The Housing Minister has stated that councils should not profit from selective licensing fees, and these fees must be ringfenced for the sole purpose of running the licensing schemes. Matthew Pennycook warned councils “not to use selective licensing fees to fund other local authority services.”

This guidance comes after a report by Property118 revealed that Nottingham City Council allegedly mishandled these fees. Kevin Hollinrake, Shadow Housing Secretary, questioned the Ministry of Housing, Communities and Local Government on whether selective licensing revenues are ringfenced and if they can be used for general revenue or if councils can charge above cost recovery. Mr. Pennycook responded by confirming that fees should only cover scheme running costs and that local authorities are “not expected to profit from licensing” nor should they use these revenues for other services.

Despite this clear guidance, Nottingham City Council reportedly failed to properly ringfence selective licensing fees for several years, only beginning to do so in 2024. A previous report by accounting firm Ernst and Young (EY), cited by Property118, accused the council of “inappropriate financial activity” and confirmed that selective licensing fees were only properly ringfenced in 2024. Selective licensing was noted as a primary source of licensing income for the council. According to its annual expenditure report, the council spent £4.2 million on selective licensing between 2020/21 and an additional £2.8 million in 2021/22. The council, in a statement, claimed that “there is nothing specifically identified within the samples tested in the assessment that suggests any allocated funds have been misspent or funding has not been used for its overall intended purpose,” and that it has “been open about the nature and seriousness of the assessment’s findings.”