Motion made, and Question proposed, That this House do now adjourn. —[Alison Seabeck.]

I am grateful for this opportunity to put before the House a matter of particular concern to my constituency. I should begin with an apology to my hon. Friend the Minister. I know from my own experience as a former Minister that for those who draw having to answer the Friday Adjournment debate, it is not usually the highlight of their week; it means cancelling all their engagements with their constituents. I apologise to them and to him, but this is a matter of some importance to people who work in my constituency.

I rise with a feeling of déjà vu. In 2001, when the Budd report on gambling was published, many of us in this House—on both sides—worked very hard to explain to the Government what we perceived to be its deficiencies. Had it been enacted in the way that Budd proposed, it would have ended the seaside arcade and amusement machine business very quickly. However, through those debates and all that work in the House, in which many of us were closely involved, the Government came to realise that the coin-operated amusement machine industry was very important, that seaside arcades were a very important part of the traditional seaside offering, and that it was therefore necessary to ensure that an accommodation was reached with the industry such that it could survive.

That accommodation was reached in the end. I do not think that the amusement arcade industry was entirely happy with it, but both it and the Government thought that there was a basis for moving forward and that the industry would survive. Subsequently, the Gambling Act 2005 was passed. Unfortunately, that hopeful attitude has proven not to be well founded. The industry in general is suffering greatly, and I will explain why in a moment.

The reason why this issue is important to me is, of course, that I have a seaside constituency. It includes the seaside towns of Ramsgate and Broadstairs, in which we have a number of arcades. There are also a number of people in my constituency who provide and maintain these machines, and a company, Harry Levy Amusements, that makes quite a few of them. All those businesses are suffering greatly.

I have a personal interest, as well, in making sure that the seaside arcade survives. I have very fond memories of spending a few coins in seaside arcades as a child. It was a fun part of going to the seaside—one played on the beach, had some ice cream and went into the arcade. I do not see why the kids of the future should be denied that pleasure.

How bad is the position? Since September 2007, when the 2005 Act came in, the revenue of adult gaming centres—the part of the seaside arcade where only people aged over 18 can play—has been reduced by 23 per cent. The family entertainment centres that are usually attached to adult gaming centres, and in which anybody can play such machines, have seen a 15 per cent. loss in revenue. Machine suppliers' income has been reduced by 16 per cent., and machine manufacturers' trade has fallen by 55 per cent. on average.

Let me give as a concrete example to my hon. Friend the experience of Harry Levy Amusements, the company in my constituency that makes some of those machines. Since September, its production has dropped by 40 per cent., and its number of employees is 20 per cent. down for this time of year. Usually, by this time of year, 75 people would be working in the factory. At the moment, it has just 50 people working, so 25 jobs have been lost already. Usually, it would take its orders for the year at the major ATEI trade exhibition in January. This year's orders were 50 per cent. down on last year's, which were 35 per cent. down on the previous year. My hon. Friend will see that the industry has a serious problem.

I congratulate my hon. Friend on securing this timely debate. My constituency, like his, relies heavily during the summer months on family entertainment centres. But it is important to remember the impact not just on family entertainment centres but on the creation of other industry jobs, such as screen printing and manufacturing. Does he believe that that is one of the failures of the Gambling Act, along with the effect on family entertainment centre revenues?

My hon. Friend is absolutely right, and I congratulate him on his efforts on behalf of his constituents to raise those concerns. A lot of ancillary industries are involved. I have mentioned only Harry Levy Amusements, but that company buys components, parts and services from other surrounding factories, which also experience a knock-on effect.

The hon. Gentleman makes an important point. I would encourage him to add bingo halls to his list of adult gaming centres and seaside arcades. In my constituency, they have suffered a catastrophic fall in their income for very similar reasons.

I agree with the hon. Lady. Bingo halls have also been affected by the smoking ban, which I supported and have no objection to, but it has had a further impact on those businesses.

What has happened to seaside amusement arcades? Before the Gambling Act, they were able to operate what were called section 16 machines, which would allow a £2 stake for a £500 potential prize. They were allowed an unlimited number of those. They were competing, however, with licensed bookmakers' shops, which were allowed to have fixed-odds betting terminals, on which one can gamble as much as £100 on every press of the button for a £500 prize.

