Again, we can deal with the clause fairly briefly; I want to make just a few comments. Gaming machines are another important source of revenue for the Treasury. In 2009, approximately 190,000 machines in the UK were subject to amusement machine licence duty, including machines not only in dedicated gambling establishments but in pubs, clubs and other venues. There has been a debate about the accessibility of such machines, particularly to younger people, who are theoretically prohibited from using them. If the machines are based in premises accessible to young people, it is difficult to police that.
The previous Government announced in 2009 that they would move to a gross profits tax for gaming machines to replace the current amusement machine licence duty. We began a consultation in 2009. The benefits of introducing a gross profits tax were as follows. Five of the seven gambling tax regimes—general betting duty, pools betting duty, gaming duty, remote gaming duty and bingo duty—are now charged on gross profits. Lottery duty is still charged on stakes. However, amusement machines face a more complex regime, as they are subject to amusement machine licence duty, a licence fee for each new gaming machine and VAT on net takings. Compared with the other regimes, it is relatively inconvenient to pay, and the category-based system is not able to deal with technological changes or changes to social regulations with the same flexibility. Currently, the Department for Culture, Media and Sport must regularly review them and machines can switch between categories. Machines making equal amounts of profits can also pay different levels of duty if they are in different categories. Under a flat-rate gross profit tax system, technological innovations and changes to social regulations may not require changes to the gaming machines tax law.
Rather than being based on takings, the licence fee represents a fixed overhead cost to machine operators, so it could be considered to be a barrier preventing some potential operators from entering the gaming machine market, which means that it would be acting in favour of the current operators. A gross profits tax would remove the fixed-cost element of the current regime.
From a tax revenue perspective, a gross profits tax could be easier and cheaper to administer than the current system, and could maximise revenues, which is important at the current time. Making the system simpler could also make it easier for companies to comply with the legislation, thus reducing tax evasion.
The new Government have delayed that change. In December 2010, they responded to the consultation and said that they would introduce legislation in the Finance Bill 2011. The name for the new tax would be the machine games duty, which would replace the amusement machine licence duty and VAT on machine games. The Government argued that a gross profits tax would
“improve the future predictability and sustainability of the tax regime by making it more resilient to technological progress, regulatory changes and to inflation.”
It would also bring gaming machines in line with other gambling duties and make the tax system fairer.
The Government have not done that. Budget 2011 now says that there will be a further consultation in May on the design of the tax, and then legislation in the 2012 Finance Bill. What is the reason for the delay? Given the urgent need to protect revenues now and to maximise revenues that will not impact families directly, such as gambling duties—as opposed to some of the other revenue-raising measures, such as the increase in VAT to which the Government have resorted—why has the matter not been given higher priority?
It is important to have a period of adjustment for businesses, but the Government said originally that the change would be announced in this year’s Finance Bill in order for it to come into effect in 2012. If the change will not be introduced until Finance Bill 2012, does that mean that it will not come into effect until 2013?
The Government recognised that there would be winners and losers from the change, as is usually the case, but they decided in December to press ahead anyway, which was right, because the new system would be fairer. If the Minister has received representations from businesses that have caused her to delay the change, why were those views not represented in the consultation? Why did the Government decide in December that they were going to press ahead, before deciding in the run-up to the Budget not to go ahead with it and delay it for a year?
Clause 18 increases amusement machine licence duty rates in line with inflation to ensure that the duties continue to make a fair contribution to overall gambling duty receipts. This change took effect from 4 pm on 25 March 2011. The background to the clause is that, as we have heard, the amusement machine licence duty taxes the duty of all gaming machines and is charged at different rates, based on machine type and the duration of the licence. The changes made by clause 18 are already assumed in the public finances. Increasing the rates of the amusement machine licence duty in line with inflation therefore ensures that the tax on gaming machines stays the same in real terms, and that machine operators continue to contribute their fair share of tax revenues.
The hon. Member for Bristol East mentioned the proposal to introduce a machine games duty. I welcome her recognition of many of the reasons why we as a Government also want to pursue it. I will not go into them in the same detail as she did, but we think that a machine games duty would improve the future predictability and sustainability of the tax regime and make it more resilient to technological progress, regulatory changes and inflation. She pointed out that a machine games duty would be significantly fairer than the system under the amusement machine licence duty, because the tax liability would be linked directly to machine profits.
The hon. Lady asked why we had put in place extra time before the change was introduced. After the consultation, we listened to the industry, and the extra time gives us longer to consult on the detail of the proposal. The proposal affects many different businesses—some very small and some much larger, some in parts of the country that we particularly want to support, such as seaside areas that have struggled over recent years—and it therefore seemed sensible, given the relatively short consultation, to implement any changes on a time scale that gave the industry time to adjust, and enabled the Treasury to work with the industry and ensure that we got the key decisions about the structure and working of the new tax right. We are about to launch another consultation on the next layer of detail of how machine games duty will work.
The hon. Lady is right that we have pushed back the date for the introduction of the new duty, but it will then hopefully work better with the industry and will produce all the benefits—which the hon. Lady has set out—of moving to machine games duty, while mitigating some of the inevitable risks of a change in the duty structure.