The following is the current position - from the consultation document linked to above. It appears that the intention was to make the public singing and dancing for their own enjoyment, into a licensable activity by making licensable any premises in which they were singing and dancing.

Department for Culture, Media and Sport
Proposal to clarify the definition of "entertainment facilities"

1.5 The definition of regulated entertainment contains two elements: the provision of 'entertainment' and the provision of 'entertainment facilities'.

The separate 'entertainment facilities' element is intended to address situations where people take part in entertainment that may not be provided solely for the purpose of entertaining an audience, but which may nevertheless present risks to the promotion of the licensing objectives.

Examples may include the use of a dance floor, or some karaoke performances. As part of this, the provision of musical instruments (such as 'pub pianos') can be licensable (separate from a performance of live music) if they are to be used by customers to entertain themselves.