Offshore Gambling Bill
Debate between Baroness McIntosh of Pickering and James Duddridge(11 years, 11 months ago)
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Miss McIntosh
I am delighted to do so, and I shall say a little more about bet365. Not only is it a major employer but it demonstrates what can be done to keep that type of operation onshore in this country while contributing to the local and national economy and employing people in the hon. Gentleman’s constituency.
James Duddridge (Rochford and Southend East) (Con)
My hon. Friend has referred several times to this country, and I am not sure what she means. The Gambling (Licensing & Advertising) Bill includes explanatory notes, with a section on territorial extent around Scotland, Northern Ireland and Wales. I could not find in the Vote Office explanatory notes for her Bill, which is another excellent measure, and wondered whether it provided similar provisions.
Miss McIntosh
On a closer reading of the Bill, my hon. Friend will see that it
“extends to England and Wales, and Scotland”
and, in part, to Northern Ireland. That is obviously a matter for debate.
Horse racing is important for both business and tourism, with a number of race courses in and around my constituency. Thirsk is the main local race course, but there are also courses at York, Wetherby and Ripon. The industry is vital, and a large number of trainers, jockeys, breeders, bloodstock agents and stable lads and lasses depend on the racing industry for their livelihood. My constituency home is on a former stud farm. The contribution that racing makes locally in Thirsk, Malton and Filey is considerable. There is a direct link to point-to-point racing, as well as a contribution to local pubs, shops and restaurants, which benefit from the visitors, thus making a contribution to leisure tourism. One need only visit Thirsk on race day, or race evening, to see the town come alive.
I thank my constituency chairman, Peter Steveney, who has been extremely helpful in enabling me to prepare for the debate and introducing me to many of the main players in the racing community both locally and nationally. I thank everyone who briefed me for today’s debate.
Miss McIntosh
I hope that I might please you, Mr Speaker, even if I disappoint other hon. Members, when I say that I have no intention of going down that path today. I do not wish to enter into a competition about who is the most assiduous or distinguished member of the Select Committee. Suffice it to say that I yield to no one in my admiration for the members of the Committee here today.
James Duddridge
All members of the Committee are distinguished and their advice should be considered carefully. Both the Department and the Treasury should work closely together, which is why I am encouraged to look at the Government’s alternative Bill, rather than my hon. Friend’s Bill. Perhaps she could reassure me and explain some of the discussions she has had with the Treasury and the Department.
Miss McIntosh
I believe that the debate we are about to have on clause 4 goes to the heart of that matter, but I would like to remain in order and to go through clauses 1, 2 and 3 first before addressing the issue of the levy, which is set out in clause 4 of the Bill, which I am promoting on behalf of my hon. Friend the Member for West Suffolk.
Clauses 1, 2 and 3, as the Select Committee has made clear, set out the problem. The Bill proposes to put the operation at the point of consumption, which means where the customer is in the United Kingdom. I do not think that any customer placing a bet, either through a betting exchange or online—I saw yesterday for the first time a betting exchange work on someone’s mobile phone, but I am afraid that I resisted the temptation to place a bet—assumes that the company through which they are placing it is based anywhere other than the United Kingdom. I think that it would come as a surprise to them to learn that the company is based in Gibraltar, the Isle of Man or some other such place.
The background information provides a reason for bringing offshore operators into the United Kingdom for the purposes of advertising, licensing and the levy. Betting companies that provide gambling facilities for British customers will be required under the Bill to be licensed by the Gambling Commission, which will ensure that the correct tax and levy are paid, and the tax situation will be resolved in future by the Treasury. If a bet is placed in the UK, under the point of consumption licensing, that bet and the company behind it should be covered by UK law and domestic regulation to protect consumers. That should be welcomed by the betting companies because it gives them, to use the idea expressed by the hon. Member for Newcastle-under-Lyme, clarity and legal certainty and sets the relationship on a sound commercial basis on which they can operate. It will be completely transparent and open to scrutiny by the regulator.
Miss McIntosh
I think that my hon. Friend’s argument helps mine and disagrees with that of my hon. Friend the Member for Shipley, who might, therefore, like to explore it.
