Offshore Gambling Bill

James Duddridge Excerpts

Friday 25th January 2013 Commons Chamber

[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.

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[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.

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[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.

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[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.

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[Paul Farrelly]

I take the hon. Lady’s point, but I think she is rather doing herself down, because the case made in this Bill and the fact that the horse racing levy exists at all show the power of the industry and the representations made on behalf of racing.

On the thrust towards a point of consumption basis, the vast majority of the RGA’s members are based offshore, where they pay very little tax. Therefore, although I respect the RGA in many respects, we have to take its arguments against the thrust of the change to the regime with a pinch of salt. The big exception among its members is bet365, which in 10 years has become the biggest employer in north Staffordshire. It is largely UK-based—all its sports betting has always been UK-based—because the founding Coates family believe in creating employment locally and paying their fair share of tax. Their commitment to our local area and sport in general is shown in their ownership of Stoke City football club, as the hon. Member for Shipley (Philip Davies) will very well know. Indeed, unless someone is a very wealthy racehorse owner—I am looking to Manchester—owning a premier league football club is going to make a big dent in their pocket. The commitment of the Coates family is demonstrated and well regarded.

We do not see it in the RGA’s representations, although it appears in its previous submissions to the Select Committee, but bet365 wholly welcomes the Government’s change to a point of consumption basis for taxation. By virtue of that, it is important to recognise that the RGA does not speak for all its members on that matter or, because of the success of bet365, for a big slice of the UK online market.

[James Duddridge]

It is interesting to hear what bet365 has done, for good reasons, within its community. Has the hon. Gentleman learned from his discussions with the company whether it has managed to persuade any other organisations to start thinking in a similar way and to come back onshore on a voluntary basis, or are those organisations so far removed from bet365 that it will remain an isolated case?

[Paul Farrelly]

I do not want to get involved in the internal politics of the RGA. All its members are reputable, and the vast majority—the likes of William Hill, Coral and bwin.party—will of course accept a licence if we move to the new regime. They will not want to be unlicensed operators. That is not how they do business and they would not make money in a big market such as the UK as comfortably as they do at the moment.

Cutting through the bluster, we can see that tax is the fundamental factor. It is important to recognise that, for those operators, this is about getting the tax right. The other arguments are incidental, and those operators will be able to live with the changes. Some will have different experiences because of their distance from the UK market, but they will all be able to live with the changes as long as they are comfortable with the tax arrangements. That very point was highlighted in William Hill’s submission to the Select Committee for our scrutiny of the Government’s draft Bill. Having made all its arguments, the RGA has effectively suggested that it could live with all the changes if the gross profits tax were reduced from, say, 15% to 5%. That is the crux of the argument. We will test all those objections in our scrutiny Committee on Tuesday. As the hon. Member for Thirsk and Malton said, our report called on the Treasury to establish what should be the current level of tax for online gambling, taking into account the need to bring everyone on board and not to encourage an unlicensed grey market.

The continued presence and success of bet365 in sports activities is rather inconvenient for the rest of the industry, because it shows that the doomsday arguments do not have any substance. Bet365’s success proves that it is fully able to compete here, and there is no reason why the other big names should not do so as well.

Let me set out some of the facts for the House. In the year ending March 2012, bet365 took £12 billion in wagers, which was 45% up on the previous year. It made pre-tax profits of £116 million, which was up 22%. That is a record that most UK businesses can only envy in the current economic environment. Its total contribution to the UK Exchequer, including betting duty, VAT and £20 million corporation tax, was £130 million; and, importantly for our area in these difficult times, it recruited another 500 staff.

Bet365’s record is exemplary, and if it can be so successful there is no reason why the likes of William Hill, Coral or Ladbrokes—all the names, old and new, that we know so well—cannot be successful here too and contribute to the UK Exchequer. This is all about tax, and for the Government it is all about revenue. It would be helpful for us, and for the industry, if the Minister shed some light on any conversations that he has had with the Treasury on how its modelling of the tax take has progressed and on the discussions it has had with the industry on tax levels.

If tax is the nub of the argument for the industry, the core issue in the Bill is, as the hon. Lady has made clear, a special plea for the horse racing industry. I do not have the opportunity to indulge myself in racing as much as the hon. Member for Shipley does, but I enjoy the odd visit to the races and the odd flutter. We have Uttoxeter nearby in Staffordshire, and Chester races are just across the border.

