REVIEW OF LICENSING FEES AND CHARGES
The Senior Licensing and Enforcement Officer presented the report of the Head of Housing and Public Protection in respect of a Review of Licensing Fees and Charges. The following appendices were submitted with the report:
Appendix A - 2012 Annual Report to the Licensing Committee;
Appendix B - Licensing Fees and Charges 2013/14;
Appendix C - Analysis of Centrally and Locally Set Fees and the Application of the EU Services Directive;
Appendix D - Benchmarking with Other Local Authorities;
Appendix E - Analysis of Current Fees against Best Estimate Actual Cost; and
Appendix F - Draft LGA guidance on locally set fees.
The Senior Licensing and Enforcement Officer advised that licensing was a statutory function. Case Law had established the principle that licensing should be carried out on a not-for-profit basis, and this had been reinforced in the EU Services Directive 2006. However, nationally there were inconsistencies and a general complacency with this approach. This was particular evident in the setting of fees for the licensing of Sex Establishments.
The Senior Licensing and Enforcement Officer referred to the Hemming Case, which was a landmark judgement in relation to the common law in respect of licensing fees, as it confirmed the impact of the Services Directive on existing legislation. The case revolved around the sex shop fee set by Westminster Council, that included a significant cost in relation to the enforcement against unlicensed premises.
The Senior Licensing and Enforcement Officer commented that the Court of Appeal upheld the judgement of the High Court, and confirmed that fees could only reflect the cost of administering the application, not the cost of enforcement against unlicensed premises. It was noted, however, that Westminster City Council was likely to appeal this decision to the Supreme Court.
The Senior Licensing and Enforcement Officer advised that it was the responsibility of the Head of Housing and Public Protection, in consultation with the Cabinet Portfolio Holder for Housing and Environmental Health, to set licensing fees on behalf of the Council. In so doing, they were required to pay regard to the Councils Medium Term Financial Strategy, but there was also an element of local discretion.
The Senior Licensing and Enforcement Officer highlighted a number or areas in the report which he felt should be considered by the Committee. These were:
Subsidies - whilst the Medium Term Financial Strategy advocated the close review of subsidies, there was an economic development issue, in that increased fees could be detrimental to businesses, and could even lead to a greater number of unlicensed activities. It was a case of the risk of cost recovery being balanced against an increase in unlicensed businesses (bearing in mind that the cost of enforcement had to be borne by the General Fund);
Costing Reviews - Case law had established that regular reviews should take place and therefore it would be appropriate for the Council to undertake a three-yearly review of licensing fees, with possible inflationary increases in intervening year;
Timescales for Cost Recovery - as previously mentioned, there was a risk of large fee increases adversely affecting economic growth and possibly resulting in more unlicensed businesses. So it could be that some fee increases were phased in over a period of time, and that annual increases could be capped at a maximum percentage;
Enforcement of Unlicensed Premises - as stated in the Hemming Case, Local Authorities could not recover their enforcement costs through fee setting, and so such costs should be financed from the General Fund. However, the absence of enforcement defeated the object of licensing, which was predominantly to ensure public safety. It was therefore the risk to public safety being balanced against the cost of enforcement; and
Smarter Working - the Licensing Service was regularly reviewing opportunities for internal and external working, and any ideas aimed at making the Service more cost effective would be welcomed.
In terms of the future, the Senior Licensing and Enforcement Officer stated that, from 2015/16, Licensing Act 2003 fees were likely to be capped to full cost recovery levels - a Government consultation on this was expected shortly. With regard to the Local Government Association guidance on locally set fees, attached as Appendix F to the report, the Senior Licensing and Enforcement Officer drew attention to the fact that it was in some ways contradictory to the outcome of the Hemming Case. He cautioned Members against apportioning too much weight to it, as guidance did not override the position in common law.
The Senior Licensing and Enforcement Officer summarised by stating that NHDC was quite advanced in its licensing fee-setting process. Only Dacorum Borough Council of the Hertfordshire and Bedfordshire Councils had undertaken a similar exercise, and it seemed clear that there was more likelihood of legal challenge to those Councils who had not reviewed their fee levels. Officers were confident that the costings set out in the report were accurate, but stressed that they were provisional, as the number of applications was difficult to estimate and the 204/15 Budget had yet to be set.
