Clause
20
Rates
of gaming
duty
Question
proposed, That the clause stand part of the
Bill.
Mr.
Gauke:
Thank you, Sir Nicholas. For a moment, you raised
the hopes of some members of the Committee, given that play has now
started at
Lords.
The
clause will increase the gross gaming yield bands for gaming duty in
line with inflation for accounting periods starting on or after 1 April
2008. I draw attention to bingo as one particular gaming activity. My
hon. Friend the Member for Putney has worked closely with the bingo
industry. She has done a lot of research and had meetings with industry
members. I am sure that she regrets her inability to raise her points
in person. The bingo industry is struggling, for a number of reasons,
but particularly because of the Gambling Act 2005, which I accept is
going to be reviewed, and various changes such as the smoking ban and
so on. Times are difficult for bingo halls, which play an important
role in many communities. They have been very popular. I am sure that
we would all agree that it would be a great pity if bingo halls started
going out of
business.
The
Government will set out their policy on gambling, particularly on
gaming duty, which covers bingo, so I would be grateful to know if the
Minister recognises the concern about the bingo industry and the number
of bingo halls going out of business. Secondly, in evaluating gaming
duty, will the Government consider some reform or take any action to
assist bingo halls? When considering clause 21, the Committee of the
whole House addressed the issue of amusement machines, which is a
similar area. A popular and traditional industry, which provides a
great deal of pleasure to a lot of people, is facing difficult times.
Perhaps we could use the opportunity to ask if the Government intend to
do anything about rescuing an industry in
trouble.
Mr.
Browne:
I want to support the brief, probing speech made
by the hon. Member for South-West Hertfordshire. I had the great
pleasure of calling the bingo numbers in Mecca Bingo in Taunton
recently, and was congratulated both on the clarity with which I did it
and on not allowing myself to stray into those colloquial terms with
which we are all so
familiar.
The
point was made to me on that occasion, and has been made to me on many
other occasions, that bingo is an industry that suffers from what is
commonly known as double taxation. That is problematic, given that the
industry faces other pressures as a business. I am the last person to
think that businesses should be propped up if they are unable to
attract customers. It is for the bingo industry to appeal to people to
spend their leisure time playing bingo, rather than watching television
or
going for a walk in the countryside or whatever else people might choose
to spend their free time doing, but there are pressures on the bingo
industry as a result of the smoking ban, most obviously, and other
considerations. The sector is important, as it employs significant
numbers of people. Bingo is also enjoyed as a leisure activity by many
thousands of our fellow citizens. The point is constantly made that the
taxation arrangements are disadvantageous compared with other forms of
leisure pursuits with a gambling dimension. I would be grateful if the
Minister responded to those
concerns.
Kitty
Ussher:
As the hon. Member for South-West Hertfordshire
said, the purpose of the clause is to increase gaming duty bands in
line with inflation for accounting periods starting on or after 1 April
2007. Such revalorising is in accordance with Government practice in
recent years. I trust that that will be
uncontroversial.
On
the bingo industry, I, too, have had the pleasure of calling the
numbers in my local bingo hall—congratulations to Gala Bingo
Burnley, for giving me that opportunity. My constituents remarked that
I was extremely bad at it, although I hope shortly to have the
opportunity to practise further. I shall take lessons from the hon.
Member for Taunton on style. I am intrigued, too, to know what type of
research the hon. Member for Putney has undertaken on the bingo
industry. The Committee should be told about her number-calling
technique.
2.45
pm
We
are in close dialogue with the bingo industry. I congratulate the Bingo
Association on the effective way in which it represents its members,
with a strong voice. We very much hope that the dialogue will continue.
In the Finance Act 2003, we made a point of reducing the average
effective rate of bingo taxation from about 35 per cent. to nearer to
25 per cent. That was partly in response to the well-documented trend
of bingo establishments closing. There are a number of factors behind
that. Obviously the smoking ban—which is the right thing to do
for the country—has played a part, producing that side effect.
Demographic and social trends, too, are leading people to switch away
from bingo, although many people still devote considerable leisure time
to
it.