I am not intrinsically against a special deal for the racing industry, because it is a reality that the racing levy is part of the landscape—the hon. Lady talked about grandfather rights—and it is a national lottery for the horse racing industry. However, I do not believe that she made the point as strongly as she might have done for Ministers to back the case for the racing industry and not to cave in to special pleading for, say, a football levy to help struggling clubs. An example of such a club is Port Vale, which is at the opposite end of the city from Stoke City FC—owned by bet365—and recently went into administration. If the hon. Lady would like to intervene on me, I would be interested to hear why she thinks the Minister should not listen to special pleading from other sports.

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[George Freeman]

Those operators are not required to comply with the regulation that applies to operators based in the UK. The Bill will simply create a level playing field by making offshore bookmakers subject to exactly the same regulation, which I do not think anyone would consider unduly onerous. Such a level playing field would also encourage new entrants into the betting market, a development of which Conservative Members in particular would approve.

I support the Bill principally because I think the amendments that it proposes to the 2005 Act will create that level playing field. It will

“regulate remote gambling on a point of consumption basis; to require all operators selling into the British market, whether in the United Kingdom or overseas, to hold a Gambling Commission licence to enable them to undertake transactions with British consumers and to advertise in the United Kingdom; to provide that all relevant operators contribute to the Horserace Betting Levy”.

That does not strike me as a radical package of anti-business measures. It does not strike me as a dramatic attack on the freedom of the market, or a contravention of any simple, basic business principles. It is simply common sense. We need a structure that supports our industry, is fair, and provides a level playing field for all operators.

I believe that the Bill will unlock three important benefits. It will provide better protection for consumers. If all operators are subject to Gambling Commission requirements, everyone who places a bet will know that wherever they are placing it, it will be subject to the same regulation. Operators will be mandated under the Gambling Commission’s licence condition 15.1 rather than being able to operate on a voluntary basis. The Bill will, as I have said, return a level playing field to the market, and in so doing will make it easier for small to medium-sized operators to enter the sector.

At the heart of the debate is an issue similar to the one that we face across the board. Industries are increasingly dominated by big players, while smaller placers are locked out at the bottom. The pyramid of racing, which at the top relies on the glamour and prestige of the Derby, the grand national and other big, celebrated events, has deep roots at the bottom. Unless we look after those roots and introduce a system that maintains their viability and sustainability, we will see them wither. I believe that the Bill does what the 2005 Act failed to do. It resolves a very simple and fundamental funding crisis at the heart of racing, and gives hope to the 60 race courses in the country—including Fakenham, which is on the edge of my constituency—by reassuring them that they have a sound basis on which to continue to thrive, and to support both racing and the local rural economy.

I understand that the Government intend to give effect to these measures with legislation of their own, and that they have published a draft Bill. I hope that the Minister will assure me that in pursuing their own legislation, the Government will seek to give effect to undertakings given previously. On 20 January 2011, at the end of the debate on the funding of British horse racing, my hon. Friend the Member for Weston-super-Mare (John Penrose)—who was then the Minister responsible for tourism and heritage—said:

“It has also been pretty much universally agreed in today's debate that the current levy system is old-fashioned and, if not broken, in the process of breaking.”

He also said:

“It is absolutely right for the House to urge the Government to come up with concrete proposals before the end of the year, and I am happy to accept that challenge, in line with the mood of the House.”—[Official Report, 20 January 2011; Vol. 521, c. 1067.]

Since May 2011, racing has been involved in a pre-consultation process and subsequent bilateral discussions with the betting industry, represented by the industry’s recognised trade body, the Association of British Bookmakers, and under the auspices of the Department for Culture, Media and Sport, to achieve a sustainable long-term replacement for the levy. Despite its best efforts, and notwithstanding the aims of the Bill, racing is continually told that the levy is incapable of the reform that would enable it to capture modern forms of betting. It is therefore vital for the work to establish a mechanism that is fair, enforceable, commercial and sustainable to be completed. Solutions, including a racing right and a Gambling Commission licence condition requiring bookmakers to have commercial terms agreed with racing, are available and the consultation is due to begin this year.

I understand the Government’s preference for legislation of their own. Having looked at the draft Bill and heard the views of the British Horseracing Authority, I should like to raise a number of issues which I hope the Minister will address in his closing remarks.

