Licensing (Fees) (Scotland) Regulations 2007 (SSI 2007/553)
We come now to item 2 and the first of a few pieces of subordinate legislation that we have to consider. Last week, the committee gave preliminary consideration to the Licensing (Fees) (Scotland) Regulations 2007. A number of committee members expressed concerns and it was agreed that we should invite the Cabinet Secretary for Justice to give evidence today. Members have received submissions from the Convention of Scottish Local Authorities, Punch Taverns and the Maclay Group; an updated submission from the Scottish Beer and Pub Association; and further e-mails from interested parties, which were circulated on Monday.
I am grateful for the opportunity to talk about the Licensing (Fees) (Scotland) Regulations 2007. They are the final substantial set of regulations to make the new licensing system work that the committee is being asked to consider. The new system was the creation of the previous Administration and many committee members will recall the debate that led to its acceptance. Since the election, we have been happy to continue the work started by our predecessors.
Thank you. Committee members will now ask questions.
Good morning, cabinet secretary, and thank you for that introductory discourse, much of which no one could really disagree with. You said that the trade needs to meet the system's running costs, that the council tax payer should not subsidise the licensed trade and that there should be full cost recovery, and I agree with you. You also say that the fees are proportionate.
There are two points. First, I do not set the fees, apart from in some cases such as the personal licence. We set a maximum, and it is up to local licensing boards to set a level that they think is proportionate and appropriate for their area. That is appropriate because the local licensing boards know their areas, and cost recovery can vary between small rural authorities and large urban authorities. We set the maximum and the bandings, but we do not set the precise amount, which remains for local licensing boards to do.
I hear what you say, which is that the councils spoke with one voice through COSLA. Obviously, the Government must consider evidence from all interested parties, but why did you give more weight to COSLA's evidence than to that of the trade? What convinced you and the Government that COSLA's arguments were better or had more weight than the trade's arguments?
A variety of factors were involved. One is that I have great faith in local and national democracy. Councils consist of elected representatives who have a mandate to speak for their communities; they do not represent the vested interests of a particular section of a trade that operates to achieve profit levels. The ethos of the 2005 act is to deliver a variety of matters, from public safety through to—with respect to the regulations before the committee—the Nicholson committee's desire, which pre-dates the 2005 act, for full cost recovery for the licensing system. We believe that licensing standards officers will be a vital tool in the armoury of licensing boards and will help to ensure that the situation improves. We also believe that the costs of that tool must be met. That is why I believed and took on board the views of councils from across the political spectrum.
Again, I hear what you say and I have taken cognisance of it. However, would it not have been better for all concerned—the Parliament, the trade and local government—if the Government had laid the regulations before the last possible date for doing so? What reassurance can you give the trade that what you say today will turn out to be the case and that it should not worry?
I do not understand the final part of your question about the trade worrying. The setting of fees is a matter for local licensing boards, which must balance the interests of their communities against those of the trade. We set the maximum fee level and, with the Accounts Commission, we will review how things are operating in due course. However, the fees are ultimately a matter for the licensing boards; I am happy to trust their judgment of what is necessary for their communities.
Indeed, and I have seen and heard you in the media as well, cabinet secretary. I understand what you are saying, but do you think that it was good practice that an interest—in this case, the licensed trade—should be given notice of a substantial change to maximum fees on the day on which the regulations were laid? Do you call that notice?
I do not see how else I can carry out a consultation process, unless I have a pre-consultation process that is then followed by a further consultation process. We went out to consultation, and I had to balance the views of local authorities, including Labour-led authorities in Glasgow and elsewhere, with representations from the trade.
I am obliged.
Cabinet secretary, let me take you back to your comment that you had to come down on the side of the responses that you received from the licensing boards. What information did your officials provide to you to ensure that you could interrogate effectively the proposals that were put before you? I am sure that you would not have taken your decision unless you had been provided with compelling evidence from your officials that there was a need to increase the fees.
