Lord Lipsey
Main Page: Lord Lipsey (Labour - Life peer)Horserace Betting Levy Regulations 2017
Lord Lipsey Excerpts
Lord Lipsey
At end insert “but this House regrets that Her Majesty’s Government have taken insufficient account of authoritative legal opinion that the draft Regulations are ultra vires.”
Lord Lipsey (Lab)
My Lords, I beg to move the amendment in my name. I declare a remote interest as a member of the Starting Price Regulatory Commission, chaired by the noble Lord, Lord Donoughue, and as a recipient of occasional hospitality from bookmakers, as stated in the register.
The Minister said that this is approaching the final furlong: I think this is the first of three gigantic Becher’s Brooks, at which this legislation will fail, and I shall explain why.
I make no secret of the fact that I am against the levy—I am against statutory support for a particular industry. I believe that racing should stand on its own feet through a proper market-oriented system of money from bookmaking. Of course, that is what has been happening, because media rights have now far dwarfed any yield from the levy—they are three times as much as the levy, which was fading away. I oppose the levy because it is a state-mandated picking of the pockets of poor punters to fill the boots of rich owners such as me. But I do accept that, if you are going to have a levy, it is right that everybody should pay it and that offshore operators should not escape it. So to that extent, I sympathise with the Minister, and if that was the objective, the Government could have proceeded in a perfectly straightforward way and introduced primary legislation, which would be subject to full parliamentary scrutiny, to reconstruct the levy.
Indeed, it was the clear advice of the parliamentary authorities that that is what the Government should have done. Mr Colin Lee, Clerk of Bills in the Commons, said in a note to Philip Davies MP:
“I can say with reasonable confidence that changes to the levy itself and its scope would need primary legislation”.
However, we do not have primary legislation before us tonight. The truth that Mr Lee was speaking unto power has had no effect, and DCMS, no doubt under pressure from some of its Ministers, has cobbled together a two-phase process to reconstruct the levy: the order before us now, and another in the autumn to abolish the levy board and hand over collection to the Gambling Commission.
This House is rightly sensitive about secondary legislation, the use and abuse of Henry VIII powers, ministerial attempts to minimise parliamentary scrutiny and so on. However, in this case there is a further problem. According to legal experts who have examined the order, it is not only the wrong way of doing things, it is actually ultra vires. I will cite the opinion of two such authorities: Olswang, the leading firm of gambling lawyers; and Tim Ward QC, in counsel’s opinion prepared for the Remote Gambling Association. The Library has copies of their documents if anyone wants to read up on this in more detail. I shall paraphrase their arguments.
In the latest note from Olswang, Mr Dan Tench does not dispute that an order to impose levy on foreign betting operators who do not at present pay it is in order; the 2014 Act provides for that. However, Mr Tench says that this order goes “well beyond” that. It mandates a fixed levy of 10% for all bookmakers, in place of the present process of annual levy fixed by the Levy Board. It mandates the extension of the levy to the Tote’s on-course operation. Incidentally, it was rather telling that the DCMS told a delegation only a week or two ago that the Tote already pays levy on its on-course business. It does not. I was a director of the Tote, so I am something of an authority on it. The DCMS just got that wrong, as it has got this order wrong. There is a £500,000 per annum exemption limit for on-course bookmakers, but it is an extension.
To summarise Mr Ward’s opinion, in paragraph 4 he says:
“DCMS has failed to establish a robust legal basis for the measures in these Draft Regulations. The explanations now given by DCMS raise serious concerns in circumstances where DCMS is seeking to enact under delegated legislative power a wide-ranging reform of the statutory Levy regime in the absence of any express statutory power to do so … On DCMS view, the Henry VIII clauses can be used to effect a wide-ranging restructuring of the Levy, even though on its face it affords only a power to ‘secure’ the levy is extended to offshore bookmakers. Such a broad reading of the clause is in stark contrast to the restrictive approach approved by the Supreme Court”.
I should say that this evidence was not available to the Joint Committee on Statutory Instruments when it considered the order.
I know why the DCMS has made these extra changes: it thinks they will help to get state aid approval. However, it may be significant that Ministers have been disappointed in their hope that they would have that state aid approval by tonight. The thing is, Commission approval is not enough. As we have seen before in the horseracing field, the Commission can be taken to the European court, and I can say with total confidence that this order will be challenged in the European court. I am not a legal expert and I cannot judge the chances of success of that challenge. However, the lawyers I have spoken to think that the Government’s retort that this is rather similar to the French parafiscal case, where something slightly similar was approved, will crumble on examination, the French system being so different from ours. We have a competitive market, they did not.
