Clause 182 - Combined bingo

Finance Bill – in a Public Bill Committee am 10:00 am ar 18 Mehefin 2013.

Danfonwch hysbysiad imi am ddadleuon fel hyn

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

Photo of Sir David Amess Sir David Amess Ceidwadwyr, Southend West

With this it will be convenient to discuss new clause 5—Rate of bingo duty—

‘The Chancellor of the Exchequer shall within six months of the passing of this Act provide a report to Parliament on the impact of bingo duty on—

(a) the level of employment in the bingo industry, and

(b) the competitiveness of the bingo industry relative to other gambling industries.’.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

As the Committee will no doubt be aware, bingo duty is charged at 20% of a person’s bingo profits and is calculated by reference to receipts and expenditure on winnings. Combined bingo, however, is where a game is played simultaneously in more than one place and promoted by more than one person, such as the national bingo game, which allows players in different bingo clubs to share in the chance of winning a prize from a prize pool generated by the moneys contributed by all participating clubs.

To prevent double counting of payments transferred between promoters as contributions to prize funds, special accounting provisions apply to combined bingo. As the legislation currently stands, a qualifying condition of the accounting provisions is that all participants must play from within the UK. At Budget 2012, the Chancellor announced his intention to remove the qualifying condition and, following an informal consultation in the summer of 2012, the clause legislates for that removal.

As a result of the consultation, the measure will not come as a surprise to the industry, but I want to touch on a couple of points. The impact note for clause 182 states that the current law prevents the

“double-counting of receipts but, as an anti-avoidance measure, this provision only applies where the combined bingo is played entirely in the United Kingdom.”

I want clarification on that, because it suggests that at present the restrictions are in place to ensure that tax avoidance cannot take place when games are run. Will the Minister confirm what anti-avoidance measures will be put in place once the restrictions are removed? Will the Minister also give us some information regarding his assessment of the risk of tax avoidance once the restrictions are removed? Can he comment on HMRC’s assessment that

“by removing this restriction larger jackpot prizes may be offered for games of combined bingo which may indirectly benefit those individuals who participate”?

Can the Minister give us an indication of the numbers involved, such as the number of businesses likely to be affected by the clause? What is his assessment of the number of new combined bingo games that might become available to players in this country as a result of the changes? What will be the regulatory impact of the measure? Will, for example, non-UK operators be required to apply for a licence in this country in order to link up with UK-based bingo operators to engage in combined bingo?

In addition to those questions for the Minister on combined bingo, I want to propose a few questions on new clause 5, which we tabled to shine a light on the issues facing the bingo industry and to probe the Minister on what consideration the Government have given to the impact of those issues. The bingo industry is important to our country and our economy. Provisional 2012 data show there are approximately 400 bingo clubs providing direct employment for more than 12,500 people. In 2012 there were approximately 45 million player admissions to bingo clubs, generating more than £200 million a year in tax revenue for HMRC. Despite the contribution bingo clubs make to the economy, which was recognised in the Mary Portas review last year and the ResPublica study, many in the bingo industry continue to feel they are getting a poor deal compared with the rest of the gambling sector.

I am sure the Minister is aware of the recent history of bingo taxation in this country. In 2009, the then taxation regime—15% plus VAT—was replaced by an increase in gross profits tax from 15% to 22%, with bingo clubs becoming partially exempt for VAT reclaim purposes. GPT was then reduced to 20% in 2010. However, the industry remains concerned about its inability to reclaim all its VAT, which has led to investment and refurbishment costs remaining high.

The industry further criticised the Government’s introduction of the machine games duty in February 2013, which, according to industry figures, hit bingo clubs with an additional £9.25 million in tax each year. The industry has made clear that it is concerned about the impact of the taxation rise on the sector, which has resulted in bingo having one of the highest starting rates of all gaming activity in Britain. Bingo clubs play an important role, not just in the economy but in the lives of the many people who enjoy and take part in it, and for whom it is a social event in their calendar. Bingo clubs are currently closing at a rate of one a month.

