(Except clauses 7, 8, 9, 11, 14, 16, 20 and 92) - Clause 112

Finance Bill – in a Public Bill Committee on 25th June 2009.

Alert me about debates like this

VAT exemption for gaming participation fees

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

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

May I start by welcoming you back to the Chair, Mr. Atkinson. I also welcome the new Exchequer Secretary because this is the first opportunity I have had to do so. It seems like only yesterday—perhaps it was yesterday—that we welcomed her predecessor. In fact, it was only last Tuesday that I welcomed the hon. Member for Burnley (Kitty Ussher) to the role, while we were debating the MEPs’ pay clause. She got the chop after just nine days, making her the Lady Jane Grey of the Treasury. However, I wish the new Exchequer Secretary well. The Treasury desperately needs some stability at this time of record deficits, rapidly increasing unemployment, open warfare with the Bank of England and unhelpful directives from the EU.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Is it not salutary to reflect that Government borrowing went up by more than £3 billion during the tenure of the previous Exchequer Secretary?

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

Order. I hope that we can conduct this sitting in a more ordered fashion. We are discussing clause 112. We have had our fun now.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

It is worth saying that since the publication of the Finance Bill, five Ministers have had responsibility for North sea oil, whether on a permanent or semi-permanent basis. The Exchequer Secretary appears to be well-trained as she approaches her portfolio.

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

Order. I have made it clear that we have gone far enough. The hon. Gentleman is taking liberties with my patience.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

Thank you, Mr. Atkinson. Clause 112 represents the other side to the Government’s measures on bingo, although it will also have some effect on games such as poker. That impact will become clearer when we discuss clause 113. Hon. Members will remember the debate in the Committee of the whole House on 13 May on clause 20, which will raise bingo duty on gross profits from 15 to 22 per cent. Clause 112 will remove the VAT on participation fees, which are the  up-front charges that players pay to enter the game. The Government argue that by introducing those two measures simultaneously, they will reduce the bingo industry’s effective rate of taxation.

The Government have trumpeted the generosity of these provisions, but as I explained to the Committee of the whole House, in practice, they are nothing of the kind. Bingo operators have argued for years that the VAT on participation fees was unfair and impermissible under EU law. Following a VAT tribunal hearing last year, which was discussed in some detail under clause 20, most bingo operators have withheld their VAT payments, especially on interval bingo. Operators such as Top Ten Bingo have withdrawn or withheld VAT altogether.

In the Committee of the whole House, the then Exchequer Secretary, the hon. Member for Wallasey (Angela Eagle)—just to be quite clear, that is going back two Exchequer Secretaries—was forced to admit that the figures in the Red Book were based on the Government’s interpretation of the law and what they thought should be paid, rather than on actual receipts. In practice, every operator believes that they will pay more tax as a net result of the changes in clauses 20 and 112. However, she stuck terrier-like to the theory and shunned what was happening with VAT in practice. She explained:

“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.”—[Official Report, 13 May 2009; Vol. 492, c. 978.]

With the best of possible intentions, I advise her second successor to take a more conciliatory line. The Treasury figures would have only begun to make sense if the Government had won the ongoing appeal in the High Court. We took the view that the Government were seeking to pre-empt the Court’s decision and tabled—and voted on—an amendment seeking to delay the changes until the legal position became clearer.

Only a few weeks later that argument already seems vindicated. Since we debated clause 20, the High Court has ruled against HMRC. The Government have lost their case. In the Court’s view, the VAT that clause 112 proposes to lift from interval bingo should never have been applied in the first place. That is the crux of the matter. Furthermore, the ruling has also been interpreted as giving strong support to the view that VAT on any form on bingo is impermissible under EU fiscal neutrality rules.

I was interested to read The Times’ City Diary on 9 June, which commented:

“With further claims amounting to £50 million in the pipeline from Rank and as much as £500 million from the wider gaming industry, it is not hard to work out why HMRC launched a cynical pre-emptive strike on duty in the Budget.”

