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Although the loss of VAT on interval games has been of some benefit to bingo halls, one industry representative said that the fact that they have had to deal almost at the same time with the rise of almost 50 per cent. in bingo duty has meant that it has been something of a pyrrhic victory. Bingo halls have had a very short stay of execution in their attempt to sort out their finances and ensure a long-term future.
As we have heard, the rise in duty affects all bingo, whether it takes place in the interval or on the main stage. Both forms of the game, and especially interval bingo, will play a pivotal part in the bingo industry’s future. Very many of our constituents enjoy bingo on an extremely regular basis, and for them it is often their primary leisure activity. It satisfies their need for social interaction and belonging, as one can clearly see when one goes to a bingo hall to enjoy a game.
Bingo crosses all sorts of boundaries, and it is played by young and old alike. I think that I am right in saying that an increasing number of younger people enjoy bingo on a regular basis. We need to ensure that they, and those members of the older generation with a long history of enjoying bingo, are able to enjoy the game for many years to come. The Henley Centre published a research paper entitled “Unlucky for Some: The Social Impact of Bingo Club Closures”. It said that the closures are both a manifestation of, and a catalyst for, the wider breakdown of local communities, with a negative impact on society.
Bingo halls are essentially clubs for people. They love going to them and spending time with their friends. We should not deny them that opportunity in an attempt to claw back what is a minuscule amount compared to the overall deficit in the Government’s finances. It is time that the Government thought again, because the bingo industry feels exasperated and betrayed.
I urge the Government to wait for legal certainty. They can then think again and ensure that the bingo industry has the future that it deserves.
Mr. Don Foster: Other hon. Members have pointed out the vital importance to many local communities of the soft form of gambling entertainment that is available in our bingo clubs. I particularly congratulate the hon. Member for Crewe and Nantwich (Mr. Timpson) in that regard. It has been noted as well that the clubs also provide an opportunity for people to come together and enjoy cheap food and so on.
It is therefore especially disappointing to hear that more than 30 bingo clubs have closed in the past year, and that more than twice as many have closed since the start of 2007. The result is that many communities have been deprived of a much-loved form of entertainment. The hon. Member for Barnsley, Central (Mr. Illsley) highlighted their importance by referring to the 26,000 members of one club in his area.
Many of us, knowing that the closures are happening, have campaigned to deal with some of the issues that we believe have caused some of the closures. The hon. Gentleman rightly said that levels of taxation were not the only problem; other factors, such as the smoking ban, have had an effect. It is worth remembering that the Bingo Association supported the smoking ban, even though it recognised that it would cause a problem for its members. I admire the association for making that decision.
Many of us knew that the real cause of concern was double taxation. Before this year’s Budget was announced, the Treasury acknowledged that bingo, one of the softest forms of gambling, was also one of the most highly taxed. I pay tribute to the Government for deciding to end double taxation. As my hon. Friend the Member for Taunton (Mr. Browne) says, the Government took the right decision and they deserve credit for ending VAT on participation fees.
Angela Eagle: I wonder whether the Liberal Democrats support the Conservative amendment, which would delay the removal of VAT on participation fees.
Mr. Foster: The Minister makes a fair point, and I shall come to it shortly, but before she starts criticising me, I wish to praise her further. The Government also deserve praise for assisting the bingo industry by agreeing to an increase in the number of gaming machines allowed on premises, which will be an important source of additional revenue for clubs. I welcome that.
Given that those good moves have been made, many of us are extremely surprised that the Government are persisting in, as others have put it, giving with one hand and taking with the other, and pressing forward with a policy that leads to one of the softest forms of gambling being one of the most highly taxed. That strikes many of us as unfair and is likely to lead to problems, particularly if the Government’s figures in the Red Book prove to be incorrect—if the High Court judgment goes against them.
