This is what the Licensing Bill proposes:
110,000 on-licensed premises in England and Wales (pubs, bars, restaurants etc) would lose the right to allow one or two musicians to perform. Case law precedent dates this limited exemption back to at least 1899 for unpaid performers. It was incorporated into primary legislation with the Licensing Act 1961, allowing one or two professional performers.
The provision of one unamplified guitarist, paid or unpaid, once a month in a restaurant would become a criminal offence unless licensed.
Broadcast entertainment on satellite or terrestrial tv, or radio, is to remain exempt from licensing under this Bill. There is no requirement to declare these entertainments on licence applications, nor to disclose the power of amplification used.
15,000 churches outside London would lose their licensing exemption for public concerts - bizarrely this would replace 1982 legislation with provisions dating from 1963 that apply only in London.
5,000 registered members clubs lose their licensing exemption for live
music.
Thousands of private events, hitherto exempt, become licensable if 'for consideration and with a view to profit'.
The same applies to any private performance raising money for charity.
Even wedding receptions, corporate functions, parties, Bar Mitvahs etc are affected: payment to bandleaders or DJs organising entertainment (which may be bands, dance floors, PAs etc etc)triggers the licence requirement. This is disputed by the government, but expert licensing lawyers have confirmed that this is the effect of the wording of the Bill (Schedule 1, paras 1(4) and 1(5) in particular).
A new licensing criterion is introduced: the provision of 'entertainment facilities'. This clearly includes the provision of musical instruments and any amplification where applicable. This would mean professional rehearsal studios, broadcasting studios etc will be illegal unless first licensed.
Premises without a licence allowing live music will be restricted to 5
events per year, a maximum of 499 people attending/participating. Temporary event permissions may last up to 72 hours. 'Premises' is defined as 'any place' in the Bill (Clause 188). That means your front room, garden, a street, park or field, etc etc.
Musicians could be guilty of a criminal offence if they don't check first that premises hold the appropriate authorisation for their performance.
Buskers similarly potential criminals - unless they perform under a
licensing authorisation.
Church bell ringing, except when part of a religious service, would a criminal offence unless licensed.
Organised carol singing, on front door steps or in the street, would be a criminal offence unless licensed.
The maximum penalty for unlicensed performance is a £20,000 fine and six months in prison.
The one measure welcomed by the MU is the proposal to cap fees and set them centrally. However, as discussed below this alone will not bring about a renaissance in local gigs.

The licensing rationale, where live music is concerned, is essentially to prevent overcrowding and noise nuisance. The government claims their reforms will usher in a licensing regime fit for the 21st century. But surely 21st century planning, safety, noise and crime and disorder legislation can deal effectively with most of the problems associated with live music?

Not according to Culture Minister Kim Howells. He says the swingeing
increase in regulation is necessary because 'one musician with modern
amplification can make more noise than three without'. Of course it is true that amplification can make one musician louder than another playing without amplification. But that was true when the two performer exemption was introduced in 1961 and had been true for many years before that. The important questions are: does live music present a serious problem for local authorities? Does this problem justify the increase in licensing control? The answer, on both counts, is no.

Noise from live music is not the problem
The Noise Abatement Society has confirmed that over 80% of noise complaints about pubs are caused by noisy people outside the premises. The remaining percentage is mostly down to noisy recorded music or noisy machinery. In fact, while noisy bands can be a problem, complaints about live music are relatively rare. In any case, local authorities have powerful legislation to tackle noise breakout from premises. All local authorities can seize noisy equipment, and they can serve anticipatory noise abatement notices.
Camden used a noise abatement notice to close the West End musical Umoja earlier this year. One resident's complaints were enough. And the police can close noisy pubs immediately for up to 24 hours. The trouble is, many complainants perceive the legislation as inadequate because their local authority doesn't enforce it effectively.

It looks as if musicians are being made the scapegoat for a problem that is nothing to do with live music. Certainly abolition of the two-performer licensing exemption will do nothing to reduce noise from people outside premises.

Rather late in the day, the Department for the Environment, Food and Rural Affairs (DEFRA) has just commissioned a study into the noise nuisance potential of the licensing reforms - but the study won't be completed until the Spring of 2003 at the earliest. A classic case of shutting the stable door...

Standardised licence fees alone will not revitalise live music
The government says that standardising licensing fees, with no premium for entertainment, removes the disincentive to provide live music. This change is welcome. However, fees are only half the problem. The other half is the potential for unnecessary local authority licence conditions. Earlier this year, Kim Howells warned the Musicians' Union that if it were to lobby for satellite tv to become a licensable entertainment, this would be 'resisted robustly' by the leisure industry. He did not say why, but the reasons are clear. The industry does not believe government assurances that local
authorities will adhere to published guidance over future licence
conditions. They fear the cost implications of conditions such as monitored safe capacities, and CCTV. (Two years ago the Home Office warned all local authorities not to impose disproportionate conditions. Few, if any, took notice).