[James Duddridge]

My hon. Friend has referred repeatedly to the contribution of horse racing specifically, but the industry does not benefit the country equally. It is targeted on helping those in rural communities, some of which have suffered particularly badly over the last decade or so.

[George Freeman]

My hon. Friend has made an excellent point. While of course the industry has a general economic impact on the UK economy, certain pockets of the country are being hit particularly hard, including some of the areas that most need the economic growth that the Government are doing their best to unlock.

I move on to the areas that I wanted to ask the Minister to address. As I understand it, the clause in what might be called the “McIntosh/Hancock” Bill providing that once all operators selling into the British market have a Gambling Commission licence the legislation must provide that all operators contribute to the levy has been omitted from the Government Bill. Will the Minister provide reassurance that the Government Bill or some other measure will provide that all operators will contribute fairly to the levy?

Does the Minister agree that we need to tackle the basis on which we fund racing, and that voluntary arrangements for the funding of an industry and a sport as important as racing are unsatisfactory in the long term, unless they are enshrined in some sort of contract, with legal underpinning, on the basis of which the industry can plan and invest? Does he agree that we would do well to look at some of the overseas examples, as different countries have tackled this problem in different ways? Australia, in particular, has very effective legislation that ensures a commercial basis between the sport and the bookmakers, providing a sustainable basis for funding the industry.

On regulation, I note that the Government Bill says that the enforcement of licensing at the point of consumption will be light touch. We are all in favour of light-touch regulation, but will the Minister guarantee that the Government’s interpretation of “light touch” will still mean appropriate provision for enforcement is made to prevent many operators from escaping its provisions? Such a situation occurred as an unintended consequence—I am sure it was that—of the Gambling Act 2005.

I hope that the Minister will reassure the House that the ambitions of this Bill, the ambitions set out by the House in discussing its original presentation and the undertakings given by the former Minister will be dealt with in due course by the Government. I understand, as I am sure all hon. Members do, the pressures and complexities that the Minister faces in legislating in this field, but we have a duty to get this right. We have an historic opportunity to do so in this Bill, in the interests of our economy, at a time when we need to do everything we can to ensure growth in key industries in this country, and, in particular, in the interests of our rural economy and British leadership around the world in a great and growing business.

We are having this debate on the day the Prime Minister returns from Davos having given major undertakings about this generation of Conservatives’ commitment to fair tax and to ensuring that we believe in and will support responsible capitalism and moral markets. As Conservatives developing an agenda for growth, enterprise and entrepreneurship, we need a fair tax regime that ensures that those who benefit from the sector pay their fair share in supporting it. I very much look forward to hearing the Minister’s remarks.

[James Duddridge (Rochford and Southend East) (Con)]

It is a pleasure to follow the excellent speech by my hon. Friend the Member for Mid Norfolk (George Freeman). When looking around the Chamber, I was surprised to find that he was handing out a copy of his speech to other Conservative Members, who were taking great interest in it. I then realised that it was not his speech but the Racing Post. Mr Speaker, who was in the Chair at the time, noticed that and allowed it, thus establishing a precedent that although it is, rightly, not permissible for hon. Members to read newspapers in the Chamber, unless, like the Vice-Chamberlain of Her Majesty’s Household, the right hon. Member for East Yorkshire (Mr Knight), who was previously the Chair of the Procedure Committee, they read them on their iPad, they are allowed to look at the Racing Post.

[Philip Davies]

Will my hon. Friend give way?

[James Duddridge]

I have quite a few points to make, but I will give way.

[Philip Davies]

I just want my hon. Friend to clarify something. Is he advancing the case that hon. Members are able to read the Racing Post in the Chamber at any time or merely when it relates to a Bill under discussion?

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[Mr Deputy Speaker]

I think that that means no precedent has been created.

[James Duddridge]

Obviously I abide by that very wise ruling, Mr Deputy Speaker.

The hon. Member for Newcastle-under-Lyme (Paul Farrelly) referred to bet365. I had seen some promotional material for that company, but I was able to look on my iPad to find out a little more. The company should be very proud of the taxation it is paying rather than going offshore, and although I am not a heavy better, I will try to bet with bet365 and, thus, keep that money in the UK rather than send it offshore. I hope that that sends a message to other gambling firms that not only is doing the right thing moral, but individual consumers will change their behaviour and firms will benefit from that approach—Starbucks is starting to learn that lesson here in the United Kingdom.