The Government have proven themselves to be the enemy of the bingo sector and of hundreds of thousands of bingo players up and down the country.

Photo of Brian Binley Brian Binley Conservative, Northampton South

Does my hon. Friend agree that this is a growing tax that is hated up and down the land? I have heard many people, many of them elderly ladies who derive great pleasure from this hobby, who feel really hard done by.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I thank my hon. Friend for that intervention. I will shortly discuss the demographics of bingo. He makes a very strong point. I was intrigued to see the ongoing campaign on the issue. The campaign organisation has produced a bingo board with the faces of all of the relevant Government Ministers. It blots out the faces of all the Ministers who have left since the Finance Bill was published. There are a number of full houses and lines due to the incredible comings and goings we have seen across the Government since the Budget on 22 April.

It would be extremely helpful, for the purposes of the debate, if the Minister could indicate whether HMRC will be appealing the High Court’s decision. It has only a few days left in which to do so. It would be helpful for contributors to the debate to know whether the ruling will actually be appealed. Would she like to intervene at this point?

Photo of Sarah McCarthy-Fry Sarah McCarthy-Fry Parliamentary Secretary, HM Treasury

I am more than happy to intervene. There are some important legal points to consider, and the decision to appeal has not yet been made. I recognise that time is of the essence, and a decision will obviously be made before the date.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I thank the Minister for that intervention. We would all hope that a decision would be made in the required time. It expires in the next few days. If I remember correctly, the High Court ruled more than two weeks, or maybe even three weeks ago. There are only a handful of days left.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I thank the Minister for that intervention. The clock is ticking. Today is the 27th. [Hon. Members: “25th.”] It is the 25th, I apologise. There is less than half a business week, which is a terribly long time in the world of the Treasury. Who knows what might happen in those few days? I digress. I found that answer very interesting.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

Given what has just been said, is it unfortunate that we are discussing this clause now? Unless my hon. Friend is intending to speak until after 30 June, would it not be better—[Laughter.] I cannot give way. My point is that it is unfortunate that this is being discussed now.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

It would be beyond the scope of my contribution to debate the timetable. Today is scheduled as the last day. I suspect that bingo may come back at a later stage in the consideration of the Bill. I hope that we will have a chance to consider the implications of the Government’s decision, assuming that they do make one.

During the debate on clause 20, I questioned the Government’s figures on the cost of removing VAT from participation fees, which is what we have in front of us today—in other words, the theoretical rather than the actual cost of the clause. We need to look at both, bearing in mind what has been happening in the industry in relation to paying VAT. We need to look at the cost at the moment, assuming that VAT was being paid in all areas. Since the debate on clause 20, we have more  information, via answers to written questions, on how the Treasury arrived at its figure of £50 million. On 18 May, the Financial Secretary, who is with us this morning, replied that the cost of removing VAT on mainstage bingo, which is the standard form of the game, was £20 million. In one of the few acts during her short-lived return to the Treasury, the Minister’s immediate predecessor, the hon. Member for Burnley, added on 10 June that the cost of removing VAT on interval bingo, which is the newer form that the High Court ruled on, was £25 million. Both figures account for the effect on duty revenue. That makes £45 million in total, compared with the figure of £50 million in the Red Book. I assume that the remaining £5 million relates to participation fees on so-called equal chance games other than bingo, principally poker, which, as I mentioned at the beginning, is affected by clause 112. Will the Minister confirm the figures? It has been difficult for me and some of my hon. Friends, notably my hon. Friend the Member for Bournemouth, East (Mr. Ellwood), to get to the bottom of the figures. I would be grateful for clarification of whether the £50 million is the 25-plus-20-plus-5 that I just outlined.

