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Session 1997-98
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Standing Committee Debates
Finance (No. 2) Bill

Finance (No. 2) Bill

Standing Committee E

Tuesday 23 June 1998

(Afternoon)

[Mr. John Butterfill in the Chair]

Finance (No. 2) Bill

(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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