I welcome the opportunity to discuss the detail of the Bill and I add my congratulations to those given to my hon. Friend the Member for West Suffolk (Matthew Hancock). He is now the Under-Secretary of State for Skills, but he first introduced this Bill last summer. I also congratulate my hon. Friend the Member for Thirsk and Malton (Miss McIntosh). My hon. Friend the Member for Mid Norfolk refers to this as the McIntosh/Kinnock—sorry, not that.

[The Parliamentary Under-Secretary of State for Skills (Matthew Hancock)]

What did I do to deserve that?

[James Duddridge]

My hon. Friend has done many things to deserve that, as he well knows. However, I think it best that I move on swiftly.

My hon. Friends have been a great double act in preparing and explaining the Bill and, whatever happens today, legislation should be introduced. Regardless of whether that happens through this Bill or another, there will be a great improvement.

[George Freeman]

Although attendance in the House and Public Gallery is relatively sparse today, as it is a Friday, does my hon. Friend acknowledge that the debate is being closely followed by the many thousands of people involved in the industry? The attendance today is not a sign of paucity of interest; a substantial degree of interest in the Government’s getting this right has been shown in the newspapers and online.

[James Duddridge]

I could not agree more. That is very important and I am sure that if there is a vote, if we reach that point in our proceedings, hon. Members who are working studiously in their offices and Committees will rush to the Chamber to express a view.

Although some might say that there is limited value in having the two Bills progressing through Parliament at the same time, it provides an excellent opportunity for Members of Parliament to undertake additional scrutiny that goes above and beyond the excellent work done by the Select Committee on Culture, Media and Sport.

Hon. Members will have two options, if they choose to legislate. The first is to pass the Bill today, to allow it to go to Committee and to make progress in that way. The other will be to receive reassurances from the Minister on clause 4 and allow amendment of the Government’s Bill. It is good to have that dual-track approach. I have listened to the debate carefully and would be minded to allow matters to be taken forward in the Government Bill.

In an intervention, I asked about the territorial extent of the Bill and I received some reassurances. I shall come to that later, although I managed to tease out from my hon. Friend the Member for Thirsk and Malton that there are no explanatory notes. They would have been useful and would have helped its case.

I intend to speak primarily about the parts of the Bill that are shared with the Government’s draft Gambling (Licensing & Advertising) Bill, although I wish to make some additional points on the levy.

[George Freeman]

My hon. Friend makes an interesting point about the lack of explanatory notes. Does he agree that the Bill is admirably short? It does not even cover the two sides of the page and has no more than five very short clauses? It is also incredibly simple, making provision for the three things that we have all described. Does he agree that it does not need substantial explanatory notes and that it is a wonderful example of proposed legislation? Perhaps we could take that up more generally in the House and encourage the Government to produce simple and short Bills for our consideration.

[James Duddridge]

I would certainly encourage the Government to produce simple and short legislation, and less of it. My hon. Friend mentioned that the Bill has only five clauses, and clause 5—entitled “Short title, commencement and extent”—is needed for every Bill, so it actually has only four clauses. We have already questioned whether another clause can be taken out or amended in Committee, further shortening the Bill. The hon. Member for Eltham (Clive Efford) talked about the Government’s draft Bill and said that there are many similarities. I am not sure who has copied whose Bill, but they both seem to be operating with equal brevity, which should be encouraged.

I want now to give some of the background to the Bill. My hon. Friend the Member for Mid Norfolk mentioned the Gambling Act 2005, and despite his criticisms I think that there is general consensus outside the House and among most Members of Parliament that that Act was a step in the right direction. It brought together other pieces of gambling legislation, particularly the Gaming Act 1968, and had an awful lot of good stuff in it that I would not want to see go. It might not have been not bold enough, and perhaps it did not have sufficient foresight about how the offshore industry might work and how internet gambling might fit alongside all other forms of gambling.

[Philip Davies]

My hon. Friend might be being far too kind to the 2005 Act. As far as I can see, it was intended to introduce a range of casinos into the country that did not materialise and to make the UK a hub for gambling businesses. Since the introduction of that Act, not only has there been no expansion in casinos but betting companies are all clearing offshore rather than moving to the UK.

[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.

