The impact of alcohol-related hospital admissions should be considered when bars want to renew their licences, according to local councils.

The Local Government Association (LGA), a body representing councils, has called for public health issues to be a “legal requirement” in whether to grant new operating licences to bars, restaurants, clubs and takeaways.

This would mean a licence could be assessed on whether it would “exacerbate an existing public health issue”, including alcohol-related admissions to hospital, or infectious diseases.

The LGA added councils did not want to “refuse every application” for a premises licence and said the new rules would also “ensure that we are better prepared to deal with a future pandemic” by creating a set of powers to “protect customers” from infectious outbreaks.

But the proposals have been criticised as they could impact small businesses “disproportionately”.

Nesil Caliskan, chair of the LGA’s Safer and Stronger Communities Board, said: “The last year has shown us the importance of businesses taking measures to protect public health, yet currently councils are specifically discouraged from using the Licensing Act to consider public health issues.

“Councils want to support businesses and enable them to be successful, but they also have a duty to protect their communities from infection and ill-health.”

Ms Caliskan, who is also the leader of Enfield Council, said: “Councils do not want powers to refuse every application. But being able to consider the public health impact of new licensed premises would allow them to take a more balanced view in line with their other priorities such as creating vibrant and safe town centres and protecting people from harm.”

Alcohol-related harm is estimated to cost the NHS in England £3.5 billion every year, and the LGA said “additional costs” fall to social services, police and businesses.

Councils can consider four issues when deciding whether to grant licences – the prevention of crime and disorder; public safety; prevention of public nuisance; and protection of children from harm.

The LGA wants to see the Licensing Act updated to include a public health objective and allow for action “where premises fail to protect the health of their communities”.

It also wants to see councils given greater access to NHS data, including hospital admissions and ambulance call-out details to assist decision making.

The Licensing Act 2003 does not only cover the sale of alcohol, but also the sale of hot food and drink after 11pm and entertainment including live music, indoor sports events, plays and the cinema.

The Federation of Small Businesses has warned small firms are “getting back on their feet” after the pandemic, and said the proposed law change could create “further barriers”.

FSB national chair, Mike Cherry, said: “Often new regulatory requirements seem to make sense in isolation, but the cumulative burden on small businesses keeps growing.

“Instead of continuously adding further barriers, we need to be looking at the regulatory environment differently. For example, bringing in a ‘one-in, one-out’ or ‘one-in, two-out’ rule regarding new regulations, something that’s been successfully adopted elsewhere, would make a difference to small firms.

“This suggested licensing change would hit small businesses disproportionately. Perhaps a period of allowing small business hospitality to recover after an exceptionally difficult 18 months is in order.”

A Government spokesperson said: “The Licensing Act plays a crucial role in preventing crime and in ensuring public safety.

“Directors of public health are responsible authorities which means that they must be given notice of all licence applications and can make representations about any that raise concerns relevant to the four licensing objectives.

“We are considering the LGA’s proposal and will respond in due course.”