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John Healey: Shortly means shortly.
Mr. O'Brien: That was not the reassurance for which I was looking. Having put the question on the record, our expectation will be that the model will be published before the summer recess. Anything beyond that would stretch the meaning of the word shortly, however often it is repeated. On the basis of such assurances, we will not press the issue further.
Mr. Wilshire: I hasten to say that I have not been put up to this, and I have not even consulted my colleagues on the Front Bench so they will be worried about what I am about to say. I want to make a plea from the heart, and on a serious point. Over a number of years, I have done my level best to produce English wine. It is not a declarable interest because no one in their right mind would ever buy it from me. No money is involved, but it has given me an insight into the English wine industry. Its small-scale production means that its overheads and its ability to compete in the marketplace are seriously undermined.
I appreciate the difficulty of discriminating between one sort of alcoholic grape juice and another; I am well aware of that. However, if the Government, or any other Government, were looking for a means of import substitution to help the balance of payments, any way that could be found to assist and encourage the production of English wine would make a great deal of difference.
Ian Lucas (Wrexham): Does the wine to which the hon. Gentleman refers include Welsh wine?
Mr. Wilshire: I am proud to be an Englishman. The Welsh can make their own case. I doubt that the Scots would want to—it is a bit too chilly up there. I am aware of Welsh wine. It is, of course, nothing like as
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good as English wine, but I will make a plea for that as well, if it will help. The point is a serious one. Anything that any Government can do to encourage small-scale production, through any financial relief or benefit, would be valuable for eccentrics such as myself in England, and it would be quite useful in a very small way for the British economy.
Mr. Jack: The Minister might say a word or two about the current structure of the rates of duty per hectolitre, because I thought the tax was on alcohol. Why is it that the rate for wine or made-wine up to a strength of 15 per cent. is £158.69 but the addition of a dash of carbon dioxide, whether added naturally or by the process of fermentation, raises the duty rate to £220.54? It seems quite an expensive tax for a whiff of carbon dioxide, unless it is an anti-greenhouse gas measure, but I do not understand why there is such a large differential if we are taxing alcohol.
John Healey: We have made rapid progress. I welcome the information that the hon. Member for Spelthorne is a small wine producer in his own right. We have considered the suggestion that has been put to us of some sort of reduced rates for small wineries, similar to the scheme that we introduced for small breweries nine months ago.
The European directive does not allow for us to set reduced rates for small wineries. In considering whether the UK should press for such an alteration in EU law, it is important to appreciate that despite the hon. Gentleman's best efforts, less than 1 per cent. of the wine consumed in the UK is produced in the UK. By comparison, 90 per cent. of the beer drunk in the UK is produced and manufactured here. Even were we able to amend EU law to consider such a measure, it would remain the case, under other European and world trade agreements, that we could not apply such a scheme to UK wine producers only. It is likely that much of the wine that might qualify under such a scheme would come from overseas. Our own small wineries would receive comparatively little benefit from such a move.
The right hon. Member for Fylde asked why there was an increase on still wine in line with inflation, but a freeze on sparkling wine.
Mr. Jack: The question was not about the differential rate of increase, but the different rates of duty. If we are taxing alcohol, what is the explanation for having such a big difference between still and sparkling wine, when carbon dioxide is the only difference?
John Healey: For duty purposes, we treat sparkling wine such as champagne as more comparable to other alcoholic drinks than to still wine. There is, therefore, a different duty band, and the rates in the Bill to which the right hon. Gentleman points are different.
I believe that I have given all the reassurances that I can to the hon. Member for Eddisbury. He has raised again points that he has raised in previous debates. I have explained that ''shortly'' means shortly.
Question put and agreed to.
Clause 3 ordered to stand part of the Bill.
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Clause 6
General betting duty and pool betting duty: relief for losses
Question proposed, That the clause stand part of the Bill.
10.15 am
John Healey: We turn now to general betting duty and pool betting duty. For about a year and a half now, we have had in place a reformed taxation system based on a new gross profits tax on betting. When we introduced those reforms, they were a radical and bold response to a difficult and rapidly changing competitive environment for our betting industry. They represented a fundamental shift in the approach to taxation in that sector.
We have now completed a review of the reforms and I am happy to be able report that bookmakers, racing representatives, academics and industry observers widely hold them to have been a significant success. John Brown, chairman of William Hill, speaking at the British Horseracing Board annual general meeting last year, said that the implementation of the gross profits tax was
''truly momentous. The significance of which cannot be over estimated. The new tax changes everything—the basis is now fairer, it is set at a sensible rate, and thus enables the bookmaker to stand the tax, without deductions from the punter. It represents forward thinking of the best possible sort''.
I am quoting because I would hesitate to make this claim myself. Mr. Brown continued:
''GPT will prove to be the single most important and influential development in betting and racing in 30 years.''
I shall not embarrass my hon. Friends by citing other commentators who have made similar remarks—
Rob Marris: Go on.
John Healey: Since my hon. Friend presses me, an article published last year in The Economic Journal concluded:
''The switch to a gross profits tax is likely to lead to lower prices and enhanced consumer welfare . . . Further, the switch will . . . enhance the ability of UK betting firms to compete in an increasingly competitive environment.''
