Finance Bill

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The Committee consisted of the following Members:

Chairmen: †Mr. Peter Atkinson, Mr. Jim Hood, Sir Nicholas Winterton

† Bailey, Mr. Adrian (West Bromwich, West) (Lab/Co-op)

Barlow, Ms Celia (Hove) (Lab)

† Binley, Mr. Brian (Northampton, South) (Con)

† Blackman, Liz (Erewash) (Lab)

Blizzard, Mr. Bob (Waveney) (Lab)

† Bone, Mr. Peter (Wellingborough) (Con)

Breed, Mr. Colin (South-East Cornwall) (LD)

† Brown, Mr. Russell (Dumfries and Galloway) (Lab)

† Browne, Mr. Jeremy (Taunton) (LD)

Cable, Dr. Vincent (Twickenham) (LD)

† Dobbin, Jim (Heywood and Middleton) (Lab/Co-op)

† Duddridge, James (Rochford and Southend, East) (Con)

† Engel, Natascha (North-East Derbyshire) (Lab)

† Field, Mr. Mark (Cities of London and Westminster) (Con)

† Flello, Mr. Robert (Stoke-on-Trent, South) (Lab)

† Gauke, Mr. David (South-West Hertfordshire) (Con)

† Hands, Mr. Greg (Hammersmith and Fulham) (Con)

† Hoban, Mr. Mark (Fareham) (Con)

Hosie, Stewart (Dundee, East) (SNP)

† Howell, John (Henley) (Con)

† Jenkins, Mr. Brian (Tamworth) (Lab)

† Joyce, Mr. Eric (Falkirk) (Lab)

† McCarthy-Fry, Sarah (Exchequer Secretary to the Treasury)

† Moffatt, Laura (Crawley) (Lab)

† Pearson, Ian (Dudley, South) (Lab)

Pugh, Dr. John (Southport) (LD)

† Robertson, John (Glasgow, North-West) (Lab)

† Roy, Lindsay (Glenrothes) (Lab)

† Seabeck, Alison (Plymouth, Devonport) (Lab)

† Soulsby, Sir Peter (Leicester, South) (Lab)

† Stuart, Mr. Graham (Beverley and Holderness) (Con)

† Syms, Mr. Robert (Poole) (Con)

† Timms, Mr. Stephen (East Ham) (Lab)

† Todd, Mr. Mark (South Derbyshire) (Lab)

Liam Laurence Smyth, Committee Clerk

† attended the Committee

Column number: 631

Public Bill Committee

Thursday 25 June 2009

(Afternoon)

[Mr. Peter Atkinson in the Chair]

Finance Bill

(Except clauses 7, 8, 9, 11, 14, 16, 20 and 92)

Clause 114

Remote bingo etc.

1 pm

Question (this day) again proposed, That the clause stand part of the Bill.

The Exchequer Secretary to the Treasury (Sarah McCarthy-Fry): Welcome back to the chair, Mr. Atkinson. There are a couple of points I wanted to conclude with. The clause simply corrects a deficiency in the original legislation for remote gaming duty to ensure that the original policy intentions are delivered.

My hon. Friend the Member for South Derbyshire asked about the ability of bingo clubs to provide terminals, in order to offer, within the club, remote bingo from operators based in the UK or elsewhere. That is an interesting but complex area and we will continue to explore it. I thank my hon. Friend for raising the issue. We will look at it in more detail, although the social regulation falls under the remit of the Department for Culture, Media and Sport and the Gambling Commission, and we will continue to work closely with them.

My hon. Friend the Member for Tamworth asked about companies moving offshore and offering gambling products to UK residents from low-tax jurisdictions. When we introduced remote gaming duty in 2007, we looked closely at options for taxing such operators on the basis of the place of consumption, but concluded at the time that it would be difficult to ensure compliance with any such regime without co-ordinated international agreement.

I noted before the Adjournment that the DCMS is soon to conduct a review of remote gambling legislation in the UK to report to Parliament before the end of 2009. The review will explore ways to make the system of gambling regulation in Britain fairer to ensure a more level playing field between British businesses and their overseas counterparts, and we will continue to look carefully at that from a tax perspective.

Clause 114 removes inconsistencies in legislation to bring remote bingo within the scope of remote gaming duty. Without it there is a danger that remote bingo offered from the UK could be left untaxed.

Question put and agreed to.

Clause 114 accordingly ordered to stand part of the Bill.

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Clause 115

Meaning of “gaming machine” and “gaming”

Question proposed, That the clause stand part of the Bill.

Mr. Greg Hands (Hammersmith and Fulham) (Con): Clause 115 is purely technical and relates to the meaning of the terms “gaming machine” and “gaming”. The intention is to amend the definition of those terms in the Betting and Gaming Duties Act 1981 so that any cross-references to the definitions in that legislation are no longer required. Will the Minister clarify that it has no wider potential impact? If she can assure us of that, we will have no problem in supporting the clause. Can I also ask her briefly about a written parliamentary question on the subject of taxation of gaming machines? A question was tabled by my hon. Friend the Member for North-East Cambridgeshire (Mr. Moss), and the Minister’s predecessor, the hon. Member for Burnley (Kitty Ussher) said:

“An impact assessment, including an assessment of compatibility with Hampton principles, will be published alongside the consultation document on moving gaming machines taxation to a gross profits regime. We expect to publish these before the summer recess.”—[Official Report, 15 June 2009; Vol. 494, c. 54W.]

The Chairman: Order. I am listening carefully to the hon. Gentleman and he seems to be straying very wide of the clause, which deals with the meaning of “gaming machine” and “gaming”.

