HC Deb 29 October 1996 vol 284 cc555-62

motion made, and Question proposed, That this House do now adjourn. —[Mr. Anthony Coombs.]

10.15 pm
Mr. Iain Duncan Smith (Chingford)

I wish to raise a matter of great concern to some of my constituents, which I believe is also of great concern and interest to the wider public. My hon. Friend the Under-Secretary of State for the Home Department will know from the files given to him by his staff, about my conversations with his predecessor, that I have been raising the issue for the better part of three years. I first raised it on behalf of a constituent, but the more I have looked into it, the more I have realised that a problem is developing.

The issue is the gradual creation of a betting cartel that will be—as all cartels are—to the detriment of the public and, eventually, the race course owners themselves, although they may not be aware of the matter now. Before I get into the meat of my speech, I shall take my hon. Friend through a couple of points of history, which are important because they relate to the way in which the issue has developed. He is no doubt aware of the events that led to the creation of the Ferguson agreement, which was set up to control the new on-course betting facilities and those who run on-course betting. For a short time, the agreement seemed to settle some of the problems caused by the arrival of off—course betting shops on course.

In the early 1970s, the first cracks appeared in the agreement, with race course owners realising eventually—some, I suspect, realised earlier—that they could receive some substantial revenue from the introduction of betting offices on race courses. So in 1972, as my hon. Friend knows, the National Association of Bookmakers formed a company entitled the National Association of Racecourse Betting Offices Ltd. —NARBOL—and it was agreed, to resolve the problems, that the Horserace Totalisator Board, the Horserace Betting Levy Board—the HLB—and the Racecourse Association would receive 1 per cent. of the achieved distribution between them. As a result of those discussions and of the NARBOL agreement, the Ferguson scheme was saved, albeit in a paste-and-patch-up form.

During the latter part of the 1970s, after the HTB had been permitted to enter the bookmaking arena, the Tote also became interested in operating on-course betting shop facilities. As a result, meetings took place between the RCA, the HLB, the HTB and NARBOL, together with the NAB, which led to what became known as the Cross arbitration. I know that my hon. Friend knows those facts, but I wish to put them on record because they set the scene for my main areas of concern. The effect was to permit the HTB to operate a betting office in the members' area on a race course while NARBOL continued to operate facilities in Tattersalls, which is the ring in which the race course bookmakers operate.

I shall come forward to the present. The livelihood of the ring bookmakers is today under serious threat. As we know, the Finance Act 1987 changed the way in which betting was done by making betting on course tax free. It was clearly aimed at enhancing attendance at race courses by getting rid of that tax. Yet today the public are rightly concerned and confused, because on-course betting shops charge people placing bets between 5 and 6 per cent. extra, often referring to that as a tax. I understand that there is also some concern about betting shops at football grounds that charge a similar levy.

The Minister will know that I began strongly objecting some time ago to the use of the word "tax", which misled the public into thinking that it was a Government levy, which it is not. Many people who place bets are occasional visitors to courses. They understand that bets in the high street carry the tax, but they are often unsure about whether it also applies to race courses. To be sure, some betting shops have decided to refer to a surcharge because of concern about the word "tax"—but not all of them. I notice, too, that the words "deduction" and "levy" are also occasionally used.

I have often told the Government that this practice should have been stopped years ago, but even getting rid of the word "tax" will change very little. People will still be left with the idea that there is some sort of link with the Government, so they will accept the charge without question. At no stage are they told what the surcharge is for or whether there is an alternative betting venue at a particular race course.

The truth, of course, is that the 6 per cent. is part of a deal done with the race courses when the NARBOL agreement finally terminated in 1992, leaving the Racecourse Association free to enter into agreements with the high street betting companies for the provision of on-course betting facilities. Betting shop facilities at all Racecourse Association courses are now in the hands of the Horserace Totalisator Board, Ladbroke and Coral, and the agreements have meant that betting shops pay as much as 10 per cent. of their gross turnover to courses for the facilities. Most important, part of that money is found by charging the general public a 6 per cent. surcharge which, as I said, has been disguised as a tax.

My hon. Friend the Minister may say: so what? The ring still exists, as does the Tote, so the public have a choice. I, however, question the amount of choice that the public really enjoy, now and in the next few years. The position of away bookmakers in the ring has been changed to their detriment; they will be the first to be squeezed out of the market. That is a sort of cold premonition of what is likely to follow for the rest of the ring.

In any properly functioning market, the public must understand what they are paying for and why. Secondly, they must be able to take their business elsewhere if they so choose: there must be an alternative. Most people who attend race courses irregularly have an extremely limited understanding of how the system operates, and once they enter these shops, they are usually uncertain as to the difference between an on-course betting shop and the bookies in the ring. The difference comes down to how much they pay, and the surcharge has merely added to the confusion. The position and prominence of the ring itself on the race course also matter a great deal.

