Offshore Gambling Bill

Philip Davies Excerpts

Friday 25th January 2013 Commons Chamber

[Miss Anne McIntosh (Thirsk and Malton) (Con)]

I beg to move, That the Bill be now read a Second time.

I am delighted to present the Bill on behalf my hon. Friend the Member for West Suffolk (Matthew Hancock). As one of its early sponsors, I want to take this opportunity to pay tribute to him for initiating it and thank him for his excellent work, which has stood us all in good stead. I am pleased to be taking the Bill forward today with his support and I congratulate him on his preferment and the excellent work he is doing as the Minister responsible for skills and apprenticeships. It is already bearing fruit, bringing extra apprenticeships to my constituency of Thirsk, Malton and Filey.

The Bill aims 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; and to provide that all relevant operators contribute to the horse race betting levy.

[Philip Davies (Shipley) (Con)]

It would help if my hon. Friend set out the main purpose of the Bill and if we pinned down its main thrust at this stage. Is it better to regulate the online market to raise revenue for the Treasury or to raise more income for the horse racing industry?

[Miss McIntosh]

I am grateful to my hon. Friend, who takes a close interest in horse racing. He and I share a love of horse racing, and I shall a say little about the contribution that racing makes to the rural economy in my constituency. The Bill’s main purpose is to bring things onshore to the United Kingdom, where the racing takes place, and to emphasise that when a bet is placed online the point of consumption is in this country. The whole thrust of the Bill is to bring money back into racing, and I shall explain how. The Treasury’s proposals, which I understand can be introduced in any Budget—perhaps not this year; possibly next year—will restore the tax situation to those offshore betting companies. That is not the purpose of this Bill. The main difference between it and the draft Gambling (Licensing & Advertising) Bill, which has been drafted by my right hon. Friend the Minister, whom we welcome to the Chamber—we look forward to his response—is that this Bill relates to the levy.

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[Miss McIntosh]

On a closer reading of the Bill, my hon. Friend will see that it

“extends to England and Wales, and Scotland”

and, in part, to Northern Ireland. That is obviously a matter for debate.

Horse racing is important for both business and tourism, with a number of race courses in and around my constituency. Thirsk is the main local race course, but there are also courses at York, Wetherby and Ripon. The industry is vital, and a large number of trainers, jockeys, breeders, bloodstock agents and stable lads and lasses depend on the racing industry for their livelihood. My constituency home is on a former stud farm. The contribution that racing makes locally in Thirsk, Malton and Filey is considerable. There is a direct link to point-to-point racing, as well as a contribution to local pubs, shops and restaurants, which benefit from the visitors, thus making a contribution to leisure tourism. One need only visit Thirsk on race day, or race evening, to see the town come alive.

I thank my constituency chairman, Peter Steveney, who has been extremely helpful in enabling me to prepare for the debate and introducing me to many of the main players in the racing community both locally and nationally. I thank everyone who briefed me for today’s debate.

[Philip Davies]

My hon. Friend will be delighted to know that I contribute to the local economy in her constituency by owning and breeding a number of horses stabled there—at great expense, I might add; I cannot advise anyone to get involved in that activity on commercial grounds. Does she agree that it is not just the trainers and the breeders but the stable staff who work in our constituencies who rely on the racing industry, not just for income but for their jobs?

[Miss McIntosh]

I shall try to speak more slowly, because I referred to the stable lads and lasses. I yield to no one in my admiration for the work they do. Mucking out horses, taking them out of the stables and returning them to the stables at this time of year is a hard job. I have visited a number of stables, but I have not had the good fortune to see any of my hon. Friend’s rides saddled in my own constituency.

I should like to recall the tragedy that occurred in Malton three or four years ago. Two successful jockeys—rising stars—lost their lives in a tragic fire. For that reason, we very much hope to establish an injured jockeys facility in Malton.

[Philip Davies]

Has my hon. Friend had the pleasure of seeking out the advice of Mr Michael Easterby, the trainer of my horses and a supportive constituent of hers? If she has not, I suggest that she does. I am happy to facilitate such a visit, because she will learn an awful lot from him, not least some colourful language.

[Miss McIntosh]

Indeed, my ears are still smarting from my last visit, when I witnessed the severe flooding suffered by the Easterby stables. We must not forget Michael Easterby’s brother, Peter, and I congratulate all the trainers based in my constituency on having the good sense to bring horses such as those owned by my hon. Friend to a marvellous constituency where there are many excellent opportunities to train them.

Having said that, I have visited Middleham in the constituency of the Foreign Secretary, my right hon. Friend the Member for Richmond (Yorks) (Mr Hague), where there are some major racehorse trainers, which only emphasises how important racing is to the north Yorkshire economy. Indeed, many rural market towns depend on local race courses as a source of enjoyment and employment, and as a contribution to the local economy. However, those race courses are under increasing pressure, and it is all too easy for smaller, rural race courses to be under threat from other purposes such as housing. The House would wish to record its disappointment at the recent closure of race courses such as Folkestone and Hereford, and I hope that that process will be halted and kept under review. This is a desperate state of affairs, and many fear that local communities are losing out, with jobs being lost and people being made redundant.

In 2011, 93 races were held at Thirsk race course, with 2,253 entries. These fixtures attracted 55,000 people over one year. This proves that racing is entertainment, which draws people to the area to spend money and contribute to the local economy. In 2011, according to the Sheffield Hallam economic impact study, York race course contributed £58 million to the local economy. The wider racing industry in Yorkshire, with nine race courses, the Northern racing college, Doncaster bloodstock sales, and 120 training yards and stud farms, was calculated to contribute more than £220 million a year to the economy and to support more than 2,300 full-time jobs from the core activity. A further 830 jobs were also supported in the region.

York race course is widely recognised for its good racing. I was honoured to attend during the Royal Ascot at York week. In the past decade York race course has invested over £30 million in capital projects, including the new stands, the track and race-goer facilities. The key part of its income is from the levy board, which helps to fund prize money, and from the wider investment that York race course enjoys through non-interest-bearing loans for capital expenditure for things such as the new stands. Funding from the levy went towards the major developments of the Knavesmire stand in 1996, the excellent Ebor stand in 2003 and the upgrading of the Melrose stand in 2011, as well as the track project in 2009. There is currently a £5 million development at the northern end of the race course to provide a new weighing room, a pre-parade ring and a saddling box. If York race course had not made the improvements to the track, it could not have hosted Royal Ascot at York because the track was not big enough.

The current situation with the levy, which needs to be addressed, means that eventually there will be fewer and fewer entries in races. My hon. Friend the Member for Shipley (Philip Davies) has given us a few markers as to why. Owners and trainers will want to enter their horses in races held overseas to capitalise on the high prize money available there. This would be devastating for north Yorkshire, Yorkshire as a whole and the rest of the country, as the number of active race courses in the UK would decline, a large number of people would lose their income, and livelihoods dependent on racing would decrease.

[Philip Davies]

I hope my hon. Friend will not over-egg that pudding. Most small owners—and most owners are small owners—own horses because we want to see them run. It is therefore not very likely that we would send them off to be trained in France because the prize money is better there. The races with the most prize money tend to have the fewest entries, and the races with the lowest prize money tend to have the most entries, so I am not entirely sure that the correlation my hon. Friend is presenting stands up to a great deal of scrutiny.

[Miss McIntosh]

That is a matter for debate. The five-year trend shows that there has been a 15% drop in prize money in flat racing. Perhaps my hon. Friend enters horses only in jump races and is not affected by that.

[Philip Davies]

My horses run on the flat and over jumps. Any prize money that anybody gets back from owning a horse is a bonus. Most people write off the money and do not expect to get anything back. About 85% of all prize money goes to the top 10 or 15 owners, so increasing the prize money tends to be an exercise in throwing apples into already full orchards.

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[Miss McIntosh]

I think that the hon. Gentleman might find some reassurance in the remarks I am about to make. I will answer the point the hon. Member for West Ham (Lyn Brown) made earlier about enforcement. I hope that the Bill will satisfy her in that regard. The Select Committee’s excellent report sets out why we need the Offshore Gambling Bill, as opposed to a remote gambling Bill. I will now go through the relevant clauses.

[Philip Davies]

The hon. Member for Newcastle-under-Lyme (Paul Farrelly) is a far more distinguished member of the Committee than I am. Has my hon. Friend given any thought to the legality of her proposal to add the levy requirement on to this issue, because it seems to me that it might contradict European law? She is much more of an expert in that field than I am, so I wonder whether she could tell us about it. If it did fall foul of the European Union, perhaps that would encourage her to join me in voting no when the referendum comes.

[Miss McIntosh]

rose—

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[Miss McIntosh]

I believe that the debate we are about to have on clause 4 goes to the heart of that matter, but I would like to remain in order and to go through clauses 1, 2 and 3 first before addressing the issue of the levy, which is set out in clause 4 of the Bill, which I am promoting on behalf of my hon. Friend the Member for West Suffolk.

