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That is vital, because the Government argue that the sector will benefit from the removal of VAT with an increase in gross profits tax to 22 per cent. The sector and I, however, will argue that that is false because the rulings that we have had so far would tend to indicate that the Government were never entitled to levy the tax or collect that revenue in the first place.
I do not want to pre-judge the appeal, but as the Government have lost the first two roundsthe VAT and duties tribunal and the original High Court caseit appears to me that there is no certainty that the Court of Appeal will come to a different decision next time round. That means that we are voting on a point of principle about unfairness and, more important, on the impact of the rise of GPT from 15 per cent. to 22 per cent. on bingo clubs, communities, jobs and tax yield. I would argue, given what we have seen in the recent history of the bingo sector, that the implications of that tax have the potential, at least, to be pretty nasty in communities around the country.
Let us gently remind ourselves that the sector provides good quality community facilities and safe environments, mainly for women, in mainly working-class communities. The bingo companies invest in the clubs in those communities. That entertainment and investment might well be lost if, as we have seen, more clubs over and above the 40 that have closed recently close in the next few years. The sector provides employment and, again, the jobs are mainly based in working-class communities. If those jobs are lost now, with unemployment rising, employment falling and vacancies coming down massively, those lost jobs might be lost for good. The Governments old argument was that people who lost their jobs in bingo clubs could find new jobs elsewhere, but that becomes less valid as each day passes, as unemployment rises and as the number of vacancies comes down. We have already lost 4,000 jobs.
Mr. Mike Weir (Angus) (SNP): My hon. Friend is making a very powerful case. In Montrose, the local Gala club has closed down and it is very difficult for its former employees to find alternative jobs. The same sort of businesses in the town, which might have taken up that slack, are also suffering in the recession.
Stewart Hosie: That is absolutely right. The closure of the club in Montrose was a tragedy for the town and for the borough. The jobs have been lost and my hon. Friend is right that it is difficult for those people to find replacement jobs. In the current climate, it is also nigh-on impossible to identify any other business that would seek to reinvest in such community facilities given the rate of returns, not least when we take account of the cost of borrowing money to invest in new facilities to replace those that are being closed.
Hywel Williams (Caernarfon) (PC): In my constituency, the club has received substantial investment recently. The companies have a good track record of investing their money in local communities, which need such facilities.
Stewart Hosie: That is absolutely right. We see the large clubs, the well-run clubs and the millions of pounds that are required to be and are invested and reinvested year after year, on a cycle, to refurbish them and bring them up to speed so that they continue to provide the good quality facilities that we all have in our constituencies. We do not want to see any of that investment lost.
Of course, it is not about investment, jobs or community facilities. As the clubs close, business rates fall, income tax take goes down, national insurance yield goes down, benefit costs increase and, of course, community facilities close. For all those reasons, we need to ensure a level playing field and fair taxation and to remove this quite extraordinary burden on bingoof all sectorswhen compared with all other gaming sectors.
Stewart Hosie: I do not have forecasts, but I suspect that the industry will be anxious that its pressure on the Government is successful so that we can avoid the eventualities to which the right hon. Gentleman refers. However, I am sure that the profitability of all clubs, and their investment profile over the next few years, is being looked at. In the recent past, 40 or so clubs have closed with 4,000 or so job losses, so we can see the sort of picture that might emerge if things remain very difficult.
Amendment 4 would keep the duty at 15 per cent. but amendment 5, also in my name, would delay the implementation of the change until 2010. The advantage of that is that at least we would have the certainty of the outcome of the Appeal Court hearing.
I shall listen to what other hon. Members say in the debate, but my instinct is to ask to press amendment 4 to the vote. Holding the rate at 15 per cent. is better in principle than simply seeking to delay the change, as that might give rise to a grey area. As I said, I shall listen to the debate, and especially to what the Minister says.
We have no wish to widen the gaping hole in the public finances. Instead, we wish to prevent the Government from pre-empting the legal process through this sudden change to their systemafter all, it was the Government themselves who launched the appeal to the High Court.[ Official Report, 13 May 2009; Vol. 492, c. 970.]
He was absolutely right. He backed the amendment, as did many of his Front-Bench colleagues, including the hon. Members for Fareham (Mr. Hoban) and for South-West Hertfordshire (Mr. Gauke), as well as the Opposition Treasury Whip, the hon. Member for Rochford and Southend, East (James Duddridge) and many others. The Government have announced their intention to appeal the High Court decision, so todays debate on an
identical amendment is framed in terms that are precisely the same as those that he used to define the debate on 13 May.
Mr. Hands: I thank the hon. Gentleman for giving way. He is being quite accurate, but he is leaving out an important piece of information. He was not present for it but, in the interim between this debate and the debate of the Committee of the whole House, there has been a vote on clause 112 of the Finance Bill, which would remove VAT from bingo. That is relevant to todays debate.
