Clause 115 - Rate of bingo duty

Finance Bill – in a Public Bill Committee at 5:15 pm on 10 June 2014.

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

Photo of Gary Streeter Gary Streeter Conservative, South West Devon

With this it will be convenient to consider clause 116 stand part.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

I shall deal first with clause 115 and the reduction in bingo duty from 20% to 10%. As Committee members will be aware, bingo duty, similarly to gaming duty, which we have just discussed, is a gross profits tax. In other words, the amount of bingo receipts minus the amount of bingo winnings equates to the HMRC-termed bingo promotion profits. It is those profits that are liable to bingo duty, which is currently at a rate of 20%.

The position differs from that under the previous taxation regime. Until 2009, there was a gross profits tax at a rate of 15% plus VAT. In 2009, that was replaced by a 22% gross profits tax, with bingo clubs becoming partially exempt for VAT reclaim purposes. Gross profits tax was then reduced to 20% in 2010. However, the industry remained concerned about its inability to reclaim all its VAT, which caused investment and refurbishment costs to remain high. I raised that concern on behalf of the Opposition in last year’s Finance Bill Committee. I also pointed out concerns raised by the bingo industry, notably by the Bingo Association, about the impact of the current rate of bingo duty on the industry, the wider economy, and jobs and growth. The Opposition have raised such concerns on numerous occasions.

Photo of Duncan Hames Duncan Hames Liberal Democrat, Chippenham 5:30, 10 June 2014

The hon. Lady has clearly done a lot of work on this subject. That being the case, was she at all surprised that many of her colleagues criticised the Government for acting on the measure in the last Budget?

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

It is interesting that the hon. Gentleman raises that issue. I will go on to address some of the concerns raised about how the policy was announced; it also relates to members of his party. Obviously, we welcome that change. We had called for the Government to consider it on numerous occasions during debate on previous Finance Bills. However, we also need to address the wider issues in this debate. This is not only about the impact of bingo duty; it is also about the introduction of the machine games duty in February 2013, which according to industry figures will hit bingo clubs with an additional £9.25 million in tax each year. The industry believes that that, combined  with a high rate of bingo duty, has left it facing one of the highest starting rates of tax of all gaming activity in Britain.

For that reason, we tabled an amendment to last year’s Finance Bill calling on the Government to explore what consideration they had given to the impact of the rate of bingo duty on the bingo industry, which, as we have discussed in previous Finance Bill Committees, plays an important role in communities up and down the country, but whose bingo clubs are closing at a rate of one a month. As we had sought clarification on why bingo is being taxed at a higher rate than other kinds of gaming, our amendment highlighted the fact that Ministers had apparently taken no account of the impact of bingo duty on the industry, jobs and growth. In fact, when the then Economic Secretary to the Treasury, the right hon. Member for Bromsgrove (Sajid Javid), responded, he discussed only the impact of a bingo duty cut on the Treasury, not the impact on the industry, while simultaneously dismissing any notion that the coalition’s machine games duty might inadvertently have affected the bingo industry.

However, it appears that Ministers had a rethink on the issue in the intervening period. The Chancellor announced at this year’s Budget that he would go further than the industry’s calls to cut bingo duty to 15% and instead cut it to 10%. Clause 115 enacts that provision and is welcome. We called on the Government for many years to explore such a measure, and we are pleased that our calls have been heeded. Indeed, it seemed that the cut in bingo duty, perhaps along with the cut in beer and other alcoholic duties, was possibly one of the most popular announcements in the Chancellor’s Budget, at least until the evening tweet-fest began and that poster surfaced on social media, doing the rounds in the press the following morning after the Conservative party chairman’s tweet that said:

“#budget2014 cuts bingo & beer tax helping hardworking people do more of the things they enjoy.”

I confess that I thought it was a spoof at first, as I believe did the Chief Secretary to the Treasury. He went on to say on national television:

“It may be our Budget, but it’s their words”.

It is interesting to explore whether Ministers really thought they could just fob off working people, patronising them with cuts in bingo and alcohol duties to brush over the cost of living crisis, which the Government have completely failed to deal with. I have some questions, and although I regret that the Chancellor is not here to answer, I would be grateful if the Exchequer Secretary would answer them in his absence. It has been difficult to ascertain exactly what went on with that advert. Did the Chancellor sign it off? Did he or any other Ministers have any part to play in its design or its signing off? The idea that taking 1p off a pint of beer—we have already discussed that people would have drink 100 pints of beer to save £1—or cutting bingo duty and then saying, “Don’t worry, people out there; we’ve solved the cost of living crisis faced by millions of hard-working people up and down this country, and we know what you enjoy doing in your spare time,” just shows how out of touch the Government are. It very much rang that way with members of the public.

Photo of Mark Garnier Mark Garnier Conservative, Wyre Forest

I am curious to know whether the hon. Lady is saying that she would have ignored the calls by bingo clubs for the duty to be  reduced and therefore whether a Labour Government would have turned round and said to them, “No, we’re not going to support the bingo clubs; we’re going to keep the bingo duty high.”

