Gambling (Licensing and Advertising) Bill — Second Reading

– in the House of Lords at 8:00 pm on 17 December 2013.

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Moved by Lord Gardiner of Kimble

That the Bill be read a second time.

Photo of Lord Gardiner of Kimble Lord Gardiner of Kimble Lords Spokesperson (Department for Culture, Media and Sport), Lord in Waiting (HM Household) (Whip) 8:08, 17 December 2013

My Lords, the Bill is a prudent measure, seeking to increase public protection for consumers based in Great Britain by tightening current legislation to ensure that all remote gambling, whether provided by British or overseas suppliers, is a licensed activity subject to the Gambling Commission’s standards and controls. This is a small but significant Bill, the key purpose of which had broad support across all sides in the other place. In fact, this Bill has its origins in the previous Administration’s review of the remote gambling regulatory framework.

Remote gambling is gambling in which people participate by the use of remote communication—internet, telephone, television or other kinds of electronic communication. Remote gambling is on the increase year after year. According to the latest Gambling Commission statistics, it has increased by 5% from last year alone, fuelled by the spread of fast internet connections and the use of mobile phones.

The Gambling Act 2005 currently regulates those operators who have at least one piece of their remote gambling equipment in Britain, described as,

“at the point of supply”.

These operators are required to hold a Gambling Commission licence and are subject to the commission’s licence code and conditions. However, there is no such requirement for remote gambling operators based wholly overseas. The Gambling Commission estimates that around 85% of remote gambling activity by British consumers currently takes place with operators that the commission does not regulate, and that includes many of the well known high street brands. This is a sizeable proportion outside the scope of the British regulatory regime. While these operators are governed by the regulatory regimes of the jurisdictions in which they are based, British consumers can experience varying levels of protection.

Given the increasing number of British consumers using these services, it is time to extend the regulatory framework established by the 2005 Act to this growing market. We need to move with the times and ensure that British consumers enjoy consistent consumer protection in an age where the use of technology is prevalent and means that operators transacting with British consumers can be based anywhere in the world.

The increased accessibility to online gambling products means that we need to take this opportunity to ensure that the Gambling Commission can monitor and respond swiftly and effectively to developments in remote gambling. While the current arrangements have not as yet led to widespread problems for consumers, the Government are committed to staying ahead. The market is growing and we need to take this opportunity to give the Gambling Commission the ability to identify and understand emerging issues before they manifest themselves on a larger scale.

The Bill therefore seeks to extend the regulatory regime established by the 2005 Act to all remote operators that seek to advertise and sell into the British market, whether they are based in Britain or abroad. In this sense, the regulation of remote gambling will move from the point of supply to the point of consumption by consumers.

With this change, all remote gambling operators advertising and selling into Britain will be required to hold a Gambling Commission licence, making them subject to robust and consistent regulation by the commission, increasing protection for British consumers; supporting action against illegal activity, including sports betting integrity; and establishing fairer competition for British-based operators. As licence holders, they will be required to comply with the Gambling Commission’s licence code and conditions, which include social responsibility and technical standards requirements, including licence conditions that protect children and vulnerable adults. It means, too, that for the first time all remote gambling overseas operators will also have to inform the Gambling Commission about suspicious betting patterns to help to fight illegal activity and corruption in sport. The recent allegations of match fixing illustrate the importance of extending this requirement to overseas operators, and the Financial Conduct Authority will further strengthen the existing arrangements by issuing new guidance to sports spread betting operators about their requirements to notify of suspicious market activity.

Advertising is of major importance to operators and central to their ability to attract custom; in many ways it is their life-blood in a very competitive market. The Bill will bring operators’ ability to advertise in Britain in line with the new regulatory regime. As a result of the Bill, all remote gambling operators wishing to advertise to British consumers will be required to hold a Gambling Commission licence. The requirement for a licence means that a failure to comply with the advertising codes of practice, which seek to ensure that adverts do not glamorise gambling, exploit vulnerable people, appeal to children or suggest gambling as a solution for financial difficulties, could result in an operator losing their licence. The loss of their licence would mean they could not advertise in Britain, which would go to the heart of the viability of their business.

