Newcastle’s Late Night Levy – A disaster for local pubs?

All eyes are on Newcastle after the city’s council controversial late night levy was introduced on November 1.

The city is the first in the country – in fact despite a number of towns including Milton Keynes, Warrington and York considering it, the only one so far – to introduce such a scheme.

Pub, club and bar bosses are obviously angry at what they see as a “tax on business”, while councillors and the police say it is right that those serving alcohol after midnight in the North East’s “party city” contribute more to the costs they have to bear.

Here we analyse the arguments – and discuss why, when you pick it apart, it seems hard to justify the new scheme.

 

So what is the late night levy?

The Government’s Police Reform and Social Responsibility Act 2011 gave council’s the power to introduce an extra fee for licensed premises that are allowed to open during a pre-determined time period, that starts no earlier than midnight and ends no later than 6am.

Newcastle went for the maximum six hour period and set a sliding scale of fees, with the biggest pubs and clubs – who theoretically create the most boozed up bother – paying up to £4,400 a year, and the smallest £299.

The money is spilt 70:30 between Northumbria Police and Newcastle City Council.

But that still means if a pub closes at 11.59pm, it’s fine, and similarly if an off licence starts selling booze again at 6.01am, that’s not a problem so long as its licence says it can.

You may have noticed the words “allowed to open” there – The levy applies even if a pub never uses the full extent of its licence. So even if a pub shuts at 11.59pm every day, but in the past has managed to get a licence to allow it open until 1am for perhaps a few special events each year, it would be liable for the new charge.

However in Newcastle there are exemptions – pubs and clubs that have a licence that only allows them to open beyond midnight on New Year’s Eve, hotels, theatres, cinemas, bingo halls, community amateur sports clubs, and church and village halls do not have to pay.

And there is a 30% discount if businesses sign up to a new council best practice scheme.

 

Why do the council and police want to introduce a late night levy?

According to the figures published in the levy consultation it costs Northumbria Police £1.8m a year to police the city centre between midnight and 6am. The council then spends £480,000 on street cleaning, £80,000 on “environment and public protection enforcement officers”, and £280,000 on it’s Safe Newcastle programme, which includes taxi marshalls, street pastors, a community safety officer, crime prevention initiatives and slightly confusingly considering the authority is spending £15,000 raised from introducing the levy on creating the new one, a best practice scheme.

All in all that’s a bill of £2.64m – assuming the authorities kept spending the same amounts as when the consultation began in February – and at a time of swingeing cuts to public service budgets it’s understandable that they may look to the private sector for more help.

 

So who’s affected by the late night levy?

According to the council 372 properties were identified as being liable for the levy.

Of those 38 will have to cough up the £4,400, and just 20 are eligible for the lowest fee.

Ninety-nine businesses applied to vary their licences – with the council saying most variations were to “remove conditions that no longer needed” – which you’ve got to think includes later opening.

 

Ok, so what’s the problem with the late night levy?

When you look at them the sums and reasoning for the levy don’t really add up – and the result is rather unfairly stacked purely at the pubs and clubs.

 

The financial case

When the consultation was published in February the £2.64m bill quoted was true – and the projection for how much the levy would raise was around £300,000 after discounts – but since then things have changed, purse strings have tightened and the council budgets for most of the services they provide to the night time economy have diminished by far more.

A quick perusal of the city council’s budget for 2013/14 shows that the CCTV budget has been slashed by a colossal 88.4% since April – that’s £119,120, while the Safe Newcastle group that provides much of the services the levy is meant to help pay for has seen £216,710 taken away. Public protection has lost £81,170 – £1,170 more than the entire budget for it’s night time public protection officers – while public toilets has lost £48,810 and the council is trying to sell off the loos in the centre of the busy Bigg Market.

Which would mean, even with the £90,000 the council gets from the levy, and even before you consider street cleaning, that just in those four areas pubs and clubs are paying a lot more more while receiving more than £375,000 less in services than they did just eight months ago.

 

The opposite side of that coin could be that the money is needed more than ever but there is also something of an elephant in the room – business rates.

