Steve Beasant

Lord Mandelson, the Business Secretary is abolishing an exemption for charities from music licensing rules, which will hit them with huge bills for holding events with recorded music.

Village hall dances and other charity fundraising events face a new £20 million tax after the Business Secretary scrapped an opt-out which allowed organisation to play music.

Community groups claim they would be forced to abandon hundreds of services for the elderly and children because of the new rules.

Abolition of the so-called PPL exemption will affect charity discos, tea dances, youth clubs, salsa groups, sports clubs, coffee mornings and even charity shops which have a radio in their staff room.

The changes are being imposed by the Intellectual Property Office which is part of Lord Mandelson’s Department for Business, Innovation and Skills. The new levy will come into effect in April 2010 subject to the regulations being ratified by Parliament.

In its own impact assessment the Government admits that it will cost voluntary groups £20 million a year and will be “highly detrimental”. Some organisations will “cease playing music” because they cannot afford a license, and it will hit a quarter of a million organisations - 140,000 charities, 6,750 charity shops, 66,440 sports clubs, 4,000 community buildings, 5,000 rural halls and 45,000 religious buildings.

The National Council for Voluntary Organisations (NCVO) is running a ‘Don’t Stop the Music’ campaign to highlight the effect of the new £20 million levy on the voluntary and community sector. Already, 63 MPs have signed a Commons motion calling for the exemption to be retained.

The clampdown is part on an ongoing tightening of music licensing law which has already proved controversial. Last month this newspaper revealed that police forces were paying hundreds of thousands of pounds a year to allow officers to listen to music at their desks, in canteens and even in cell blocks.

The cash is handed to organisations which pass on royalty payments to musicians and songwriters. Figures show that across the UK, forces are paying more than £800,000 a year for the licences, dubbed “iPlod”.

Such payments have soared in recent years, following an aggressive campaign by the main licensing organisation, PRS for Music, formerly the Performing Right Society, which demands that licenses are obtained for any workplace where music is played on a radio, CD or cassette player.

Some shopkeepers have complained of being hounded with threatening letters demanding money when they haven’t even got a radio or CD player in their store.

In 2007, PRS launched a test case against Lancashire Police, which it argued was not paying enough money and secured a 20 fold increase. The music bill for Derbyshire Police rose from around £700 in 2007 to £60,000 the following year.

Critics say the charges are unscrupulous when levied on essential public services and charities.

An NCVO spokesman called the scrapping of the exemption “shameful” and said: “This is an incredible amount of money which can only be met by funds earmarked for charitable purposes. This places an additional financial burden on charities at a time when the voluntary and community sector is already struggling with the impact of the recession.”