Finance (No. 2) Bill

Debate between James Wild and Alex Ballinger

Committee of the whole House
Tuesday 13th January 2026 Commons Chamber

[James Wild]

These changes were presented as some sort of simplification and modernisation, but clauses 83 and 84 nearly double remote gaming duty from 21% to 40% and increase general betting duty to 25%. We will have some of the highest rates of tax on gambling in the world. As we have heard from some Members, the industry has warned that that could have severe consequences for an internationally competitive sector that supports tens of thousands of jobs, underpins horseracing and other sports and already contributes significantly to the Treasury. It is questionable whether these measures will lead to stable, long-term revenue gains for the Exchequer, and there is a very real risk that they will result in job losses and greater use of unregulated operators in the black market. New clause 25 would require the Chancellor to come back to the House and explain what the consequences have been for revenue, sports and horseracing, high street betting shops, the black market, jobs and the public finances.

Of course, the origin of these changes owes much to Gordon Brown, who encouraged the Chancellor to hike taxes in order to increase welfare spending. Proponents of higher taxes often suggest that they will not have any consequences, but it is the role of us in this House to scrutinise potential changes and assess the impact after the event. Independent modelling from EY shared by the Betting and Gaming Council suggests that the impact of doubling remote gaming duty could be the loss of 15,000 jobs, and a further 1,700 jobs could be lost as a result of the increase in general betting duty. In total, 17,000 positions located in Stoke-on-Trent, Leeds, Sunderland, Manchester, Nottingham, Newcastle-under-Lyme, Norwich and other areas could be affected. Of course, those are simply projections—they could prove to be pessimistic, and we certainly hope that will be the case—but when unemployment has risen consistently under this Government due to the jobs tax and other costs, such warnings should not just be dismissed. That is why the Chancellor must account for the impact of her choices, as new clause 25 requires.

There has been some mention of horseracing. I was pleased to join colleagues across the House in support of the “Axe the Racing Tax” campaign. That is another tax that the Chancellor wanted to introduce, but she was forced into one of her all-too-regular U-turns.

[Alex Ballinger (Halesowen) (Lab)]

Does the hon. Gentleman accept that the proposal to harmonise gambling taxes, which the horseracing industry was most opposed to, was first proposed by his Government? It is something that they were proposing; we have just inherited it.

[James Wild]

We are debating the measures in this Bill, which was introduced by this Government. I was not involved in the changes that the hon. Gentleman refers to, and I certainly would not have supported hitting the horseracing sector in the way that was proposed. I do not remember that being in a previous Finance Bill introduced by a previous Government; it is this Government who sought to bring forward those measures, but they were roundly rejected, because horseracing supports around 85,000 jobs and contributes £300 million in tax revenue every year.

Despite the Government’s climbdown in exempting horseracing from the higher rates, the industry could still feel the consequences of this Government’s approach to gambling duties. When the online betting sector is squeezed, sponsorship is likely to be reduced, and because racing’s funding depends heavily on those partnerships and that sponsorship, we could see an impact on racing. In my area of Norfolk, we are very fortunate to have Fakenham races—I went there to support the British Horseracing Authority’s campaign against the Government’s plans. That venue is synonymous with the area and its identity, and is a source of local employment, not just at the track itself but for the farriers, the pubs, the hotels and the whole ecosystem that supports racing. That is why these clauses in the Bill continue to pose a risk to the sector and other sports, and that risk needs to be accounted for.

I now turn to the black market, an issue that was raised by the hon. Member for Stoke-on-Trent Central (Gareth Snell) and my right hon. Friend the Member for Stone, Great Wyrley and Penkridge (Sir Gavin Williamson). The Government have acknowledged the risks associated with taking this approach, which is why they quietly set aside £26 million for the Gambling Commission to combat expansion of the black market, but the same EY analysis suggests that over £6 billion in stakes could migrate to the black market, doubling its current size and undermining the progress that has been made through the existing regulatory framework. The Office for Budget Responsibility has identified potential leakage of around £500 million in lost revenue as activity shifts away from properly regulated markets. Those projections—which again could be wrong, but could also be right—raise legitimate questions about the overall effectiveness of the Government’s approach.

When taxes rise too far, behaviour can change and the yield can go down, which is what we will see with a number of the tax rises that the Government have included in their Finance Bill. Rather than reducing demand, activity will move to unregulated markets where consumer protections are weaker, fraud risks are higher, and tax revenue is not collected. I am not sure we have heard a convincing response from the Minister about how that will be addressed and whether those risks have been taken properly into account.

Let us look at what happened in the Netherlands, where the Dutch Government raised their remote slots tax rate to 34% last January. Within months, gross gaming revenue fell by a quarter and gambling tax receipts dropped to just 83% of the previous year’s figure, leaving a €200 million shortfall from the projections. Somewhat predictably, the Dutch regulator then reported a huge growth in the number of people accessing unlicensed domains, rising from 200,000 to a million. That should serve as an example of why we should be cautious about the Chancellor’s plans. Experience suggests that changes have unintended consequences, and those risks must be carefully assessed. In winding up, will the Minister provide a bit more clarity about how that will be monitored and what steps the Government will take if there are unintended consequences and those projections prove to be accurate?

There is some debate and confusion in the sector and some of the professional bodies about the treatment of free bets and free plays. The sector and those bodies have raised concerns about that. The Budget costings document calculates gambling duty using the gross gambling yield, which is the revenue retained by operators after paying out winnings to customers. However, current law uses a wider measure, which also counts the value of free bets and free plays. That means there is a potential mismatch. Will the Minister clarify that? I am sure she has had representations on it directly.