The
hon. Member for Taunton mentioned participation fees. The existence of
those fees is not necessarily unfair, given the effective rates of
taxation in comparable industries. Lottery operators face an effective
tax rate of 24 per cent. For casinos, it is roughly 25 per cent., and
the figure for bingo duty is similar. Amusement machine licence
duty—discussed elsewhere—is about 21 per cent. Removing
the participation fees would reduce to about 15 per cent. the effective
rate for bingo, which would be out of line. There are other reasons why
we have not bought the argument for removing participation fees,
although we have considered it. When someone pays those fees, they are
buying a service, and the fees should therefore be taxed at the
appropriate rate. We have considered seriously all the points that the
bingo industry raised, but we decided not to make any changes in the
taxation of bingo in this Budget. The Bingo Association has made it
clear that it will continue to lobby. We welcome that, and we welcome
the conversation.
The
Chairman:
I shall put the question on clause
20—blind
20.
Question put and
agreed
to.
Clause
20
ordered to stand part of the
Bill.
Clause
24
Rates
of R&D relief and vaccine research
relief
Question
proposed, That the clause stand part of the
Bill.
Mr.
Gauke:
I do not know whether you are able to enlighten us,
Sir Nicholas, as to whether it is easier to chair a Finance Bill
Committee or call the numbers in a bingo hall. I do not know whether
anyone has done both, but I expect that if anyone has done, it is
probably your good
self.
Clause 24 is the
first of four clauses relating to research and development relief and
vaccine research relief. Clause 24 incorporates schedule 8, which makes
changes to the rates of those reliefs. Given that the Government are
changing the rates, I would like to probe their policy in that area. I
am sure that there is common ground across the Committee on the belief
that research and development are an important element of our economic
policy and the way in which the UK will prosper in the coming years.
The question is how we go about ensuring that that happens. The context
in which the Government seek to increase the rates of research and
development relief is one in which manufacturing is not having the best
of times. I recently became aware of OECD figures that showed that in
manufacturing growth in the past 10 years, the UK comes second from
bottom, above only Norway. All other countries have done
better.
I mention
that, because if manufacturing is to prosper in the years ahead, it
will do so in the highly developed value-added area. That will not be
achieved by doing things on the cheap because of increased
international competition. Research and development play an important
role. The question I want to probe—I stress,
“probe”—is how effective the Government’s
approach to research and development is, and how effective taxation
incentives are in developing research and development in the UK, given
that manufacturing industry, which is presumably its ultimate
objective, has not grown substantially.
We should be
aware, and I do not want to digress, other than very briefly, that many
other aspects of the taxation system have an impact on manufacturing.
We have already debated the fact that the likes of Shire
Pharmaceuticals appear to have been driven out of the UK by taxation
matters and the headline rate. The Committee has already debated the
balance between exemptions and reliefs, and the need for a lower
headline rate. We all have to address that matter, but I should be
grateful if the Minister told us what assessment the Treasury has made
of the effectiveness of research and development reliefs and credits,
as opposed to a policy of lowering rates.
There are a
number of reasons why research and development reliefs and credits have
not been as effective as they might have been, including administrative
costs involved in making a claim. We will come back to this
point in other clauses, but I am conscious that there are always issues
of state aid in this context, which limit the actions that the
Government may take. Do they consider that an impediment to the action
that would be necessary for a more effective regime? To give one
example, in the Finance Act 2007, we legislated for an extension of the
small and medium-sized enterprise definition so that it would
incorporate more companies. As of a few weeks ago, that had not come
into effect. Has agreement now been received from the European
Commission to do that? There are other examples too. In 2006, I think,
we legislated so that payment to clinical trial volunteers was eligible
for these reliefs and credits. Again, I should be grateful for an
update from the Minister. I should like to hear what assessment the
Government have made as to the effectiveness of this area, given that
we are going to increase the rates available to
businesses. I
wish to make a specific point about the circumstances in which large
companies pay mainstream corporation tax. It perhaps relates to the
detail in schedule 8, but it would prevent my having to make any
further comments. We have seen a reduction in corporation tax from 30
per cent. to 28 per cent., yet for large companies, the relevant rate
has gone up from 125 per cent. to 130 per cent. To save time, I shall
not set out all of the numbers of a worked example, but an example I
have seen suggests that to have retained the position regarding the
amount of tax relief available for a large company, the rate would have
had to increase to 133.5 per cent., because corporation tax has been
reduced. I would be grateful for confirmation from the Minister that
that is the case.