I was provided with a lot of information. North Lanarkshire Council said that, without an increase in fees, it would be underfunded and that either the costs of licensing standards officers would be passed on to residents or a less-than-effective enforcement service would be delivered. I thought that that was a worrying statement. Shetland Islands Council indicated that there would be underrecovery and that a flat fee would be unlikely to achieve cost recovery, given the small number of licensed premises in that area. I have a great deal of sympathy with that point, given the council's location. Aberdeen City Council said that the cost of collecting annual fees would be as much as the fee itself.
I ask you to answer my question. I appreciate that you have received conflicting evidence from the Scottish Beer and Pub Association and local authorities. I do not doubt that authorities—Glasgow City Council in particular—provided information with the best of intentions and as accurately as possible. I am sure that every consultation that the Scottish Government undertakes is interrogated effectively. However, my question is whether you interrogated the information. Did your officials do that effectively? How did they reach the calculation that they reached?
I have—
The question is straightforward, cabinet secretary. I am not asking for another preamble about Glasgow City Council's response. The question is clear: how did you reach the decision? On the conflicting evidence, did your officials provide you with a briefing paper? If so, will you be kind enough to provide it to the committee so that we can ensure that you interrogated the proposal effectively?
The question is predicated on a false assumption. You seem to be asking me to interrogate those who submitted the information on the ground that you doubt their veracity.
I am not saying that.
Well, you asked what interrogation I had carried out. If, as Cabinet Secretary for Justice, I receive a communication from Glasgow City Council on behalf of its licensing board in which the council says that it faces a £300,000 shortfall, it is not appropriate for me to say, "I have reason to believe that you are lying." I do not think that the authorities were lying. I took at face value the representations from local authorities and from the trade. It would be highly inappropriate for the department or the cabinet secretary to work on the assumption that the information that we are given is false, misleading or anything other than accurate. Therefore, my answer is no, I did not interrogate them.
You do a great disservice to the question, cabinet secretary. I asked an objective question that was not at all predicated in the way that you suggest. I asked whether you interrogated the representations that you received in the consultation—
And I answered you.
Clearly, you did not. The committee should consider that when it makes its decision.
Absolutely, but the polluter-pays argument is a separate matter, which we will address in due course and to which we are committed fully, as I have said publicly and to the committee. However, of course there is a broader ethos or theme that runs through this debate, which is that the polluter should pay. At the end of the day, it is inappropriate for the trade to cover only 63 per cent of the costs of the licensing system and for the council tax payer to have to deal with the balance of 37 per cent. That is unacceptable. We believe that those who profit from the sale of alcohol should meet the costs arising from the sale of alcohol.
I want to follow up a point that Mr Martin raised. When the regulations first came before the committee, we received correspondence from you that indicated that at some stage in the process the Accounts Commission would be asked to carry out a review of the charges imposed by local authorities to ascertain whether they were reasonable and that, in the event of it being found that the fees charged were not reasonable, licensees and applicants would be given the appropriate refund. Bearing in mind the concerns that Mr Martin articulated, did you not think it appropriate that the Accounts Commission should carry out some preliminary work prior to your laying the regulations, to see whether the fees that local authorities were likely to charge would be appropriate in all circumstances?
No. That would have been premature. We will look at how the system beds down first. The purpose of the Accounts Commission is to review, not to speculate. We will be happy to see how boards adapt to the new system; we will review it after it comes fully into force—not this year, but in September 2009.
Good morning, cabinet secretary. This morning you backed up what you said in a letter to the convener by advising us that, under the current licensing regime, only 63 per cent of the costs are met by the licensing fees set. That being the case, will you confirm whether the fee levels suggested in the consultation document, which was issued last year, would create a self-financing system?
The whole purpose of the consultation was consultation. There was only anecdotal evidence about the position, so we issued a consultation to test the water. What we got back was one side saying, "This is far too much and you are squeezing our profit margin," and the other side saying, "This is inadequate and it won't cover our costs." The purpose of a consultation is to find out views. If information is not available, you have to make inquiries. The information that we included in the consultation was intended to provide the spark for the debate.
