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
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 hallcongratulations 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.
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 banwhich is the right thing to do for the countryhas 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 dutydiscussed elsewhereis 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.
Question put and agreed to.
Clause 20 ordered to stand part of the Bill.
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 probeI stress, probeis how effective the Governments 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
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 outand no doubt the Minister will refer to thisby 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 Ministers 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 scheduleclause 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
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 showswhich I shall lay out to him as briefly as possiblethat 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 companiesthe largest survey of its kindshowed 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.
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
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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