The change in the licensing regime means the end of what has become known as the white list. At present, operators based in the EEA, including Gibraltar, or in a non-EEA country designated by the Secretary of State, are able to advertise remote gambling to consumers in Britain without a British licence. Those countries, known as the white list countries, include Antigua and Barbuda, the Isle of Man, the States of Alderney and Tasmania. The list was closed in 2009, pending the outcome of the consultation on the proposal for the Bill. The white list will be repealed by the Bill, and all operators, whether based in the EEA or elsewhere, will require a British licence.

The Bill also creates a new offence of unlicensed advertising of remote gambling in Northern Ireland, which has been welcomed and agreed by the Northern Ireland Executive and Assembly. Unlike Scotland and Wales, gambling is a devolved matter in Northern Ireland, but the law there is silent on remote gambling. For that reason, Section 331 of the 2005 Act, which prohibits the advertising of remote gambling by an operator from a non-EEA or white list jurisdiction, was also extended to Northern Ireland. The changes being brought in by this Bill require the repeal of Section 331.

The Northern Ireland gambling laws are currently in the process of being rewritten and updated. In the mean time, the Government and the responsible Northern Ireland Minister, the Minister for Social Development, Mr Nelson McCausland MLA, were concerned to ensure that Northern Ireland consumers continued to have the same protection as other British consumers in relation to the advertising of remote gambling, as was the case under Section 331. This new offence achieves that. It means that all UK consumers will enjoy the same protection in respect of the advertising of remote gambling.

So far as enforcement is concerned, overseas operators that are required to hold, but fail to obtain, a Gambling Commission licence will be committing the offence of providing facilities for gambling or the separate offence of advertising unlawful gambling. The Gambling Commission is empowered under the 2005 Act to take appropriate action against illegal operators.

The Gambling Commission has a number of enforcement tools available to it under the 2005 Act with which it is able to detect and disrupt unlicensed operators. It has wide investigatory powers under the 2005 Act and the Regulation of Investigatory Powers Act 2000 and employs expert staff with forensic accounting, e-commerce and police investigatory skills.

Stopping illegal advertising is an important way the commission protects consumers from illegal operators. The Gambling Commission has demonstrated that it is able to take effective, swift action to remove illegal advertising, including working with third-party carriers such as Google and Yahoo. Third parties which carry illegal advertising are themselves at risk of prosecution under the 2005 Act. Player education is another important tool in combating the use of unlicensed services. The commission also has power to bring criminal prosecutions, including in absentia.

The Gambling Commission also continues to build links and information-sharing gateways with regulatory bodies across the world. Many jurisdictions take account of prosecutions overseas when considering the ongoing suitability of licensees, as does the Gambling Commission.

Of course, I do not claim that the commission can eliminate all instances of illegal activity. The commission will, as it currently does, take a risk-based and proportionate approach to enforcement. There will always be some operators who do not comply and players who disregard the risks, but the Government are content that the existing powers under the 2005 Act provide the commission with broad investigatory and enforcement powers with which to achieve the consumer protection aims of the Bill. The situation is not unlike the difficulties posed by counterfeit goods. We cannot necessarily act to prevent their manufacture in overseas countries, but we can use all the tools at our disposal to disrupt and prevent their importation and sale in this country.

The Bill will increase consumer protection. As a result of the Bill, all operators selling or advertising in the British market, whether from here or abroad, will be required to hold a licence from the Gambling Commission. This Bill is a significant step towards enhanced consumer protection. It extends the scope of the 2005 Act to protect British consumers in this fast-growing market and will ensure consistency of consumer protection and a level playing field between operators. The increase of remote gambling makes this the right time to act to ensure that the Gambling Commission has the ability to intervene to protect British consumers of remote gambling now and in the future. I beg to move.

Photo of Baroness Pitkeathley Baroness Pitkeathley Deputy Chairman of Committees, Deputy Speaker (Lords) 8:21, 17 December 2013

My Lords, when it comes to gambling, I am far from being a usual suspect in your Lordships’ House. In fact, this is the first time I have ever addressed your Lordships’ House on this topic. I do so tonight because I have two important personal interests. The first is as a Channel Islander because this Bill has major implications for the Channel Islands, particularly Guernsey and Alderney. I am a very proud Guernsey woman—the only one, I think, in your Lordships’ House.

