HC Deb 16 June 1966 vol 729 cc1812-25
Mr. J. Bruce-Gardyne (South Angus)

I beg to move Amendment No. 177, in page 16, line 10, after "licence", to insert which expression shall except where the context otherwise requires, include a half-year's gaming machine licence". At this point we move from the rarified atmosphere of the historical background of backgammon and crown and anchor to the more mundane subject of the "one-armed bandit".

I suspect that the "one-armed bandit" has few friends on either side of the Cormmittee—[HON. MEMBERS: "Oh."] I am delighted to hear from some of my hon. Friends that it has. I was going on to say that perhaps many of us have "shaken its hand". I have no personal interest to declare, because whereas I have on occasion won money at backgammon, I have never succeeded in winning any- thing from a "one-armed bandit".

The purpose of the Amendment is to call attention to the position of a club or other institution where a "one-armed bandit may be installed, but where, by the nature of the activity which is carried on by that club, the machine is liable to be used only for a seasonal period. I suggest that in this case we are dealing with what might be called a "half-armed bandit", rather than a "one-armed" one.

I want to explain an individual case which was drawn to my attention, which I think brings out very clearly the purpose of the Amendment. I had a visit last weekend from one or two of my constituents who are officials of a bowling club at Monifieth, in my constituency. They pointed out that they were extremely worried about the effects of the Bill on their finances.

They have a membership of 68 men End about 34 women. The women do not pay the full subscription, but they do not enjoy the full facilities. They had to in- crease their subscription last year by £1, because of rising costs. About 30 per cent. of their members are old-age pensioners, and they were afraid that if they had to increase the subscription further many of the members would leave and the club would have to close down.

They felt that they would be badly hit by the Selective Employment Tax, which we shall be discussing later, and also drew my attention to the predicament they were in over the gaming machine or "one-armed bandit" which they have recently installed. The income from this machine is about £5 a week. This is divided—I believe that this is the normal arrange- ment—between the owner, the lessor of the "one-armed bandit", and the club, providing £2 10s. a week each.

As I am sure the Financial Secretary will appreciate, a bowling club functions only during the summer, and in my constituency it would be unlikely to function for more than six months in a year. The result is that the gross income from the one-armed bandit at £5 a week could not possibly exceed a maximum of £65 a year each for the owner of the machine and the club. Clearly, if the owner of the machine has to pay a £75 licence fee, he will take the machine away. This would be a blow to the finances of the club which, facing as they do the other consequences of the Government's fiscal policy, they simply could not meet.

They put it to me that it was not unreasonable that, in the case of a gaming machine, as in the case of a car or a game licence, it should be possible to obtain a licence for less than a year at a reduced fee. That is the simple purpose of the Amendment—to provide that, where a gaming machine will be used for only six months in the year, the licence fee should be part of the full licence fee as stated in the Clause 13.

I have cited the case of a bowling club, because that was the case represented to me by my constituents, but this applies, as I am sure the Financial Secretary appreciates, to many other clubs of that type. I have had drawn to my attention the case of cricket, football, ski-ing and sailing clubs and any institution which, by the nature of its activities, operates on a seasonal basis through the winter or the summer. I am sure that many hon. Members would be able to add to the list.

I am told that the Amusement Trades Association claims that it has a list of 57 clubs in the area of Surrey, Sussex, Kent and Essex alone, which run machines from which they cannot expect to have takings of £75 over the season, and each of which is liable to be withdrawn. As I said, provision is made for seasonal game licences for three months and for car licences for four months and it seems not unreasonable that gaming machine licences should be available for half a year.

I hope that I have said enough to explain the purposes of the Amendment and to give the Financial Secretary an idea of the thinking behind it. I hope that he will be able to offer us some satisfaction on this matter.

11.0 p.m.

Mr. MacDermot

As has already been made clear a number of times in our debates, we are very anxious to keep the administration of the new measures as simple as possible, and do not want to have a vast army enforcing them.

