I beg to move amendment 14, page 12, line 15, leave out subsection (2).
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With this it will be convenient to discuss the following: amendment 9, page 12, line 18, at end insert—
'(3A) The Treasury must, before the publication of the 2009 Pre-Budget Report, prepare and lay before the House of Commons a report on the impact of the increase in bingo duty under subsection (2) on the competitiveness of licensed bingo clubs.
(3B) A Minister of the Crown must, not later than one month after the report has been laid before the House of Commons, make a motion in that House in relation to the report.'.
Amendment 15, page 12, line 19, leave out from 'effect' to end of line 20 and insert
'as the Treasury may by order provide.
(4A) An order under subsection (4)—
(a) shall be made by statutory instrument,
(b) may not be made unless a draft has been laid before and approved by resolution of the House of Commons, and
The amendment seeks to introduce fair taxation for bingo, in the light of the increase in bingo duty from 15 to 22 per cent. For the gaming or gambling industry, that means that whereas online bingo, casino and poker, online sports betting, sports betting in a betting shop, football pools and betting exchanges are all taxed at 15 per cent., licensed bingo clubs, almost uniquely, are taxed at 22 per cent. I say "almost uniquely" because casino gaming duty is levied on a sliding scale between 15 and 50 per cent., but I will return to that subject later.
As many hon. Members will know—although there are almost no Members here on the Labour Benches, apart from the long-suffering Minister and a Whip—there has been an ongoing campaign for fair taxation on bingo, in order to remove the double taxation of VAT and bingo duty. What at first glance appeared to be a success, with the removal of VAT, now seems to have been merely a sleight of hand by the Government. With one hand they have given, by removing VAT, but as the industry claims—and I believe that the numbers stand up—they have taken away a great deal more by raising bingo duty to 22 per cent.
As I understand it, the Government claim that the changes will benefit the industry to the tune of some £15 million a year. My argument is that that calculation is rather flawed. That flaw is rooted in the Treasury's shortcoming in being unable to identify the VAT charged on games of bingo. As I understand it, the net effect of the changes is that Mecca Bingo alone, which represents about one third of the sector by value, will pay an extra £6 million a year to the Exchequer, with about £18 million paid across the whole industry. That is in the context of a sector that last year made an operating profit of £41.8 million.
It would be instructive to take a look at the background to the changes proposed in the Budget and the Finance Bill. In May 2008 the VAT and duties tribunal ruled that the application of VAT to interval bingo in Mecca bingo clubs was in breach of the EU principle of fiscal neutrality, which states that similar services should be taxed equally. As a consequence, Mecca Bingo and other bingo operators ceased to pay VAT on interval bingo. The benefit of the VAT abolition therefore applies only to main-stage bingo, which represents only about one third of all bingo by value. The increase in bingo duty affects all bingo, whereas the reduction in VAT benefited only one third of the revenue.
I shall talk about the social costs and benefits of what was the iniquity of double taxation, and what remains the unfairness of this particular tax. I am sure that the hon. Gentleman will be able to speak to his constituents in his own way to describe how unfair these proposals are.
The hon. Gentleman referred earlier to the Government's claim that there would be a £15 million benefit to the industry. Anyone who has studied page 153 of the Red Book will see that the abolition of VAT on participation fees would save the industry £50 million. He has rightly pointed out that VAT is no longer charged on interval bingo. Will he ask the Minister to intervene to tell us whether the £50 million included that change in respect of interval bingo? That is the key issue.
That is a very important question. The fundamental point is that there has been an inability to count the VAT; it has been assessed, or calculated. The industry advises us that the Treasury has overestimated the historic levels of VAT, but if the Minister would like to clarify that point, I would be delighted to give way to her.
I can clarify the costings in the Red Book: they work from the law as it stands prior to the changes in the Budget. The law refers to the status quo of having VAT on participation fees, notwithstanding the results of the tribunal, which are still due as the considerations are ongoing. I hope that that makes it clear that the costings relate to the status quo prior to the Budget.
I thank the Minister for that clarification; she has made the point perfectly.
In the absence of what many would consider to be accurate information—whether or not interval bingo was included—or a correct calculation of the VAT to justify the increase, my judgment would be that the principle of fairness should apply. Licensed bingo clubs should therefore be taxed at 15 per cent., which is comparable to the rate applied to the other forms of gaming that I described earlier. That is what my amendment seeks to achieve.
I seek to achieve that also for the reason that Mr. Binley mentioned earlier. The importance of bingo in our communities cannot be overstated. I can think of many instances—including one in my own constituency—of licensed bingo clubs that are secure, and in which proper investment has been made providing good-quality entertainment, particularly for women and particularly in the middle of working class communities. To lose those facilities and that capacity would be devastating for social cohesion in certain communities.
In my constituency, a well-managed and organised bingo hall provides highly subsidised food for people. Many of my elderly residents go along there at 12 o'clock, have a well-prepared lunch, then stay on for the entertainment at a relatively cheap rate until 4 o'clock. That is almost a social benefit, and that should be taken into account by the Government.
That is absolutely right. We cannot overstate the social importance to certain communities of well-run licensed bingo clubs. There is no question about that. The loss of such clubs would be devastating.
