§ 3.11 p.m.
§ Order of the Day for the House to be put into Committee read.
§ Moved, That the House do now resolve itself into Committee.—(The Lord Chancellor.)
§ On Question, Motion agreed to.
§ House in Committee accordingly.
§ [The LORD MERTHYR in the Chair.]
§ Clause 1 [Establishment of Horserace Betting Levy Board]:
LORD DENHAM moved to add to subsection (1):
The Levy Board may in assessing the levies paid by bookmakers have regard to the amount of money staked with bookmakers relative to the amount of money staked with the Totalisator with a view to securing that the monies staked with bookmakers will as far as possible make a similar proportionate contribution to monies staked with the Totalisator.
The noble Lord said: I rise to move this Amendment on behalf of my noble friend Lord Astor, who very much regrets that he is unable to be present this afternoon as he is abroad. This Amendment seeks to put into the Bill the general principle on which my noble friend spoke on Second Reading. That principle, which seemed to commend itself to the House on that occasion, is that there should be parity of treatment between bookmakers and the totalisator, so far as this Bill is concerned, and
between investors on the books and on the Tote; because there is a possibility, as was recognised by the Peppiatt Committee in paragraph 24 of their Report, that this levy may well be passed on to the "punters".
§ The general principle is that the levy should be fair to both. No one will wish to discriminate between the bookmakers, on the one hand, and the totalisator, on the other, and if all parties bear a fair burden, the burden on the individual will be a light one. But when the principle has been laid down, there are various practical difficulties in achieving an exact mathematical parity; so that it is essential to give the Levy Board the utmost freedom in putting the principle into practice. For instance, bookmakers' accounts and the books they keep differ very much from those kept by the Totalisator Board. Bookmakers quote odds before the time, and even before the day, of the race, whereas the totalisator calculates its odds on an arithmetical sum after the start of the race. Then, bookmakers have various ingenious things such as "accumulators" which the Tote cannot emulate. Again, the small bookmaker who may not have a very large turnover, is in a rather different position from his bigger brethren, and also from the totalisator, because out of the comparatively small amount out of which he has to find his living expenses.
So we may agree that we cannot have an exact mathematical parity, pound for pound. I do not think it will be found that we have asked for that in this Amendment, however, because we use the words, "as far as possible". It is agreed that the Board must have great freedom, tolerance and flexibility in operating this scheme, but I do not think that, because of that, we should fail to give the Board guidance in the principles which should influence them in working with tolerance and flexibility. In his speech on the Second Reading of the Bill the noble and learned Viscount who sits on the Woolsack said [OFFICIAL REPORT. Vol. 228 (No. 35), col. 387]:
It is obvious that the amount of the levy depends on three factors: first, the needs of horse racing and breeding, and of veterinary science and education, and the other potential objects of the benefaction; secondly, the capacity of bookmakers to pay and, thirdly. the need to balance in an equitable manner the
amounts taken from the bookmakers and the Totalisator Board.
The first two of those three factors are incorporated in the Bill, and my noble friend, Lord Astor and I are asking your Lordships to incorporate the third, in principle—but only in principle—in the Bill. I beg to move.
Page 1, line 18, at end insert the said words —(Lord Denham.)
§ LORD STONHAM
The Amendment which has been so persuasively moved by my noble friend Lord Denham bases its plea on the desirability of parity of treatment between the Tote and the bookmakers; and, of course, any appeal for parity of treatment is a most compelling one. The noble Lord went on to say, quite rightly in my view, that we must give the Levy Board the utmost freedom in determining how they should assess the ability of bookmakers to pay. But in fact, in my view, the very terms of this Amendment would impose quite rigid restrictions on the freedom of the Board, and it is for that reason undesirable.
As I understand it, the Tote charges 15 per cent. on losing bets and an average of rather more than 11 per cent. on all bets, winning and losing. That 11 per cent. is on the amount staked, and in view of that fact, and many others, I feel that this is a most unfair proposal. It is unfair to the bookmakers and quite unworkable. It is true that the qualifying words "as far as possible", are used. But even so it means (to quote a practical example) that if £40 million were staked on the Tote there would be a deduction of £4,400,000–11 per cent. of that sum. But if £160 million were staked with bookmakers the deduction would be £17,600,000, which, of course, is a quite fantastic sum.