Electronic gambling is of major importance to both islands and is crucial to the economy of Alderney. The sector provides approximately £50 million a year of benefit to the Bailiwick of Guernsey’s economy, and it employs almost 400 people directly and in related services. For Alderney, one of the smallest of the Channel Islands with fewer than 2,000 residents, it accounts for 12% of its GDP. The consequences for Guernsey and, particularly, for Alderney, should this sector be threatened, are significant and would be of concern to those of us who recognise the importance of the Channel Islands to the British family, which the islanders always emphasise.

The development of e-gambling in Alderney since 2000 has been a huge success, largely because of the quality of regulation that its Gambling Control Commission provides. The commission knows that to survive and succeed it has to meet and exceed the highest international standards of regulation. It has set itself objectives which seek to ensure that all electronic gambling on Alderney is conducted honestly and fairly, that the funding, management and operation of electronic gambling on Alderney remains free from criminal influence and that electronic gambling is regulated and monitored so as to protect the interests of licensees’ customers as well as the young and vulnerable.

In order to do that, Alderney invested considerable effort and resource to become one of the very few jurisdictions to be placed on the UK’s e-gambling white list, which was mentioned by the Minister. The UK recognised Alderney as one of only five jurisdictions with regulatory regimes that were benchmarked to be of such a high standard that Alderney operators were allowed to advertise their e-gambling services in the UK. To achieve this, the Alderney Gambling Control Commission had to demonstrate the very highest standards of regulation, propriety and probity. It has done so to such an extent that the UK’s own Gambling Commission has come to rely on the AGCC providing a benchmark of best practice and it has recognised its enormous expertise in regulating remote gambling. Many British firms have established themselves there and have accessed the British public with little or no negative consequence in terms of player protection.

One of the consequences of the Bill should be that the UK and ordinary regulators should work even more closely together to protect the consumers of e-gambling. This would not only avoid duplication of effort, which is in itself sensible enough, but also ensure that, where the Gambling Commission finds itself stretched thinly by the new responsibilities in this Bill, it can ask Alderney to assist. Over the years the AGCC has worked closely with its UK counterparts in developing its own regulatory framework and has been influenced by what we do in the UK. It is one of the very few jurisdictions outside the UK which has placed a mandatory requirement on its licensees to contribute to research, education and counselling of problem gambling, and could be an exemplar for other jurisdictions. I know there is much concern about problem gambling, and rightly so, especially if unregulated operators are allowed to advertise their services, which might be a temptation to problem gamblers. Other noble Lords will no doubt speak about this.

Alderney is a jurisdiction which has had great success in e-gambling and relies on it as a significant driver of its economy. It is at the very forefront of excellence in e-gambling bodies around the world, and it wishes to develop its partnership with the Gambling Commission further within the framework of this Bill. Ministers will, I hope, not only recognise these developments but preserve them, as it is clearly in the interest of British players and the Gambling Commission for them to do so and to capitalise on the work done by the white-listed jurisdictions.

Can the Minister indicate to the House what has been done to ensure that the codes and practices as well as the expertise in the white-listed jurisdictions are being considered in the introduction and development of the new licensing framework? Can he also confirm that he will encourage the Gambling Commission to work with trusted white-listed jurisdictions to avoid any duplication of effort and to ensure that the best standards of regulation, of the sort that are provided by my sister island of Alderney, become the general standard for the United Kingdom?

I turn now to the other personal interest I have in this Bill, which is not as a proud Guernseywoman but as a proud mother. I have a daughter who is an amateur jockey and a son-in-law who is an owner. I often join them at racecourses in various parts of the country. Before I started doing this, I might have had an image of racecourses as rather bleak, rundown places peopled by shady characters out of a Dick Francis novel. Not so, my Lords. Even on cold and rainy weekdays I have found racecourses vibrant, exciting places full of both aficionados and newcomers, families as well as professionals—in short, people having a good time. They are also innovative, constantly trying new ideas and schemes to bring more people in—ladies’ days, music of all kinds and many other things which contribute to a family day out.