[Philip Davies]

My hon. Friend is right about the importance of people being able to self-exclude from gambling. We all want to see as little problem gambling as possible, but I am sure it is just as possible for somebody to self-exclude online as it is to self-exclude in a shop or in a casino. I am sure the facility to self-exclude applies online as well.

[James Duddridge]

What my hon. Friend says is logical, but I challenge him. I have not seen examples of that. I notice that he has his iPad, so perhaps he can zip through a few websites to see whether there are any that are self-excluding. I know that the casinos and the operators were very proud of that facility.

[George Freeman]

My hon. Friend was developing an interesting argument about onshore and offshore taxation. Does he agree that there are strong parallels with the message that the Prime Minister has been giving at the Davos summit in preparation for the British leadership of the G8, that one of our central themes and ambitions will be to ensure an appropriate regime for tax accountability generally for companies offshore and to close the loopholes that have seen major corporations in other areas moving offshore and denying the Exchequer appropriate tax revenues? This is part of the much bigger debate about responsible capitalism.

[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.

[Mr Nuttall]

Will my hon. Friend give way?

[James Duddridge]

Without hesitation, on the condition that I have a first supporter.

[Mr Nuttall]

Will my hon. Friend enlighten the House on the odds he was able to obtain on his becoming the next Prime Minister?

[James Duddridge]

I will illustrate the point I was trying to make by placing the bet. Initially, staff pretty much told me that they had never heard of me, but I pressed the issue, particularly when I saw some of the people who were listed. They gave me odds of 250:1. I was not trying to earn money, because I thought that the chances of my ever becoming Prime Minister, let alone the next one, were zero. Instead, I was looking at how the odds could be changed and at suspicious betting patterns, particularly given my comments about Liberal Democrat betting. Within the day they had suspended taking bets on me because I was so popular, based only on one or two bets that I had other people across the country make for only another few pence. That demonstrated how easy it is to manipulate the betting statistics and, in relation to the Bill, how important it is that betting is regulated, supervised and licensed locally, rather than simply offshore.

[George Freeman]

I apologise for interrupting my hon. Friend’s argument. He mentioned that the 1992 grand national included a horse called Party Politics, which he thought was a sign. I have just noticed that the Blue Square website claims that the favourite for the race to which I referred in my speech, the 1 o’clock at Lingfield, is a horse called Wind for Power. I wonder whether he thinks, particularly in the light of the business of the House, that that, too, is a sign.

[James Duddridge]

I am not sure whether I might not still be on my feet at 1 o’clock, but perhaps if I rush through my comments I will find time to place a bet on behalf of myself and my hon. Friend.

Although the majority of operators currently targeting British consumers are subject to established and effective regulatory regimes, not all of them are, so we are suffering from those problems now. For example, some online operators have begun to target British consumers and very little is known about the level of their regulation or, indeed, consumer protection. There is concern about that issue and others when it comes to European operators and, in particular, operators beyond Europe without sufficient regulatory oversight. There has been some debate about light-touch regulation and what is sufficient, but there needs to be a level playing field. I will not go into details of my particular view on the level of regulation—that would be wrong and I do not think that it applies to this Bill.

Even where operators are subject to appropriate levels of overseas regulation, there are different regulatory standards and approaches. This lack of parity inevitably leads to British consumers receiving different levels of protection depending on which operator they use. I recall discussing case work with another Member of Parliament in the Tea Room. A constituent of his had lost £25,000, by which I mean that their online betting account, which had been very successful and had a balance of more than £25,000, was hacked into, a losing bet was made and that money was lost. They maintain that it was not they who made the bet and I am not sure—I was not privileged to sit in on the relevant debate—whether that online gambler was subject to online regulations.

We wander around and make decisions in the United Kingdom under the security of British law. Although there are exceptions when there are problems, largely we are very well protected as UK citizens when making purchases. It is clear that that is not always the case in the gambling arena and that the 2005 Act has not allowed for it. I welcome the exploration of how we can solve some of those problems, whether through the Offshore Gambling Bill or the draft Gambling (Licensing & Advertising) Bill.

My hon. Friend the Member for Thirsk and Malton referred initially to the remote gambling Bill. Perhaps that was the working title of the Government Bill. My hon. Friend nods in assent, for which I am grateful. I was somewhat confused when preparing for this debate, because I thought there was a third Bill in play, so I am grateful to find that that is not the case. It is difficult enough to deal with two Bills at one time.

