Horse Racing (Funding)

John Penrose Excerpts

Tuesday 22nd November 2011 Westminster Hall

[The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (John Penrose)]

It is a pleasure to have you in the Chair looking after us today, Mr Williams. I want to thank and congratulate all hon. Members who have spoken in today’s debate. My hon. Friend the Member for West Suffolk (Matthew Hancock), who secured the debate, has been notable in his continuing support for the industry and also for his tenacity in following it.

I am greatly heartened by the relatively widespread cross-party position on many aspects surrounding the debate. That is important to note not just now but for the future, because the problem has been knocking around for 51 years—the levy is 51 years old this year—and has defeated many people across the House and in the gambling and horse racing industries. It is not a simple problem; it is a difficult issue. Many Members have remarked on the fact that there are entrenched interests and points of view, and honestly held and fervently delivered opinions on all sides. If the problem were simple, we would have solved it 30 years ago. However, nobody has managed it, so it is helpful and worth marking that there seems to be emerging consensus, although there are still many important points of detail to deal with.

I am not sure whether this is a declarable interest, but in the interests of transparency I mention that my wife is a non-executive director of the race course at Cheltenham, from where my hon. Friend the Member for Tewkesbury (Mr Robertson) comes. She also has a horse in training, although the prospect of its being involved in any meaningful prize money is more theoretical than actual at the moment. At least the declaration has been made.

Several colleagues have asked about the proceeds of the Tote, including my hon. Friend the Member for West Suffolk and the hon. Member for Eltham (Clive Efford). The Government made a promise during the process of selling the Tote that 50% of the net returns would go to racing, and we intend to honour that promise. We are currently in discussions with the racing industry, and my approach has been very simple. I am happy to provide those proceeds via whatever mechanism racing chooses, with the sole proviso that it will not fall foul of competition or state aid rules. Basically, we sat down with racing and said, “With those sole provisos, tell us how you want it done”, and we are getting close to a solution. I am pleased to report steady progress, but there are important details that need to be sorted out.

The hon. Member for Bradford South (Mr Sutcliffe) asked about progress on on-course bookmakers’ pitches. That is a knotty problem that has been ongoing since he was in the ministerial chair. I am happy to report that Arena and Northern race courses are making good progress. They are all but there in terms of signing agreements. Certainly, there have been handshakes on deals, and I welcome that progress. Jockey Club race courses are still in negotiation. Once the big three groups of race courses have agreed a structure, I suspect that the remaining independents, of which there are many, as the hon. Gentleman will appreciate, will follow. I urge Jockey Club race courses and on-course bookmakers to pursue that remaining piece of negotiation rapidly. Others have managed it already. If we can get them over the line, or if they can get themselves over the line, they will not have to worry about politicians interfering. If politicians come up with a deal, I suspect it will be less good than one the industries come up with themselves.

I was delighted about and thankful for the level of support voiced for the Government’s proposals to change the way that offshore bookmaking is dealt with. It is important to realise that for entirely understandable commercial reasons—entirely logical commercial decisions in many cases—because of a system that was set up with a set of commercial incentives, many bookmakers moved offshore over the course of the past five or 10 years. We aim to change the way those offshore bookmakers are regulated. Several colleagues have been kind enough to describe this as simple and elegant; we are switching the way offshore bookmakers are regulated so that anybody anywhere in the world who is selling gambling services to people based in Britain will have to hold a British Gambling Commission licence. That neatly enfranchises all those firms within the British regulatory net, which is important for consumer protection. In this country, we are used to a well regulated and responsible gambling industry that is by and large clean and tries to make sure that it delivers on its social responsibilities for the small and unfortunate minority of people who suffer from gambling addiction. That is not the case in many other countries.

We need to ensure that we remain well regulated and that we continue to have a responsible industry. A British punter who goes online and uses this or that gambling website does not necessarily know whether the website is regulated in the UK or abroad. In some foreign jurisdictions, there are good regulators, but not in others, I am afraid. It is essential that a British punter knows that no matter where the website may be hosted, it is still protected by British regulation, and therefore they have the legal protections that they would expect if they walked into a betting shop on a British high street. That is the starting point for our regulatory changes.

The changes may also have important knock-on implications for taxation. I will try not to tread on the Treasury’s toes, but some parallel announcements were made a few days after we announced our regulatory changes. They are also working their way through the system. The point I want to make to my hon. Friend the Member for West Suffolk and anybody else who has raised the point during the debate is that changing the way we treat offshore regulation is an essential first step to dealing with consumer protection and potentially to dealing with things such as the levy and possibly even taxation. However, that is not the whole answer. Clearly, we need to move on, having built that foundation, to create a new environment and a new type of successor to the levy.

[Mr Edward Leigh (Gainsborough) (Con)]

We do not want the gambling industry to go the same way as the British shipping industry. The way to solve the problem is to reduce taxation so that the industry does not want go offshore in the first place.

[John Penrose]

As a low-tax and free-market Tory, my instincts are of course with my hon. Friend. We will have to wait for the Treasury’s announcement on such matters. It is important to remember that there is a distinction between betting duty and corporation tax. Just as Goldman Sachs has a headquarters based in America but a large operation here in the UK, so too the location of betting firms’ corporate headquarters may be in a different place from where their operations and the jobs are. That is an important distinction to remember.

Given the limited amount of time, I want briefly to update colleagues on the progress we are making in the ongoing discussions between the gambling and horse racing industries in our search to find a successor to the levy. I am afraid I will not be able to give a running commentary, because the conversations are detailed and difficult, with the entrenched positions that everyone here has already mentioned. However, I can report that I have been impressed so far by the willingness of all sides to engage constructively and actively, and with a degree of determination. We are only partway through the process. There is a great deal further to do.

I reassure my hon. Friend the Member for Tewkesbury that while we may have started with the three options that I laid out to get the conversation started, we are moving on from them. I am taking the approach that if the gambling and horse racing industries can come up with something that they are both willing to sign up to, which satisfies basic principles of fairness on each side, it is not up to politicians to second-guess or contradict what the two industries can agree. We want to come up with something that is both enforceable and sustainable, so that when a new contract comes to an end there is a series of incentives and potential downsides for both industries that force them back to the table. That would ensure that they need to negotiate a successor contract or agreement so that the arrangement does not just come to an end after five years. If we can arrange those kinds of incentives, we will have that long sought after arrangement where racing will become in the best possible sense of the word a normal sport that does not depend on politicians and does not require Ministers or anybody from the Department for Culture, Media and Sport, and where the phrase “Hello, I’m here from the Government, and I’m here to help” does not send a chill through the blood.