In many of these communities, the clubs provide not only entertainment and community cohesion but valuable jobs. I am sure the Minister will correct me if I am wrong, but the previous argument was that if someone who worked in a bingo club lost their job, they were likely to be absorbed into the work force elsewhere. However, at that time there were perhaps 600,000 or 700,000 vacancies on the books. Now that unemployment stands at more than 2 million and the number of vacancies on the books is shrinking, I am not convinced that that argument still holds water.
Timing is not the only issue. The tax is pernicious because it is a tax on elderly and frail people. The only time that my elderly mother got out of her house to meet other people during the week was when she went down to the bingo hall in Halifax, where she enjoyed a social life. That kept her in her own community, safe, off social service benefits and out of the NHS. The tax will cost the Government money in the round; it will not save them any money.
I hear what the hon. Gentleman says. I am trying to make the fiscal case, and I hope he has not overstated his position, but I have made the point that bingo clubs are vital in many communities, particularly to women. In certain communities they provide an afternoon as well as a night-time economy. They are extraordinarily important.
I was talking about employment levels and the importance of jobs in the communities concerned. We have seen 31 bingo halls close recently. I think that one closed very recently in Montrose, in the constituency of my hon. Friend Mr. Weir. That was a loss, and it involved a loss of jobs. We have seen 4,000 jobs go from the sector in the last six years, and in many cases it was argued that that was a result of the double taxation. Goodness knows what would happen now, with this unfair taxation. We do not want any more jobs to go—certainly on that scale—in the middle of a recession. There are many, many arguments for ensuring that the tax regime is fair, and that bingo clubs stay open to provide social life, community cohesion and employment.
I said at the outset that bingo was taxed unfairly in comparison with many forms of gaming, and that casino duty was applied on a sliding scale, rather like income tax. The first £1.9 million of revenue in a six-month period is taxed at 15 per cent., the next £1.2 million is taxed at 20 per cent., and so on through the bands—30, 40 and 50 per cent. I understand that even if bingo were taxed on that basis, all clubs would pay tax at 15 per cent. I am sure that if there were a super-club making huge amounts of money the levies would be high, but it strikes me that, given that all online betting and betting shop gaming is taxed at 15 per cent., given that even if bingo were taxed on the same basis as casino duty it would be taxed at 15 per cent., and given the social importance and importance to community cohesion and jobs of bingo halls in many of our constituencies, fairness alone should dictate that the duty should not be raised to 22 per cent. I hope that the Government will view that suggestion sympathetically, not least given the difficulties over what is happening to VAT, on which they seem to be basing their calculation of any benefit conferred on the industry by the tax increase.
I am pleased that we have done away with the iniquity of double taxation. I hope that the Minister will now go a step further and, with the single tax, ensure fair taxation and fair play for bingo.
It is a pleasure to follow Stewart Hosie, who gave a very good account of the present state of bingo taxation. As he said, over the last few years attempts have been made to remove the iniquity of the double tax. He will probably recall that last year there were meetings between Members and the Prime Minister, the Chancellor and my hon. Friend the Exchequer Secretary with the aim of removing VAT on participation fees, which is where the double taxation occurred: bingo clubs were paying VAT on participation fees while also paying gross profits tax.
Last year's campaign to reduce the burden on bingo clubs was unsuccessful, although, as the hon. Member for Dundee, East pointed out, a number of clubs were closing. In my constituency, one of the Gala bingo clubs closed towards the end of last year. We lost a valuable facility, which I will come on to in a moment.
The campaign to change the double taxation started in 2003 with amendments to the Finance Bill of that year.
I think that the hon. Gentleman mentioned meetings with the Prime Minister. May I take him back? If I am not mistaken, the hon. Gentleman asked about the matter at Prime Minister's questions on
We did have a meeting with the Prime Minister, but at the same time we had a meeting with the Chancellor of the Exchequer and with the Exchequer Secretary to the Treasury. We also met with the Under-Secretary of State for Culture, Media and Sport, my hon. Friend Mr. Sutcliffe, because of his departmental involvement in the matter. Therefore, it is not fair to criticise the Government on the grounds that there was no Treasury involvement; there were detailed meetings with Treasury Ministers at the time of that delegation. However, the hon. Gentleman is right that the Prime Minister agreed to that meeting.
As I mentioned, this matter goes back to the Finance Bill 2003, when the Bingo Association tried to reduce the double taxation burden on the bingo industry. A combination of factors led to further problems perhaps two years ago, as we pointed out last year: the ban on smoking, the downturn in the leisure economy and people drinking at home. Beer prices, alcohol duties and supermarkets all played a part in the argument. A combination of factors led to problems experienced by bingo clubs. The largest number of closures occurred in Scotland, which suffered the greatest loss of bingo clubs as a consequence of the policy of double taxation.
I mentioned that there was a closure in my constituency last year. I recall a few years ago opening a refurbished Gala bingo club in my constituency. I was invited there. It had been redecorated; the clubs are very good in that regard. They provide a welcoming environment. They are brightly lit; they are not dingy places. They are welcoming. They provide food and entertainment. When I opened that refurbished club, I was astounded to be told that the club had 26,000 members in Barnsley—an incredible number.
It is well worth the Government thinking how many people are affected throughout the country by closures of bingo clubs. Many people use those clubs. Many people like to take part in a soft form of gambling. Many of the people who use bingo clubs are women; they are often younger women who want to go into a safe place where they can gamble a bit and have a drink in a protected environment. Not that many men frequent bingo clubs; it is mainly a female entertainment. It is sad that we seem to be putting pressure on that type of club, yet we allow other harder forms of gambling a free rein.