The Minister asks why we might support the Conservative amendment. In one sense, she is right: the amendment, which was well explained by the hon. Member for Hammersmith and Fulham (Mr. Hands), is a delaying tactic, tabled in the hope that the High Court will rule in favour of the bingo industry and not of the Government. Although I think that the hon. Gentleman is right to take a punt on that, our preferred option is to support the SNP amendment, which was eloquently explained by the hon. Member for Dundee, East (Stewart Hosie)—I like to give him credit occasionally. That amendment makes it clear that the bingo industry would be subject to a fair level of taxation.
The Minister could, rightly, say that it is easy to propose a reduction in Government income, just to garner cheap popularity with bingo clubs. It is therefore incumbent on anyone making such a proposal to make direct suggestions on how the Government could recoup the loss, and I have two or three suggestions to make, which I hope the hon. Lady will consider seriously. I alluded to the basic principle of one of them when I intervened on the hon. Member for Barnsley, Central. I genuinely believe that we ought to shift to a system where the harder forms of gambling are more highly taxed than the softer forms.
It is bizarre that the duty imposed on a gaming machine on which the maximum bet is £1 is exactly the same as the duty imposed on a gaming machine that has a £100 maximum bet. I genuinely believe that the Government should consider setting differential duties, especially in the light of the Gambling Commission’s prevalence studies showing that those higher-stake machines have a higher level of prevalence—in other words, they are more addictive—than lower-stake machines.
Angela Eagle: Has the hon. Gentleman noticed that we are proposing a consultation on moving towards a gross profits tax for amusement machine licence duty?
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Mr. Foster: I am delighted to note that the Minister is proposing that, although we have not yet got there and I am suggesting one way of dealing with the problem. I shall come back to gross profits tax at the end of my remarks, but for now let me stick with higher levels of gambling.
If we look into the higher end of gambling addiction problems, many of us know that online gambling is a particular cause for concern. The Minister will be well aware that there are about 6,500 internet gambling sites worldwide, which generate about £12.5 billion that is placed by the punters. Sadly, only about 1,000 of those internet gambling sites are regulated anywhere in the world, but it is at least pleasing to know that about 80 per cent. of all the money spent on internet gambling sites is on those regulated ones. Such gambling is extremely addictive, so it is particularly bizarre that we allow a number of internet gambling sites that are regulated outside the UK—whether they be in jurisdictions that we deem to be white-listed or in other European economic area countries—to advertise in this country. We are meant to spend money to check that their regulatory regime is fine. To date, we have made no charge on them whatever; and neither do we insist that they contribute to research, education and treatment in respect of problem gambling. I am delighted that, at long last, the Minister has given me an assurance that the Government are going to look further at this issue; it does provide another potential source of income.
The Minister also made reference to gross profits tax. Let me tell her that there is a simple way of ensuring that the Treasury recoup any loss that I may be proposing by supporting the amendments this evening—it is by using gross profits tax as the standard way of taxing gambling, and applying it to the national lottery. If such a tax were introduced in the national lottery, as many of us have advocated for many years, it would accrue significant additional income to the Treasury, but, more importantly, it would provide the additional benefit of giving significant extra funds to the lottery good causes, which have recently lost money to pay for the black hole in the Olympic budget.
Although I am delighted that the Minister has removed VAT on participation and that the Government have allowed for an increase in the number of gaming machines, I am disappointed that they are still going ahead with a higher rate of taxation for bingo than for most other forms—often more addictive forms—of gambling. There are ways in which the Government could change the system to provide for higher rates of taxation on more addictive forms of gambling.
Kelvin Hopkins: I shall be brief. I did not intend to speak, but I heard so many interesting and fine speeches on this issue that I wanted to make my own contribution. I shall visit my own local bingo club on Friday, and I shall express the same views there as I do here.
