UK Anti-corruption Plan

Debate between Philip Davies and Matt Hancock

Thursday 18th December 2014 Commons Chamber

[Matthew Hancock]

I think the hon. Gentleman and members of his office would benefit from reading my book, because it is all about why the worst financial crash in the history of the world happened on Labour’s watch. Labour Members have a few lessons to learn.

The hon. Gentleman rather unhelpfully missed the tone of this discussion, but I will deal with the more constructive elements of his questions. The issue of resources is very important. First, it is about the effectiveness of the deployment of resources. Bringing together actors from different agencies will help to deliver a more effective response from any level of resources. Some of the funding currently comes from the DFID budget. We are exploring how international development funding can further support anti-corruption work at home and abroad. That is part of the plan, and announcements will be made on it in the coming months.

I am glad to report that the ministerial group has met. I chair it, alongside the Under-Secretary of State for the Home Department, my hon. Friend the Member for Staffordshire Moorlands, and it includes representatives from across Government and different agencies. We are accountable to Parliament, and I am indeed reporting back now. Discussions with the overseas territories are under way, as I said to my hon. Friend the Member for North East Cambridgeshire (Stephen Barclay).

I welcome the cross-party support for an anti-corruption plan. The substance of the hon. Gentleman’s questions was relevant. I look forward to working with him, with the APPG and with others to strengthen the plan further, because we are a better and stronger United Kingdom if we work together to enact it.

[Philip Davies (Shipley) (Con)]

Clearly, we all want to do everything we can to tackle corruption effectively, but I worry that the rules become so onerous that they catch an awful lot of legitimate small businesses and traders. Can the Minister assure me that the right balance will be struck so that rules will not be so onerous and officious that it is very difficult for law-abiding people to comply with them?

[Matthew Hancock]

My hon. Friend makes an important point that was also made by the Opposition spokesman. We need to ensure that the money-laundering regulations, in particular, do their job of tackling money laundering without putting undue burdens on ordinary people and on other businesses. There is a vital balance to be struck. Many changes can be made in order to reduce burdens while ensuring that the rules are just as tight, if not tighter, on the perpetrators of corruption whom we really want to capture.

Horse Racing (Funding)

Debate between Philip Davies and Matt Hancock

Tuesday 22nd November 2011 Westminster Hall

[Matthew Hancock]

I was just about to come to exactly that point, so the hon. Gentleman is prescient. There is consensus that the system is broken and needs to be reformed. We have no God-given right in Britain to some of the best racing in the world.

[Philip Davies (Shipley) (Con)]

My hon. Friend mentioned the fact that the levy is going up, which must be welcomed by everybody. Does he not agree though that that is only half the story and that one of the other major costs for bookmakers is the media rights that they pay? After 2012, those will increase by £50 million a year, which is a huge windfall for the racing industry. It will even benefit race courses such as the one in the constituency of my hon. Friend the Member for Skipton and Ripon (Julian Smith).

[Matthew Hancock]

I am not surprised that the amount being paid by bookies for picture rights is going up, not least because of the attractiveness of the sport and the amount of interest in racing. Of course the rise is good news but picture rights are only part of the story, because when a punter bets on a race the bet is based on the racing product that underpins it, so picture rights alone cannot be the answer to the question of how to fund horse racing.

I come now to what will be the core of my argument today and the core of the question that I will put to the Minister. During the last decade or so, what has been central to the fall in the value of the levy is the removal from British shores of almost all the big bookmakers. Of the 20 biggest bookies, only two are now domiciled in the UK. As I said earlier, that change reflects changes in technology that mean we can bet more online and over the phone. However, we must recognise the change and deal with it, if we are to put matters right.