The estimates for 2009-10 back up the argument I made during debate in the Committee of the whole House, that the industry will in practice pay more as a result of the Bill. We are not aware of any major operator paying VAT on interval bingo at present. After the Court ruling, it is hard to believe that any operators would contemplate doing so. A number of operators are withholding VAT receipts on mainstage bingo, feeling—as may turn out to be correct—that mainstage bingo is equally affected by the ruling. That number would, I believe, now swell. It is reasonable to conclude that actual receipts would have been below £20 million for the 2009-10 financial year before the Court ruling and could now potentially be zero—so not the £50 million that is outlined in the Red Book.

Going back to clause 20 for a moment, the Red Book shows that the increase in bingo duty is expected to raise £35 million. Far from reducing the effective tax rate, as the Minister’s predecessor insisted, the Government’s proposals constitute a tax hike of at least £15 million. I would be grateful for confirmation of that figure.

I am not sure why the Financial Secretary said the following during the Budget debate:

“Overall, the announcements in the Budget on the taxation of bingo are welcome to the industry.”—[Official Report, 23 April 2009; Vol. 491, c. 434.]

I found that extraordinary at the time and, in retrospect, it has become even more so. Perhaps he can now understand why the industry reacted so vociferously. An article in the The Sun on 9 June was headlined in typical fashion, “Hands off our balls”. That headline was not referring to me, unlike the other headline “Hands catches Balls” which related to terrorist finance and yet another previous Treasury Minister. The headline in The Sun to which I referred was purely about bingo. The chief executive of Rank said:

“Bookmakers, the football pools, provincial casinos all pay just 15 per cent—yet we are hit like this. What I find most staggering is that bingo players are typically in Labour heartlands. Yet we have had more support from Conservatives, the SNP and the Lib Dems than anyone in Government.”

Four members of this Committee seem to agree with the chief executive and have signed early-day motion 1569, which effectively calls on the Government to rethink their position on raising bingo duty. When I checked yesterday, some 67 Labour MPs had signed the motion. The Government have even managed to unite all of the bingo operators. The “I’m backing bingo campaign” combines the Bingo Association, Mecca, Gala, Castle, Buckingham, Club Grand, Carlton, Opera and Cosmo, and all are opposed to the Government’s plans. Many hon. Members will already have received letters from constituents who play bingo. As I understand it, there will even be a bingo rally in Parliament square, which we can all look forward to.

Bingo clubs must be seen in their proper perspective. As my hon. Friend the Member for Northampton, South said, bingo plays an important role in the lives of the many and not the few. The Government’s crass approach to bingo in this year’s Budget has upset bingo players up and down the country. As my hon. Friend the Member for Bournemouth, East pointed out in the debate on Second Reading, some 8.5 million people in this country play bingo each year. More than 200 Members of the House have a bingo club in their constituency. Regrettably, I am no longer one of them. Mecca Bingo on Vanston place in Fulham closed just a couple of years ago due partly, I believe, to the pressures facing the industry, about which I will be talking. The bingo clubs have a lot of members. I met Rob Halfon, the Conservative parliamentary candidate for Harlow, recently, and he told me that there were 42,000 members of the Harlow bingo club. In a Westminster Hall debate in February, the hon. Member for Birmingham, Yardley (John Hemming) told the Chamber that there were 83,000 members of a club in his constituency.

Just to return to Harlow for a moment, when my hon. Friend the Member for Hertford and Stortford (Mr. Prisk) and Rob Halfon visited the club, I am told that almost 200 players were hard at it in the middle of the day. So, we are talking about incredibly popular facilities. My hon. Friend the Member for Crewe and Nantwich (Mr. Timpson) talked in that same debate about his Mecca bingo hall in Crewe. He said that 33 employees deal with, on average, 2,500 visits each week, and the club has some 12,500 members.

Photo of Brian Binley Brian Binley Conservative, Northampton South 9:15 am, 25th June 2009

Does my hon. Friend also accept that there is a very great social facet to this whole business? Many people go to the bingo clubs and are treated to subsidised lunches, which is a great boon because they do not have to cook for themselves. Have the Government taken that into account?