This is very pleasing to see and confirms the statistics of the British Horseracing Authority that horse racing is not only the country’s second most popular sport, with 5.6 million attendees at events in 2012, but also the second largest sporting employer. British racing supports a predominantly rural industry which makes a significant contribution to the British economy, generating £3.5 billion in annual expenditure and providing direct and associated employment for no fewer than 85,000 people.

There is, however, concern that the future of the industry is threatened by the inadequacies of the horserace betting levy, the legislative mechanism which provides racing a return from betting activity on its sport and which is used to fund prize money and other important expenditure, including regulatory and integrity services and veterinary research and education. This has fallen from an average of £106 million in 2003-04 to £66.7 million in 2008-09.

As just two knock-on effects, the number of horses in training has fallen by 10.6% between 2008 and 2012 while foal production was down 26% over the same period. The move by many betting operators to an offshore location for their remote gambling arms has been an important factor in the decline of the levy in recent years. Betting operators licensed offshore for remote operations are not liable to pay levy on their gross products on British racing from these sources. In other words, they are free riding. This is costing millions in annual levy receipts to racing and unfairly distorts the market against those operators which do pay the levy.

I think that British racing welcomes the Government’s introduction of this Bill, which will license all remote gambling, but as drafted it does not make any provision in relation to racing or the horseracing betting levy, meaning that the sport will not receive a return from remote betting activity, even once it is licensed with the UK Gambling Commission.

There was a Private Member’s Bill debate on offshore gambling in another place last year and the Minister of State for Sport, Hugh Robertson, said that any reform to the levy to capture revenues under a point-of-consumption licensing regime would constitute state aid, but a recent and comprehensive ruling from the European Commission will perhaps change the Government’s legal position. A French levy on online horserace betting has been approved, recognising racing’s special status and common interest with the betting industry. It sets a vital precedent and is, I believe, in the process of being reviewed by DCMS for any read-across to the Government’s previous legal position. I hope that the Minister will be able to update the House on that. The legal advice received by the British Horseracing Authority is that the collection of levy from remote operators under a point-of-consumption licensing regime does not constitute state aid. Amendments were put down on this matter in another place. Would the Minister be prepared to accept similar amendments in your Lordships’ House?

I should point out that there is no conflict between my support for Alderney in this regard and my call for changes to levy. The position of the Alderney Gambling Control Commission has always been that it would be willing to consider requiring its relevant licensees to contribute to the levy.

I understand that the Government have agreed to review the situation with regard to the levy. I hope that the Minister will be able to update your Lordships’ House on this when he winds up.

Photo of Lord Clement-Jones Lord Clement-Jones Liberal Democrat 8:31, 17 December 2013

My Lords, it has undergone a lengthy process but I welcome this Bill, which I hope will remedy clear flaws in the Gambling Act 2005. It has already undergone extensive pre-legislative scrutiny and well informed debate in the Commons. As my noble friend the Minister outlined in his introduction, the Bill will require remote operators to hold a Gambling Commission licence to deal with British consumers or to advertise in Great Britain.

The licences will be important. I understand that the licences for such online sites to be granted by the Gambling Commission will include a condition for comprehensive reporting of suspicious patterns of activity, but will the penalties for non-compliance be adequate? Much needed also is a licence condition for protection of player accounts following the Full Tilt case. What is the status of the consultation on this? Can the Minister give us an update tonight? What restrictions on advertising—for example, before the watershed—can the Gambling Commission impose and include as part of its licensing conditions. I hope that the Minister will be able to answer those questions.

Other questions remain with regard to the Bill and online gaming. What are the Government doing to combat problem gambling online, particularly as regards the ability to self-exclude, including “one stop shop” exclusion? What pressure are they and the Gambling Commission putting on operators to develop and use the necessary technology, such as play scan, to identify this? Will there be kitemarking of sites, as recommended by the Culture, Media and Sport Select Committee last May? Is it the Government's intention to introduce this and how will they fulfil it? Why are there no powers to block illegal offshore sites being introduced? If no statutory powers are proposed, is progress being made towards a voluntary agreement between ISPs? Why are there no measures such as payment blocking along the lines of the US Unlawful Internet Gambling Enforcement Act, which has been adopted by so many countries? Why are there no proposals, voluntary or statutory, to ensure that illegal sites cannot appear prominently in search results on search engines? How effective will monitoring and enforcement be? How will licensing checks be carried out by the Gambling Commission? Will adequate resources be given to the Gambling Commission to carry out regular test purchases and enforce conditions of the licences? When is it anticipated that the Bill will come into effect? How will the transitional provisions operate, particularly with regard to white-listed countries? The noble Baroness, Lady Pitkeathley, raised that point.