It is always
necessary to consider these reliefs and credits critically, by which I
mean assessing sensibly whether they are working. I wonder, given that
UK businesses appear to be very critical of the tax system and a number
of them are seeking to move abroad, because our headline rates are not
as low as those of some of our competitors, particularly Ireland,
whether the Government have looked at reducing some of these reliefs,
which would enable them to fund a reduction in rates. I should say for
the sake of clarification that I do not particularly advocate that
policy. It was set out—and no doubt the Minister will refer to
this—by the tax reform commission led by Lord Forsyth. It is a
recommendation that he made, but it is not one that my party has
adopted as such, and our policies will become clearer nearer the time
of the next election. It is a legitimate area for debate, whether for
the Opposition or the Government, to keep these matters under review
and I would be grateful for the Minister’s assessment of where
we
are.
The
Chairman:
Before I call the Minister, may I seek to be
helpful to the Committee? A particular clause is linked to a particular
schedule—clause 24 to schedule 8; clause 25 to schedule 9; and
clause 26 to schedule 10. For the convenience of the Committee, I am
sure that if hon. Members who are going to participate in the debate
wish to refer to the schedule when dealing with the clause, that will
be sensible and will remove the necessity of a separate debate on the
schedule. Is that agreeable to members of the Committee?
[ Hon. Members: “Yes.”]
Excellent.
Kitty
Ussher:
The 2007 Budget announced a
package of reforms to the business tax system, including changes to the
rate of corporation tax and the capital allowances
system. As part of those reforms, the Government intended to promote
innovation by increasing the generosity of enhanced tax deductions
available to companies undertaking research and development that
qualified for the research and development tax credits, which were
introduced by the Government in 2000 for small and medium-sized
enterprises and in 2002 for large companies.
That means making changes to the
vaccine research relief, which allows companies to claim an additional
tax relief on top of R and D tax credits. The small and medium-sized
enterprises scheme and the VRR are both notified state aids and are
subject to the requirements of the framework for aids for research,
development and innovation. That is the combined effect of clause 24
and schedule
8.
I
turn to the points that have been raised, including the more general
point raised by the hon. Gentleman. We think and all the analysis
shows—which I shall lay out to him as briefly as
possible—that the R and D tax credits are having a positive
effect on R and D spending. It is with some amusement that I listened
to him waxing lyrical about the manufacturing industry, given what
happened to it when his party was in power. If future manufacturing
success depends on research, development and innovation, why was it
that the previous Government slashed the science budget, which has now
doubled under our Government? I am slightly resistant, in the
friendliest possible way, to taking lessons from the Conservative party
on these matters.
I am sure that
the hon. Gentleman will be delighted to know that the 2005 independent
survey of almost 1,000 R and D performing companies—the largest
survey of its kind—showed that three quarters of companies that
had claimed R and D tax credits found the process fairly or very easy.
The survey found positive signs of the early impact of the scheme,
bearing in mind that the legislation was introduced for large companies
only three years previously, in 2002. Some 55 per cent. of the
companies that had successfully claimed reported that they had been
able to change the amount or type of R and D activity that they
undertook as a result of claiming R and D tax credits.
Those results and the highly
successful take-up of R and D tax credits to date suggest that the
scheme was of sufficient value to influence R and D investment, and
that is why we are expanding it. The full effects of the fiscal
incentives are known to emerge only over the long term. The Institute
for Fiscal Studies has said that it could be as long as 10 years, but
the results have been encouraging so far, which is why we are proud of
the policy. International work by the OECD has led to a general
consensus about the positive relationship between R and D tax credits
and the amount of R and D, and we are comfortable with
that.
3
pm
The
hon. Gentleman made some broader points about competitiveness in
taxation that, strictly speaking, are not within the scope of this part
of the Bill. It is something that we are always extremely aware of, and
that is why my right hon. Friend the Financial Secretary has set up a
new group of people in industry to look at such issues more broadly. It
is not our policy to raise R and D tax relief to fund a
reduction in corporation
tax, which is at an historically low level—indeed, much lower
than it was in 1997. It has had a positive effect on our
competitiveness.
Mr.
Gauke:
The Minister made a point about
competitiveness. Yes, corporation tax is lower than it was, but it is
not as low as it was compared with our competitors, and it is that
problem that the Government must
address.
Kitty
Ussher:
As I have said, we are ever vigilant to make sure
that our economy is as competitive as it can be, given our other public
objectives. That is why we shall be examining such issues under the
group chaired by my right hon.
Friend.
Question put
and agreed
to.
Clause 24
ordered to stand part of the
Bill.
Schedule 8
agreed
to.
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