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

The hon. Gentleman is clearly being ridiculous and not listening to the important points I have made. I have said clearly that we have called on this and numerous other Finance Bill Committees to look at the duty. We welcomed the change, but not the Government’s inability in this Budget to recognise the cost of living crisis that people are facing up and down the country. It was incredibly patronising to suggest to members of the public that 1p off a pint of beer and a tax cut for the bingo industry would somehow solve everybody’s problems.

Photo of Charlie Elphicke Charlie Elphicke Conservative, Dover

The cost of living crisis—by which the hon. Lady means that wages have not kept pace with inflation—is something that happens after every recession, as she knows. It is particularly deep on this occasion because the recession and the stunning, galactic economic mismanagement that we saw previously brought this country so low for so long that this Government have been turning things around. Very soon, she may regret banging on about the cost of living crisis, as we head to the election with rising wages.

Photo of Gary Streeter Gary Streeter Conservative, South West Devon

Order. I feel obliged to intervene at this point. We are discussing the rate of bingo duty and clauses 115 and 116, and I do not particularly want to go into too much detail about adverts relating to them. Let us continue our important mission on clauses 115 and 116.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

Thank you, Mr Streeter, for calling us back to order. I appreciate the point the hon. Member for Dover is making, but it totally ignores the fact that many of the choices and decisions made by this Government—the VAT increase is just one example—have made it a lot worse for ordinary households up and down the country.

Let me turn to clause 116 and the small-scale exemption for adult gaming centres. I would like some clarity from the Minister. Clause 116 relates to an exemption to bingo duty—specifically, the exemption provisions for adult gaming centres—that is available to small-scale amusements provided commercially, which are arcades for adults providing gaming machines with higher payouts than family entertainment centres. The legislation provides for certain types of bingo operation—from domestic and small-scale bingo, to not-for-profit bingo and, of course, small-scale amusements provided commercially—to be exempt from bingo duty. Paragraph 5 of schedule 3 to the Betting and Gaming Duties Act 1981 describes a number of conditions that need to be met for small-scale amusements provided commercially to be exempt from bingo duty, including the maximum levels of stakes and winnings.

One further condition in the case of adult gaming centres, is that such premises should have an amusement machines licence in force. However, as I am sure Committee members know, amusement machine licence duty was repealed in the Finance Act 2012 and replaced with machine games duty. At that point, the reference to  amusement machine licensing in the conditions listed in paragraph 5(1)(b) of schedule 3 to the 1981 Act became redundant. Clause 116 seeks to correct that by replacing the reference in paragraph 5 with an equivalent reference to machine games duty in order for adult gaming centres to remain exempt from bingo duty.

I have one question for the Minister. Neither the explanatory notes nor the tax information and impact note on the measure explain what the impact of the technical flaw has been so far. Machine games duty was introduced on 1 February 2013, so presumably from that date until the change in the clause comes into force following the Bill gaining Royal Assent, any bingo in adult gaming centres will not have been exempt from bingo duty as it should have been. Can he tell the Committee what impact this technical flaw has had on adult gaming centres? Has it led to them inadvertently paying more duty than they would have, had the irregularity not been missed? Has the flaw resulted in any notable impact on the Exchequer?

I would be grateful if the Minister would address those points, as well as the important issue relating to the bingogate advert that I put to him earlier.

Photo of David Gauke David Gauke The Exchequer Secretary

Clauses 115 and 116 make changes to the taxation of bingo. The bingo industry plays an important role in bringing local communities together, supporting employment and contributing to British culture.

Before I set out the detail of the clauses, I will give some background. According to the Bingo Association, in the mid-1970s there were around 1,700 bingo clubs in Great Britain. However, as hon. Members will be aware, the bingo industry is in long-term decline and club numbers have fallen drastically. The Bingo Association estimates that there are now only 400 bingo clubs operating in Great Britain. There are many reasons touted for the decline, including changing consumer tastes and the smoking ban. In recent years the tax treatment of bingo has also changed. In 2009, bingo participation fees were made VAT exempt, but the rate of bingo duty was increased to 22%, before being reduced to 20% in 2010.

According to industry figures, there were 43 million visits to bingo clubs in 2012 and 6 million people are retail members of the Bingo Association. Earlier this year, more than 300,000 bingo players signed a petition that was delivered to 11 Downing street asking the Chancellor to cut bingo duty. Their slogan was “Boost bingo”, because they wanted bingo duty to be cut to 15% to boost the industry. I am happy to say that the Government have been able to go further: clause 115 halves the duty to 10%.

Photo of Ian Swales Ian Swales Liberal Democrat, Redcar

May I pass on to the Minister the thanks of the Beacon bingo club in Redcar? Its members took an active part in the campaign he mentioned and were quite pleasantly surprised to see that it was doubly successful. Should things not work out for me next May, I have been offered alternative employment as a bingo caller.