When amusement arcades had a significant number of section 16 machines with a £2 stake and maximum £500 prize, they could compete with bookmakers. Since the Gambling Act was introduced, however, those section 16 machines have been made illegal, and 13,000 have had to be removed from amusement arcades around the country, or upgraded. That involves about £50 million-worth of equipment. Their replacements, known as B3 machines, only allow a £1 stake, and adult gaming centres are only allowed four of them. They now have to compete with bookmakers—which can have four machines that take up to £100 stakes for £500 prizes—with only four machines that can take a £1 stake. The only impact that bookmakers have felt as a result of the Gambling Act is that their fixed-odds betting terminals were renamed B2 machines; otherwise, they have been allowed to carry on doing exactly the same thing as before.

Faced with a choice of going to an adult gaming centre, where one is limited to a £1 stake, or a bookmaker, where one can potentially gamble £100 a time, people are going to bookmakers in great numbers. Family entertainment centres that were associated with adult gaming centres used to rely on a certain amount of cross-subsidy from the revenue of those adult gaming centres, so family entertainment centres are also suffering.

In addition, compliance costs have increased under the new Gambling Act. Previously, operators might have been able to comply with the old legislation for as little as £85. They now have to pay £1,000 to comply with the new Act. The owners of some of the arcades in my constituency tell me that their costs have gone up to as much as £3,000 to comply with the Act, so there has been a loss of revenue and increased compliance costs.

The problem is precisely encapsulated in a letter that Harry Levy Amusements has been prepared to share with me. I shall not use the names of the people involved, but it is a letter that the company recently received from one of its best customers, when he had to cancel his order. It states:

"With reference to our telephone conversation yesterday—we have experienced a significant downturn in High Street business since September 1st. I would relate this directly to the unfair playing field created by the new legislation with our main competitor the High Street bookmaker. As I am sure you are aware the category B3 machines that have replaced the popular section 16 format are restricted to a £1 stake, whereas the FOBT machines in bookmakers can offer anything up to a £100 stake.

Also the FOBT machines include B3 games on their programs and as such offer a greater variety for the customer. This leaves adult gaming centres without an individual product to be able to compete. Another contributing factor would be the extended opening hours of the bookmakers from 6pm till 9pm which has reduced our evening trade.

Sorry to cancel the order."

With that, Harry Levy lost a significant order and a significant amount of work.

I have also been contacted by Community, the trade union that represents people who work not only in seaside arcades but in the licensed bookmaker trade. It, too, is worried about the trend and its social consequences. In its view, bookmakers do not monitor the people who play their machines as closely as the seaside industry monitors those using adult gaming centres. Justification for its concern that the Act is having an inadvertent social effect can be found in the 2007 gambling prevalence survey, which found that there was a 2.6 per cent. rate of problem gambling associated with slot machines in seaside amusement arcades—the so-called B3 machines—but that the machines offered in licensed betting offices were associated with an 11.2 per cent. problem gambling rate.

The Gambling Act, which was intended to prevent the social problems of gambling by preventing people from getting into trouble, has had the perverse effect of destroying good business revenues and pushing people in the direction of a series of machines and an environment that make them more likely to be problem gamblers. Whether one is concerned about the social impact, the traditions of the British seaside or the businesses associated with seaside arcades, the Gambling Act has had that perverse effect, which nobody, neither the industry nor the Government, intended. That clearly needs to be addressed.

Seaside arcades need a competitive product. I understand that Adjournment debates are not the place for major Government announcements; I hope that my hon. Friend will stand up and say that he will give me everything that I am asking for, but I am not very optimistic. I hope, too, that, in the next few days, he will announce that he is going to conduct a thorough and urgent review of stakes and prizes across the board in this sector. In the meantime, the stake on B3 machines needs to be increased to £2, and the adult gaming centres need to be given the opportunity to have more of them.

The industry has said that it would like 20 per cent. of the machines in adult gaming centres to be B3 machines with £2 stakes. If my hon. Friend the Minister could announce that in the near future—while the review is going on—it would send a signal to the industry that it has a future, and there is a real possibility that we could turn the problem around.