We need to strike a balance with the levels of taxation. The industry is warning that these increases will impact on sports and lead to job losses and more black market activity. New clause 25 seeks transparency and an answer to those concerns. It asks the Chancellor to assess the impact of these rises on horseracing, the black market, jobs and the public finances. That is the minimum that Parliament should expect, and I hope Members will support our new clause.

Finance Bill (Third sitting)

Debate between James Wild and Alex Ballinger

Committee stage
Thursday 30th January 2025 Public Bill Committees

[James Wild]

As we have heard from the Minister, clause 65 increases excise duty on all tobacco products and the minimum excise tax on cigarettes by the duty escalator RPI plus 2%. In addition, the excise duty rate for hand-rolling tobacco increases by an additional 10%. This is a one-off increase in addition to the restated policy of increasing rates in line with RPI plus two percentage points. We are broadly supportive of these measures but I have some questions around purchaser behaviour and its impact on the illicit market and enforcement. In addition to speaking to clause 65, I will also speak to new clause 5, which stands in my name.

Tobacco receipts are expected to be £8.7 billion this year, down by 2.7% on last year. They are forecast to decline by 0.5% a year on average over the rest of the forecast period to £8.5 billion, as declining tobacco consumption offsets increasing duty rates. The tax information and impact note explains that over the four years from 2019 to 2023, the tobacco escalator coincided with a reduction in smoking prevalence from 14.1% to 11.9% of people aged over 18. That is clearly welcome. The Government are bringing forward the Tobacco and Vapes Bill, which the Minister referred to and which includes lots of measures to make vapes less attractive to children and harder to get hold of. There is a lot to be said about that Bill, but fortunately, that is the job of another Committee.

Increasing the price of tobacco clearly comes with the risk of boosting the illicit market. The tax information and impact note suggests that some consumers might engage in cross-border shopping and purchase from the illicit tobacco market. HMRC will monitor and respond to any potential shift. Indeed, the OBR has suggested that the duty rate is beyond the peak of the Laffer curve—the revenue-maximising rate of tax. Can the Minister confirm what measures will form HMRC’s response to any shift in illegal consumption?

There are also questions around the figures. Although HMRC estimates that 10% of cigarettes and 35% of hand-rolling tobacco consumption is from illegal and other non-UK duty paid sources, evidence submitted by the industry believes that is a significant understatement. Its data shows that the consumption of tobacco from non-UK duty paid sources currently accounts for 30% of cigarettes and 54% of hand-rolling tobacco consumption. Has the Minister discussed with HMRC the difference between those figures and the basis on which they have been put together?

The Tobacco Manufacturers’ Association said that the illegal market is not in decline but that, contrary to HMRC’s claims, it is expanding. As well as providing more accurate figures on the scale of the illegal market, it would be useful to know whether the Government have calculated the potential consequences for retailers and law enforcement of an expanding illegal market.

[Alex Ballinger (Halesowen) (Lab)]

Does the hon. Member agree that the tobacco market’s estimates are not unbiased? It has form in exaggerating the scale of the illicit tobacco market in the UK.

[James Wild]

The hon. Member has probably seen the same evidence produced by the industry as I have; I do not think that we should dismiss it out of hand. Representatives from the industry do, for example, go around football terraces, pick up the empty packets, see where they came from, and do sampling or take other measures. Of course the industry’s evidence should be challenged and tested, but my point is about whether HMRC has worked with the sector to see if its figures are wrong. If they are, and HMRC’s are perfectly right, we can follow the HMRC figures. I am raising a legitimate concern about the accuracy of the data to make sure that we are all operating from the same page because, as the OBR has pointed out, we may already have reached the peak point where the tax will be doing harm.

The Minister referred to the success of enforcement over the last couple of decades. In March last year, the previous Government set out a new strategy to tackle illicit tobacco. With evidence of a substantial illegal market—and whichever set of figures we take, it is substantial—what steps are the Government taking? Are they taking the previous Government’s strategy forward or will they introduce their own strategy?

The industry has specifically proposed that the Government provide trading standards with full access to the powers granted to HMRC under the Tobacco Products (Traceability and Security Features) (Amendment) Regulations 2023. At present, the legislation allows trading standards to refer cases to HMRC, which will then consider imposing on-the-spot penalties of up to £10,000 on those selling tobacco.

The industry proposed that it would be far more effective for trading standards to apply the penalty at the point of enforcement rather than having to refer the case to HMRC. It also suggested allowing trading standards to keep the receipts from any such penalties to reinvest in its enforcement action—we are all familiar with the pressures that trading standards is facing. Will the Minister say whether the Government have considered those proposals and, if they have not, will he?

I have tabled new clause 5 to ensure there is better understanding of the risk around the illicit market. The Minister respectfully dismissed the need for it, but it would require the Chancellor to, within six months of this Act being passed, publish an assessment of the impact of the changes introduced by clause 65 of the Bill on the illicit tobacco market. As we have heard, increasing tobacco duty could alter the behaviour of consumers, and we could see greater illicit market share.

Evidence from the industry—which may be contested—shows that non-UK duty paid sources are significant. There is clearly a risk that a further increase to tobacco duty could boost the illicit market, and HMRC needs to act to protect lawful revenues for the taxpayer. We would therefore welcome the Chancellor publishing an assessment of the impact of the changes. As I set out, we will not oppose clause 65, but I look forward to the Minister’s response to my points, particularly on the illicit market.