Offshore Gambling Bill

Lindsay Hoyle Excerpts

Friday 25th January 2013 Commons Chamber

[Philip Davies]

My hon. Friend is right. Such measures have been established in other parts of the European Union, and there is no problem with having point of consumption in principle. I have no problem with that, and if I remember rightly my hon. Friend quoted the conclusions of the Culture, Media and Sport Committee on which I serve. She was absolutely right; it was a unanimous report in every regard. There was no minority report or any divisions on the recommendations, and the Committee agreed the report in full. I certainly stand by the recommendations highlighted by my hon. Friend.

This is not about the principle of point of consumption, but the Government may run into problems when considering the purpose for which such a measure is being introduced. If they can satisfy the European Union that they are introducing it to regulate better the gambling sector, they will be on strong ground, and I suspect that test was satisfied in other parts of the EU where such measures have been introduced. In those cases, however, people may have been starting from scratch and deciding to start their regulation of the gambling industry on that basis. That would not apply in the United Kingdom where we already operate on a different basis that we would need to change, thereby introducing a complication that might not have applied elsewhere.

The Government want this debate to focus on why a point of consumption tax, this Bill and the Government’s version of it are so necessary. This is not about increasing funding to the racing industry by increasing levy payments, because that would introduce a complication, and the Bill’s main purpose is not one of increasing revenues to the Treasury—the Government do not want to go down that route because they will run into different legal problems. The Government want to concentrate on the fact that the Bill is necessary only to regulate the gambling industry better. That it may also increase revenues to the Treasury, or that my hon. Friend the Member for Thirsk and Malton may use it to increase revenues for the racing industry, is merely a useful coincidence, and, as I understand, certainly not what the Government would like us to believe the Bill is about.

As the Minister knows, I have an awful lot of respect for him—he is a great man and we are very lucky that he holds that position. I suspect, however, that he has been passed what might in rugby terms be described as a hospital pass with this Bill, and it will take all his considerable abilities, charm and finesse to extract himself and the Government from this situation. His position was not helped—he will certainly not want to agree with me on this, although he is entitled to feel it—by our right hon. Friend the Chancellor of the Exchequer who signposted the proposed legislation in his Budget speech.

Perhaps I may remind hon. Members of what the Chancellor said:

“One area where I am today making substantial changes is gambling duties…The current duty regime for remote gambling introduced by the last Government was levied on a ‘place of supply’ basis. This allowed overseas operators largely to avoid it, and much of the industry has, as a result, moved offshore. Ninety per cent of online gambling consumed by our citizens is now supplied from outside the UK, and the remaining UK operations are under pressure to leave. This is clearly not fair—and not a sensible way to support jobs in Britain. So we intend to introduce a tax regime based on the place of consumption—where the customer is based, not the company—and, from this April, we will also introduce double taxation relief for remote gambling. These changes will create a more level playing field, and protect jobs here.”—[Official Report, 21 March 2012; Vol. 542, c. 803.]

The genesis of the legislation is therefore clear—the Chancellor’s Budget. It will be no great surprise that my hon. Friend the Under-Secretary of State for Skills, whom all hon. Members regard highly, was and remains a close friend and ally of the Chancellor of the Exchequer. I suspect it will not be difficult for people to put two and two together and think, “Well, hold on a minute. The Chancellor said what he said in the Budget, and we have the Offshore Gambling Bill. Hey presto! That is how the Government will introduce the legislation.”

The problem is that the Chancellor made no reference in his Budget to the need to introduce the measure to improve player protection or better regulate the gambling industry. He made no reference to that being a problem that needed solving. We are beginning to understand what motivated the Government to introduce the Bill. I do not criticise the Chancellor: what he said was perfectly reasonable and fair, and many hon. Members on both sides of he House agree with his analysis, but I suspect that it has been unhelpful. He may not have been aware of the legal minefield he was in at the time, but people have become aware of it, and the Government have backtracked to change the nature of the debate. The debate must now be based, therefore, on player protection and the regulation of gambling rather than on—we can probably guess this is the real motive for the measure—getting money into the Treasury, which is no bad thing, and levelling the playing field for companies such as bet365 so that they do not go abroad, which no hon. Member wants.

I believe the Chancellor was also hinting that, if we get the measure right, we may even be able to reverse the trend. It would be fantastic if we were not just trying to stop bet365 leaving the country, but putting a regime in place that encouraged companies that have left the UK to come back. Not only would we retrieve lost revenue; we would also get jobs back. Lots of people in the UK would love the jobs that have been exported to places such as Gibraltar because of the current situation to come back to this country. With the best will in the world, neither the Offshore Gambling Bill nor the Government’s alternative Bill will make any difference in that respect.

There is no prospect whatever of any of those organisations relocating to the UK, whatever rate of tax the Government introduce. I think that would be a missed opportunity. My hon. Friend the Member for Rochford and Southend East (James Duddridge) mentioned a rate of 5%. If we had that rate and the Government asked the gambling industry whether it would agree to come back in return for that rate, there might well be scope for negotiation, but VAT will scupper such a plan, because gambling industries in the UK cannot reclaim their VAT. The money they spend on advertising is not reclaimable, but it is reclaimable overseas.