Photo of Rory Stewart Rory Stewart Ceidwadwyr, Penrith and The Border

Does the hon. Lady agree that that is particularly true for rural populations and the elderly, for whom bingo is an important contribution to life? There is a big demographic issue here. There is a portion of the population for whom bingo is particularly important at the moment.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

I thank the hon. Gentleman for his intervention. He speaks for a rural constituency, so he is very conscious of these issues. I have to say, I know an awful lot of young people who play bingo; it is surprisingly popular among my friends and colleagues. However, I agree that we need to take into consideration the demographics of those who take part in bingo, and the rural and geographical implications of the closure of bingo clubs and halls. It is obviously devastating for people for whom bingo is their main social event in the week or the month.

The industry has argued for a reduction of GPT to 15% to help reverse this trend and for bingo taxation to be put on the same footing as the taxation on other gaming industries. It states that its target level of 15%, which it believes to be a fair amount, would lead to further capital investment. Gala is planning £29 million of capital investment, and Mecca Bingo has pledged to open new clubs if the tax rate is reduced to that level.

The Bingo Association expects, using a demand elasticity based on observed data from both the 2004 and 2010 rate changes, a 15% rate of gross profits tax to stimulate growth that could return the sector to 2008 levels of activity—when they were last at their highest—by 2014. It is an ambitious target, but it believes it has the data to back that up. Given those figures, it would be helpful if the Minister could outline the Government’s reasoning behind the decision to put bingo GPT at the current rate. What assessment have the Government made of the cumulative impact of both the current rate of GPT and machine games duty on jobs and growth in the bingo sector? I am sure the Minister will have received many considered representations from those in the industry about reducing the rate of GPT. What assessment has the Department made of the impact that reducing the rate of GPT would have on the Exchequer and the industry? Will he also explain a little about the decision to tax bingo at a higher rate than other parts of the leisure sector? Does it relate to any social or economic policy objectives of the Government?

I want to be clear that we do not wish, with this proposed new clause, to suggest that other areas of the leisure or gaming sector are receiving a good deal compared with bingo. We are merely trying to probe and establish whether bingo is receiving a poorer deal  in comparison. We are asking the Government, for the reasons I have set out, to commit to a review so that the full impact of the current taxation regime on bingo can be fully understood.

Photo of Fiona O'Donnell Fiona O'Donnell Llafur, East Lothian

It is a pleasure to see you back in the chair, Mr Amess. I am not sure whether you have ever played bingo, Mr Amess. I see you nodding; that is an interest. The first time I played bingo was in 1982 at the Royal British Legion club in Kilkenzie? I decided to play one card, thinking that that would tax me enough—“tax” being the operative word today—and did not understand that the lines were in units and tens. Every time a number was called I quickly scanned, and was amazed by all the, mainly, women who were managing with three or four cards.

I speak in support of our new clause 5, because there are serious concerns, as the hon. Member for Penrith and The Border mentioned, especially for older people and in rural constituencies. It is great that in my constituency we have free bus travel for older people, so they are able to come out during the day and spend time in one of the local bingo clubs. Increasingly, bingo clubs provide a really important service in preventing isolation for older people in rural communities. The sad reality is that for many older people it means that they can turn off the heating at home and sit during the day in a warm environment and have social interaction with people of their own generation. That is many older people choose to spend time in a bingo club.

I do not have the same concerns about bingo clubs as I do about online gambling. On that subject, I wish that there had been an opportunity in the Bill to talk about off-shore gambling and its impact on the horse racing industry in this country. However, I am aware that is not the subject of new clause 5, so I will move on.

The atmosphere in a bingo club is responsible and social. We do not need to be concerned about them in the same way as about online bingo because we do not see the excesses that we do online. I was concerned recently was to hear one online bingo site boasting that it had given £5 million in prizes last year. That prompts questions about how much money had been spent on the site, often by people sitting at home on their own, with no restriction on access. People can get carried away and not realise how much they are spending and how much debt they are building.

I hope the Minister will welcome new clause 5, because it is an opportunity to pause and ensure that there is no detrimental impact. That impact could be on income to the Treasury; on economic growth in some communities through investment in refurbishing, as my hon. Friend the Member for Newcastle upon Tyne North said. There is also the general health of the high street. Where there is a bingo club, as is the case in Musselburgh in my constituency, people coming out to play bingo will pick up a paper and perhaps buy a dabber for marking off the numbers. That provides a boost for the whole high street, not just for the bingo club.

I hope that the Minister will welcome this opportunity to assess the impact on the Treasury’s take and on local communities, and the social impact on older people who, in the main, use bingo clubs as a way of staying socially active—and, sadly, keeping warm.

