Horse Racing Levy

John Penrose Excerpts

Thursday 20th January 2011 Commons Chamber

[The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (John Penrose)]

To begin, I echo a common thread throughout the debate by congratulating the hon. Member for West Suffolk (Matthew Hancock)—I nearly called him the Member for Newmarket, but his constituency is of course broader than that. I also congratulate the Backbench Business Committee on choosing what is clearly a well selected debate, given the breadth, depth and variety of the contributions. That shows what an important issue this is.

The motion calls for the Government to come forward with proposals by the end of the year. I am happy to accept that as the challenge and the target, and we will aim to meet it. I cannot make announcements right now, it being only January. The consultation that was kicked off by the last Government has been completed and there were a large number of submissions on the future of remote gambling and offshore gambling, which is a broader issue than the horse race betting levy, but is none the less important to the levy. We will respond to that consultation, and I am currently in the process of considering the responses.

A range of other interests have been laid out ably and well in this debate. I will not recap them all, partly due to lack of time. I want to ensure that I respond to some of the points that were made, rather than just repeat them. 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.

I will have to tread a little carefully because, as I said, we are still considering the details of our proposals. I am happy to give as much detail as I can on the direction of thinking and the principles that underlie what has to be done, but beyond that, I shall rely on a quotation from Alan Greenspan, a former chairman of the Federal Reserve in America, who said in a speech to the Economic Club of New York in 1988, when asked about the future direction of interest rates, on which he was obviously not allowed to opine:

“I guess I should warn you, if I turn out to be particularly clear, you’ve probably misunderstood what I’ve said.”

I will be a little careful on that basis.

What I can say on the principles underlying this matter is that it is absolutely right, as everybody has agreed, that there is a strong symbiotic relationship between racing and bookmaking, and rightly so. It is clear that each of the two cannot exist without the other. Racing needs the income from bookmaking. Bookmaking is perhaps less dependent on horse racing than 10, 15 or 20 years ago, but it is still a tremendously important part of its income. We must recognise that.

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. It is a solution that to modern eyes and ears feels corporatist. It feels peculiar to have political intervention, lobbying and decision making on something that feels as though it ought to be a normal commercial relationship. As a number of hon. Members stated, the challenge is not whether we accept that premise—most hon. Members have accepted the basic premise—but in working out what a normal commercial relationship will look like and how we can get from where we are today to that point, and on a sustainable basis.

[Philip Davies]

Will the Minister give way?

--- Later in debate ---

[John Penrose]

I am afraid that I have to be extremely quick and will not be able to take any more interventions due to the pressure of time, but my hon. Friend’s speech was very short so I shall give way to him.

[Philip Davies]

I am very grateful. May I suggest that that commercial arrangement is simply between bookmakers and racecourses? Often, the problem is that too many people are pitching in, when in fact all the bookmakers want to do is buy a product from the promoter of the racing product, so to speak, which is the racecourses. Surely it should be up to the racecourses to put up prize money levels to attract owners in the first place. The commercial arrangement should be a simple one.

[John Penrose]

That illustrates one of the difficulties in designing a sustainable system for the future. My hon. Friend is quite right that that is one potential solution, but I think many people would have grave problems with it. I hope that Members will wish me luck in coming up with a solution that pleases everybody, or at least does not displease too many people. Many people in the Horsemen’s Group and other parts of racing would be extremely worried by my hon. Friend’s suggestion, but I take his perfectly legitimate point.

A flier has been going around from William Hill, and I believe the substance of it also largely appeared in an advertisement in the Racing Post last week. It states:

“What is the answer, then? Simple. Replace the levy with a normal commercial negotiation.”

Amen to that, and many people would say the same thing. The difficulty is, what exactly does a normal commercial negotiation look like given that at the moment, we do not have a willing buyer and a willing seller? Racing has nothing to sell—it does not have the type of property rights that my hon. Friend the Member for West Suffolk talked about. I am not sure whether William Hill is proposing a property right, but if it is, I suspect that many people in other parts of the bookmaking and gambling industry will be concerned about that. That is another problem that we face. There is no obvious compromise, and if we are to get one, there will have to be a great deal of good will on both sides and a willingness to discuss the matter.

We have already taken our initial steps. We intend to take powers in the Public Bodies Bill to remove the Secretary of State’s role in the levy determination process. That is a step in the right direction because it takes politicians and politics out of the individual levy determination, but it does not go nearly far enough towards revising the system fundamentally, and that is the point that we have to get to.

Whatever solution is proposed—as I said, I intend to take up the challenge of bringing solutions forward for discussion during the course of the year—it has to produce a level playing field in a number of ways. First, there has to be a level playing field between betting exchanges and bookies, which are two fundamentally different business models. It is clearly no responsibility of any Government to start dictating which business models they prefer within a particular industry, so we should not play favourites between betting exchanges and traditional bookmakers. However, we should ensure that there is a level playing field in the contribution to racing of those two business models, and then one or the other will presumably win out in due course by the normal rules of free commercial competition.

Equally, it is essential that we have a level playing field between British horse racing, other sports and events that are bet on—given the innovation in the industry, it seems that we will be able to put a bet on many more things in future—and foreign racing. It would clearly not be in the interests of British racing if a significant, or even modest, contribution was inherent in the cost of placing a bet, but was not applied to other events on which people could place a bet in a bookmaker’s. We have to understand whether we can either whittle that differential down or get as close to a level playing field as we can, so that we do not disadvantage British racing.

As a number of colleagues have said, we must also have a level playing field between people who place bets with domestic bookmakers and betting exchanges and those who do so remotely or overseas through operations based offshore, including through the internet. We are clearly a long way from that at the moment.

As I said earlier, when I consider the responses to the previous Government’s consultation, I will bear in mind the broader issue. Important though a level playing field is, there is also the question of consumer protection. At the moment, people who place bets in Britain, with domestically regulated exchanges or bookmakers or through any other type of gambling, are protected by the Gambling Commission. If someone places a bet on equivalent games that are regulated offshore, their protection may be severely lower or in some cases zero. That clearly has implications such as the potential for problem gambling.

I have heard what Members have said and am happy to pick up the challenge. As I said, I hope Members will wish me luck. They will have heard from the debate that the different positions are quite wide apart at the moment, and in some cases deeply entrenched. That is a major problem that we have to solve, and I look forward to bringing forward our proposals as requested in the motion.