Examination of Witnesses (Questions 374
- 379)
TUESDAY 13 JANUARY 2004
JOHN HEALEY
MP
Q374 Chairman: Can I welcome John
Healey, Economic Secretary to the Treasury. We really are very
grateful to you for coming to our Committee. We know you have
already had a two-hour stint in a Standing Committee upstairs,
which from personal experience I know is a pretty draining experience.
I do not think there are any interests in this element which are
relevant, except to remind everyone that all the interests that
have been declared by Members are available, if anybody wishes
to see them. The only interest—if that is not too strong
a word for it—that I would mention is that Mr Healey stood
against me in Rydedale in 1992, and what a lot of good it has
done him!
John Healey: But not in 1992.
Q375 Chairman: John, you say that
Treasury officials are actively working with the Department of
Culture, Media and Sport on tax policy issues. Is this an area
in which, to your knowledge, there has been a great deal of interdepartmental
activity, given the interests of DCMS, the Office of the Deputy
Prime Minister, the Department of Health, the Department of Trade
and Industry and so on? Or is it early days?
John Healey: The short answer
is yes. If I may say, as part of my initial response, I have always
been a strong supporter of pre-legislative scrutiny and I very
much welcome the Inquiry you are doing. I notice, Mr Chairman,
you interpret your brief quite widely, and Lord Falkland before
we started here, said that in 20 years in the House this is the
most interesting and fascinating thing he has dealt with. I was
glad to be invited to submit the written memorandum. I hope that
has been useful. I hope it points out that there is indeed work
going on between the departments and has been for some months
on this, but that on the tax side we are inevitably at a relatively
early stage. Secondly, I hope it points out that there is a very
important potential supplementary role for tax reform to reinforce
and reflect the sort of regulatory changes that, Mr Chairman,
your Bill is looking at. Within Government, it has been the responsibility
of DCMS to co-ordinate the communication and the work that has
gone in so far to the draft Bill's measures. There has been a
series of meetings, both interdepartmental and bilateral including
the Treasury, on framing the deregulation policy that this contains.
Recently Lord McIntosh and I have agreed that we should set up
and formalise certainly between the two departments, DCMS and
the Treasury. So we have set up now a formal steering group of
officials to back the work that we need to do together. Principally,
the first task of that group of officials will be to try and develop
the analysis that allows us better to estimate the economic impact
and the potential benefits from the deregulatory reform and, also,
form the modelling that is obviously essential to considering
any tax options for the future.
Q376 Chairman: We are going to come
on to some of the specifics in a moment, but you have just said
that you do see taxation as part of the regulatory framework.
In other words, is it still an objective of taxation on gambling,
as it is for example on tobacco and drink, that it has a role
in deterring excessive gambling?
John Healey: I think the proper
place for potential tax reform in the territory that this Committee
is considering, if I may say so, is as follows: as I said in my
written memorandum, deregulation is the foundation for the future
development of the industry and for its future prospects. Certain
tax changes or planning policy certainly could amplify the impact
of the deregulation, but deregulation and the Bill that this Committee
is considering remains central. I note Lord MacIntosh mentioned
tax planning and deregulation, if you like, as three legs of the
stool; I see it more as table and chairs, where the central and
important policy area is deregulation; planning policy and tax
policy may be very useful supplementary policy changes we can
bring to bear, and certainly from the Treasury point of view we
are drawing up the tax chair to this deregulation table.
Q377 Baroness Golding: Your memorandum
also states that ". . . it is not possible to make evidence-based
policy decisions on tax until there is sufficient certainty about
certain central features of the new regulatory regime and we have
a clearer picture of estimated implications, for example the size
and distribution of the new market." However, we have been
told by the Casino Association, for example, that "Nobody
can assess the future viability of a casino until the future tax
and duty regime has been resolved." We have also been told
this morning by the Cross-Industry Group that the level of investment
will depend on taxation. We are in a bit of a dilemma over this
chicken-and-egg situation in our deliberations. Can you give us
any help?
John Healey: I will certainly
try, Lady Golding. There is certainly an element of chicken-and-egg.
The Casino Association itself in its response to our consultation
on amusement machine licence duty (by-the-by, Chairman, the summary
of responses we are publishing today, which I hope the Committee
may find helpful) recognised the importance of careful timing
of any tax changes, and also the difficulties involved in considering
duty reform in advance of clear, settled and shaped regulatory
reform and some estimate then of the likely economic impact changes
to consumption, changes to markets and changes to business models
that that would entail. So we are entering a period now where
many of the principal details of the regulatory reform have recently
now largely been settled (I am thinking of gaming floor sizes,
number of machines per table, issues like that) which I think
probably gives us, in terms of the regulatory shape, sufficient
information on which to do now some serious tax modelling. In
terms of the interest of the industry I quite understand, clearly
and reasonably, they want to see as much clarity as possible,
but they also do want to see a degree of certainty and stability.