Clauses 1, 2 and 3, as the Select Committee has made clear, set out the problem. The Bill proposes to put the operation at the point of consumption, which means where the customer is in the United Kingdom. I do not think that any customer placing a bet, either through a betting exchange or online—I saw yesterday for the first time a betting exchange work on someone’s mobile phone, but I am afraid that I resisted the temptation to place a bet—assumes that the company through which they are placing it is based anywhere other than the United Kingdom. I think that it would come as a surprise to them to learn that the company is based in Gibraltar, the Isle of Man or some other such place.

The background information provides a reason for bringing offshore operators into the United Kingdom for the purposes of advertising, licensing and the levy. Betting companies that provide gambling facilities for British customers will be required under the Bill to be licensed by the Gambling Commission, which will ensure that the correct tax and levy are paid, and the tax situation will be resolved in future by the Treasury. If a bet is placed in the UK, under the point of consumption licensing, that bet and the company behind it should be covered by UK law and domestic regulation to protect consumers. That should be welcomed by the betting companies because it gives them, to use the idea expressed by the hon. Member for Newcastle-under-Lyme, clarity and legal certainty and sets the relationship on a sound commercial basis on which they can operate. It will be completely transparent and open to scrutiny by the regulator.

[Philip Davies]

If the Gambling Commission had to license each individual betting operator wherever they operated around the world, as opposed to simply accepting a white list and the regulation that takes place in a particular jurisdiction, has my hon. Friend given any thought to what the resource implications would be for the commission and how many extra staff it would need to take on to deal with that extra licensing?

[Miss McIntosh]

I hope that my hon. Friend will not mind me answering in plain Yorkshire by saying that that is plain daft. The Gambling Commission had the right number of people in place from the outset; they are just not being put to good use. The so-called white list is being completely avoided, contrary to the terms set out by my hon. Friend’s own Committee, which wants to discourage the formation of a grey market. The white list is not working—a grey market is coming in and undermining companies such as bet365.

It is absolutely clear that an unintended consequence of the Gambling Act 2005 was the movement offshore of the major betting operators. All it took was for one operator to move offshore and the others followed, as it became less competitive for them to remain in the UK. This was neither the wish nor the stated intention of the House when the Gambling Bill was going through its stages, and now the problem must be rectified once and for all. The Offshore Gambling Bill would restrict what betting operators can do on the internet without a licence, and it would make it harder for operators to find customers in the UK, because they would be banned from advertising and marketing if they did not obtain a licence.

[Philip Davies]

My hon. Friend claims that that what I said was daft, but could she give some examples of betting companies that operate on the grey market and that do not offer proper protection to punters? As far as I am aware, there is very little evidence of betting by UK punters on any grey market whatsoever. The danger is that the Bill would create a grey market, not that there is a grey market at the moment. We would all be interested to hear whether my hon. Friend has evidence of any companies with UK customers that are operating on what she would describe as a grey market.

[Miss McIntosh]

I do not think that the purpose of this debate is to draw up a grey list or a black list; the purpose of the debate is to set out the problem, as identified by my hon. Friend’s Committee, and to address it.

Obviously, it is impossible to restrict all internet use because of its sheer size, but we want to make the situation much fairer and clearer for anybody placing a bet and put everything on to an even keel. I think that one point that my hon. Friend and I would agree on is that we want to bring more money back into the UK so that it can then be spent on racing.

Because of the increased use of the internet for gambling purposes, it is crucial that the integrity of the sport is maintained. Therefore, information-sharing between betting operators—for example, the information on account holders—must occur when suspicious gambling takes place.

As I said earlier, the Gambling Commission would play a crucial role in the public policy aspect of clauses 1, 2 and 3 in protecting the young and vulnerable. It surely must be in the interest of bookmakers to have a healthy racing industry. The purpose of the Bill is not to pit bookmakers against other sectors of the racing industry; its purpose, and that of the positive conversations that I have had with those in the racing industry, is to promote partnerships. That is something that successive Government have done. The Labour party chose to call them, rather vulgarly, stakeholders, but we prefer a more cuddly partnership approach. That is precisely what we want to achieve—a partnership with bookmakers, whom I think have become one step removed from other partners in the racing industry. We also want to create fair competition between onshore and offshore bookmakers.

Hon. Members may raise the fear later in the debate that the operation of online betting will be moved further offshore to China. I would like to know from those hon. Members how that can happen when it is completely illegal to place a bet in China, either online or offline. China is a bad example to use.

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[Miss McIntosh]

My hon. Friend throws new light on the debate with an issue of which I was unaware. I do not know whether my hon. Friend the Member for West Suffolk knew of it when he was drafting the Bill, but I am sure that it has caused great consternation to the House.

Racing is still the main sport that attracts those who place bets online or offline into a betting shop or on to a computer to place a bet, and that is why this Bill is so important.

[Philip Davies]

Will my hon. Friend give way?

[Mr Speaker]

Order. May I just say, with reference to what has been said, that periodic reference to and use of the word “offshore” because it is part of the title of a Bill does not render orderly an intervention that is otherwise disorderly?

[Philip Davies]

Thank you, Mr Speaker. I am grateful to my hon. Friend for giving way, but would she accept that most of the corruption she mentions with regard to sport and gambling has had nothing to do with any UK-based company or even one based in Gibraltar? It has been fuelled by illegal activity in the far east—perhaps that is why she got mixed up on China earlier. Any changes to regulation here would make no difference at all to that illegal betting activity in the far east.

[Miss McIntosh]

What we are trying to do is help racing in the UK by bringing activities that are deemed to be in the UK back here so that they fall within the remit of the Gambling Commission. That would lead to, I hope—mindful of those placing bets—a duty to behave responsibly and would provide legitimacy for licences based in the UK. I will come in a moment to why it would introduce a level playing field.

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[Miss McIntosh]

Perhaps I am not being very clear, but I think that the wish of the House is to include clause 4 to address the levy situation. Together with any potential Treasury action in the Budget, we need to ensure not only that a sensible rate of tax is set by the Treasury but that the levy and tax contributions together cannot be left as voluntary. We have recently seen too much of corporations such as Amazon and Starbucks avoiding tax in this country.

[Philip Davies]

I understand the thrust of my hon. Friend’s point. However, when the Secretary of State comes to a determination on the levy, or an agreement is reached on it, the mechanism used is designed to reach a particular figure of, say, £75 million. If the Bill succeeded and money were added on, the target figure of £75 million would still apply. All that would happen is that the mechanism used to calculate it would change in order still to hit £75 million. We would not get any more money through the levy; we would just have a different mechanism for getting to that figure.

[Miss McIntosh]

That is a matter for debate. I would hope that there can be some flexibility in this regard. Tax is a matter for the Treasury, while the levy is a matter for the Department for Culture, Media and Sport.

As the levy already exists, there should not be a problem in extending it to overseas operators to equalise the conditions of competition so as not to generate a new state aid issue. If it is thought that the levy raises such an issue, the Gambling Commission has waited an incredibly long time to say so. The levy is not paid directly to economic operators in the field of horse racing but directly to the Horserace Betting Levy Board, which then distributes it for the improvement of horse racing as an industry, including veterinary science and education. Without the levy, it is hard to see what contribution bookmakers would make. The levy fell to a very low level, but it started to rise and now seems to have stabilised again.

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[Miss McIntosh]

I do not want to appear ungracious and I congratulate the Minister on the work he has done in preparing the remote gambling Bill. However, there is a sense of urgency. Every time I visit a stable yard—whether or not it is the one housing the horses of my hon. Friend the Member for Shipley—I have the acute impression that a crisis is hanging over the racing industry that we need to address. Competition is currently distorted and some companies are reaping the benefits of the industry—consumers wanting to place bets—but do not contribute financially to the long-term upkeep and maintenance of horse racing.

Although the levy is provided from state resources, its extension to overseas operators would only equalise, not distort, competition. The overall impact of betting operators having moved offshore has been the decline in prize money I referred to earlier. Race courses have therefore had to fund part of the prize money themselves, as well as fund the levy, which is its biggest overhead. Therefore, if the levy decreases, race courses have to contribute more to maintain the same level of prize money. That is difficult to do, because if more money goes into prize money, less is available to spend on the integrity of the sport and things such as the photo finish and dope testing.

[Philip Davies]

That is not necessarily the complete picture, as I am sure my hon. Friend knows. Racing and race courses get income not just from bookmakers through the levy; increasingly it comes from picture and media rights, which those have gone up massively in recent years to the extent that, if the levy and media rights are taken together, we see that bookmakers are now paying far more for the racing product than ever before.

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[Miss McIntosh]

As I have said, other reasons include the cost of keeping a horse in training, to which I am sure my hon. Friend the Member for Shipley will testify. Feeding costs have gone up hugely for all livestock, including horses. Bedding costs have gone up hugely. Alternatives to straw are being considered. Corn is being produced so that more corn goes to cereal and there is less straw, which has a huge impact on the stabling costs. Many of the stables I have visited had considered alternatives such as cut-up newspaper. However, I understand that stabling horses with newspaper—this also applies to using newspaper for chickens—leads to a cough and is a health hazard that can prevent horses from running.

