fee which goes beyond the cost to a licensing authority of processing an application. Accordingly we consider that it would not be sensible to recommend the extension of the fee multiplier to supermarkets at this time.

582.We recommend that the Home Office should consider whether the Fees Regulations should be amended to make them compatible with the EU Services Directive and the Provision of Services Regulations 2009.

583.If, as we recommend, the power to set licence fees is devolved to licensing authorities, then this power will inevitably have to be constrained by any conclusion which the Home Office draws on the compatibility of fees generally with the Directive and Regulations.

523 Written evidence from Home Office (LIC0155)

524 Licensing Act 2003 (Fees) Regulations 2005 (SI 2005/79). The Licensing Act 2003 (Fees) (Amendment) Regulations 2005 (SI 2005/357). Subsequent amending Regulations have made only minor changes, and have not increased the fees.

525 For examples of the former position, see written evidence from Beds & Bars (LIC0114), Sainsbury’s (LIC0046) and CAMRA (LIC0121). For examples of the latter position, see written evidence from Ashford Borough Council (LIC0016), Healthier Futures (LIC0097) and the LGA (LIC0099).

526 Licensing Act 2003, section 197A(4)

527 Q 11 (Andy Johnson, Head of Alcohol, Home Office)

528 Written evidence from Beds & Bars (LIC0114)

529 Q 90 (Kate Nicholls, Chief Executive, Association of Licensed Multiple Retailers)

530 Written evidence from Beds & Bars (LIC0114)

531 Written evidence from Pinsent Masons LLP (LIC0074)

532 Written evidence from Sedgemoor District Council Licensing and General Purposes Committee (LIC0076)

533 Written evidence from Waverley Borough Council (LIC0117)

534 Written evidence from Brighton and Hove Council (LIC0017)

535 Q 21 (Councillor Peter Richards, Chairman of the Licensing and Regulatory Committee, Stratford-on-Avon District Council)

536 Written evidence from Ashford Borough Council (LIC0016); Healthier Futures (LIC0097)

537 Written evidence from Royal Borough of Greenwich (LIC0176)

538 CIPFA, Licensing Act (2003) Fees Survey (July 2016) p 4

539 Written evidence from Westminster City Council (LIC0090)

540 Written evidence from Westminster City Council (LIC0090)

541 Q 11 (Andy Johnson, Head of Alcohol, Home Office)

542 HL Deb, 24 February 2005, cols 138–1392

543 Written evidence from CAMRA (LIC0121)

544 Directive 2006/123/EC of the European Parliament and the Council of 12 December 2006 on services on the internal market (OJ L 376/36, 27 December 2006)

545 Provision of Services Regulations 2009 (SI 2009/2999)

546 R (on the application of Hemming (t/a Simply Pleasure Ltd) and others) v Westminster City Council [2015] UKSC 25 :–0146-judgment.pdf [accessed 10 March 2017]

547 The claimant is the licensee of a sex shop. The fee is therefore set under Schedule 3 to the Local Government (Miscellaneous Provisions) Act 1982, but it is clear that what is decided in that case would apply equally to fees set under the Licensing Act.

550 In paragraph 78 of his Opinion the Advocate-General stated that the Court of Appeal, in paragraphs 80–84 and 88 of its judgment which was appealed to the Supreme Court, “held—correctly in my view—that Member States could not impose charges that went beyond the costs of the authorisation and registration procedure”. See the judgment of the Court of Appeal: [accessed 10 March 2017]

551 Department for Business, Innovation and Skills, The European Services Directive: Guidance for Local Authorities, 2nd edition (June 2009), part 12d: [accessed 27 March 2017]

552 Department for Business, Innovation and Skills, Guidance for Business on the Provision of Services Regulations (October 2009), paragraph 86: [accessed 27 March 2017]

553 Written evidence from Westminster City Council (LIC0090)

554 This does not apply only to authorities licensing sex shops (as in Hemming itself) or the sale of alcohol; before the Supreme Court there were 8 interveners, including the Local Government Association, the Bar Council, the Law Society, the Architects Registration Board, and other bodies relying on fees for enforcing their regulatory schemes.

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