The two methods of betting are not comparable, either with regard to risks or expenses. The Tote is never at risk. It lays against all the runners and takes approximately 11 per cent. of all that is staked, whichever horse wins. The Tote is always sure of its expenses plus profits, and the profits are directly related to the turnover—the bigger the turnover, the bigger the profit. None of these things applies to the bookmaker. He is almost always at risk because he is rarely able to lay against the whole field, and hardly 19 ever able to make his book so that, like the Tote, he is certain of a profit, whichever horse wins. His profits are frequently in inverse ratio to his turnover, because his turnover is always bigger when his customers are enjoying a winning run and are therefore reinvesting. In a year of bigger turnover a bookmaker often makes less profit than in a year of small turnover.
These reasons, alone, I submit, are sufficient for rejecting the Amendment; but, in addition, it seems to me that what it proposes would be unworkable, because the Tote does not make bad debts while the bookmaker often does. Is he then to pay 11 per cent. on all debts made with him by defaulting backers? The Tote deals to a major extent with the original punter. Its turnover is not inflated by the system of laying-off. Nor is it true that the Tote does not accumulate this, because there is the daily Tote "double". All starting price bookmakers, except perhaps the largest firms, continually find it necessary, in order to safeguard themselves against very heavy loss, to pass on to larger firms a proportion of the bets they have taken on one or more horses in a particular race. If a man takes £100 on a horse and lays off £80 of that £100, that £80 becomes part of the turnover of the second bookmaker and the total is then £180; and some of it can even go on to a third man. But let us just take two. If the original £100 becomes £180, in total turnover the 11 per cent. would become 19⅘ per cent.—a quite impracticable impost; and it would be impossible to separate the two forms of betting and say that one was original and one was secondary or tertiary.
Bookmakers already have expenses amounting to anything from 60 per cent. because quite a lot, particularly the medium and the smaller ones, employ agents to whom they pay commission of from 5 to 7½ per cent. If, in, addition, they had to pay what amounts to an 11 per cent. turnover tax they would either have to evade it or go out of business. In practice there would be wholesale evasion, just as there was in 1926 when the tax was only 1¼ per cent., 3d. in the £. The amounts collected then were derisory in relation to the volume of betting and the thing failed dismally. There has to be justice in this thing. I personally think that the Levy Board is going to 20 do a first-class job, but it will not be able to do a first-class job if it is tied down in the manner that this Amendment suggests. In fact I think that is the strongest argument against it, because it would wreck the Bill.
During Second Reading I made it abundantly clear that I was wholly in favour of the Bill and confident that bookmakers could afford to pay considerably more in their first year than the Peppiatt Committee suggested. I am certain that that is the case. But I am equally certain that they would not be able to do what this Amendment asks them to. There are only two possible criteria: the size of the business, judged by a good many different means, or the size of their profits. With these the Levy Board can form a reliable estimate of what a bookmaker can be reasonably asked to pay. If they had to rely on turnover it would wreck the Bill, and I hope that the noble Lord will see fit to withdraw his Amendment.
§ LORD JESSEL
I should like to support the arguments advanced by the noble Lord, Lord Stonham. As he said, the Tote cannot lose; the bookmaker can lose. One argument used by my noble friend Lord Denham really surprised me. He said he thought the levy would be passed on by the bookmakers to their clients. That argument was disclaimed by my noble friend Lord Astor on Second Reading.
§ LORD DENHAM
I am sorry to butt in here, but I was quoting the Report of the Peppiatt Committee, paragraph 24, which says:In spite of a firm opinion to the contrary which is held by one of our number, we are not all convinced that in the end means would not be found to pass on at least part of it, directly or indirectly, but in view of our conclusions as to the amount of the levy this question is not of critical importance.
§ LORD JESSEL
My noble friend Lord Astor, in whose name this Amendment stands, said on Second Reading that he did not believe in that argument, because if the bookmakers persistently gave worse odds than the Tote, then people would bet with the Tote. I think that is a bad argument for someone supporting the Amendment of Lord Astor. I hope that Her Majesty's Government will not accept it.