There are therefore reasons other than economic ones—though costs are increasing—for smaller field sizes and fewer runners. In turn, that reduces the footfall at the race course, and so yields less income from admission prices. Figures for the past five and 10 years show that average attendances are down by a considerable 7%. Trainers are training fewer horses, and therefore require fewer stable staff and fewer farriers, which will have huge knock-on effects in rural areas such as my own of Thirsk, Malton and Filey. The trainers require fewer saddlers and horse boxes. The knock-on effect on the whole rural economy is potentially huge.

The results are the same if there is less prize money, because owners enter their horses in races from which they will see a greater return, and at this point in time that means overseas. My hon. Friend the Member for Shipley seems to be bucking the trend, because it appears that the number of owners is down. The number of sole owners has dropped in the past 10 years by 13%, which is less than the drop in partnership or company owners whose numbers are down by more than 31% in the past 10 years, and by almost 20% in the past five years. I do not think the House can argue that the racing industry is not facing a crisis. That is why the Bill is so urgent. My hon. Friend the Member for Rochford and Southend East (James Duddridge)—I am delighted to have had the honour to represent that area in the European Parliament between 1989 and 1994—must now be satisfied about why the racing industry is in penury and why racing needs the money.

It is true that the wealthy end of the sport—I am looking at no one in particular—is unaffected by the reduction in prize money. However, at the budget end of the sport, the smaller syndicates and individual owners are struggling.

[Philip Davies]

Lest anyone be confused by my hon. Friend’s musings, I assure her that I am certainly not at the wealthy end of any spectrum, and that I own my horses through small syndicates, which she said were not decreasing in number as much as sole owners. I am at that end of the market rather than the Sheikh Mohammed end.

[Miss McIntosh]

I have a link with Sheikh Mohammed—his horses were at stud where I live in the constituency—but I take my hon. Friend’s point.

The fact is that the problem affects the race courses that are in far more remote areas of the country, located further away from racing centres. I am not thinking particularly of my area in that regard, but of further- flung courses in Scotland and the UK, which are feeling the effects of the reduction in the levy because they have less to offer to owners and trainers. A further consideration is the price of fuel and the location of the race course in relation to the trainer’s yard. The trainers to whom I have spoken have made that point most vigorously. They take not just one horse to one course on a given day, but multiple horses to multiple race courses. That makes certain race courses far less appealing than others.

I have argued that state aid rules should not be a significant issue, but if they are, a way around them has been suggested: all betting operators could require a UK licence. However, in order to obtain that licence, they must enter into a commercial deal with the British Horseracing Authority that ensures that a percentage of their gross profit goes back into racing. That approach has already been taken up by one betting operator, to which I have referred. Pressure must be placed on others to follow. There could be a further incentive: betting operators must have a commercial deal if they want to sponsor the big races and meets.

On the so-called problem of competition law—[Interruption.] I ask for the Minister’s attention at this point, because this is the crux of my argument and the main difference between the Gambling (Licensing & Advertising) Bill, which deals with remote gambling, and the Offshore Gambling Bill. I struggle to see why the Minister, the Department or the Government should so categorically state that extending the levy to overseas operators would breach the rules on state aid. I mentioned my own background information in that regard, but I have also taken advice from a legal counsellor.

To state the obvious, the levy already exists, so its extension to overseas operators would purely be to equalise the competition conditions and ought not to generate any new state aid problem. Those arguments arose at the time of the sale of the Tote—I argued vigorously with successive Governments that there were no state aid issues. We are often fearful in this country of debating with the European Commission, and yet, in my experience, Commission officials are even more open than officials from UK Government Departments. The existing levy of the 1960s pre-dates our entry into the Common Market in 1973 and has grandfather rights, as I have said. If it is thought to raise a state aid issue—as I have explained, there are good reasons why it should not—why has the Commission waited so long to raise this point? I put it to the Minister and the House that the Commission has chosen not to do so because there is no state aid issue. I want to help the Government and my right hon. Friend the Minister in this regard. The Government might be nervous that the Commission is currently examining the state aid aspects of the parafiscal levy on online horse race betting in France. France has been notified that such a measure is, in the Commission’s view, a state aid.

The Commission has opened proceedings under article 108(2) of the treaty on the functioning of the European Union. The case that the Commission brought against France commenced in 2010 and has still not been completed some three years on. It relates to a levy to finance the public service mission of

“improvement of the equine species and the promotion of horse breeding”—

this is from official journal, which is the reason for the legalese—and

“training in the horse racing and breeding sector and rural development.”

The invitation to submit comments under the treaty on the functioning of the EU was published in January 2011.

The case against France is that the French authorities notified the Commission of a proposal for a parafiscal levy on online horse race betting in order to fund a public service mission entrusted to horse racing companies. The notified measure comes in the context of the opening up of certain online games of betting and chance under the French law of 12 May 2010. That law ends the monopoly on online horse race betting held by Pari Mutuel Urbain, commonly known as PMU, an economic interest grouping of 51 horse race companies that, however, retains the monopoly of online horse race betting through its physical network of sales outlets. The French authorities argued their case that the purpose of the levy was to fund the public service mission improvement. They subsequently submitted this to the Commission and it considers that the aid measure contains all the features constituting the concept of state aid, and published its decision inviting comments and consultation.

My question to the Minister today is: have we, as a party, joined that case? Did the Government respond to that invitation to clarify the legal situation? That would have been immensely helpful to the Minister, both in responding to the Offshore Gambling Bill today and in preparing his own remote gambling Bill. I want to strengthen the Minister’s and the Government’s arm. We have nothing to fear on this point from the European Union. We have a very strong case to put, and it appears to me that there are distinctions between it and the French case. I hope the Minister has joy and that the Government did respond to that consultation and can use it as an opportunity to clarify the difference between the French proposed parafiscal levy and our levy which has existed since the early 1960s and enjoys grandfather rights, which by no stretch of the imagination can be said of the French proposed parafiscal levy. If the Minister did not respond to that consultation, he owes the House an explanation of why the Government chose not to respond, as it would have been a unique opportunity to clarify the law in this regard.

There are distinctions between the French case and the Horserace Betting Levy Board. Most importantly, the levy in this country is not paid to economic operators in the field of horse race betting, but paid direct to the Horserace Betting Levy Board, which then distributes the proceeds of the levy for the improvement of racehorses: and breeds of horses, and for the advancement of veterinary science and education. There is no direct participation by bookmakers in the proceeds of the levy, and if any advantage is conferred on them it is only on the maintenance of the stock of good quality horses, the provision of grants to cover the costs of regulating races and to provide loans for the improvements to racehorses. It is very hard to reconstruct what contribution bookmakers might have made without the levy, but it cannot be sensibly said that the levy relieves bookmakers of the burden that they would otherwise have had to assume. Indeed, the paradox before us today is that the existing levy confers an advantage on overseas operators, since they derive, albeit indirectly, the benefit from a healthy horse stock and well-provisioned race courses without having to make the contribution that their domestic competitors have to make. That must surely distort competition.

We are not proposing state aid. In no way would the Government, were it to agree to clause 4, be proposing state aid. Clause 4 seeks to equalise unfairness and to remove the distortion to competition between bet365 and others who place their bets in the UK, and those offshore operators who place their bets in Gibraltar and in other offshore territories. It may be that I have to concede that the levy is provided from state resources, because it is a statutory levy. However, there seem to be powerful arguments that its extension to overseas operators would tend to equalise the conclusions of competition, not distort it.

I therefore put it to the Minister that today is his opportunity to explain his views, his Department’s views and the Government’s views on state aid once and for all. We have never had the opportunity in the House to discuss this—this is a unique opportunity to do so. It is incumbent on the Minister to explain why, if he did not, he did not respond to the consultation’s points in the official journal called by the European Commission to the French-proposed parafiscal levy. I ask the Minister to explain his views on state aid, and explain why they are at such variance from mine and those of the Under-Secretary of State for Skills, my hon. Friend the Member for West Suffolk who is sat next to him on the Front Bench. We believe that this does not constitute state aid but merely seeks to close the gap and remove the existing distortion from competition.

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[George Freeman (Mid Norfolk) (Con)]

I pay tribute to my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) for leading the debate this morning, and to my one-time office mate, the Under-Secretary of State for Skills, my hon. Friend the Member for West Suffolk (Matthew Hancock), whose constituency includes Newmarket.

As a sponsor of the original Bill, it is a pleasure for me to be here on this Friday morning to support this Bill. I support it because I believe the racing industry needs it, and I shall say something about why this great industry requires our support. Contrary perhaps to the wishes of the Whips, I do not intend to talk the House through my family’s long connection with racing, other than to acknowledge it, as I think that will reveal something about the extent of this great industry’s footprint out in the rural economy.

As one or two Members know, my father was a one-time national hunt jockey who rode for Her Majesty the Queen Mother and won the grand national in 1958. My brother is a racehorse trainer in California, where the funding for racing is rather more sustainable. It a place to which many of the British diaspora in racing have headed because of its more sustainable model of funding. Other members of my family have for many years been involved in breeding. My uncle Christo Philipson was a one-time chairman of the British Bloodstock Agency, and I grew up Newmarket, so I know very well that it, along with a number of towns such as Newbury, Malton and others in the UK, is totally dependent on this industry.

