Public entertainment licences (PELs) have been branded archaic by MPs during a debate at the House of Commons.
David Heath, MP for Somerset and Frome, said the rules surrounding PELs had a "sparing connection with reality" despite being "vigorously applied by many local authorities". He has recommended they are scrapped or ignored.
He said most of the problem lay with the "ridiculous two-in-a-bar rule", which means a solo or duo performance does not require a PEL but a group of three or more performers does.
The debate was provoked by a recent High Court case which ruled this applied even if individual performers appeared on stage one after the other rather than as a group, as in a karaoke session.
Licensee Sean Toye, who brought the case, had argued he did not need a PEL for a music quiz karaoke night in his pub, the Fleece in Southwark, London, because no more than two performers were on stage at any one time.
But the judge ruled against him, setting a precedent for other cases.
Mr Heath pointed out that the ruling means even spontaneous singing, such as drinkers singing football songs during a televised match, could technically result in the licensee being prosecuted.
He said there were "disproportionate" penalties involved for publicans who break the PEL laws. Fines can be up to £20,000 and licensees can be sentenced to up to six months in prison if found guilty. He also said there was widespread inconsistency between local authorities as to how strictly the rules were enforced.
"There is a crying need for legislation to change the regulations. That does not mean simply abolishing the "two-in-a-bar" rule. We need a complete change," Mr Heath said. "Will ministers at least issue guidance to local authorities on how they should exercise the powers at their disposal so their decisions are not so arbitrary?"
Minister Richard Caborn, who answered Mr Heath's questions on behalf of licensing minister Kim Howells, said the answer lay in the Government reform of licensing.
He said: "Licensing reform will be good for business because it will sweep away a great deal of expensive red tape which no longer serves the purpose of protecting the public and sometimes deters licensees from staging musical events on their premises."
Related stories:
Trade waits on PEL rule (18 February 2002)
Licensees must have PEL for karaoke says court (20 July 2001)
Protesters: PELs "killing off live music in pubs" (20 July 2001)
Local councils under attack for exploiting PELs (10 July 2001)
Trade campaigns to update PEL system (21 June 2001)