I agree entirely. Does my hon. Friend agree that one of the problems is that the perception is that the Government are making it hard for these clubs and their customers to continue and that that is having a knock-on effect on the voluntary sector in terms of bingo? There are all sorts of rumours at the moment about what people are going to be charged for a game of bingo and what tax will be levied. That is not a good thing. This is a good form of local entertainment, yet we are almost taking it away.
My hon. Friend makes a valid point. Bingo is played not only in licensed bingo clubs but in places used by charities, during get-togethers and, dare I say it, in political clubs where we try to fundraise.
After a lot of hard campaigning, a lot of people thought that in this year's Budget the Government had answered the problems of the bingo operators by removing VAT on participation fees and ending the policy of double taxation. Only then did they realise that the gross profits tax had been increased from 15 to 22 per cent.—an incredible 50 per cent. increase in that rate of tax, as applied to the bingo clubs.
The hon. Gentleman is very knowledgeable about these matters and is a great supporter of bingo clubs, as he is of his community generally. Does he think that that tax increase was about clawing back some of the money the Government thought they gave away by doing away with double taxation, or was there another reason?
I am grateful to the hon. Gentleman for his kind words. I cannot answer his question; perhaps when the Minister responds, she will explain why there has been such a big increase in gross profits tax when everybody thought that the Government were going to give a helping hand to bingo clubs at this time. The impression is that what the Government have given away with one hand they have recovered with the other, because the bingo clubs say categorically that they are paying more tax now than before the Budget and that they are going to pay much more tax; I have a brief to hand from the Gala Coral Group.
We could say, "Well, the Government have a big public sector borrowing deficit, and we must find the money to reduce our public borrowing from somewhere," but it seems to me that we are not going to make a big dent in that just by taxing the old ladies down at the bingo club; that is not going to bring in £175 billion. It seems strange that after all the pressure applied in campaigning against double taxation, we have been hit with this increase in the gross profits tax, and the bingo clubs are worse off. The only argument the Government have got is, "Everybody is worse off. We are paying more for alcohol and tobacco and so forth, as duties on them have gone up, so why not bingo?"
The important comparison, however, comes in what the hon. Member for Dundee, East said about the rates of gaming duty in clause 19. He said that the first £1.9 million is at 15 per cent. and the next £1.3 million is at 20 per cent. The bingo clubs will get nowhere near that. The online gaming and gambling companies will do so, however. I was told a few weeks ago—I will not mention any names—that the daily turnover of one of these online gaming organisations is £50 million. That is the turnover from internet betting in one day, yet we are absolutely nailing down bingo clubs with their soft form of gambling.
I agree very much with what my hon. Friend is saying. I have visited my local bingo club and listened to its case. This is portrayed as a tax on companies, but in fact is it not, effectively, a regressive form of taxation on people on moderate and low incomes? The Government rightly want to raise more tax to cover their current problems, but that should be done in a progressive manner, by taxing the better off rather than the poor.
My hon. Friend is absolutely right; it is a regressive form of taxation. When I was taught economics, I was always told that one of the five or six rules of taxation is that it must be progressive. He is right that we have moved too far away from that. We could tax other areas or industries; we could find other ways of raising this amount of money than taking it from bingo clubs, where a lot of our constituents enjoy simple entertainment.
Does the hon. Gentleman not agree that even if we were to try to raise more money to make up for the cut in the tax on bingo, as many of us would like, we could remain within the field of gambling, because at present soft forms of gambling appear to be being taxed more heavily than harder forms? Surely we could look at a way of switching this, not least in respect of online gaming?
I entirely agree. There are other, harder, forms of gambling. There are no VAT payments on betting shops. People simply walk into the betting shop and place their bet; there is no VAT payment, and nor is there any other taxation payment in relation to that bet. As the hon. Gentleman says, we could find other ways of getting hold of this balancing increase by turning to other, harder forms of gambling, and taking a more lenient attitude towards bingo, which is one of the softest and least damaging forms of gambling. It appeals to hundreds of thousands of our constituents—mainly females, as it is a protected environment providing soft entertainment. Why do we seem to be punishing it so hard year after year?
First, may I serve notice that we hope to have the opportunity to put our amendment 15 to the vote? We will also vote for the Scottish National party's amendment, although our reasoning is different; we seek a postponement of any changes to the duty regimes, as I shall outline.
As the Committee is aware, the Government are seeking, through this and related clauses, to remove VAT from bingo while increasing bingo duty from 15 to 22 per cent. The purpose of our amendment is to delay the implementation of the rise in duty until the High Court resolves the legal position of VAT on bingo. I ought to make it clear at the outset that if our amendment is carried, we will also seek to delay the removal of VAT. We have no wish to widen the gaping hole in the public finances. Instead, we wish to prevent the Government from pre-empting the legal process through this sudden change to the system—after all, it was the Government themselves who launched the appeal to the High Court.
