Clause 9 — Bingo Duty

Finance Bill – in the House of Commons at 4:45 pm on 13th May 2003.

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Votes in this debate

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

With this it will be convenient to consider amendment No. 69 and Government amendments Nos. 70 and 71.

Photo of Stephen O'Brien Stephen O'Brien Shadow Paymaster General

It may help the Economic Secretary to note that the aims that the amendments seek to achieve could probably have been most elegantly and simply achieved by other unselected amendments. For understandable reasons, not least including legal drafting, we are not proceeding with those amendments, so I shall not seek to detain the House or debate them, although I should say that I refer to amendments Nos. 5 and 68.

In any event, amendments Nos. 6 and 69 would achieve what we seek to achieve, and I hope that the Economic Secretary will be minded to accept them after he has heard the arguments, as they would improve the Bill and deliver on the very aims that were flagged up by the Chancellor himself. Indeed, the only point of attempted levity in the Chancellor's hour-long Budget speech, as recorded in the Official Report of 9 April, arose when he said:

"I turn now to bingo. I will abolish the bingo tax . . . just as I have abolished direct taxes on the pools and on betting on horse racing."

The phrase "just as I have" implies a direct equivalence, and that was the expectation given to all those who are interested in bingo, whether they are providers or the millions of people throughout the country who play the game. Bingo is a pastime of interest and enjoyment to many communities around the country. I have been privileged to visit my local bingo club in Winsford in my constituency, where I recently had the pleasure of presenting a very large cheque to a young lady who had been going there with her mother for many years and had won the sweep across the country—they are all computer-linked these days. She said that it would not change her life, but she was going to live in Spain.

The Chancellor went on to say:

"The tax on bingo players' stakes and the tax on bingo prizes will be replaced in the same way as the tax on betting and the pools."—[Hansard, 9 April 2003; Vol. 403, c. 278.]

He then went on to make the joke that did not work. I ask the Minister to keep in mind the phrases that the Chancellor used—"just as I have" and

"will be replaced in the same way".

The language that he used clearly created an expectation of a direct equivalence.

Bingo is currently liable to duty at a rate of 10 per cent. on all moneys staked. Betting and football pools have both in the recent past moved on to a gross profits tax basis—in the case of betting, with the active support and encouragement of that industry. A move to gross profits tax for bingo, which the industry has indicated in the past it would not welcome, was announced by the Chancellor in April 2002—just over a year ago—without prior notice to or discussion with the Bingo Association, which represents by far the greatest number of bingo operators and interested groups. At that point, there were no indications of how any new system might work or of what the rate might be. I understand that the Bingo Association has held lengthy and detailed discussions with Customs and Excise, including extensive modelling by the Henley Centre, in order to examine all possible options. The industry favoured a system that made participation fees VAT-exempt and levied GPT—gross profits tax—at a rate of 15 per cent., in line with betting and the pools: "just as" or "in the same way", to keep in line with what the Chancellor was leading the whole industry and all those who play bingo to expect. The Bingo Association voiced objections to any system that maintains VAT.

The problem, which will come as no surprise to the Government, is that bingo is still liable to VAT on participation fees—or "par fees", as they are known—and will be double-taxed because of the way in which the GPT calculation has been set. The gross profits calculation does not allow VAT to be treated as a cost, thereby implementing double taxation. The system will not deliver even the limited benefits that the Chancellor outlined and could in many circumstances leave clubs worse off. The tax burden on bingo remains significantly higher than on any other gaming product, at 30.7 per cent. The bingo industry rightly considers that that amounts to discrimination against bingo players.

I do not know whether that is something that the Government are happy to stomach, or whether they intended it, but the Government's promise of a fairer tax regime in relation to bingo rings hollow in the ears of bingo players across the country. The Government's proposed changes to the way in which the bingo industry is taxed leaves it at a serious disadvantage to the rest of the gaming industry. The Chancellor's sleight of hand is evident. The Government's proposed tax system will not even deliver the limited benefits that he previously promised. The tax burden on bingo remains significantly higher than on any other gaming product. Britain's bingo players, and the industry, deserve a fair deal, but once again they are being let down.

Conservative Members, as Her Majesty's official Opposition, will lend support if the Government recognise that, on this occasion, there has been sleight of hand or—let me be generous—an oversight, and that they had intended, as the Chancellor clearly stated, to put bingo on the same footing as the pools and the betting industry. That has not happened, hence we will support Government action in amending to the Bill to ensure that bingo players and the gaming industry have a level playing field. Amendments Nos. 6 and 69 would achieve that.