Yes those pesky taxes one might expect should already pay for all the things we are told the new fee is raising cash to finance.

Indeed you cannot escape them when looking at the levy, as it is calculated using the amount of tax that pubs and clubs are already paying – and it disproportionally effects smaller businesses.

Those 20 businesses who are eligible for the £299 fee are at most paying £4,300 each in rates – so the levy is equivalent to at least 1/15 of their rates bill.

On the other hand the 38 at the top have rates bills of at least £125,000 but a levy of £4,400 – at best a 1/28 comparison.

But then think again about that top group for a moment. That’s 38 businesses paying combined business rates of at least £4.75m a year.

Now under the current system councils are allowed to keep around 50% of the rates for the firms in their area – so just from that small group of pubs and clubs Newcastle City Council is getting in the region of £2,375,000 a year – 282% of the bill the authority claims it needs help with, and now they have to pay £167,000 more between them.

 

Now at that point you might think that while the financial case for the council – which has had to find £17,890,400 in savings this year – may be on shaky ground, the police case is more solid.

 

The policing case

But even here there seems a discrepancy. Northumbria Police says it takes £1.8m a year to police the city centre between midnight and 6am.

Yet of all the crimes in the city centre in the 12 months to 2012, just 42% were alcohol related – so not all of that £1.8m is being spent as a result of drinking in pubs and clubs.

 

And ok, so anyone who has spent any time sat covering Newcastle Magistrates’ Court on a Monday morning cannot help but admit that people do get drunk and get themselves into trouble – sometimes with terrible consequences.

But many of those cases come from the city centre, where there is naturally a higher concentration of bars, pubs and people. In the main you’ll find they are not from outlying pubs and clubs – and yet one of the justifications for making it a blanket, citywide levy was that there are “hotspots” of disorder, which rather surprisingly the list includes places like the usually rather pleasant and sedate Ouseburn area.

In the four months to September just 30 crimes were reported, none of which were public order offences, and only a third of which were classed as anti-social behaviour. Not bad for a small area with six very popular pubs.

 

Unfairly targeting pubs

The levy is seemingly not necessarily about targeting those businesses that sell the most alcohol or also play a role in creating some of the problems the council and police want money to help target.

For example, if a supermarket sold ten times the amount of alcohol as the biggest bar, allowing revellers to get tanked up at home before heading out and causing trouble, if it does not have a post midnight licence, it pays no levy at all.

And even if it did the most it would pay would be £1,493 as the levy has special multipliers for businesses that “primarily or exclusively sell alcohol for consumption on the premises” – which a supermarket, with all its food, does not.

There is no levy either for the taxi firms that then transport “pre-loaded” people into the city.

And walk along any city street and the issue of cleaning is not one of bottles, but usually one of discarded, squashed chips, or spilt, limp formerly kebab salad. Yet no takeaway – with all the obesity and grease related health issues they present – must contribute either.

I put this inherent unfairness to Newcastle City Council and was told that as the Government had only legislated to allow pubs and clubs to be targeted, so only they had been levied.

 

A nail in the coffin of businesses

Yet the most damaging aspect of the levy – apart from the fact that it could have the unintended consequence of forcing pubs and clubs to try and sell tens of thousands more pints to make the same amount they do now, potentially leading to more disorder – is its knock on effects.

Hidden within the original consultation documents is the council’s prediction that more pubs shutting earlier could mean they miss out on trade – with just a 10% fall in income potentially proving disastrous for the viability of businesses.

And now, with the levy finally here, we have learned that 99 licence variations have been received and processed by the council since the scheme was announced, with at least some landlords giving up their early morning opening.

Previously landlords like Tony Brookes, managing director of the Head of Steam pub chain have spoken of how revellers no longer arrive in the city from their homes until after 10.30pm.

So if pubs feel they are forced to close at midnight it gives then an incredibly small window in which to try and capitalise on the opportunities that the evening economy brings.

 

The rest of Britain is watching Newcastle to see how the late night levy goes. All we can hope is elsewhere they look a bit more closely at the potential pitfalls.