You have not answered my question. You have said that you accept information that comes to you from local authorities. I would expect the figures and facts in a Government consultation that is issued to local authorities and the trade to have been costed. Would the fee levels suggested in the consultation document have provided a self-financing licensing system?
I cannot possibly speculate on that. I do not know how many licensing standards officers a particular area might want. We as a Government could speculate that Shetland Islands Council might want half a licensing standards officer—it might want to share one with another area—or that Glasgow City Council might want one. However, authorities might come back to us and say that they want three or four such officers. There is some information that we cannot possibly know.
I have made no suggestions; you and your officials are making suggestions on licensing fees.
You are quite right; we had to base our figures on evidence. We based them on research that was carried out in 2005, when, as you know, we were not the Administration. We based the consultation on the most reliable information that we had at the time, which was the report that had been instructed by the Liberal-Labour Executive.
I am grateful, because I think that we have moved on a little. Are you saying that the figures in the consultation document that was issued last year were based on information in the Nicholson report, other information that the previous Scottish Executive had and inflation—
They were based on the research report, which had nothing to do with inflation.
If they had "nothing to do with inflation", why did you just mention inflation?
The consultation was based on information in the research report of 2005. We then had to consider the representations of local authorities, including North Lanarkshire Council, in your area, which said that it would be underfunded—
I think that you have misunderstood the question. Convener, I think—
Let the cabinet secretary finish.
It might be that local authorities took into account inflation between 2005 and 2007—I do not know. However, I can say that North Lanarkshire Council said that on the basis of the figures in the research report that was commissioned by the Labour-Liberal Executive, it would be underfunded and either the costs of licensing standards officers would be passed on to residents or a less-than-effective enforcement service would be delivered. I have no doubt that that is not what you want for the residents of North Lanarkshire, which is why I supported the representation that its elected councillors made.
Are you saying that the consultation that went out last year was based on the findings in the research report and inflation between 2005 and—
Inflation is a red herring. The consultation was based on the research report.
We will have to check the Official Report. It was you who threw in the point about inflation in response to my question.
I mentioned inflation in the context of making the point that there was inflation between 2005 and 2008, whatever level it ran at, which might or might not have been a factor that influenced North Lanarkshire's desire for an increase. As I said, North Lanarkshire Council wanted to ensure, through LSOs, effective enforcement and cost recovery.
I turn now to North Lanarkshire Council's submission. I accept that North Lanarkshire wants a self-financing system. The council expresses concern about basing the proposed increase in fees on rateable value. It is concerned about who would determine which band an applicant would fall within. Would the applicant be expected to provide the necessary information? Would the licensing board be expected to check the information that the applicant gave? How would it go about doing that?
That would be an administrative matter for the board. Rateable values are dealt with by local authorities, and it appears appropriate to me for such matters to be dealt with by local authorities, not nationally. It is not rocket science for the licensing board convener to get the information by speaking to whomever in the local authority deals with rates assessment. That is a straightforward administrative matter, which any local authority would be perfectly capable of dealing with.
Some people have suggested to me that the reason for the increase between September and December is more to do with shortfalls in the Government's budget and what it has been able to give to local authorities, rather than with having a fair and equitable self-financing system. How would you respond to people who might suggest that to you?
That is total baloney. The system is to be self-financing. The intention was never to get any money from central Government. It was clear that the consultation document was based on erroneous information, which was dated or which did not work out. We required to increase the fees that were available to allow North Lanarkshire to deliver the self-financing operation. There is no central Government involvement here, apart from in setting the maximum fee level. Otherwise, the system is up to the local authority. Ever since the Nicholson review, it has been anticipated that the costs should be met by those who profit, through the till or across the counter. That remains the commitment of this Government, as it was of the previous Administration.
Good morning, cabinet secretary. I will make a comment before I ask my question. It is fair to say, from both this question session and last week's meeting, that all members of the committee want the system to be self-financing. We do not want the licensed trade to be subsidised by the taxpayers and local authorities of Scotland. We are all trying to get to the same end point, where we have a fair system. It will be fair to all sides if it is based on transparency, but there seem to have been a number of points along the way where we have had a distinct lack of transparency.
