Standing Committee E
Tuesday 23 June 1998
(Afternoon)
[Mr. John Butterfill in the Chair]
(Except clauses 1, 7, 10, 11, 25, 27, 30, 75, 119 and 147)
New clause 3
Reduction in rate of bingo duty (2)
`. (1) In paragraph (a) of section 17(2) of the Betting and
Gaming Duties Act 1981 (bingo duty), for "10 per cent" there shall
be substituted "5 per cent".
(2) In paragraph (b) of that section, for "one ninth" there shall be
substituted "one eighteenth" and for "10 per cent" there shall
be substitued "5 per cent".
(3) This section shall come into force on 31st August 1998.'.
[Mr. Whittingdale.]
Brought up, and read the First time.
Motion made [this day], That the clause be read a
Second time.
4.30 pm
Mr. John Whittingdale (Maldon and East Chelmsford): When we adjourned, I was arguing that bingo differs greatly from other forms of gambling
although it is taxed in the same way. It is almost
impossible to lose a large quantity of money by playing
bingo. However, other forms of gambling, such as the
national lottery, set no limit on the number of tickets that
punters can purchase. They may spend their entire life
savings on national lottery tickets if they so wish.
Similarly, those who bet on horses or on greyhounds may
also stake sums that greatly exceed what they can afford.
In casinos, the potential to lose very large sums of money
is of course considerable. That is not the case with bingo.
Committee members who have attended a bingo session
will know that there is a physical limit on the number of
bingo cards that one can play in a single game. Regular
players of bingo are extremely professional, and can play
as many as six cards simultaneously. Personal experience
has shown me that it is very difficult to keep up with just
one card. I was indebted to the lady who sat next to me
during that game, who managed to study my card as well
as her own four, and to point out when I had made a
mistake.
It is therefore virtually impossible to run more than six
cards in one game. Given that each card costs no more
than 50p, the maximum amount of money that can be
staked in a single game is extremely low. For that reason
it is impossible to chase one's losses. The financial risk
attached to playing bingo is therefore wholly unlike that
associated with other forms of gambling. Nevertheless,
bingo has traditionally been treated as a form of gambling,
and is subject to many of the same controls to which
casinos and betting, for example, are subject.
Since the introduction of the national lottery, the
bingo industry has been under considerable pressure.
A monthly survey conducted during a two-year period
showed that bingo players' propensity to play the national
lottery is twice the national average. Attendances at bingo
halls have therefore fallen quite substantially since the
national lottery's inception. Attendances during 1997
were 8 per cent. lower than those for 1994. As a result, a
number of bingo halls have gone out of business
altogether. Since November 1994, 158 bingo clubs have
closed down. In 1997 alone, 66 clubs closed. Attendant
on that figure was the loss of 3,500 jobs.
Dr. Lewis Moonie (Kirkcaldy): I have a great deal of
sympathy with the hon. Gentleman's points. My own
constituency has two large bingo clubs, and I therefore
listen to his comments with great interest. However,
during the speech that he made before lunch, he made
much of the fact that many large and wonderful bingo
halls are being set up. Here there seems to be a
contradiction, because that image fails to resonate with the
one he now conveys of the closure of many bingo clubs.
Mr. Whittingdale: The hon. Gentleman makes a valid
point. Some of the closures have been of older and smaller
halls, which have been replaced by much larger and newer
halls. That is to be welcomed; but it is not the whole story.
Mr. Philip Hammond (Runnymede and Weybridge):
Is it not also correct that restrictions on the advertising of
bingo halls mean that those that are not well positioned
have tended to close down and be replaced by halls in
prominent locations, where they can overcome the tight
restrictions on advertising that have prevailed until
recently?
Mr. Whittingdale: That is correct. The controls
governing the advertising of bingo halls and the
restrictions on membership and on playing the game are
another subject, about which I feel equally strongly.
Perhaps now is not the time to show that, but my hon.
Friend is right.
New halls have been set up and the larger halls are still
making a profit. Nevertheless, the fall in attendances has
put great pressure on the industry. A number of the halls
that have gone out of business have undoubtedly done so
as a result of no longer being economically viable.
The effect of bingo duty on the industry is determined
by its structure: as it is not linked directly to the number
of people attending, the amount of duty raised has not
decreased at the same time. To maintain the attraction of
playing bingo, proprietors of bingo halls have been adding
their own money to the prize pot to make up for the fact
that fewer people are paying for tickets. Bingo duty is
levied not only on the stake the amount of money put
up by those playing the game but on the additional
money put in by the proprietor. Therefore, while takings
have fallen, the amount of tax that the industry has had to
pay has not fallen proportionately. The burden of the tax
has been greater and proprietors have been subjected to
an ever increasing squeeze.
It is worth comparing the impact of tax on bingo with
the impact of tax on other forms of gambling. Those other
forms are much more dangerous to the punter, who has a
much greater chance of losing a lot of money, but bingo
bears the heaviest tax burden. The best way to show that
is to take the combined amount of duty and VAT as a
proportion of net consumer spend the aggregate of the
amount of money spent by those gambling in whichever
form minus the amount of money returned to them as
prizes. On that basis, the duty rate on the national lottery
is 24 per cent., the duty rate on betting is 30.3 per cent.
and the duty rate on bingo is 37.2 per cent. The figure for
bingo increases to more than 40 per cent. if the effects of
the additional tax on added prize money are included.
