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Financing of licensing schemes

The Court of Appeal has held that there is no general legal principle that licensing schemes are intended to be self-financing, write Gerald Gouriet QC, Charles Streeten and Leo Charalambides.

No general principle

Wakefield Council had argued in the High Court and again in the Court of Appeal that “it is a principle of law” that licensing schemes ought to be self-funding rather than being reliant on a local authority’s general funds raised from its council tax payers. The High Court (HH Judge Saffman) was not persuaded there was any such principle; and in Rehman (On Behalf of the Wakefield District Hackney Carriage And Private Hire Association), R (On the Application Of) v The Local Government Association [2019] EWCA Civ 2166 the Court of Appeal dismissed the council’s appeal against his decision.

Cross-subsidy

The issue arose on a judicial review brought by Wakefield District Hackney Carriage and Private Hire Association of a decision by Wakefield Council to include in the fee it charged for the issue of vehicle licences (under Part 11 of the Local Government (Miscellaneous Provisions) Act 1976) the costs of enforcement against licensed drivers. The difficulty faced by the council was, in the Court of Appeal’s words, that “there are distinct and detailed regimes” for (1) vehicle licences for taxis and private hire vehicles, (2) drivers’ licences, and (3) operators’ licences. The Court went on to say: “The notion that the fee for one type of licence can reflect the costs involved in another, far from being implicit in Part 11 of the 1976 Act, is entirely contrary to its structure.”

Different powers to charge fees for drivers’ and vehicle licences

Section 53(2) of the 1976 Act empowers a local authority to demand and recover such fees for the grant of drivers’ licences “as they consider reasonable with a view to recovering the costs of issue and administration”. Section 70(1)(c) allows a licensing authority to charge such fees for the grant of vehicle licences as may be sufficient to cover (inter alia) costs incurred “in connection with… the control and supervision of hackney carriages and private hire vehicles”. Wakefield Council contended that the costs of enforcing the conduct of drivers fall within the words ‘the control and supervision of hackney carriages and private hire vehicles’ in section 70(1)(c) because, after the grant of a vehicle licence, the driver controls the vehicle. The Court of Appeal said:

“If the argument is that, by controlling the driver, in terms of monitoring and enforcing the behaviour of the driver, the district council control the vehicle, then that is a very strained and artificial interpretation of the relevant words."

The council’s case

The council urged that ‘strained’ construction on the Court, however, on the basis:

(i) that there was a general principle of law that licensing regimes were intended to be self-funding;

(ii) that the cost of driver enforcement was not recoverable under section 53(2) in the fee for a driver’s licence; and

(iii) that the fee for driver enforcement was therefore recoverable under section 70(1)(c) in the vehicle licence fee, because it could not otherwise be recovered anywhere else.

As for (i), the Court of Appeal rejected the council’s argument that there was a general principle of law that licensing regimes were intended to be self-funding.

As for (ii) it considered that the cost of driver enforcement is recoverable under section 53; but held that “irrespective of the proper interpretation of section 53” the costs of monitoring and enforcing driver conduct cannot be taken into account in fixing the vehicle lice fee under section 70.

As for (iii) it held that the words of section 70(1)(c) “cannot have been intended by parliament to authorise something entirely alien to the structure of Part 11 [of the 1976 Act], which, on the face of it, has a comprehensive, self-contained regime for each category of licence.”

The construction of section 53(2)

Because it was not determinative of the judicial review claim before him, HH Judge Saffman declined to rule as to the proper interpretation of section 53(2). In the course of argument in the Court of Appeal, the Master of the Rolls indicated that if consideration were given by the Court to the interpretation of section 53(2) it would not be binding on licensed drivers because they were not represented before him. In its judgment, the Court said that contrary to the council’s submissions in the High Court, and without having heard the point argued, it considered that the costs of monitoring and enforcing driver conduct can be included in the driver’s licence fee under section 53(2). It is clear from the reasons given for that conclusion, however, that the Court was dealing with enforcement against licensed drivers and the continuing powers that Parliament intended a licensing authority to have over them post the grant of a licence. The recovery in drivers’ licence fees of the costs of enforcement against unlicensed drivers is likely to remain controversial until the point is taken, argued and determined in an authoritative ruling.

Local Government Association intervention

The Local Government Association was given permission to intervene in the appeal. It supported Wakefield Council and stressed the limited resources available to local authorities and the potential adverse impact on compliance and enforcement activities if the taxi and private hire vehicle licensing scheme were not self-financing. The Court of Appeal responded that “a general resource consideration of that kind cannot… affect the proper interpretation of the legislation governing this or any other licensing scheme.”

Gerald Gouriet QC and Charles Streeten are barristers at Francis Taylor Building. They appeared for the Wakefield District Hackney Carriage and Private Hire Association.

Leo Charalambides, also of FTB, acted for the Local Government Association.

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