I also have a constituency interest. I am not lucky enough to have Fakenham race course in my constituency, but it sits on its northern boundary. It sits at the heart of a deep local, rural and equestrian economy of which Norfolk is proud and on which it relies—a network of point-to-point races, local equestrian activity and pony clubs, which are all part of the grassroots footprint, particularly of national hunt racing, and a cluster of trainers and breeders around the Attleborough area on the fringes of the Shadwell Stud in the corridor between Fakenham and Newmarket. This is the invisible side of racing that one does not see when tuning in to watch the Derby, the 2,000 Guineas or even the grand national. It is for the benefit of those communities and the rural economic impact that I stand here today.

We are debating this important issue because the health of racing is vital to our overall economy, yet it is under severe threat. The crisis in prize money and the crisis in respect of the leaching away from the industry of revenues on which every other racing industry around the world is able to rely is undermining the health of this great industry, It is, as I say, an issue of vital national importance.

Let me take the opportunity of reminding the House of the industry’s size. More than £10 billion a year is placed in bets; more than 6.5 million people attend our race courses, with a total turnover of over £3 billion. About 7,000 staff are employed directly, but more than 80,000 full-time equivalent staff are employed in supporting and associated activities. There are more than 4,000 breeders. We hear a lot about the top 10 or 15 breeding operations, but there are many small breeders and small-time trainers at the bottom of the pyramid who rely on prize money to keep them in business.

I would also argue that the horse racing industry has a disproportionate impact in the rural economy—an area that the Government have rightly put at the heart of their economic mission to drive a rebalanced economy and to help this country claw its way out of the debt crisis that confronts us. Its wider footprint—the feed suppliers, the hauliers, the farriers, the saddlers and the tourism associated with local race tracks—is very significant.

The truth is that our racing industry faces a crisis in respect of prize money, and it is a crisis that is particularly affecting those in the bottom half of its pyramid. At the top of the racing industry, particularly in the flat sector, the cost of racing is easily met by the rewards associated with breeding. For those at the bottom of the pyramid, however, prize money is the central method for covering costs and maintaining racing as a sustainable and viable activity. I shall say a little more about that in a few moments.

[Philip Davies]

As my hon. Friend knows, I share his passion for horse racing, but does he not accept that the levy model largely works by taking its income from low-quality racing, which some people might describe as betting office fodder? The money raised from that tends to be used by the levy board to increase the prize money at the top end rather than increase it at the bottom end, which might help the small-time owners, trainers and breeders to whom he refers.

[George Freeman]

My hon. Friend makes an interesting point. I dare say there is an extent to which the industry needs to think about how it allocates its prize money, but the fundamental point is that unless it has a sustainable link to a reliable source of revenue from its principal input, which is betting, all this discussion is academic. The central point we are confronting today is how this great industry, which successive Governments have acknowledged needs a statutory basis, continues to ensure that the betting activity that feeds off it puts back a sustainable and responsible contribution to promote it.

The truth is that the levy has not been able to react quickly enough to the transformation in the gambling industry, which has seen so many of our gambling businesses move offshore. Eighteen of the 20 biggest bookmakers are now offshore. We have heard of one this morning—it is an “n of 1”—proudly maintaining a presence here in the UK, but the trend is indisputable and has been very significant in reducing the industry’s income.

Prize money has been significantly affected. It is important to acknowledge that prize money is vital for ensuring that we attract the best horses for breeding here, the best horses in training and the best people in the industry. Our elite racing sector at the very top is, of course, world beating, but prize money is also crucial to sustaining the less glamorous part of the industry out in our more diverse parts of the rural economy.

The levy contribution has nearly halved over the last five or six years. I want to highlight that by having a look at today’s Racing Post, which will illustrate some Members’ points. I do not intend to read it all, but let us look at today’s card at Lingfield. The first race at 1 o’clock is the Bet at bluesquare.com claiming stakes. The prize money is £2,045. If we divide that up between the first, second and third and between the owner, the trainer and jockey, and we take off the costs—of fuel, of staff, of getting a lorry to get a horse to the races— we see that that simply does not add up. Across the country, we are seeing small trainers and breeders packing up.

The other interesting thing to notice about the 1 o’clock at Lingfield is that there are only four runners in it. What is happening across the sector is that in that lower half of the market, fewer and fewer people are able to survive. That feeds in on itself. The smaller the fields, the less attractive for TV coverage and the less attractive for betting. In case anyone is concerned that there is a bumper race with huge prize money somewhere in the middle of the afternoon, the 1.30 prize money is £2,000, the 2 o’clock is £2,700 and the 2.30 is £2,040. These are disproportionately small sums compared with prize money in France or in Ireland. That is why we are seeing increasing numbers of trainers leaving this country and going to those territories. We are allowing this structure to undermine one of our great industries at a time when the Government are rightly doing everything they can to remove obstacles to growth and to drive economic recovery.

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[James Duddridge (Rochford and Southend East) (Con)]

It is a pleasure to follow the excellent speech by my hon. Friend the Member for Mid Norfolk (George Freeman). When looking around the Chamber, I was surprised to find that he was handing out a copy of his speech to other Conservative Members, who were taking great interest in it. I then realised that it was not his speech but the Racing Post. Mr Speaker, who was in the Chair at the time, noticed that and allowed it, thus establishing a precedent that although it is, rightly, not permissible for hon. Members to read newspapers in the Chamber, unless, like the Vice-Chamberlain of Her Majesty’s Household, the right hon. Member for East Yorkshire (Mr Knight), who was previously the Chair of the Procedure Committee, they read them on their iPad, they are allowed to look at the Racing Post.

[Philip Davies]

Will my hon. Friend give way?

[James Duddridge]

I have quite a few points to make, but I will give way.

[Philip Davies]

I just want my hon. Friend to clarify something. Is he advancing the case that hon. Members are able to read the Racing Post in the Chamber at any time or merely when it relates to a Bill under discussion?

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[James Duddridge]

I would certainly encourage the Government to produce simple and short legislation, and less of it. My hon. Friend mentioned that the Bill has only five clauses, and clause 5—entitled “Short title, commencement and extent”—is needed for every Bill, so it actually has only four clauses. We have already questioned whether another clause can be taken out or amended in Committee, further shortening the Bill. The hon. Member for Eltham (Clive Efford) talked about the Government’s draft Bill and said that there are many similarities. I am not sure who has copied whose Bill, but they both seem to be operating with equal brevity, which should be encouraged.

I want now to give some of the background to the Bill. My hon. Friend the Member for Mid Norfolk mentioned the Gambling Act 2005, and despite his criticisms I think that there is general consensus outside the House and among most Members of Parliament that that Act was a step in the right direction. It brought together other pieces of gambling legislation, particularly the Gaming Act 1968, and had an awful lot of good stuff in it that I would not want to see go. It might not have been not bold enough, and perhaps it did not have sufficient foresight about how the offshore industry might work and how internet gambling might fit alongside all other forms of gambling.

[Philip Davies]

My hon. Friend might be being far too kind to the 2005 Act. As far as I can see, it was intended to introduce a range of casinos into the country that did not materialise and to make the UK a hub for gambling businesses. Since the introduction of that Act, not only has there been no expansion in casinos but betting companies are all clearing offshore rather than moving to the UK.

[James Duddridge]

My hon. Friend is right to chastise me in relation to super-casinos. I was referring to the broad objectives, which were to prevent gambling from being associated with crime and disorder; to prevent it from being used to support a crime; to ensure that it was conducted in a fair and open way; and to protect children and other vulnerable persons from being harmed or exploited. I thought that those aims were laudable, as opposed to the excessive regulation of super-casinos, to which I shall return anon.

[James Duddridge]

The 2005 Act was a bit of a pig’s ear in relation to a number of issues. In Southend, for example, we had three casino licences, and were pushed to bid for a super-casino, to which my hon. Friend the Member for Shipley (Philip Davies) referred, not because we particularly wanted it, but because a super-casino on the Thames corridor would put the three casinos out of business. I shall return to the casinos in Southend, because they are relevant to the responsibilities envisaged by the Bill. The further the regulation from the person making the bet, the easier it is not to take responsibility.

I particularly welcomed the provisions in the 2005 Act on the protection of children, because as a child I placed a bet. I am clearly not very good at betting— I did not win—but I placed a £1 bet. Someone kindly explained to me that I had a better chance of winning if I placed an each-way bet. I did so, only to find that it cost me £2. They said, “Would you like to pay tax?” I thought that that was rather strange, because as a 16 or 17-year-old I was not used to paying tax, so I said, “No.” Then I realised that I had to pay tax if I won. Children need to be protected. [Interruption.] My hon. Friend the Member for Shipley (Philip Davies) should have better sense than to barrack me from a sedentary position. I have known him for a number of years, and have discussed betting on a number of occasions, and every time I come away with him trying to sell me a horse’s leg or urging me to place a bet. Invariably, not knowing how to place a bet, I end up giving him a fiver and asking him to place an extra bet for me. He has never given me anything in return, so when he says that horse ownership is not a commercial business, I can well believe it.

