John Whittingdale
Main Page: John Whittingdale (Conservative - Maldon)Gambling (Licensing and Advertising) Bill
John Whittingdale Excerpts
Mr John Whittingdale (Maldon) (Con)
May I begin by reminding the House of my entry in the register showing that I paid a visit to Gibraltar in September, at the invitation of the Gibraltar Betting and Gaming Association, to discuss the provisions of the Bill?
Mr Whittingdale
I am not sure that there is anything on that point, but I am happy to give way.
Paul Farrelly
Following the hon. Gentleman’s discussions over the summer with the Gibraltar-based companies, can he tell the House whether they are still minded to launch a last-minute legal action in Europe against these provisions? When he was there, did he discourage them from doing so?
Mr Whittingdale
The hon. Gentleman will have to ask the Gibraltar gaming authorities whether they intend to launch legal action. They have certainly expressed concern as to whether the Bill’s provisions are legal, and it is obviously up to them whether they take legal action. I made it clear to the authorities and the gaming associations that I supported the Bill, and that therefore I would certainly discourage them from doing so. They did raise some concerns, which I shall discuss in the course of my remarks.
I wish to make it clear that my Select Committee supports the Bill’s general provisions, as do I. The Committee has spent some time examining gambling. We carried out post-legislative scrutiny in 2011-12 of the entire Gambling Act 2005. Although we examined online gaming, which is obviously the most rapidly increasing form of gambling, inevitably the main focus on the 2005 Act related to casinos, the previous Government’s abortive attempt to introduce regional casinos—super-casinos—in the UK and the provisions relating to fixed odds betting terminals in betting shops. I do not propose to explore the latter issue at great length today, although it remains one of some controversy.
Hon. Members may recall that when that Gambling Bill became an Act, the then Secretary of State declared that one of its purposes was to make the UK the world centre for online gaming and that that would be of great benefit to the UK economy. Unfortunately, the then Chancellor of the Exchequer holed the then Secretary of State amidships by setting the tax rate at a level that led to almost every operator moving offshore. There is a single exception, which I am sure the hon. Member for Newcastle-under-Lyme (Paul Farrelly), my friend from the Select Committee, will mention: bet365 remains the last operator headquartered in the UK. Almost all the others have moved to offshore jurisdictions such as Gibraltar, Alderney and some European Union member states.
The system that existed at that time of operating a white list to recognise the regulatory authorities of different jurisdictions appears, in the main, to have worked reasonably well. The Government, in putting forward the arguments for this Bill, have raised one or two concerns about how the current regime works. In particular, they have said that there is some confusion about the different regimes in different jurisdictions, and that consumers may sometimes be confused as to where responsibility lies and where they should go with their complaints.
There are undoubtedly some differences between the rules applied in different jurisdictions. I agree with the Remote Gambling Association that, in general, the industry is reasonably well regulated in the white list countries. As CARE—Christian Action Research and Education—has pointed out, one or two jurisdictions, particularly Gibraltar, operate slightly stronger regulatory conditions than those in the UK. In particular, the Gibraltar rules governing the reporting of suspicion that individuals might have a problem with their gambling habits are slightly stronger. The UK Gambling Commission might want to consider whether it can tighten its licensing conditions, particularly on problem gambling, which is rightly a great concern to everybody who considers gambling and the policies governing it.
Philip Davies
I challenge my hon. Friend, who does a fantastic job as the Chair of the Select Committee, to stand there and say with a straight face that he believes that the Bill is all about regulation. Might he concede that it is more to do with taxation than regulation?
Mr Whittingdale
My hon. Friend has made his view known during the course of our debates and I shall reach a conclusion on that point very shortly. As I say, however, the Government have advanced the argument that the Bill will result in major gains in consumer protection.
Paul Farrelly
Does the Chair of the Select Committee agree that the example of Full Tilt Poker, which was licensed by Alderney but not, as we understood it, by Malta, demonstrates the scope for greater regulatory co-operation, particularly in Europe?