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

Regrettably, the Government have not taken that into account. We can see that by their really appalling treatment of the sector over the years, and, most notably, in the Finance Bill. My hon. Friend is quite right to emphasise the clubs’ important social role. The closure of bingo clubs has been shown to contribute to social dislocation in communities, particularly for women and the elderly.

The demographics of bingo are not always what one would expect. The age profile of bingo players is becoming younger. I am told that the mid-age for some clubs can  be as low as 45, which, as the hon. Member for Taunton and I were saying only the other week, is getting dangerously close to home. Some 75 per cent. of players are women, and they are uniformly well behaved citizens, enjoying some leisure time in a fairly harmless manner. I know that it is gambling, and no one should underestimate the wider impact of gambling in our society. None the less, we are discussing a group of law-abiding, orderly citizens who have been playing the game that they love in a socially interactive way.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Of course, bingo is gambling and some people disapprove of all gambling, but most people would admit that it is the most benign form. If the Government were to penalise any form of gambling, one would have thought that it would be the type that was addictive or most likely to be financially harmful to the participants, rather than disproportionately punishing the most benign form.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I agree with the hon. Gentleman. It seems to make no sense to tax bingo at 22 per cent. and many other forms of gambling at 15 per cent. He makes a fair point about the comparative nature of forms of gambling and their addiction and social impact.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

My hon. Friend is being very generous in giving way. I agree with his speech in general, but bingo does not prosper only in Labour areas. There may be more Labour seats at the moment, but they will be Conservative after the next general election. In my area, I shall be visiting the Flutters club in the near future, because the manager is worried about the very points that my hon. Friend is making.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I thank my hon. Friend for his intervention, and I look forward to hearing a report from the club, and hearing at first hand what some of the members are saying about the Government’s proposals in clauses 20 and 112.

Photo of Sarah McCarthy-Fry Sarah McCarthy-Fry Parliamentary Secretary, HM Treasury

I am enjoying the hon. Gentleman’s setting of the scene, but given that we are discussing not clause 20, but clause 112, will he say whether he supports its removal?

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

Perhaps I should have made it absolutely clear. We have been calling for removal of VAT on bingo for many years. Of course we support clause 112, but it would not have arisen without clause 20, so it is only fair to refer to clause 20 when considering clause 112.

Photo of Mark Todd Mark Todd Labour, South Derbyshire

As the hon. Gentleman has been allowed some breadth to consider the matter, perhaps he would discourse on the longer term taxation of this activity. I seem to recall a taxation level before 1997 that exceeded that which applies now.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I am unaware of that, but I am happy to look into it. I was not in the House—it was 12 years ago—and I was not a regular in bingo halls. I am unaware of what the tax situation was prior to 1997, but I am happy to look into it, and I will write to the hon. Gentleman about it.

Bingo clubs make a significant contribution to the Exchequer’s coffers, and accordingly to industry sources, every club contributes around £1 million per annum in taxation. However, the overall tax contribution from bingo is falling, and bingo clubs are out of fashion. In 2003, there were 699 clubs in the UK, but that number has fallen by about 15 per cent. to around 590. Last year, more than 30 clubs had to close.

Obviously, several factors are involved, and the sector has been hit hard by the smoking ban and the restrictions on gaming machines. I appreciate that those restrictions have been relaxed a little, but it is estimated that they have resulted in around 3,500 job losses in the sector since the Gambling Act 2005. Nevertheless, the bingo world’s tax treatment has been its biggest irritant. Anyone who has talked to the clubs knows that operators have campaigned for its removal for some time. Ordinarily, they would welcome the clause.

The Department for Culture, Media and Sport agreed with the clubs some time ago—this is one of those interesting splits in the Government—and stated in the explanatory memorandum to the Gambling Act 2005 (Gaming Machines in Bingo Premises) Order 2008:

“The consultation produced 12 other proposals for assisting the bingo industry. The most popular of these was removing that on bingo participation. This is a matter for the Treasury, but DCMS continues to put the case for this reform.”