More broadly, what are the prospects of this balsa boat surviving the rough seas into which it is being launched? Not strong, I think. Any interested party can challenge the order, and in the opinion of those I have cited, they would have a good chance of success. Next, the Government have to launch their second order, a legislative reform order, in the autumn. I will have a chance to make my views on that known—or rather, the views of the lawyers I have consulted—but again, there is a strong legal view that this is outside the scope of the legislative reform order they are seeking. Then, there is the possibility, which I have mentioned, of a state-aid challenge to the European court. I do not think Brexit will come along fast enough to affect that and if it does, there are likely to be other restrictions on state aid and whatever arrangements follow.
I make one closing point. Ministers, in proceeding with what I fear they must know is a dodgy order, are making a political calculation. They thought, wrongly, that the new levy was uncontroversial in both Houses of Parliament. They think that they have the bookmakers by the short and curlies so long as the triennial review is impending, with the threat of slashing FOBT stakes deterring them from making legal challenges.
They might be right, but let us suppose that they are wrong. Let us suppose that a challenge arises, if not from the big bookmakers then from some other betting firms, and the Government lose. For racing—and there are many present in this House tonight because they are supporters of racing, as I am—that could be a catastrophe. In all likelihood, they would end up not even with the existing levy but having to pay back the money that had been collected under the terms of this order; that is, roughly £50 million a year.
For Ministers, too, I have to say to the noble Lord that it would be a catastrophe. They were warned by the lawyers, by me tonight and by others that if they went ahead, they would be behaving illegally; they went ahead anyway; and they have been caught. I can see the short-term advantages to Ministers of going ahead with this scheme. The Queen will no doubt warmly thank the Prime Minister at her weekly audience because her horses will cost her less. Mr Hancock, the Minister of State for Culture in another place, will no doubt feel confident that his Newmarket constituents will be minded to add still more to his 13,000 majority. But those thanks will turn to ashes. Far from providing certainty to racing, the order promises prolonged uncertainty. Long term, there is every chance that this half-baked legislative scheme will collapse at the hands of the courts. The Queen, Mr Hancock’s constituents and indeed the racing public will ask: “Why did you plough ahead? You had been warned”. I beg to move.
Viscount Astor (Con)
My Lords, briefly, I welcome this order and congratulate the Government on it. I claim some very small credit for it because the noble Lord, Lord Collins, and I, in a cross-party movement, managed to persuade the Government to accept an amendment to the earlier Bill, one that had been rejected in the Commons, which allowed these regulations to be brought forward.
I note that when the regulations went through another place they were endorsed and supported by the Opposition. They were even supported by the SNP, although I am not sure your Lordships would necessarily regard that as a terribly good endorsement of any prospect. However, it gives certainty to racing and to the bookmakers. They know that we will avoid the annual or tri-annual reviews that have beset racing and various Secretaries of State. I am sure my noble friend Lord Howard will refer to that.
I always noted that the noble Lord, Lord Lipsey, never liked the levy. Of course, we know his interest in greyhound racing, which has never benefited from the levy. However, I saw that the Minister in another place said that the noble Lord has volunteered to chair an active mediation. Although there are no plans to introduce a statutory levy for greyhound racing, we will try to encourage more money into the sector. I hope that gives him some assurance that greyhound racing will be supported.
Lord Lipsey
I thank the noble Viscount for drawing attention to that. Of course, the reason I took this job on is precisely in order that a statutory levy is not necessary for greyhound racing and that sensible parties working in a market environment sort it out between themselves, perhaps with a little help from me.
Viscount Astor
I am sure that the noble Lord’s involvement will be very helpful to greyhound racing. I was recently at the new greyhound track in Towcester for a very successful event.
I will not say anything about the legal things as my noble friend Lord Howard will mention them. I just note that, should there be any involvement of and appeal to Brussels, after what happened today one would have thought that by the time the appeal got resolved other events might have made the whole thing unnecessary.