The fact that bet365 and Coral are still onshore is great news, but we should not be in a position where we have to be grateful to bookies for staying onshore. The idea that we should thank people for paying the tax that they are due to pay is not one that we apply anywhere else in the tax system. In fact, everywhere else in the tax system we are pretty firm if people do not pay their tax. Although I am grateful that those two bookmakers—bet365 and Coral—have stayed onshore, many independent bookmakers cannot move offshore; they do not have the capacity to do so, as they are too small. Consequently there is not a level playing field even within the gambling industry to ensure that there can be fair competition in gambling.

The impact of that offshoring is felt across the board. There is a loss of millions in levy contributions and a loss to the taxpayer, estimated at £62 million a year, in lost betting duty. I would be very interested to find out whether the Minister has an updated estimate of the amount of tax that is lost in betting duty because of the number of offshore bookmakers.

--- Later in debate ---

[Matthew Hancock]

I think that the consensus in the House on the need to make such reforms is demonstrated by the fact that all the interventions so far have anticipated the next page of my speech. I am very grateful to my hon. Friend for his intervention, because dealing with that offshore loophole is the first thing that we need to do if we are to sort out the problems of financing the racing industry.

When I talk to individual bookmaking companies that are offshore, each of them argues that they would really like to be onshore and that the only reason they are not onshore is that all their competitors are offshore. I have worked in a small business and I understand that argument. If somebody else has taken a chunk of tax and levy contributions out of their cost base, of course others will want to do the same.

I have a solution, which is to create a level playing field; let us have everybody onshore and paying their fair share of tax and levy contributions. The solution that the Minister put forward in July was a neat and quite simple one. Changing the designation of the location of a bet from where the bookie is based to where the punter is based would turn what at the moment is legitimate tax avoidance into tax evasion. Because of the internet, we might not necessarily catch 100% of bets by making that change, but we could capture the vast majority. All the major bookmakers who want to advertise or do other business in the UK will come onshore because they would not want to break the law by not paying tax and levy on the bets placed with them. Most bookmakers are good corporate citizens, so a change such as this would ensure that all the major players would come onshore. That would not only help with the funding of racing, on which bookmakers’ own business models depend, but with the lack of a level playing field, which is a scourge of independent and small bookmakers.

[Philip Davies]

I understand the point that my hon. Friend is making. May I suggest a more conservative approach? I understand that he has great influence with the Chancellor. Has he thought about persuading the Chancellor to reduce the rate of tax on those offshore businesses, which will tempt them back onshore? As a keen economist, I am sure that my hon. Friend will appreciate that 5% of something is far better than 15% of nothing.

[Matthew Hancock]

I do not believe in tempting people to pay tax; I believe in ensuring that people pay tax. I myself am not tempted to pay tax, but I have to pay tax. Indeed, the tax is taken out of my wages before I even see it. People across the country would not understand a system in which we merely tempt people to pay tax; we need to insist that people pay tax.

Nevertheless, my hon. Friend makes an important point. As he suggests, if all bookmakers came back onshore, the amount that went into the racing industry through tax and the levy would be substantially higher and it may well be that at the same time we could look at the rates of tax being applied to bookmakers. Indeed, there is a Treasury consultation on that very point at the moment. I am sure that he and others will make a contribution to that process, and no doubt the Chancellor will listen to all Conservative Back Benchers equally.

The argument that the Minister made in July in his written ministerial statement, and in response to a question that I put on the Floor of the House, concentrated on widening the regulatory net and ensuring that gambling regulations cover all people in the UK who make bets; it focused on the regulatory aspect. Of course I support the argument that the appropriate regulatory net should cover all people gambling in the UK and the principles behind that argument, but expanding the reach of regulation is not as urgent for the financing of the racing industry as closing the tax and levy loophole. I urge the Minister to look at the issue from the perspective of fair and appropriate funding of horse racing rather than the wider changes to the coverage of gambling regulation that he seeks. I am sure that people will support him in both those aims but one is urgent and the other is important, and the distinction between urgency and importance is one that I am sure he recognises every time he opens his ministerial red box.