§ LORD WILLOUGHBY DE BROKE
I have every sympathy, I must confess, with this Amendment which stands in the names of my noble friends Lord Astor and Lord Denham. But (and I wrote to my noble friend Lord Astor, and I also took the liberty of communicating my views on this subject to the noble and learned Viscount who sits on the Woolsack) surely this Amendment, with which some of us may sympathise, is a matter for the Betting Levy Board to go into; and I am sure that they will do so when they are constituted and considering the various methods of the possibility and desirability of obtaining the levy from the bookmakers. In my humble opinion, it would be very unwise to write into this Bill any formula which would in any way impair the excellent flexibility of the Bill that is before the Committee to-day.
I should, however, like to correct, if I may, the noble Lord, Lord Stonham. He says that the Tote can never lose. But there is a corollary to that, which is that the bookmakers very often never pay out. I have seen this frequently at races. Very often races are won by horses the names of which are never even written in their books; and when that happens they "trouser" the lot. So they are at a great advantage compared with the Totalisator, which, I think I am right in saying, ever since it has started has hardly ever not had to pay out. I speak subject to correction. I believe that the stakes are refunded on those occasions when there is not a single winning ticket.
§ LORD STONHAM
If the bookmakers have so many "skinners", as I think they are called, would that not be an argument for placing a levy on profit rather than turnover?
My noble friend Lord Denham has put his Amendment and his views and the views of his noble friend Lord Astor to your Lordships, asking for sympathetic treatment, and I admit that he has put them with great clarity and with great sincerity. But I must agree with the noble Lord opposite in what he says. We are dealing here with two completely different types of business. They are businesses which are carried on not only, obviously, by completely different people, but under completely different terms of business. The noble Lord, Lord Stonham, and my 22 noble friend Lord Willoughby de Broke have said that the Tote cannot lose; and, of course, that is quite true. The Tote have a monopoly of all pool betting on the racecourses. They deduct from every single bet which the punter puts on an average of something like 11.15 per cent., as the noble Lord, Lord Stonham, has told us. That deduction is taken from the punter whether he likes it or not.
If I may correct my noble friend Lord Denham, I would point out that the Tote itself does not fix the odds which it pays out; that is decided by the punter. The more punters there are on a particular pool—that is, on a particular horse; probably the favourite—naturally, the smaller the odds or the winnings that will be returned to the punter. If there is a lesser number of punters on a particular pool, the winnings to each individual winner are greater. That must mean that, whatever happens, win or lose, the Tote cannot lose. It has already drawn its 11 per cent.
By the figures of 1959, the Tote had some £28½ million turnover, and, from that, some 2 per cent. was retained as profits. After taxation was paid, and after its own management expenses (which are very considerable) were paid, the Tote then had £690,000 to distribute to the industry. They decided to withhold £90,000 for future contingencies—possibly the sort of contingencies which my noble friend Lord Willoughby de Broke might envisage, when the Tote pool might run short. It is doubtful that such a contingency would arise, but it could. However, £600,000 was paid back into the racing industry by deducting this 11 per cent. from the punters' money.
Now my noble friend Lord Denham has said that the bookmakers have a similar type of profit, and it is the intention of his Amendment to try to treat their profit in the same manner as the Tote treats its profit. I do not believe that that can possibly be so. It is a completely different type of profit. Indeed, it can even be a loss, and is very often a loss, whether on individual races or whether over the whole season. The noble Lord, Lord Stonham, also mentioned another variable which we must take into consideration, and that is the fact that the bookmaker himself has to earn his livelihood.
23 Now how can one classify a bookmaker's livelihood? Is he in a small house of, say, a council house type? Is he a magnate living on the top floor of a very large office? Or has he a large country home, children at public schools and so forth? I think that a bookmaker's livelihood would be very difficult to assess in the course of working out what the profit or loss of a firm or of an individual bookmaker would be. All through the racing season, whether it is good weather or bad, whether or not favourites have a winning streak of luck, the going, of individual racehorses, accidents, withdrawals of horses and injuries to jockeys—every one of those factors come in to make racing the sport of kings, as it is called, and produce a hazard to the profits and to the turnover of the bookmaker. None of those hazards affects the Tote at all The turnover may be smaller, it is true, but the percentage they deduct is still deducted from the punters' money. That is the difference between the two businesses.