We are asked in the Amendment to make a special concession which would operate in favour of small clubs. The reaction of anyone at first sight, and particularly when first hearing the matter so forcefully argued as it was by the hon. Member for South Angus (Mr. Bruce-Gardyne), is, naturally, to feel sympathetic towards it. But there are other aspects to this.

A half-yearly licence at half rates is proposed. A number of seasonally operated fruit machines are operated only for a few months in the year, but they take considerable sums of money. I think particularly of those at seaside resorts.

It would be anomalous to grant a licence on which only half the duty was paid in respect of such a machine, whereas the full duty would be paid for another machine in a club operated over the whole year with far lower takings. This immediately shows the sort of anomaly that one gets into as soon as one tries to adjust the law to meet a hard case.

We have had the position of small clubs very much in mind, because we know that a large number of sporting and other clubs have the machines, and that they are a valuable source of revenue for the clubs. We are aware that their takings are often rather low, and this is one of the main reasons why we have pitched the rate of duty as low as we have, at £75 a year.

We have been criticised for that by many people, who have said that the duty should have been higher and that many machines are taking sums that could have borne a very much higher rate. But we were determined on a flat rate, because the duty must be simple and easy to administer. Therefore, we had to select a rate that would enable the great majority of the machines to continue to be used.

The odd social club may not find it worth while to take out a licence, but I do not think that there are nearly as many as the hon. Member for South Angus suggests. For example, he quoted the case of a person who hires a machine to many different clubs within a year, none of which would be able to bear a duty of £75. The answer is that none of them would have to do so, because the man who hires out a machine pays the one duty in respect of a particular machine. All that is required is that over the year the takings at one premises shall be sufficient to pay the duty.

Mr. Bruce-Gardyne

I think that the Financial Secretary has misunderstood what I said. The 57 clubs in the South-East which I quoted are not, as I understand it, hiring from one person. They are each hiring a machine on which a licence will have to be paid.

Mr. MacDermot

Where there is seasonal use of machines, the partial solution may be for the owners, where machines might be moved from a summer to a winter site, to share the burden of the duty. There is no reason in principle why an exception should be made for small clubs, once we accept that it is right to impose a duty upon the machines.

When the clubs are deciding whether it is worth while and profitable to them to operate a machine, they will have to take the duty into account. There is no concession in other spheres of duty for small clubs. If, for example, they obtain a club licence, they must pay the same as a publican pays for his licence. They must also pay the same duty on the beer which they sell.

It might be much more profitable for them if they were exempt from those duties, but there is no such exemption. We do not feel that we can go any further than we have done to meet the small clubs, and we have gone a very long way to meet them by pitching the duty as low as £75 a year.

We know that there are many small clubs which have takings as low as £100 to £150 a year, and with the duty at this rate it would still be worth their while to operate the machines. We do not feel that we can lower the duty.

Dr. M. P. Winstanley (Cheadle)

I am anxious to understand the hon. and learned Gentleman clearly. Did I understand him to say that, where a fruit machine is moved from one club to another, the different clubs can make some arrangement about the licence? That would appear to suggest that it is the machine which is licensed. Is the Financial Secretary therefore saying that in the case of any individual "one-armed bandit", or fruit machine, the machine will have to bear duty only once per year, irrespective of where the machine happens to be placed from time to time? In other words, are there circumstances in which more than one licence would have to be obtained for one machine?

Mr. Ian MacArthur (Perth and East Perthshire)

While the Financial Secretary is considering that ingenious point, may I ask him to give further thought to this whole question? I appreciate that there is no force in the argument that a lower rate of duty should be paid in respect of "one-armed bandits", or fruit machines, in seaside clubs or piers because of the seasonal nature of the seaside resort.

What my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) and I have in mind is something quite different. My hon. Friend and I represent constituencies consisting mainly of small communities with small clubs, many of which depend for some part of their revenue on a "one-armed bandit". I recognise that there are objections to introducing Amendments which would lead to abuses and anomalies, Cut I believe that there is a simple way of solving this problem which would meet a very large part of the case advanced by my hon. Friend. The concession should be related to clubs wholly or mainly engaged in sporting pursuits. A form of words was devised to meet this case in the Licensing (Scotland) Act, 1959, and it eased many sporting clubs in Scotland. A procedure of this kind could well avoid anomalies and it would be completely fair.