Without specific requirements imposed by overseas jurisdictions, operators may not be compelled to report certain information, such as suspicious betting activity, to the Gambling Commission or relevant sports bodies, even when such an activity may involve a British sportsperson and/or British consumers. As such, there is a potential risk of match fixing. The hon. Member for Newcastle-under-Lyme used the term “in-match betting”, I think, which I was not familiar with, but I suspect it covers things such as how many times a bowler will stray away from the wicket during the course of one over. I understand from press reports that that is an increasingly popular sign of betting.

[Paul Farrelly]

The hon. Gentleman is right, but the not very technical term is “in-game betting”, as I understand it.

[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.

[Philip Davies]

I am struck by how much faith my hon. Friend has in the Gambling Commission over and above any other regulator in any part of the world that has been assessed as having as good a regulatory standard as ours. On what basis does he have such complete and utter faith in the Gambling Commission and know for a fact that it is so much better than any other regulator in any other jurisdiction?

[James Duddridge]

I think that my hon. Friend is putting words into my mouth in relation to the Gambling Commission. I would say, though, that we have more control over the Gambling Commission in comparison with a foreign commission or an area that is completely offshore and completely unregulated. There is no great history of regulation in this area, but we do sometimes focus on some of the more problematic cases.

To return to the idea of working across jurisdictions, one can often go on to a website and not be sure which jurisdiction one is trading in. I mentioned my dabbling in the national lottery. A friend who used to live in Southend and moved away to southern Spain—Southend being as sunny as it is, it comes as a surprise that anyone would want to do that—bought a lottery ticket there. Although they had a modest win—£10, I think—they were outside the jurisdiction and blocked from receiving that money. We need clarity because there is confusion even with something as simple as a lottery ticket in the EU, and we should look at the issue in detail.

The Gambling Commission reported that it receives inquiries about social responsibility and unfairness in relation to offshore gambling—I am sure it also receives such inquiries in relation to onshore gambling—but that it is not able to do much about what is going on. It has been unable to investigate complaints or inquiries, so it is difficult for me, or indeed anyone, to understand the size of the problem. It would be advantageous to solicit information and hard numbers, and I urge other Members of Parliament to consider the issue.

[Mr Nuttall]

My hon. Friend makes the valid and interesting point that some people may complain that they have accessed sites and did not realise which jurisdiction they were in. Equally, however, will not many customers be satisfied that they are getting better value by accessing sites in other jurisdictions? Perhaps they even go out of their way to seek those other sites.

[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.

--- Later in debate ---

[Philip Davies]

I understand my hon. Friend’s point, but in some respects she argues against herself. As she says, the Government are looking at this issue—indeed, everybody has been looking. I think even she said in her speech, in passing, that the levy system was broken to a certain extent—everybody starts these debates like this—or that it was not ideal and was not delivering the right outcome. However, it seems rather strange to say, “The levy system’s broken; let’s introduce a measure that entrenches it even more.” I do not quite follow how that is the solution to the problem that she rightly highlights.

I am not a big fan of the levy system either. My hon. Friend the Member for Rochford and Southend East would describe himself as a layman, but he made some pertinent points about other sports and industries being subsidised, and all the rest of it. I certainly do not think there is any justification for that. Really, the levy is something historical, because that is how it started. If we were starting again now, would we have the levy system? Possibly not—I do not know; probably we would come to a commercial agreement—so I am not sure that entrenching the levy system is the solution to the problem that my hon. Friend the Member for Thirsk and Malton identifies, nor would it deliver any extra funding for racing. Therefore, I am not sure that this proposal is worth persevering with, given that it would also add legal complications—again, I accept her point about the legal position as she sees it—that the Government could well do without. I see lots of downsides for the Government in pursuing this proposal; I do not really see any great upside, for the reasons I have given. Therefore, it is probably not worth while persevering with. Again, however, I am sure that the Minister will have a view on that.