We are considering a problem that is simple to solve. Have the Government the will to live up to the Chancellor's words in the Budget statement as recently as 9 April? Conservative Members have not attempted to generate artificial anger, although it is easy to suggest that we have made such attempts. Representation after representation has been made on the issue. It is appropriate to cite the bingo club in my constituency—Top Ten Bingo in Dingle lane in Winsford—from which I received a letter. I did not solicit it, but it happened to arrive in my post this morning after I had prepared my remarks. It is so relevant that I shall quote from it. It is dated 9 May and states:

"Dear Mr. O'Brien,

As you know in his budget speech, the Chancellor announced that he was abolishing bingo duty. This follows his statement last year when he made it clear that he wanted to benefit both the players and the industry.

A consultation paper was issued in which the Minister"— the Economic Secretary is named—

"wrote:-

'We want to deliver the same (as for bookmakers) successful reform for bingo that should allow bingo companies to invest more in growth of their clubs and increase their prize payout, which in turn should help boost attendances'."

Mr. Ryder, the club's general manager, continues:

"These aims cannot be realised because unlike the betting industry VAT will still apply to bingo. This means that the amount available to pay the new tax, invest more in clubs and to give extra meaningful prizes will be totally insufficient. Indeed in the medium term, according to research carried out by the Henley Centre, both stake money and prize levels are likely to decrease by 2007."

I mentioned the centre earlier, and Mr. Ryder's reference to it suggests that he is a member of the Bingo Association or has heard of its work. The letter goes on:

"There will therefore not be the growth in the industry for which we had hoped."

I am sure that the Economic Secretary takes the matter seriously. Mr. Ryder quotes his words in a consultation paper. Top Ten Bingo is a highly reputable club and an attractive venue for all those who enjoy the sport and entertainment.

Photo of Adam Price Adam Price Plaid Cymru, Carmarthen East and Dinefwr 5:00 pm, 13th May 2003

The hon. Gentleman referred to the differential tax burden on bingo when compared with other parts of the gaming industry. Does he accept that the new proposals, which increase the tax burden, discriminate against smaller clubs in particular? They would especially benefit from the abolition of par fees to which he referred.

Photo of Stephen O'Brien Stephen O'Brien Shadow Paymaster General

The hon. Gentleman makes an important and telling point. I am sure that his constituency has many typical bingo outlets that are probably similar to those that characterise the sort of constituency that I represent on the English-Welsh border. Club ownership obviously varies from constituency to constituency, but the detailed scrutiny of a Committee allows us to look out for areas that will suffer from genuine cost burdens, new regulatory impacts, and a challenge to all those who run community services and provide the community's lifeblood. People feel that they can come together in such places and be part of the community.

Mr. Ryder's letter continues:

"The most disturbing matter for the industry is that the Chancellor has raised false expectations. Our customers are asking where are the price reductions and the bigger prizes they were led to expect."

That goes to the heart of the point made by Adam Price. Local bingo halls, perhaps single businesses or those with a very small company base, will have to recover a certain proportion of their overhead costs in order to stay in business. To do that, they need a level playing field, so as to be able to compete against the pools and the betting industry. They also need the incentive to back not only the sustainability of their businesses but their growth, which is what the Minister was seeking to encourage in the quote that I read out, and which he wanted the industry to understand that he was encouraging.

The absence of the removal of VAT is occurring alongside the unwelcome imposition of the gross profits tax. These businesses have accepted the GPT, but they remain burdened by VAT, unlike those with whom they have to compete and also the smaller businesses. That must also apply to the larger businesses, because they are seeking to attract people with the potential for winning prizes. We know from the extraordinary experience of the lottery that, as soon as there is a rollover from one week to the next, a whole load more tickets are suddenly bought. There is no logic to that, because the odds are always the same, mathematically, whether we choose the same numbers or different ones, from week to week. Mathematically, that is illogical, but from the point of view of encouraging business, it is very real.

Photo of George Osborne George Osborne Opposition Whip (Commons)

I do not want to pick my hon. Friend up on his maths, but if the stake is larger in the lottery, the effective odds are better in a rollover week.

Photo of Stephen O'Brien Stephen O'Brien Shadow Paymaster General

That depends entirely on individual circumstances, but the mathematical basis remains constant.