The purpose of clauses 1, 2 and 3 is to bring offshore activities back onshore to allow the Gambling Commission to intervene in order to be able to discharge its public policy role and promote consumer protection. The sports integrity of racing, football and cricket is also important. The gambling scam in cricket captured everybody’s attention, but we now know that that could so easily happen in racing and football, too. This is, potentially, a big and growing issue. If a relevant website was licensed by the Gambling Commission, that would give it the opportunity to report all suspicions activities. They could be monitored and the commission could discharge its public-policy and consumer-protection role.
James Duddridge
The hon. Lady mentions suspicious transactions in cricket and football, but would she also include politics and politicians placing bets on that list? Our Liberal Democrat friends, who are no longer in their place—if they ever were during this Friday sitting—are well known at by-elections for placing bets of relatively small amounts on their candidates, in order to move the odds and then place a leaflet in “Focus”, or whatever their little yellow paper is called. If this is moved offshore, would it not be even harder to catch them in the act?
Miss McIntosh
My hon. Friend throws new light on the debate with an issue of which I was unaware. I do not know whether my hon. Friend the Member for West Suffolk knew of it when he was drafting the Bill, but I am sure that it has caused great consternation to the House.
Racing is still the main sport that attracts those who place bets online or offline into a betting shop or on to a computer to place a bet, and that is why this Bill is so important.
Miss McIntosh
The hon. Gentleman makes a powerful and pertinent point that I hope will satisfy my hon. Friend the Member for West Suffolk.
The purpose of clauses 1, 2 and 3 is to bring unlicensed offshore companies back under UK law and back under the regulator, making sure that they advertise here, have a licence here, and are under UK public policy provisions and the UK consumer protection remit of the Gambling Commission. Offshore betting online—remote gambling —would be back under UK regulation so that all those betting activities could be regulated equally by the commission.
Clause 4 relates to the horse racing levy. This provision is the main difference between the Bill before us and the remote gambling Bill that we hope Ministers will introduce in the next parliamentary Session. When betting shops were legalised in 1961, that was the first time that a bet could be placed other than on course. Now, even more gambling is taking place with internet gambling, and there is a wider choice of how to place a bet. That raises the question of how to bring the money placed on an offshore bet into the levy so that it can return to racing.
It has been pointed out to me in the course of preparing for this debate that an unintendend consequence of the Bill is that the UK could become a centre from which illegal markets operate. Foreign companies that are not subject to tax and the levy could find it more competitive to attract British consumers in this way. There is a fear that operations could move from the EU to third world countries, as the ordinary consumer—the person placing the bet—would not be able to tell where the website was licensed. In addition, the EU Commission needs to be persuaded that clause 4 is acceptable, and for that purpose there has to be proof that consumers are not benefiting from the current system. However, Bills similar to this have already been passed in other EU countries.
The Government have voiced concerns over a potential state aid issue whereby a tax is applied to companies based in other EU countries to fund racing in those countries. I hope that the Minister will respond to this point. Some companies based offshore thereby avoid paying tax and the levy despite the fact that they operate almost solely in the UK. It has been suggested that there could be problems in compelling the whole market to pay at the point of consumption, as betting operators are not keen to pay the tax and levy unless they can see that everyone else is doing so. This would increase the currently uncompetitive nature of being based in the UK and mean that less money is put back into racing.
Betting operators who are based offshore are reaping all the benefit of accessing the British market but are not contributing financially to the future of horse racing. The UK has the most liberal gambling market imaginable, with open competition, betting shops, the internet and the legalisation of gaming machines in shops. If betting operators are brought into the taxable area, their biggest concern will be the rate at which the tax is set. I accept that that is a matter for Her Majesty’s Treasury. However, it has been put to me that if the tax were set at 15% of gross profits, a number of betting operators would become unprofitable. The purpose of the Bill is not to increase tax, which is properly a matter for the Treasury, but to level the playing field for those contributing or not contributing to the levy. I hope that that addresses any potential misunderstanding of the purpose of clause 4 and the Bill, as opposed to the remote gambling Bill.
James Duddridge
If hon. Members are concerned about the levy—I have a few concerns—would it be possible to propose the removal of clause 4 in Committee to make the Bill more like the Government Bill? That would give the House the opportunity to consider today whether to take forward this Bill or the Government Bill.