Research has indeed confirmed that the gross profits tax is more efficient, fairer and more sustainable than the former regime.
Adam Price (East Carmarthen and Dinefwr): Does the Economic Secretary have any quotations or positive assessments made by the betting industry since the Budget or the publication of the Finance Bill that he can share with the Committee?
John Healey: I am grateful to the hon. Gentleman. As it happens, I published a report yesterday containing the results of the review, so I can bring him and the Committee bang up to date by summarising one or two of its main findings.
The report shows that since the reform, betting shops have experienced an increase in turnover of 82 per cent., almost half of which is attributable to the gross profits tax. It shows that 2,000 jobs have been created in the industry in the UK, and that internet and niche gambling sectors have had a significant
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boost—the previous duty on stakes was a greater burden to such small operators because their margins were tighter, so that is a significant gain from the new system. The report also shows that the benefit of betting offshore or illegally, which was a serious problem for the industry, has been removed and that the level of illegal bookmaking has been significantly reduced. Finally, it shows that international business appears to be drawn to the UK. Although it is still too early to quantify, at least one large chain has reported a 10 per cent. increase in overseas sales since the introduction of the gross profits tax.
None the less, because the review threw up some questions from the industry for the Government, we are taking the opportunity it provides to make some further improvements to the new regime. We are doing that through this clause and the related clauses 7 and 8. At present, if a bookmaker makes a loss over an accounting period, although no duty is payable because no profit is made, that loss cannot be carried forward to the next accounting period to be offset against future profits. During the review, some smaller bookmakers and spread betting firms argued that, when they made a loss over an accounting period, the lack of a carry-forward facility meant that over a year they paid a higher effective rate of duty than 15 per cent. on their gross profits over the year as a whole. Having considered the merits of the bookmakers' argument, the Government have decided to refine the betting provisions to allow them to carry forward losses between accounting periods. For consistency, the arrangements also apply to pool betting operators.
I hope that the Committee will realise that the clause demonstrates the Government's commitment to consult, to listen to the industry, to respond when there is good evidence and a good case is put to them, and to refine the regime accordingly. On that basis, I commend the clause to the Committee.
Mr. O'Brien: I recognise that it must have been in order, because otherwise you would have brought it to the Economic Secretary's attention, Sir Nicholas, but clearly his introduction was to the whole group of clauses rather than specifically to clause 6.
It was quite interesting that the Economic Secretary said that he was hesitating. I have never before noticed him hesitate to heap praise on himself and the Government. When he was called for an encore, he seemed to have one well prepared—a well rehearsed pat on his own back. Perhaps he is concerned with a new game of who can pass the bucket fastest, but that for him to decide.
The Economic Secretary is right to say that we are dealing with a rapidly changing industry. Whenever there is change, it is appropriate to consider during the fundamental redrawing the settlement between activities that are taking place and the proper approach to the element that will eventually benefit the public purse through revenue raising. I do not take issue with the approach on gross profits tax.
Although I do not want to stand in the way of progress and development in the industry, we should not lose sight of the effect that the tax regime and the way in which the industry is developing are having.
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This is yet another example of arguments about services, opportunities and entertainments in localities and communities. We are deeply concerned on behalf of our constituents about community post offices and pharmacies, given the rate of closures and threatened closures; so it is with the pleasure of many of our constituents who like to have a bet and take part in gaming in other ways.
Although it would be wholly inappropriate to say that the matter should be the subject of a regulatory impact assessment, it is right to seek an assurance from the Economic Secretary that, when considering such matters, the Government genuinely acknowledge at all times the effect on communities and opportunities for people, as opposed to simply industrial, commercial and taxation issues, which may become clinical unless there is determination to hold on to the community aspect. The businesses in question are meant to serve and to entertain their customers, who are using their hard-earned, post-tax money.
On clause 6—perhaps this is unsurprising but it should be recorded none the less—it is nice to see the Government trying to get the law right at the second time of asking. The clause allows for losses that occur when winnings paid out by bookmakers exceed lost bets to be carried forward to offset gross profits in the following accounting period; that applies to both stake and pool betting and is in line with the general hopes and expectations of the interested parties. The clause will, of course, take effect from 1 September. It would be helpful if the Minister were to ensure through his reply that there is an absolute understanding about the following accounting period—it is obvious, but it would be helpful to have a clarification on the record.
One significant issue is not transparent: what is the position on carrying back losses? If there is relief for losses where winnings paid out by bookmakers exceed lost bets, what is the position on carrying back losses to prior accounting periods? Does the clause provide for that? It would be helpful to hear the Minister's observations. If the issue has not been considered or covered, it clearly should be and he should examine it. He may well have been advised that other accounting provisions cover it according to the entity, individual or business affected.
We considered many of the issues relating to the general application of GPT when we had our extremely important, although sadly unconsensual, debate on bingo in the Committee of the whole House. That debate has continued to resonate loudly within communities interested in bingo, and many of the issues relating to bookmakers have similar community bases. We should ensure that everything is done to facilitate the more modern approach that is appropriate under GPT, given how the whole business is developing. I look forward to the Minister's responses to those questions.
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