I appreciate that in some cases the duty of £75 may appear to be low. However, for small clubs of the type my hon. Friend and I have in mind this figure is very high. Seventy-five pounds represents an enormous amount of playing on a machine. I have made some calculations showing that the raising by a small club of the £75 necessary to pay this duty would be beyond any reasonable expectation. To raise £75 requires the clearing of 3,000 sixpences. There is one popular model of this machine which on average pays back three sixpences for every four sixpences played. This means that 12,000 sixpences have to be played through the machine for 3,000 sixpences, or £75, to be cleared to pay the duty. In addition, the small club has to pay a very large price to have the machine.

It is unlikely that a small club of the type which my hon. Friend mentioned would buy a machine of this type outright, because these machines cost hundreds of pounds. They are much more likely to rent those with a rental and share the cost based on one. Sharing the cost on a 50/50 basis is a popular method. In a case of that kind the number of sixpences to be played to pay the rental and the £75 would be 24,000. In the case of a bowling club, which, in Scotland, has a bowling life of about six months in the year, this represents 4,000 sixpences per month, or 1,000 shots at the machine a week. Obviously, this is far beyond the possible expectation of a small club with 100 members or so, which is typical of these small sporting seasonal clubs in Scotland, and, I am sure, in many parts of England and Wales.

I hope that the hon. and learned Gentleman will consider this sympathetically and investigate the possibility, at a later stage, of providing some relief to clubs of this kind.

Mr. MacDermot

To deal, first, with the point raised by the hon. Gentleman the Member for Cheadle (Dr. Winstanley), may I confirm what I said before, which is that it is open to the owner of a machine which is being used only seasonally on one set of premises to arrange to transfer the licence if he makes arrangements with another club operating during another season. He will find the relevant provision in part II of paragraph 10 of the Second Schedule, which gives power to: The proper officer … in such manner as the Commissioners may direct, and without any additional payment— (a) transfer a gaming licence in respect of any premises to a successor in title to the interest in those premises of the person to whom the licence was granted; Or (b) amend a gaming machine licence by substituting different premises for those in respect of which it is for the time being in force. In the majority of cases, the type of clubs with which we are concerned would not be the owners of the machine. They would be hiring it and in such cases the licence would be taken out in respect of particular premises by the company hiring it out. If it is only hired for six months, the company can arrange for the licence to be transferred to another set of premises, to which it will hire the machine for another period. In this way we would only be recovering one set of duty in respect of one machine for one year. This may assist a number of these small clubs, who would otherwise not find it advantageous to have one of these machines, to continue to do so.

The Committee will readily realise that if we are to tax these machines at all one will always find the case of a small club, at whatever level one fixes the duty, saying that it was once worth its while having one of these machines, but it is no longer, as a result of the duty. If we go on pitching the duty lower and lower we will not find a solution because it will only mean that there will be another group of clubs coming forward saying that they were affected.

One has, first of all, to try to find out what is the right level. We think that £75 is a modest and generous level, aimed at helping the great majority of clubs. Then comes the suggestion, "Why not exempt the deserving cases altogether." Once one does that one is running into trouble, because one has to have a system for defining criteria for clubs which are to be exempted and one has to scrutinise their applications and have appropriate machinery for doing this. I predict that one would not be able to avoid the sort of difficulties encountered in relation to entertainments when it was proposed to set up exemptions by reference to the aims and objects of a club.

Much as I sympthise with the suggestion made by the hon. Gentleman, I would be misleading him if I were to suggest that between now and Report stage I could find a solution to this. It is an idea which occurred to me, too, as soon as I looked at the matter, because one has sympathy with the problem and knows that it exists. I have looked into it, but I must advise the Committee that I cannot find any solution which would meet the case and leave a workable scheme. If any hon. Gentleman has a further suggestion to make and cares to write to me between now and Report, I shall gladly look at it; but I do not think that it will be easy.