Miss McIntosh
Perhaps I am not being very clear, but I think that the wish of the House is to include clause 4 to address the levy situation. Together with any potential Treasury action in the Budget, we need to ensure not only that a sensible rate of tax is set by the Treasury but that the levy and tax contributions together cannot be left as voluntary. We have recently seen too much of corporations such as Amazon and Starbucks avoiding tax in this country.
Miss McIntosh
That is a matter for debate. I would hope that there can be some flexibility in this regard. Tax is a matter for the Treasury, while the levy is a matter for the Department for Culture, Media and Sport.
As the levy already exists, there should not be a problem in extending it to overseas operators to equalise the conditions of competition so as not to generate a new state aid issue. If it is thought that the levy raises such an issue, the Gambling Commission has waited an incredibly long time to say so. The levy is not paid directly to economic operators in the field of horse racing but directly to the Horserace Betting Levy Board, which then distributes it for the improvement of horse racing as an industry, including veterinary science and education. Without the levy, it is hard to see what contribution bookmakers would make. The levy fell to a very low level, but it started to rise and now seems to have stabilised again.
James Duddridge
Have the Government not asked the levy board to look at a consultation on the voluntary arrangement that is not concluding until autumn 2013? Could it be argued that this is the wrong time to legislate and that we should let the Government encourage that consultation? Without intending to use too many puns, is not my hon. Friend putting the cart before the horse in pushing this Bill through now?
Miss McIntosh
Perhaps we are in danger of the horse having bolted. I would say, as we canter around the course, that the voluntary idea simply does not work. A lot can be said for the one company, which I shall try not to name, that has proceeded on a voluntary basis. It has entered into a commercial deal that has safeguards in place to ensure that the contribution is made at the point of consumption. The time has passed for a voluntary option, and we have to move on to some sort of compulsion. It would be helpful if there were a further level playing field in that those who had entered into a voluntary deal were allowed to sponsor prizes and races. It is unfair that the one company that has so far entered into the voluntary arrangement is not allowed so to do.
James Duddridge
My hon. Friend is defeating her own argument by mentioning the one company that has come forward and done the right thing on a voluntary basis. Does that not show that some people are starting to come forward and that the process is working, and may I urge her to name the company? It sounds like a company that, although it might not be perfect, is doing better than the rest of the marketplace. We should encourage it.
Miss McIntosh
Let me make the case, and then perhaps I will satisfy my hon. Friend’s request. Importantly, the levy was created and enforced prior to our entry in 1973 into the Common Market, as the European Union was then called. Let me state clearly and graphically that the levy enjoys grandfather rights—that is the big difference between the Bill under consideration and the remote gambling Bill—and cannot therefore be said in any shape or form to constitute a state aid.
What authority do I have to make this case? I hesitate to say this, but as a mere youth in 1978 I spent six months on a stagiaire placement as a trainee with the Commission in the Directorate General for Competition, then known as DG 4. The House will be familiar with the competition rules—originally articles 85 and 86 of the treaty of Rome, and now known as articles 105 and 106 of the snappily entitled treaty on the functioning of the European Union—that set out the common rules on competition, taxation and approximation of laws. As the levy existed prior to 1973, and because it has grandfather rights, it cannot be deemed to constitute a state aid, and the fact that we have not been pursued by the European Commission emphasises that. I hope the Minister will listen closely to and support those arguments, and that he will either give the whole Offshore Gambling Bill a fair passage today, or say that when the remote gambling Bill is brought forward, clause 4—or its equivalent relating to the levy—will be included.
Miss McIntosh
I am not concluding quite yet, but I have always considered myself to be particularly close to the Government having served for nine years as a shadow Minister. I have had loose discussions on that issue; I am sure the Minister will elaborate in summing up and—hopefully—accepting this Bill, and we will then have a space in the legislative programme from May for another Bill such as the water Bill. I am sure the whole House joins me in looking forward to that.
We are seeking reassurances about when the Government will bring forward their remote gambling Bill. It is not sufficient for the Minister simply to say that it will be in the next Session, which will start in May 2013 and end in May 2014. I think that would be unacceptable, and I hope that the Minister will comment not only on when the Bill will be presented but, as the hon. Member for Eltham (Clive Efford) said, on what the timetable will be and when the legislative stages will conclude. I hope he will also respond to the point about the levy, which, as I have said several times, is the main point of contention when comparing the Offshore Gambling Bill and the Government’s remote gambling Bill.