Let me return to the point about the levy. There is a slight misnomer—I am certainly not alleging that anybody is trying to mislead anybody when they trot it out—that can give a false picture, which is the idea that the levy is essential for the small trainers, the small owners and the small breeders, whom we have got to support, and that without the prize money the levy generates, they would go under. I do not think that that is the case. If we look at the figures more closely, we can see that it is not quite as simple as that. There is an element of that involved: the levy board supports fixtures at the bottom end that might not otherwise be viable, and I am not going to decry that, but that is not the only destination for the levy board’s money. It might not even be where most of it goes; I am not entirely sure. It would be interesting to have a breakdown of where the board’s funding goes, so that we can see whether it represents a sensible way of diverting resources.

As I said, a very high percentage of prize money in this country goes to a very small number of people, including the top owners and the top trainers. In effect, we are asking for money to be transferred from poor people in betting shops—they are the ones who pay the levy, after all; it is the punters, not the companies, who are paying in one form or another—to wealthy racehorse owners. That set-up represents a strange redistribution of wealth, and it is not one that I recognise. There are not many calls in the House for the very poorest to pay more to the very wealthiest people in the world, but the levy, in essence, brings about just such a transfer of wealth. I do not think that that arrangement stands up to scrutiny.

The levy is certainly used to prop up the prize money of some of the top races in the country. I am sorry if I am returning to a subject that you would rather I did not mention, Mr Deputy Speaker, but with the best will in the world, a small owner like me is not going to win the top classic races on the flat. That is simply not going to happen, so I will not benefit from an increase in the levy. The people who win that kind of race are Sheikh Mohammed, the Coolmore stud in Ireland and the new people from Qatar, who are a welcome addition to the racing industry. It would be stretching the imagination to suggest that any of them were struggling to get by, based on what they have at the moment. We cannot pursue that particular avenue too far. We should be careful about what we say the levy is used for; it is not used just for the purposes that my hon. Friend the Member for Thirsk and Malton claims it is.

The figures that my hon. Friend gave earlier rightly showed how the levy had reduced over the years. My hon. Friend the Member for Bury North was right to point out that it had stabilised and started to move back up again, and I am sure that everyone is happy about that. It is not right, however, to say that the only contribution that bookmakers make to the racing industry is through the levy. In recent years, for example, they have been asked to pay a vastly increased contribution to race courses for picture rights. That money is going to the race courses and the media companies.

I accept where my hon. Friend the Member for Thirsk and Malton is coming from and what she wants to achieve, and I would like to think that there is no greater supporter of horse racing in the House than me. It is my great passion in life—to be perfectly honest, it is a greater passion than politics—and I want to see the horse racing industry thrive. My point is, however, that the money that bookmakers pay for the racing product is not being efficiently passed down the racing food chain. A lot of it gets stuck with the broadcasters who are supplying the pictures, for example. Perhaps we could explore the possibility of finding a better mechanism for getting the money from the broadcasters down into the racing industry, as my hon. Friend the Member for Thirsk and Malton wants to do. It is also possible that the race courses are piling up the money from the picture rights and not passing it on in prize money.

[James Duddridge]

I apologise to my hon. Friend for not being here right at the beginning of his speech. Having sat through three or four hours of the debate, however, I have started to get a feel for the issues involved and I understand the points that he is making about the levy. It has been pointed out that we should not look at the levy in isolation, and that we should look at other sources of revenue. Does he have any idea of the amounts that are being acquired, or could be acquired, through picture rights or other avenues? The Bill tries to make the case that the levy does not raise enough money, but without being able to see the bigger picture, it is difficult to say whether there is enough money in the industry at the moment.

[Philip Davies]

I am grateful to my hon. Friend and I will try to assist him by looking at the data from 2009-10 and then from 2010-11. In 2010, the levy was £75 million and the picture rights were £140 million—the betting industry was paying for them—and other costs came to £26 million. That total of £241 million was, in effect, what racing cost the betting industry. The total dropped to £228 million in 2010-11, which was largely the result of a drop in the levy by £16 million, and the overall amount that betting gave to racing dropped by £13 million. Since then, however, it has steadily risen. In 2011-12, the picture rights went up by £11 million and the levy went up by £60 million, so the total went up from £228 million to £256 million. For this year, 2012-13, the betting industry is forking out £267 million for racing products compared with £256 million last year. In the current climate, that is a considerable rise. Next year, with the agreements that have been made, it is going to go up from £267 million to £275 million.

