Horserace Betting Levy Regulations 2017 — House of Lords, 2017-03-29
Topic: Domestic Commerce
David Lawrence Lipsey (Labour, Centre-left): My Lords, I beg to move the amendment in my name. I declare a remote interest as a member of the Starting Price Regulatory Commission, chaired by the noble Lord, Lord Donoughue, and as a recipient of occasional hospitality from bookmakers, as stated in the register. The Minister said that this is approaching the final furlong: I think this is the first of three gigantic Becher’s Brooks, at which this legislation will fail, and I shall explain why I make no secret of the fact that I am against the levy—I am against statutory support for a particular industry. I believe that racing should stand on its own feet through a proper market-oriented system of money from bookmaking. Of course, that is what has been happening, because media rights have now far dwarfed any yield from the levy—they are three times as much as the levy, which was fading away. I oppose the levy because it is a state-mandated picking of the pockets of poor punters to fill the boots of rich owners such as me. But I do accept that, if you are going to have a levy, it is right that everybody should pay it and that offshore operators should not escape it. So to that extent, I sympathise with the Minister, and if that was the objective, the Government could have proceeded in a perfectly straightforward way and introduced primary legislation, which would be subject to full parliamentary scrutiny, to reconstruct the levy Indeed, it was the clear advice of the parliamentary authorities that that is what the Government should have done. Mr Colin Lee, Clerk of Bills in the Commons, said in a note to Philip Davies MP: "I can say with reasonable confidence that changes to the levy itself and its scope would need primary legislation" However, we do not have primary legislation before us tonight. The truth that Mr Lee was speaking unto power has had no effect, and DCMS, no doubt under pressure from some of its Ministers, has cobbled together a two-phase process to reconstruct the levy: the order before us now, and another in the autumn to abolish the levy board and hand over collection to the Gambling Commission This House is rightly sensitive about secondary legislation, the use and abuse of Henry VIII powers, ministerial attempts to minimise parliamentary scrutiny and so on. However, in this case there is a further problem. According to legal experts who have examined the order, it is not only the wrong way of doing things, it is actually ultra vires. I will cite the opinion of two such authorities: Olswang, the leading firm of gambling lawyers; and Tim Ward QC, in counsel’s opinion prepared for the Remote Gambling Association. The Library has copies of their documents if anyone wants to read up on this in more detail. I shall paraphrase their arguments In the latest note from Olswang, Mr Dan Tench does not dispute that an order to impose levy on foreign betting operators who do not at present pay it is in order; the 2014 Act provides for that. However, Mr Tench says that this order goes "well beyond" that. It mandates a fixed levy of 10% for all bookmakers, in place of the present process of annual levy fixed by the Levy Board. It mandates the extension of the levy to the Tote’s on-course operation. Incidentally, it was rather telling that the DCMS told a delegation only a week or two ago that the Tote already pays levy on its on-course business. It does not. I was a director of the Tote, so I am something of an authority on it. The DCMS just got that wrong, as it has got this order wrong. There is a £500,000 per annum exemption limit for on-course bookmakers, but it is an extension. To summarise Mr Ward’s opinion, in paragraph 4 he says: "DCMS has failed to establish a robust legal basis for the measures in these Draft Regulations. The explanations now given by DCMS raise serious concerns in circumstances where DCMS is seeking to enact under delegated legislative power a wide-ranging reform of the statutory Levy regime in the absence of any express statutory power to do so … On DCMS view, the Henry VIII clauses can be used to effect a wide-ranging restructuring of the Levy, even though on its face it affords only a power to ‘secure’ the levy is extended to offshore bookmakers. Such a broad reading of the clause is in stark contrast to the restrictive approach approved by the Supreme Court" I should say that this evidence was not available to the Joint Committee on Statutory Instruments when it considered the order I know why the DCMS has made these extra changes: it thinks they will help to get state aid approval. However, it may be significant that Ministers have been disappointed in their hope that they would have that state aid approval by tonight. The thing is, Commission approval is not enough. As we have seen before in the horseracing field, the Commission can be taken to the European court, and I can say with total confidence that this order will be challenged in the European court. I am not a legal expert and I cannot judge the chances of success of that challenge. However, the lawyers I have spoken to think that the Government’s retort that this is rather similar to the French parafiscal case, where something slightly similar was approved, will crumble on examination, the French system being so different from ours. We have a competitive market, they did not More broadly, what are the prospects of this balsa boat surviving the rough seas into which it is being launched? Not strong, I think. Any interested party can challenge the order, and in the opinion of those I have cited, they would have a good chance of success. Next, the Government have to launch their second order, a legislative reform order, in the autumn. I will have a chance to make my views on that known—or rather, the views of the lawyers I have consulted—but again, there is a strong legal view that this is outside the scope of the legislative reform order they are seeking. Then, there is the possibility, which I have mentioned, of a state-aid challenge to the European court. I do not think Brexit will come along fast enough to affect that and if it does, there are likely to be other restrictions on state aid and whatever arrangements follow I make one closing point. Ministers, in proceeding with what I fear they must know is a dodgy order, are making a political calculation. They thought, wrongly, that the new levy was uncontroversial in both Houses of Parliament. They think that they have the bookmakers by the short and curlies so long as the triennial review is impending, with the threat of slashing FOBT stakes deterring them from making legal challenges They might be right, but let us suppose that they are wrong. Let us suppose that a challenge arises, if not from the big bookmakers then from some other betting firms, and the Government lose. For racing—and there are many present in this House tonight because they are supporters of racing, as I am—that could be a catastrophe. In all likelihood, they would end up not even with the existing levy but having to pay back the money that had been collected under the terms of this order; that is, roughly £50 million a year For Ministers, too, I have to say to the noble Lord that it would be a catastrophe. They were warned by the lawyers, by me tonight and by others that if they went ahead, they would be behaving illegally; they went ahead anyway; and they have been caught. I can see the short-term advantages to Ministers of going ahead with this scheme. The Queen will no doubt warmly thank the Prime Minister at her weekly audience because her horses will cost her less. Mr Hancock, the Minister of State for Culture in another place, will no doubt feel confident that his Newmarket constituents will be minded to add still more to his 13,000 majority. But those thanks will turn to ashes. Far from providing certainty to racing, the order promises prolonged uncertainty. Long term, there is every chance that this half-baked legislative scheme will collapse at the hands of the courts. The Queen, Mr Hancock’s constituents and indeed the racing public will ask: "Why did you plough ahead? You had been warned". I beg to move.