The Gambling Commission—the new regulator set up by the 2005 Act—has duties including the operation of licences for organisations and individuals who provide gambling, as well as personal licences for certain individuals working in the gambling industry. Remote gambling is the key issue addressed by this Bill and the Government’s Bill, and indeed the desire to impose order and regulation on the online sector was one of the motivations behind the 2005 Act, alongside the interests of the Treasury following a visit by Americans who thought that it would be a great boost to the UK economy to introduce super-casinos—which was certainly not the case.

The intention of the Act was to protect British customers from unscrupulous operators and to make Britain a base for the growing online gambling industry. It has clearly failed, and many Members have evidenced that today. I do not think that I need to go into the details, as that would prolong the debate for the sake of it, which I do not want to do, as I have a number of issues of substance that I want to cover.

Under the Act, remote gambling operators are required to hold a Gambling Commission licence only if they have remote gambling equipment located outside Britain. Operators based outside Britain but licensed in the European economic area and Gibraltar are permitted to advertise gambling services in the UK with reliance on the licence issued in their home jurisdiction. I believe that other operators are allowed to operate in Antigua, Barbuda, the Isle of Man, the States of Alderney, and Tasmania. Quite why those countries are allowed to operate on the same basis, I do not know, because they are a bizarre collection of countries and geographies that are not usually put together. Perhaps later in the debate someone will explain why they stand out. This has created a number of key problems and challenges around consumer protection and the regulation as competitiveness issues of British licensed gambling operators. I would like to spend some time developing these points further.

Participation in remote gambling is steadily increasing. According to the British gambling prevalence survey in 2010, 73%—that is, 35 million—of the adult population participated in some form of gambling in the year prior to the survey, with 14% using the internet to gamble. I thought that was an awfully large proportion. As a novice gambler I thought that I was not a participant in this great project, but then I realised that state gambling included the national lottery, which I do online, and well as the pools, which some people do online. Some of those silly games—Monopoly or similar—that I have been persuaded to play while topping up my national lottery game are included as well, so it is quite a broad area.

Like most people, I had no idea where the tax on those games on websites was going. There is a complete lack of clarity. It is a growing industry and a growing problem. A report by the Gambling Commission on industry statistics estimates that the total global revenue from gaming, the gross gambling yield, which for some reason excludes telephone betting, was more than £20 billion in 2001, representing 10% growth on the previous year.

The UK consumer gambling yield which, as opposed to the broader statistics, includes telephone betting, is estimated to have grown by 5% between 2010 and 2011 to reach £2 billion, so this is big business. It has an impact on many people, which makes the need for reform so much more important and relevant. The Government rightly recognise that the current system is flawed and can no longer adequately ensure the protection of British consumers that had originally been envisaged.

I said that I would return to the subject of Southend and gambling. There are three casino licences in Southend. I go into those casinos, as one would expect of a Member of Parliament, and talk a lot to operators about the responsibility for problem gamblers. People with British licences onshore are responsible for that regulation. Having listened to the debate, I think that the position offshore is less certain. In some cases operators could have no responsibility.

If a problem gambler in Southend goes into the casino and is in remission, for want of a better word, and going to Gamblers Anonymous, they can say to casino staff, in effect, “Look, I’ve got a gambling problem. Please don’t serve me when I come in.” A register is maintained. I believe this goes across the board. If that person, for whatever reason—stress, perhaps—is worrying about whether they should gamble or not and subsequently says, “I’ve changed my mind. I want to gamble again,” they are not allowed to do so. They are opted out, but that same person can nip on to a computer and bet.

It is wrong that that differential exists between online and offline, onshore and offshore. It is not a level playing field. It is not to the benefit of the gambler. Most gambling is perfectly legitimate and does not cause a problem, but for some people it does cause problems. Bringing the legislation, the supervision and the taxation closer to the individual would be a great help.

[Philip Davies]

My hon. Friend is right about the importance of people being able to self-exclude from gambling. We all want to see as little problem gambling as possible, but I am sure it is just as possible for somebody to self-exclude online as it is to self-exclude in a shop or in a casino. I am sure the facility to self-exclude applies online as well.

[James Duddridge]

What my hon. Friend says is logical, but I challenge him. I have not seen examples of that. I notice that he has his iPad, so perhaps he can zip through a few websites to see whether there are any that are self-excluding. I know that the casinos and the operators were very proud of that facility.

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[James Duddridge]

I am not sure that there is a reluctance to engage with the technology per se, but there is a reluctance to do so where it might be disadvantageous rather than advantageous. I recall going to a business in Southend that specialised in online marketing. I did not question it on the taxation arrangements of the companies they were helping or those of the company itself, because that was not the focus of my visit. I think I will go back and ask a little more about the online gambling firms it is working with and the implications of how technology can be used to assist not only in compliance with regulations but in best practice, which is in the interests of the whole industry.

Many operators have different products licensed in different jurisdictions, and it might be thought that this provision could be a regulatory burden. I know that my hon. Friend the Member for Shipley will pull me up very quickly on that issue. However, several companies deal across different jurisdictions, and I do not think that it should trouble them too much.

[Philip Davies]

I am struck by how much faith my hon. Friend has in the Gambling Commission over and above any other regulator in any part of the world that has been assessed as having as good a regulatory standard as ours. On what basis does he have such complete and utter faith in the Gambling Commission and know for a fact that it is so much better than any other regulator in any other jurisdiction?

[James Duddridge]

I think that my hon. Friend is putting words into my mouth in relation to the Gambling Commission. I would say, though, that we have more control over the Gambling Commission in comparison with a foreign commission or an area that is completely offshore and completely unregulated. There is no great history of regulation in this area, but we do sometimes focus on some of the more problematic cases.

To return to the idea of working across jurisdictions, one can often go on to a website and not be sure which jurisdiction one is trading in. I mentioned my dabbling in the national lottery. A friend who used to live in Southend and moved away to southern Spain—Southend being as sunny as it is, it comes as a surprise that anyone would want to do that—bought a lottery ticket there. Although they had a modest win—£10, I think—they were outside the jurisdiction and blocked from receiving that money. We need clarity because there is confusion even with something as simple as a lottery ticket in the EU, and we should look at the issue in detail.

The Gambling Commission reported that it receives inquiries about social responsibility and unfairness in relation to offshore gambling—I am sure it also receives such inquiries in relation to onshore gambling—but that it is not able to do much about what is going on. It has been unable to investigate complaints or inquiries, so it is difficult for me, or indeed anyone, to understand the size of the problem. It would be advantageous to solicit information and hard numbers, and I urge other Members of Parliament to consider the issue.

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[Philip Davies (Shipley) (Con)]

We have had an excellent debate today, and I commend everybody who contributed to it. It has been very informative. Some strong opinions have been expressed on both sides of the argument, but I think that they have also been well informed.

Before I get into what I want to say, I refer Members to my entry in the Register of Members’ Financial Interests. Unusually, I do not think there is anything in there that is worth declaring, but in case anyone does, I would like them to have a look at it and pore over it themselves to see what they can find. Just to give a complete disclosure, the only thing that I think is of any relevance is a subscription from which I receive no financial benefit whatsoever, from a company called Peninsula Business Services Ltd. It does what it says on the tin: it deals with employment services, and that is how I dealt with it when it approached me about an employment matter. It happens to be owned by Peter Done, the brother of Fred Done, who owns Betfred and now the Tote. You might think it a rather tenuous link, Mr Deputy Speaker, but others might not, so it is all there on the record for anyone to pore over. I reiterate that I receive no personal financial benefit from it. If I was ever to invoke the subscription I receive, it would be to the benefit of the taxpayer, rather than me.

Even though we have had an informative and extensive debate, I think it would be fair to say that it has not been incredibly helpful to the Minister or the Government. My hon. Friend the Member for Thirsk and Malton (Miss McIntosh) made an excellent speech. I did not necessarily agree with all the points she made, but she made them very well. In my first intervention on her, however, I asked her what she thought the main thrust of the Bill was—whether it was to improve regulation of the gambling industry and player protection, whether it was to raise money for the Treasury, or whether it was to provide more money for the racing industry. I stand to be corrected, but my hon. Friend seemed to say that the thrust of what she is trying to achieve was to bring in more money to the racing industry. As she made perfectly clear, she represents a community in which racing has a large presence, and she is, quite properly, trying to do the best for her constituency, constituents and local community. That is why she feels so passionate about it, and more power to her elbow in that regard. I take it that that is why clause 4, which relates to the levy, is so important to her and why its omission from the Government’s own Bill, which covers many of the same matters, is unacceptable to her. That is her opinion and we all appreciate the clarity with which she expressed it.