I probably cannot answer that; you would have to ask the individual local authorities. If we had a consultation document but I simply plucked figures from fresh air, that would be inappropriate and there would be outrage. The only available empirical evidence was from the research document. That document was produced in 2005, before the Licensing (Scotland) Act 2005 was passed and perhaps before certain matters had been fully developed. I have no reason to challenge the accuracy of the report or to believe that the way in which it was produced was flawed, but I have to consider the representations that are being made now.
Licensing boards are quasi-judicial. I used to serve on a licensing board in Edinburgh and the party-political affiliation of the convener is a total irrelevance. They are being asked to make a judgment—based on the judgment of their officials—on what the costs of the upcoming licensing system will be, and everybody's intention is to achieve the recovery of the costs of the administration of the system. Whether the convener is Labour or Liberal Democrat is probably irrelevant if they are being asked the same question—namely, what will be the cost of the administration of the new system if it is to recover fees?
Was there a question for me there?
No. Your answer to my earlier question was a slur on conveners of licensing boards, so—
I have to repudiate that, convener. It is only fair to put that on record.
You will have a chance to repudiate it in a minute, but let Ms Smith finish.
Councils have been asked a simple question: what will the system cost you? They gave one set of figures, which formed the basis of the consultation document that the Scottish Government sent out. People then responded on the basis of the consultation document, and local authorities have changed their position. The trade has been working on the assumption that the consultation document contained the research on which your work is now based. Local authorities have changed their minds and asked for more money, and you have listened to them, but you have not listened to the trade, which is saying that the fees are now too much and represent a quadrupling of the fees. That is not a particularly transparent way to do business—unless you go back to the trade and give it a chance at least to comment on the fact that, instead of doubling the fees, you are quadrupling them.
You raise significant issues. I make it clear that neither I nor the department have ever cast a slur on licensing boards. Indeed, we are taking them at face value. I believe in their veracity. We are not interrogating or challenging them, because I believe that they have represented their local authorities appropriately. It is when people suggest otherwise that aspersions and slurs are cast.
Believe me, if that is what I was saying, I would say it.
We think that the matter should be left to local authorities.
I have a specific point about something that may be missing—the regulations do not appear to cover fees for the transfer of a licence.
I am told that regulation 11 provides for that.
Right—that is fine.
The whole ethos of the Nicholson review was about cost recovery, and that was the basis of the 2005 act, which was passed under a previous Administration. We would certainly expect a board that had overcharged to seek to provide a reduction in fees in the following years. Such matters are set in the act. If that board did not do so, the Accounts Commission would, doubtless, pick that up in due course.
After we discussed the regulations last week, we wrote to you about specific issues on which we required clarification, one of which was cost. You kindly replied on 17 January and, in paragraphs 9 to 12 of your letter, you clearly set out costs for an average pub. In paragraph 12, you concluded:
I do not think so.
You considered costs over 10 years. If the issue had been that the arrangements would cost the average pub £130 or so extra per annum I do not think that the committee would have been tremendously sympathetic. However, we had representations—which you have seen—from two public houses, one in the Borders and one in Ayrshire, where turnover is low and the impact would be significant.
In paragraph 11 of my letter, I gave further information. I am not sure what more information you seek from us.
I am not seeking further information; you provided comprehensive information. My concern is that the conclusion that you reach in paragraph 12, which is arithmetically correct, is perhaps slightly misleading, in that you consider a business's operating costs over 10 years. Do you agree that if you consider operating costs over three years, the amount that the business pays will be disproportionately high?
We had to take a position, and that is the one that we put forward. I can only go back to what I said in my introductory remarks. If we do not bring in the regulations, a small rural pub will continue to pay the same fee as others pay. We are providing a system in which fees reflect rateable value. The approach is not 100 per cent accurate, but it is better than a simple blanket rate that does not take into account criteria that are more accurately reflected in the rateable value. It is probably the case that some pubs will face difficulties. However, many will benefit, because the system will be loaded against the hypermarkets and super-pubs, not the smaller outlets. That seems perfectly appropriate.