James Duddridge
My hon. Friend is perhaps being unfair on the Minister. Although he has indicated that the Bill will make progress in the third Session of this Parliament, would it not be unprecedented, given all the enormous problems in the country, for such a Bill to be given preference following the Queen’s Speech? He has already gone some way to making assurances, but to hold back praise purely on the issue of timing in the next Session seems rather unfair and churlish.
Miss McIntosh
I do not want to appear ungracious and I congratulate the Minister on the work he has done in preparing the remote gambling Bill. However, there is a sense of urgency. Every time I visit a stable yard—whether or not it is the one housing the horses of my hon. Friend the Member for Shipley—I have the acute impression that a crisis is hanging over the racing industry that we need to address. Competition is currently distorted and some companies are reaping the benefits of the industry—consumers wanting to place bets—but do not contribute financially to the long-term upkeep and maintenance of horse racing.
Although the levy is provided from state resources, its extension to overseas operators would only equalise, not distort, competition. The overall impact of betting operators having moved offshore has been the decline in prize money I referred to earlier. Race courses have therefore had to fund part of the prize money themselves, as well as fund the levy, which is its biggest overhead. Therefore, if the levy decreases, race courses have to contribute more to maintain the same level of prize money. That is difficult to do, because if more money goes into prize money, less is available to spend on the integrity of the sport and things such as the photo finish and dope testing.
James Duddridge
My hon. Friend is right to chastise me in relation to super-casinos. I was referring to the broad objectives, which were to prevent gambling from being associated with crime and disorder; to prevent it from being used to support a crime; to ensure that it was conducted in a fair and open way; and to protect children and other vulnerable persons from being harmed or exploited. I thought that those aims were laudable, as opposed to the excessive regulation of super-casinos, to which I shall return anon.
Miss McIntosh
I am following my hon. Friend’s remarks with great interest. Did the 2005 Act not liberalise and deregulate some casinos?
James Duddridge
The 2005 Act was a bit of a pig’s ear in relation to a number of issues. In Southend, for example, we had three casino licences, and were pushed to bid for a super-casino, to which my hon. Friend the Member for Shipley (Philip Davies) referred, not because we particularly wanted it, but because a super-casino on the Thames corridor would put the three casinos out of business. I shall return to the casinos in Southend, because they are relevant to the responsibilities envisaged by the Bill. The further the regulation from the person making the bet, the easier it is not to take responsibility.
I particularly welcomed the provisions in the 2005 Act on the protection of children, because as a child I placed a bet. I am clearly not very good at betting— I did not win—but I placed a £1 bet. Someone kindly explained to me that I had a better chance of winning if I placed an each-way bet. I did so, only to find that it cost me £2. They said, “Would you like to pay tax?” I thought that that was rather strange, because as a 16 or 17-year-old I was not used to paying tax, so I said, “No.” Then I realised that I had to pay tax if I won. Children need to be protected. [Interruption.] My hon. Friend the Member for Shipley (Philip Davies) should have better sense than to barrack me from a sedentary position. I have known him for a number of years, and have discussed betting on a number of occasions, and every time I come away with him trying to sell me a horse’s leg or urging me to place a bet. Invariably, not knowing how to place a bet, I end up giving him a fiver and asking him to place an extra bet for me. He has never given me anything in return, so when he says that horse ownership is not a commercial business, I can well believe it.
The Gambling Commission—the new regulator set up by the 2005 Act—has duties including the operation of licences for organisations and individuals who provide gambling, as well as personal licences for certain individuals working in the gambling industry. Remote gambling is the key issue addressed by this Bill and the Government’s Bill, and indeed the desire to impose order and regulation on the online sector was one of the motivations behind the 2005 Act, alongside the interests of the Treasury following a visit by Americans who thought that it would be a great boost to the UK economy to introduce super-casinos—which was certainly not the case.
The intention of the Act was to protect British customers from unscrupulous operators and to make Britain a base for the growing online gambling industry. It has clearly failed, and many Members have evidenced that today. I do not think that I need to go into the details, as that would prolong the debate for the sake of it, which I do not want to do, as I have a number of issues of substance that I want to cover.
