Pool Betting Duty

Orders of the Day — Finance Bill – in the House of Commons at 3:30 pm on 3rd April 1995.

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'.—(1) In section 7(1) of the Betting and Gaming Duties Act 1981 (which specifies 37.50 per cent. as the rate of pool betting duty) for "37.50 per cent." there shall be substituted "32.50 per cent."

(2) This section shall apply in relation to any pool betting duty the requirement to pay which takes effect on or after 6th May 1995.'.—[Mr. Heathcoat-Amory.]

Brought up, and read the First time.

Photo of David Heathcoat-Amory David Heathcoat-Amory , Wells 4:20 pm, 3rd April 1995

I beg to move, That the clause be read a Second time.

We debated pool betting duty in Committee. In rejecting a similar new clause tabled by my hon. Friend the Member for Sutton and Cheam (Lady Olga Maitland), I said that we were, nevertheless, in touch with the pools companies and would review the duty in due course. Before I report the outcome of those discussions, I remind the House that, in 1990, pool betting duty was reduced from 42.5 per cent. to 40 per cent., with the difference being donated to the Football Trust. The money was used to update football grounds in line with the Taylor report on the Hillsborough disaster.

In August 1991, the duty was cut again by 2.5 per cent. to the present 37.5 per cent. The proceeds of that duty cut are paid to the Foundation for Sport and the Arts. The pools companies make a further voluntary donation to the FSA of 5p for each pound stake. Hon. Members will know how appreciated that funding for the FSA is and that it supports many excellent projects in all our constituencies.

Recent discussions with the pools companies have confirmed the scale of the competition that they face from the great success of the national lottery. We do not know how the position will develop in the longer term. The pools companies are responding to the challenge with new schemes and are helped by a number of deregulatory measures introduced as a result of the National Lottery etc. Act 1993. In the short term, however, the future of the football pools is threatened and, as a result, the Football Trust and the FSA face declining revenues. The Government have therefore decided on a 5 per cent. cut in pool betting duty. In return, the pools companies have confirmed that they can maintain their contribution to the organisations that I mentioned. That is a good outcome, and I commend the new clause to the House.

Photo of Mr Michael Stern Mr Michael Stern , Bristol North West

How much will that measure cost in 1995–96 and in future years?

Photo of David Heathcoat-Amory David Heathcoat-Amory , Wells

In a full year, it will cost some £40 million.

Photo of Hilary Armstrong Hilary Armstrong Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson

The Opposition welcome this move by the Government, which, in Committee, they were determined not to make. I am sure that the House is aware that the Opposition managed to secure a tied vote in Committee on a similar proposal, so we are pleased that the Government have now recognised the Committee's spirit and will.

It is important that the Government try to establish a level playing field. It is essential that we ensure fair trade and competition, because the advantages given to Camelot have meant other forms of gambling have enjoyed far from fair opportunities in comparison.

It is somewhat ironic that I should deal with this issue, because as you know, Madam Speaker, I am inherently uneasy about any form of gambling. I spent part of this weekend undertaking my duties as treasurer of the Methodist Division of Education and Youth. We discussed how we should deal with the fact that funds for some of our charitable work are declining and with the Methodist Church's continuing implacable opposition to the lottery and to receiving funds from it. It is therefore a little difficult for me to speak about the new clause. I welcome, however, the fact that it will ensure that all those involved will be treated fairly, because, to date, the pools industry has not had a fair deal.

The Government should keep an eye on things, because we are not sure whether the measure will work and whether other forms of raising money for charitable and good causes will continue to survive and prosper. We already know from the charities of their considerable unease about what is happening to other forms of charitable giving. Last week, the problems associated with a charity involved in cancer research were highlighted. Such specific charitable work is outside the current provisions for charitable giving agreed by Camelot.

The Government should seriously reconsider the terms that they set down for Camelot because it is clear that it is making far more money than I suspect the Government intended or envisaged when they issued the guidelines for the operation of the lottery and accepted its hid. No one knows the precise amount that Camelot has been able to take as profit from the lottery, because the lottery has been running for only a short time and we do not have the company's first-year results. It has been speculated in the press and elsewhere, however, that it has already made a considerable fortune in a relatively short time.

