The London Borough of Hackney Council introduced the Late Night Levy (the ‘Levy’) on 1st November 2017. This followed a consultation detailing the proposal and subsequent approval from the Full Council.
Poppleston Allen made a Freedom of Information request of the Council to analyse and review the impact of the Levy one year one, comparing the information provided against the previous projections and what was proposed by the Council in its Levy consultation reports. We also made a Freedom of Information request to the Metropolitan Police, in respect of the Levy and crime statistics relating to this period in Hackney. This report summarises our findings and is based on information provided by the Council and the Police in response to our request.
Number of Premises that paid the Levy
Hackney Council opted to apply the Levy to premises which were permitted to supply alcohol between midnight and 06:00. There were no discretionary exemptions or reductions applied by the Council for any premises that would be liable to pay the Levy including no exemption for those premises that only sell alcohol beyond midnight on New Year’s Eve, an exemption which other councils have adopted when introducing a Levy including other London Borough councils.
Prior to the Levy being adopted, the Council identified in its consultation report to the Full Council back in July 2017 that 429 premises would potentially be liable to pay the Levy.
In reality, the Council confirmed 418 premises paid the Levy in the first year, 11 premises less than the number that had been estimated as liable to pay the Levy prior to it being adopted.
Number of Premises that reduced their hours to avoid the Levy
The Council confirmed in response to our FOI that no estimation or projection had been made as to the number of premises that would reduce their hours by way of a minor variation to avoid being liable to pay the Levy.
However, the Council confirmed that 78 premises reduced their hours to avoid the Levy in its first year (26 premises reduced their hours by way of a ‘free’ minor variation and 52 premises reduced their hours by way of a minor variation or variation with a Council fee being paid). Therefore it is clear that a significant number of premises have been willing to reduce their hours to avoid the Levy.
How much revenue has the Levy realised?
The Council’s Levy Report estimated that the maximum income from the Levy would be £395,450. The Council estimated that the cost of administering the Levy in the first year would be in the region of £10,000-£15,000. Therefore using these figures, we can calculate that the Council’s projected figures for net revenue from the Levy in the first year were £380,450.
Although the Council did acknowledge in the report prior to the levy being adopted that the anticipated maximum gross income may be reduced due to some premises cutting back their trading hours to avoid paying the levy, given this acknowledgement, the Council did not specifically factor in an estimate for how the revenue may be affected by such premises reducing their hours to avoid the Levy, as some other councils who adopted the levy had done..
The actual amount collected from the Levy in the first year was £414,758.
The Council confirmed that the costs for setting up the Levy in the first year and administration costs (including dealing with free minor variations) was £20,266. Therefore, we can use these figures to calculate that the net Levy revenue collected from the first year is £394,492.
The revenue collected has exceeded projected gross income by almost £20,000 and projected net income by almost £15,000.
On review of the Council’s own ‘Late Night Levy One Year Report’ published on 16 January 2019 following the first year of the Levy, the Council have confirmed that “the revenue collected exceeded the amount forecasted during the consultation. This is due to a number of factors including the re-rating of non-domestic rateable value bandings, authorisations approved during the year and a lower than expected amount of licences surrendered”.
It is interesting to see that the re-rating of non-domestic rateable values for sites that were liable to pay the Late Night Levy which put them into a higher value banding resulting in a higher Levy fee being payable than initially projected, along with a large number of premises either obtaining licences or varying the licences so they were liable to pay the Levy, had a significant effect on the Council achieving and surpassing the revenue figures projected.
The Home Office guidance on the Levy indicates that “any financial risk (for example lower than expected revenue) rests at a local level and should be fully considered” prior to adopting the Levy. The Council by their own admission did not specifically take account of or anticipate as part of their projected revenue figures the effect both premises reducing their hours to avoid the Levy and the re-rating of non-domestic rateable values could have on projected Levy revenue figures. However, on this occasion the lack of proper consideration in these factors has not come back to adversely affect the Council with the re-rating of the rateable values effectively working in their favour with regards to revenue figures for the Levy. However, it is worth noting that as a word of caution for the Council that if the re-rating had resulted in liable premises’ values decreasing such that the banding level would be lower this could have resulted in less revenue being collected from the Levy than had been projected.
We note that the Council confirmed the administrative costs of introducing the Levy in the first year (including dealing with the 26 free minor variations) was £20,266 which is over £5,000 more than the maximum estimation for costs that had previously been projected by the Council (as mentioned the Council had projected costs for administering the Levy in the first year would be in the region of £10,000-£15,000).
Use of proceeds by the Police and Council
We understand that although at least 70% of the net revenue collected by the Levy could be paid to the Police, the Council confirmed that it decided on 5th December 2017 by the Mayor’s Office for Policing and Crime (MOPAC) that the income would be pooled and the allocation of the funds determined by the “Management Board”.