The worst of all worlds, I think, for many of these companies
that are looking at potential long-term investments is to see
us make changes rapidly in order to reflect some of the issues
immediately apparent in the Gambling Bill, only to find that,
perhaps, a couple of years later we want to radically overhaul
another aspect of the gambling taxation regime. So we have to
take a view on the likely developments in the industry, the likely
developments in consumption, market share and business models.
We are not starting from scratch, in the sense that we have already,
right across the gambling and gaming field, an established and
evolving industry. That gives us, particularly with the reforms
that we have carried out over the last three years, quite a lot
of important industry data on which to base the work, and I think
now the co-ordination of the work with the main interest groups
from the industry will be important. Mr Chairman, you raised the
issue of co-ordination and communication within government; I
think now the co-ordination and communication with the industry's
assessment and analyses indicates that they are willing to share
their information with us to allow the sort of assumptions they
are making, on which their modelling is based, on the inputs that
they are anticipating, because in that way I think we can get
ourselves into a position where we have got tax impact models
that allow us to look at the potential options that may be part
and parcel of reflecting the deregulation that this Bill is attempting
to achieve.
Q378 Baroness Golding: Could I, on
that, say what if we decide (I am not saying we will) that the
floor size and number of machines is wrong; that the number of
large casinos is wrong? What difference will that make to your
tax deliberations?
John Healey: It would make a substantial
difference. These, as I have indicated, are key elements. I would
see the sequence as follows: based on what the DCMS appear to
be settling on as their proposals in those types of areas, we
can begin some of the work that we now need to do on further analysis
modelling. Clearly the Committee may well take a view on those
issues when it reports in early April. The Government then, led
of course by DCMS, will need to respond to that. Now, if some
fundamental aspects, for these purposes, of the regulatory regime
are then changed, clearly we will need to reflect that in our
modelling. So really, I think, in terms of sequencing, the conclusion
I would suggest is we can do the tax work and we can conclude
our tax work only after elements of the regulatory regime have
been properly settled. Hence my argument in the memorandum that
we need to align the work on any possible tax reform with the
progress of regulatory reform, including this Committee's conclusions
and recommendations, the Government's view in response to those
and then, obviously, the introduction of the Bill itself.
Q379 Chairman: You see, one reason
why we might (I am not saying we will) make some recommendations
that would suggest that the proposed regime should be adjusted
would be concern that if deregulation comes too fast, too quickly,
it will lead to problem-gambling. That is why I really would like
to come back to the question I asked you before. If there was
a big increase in problem-gambling then, bearing in mind the health
issue, the inevitable cry will be "You have got to put the
taxation up", and that is why I asked you the question (and
perhaps I could ask you to think about answering in a different
way): to what extent is that taxation regime seen by the Treasury,
still, as a key objective to be a deterrent against excessive
gambling?
John Healey: Perhaps, Mr Chairman,
I can answer that in two ways. The first is an observation about
the nature and potential scale of problem-gambling in the role
of regulation, and then I will tackle the question about whether
or not taxation has a role. It is clearly the case that there
is a risk with this Bill that it will increase the availability
of gambling, therefore the amount of gambling and, potentially,
the risk is it increases the amount of problem-gambling. On the
other hand, and I know the Committee will be giving equal attention
to this, it builds in safeguards through the regulation to ensure
that that does not happen. Certainly my colleagues in the DCMS
would argue it builds in safeguards which are as good as or better
than anywhere else that one might find in the world. So the Government,
as you may be aware, expects no overall increase in the level
of problem-gambling as a result of the Bill. If that were to happen,
one of the advantages of this approach, set out in the Bill, is
that rather than the very inflexible primary legislative-based
regimes that we have at the moment, the framework is one of regulation
that can be adjusted rapidly and responsively if research or experience
demonstrates that problem-gambling does increase or becomes apparent
in certain areas that we had not anticipated. So the Bill itself
builds in the safeguards, I would suggest to the Committee, sufficient
to deal with any potential risk of an increase in problem-gambling.
On taxation, were one to argue or suggest that taxation might
be the tool by which to try and potentially control problem-gambling,
I would suggest two or three things. First is that it is, particularly
compared to regulation, a relatively blunt instrument. Second,
there is no established link in this field between levels of taxation
and levels of problem-gambling. Third, if we view problem-gambling
as essentially an addictive problem where the essential harm is
the impoverishment of the person that has the problem-gambling
and those that may be related or live with them, then arguably
if you have very high rates of tax, rather than simply deter problem-gambling
it may exacerbate the impoverishment and the problem that the
Committee and certainly the Government will be seeking to avoid.
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