I hope that the Government now acknowledge that certain problems have arisen that they did not envisage when the national lottery was set up, not least those experienced by particular sectors in society. As yet, no suggestion has been made about how those sectors will be dealt with by Camelot through its charitable committee. How will their problems be sorted out? It is clear that people who buy their lottery ticket see that as their form of charitable giving, but the proceeds from those tickets are not meeting the needs of many charities.

We know that the pools industry in particular has suffered from the effects of the lottery. One of the pools companies said that, as a result, it intended to pull out of the Football Trust, which has done so much to improve football grounds. I am delighted, therefore, that the Government have acknowledged the importance of acting now and have not waited until the Budget to do so. I hope that the Government will keep a close eye on that. The British public will be horrified if the lottery company makes such excessive profits while charities are seen to he failing as a result of the activities of the lottery.

Those people who work for, and who obtain their work from, the pools—for example, those in the print industry—have also been severely undermined. Many jobs have gone already. It was important, therefore, that steps were taken to protect the good works arm of the lottery and to protect the pools industry so that it might continue to flourish. It is an important sector of the economy, especially in the north-west.

For those reasons, we welcome the measure, but we hope that the Government will monitor things carefully and will allow the House to reconsider the position to ensure that all the things that hon. Members on both sides of the House wanted when they agreed to the introduction of the lottery—for example, the protection of other parts of the gambling industry and charities—are properly placed in the framework of fair competition.

4.30 pm

Photo of Jane Kennedy Jane Kennedy , Liverpool Broadgreen

May I congratulate the hon. Member for Sutton and Cheam (Lady Olga Maitland) on tabling a new clause in Committee and say to the Paymaster General how very warmly welcomed the Government new clause is on Merseyside?

When the vote was tied in Committee, we were deeply disappointed that the two Liberal Democrat Members who should have been present failed to turn up and vote. Given the representations that they make on Merseyside, we felt that that was a significant and serious omission.

Our preoccupation on Merseyside has broadly been with the number of jobs that we have perceived to be under threat as a result of the introduction of the national lottery. Ninety-five jobs have gone at Vernons Pools and 560 at Littlewoods. Although I accept that those jobs have not been lost entirely as a result of the introduction of the national lottery, its introduction has, in part, had an impact on employment prospects on Merseyside.

The new clause recognises that the national lottery has been an immense success and that it will continue to go from strength to strength. The number of lottery retail outlets is growing by 1,000 a month, Camelot has just introduced a new scratch card game that I have seen advertised under the name of Instants and a second weekly on-line game is to be introduced in the summer. The improved terms for competitiveness of the pools companies will not pose a threat to the national lottery.

Photo of Mr Dafydd Wigley Mr Dafydd Wigley Leader and Party President, Plaid Cymru

Does the hon. Lady accept that the introduction of scratch cards has had a serious effect on other charities, such as Tenovus, a cancer charity, and that the problem must be considered? I welcome the steps that have been taken today and their significance for people such as the Foundation for Sport and the Arts and the others who will benefit, but that worry remains.

Photo of Jane Kennedy Jane Kennedy , Liverpool Broadgreen

I accept what the hon. Gentleman says. Indeed, if pools companies develop their marketing and new products, that will have an even greater impact on the sales of small lotteries run by charities. That emphasises the need for the Government to keep the matter under review.

We are witnessing the determination and resilience of pools companies, as demonstrated by the development of new products. I wish to mention one or two aspects of the way in which their determination to succeed despite problems presented to them by the national lottery has been demonstrated recently.

Before I do so, I should deal with marketing, which the pools companies are desperately eager to get on with. It is estimated that the national lottery's television advertising campaign has cost between £30 million and £50 million in its first year. No pools company is in a position to compete with such expenditure on television marketing, although the ability to do so is very much welcomed.

I understand that Littlewoods is considering following Zetters in reverting to an older system of scoring. That will result in smaller prizes overall, but more winners. I understand that Zetters' sales have increased as a result. Perhaps the national lottery will get the message and learn a lesson from that method.