Mr. Hands: I accept your ruling, Mr. Atkinson, and I will try to raise the point on another occasion.

Sarah McCarthy-Fry: It may please the Committee to hear that this is the final clause on gambling taxation in this year’s Finance Bill. We have had interesting debates in the proceedings that I have been involved in. The first part of the clause concerns the excise definition of a gaming machine, the second the definition of gaming. At present, the definitions read from the VAT law. The clause amends the Betting and Gaming Duties Act 1981, so that it contains statutory definitions of “gaming machine” and “gaming”. The change simplifies and clarifies this area of the gambling tax legislation and I am pleased to confirm that, beyond the clarification, there will be no impact on the industry.

Question put and agreed to.

Clause 115 accordingly ordered to stand part of the Bill.

Clause 116

Taxable commodities ineligible for reduced-rate supply

Question proposed, That the clause stand part of the Bill.

Mr. Hands: I must say that I am a little surprised that the Minister has not risen to introduce clause 116, which, like clause 117, is on the climate change levy. However, I will try to explain what clause 116 is all about. I will briefly explain the climate change levy, because when we come to discuss exactly what has been changed we must understand the context for that change.

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Normally the Government love to talk about and defend the climate change levy, so, as I say, I was slightly surprised by the Minister’s reluctance to talk about it.

Sarah McCarthy-Fry: I shall be speaking on it.

Mr. Hands: The Minister says, from a sedentary position, that she will be talking about the clause, but I was under the impression that, when we are debating a clause, normally a Minister would first seek to defend what the Government are proposing.

The climate change levy, as we know, is a tax based on the quantity of a commodity supplied. The levy is charged on taxable supplies, which are supplies of what is called a “taxable commodity”, as defined in the legislation and on which climate change levy is due to be paid. The definition of a taxable commodity is also found in paragraph 3 of schedule 6 to the Finance Act 2000. According to that measure, the following are taxable commodities:

“(a) electricity;

(b) any gas in a gaseous state that is of a kind supplied by a gas utility;

(c) any petroleum gas, or other gaseous hydrocarbon, in a liquid state;

(d) coal and lignite;

(e) coke, and semi-coke, of coal or lignite;

(f) petroleum coke.”

Paragraph 3(3) of that schedule says:

“The Treasury may by regulations provide that a commodity of a description specified in the regulations is, or is not, a taxable commodity for the purposes of this Schedule.”

We will come on to discuss the reduced rate. It is a relief that is intended to operate for a 10-year transitional period, to allow businesses to make energy efficiency savings. The 10-year period is a condition of being given approval by the European Commission under the state aid rules; there must be a 10-year transitional period for these energy efficiency savings. Paragraph 44 of schedule 6 to the 2000 Act makes provision for an 80 per cent. reduction in the levy for energy-intensive industries that have entered into a negotiated energy efficiency climate change agreement. Those CCAs will be referred to in the course of our debates on clauses 116 and 117 and the relevant schedule.

Energy-intensive users are those who operate a part A process listed in schedule 1 to the Pollution Prevention and Control (England and Wales) Regulations 2000, which is Statutory Instrument 2000 No. 1973. In return for the reduced rate, targets for energy efficiency or emissions reduction are set. In other words, because of the state aid rules, so long as a company states over the 10-year period how it will become more energy efficient, as part of the CCA, at the end of that period it gets a reduced rate.

Until now, the Department for Environment, Food and Rural Affairs has been responsible for classifying a facility as being eligible for the reduced rate under a CCA. I am assuming that the Department of Energy and Climate Change is now responsible for making such classifications, but it would be helpful if the Minister could clarify that. At the same time, however, HMRC is given access to the variation certificates, to enable verification of the legitimacy of any claims that are made under the relief. Examples of industries included are: energy industries; production and processing of metals; the mineral industry; the chemical industry, and waste management.

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Paragraph 44 of schedule 6 refers to paragraph 45 of the same schedule, which deals with variations in terms of notices and establishes the power of the commissioners to make regulations covering whether or not a supply of a taxable commodity is made to a facility covered by a notice, including specific provision to determine whether a supply is delivered to a facility.

A variation certificate may be issued, which either removes or adds to the entitlement of a facility covered by a CCA, or amends the period to which a CCA applies. That is my understanding of the background to clause 116. It would be helpful if the Minister could confirm that my understanding is correct.

I turn to clause 116 itself, which is entitled “Taxable commodities ineligible for reduced-rate supply.” As I have mentioned, the reduced rate provided by CCAs is classified as state aid. New community guidelines on state aid for environmental protection were issued in 2008, and, as I understand it, provide the background to the clause. The energy product directive 2000/96/EC provides minimum rates unless the European Commission can be satisfied that additional relief is proportionate and necessary. It would be helpful if the Minister could confirm whether the issue under discussion is solely due to that directive.

The climate change levy reduced rates for gas and solid fuel are below those minimum rates, hence the need for the clause. The clause ensures that the Secretary of State can vary existing certificates to make eligible taxable commodities ineligible, and vice versa, with the consent of HM Treasury, and provided that the provision is in line with the Commission’s state aid rules. Sectors that do not meet the necessity and proportionality test entitlement to claim the reduced rate on gas and electricity will be denied relief, thus ensuring compliance with the state aid rules.

Thus, sectors can still be within the rules on a CCA, but can only get the reduced rate on other taxable commodities, such as electricity. That is my understanding of the issue, and it would be helpful if the Minister could confirm that that is the case, and that the issue arises solely as a result of the European Union directive that became live last year.

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Prepared 26 June 2009