I am pleased to follow the hon. Member for Bath (Mr. Foster) and I share his concern about gambling addiction, which I believe is a very serious matter. I was
strongly against the super-casinos, which loomed large for a long time, but have now been dispensed with, I am glad to say. Bingo is a very modest form of gambling: it is easily contained; it is not addictive; people do not lose large sums of money. Furthermore, there are even health benefits, as many people who play bingo are middle-aged and might otherwise sit at home; going out and mixing with people is beneficial to health, particularly psychologically, but probably physically as well. It is the same argument that we hear about free travel on buses, as getting people out and about is beneficial to health. The issue is not just about being fair to people, as improving the health of the nation is also relevant. I say that especially since smoking in public places has been banned, which has really made a difference.
I am afraid that the provisions have the hallmark of Treasury officials all over them. I am not blaming the Exchequer Secretary, but Treasury officials, having been forced to get rid of double taxation, are getting in their little revenge by raising levels of tax in order to get their own back. But we are talking about tiny sums of money—£30 million or £40 million—compared with the £12 billion cost of reducing VAT, the £4 billion we lose as a result of tobacco smuggling, and the £37 billion we lose as a result of tax avoidance. If the Treasury wants to raise more money, as we undoubtedly need to do to pay the vast bills that have arisen from the banking crisis, it should look at those much larger sources of income, rather than adding relatively small amounts in taxation on bingo, which will have a disproportionate effect on those on modest and low incomes. I urge my hon. Friends on the Front Bench to consider more productive areas that will raise large amounts of revenue.
I am slightly worried about the presence in bingo clubs of fruit machines, which are addictive. However, bingo itself has every kind of benefit, including social, and it is not addictive as far as one can see. Habitual playing of bingo is a bit of fun every week, and is not serious gambling in the same sense as other activities. If we can encourage more people to play bingo, and fewer people to stay at home gambling online, a lot of people would be saved from addictive gambling, losing money and pain. There is everything to be said for encouraging bingo through lower taxation, and discouraging other forms of gambling through higher taxation and more regulation.
The overall tax gap between the tax that should be paid and that which is actually paid could be as large as £100 billion. If we addressed that, we could raise a lot more revenue. If we could make a 10 per cent. inroad into that, we would have £10 billion a year extra—hundreds of times more than the small amount that would be raised from taxing bingo disproportionately and unfairly. I hope that my few points register with my hon. Friend the Exchequer Secretary.
Angela Eagle: We have had a small, boutique, but extremely well proportioned debate, after many hours on the Finance Bill. I look forward to many more such debates over the next couple of months, as we vacate the Floor of the House and move upstairs.
Despite some of the comments in the debate, it is wise at this juncture to acknowledge that the effective tax rate for bingo has gone down from what was acknowledged by the Bingo Association in its Budget submission to be 24 to 25 per cent. In a press notice last November, the
hon. Member for Dundee, East (Stewart Hosie) said that the effective tax rate was 28.2 per cent. Whatever our feelings, it is reasonable for all of us to acknowledge that the effective tax rate has gone down from between 24 and 25 per cent. to 22 per cent., which some have welcomed.
Mr. Hands: Will the Exchequer Secretary tell us who has welcomed the proposals?
Angela Eagle: I was saying that some who have contributed to tonight’s debate have acknowledged that the Government’s abolition of VAT on participation fees has reduced the effective tax rate for bingo from between 24 and 25 per cent. to 22 per cent. As 22 per cent. is lower than 24 or 25 per cent., I wanted to put it on the record that we are debating, among other things, a reduction in the effective tax rate for bingo.
Mr. Hands: I am trying to follow the Minister’s argument. Presumably she is saying that the effective rate has come down, assuming that the industry is paying VAT on everything. Is that right?
Angela Eagle: No. Prior to the Budget, the effective tax rate was calculated—and widely acknowledged—to be between 24 and 25 per cent. The Bingo Association acknowledged that. Our assessment was that it was between 24 and 25 per cent., and it might be sensible to remind hon. Members at this juncture that the effective tax rate had come down from 35 per cent. in 2003, so there has been a steady decline in the effective rate of taxation on bingo. It went down from 35 per cent. in 2003 to between 24 and 25 per cent. prior to the Budget, and when the Budget is put into effect, the rate will go down to 22 per cent. Those are facts, acknowledged widely in the industry and featured in the Bingo Association’s Budget representations.