The Scottish comparison
Genuine 21st century reform for live music, particularly small-scale
performance in pubs and bars, would see England and Wales brought into line with Scotland, Ireland and continental Europe. Scotland is a good example because public safety and noise is regulated by UK-wide legislation. In that country a typical bar or pub can host live music automatically during permitted hours, provided the music is ancillary to the main business. In New York City, premises of capacity 200 or less are likewise free of a requirement to seek prior authorisation for live music. Noise breakout is strictly monitored by street patrols. In Germany, Finland and Denmark the provision of some live music is assumed when the equivalent of an on-licence is granted. In rural Ireland no permission is need for live music in a pub, and customers would think it very odd to suggest that it be a criminal offence unless first licensed.

The Musicians' Union has argued for reform along Scottish lines for some time. But the government has rejected this option. Our campaign for more live music, particularly in small venues, is supported by the Arts Council, the Church of England, Equity, the English Folk Dance and Song Society and many others. The Union recognises that premises specialising in music, or music and dance (like nightclubs) need the additional controls that licensing provide. But if live music of all kinds is to thrive in small community venues like pubs, an automatic permission, within certain parameters, is essential. We should not treat all musicians as potential criminals. That doesn't sit well with the participation and access agenda of the DCMS.

Public entertainment licensing - historical context
Licensing the performance of live music began in 1753. Its had one aim: to curb rowdy ale-houses in the City of Westminster! The shift towards public safety as the licensing rationale increased throughout the 19th and early 20th century. It is important to note that, compared to today, safety and noise legislation at that time was rudimentary or non-existent. However, in 1899 an important legal case established that where two pub customers (and probably more) made regular music for their own amusement, no charge being made, this should not be licensable. [Brearley v. Morely, 1899, 2 QB 121]
The government's proposals would make even this limited amount of live
music illegal unless licensed.

In 1961 this limited precedent was incorporated and expanded in the
Licensing Act of that year. For the first time landlords could hire one or two professional musicians without a public entertainment licence (PEL).
This exemption was retained in the Licensing Act 1964, (S.182) which is the current legislation. The two performer exemption is known to musicians as the 'two in a bar rule'.

Until 1983 magistrates administered the PEL regime. Fees were nominal and the licence relatively easy to obtain. The sharp decline in live music in pubs and bars began when local authorities were handed control of PELs in 1983. Fees rose steeply in many areas, and PEL conditions became onerous.
The combined costs proved an effective deterrent to seeking PELs. Only 5% of 110,000 on-licensed premises currently hold annual PELs.

Since the Health and Safety at Work Etc Act 1974 (HSWA), the Environmental Protection Act 1990, the Noise Act 1996, and other legislation which imposes a statutory duty on employers to undertake risk assessments of all activities on their premises, and a statutory duty on local authorities to enforce health and safety legislation where entertainment is provided (irrespective of PELs) many, if not most, of the safety and noise controls available via PELs have become unnecessary for incidental live music in a typical pub or restaurant. This is borne out by the Scottish licensing regime where no PEL is required for incidental live music in licensed premises during permitted hours. Safety and noise legislation applies UK-wide.

However, PELs do provide necessary additional controls for premises such as nightclubs where it may be difficult to enforce necessary measures using subsisting legislation (such as chill out rooms, free drinking water, door supervisers etc).

Safe capacities - a key issue
There will be much debate about 'safe capacities' and how they may set in pubs, bars and nightclubs. Contrary to claims made in various letters to MPs by Culture Minister Kim Howells, there is a means whereby safe capacities are set in pubs or bars now without recourse to PELs. Licensing justices can and do append a safe capacity, on the recommendation of the fire service, when granting a justices on-licence. Noise limiting conditions are set in the same way if local authorities make representations. The power used is s.4 of the Licensing Act 1964 which confers general powers on the licening justices to impose conditions that are in the public interest. Because this power is to be abolished by the government's reform, this means that one important pre-emptive measure that might apply to premises providing non-licensable entertainments (such as satellite tv) will be lost.

The Justices Clerks' Society publishes guidance that discourages the
practice of appending conditions to on-licences, but their guidance has no statutory force, and safe capacities and noise limiting conditions are set in this way in London, Birmingham and some other parts of the country.

I know this is a repeat but this is probably a more suitable thread for the information.