Mr Whittingdale
The hon. Gentleman anticipates the next two words on my notes, which read “Full Tilt”. He is, of course, correct. Something went badly wrong with Full Tilt Poker, which was regulated by the Alderney gambling control commission. It is right that there should be a review of how that happened and I understand that lessons will be learned. There have certainly been concerns about some incidents in white list countries, and for that reason there might be some advantages to consumer protection of bringing the entire remote gambling industry under the licensing rules of the UK Gambling Commission.
The hon. Member for Eltham (Clive Efford) spent some time on match fixing and licence condition 15.1. He is quite right that the Select Committee received evidence on that and there is no doubt that all the major sporting bodies support the Bill, because they have expressed concern that some of the other regulatory authorities outside the UK have not always been particularly good at reporting suspicious activities. Indeed, if we consider the statistics, we can see that there have been far more reports of potential suspicious gaming activity from UK-licensed operators than from offshore operators. If licence condition 15.1 is applied to all those offering online gambling facilities to UK customers, I hope that that will result in more attention being given to the issue.
I was also interested to hear the hon. Gentleman’s suggestion about spread betting. As my hon. Friend the Member for Shipley (Philip Davies) points out, there is difficulty in drawing a line between where sports betting stops and financial transactions begin. If it were possible for the Financial Conduct Authority to require suspicious activity to be reported to the relevant regulatory body, that would seem to be a sensible move.
Mr Sutcliffe
Would not having sports betting rights be a good idea, so that we could sort out the definition of financial transactions related to the market? If sports had their own betting rights and the ability to sell their sports to the betting operators, that would clarify any problems with the definition.
Mr Whittingdale
I think that would go rather further than defining sports betting and financial speculation and would have other implications that would need further consideration. I am not sure that I am convinced by the hon. Gentleman's suggestion, but I would certainly be happy to debate it with him later.
Let me return to the issue raised by my hon. Friend the Member for Shipley. The Government have made it very clear that the purpose of the Bill is to strengthen consumer protection and, of course, the Committee accepted the evidence given to us by the Minister on that point. It is important that that is its purpose, because if it had other purposes the Government might, as has been pointed out, be vulnerable to legal challenge. However, it seems entirely acceptable to argue that those people who sell gambling services to UK consumers should be required to pay UK tax. Although that might not be the purpose behind the Bill, if the consequence is that they come within the tax net, that would benefit the Exchequer and create a level playing field, which it is important we should have.
Some operators might even choose to return to the UK once the new licensing regime comes in. I realise that the level at which the tax is set is not an issue for my hon. Friend the Minister, but that is what will determine whether they return. Many of the remote gambling operators in Gibraltar and other jurisdictions have expressed concern that there is a danger that the tax will be set too high, which will have an impact on their operations and create an incentive for consumers to look elsewhere—to go outside the licensed operators to the black market. That is a serious threat, which I want to talk about.
Philip Davies
Is my hon. Friend aware that the Treasury has already given some estimates of the amount of money it expects from this measure? It believes that if the tax is imposed at a 15% rate, 20% of the UK market will be unlicensed, unregulated and not paying tax. That will mean that a higher proportion of people will be playing on unregulated sites.
Mr Whittingdale
That is a matter for the Treasury, but I agree with my hon. Friend that a 15% rate would have a damaging impact. The Remote Gambling Association has suggested 5% as a reasonable level, but the Treasury will obviously have to examine that and strike a balance. The Treasury will need to bear in mind the risk not only that its revenues might suffer if consumers were driven from the licensed market to the black market but that consumers would suffer, as they would have none of the protections that would result from the new licensing requirements in the Bill. That seems to be at the heart of the issue, so although it is important that we should debate all the provisions in the Bill, the critical question will be determined not by the Minister but by her colleague in the Treasury.
One or two other concerns have been raised, particularly about the fact that this is an enormous new responsibility for the UK Gambling Commission, which will have to issue licences to a huge number of operators based in all parts of the world. The Select Committee had some concerns about the commission’s ability to do that and about the resource implications. The Gibraltar betting and gaming association has raised the concern that the change could result in brass plating, with the Gambling Commission merely giving an operator a tick because it does not have the resources to go to the other jurisdictions to question the regulating authorities. The UK Gambling Commission will have to rely on other regulators in a way not dissimilar from its reliance on those on the white list, so if it is to accept the regulatory approval of other regulators in different countries it is important that it satisfies itself that those regulators are doing a good job. That might require additional resources, and we expressed some concerns about the degree of the extra responsibilities that will be placed on the commission.