As I understand it, the reduction in pools betting duty will have an impact on the Football Trust. Since Littlewoods has given notice that it is to reduce its contribution from spot-the-ball by 6 per cent., following the dramatic decline in sales of the game, what does the Paymaster General estimate the impact will be on the Football Trust?

Vernons pools stated its intention to withdraw its 5p contribution to the Foundation for Sport and the Arts from every coupon sold, but I understand from the Paymaster General's opening that it is to continue that commitment. That is very welcome as many small organisations in my constituency have benefited directly from the Foundation for Sport and the Arts, but it means that the 5 per cent. reduction in pools betting duty is effectively 2.7 per cent, with the consequential overall cost benefits of that lower figure.

I recognise that the Government's intention is good and I welcome the new clause and the improvement that it makes in allowing pool companies to compete, but if the companies continue to support other organisations they will not benefit from the whole 5 per cent. reduction in betting duty. Clearly, the pools companies were saying that they needed a reduction of 5 per cent. to be able to compete more fairly. I ask the Paymaster General to take that point on board in conducting the overall review of the impact of the national lottery on businesses that are so important to the constituents whom I represent.

Photo of Lady Olga Maitland Lady Olga Maitland , Sutton and Cheam

I warmly welcome the new clause. It is good news to the pools industry, which has campaigned for such action for some time. Putting £34 million back into their coffers is rather like sending a lifebelt out to a drowning man at sea. The move has given the pools companies a chance to regroup, replan and—we hope—move into more fortunate times.

The reduction in duty has not come a moment too soon. I am grateful for the fact that the Paymaster General has decided to ensure that it takes effect on or after 6 May 1995—in other words, almost immediately. I appreciate that he now recognises the urgency of the situation.

As my hon. Friend the Paymaster General knows, I went to see him in private, made an urgent plea for action and moved my new clause in Committee. Indeed, I had been charting the fortune and misfortune of the pools industry ever since the launch of the national lottery. I was a member of the Committee that considered the National Lottery etc. Bill and I recall clearly how we were assured that the pools industry would not run into dire straits as a result of the national lottery. The national lottery has been a staggering success, but its success has plunged the pools industry into deep crisis. As the House has heard, there has been a serious loss of jobs and a crisis of confidence. The most important thing about the new clause is that it offers a chance to move forward.

It has been very encouraging to speak to all the pools promoters, who were delighted at the news, but they uttered a word of caution. They trusted that this move alone would not close the matter and they hoped that the Government would keep an open ear and, indeed, review the situation as time goes on. They hoped that, if they have to raise the matter again, they will be free to do so. Moreover, they said that they would not again use the issue about good causes and the Foundation for Sport and the Arts as a lever—the foundation has suffered so much during the latest downturn—and they recognised that future judgments would have to be made purely and solely for commercial reasons.

None the less, the new clause is excellent news. It shows that the Government are listening and that they will respond to companies in trouble. That in turn will be very much appreciated.

Photo of Mr Michael Stern Mr Michael Stern , Bristol North West

I have no desire to he churlish about the proposal. The Foundation for Sport and the Arts does a great deal of useful work and would have been prevented from doing some of it without the new clause. A ballet dancer in my constituency depends on the foundation for the continuation of her training; and a great deal of useful equipment has been provided for a female weightlifting group there.

I must, however, sound a note of caution—it is, perhaps, inevitable that I should do so when the whole House joins together to welcome a tax cut. I should be grateful if the Minister gave us information about the extent, if any, to which the Government's plans for raising taxation from betting have been changed as a result of this announcement. When the Chancellor made his Budget statement, he will have included, in the balance of tax and expenditure, a certain yield from betting.

Those of us who follow the industry's progress in the newspapers, or who, like me, invest regularly in the national lottery—[HON. MEMBERS: "Invest?"] That is the technical term. Nevertheless, it is clear that the taxation yield of the national lottery has been higher than expected. I should like my hon. Friend to reassure me that the expected yield, next year and in subsequent years, is sufficiently higher from the national lottery and other forms of betting to allow him to give away this £40 million.