Under the Act, remote gambling operators are required to hold a Gambling Commission licence only if they have remote gambling equipment located outside Britain. Operators based outside Britain but licensed in the European economic area and Gibraltar are permitted to advertise gambling services in the UK with reliance on the licence issued in their home jurisdiction. I believe that other operators are allowed to operate in Antigua, Barbuda, the Isle of Man, the States of Alderney, and Tasmania. Quite why those countries are allowed to operate on the same basis, I do not know, because they are a bizarre collection of countries and geographies that are not usually put together. Perhaps later in the debate someone will explain why they stand out. This has created a number of key problems and challenges around consumer protection and the regulation as competitiveness issues of British licensed gambling operators. I would like to spend some time developing these points further.
Participation in remote gambling is steadily increasing. According to the British gambling prevalence survey in 2010, 73%—that is, 35 million—of the adult population participated in some form of gambling in the year prior to the survey, with 14% using the internet to gamble. I thought that was an awfully large proportion. As a novice gambler I thought that I was not a participant in this great project, but then I realised that state gambling included the national lottery, which I do online, and well as the pools, which some people do online. Some of those silly games—Monopoly or similar—that I have been persuaded to play while topping up my national lottery game are included as well, so it is quite a broad area.
Like most people, I had no idea where the tax on those games on websites was going. There is a complete lack of clarity. It is a growing industry and a growing problem. A report by the Gambling Commission on industry statistics estimates that the total global revenue from gaming, the gross gambling yield, which for some reason excludes telephone betting, was more than £20 billion in 2001, representing 10% growth on the previous year.
The UK consumer gambling yield which, as opposed to the broader statistics, includes telephone betting, is estimated to have grown by 5% between 2010 and 2011 to reach £2 billion, so this is big business. It has an impact on many people, which makes the need for reform so much more important and relevant. The Government rightly recognise that the current system is flawed and can no longer adequately ensure the protection of British consumers that had originally been envisaged.
I said that I would return to the subject of Southend and gambling. There are three casino licences in Southend. I go into those casinos, as one would expect of a Member of Parliament, and talk a lot to operators about the responsibility for problem gamblers. People with British licences onshore are responsible for that regulation. Having listened to the debate, I think that the position offshore is less certain. In some cases operators could have no responsibility.
If a problem gambler in Southend goes into the casino and is in remission, for want of a better word, and going to Gamblers Anonymous, they can say to casino staff, in effect, “Look, I’ve got a gambling problem. Please don’t serve me when I come in.” A register is maintained. I believe this goes across the board. If that person, for whatever reason—stress, perhaps—is worrying about whether they should gamble or not and subsequently says, “I’ve changed my mind. I want to gamble again,” they are not allowed to do so. They are opted out, but that same person can nip on to a computer and bet.
It is wrong that that differential exists between online and offline, onshore and offshore. It is not a level playing field. It is not to the benefit of the gambler. Most gambling is perfectly legitimate and does not cause a problem, but for some people it does cause problems. Bringing the legislation, the supervision and the taxation closer to the individual would be a great help.
James Duddridge
I entirely agree. The Prime Minister’s other speech this week will receive much more coverage in the coming weeks and months, but I think that his Davos speech was equally important because it sent a message to companies about how they should conduct their tax arrangements, whether they are banks, Starbucks or online casinos. They need to do the right thing and pay tax on their online business, as John Lewis does, or pay tax on the betting framework, as bet365 does.
Miss McIntosh
On the point about self-exclusion, is it not the case, as I found when I visited some high street betting shops in Thirsk and other towns in my constituency, that self-exclusion is more difficult online? The staff in betting shops are trained to identify at-risk and vulnerable people and will step in to discourage them from placing a bet, but I am not sure how that control can work on a home computer.
James Duddridge
I apologise to my hon. Friend, but I will have to defer to others on that point, because I have placed a bet only twice. The first time was around the ’92 election, when there was a runner called Party Politics, which I thought was a sign. The election result was not as pleasing as I had hoped, but I did win on that bet. The other time was to bet on my becoming the next Prime Minister. I will indulge the House a little more on that unlikely subject, because I think it illustrates some points in relation to supervision.