Lord Ashton of Hyde
My Lords, I thank all noble Lords who have made interesting contributions to this debate, and a number of very important points. The levy has been around for many decades and needed fixing. It is clear that the existing system is unfair and that the fudge, as my noble friend Lord Mancroft called it, creates more money for horseracing in general and is fairer. It includes things like veterinary research, which the noble Lord, Lord Trees, talked about. Since 2000, £32 million has been raised from the levy. This will raise more money and some of it can go to things such as veterinary research.
The noble Lord, Lord Lipsey, raised a number of points. His opposition to the levy is something of a well-trodden path, and he was honest enough to say that some of the technical reasons he was putting forward were really based on the fact that he does not approve of the levy. Before I go on, I should acknowledge that he has been completely open, and we have had useful meetings. We absolutely listen to his views and respect his knowledge but, ultimately, we have agreed to disagree.
Betting and racing have a well-established, intertwined relationship, and the Government are clear that the levy continues to be necessary to aid horseracing and the equine sector, reflecting that mutual interest. But it must be right that all operators who derive significant benefit from British racing should contribute.
On the legal basis mentioned by the noble Lord, Lord Lipsey, the levy is a state aid. Section 2 of the Gambling (Licensing and Advertising) Act 2014 allows the Government to extend the levy in a state-aid compatible way, using secondary legislation. At the time, my noble friend Lord Gardiner, who I am glad to see is in his place, was explicit that the power had to be broad enough to enable the Secretary of State to make changes to ensure state aid approval. That was Parliament’s clear intention when enacting the power in 2014. So there is no need for primary legislation. The point of securing the power in 2014 was to allow us the flexibility to use secondary legislation, and that power is broad enough to address all the issues to secure state aid approval.
We have thought through very carefully the right way to apply the state aid requirements to the British context. We consider that our proposals, taken together, represent the right approach for Britain. The exempt amount means that we can protect smaller operators, and the diversity of the betting market at racecourses in particular. There is no justifiable reason for differential treatment between different types of betting operators going forward.
There was talk about the challenge to state aid approval in the European court. The noble Lord, Lord Lipsey, questioned whether racing would have to repay funds in the event of a successful challenge, but that will depend on the reasons why the European court sets aside the Commission’s decision. Racing would not be liable to repay historic funds. We are confident that the European court will uphold the decision of the Commission to approve the levy as compatible state aid, as it did in the French case, so we do not expect that to happen. The noble Viscount, Lord Falkland, was worried about the seven-year period being a long time, but I can confirm that the Secretary of State has to review the levy within seven years—if need be, it can be sooner than that. Looking ahead, in terms of the transfer of functions to the Gambling Commission and racing authority respectively, we will consult on this in due course. This will provide an opportunity for all interested stakeholders, including the noble Lord, Lord Lipsey, to inform our consideration of this issue.
The noble Lord, Lord Donoghue, talked about media rights and he is right that they have increased in recent years. For example, they were £90 million in 2012 and increased to £128 million in 2014. But media rights are a distinct commercial product and are voluntarily entered into. Many online operators do not purchase media payments, so relying on media payments alone would not secure a contribution from many online betting companies to racing. Racing has told us that the current price for media payments has reached a peak. Since January 2017, some high street betting shops—Ladbrokes, Coral and Betfred—have not been showing pictures from Arena Racing Company racecourses due to a media rights dispute. This demonstrates the uncertainty attached to this form of income. The noble Lord also asked whether we had changed our mind on the Levy Board collection since March 2016. For the time being, collection remains with the Levy Board and we will be consulting on the transfer of the collection function to the Gambling Commission in due course.
The noble Lord, Lord Lipsey, said that we were wrong about the Tote paying the levy; the Tote on course is liable to pay the levy but amounts paid are negotiated with the Levy Board. These regulations abolish that differential treatment and apply the levy equally to all operators.
We think that these reforms will make a profound difference to the British racing industry and will help the sport to grow as an attractive betting product. I hope that my explanation will have satisfied the noble Lord, Lord Lipsey, sufficiently and will allow him to withdraw his amendment.
Lord Lipsey
My Lords, this has been a really excellent debate and the arguments on all sides have been well expressed. I just say that the Government, by laying these regulations, have disposed but—at the end of the day, and whether the noble Lord, Lord Howard, likes it or not—the Commission, our courts and the European court will decide. I do not wish to put this to a vote tonight. We will see in the light of history who turns out to have been right. I beg leave to withdraw my amendment.
Amendment to the Motion withdrawn.
Motion agreed.