The background to this change is a VAT tribunal last year, as has been mentioned, at which one of the major bingo groups, Rank, which operates the Mecca chain of clubs, successfully challenged the applicability of VAT to new, faster versions of bingo played during intervals in the traditional game. As we know, the industry as a whole has long argued that the so-called "double taxation" of duty and VAT was unfair. The tribunal found that it was also, at least in part, unlawful. As we know, Rank has not paid a penny in VAT on these games since, and Her Majesty's Revenue and Customs had to return more than £59 million in previous payments last November. As I said, it was the Government who appealed the tribunal's decision.
I wish to stress that the Opposition are not expressing a view, one way or the other, on the legal merits of Rank's case, but we think that when the High Court has already heard the evidence and is expected to make a decision within weeks it is quite wrong of the Government to rush through changes to the system. It was only in February that the Exchequer Secretary claimed
"that altering the tax regime would not be appropriate."—[ Hansard, 25 February 2009; Vol. 488, c. 130WH.]
We are asking what the reason is for her volte-face.
Ministers have even had the cheek to suggest that bingo operators are standing behind them on this. Speaking in the Budget debate, the Financial Secretary said that
"overall, the announcements in the Budget on the taxation of bingo are welcome to the industry."—[ Hansard, 23 April 2009; Vol. 491, c. 434.]
I have to break it to them that they could not be further from the truth. The test case in the High Court has the potential to affect every operator and every form of the game. This is not some arcane spat between Rank and HMRC; other operators confirm that they have been watching the case closely as well, and that it has already altered their payment of VAT. As a result—this has been mentioned—nobody believes the estimates of VAT receipts from bingo that appear in the Red Book. Because operators have not been paying VAT on substantial parts of their business, they each believe that they will pay more if bingo duty increases. One operator, Top Ten, is not paying any VAT at all at the moment, Gala says that it will pay more tax as a result of the changes, and Rank had to issue a profits warning the day after the Budget as a direct result of the changes.
The basis for the Government's figures appears even more curious when one examines recent parliamentary answers. Perhaps there is some credible explanation for why the Exchequer Secretary estimates that £65 million was raised from VAT on bingo participation fees in 2008-09 but only £50 million would be lost by its removal in 2009-10. When VAT receipts are projected for 2010-11, with VAT back at 17.5 per cent. throughout, they are estimated at only £55 million. These estimates are all over the place; they have gone from £65 million down to £50 million and back up to £55 million. Bingo clubs have been closing, so unless the Exchequer Secretary anticipates a new wave of bingo clubs opening, how does she explain the fact that the 2011-12 figure goes up to £60 million? To make one's puzzlement complete, the estimated boost to revenue from raising duty is given as a static £35 million in each of those years, so we have severe doubts about the figures being used by the Government.
While I hope for answers on those points, the Government should at least say whether those are estimates of what the industry is actually paying or what the Government think it should pay. Those are two very different things, but the Exchequer Secretary appears to have said the latter.
The Government's measures could take on a very different complexion, depending on the outcome of the High Court appeal. As I have said, we want the court to determine the merits of the case that it has only just heard. Surely the Government can see that their proposals can be properly evaluated only after the Court's decision? I fear that the Government know that all too well. The changes in the Bill have all the hallmarks of a pre-emptive strike by the Treasury. If the Government were in any doubt about the outcome of the appeal, in revenue terms it is now heads the Government win, tails bingo loses. Given our overall position of awaiting the ruling of the High Court, we will support both amendments 14 and 9 if they are pressed.
The effect of amendment 15 would be to allow Ministers the opportunity to think again in the light of the High Court's verdict and take whatever action seems reasonable in that context at the time. Ironically, the Red Book figures suggest that the Exchequer would be better off while it waited. The industry wants to wait and, until we have the Court's ruling, the fairness of the Government's proposals must stand in question.
Amendment 9 is in my name and that of my colleagues. The case for amendment 14 has been put very effectively, and it gets to the real nub of the issue. If it is pressed to a Division, my party will support it. Amendment 15, tabled by the Conservatives, has also been explained concisely but effectively by Mr. Hands, and we would support it too. Amendment 9 is much broader and it may not be necessary to press it, but it is helpful to have the opportunity to contribute to a debate that justifiably arouses strong feelings in my constituents and those of every other right hon. and hon. Member.
It is worth briefly touching on the history of our deliberations. Bingo used to be subject to double taxation, which cost the industry some £85 million a year, because VAT was payable at 17.5 per cent. and gross profits tax at 15 per cent. Last year, I tabled a new clause to the Finance Bill to remove that double taxation and another to require the Government to report on the negative impact that double taxation was having on bingo. I am pleased that that point has been taken to heart by the Government and that the anomaly of bingo being subject to double taxation when other forms of gambling were not has been resolved. However, as Mr. Illsley said, the problem is that while the Government have made a concession to the bingo industry with one hand, they have taken it back with the other.
The Treasury estimates that the cost will be £50 million in 2009-10 and £55 million in 2011-12, but we know that those figures are heavily disputed. Clause 20 would increase the rate of bingo duty from 15 per cent. to 22 per cent. and Stewart Hosie drew effective comparisons between bingo in a club being taxed at 22 per cent. and bingo online or in a casino being taxed at 15 per cent. Sports betting online and in a betting shop is taxed at 15 per cent., as are the football pools. There is a clear anomaly. When the bingo companies won their campaign and double taxation ended, they thought that they would be treated on the same footing as other forms of betting and did not expect that concession to be offset with an increase in the gambling tax that they were required to pay.
