Horserace Betting Right

Baroness Neville-Rolfe Excerpts

Wednesday 20th April 2016 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills and Department for Culture, Media and Sport (Baroness Neville-Rolfe) (Con)]

My Lords, I thank noble Lords for their valuable contributions to this informative debate. I particularly thank my noble friend Lord Astor and the noble Lord, Lord Collins, for the amendment they moved to the Gambling Act 2014 which underpins our proposed changes. In a sense, they were the midwives to the proposals in the paper that we have recently issued.

The racing and betting industries in this country have a unique interdependency going back more than 200 years. For most racegoers, their day out would be incomplete without a bet on the horses; it is a major part of British cultural life and heritage. While preparing for this debate, I was watching the Grand National, which is the toughest betting race. How happy the bookies must have been as Rule the World overtook the favourite; I am very sorry that my noble friend Lord Smith had a bad day.

There are almost 60 racecourses spread across Britain. This is my first debate on racing but I have been to quite a few racecourses. I have been to York—I did not know that there were eight others to go to in Yorkshire. I have also been to Ascot, Newmarket, Salisbury, Wincanton—and Chepstow, for those of us who love the Welsh. Each course plays a part in supporting local communities in driving inward investment, which is very important, and creating jobs. From recent stars such as the wonderful Golden Horn—see my Twitter account—to classic names such as Frankel, the British racing industry continues to produce exceptional talent. To ensure that this great British success story continues to prosper, it is vital that the entire betting industry makes a fair contribution to a sport from which it profits.

The mutually beneficial principle of transferring funding to racing from the proceeds of betting under statutory arrangements dates back to 1928. But the current levy system is, I think we all feel, broken because it does not apply to bookmakers who are based offshore. Following the introduction and rapid growth of online gambling, this has meant that more and more potential funding is falling outside the scope of the levy.

We have an unsatisfactory, two-tier system where British-based bookmaker A must pay the levy, whereas bookmaker B, based offshore but otherwise in identical circumstances, does not. Statutory contributions have declined steadily, as has been said, and amounted to just £60 million last year. However, a number of bookmakers make voluntary contributions, which I welcome.

Last month we set out our plans for new funding arrangements for British racing. This will ensure a level playing field and a fair return to racing from all gambling operators, regardless of where they are based. The funds will be passed to racing to make spending decisions and will benefit all those who play a part in enabling horseracing on which betting takes place. This includes racecourses, breeding groups, veterinary groups, trainers and, of course, stable staff.

Investment in the equine veterinary profession, disease control, watering of courses and the role of the HBLB—I may have got that wrong—is very important; it was raised by the noble Baroness, Lady Mallalieu, and some of my noble friends. It will be for the racing industry to make decisions on the spending of funds. It is in the interests of racing as a whole that the funds raised benefit the entire industry. The current levy has supported the advancement of veterinary science, and I very much hope, as do other noble Lords, that that will continue.

As my noble friend Lord Astor rightly said, racing is a huge industry contributing £3.5 billion to the economy. There are 85,000 direct and indirect jobs associated with it, including the 6,500 stable lads and lasses whom we heard about from the noble Baroness, Lady Mallalieu. Attendance rose to 6 million last year, so we are talking about a very popular sport. My noble friend Lord Suri added his own experience to that picture.

My noble friend Lord Astor also mentioned the oncourse industry. Oncourse bookmakers have a distinct and unique position in the betting and racing sphere; they have a vital role in providing better services for customers at the racecourse. We are considering how best to factor oncourse bookmakers into the new arrangements, and we will hold further discussions with that sector on this issue.

As to how the rate will be set, the rate payable by bookmakers will be informed by independent economic analysis and further consultation with betting and racing. I will say a little more about that later. That will take account of all sources of revenue, including media rights, to pick up a point made by the noble Lord, Lord Lipsey. I did not agree with every point that he made on this occasion; I do not think that he meant it seriously, but a purely voluntary environment would mean that not all betting operators would continue to contribute.

