Small venues initiative provides economic boost and blueprint for undertaking reforms

Peter Gill

The State Government’s small venue license initiative has not only revitalised Adelaide’s CBD, contributed to a changed drinking culture and supported the creation of at least 1250 jobs since the previous regulatory restraints on restaurants and bars were lifted in 2013. According to a new study by the South Australian Centre for Economic Studies (SACES), it is also a case study in how to cut through bureaucratic inertia and achieve meaningful policy reform.

In its report, Contribution of Small Venues to Economic Opportunity, SACES maintains the previous regulatory regime allowed existing operators in the hospitality industry to stifle competition to the detriment of job seekers and the State’s economy.

“As with most reforms, the incumbents as beneficiaries of existing restrictions were opponents of reforms. They had at their disposal an appeal and a hearing process to contest and/or slow down applications thus increasing burdensome costs to the innovators,” SACES says.

But perhaps the industry did not reckon with the unique combination of ministerial responsibilities held by the Hon John Rau SC, the instigator of the changes to Liquor Licensing Act 1997, and his drive to create the new small venue license category.

At various times, Mr Rau was Attorney General, Minister for Tourism, Minister for Food Marketing, Minister for Consumer and Business Services, and Minister for Housing and Urban Development, Planning and the City of Adelaide, amongst others.

“The policy coordination role of a single Minister is respectful of experience, institutional knowledge, and different perspectives; it provides access and sharing of data that informs evidence-based debate and decision-making; and it provides for shared responsibility and accountability to act,” SACES says.

“The policy decision to legislate for a small venue licence should be seen not just as pro-competition, regulatory reform, and an exercise in red tape reduction but as a collaborative, evidence-based decision-making framework to address multiple problems.

“There is a second lesson to be learnt from the success of the small venue licence experience and that is the efficiency of policy or regulatory changes can often fail or be delayed by a silo mentality.

“Coordination and oversight through one person or a team has been shown to be able to cut through the silo mentality, achieve cooperation and maximise planning capabilities and minimise against regulatory capture by special interest groups or firms.

“In the case of the small venue licence legislation it was the Minister John Rau who was able to draw all parties to the table and shepherd through the necessary regulatory changes.”

The review of the small venue licences, an initiative of the previous Labor Government, is the first major project undertaken by SACES on behalf of the SACES Independent Research Fund, a collaborative venture between SACES, the University of Adelaide and prominent members of the business community.

Against a background of increasing concern over drunkenness and associated violence in the CBD, Mr Rau proposed a new ‘small venue licence’ that would facilitate venues with restricted trading hours, a limit of 120 patrons, and be likely to be predominantly owner-operated.

For the State Government’s part, the proposal was motivated by a desire to change the drinking culture in Adelaide and utilise under-used spaces, including lane-ways and empty shopfronts, in the CBD.

SACES notes ‘an observational study’ by the Adelaide City Council in 2016, three years after the introduction of the small venue licence, found that people felt “safer” in small venues.

“The level of hostility, aggression and intoxication was perceived to be lower at small venue sites while cleanliness and overall atmosphere favoured locations accommodating small venues, especially those that have flourished since the introduction of the small venue licence,” the SACES report says.

SACES says the small venue initiative was timely and corrected a ‘market failure’ – “an unmet demand by those who preferred a non-gambling environment, smaller more intimate places to gather and a preference for different eating and drinking experiences”.

Key elements of the new licence category include:

• Dropping the previous regulatory requirement that proponents of new venues prove that a public ‘need’ existed for a ‘unique’ new venue in a particular location.
• Fast-tracking of applications for a small venue licence to the Liquor and Gambling Commissioner, whose decisions can no longer be challenged in the courts.
• Hearings associated with an appeal to a decision by the Commissioner do not apply in respect of small venue licences.
• Annual licence fees are lower for small venues than for larger hotels and restaurants.

The result of the small venue licences has been a proliferation of new establishments in the CBD with positive employment and economic outcomes. SACES says that an economic impact study conducted in 2015 estimated the average employment per venue was 11.5 jobs.

“Using this number, which we also believe to be accurate in early 2019 based on recent interviews with owner-managers of venues, total employment in the sector is estimated at 1250 jobs for the 109 licences which have been granted (since 2013),” SACES says.

“The large and continuously expanding number of small venues in the CBD confirms the growth of investment and start-ups in the sector. The new licence class has unleashed entrepreneurship in the city centre,” it says.

The SACES Independent Research Fund will analyse some of the most challenging issues facing the private and public sectors and make recommendations to the State and Federal governments. The initiative, launched late last year, will see the economic and social research skills of SACES and the University of Adelaide applied to questions that have dogged the private sector and are often ignored by governments.

There will be ongoing analysis of regulations (past and present) which will be viewed though a prism of their relevance in a modern economy and their contribution to State and regional growth.

For more information see the full Contribution of Small Venues to Economic Opportunity report.