Gambling (Licensing and Advertising) Bill

Part of the debate – in the House of Commons at 2:38 pm on 5 November 2013.

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Photo of Paul Farrelly Paul Farrelly Labour, Newcastle-under-Lyme 2:38, 5 November 2013

It is bet365, which is the biggest UK operator and perhaps now the biggest operator worldwide. However, the Chair of the Select Committee will have to be patient, because I will speak about that company a little later.

Notwithstanding the delays to which my hon. Friend Clive Efford referred, I congratulate the Government on introducing the Bill and on sticking to the timetable that they set out in 2012 to bring the reforms into force, after careful consideration and consultation, by the close of next year.

A replication of that resolve would be welcome on the wider related issue of corporate tax avoidance by huge multinationals, both on and offline, which has gained a head of steam in these straitened times. Although gambling, both on and offline, is treated differently from general business because it has licensing regimes, the design of an effective point-of-contact consumption tax system holds lessons about what tax authorities can do for themselves, without passing the buck to the interminable renegotiation of international tax treaties, which may well take a lifetime.

The Bill and the issues to which it relates have been well scrutinised in this Parliament. The experience of the UK since the passing of the Gambling Act 2005 has been referred to at length. That was the subject of a DCMS consultation that started in 2009, before the last election, which recommended the current course. The Select Committee endorsed that approach in the report that we issued in July 2012. This April, the Committee published another report welcoming unanimously and on a cross-party basis—although perhaps for different reasons—the main thrust of the draft Bill following extensive pre-legislative scrutiny. In January, the House staged a precursor to this debate on the private Member’s Bill promoted by the hon. Member for West Suffolk

(Matthew Hancock), which was introduced by Miss McIntosh following his move to the Government Front Bench. I recall that that Bill was intended as a parade ring for the gambling concerns of the Newmarket and Thirsk race courses, but it covered much of the same ground as this Bill.

I will be brief and will not run around the Select Committee circuit, as Mr Whittingdale has done. Once again, he has proven himself to be Essex’s own latter day Seabreeze in the way that he has galloped around the track. However, it is worth re-emphasising the extent of the flight of most online gambling offshore and the resulting loss of tax to the Exchequer. The new regime should, if carefully designed, encourage a more level playing field for the online operators who have stayed and for the rest of the traditional sports gambling industry in the UK.

The Chair of the Select Committee has waited long enough. Chief among the online companies that continue to base their sports gaming operations in this country is bet365. It is, in many respects, a modest company with a great deal to be immodest about. It certainly does not seek the limelight, but I do my best for it.

Bet365 is based at Festival Park in Hanley in the constituency of my hon. Friend Tristram Hunt. In 1986, Festival Park was the site of Britain’s second national garden festival. The first was in Liverpool and the successive ones were in Glasgow, Gateshead and Ebbw Vale. They were a sort of biennial Olympics, or biennale as Boris would describe them, for Britain’s most deprived areas during the pain of the Thatcher era. Stoke was chosen after the closure of Shelton Bar steelworks in a north Staffordshire that was ravaged by the loss of its coal mines and many of its pottery makers.

Bet365 is a world-beating break from that legacy. It is one of the most phenomenal success stories in British business in the new millennium, having been started in 2000. With more than 2,000 highly skilled staff, it is now the largest private sector employer in north Staffordshire. It has led the local regeneration without a hand up or a handout from Government. In the last year, in a highly competitive industry, it has increased its pre-tax profits from online gaming by more than 50% to about £180 million. It has done that in just 13 years. As I have said before, £20 billion was wagered with bet365 in 2012-13, which is a 57% rise. That has happened because it is one of the industry’s most innovative and trusted players.

Unlike its online competitors in the UK, bet365 paid £31 million in corporation tax to the Exchequer last year. With betting duties and VAT, over the years it has paid hundreds of millions of pounds more. It also pumps a fortune into the local premiership football team, Stoke City, which is another source of pride and a sign of its commitment to the local area. Charities and good causes benefit from the Bet365 Foundation, the Stoke City Foundation and the Coates family themselves.

The reason bet365 remains in this country is not just that it is privately owned. It is because the Coates family—Peter, the Stoke City chairman, his daughter Denise, who was the founding force of the company, and her brother John, the joint managing director—believe in creating employment where they come from and in paying their fair share of tax.

The firm is a leading member of the UK’s Remote Gambling Association, which John Coates has chaired and which does much to promote responsible gambling and the industry overseas. However, unlike other leading members, including household names such as Ladbrokes and William Hill, bet365 supports the changes in this Bill because it is mainly based here and not offshore. If it is so successful while paying taxation, why should its competitors not do so too? I do not think that the UK’s legislative framework should discriminate between a private company and a publicly quoted company, even if publicly quoted companies are motivated by profit maximisation.

I sympathise with some of the arguments that have been made by bet365’s competitors and by the RGA during the gestation of the Bill, which we have heard about today from the hon. Member for Shipley. I also welcome the change of tone from the RGA towards these reforms, which will surely happen. I hope that there is no challenge from the Gibraltar-based companies in Europe, because that would be a delaying tactic that is all about taxation.

In Committee and in the subsequent stages of the Bill’s passage, we must have the best possible scrutiny to get the legislation right. The success of the regime will depend on British consumers choosing to gamble with licensees who have chosen to go with the Gambling Commission. There will have to be effective enforcement to deter non-licensed companies from muddying the waters with a grey or black market. There are outstanding licensing issues on which the industry is being consulted. We must remember that this is an international industry in which operators hold licences overseas in reputable jurisdictions. As the RGA says, it is in everyone’s interests that the regulators work together.

As we have heard, it is crucial that we get the level of taxation right. It is also important to get the definition of what is to be taxed right. I hope that the Treasury is listening to the arguments from the industry for a gross profits tax, rather than a wider gross gaming revenue definition, which rather moves the goalposts from what the operators were expecting.

In listening to the industry, we must recognise that other jurisdictions, notably in Europe, have successfully introduced similar licensing systems and taxation on a point-of-consumption basis. That is reaping revenue for their Exchequers. One of the most recent countries to do so was Denmark. The duty there is 20%, which is higher than the 15% gross profits tax in this country. None of the major operators—all responsible members of the RGA—have seriously suggested to the Select Committee or to anyone else that they would not apply for a licence under the new regime established by the Bill, but instead join an unlicensed or grey market. They have not done so in Denmark, Germany, Greece or Spain. Frankly, the UK is too important a market and their reputations are too important for them to do so here. I repeat: if bet365 can be so successful and supportive of these changes, that also shows what the competition is capable of doing.

To conclude, once we implement this new system—by the close of 2014, I hope, and following parallel moves by other European countries—UK operators, including bet365, will not only have a greater degree of certainty for their future investment and growth, but in co-operating with, rather than resisting, the new British system, all those who claim to be a reputable UK company will be better placed to argue, particularly at European level, for fairer access to other major markets such as France and Italy, and to ask the UK Government to help support the industry in Europe and worldwide.