My noble friend Lord Jessel has said that he did not think that there would be a danger that the levy would be passed on to the clients by the bookmaker. I completely agree with what he has said, because, obviously, if a bookmaker decides to pass on this levy to his clients, then his odds must be lower, and if that is so then the client will bet with the Tote. We believe that we have written into the Bill a guidance to the Levy Board. Indeed, that guidance is agreed by my noble friend Lord Willoughby de Broke and by the noble Lord, Lord Stonham, opposite. There are the three independent members appointed by my right honourable friend the Home Secretary. They are completely independent of racing, and are to be appointed under Clause 1 (2) (a).
Now they must consider—and this, again, is written into the Bill in Clause 3, subsection (6), paragraphs (a), (b), and (c)—the three things which my noble and learned friend the Lord Chancellor referred to in his speech on Second Reading. They must consider, first, the capacity for the time being—I repeat, "for the time being"—of bookmakers to take contributions; then they must weigh up the capacity at the time being of the Tote to make its contributions; and all 24 that must be considered with the extent of the need of the racing industry for contributions at that time. We believe that this will make a flexible and workable scheme and one that will be simple to vary from time to time. Always that scheme will be watched over (for which reason they are appointed) by the three independent members. If this Amendment were accepted, I think it would tie the Levy Board to making a scheme—and even there my noble friend Lord Denham is not too certain, because his Amendment has to include the words "as far as possible". So we tie the scheme, "as far as possible", to, really, an irrelevant and probably unfair assessment of the ability of the bookmaker to pay, as compared with the known, proved and assessable ability of the Totalisator board to pay. For these reasons, I cannot accept the Amendment, and I ask my noble friend to withdraw it.
§ LORD DENHAM
I cannot say that I am entirely convinced by the arguments of my noble friend Lord Bathurst or of the noble Lord, Lord Stonham, or by those of my noble friends Lord Willoughby de Broke and Lord Jessel. The noble Lord, Lord Stonham, said that this Amendment would impose rigid restrictions, and the noble Earl, Lord Bathurst, said that it would tie the hand of the Levy Board. I may be wrong, but I should have thought that the phrasing of this Amendment, thatThe Levy Board may"—I emphasise "may"—in assessing the levies … have regard to the amount of money staked with bookmakers relative to the amount of money staked with the Totalisator with a view to securing that the monies staked with bookmakers will as far as possible"—I repeat, "as far as possible"—make a similar Proportionate contribution …was not very rigid. But in view of the obvious feeling of the House on this matter, I ask your Lordships for leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Clause 1 agreed to.
§ Clause 2 agreed to.25
§ Clause 3 [Bookmakers' levy schemes]:
§ 3.38 p.m.
LORD JESSEL moved in subsection (6), to omit "have effect accordingly for that period" and to substitute:
be submitted to The Secretary of State and if approved by him shall be laid before Parliament as a statutory instrument but shall not have effect unless approved by resolution of each House of Parliament.
§ The noble Lord said: I have put down this Amendment because I was not convinced by the arguments advanced by the noble and learned Viscount the Lord Chancellor when replying to my speech on the Second Reading of this I still think that it is only fair to the bookmakers that the amount Which is to be levied, and the manner of collection, should have the approval of the Home Secretary. As your Lordships know, the Levy Board is composed of a Chairman, two independent members, two representatives of the Jockey Club, one representative of the National Hunt Committee, the Chairman of the Tote and one bookmakers' representative. Now let us suppose that, after a prolonged discussion, the Levy Board fails to agree, and it is then left to the Chairman and the two independent members to make up a levy scheme. They will have heard the arguments of their colleagues, which I suggest will have been mostly against the lone voice of the bookmakers' representative, and this must, subconsciously, at any rate, affect their final decision.
In regard to the levy scheme, the noble and learned Viscount the Lord Chancellor, in his opening speech on Second Reading, said [OFFICIAL REPORT, Vol. 228 (No. 35), col. 355]:
Since the scheme is to be domestic to the industry, this is not a function which ought properly to be undertaken by a Minister of the Crown".
