Finance Bill

First, I congratulate the hon. Member for Wycombe (Mr. Goodman) on his research. He employed a wide set of references, with the result that we heard just about everybody’s views but his own during the course of his speech. I am sure that the Committee would be interested to know whether he agrees that a new gaming duty rate of 50 per cent. is appropriate in the present circumstances, bearing in mind that it will apply only to profits in excess of £10 million gained in a period of six months, rather than one year, as he mentioned. For the purposes of the debate, it would be interesting to hear the views of the hon. Gentleman and his Front-Bench colleagues, rather than those of a wide sample of commentators. The hon. Gentleman posed several questions, but mixed up his questions about the new provisions for the new remote gaming duty and questions about the changes to the rates and bands in clause 7. I shall deal first with clause 7 and the effect on the existing UK industry of the rate and band changes. As I explained to him, we carried out an assessment. Partly because the casino industry in the UK is a growing industry and partly because, from this year, we face a new situation in which the Gambling Commission oversees many aspects of social regulation, and restrictions on casinos have been relaxed by the Gambling Act, there is a good basis on which to make the sort of reforms of the gaming duty rates that we propose in clause 7. The hon. Gentleman quoted a number of commentators speculating before the Budget about what decision we would reach on remote gaming duty—the new duty introduced by clause 8. That only served to demonstrate that it is better to reserve judgment until after the Budget is announced. Clearly, the principal newspaper article that he quoted, and Mr. John O’Reilly of Ladbrokes, were wrong in their speculation about what the Budget would bring. The question to be asked in relation to remote gaming duty is whether offshore online gambling companies will choose to come onshore into the UK, to be regulated in the UK by the Gambling Commission and therefore also to pay tax in the UK. We considered the question of a new remote gaming duty and what the appropriate level would be. The hon. Gentleman quoted some of the exchanges that he and I have had in the past year or two. I have been looking into the matter for a couple of years. I met the Remote Gambling Association in the run-up to this Budget and the previous one, and officials have been in close contact with the association and some of its leading members. We have consulted on the draft legislation to introduce the new gaming duty. I do not think that we could have done more to get the structure right, but in the end the decision on the rate is for my right hon. Friend the Chancellor and me to take. We discussed and analysed very closely with remote gaming operators and their association the sort of commercial decisions that might be affected by tax rates and the rates of the new gaming duty. As the hon. Gentleman and other members of the Committee will understand, remote gaming operators are located in tax havens. Even operators that have parent companies in the UK, are interested in the UK and have been following the development of the social regulation that my hon. and right hon. Friends at the DCMS have been establishing, or are well disposed toward the UK—what might be called UK-facing operators, which would be most likely to consider coming onshore with their online offshore operations if the structure and incentives were right—have told us that the value of being regulated in the UK is only about 2 per cent. of gross profits from remote gaming. Set that alongside even the total amount of irrecoverable VAT that would be present in any operation that came onshore, which would be about 4 per cent. of gross profits from remote gaming, and members of the Committee will see that even a zero rate of remote gaming duty would not, in itself, attract the industry to this country. We concluded that there was no tax rate solution to the question of how to encourage such operators to consider making the UK their base for future operations, in line with the new social regulation. At different points in his speech, the hon. Gentleman advanced different arguments regarding the yield from the package of tax changes. Those changes will raise only about £30 million extra; that is set out in the Red Book. They are designed to complement the Government’s social policy on gambling and, as I have consistently and clearly said over the past couple of years, to adapt the tax regime to enable it to adjust for developments in the casino market and the regulatory regime. We calculate that clauses 7 and 8 combined will yield an extra £30 million in a full year. That is hardly either a tax bonanza, when set alongside the £143 million raised from casinos in 2005-06, or a tax bone, given to operators to secure a massive expansion of casinos in this country or to tempt offshore operators into the UK. Both the hon. Gentleman and my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) raised what they described as the ““Mecca bingo”” question. That is a little beyond the scope of the clauses and the schedule under discussion, but if you will allow me, Mr. Gale, I shall comment on it. As the Committee would expect, I regularly meet representatives of the Bingo Association and bingo operators, including Mecca. I am acutely aware of the situation that bingo operators face in Scotland after the smoking ban. They must make commercial decisions on whether to continue or to close the clubs. At root, this is not principally a tax problem with a tax solution; it is the product of a complex combination of changing demographics and changing tastes in leisure activities. In addition, the policy of applying VAT and duty to bingo participation fees is entirely consistent with our treatment of other player-to-player games in licensed premises, such as poker played in casinos. My hon. Friend asked some specific questions about the provisions in the Bill. The reference in the schedule to those who provide ““facilities for remote gaming”” is intended to identify and define companies that provide that type of gaming. After all, the new tax regime is designed to apply to those very companies. He had concerns about ensuring that the taxation regime would apply to companies that provide online services to players in the UK but are based abroad, particularly outside the European Union, in the tax havens that the hon. Member for Wycombe mentioned. The reality is that those companies are beyond the reach of UK regulation and our taxation regime. I agree with my hon. Friend the Member for Wolverhampton, South-West, that it would be an advantage to be able to regulate and tax such operators and operations, but part of the reason why they operate from those tax havens is that it places them beyond the reach of our taxation system. I hope that those points of explanation have been useful to the Committee, and I hope that it accepts that clauses 7 and 8 should stand part of the Bill, and schedule 1 should be agreed to.