The Council had indicated that they would establish a local Management Board as recommended by the Home Office and that this Board would be responsible for overseeing how the revenue is spent. The Council have formed a Late Night Levy Board. The Board will provide yearly reports through the Licensing Section at the Council to be delivered to the Licensing Committee, such as the Late Night Levy One Year Report. The approved Late Night Levy Board’s governance and terms are available on the Council’s website. The Board consists of business representatives, Police, Chair of the Licensing Committee, other relevant Responsible Authorities and relevant Cabinet members.
The Late Night Levy One Year Report states that the Board had its first meeting on 24th May 2018, the second meeting on 27th September 2018 and the third meeting on 14th December 2018, and that representatives of the Council, Licensing Sub-Committee, Police and licensing trade have been present at all of the meetings.
We asked the Licensing Authority whether Levy payers had been consulted regarding the spending of the money and the Council confirmed “no further consultation has been carried out with those liable to pay the Levy” and “information is not provided to those liable to the Levy”.
We also asked the Council how the Levy is being assessed and reviewed. The Council confirmed “the Late Night Levy is still in effect in Hackney. It is anticipated that the Late Night Levy Board [local Management Board] will assess the Levy in due course”.It appears for Levy payers to remain updated on how Levy proceeds are being used, unless they are attending the Board meetings, they will need to rely upon obtaining and reviewing reports from the Board provided to the Licensing Committee to keep up-to-date on how Levy proceeds are being spent.
It is also worth noting that before the Levy was introduced the Council’s Regeneration Delivery Team had an agreement with 40 businesses in the Dalston and Shoreditch areas to fund the overtime costs of 6 Wardens on Friday and Saturday nights. We asked the Council whether in light of the Levy being introduced whether this would continue. The Council confirmed that this voluntary scheme no longer exists –due to the revenue collected from the Levy now addressing these costs.
The Council confirmed that revenue collected from the Levy in the first year was spent on the Metropolitan Police New Year’s Day costs of £5,944 and provision for Council Enforcement Patrols previously funded by the voluntary Levy in Dalston and Shoreditch which accounted for £56,068 of expenditure in the first year of the Levy. Therefore including the set-up and administrative costs of over £20,000 previously referred to, the total spend of the gross revenue income collected from the Levy in the first year has been £82,278 which the Council have confirmed leaves a surplus to be carried over in year two of £332,480.
This clearly indicates a large amount of the revenue collected from the first year has yet to be spent. The Council’s One Year Report did indicate that “Police spend in year one has been impacted by Metropolitan Police roll-out of the Basic Command Units (BCUs) during 2018. The BCUs saw single Borough Command Units replaced with operational Police structures that cover between 2 and 4 Local Authorities. After initial pilots in Barking and Dagenham, Havering and Redbridge, Camden and Islington, Hackney Police and Tower Hamlets Police merged into one BCU. The Police were initially unable to commit dedicated resources funded by the Levy during year one”. However, the Council confirmed that an initial forecast of £170,000 has been provided for year two which will be used to fund an additional Sergeant and 4 Constables (we understand that the posts have been advertised and will be filled by early 2019). The Report further confirmed that “it is anticipated that this will give greater flexibility to provide a resource to the range of Hackney’s Night Time Economy areas including those outside the busiest areas of Shoreditch and Dalston”.
The Council have confirmed that the Management Board have already committed resource to fund the following activities in the second year of the Levy:
- An additional Public Space Surveillance Officer deployed over the course of the festive period. This Officer will be in place to monitor/operate mobile CCTV from 21:00 to 05:00 up to and including New Year’s Day.
- A new Safer Socialising Campaign to be deployed with the Media and Communication Service.
- The appointment of a Night Time Economy Manager with duties including the co-ordination of activities associated with the Levy. Details have been provided by the Council on implementing these schemes.
Finally, the Report confirms in its conclusion from year one that it is anticipated that the revenue collected in year two will be consistent with year one, however, a slight increase is expected due to continued growth in the Night Time Economy. This is likely to be as a result of businesses acquiring premises licences or extending existing premises licences such that a larger number of premises become liable to pay the Levy in the second year compared to the first year.
Review of the effectiveness of the Levy and its impact
The Council confirmed that “it is anticipated that the Late Night Levy Board will assess the Levy in due course”. The Council have produced their Year One Report on the Levy and although this does not consider specifically the effect the Levy and the use of the funds have had on the Night-Time Economy, detailed information is provided in the Report which we have referenced in this document including the revenue achieved and how it has been spent.
At our request, the Police provided specific crime statistics relating to Hackney which we had asked for to establish whether there has been any reduction in crime and disorder since the Levy was introduced. However, as the full Levy proceeds have not yet been used, it could be argued that the true effect of the Levy on crime and disorder in Hackney cannot be properly assessed until the funds are used and the funded operations are given time to show their effectiveness with regards to reducing crime. Therefore we feel it may be more apt to revisit the crime statistics in 1 or 2 years’ time to assess the effectiveness of the funded operations and the Levy with regard to reducing crime and disorder. Analysing such data will also be vital for the Council and its Levy Management Board to consider as part of their ongoing review of the Levy and its impact on Hackney.
We will keep a keen eye on the outcome of the Council’s review of the Levy and provide our views on the findings. In the meantime, if you have any queries please contact us.