Stewart Hosie: I understand the black-hole argument perfectly clearly, but it does not apply here. The tribunals and the first High Court decision told us that the Government were not entitled to that VAT in the first place, and the Appeal Court ruling may confirm that. If the argument is that some of the Red Books revenue yield forecasts will have to be changed, I refer him to what many Opposition Members have said. They have described the Red Book as difficult to believe, and I shall put it no more strongly than that.
Mr. Hands: I thank the hon. Gentleman for giving way again. I think that he is referring to the assertions that I and various right hon. and hon. Friends have made about some of the growth forecasts and income projections for future years. It is very important that a proper distinction is made between what the Treasury will take in this year, and what it will get in future financial years.
Stewart Hosie: What I am trying to do is prevent members of the Conservative Front Bench from wriggling out of their responsibilities to the bingo sectorand, more importantly, to bingo club members up and down the country. It is vital that we keep the assets and the jobs, and all the income and duty yields from national insurance, income tax, corporation tax and business rates. For all those reasons, we reject the proposal to raise the rate to 22 per cent. We must keep it at 15 per cent. and, on a point of principle, deliver fairness across all forms of gaming. Bingo must not be left hung out to dry.
Mr. Eric Illsley (Barnsley, Central) (Lab): It is always a pleasure to follow the hon. Member for Dundee, East (Stewart Hosie). As he points out, we have rehearsed these arguments previously, but he is right to say that the argument is about the closure of amenities for our constituents, the threat to bingo clubs and the facilities that they provide throughout the country, and the consequent job losses when such clubs close.
The hon. Gentleman referred to the history of the argument, beginning with double taxation. The bingo industry has long argued that it is the only form of gambling subject to double taxation, with VAT levied on participation fees and gross profits tax on the overall profits of the industry. The industry argued for some years that it should be given parity with bookmakers, casinos and the internet, where harder forms of gambling take place, with larger sums of money, yet those are not subject to double taxation. For example, when someone walks into a betting shop to place a bet on a horse race, there is no charge involved in placing that bet.
When I was preparing for todays debate, it occurred to me that we could go back a few years to arguments about bingo and other forms of gambling when advertising for bingo was not allowed, although it was allowed for other, harder, more commercial forms of betting. We seem to be involved in a similar argument now. There appears to be a bias against the bingo industry. In Committee on 13 May we explored the arguments, which were ably outlined by the hon. Gentleman. As a consequence, the Government undertook to remove the burden of double taxation in the Bill by removing VAT on participation fees.
Double taxation is not the only problem facing the industry. There are other issues, which have been outlined in the House previouslythe general economic situation, the smoking ban and other issues, which the industry accepts and which we are not using in support of that industry. The present argument is about the level of gross profits tax and the ending of double taxationthe double-edged sword of increasing gross profits tax to 22 per cent., without giving the industry time to adapt to the removal of VAT on participation fees, to see where those funding streams were likely to settle. There is an argument over the figures, as the hon. Gentleman pointed out, and there is some argument about the amount of VAT raised.
My own constituency has suffered a bingo club closure. As I mentioned in the last debate, the remaining bingo club in my constituency has a membership of more than 20,000. These are important facilities in our constituencies. They have a large membership and it is important that we keep them as an amenity. The loss of a bingo club is a huge loss to the community, particularly if it is the only bingo club in town and a large number of people have to find an alternative leisure facility or go to another town to join another bingo club if that one remains open.
Mr. Weir: I strongly agree with the hon. Gentleman. I have experienced the same thing in my constituency, in Montrose. It strikes me that there is another aspect to the argument. Anyone watching certain TV channels will notice a huge growth in online bingo. I wonder whether it is healthy for people to sit and play bingo on a computer, rather than going to the more social setting of their local club.
Mr. Illsley: The hon. Gentleman makes a valid point. I am not sure that it is healthy for anybody to sit in front of a computer terminal for any length of time, whatever they are doing. That relates to what I shall say shortly when I compare bingo with other forms of gambling. As opposed to someone sitting in front of a computer terminal at home with a credit card, playing bingo in relative secrecy, people play bingo at a club in an environment that is protected, regulated and managed. People are looked after by the management of the clubs, which by and large is good.
The industry looks to the Government for support, in view of the closures, the double taxation and the losses. It welcomed the ending of double taxation, as I have said. There has been considerable support across the House for ending double taxation and for the bingo industry; 129 Members have signed an early-day motion
in support of the bingo industry, such is the popularity of bingo and the concern felt by hon. Members across the House about the effect of closures on their constituency or locality.