Photo of Stephen O'Brien Stephen O'Brien Shadow Paymaster General

Indeed, there is a bigger stake but, for my hon. Friend's maths to work, one would have to participate in the game to the same proportion. This discussion, however, is stretching the nature of our purpose here today to its limit.

In addition to what Mr. Ryder says his customers are asking for, he says that they now realise that the expectations that the Chancellor raised are not going to be met. They also realise that, as bingo players, they are being unfairly treated compared with those using betting shops. This will often relate to two halves of a couple living in the same household, so conversations about this take place, however much people might believe that they do not. Mr. Ryder goes on to point out that

"the majority (75 per cent.) of bingo players are women"—

I did not know that statistic until I read it here—

"and the reverse is probably true of betting shops", as I have just instinctively pointed out, although I did not have the evidence to do so until I read what Mr. Ryder had written. He goes on to say that

"this does not represent 'social equality', a phrase much used by the Chancellor on budget day and Tony Blair. I am therefore writing to express my great disappointment and dissatisfaction at what is now being proposed. I will be forced to face customers expecting improvements as a result of previous budget promises, that will be impossible for me to meet. I feel that the Chancellor is totally to blame for this and that the only way to redress matters is for bingo participation fees not to be subject to VAT."

As I said earlier, I prepared my remarks on this amendment before I read what Mr. Ryder had to say on the matter. He has put it very well, but I am afraid that I am not going to decline the opportunity to give the House some of the remarks that I had prepared earlier. The recommended solution is to make participation fees VAT-exempt. During discussions with Customs and Excise, it was made clear that the discretion to take such a step exists. If that proves impossible, however, it would be possible to get to the same position by reducing the gross profits tax to 4 per cent. The latter option would provide significantly less benefit to the consumer and the industry; it is, however, what has ended up in the amendments.

I wonder whether the Minister is prepared to give an absolute guarantee at the Dispatch Box today that he likes the look of what were amendments Nos. 5 and 68, to the extent that he will adopt them. Former amendment No. 68 is, of course, a better version of former amendment No. 5, although there might be a small EU law issue as to whether bingo being singled out would qualify under the broad categories applicable under the EU directive governing VAT. On the other hand, the Minister could achieve the same result by accepting our current amendments. Perhaps he will give a guarantee that he is prepared to accept the amendments that we were unable to pursue because of the amendment of the law provision—about which I had some issues, as we were seeking relief from an exemption in relation to bingo, rather than providing for an exemption, to which the terms of the amendment to the law resolution relate. I had to accept what had been decided, however, so I had to adopt this course.It is our duty to do our best to find a solution. Bingo could decline rapidly, in relative terms, unless the Government are prepared to acknowledge the seriousness of the issue.

The reforms announced on 9 April will not deliver the Government's stated objectives. The VAT element is largely responsible for the significantly larger tax burden on bingo. A KPMG study carried out in 2000 showed that it was being taxed at 34.1 per cent. then, but the current differential is still very great, and to make matters worse double taxation is now being introduced.

If the Government want to move, they can move very fast; if they want to stall, I dare say that they can do that. It is clear that they could remedy the problems inherent in what the Chancellor seems to have been determined to suggest he was delivering—something that is now being discussed by businesses throughout the country, and increasingly, by bingo players: naturally, when they get together the subject will arise, and the conversation is not one that I imagine the Government would wish to take place. I am suggesting a remedy—a way in which the Government might be able to make themselves more popular with bingo players. That may be the right way to bring about a better law, but I must say that it goes against my instincts.

Our amendment would deliver the Government's stated objectives and implement reform. It was on this basis that the industry accepted the move to GPT. Amendments Nos. 6 and 69 would remove the unfairness in the current system, and would enable the Government to live up to the expectations that they deliberately peddled to bingo players and the industry—while also being open to the charge of having been somewhat economical with their explanations in the Budget speech, and having previously failed to deliver on clearly stated objectives.

A considered response from the Minister would be helpful, and unless he can give the categorical guarantee and reassurance that I seek, we will press the issue. I could advance further arguments, but I hope that the Government have listened to what I have already said, and I do not want to take up more of the Committee's time.

Photo of David Laws David Laws Shadow Chief Secretary to the Treasury

I have three questions. First, is it Government policy for bingo taxation to be neutral in relation to other forms of gambling? Secondly, following the Budget, is it neutral in that sense? Thirdly, if it is not, what would it cost the Exchequer in an average year to achieve neutrality?

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

The Committee is grateful to the hon. Gentleman for his brevity.