Photo of Sheila Gilmore Sheila Gilmore Llafur, Edinburgh East 10:15, 18 Mehefin 2013

It would be wrong to give the impression that absolutely everybody who plays bingo is elderly, as that might suggest that it is an industry that is about to disappear. It certainly does cater for that demographic, but there is a wider age range than some might expect. It may be true that there are more female bingo players than males. We see mothers and daughters going together; in that sense, it is a family outing.

Photo of Fiona O'Donnell Fiona O'Donnell Llafur, East Lothian

Does my hon. Friend agree that the opening hours during the day are convenient to older people? Those people may not have access to the internet and online gambling, which may be a blessing, but for older people bingo is a unique service during the day.

Photo of Sheila Gilmore Sheila Gilmore Llafur, Edinburgh East

I certainly agree that there is that element. We are dealing with relatively low-level gambling in terms of the stakes and the amount that people can spend. Indeed, unlike in some other forms of gambling, the outlay is relatively low; it is probably not dissimilar to other social activities, unlike machine gambling activities or, even worse, online gambling.

Photo of Pamela Nash Pamela Nash Llafur, Airdrie and Shotts

I support my hon. Friend’s point about the younger generation going to bingo. In recent years, many of my friends have started to have children and we often swap a night in a nightclub for a night in a local bingo hall. In fact, Gala Bingo now does a disco night for young people, which I have participated in.

Photo of Sheila Gilmore Sheila Gilmore Llafur, Edinburgh East

I am not sure what is worse: a night in a club or a night at bingo. I suspect, however, that bingo allows people to get to sleep earlier, which must be beneficial.

In terms of tax, during the last three years in particular—but perhaps for even longer—the industry has been subject to a lot of changes and alterations that have made things difficult for those who work in the industry. The accumulation of those changes, with, most recently, the impact of machine games duty, makes them feel that the tax system is not giving them the support that they need.

We all know of bingo halls that have had to close down. Undoubtedly, there will be other reasons why some halls found it difficult to survive, but, faced with difficulties and concerns—many were concerned by the smoking ban, for example—many have sought to reinvent themselves to appeal to a wider audience and to keep functioning. Most—not quite all—in my constituency have managed to keep functioning. Having done that, however, they need some certainty on what the tax will be, and for that not to change, but also they need to feel that they are not being placed in an adverse position, even in relation to other forms of gambling, as they are subject to competition.

New clause 5 relates to issues that have come up in previous Finance Bills. We now need to assess what is going on and to be fair to the industry. We need a proper review to determine whether we are taxing it appropriately, or whether there could be better taxation arrangements that would protect it.

Photo of Chris Evans Chris Evans Llafur, Islwyn

Thank you, Mr Amess, for calling me again. As a member of the Caravan Club, you know that bingo is a mainstay of many of our rallies. I want to speak in defence of the gambling industry. My father was a bookmaker; my grandfather was a bookmaker; so I am a son of a bookmaker’s son. I want to talk about the problems we have with the gambling industry in general. Bingo is seen as the acceptable face of gambling. I held an event with William Hill recently at the Commons and every time representatives of the betting industry come here they feel they have to defend themselves—

Photo of Ben Gummer Ben Gummer Ceidwadwyr, Ipswich

I agree with the hon. Gentleman. He is an honourable man and I am sure his family is too in their profession. His leader was in my constituency a few weeks ago lecturing us all about how there were far too many betting shops in the high street—reputable ones, good ones that people enjoyed using, which employed people, made money and gave people a bit of leisure betting. He was telling us all that they should be empty. Does he support his leader’s position on that?

Photo of Chris Evans Chris Evans Llafur, Islwyn

My general attitude is that I would walk into the shop and see how it was. I would defend the betting industry to the hilt because this is my family’s business. There is a version of the betting industry and it is not the one I recognise. I see that 53% of people who are employed in the industry are women. It is a flexible, part-time occupation. The betting industry has a problem with the way it promotes itself. It is being labelled with the pawnbrokers and the moneylenders and all these other bloodsuckers we see on the high street. In reality, people go into a betting shop because they are interested in sport. I will be honest. I have been in the betting industry all my life and I have not met a problem gambler yet. Most people talk about fixed odds betting terminals and amusement with prizes, but the average punter does not like FOBTs anyway because it distracts them from the horse racing.