The Chairman reiterated that it was not the responsibility of the Committee to set licensing fees, but that the Head of Housing and Public Protection and Cabinet Portfolio Holder for Housing and Environmental Health were looking for a steer from the Committee to inform their future decision-making.
The Chairman asked the Group Accountant to explain the concept of zero based cost accounting mentioned throughout the report. The Group Accountant advised that, instead of basing fess on historical budgetary information, the fee setting process would start from scratch. All of the processes would be identified and given an hourly rate, which would be multiplied with the officer time spent to give the fee/cost. The number of applications for each licensing activity would then be multiplied by the fee/cost to give the income target. Previously, the convention had been that the next years figures were routinely increased in line with inflation.
The Committee asked a number of further questions, which were answered by officers.
Prior to debating the report, the Chairman and a number of other Committee Members commended the Officers on the production of a thorough and comprehensive report.
In debating the report, the Committee was supportive of the general principles for the setting of licensing fees in that they should generally seek to recover all lawful costs but pay regard to the need to promote local economic growth; an analysis of licensing costs should be undertaken every three years, but in the years in between cost reviews fees should be subject to inflationary increase; enforcement activities in respect of unlicensed businesses/individuals should continue with the associated costs being financed from the General Fund; and enforcement activities should be periodically reviewed to ensure that they were being delivered in the most cost effective manner.
The Committee spent a time debating the under/over recovery of full cost within existing licensing fees and charges. At the conclusion of the debate, the officer recommendation was supported, in that any under/over recovery of full cost within existing licensing fees and charges should be rectified without undue delay, where legislation allowed. However, where this may result in a significant increase in a licence fee/charge, then consideration would be given to a phased introduction of the new levy.
The Cabinet Portfolio Holder for Housing and Environmental Health thanked the Committee for its deliberations, and stated that he would take on board its resolutions in future when setting licensing fees in consultation with the Head of Housing and Public Protection.
RESOLVED: That, having considered the criteria suggested within the report, the following principles for the setting of future licensing fees and charges be supported:
(a) licensing fees and charges should be set having regard to the need to promote local economic growth provided that they are consistent with the following objectives:
(i) That the local Council Tax payers does not, unless provided for by law or decision of the Council, subsidise the operating costs associated with businesses or other trading entities (i.e. the Council seeks to fully recover the lawful costs licensing activity);
(ii) the Council may not fully recover its lawful costs associated with licensing activity if a) this would result in significant hardship to third parties, or b) the effect of fees or charges associated with licensing may encourage unlicensed activity and where formal enforcement is unlikely to be an effective control, or c) where the Council specifically wishes to encourage the growth a specific licensable activity;
(b) an analysis of licensing costs, including detailed analysis of all recharges, should be undertaken every three years vis-à-vis licensing fees and charges;
(c) in the years between cost reviews, fees and charges should ordinarily be subject to the Councils published inflationary increase;
(d) any under/over recovery of full cost within existing licensing fees and charges should be rectified without undue delay, where legislation allows. However, where this may result in a significant increase in a licence fee/charge then consideration will be given to a phased introduction of the new levy;
(e) that enforcement activities in respect of unlicensed businesses/individuals should continue with the associated costs being financed from the General Fund; and
(f) that enforcement activities are periodically reviewed to ensure that they are delivered in the most cost effective manner including, where appropriate, the use of other internal departments or external statutory bodies.
REASON FOR DECISION: To recognise the relevance of the Councils licensing fees and charges to the economic vitality of local businesses; to ensure that the fees and charges set by the Council in respect of its licensing services fully reflect the living within our means priority for the District as adopted by Full Council on 5 September 2013; to ensure that, where legislation allows, fees and charges are set at a level to allow full permitted cost recovery to take place; and to ensure that the costs of enforcement activity as regards unlicensed businesses/individuals continues to be met by the General Fund.