Photo of David Gauke David Gauke The Exchequer Secretary

I am grateful to learn from my hon. Friend of the support from his own bingo club. Although clearly it must be pleasing to him to have the offer he mentioned, I am sure it will not be needed.

Photo of Ian Mearns Ian Mearns Labour, Gateshead

The fact that the online petition reached 300,000 signatures is of great interest. I was invited to my own local bingo club, the Mecca bingo club in Gateshead. I have to say that I had not set foot in it before and I was stunned by the vastness of the place—it is a really large establishment. However, I still do not really understand why the Minister and his team decided to cut the percentage rate of duty from 2-0, blind 20, to Downing street, No. 10.

Photo of David Gauke David Gauke The Exchequer Secretary 5:45, 10 June 2014

We believe that it was the right thing to do to support the bingo industry. I would describe No. 10 as Dave’s den—put it this way, I do not think it is going to be Ed’s den. It was right to provide support to the sector. As an industry, it was facing a significant and difficult tax regime—one that we inherited, it has to be said.

The hon. Member for Newcastle upon Tyne North tried to convey the impression that she had long been campaigning for this cut in bingo duty, but that is not the impression I got from previous Finance Bill debates. There was a vigorous campaign, and I can think of one or two of my parliamentary colleagues in particular who were prominent in that campaign, not least my hon. Friends the Members for Wyre Forest, for Hastings and Rye, for Gosport, for Spelthorne, for Dover, for Fylde, for Tamworth, for Crawley, for South Derbyshire and for Harlow (Robert Halfon).

Before I start giving too much credit to various hon. Friends for their contribution, let me say that we believe the Budget announcement will allow many bingo clubs to expand. Since the Budget, both major operators and many independent operators have come forward with investment plans as a result of the duty reduction. The Rank Group, which operates Mecca bingo, has committed to develop three new bingo clubs and restart its modernisation programme. Those changes will involve at least £6 million in capital investment over the next three years and are expected to create more than 200 jobs, as well as safeguarding many existing ones.

Gala Bingo no longer plans to close nine of its clubs, protecting almost 200 jobs, and will invest £40 million in stepping up its refurbishment programme. In addition, Gala has announced that it will open a new club in Southampton, investing £5 million and creating 50 new jobs. Castle Leisure is an independent operator that runs 11 bingo clubs. Shortly after the Budget, the Chancellor visited Castle bingo in Cardiff. In the next three years, Castle will create 100 jobs by substantially increasing its capital investment. Castle will invest £5.5 million in refurbishing its existing clubs and a further £7.5 million in developing a new bingo club. Non-traditional bingo clubs are also investing in bingo. Rileys Sports Bars also intends to recommence its roll-out of bingo, creating 60 new jobs.

I hope that provides a bit of an answer to the hon. Member for Gateshead on the benefits of the reduction—and who knows, it might even bring new jobs to his constituency. The reduction will certainly support bingo players living in Gateshead and elsewhere. The changes in clause 115 will enable the industry to grow and secure its future as a safe social activity at the heart of local communities. Miles Baron, chief executive of the Bingo Association, has said:

“We are already seeing evidence that the duty reduction on bingo will be transformational for operators and customers.”

Clause 116 addresses a related issue: bingo provided commercially, on a small scale, in adult gaming centres. Such premises were exempted from bingo duty on the condition that they met certain qualifying criteria, one of which was that they also provided gaming machines and paid amusement machine licence duty. When machine games duty was introduced in 2013 to replace AMLD, the relief was unintentionally overlooked. Clause 116 corrects that by substituting the requirement for an amusement machine licence with a requirement that a machine subject to machine games duty is also provided for play on the premises. Businesses that were covered by the exemption when AMLD was in force will generally be covered after this update. The Government’s intention is clear: such businesses are exempt from bingo duty. HMRC will not be pursuing any bingo duty in respect of such clubs, so there will be no effect on them.

I am delighted that we can pass legislation this afternoon to reduce the bingo duty rate and to reinstate an exemption that was inadvertently lost. It still seems to me that the Opposition are somewhat grudging about the changes we have introduced. They are not so much interested in the substance, but in extraneous matters. The truth is that this Government are delivering a substantial cut that will benefit millions of people and I am delighted to be able to put it in place.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

The Minister talked about “extraneous matters”, which drew my attention to the fact that he has not responded to my question. Did Ministers have a role to play in reviewing and signing off the advert that went out on the bingo and beer duty cut, which was clearly insulting to the majority of the population?

Photo of David Gauke David Gauke The Exchequer Secretary

Not for the first time this week, the Opposition are more interested in process than substance. All I would say is that if the hon. Lady wishes to continue this discussion and draw further attention to a reduction in bingo duty that will benefit bingo clubs up and down the country and those who play bingo, she is more than welcome to do so. I, for one, am proud that the Government have taken action to cut bingo duty.

Question put and agreed to.

Clause 115 accordingly ordered to stand part of the Bill.

Clause 116 ordered to stand part of the Bill.