Photo of George Osborne George Osborne Opposition Whip (Commons) 5:15 pm, 13th May 2003

I shall not be quite so brief, Sir Nicholas; nevertheless, I hope to make a relatively short contribution. I congratulate my hon. Friend Mr. O'Brien on an excellent speech. I always suspected that he was an expert on the bingo industry—even before he went to Winsford to present the prize. In fact, I have gone one better than him and called bingo numbers on several occasions in Cheshire. I discovered that when the number 10 is pulled out, it is called "Tony's den". That is something that Clare Short wants to change, and I would approve of that.

On a serious note, my hon. Friend the Member for Eddisbury is right to bring to the House's attention the very real concerns of the bingo industry and of bingo players across the country, and he has done so in a very eloquent way. As he said, the Chancellor's objective was to create the right environment for bingo to maintain its role in the community and to reach maximum growth; indeed, the Economic Secretary told us last year that reform will not only benefit bingo players and bingo companies, but strengthen the increasingly important role played by bingo clubs within the wider community and help to ensure that the next 20 years are ones of growth and success. That is what the Economic Secretary set out to achieve, so presumably he was very disappointed when the Bingo Association told him that, as a result of the proposals announced in the Budget, clubs will be no better off, and in some cases will be worse off than before. If that is what the industry is saying, he will presumably want to think again about these proposals extremely carefully.

My hon. Friend the Member for Eddisbury referred to KPMG's interesting study on this issue, carried out in 2000, with which Members are doubtless very familiar. It found that the effective tax burden on the bingo industry was 34.1 per cent., which is considerably higher than that on arcades, at 19.9 per cent., on casinos, at 21.7 per cent., on pools, at 15 per cent., or on betting generally. It is true that this reform would reduce somewhat the effective rate of tax on the industry, but only to 30.7 per cent., which is still far above that for all other forms of gambling. Such a rate would continue to discriminate against the bingo industry. Indeed, because of the way in which the reforms are structured, they may lead to an increase in the burden for smaller clubs—a point made by my hon. Friend and by Adam Price.

The industry feels that the proposals announced in the Budget are a betrayal. Given that they were introduced to help the industry, the Economic Secretary should listen on this occasion. I welcome the fact that the Government have already tabled an amendment to delay the implementation of some of these proposals; that was a particular concern of the industry. Nevertheless, that does little to help smaller bingo clubs in particular.

I end my contribution by pointing out what the Bingo Association itself had to say:

"Bingo clubs and players want fair play. They want to be treated in the same way as those who bet and play the pools."

[Interruption.] I see that my hon. Friend the Member for Eddisbury wants to intervene and interrupt the Bingo Association.

Photo of Stephen O'Brien Stephen O'Brien Shadow Paymaster General

In that context, my hon. Friend might find it interesting to note that the Bingo Association wrote to the Economic Secretary on 8 May; indeed, I have a copy of the letter in front of me. It states that in advising him,

"Customs and Excise have leant very heavily on the Nottingham University Business School's evaluation of GPT on bookmakers."

It continues by pointing out that there seems to be an excessive reliance on the assumption that what is true for bookmakers is true for the bingo industry. I hope that that is a helpful reinforcement of the valid points that my hon. Friend is making.

Photo of George Osborne George Osborne Opposition Whip (Commons)

Indeed it is, and I should hate to think that Customs and Excise—or, indeed, the Treasury—did not have a proper understanding of the bingo industry. However, in the light of these proposals and of our knowledge of the industry, that appears to be the case. The Bingo Association makes a very straightforward point: it wants the Chancellor to live up to his promises. It believes that current proposals should be amended to include VAT exemption from participation fees, removing the unfair discrimination against millions of women—and presumably men—who play bingo, and giving bingo clubs across the country, many of whom are struggling to survive, the chance of future success.

Photo of John Healey John Healey The Economic Secretary to the Treasury

Mr. O'Brien urged me to make a considered response to his points, and I shall attempt to do so. I want to deal thoroughly with the issues because millions of bingo players in every constituency across the country are potentially affected and should potentially benefit from our proposals. First, I shall explain the background and purpose of the reforms and explain our decisions. Secondly, I shall respond to Opposition Members' plea to make the reforms more generous and deliver a bigger tax saving to the bingo industry. Thirdly, I shall assure the House that Ministers and our officials have listened to the industry about the changes necessary to make the reforms work as well as possible, and I shall explain the amendments that the Government have tabled to that end.