If we take all that together, it is difficult to sustain the argument that bookmakers are not paying a fair amount for their racing products. It might not be through the levy—the levy is at a level similar to what it was five or six years ago, now that it has stabilised and gone back up—but it is not the levy that is costing the bookmakers more: it is the other things. Given that we have heard from a number of Members today how horse racing makes up a smaller and smaller part of the income bookmakers receive, it is not, in my view, sustainable in the long run for, on the one hand, horse racing to take less and less of the bookmakers’ share of the bets they are taking, while on the other expecting bookmakers to pay more and more every single year for the horse racing product. At some point, it is going to snap; it will reach a point where it is no longer sustainable.

I point out gently to my hon. Friend the Member for Thirsk and Malton that it is always easy in this place to say “Let’s get those awful bookmakers to pay more money.” They have paid more money and they are paying more money, but that will not be possible in the long run: we need to find alternative ways to get the money into racing. We need a commercial agreement based on picture rights, as we must find a mechanism for getting money into racing.

Before the intervention of my hon. Friend the Member for Rochford and Southend East, I mentioned race courses, which are one of the main beneficiaries of the increase in picture right costs. As my hon. Friend the Member for Thirsk and Malton said, two race courses have closed, which is a matter of great regret. I am very sad about that, as one of the great virtues of British racing is the diversity of race courses all around the country and the ability of people living nearby to get to them. I am sure that this is also a great regret to the Minister, given that one of the courses that closed down was in his area of Kent.

People might get the idea that the race courses must be struggling, too, if they have to close down, but I do not think that is the case. I think there has never been a better time for race courses; they have never had more money coming in from picture rights and other sources. The reason for the closure of the two race courses, as I see it, is that they were owned by this big company—it was Northern Racing, but is now in a bigger group, ARC, Arena Racing Company, owned by the Reuben brothers—which took advantage of the fact that fixtures could be transferred from one race course in a group to another race course in the group. It thus closed down the least profitable race courses to move the fixtures to the most profitable race courses—not because the two race courses were not viable, but simply because profits could be enhanced by moving fixtures to other race courses in the group. That is a very sad and serious state of affairs, and I hope the racing industry will wake up to that, and change the allocation of fixtures to stop that happening. I do not believe, however, that any of those issues need to be dealt with by clause 4. As I say, it would not help the situation; it could make it worse because of the legal problems that it will bring about.

[James Duddridge]

My hon. Friend is explaining very well how money flows from the bookmakers via the picture rights. We have been concentrating on the levy, but is not one of the problems the fact that the race courses are not filtering the money further down to the jockeys and some of the industries mentioned by my hon. Friend the Member for Mid Norfolk (George Freeman)? If that hold-up were dealt with and the money flowed down properly through the industry, we might not need to do all this work on the levy.

[Philip Davies]

That is essentially the point that I am making. In the past, there has been a “racing versus bookmaker” attitude that has got neither side anywhere. There have been faults on both sides of that polarisation. Bookmakers need to accept that horse racing must thrive if they are to do well in their business, and, equally, the racing industry needs to understand that without betting, it has not much of a product to sell. Each side needs the other; a “them and us” approach gets us absolutely nowhere.

Rather than rehearsing those decades-old arguments, let us look at the facts in the cold light of day. Let us see where the money is, and how it can be filtered down. I think that there is an awful lot more money in the race courses now than there was before, but what we want is for the prize money to filter down. The amount of prize money could be increased if funds were passed down efficiently, and the smaller trainers, owners and breeders could benefit in the way that my hon. Friend the Member for Thirsk and Malton wants if that increased prize money were passed on by the race courses.

Another problem is the fact that the Horsemen’s Group, which represents racehorse owners, trainers and so forth, placed a minimum tariff on different race classifications. The prize money for a class 5 race, for instance, will be at a certain minimum level, while for a class 4 race the level will be slightly higher. Although that was done for a good reason—to end what I am sure my hon. Friend would consider to be the worst excesses of paltry prize money and establish some minimums —it has encouraged race courses to put on lower-grade racing so that they can get away with providing the minimum maximum, as it were. A well-meant initiative has had an unintended consequence. Race courses have been given a perverse incentive to “dumb down” the quality of the racing that they offer so that the prize money can be as little as they can get away with, although it will still hit the minimum prescribed by the Horsemen’s Group. That, too, is not of much benefit to anyone.

There is money in the system. Money has been flowing from the betting industry. What we need to do is find mechanisms that will enable it to be conveyed to the people whom my hon. Friend has rightly identified.