I agree that it is domestic to the industry, but the same argument applies equally to the distribution of the money which has been raised; and if your Lordships will look at Clause 2 (2) (d) of the Bill you will see that the scheme for distribution requires the approval of the Home Secretary with or without modifications. It has also been argued by the noble and learned Viscount the Lord Chancellor [OFFICIAL REPORT, Vol. 228 (No. 35), col. 389] that:
the scheme for levying bookmakers would have to be drawn up on the basis of detailed knowledge of racing and of the manner in
which bookmakers worked. That information will be available to the chairman and the independent members, if they are required to adjudicate, but my right honourable friend the Home Secretary, of course, would not have this advantage. He would have no independent sources of information on which to call.
Surely, however, the same argument can be advanced against the provision which the Government have inserted in this Bill, that the scheme of distribution shall require the approval of the Home Secretary. Why should he have detailed information about this matter? In the debate in another place the Government spokesman made a great point of the fact that it should be possible for the Home Secretary to be questioned in Parliament about any scheme of distribution which he had approved. Surely exactly the same argument applies to the amount and method of the levy.
§ My second point is that, as this levy is a tax on a certain section of the public, it should have the approval of Parliament. Your Lordships may recollect that in his winding-up speech on the Second Reading of this Bill the noble and learned Viscount the Lord Chancellor talked to us about the distinction between a hypothecated tax and a levy; and he quoted precedents for a levy, such as that on cinema takings, the sugar surcharge mechanism, the levy on the cotton industry, and the levy payments made under agricultural marketing schemes. But surely all those schemes require Parliamentary approval before they can be put into operation.
§ THE LORD CHANCELLOR
Would the noble Lord tell me, because my research has completely failed to discover it, of any other levy scheme at present in existence which is subject to annual approval by Parliament? I do not know of one, and if the noble Lord can refer me to one, I will have a look at it.
§ LORD JESSEL
I do not know that they have to be subject to annual approval by Parliament, but I do know, having sat on the Special Orders Committee for several years, that we have frequently had to approve Orders under these particular schemes to which reference has been made. It may be over a period of three years, I cannot remember; but these schemes do need positive approval—I do not say annual approval, but positive approval—first of all by the Special 27 Orders Committee, and then by the whole House, before they can be put into operation.
Another argument advanced was that, if the levy scheme had to be approved annually by Parliament, there might be delay in bringing it into operation. I do not think that this will be the case. If the levy scheme appears to be fair, the statutory instrument giving it effect would be approved without delay. Only if the scheme appeared to be obviously unfair—and this is the safeguard for which I am asking—would it be debated. The purpose of requiring the scheme to be approved by Parliament is not to have a debate, but to indicate to those participating in the scheme that that possibility exists. Both Houses of Parliament are constantly approving statutory instruments of which most Members have no knowledge, but this does not mean that a particular scheme is not a good one. I hope that Her Majesty's Government will give this matter further serious consideration, and I beg to move the Amendment.
Page 5, line 21, leave out from ("shall") to end of line and insert ("be submitted to the Secretary of State and if approved by him shall be laid before Parliament as a statutory instrument but shall not have effect unless approved by resolution of each House of Parliament").—(Lord Jessel.)
§ LORD WILLOUGHBY DE BROKE
I am very surprised that my noble friend Lord Jessel has brought forward this Amendment before your Lordships today, in view of the way that my noble and learned friend the Lord Chancellor shot down from a very great height this particular train of thought, in his admirable summing-up on the Second Reading of this Bill on February 7 in your Lordships' House. I think I can safely leave it in the hands of the noble Earl, Lord Bathurst, to fire the left barrel and to kill this proposal once and for all. I very much hope that your Lordships will resist this Amendment.
§ VISCOUNT MASSEREENE AND FERRARD
I should also like to say that I cannot support the Amendment of my noble friend Lord Jessel. Surely Parliament has so much business to do to-day that if it were to be asked to give approval every year to schemes of such bodies as the Cotton Board and the Levy Board it would become quite impossible 28 for it to carry out its work. After all, any one of your Lordships is able to put down a Question about any scheme, or even have a debate and put down a Motion. I do not think that there is any call for this sort of Amendment, and I hope that the noble and learned Viscount the Lord Chancellor will stick to his guns.