The reforms are the latest elements of our wider programme to reform the taxation of gambling in this country by replacing across the board duty regimes that have been in place since the 1960s with simplified systems of taxation that reflect the modern age and support the future competitiveness of the UK's gambling industries. Following our reforms to betting and pools taxation, my right hon. Friend the Chancellor announced in the last Budget that he would examine the scope for abolishing the duty on bingo players' stakes and replacing it with a tax on bingo companies' gross profits. What the Chancellor proposed is what we are now doing—abolishing bingo duty and moving from a turnover to a gross profits tax.

That was the main purpose of our consultation last summer. As a result we have been able to deliver reform in the Budget in a way that both modernises the tax system and gives real financial support to the industry. Although Angus Robertson has just taken his place, I will give way to him. [Interruption.]

Photo of Angus Robertson Angus Robertson Shadow SNP Spokesperson (Defence), Shadow SNP Spokesperson (Foreign and Commonwealth Office)

May I confound the intervention from a sedentary position to the effect that I was just placing a bet? Unfortunately, I have had parliamentary duties elsewhere and I am grateful to the Economic Secretary for allowing me into the debate. What message would he give to the Carlton Clubs in Inverness, which has many bingo establishments, including several in my constituency? The clubs have written to me complaining that they will have to pay an additional £500,000 this year, limiting the company's ability to increase prizes or to reinvest.

Photo of John Healey John Healey The Economic Secretary to the Treasury

I would say to the Carlton Clubs that we would be delighted to see any detailed analysis of evidence that would bear that contention out. It goes against the analysis that we have undertaken, against the discussions that we have had with the bingo industry and against the research commissioned by the Bingo Association on behalf of the industry, which was submitted to us as part of the consultation process. I shall touch on that again in my later remarks.

Photo of George Osborne George Osborne Opposition Whip (Commons)

Once the Financial Secretary has examined the detailed analysis, which I am sure that Angus Robertson will forward to him, and it turns out to be correct, will he re-examine the Government's proposals?

Photo of John Healey John Healey The Economic Secretary to the Treasury

Just as we have done with betting taxation and pools taxation reform, so we shall do with bingo taxation reform—monitor implementation, be prepared to receive fresh evidence and, if a good case can be made, consider further reform and refinement of the regime that we are putting in place. I will return to the point later.

I shall now deal with the second set of three questions asked by Mr. Laws this afternoon. Our approach to the reform of bingo taxation is consistent with our approach to betting and pools, but it is not neutral across the gambling regimes because industry-specific factors need to be taken into account. For example, with the challenges faced by the betting and gambling industry, we were mindful of a strong move towards moving betting offshore and on to the web. That consideration clearly applies to that part of the gambling industry, but not to bingo. Introducing a neutral regime across the different gambling industries is not our policy aim. Therefore, we have not calculated the cost to the Exchequer of pursuing that objective.

Photo of David Laws David Laws Shadow Chief Secretary to the Treasury

I thank the Minister for giving way, and for his candid response that he has not achieved tax neutrality across all forms of gambling. Given the special factors that he mentioned in relation to one particular sector of the gambling market, does he see any prospect of moving towards neutrality? Is that his objective in the years to come?

Photo of John Healey John Healey The Economic Secretary to the Treasury

No.

I turn now to the points raised by the hon. Member for Tatton, and to those raised by Adam Price in an intervention on the hon. Member for Eddisbury. Those hon. Members were concerned about the apparent position of small bingo clubs.

There seems to be a claim that some small bingo clubs will be worse off as a result of the reforms confirmed by my right hon. Friend the Chancellor in last month's Budget. As the reforms cut the tax for all bingo clubs, regardless of size, it is hard to see how that could be the case.

In discussions since the Budget, the bingo industry raised the point with officials. We have invited industry members to submit evidence to substantiate the fear, but we have not yet received the information. However, we can draw some comparisons with the experience in other regimes. The analysis conducted by Nottingham university of the impact on small bookmakers of changes in the betting regime suggests that modelling a gross profits tax in that way on gambling industries would not have the effect of making smaller concerns worse off.

In addition, the bingo industry has told the Government consistently that small clubs pay a higher effective rate of tax than larger clubs. That is largely because small clubs' profit margins are narrower. Moving to a profits-based tax would mean that their effective rate of tax would be equalised. Therefore, it is once again hard to see how the claim that small clubs are proportionately penalised and worse off can be sustained.