The hon. Member for Newcastle-under-Lyme (Paul Farrelly) also made an excellent speech. I, like him, commend bet365, and not just because it has stayed in the UK to pursue its business interests and has not gone abroad like everybody else. It has been helped by the fact that it is family-owned and does not have any shareholders to account to. I think I am right in saying—I will apologise to the company profusely if I am wrong—that, when its representatives gave evidence to the Culture, Media and Sport Committee as part of our inquiry into the Gambling Act 2005, they themselves acknowledged that had bet365 been a public company on the stock market, they would have found the pressure to move abroad irresistible. Nevertheless, it could still do that as a family-owned business. The fact that it has not shows—this is what I took from the evidence its representatives gave us—a deep-seated commitment to its local community. That should be commended. They are very proud of the fact that they employ so many people in Stoke and of the impact that they have on the local community—the hon. Gentleman mentioned the football club—and that is to their credit.

However, by talking so much about bet365—as he is entitled to do, because it is a big employer of his constituents—the hon. Gentleman seemed really to be focusing on the tax implications of the Bill and the idea that it offered an opportunity not only to level the playing field with regard to the competition that bet365 faces from people who have moved abroad, but for the revenues that such a move would generate for the Treasury. This seems rather inconvenient for the Government and, no doubt, for the Minister.

The Minister’s knowledge of these matters is greater than mine, so I would happily be corrected, but, as I understand it, the thrust of the Government Bill, which so closely mirrors this Bill—the point of consumption bit is virtually the same, if not identical—is not actually about bringing money in to the horseracing industry, which may well fall foul of European law. It would probably be tested in the courts and, as we have seen in the past, it is very difficult to predict the verdict of the European Court of Justice.

To illustrate the point, there was a court case in which the racing industry was trying to argue that it had data that it could sell on to bookmakers on a commercial basis. I think that the industry was very certain that it was going to win its case against William Hill when William Hill challenged it in the courts, and it seemed to be a great surprise to the industry when it lost. Court cases seem to be unpredictable.

[Miss McIntosh]

I am following my hon. Friend’s remarks carefully; I apologise for missing the start of his speech. Is he aware of the basic concept in European law that the European Commission is the arbiter of competition law, and that it has had an unconscionable length of time in which to bring the British Government to task if it wished to do so? I believe that we are on very strong ground in that regard.

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[Philip Davies]

I accept what my hon. Friend says. She is far more of an expert on these matters than I will ever be. The House will listen to her opinion with great interest and deference because she is an expert on this subject. I am not a lawyer. People like my hon. Friend the Member for Bury North (Mr Nuttall) are much better qualified to speak on legal matters than I am. I am not an expert, I do not pretend to be an expert, and I will just have to see how events unfold, as will everybody else.

My hon. Friend the Member for Thirsk and Malton may well be right, but whatever the merits of the case, I suspect that were the purpose of the Bill to increase levy payments for the racing industry—notwithstanding the fact that she thinks that is perfectly reasonable—it would face a legal challenge that the Government could probably well do without. Furthermore, it would in many respects entrench the levy system in the industry at a time when the Government have been trying to get away from that system for funding horse racing, so it seems to be moving in the wrong direction in that regard too. I accept my hon. Friend’s legal opinion on the matter, but this measure would certainly add a legal complication that I suspect the Government would rather avoid.

As regards raising revenue for the Treasury. I think I am right in saying that the same issue applies. If it is felt that the reason for the point of consumption legislation is simply to fill the coffers of the Treasury, that in itself could well fall foul of the European Union’s rules, because it certainly would not want to get into a situation where people in one part of the EU are introducing point of consumption taxes on places in other parts of the EU, because the whole thing starts to fall apart at that point. If that was the main motivation behind the legislation, I think that the EU would want to avoid it.

[Miss McIntosh]

The point of consumption tax has already been established in other member states for the purposes of licensing and advertising activities. That is a separate point from the levy, which is the purpose of clause 4. As I said at some length, the tax issue should rightly be separated from this Bill. I understand that the Treasury has already consulted on the tax situation in 2012. It is for the Treasury to come forward with tax proposals.

I do not wish to mislead my hon. Friend and the House, so I merely say that the purpose of clauses 1, 2 and 3 is purely to establish the point of consumption for the purposes of obtaining a licence, being a licensed operator, having a commercial deal, and advertising the activity, all of which are deemed under the Bill to take place in the United Kingdom. There is common ground between what the Government are proposing and what my hon. Friend the Member for West Suffolk (Matthew Hancock) and I are proposing. Clause 4, on which the debate and the Bill hang, would extend the levy in the way that I set out.

[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.

[Miss McIntosh]

Obviously we hope to hear the Minister give the reassurances that we have requested, but the whole point is that—I hope he will confirm this—we have set in place a six-month time frame for the current levy board-led process to come up with a replacement. That is why the Bill, particularly clause 4, is so pertinent and so appropriate at this time, and why we need it on the statute book.

[Philip Davies]

I understand my hon. Friend’s point, but in some respects she argues against herself. As she says, the Government are looking at this issue—indeed, everybody has been looking. I think even she said in her speech, in passing, that the levy system was broken to a certain extent—everybody starts these debates like this—or that it was not ideal and was not delivering the right outcome. However, it seems rather strange to say, “The levy system’s broken; let’s introduce a measure that entrenches it even more.” I do not quite follow how that is the solution to the problem that she rightly highlights.

I am not a big fan of the levy system either. My hon. Friend the Member for Rochford and Southend East would describe himself as a layman, but he made some pertinent points about other sports and industries being subsidised, and all the rest of it. I certainly do not think there is any justification for that. Really, the levy is something historical, because that is how it started. If we were starting again now, would we have the levy system? Possibly not—I do not know; probably we would come to a commercial agreement—so I am not sure that entrenching the levy system is the solution to the problem that my hon. Friend the Member for Thirsk and Malton identifies, nor would it deliver any extra funding for racing. Therefore, I am not sure that this proposal is worth persevering with, given that it would also add legal complications—again, I accept her point about the legal position as she sees it—that the Government could well do without. I see lots of downsides for the Government in pursuing this proposal; I do not really see any great upside, for the reasons I have given. Therefore, it is probably not worth while persevering with. Again, however, I am sure that the Minister will have a view on that.

Let me return to the point about the levy. There is a slight misnomer—I am certainly not alleging that anybody is trying to mislead anybody when they trot it out—that can give a false picture, which is the idea that the levy is essential for the small trainers, the small owners and the small breeders, whom we have got to support, and that without the prize money the levy generates, they would go under. I do not think that that is the case. If we look at the figures more closely, we can see that it is not quite as simple as that. There is an element of that involved: the levy board supports fixtures at the bottom end that might not otherwise be viable, and I am not going to decry that, but that is not the only destination for the levy board’s money. It might not even be where most of it goes; I am not entirely sure. It would be interesting to have a breakdown of where the board’s funding goes, so that we can see whether it represents a sensible way of diverting resources.

As I said, a very high percentage of prize money in this country goes to a very small number of people, including the top owners and the top trainers. In effect, we are asking for money to be transferred from poor people in betting shops—they are the ones who pay the levy, after all; it is the punters, not the companies, who are paying in one form or another—to wealthy racehorse owners. That set-up represents a strange redistribution of wealth, and it is not one that I recognise. There are not many calls in the House for the very poorest to pay more to the very wealthiest people in the world, but the levy, in essence, brings about just such a transfer of wealth. I do not think that that arrangement stands up to scrutiny.

The levy is certainly used to prop up the prize money of some of the top races in the country. I am sorry if I am returning to a subject that you would rather I did not mention, Mr Deputy Speaker, but with the best will in the world, a small owner like me is not going to win the top classic races on the flat. That is simply not going to happen, so I will not benefit from an increase in the levy. The people who win that kind of race are Sheikh Mohammed, the Coolmore stud in Ireland and the new people from Qatar, who are a welcome addition to the racing industry. It would be stretching the imagination to suggest that any of them were struggling to get by, based on what they have at the moment. We cannot pursue that particular avenue too far. We should be careful about what we say the levy is used for; it is not used just for the purposes that my hon. Friend the Member for Thirsk and Malton claims it is.

The figures that my hon. Friend gave earlier rightly showed how the levy had reduced over the years. My hon. Friend the Member for Bury North was right to point out that it had stabilised and started to move back up again, and I am sure that everyone is happy about that. It is not right, however, to say that the only contribution that bookmakers make to the racing industry is through the levy. In recent years, for example, they have been asked to pay a vastly increased contribution to race courses for picture rights. That money is going to the race courses and the media companies.

I accept where my hon. Friend the Member for Thirsk and Malton is coming from and what she wants to achieve, and I would like to think that there is no greater supporter of horse racing in the House than me. It is my great passion in life—to be perfectly honest, it is a greater passion than politics—and I want to see the horse racing industry thrive. My point is, however, that the money that bookmakers pay for the racing product is not being efficiently passed down the racing food chain. A lot of it gets stuck with the broadcasters who are supplying the pictures, for example. Perhaps we could explore the possibility of finding a better mechanism for getting the money from the broadcasters down into the racing industry, as my hon. Friend the Member for Thirsk and Malton wants to do. It is also possible that the race courses are piling up the money from the picture rights and not passing it on in prize money.