Mecca, which is the organisation that I suspect most people will be familiar with, generates about £150 million of profit a year. It will pay £10 million more because of this increase than would have been the case. Let me briefly explain the impact that that will have on individual communities. I am told that each Mecca club pays an average of £900,000 a year in taxes, national insurance contributions and local rates and that 70 per cent. of Mecca revenues come from interval bingo, which was never subject to VAT in the first place. The punishment, in effect, is all the more profound in those circumstances.
I am also told that 31 bingo clubs closed last year—I think that that number was mentioned by the hon. Member for Dundee, East—so the effect is real, with an impact on the type of people who particularly enjoy bingo. People of all backgrounds enjoy bingo, but that enjoyment is particularly concentrated among some groups of people. For example, the point was made that women in particular participate in bingo much more than they participate in other forms of gambling. There are people within the communities that we represent in the House who are particularly adversely affected by the treatment of bingo.
Let me conclude by bringing this closer to home. In the two days since Monday—it is only Wednesday, although it feels like it might be later because of the amount of time we have spent on this Bill—I have received 109 letters from constituents who enjoy visiting Mecca bingo in Taunton up to three times a week and want to know why the Government are penalising club bingo. As Mr. Binley pointed out, there are many social aspects that go with bingo. It is not just about the gambling itself, which takes a fairly modest and harmless form, but it is about the food and the social interaction, too.
Constituents who have written to me on this subject include Edith Garland, Philip Horton, Kim Lee, Mike Hill, Margaret Grundy, Clare Povey, Sandra Loveridge and others. It is also notable how many married couples and families attend bingo together. That has been my experience when I have had the good fortune to visit Mecca bingo in Taunton. I have noticed how many people enjoy going with family members or with their spouses or friends. It is a regular social activity and one that they would be very upset to lose. Of course, bingo is also played in more informal settings across my constituency and across the country.
I am pleased that the double taxation anomaly has been resolved, but I am upset on behalf of my constituents and the hundreds and thousands, if not millions, of people who enjoy bingo across the country that that has been offset by the increase in taxation that means that bingo is still penalised compared with other forms of gambling. My colleagues and I will support all three of the amendments if and when they are pressed to a Division to try to get the Government to think again on this very important matter.
May I endorse the clear and strong arguments that have been articulated by Members from all parties on this issue? It is clear that the issue touches the many communities that we represent, and that is reflected in the fact that every party represented in the Chamber this evening has had a representative who has clearly articulated the view that the Government's current position is untenable and unfair and needs to be reconsidered.
I should like to declare an interest of sorts, Mrs. Heal, in that I am a member of my local Mecca bingo club in Crewe. I confess that I am a fairly new convert to the game, but my wife and I have had an exceptionally enjoyable evening there, along with many others on that occasion. Mr. Illsley said that his local bingo club had 26,000 members. I can tell the Committee that the one in Crewe has 20,000—which amounts to almost one in four of the local residents—and that it contributes hugely to the social life of a great many people.
Before I deal with the social impact of the Government's proposals in a little more detail, I want to say something about their economic impact. We have heard that the proposals in the Red Book will lead to the Rank and Mecca organisations paying an extra £9 million in tax per year. My hon. Friend Mr. Hands said that the Red Book makes it clear that the Treasury's estimate of the effects of the change will depend on the outcome of the High Court appeal. I therefore believe that the Government should let the legal process take its course before they consider its effect on their proposal. Only when they can see the full facts in the cold light of day will they be able to see what the industry's future is likely to be.
Although the loss of VAT on interval games has been of some benefit to bingo halls, one industry representative said that the fact that they have had to deal almost at the same time with the rise of almost 50 per cent. in bingo duty has meant that it has been something of a pyrrhic victory. Bingo halls have had a very short stay of execution in their attempt to sort out their finances and ensure a long-term future.
As we have heard, the rise in duty affects all bingo, whether it takes place in the interval or on the main stage. Both forms of the game, and especially interval bingo, will play a pivotal part in the bingo industry's future. Very many of our constituents enjoy bingo on an extremely regular basis, and for them it is often their primary leisure activity. It satisfies their need for social interaction and belonging, as one can clearly see when one goes to a bingo hall to enjoy a game.
Bingo crosses all sorts of boundaries, and it is played by young and old alike. I think that I am right in saying that an increasing number of younger people enjoy bingo on a regular basis. We need to ensure that they, and those members of the older generation with a long history of enjoying bingo, are able to enjoy the game for many years to come. The Henley Centre published a research paper entitled "Unlucky for Some: The Social Impact of Bingo Club Closures". It said that the closures are both a manifestation of, and a catalyst for, the wider breakdown of local communities, with a negative impact on society.
Bingo halls are essentially clubs for people. They love going to them and spending time with their friends. We should not deny them that opportunity in an attempt to claw back what is a minuscule amount compared to the overall deficit in the Government's finances. It is time that the Government thought again, because the bingo industry feels exasperated and betrayed.
I urge the Government to wait for legal certainty. They can then think again and ensure that the bingo industry has the future that it deserves.
Other hon. Members have pointed out the vital importance to many local communities of the soft form of gambling entertainment that is available in our bingo clubs. I particularly congratulate Mr. Timpson in that regard. It has been noted as well that the clubs also provide an opportunity for people to come together and enjoy cheap food and so on.