The House would support a regime that levelled the playing field, and that means companies paying more in taxation than they currently pay—no one would argue with that. The House would support a regime that gave companies an incentive to bring their operations back to the UK and the jobs that would come back with them. Surely that is a great prize to aim for, and I urge the Minister to lobby the Chancellor. All that is required is for the Chancellor to help with taxation—not just point of consumption taxation for the online industry, but VAT relief. Those two things combined could get those jobs and companies back. That is what we should be aiming to do. It is a strange state of affairs when we are spending lots of time trying to stop one company leaving—it is a negative thing to try to achieve—when much bigger prizes are at stake.

In many respects, the main thrust of what my hon. Friend the Member for Thirsk and Malton said concerned the levy. I should thank my hon. Friend, because from what she and my hon. Friend the Member for Mid Norfolk (George Freeman) were saying, it seems that, in essence, the Bill is designed to help me. As we discussed earlier, I am a very modest owner of racehorses. I am an owner of very modest race horses, too, to be perfectly honest. Contributing to the odd shares and legs and other parts of the anatomy—I am sure that it does not make a great impact on the considerable wealth of Mr Michael Easterby, in the constituency of my hon. Friend the Member for Thirsk and Malton—provides me with a great deal of pleasure. I seem to be the kind of owner that my hon. Friend says she wants to help. I regret to inform the House that I am also a very small-scale breeder of racehorses, too. The saying goes in racing circles that the only thing worse than having one broodmare is having two. There is no better way of leaking money as quickly as possible than breeding horses. The only thing that can compete is owning horses. Whichever one chooses, the only possible outcome is that one will be considerably poorer at the end of it than at the start. I think that somebody once said that the best way to gain a small fortune out of owning and breeding racehorses is to start with a large fortune—there is a considerable amount of truth in that. I should therefore be grateful to my hon. Friend for having me in mind to try to boost the modest returns I get from my horses. It is a rare pleasure when any of them trouble the scorers.

In passing, my hon. Friend the Member for Mid Norfolk encouraged us all—I think I am right in saying this; we can all check Hansard later—to back a horse called Wind for Power in the 1 pm at Lingfield today. I am sure that that was partly directed at the hon. Member for Brighton, Pavilion (Caroline Lucas), who was waiting to debate her Bill. I am sure she would have been encouraged to back a horse with that particular name, and I am delighted to announce that the horse won. If anybody took my hon. Friend’s advice, they are now considerably richer than they were when this debate started.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I loved the hon. Gentleman’s description of his horses, whether he has a leg and which horse is going to win. I am sure that it is very relevant to offshore gambling, but we seem to have lost that for a little while—I think we got lost in the leg somewhere. I am sure he is going to bring it back into line for me.

[Philip Davies]

I am very grateful, Mr Deputy Speaker. You are, as ever, absolutely right. I was getting carried away with my hon. Friend’s tipping prowess and I promise not to return to it. I will take your chastisement as an indication that you are keen to acquire a leg or two of your own, and I will certainly be happy to negotiate a deal for you.

Even though the horse racing levy is supposed to benefit people like me, I am not entirely convinced by the argument given by my hon. Friend the Member for Thirsk and Malton. Clause 4 is well meaning and I do not want to decry that, but I do not think that it will have the impact she thinks it would. I spoke about this briefly in an intervention. The levy is determined, hopefully, by agreement—it has been recently, which is to be welcomed—between the betting industry and racing industry through the auspices of the levy board, and we should all thank it for its work. When they come to an agreement about how much money should be handed over from the betting industry to the horse racing industry, rather than concentrating on the mechanism of how that money is raised, people are really thinking about how much it will raise. People think, “Well, what we need is a certain amount of money from the betting industry to make the racing industry viable which is reasonable to ask the gambling industry to provide based on the money it makes from the horse racing product.” A figure is therefore arrived at that seems reasonable.

I cannot remember, but I have a feeling—the Minister will be able to help out on this—that the last time the Secretary of State determined what the Government thought was a reasonable price for the betting industry to pay the racing industry, the figure arrived at was somewhere around £75 million. The Government then introduced a mechanism in the levy, making slight amendments to try to deliver £75 million—or whatever figure they thought was a fair amount for the gambling industry to pay—and that was that. The mechanism was arrived at to deliver the figure.

My hon. Friend the Member for Thirsk and Malton seems to presume that everyone will continue with the same mechanism, which will simply deliver more money to the racing industry, but I suspect it would not really work like that. I suspect that the levy board would still go through the same deliberations and work out what was reasonable to expect the gambling industry to provide, and that a mechanism would be worked out to deliver around £75 million. Therefore, the 10.75% of gross horse racing profits that go to the levy would probably be reduced to hit that target. As a consequence, the Bill —clause 4 in particular—would generate no more money for the racing industry. Rather, it would simply mean that the money came from a different mechanism.