A blunt tool, a punitive tax, and a source of concern and frustration are all words that have been used to describe the Late Night Levy (LNL).
Introduced in October 2012, under the previous year’s Police Reform and Social Responsibility Act, the idea behind the levy was that local councils – if they choose to do so - would be able to impose a change on businesses selling alcohol between midnight and 6am.
The funds raised – which are charged based on rateable value bands – would then be split approximately 70/30 between the police and the licensing authority, respectively, to help with the cost of policing crime and disorder that was directly related to the sale and supply of alcohol in the area.
While the number of councils that have decided to adopt the levy has been “mercifully low”, it’s had a profound effect on the areas in which it has been imposed, Kate Nicholls, chief executive, UKHospitality, tells MCA.
“And even where it’s not in place, the looming threat of the levy hangs heavily over the sector,” she says.
Many operators have adapted their openings hours in order to avoid payment. Licensing solicitors Poppleston Allen made a freedom of information request several years ago and found that in Newcastle, 135 premises made variation applications in order to avoid being hit with the extra payments.
The introduction of the levy has also meant businesses that have considered opening for longer, particularly only for certain occasions or certain days have decided against it, as the levy is a flat rate, regardless of how many times alcohol has been sold during that time period over the course of a year.
Emma McClarkin, chief executive, British Beer & Pub Association, says the levy does not solve the issue it seeks to and is “a punitive tax which unfairly places burdens on pubs, bars and clubs”.
To date there have been 12 councils in England who have adopted the levy – far less than the government’s prediction of 80 – and out of those, two (Cheltenham and Southampton) have since dropped it, and others are considering whether to do the same. For example, the licensing committee for Nottingham City Council met last month to discuss its future and has decided to consult on a proposal to remove it.
“We would encourage other authorities to look closely at the levy and consider how fair it is, as well as its negative impact on hospitality after an extremely tough two years,” McClarkin tells MCA.
‘They threaten stability and investment’
“Levies are indiscriminate and a blunt tool, unfairly heaping financial pressure onto venues that are already contributing financially to the success of their areas, and penalising hardworking businesses,” says Nicholls. “They threaten stability and investment and are unlikely to effectively tackle any issues that an area may have.”
She says that the lack of transparency around how and where levy funds are used makes them all the more disliked.
According to Suraj Desor, associate solicitor at Poppleston Allen, it is fair to say “there has not been great enthusiasm for adopting the levy”, with many councils sharing operators’ views that it lacks flexibility, not least in the event of unforeseen circumstances like the pandemic.
“Instead, many within the trade feel Business Improvement Districts (BIDs) offer a more effective, targeted approach, where businesses are part of developing solutions which can target those areas of greatest concern and needs within a council area,” Desor explains.
“This view is most evident in the case of Cheltenham where the levy was adopted but only collected half the revenue anticipated and was swiftly replaced with a BID (adoption of a local BID was a key consideration in the decision to remove Southampton’s levy).”
Will all this in mind, is a new approach needed? A chorus of trade bodies believe so. Even the House of Lords Committee reviewing the Licensing Act has recommended as much.
The licensed landscape is very different post-Covid, creating a new environment with fresh approaches to licensing now required, Nicholls says.
The need to replace outdated burdens has come into even sharper focus during and post the pandemic, with UKHospitality continuing to campaign for the removal of the levy, which it believes it “irrelevant in a post-Covid world”.
“We made this clear in both our historic and more recent submissions and oral evidence to the House of Lords Committee reviewing the Licensing Act and agree with its finding that the Late Night Levy had ‘failed to achieve its objectives, and should be abolished’, with best practice initiatives favoured in its stead.”
Michael Kill, chief executive of the Night Time Industries Association also notes the findings from the House of Lords review that the Late Night Levy has not achieved its purpose, “and feedback from the industry would suggest that in the current environment it is seen as an unnecessary and unjust tax on late night economy”.
McClarkin says that, in reality, local partnerships such as National Pubwatch and Best Bar None can be much more effective in tackling anti-social behaviour and are proven initiatives the industry continues to fund and support.
‘Licensing needs to be supportive of high street regeneration’
Nicholls believes the opportunity should be taken for a post-Covid reset around licensing policies – many of which will not have been reviewed in the past five years. A lot of policies will have been put in place based around saturation of late-night venues in the area, but with the industry seeing a 10% reduction in the number of licensed premises over the course of the pandemic, this may not stack up now.
The government has already made some changes to the levy, through the Policing and Crime Act 2017, which introduces flexibility to allow councils to ‘localise’ the levy, rather than apply it to whole council areas, as well as expanding the levy so that it could also apply to late night refreshment premises, for example kebab shops – which serve hot food and operate beyond midnight, explains Desor.
“Yet a few years on these changes have still not come into force, with a government consultation on the level of charge appropriate for late night refreshment premises still required,” he says.
“In my view, if the government retain the levy and these changes come into effect, councils put off by the inflexible nature of the levy may have a renewed interest – even then, whether this ‘levy lite’ will be preferable to BIDs only time will tell. But until then appetite for adoption for the levy is likely to remain mild at best.”
The House of Lords recently carried out a further review of the Licensing Act – the first since 2017. UKHospitality submitted evidence to the review in February and is waiting to hear back from government with its response.
The sector needs a licensing regime that is “supportive of high street regeneration, of giving business the head space and agility to be able to response to consumer demand and is up to date and fit for purpose”, Nicholls says. Let’s hope the government listens.