I want to put on record my feelings about what I think is a good industry. When alcohol or beer groups come to the House—the Minister mentioned the beer from his constituency in Bromsgrove—the alcohol industry is proud that it sells beer. It is proud of what it does. Yet all the betting industry does is defend itself over problem gamblers. I feel it should promote a British tradition. There is no better tradition than bingo. I pick on the hon. Member for Bristol West an awful lot about the valleys. He will remember that one of the features of the valleys is the bingo hall. The saddest thing you see when you go round the valleys now is the almost Art Deco buildings being boarded up because bingo has died out in most communities. It is so important for older people. My grandmother still goes to the Tylorstown Con every week, where she can play Housie and play on the Snowball or whatever. She enjoys that and it is part of her community. She likes to see her friends and get together there as well.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

My hon. Friend makes a passionate and personal case for supporting this industry. He mentions his grandmother and the social side of bingo and gambling. For many elderly people, it keeps their brains active. It keeps up their interests. It is a bit like  Sudoku for many people in exercising their brains, which is so important when we see the rising levels of dementia, Alzheimer’s and those difficult conditions that a lot of people develop in their later years.

Photo of Chris Evans Chris Evans Llafur, Islwyn

I agree. One of the big things that older people face is loneliness. They lose their spouse and have to learn to live on their own. It is important that, when they go to bingo, they are allowed to mix and meet friends, and to share experiences. That is something that cannot be measured in a Finance Bill or by taxation. When the Prime Minister was the Leader of the Opposition, he said that we should not measure GDP without taking into account the feel-good factor and quality of life. That is important with bingo.

Bingo is one of the industries that have been victims of the double taxation rule. I am glad that that has now come to an end, but the bingo tax—the gross profits tax—should be reduced to 15%. As for bingo halls themselves, it is the same as with betting shops: we have to remember that there are not many gamblers in the shops any more—certainly that is the most important difference I can see from when I worked in the industry. That is why I have a big issue about problem gamblers: the problem gambler is probably gambling in private, on his iPhone or online. That is what we see with the betting industry now: the real competition for bingo is not in the betting shop but online—we often see Foxy Bingo or Sun Bingo sponsoring all sorts of programmes on ITV. The real and important issue is how we get people back into the bingo clubs.

I want to make the case for a tax cut for bingo. An additional £9.25 million tax has been added to the bingo industry with the introduction of the machine games duty, and I know that the Minister will be lobbied hard by those who are anti amusement machines and FOBTs. What are his thoughts about those industries? The bingo hall or betting shop is being squeezed by the internet and other competitors.

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

Clause 182 relaxes the tax rules for combined bingo and will benefit UK bingo clubs. By way of background, combined bingo is a game of bingo promoted by more than one bingo operator and played in many locations simultaneously. In effect, it refers to when bingo clubs groups together to offer larger and more attractive prizes to consumers.

The current tax rules for combined bingo apply only to UK bingo clubs. That means that if a UK bingo club joins with a non-UK club to offer combined bingo, it will be liable for a disproportionately larger bingo duty charge. The clause relaxes that rule and will allow UK bingo clubs to join with non-UK clubs to offer combined bingo without causing the UK bingo operator to incur additional duty.

The clause has been welcomed by the bingo industry. It encourages bingo clubs to expand their customer base and to grow their businesses. An informal consultation with industry representatives was held last year and draft legislation was shared with them in December. As I have said, the industry welcomed the change.

New clause 5, tabled by the Opposition, would compel the Government to publish a report on the impact of bingo duty on the bingo industry. The Government carefully consider gambling tax rates and the potential impact on affected industries each year at the Budget,  and will continue to do so, to ensure that gambling businesses continue to make a fair contribution to the public finances. To that extent, the new clause is unnecessary, as the Treasury keeps taxes under review at all times. I will therefore be asking Opposition Members not to press the new clause.

First, however, I will turn to some of the questions raised by hon. Members.

Photo of Ian Mearns Ian Mearns Llafur, Gateshead

I am not sure whether the Minister is an avid bingo player. One aspect of the development of the game that I keenly regret is the demise of the idiosyncratic way of calling bingo numbers: things such as, “Five and nine—the Brighton line,” or, “Doctor’s orders—number nine,” or, “Kelly’s eye—number one,” or, “Two horizontally challenged persons—88.” It was an idiosyncratic way of doing it, but it was actually quite entertaining in its way. Nowadays, when I have gone into bingo clubs in the north-east, I have found that the way they churn the numbers over and get the games out quickly is a bit industrial.