I for one have never yet discovered where all the money goes. A heavy veil seems to have been drawn across the whole subject. We are told endlessly that the money is used to improve racing, but no one has ever told me how or where. The ring operates in all weathers, more often than not in the open. It is therefore—arguably—less user-friendly, particularly for the occasional visitor. Little effort has been made to change all that; I expect that that has a great deal to do with the fact that race courses receive from the ring only five times the entry fee, as specified originally in section 13(2) of the Betting, Gaming and Lotteries Act 1963.

Even if a person placing a bet knows about the ring, he may be discouraged from using it during inclement weather. Moreover, the relationship between race course and ring is changing in some areas. As race courses realise that they can obtain a higher additional fee from the on-course bookmakers, they may feel tempted to marginalise the ring. There have been cases at a number of race courses where the ring has been moved further and further from the winning post, particularly after renovations and modernisations to the main stand areas. I understand that, in one case, the ring was moved out to the car park. There might be some interest in betting on the number of Jaguars in the car park, but I am not certain that it helps the free market to have the ring so far away from the stand.

Some may again say: so what? They may go further and say that that is a matter for the race courses and the ring to sort out, and not Ministers. I would say that because the reference to five times the entry fee was contained in the 1963 Act, we have a serious interest in what happens. No one has come forward publicly—nor, I doubt, to see my hon. Friend the Minister—to say that we need a proper debate about the way in which the ring works, the facilities available to it and the money that it passes to the race course owners. Furthermore, if it was simply an argument about the ring, the race course owners and the finance, I suspect that it would have been brought to my hon. Friend's attention some time ago. I do not believe that that is the case. What worries me is that so much of the matter is now being resolved by stealth.

It has been inherent in all the legislation since 1928 that bookmakers and the HTB should be on an equal basis, offering a perfect choice to members of the public as to the method of betting that they may choose. That situation no longer arises when it comes down to the multiples—including the HTB—being allowed to offer far better and more comfortable facilities to the public than can the bookmaker in the ring. To a large extent, the majority of race course betting offices are now situated within covered accommodation and—in certain circumstances—quite luxurious accommodation, including bar facilities and so on.

When the ring is moved or its position made less accessible, it clearly makes the individual members of the ring question the viability of their profession. As we have seen, many of them have begun to drift away from the business. That is immensely harmful for racing because, as my hon. Friend knows, they set the price. I can see them questioning whether they can fulfil such a role in future because there may be so few of them. It may not be worth people's while to try to visit them if it takes so long to get there. If so, we shall see the shrinkage of the free market, as I predicted.

The ring is being squeezed and will over a period be made less and less relevant to those who go racing, and to those such as myself who take an interest and believe that the historic relationships will be changed. The role of the on-course bookmaker in the stand will grow more dominant, and will undermine the Chancellor's decision in 1987. At this rate, if nothing is done, on-course bookmakers could eventually be setting the starting price, and thus change the nature of betting for the worse.

As soon as one raises the matter, one is told that one must "move with the times", "not sit back on historical perspectives" and "look forward". I have even heard business men say that there is a global perspective. Betting shops say that they are in the business of creating a vast global marketplace and that such matters just stand in their way. I must warn my hon. Friend to be wary of business men who come to him talking about global marketplaces. It is my understanding that that is always the beginning of an argument that runs along the lines of, "Wouldn't the world be a tidier place if, in every single business area, there were only one provider? That would make life so much simpler for the poor buyer, and the person in the high street would not have to make that ghastly thing called choice." That is essentially what will happen as companies seek to close down the system.

I do not doubt that there are vast sums to be made through video, Teletext links and away betting at different race courses in different countries. But we should act primarily in the interests of the person placing a bet here in the UK, as that has created the historical strength of the free marketplace. We should be careful if we intend to change that. Perhaps I may remind my hon. Friend the Minister—although I am sure that he needs no reminder from me—of the words of Adam Smith, who said that the interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from and even opposite to, that of the public. To widen the market and to narrow the competition is always in the interests of the dealers. To widen the market may frequently be agreeable enough to the interests of the public: but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy for their own benefit, an absurd tax upon the rest of their fellow citizens. I am sure that he was not necessarily thinking of on-course betting, but the use of the word "tax" had a certain resonance during my investigations.

In short, having been in business, I know that it is the desire of every business to become a monopoly or cartel or to create such a position. I hope that my hon. Friend will decide to consider the matter in that context, not merely because of the use of the word "tax", but because of the much wider problem of the changes that seem quietly to be taking place and which are underhand. He should ask himself whether they are in the interests of the racegoer, and if he has the slightest doubt, it is in our interest and that of racegoers for him to act. It started with the misrepresentation of the word "tax"; it will end with control of betting on course and off course in a small number of hands, with my constituents and those of my hon. Friend picking up the bill. That would be not only a tragedy, but a total injustice.