11.15 p.m.

Mr. Percy Grieve (Solihull)

I support the Amendment. I am convinced that the Financial Secretary has sympathy for the motives which prompt this proposal. If I may say so, I have known him in other capacities over a great number of years, and I am sure that he has great sympathy with the small clubs here involved, which are likely to suffer considerably as a result of having to pay an annual licence fee for one of these machines.

As I understand it, the difficulty which the hon. and learned Gentleman sees in the way of accepting this Amendment, or something similar, is that it would lead to administrative complications and that more staff would have to be employed for the purpose. Is this really so? Will it be so much more difficult in the case of the small local clubs to provide for a half-yearly licence than to provide for an annual licence? I very much doubt that any greatly increased staff would have to be taken on to issue half-yearly rather than annual licences.

Although there are very many of these machines in use in small clubs throughout the country, I greatly doubt that, in proportion to the whole cost of administering this new tax, such a change would cause a much larger staff to be taken on. I urge the hon. and learned Gentleman to reconsider his attitude towards the Amendment between now and Report.

Mr. Frank Taylor (Manchester, Moss Side)

I reinforce the proposal that we should give seasonal alleviation to these clubs. There is a real case for it generally, and particularly in the sporting world, because most sports are seasonal and clubs have an off-season. It is not relevant to say that some clubs at the seaside make a lot of money out of these machines in the summer and go on to argue that this is a reason for killing off a lot of smaller clubs. That is no more relevant than to point out that one club may make £2,000 out of a machine whereas another may make only £100 in a whole year. The seasonal aspect of the matter is important and should be given full weight.

We ought to tax these machines very much as we tax motor cars. We tax the car, not the owner or the user. There seems to be no reason why we should not proceed in that way in this case. It would save on administration if each machine had a taxation licence plate on it. If one were found without a licence, the law would be broken and one could proceed against whoever was using it. In that way, we could achieve our objective at very little expense, certainly much less expense than the procedure now proposed of finding the machine and then trying to trace the owner and starting action against him.

The six months' licence fee, which could be a little more than half the annual fee, perhaps, would serve the purposes urged by all speakers in the debate and it would be generally fair all round. I ask the Government to accept the proposal.

Mr. Robert Cooke (Bristol, West)

I shall not cover again the arguments already deployed lit favour of giving special treatment to the smaller and more modest clubs. I quarrel with something which the Financial Secretary said in his last speech but one. I think that the hon. and learned Gentleman used a bad analogy when he compared this with the liquor licensing provisions of the clubs and public houses. He said that the clubs and "pubs" were on all fours in that matter, but surely that is not so. He drew a bad parallel, because clubs do not face anything like the rigours which "pubs" have to face in liquor licensing. I think that they do not even have to pay the same amount of money for their licences and certainly they do not have to provide anything like the high standard of facilities to do with the sale of intoxicating liquor.

I hope that the hon. and learned Gentleman will answer that and perhaps reconsider, as clubs and "pubs" are not on all fours, whether there is a case to be answered when my hon. Friends have been pressing for special treatment for clubs in the matter of licensing these gaming machines.

Mr. Costain

As a rule, there is a limited use of small sporting clubs. A cricket club, for instance, may be used only on a Saturday. When the hon. and learned Gentleman referred to Schedule 2, I gathered that he was saying that these machines were licensed rather like motor cars. If so, surely it would be advantageous for the cricket club, which was only on Saturdays, to arrange with another club, which was shut on a Saturday, to use these machines.

There would be a further benefit which should appeal to the Chancellor, who must have been extremely alarmed when it was revealed in a Written Answer that £4 million was spent in foreign currency on buying these machines. If we could get the maximum use from the available machines, we should not only save cash which would otherwise be spent on their import, but give an advantage to the Chancellor if the taxation system for the machines encouraged their maximum use.

Mr. Rees-Davies

There are two points. First, is it clear that the licence attaches to the machine?

Mr. MacDermot

On the premises.

