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Morning Briefing for pub, restaurant and food wervice operators

Wed 12th Feb 2020 - Legal Briefing

Government must speed late-night levy reforms or scrap this unfair tax by Patrick Robson

As the government has finally cleared the Brexit hurdle, it would be nice if it devoted time to reforming a measure that has caused frustration and controversy across the licensed hospitality sector – late-night levies.

Introduced in 2012, the levy enabled local licensing authorities to charge licensed premises that stayed open after midnight anything from a few hundred to a few thousand pounds. The move prompted some operators to cut their hours, with others ending late-night opening altogether.

Almost three years on from the Policing & Crime Act 2017, which proposed changes to the levy, there has been little movement on making it a fair and effective tool for local authorities and turning it into something that might ultimately benefit late-night operators.

That inactivity, coupled with a trickle of levy implementations and the lack of evidence of town centre improvements thanks to the extra revenue, suggests there’s a strong case for scrapping it completely. 

The levy has been taken up by only 11 of England’s 343 local authorities, with London boroughs adopting half of those. Many large metropolitan councils, Leeds for example, decided against introducing it, while Cheltenham Borough Council dropped the levy after three years when it only generated 39% of the total revenue forecast, partly due to some premises reducing hours to avoid paying it.

Two main things render the levy unfair – it’s an extra burden on pub and bar operators, which already pay rent and business rates; and revenue generated by the levy is typically split 30/70 by councils and regional police forces, with the police allowed to spend their share on what they want. Critics of the levy are justifiably unhappy the police aren’t forced to spend that money on initiatives to improve and enhance the late-night economy in their area. 

Then there’s the fact some operators might open until midnight for 364 days of the year, only extending their hours by 30 minutes on New Year’s Eve. If the levy is in force and New Year’s Eve isn’t exempted, half an hour extra on one night of the year could cost them up to £4,000, which doesn’t seem worth it – or fair. 

While operators are vocal in their opposition to the levy, those affected by it have no forums in which to make themselves heard by councils and often find it difficult to get in front of licensing officials to air their views. It means most of the effective lobbying is carried out by trade bodies such as the British Beer & Pub Association and UKHospitality, with both critical of the levy from the outset.

Given their opposition, councils’ seeming reluctance to impose the levy and the snail-like take-up, there’s surely a case for consigning the levy to the bin? It has proved popular among London councils, where it’s a valuable source of extra income as greater numbers of late-night operators stump up thousands of pounds a year.

However, for provincial councils the cost of setting up and administering the levy outweighs the revenue it generates. Back to Cheltenham, where the borough council introduced the levy in 2014. Three years later it was scrapped, replaced by a Business Improvement District (BID) in which all businesses pay a charge to cover the cost of night-time services such as extra police and street pastors. Cheltenham was the first local authority to ditch the levy – and surely won’t be the last.

BIDs, which take a more co-operative and collaborative approach to the late-night economy, appear to be more popular with operators because they offer a much more transparent use of funds generated than the levy, resulting in real commercial benefits rather than just more police or improved security.  

In 2017, the House of Lords said some of the reforms proposed in the Policing & Crime Act could improve the levy but was highly critical of it as a revenue-generating tool, stating in its current form it should be abolished. Since then, nothing of note regarding the levy has been enacted. 

With no sign of movement on reforms to the levy, the slow take-up by councils looks like continuing, with only one or two a year getting on board. The London borough of Southwark put it in place in September, with Redbridge expected to introduce it in May. 

However, it might be the general lack of appetite for the late-night levy that eventually kills it. Deeply flawed, unfit for purpose and with too little transparency about what the police’s share of revenue is spent on, the government must push through their promised reforms or abolish the levy.
Patrick Robson is an associate at leading licensing firm John Gaunt & Partners

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