Let me return to the question of the consequence of consumers being driven into the black market. The industry is highly competitive and a very small difference in cost can result in operators offering more attractive odds than the licensed operators. On those grounds, there is a risk that people will look towards the black market.
Chris Evans (Islwyn) (Lab/Co-op)
The hon. Gentleman is making a succinct point, but does he agree that online customers are more promiscuous than their retail counterparts and will follow prices more closely than those who have a loyalty to the shop and the shop manager?
Mr Whittingdale
The hon. Gentleman is almost certainly right. Obviously, people go to high-street betting shops to bet, but they also do so for other reasons. They form friendships and it becomes a social environment. None of that exists in online gambling; it is being done in bedrooms by gamblers on their own, and they will look for the site where they can get the best odds. Therefore we need to look at measures to ensure that they do not go into the black market.
Paul Farrelly
Before the Chairman of the Select Committee perhaps over-eggs fears of the black market, will he explain why, in the last year, the gambling revenues of bet365—he was right that I would mention bet365, and I will do so again later—have risen from £12 billion to £20 billion, when it operates in the UK and pays tax on its sports betting activities at 15%, rather than the near 1% in Gibraltar?
Mr Whittingdale
I am delighted to hear of the success of the company based in the hon. Gentleman’s constituency, but he will remember that when witnesses from bet365 gave evidence to the Committee they said that it was becoming increasingly difficult for them to remain in the UK, and unless something was done soon, they might very reluctantly have to follow the exodus. Happily, I hope the Bill will address that, but as I said earlier, it all comes back to the rate of tax that is levied. We want a rate of tax that is attractive to online operators, so that they license themselves in the UK, and does not drive people into the black market.
However, other measures are also required, and one or two of those who have made representations on the Bill have said that the Government must consider taking other measures to prevent illegal gambling online. There are several ways in which that could be done. They are not dissimilar to the measures that we have been looking at in order to tackle online piracy.
There are three potential ways forward. The first is to work with payment companies to ensure that unlicensed sites cannot use the payment facilities offered by credit card companies. The second is IP blocking—actually, URL blocking—preventing access via the internet to certain websites. That has technical difficulties but is certainly worth exploring. In the third, search engines have a role. I expect that my hon. Friend the Minister will be aware of the vigorous debates that have taken place with Google about the extent to which it is willing to take responsibility to ensure that illegal websites, or websites offering illegal products, do not appear at the top of their search engine results. That too is an area where more work could be done to make it harder for consumers to be tempted by illegal online operators once the new regime is in place. Those are genuine concerns, which I hope the Government will address in the course of debate.
I shall flag up one more issue. An anomaly was identified to the Select Committee, about which we had considerable sympathy. Casinos are among the safest places to gamble. They have strong measures in place to prevent money laundering, to identify those at risk of problem gambling and, if necessary, to exclude individuals and so on. They also have experienced, well trained staff on the premises. For all those reasons, a casino is one of the safer places to gamble—certainly considerably safer than in a bedroom alone, where people are able to gamble for lengthy periods without any controls and to lose a huge amount of money.
Angie Bray (Ealing Central and Acton) (Con)
I am delighted that my hon. Friend has raised this issue. Does he agree that we could usefully employ British bricks-and-mortar casinos, which have an excellent reputation for responsible gambling, to operate some of the online gambling on their premises, to allow them to monitor how it is working and, indeed, then help to frame any regulations that we might need in future?
Mr Whittingdale
That is an interesting idea, but my hon. Friend’s suggestion runs straight into the problem—the anomaly that the Select Committee received evidence about—that it still will not be possible for casinos to offer their own remote gambling facilities within their buildings. I could go into a casino and place a bet using my own iPad or iPhone or other online device, but when the Bill is passed, the casino will not be able to offer that facility through remote terminals, or by giving out their own devices. That seems an extraordinary anomaly, so the Select Committee suggested that the Bill should be amended to remove it, and to allow casinos to offer a remote gambling facility as well. I was disappointed that the Government appeared not to accept our argument, and I hope they will still think about that and perhaps allow an amendment to the Bill in the course of debate.