By abolishing the duty on stakes and on added prize money, the Government are encouraging lower prices and higher prizes for bingo players. Those factors will help attendance and turnover at clubs. By setting GPT at 15 per cent., we are delivering a £25 million tax cut to the bingo industry. The bingo industry itself estimates that that will deliver a £240 million benefit to players, in the shape of lower prices and higher prizes. That was set out in the Bingo Association's press release of 9 April, in response to the Budget.

Understandably, the bingo industry has argued for the removal of the duty on bingo stakes and prizes, and for the removal of value added tax on participation fees. However, during the consultation the industry also estimated the impact that a GPT at 15 per cent. and the retention of VAT on par fees would have on the industry. The industry drew on the analysis by the Henley Centre, commissioned for the Bingo Association. The evidence was submitted to the Government in December, as part of the consultation process. Based on the work of the Henley Centre, that evidence estimates that setting GPT at 15 per cent. and retaining VAT on par fees would increase prizes by at least £18.75 million, would increase admissions by at least half a million a year, and would increase prizes as a percentage of bingo spend from 67.2 per cent. to 68.7 per cent. It was also stated that the move would increase bingo industry profitability from £117 million a year to £191 million a year.

All I can suggest to the hon. Member for Eddisbury is that he encourage his constituent Mr. Ryder to examine the Henley Centre's analysis quite closely, just to check that he is not misinterpreting or misquoting the results of the work that it did for the Bingo Association, and which were submitted to the Government.

I have spoken with representatives of the bingo industry since the Budget, and officials have held detailed discussions. I know that the industry wishes that our reforms had delivered a bigger tax cut. That is not surprising. I know that it wishes that we had altered VAT treatment on par fees. I have discussed those issues with some leading figures in the industry, and I know they appreciate that I understand their concerns. However, all Governments need to make difficult decisions about the scope and size of tax changes in every Budget. That is never more true than in deciding where to draw the line when giving a relief from tax. Many people may appreciate how far we have gone, but many more will usually argue that we should go much further.

Photo of Adam Price Adam Price Plaid Cymru, Carmarthen East and Dinefwr 5:30 pm, 13th May 2003

Let me return to the disproportionate impact on smaller clubs. One difference between smaller and larger companies, as those of us who have been in business know, is that larger companies have better access to professional expertise and advice on perfectly legal tax avoidance.

On another point, what has the Minister to say about the fear that the changes are being rushed through and the burden that that truncated time period will place on smaller clubs?

Photo of John Healey John Healey The Economic Secretary to the Treasury

I emphasise that we developed our proposals after detailed consultation with and shared analysis from the industry, but if the hon. Gentleman will allow me, I shall explain later, in relation to one of the Government amendments, precisely how we shall continue that consultation and how we are ready to adjust our plans in light of what the industry tells us.

There will always be those who urge us to go further on any Budget decision that allows a tax relief. Inevitably, there will be criticism of almost every tax relief that we introduce. In the eyes of some people, they do not go far enough, and that is so whether the relief is for small cars, small breweries, film makers, bookmakers or bingo clubs. However, we wanted to support the bingo industry, and we have done so fairly and affordably. We have tried to do that in a spirit of close and ongoing consultation with the industry.

Photo of David Laws David Laws Shadow Chief Secretary to the Treasury

I appreciate that there are many competing priorities in every Budget and that Ministers have to decide between them. Does the Minister understand, however, why the bingo industry is likely to be frustrated with his announcement of a moment ago that he has no intention of trying to move towards any equality between different forms of gambling in the way that they are taxed? What is his estimate of the cost of achieving neutrality for the bingo industry?

Photo of John Healey John Healey The Economic Secretary to the Treasury

The phrase "flogging a dead horse" comes to mind. The point is not revenue neutrality. The bingo industry is understandably disappointed because we have not decided to go as far as the industry urged during consultation. It argued for a formula of tax changes and reliefs that would have cost the Exchequer £80 million a year.

I appreciate the spirit in which the hon. Member for Eddisbury moved the amendment. However, it beggars belief to hear Conservative Members berating us for not doing enough to support the bingo industry. The hon. Gentleman may do well to recall the impact on bingo clubs of tax reforms under Conservative Governments. In 1980, the tax on stakes was 5 per cent. Did the Conservatives cut or abolish it? No: they increased it to 7.5 per cent. In 1981, in a Budget described by the present shadow Chancellor as ground-breaking, they were back for more, increasing the tax on stakes to 10 per cent. In the space of two years, the Conservatives doubled the tax on stakes. In the same period, they doubled the tax on added prize money from 5p in the pound to 11p.

