Offshore Gambling (Licensing)

Matt Hancock Excerpts

Tuesday 7th February 2012 Commons Chamber

[Matthew Hancock (West Suffolk) (Con)]

I beg to move,

That leave be given to bring in a Bill to amend the Gambling Act 2005 to regulate remote gambling on a point of consumption basis; to require all operators selling into the British market, whether in the United Kingdom or overseas, to hold a Gambling Commission licence to enable them to undertake transactions with British consumers and to advertise in the United Kingdom; to provide that all relevant operators contribute to the Horserace Betting Levy; and for connected purposes.

I am proud to stand in the House to represent the global headquarters of horse racing. For centuries, Newmarket has been at the heart of that great sport. From the time when the merry monarch moved his court twice a year to gamble on the races, to modern times when the jobs of 5,000 of my constituents are linked to racing, the story of Newmarket has been, and remains, interwoven with the story of racehorses.

I declare an interest. I am widely supported by the racing industry, including as declared in my entry in the register, and I am an unwavering supporter of racing.

As the presence of so many Members in the Chamber shows, the issue is not just about Newmarket. Attendance at horse racing is second only to football. British racing is among the best in the world; our blood stock is the best in the world. More than 6 million people, from every walk of life, visit British race courses every year; £10 billion is placed in bets, £300 million is paid in taxes and 100,000 people are employed by the racing industry nationwide.

This great sport is under threat. Racing has suffered a devastating fall in funding. The horse-racing levy—the annual payment from betting to racing in return for the product on which so many bets are placed—has declined from more than £100 million in 2009 to less than £60 million last year. Prize money, the lifeblood of the sport, has fallen by half in two years. Even second place will no longer cover the cost of diesel to many of our smaller fixtures. The number of mares in foal is declining and more of our best stock is sent overseas for training, especially to France.

Race courses, trainers, jockeys and staff are struggling, and livelihoods are under threat, but with attendances at courses at record levels, why is there that decline? It is because since 2007, 18 of our 20 biggest bookmakers have moved offshore, so according to bookmakers’ own estimates they avoid £300 million in tax and tens of millions in contribution to the levy. As punters increasingly go online, that avoidance is set to grow. Offshore bookmakers also fall outside UK consumer protection rules and stifle competition from those who remain onshore. Smaller independent bookies lose out, as do responsible bookmakers who remain onshore, such as Bet365 and Coral. In their correspondence with me, independents despair that there is no level playing field. Why should they pay the tax and full levy when the big boys do not?

Offshore bookmakers tell me that they are only offshore because their competitors are, so I shall take them at their word. Let us have a level playing field, efficiently enforced right here in the UK. How should it be done? What is the proposed solution?

There is now broad consensus in the House and outside that the levy system is broken. It has failed to keep up with the times and it should be replaced with a commercially sensitive alternative, such as a racing right. Instead of the antagonism generated by the levy system, gambling and racing can work together to their mutual benefit. As Paul Bittar, the impressive new chief executive of the British Horseracing Authority has set out, the new system must be sustainable, able to adapt to ever-changing technology and to the rapid channel shift towards online and smartphone betting. Of course, those wider reforms must also encompass betting exchanges. After all, a bet is a bet whether one side is a company or another punter.

The basis of any commercial arrangement must be a level playing field for bookmakers—onshore paying tax. That is what the simple change in the Bill would bring about. It would not solve all the problems of the world, but it would have a big effect. It would define the location of the bet as not where the bookie is but where the punter is. Technically, gambling licences would be provided on the basis of point of consumption, not point of sale. A bookmaker who wants to market to British punters and take bets from them must be licensed by the Gambling Commission. Tax and levy would be paid. It is a simple change with a big effect. There are two concerns that I want to tackle head-on. First, some say that bringing bookies onshore would drive punters to unlicensed sites. Hold on: most sites are already offshore, outside full regulation. That, indeed, is part of the problem, so the Bill would bring the vast majority of bookmakers back onshore. Offshore bookmakers could not advertise and would face prosecution.

I am a practical man. Let us not make the best the enemy of the good. Just because we cannot do everything does not mean that we should do nothing. Indeed, the argument about leakage shows just how important it is that the onshore rule is enforced properly. I say, yes, there is concern about leakage: let us ban offshore gambling effectively. Others make the objection that the 15% tax rate is too high, and should be cut—we should use the carrot, not the stick—and I think there is merit in that argument. I am in favour of lower taxes, and no tax should be punitive. I say, yes, there is a tax rate that is fair to racing, bookmakers and the Treasury. It is not zero, and the Bill should be the first step in finding it.

British horse racing has a proud history, and a broad and passionate following. For generations, it has been the best in the world, attracting talent from around the world, and it is the envy of the world. At this moment—the moment of Frankel, Kauto Star and Her Majesty’s own Carlton House—when the glittering sport of racing is at its best, we should look to the future with optimism and hope, yet optimism there is not, because the sport’s financial currents are on a rip tide. However, there is hope. It begins with this Bill. The support of the House would give this finest of sports, the sport that we love, hope to compete in the world, hope that jobs can be saved and our heritage enhanced, and hope for a bright future. I commend the motion to the House.