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury 10:30, 18 Mehefin 2013

If the hon. Member for Gateshead ever chooses not to be a parliamentarian any more, I can think of an alternative career that he would be a great success in. The answer to his question is that I have played bingo, but I certainly would say that I am not an avid player. Perhaps one day I will be. It is an important industry.

Many hon. Members spoke, including my hon. Friend the Member for Penrith and The Border, who intervened, and the hon. Members for Edinburgh East, for East Lothian and for Islwyn. The hon. Member for Islwyn spoke with great passion, given his family experience. I listened carefully, and I think that he, along with other hon. Members, made good points. Many hon. Members pointed to the social value of bingo, which I recognise.

In that vein, I think all hon. Members will join me in welcoming the change to combined bingo rules, which, as I said, has been welcomed by the industry. It is a positive change; it is an opportunity for UK clubs to link with non-UK clubs. Although it is voluntary, it increases the flexibility of clubs and will hopefully lead to new businesses and more jobs.

The hon. Member for Newcastle upon Tyne North asked about the potential impact. It is difficult to measure that. We also asked the industry. Although it lobbied hard for the change and clearly welcomes it, it is hard to put any numbers on the issue. I think it is fair to say that the impact of this particular change will probably be minimal, because not all clubs would be interested in the new combined bingo rules.

The hon. Lady also asked about anti-avoidance measures. Combined bingo rules have existed for some time—albeit not on this basis, but they are long-standing rules. When we looked at the potential changes, we were comfortable that no new anti-avoidance measures would be necessary. However, we will keep a close eye on the matter and ensure that if changes need to be made and if anti-avoidance measures are necessary, we will not hesitate to make them.

As I said, I recognise the positive social impact of bingo. The Government are currently reviewing the stake and prize limits for gaming machines, following a  public consultation that closed on 9 April; the hon. Member for Islwyn raised the issue of gaming machines. The Government’s initial preferred option is to increase stake and prize limits for some gaming machine categories, which would benefit bingo halls. Once the Government have made a decision, I will be sure to share it with hon. Members. The issue of larger prizes was also raised. That could be a result of the change.

I was asked whether the Government had assessed the new games that might come into existence due to the change. Clearly, there will be new games, but HMRC has not directly assessed what and how many new games there will be. I think that that is unnecessary.

Photo of Pamela Nash Pamela Nash Llafur, Airdrie and Shotts

I seek clarity in the Minister’s comments. Recently there has been a high-profile campaign against fixed odds betting terminals, seeking to reduce the maximum stake available to players on such machines. Is the Minister saying that the Government are looking to increase the stake?

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

Yes. We are reviewing stake and prize limits. We are looking at potentially increasing them for certain types of machines. I emphasise that no decision has been made at this point. When we look at the matter further, we will look at its potential impact and provide the information to hon. Members.

I was also asked whether the Government have estimated the impact if the rate of bingo duty was decreased to 15%. Our estimate is that such a decrease would lead to a reduction of tax revenue of approximately £30 million a year. If that is the case, clearly we would have to find a way to fund the reduction in revenues already assumed in Government finances.

The impact of machine gaming duty was raised by hon. Members, and it was suggested that it might hurt bingo halls. Machine gaming duty is designed to be revenue-neutral for the Exchequer. The impact on different businesses will vary, but the change will ensure that machine operators continue to make a fair contribution to tax receipts.

Lastly, I want to touch on the important issue of online gambling, which the hon. Member for East Lothian mentioned. Although it is not the subject of the clause, it pertains to the issue of having a level playing field for gambling taxes. She will know that we are introducing a remote gambling reform, on the basis of the place of consumption, to create a fairer playing field. I am sure she supports that reform. It will ensure that all gambling businesses that target UK consumers, no matter where they are based in the world, make a fair contribution to UK tax. The reform will help to create a level playing field for gambling operators based in the UK and those based overseas.

The clause makes a small, uncontroversial change to bingo duty, and benefits the bingo industry. I ask hon. Members to consider not pressing new clause 5, and I hope that clause 182 will stand part of the Bill.

Question put and agreed to.

Clause 182 accordingly ordered to stand part of the Bill.

Clause 185 ordered to stand part of the Bill.