James Duddridge
I am grateful for that correction. One of the things emerging from this debate is that I need to spend some more time betting in order to be able to contribute more fully to debates such as this.
There is a potential risk of match fixing and suspicious betting practices taking place on overseas-licensed sites, including those that may have an impact on sports in Britain. The British authorities may not be notified, thereby placing individuals at much greater risk.
Some offshore operators do share information with the Gambling Commission, in addition to their home regulator, and they do so on a voluntary basis. I would be interested to hear more examples and details from the Minister. It is all very well to say that they share some information, but is it sufficient? I suspect there may be some smoke and mirrors regarding what is and what is not shared.
The detail is often insufficient for it to be used in an investigation. In fact, I cannot find many examples of investigations taking place. That limits the Gambling Commission’s ability to conduct thorough investigations when it does not have powers of jurisdiction. There have been instances when the commission has not received the relevant information and has been unable to obtain information from its overseas licensed operators or regulators. That is clearly not in anybody’s interest or in that of the market to work effectively. Let us face it: if the market is not robust, people simply will not place a bet. Why would they place a bet with an organisation—be it online or offline, onshore or offshore—if they thought that it would wriggle out of the contract? It is important to look at the benefits of bringing all this back to the UK for the sustainability of the industry.
In some cases, the Gambling Commission is told that the refusal to provide information is down to overseas data protection requirements. I would be interested to hear whether the Minister thinks that that is a legitimate concern or just a veil that these organisations are using. There is currently no way of ensuring that the protections of the gambling regulations framework, particularly those afforded to licence condition 15—for those who do not know, that is about the reporting requirements on restrictions of betting activity—are applied on a consistent basis to operators who transact with British consumers or are allowed to bet on British events.
With technological advancement, it is becoming increasingly difficult to identify the level of regulatory oversight of gambling service provision and where the key equipment is, which is important in relation to the legislation.
Miss McIntosh
I understand that countries such as Denmark have made the point of consumption the basis of advertising licensing, as well as tax. The technological changes are obviously happening, so does my hon. Friend think that there may be a reluctance on the part of some operators to engage with the technology?
James Duddridge
I am not sure that there is a reluctance to engage with the technology per se, but there is a reluctance to do so where it might be disadvantageous rather than advantageous. I recall going to a business in Southend that specialised in online marketing. I did not question it on the taxation arrangements of the companies they were helping or those of the company itself, because that was not the focus of my visit. I think I will go back and ask a little more about the online gambling firms it is working with and the implications of how technology can be used to assist not only in compliance with regulations but in best practice, which is in the interests of the whole industry.
Many operators have different products licensed in different jurisdictions, and it might be thought that this provision could be a regulatory burden. I know that my hon. Friend the Member for Shipley will pull me up very quickly on that issue. However, several companies deal across different jurisdictions, and I do not think that it should trouble them too much.
James Duddridge
That is a reasonable point. There could be better protection in other jurisdictions, or simply better odds, and people may be very aware of the risks they are taking in response to those odds. During the problems with the Icelandic banks, people felt that they knew the risks they were taking for an extra couple of per cent. If I were to place a bet on bet365—I was tempted to place one on the next leader of the Labour party—I might be tempted to use a site I had never heard of if I got better odds. It is worrying, however, because people must know the details and be confident that when that eventuality—the change of leader—takes place around 2015, the site will pay up. Will the site pay up against a person standing in as temporary leader or must it be a long-term leader? Will it pay up for someone who is just keeping the position warm before another Member of Parliament takes on the role? I am not sure, but offshore gamblers need clarity about when the site will pay up, and it is clear from this discussion that such clarity does not currently exist.
Having set out my broad position, I will now look at the specifics of the Bill and in particular the point of consumption, which goes to the heart of the Bill. The Government are already introducing measures on remote gambling, which in many ways will provide greater protection for British-based users of remote gambling services. The case for change is clear, but there is limited consensus on standards of software testing and what it means to be a British consumer—where the hardware is, whether it is a software issue. Those matters are quite complex as information is pinged around the world within seconds.
There is concern about a lack of fairness towards British-licensed operators that operate overseas or have overseas consumers. We must look at that issue and at what happens when British citizens travel overseas. If I travel to America and use a site to place a bet on Stoke City, what would the regulations be compared with those covering a bet made in the country where the event takes place?