It is therefore especially disappointing to hear that more than 30 bingo clubs have closed in the past year, and that more than twice as many have closed since the start of 2007. The result is that many communities have been deprived of a much-loved form of entertainment. Mr. Illsley highlighted their importance by referring to the 26,000 members of one club in his area.
Many of us, knowing that the closures are happening, have campaigned to deal with some of the issues that we believe have caused some of the closures. The hon. Gentleman rightly said that levels of taxation were not the only problem; other factors, such as the smoking ban, have had an effect. It is worth remembering that the Bingo Association supported the smoking ban, even though it recognised that it would cause a problem for its members. I admire the association for making that decision.
Many of us knew that the real cause of concern was double taxation. Before this year's Budget was announced, the Treasury acknowledged that bingo, one of the softest forms of gambling, was also one of the most highly taxed. I pay tribute to the Government for deciding to end double taxation. As my hon. Friend Mr. Browne says, the Government took the right decision and they deserve credit for ending VAT on participation fees.
The Minister makes a fair point, and I shall come to it shortly, but before she starts criticising me, I wish to praise her further. The Government also deserve praise for assisting the bingo industry by agreeing to an increase in the number of gaming machines allowed on premises, which will be an important source of additional revenue for clubs. I welcome that.
Given that those good moves have been made, many of us are extremely surprised that the Government are persisting in, as others have put it, giving with one hand and taking with the other, and pressing forward with a policy that leads to one of the softest forms of gambling being one of the most highly taxed. That strikes many of us as unfair and is likely to lead to problems, particularly if the Government's figures in the Red Book prove to be incorrect—if the High Court judgment goes against them.
The Minister asks why we might support the Conservative amendment. In one sense, she is right: the amendment, which was well explained by Mr. Hands, is a delaying tactic, tabled in the hope that the High Court will rule in favour of the bingo industry and not of the Government. Although I think that the hon. Gentleman is right to take a punt on that, our preferred option is to support the SNP amendment, which was eloquently explained by Stewart Hosie—I like to give him credit occasionally. That amendment makes it clear that the bingo industry would be subject to a fair level of taxation.
The Minister could, rightly, say that it is easy to propose a reduction in Government income, just to garner cheap popularity with bingo clubs. It is therefore incumbent on anyone making such a proposal to make direct suggestions on how the Government could recoup the loss, and I have two or three suggestions to make, which I hope the hon. Lady will consider seriously. I alluded to the basic principle of one of them when I intervened on the hon. Member for Barnsley, Central. I genuinely believe that we ought to shift to a system where the harder forms of gambling are more highly taxed than the softer forms.
It is bizarre that the duty imposed on a gaming machine on which the maximum bet is £1 is exactly the same as the duty imposed on a gaming machine that has a £100 maximum bet. I genuinely believe that the Government should consider setting differential duties, especially in the light of the Gambling Commission's prevalence studies showing that those higher-stake machines have a higher level of prevalence—in other words, they are more addictive—than lower-stake machines.
Has the hon. Gentleman noticed that we are proposing a consultation on moving towards a gross profits tax for amusement machine licence duty?
I am delighted to note that the Minister is proposing that, although we have not yet got there and I am suggesting one way of dealing with the problem. I shall come back to gross profits tax at the end of my remarks, but for now let me stick with higher levels of gambling.
If we look into the higher end of gambling addiction problems, many of us know that online gambling is a particular cause for concern. The Minister will be well aware that there are about 6,500 internet gambling sites worldwide, which generate about £12.5 billion that is placed by the punters. Sadly, only about 1,000 of those internet gambling sites are regulated anywhere in the world, but it is at least pleasing to know that about 80 per cent. of all the money spent on internet gambling sites is on those regulated ones. Such gambling is extremely addictive, so it is particularly bizarre that we allow a number of internet gambling sites that are regulated outside the UK—whether they be in jurisdictions that we deem to be white-listed or in other European economic area countries—to advertise in this country. We are meant to spend money to check that their regulatory regime is fine. To date, we have made no charge on them whatever; and neither do we insist that they contribute to research, education and treatment in respect of problem gambling. I am delighted that, at long last, the Minister has given me an assurance that the Government are going to look further at this issue; it does provide another potential source of income.
The Minister also made reference to gross profits tax. Let me tell her that there is a simple way of ensuring that the Treasury recoup any loss that I may be proposing by supporting the amendments this evening—it is by using gross profits tax as the standard way of taxing gambling, and applying it to the national lottery. If such a tax were introduced in the national lottery, as many of us have advocated for many years, it would accrue significant additional income to the Treasury, but, more importantly, it would provide the additional benefit of giving significant extra funds to the lottery good causes, which have recently lost money to pay for the black hole in the Olympic budget.
Although I am delighted that the Minister has removed VAT on participation and that the Government have allowed for an increase in the number of gaming machines, I am disappointed that they are still going ahead with a higher rate of taxation for bingo than for most other forms—often more addictive forms—of gambling. There are ways in which the Government could change the system to provide for higher rates of taxation on more addictive forms of gambling.
I shall be brief. I did not intend to speak, but I heard so many interesting and fine speeches on this issue that I wanted to make my own contribution. I shall visit my own local bingo club on Friday, and I shall express the same views there as I do here.
