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Licensing fiasco is unfair on business

15 August 2005

Bob Cotton, chief executive of the British Hospitality Association, attacks the Government over its latest legislation shambles

What a mess! Rarely has a piece of legislation, which was so necessary and so well supported in principle, become mired in such controversy. I'm talking, of course, about the new licensing legislation.

Was change needed? Absolutely. The industry was originally all in favour of bringing the drink laws up to date, allowing for more flexible opening hours and a simpler system of licensing. This brings benefits to customers, visitors and the industry generally.

But instead we have had a hugely complicated application system, which has meant most applicants having to take legal advice before completing the form and providing a 1:100 floor plan of every area of consumption (and supplying up to 12 copies).

The move to local authority control (rather than magistrate control) has also not been helpful, leading to confusion in different areas of the country as the new rules and regulations have been interpreted differently by local authorities. This is unfair on businesses.

And, despite a suggested but dubious £2b saving over ten years lauded by the DCMS, we have also had higher immediate costs.

Nick Scade, chairman of the BHA's Restaurant Association, reckoned the application cost his single restaurant £1,000. For those who had to use a consultant or a solicitor, the cost was much more. Larger groups have had to spend millions of pounds.

But that's not all: in addition to the initial, one-off cost of the applications, there remains an annual fee of £350 a year (up to three times that for larger premises), plus the potential charge on establishments in Alcohol Disorder Zones, which could run into thousands of pounds every year.

In fact, the new legislation is least equitable on small hospitality businesses that have a high rateable value, because this is what the licence fee is based on.

Even a small guest house, with very low alcohol sales but with a rateable value of between £33,000 and £87,000 (equal to a turnover of between £300,000 and £800,000 approximately) will have to pay £315 to convert its licence and an annual fee of £295. A slightly larger business in the next band will have to pay even more.

The problem is that many of the businesses in these lower categories do not have a bar and only provide a drink with meals. Their total annual profit from liquor sales is less than the fees being charged to provide the alcohol in the first place.

Incidentally, this may well account for a percentage of those establishments that have not yet applied for a licence.

They typically provide only a bottle of wine for their guests in the evening and the cost of conversion and the annual fee is simply not an economic proposition in view of the profit made from such minor sales. The result, however, is that this denies guests a reasonable service, restricts choice and leads to customer irritation.

The BHA has always argued that the licence fee should be capped for such small businesses. We have taken this up with the Independent Review Panel, under Sir Les Elton, which is currently reviewing the fee scales - not before time.

Government here has not played fair with the industry. The original set of fees proposed by the Government was increased in a consultation document after lobbying by the Local Government Association, and the final fees set in January this year were at an even higher level.

Why do these fee scales have to be reviewed even before the new legislation comes into effect? Because the Government has showed a record level of indecision as well as a lack of clarity all the way through the reform process.

And instead of insisting that the change-over should be effectively completed by August, it would have been wiser to listen to the industry's original view that this timescale was too tight and should have been extended to the end of the year.
The Government didn't listen - but is that anything new?

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