[James Duddridge]

I apologise to my hon. Friend for not being here right at the beginning of his speech. Having sat through three or four hours of the debate, however, I have started to get a feel for the issues involved and I understand the points that he is making about the levy. It has been pointed out that we should not look at the levy in isolation, and that we should look at other sources of revenue. Does he have any idea of the amounts that are being acquired, or could be acquired, through picture rights or other avenues? The Bill tries to make the case that the levy does not raise enough money, but without being able to see the bigger picture, it is difficult to say whether there is enough money in the industry at the moment.

[Philip Davies]

I am grateful to my hon. Friend and I will try to assist him by looking at the data from 2009-10 and then from 2010-11. In 2010, the levy was £75 million and the picture rights were £140 million—the betting industry was paying for them—and other costs came to £26 million. That total of £241 million was, in effect, what racing cost the betting industry. The total dropped to £228 million in 2010-11, which was largely the result of a drop in the levy by £16 million, and the overall amount that betting gave to racing dropped by £13 million. Since then, however, it has steadily risen. In 2011-12, the picture rights went up by £11 million and the levy went up by £60 million, so the total went up from £228 million to £256 million. For this year, 2012-13, the betting industry is forking out £267 million for racing products compared with £256 million last year. In the current climate, that is a considerable rise. Next year, with the agreements that have been made, it is going to go up from £267 million to £275 million.

If we take all that together, it is difficult to sustain the argument that bookmakers are not paying a fair amount for their racing products. It might not be through the levy—the levy is at a level similar to what it was five or six years ago, now that it has stabilised and gone back up—but it is not the levy that is costing the bookmakers more: it is the other things. Given that we have heard from a number of Members today how horse racing makes up a smaller and smaller part of the income bookmakers receive, it is not, in my view, sustainable in the long run for, on the one hand, horse racing to take less and less of the bookmakers’ share of the bets they are taking, while on the other expecting bookmakers to pay more and more every single year for the horse racing product. At some point, it is going to snap; it will reach a point where it is no longer sustainable.

I point out gently to my hon. Friend the Member for Thirsk and Malton that it is always easy in this place to say “Let’s get those awful bookmakers to pay more money.” They have paid more money and they are paying more money, but that will not be possible in the long run: we need to find alternative ways to get the money into racing. We need a commercial agreement based on picture rights, as we must find a mechanism for getting money into racing.

Before the intervention of my hon. Friend the Member for Rochford and Southend East, I mentioned race courses, which are one of the main beneficiaries of the increase in picture right costs. As my hon. Friend the Member for Thirsk and Malton said, two race courses have closed, which is a matter of great regret. I am very sad about that, as one of the great virtues of British racing is the diversity of race courses all around the country and the ability of people living nearby to get to them. I am sure that this is also a great regret to the Minister, given that one of the courses that closed down was in his area of Kent.

People might get the idea that the race courses must be struggling, too, if they have to close down, but I do not think that is the case. I think there has never been a better time for race courses; they have never had more money coming in from picture rights and other sources. The reason for the closure of the two race courses, as I see it, is that they were owned by this big company—it was Northern Racing, but is now in a bigger group, ARC, Arena Racing Company, owned by the Reuben brothers—which took advantage of the fact that fixtures could be transferred from one race course in a group to another race course in the group. It thus closed down the least profitable race courses to move the fixtures to the most profitable race courses—not because the two race courses were not viable, but simply because profits could be enhanced by moving fixtures to other race courses in the group. That is a very sad and serious state of affairs, and I hope the racing industry will wake up to that, and change the allocation of fixtures to stop that happening. I do not believe, however, that any of those issues need to be dealt with by clause 4. As I say, it would not help the situation; it could make it worse because of the legal problems that it will bring about.

[James Duddridge]

My hon. Friend is explaining very well how money flows from the bookmakers via the picture rights. We have been concentrating on the levy, but is not one of the problems the fact that the race courses are not filtering the money further down to the jockeys and some of the industries mentioned by my hon. Friend the Member for Mid Norfolk (George Freeman)? If that hold-up were dealt with and the money flowed down properly through the industry, we might not need to do all this work on the levy.

[Philip Davies]

That is essentially the point that I am making. In the past, there has been a “racing versus bookmaker” attitude that has got neither side anywhere. There have been faults on both sides of that polarisation. Bookmakers need to accept that horse racing must thrive if they are to do well in their business, and, equally, the racing industry needs to understand that without betting, it has not much of a product to sell. Each side needs the other; a “them and us” approach gets us absolutely nowhere.

Rather than rehearsing those decades-old arguments, let us look at the facts in the cold light of day. Let us see where the money is, and how it can be filtered down. I think that there is an awful lot more money in the race courses now than there was before, but what we want is for the prize money to filter down. The amount of prize money could be increased if funds were passed down efficiently, and the smaller trainers, owners and breeders could benefit in the way that my hon. Friend the Member for Thirsk and Malton wants if that increased prize money were passed on by the race courses.

Another problem is the fact that the Horsemen’s Group, which represents racehorse owners, trainers and so forth, placed a minimum tariff on different race classifications. The prize money for a class 5 race, for instance, will be at a certain minimum level, while for a class 4 race the level will be slightly higher. Although that was done for a good reason—to end what I am sure my hon. Friend would consider to be the worst excesses of paltry prize money and establish some minimums —it has encouraged race courses to put on lower-grade racing so that they can get away with providing the minimum maximum, as it were. A well-meant initiative has had an unintended consequence. Race courses have been given a perverse incentive to “dumb down” the quality of the racing that they offer so that the prize money can be as little as they can get away with, although it will still hit the minimum prescribed by the Horsemen’s Group. That, too, is not of much benefit to anyone.

There is money in the system. Money has been flowing from the betting industry. What we need to do is find mechanisms that will enable it to be conveyed to the people whom my hon. Friend has rightly identified.

[Mr Nuttall]

Does my hon. Friend agree with the comments of Rachel Hood, the president of the Racehorse Owners Association, to whom I referred earlier? She said that there was more cause for optimism than there had been “for some considerable time”.

[Philip Davies]

I do. Rachel Hood is the wife of John Gosden, one of the top trainers in the country. She is also, I believe, a lawyer by profession. She is an extremely talented person, and the Racehorse Owners Association is lucky to have her representing it. She is a formidable character, and we do not always see eye to eye, but my hon. Friend was right to quote her. She also said:

“British racing’s funding model has changed so much in recent years and while there remains a lack of total transparency around the issue of media rights, to its credit the Racecourse Association has recently confirmed that by 2013 racecourses will be receiving media rights of at least £84m, nearly £30m more than in 2010.”

She herself has identified the fact that the race courses are receiving a windfall from the media rights that the bookmakers are paying. She may also have cottoned on to the fact that there may well be more mileage for the owners in trying to pass some of it on in prize money.

I am well aware, Mr Deputy Speaker, that time is passing, and it is a shame when there is so much to say about such a big subject and so little time in which to say it—unfortunately, I seem to encounter that problem regularly, and on Fridays in particular. However, I want to talk about regulation because, as I said at the start of my remarks, this will help the Government to a certain extent; they want us to get on to discuss regulation because as far as they are concerned that is what they are all about. That is probably about as helpful as I am going to get for the Government, but I thought I would help in that respect.

The Minister is on the horns of a dilemma, because he has to say that this issue is about regulation. The problem is that I do not see, and neither did our Select Committee when we took evidence, a great deal of evidence of a massive problem with the regulation of the betting industry in this country. If anybody has any evidence of the failures of regulation, the Select Committee would love to see it because we genuinely did not see any. If we are to take the Government’s word on what this is all about, the Bill seems to be the perfect example of a solution looking for a problem. I am not aware of what the problem is, but it will be for the Government, either today or at a later date, to spell out what the particular issue is. I do not know whether the Minister sees the Bill as an irritant—perhaps he will be able to tell us. Some aspects of the Bill are superfluous, because the Treasury and the Department for Culture, Media and Sport have already indicated that they are going to carry out much of what is in it, and some of it may be illegal.

Let me discuss some of the particular regulation issues. At the moment, we have a white list, which is based on the view that the regulation in the other regimes involved is just as rigorous and onerous as it is in this country, and we are satisfied as a country that those regimes are just as good. So the principle goes: given that we are happy with the regulatory regime in those jurisdictions, we are happy to accept the licences that they issue. If we are simply looking at this in terms of regulation, the model of regulation seems to be sensible. So if we are happy with the overall standard of regulation, why do we need to get bogged down in issuing each individual operator a licence, given that they have already been given a licence in a regime that we think is good enough? That is the basis on which we have operated our regulation in this country and it has worked particularly well.

This country has a very small number of people who bet with illegal operators, although, again, I am happy to listen to evidence to the contrary on that and I will certainly accept it if it exists. In other countries, particularly those in the European Union, illegal betting is a massive problem. These countries give licences to a very small number of people on different bases. In Belgium, someone has to have shops—they have to have a physical presence in the country—in order to be given an online licence. There are all sorts of rules like that. The inevitable consequence is that a massive amount of illegal gambling goes on, in the sense that people bet with operators abroad who have no licence in their home jurisdiction.