You said that the Accounts Commission will review the situation in 2009. If it turns out that a few pubs in rural communities in Scotland have closed because of the new arrangements, will it be possible to introduce a new band for businesses with a rateable value of under £11,500, to help rural businesses?
We would be more than happy to consider a change in the banding, whether that means providing higher or lower bands. There would be complexities, but we do not rule out doing that. We should see how the new arrangements bed in. All parties wanted the approach in the 2005 act and local authority licensing boards desired the new arrangements. If there is a gap that we are failing to address or if problems arise, we will be more than happy to consider what can be done.
A great deal of the discussion has been about how the numbers doubled. It seems that the numbers came from the local authorities. I have a sneaking suspicion that I am not the only former councillor and licensing board member on the committee. I cannot help wondering whether the local authority licensing boards' first calculations were made on the back of an envelope but the chief executive came along later and said, "Hey guys, that is the marginal cost. The full cost is double that figure." That is what tends to happen.
I think that we have to leave it to local democracy. As a representative of the city of Edinburgh, I add only that I remember being flabbergasted when Tom Wood, from the drug and alcohol action team, pointed out that there were more licences in Edinburgh than there were in Glasgow, because we have a significantly greater number of corner shops with alcohol licences. Although Edinburgh has a smaller population than Glasgow, we have more liquor licences.
So it might just be a volume effect, in more ways than one.
That is helpful.
York Consulting carried out its research in 2005. Have you asked it to comment on the issues that respondents raised in the latest consultation exercise, which took place in 2007?
No. The Administration takes the view that we are sick and tired of consultations, studies into consultations and consultations on consultations. We have had a consultation, to which local authorities and the licensed trade have responded. We have decided that we will see how the system beds down. If there is overcharging, I hope that that money will be repaid through reduced fees. As matters come out in the wash, the Accounts Commission will be able to review them. If there are problems, as Stuart McMillan has said, the Administration can address them. We have to move on. We are in 2008. The 2005 act is bedding in and a decision has to be taken. We do not need further consultations and studies.
You said that you based your assumptions on the York Consulting document of 2005. I am not asking you whether you carried out another consultation exercise; all I am asking is whether there was any communication between York Consulting and your officials to see how the figures were arrived at and examine why they had to be quadrupled. Was there any communication with York Consulting? We must have paid it a lot of money in the first place. Surely we could go back to it and ask for further information.
Your colleague Margaret Smith said that these matters are quasi-judicial. The convener will know the legal term "the best evidence rule". The best evidence here is the information from the licensing boards. Why would I go back to York Consulting to ask it to clarify the position that it got from an individual licensing board, when the individual licensing board has given me information directly? The best evidence is the information provided by the licensing board. I am not criticising or casting aspersions on York Consulting, which did what it did in 2005. If you are asking me whether I am going to pay York Consulting more money to clarify what the licensing boards are saying, the short answer is no. I had the information directly from the horse's mouth and I accepted it.
Was there any contact with York Consulting—yes or no? I am not asking whether you paid any more money or anything like that. All I am asking is whether there was any communication with York Consulting in respect of its document of 2005—yes or no?
No. We had the information from the licensing boards, which we accepted.
Good morning, cabinet secretary. One of the problems here is that the devil is in the detail in relation to full cost recovery. You said earlier that the Accounts Commission would be asked to review the situation. What review, if any, will your department carry out of the job remits of licensing standards officers? I accept the full cost recovery principle, but the issue is what exactly the officers will be expected to do as part of their functions. You said earlier that, depending on the level of pay that Glasgow or Edinburgh may decide to award to the position—one may decide to award £20,000 and one may decide to award £40,000—the full recovery costs will increase dramatically from authority to authority. I am concerned by the number of authorities that are saying that, because of the costs involved and because of the decisions that have been made by licensing boards, they need to charge the full rate as opposed to the reduced amount that Edinburgh is going to charge. Will your department monitor the implementation of the regime, in addition to the review that the Accounts Commission will conduct when the system is bedded in?