With regard to whether the rate will be assessed against a bookmaker’s turnover or gross profits, this is a point that we will be discussing with the industry. The current method, based on gross profits, has been in place for more than a decade. It is consistent with the approach taken to general betting duty. With regard to VAT, respondents to the consultations on the future of the levy raised serious concerns around the application of VAT to the racing right model. I am pleased to say that, as with the current system, whereby levy payments do not attract VAT, the new model will retain this key benefit. The racing authority will be set up by the racing industry and will be responsible for making spending decisions in line with the overall purposes of the scheme, and with an appropriate reporting mechanism. This body will be referred to in legislation but it will not be a statutory body.

The necessary changes will be made by secondary legislation, as has been said, using powers in Section 2 of the Gambling Act 2014. The regulations will, of course, be subject to the affirmative procedure and will therefore require debate and approval here and in the other place. I am not sure whether I can promise to hit the 2016 timetable referred to by my noble friend Lady McIntosh, but I can take the House through the timetable as I see it.

This is spring 2016—it is wonderful outside—and following analysis from Frontier Economics, we will begin discussions with betting and racing industries to inform the level of contributions from betting. To reply to my noble friend Lord Risby, Frontier Economics is due to report to Ministers later this month, and I think that it is reasonably on track.

Secondly, we have set aside summer and autumn this year for the state aid notification process with the European Commission. A good point was made about how it can be valuable to consult during that process. This particular area is not one that I am dealing with ministerially but I will feed that back because, having dealt with other areas, I know very well how valuable stakeholder engagement can be in getting the right arguments and moving things forward efficiently.

We are planning to publish the statutory instrument and a full impact assessment by the end of 2016—which the noble Lord, Lord Stevenson, who I see is in his place, will be glad to hear. That will enable us to bring the new funding model into force in April 2017, which is what we are hoping to do. There will be no formal role for the Bookmakers’ Committee in the new system, but racing and betting have shown that they can work together and I hope that such co-operation will continue.

My noble friend Lord Astor also asked what dispute mechanism would be in place. With the rate set by the Government, there will be less room for disputes in the new arrangements. However, we will retain the existing dispute and enforcement mechanisms, which I think are well respected.

I come back to the important subject of state aid. The levy has not been subject to an assessment under state aid rules because, as I think has been said, it originated before our accession to the European Union. The new arrangements will also cover the offshore market, and we want to ensure that the new system is sustainable and can last for a number of years. It is therefore prudent to seek clearance, which will provide certainty for all parties.

On the subject of timing, we have already begun informal conversations with the European Commission. That is why we believe that April 2017 is both a realistic and an achievable target. I think I have already said that we will ensure that the industry is kept in touch as that process takes place. I was given some comfort when talking this morning to the officials who are involved in the early stages of that state aid process.

I thank my noble friend Lord Risby for his valuable contribution. I have already explained the timing and said that Frontier Economics is making good progress. Following consideration of the report, the Government will meet the betting and racing industries to discuss the level of contributions from betting to racing.

The noble Lord, Lord Lipsey, asked about other sectors, particularly greyhound racing, which I know he is very passionate about. I have not been to greyhound racing for a very long time, and this reminds me that that is something I should try to do in my ministerial role. He may be disappointed to know that we have no plans to widen the scope to apply to other sports. However, we have expressed a desire, which I very much endorse, for both industries to agree a mutually beneficial voluntary arrangement that demonstrates a fair and just return to that sport. I should perhaps confirm that the Government have no plans to introduce a sport betting right.

With the extraordinary growth of online betting, the current levy system is fair to neither betting nor racing. The new funding model that we have discussed today will create a level playing field between all gambling operators. It will provide a fair return to racing and will ensure that our proud and vibrant racing industry can continue to produce world-class racing for generations to come. I thank my noble friend for securing this debate and look forward to discussing these issues further with him and other noble Lords in the weeks and months ahead.