Without such an assurance the House might want to debate whether such a tax cut would have been more usefully applied in other directions. I do not intend to sound unwelcoming about the tax cut. I have argued in the past and will argue again that all tax cuts are of benefit to the economy, but I hope that my hon. Friend can demonstrate this afternoon that this tax cut will not involve a diminution of yield to the Exchequer and that it is based on something rather more substantial than undue pressure from the pools companies.

Photo of Mr Dafydd Wigley Mr Dafydd Wigley Leader and Party President, Plaid Cymru

I apologise to the Minister for missing some of his opening remarks.

An important point has been made about the Foundation for Sport and the Arts. There can be no question hut that it does excellent work. I doubt whether there is a constituency in the land that does not receive some benefit from it—more than 15,000 small clubs and organisations have benefited, and more than £200 million has been paid out, often in small sums, occasionally in larger ones.

The hon. Member for Liverpool, Broadgreen (Mrs. Kennedy) made an important point about how the changes will ensure that Vernons can still pay out adequate sums to maintain the work being done by the FSA. I should like also to take up her point about scratch cards. The Minister will be aware of the severe impact that the lottery scratch cards have had on some charities that depend on scratch cards and other forms of this sort of gambling. I do not criticise the lottery, although it has been much more successful than people expected, but it has had a knock-on effect. Tenovus in Cardiff has been doing vital work in cancer research and it would be unfortunate indeed if, as appeared from last week's announcement, that work were to be undermined. I should like some of the proceeds of the national lottery to be channelled in that direction, especially when no one wins the large prizes. Instead of rolling them over, the moneys should be distributed to good causes—but that is another issue.

I hope that in this short debate the vital work of the Foundation for Sport and the Arts can be safeguarded, following the Minister's announcement.

Photo of David Heathcoat-Amory David Heathcoat-Amory , Wells

I am grateful for the support of the House for the new clause—especially for the support of my hon. Friend the Member for Sutton and Cheam (Lady Olga Maitland), who tabled the original new clause. To answer the hon. Member for Caernarfon (Mr. Wigley) I should say that we shall of course keep the matter under review. If there has been a reduction in charitable giving, that does not necessarily follow from the success of the national lottery, but to the extent that it does I agree that the one fifth of the money going to good causes that will be channelled to charities will at least make up, in cash terms, the money that may be forgone in the shorter term.

The national lottery is a national success. The hon. Member for Durham, North-West (Ms Armstrong) almost made that success sound like a failure. The fact is that the lottery will give large sums of money to a wide range of good causes, including charitable causes.

4.45 pm

The hon. Member for Durham, North-West sounded critical of Camelot, but that company gained the right to run the lottery in competition with other bidders. It would be quite wrong of us to break its contract just because the lottery has been so successful, but I am sure that she was not asking us to do that. We should all rejoice in the fact that these sums will be available for good causes.

To answer my hon. Friend the Member for Bristol, North-West (Mr. Stern), I should perhaps correct my earlier answer to him. The sum of money forgone in a full year will, I believe, be £30 million, not £40 million. I can confirm that it looks as though the total yield from this area of gaming and betting will remain buoyant overall. I think that he would agree that it is right to look again at pools duty, simply because the pools face direct and evident competition from the success of the national lottery.

I say to the hon. Member for Liverpool, Broadgreen (Mrs. Kennedy) that the cut in duty will not adversely affect the Football Trust. Quite the reverse: maintaining the viability of the pools companies means that total pools turnover will be kept up, so funding for the Football Trust and for the good work that it does will be enhanced.

The pools companies have told me that they intend to keep paying not just the 2.5 per cent. to the Football Trust and the FSA but the 5p per coupon that they now voluntarily give the FSA. The 5 per cent. duty cut will help these companies to maintain their overall prize money; that in turn will help them to keep up their profitability, turnover and employment—and hence their giving to the FSA and the Football Trust.

This seems to be one of those rare occasions when the whole House should welcome what the Government have done, and I am grateful for remarks along those lines.

Question put and agreed to.

Clause read a Second time, and added to the Bill.