Both Bills seek to amend the Gambling Act 2005 so that remote gambling by consumers living in Britain is regulated on a point of consumption basis, rather than on the point of supply, and there is broad agreement that that is the right way forward. Such a measure is sensible and a fundamental change to the basis on which the system of remote gambling is regulated in the UK. By moving from the current place of supply basis to a place of consumption basis, the British consumer becomes the focal point around which the system is based, rather than the location of the gambling operator. In terms of consumer protection, that is the right way forward.
All operators selling into the British market will be required to hold a Gambling Commission licence, and will therefore be subject to all the provisions of the previous Government’s Gambling Act 2005 and its regulations, to the Gambling Commission’s social responsibility and technical standards requirements, and to the provisions I have referred to. That will bring the original intent of the Act up to date. My hon. Friend the Member for Shipley was entirely right to say that I should tar not the whole Act with the brush of success— I am thinking of super-casinos—but only its broad understanding.
Bringing the original intent of the Act up to date will give consumers greater confidence that the operators they choose will be subject to the same standards. For example, an offshore operator that makes remote gambling facilities available to consumers around the world on the internet will need to obtain an operating licence from the Gambling Commission if people in parts of Great Britain are capable of using them, regardless of whether they are used in Great Britain. If operators want to avoid having such a licence, they would need to block internet access from consumers in Great Britain at their own cost, so that people are incapable of using remote gambling facilities illegally in the UK. The measure will also mean that there is a requirement for operators to contribute British problem gambling issues and regulatory costs. Effectively, they would have to make a contribution where they are part of the problem, which is an extremely welcome development, and will go some way to levelling the playing field for UK-based companies.
I have concerns about the whole arena of gambling. Recently, the Southend Standard, a weekly publication in my patch of Rochford and Southend East, set out the number of betting offices on the local high street. I was surprised to find that there were five, including two run by the same company. I cannot help but think that we need to look again at the broader issue of gambling, and particularly at how online gambling based offshore encourages people to bet money they may not be able to afford.
Switching to a point of consumption basis will mean that the location of the gambler and not the operator will be the deciding factor on what tax to pay. For example, money collected by an online casino that is attributed to a UK player will be subject to British taxation, which seems entirely fair. Although there is no mention of the rate, the current rate of 15% on gross profits clearly puts domestic operators at a disadvantage. The hon. Member for Newcastle-under-Lyme rightly said that the level of taxation is the crux of the matter. I believe William Hill accepts the principle of changing to the point of consumption from the place of supply if the rate of taxation is right. I understand it has pitched for 5%, but it would suggest a low figure, wouldn’t it? I have never been a fan of high taxation—I prefer lower and flatter rates—so I encourage the Government to consider whether 15% is right and competitive, and whether it will encourage growth in the UK and people in other jurisdictions to bet in the UK.
The new licensing arrangements will also mean that, for the first time, overseas-based operators will be required to inform the British Gambling Association of suspicious activities, which will help the fight against illegal activity and corruption in sports betting, which discredits not only the betting community but the sporting community—people cannot enjoy sport if they believe the result is fixed. I welcome the inclusion of that measure, which, as I have said, removes the potential risk of match-fixing and suspicious betting practices in sporting events on overseas-licensed sites.
The second half of the Bill relates to the horse racing levy. My experience of horse racing is not much better than my experience of betting in a shop or online, but I have been to Aintree, and to Lingfield a couple of times—they were enjoyable events. As a Member of Parliament whose constituency is partly rural, I am particularly concerned about rural communities. Quite often we make decisions here that have an impact on them. A number of Members have mentioned the great benefits of the horse racing industry, with 60 race courses across the UK.
Miss McIntosh
As I think I said, two race courses have closed, so we are have only 58 race courses at the moment.
James Duddridge
I thank my hon. Friend for that correction. I had not picked up on the fact that that figure was the old figure, rather than the new figure after those closures.
The numbers are immense. I shall not repeat them, partly because I might get one of them wrong again, but also because I think similar numbers were read into the record by my hon. Friend the Member for Mid Norfolk. However, the contribution is massive.