Mr. Rees-Davies

If one company has a business over half the country and another company has the business over the other half, if the machine is licensed, it could be "let", if I can use that term, to Margate in the summer for six months and Peterborough for the winter.

Secondly, there are two different types of machine. That used in the clubs takes roughly 20 per cent. and is a gaming machine. It has a jackpot which produces substantial sums of money. The other machine is the "pub" machine which was specially designed as a result of opinion from counsel. That takes only 10 per cent. of the take and is only an amusement machine. It gives 2s. 6d. or 5s. tokens which have to be spent in the public house on cigarettes, sandwiches or beer.

There ought to be a different price for an amusement machine in a "pub", which should be taxed at one price because it gives very little return. The average return which it gives to a public house is a net profit of about £45 a week, which is divisible three ways, between the operator, the licensee and the publican. It is used very largely as an amenity. A machine at a club is used to make a profit for the club, and it gives a very much bigger return.

The loophole which the Treasury appears to have overlooked is the difference between the machine which is of an amenity nature for the public house—the machine which is specially designed and produced for the public house—and those designed for clubs.

I have some connection with the tourist trade myself, and I do not regard the £75 as unduly high. It is perfectly reasonable. I agree entirely that it is important that it should be possible only to hire for three months in the summer. If the duty attaches to the machine so that clubs in the tourist resorts can hire them for three or six months only, it is reasonable. However, if they are compelled to pay a licensing fee of £75 for 12 months when they only require the machine for three, it will be quite wrong.

Mr. Iain Macleod

The speech by my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies) has helped the Committee considerably. I do not know what attitude my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) intends to take. The Financial Secretary has been sympathetic to the point and has given a sympathetic answer. It is a very difficult problem. The short situation is that for many "one-armed bandits", £75 is very little. For many others, it is a vast amount of money. That is the problem, and I understand the difficulties.

However, if I understood the Financial Secretary aright, he said that, without any commitment at all, he would look at the position between now and Report stage. Possibly we could do the same and, in the light of discussions, see if we can come up with a helpful answer on Report. Perhaps on that, my hon. Friend might be willing to withdraw the Amendment.

Mr. MacDermot

I agree that the hon. Member for the Isle of Thanet (Mr. Rees-Davies) made a very helpful speech. I quite agree with the way in which he summarised the point that I sought to make in answer to his hon. Friends.

The machine in the "pub", if it is purely an amusement machine, will probably find exemption under subsection (2). If it is an amusement machine, it may not get by under that, and it is presumably there because the publican finds it to his commercial advantage to have it there. In those circumstances, I do not see any reason why there should be a lesser duty.

I agree with the right hon. Member for Enfield, West (Mr. Iain Macleod) that I approach the general subject with sympathy. I have already sought to see whether I can find a solution to the problem. I have failed, and I have given reasons why the proposals that have been made appear to me to be unacceptable. But I will gladly look further, and I will more gladly welcome suggestions from other hon. Members.

11.30 p.m.

Mr. Bruce-Gardyne

I am grateful for the rather limited assurance that the Financial Secretary has given. I am bound to say that I found that the arguments in his first reply were not very impressive, particularly the argument that a "one-armed bandit" at a seaside resort might be much more heavily used than one which was used throughout the year in a place which was not a seaside resort. Surely that is equivalent to saying that in certain cases a car which has a four-month licence taken out on it might be expected to be used more than one with a year's licence.

Any level which we fixed for a licence would be bound to leave some people in a position where they could not operate profitably. I accept that. But I am not seeking to query the level fixed in the Bill. I suggest that there could be and should be a half-year level.

I am grateful to my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies) for the points he has made. The point made by the Financial Secretary about the possibility of transferring the licence might be of assistance in certain cases, although I doubt whether it would assist a case like that put to me by my constituents.

The Financial Secretary said that the Government wanted to keep legislation simple. Coming from a Government which produced last year's Finance Bill and this year's Selective Employment Tax, that leaves me gasping. All I can say is that I hope that the Financial Secretary will look at these points again carefully before Report. On that basis, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause ordered to stand part of the Bill.

Clause 14 ordered to stand part of the Bill.