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I turn now to the points raised by the hon. Member for Tatton, and to those raised by the hon. Member for East Carmarthen and Dinefwr (Adam Price) in an intervention on the hon. Member for Eddisbury. Those hon. Members were concerned about the apparent position of small bingo clubs.
There seems to be a claim that some small bingo clubs will be worse off as a result of the reforms confirmed by my right hon. Friend the Chancellor in last month's Budget. As the reforms cut the tax for all bingo clubs, regardless of size, it is hard to see how that could be the case.
In discussions since the Budget, the bingo industry raised the point with officials. We have invited industry members to submit evidence to substantiate the fear, but we have not yet received the information. However, we can draw some comparisons with the experience in other regimes. The analysis conducted by Nottingham university of the impact on small bookmakers of changes in the betting regime suggests that modelling a
gross profits tax in that way on gambling industries would not have the effect of making smaller concerns worse off.In addition, the bingo industry has told the Government consistently that small clubs pay a higher effective rate of tax than larger clubs. That is largely because small clubs' profit margins are narrower. Moving to a profits-based tax would mean that their effective rate of tax would be equalised. Therefore, it is once again hard to see how the claim that small clubs are proportionately penalised and worse off can be sustained.
By abolishing the duty on stakes and on added prize money, the Government are encouraging lower prices and higher prizes for bingo players. Those factors will help attendance and turnover at clubs. By setting GPT at 15 per cent., we are delivering a £25 million tax cut to the bingo industry. The bingo industry itself estimates that that will deliver a £240 million benefit to players, in the shape of lower prices and higher prizes. That was set out in the Bingo Association's press release of 9 April, in response to the Budget.
Understandably, the bingo industry has argued for the removal of the duty on bingo stakes and prizes, and for the removal of value added tax on participation fees. However, during the consultation the industry also estimated the impact that a GPT at 15 per cent. and the retention of VAT on par fees would have on the industry. The industry drew on the analysis by the Henley Centre, commissioned for the Bingo Association. The evidence was submitted to the Government in December, as part of the consultation process. Based on the work of the Henley Centre, that evidence estimates that setting GPT at 15 per cent. and retaining VAT on par fees would increase prizes by at least £18.75 million, would increase admissions by at least half a million a year, and would increase prizes as a percentage of bingo spend from 67.2 per cent. to 68.7 per cent. It was also stated that the move would increase bingo industry profitability from £117 million a year to £191 million a year.
All I can suggest to the hon. Member for Eddisbury is that he encourage his constituent Mr. Ryder to examine the Henley Centre's analysis quite closely, just to check that he is not misinterpreting or misquoting the results of the work that it did for the Bingo Association, and which were submitted to the Government.
I have spoken with representatives of the bingo industry since the Budget, and officials have held detailed discussions. I know that the industry wishes that our reforms had delivered a bigger tax cut. That is not surprising. I know that it wishes that we had altered VAT treatment on par fees. I have discussed those issues with some leading figures in the industry, and I know they appreciate that I understand their concerns. However, all Governments need to make difficult decisions about the scope and size of tax changes in every Budget. That is never more true than in deciding where to draw the line when giving a relief from tax. Many people may appreciate how far we have gone, but many more will usually argue that we should go much further.
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Adam Price: Let me return to the disproportionate impact on smaller clubs. One difference between smaller and larger companies, as those of us who have been in
business know, is that larger companies have better access to professional expertise and advice on perfectly legal tax avoidance.On another point, what has the Minister to say about the fear that the changes are being rushed through and the burden that that truncated time period will place on smaller clubs?
John Healey: I emphasise that we developed our proposals after detailed consultation with and shared analysis from the industry, but if the hon. Gentleman will allow me, I shall explain later, in relation to one of the Government amendments, precisely how we shall continue that consultation and how we are ready to adjust our plans in light of what the industry tells us.
There will always be those who urge us to go further on any Budget decision that allows a tax relief. Inevitably, there will be criticism of almost every tax relief that we introduce. In the eyes of some people, they do not go far enough, and that is so whether the relief is for small cars, small breweries, film makers, bookmakers or bingo clubs. However, we wanted to support the bingo industry, and we have done so fairly and affordably. We have tried to do that in a spirit of close and ongoing consultation with the industry.
Mr. Laws: I appreciate that there are many competing priorities in every Budget and that Ministers have to decide between them. Does the Minister understand, however, why the bingo industry is likely to be frustrated with his announcement of a moment ago that he has no intention of trying to move towards any equality between different forms of gambling in the way that they are taxed? What is his estimate of the cost of achieving neutrality for the bingo industry?
John Healey: The phrase "flogging a dead horse" comes to mind. The point is not revenue neutrality. The bingo industry is understandably disappointed because we have not decided to go as far as the industry urged during consultation. It argued for a formula of tax changes and reliefs that would have cost the Exchequer £80 million a year.
I appreciate the spirit in which the hon. Member for Eddisbury moved the amendment. However, it beggars belief to hear Conservative Members berating us for not doing enough to support the bingo industry. The hon. Gentleman may do well to recall the impact on bingo clubs of tax reforms under Conservative Governments. In 1980, the tax on stakes was 5 per cent. Did the Conservatives cut or abolish it? No: they increased it to 7.5 per cent. In 1981, in a Budget described by the present shadow Chancellor as ground-breaking, they were back for more, increasing the tax on stakes to 10 per cent. In the space of two years, the Conservatives doubled the tax on stakes. In the same period, they doubled the tax on added prize money from 5p in the pound to 11p.
Mr. Richard Bacon (South Norfolk): Ancient history.
John Healey: It is not ancient history. The hon. Member for Eddisbury professes concern about the decline in bingo clubs, but what happened to the bingo clubs following those taxation changes was that their numbers significantly declined.
When Lord Howe became Chancellor, there were 1,697 bingo clubs in the UK. By 1982, the number had fallen to 1,556 and at the end of the second Thatcher Government there were only 1,115. By the end of the Major Government, there were just 782. Today, there are only 688—1,000 fewer bingo clubs—so I hope that Conservative Members will understand my reaction when they take up cudgels on behalf of an industry that they taxed too much and ignored for too long when they were in government.
Mr. George Osborne: The Economic Secretary pointed out the decline in the number of bingo clubs. Could he tell me, first, whether the number has increased or decreased since Labour came into power; and, secondly, whether he will judge the success of the proposals by the number of bingo clubs that open in forthcoming years?
John Healey: To answer the hon. Gentleman's first question directly, let me repeat what I have just said. By the end of the Major Government, or in other words at the beginning of the Blair Government, there were 782 bingo clubs in the UK; six years later, there are 688. There were 1,000 fewer clubs than in the 1980s.
It is true that there is pressure on the bingo industry and that there is a long-term decline. However, it is also true that part of the purpose of our reforms is to try to assist the bingo industry to deal with the challenges presented by those problems. As I said, I understand the feelings of those in the industry who wish that we had gone further. I assure them that, first, we shall examine the evidence offered by the industry, as we have done before; secondly, we shall keep the reforms under way, as we have done for the reforms to betting and the pools; and, thirdly, we shall continue to look at the case for further change, as we do every year as part of the Budget process. For this Budget, however, I cannot accept amendment No. 6, which would cost £60 million and would require us either to increase taxes elsewhere or to reduce the money that we are spending elsewhere. We are not prepared to do either.
Mr. George Howarth (Knowsley, North and Sefton, East): Can my hon. Friend confirm that, although there has been a continued, but less steep, decline in the number of bingo halls since the Labour Government came to power, the number of people attending bingo events has increased, mainly as a result of the liberalisation of advertising in the bingo industry?
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