As the hon. Member for Dundee, East, mentioned, gross profits tax has increased from 15 to 22 per cent. That is a 46 per cent. increase in GPT. Even without going into the mathematicseven just looking at that increaseone can say that the fact that there was a 46 per cent. increase in GPT after VAT was removed tends to suggest that there was some compensating on the part of the Government. With that substantial increase, they are giving with one hand and taking back with the other.
It is on the VAT and GPT figures that the industry and the Government have once again parted company. The Government maintained, and Ministers said in a previous debate, that the overall taxation on bingo had fallen from about 34 per cent. to about 26 or 27 per cent. I think that the hon. Member for Bath (Mr. Foster) said that it was 27 per cent., taking into account other factors. The Governments estimate in the Red Book is that they will lose £50 million of revenue in VAT losses, but will gain £35 million from GPT, leaving a net gain to the industry of £15 million. It is those figures that the industry disputes. It does not believe that those figures are accurate or sustainable. I understand that the Bingo Association has provided the Government with figures to try to show that there is a dispute about the Governments numbers.
The same end resultan advantage of about £15 million to the industrycould be achieved with a much lower rate of GPT, because the VAT receipts are lower. I have in my hand figures provided to me by the Bingo Association that demonstrate that, but I do not profess to understand everything on that piece of paper. Having surveyed 592 bingo clubs across the country, the industry is saying that if we assume a VAT rate of 17.5, and not 15, per cent., and a GPT rate of 18, and not 15, per cent., main-stage bingo would raise something like £20.8 million in VAT. Interval bingo would raise £39.8 million in VAT. There would be irrecoverable VAT at £21.7 million. That would leave an overall VAT figure of £38.9 million, balanced by GPT figures of £23.3 million. That would leave a balance in favour of the industry of £15.6 million. Those are the figures put forward by the industry to contradict the Governments figures in the Red Book. As I shall say later, the industry would like further consideration of the VAT and GPT figures that it has provided, because it feels that it can achieve the figures in the Red Book without such a huge hike in GPT.
Nia Griffith (Llanelli) (Lab): Has my hon. Friend had representations from constituents who have looked at the figures for their local club, and who, in some of the smaller clubs in particular, find that the change in VAT is not bringing them the benefits that they were told it might? Is he concerned that some of the smallest clubs will therefore have the hardest time?
I am grateful to my hon. Friend for that intervention. I had not had that information, but she has made the point eloquently. I agree with her that it will be the smaller clubs that feel the pinch. Obviously,
the bigger companies are more able to stave off losses, but at the end of the day the effect will be felt by the whole of the bingo industry.
Mr. Bone: The owners of my local bingo club in Rushden, Flutters, made a very powerful point: the club needs renovating, but they will not renovate now, because they cannot claim back the VAT as they previously could have done.
Even though the Government have halted VAT on participation fees, the industry still warns of further closures, and they are continuing. That suggests that the industry is still adversely affected by the changes to the taxation regime: it still hurts the industry to the point that more clubs are closing down. That suggests in turn that the industrys figures might be right and the Governments optimistic, because it is generally agreed that the Red Book VAT receipts figure of £50 million is something of an estimate. It is not that well defined. Perhaps the Government could look at the figure again, with the industry, to see whether there is a way forward.
The industry maintains that it is more heavily taxed than other forms of gambling, as the hon. Member for Dundee, East said. His amendment seeks to retain GPT at 15 per cent. to maintain that parity, and he made a strong argument for it. Again, he mentioned casino GPT, which is on a sliding scale. If that were applied to bingo clubs, it would give all bingo clubs an effective rate of 15 per cent., because of the banding that applies to the casinos.
The hon. Gentleman went through the reasons why we should support bingo, and I shall quickly touch on them to reinforce them, yet again, on behalf of our constituents. It is a softer form of gambling than others, such as internet gambling, casinos and so on, and it is attractive predominantly to women. Many women enjoy going to bingo clubs in groups, and sometimes with their husbands or whoever. They feel safe, it is a protected environment, they are looked after, and they cannot gamble too much of their money away. Daytime bingo sessions are sometimes the only entertainment that elderly members of our communities get in the week, and people very much look forward to going out with friends to enjoy bingo in the afternoons and so on. Those are often social occasions, and bingo clubs are a social amenity, but once they are gone there is little alternative other than, as the right hon. Member for Suffolk, Coastal (Mr. Gummer) said, online bingo in front of a computer screen, daytime TV or whatever.
Let us compare bingo with forms of gambling that are unregulated and not subject to the same regime, such as internet gambling, poker and in-play betting. I am not opposed to in-play betting, but we see adverts in the middle of a football match and we can imagine them playing in a public house, where at half time someone comes on saying, Bet in play. You can bet on the next corner, goal or booking. If drink is involved and lads are watching a football match, a lot of money could be spent over the telephone betting, yet we are not doing anything about that form of gambling. We are, however, coming down pretty hard on bingo, and allowing closures to take place that affect a very soft form of gambling.
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