Finance Bill

It is a pleasure to speak in this debate and in proceedings on the Finance Bill for the first time and it a pleasure to see you in the Chair, Mrs. Heal. It is also a pleasure to see the Financial Secretary, who I suspect will be doing much of the heavy lifting for this year’s Finance Bill. I know that he looks forward to that with unrestrained enthusiasm. I am mindful that, shortly after I was first elected to the House, I served with the hon. Member for Wolverhampton, South-West (Rob Marris) on the Work and Pensions Committee. Our then Chairman—now Lord Kirkwood of Kirkhope—used to say at particularly difficult moments of inquiries that we were merely simple seekers after truth. I am going to take that as my leitmotiv for the discussion of clauses 7 and 8. It was not in a hostile spirit that we asked for them to be debated. We simply want to get to the bottom of some of the issues that they raise. In setting out the case for clauses 7 and 8 and schedule 1, the Financial Secretary took us through the rationale for the changes to the bands. However, I do not feel that he fully analysed the effect of the clauses on the gambling industry—doubtless he will want to take the opportunity to do that later—and that is what I want to probe him on this evening. The section of the Red Book that concerns the clauses—it is on page 131—is very brief. It does not say much about their effect. Perhaps the best place to start is with a story that appeared in The Daily Telegraph on 23 February—roughly a month before the Budget, when pre-Budget speculation was getting going. The article said:"““Gordon Brown will announce plans in next month's Budget to encourage the beleaguered online gambling industry to be regulated and licensed by the UK Government…In a surprise move, the Chancellor will use the Budget to announce that in return for a small amount of tax—possibly as low as 2pc or 3pc—companies can obtain a UK licence and still remain based overseas.””" John O’Reilly, head of online gambling at Ladbrokes, was quoted as being pleased with the supposed deal, saying, ““It’s quite a breakthrough””—as though the decision had actually been announced. The article continued:"““He confirmed that if the rate was less than 3pc Ladbrokes would almost certainly sign up for a UK licence…Andrew ""McIver the chief executive of Sportingbet, currently based in Antigua, said he intended to apply for a UK licence if the duty was ‘a nominal amount’.""““Clive Hawkswood, the chief executive of the Remote-Gambling Authority…justified the low rate of tax because ‘these companies have grown up in zero tax jurisdictions. They operate on very thin profit margins. A 15pc gambling duty would wipe out half the industry overnight.’””" The report does not seem to have been a one-off. Ministers and officials from the Department for Culture, Media and Sport have met representatives of the internet gambling industry no fewer than 26 times. As recently as last October, at an international summit hosted by the Government, the Secretary of State for Culture, Media and Sport said:"““Of course we … want online gambling companies to come onshore.””" As we know, the Chancellor announced on Budget day that the new remote gambling duty, for which clause 8 and schedule 1 provide, would be 15 per cent.—the very figure that Mr. Hawkswood said would wipe out half the online gambling industry overnight. Clause 7 will increase the duty on annual gross gaming yields of more than £10 million from 40 per cent. to 50 per cent. As the Financial Secretary said, it will raise the starting rate of the duty from 2.5 per cent. to 15 per cent. Those changes, together with the measures in clause 8, will raise £30 million for the Treasury this year, £35 million next year and £35 million in the year after that. That £100 million represents quite a nice little earner for the Treasury. It will make a modest contribution to restraining the Chancellor’s borrowing, which, on his figures, is due to reach £153 billion by 2011. The £100 million rise over three years was reported to have left the industry ““gobsmacked””. Lady Cobham, the chairman of the British Casino Association, said that the move would"““hit the smallest casinos, often situated in seaside resorts, hardest with a knock on effect for jobs and industry suppliers.””" She said that it"““exposes the contradictions that have characterised the Government’s handling of the entire process … On the one hand, they are talking about developing new casinos, which enables money to go into regeneration, and at the same time they’ve brought in hugely increased tax rates””." Ian Burke, Rank’s chief executive, said that the changes would make some casinos, especially those in the regions, unviable and asked:"““How can you make sensible long-term investment decisions if rules change at a whim?””"