My hon. Friend and his colleagues in government have proved that they are prepared to listen and act decisively. They did so on the potential loss of gaming revenue in clubs. They realised that there was going to be a serious problem and introduced so-called B3A machines for clubs to prevent that from occurring. So my hon. Friend and his colleagues have already demonstrated that they are prepared to act decisively when there is evidence of a problem, and I hope that he will agree to act as decisively now in respect of the sector that I have described. If he does, he will forever be known as the saviour of the British seaside, and I promise him that, when he comes to Ramsgate or Broadstairs, there will be an ice cream waiting for him.

I congratulate my hon. Friend Dr. Ladyman on securing this important debate. It is good to see lots of hon. Members in the Chamber to discuss this crucial issue, which affects not only the seaside towns but many of our other towns as well. He referred to Ministers being held to account here on a Friday afternoon; I am pleased to be here to talk about this important subject. He has tempted me to make many announcements today, but I hope that he will forgive me if I do not do so. I shall, however, think through the issues that he has raised.

The Easter holidays will soon be upon us, and they are the traditional curtain-raiser to the season in many seaside towns. Now is therefore an opportune time to reflect on the important role that those towns play in our national life and economy. It is true that many businesses in seaside towns, including the arcades, are having a tough time. Across Government, we are therefore putting in place a range of initiatives to assist the economies of seaside towns and to boost tourism. The then Secretary of State for Culture, Media and Sport, my right hon. Friend James Purnell, announced a new funding programme for coastal resorts in November last year. That will see £45 million of investment over three years to help regeneration through heritage and culture. A cross-Whitehall working group has been set up to look further at the common issues facing coastal towns and to make sure that our approach is joined up.

As my hon. Friend the Member for South Thanet has said, seaside arcades form an integral part of many families' seaside holidays or day trips. The penny falls and crane grabs have provided many generations of children—and some adults—with harmless fun, and we want to see that continue. Of course, the arcade sector also encompasses adult gaming centres—AGCs—in the many hundreds of arcades for the over-18s that can be found not only in seaside towns but on many inland high streets.

I should like to pay tribute to the responsible operators of AGCs and their staff, who have worked hard in recent years to professionalise their operations and improve the sector's image, developing a loyal customer base in the process. It is a matter of concern to me that some in the industry appear to be experiencing difficult trading conditions. We are looking closely at the evidence provided by the British Amusement Catering Trade Association on the extent of the current downturn and what might have caused it. My hon. Friend referred to the range of factors that might be involved. I supported, and continue to support, the smoking ban, because I think that that was the right thing to do. There have been wider technological developments in the gambling industry and there is now more intense competition from other sections of the leisure industry. All those factors might have played a part. Much has been made of the part that the introduction of the Gambling Act 2005 may have played, and I will consider that alongside other possible factors.

What has perhaps been overlooked in the debate is how we have sought, through the Gambling Act, to help to equip arcades to face some of the new challenges that they face. We have introduced an effective system of regulation for the gaming machine sector, right the way through the supply chain from manufacturers to suppliers to operators. That has ensured that customers can have the confidence and assurance that they are dealing with professional organisations that take consumer protection seriously.

We have scrapped the prohibition on profit or revenue sharing that was introduced in the Gaming Act 1968. It will take time for the full impact of that change to be felt, but it creates the potential for suppliers to exploit new markets. We have also completely overhauled the rules governing how gaming machines may operate, giving manufacturers new flexibilities in the way in which machines can be developed. For the first time, adult gaming centres have been granted an entitlement in law to up to four high-stake, high-prize gaming machines. I understand the issue around B3 machines, and I am prepared to look at that and have a detailed discussion. We made it clear throughout the passage of the Gambling Act what limits on stakes and prizes would apply under the new legislation, and we made it clear that these machines would not qualify for grandfather rights.

We want to assist the industry, but our principal objective in regulation is to protect the public, and I make no apologies for that. Even allowing for that overriding priority, the industry has fared well under this Government by any measure.

Does my hon. Friend accept the argument that driving customers away from family entertainment centres has had the effect of sending them into hardened gambling in licensed betting offices? The 2005 Act also made licensed betting offices more open. They are no longer seedy places; they have become open and transparent, so that people can see them and be attracted to the machines. Inevitably, we have driven people away from family entertainment centres and adult gaming centres into more hardened forms of gambling.

