Examination of Witnesses (Questions 360
- 373)
TUESDAY 13 JANUARY 2004
PROFESSOR LEIGHTON
VAUGHAN WILLIAMS,
MRS BRIGID
SIMMONDS, MR
IAIN WILKIE,
MR JOHN
KELLY AND
MR JIM
TWOMEY
Q360 Lord Faulkner of Worcester: When
the minister came before us he made it very clear that the Government
is not interested in resort casinos being given a special status.
You are saying that they would have to take their chance on the
basis of the way in which the free market works. Do you not feel
that there is a real danger that if the free market applies to
the location of a few casinos, particularly big ones, then they
will not go to Blackpool at all and they will not go to Scarborough
and they will not go to Great Yarmouth but they will go to places
like Liverpool or Manchester or Leeds?
Mr Wilkie: I think that comes
down to the quality of the entertainment experience and the service
and the other attractions that are there.
Q361 Lord Faulkner of Worcester: How
is the market—if that is what is going to determine the
location for casinos—going to decide that, when the operators
come in, say, from the United States and say, "I want to
go to where there is an established population"?
Mrs Simmonds: I think that is
the distinction we have got to make between resort casinos and
single casinos which are over 5,000 or 10,000 square feet in individual
towns or cities. I think we have to be careful we do not confuse
the two here. The question was specifically about the number of
resort casinos, which is somewhere like Blackpool that has five
or six casinos within it, not about having a single casino of
a certain size in various cities. There is a distinction between
that, and the Regional Development Agencies have a key role in
helping that determination.
Q362 Lord Faulkner of Worcester: You
are saying, though, that the Regional Development Agencies should
say no to Manchester, no to Liverpool and concentrate on Blackpool.
Mrs Simmonds: No, because I think
it depends on what you are talking about.
Q363 Lord Faulkner of Worcester: I
am talking about a big casino.
Mrs Simmonds: If you are talking
about a big casino, then I think they have got to look at them
differently. There is a big difference between Blackpool having
five or six and Manchester having one. I think there is a market
that is probably big enough for both. As we all know, there are
lots of things that are going to determine this; it is about investment,
it is about planning. I am hugely concerned about planning and
not convinced by what the Minister said to you all last week.
Instead of demand we are going to have need, and local authorities
are going to argue a lot about where you are going to have these
casinos on grounds of need.
Q364 Viscount Falkland: I have certainly,
and I think colleagues also, had the impression when we went to
Blackpool that there was some doubt because of the enormous investment
which would be needed to convert Blackpool from its historic position
into a huge resort of the kind that we are discussing, and that
the strategy involved in having nationally what you described
as four of these destination casino developments/entertainment
developments would require a strategic plan which would need to
go beyond the regional and needs to be a national strategy. So
what the Minister said to us was very interesting. The conclusion
that I drew from what the Minister said, that the market must
decide, was that this is just not going to happen, because it
has to be a strategic decision. The economic and social impacts
of letting the market decide, in the way that he suggested, would
create absolute chaos.
Mrs Simmonds: I just do not think
that planning works like that in this country. We are going to
have these new Regional Spatial Strategies which will very clearly
have to identify sites for various types of leisure activity.
If it is not zoned for leisure you cannot put leisure on it.
Q365 Chairman: You made the point
that—forgive me if I try and summarise this wrongly—there
is a difference between large casinos of more than 10,000 square
feet and the resort casino which would be considerably larger.
Mrs Simmonds: Yes.
Q366 Chairman: Do any of you have
a view on whether the Government has got it right in suggesting
that once you get to 10,000 square feet and more than 40 tables
you can have unlimited jackpot machines with no maximum stake
and no maximum prize, or should that opportunity be the preserve
of these resort casinos in order to give them a chance of succeeding?
Mr Kelly: It is my view, and I
think it is the Cross-Industry Group's view as well, that the
current proposals are about right; that to actually confine unlimited
machines to a particular set of business which is differentiated
from the rest by a huge number of different characteristics would
be wrong. There has to be the opportunity for sensible and fair
competition within casinos, and that to a great extent is going
to depend upon the products they can offer. So the 10,000 square
feet/40 table issue is about right. You could place that trigger
at any particular point, but if one chooses to look at the 10,000
versus the 5,000 I think that is almost where we need to be. There
is an interesting issue that has been raised about resort casinos
and whether one does it in a free market or whether one does as
a planned, national strategy, and the Cross-Industry Group has
not entered into that debate, and Brigid I think has answered
that, but on your specific point I think we are about right. I
would be extremely concerned about a proposal that said "only
resort casinos"; you would then have to be very clear about
what the definition of a resort casino is. Is it with 400 bedrooms?
Is it with 400 car-parking spaces? Is it on a minimum investment
basis or is it on a square-footage basis? If they are the only
people who could be allowed to operate unlimited stakes and prizes
machines, I think that would be quite wrong.
Q367 Mr Meale: This is to Mr Wilkie
or Mr Twomey. The £5 billion of inward investment, it is
only three or four large resort casinos. Where does that fit into
that kind of investment? It is £1 billion plus each.
Mr Twomey: Iain will help me if
I misquote it, but my understanding is that he was talking about
determining numbers of resorts. Within each resort there may be
three, four, five casinos.