I should be grateful to hear from the Minister whether she, her predecessor or her predecessor but one have finally listened to the DCMS view, and what finally swung it for them this year, because in previous years it did not seem to cut much ice.

The Treasury has made conflicting noises on the extent to which the decline of bingo is due to the tax regime. We know that the last but one Exchequer Secretary, the hon. Member for Wallasey, who debated clause 20 on the Floor of the House some five weeks ago, campaigned for many years for a reduction in tax on football pools. I shall explain why that is relevant. Littlewoods is, of course, in her constituency.

The Government tax football pools at 15 per cent. of gross profits—the same rate that bingo was charged at before the Budget, but football pools have been VAT-exempt for some time. The hon. Member for Wallasey told her local newspaper, the Wirral Globe, on 26 March 1997:

“We must fight to preserve the remaining pools jobs. We will be pressing the new Government to achieve a level playing field in tax and regulations between pools and lottery. We are aware that the lottery changes the nature of the gaming industry and poses a continuing threat to the remaining 1,400 pools jobs and those of 57,000 collectors.”

I recall that it was a long election campaign and that quote must have been given during it.

Internal Treasury documents, which came to light after freedom of information requests, show that the Treasury believes that bingo’s plight is at least partly due to tax. One states that

“it is hard to believe that the problems faced by bingo clubs could be solved purely by removing VAT.”

We agree, but the implication is that if they cannot be explained purely by removing VAT then tax is part of the problem, in the same way that the last but one Exchequer Secretary viewed it as being part of the problem for the football pools industry. I note that she never suggested raising pools duty to 22 per cent.

Meanwhile, I am told that the Chancellor of the Exchequer has refused to meet representatives of the bingo industry or the Bingo Association—he may have other things on his mind at the moment—and, incredibly, even insisted that none were present when he visited a bingo club in his constituency in October 2008. That must be a unique occasion: the Chancellor barred the company’s management from their own premises. The reason given was that the right hon. Gentleman was visiting

“as a constituency MP, rather than as Chancellor”.

I am told that that is the only occasion in more than 60 MP constituency visits to local Mecca Bingo clubs that anyone has refused to meet the company’s management. It is an extraordinary state of affairs.

Photo of Mark Todd Mark Todd Labour, South Derbyshire

In my correspondence with the local bingo industry—there is no hall in my area but my constituents visit one nearby—I have asked to look at the business’s books to understand how the tax works and the impact of the VAT reduction. Would the hon. Gentleman be surprised to learn that, so far, that invitation has not been taken up?

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

Sorry, I may have misunderstood the intervention. The hon. Gentleman invited the business to show him its books so that he could see the impact—that is a kind offer. It is not for me to talk about the relationship between him and his local bingo club, but he must agree that it is bizarre for the Chancellor to refuse to meet the management. Why would a Chancellor visit his local bingo club and not be prepared to debate the issue?

James Duddridge (Rochford and Southend, East) (Con) rose—

Mr. Binleyrose—

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I give way to my hon. Friend the Member for Rochford and Southend, East.

Photo of James Duddridge James Duddridge Opposition Whip (Commons)

Surely the issue is that the business mentioned by the hon. Member for South Derbyshire is not in his constituency. It would be wholly inappropriate for him to interfere with a business in a neighbouring constituency, as he very well knows. I have met Mecca Bingo twice in my constituency and it has been very good. I met once with the national management, who wanted better dialogue and were very angry that Alistair Darling had not met their management team. I am saddened by bingo taxation legislation. It is detrimental—

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

Order. May I remind the hon. Gentleman that we do not yet refer to right hon. and hon. Members by their names? I believe that he is referring to the Chancellor of the Exchequer.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I thank my hon. Friend for his intervention. I am not sure that I can add anything to it, but I congratulate him on going to see his local Mecca Bingo club. I only wish that I could have the same pleasure.  Unfortunately, my local club closed down, as I mentioned, because of many of the pressures that we have been talking about.