I am pleased to follow Mr. Foster and I share his concern about gambling addiction, which I believe is a very serious matter. I was strongly against the super-casinos, which loomed large for a long time, but have now been dispensed with, I am glad to say. Bingo is a very modest form of gambling: it is easily contained; it is not addictive; people do not lose large sums of money. Furthermore, there are even health benefits, as many people who play bingo are middle-aged and might otherwise sit at home; going out and mixing with people is beneficial to health, particularly psychologically, but probably physically as well. It is the same argument that we hear about free travel on buses, as getting people out and about is beneficial to health. The issue is not just about being fair to people, as improving the health of the nation is also relevant. I say that especially since smoking in public places has been banned, which has really made a difference.
I am afraid that the provisions have the hallmark of Treasury officials all over them. I am not blaming the Exchequer Secretary, but Treasury officials, having been forced to get rid of double taxation, are getting in their little revenge by raising levels of tax in order to get their own back. But we are talking about tiny sums of money—£30 million or £40 million—compared with the £12 billion cost of reducing VAT, the £4 billion we lose as a result of tobacco smuggling, and the £37 billion we lose as a result of tax avoidance. If the Treasury wants to raise more money, as we undoubtedly need to do to pay the vast bills that have arisen from the banking crisis, it should look at those much larger sources of income, rather than adding relatively small amounts in taxation on bingo, which will have a disproportionate effect on those on modest and low incomes. I urge my hon. Friends on the Front Bench to consider more productive areas that will raise large amounts of revenue.
I am slightly worried about the presence in bingo clubs of fruit machines, which are addictive. However, bingo itself has every kind of benefit, including social, and it is not addictive as far as one can see. Habitual playing of bingo is a bit of fun every week, and is not serious gambling in the same sense as other activities. If we can encourage more people to play bingo, and fewer people to stay at home gambling online, a lot of people would be saved from addictive gambling, losing money and pain. There is everything to be said for encouraging bingo through lower taxation, and discouraging other forms of gambling through higher taxation and more regulation.
The overall tax gap between the tax that should be paid and that which is actually paid could be as large as £100 billion. If we addressed that, we could raise a lot more revenue. If we could make a 10 per cent. inroad into that, we would have £10 billion a year extra—hundreds of times more than the small amount that would be raised from taxing bingo disproportionately and unfairly. I hope that my few points register with my hon. Friend the Exchequer Secretary.
We have had a small, boutique, but extremely well proportioned debate, after many hours on the Finance Bill. I look forward to many more such debates over the next couple of months, as we vacate the Floor of the House and move upstairs.
Despite some of the comments in the debate, it is wise at this juncture to acknowledge that the effective tax rate for bingo has gone down from what was acknowledged by the Bingo Association in its Budget submission to be 24 to 25 per cent. In a press notice last November, Stewart Hosie said that the effective tax rate was 28.2 per cent. Whatever our feelings, it is reasonable for all of us to acknowledge that the effective tax rate has gone down from between 24 and 25 per cent. to 22 per cent., which some have welcomed.
I was saying that some who have contributed to tonight's debate have acknowledged that the Government's abolition of VAT on participation fees has reduced the effective tax rate for bingo from between 24 and 25 per cent. to 22 per cent. As 22 per cent. is lower than 24 or 25 per cent., I wanted to put it on the record that we are debating, among other things, a reduction in the effective tax rate for bingo.
No. Prior to the Budget, the effective tax rate was calculated—and widely acknowledged—to be between 24 and 25 per cent. The Bingo Association acknowledged that. Our assessment was that it was between 24 and 25 per cent., and it might be sensible to remind hon. Members at this juncture that the effective tax rate had come down from 35 per cent. in 2003, so there has been a steady decline in the effective rate of taxation on bingo. It went down from 35 per cent. in 2003 to between 24 and 25 per cent. prior to the Budget, and when the Budget is put into effect, the rate will go down to 22 per cent. Those are facts, acknowledged widely in the industry and featured in the Bingo Association's Budget representations.
Again, I thank the Minister for giving way; she is being most generous. Why, then, is every single bingo operator, as far as I am aware, saying that as a result of the changes, they will be paying more tax? Why have various City analysts issued profit warnings for the sector, due to the negative impact of the overall package of changes? She still seems to be saying that the changes are welcome overall, when the industry is saying precisely the opposite.
The industry can have any opinion that it likes about the taxation system that applies to it. I am not responsible for the opinions of the bingo industry; it can welcome the measures or not. What I am talking about is the effective tax rate. Prior to the changes that we are suggesting in the Finance Bill, the effective tax rate for bingo consisted of VAT participation fees at 17.5 per cent. and the bingo duty of 15 per cent. Removing VAT fees and increasing bingo duty to 22 per cent. means that the effective tax rate is 22 per cent., not the 24 to 25 per cent. figure that was acknowledged by all sides prior to the Budget, and that featured in the Bingo Association's Budget submission. In fact, the hon. Member for Dundee, East, quoted a 28 per cent. figure last year, but those of us who were involved with the Finance Bill last year will remember that there was widespread acknowledgement that the effective tax rate for bingo, taking the factors that I mentioned into account, was between 24 and 25 per cent.
The Minister is making heavy weather of the point. Most of us entirely agree with her analysis, on the assumption that the Government win the High Court case. The effective overall level of taxation that the industry would now suggest is different, because of course it has stopped paying VAT on interval betting. Surely that is the difference. Could we perhaps move on?