Photo of John Healey John Healey The Economic Secretary to the Treasury

It is not ancient history. The hon. Member for Eddisbury professes concern about the decline in bingo clubs, but what happened to the bingo clubs following those taxation changes was that their numbers significantly declined.

When Lord Howe became Chancellor, there were 1,697 bingo clubs in the UK. By 1982, the number had fallen to 1,556 and at the end of the second Thatcher Government there were only 1,115. By the end of the Major Government, there were just 782. Today, there are only 688—1,000 fewer bingo clubs—so I hope that Conservative Members will understand my reaction when they take up cudgels on behalf of an industry that they taxed too much and ignored for too long when they were in government.

Photo of George Osborne George Osborne Opposition Whip (Commons)

The Economic Secretary pointed out the decline in the number of bingo clubs. Could he tell me, first, whether the number has increased or decreased since Labour came into power; and, secondly, whether he will judge the success of the proposals by the number of bingo clubs that open in forthcoming years?

Photo of John Healey John Healey The Economic Secretary to the Treasury

To answer the hon. Gentleman's first question directly, let me repeat what I have just said. By the end of the Major Government, or in other words at the beginning of the Blair Government, there were 782 bingo clubs in the UK; six years later, there are 688. There were 1,000 fewer clubs than in the 1980s.

It is true that there is pressure on the bingo industry and that there is a long-term decline. However, it is also true that part of the purpose of our reforms is to try to assist the bingo industry to deal with the challenges presented by those problems. As I said, I understand the feelings of those in the industry who wish that we had gone further. I assure them that, first, we shall examine the evidence offered by the industry, as we have done before; secondly, we shall keep the reforms under way, as we have done for the reforms to betting and the pools; and, thirdly, we shall continue to look at the case for further change, as we do every year as part of the Budget process. For this Budget, however, I cannot accept amendment No. 6, which would cost £60 million and would require us either to increase taxes elsewhere or to reduce the money that we are spending elsewhere. We are not prepared to do either.

Photo of George Howarth George Howarth Labour, Knowsley North and Sefton East

Can my hon. Friend confirm that, although there has been a continued, but less steep, decline in the number of bingo halls since the Labour Government came to power, the number of people attending bingo events has increased, mainly as a result of the liberalisation of advertising in the bingo industry?

Photo of John Healey John Healey The Economic Secretary to the Treasury

My hon. Friend makes an important point: the health of the industry cannot be judged simply by the number of clubs alone. One of the purposes of our reforms is to try to encourage greater participation in bingo. As I mentioned, the evidence submitted to us by the Bingo Association, as part of the consultation process, suggests that, as a result of our reforms, there will be an extra 500,000 players a year.

In direct response to the point made by Adam Price, I stress that we are still willing to talk to and listen to the industry. That is why we are introducing two amendments on the implementation and administration arrangements. I shall briefly explain the background to the amendments to exemplify my general point.

When we held consultations on the abolition of bingo duty, we asked bingo operators how long they would need to introduce the changes necessary to comply with a gross profits tax system. The industry's responses were clear: three months from the date of the announcement would be sufficient. We thus announced in the Budget on 9 April that bingo duty would be abolished and replaced by a tax on bingo companies' gross profits from 4 August this year. However, at a meeting held shortly after the Budget to discuss implementation, the industry told officials that previously unforeseen issues had been identified, which meant that it would not be ready to operate the tax by that date. The industry asked the Government to delay the start of the new tax to allow it sufficient time to amend its systems. We have listened to the industry's concerns and are amending the Bill to delay the tax reform until 27 October—the date that the industry now prefers. In addition, the bingo industry asked whether the start and end of the accounting periods could be amended so that they matched more closely the industry's accounting practices. That would avoid the need for bingo operators to make amendments to their accounting systems. We therefore propose to amend the accounting periods as suggested in the second Government amendment.

Finally, in our discussions with the bingo industry since the Budget, we have been asked to examine how the calculations of the gross profits tax will interact with the treatment of VAT on par fees, which is the subject of amendment No. 69. I am considering that specific issue further.

In summary, this clause, with the two minor amendments, will put in place a sensible reform of an outdated duty system. As it stands, the package of reform will deliver a £25 million tax boost to the industry, which should benefit both players and companies. On the detail of implementation and reform, we are undertaking, and we will maintain, a continuing close dialogue with the industry. On that basis, I urge my hon. Friends to support the clause and the two Government amendments but to reject the other amendments.

