Clause 21

Finance Bill – in a Public Bill Committee at 12:30 pm on 2nd June 2009.

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Amounts of duty on amusement machine licences

Question proposed, That the clause stand part of the Bill.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

Clause 21 is closely related to clause 22 and raises the amusement machine licence duty, or AMLD, rates payable on gaming machines. The clause is notable for the level of the duty increases within the various categories under consideration. The increases are not entirely uniform, but they are all significantly above the rate of inflation. The Government have yet to explain their reasoning for those increases, and the Red Book fails to mention the issue at all, beyond noting the additional £20 million in revenue that will be raised.

In fact, page 175 of the Red Book lists AMLD among those duties rising by this year’s third-quarter RPI, which is clearly wrong. The rises are about 9 per cent. on last year’s Budget, and that figure is certainly nowhere near any RPI figure that I have seen for a number of years. For example, a 12-month category A licence rises from £5,160 to £5,625, which seems to be a lot more than 3 per cent. and more like 9 per cent. A six-month category C license rises from £400 to £435. Those are rises of 9 per cent. and 8.75 per cent. respectively. We were told in the Red Book that the rises were at the rate of third-quarter RPI. They are nowhere close to that.

The amount of licence duty payable is determined, at present, by the period covered—one to 12 months—and the number and category of machines. Machines can have very different maximum prize values and minimum stakes, and it is right that duty reflects that. The Opposition have repeatedly drawn attention to the lack of sense in taxing highly addictive machines, such as the B2 fixed odds betting terminals found in bookmakers, at the same rate as the B3 machines, which are the softer form of gaming machines found in bingo halls and gaming centres. We have great concerns about the growth in the popularity of fixed odds betting terminals, which appears to be aiding migration away from arcades.

In a 2007 prevalence study, problem gambling associated with FOBTs was the second highest form of problem gambling, with a problem gambling rate of 11.2 per cent. My hon. Friend the Member for Putney (Justine Greening) raised those concerns at length last year, so I will not repeat them this year, but the minor recalibration of the duty bandings in this year’s Budget has not addressed the problem. The Budget announced an imminent consultation on switching amusement machine licence  duty to a gross profits basis rather than a licence charge, but further detail is yet to be forthcoming. It would be helpful if the Minister said when the consultation will be launched and what options are being considered to reflect the different machines, and their different level of addictiveness, covered by AMLD at present. I would particularly appreciate an explanation of why she is maintaining that the figures on page 175 of the Red Book, which state that the rises are way in excess of RPI, are based on this year’s third-quarter RPI.

I look forward to hearing the Minister’s response.

Photo of James Duddridge James Duddridge Opposition Whip (Commons) 12:45 pm, 2nd June 2009

Thank you for calling me, Mr. Atkinson. I know that it is not traditional for a Whip to speak, but I represent Southend and this measure is very relevant. There was lots of amusement in Southend over the weekend but there was certainly no amusement over clauses 21 and 22. I would like to probe the Minister for more detail on the reasons for the larger than inflation increases and to look at whether there can be flexibility on the periods for which the machines are licensed.

In Southend some arcades are closed during the off season but still pay a significant amount for licences. In 2003 there was a big review of such machines. It was decided to leave all alone and that no further progress should be made given the difficult underlying market conditions and the real concern about the industry as a whole. We are looking at the changes in difficult economic times, at the height of recession, when people are less prepared to spend money either at home or visiting areas of entertainment and pleasure, such as Southend seafront where there are a lot of amusement arcades.

I would like the Minister to look at not only the amount, but the location of machines. I have entered into extensive correspondence with Bunter’s CafĂ(c) of 68 Sutton road—I do not expect the Minister to know the exact case. It may sound parochial, but sometimes looking at a specific issue shows how foolish legislation is. Bunter’s CafĂ(c) has always had a little machine that you could put money in and gamble, which was licensed via Southend council. Under the Gambling Act 2005 it will not be allowed to have that machine, but if it sold alcohol, it would be allowed to have it with no other changes and, presumably, would pay the increased machine licence duty. That makes no sense to me. If it is unsafe to have a machine in a cafĂ(c), because of the type of people that will be there, surely it is more unsafe, in terms of being addictive, if people can have it in licensed premises. It does not seem to make sense, even if there is an argument for children in fish and chip shops paying over money, that there cannot be a licensed machine in a cafĂ(c) but there can be one in a family room in a licensed pub. There seems to be an awful lot of inconsistency.

I want to go back to the rates. The British Amusement Catering Trade Association, which is an excellent organisation, has questioned whether this is the right time to be making these changes. Revenues in amusement arcades have collapsed by 21 per cent. and I wonder whether the Minister has a grip on the impact on the industry. I say that because on 19 May 2008 my hon. Friend the Member for Putney asked a series of questions, requesting estimates of the number of those machines in amusement arcades, both historically and the predicted levels in the future. The Minister replied that there was no breakdown of the numbers of amusement machines  in arcades or of amusement machine licence duty that is collected specifically in arcades. If the Department does not have an awareness of those numbers, how can it possibly assess the impact of these changes? I can tell the Minister that there is quite a severe impact. Amusement arcades are closing and that will mean a loss to the Exchequer overall.

Also, as more legislation is imposed on these smaller arcades, a flood of them are turning into bigger arcades, with heavier gambling. So, some of the things that the Government are doing in this sector are counter-productive, both in terms of increasing revenue and of minimising the possibility of people becoming addicted to gambling.

Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

The clause will increase all amounts of amusement machine licence duty from 4pm on 22 April 2009 and the new amounts are set out in the clause. The net increase in effective tax rate on machines as a result of the clause will be about 1 per cent. Therefore, the effective tax rate on machines will remain broadly consistent with the effective tax rates on bingo, casinos and the national lottery.

These changes will ensure that gaming machines make a contribution to the consolidation of the public finances. They also have to be seen in the context of the regulatory changes led by the Department for Culture, Media and Sport, which allow business to benefit from higher stake and prize limits. Therefore, these machines will effectively be more profitable, as it is anticipated that more people will use them.

We increased these rates for the reasons that I was talking about earlier with respect to consolidation of the public finances. The hon. Member for Hammersmith and Fulham asked about page 175 of the Red Book. That page sets out the assumptions for the baseline against which the scorecard costings are calculated; it is not actually the calculation itself. So that is a definition of how the scoring is done. That was done with a forecast of RPI in September 2009, which is the usual way that these things are done. I hope that that answers his question.

The hon. Gentleman also asked about the consultation. No decisions have been taken yet, but officials have already had pre-meetings with BACTA, the organisation that has already been mentioned by the hon. Member for Rochford and Southend, East. We hope to launch the consultation on a potential move to a gross profits tax soon. I cannot give him any more details at the moment, but the process has begun with initial discussions.

The hon. Gentleman also mentioned off-season closures. Anyone who knows seaside resorts, as I do, will know that there is an on and an off season. Seasonal licences are permitted for small prize machines. Those licences basically give an eight-month licence for a six-month duty rate. If there was a move to gross profits tax, we would also want to take account of seasonality in the way that we levied that tax for small machines. So that is an issue that the operators in the hon. Gentleman’s constituency, either in the Billy Bunter cafĂ(c) or elsewhere, can make representations about, either directly or via BACTA. We look forward to having a productive discussion with him about that.

Question put and agreed to.

Clause 21 accordingly ordered to stand part of the Bill.