10.30 pm
The Parliamentary Under-Secretary of State for the Home Department (Mr. Timothy Kirkhope)

I congratulate my hon. Friend the Member for Chingford (Mr. Duncan Smith) on raising a particularly interesting matter for discussion. I am also grateful to him for his reference to Adam Smith. It does no harm for us to be reminded from time to time of his views and my hon. Friend used the opportunity of this debate to do so.

My hon. Friend has taken up the case of a constituent who makes his living acting as a bookmaker on race courses. In July 1994, he met my right hon. Friend the Member for Fareham (Sir P. Lloyd), who was then discharging the responsibilities that I now have in the Home Office. Concern has been expressed that self-employed, on-course bookmakers are being forced out by unfair competition from betting shops on race courses run by major off-course bookmakers.

Before I comment on the issues that my hon. Friend raised, I must say a few words about the on-course betting market. The way in which betting and racing is organised has evolved over many years. It has stood the test of time and enjoys a reputation for integrity and orderly conduct. Racing depends largely on its attraction to the public as a betting medium. The bookmakers standing in the ring are part of the atmosphere of race courses in this country. Racegoers are able to watch the changing odds and shop for the best prices—I hope that that will always be the case.

The on-course betting market is complex and it is not easily understood by people outside the industry. On-course bookmakers play an important role in setting the starting price to which my hon. Friend referred, not only on the race course, but in the 8,500 to 9,000 off-course betting shops in the country. The starting price is the price or odds prevailing on course at the time that the race begins. It is compiled on the scene from the prices offered by the ring bookmakers at the race course. The starting price is the basis on which most bets placed off course in betting shops are settled. That means that it is important to have a strong on-course market. A race meeting that attracts only a few bookmakers and only a small amount of money in the ring could lead to the manipulation of prices.

My hon. Friend said that the on-course bookmaker is threatened by unfair competition. Indeed, he went somewhat further. The horse race bookmakers have an arduous profession, which requires stamina, exhaustive knowledge of the market and the courage to back their judgment in hard cash. The market cannot stand still—it has not done so in other markets and it is not doing so in the race course betting market. Those who run race courses are under pressure to give value for money, to improve their facilities and to keep prices and facilities attractive to the race-going public at a time when income from the horse race betting levy is not keeping pace with the needs of racing. I am glad to be able to say that recent years have seen many improvements on race courses.

We cannot consider the on-course betting market without reference to the position of the Tote, which is an established presence on race courses.

Mr. Duncan Smith

As my hon. Friend has touched on the improvements to race courses, in which I know that the levy board has had some involvement, will he condemn any idea that, as a result of those improvements, the ring should be moved substantially further away from the finishing post, thus further marginalising on-course bookmakers from the process of on-course betting?

Mr. Kirkhope

The precise details of locations are matters not for me but for the race course authorities and others. I hope later to refer more particularly to the negotiations and discussions into which I entered with those parties. I have already said that I do not want to see the role of the on-course bookmakers in the ring diminished, because it is an important role.

We cannot consider the on-course betting market without reference to the position of the Tote. The Tote is an established presence on race courses. It is obviously right that it should be. It was set up to provide pool betting on horse racing. In many other countries, pool betting is the only means of betting available to the racegoer. In this country, it has to compete against the privately owned fixed-odds betting industry. The Tote's profits go to racing and its payments to race courses are increasing. It also provides a form of betting which is perhaps more attractive to the small or first-time punter.

Unlike for other betting outlets, the siting of the Tote's pool betting kiosks is not subject to approval by the levy board. That is said to have led to a proliferation of Tote outlets, which is deemed unfair by the on-course bookmaker, who can stand only in an area which has been approved by the levy board. This situation was looked at some years ago by Lord Cross in what has become known as the Cross arbitration. He advised that the levy board should exercise its powers with regard to on-course betting in such a way that it would hold the balance fairly between the different classes of bookmakers while at the same time achieving a strong starting price and taking account of the interests of racing. Those are matters for the levy board. We are aware of the views of on-course bookmakers on this issue, but do not see any reason to challenge the Cross judgment.

The on-course bookmakers also consider that race course betting shops run by the major bookmakers are taking away custom from the ring. In recent years, extra facilities and betting options have been provided by those shops. On-course betting shops used to be run by the National Association of Bookmakers, but in the past few years, those have been the subject of open tendering. I understand that the increased competition for the provision of those facilities has considerably improved the range of services for the racegoer as well as improving the financial benefits to race courses.