I am very pleased that the Treasury is conducting a consultation, but I want to ask the Minister some questions about how we will make the progress that is necessary and how we will turn tax avoidance into tax evasion through legislation. A tax change and a financial change to the levy could be made through the Finance Bill, and Finance Bills happen regularly. If that means that we cannot make the wider regulatory changes that the Minister seeks, so be it. The urgent task is on the financial side, because it is only when we tackle the offshore problem that we can go on to make the broader changes in the levy that many people want to see; indeed, I think that there is cross-party consensus about the need for broader changes in the levy.

With bookies back onshore and paying their share, we can finally establish the long-term funding structure that is both sustainable and fair to everybody involved in racing, including bookmakers, and it could improve the relationship between racing and bookmakers.

Horse Racing Levy

Debate between Philip Davies and Matt Hancock

Thursday 20th January 2011 Commons Chamber

[Matthew Hancock (West Suffolk) (Con)]

I beg to move,

That this House notes that the horseracing industry supports employment of 100,000 people in Britain and that the racing industry contributes £3.5 billion to the UK economy each year; celebrates the contribution the industry makes to the cultural and sporting landscape of Britain; recognises Newmarket’s role as the global headquarters of racing; but further notes that the horseracing betting levy yield has been falling in recent years; further recognises the changing nature of the gambling industry; is concerned that betting operators are increasingly based offshore and so do not fully contribute to the levy; and considers that the Government should bring forward proposals to improve the system of funding for racing and the relationship between racing and bookmakers before the end of 2011.

I am delighted that we have three hours to debate this important topic, because the future of horse racing in Britain is at stake. This golden sport, which brings together man and beast, flat cap and top hat, the rural charm of Bangor-on-Dee and the pomp and ceremony of Ascot—this jewel in the crown of British sporting culture—faces an uncertain future and immediate and urgent woes.

All is not lost. As anybody who has seen today’s Racing Post knows, attendances are up—racing is the second most attended sport after football. Britain’s bloodstock has rarely been of a higher quality, and A. P. McCoy won the BBC sports personality of the year award. However, racing’s finances are at risk, and it falls within the power of the House to support today’s motion, which calls on the Government to act to secure for our nation the future of the sport that is the cause of such pride.

For centuries, since King Charles II took his court to Newmarket twice yearly for a month of relaxation and raucousness, Britain has led the world in horse racing. In the past, racing provided the impetus for the training and breeding of cavalry horses during times of peace, and now it supports more than 100,000 jobs across the country and, in all, £3.5 billion of our economy. It contributes to our culture, and even to our language.

In Newmarket alone, 5,000 jobs are related to that town’s place as the global headquarters of the sport—not only owners, trainers and champion jockeys but modestly paid stable staff, grooms, farriers and those performing all the ancillary services. That complex economy, like an ecosystem, is in delicate balance, and that balance is under threat.

The levy system set up 50 years ago is broken, and the funding that underpins racing is seeping through the holes in that outdated system. I shall briefly set out what has happened, why, and what should be done about it. To explain what has happened, I shall delve into the ecosystem that I described. Money comes into racing from punters who like to punt and owners who like to own. The Tote, which was set up by racing, not by the Government, adds to the pot, and I look forward to its future being secured with the appropriate recognition of racing.

Money comes in from people who spend a day at the races, from media rights and from the levy contributions of those who make a bet. That, in turn, feeds into prize money, which goes partly to jockeys and stable staff—we should always remember that they, too, benefit when their horse crosses the line first—but mostly to owners. It is that hope and aspiration, the golden bauble of the pot of money at the finish post, that attracts owners into the industry and lures them to race. Say it quietly, but the amount of money injected by owners actually outweighs the amount that they win back in prize money by a ratio of about 3:1. If my father-in-law is watching, I hope he takes note of that. Owners, in turn, use their money, some of which they have won back in prize money, to pay horsemen to train and breed bloodstock.

There are many reasons to own a racehorse, as some Members know.