I must now give way to my hon. Friend the Member for Northampton, South.

Photo of Brian Binley Brian Binley Conservative, Northampton South 9:30 am, 25th June 2009

I thought that I was invisible, but I am most grateful to my hon. Friend for giving way. Does he agree with me when I say that, in my experience, the clubs are very open and are more than happy to welcome Members of Parliament? That is certainly the case in my local club in Northampton, which I have visited on two occasions and hope to visit again shortly. The welcome that I receive there is overwhelming, and the information given to me is as full as I needed and had asked for. The point that we are discussing came up again and again. We need to set the record straight about those clubs.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I agree with my hon. Friend. Earlier, I mentioned various hon. Members from various parties who had visited their local bingo clubs. The bingo industry is taking an intelligent approach and is inviting parliamentary candidates in key marginal seats to visit clubs. That approach may yield some interesting results in constituencies such as Harlow.

Let me return briefly to the social value of bingo. In August 2007, the Henley Centre, a research group, conducted some research on bingo. I see my hon. Friend the Member for Henley here today. I do not know much about the Henley Centre, but I assume that it is located in his constituency. It published “Unlucky for Some—the Social Impact of Bingo Club Closures”, which is the centre’s impact assessment of the closure of clubs owed in part by the tax treatment. The report concluded:

“The closure of bingo clubs, especially those in small rural venues and deprived urban locations, has meant not only the loss of a pastime and form of entertainment, but the disappearance of a unique social support network, relied upon especially by retired women.”

It continued:

“The demise of this pastime and network can have a detrimental impact upon the physical and mental wellbeing of patrons, especially as there are often few other opportunities for this group to socialise. Bingo closures also appear to be both a manifestation and a catalyst for a wider breakdown of local communities that could have a negative impact on society.”

As we debate why bingo should be taxed at 22 per cent., the Henley Centre’s study puts the question in its proper context. Although, thankfully, VAT on participation fees has been removed, the duty on bingo is significantly higher than it is on their gambling brethren, for want of a better term.

In conclusion, bingo clubs are worthy of our support, yet the Government have managed to enrage all of them. If Ministers believe that they are helping bingo, why did Gala’s chairman say that

“The industry has been quite badly hit” by the Budget, and that

“It’s nonsense to portray this”— that is, the Budget—

“as a giveaway to bingo.”

Why do all the major operators say that they will end up paying more as a result of the measure, despite the fact that the Financial Secretary claimed that the net effect would be welcomed by the industry?

Photo of Brian Jenkins Brian Jenkins Labour, Tamworth

Although I find this to be a long and tortuous route to the vote on the clause, when the hon. Gentleman says that people say they are going to pay more tax, is that in reference to the tax that they should have been paying but were withholding, the tax they are actually paying, or the tax that will be paid under the new arrangement, which is merely a tax on their profits? Which of those are we talking about?

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

All of them, I think. I outlined some details earlier, but I am waiting to hear back from the Minister to be absolutely precise. We were trying to deconstruct the £50 million in tax that supposedly will be saved by the bingo industry; the Government have not been entirely straight about where that £50 million saving is coming from. I speculated earlier, using three figures: £20 million on the interval bingo; £25 million on the more traditional bingo, and £5 million on poker duties and perhaps other duties. We are waiting for the Minister to answer our question about where that estimate of a saving of £50 million comes from.

Why have even independent City analysts joined the chorus of disapproval? For example, Investec described the measure as a “Budget nightmare” and “counter-intuitive”. When the Committee of the whole House debated clause 20, the erstwhile Exchequer Secretary, the hon. Member for Wallasey, misrepresented—perhaps wilfully—the Opposition’s position on clause 112. As I said then, if our amendment at that time was not carried, we would support lifting VAT from bingo when we reached clause 112. That remains the case.