I understand my hon. Friend's point. He will be aware of my announcement on Wednesday asking the Gambling Commission to look at fixed-odds betting terminals. We want firmer evidence that what he describes is taking place, but I am happy to meet him to discuss the issue in greater detail.

The Government think that we have done very well by the gambling industry. In 1995, the maximum stake and prize for what is now a category C machine were 25p and £10 respectively. Had we increased those limits in line with inflation since then, the limits at the end of last year would have been 35p and £14.11 respectively. Instead, they are now 50p and £35. We raised maximum stakes and prizes to those levels in October 2006 in return for a welcome commitment from the industry about social responsibility, a year ahead of the 2005 Act's planned implementation date.

At the same time, we doubled the maximum stake on what are now category B3 machines to £1. The maximum prize remains £500. Had we raised stake and prize levels in line with inflation since 1995, they would now be 35p and £352.70. We introduced those changes just 16 months ago because many in the industry were finding it tough, yet some in the industry are now asking us to double the maximum stake again on B3 machines to £2, the same amount as category B1 machines, which are permitted only in casinos.

I should like to be clear about what we are talking about. It is my understanding that before September 2007 bingo clubs and the sort of centres that the hon. Member for South Thanet mentioned were allowed machines with £2 stakes. The day after the Act's implementation, those machines were removed and £1 stake machines were put in. That made a qualitative difference to the kind of gaming that those centres were able to offer their customers, with the result that many customers walked away because the thrill was no longer as good. Surely it is a clear-cut argument: one day they had good business, and the next it had fallen by about 25 per cent. Is that not what we are talking about?

I do not think that it is as clear as that, although I understand the hon. Lady's point. There are exceptional circumstances in bingo, and I hope to return to them in discussions with the bingo industry. She is quite right that we are talking about issues affecting bingo. We are not unsympathetic to the issues raised by adult gaming centres, whether in seaside towns or in urban areas, but we want to ensure that we protect the consumer as well. It is important to strike the right balance.

I understand the industry's point, as my hon. Friend Mr. Wright mentioned, about bookies and fixed-odds betting terminals having caused some of the problem, but it is a bit perverse to argue that we should offer an increased category of gambling in adult gaming centres. If FOBTs are causing the problem, we need to deal with it, and we will consider that.

I hear what the Minister is saying, but I want to emphasise the point that I made in my speech and pick up the one made by my hon. Friend Mr. Wright. We know that the rate of problem gambling in adult gaming centres even when the machines had £2 stakes was about 2 per cent. The problem rate in licensed betting offices with those machines is 12 per cent. I am with my hon. Friend the Minister on the matter—I want to protect people from problem gambling, but the way to do so is to encourage them out of the bookmakers' shops and back into adult gaming centres.

I understand my hon. Friend's point. That is why we gave the Gambling Commission the powers that we did. He is right to say that consumer protection is vital. I am not trying to dismiss the argument made by BACTA; hopefully some time next week I shall discuss with BACTA what we might be able to do.

I acknowledge the problems being experienced in the industry and in communities, which have been highlighted by my hon. Friend today and by an early-day motion that many hon. Members have signed. I recognise that the problems are genuine. In coming up with a solution, as I want to do, I have to get the balance right, so I shall consider what my hon. Friends have said in this debate and the contents of the early-day motion, and continue to work with the industry and the association to make sure that we resolve the problems. I hope that the industry accepts that we have made great strides in the Gambling Act and the way in which the industry has developed. We all want seaside towns to be successful.

I knew that I would get a sympathetic hearing from my hon. Friend, because he is a sympathetic and fair man. I have every confidence that he will be able to sort out the problems, but I stress the urgency of the situation. We cannot afford to wait for a six-month review, or even a three-month review. My constituents' businesses are going under now. We need to send a signal now.

My hon. Friend will know that BACTA has written to me. I hope to be able to respond to the association's letter next week, as I am aware of the urgency. The industry has made a number of representations to me and I accept that there is a serious problem. However, I hope he accepts that we cannot react indiscriminately. We need to make sure that our response is a measured one.

I fully understand the concerns relating to gaming machines and bingo. We have a long tradition of bingo in this country and we do not want to do anything to damage it further. We want to support the gaming industry and bingo, and I hope that in the next few weeks we will be able to make some positive announcements.

Question put and agreed to.

Adjourned accordingly at three minutes to Three o'clock.