[Philip Davies (Shipley) (Con)]

Stupidity, in my case.

[Matthew Hancock]

Well, it is not only the triumph of hope over expectation but the glamour of the winners’ enclosure and the thrill of the race. Without the chance for owners to win prize money, racing’s finances are on tenterhooks. Prize money is at the core of racing’s economy—it is the chlorophyll in the ecosystem, or some have called it the lubricant of the wheels of racing. It attracts people in and brings in far more money than is provided for it.

What has happened to prize money? Over the past two years alone, the annual amount that the levy has paid has fallen from more than £100 million to £65 million. Prize money from the levy has fallen, too, from £65 million two years ago to £34 million, a drop of almost half. At Worcester, prize money from the levy has fallen by more than two thirds. Even before that precipitous decline, Britain ranked 38th in the world in prize money, miles behind Dubai and Hong Kong but also behind America, Italy, South Africa, Sweden, Australia, Ireland, Germany and Turkey.

The comparison with our nearest neighbour, France, is stark. Maiden race prize money in 2009 at Longchamp averaged £20,000, whereas at Newmarket it was £8,000. At Deauville, average prize money was £20,000, compared with £11,000 at Ascot. We find a similar contrast at the more provincial racecourses. At St Malo, average prize money was £12,000, but at Catterick it was £4,000—for comparable races, prize money in this country is still lower. At Le Lion D’Angers, prize money was £12,000, but £5,000 at Yarmouth.

--- Later in debate ---

[Philip Davies]

I commend my hon. Friend for his initiative in introducing this debate. Before he describes the holes in the levy, will he acknowledge that the amount given by bookmakers to racing averaged out, between 2006 and 2010, according to the independent members of the Horserace Betting Levy Board, at £164 million a year—in TV money and levy combined—and that this year it will be £160 million, which is a drop of only 2.5%? Will he also acknowledge that, at the same time, Arena Leisure’s profits increased by 52%? When he is looking at prize money, will he focus less on the betting industry, which still gives lots of money despite the fact that horse racing is a smaller and smaller part of its business, and look at racecourses, which are not passing on their increased income in prize money?

[Matthew Hancock]

My hon. Friend makes an important point, but his phraseology lets slip the error in the argument. The betting industry gives no money to racing; it pays money to racing. I want a system in which that is sustainable. Of course, people who watch a sport should pay towards it. How much of the money made from media rights gets to the front line of racing is an important question, and I hope that those rights will be negotiated very tightly by racing in future. The amount of levy has fallen from more than £100 million to £65 million, but the levy reflects the fact that when people make bets, part of their stake is a contribution to the cost of putting on that race. It is appropriate for racing to charge bookmakers for using its output and product. That is the nub of the argument.

The first hole in the levy is offshore betting. UK consumers are reported to spend about £2.5 billion on internet and phone gambling, but operators licensed by the Gambling Commission represent less than a quarter of that—the rest is spent offshore. Three quarters of online betting, therefore, does not contribute to the levy or other taxes, and consumers are not protected under UK rules. Ireland’s recent budget began to tackle that, and I hope that the Minister will follow suit. I am sure that such a measure would have the support of the gambling industry. I spoke to the big gambling organisations in the run-up to this debate. Each firm told me that it considered going offshore only because all the others are doing so. Let us bring all those firms onshore and subject bets to the levy and the appropriate tax here in Britain.

Betting exchanges are the second hole in the levy. Currently, exchanges pay 10% of the levy on profits that derive from commission from winning bets on each market. However, that produces very little for the levy—less than 0.5%—compared with the return from the same activity with traditional bookmakers. According to Betfair, some users of betting exchanges place around 1,000 bets per hour, but pay no levy or tax because they close their bets before the race is concluded. I am delighted that Betfair paid around £6 million to the levy last year, and by its widespread sponsorship, but the loss to the levy from the fact that exchanges are treated inappropriately is roughly £25 million, and I urge the Government to act.