Those figures show that bingo is being taxed
disproportionately in comparison to other forms of
gambling.
As the hon. Member for Kirkcaldy (Dr. Moonie) said,
I spoke this morning about the importance of halls in local
communities. Given that 66 clubs closed down in 1997
alone, it is important to be fully aware of the impact that
each of those closures has on the local community. I draw
the Committee's attention to a recent study, carried out
by Faith Freestone of the Worcester college of higher
education, called "Four Towns Study". She picked four
locations where clubs closed last year: Keynsham,
Fareham, Hartlepool and Paisley. I am glad to see that the
hon. Member for Paisley, South (Mr. Alexander) is in his
place. I am sure he would agree that the closure of a bingo
club is damaging to a local community.
The study consulted 200 people who were either
regular players at the clubs or employed by them. The
overwhelming majority 96.6 per cent. of players said
that the prime reason they played bingo was social. The
study found that almost two thirds of the total sample
stated that the closure of the clubs had made a difference
to their existence. There are many quotes to illustrate that.
A 72-year-old lady said:
"I don't have anywhere else to go now. I miss my bingo so
much."
A 58-year-old lady said:
"It has made a lot of difference to my social life. I have lost touch
with all my friends. I am just a small fish in a big pond now."
Some 70 per cent. of employees found that they faced the
prospect of unemployment after the club closed.
It was readily apparent from the players' comments that
there was a sense of loss of community, companionship
and friendship coupled with growing feelings of social
isolation. It is important to bear in mind that we are not
just talking about a commercial enterprise; the loss of a
bingo club will have a damaging effect on the local
community.
The Henley Centre's recent major study of the bingo
industry shows that profitability varies according to the
type of club, but that profitability in the industry as a
whole has fallen by 33 per cent. since 1994. The Henley
Centre concentrated on 600 clubs which it divided into
six categories. Two categories of clubs those in new
buildings with medium attendance levels and those in
traditional buildings with smaller attendance levels are
loss making. Those two categories comprise more than
300 of the 600 clubs. It is fair to say that more than half
the clubs are now operating at a loss. Indeed, since that
study was carried out a few months ago, a further eight
clubs have closed.
If all the clubs in those two categories were to close
they are operating at a loss and some are in the process
of closing the cost to the Exchequer would be
£37 million in lost duty and VAT. We must also take
account of additional losses the loss of VAT on the
various activities that take place in a big club, the loss of
corporation tax, and the loss of up to 5,000 jobs.
To amendment would address the loss of profitability
in the industry by implementing a 5 per cent. cut in
bingo duty. The Henley Centre used its industry model
to simulate the effect of that 5 per cent. cut. In carrying
out the analysis, it assumed that half the benefit from
the cut would go towards the participation fee and half
would be added to the prize money. The effect of the
cut would be to make both the categories of clubs that
are currently loss making profitable. The effective tax
rate on the industry, which I mentioned earlier, would
decrease from 40.8 per cent. to about 28.9 per cent.,
which is roughly on a par with other forms of gambling.
The industry put up a powerful case to justify why it
needs help, but of course the Chancellor in his Budget
ignored its pleas. Not only did he pay no attention to the
industry's requests for relief through reduced bingo duty,
but he made the position far worse by increasing duty on
amusement with prizes machines by 20 per cent., which
we debated earlier. Many of those clubs also rely on
those machines.
4.45 pm
It is estimated that that measure will cost bingo club
owners another £3 million. Our measure would cost
around £40 million, but failure to act could cost the
Exchequer much more. If action is not taken more clubs
could close, which would lead, in the long term, to a
decline in the revenue raised from bingo duty.
The previous Government recognised the effect of the
lottery on other forms of gambling and they cut betting
duty. Unfortunately I am quite open about this they
did not feel able to permit a cut in bingo duty, or perhaps
they did not have the resources to do so. A powerful case
for introducing that cut was made during the passage of
the Finance Bill in 1996, and I draw the Committee's
attention to a persuasive speech made in that debate.
A participant said:
"Bingo clubs deserve treatment and assistance similar to that
given to other parts of the betting industry... We must press the
Government on why they felt unable to extend the cut in betting
duty to the bingo industry... The loss in duty to the Treasury from
bingo alone must be balanced against the possible long-term decline
in revenue as more clubs face the prospect of closure." [Official
Report, Standing Committee E, 1 February 1996; c. 58-9.]
Committee members will have realised by now that the
advocate of that powerful case has now become the
Financial Secretary to the Treasury.
It is a matter of great regret but not of great surprise
that the Financial Secretary is not in her place this
afternoon. It is her responsibility to oversee this area of
policy. She should be here, but she is not the Paymaster
General is in her place instead. I hope that she has at least
whispered in his ear and reminded him of the very
powerful case that she advanced just a couple of years
ago for a cut in bingo duty.
As I explained, the bingo industry is facing great
problems. Unless measures are taken now more clubs will
close and the Revenue may find, in the long term, that the
amount of money raised from that duty will decline.
Social and economic cases are involved, and I hope that
the Paymaster General will recognise their force.
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