The law came in to force in 2005 and was designed to give greater freedom to hospitality businesses and provide authorities with more powers to prevent misconduct.
But the Committee, set up last year to scrutinise the Act, said the law needed a ‘radical overhaul’.
It warned that local authority licensing committees were not fit for purpose and should be scrapped. The Committee heard evidence that licencing decisions were often a ‘lottery’ with many councillors ‘indifferent’ to the process that could mean life or death for businesses.
The process should instead be handled by planning officials, the report recommended.
“It was a mistake and a missed opportunity to set up new licensing committees when the planning system was already available to regulate the use of land for many different purposes,” said Baroness McIntosh, chairman of the Select Committee.
“The Committee was shocked by some of the evidence it received on hearings before licensing committees. Their decisions have been described as 'something of a lottery', 'lacking formality', and 'indifferent', with some 'scandalous misuses of the powers of elected local councillors'."
The report also recommended rolling out minimum alcohol pricing across the UK if Scotland’s scheme is successful.
The 50p per unit minimum was approved by MSPs in 2012, but has faced a legal challenge led by The Scotch Whisky Association.
It also argued that the Late Night Levy failed to cover the cost of policing as was intended, arguing that 'in its current form it is fundamentally wrong, in principle and practice'.
“Pubs, clubs and live music venues are a vital part of our cultural identity,” says Baroness McIntosh, chairman of the Select Committee.
“Any decline in our cities’ world-famous night life ought to be prevented and the businesses supported. But the night time economy needs regulating; even in these areas of cities, residents have their rights. The current systems are not being used because they do not work.”