From the point of view of the independent on-course bookmaker, no doubt the development of well-appointed, well-run betting shops is seen as a threat, particularly by away bookmakers who bet only on other meetings which are comprehensively covered by the on-course shops.

Mr. Duncan Smith

We know that much of the improved facilities are tied up with the up to 10 per cent. levy charged by the race courses. Does my hon. Friend agree that simply to pass that 6 per cent. straight to the person placing the bet, without any explanation, and even misleading him or her about tax, is wrong?

Mr. Kirkhope

I cannot acknowledge that. I am just about to come to the percentage deduction. Perhaps we can develop that further.

Members of the public may prefer to place their bets in shops rather than braving the elements outside. The ring can also—my hon. Friend has referred to this—be rather intimidating for the first-time racegoer.

No betting tax is paid on course by the betting shops or the ring bookmakers. As the betting shops impose a 6 per cent. charge for their services, the ring bookmaker has the edge over the betting shops in that sense. Regular punters, particularly those who gamble large sums, may well prefer to place their bets with the standing bookmaker.

There is no betting duty on course, but the betting shops as a matter of practice—my hon. Friend referred to this—make a deduction from the customer, generally at a rate of 6 per cent. That is part of the terms on which they do business in receiving bets and is a commercial arrangement between the bookmaker and the punter.

Some have alleged that the 6 per cent. deduction by the betting shops is unfair—and using the term "tax" to describe that deduction is certainly misleading. That is not a new practice. It was customary when the NAB ran on-course betting shops. However, last year the levy board actively encouraged the operators of on-course shops to avoid the term, and I commend that action.

Practices in the ring have not changed for many years, and the onset of competition makes it even more important that the on-course bookmakers take advantage of new technology and practices to make the ring a more customer-friendly place. The NAB's market research has shown that the public want a better standard of service. Areas to be addressed, if on-course bookmakers are to compete with other outlets, include minimum stakes, size of bets, the availability of each-way betting and the provision of information.

The current climate also makes it even more important that agreement be reached between the race courses and the on-course bookmakers on the administration of the ring. We are aware that the Racecourse Association, representing the 59 race courses, and the National Association of Bookmakers, representing the race course bookmakers, have for several years been discussing improvements to commercial arrangements between the race courses and the bookmakers. Those are not specifically matters for the Government, but it is clearly in the interests of everyone concerned that agreement be reached without much further delay, and that the agreement should take account of the needs of both parties.

My hon. Friend called on the Government to take action to protect the viability of the present starting price system. The preservation of the system is in the public interest, in that it is seen by punters to be a fair and open means of arriving at horse-racing odds. We agree that the present system has much to commend it. We also wish to see the independent bookmakers continue to flourish on race courses, but I am not convinced that there is a need for Government intervention at present.

The bookmakers should first look to improving the service that they give to the public, to make themselves more competitive. It is not for the Government to become involved in discussions on the day-to-day management of race courses. Essentially, those must be commercial matters for the racing and betting industries to decide. I know that the British Horseracing Board and the levy board have said that they would be happy to assist in any way that they can.

The Government's role is limited to the setting of the statutory limit on the fees imposed on bookmakers by the race courses. Under section 18 of the 1963 Act, the race course management may not charge the bookmaker more than five times the highest charge made to members of the public to enter that part of the race course. I am talking about the charge made by the race courses to allow bookmakers on to the course. Commercial agreements between the race course and the betting shop operator for the use of the building provided is, of course, a separate matter. In some cases, such agreements will take the form of a lease.

I am aware that the Select Committee on Home Affairs, in its report on the levy in 1991, recommended that the Home Office should consider introducing legislation to repeal the statutory regime governing bookmakers' fees, and that courses should be able to put up individual pitches for sale by auction. It observed that on-course bookmakers paid a "relatively trivial amount". The Government's response was that we would give further consideration to such matters when the outcome of the discussions between the Racecourse Association and the NAB was known.

The Government have played their part in supporting the on-course bookmaker by removing, some years ago, the 4 per cent. tax on on-course betting. The ring bookmakers have been given an advantage over the betting shops on course, which charge their customers 6 per cent., and the off-course betting shops, where 6.75 per cent. duty is payable on turnover.

As I have said, in that sense the on-course bookmakers have the edge. Far from a cartel operating on race courses to keep up prices, the more the betting shops charge, the more the ring bookmakers have the advantage. We are seeing an improvement in the services to the racegoing public, which may mean increased competition, but not necessarily unfair competition.

Having heard my hon. Friend this evening, I wish to assure him that I shall re-examine the matters to which he has referred, and see whether further action is required to maintain the diversity of betting services available to punters at race courses. If any further action is needed, I shall not hesitate to take it, consistent with any powers that I may have.

Question put and agreed to.

Adjourned accordingly at seventeen minutes to Eleven o ' clock.