Mr. Hands: Again, I thank the Minister for giving way; she is being most generous. Why, then, is every single bingo operator, as far as I am aware, saying that as a result of the changes, they will be paying more tax? Why have various City analysts issued profit warnings for the sector, due to the negative impact of the overall package of changes? She still seems to be saying that the changes are welcome overall, when the industry is saying precisely the opposite.
Angela Eagle: The industry can have any opinion that it likes about the taxation system that applies to it. I am not responsible for the opinions of the bingo industry; it can welcome the measures or not. What I am talking about is the effective tax rate. Prior to the changes that we are suggesting in the Finance Bill, the effective tax rate for bingo consisted of VAT participation fees at 17.5 per cent. and the bingo duty of 15 per cent. Removing VAT fees and increasing bingo duty to 22 per cent. means that the effective tax rate is 22 per cent., not the 24 to 25 per cent. figure that was acknowledged by all sides prior to the Budget, and that featured in the Bingo Association’s Budget submission. In fact, the hon. Member for Dundee, East, quoted a 28 per cent. figure last year, but those of us who were involved with the Finance Bill last year will remember that there was widespread acknowledgement that the effective tax rate for bingo, taking the factors that I mentioned into account, was between 24 and 25 per cent.
Mr. Don Foster: The Minister is making heavy weather of the point. Most of us entirely agree with her analysis, on the assumption that the Government win the High Court case. The effective overall level of taxation that the industry would now suggest is different, because of course it has stopped paying VAT on interval betting. Surely that is the difference. Could we perhaps move on?
Angela Eagle: I was responding to the questions that I was asked by the hon. Member for Hammersmith and Fulham (Mr. Hands); I was attempting to be helpful. The hon. Member for Bath (Mr. Foster) is right that when there is a VAT tribunal in progress, and there is an interim judgment, it applies only to the case in question, not broadly across the piece. Any other companies that have somehow decided that they ought not to be liable for VAT on participation fees because of the prospect of a judgment that has not yet been made are not exactly being up front about the circumstances. Her Majesty’s Revenue and Customs makes it quite clear in all VAT tribunal judgments that the judgments apply only to the case before the tribunal, and that if there is any read- across, the issue of the VAT liability of other companies is still expected to be set aside until the tribunal is fully over—and it could carry on for some time yet.
Mr. Hands: I thank the Minister again for giving way. In the Westminster Hall debate in February—that was the last time everybody had the opportunity to debate the issues—she said:
“The fact that the dispute is ongoing means that it is inappropriate for me to discuss in detail issues relating to fiscal neutrality.”—[ Official Report, 27 February 2009; Vol. 488, c. 132WH.]
Surely there has been a complete volte-face since she gave that opinion in February.
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Angela Eagle: I do not understand why the hon. Gentleman thinks that. Budgets are an opportunity to examine tax rates and arrangements in all areas, and announcements on these issues are always made at Budgets. They are certainly not made in the middle of Westminster Hall debates, when the work leading up to the Budget is still ongoing.
Our principal aim in the Budget with respect to gambling taxation has been to simplify the tax regime and bring increased clarity to the sector. Clause 20 is part of that package of reforms to gambling taxation. It has two elements. First, it increases the rate of bingo duty to 22 per cent., as has been pointed out. Secondly, it increases the money prize limit to £70, as the hon. Member for Bath was generous enough to point out, for duty-exempt small-scale bingo conducted on certain premises. The increase in the rate is part of a package of measures that includes making bingo participation fees exempt from VAT, which will be debated upstairs on clause 112. The principal aim has been to simplify bingo taxation, as the industry had requested.
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