On the wider matter of the rise in bingo duty, I also said that the fairness of the Government’s proposals would stand in question until the High Court had ruled. The Court’s decision clearly reveals the proposals to be unfair, and our initial impression that they are a pre-emptive grab for revenue has been shown to be correct. Although taxing bingo at a higher rate than comparable forms of gambling could be justified in the context of a cut, it is hard to understand it over the longer term in the very different context of a tax increase. A future Conservative Government will hope to address that imbalance as time and the public finances allow.

Will the Government appeal the High Court’s decision further? The Minister has said that she has not yet made up her mind, and I think that she has a few days to do so. It would be helpful if she told us some of the considerations that will be thrown into the mix when the Government decide whether to appeal the decision. Our debate would be put in its proper context if we had a feel for whether the court case will continue or not.

Photo of Alison Seabeck Alison Seabeck Chair, South West Regional Select Committee

I rise to highlight some problems faced by my constituency. We have a Mecca Bingo that thrives, in the main, but that has been badly hit by the smoking ban. Its members broadly welcome the clause, because any encouragement for them to participate—

Photo of Alison Seabeck Alison Seabeck Chair, South West Regional Select Committee

No, I will not for the moment. I want to put my constituents’ concerns on the record before taking an intervention. My constituents are keen for the Mecca Bingo, which is in one of the poor areas of Devonport, to survive and thrive. Also, a lot of people work at the bingo hall, and I have received many letters from employees—a group who have been largely ignored during today’s debate—who want to ensure that their jobs continue. Confusion has arisen because, with a High Court judgment pending, people will be uncertain for a little while longer about the exact impact that the judgment will have in terms of the tax that the company will have to pay, and therefore the company’s view of the viability of that bingo hall. We have heard of bingo halls that have closed in other parts of the country.

The Bill’s Report stage is a few weeks down the line. I hope that HMRC and the Treasury will have enough time in the intervening period to take a view on the High Court’s decision, that they will introduce clear proposals to ensure that the bingo industry is made secure, and that my constituents will be able to continue to enjoy bingo in Plymouth.

Photo of Mark Field Mark Field Conservative, Cities of London and Westminster

Will the Minister indicate just how detrimental an effect the measure may have on the bingo industry at large, and give a perspective on the number of bingo halls have closed in the past three to five years? As the hon. Member for Plymouth, Devonport has pointed out, the Government’s smoking ban has been a major factor in some of the closures, and the measure we are discussing will be a second hammer blow.

I do not suggest that my hon. Friend the Member for Hammersmith and Fulham did not demonstrate his characteristic good sense as he spoke for 35 minutes, but the nub of the argument is the difference between the duties on bingo played in a licensed club and those on online bingo, which are 22 and 15 per cent. respectively. Why on earth do we have that ludicrous disparity? It is one thing to say that bingo is such an undesirable activity that it needs to be heavily taxed, but on what basis is online bingo worthy of the lower, standard 15 per cent. tax, while club bingo is taxed at 22 per cent? It simply makes no sense.

Photo of Sarah McCarthy-Fry Sarah McCarthy-Fry Parliamentary Secretary, HM Treasury

I am sure that members of the Committee will be pleased to know that I do not propose to rehash the debate on clause 20 that took place on the Floor of the House. I will, however, respond to the specific points that have been raised, particularly in relation to VAT.

First, I shall deal with the question about appeals. The decision on whether to appeal is not mine to make; it is for HMRC to decide whether to appeal, and it is now looking at the legal arguments. As I said, a decision will be made in time, as it has to be.

Another question was whether Red Book figures are based on the law as it stands at the time, or whether they are based on the perceived actual amount of VAT to come in.