Photo of Stephen O'Brien Stephen O'Brien Shadow Paymaster General

For the first time in Committee, I have been disappointed by the Economic Secretary's tone, because we are dealing with today's Finance Bill, this Chancellor and his Budget statement on 9 April this year—today's world, here and now. The Economic Secretary is attempting to engage in some kind of historical record swapping, about which, of course, I have no clue—he is talking about a time decades ago, way back in history. What I do know, however, is that I receive representations today about those who enjoy bingo and who want it to be put on a level playing field. The Chancellor deliberately raised their expectations in his Budget statement, and those have been dashed. We have a right and a duty, on behalf of those who make representations to us, to test why those expectations have failed to be met.

However much the Economic Secretary thinks that it may help his case, it is irrelevant to parrot historical facts: he knows that I will not have come armed with them, and that it would waste the Committee's time to argue about them. He has demeaned what has been a good debate to date by scattering around statistics suggesting that bingo has declined more under one party than another, when in fact the whole industry is in crisis because it has declined. More to the point, he scatters those statistics around as if there is no connection with sociological factors, geographical factors, economic factors or the public's preference for television, cinema, the internet or other competing entertainments. He merely chooses to make an assertion.

What happened, in truth, is that we hit a raw nerve: the Chancellor has been found out to have deliberately led expectations, with crisp phrases such as "as if", "the same as" and "just as in the case of" in relation to pools and gaming. When we look at the detail, however, we find yet again that the Bingo Association, whose representations have been good and well articulated, has been let down. It and the people whom it represents, both the businesses and people who play bingo—millions of women, primarily, up and down the country—are right to feel let down. The Economic Secretary has put up a poor defence.

Of course, I am happy to note that the Economic Secretary has clarified what was surprisingly unclear in what we have argued is, in places, an ill drafted Finance Bill. I am glad that he took notice of some of the representations made by the Bingo Association, and, of course, we accept those Government amendments—we do not take issue with them. I also noted that the Minister said that he was considering further amendment No. 69, which I tabled with my hon. Friends. That is of some encouragement, but of course the key is amendment No. 6, on which he puts a price. In the overall order of things, given the expectations that the Chancellor raised deliberately in the minds of all those who have a concern about today's world and about moving forwards, rather than about the spurious historical context that the Minister was trying to pray in aid—it did not work, I hasten to add—£60 million is a figure about which this wasteful Treasury can think again, given that it has never sought to justify, although it is about to be put under much more pressure to do so, the significant waste in government. That amount, £60 million, could easily be found, given the enormous 20 per cent. increase, from £13.5 billion to £17 billion, in administrative costs at the centre—the head office of the Government—and I urge the Government to find it.

Photo of George Osborne George Osborne Opposition Whip (Commons)

Indeed, that would also encourage the industry to grow. Therefore tax revenues from the industry would actually increase.

Photo of Stephen O'Brien Stephen O'Brien Shadow Paymaster General

My hon. Friend rightly makes the point that we are all trying to aim for that. In the papers that I have seen and in the letter that was copied to me and sent to the Economic Secretary, the Bingo Association also makes that point. It is a patient, well argued and articulate case.

I recognise that any Minister in the position of the Economic Secretary is faced with what inevitably will be carefully scrutinised representations from all sorts of competing interests. Inevitably, the Government will always say, "There will be special pleading on this and special pleading on that." The key is that special pleading gets discounted, and anyone making representations to any Government of any colour knows that. What matters is that, when people come forward with suggestions that would help the Government to deliver their objectives, the Government should listen.

The Government have set objectives and the Chancellor used phraseology in the Budget statement that confirmed those objectives. However, when the detail comes out in the Finance Bill, we find that the objectives have been trimmed. The real nub of our argument, which has quite properly been supported by the Liberal Democrat spokesman, is that there was an expectation of a level playing field. That expectation has not been met. That is why people feel let down. It would be right if the Economic Secretary had acknowledged that we have a fair argument.

I am disappointed to hear that the Economic Secretary is not prepared to accept amendment No. 6. We shall certainly press it to a vote.

Question put, That the amendment be made:—

The Committee divided: Ayes 134, Noes 336.

Division number 191 Finance Bill — Clause 9 — Bingo Duty

Aye: 133 MPs

No: 334 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Abstained: 1 MP

Abstaineds: A-Z by last name

Question accordingly negatived.

Amendments Nos. 70 and 71 agreed to.

Clause 9, as amended, ordered to stand part of the Bill.