I was responding to the questions that I was asked by Mr. Hands; I was attempting to be helpful. Mr. Foster is right that when there is a VAT tribunal in progress, and there is an interim judgment, it applies only to the case in question, not broadly across the piece. Any other companies that have somehow decided that they ought not to be liable for VAT on participation fees because of the prospect of a judgment that has not yet been made are not exactly being up front about the circumstances. Her Majesty's Revenue and Customs makes it quite clear in all VAT tribunal judgments that the judgments apply only to the case before the tribunal, and that if there is any read- across, the issue of the VAT liability of other companies is still expected to be set aside until the tribunal is fully over—and it could carry on for some time yet.
"The fact that the dispute is ongoing means that it is inappropriate for me to discuss in detail issues relating to fiscal neutrality."—[ Hansard, 27 February 2009; Vol. 488, c. 132WH.]
Surely there has been a complete volte-face since she gave that opinion in February.
I do not understand why the hon. Gentleman thinks that. Budgets are an opportunity to examine tax rates and arrangements in all areas, and announcements on these issues are always made at Budgets. They are certainly not made in the middle of Westminster Hall debates, when the work leading up to the Budget is still ongoing.
Our principal aim in the Budget with respect to gambling taxation has been to simplify the tax regime and bring increased clarity to the sector. Clause 20 is part of that package of reforms to gambling taxation. It has two elements. First, it increases the rate of bingo duty to 22 per cent., as has been pointed out. Secondly, it increases the money prize limit to £70, as the hon. Member for Bath was generous enough to point out, for duty-exempt small-scale bingo conducted on certain premises. The increase in the rate is part of a package of measures that includes making bingo participation fees exempt from VAT, which will be debated upstairs on clause 112. The principal aim has been to simplify bingo taxation, as the industry had requested.
The three amendments to clause 20 have different objectives, but they all relate primarily to the aspect of the clause that amends the bingo duty rate. Amendment 9 seeks to commit the Government to publish a report on the impact of changes made at the Budget. We always keep taxes under review and we take decisions at the Budget. Gambling taxes are no different, and we will continue to engage with the industry about the state of the industry and the impact of taxation and potential taxation measures. There is therefore no need for the Government to publish a report on the impact of increases in bingo duty later this year.
Amendment 14 seeks to retain bingo duty at 15 per cent. Amendment 15 seeks to delay the increase in bingo duty until after court proceedings have concluded and Parliament has again debated the taxation of the bingo industry. The hon. Member for Hammersmith and Fulham has been up front with the Committee today and said that the official Opposition will vote against clause 112 when we come to that debate, to remove participation fees from bingo as part of that package. I look forward to having that debate with him when the time comes.
Both those amendments would cost money—£35 million, on the basis of figures in the Red Book. The effective tax rate on bingo is now 22 per cent., as I said earlier, comparable to the average rates of tax on casinos, gaming machines and the lottery. It is not clear why the Government should await the conclusion of a court case before deciding on an appropriate rate of tax for the bingo industry. I therefore ask hon. Members to withdraw their amendments.
We are pleased with the debate. Mr. Illsley is a champion for the sector and I am delighted that he brought his experience to the debate. Mr. Hands focused on the VAT case and explained his party's anger at the Government's attitude towards it. Mr. Browne spoke to his amendment 9, but I am delighted that he could bring his party to support my amendment 14 as well.
Mr. Timpson described the current position as untenable and unfair, and described the 20,000 members of his local bingo club, which is almost a third of the entire population of the town of Crewe. That is quite phenomenal. He called on the Government to wait for legal certainty. Mr. Foster focused on the social benefits. Kelvin Hopkins spoke about the health benefits of socialising and also said that the clause had the hallmark of the Treasury officials all over it. I shall not comment. Perhaps he knows these things better than I do.
The Minister began by describing this as a boutique debate. The reality is rather less elegant than that sounds, but it was still a good debate. She then spoiled the mood by trying to justify the Government's position, which is still 22 per cent. against 15 per cent.
Members in every party, and every speaker apart from the Minister, want to see the unfairness removed from bingo. It is simple. The tax on online bingo is 15 per cent., on online poker and casino 15 per cent., on sports betting in a betting shop 15 per cent., on betting exchanges 15 per cent. and on football pools 15 per cent. The Government want good licensed bingo clubs to pay tax at 22 per cent. I think 15 per cent. will do, and I ask the Committee to support the amendment.
Question accordingly negatived.
Amendment proposed: 15, page 12, line 19, leave out from 'effect' to end of line 20 and insert
'as the Treasury may by order provide.
(4A) An order under subsection (4)—
(a) shall be made by statutory instrument,
(b) may not be made unless a draft has been laid before and approved by resolution of the House of Commons, and
(c) may not be made until proceedings in the High Court in relation to The Commissioners for Her Majesty's Revenue and Customs vs The Rank Group plc (CH 2008/APP/0448) have concluded.'.— (Mr. Hands.)
Question put, That the amendment be made.
The Committee divided: Ayes 75, Noes 282.
Question accordingly negatived.
Clause 20 ordered to stand part of the Bill.
The Deputy Speaker resumed the Chair.
Bill (Clauses 7, 8, 9, 11, 14, 16, 20 and 92) reported, without amendment, and ordered to lie up on the Table.