The Government today rejected calls by the beleaguered bingo industry to scrap double taxation, claming that tax was "not at the root of the bingo industry's problems".

Responding to a Downing Street petition for the removal of VAT that attracted almost 2,000 signatories, the Government said: "We do not believe there is a tax solution."

The response came just two days after Gerry Sutcliffe, the minister at the Culture Department responsible for gambling, hinted that he was considering helping the bingo industry by increasing the number of high-jackpot machines clubs can run.

Mr Sucliffe told the Bingo Association that he intended to issue a statement to the House of Commons in the next few weeks, adding: "I think it is fair to say that the Prime Minister is sympathetic to bingo – and recognises the role of bingo halls in supporting their local communities."

But the decision formally to rule out the removal of VAT is a bitter blow. Operators had warned the Government that the removal of VAT was necessary to prevent further club closures in an industry already badly hit by last year’s smoking ban and the scrapping of high-payout Section 21 gaming machines.

The industry had been hoping the Chancellor would use the recent Budget to remove the anomaly whereby bingo clubs, unlike casinos and betting shops, have to pay both VAT at 17.5 per cent and a gross profits tax of 15 per cent.

When Mr Darling failed to do so, he was accused of delivering a “slap in the face” to the bingo industry.

In today's formal response, Number 10 said it had "given serious consideration to the points raised by the bingo industry. However, our assessment remains that tax is not at the root of the bingo industry's problems and we do not believe there is a tax solution."

It added: "Bingo benefited from a reduction in its effective tax rate in 2003 and the average effective tax rate on bingo, which measures the combined impact of VAT and duty on a comparable basis, is in line with that on casinos, machines and the lottery. Removing VAT on bingo would cost tens of millions - money that would have to be recouped from somewhere else."

One bingo executive said the response was "depressingly familiar but no less mendacious for it".

He said the claim that bingo was subect to a similar effective tax rate as other forms of gambling was laughable.

"Angela Eagle, the Exchequer Secretary, has previously said that it is impossible to calculate effective tax rates for gaming companies. It is undeniable that the bingo industry would be better off if it was taxed on the same basis as betting shops, football pools, casinos, slot machines and poker."

The news will particularly effect Rank, owner of the Mecca Bingo chain, and Gala Coral, which runs Gala Bingo.

Explore Industry Sectors

• Banking & Finance

• Construction & Property

• Consumer Goods

• Engineering

• Health

• Industrials

• Leisure

• Media

• Natural Resources

• Retailing

• Support Services

• Technology

• Telecoms

• Transport

• Utilities

Times Recommends

• Bovis and Redrow axe close to 1,000 jobs
• Irate M&S shareholders demand fresh talks
• Investors rally to B&B amid fears of contagion