Paying the price: risk-based licensing

The Northern Territory Government has finished taking submissions on its proposed model for risk-based licensing, or RBL. What is it, and why do we need it?

In the NT, licensees pay a one-off fee of $200 for a licence, plus some minor costs associated with police checks.  There is no requirement for renewal.  In other words, a liquor licence remains valid at no further cost unless and until it is cancelled, suspended or surrendered.

It matters not whether the licensee runs a pub, nightclub, restaurant or take-away liquor store – big or small – and opening hours are irrelevant.  There is no differentiation. Indeed there is no clear categorisation of on premises licences in the NT, but that will also change with the introduction of RBL.

If you follow the grog story, you’ll probably have noticed the NT Police Association, the police officers’ union, calling for liquor licensees to take on the cost of providing security at their premises.  The Association’s President Paul McCue has argued consistently that because liquor traders are selling the stuff that leads to trouble, they should stump up. McCue says the cost burden should not be borne solely by the police via the taxpayer. The implementation of RBL should go at least some way towards easing the load.

The rationale of risk-based licensing is that those who sell alcohol should contribute to the cost of the regulatory system, policing, emergency departments, social workers and alcohol and drug treatment services.   It’s an economic tool that’s already used to moderate the behaviour of licensees and mitigate the risks associated with the sale of liquor in the ACT, Queensland, Victoria and New South Wales.

Despite a recommendation for RBL in a commissioned report by the Allen Consulting Group to the then NT Government in 2010, the NT has until now had no such scheme.

Under an RBL system, on-licence fees are calculated taking into account the likely risk of alcohol-related harm under a formula that can include trading hours, patron capacity, and the type of venue, location, and compliance with licensing legislation.  Off-licence or take-away RBL fees may be levied according to the wholesale value of take-away liquor sold. Higher risk establishments pay bigger fees than lower risk ones. 

PAAC and other reform groups such as FARE, have argued for significant alterations to the NT’s antiquated licence cost arrangement.

The former Chief Justice Trevor Riley and his expert review panel recommended that licence fees be reviewed and set at an appropriate level in line with other jurisdictions, with a starting point that would differ according to the type of licence sought or held.

In the ACT, for example, licensees pay a base fee that is set according to the type of venue, with additional costs imposed on premises that trade beyond midnight, and also on those with occupancies of greater than forty patrons. 

In Victoria, venues with gaming machines or which trade late, say until 3am, pay higher fees than a ‘general on premises’ bar or pub.  Infringements or successful prosecutions lead to increased costs.

Research into the ACT system has shown a decline in offending, including that which is alcohol-related, since the introduction of RBL.

The NT Government has now put up its proposed RBL formula.  It involves a base fee for different types of licences, depending on their risk rating.  A late-night venue would start from a base annual fee of $2000, a public bar at $1000, and a club would be out of the barrier for $500. A take-away liquor licence would attract a $2000 base fee.

The base fee would then multiplied by hours and by a volume (of liquor) factor, with ‘discounts’ subtracted.   These discounts could be applied for the presence of security or CCTV, for hosting live, original local music, or for a good compliance history. There would be a ‘breach loading’ on an increasing scale for contraventions of the liquor licence or for offences against the Liquor Act.

That’s a pretty basic description of what would essentially be a tiered system, but you get the picture.  The era of liquor licences bringing in negligible revenue will end. Licence fees will be set according to the calculated risk of the type of licence, and will cost more if the licence conditions are breached.

RBL is designed to help to address a social problem by getting those who market grog to chip in to help pay for the damage, or to earn discounts by actively attempting to reduce harm.  We hope it will give licensees cause to think twice about compliance with licence conditions. 

The changes will also help to clarify the types of licence that exist, or may be obtained, in the Territory. This should, finally, do away with the confusion over whether a venue is a restaurant, a pub, a nightclub, or some other creature.

The revenue raised through RBL is unlikely to be enough to meet the cost of all the damage that results from alcohol abuse in the NT, but if the fees are set at the right level, it will surely help.

RBL will not replace the ability of the Liquor Commission to determine complaints about licence breaches; nor will it alter the power of the Police Commissioner to order the suspension of trading in the case of an emergency or threat to public safety.

No final decisions have as yet been made on the design of RBL.  In my view, it could be argued that larger takeaway outlets with big sales volumes should start from a higher base licence cost.

First published on The Advocate 11 January 2019.