Gambling (Licensing and Advertising) Bill

Lord Cavendish of Furness Excerpts

Tuesday 14th January 2014 Grand Committee

[Lord Cavendish of Furness (Con)]

My Lords, I support the amendment proposed by my noble friend Lord Astor. First, I should declare an interest—a very direct one—as a racecourse owner. As I said at Second Reading, I have never made money out of owning a racecourse and I do not think that there is room in racing for hungry shareholders; I do not think that it is greedy from that point of view.

The noble Viscount, Lord Astor, was called away to China, as some of your Lordships know, which is why he is not present. He has ridden and won in point-to-points, and he told a story a long time ago of how he and the late Lord Longford were racing together and fell off together, and their heads collided together. He always said that, before that collision, the late Lord Longford was a very staunch Conservative and that that changed him for ever—he then joined the other side. Whether that tale is apocryphal remains to be seen; I remember him as being a wonderful addition to your Lordships’ House.

I am much intrigued by what the noble Lord, Lord Lipsey, said and take issue only in one thing, which is that I do not really regard the levy as a subsidy—it is the wrong definition. After all, we are producing a product which is used by bookmakers and all we ask is that they contribute for that product. Racing has to be co-ordinated centrally, or else we would all race on one day and there would be no racing on a lot of other days. Also—here, I do not declare an interest—I race on very favourable fixtures and I think that one ought to have regard for the people who stage races on very unattractive racecourses in February on a windy, cold day.

After Second Reading, my noble friend the Minister kindly gave some of us the time to discuss the Bill. I went to the part of the meeting on the levy and I thank him for that—it was very kind. During that meeting, I think that it was the noble Lord, Lord Stevenson, who summed it up best by saying, “Well, since this amendment probably cannot be included in the Bill, could at least powers be taken in this Bill?”. The significance of that is that any reform of the levy will require primary legislation, slots for which are not easily come by.

We heard that the Government still had anxieties—the noble Lord, Lord Lipsey, referred to this—about state aid, which may well be the case. I think that there was also a feeling that this was not entirely the appropriate Bill for this kind of amendment. Although the Treasury is very keen to reclaim leaked taxation, I think that the Government understood that we are also very keen to retrieve some of our leaked revenue. I therefore ask the Minister, since this is a probably a probing amendment, whether there would be a possibility of the Government bringing forward their own amendment if this one was not right, taking those powers in due course so that the need for primary legislation could be avoided.

[Lord Collins of Highbury (Lab)]

My Lords, I have added my name to this amendment, which is a reflection of cross-party support for the levy and the principles that underpin it, even if there is not exactly unity on it within one party. Its purpose is to capture the revenue that racing should be paid, as Parliament has already determined, from all betting operators who take online and telephone bets on British racing, wherever they are located—in effect, to secure levy payments from exactly those operators whom this Bill brings within the remit of the UK tax regime, as we have heard, and who will have to have a Gambling Commission licence in order to be allowed to continue to operate in the British market.

I do not want to repeat all the reasons why there has been a fall in the value of the levy; we have heard them already in the debate. But this change in arrangements could be worth up to £20 million a year to British horseracing and, in my humble opinion, would lead to a healthier sport, more investment, growth and jobs.

I have heard the ideological arguments today and I am impressed by them, but too often people focus on the prize money, which of course is substantial. However, there is other work that the levy provides and the board distributes, such as training, education and employment initiatives, which are key to the sport retaining its integrity and developing. Nor do people see the broader picture of how the racing industry has a direct link to building sustainable rural economies. In the past, as a socialist, I have been very keen to support training levies and to ensure that the small firm is able to benefit from the overall expansion of training and education.

This measure would also create a level playing field among all betting operators. Why should onshore betting operators and those in betting shops pay the full levy while others based overseas, which do not have a voluntary agreement with British racing, do not pay a penny? This unfairly distorts competition. It is not the free market that we are talking about. I understand the frustration for racing of seeing the Government now acting to require overseas betting operators to comply with Gambling Commission regulation, to pay the social responsibility levy and subsequently to pay tax. The only area not to be harmonised is for them to pay the levy, which Parliament has already decreed they should. Perhaps the Minister can explain why the Government have not seen fit to act further and faster for racing.