§ LORD STONHAM
Only lest silence be interpreted as consent do I rise to say that we also hope that the noble and learned Viscount the Lord Chancellor will reject this Amendment, which in some ways (although I know the noble Lord, Lord Jessel, does not put it forward as such) could be a wrecking Amendment, in that it could involve very considerable delays, and might on some occasions mean the rejection by comparatively uninformed people of the conclusions of experts. Therefore, I hope that the noble and learned Viscount the Lord Chancellor will, in the noble Lord's words, stick to his guns.
§ 3.48 p.m.
I do not know whether my left barrel is going to convince my noble friend Lord Jessel—evidently my noble and learned friend's right barrel did not. I feel that my noble and learned friend has convinced your Lordships on both sides of the House. I know that in principle possibly the noble Lord's Amendment has attractions, but we cannot believe, if the real consideration and inspection of all that is needed with regard to racing and bookmaking is to be effectively carried out, that it can be carried out by Parliament. Time alone affords one good reason why Parliament could not deal with such a problem.
My noble friend Lord Jessel mentioned the expert information that is necessary. I cannot believe that my right honourable friend the Home Secretary would be in the position to attend every single meeting of this Levy Board to hear the whys and wherefores of any particular scheme, or any scheme that may be proposed in the future. I cannot believe that my right honourable friend would be expected to hob-nob (if I may use the expression) with all the many and varied interests that are concerned in racing. The fact that he just has not the time to do such hob-nobbing, pleasant though that may well be, seems to me sufficient ground for 29 saying that he should not be an arbiter in any dispute that may take place between the Levy Board on the one side, the bookmakers on the other side, and even the Totalisator Board on yet another side. We believe that the three arbitrators, the chairman and two independent members of the Board, are the proper people to arbitrate on any dispute.
My noble friend Lord Jessel mentioned in Clause 2 (2) (d), which deals with payments from funds collected by Statute. I think that my right honourable friend is really being called upon in this paragraph to see fair play, to see that the money collected by the Levy Board is paid out to the proper people, who in fact will be the same people to whom the Racecourse Betting Control Board used to pay out moneys. This is quite different from asking my right honourable friend to adjudicate upon, or promote, schemes for raising money. We believe that a scheme is domestic to the industry and that any money raised by the Levy Board should be paid out according to a scheme made by the bookmakers themselves and the Board. We cannot see how Parliament can either invent a scheme or adjudicate upon a scheme unless it has full information and I cannot see how Members of your Lordships' House and of another place could be able to obtain the full information that would be necessary.
Clause 8 (2) of the Bill requires my right honourable friend to lay before Parliament each year the report of the Levy Board. Then questions may be asked and the matters debated with the full facts available, and both my right honourable friend and the Levy Board would be bound to take note of the criticism and suggestions made. I am sorry that I cannot accept the Amendment of my noble friend. But we believe that the method we have already written into the Bill will be the simplest and most convenient, both for adjudicating upon and for promoting schemes for collecting the levy. I would therefore ask my noble friend to withdraw his Amendment.
§ LORD JESSEL
Obviously the Committee are very much against me, but I must confess that I am not convinced at all by the "hob-nobbing" argument. The Home Secretary would have to go racing a great deal more than is good for 30 him in order to adjudicate properly on the distribution of this money.
§ LORD WILLOUGHBY DE BROKE
I really must interrupt the noble Lord. My right honourable friend the Home Secretary already does it in the case of money collected by the totalisator.
§ LORD WILLOUGHBY DE BROKE
I should be the last person to accuse my right honourable friend the Home Secretary of "hob-nobbing" with anybody.
§ LORD JESSEL
Take the case of an inspector who is called upon to make an inquiry by the Ministry of Housing: he simply reports to the Minister. The Minister is not present at the inquiry. He does not go into every detail. He must take responsibility for his subordinates. I am not really convinced by this argument, but in view of the feeling of the Committee, I beg leave to withdraw my Amendment.
§ Amendment, by leave, withdrawn.
§ Clause 3 agreed to.
§ VISCOUNT HAILSHAM
It may be convenient for your Lordships if the House resume now, in order to hear a statement by my noble friend Lord Lansdowne. I therefore beg to move that the House do now resume.
§ Moved, That the House do now resume.—(Viscount Hailsham.)
§ On Question, Motion agreed to, and House resumed accordingly.