Late Night Levies: A sledgehammer to crack a nut

The LNL was thrust upon the licensed trade in October 2012 under the previous year’s Police Reform and Social Responsibility Act.

The idea was that it would be a local power for councils to impose a charge for those selling alcohol between midnight and 6am and each local authority could choose whether to embrace this.

The levy must currently apply throughout the local authority’s jurisdiction so it cannot just target micro-zones where extra policing is deemed to be really necessary.

Poppleston Allen made Freedom of Information requests to participating councils a year after each introduced the LNL in their areas. In Newcastle, for example, 135 premises made variation applications to reduce their hours to avoid payment.

In Islington, it asked for crime figures since the introduction of the levy on 1 November 2014 to 31 October 2015. The total number of crime incidents during the levy period was approximately the same as the identical period the previous two years.

Cheltenham confirmed the revenue raised from the levy was less than 76,000 after expenses – only 39% of the revenue it had estimated it would receive.

Keith Knowles, chief executive and founder of Beds & Bars, has four venues in Southwark, one of the latest councils consulting on adopting a levy. He believes a late-night levy would be disastrous for hospitality venues.

He says: “We have invested £11m in the last four years in London – £8m of which has been in Southwark.

“In that time we have seen a 47% increase in the government take of our profits through a myriad of operating costs and taxes. Southwark’s night-time economy is the best in London and its venues are fantastic local assets.”

Another extra cost via a LNL would put it all at risk, he complains. “It’s a death by a thousand cuts, and would suggest a lack of understanding of the value of hospitality venues.”

Councils have the power to exempt premises with overnight accommodation, community premises, country village pubs and those in Business Improvement Districts (BIDS). They can also offer a discretionary 30% reduction for premises in certain circumstances.

The levies charged are based on rateable value bands and range from £299 to £4,400 per premises per year.

The police are supposed to get at least 70% of the net revenue and the licensing authority can retain up to 30% to fund other activities besides policing as long as it is related to tackling alcohol-related crime and disorder and services connected to managing the night-time economy.

The Home Office has argued that applying the levy to the whole local authority area is the fairest way for all premises that benefit from selling alcohol in the late-night economy to contribute towards the extra enforcement costs generated by the practice.

It has been particularly keen to avoid the mistakes of Alcohol Disorder Zones which local authorities shunned because they were deemed too bureaucratic.

However, operators believe that charging all sellers of alcohol in an entire council area regardless of genuine need to increase policing is wrong.

Peter Terry, group managing director of Disco Bars Group, says: “It would be fairer to be able to select areas within local authorities.”

Indeed, changes under the Policing and Crime Act 2017 awaiting a Home Office consultation would give councils the flexibility to do just that.

Suraj Desor, solicitor at Poppleston Allen, says: “Localisation is good for certain premises that may feel the Late Night Levy unfairly applies to them when really the crux of the issue may be the city centre and they are located outside.”

Peter Marks, chief executive of The Deltic Group, however, disagrees that localisation might be better – at least, not for his business. “They will just target nightclubs.

“Someone could spend their evening at a country pub, drive into the town and spend the middle evening in a very nice bar and they then could come to be for two drinks and I’m going to be targeted for dealing with the end of the night”.

He says this is unfair when most of the drinking might have taken place earlier in the evening at other venues. “This is hugely frustrating.”

Terry says the legislation to date has been “ineffective” and it is no surprise that only 10 councils have taken it up.

He says the level of fees will not make any difference to effective policing of the night-time economy and regards it as just another cash cow like parking fines.

“It doesn’t necessarily compute that if you pay a late night levy you’re going to get coppers”, he says.

Knowles says it is just another tax whichever way you look at it. “How are they going to administer it? We’ve seen as a direct impact of the Conservative Government on hospitality - a 47% increase in what they have taken from us in the past 12 months.”

The legislation also makes provision to impose a levy on late-night refreshment premises – those that serve hot food and drink into the wee hours.

The presence of alcohol arguably risks more antisocial behaviour in certain areas and therefore more heavy policing than outlets selling Red Bull and kebabs but not necessarily.

Local authorities have not all rushed forward to impose a levy to date. Desor says the Government had initially predicted as many as eighty councils would adopt the levy.

Only 10 councils have the levy in place – half of them London boroughs – for the very reason that they do not think all licenced premises should be cash cows for the sins of a few. Another two London boroughs, Southwark and Redbridge are consulting with a view to implementing the levy this autumn.

They are also aware that small businesses not in their main conurbations would be unfairly targeted and might feel forced to give up late trading – not good for a thriving night-time economy.

Desor said: “It’s a sledgehammer to crack a nut. We conducted a survey a few years ago and almost every licensing office I spoke to whether on the record or off the record said exactly that. That’s the reason why only 10 councils have adopted it so far. It’s seen as a bit of a blunt instrument. It’s inflexible.

Newcastle was the first council to enforce the levy November 2013, followed by the City of London Corporation in October 2014. Islington followed suit in November of that year, as did Nottingham and Chelmsford. Then came Southampton in April 2015, Camden, 12 months later, Liverpool, in April 2017, Hackney in November of that year and Tower Hamlets in January in 2018.

Cheltenham, which adopted the levy in April 2014, later revoked it in favour of a Business Improvement District (BID) which is a much better and fairer system because firms vote to participate and benefit from the resultant expenditure.

Jim Cathcart, policy director of UKHospitality, says BIDs are a more acceptable alternative because businesses have more oversight on where the money is spent in their local area.

He acknowledges that proposed changes to the Late Night Levy to allow councils to select specific locations within their area is better than what currently exists.

“If the driver is to get the maximum amount of revenue from a levy, would they necessarily make it as small as possible? I don’t know. You will have some that lose out that will be on one side of the zone and others on the other side.”

Desor says it is more of “a pinch point” for independents and single-operator premises but it can have an impact on larger businesses, too, if they have “a bunch of sites” in a given area and they are all hit with a LNL”.

UKHospitality says some of the councils that have imposed the levy so far have not provided proper evidence for needing to do so.

The trade group’s chief executive Kate Nicholls points out that the levy has been thoroughly dismissed as a credible option by a House of Lords Select Committee report on the Licensing Act 2003.

Piers Warne, legal director at UK law firm TLT says: “The LNL taxes indiscriminately, whether a premises uses the hours on its licence or not, and irrespective of whether they or their customers are responsible for the mischief the Levy is intended to mitigate.

“Fundamentally, it flies in the face of the central principle of the Licensing Act 2003, which is that good operators should prosper and bad operators should be penalised.”