The Bill does not make any provision in relation to racing or the horserace betting levy, meaning that the sport will not receive a return from remote betting activity even once it is licensed by the UK Gambling Commission. We have heard the very persuasive argument from my noble friend that any reform to the levy to capture revenues under a point-of-consumption licensing regime would constitute state aid. He and I know that the British racing industry strongly disagrees with this interpretation and, having read and heard the arguments, I am inclined to agree with the industry.

My noble friend also made reference to what I believe is a comprehensive ruling on this by the European Commission. A French parafiscal levy on online horserace betting has been approved, recognising racing’s special status and common interest with the betting industry. That sets a precedent and I know it is in the process of being reviewed by DCMS lawyers.

Like my noble friend, I am sure that the Minister may want to look at a more modern and commercial framework for the levy in the long term. Certainly, we have had many serious reviews of it, but very little progress. I know that the racing industry itself would support that—not just the owners, but the workers in the industry, who for a long time I have worked to support. Therefore, will the Minister reassure noble Lords and the racing industry that we are not going to wait several more years during which the racing industry will continue to lose out on this vital source of income—as I said at the beginning, £20 million a year?

--- Later in debate ---

[Lord Gardiner of Kimble (Con)]

My Lords, I thank the noble Viscount for his amendment and the Government fully acknowledge the strength of feeling on this issue. I will therefore explain why we feel that we are unable to accept the current amendment, clarify the state aid position and explain what we are doing to address the issue of levy reform.

The problem with the amendment is that it is too narrow in scope to offer the flexibility we would need to reform the existing system. Much has been said about the current levy regime no longer reflecting modern betting and racing. We want to consider reform across the whole system and the amendment will not enable or facilitate this wider approach. If we accepted this clause and notified the European Commission of our intentions, it could come back, as it did in the case of the French levy, requiring us to make changes to the levy system which could be made only through primary legislation. For that reason, among others, the clause is too narrow in scope to cater for such an eventuality.

A number of your Lordships—the noble Lord, Lord Lipsey, and my noble friend Lord Cavendish in particular—referred to the state aid position. I hope it will help your Lordships to address some of the issues raised in the European Commission decision about the French levy. The Commission ruled that France’s levy on online horserace betting operators was a state aid compatible with the state aid rules. That confirms the Government’s position that the UK levy also is a state aid. Any substantive alteration to an existing state aid requires approval by the European Commission. The French decision does not mean that the UK would not have to seek separate approval for a substantive change to the existing system. Indeed, the French had to make changes to the proposal they originally notified to the Commission in order to gain its approval. As I have said before, the amendment does not provide any room for manoeuvre should the Commission seek changes to the levy system to maintain state aid compliance.

I move on to levy reform. I am particularly mindful of what the noble Lord, Lord Collins of Highbury, said about many of the other activities of the levy board. Training is one that I know something about. The recent figures published by the Horserace Betting Levy Board indicate that levy yields, including voluntary contributions from bookmakers, will rise in the next two years from £74.4 million in 2012-13 to an estimated £75.6 million in 2013-14 and an estimated £80.2 million in 2014-15. That is clearly good news—I think that the noble Lord, Lord Lipsey, described it as encouraging—but it does not mean that the Government are kicking levy reform into the long grass. The Government have said that they would like to see the levy replaced by a more commercial arrangement between racing and betting, but a workable replacement that is fair, sustainable, enforceable and legally sound has yet to emerge. We all wish to see a vibrant racing industry. I am very much aware of just how important that industry is in many parts of the country.

Some points were made by my noble friends Lord Clement-Jones and Lord Cavendish about why the Government do not take a broader power to reform the levy. The Government are rightly cautious before adopting broad reserve powers, but are thinking carefully about how such a power could appropriately be used to achieve levy reform.

I understand your Lordships’ desire to make progress. The Government want to make progress too and are giving levy reform current and active consideration. As an immediate next step, the department is initiating discussions about the state aid implications of reform with the European Commission this month. For the reasons I have outlined and in the circumstances, I very much hope that the noble Viscount will feel able to withdraw his amendment.

[Lord Cavendish of Furness]

Am I to understand that there is a possibility that a reserve power provision could be added at a later stage of the Bill?

[Lord Gardiner of Kimble]

I do not think I can confirm that. The Government are in thinking mode on that. For reasons I have described, a lot of work is going on more generally on the levy. I am really saying to your Lordships that the Government are cautious about adopting broad reserve powers. Many of your Lordships would be concerned about the Government reserving those powers, and we are cautious about doing so for those reasons—but we are thinking about it. I am sorry that I cannot be more exacting than that.