All sorts of mechanisms are put in place to try to prevent such betting from happening, such as the site blocking that some countries put in place to try to stop people betting on illegal sites. That has not worked and we know why: modern technology means that as soon as one site is closed down, another one opens up within five minutes and by the time people get round to closing that one down, another one opens up within five minutes flat; you are for ever chasing your tail and you never deal with the problem.

Some jurisdictions therefore have a block on payments, whereby the Government come to an agreement with the banks and the credit card companies that they will not allow any transactions to take place with the unlicensed operators abroad. Of course, that can have more success than site blocking. I am a luddite, as you know, Mr Deputy Speaker, so I am probably not the best person to go through all the ways that people get around such restrictions. As I understand it—hon. Members who know more about it than I do will be able to correct me—operations such as PayPal enable people to get around those restrictions, so they are not totally successful.

The problem is that in every jurisdiction that has tried to restrict the licences it issues and whom it allows people to bet with, that approach has never worked. I do not see why we think we will solve a problem that no other country appears to have solved. It seems to me that the only possible consequence is that the levels of betting with illegal operators or operators without a licence will go up. Given that we have virtually none of that at the moment, which must be good for regulation and player protection, how can it improve regulation to set up a regime when the only possible consequence is that people will go into the grey market and will not get a licence but will still operate? How will we stop people betting with those operators? They will be able to offer better prices as they will have lower costs and lower tax liabilities, so in many respects we will be in danger of setting up a regime that actively encourages people to go to unlicensed operators abroad who do not contribute anything in this country.

We treat the online industry as if it contributes nothing to racing or to the Exchequer. Some of the big online companies are Ladbrokes and William Hill. They have thousands of shops in the UK and are massive employers. They do not contribute nothing to the British economy; they contribute an awful lot. The danger is that in the online world, fewer people will bet with the companies such as Ladbrokes and William Hill that make a contribution, if not on an online basis but though their shops, and instead will go to operators that contribute nothing to the UK economy.

We will set up a system that inadvertently pushes people to such operators and I do not see how that is a triumph for regulation or for player protection. We should be grateful that we do not have the problems that other counties do, but we would be in danger of creating them. If this is about regulation, as the Minister would like us to believe, he must explain where the big problem is and why regulation is necessary to solve it.

The white listing system means that the Gambling Commission can accept regulation from other jurisdictions and can trust it in the knowledge that those jurisdictions have as tough a regulatory system as we do—one in which we can have faith. That means the commission can accept such operators in the same way as it would one from the UK. The problem with the Bill and the Government’s draft Bill is that the Gambling Commission will have to issue individual licences to Lord knows how many gambling companies. On what basis will it do that? On what basis will it assess the abilities of betting companies in foreign lands? How will it decide whether they are legitimate, whether they can pay out to punters and whether they are ring-fencing the punters’ stake rather than putting it all in a pot? How will it do that when companies are in far-flung jurisdictions? Will all the Gambling Commission staff be off on permanent jollies, going around and looking at all those industries? Who will issue all the licences? How many more people will the commission need?

I bet the commission thinks that this is the best thing since sliced bread. Quangos love empire building; we have seen it time and time again. The commission must think all its Christmases have come at once. Instead of having to accept the licences issued by jurisdictions whose regulatory regimes we are perfectly happy with, it will have to consider every company individually. That seems to me to be what my hon. Friend the Member for Thirsk and Malton and the Minister are proposing: great stuff if you work for the Gambling Commission, but probably not so great for anyone else. Will those companies, including UK companies, that employ many people in the UK have to get an individual licence in every jurisdiction in which they operate? That is unnecessary, as we could just recognise regulatory regimes elsewhere. It is bureaucracy gone mad, and I hope that the Government can make a good case for why that should happen.

I am sure that we are all anxious to hear what the Front-Bench spokesmen have to say about the matter, but I am sorry that we have been short of time for this debate, because there is a lot more stuff that I wanted to mention. The revenue raised by the measure is not all a net benefit to the Exchequer, as there is a negative side too. There are gambling companies such as tombola—Members might have seen it advertise its product before “Emmerdale” on television—and it is a fairly new company that has enjoyed massive growth. I apologise if this is not true, but I believe that it is based offshore, so it does not contribute the taxation that people would like, and that is the problem the Bill is designed to tackle. Tombola employs an awful lot of people in the UK to work on things such as its marketing and advertising strategies. If we imposed extra taxation on such companies, which is difficult to justify given their margins, they will reduce their marketing spend—we do not have to be great geniuses to work that out—because they will not be able to afford to spend as much on it. Ultimately, therefore, they will employ fewer people in the UK to work on marketing.

We should think through the consequences of what we are doing. The Government seem to have pound signs in their eyes, thinking that this is an easy way to make money: there is no downside, it is all upside. Life is never quite as simple as that. There are no painless panaceas, and there may well be some unintended consequences, including the fact that fewer people will be employed in these industries in the UK. I am sure that none of us, whatever our view of the Bill—again, I have no problem with it in principle—wants to see unintended consequences that result in people losing their jobs in this country and in the economy losing money. We want a regime that increases revenue for the Government and increases the number of jobs. The Government can do that, but they need to be rather more careful than they have been, and rather more careful than has been the case with this Bill. However, I commend my hon. Friends the Members for Thirsk and Malton and for West Suffolk (Matthew Hancock) for introducing the Bill, because it has allowed us to have a very good debate and informed discussion. We should all be grateful for that.

--- Later in debate ---

[The Minister of State, Department for Culture, Media and Sport (Hugh Robertson)]

I start by thanking my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) for securing a debate on such an important topic, and I thank the Under-Secretary of State for Skills, my hon. Friend the Member for West Suffolk (Matthew Hancock), for his support in the earlier stages. Despite much of what has been said today, I am delighted to see that there is a considerable amount of cross-party support, in almost every corner, for the regulation of remote gambling on a point of consumption basis and for the requirement that all remote gambling operators engaging with British consumers hold a Gambling Commission licence.

In the limited time available to me, I shall go through some of the questions that were asked and try to cover as many of the points as possible. My hon. Friend the Member for Thirsk and Malton and the Opposition spokesman, the hon. Member for Eltham (Clive Efford), asked about the timetable for the Government Bill. As both are aware, the draft Bill is before the Culture, Media and Sport Committee. Providing it passes that stage, it will go forward as a third Session Bill. Clearly, it is then up to the business managers in the House to decide whether and when to take it forward, but it is our intention to do so, if legislative space can be found, as a third Session Bill.

My hon. Friend the Member for Thirsk and Malton asked about the levy, which is the subject of clause 4. The best thing I can do is read to her the legal advice that I have been given by the Government Law Officers, which says that although a levy is permitted in its current form, since it originates from before 1972 and therefore pre-dates state aid rules, the European Commission is likely to consider that the collection of contributions from overseas operators would substantially alter the levy, such that it was no longer compliant with state aid. I am afraid that, regardless of how many high-priced opinions are obtained elsewhere, once the Government Law Officers have opined that the Bill is therefore defective in that respect, the Government cannot accept it.

Let me turn to the reform of the levy board, which was the second part of my hon. Friend’s question. Given the success of the levy board in concluding the most recent negotiations, and the fact that the advice that I was given, both by the industry and by the lawyers, was that the proposed solution around secondary legislation was unlikely to withstand legal challenge, should it appear, and since the advice that I received from the chairman of the levy board was that there was much more good will in the industry—I pay tribute to the work that he and his organisation have done—it seemed sensible to allow him six months to see whether he could put together a voluntary agreement.

I think that is the right thing to do. No Government want to legislate unless it is absolutely necessary, and they need to exhaust all avenues before they do so. The chairman of the levy board is aware that the bar in that is quite high, because such an agreement would have to be sustainable, it would have to carry the confidence of both sides, and it would, I hope, bring security and stability to the industry in the medium term.

[Philip Davies]

At present the levy situation has to be resolved on an annual basis. Will the Government be able to facilitate longer-term agreements, rather than having to go through an annual procedure, which is sometimes a bun fight?

[Hugh Robertson]

The best way of answering that is that I have not in any way restricted the chairman of the levy board over that, but I have made medium-term stability a key criterion by which we will judge any deal. If he is able—I wish him the very best of luck—to conclude a three-year or five-year deal that brings stability to the racing industry and commands the confidence of both sides, which I realise is a high hurdle to jump over, I would look at such a deal very carefully.

My hon. Friend the Member for Thirsk and Malton talked a little about integrity and sports. I seemed to spend a considerable amount of my time last year locked in rooms in Switzerland talking about integrity and sports betting before the Olympics, and it is worth saying here that the system that was set up for London 2012 worked so well that it is now being imported into other games as the model of how these things should happen. Rather to our surprise, there was very little of that sort of activity around London 2012. We might find, as we discover more about it, that it is quite sport-specific, and more specific to football and cricket than to some Olympic sports, but the system worked well.

The key point, of course, is that many of the threats come not from established betting markets here and in Europe, but from illegal betting markets in the far east. When I was in Delhi for the Commonwealth games, a journalist got access to one of the illegal dens, and one could hear the buzz about it. I do not know how these things are calculated, but it is rumoured that for a one-day cricket match between India and Pakistan $1 billion was traded—