I had not realised how peculiar the levy was. Nobody is suggesting that we have a similar levy for similar industries. I am sure that even the Labour party in search of funds would not argue that the political levy should be more or less likely to be enacted just because bet365 has political betting. Many marketplaces survive without receiving a subsidy from the people who bet on them. For example, the revenues for cricket and football come from different sources. My hon. Friend the Member for Shipley made an interesting point about the case for looking more holistically at the levy. While there has largely been a decline over five years—there has been a little up-kick in the past couple of years—it would be much more interesting to see the figures going to horse racing based on TV revenues plus the levy.
As a Conservative, I do not start every debate with a blank piece of paper and decide what there should be. I am very cognisant of what there already is. The levy has provided a backbone to the horse racing industry, and it would be unwise to have a revolution in this sector. My hon. Friend pointed out that it is not perfect in its distribution of funds. While I am trying to build up a resistance to his betting advice, I will take his political advice on that.
On the broader landscape in relation to the horseracing levy, I welcome the fact that my hon. Friend the Member for Mid Norfolk raised the issue of the Davos speech. It will not turn out to be as important as the Europe speech, but it was significant in turning things on their head and saying that companies need to take a greater degree of responsibility themselves. That applies to the offshore gambling issue, but also to the levy.
I am not minded to support clause 4 in its current state. If the Bill goes to Committee, I would love to serve on it and table a probing amendment that might force a vote—I am not sure what one calls such an amendment; an aggressive probing amendment, perhaps—and remove clause 4. That is not to say it is not the right way forward in the longer term. If the Minister’s consultation and encouragement to the levy board and the voluntary system does not work, I would come back to the provisions in clause 4. It may be that, rather than removing the clause, we could make the measures provisional on what happens under the voluntary arrangement. Let us give the industry the chance to fix it and, if it does not, let us impose another solution on it.
Miss McIntosh
Today we are seeking a reiteration from the Minister of his six-month time frame for the current levy board-led process before he proposes a replacement. It would be good to know that that process is in place. I am a little disappointed that my hon. Friend the Member for Rochford and Southend East (James Duddridge) does not agree with what I said about the importance of clause 4, which seeks to remove a distortion in the market. I predict that the Minister might resist clause 4, if not the rest of the Bill, on the grounds that he believes it will constitute a state aid. However, I thought I made a powerful case—if not by PowerPoint, which I do not think would be admissible in the Chamber—for why clause 4 goes to the heart of the Hancock/McIntosh version.
James Duddridge
My hon. Friend made a very powerful argument. The case she made persuaded me to move far more towards her position than when I arrived in the Chamber. I will listen with great care to the Minister’s remarks, but I am given great security by the fact that I can listen to her comments and other hon. Members who make a contribution—via intervention or a substantive speech—and not have to come to a final view today. Either the Bill can be passed into Committee, where we can probe it in more detail, or we can amend the Government Bill in Committee, as and when it appears in the third Session. In fact, if it ends up appearing nearer the end of the third Session, we will have had more time to consider the issues.
I am not commenting on the urgency of dealing with this matter. I appreciate that Government time should not necessarily be committed at the front end of the programme, but my hon. Friend the Member for Thirsk and Malton quite understandably sees the need for a certain amount of urgency in this regard. However, that needs to be balanced against doing the right thing. My gut feeling, not having heard the Minister’s formal remarks yet, is that I would like to know a little more before full-heartedly supporting the position she has outlined.
I said that there are two ways to go forward. One is to let this Bill pass; the other is to consider and perhaps amend the Government’s Bill. At this stage I will continue to listen to the debate before making up my mind, but I am minded to prefer to see the Government Bill go through and be amended. However, that should in no way be a distraction from, or criticism of, the case made by those who have very ably brought these matters to our attention.
I have a number of other points to make, but I am conscious that other colleagues want to contribute and they may have fresh matters to raise. Rather than my reiterating and adding more detail to some of my points, I will conclude and listen to them. I thank my hon. Friend the Member for Thirsk and Malton for bringing this matter before the House. She is a passionate individual—passionate about her constituency and about all businesses, specifically the horse racing business today. The House appreciates her efforts, and I am sure that her local community and everyone associated with the broader industry will see the excellent work she is doing.