Photo of Brian Binley Brian Binley Conservative, Northampton South

The Minister just said that she had no ability to influence or to seem to influence HMRC. Does that mean that HMRC can, on its own discretion, spend taxpayers’ money willy-nilly on an appeal that is so antisocial?

Photo of Sarah McCarthy-Fry Sarah McCarthy-Fry Parliamentary Secretary, HM Treasury

I do not accept the hon. Gentleman’s point. There is a specific legal issue, and his extrapolation goes much too far.

Returning to my point, Red Book figures must be based on the law as it stands at the time, and the figures in it are based on that.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

This will be of interest to the Minister’s hon. Friend the Member for Tamworth. Can the Minister confirm whether my figures are correct? They are that £20 million comes from VAT on mainstage bingo, £25 million from interval bingo, and the other £5 million from equal-chance games other than bingo, principally poker. Are those figures, which I cobbled together from a variety of parliamentary answers, correct? I believe that her hon. Friend was asking the same question.

Photo of Sarah McCarthy-Fry Sarah McCarthy-Fry Parliamentary Secretary, HM Treasury

If the hon. Gentleman should have had a little patience, because I was just about to come on to that point. The £50 million is made up of the cost of recovering VAT on mainstage bingo, interval bingo and card rooms. The roundings are to the nearest £5 million, so although £20 million, £25 million and £5 million are not exact figures, they show the proportions.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I am intrigued. Why do the figures have to be rounded to £5 million? That is an incredible divergence on a figure of £20 million or £25 million. Is it to protect the commercial confidentiality of the various bingo operators? What is the rationale behind it?

Photo of Sarah McCarthy-Fry Sarah McCarthy-Fry Parliamentary Secretary, HM Treasury

That would certainly be a factor. I do not know the exact details of everything, but I would be more than happy to write to the hon. Gentleman to explain.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

The Minister makes an interesting point. She says that the Government based the Red Book figures on their understanding of the current law. I understand that, but is it not also the practice to provide for a contingent amount where there is a court case that the Revenue might lose? Has such provision been made?

Photo of Sarah McCarthy-Fry Sarah McCarthy-Fry Parliamentary Secretary, HM Treasury

I do not know the answer to that because I do not have the figures in front of me. Provision probably is made in the total of contingent liabilities, but it is unlikely to be specific. I do not want to say things that are not correct, so I will look into that and get back to the hon. Gentleman.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

The hon. Lady is being generous in giving way. What is the implication for the unpaid VAT from previous years? The Government were clearly counting on that VAT being paid. Where does all the VAT that the Government were expecting but that will now not be paid appear in the Red Book?

Photo of Sarah McCarthy-Fry Sarah McCarthy-Fry Parliamentary Secretary, HM Treasury

Again, I do not have the figures in front of me. It probably depends on whether HMRC decides to go further with an appeal. We can come back to that.

The clause makes bingo participation fees VAT exempt, and introduces a simplification that has long been asked for by the industry. The principal aim of the reforms is  to simplify the bingo tax regime. In the Red Book, we gave the average estimated effective tax rate and set out what the effect will be. I remind the Committee that, in the Bingo Association’s own Budget representations, it estimated its effective tax rate to be 24 to 25 per cent. On that basis, removal of the VAT and duty would reduce its effective tax rate. I am pleased to tell the Committee that I am meeting representatives of the Bingo Association on Tuesday, when they will put their arguments to me and we will discuss the matter.

The second part of the clause, of course, has the effect of making the participation fees for casino card rooms VAT exempt. In autumn 2007, we said that we would look at that matter. The most sensible way to tax casino card rooms is through the gaming duty regime, and the changes we will make in that respect will ensure consistency of treatment with other player-to-player gaming and make participation fees exempt.

I am pleased that the hon. Member for Hammersmith and Fulham has said that the Opposition will support the clause—I would have been disappointed if they had not. I look forward to the clause standing part of the Bill.

Question put and agreed to.

Clause 112 accordingly ordered to stand part of the Bill.