However, having said that, I have no doubt that the Bill is desirable because it strengthens the protection available to UK consumers who indulge in online gambling, and may have the additional benefit of resulting in some additional revenue, in due course, to the UK Exchequer. On that basis, I and the Select Committee support the Bill.
Paul Farrelly (Newcastle-under-Lyme) (Lab)
It is always a pleasure to follow the hon. Member for Shipley (Philip Davies), who is knowledgeable and free-thinking. I usually do so on the Culture, Media and Sport Committee in order to ensure that he does not have the final word.
I broadly welcome the Bill. As my Select Committee colleague has said at length, it is clearly at the regulatory end of the welcome moves towards a major reform of the taxation system—to a point-of-consumption basis—so that companies pay tax on profits made from bets placed in the UK. The Bill is not about the appropriate level of that taxation. It focuses on other crucial aspects of the regime, namely, as it says on the tin, licensing and advertising of gambling. It is a crucial part of reforms of an industry that has hugely relocated, not only online, but offshore, principally to Gibraltar for most UK operators, and largely for tax reasons. I use the word “most” pointedly, because there is one huge and important exception, which is particularly important to my local area.
Paul Farrelly
It is bet365, which is the biggest UK operator and perhaps now the biggest operator worldwide. However, the Chair of the Select Committee will have to be patient, because I will speak about that company a little later.
Notwithstanding the delays to which my hon. Friend the Member for Eltham (Clive Efford) referred, I congratulate the Government on introducing the Bill and on sticking to the timetable that they set out in 2012 to bring the reforms into force, after careful consideration and consultation, by the close of next year.
A replication of that resolve would be welcome on the wider related issue of corporate tax avoidance by huge multinationals, both on and offline, which has gained a head of steam in these straitened times. Although gambling, both on and offline, is treated differently from general business because it has licensing regimes, the design of an effective point-of-contact consumption tax system holds lessons about what tax authorities can do for themselves, without passing the buck to the interminable renegotiation of international tax treaties, which may well take a lifetime.
The Bill and the issues to which it relates have been well scrutinised in this Parliament. The experience of the UK since the passing of the Gambling Act 2005 has been referred to at length. That was the subject of a DCMS consultation that started in 2009, before the last election, which recommended the current course. The Select Committee endorsed that approach in the report that we issued in July 2012. This April, the Committee published another report welcoming unanimously and on a cross-party basis—although perhaps for different reasons—the main thrust of the draft Bill following extensive pre-legislative scrutiny. In January, the House staged a precursor to this debate on the private Member’s Bill promoted by the hon. Member for West Suffolk (Matthew Hancock), which was introduced by the hon. Member for Thirsk and Malton (Miss McIntosh) following his move to the Government Front Bench. I recall that that Bill was intended as a parade ring for the gambling concerns of the Newmarket and Thirsk race courses, but it covered much of the same ground as this Bill.
I will be brief and will not run around the Select Committee circuit, as the hon. Member for Maldon (Mr Whittingdale) has done. Once again, he has proven himself to be Essex’s own latter day Seabreeze in the way that he has galloped around the track. However, it is worth re-emphasising the extent of the flight of most online gambling offshore and the resulting loss of tax to the Exchequer. The new regime should, if carefully designed, encourage a more level playing field for the online operators who have stayed and for the rest of the traditional sports gambling industry in the UK.
The Chair of the Select Committee has waited long enough. Chief among the online companies that continue to base their sports gaming operations in this country is bet365. It is, in many respects, a modest company with a great deal to be immodest about. It certainly does not seek the limelight, but I do my best for it.
Bet365 is based at Festival Park in Hanley in the constituency of my hon. Friend the Member for Stoke-on-Trent Central (Tristram Hunt). In 1986, Festival Park was the site of Britain’s second national garden festival. The first was in Liverpool and the successive ones were in Glasgow, Gateshead and Ebbw Vale. They were a sort of biennial Olympics, or biennale as Boris would describe them, for Britain’s most deprived areas during the pain of the Thatcher era. Stoke was chosen after the closure of Shelton Bar steelworks in a north Staffordshire that was ravaged by the loss of its coal mines and many of its pottery makers.