Q368 Mr Meale: Do you think that
matches £5 billion of inward investment?
Mr Twomey: We have certainly seen
in the press some of the overseas' operators are committing themselves
to investment figures of half a billion for single site entities.
Chairman: We need to move on. The Minister
will be with us very shortly and we are going to ask him about
taxation, but we ought not to let you go before we ask you the
same. Lord Donoughue wanted to put a question. You have already
indicated that taxation, Mr Kelly, is one of the three ingredients
in terms of the general economic environment which might make
this expansion happen.
Q369 Lord Donoughue of Ashton: How
do you think the existing and somewhat complicated duty regime
will fit with the modernisation of the legislation, and what if
any changes will need to be made?
Mr Kelly: Lord Donoughue, my view
is that a blunt answer to your question is no, it will not fit
with the new, proposed shape of gaming. At the moment, the definitions
of gaming are pretty well defined both within locations as well
as within businesses. We know what a casino is, we know what a
bingo club is, we know where the betting shop office is. They,
therefore, are all taxed generally at very different rates. Once
you put all those under one roof, which is what the proposal is,
just the logistics and the organisation of the taxation regime
that encompasses three or four different modes and methods is
an absolute nightmare. My view, and the view of the Cross-Industry
Group is quite clear that there should be a gross profit tax regime
(that is the most appropriate regime), that it should be a non-VAT
regime—as the licensed betting offices and pools operators
are—and that it should be levied at around 15 per cent.
In the covering letter to the document you will see I caveated
that very heavily; that that was there in terms of allowing a
model to be constructed rather than a firm and absolute proposal.
I cannot believe that it is going to in any way viable to have
under one roof three or four different taxation regimes on three
or four different products being sold to the same customer. It
just seems to me to be completely unworkable.
Q370 Lord Donoughue of Ashton: Could
I ask specifically of you, Professor Vaughan Williams, do you
think it is possible to create a taxation regime that is future-proof
of technological developments, for example, (and betting exchanges
we have already discussed) already making the existing taxation
system outdated?
Professor Vaughan Williams: I
think one can argue with some conviction that the move to a gross
profits tax on betting was in some respects borne out of a desire
to create a tax regime that protected—in some senses, future-proofed—the
betting industry against changing economic and technological
circumstances. For example, technological or economic changes
which act so as to increase competition to UK-based bookmakers
from overseas operators could serve to reduce the gross profits
of UK bookmakers. The tax system as it is now constituted automatically
reduces the tax burden on bookmakers in these circumstances. Similarly,
if gross profits increase the tax burden automatically increases.
What is happening is that a tax based previously on quantity has
been replaced by a tax placed on price, a system which is designed
to reduce price and to increase quantity. This benefits the twin
objectives of efficiency and equity at any given point in time
and in a manner which is proof against changes and developments
over time. Since Budget 2003 betting exchanges, which had previously
been taxed on the net aggregated profits of the layers on the
exchanges, are also subject to the same gross profits tax, levied
at the same rate, of 15 per cent. To the extent that the gross
profits of exchanges are lower than their competitors, they pay
commensurately less tax. If their gross profits should increase
they will pay more tax. Far from betting exchanges making the
existing taxation system outdated, therefore, they are the most
modern example of the application of the new taxation system to
this latest application of new technology to the betting sector.
Q371 Lord Mancroft: You have already
talked about remote gambling, and whether it works in this country
or not depends upon getting the balance between the regulation
and the taxation right. How do you govern to ensure that we do
get that balance right?
Mrs Simmonds: I think there is
no doubt about it, that investment will be dependent on taxation.
That has been proved elsewhere in the world. There is no doubt
that at the moment we have taxation on gaming tables which is
40 per cent, and you are comparing that with 8 per cent in Atlantic
City. Where I think we have to be very careful—to come back,
in other words, to the question that John was asked—is it
would certainly be ridiculous to have four or five different types
of taxation in a resort casino. I do not think it would work.
On the other hand, there is some argument, and the industry has
put forward this argument with the proposals from Customs, that
we should change to GPT on AWP machines, that we do not think
it is right for that to happen now and there is some argument
that AWP machines in part should remain on the taxation system
they have got now, rather than move to a GPT scheme. One simple
reason for that is GPT, obviously, can encourage proliferation
if it is used in the wrong way.
Q372 Chairman: Is it your view then
that the taxation regime should not just be about raising revenue
but also has a role in managing the size of the industry?
Mrs Simmonds: Yes.
Chairman: Thank you all very much for
answering our questions so clearly. We have, of course, yet to
take evidence from a number of the elements that feature within
the Cross-Industry Group and businesses in their membership. So
there will be further opportunity to explore some of these issues
again with them. Did Lord Brooke want to raise a matter?
Q373 Lord Brooke of Sutton Mandeville:
It is not a question, Mr Chairman, but everything I know about
King Draco suggests that he would regard taxation as a very modest
and wimpish instrument for exerting Government policy. I am not
suggesting Mr Kelly should alter his answer but I offer that as
a historical footnote.
Mr Kelly: I appreciate that. Thank
you very much.
Chairman: Thank you, Lord Brooke, for
that. Can we particularly thank our witnesses for appearing today
and answering our questions. Thank you very much.
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