We will consider the information as it comes in. It is a fair question, but we must provide some flexibility for local authorities. For example, some local authorities may take the view that they cannot justify a full-time LSO and may seek to tie the role in with environmental responsibilities or with trading standards. That is a matter for them, and the wages will depend on the nature of the job. We must try to ensure best practice. Much of that will come through the Accounts Commission's review.
I am looking at your letter to the convener dated 17 January. You confirm in paragraph 5, on "Research undertaken", that the independent research
No, we did not do that because, as I say, we recognised that the system had changed and that time had moved on. We had to accept the information that we were given. The only logic in what you are suggesting is that we should challenge local authorities and accuse them of getting their figures wrong. Frankly, I accept the information that we received. I do not see why the department should have sought to compare and contrast the two sets of responses when the local authorities clearly thought that matters had changed significantly. Only one local authority did not respond to the initial consultation.
I ask the question because you say in your letter that the preparation of the regulations "has been assisted by" the independent research that was carried out. I would have thought it reasonable to compare the information, but you are saying that you accepted without question the information that you received from the licensing boards in the latest consultation.
The information that we accepted from the review and the consultation was, for example, that the fee level should be predicated on rateable value. That is what came through and that is what we accepted. Local authorities accepted the recommendation of the review that the fee level should be predicated on rateable value and other recommendations, and we did not disagree with that at the time.
The questions that York Consulting asked local authorities before the research was done were exactly the same as those that were asked in the later consultation. Local authorities were asked about the costs of administering the system and the fees that they would require to cover those costs. Nigel Don speculated that once the situation is clearer, people might take a different view, but local authorities were asked what they thought the costs would be under the new system and after taking into account the cost of licensing standards officers. Local authorities gave York Consulting answers, which it used.
The counter-argument to that, which is simple, does not blame or suggest ill-will by local authorities. The fee review was conducted early in the passage of the bill that is now the act on which the system is predicated. When the research was undertaken, the bill that was being taken through Parliament by George Lyon MSP—the relevant minister, who I recall was a Liberal Democrat—was predicated on each licensing board having one LSO. That subsequently changed.
Members have no more questions, so we will move to agenda item 3, which is the motion in my name. It reads:
Meeting suspended.
On resuming—
Management of Offenders etc (Scotland) Act 2005 (Members' Remuneration and Supplementary Provisions) Order 2008 (Draft)
Agenda item 4 is consideration of a draft order, which is subject to the affirmative procedure.
Community justice authorities are independent statutory bodies and, as such, part of neither local nor central Government. Therefore, they cannot be audited under existing arrangements that apply to other governmental bodies. We have consulted Audit Scotland on the most effective mechanism for ensuring that their accounts are properly audited, and the draft order makes explicit the requirement on CJAs to submit their accounts.
That the Justice Committee recommends that the draft Management of Offenders etc. (Scotland) Act 2005 (Members' Remuneration and Supplementary Provisions) Order 2008 be approved.
There being no questions or comments, there is no need for the cabinet secretary to wind up, unless he is otherwise minded.
I have no desire to do so.
Motion agreed to.
That is the conclusion of the cabinet secretary's involvement in the meeting. I suspend the meeting briefly while he and his party leave.
Meeting suspended.
On resuming—
Inquiries (Scotland) Rules 2007 <br />(SSI 2007/560)<br />Licensing (Transitional and Saving Provisions) (Scotland) Amendment Order 2007 (SSI 2007/573)
Gambling Act 2005 (Review of Premises Licences) (Scotland) Amendment Regulations 2007 (SSI 2007/574)<br />Scottish Police Services Authority (Staff Transfer) (No 2) Order 2007 (SSI 2007/576)
There are four negative instruments to be considered under agenda item 5. Are committee members content with them?
The committee will now move into private.
Meeting continued in private until 13:00.