Bet365 is a world-beating break from that legacy. It is one of the most phenomenal success stories in British business in the new millennium, having been started in 2000. With more than 2,000 highly skilled staff, it is now the largest private sector employer in north Staffordshire. It has led the local regeneration without a hand up or a handout from Government. In the last year, in a highly competitive industry, it has increased its pre-tax profits from online gaming by more than 50% to about £180 million. It has done that in just 13 years. As I have said before, £20 billion was wagered with bet365 in 2012-13, which is a 57% rise. That has happened because it is one of the industry’s most innovative and trusted players.
Unlike its online competitors in the UK, bet365 paid £31 million in corporation tax to the Exchequer last year. With betting duties and VAT, over the years it has paid hundreds of millions of pounds more. It also pumps a fortune into the local premiership football team, Stoke City, which is another source of pride and a sign of its commitment to the local area. Charities and good causes benefit from the Bet365 Foundation, the Stoke City Foundation and the Coates family themselves.
The reason bet365 remains in this country is not just that it is privately owned. It is because the Coates family—Peter, the Stoke City chairman, his daughter Denise, who was the founding force of the company, and her brother John, the joint managing director—believe in creating employment where they come from and in paying their fair share of tax.
The firm is a leading member of the UK’s Remote Gambling Association, which John Coates has chaired and which does much to promote responsible gambling and the industry overseas. However, unlike other leading members, including household names such as Ladbrokes and William Hill, bet365 supports the changes in this Bill because it is mainly based here and not offshore. If it is so successful while paying taxation, why should its competitors not do so too? I do not think that the UK’s legislative framework should discriminate between a private company and a publicly quoted company, even if publicly quoted companies are motivated by profit maximisation.
I sympathise with some of the arguments that have been made by bet365’s competitors and by the RGA during the gestation of the Bill, which we have heard about today from the hon. Member for Shipley. I also welcome the change of tone from the RGA towards these reforms, which will surely happen. I hope that there is no challenge from the Gibraltar-based companies in Europe, because that would be a delaying tactic that is all about taxation.
In Committee and in the subsequent stages of the Bill’s passage, we must have the best possible scrutiny to get the legislation right. The success of the regime will depend on British consumers choosing to gamble with licensees who have chosen to go with the Gambling Commission. There will have to be effective enforcement to deter non-licensed companies from muddying the waters with a grey or black market. There are outstanding licensing issues on which the industry is being consulted. We must remember that this is an international industry in which operators hold licences overseas in reputable jurisdictions. As the RGA says, it is in everyone’s interests that the regulators work together.
As we have heard, it is crucial that we get the level of taxation right. It is also important to get the definition of what is to be taxed right. I hope that the Treasury is listening to the arguments from the industry for a gross profits tax, rather than a wider gross gaming revenue definition, which rather moves the goalposts from what the operators were expecting.
In listening to the industry, we must recognise that other jurisdictions, notably in Europe, have successfully introduced similar licensing systems and taxation on a point-of-consumption basis. That is reaping revenue for their Exchequers. One of the most recent countries to do so was Denmark. The duty there is 20%, which is higher than the 15% gross profits tax in this country. None of the major operators—all responsible members of the RGA—have seriously suggested to the Select Committee or to anyone else that they would not apply for a licence under the new regime established by the Bill, but instead join an unlicensed or grey market. They have not done so in Denmark, Germany, Greece or Spain. Frankly, the UK is too important a market and their reputations are too important for them to do so here. I repeat: if bet365 can be so successful and supportive of these changes, that also shows what the competition is capable of doing.
To conclude, once we implement this new system—by the close of 2014, I hope, and following parallel moves by other European countries—UK operators, including bet365, will not only have a greater degree of certainty for their future investment and growth, but in co-operating with, rather than resisting, the new British system, all those who claim to be a reputable UK company will be better placed to argue, particularly at European level, for fairer access to other major markets such as France and Italy, and to ask the UK Government to help support the industry in Europe and worldwide.