It is widely expected that the Treasury will announce a POCT—point of consumption tax—rate of 15%. Is 15% the right level to ensure that overseas operators cannot compete unfairly with UK-licensed sites in future? Some of the companies that continue to develop their software in the UK have concerns. They believe that the consequence of setting POCT at 15% will be that they and companies like them will be forced to relocate core services outside the UK. Investment in research and development, and in UK marketing, will be cut. The unregulated market, they say, will flourish, to the detriment of players and decent operators. The overall tax burden will be greatest for companies resident in the UK. What is the Government’s response? Can the Minister rebut these dire predictions? What discussions have they held? Why is the POCT being set at 15% if there are such risks in prospect?

There is also the question of whether the new legislation conforms to EU law, as it could be argued that one of the major objectives of the Bill is to bring offshore sites into the UK tax net. What, if any, moves are being made towards common pan-EU standards and compliance? Is there no prospect of a harmonised approach across Europe to ensure minimum standards and effective enforcement?

The Minister will also be aware that the National Casino Forum is seeking to amend the Bill to allow the UK onshore casino sector to provide its customers with the same online gambling experience as the online sector. Under existing regulation, onshore casino operators cannot indicate that the product is available from any internet-linked computer within the casino or advertise their online site on or around an actual computer with internet access. So a customer can bring their own internet access device—a tablet or a smartphone—into a casino and play online, perhaps even on the casino’s own online site, but the casino operator cannot offer that facility. What are the Government’s reasons for resisting such an amendment so far, despite the recommendation in its scrutiny of the draft Bill by the Culture, Media and Sport Select Committee, and the wide support that that has received? It appears that this is under consideration, but only by means of secondary legislation. That route seeks to categorise an internet access device as a gaming machine—perhaps a category A machine—if it is offered for use in a casino. Someone playing in the bar on their own iPad is not playing a gaming machine, but someone playing a device offered by the casino would be. If an internet access device is categorised as a gaming machine in these circumstances, it would become subject to gaming machine technical standards regulations. So a player using two different devices—one provided by the operator on the gaming floor in the casino and the other their own device—might face different conditions of play. That is totally confusing and unnecessary.

By contrast, the industry offered an amendment in the Commons that would have allowed the Secretary of State to control the number of such devices a casino could offer. I hope the Government will reconsider their position during the passage of the Bill through this House.

At the end of the day, we have to recognise that the Bill is very limited in scope and there are some key questions relating to ongoing Government intentions in other areas of gambling. The noble Baroness, Lady Pitkeathley, raised an important subject and concisely put the argument for going beyond the current four-year voluntary agreement with the bookies. Why is there no government commitment to consultation on future statutory arrangements to ensure the future of racing industry finances? I know that Ministers have believed hitherto that a new revenue-raising point of consumption licensing regime might constitute state aid. However, as the noble Baroness mentioned, the recent case in which a French levy on online horserace betting has been approved, in recognition of horseracing’s special status and common interest with the betting industry, now sets a vital precedent. I very much hope that Ministers will take note of that.

There is also the question of spread betting. That is, of course, currently regulated by the FCA, but how will its licences compare with those issued by the Gambling Commission? Should that not be included in the Bill, as some have argued, and brought within the ambit of the Gambling Commission? If not, can my noble friend confirm that an equivalent to condition 15.1 on reporting suspicious activity to sports governing bodies will be introduced, which will be enforced by the FCA?

Then there is the desirability of ensuring portability of casino licences as, faced with unused licences in a number of localities, logic would dictate. There are also all the issues surrounding FOBTs, which are now extensively under discussion. Of course, we have the whole area of match fixing. Do we need better definition of the offences or further sanctions?

Last, but absolutely not least, we have the issue surrounding the so-called Health Lottery. Do we have a national lottery, which has a monopoly, or not? If not, are we not putting at risk all those good causes that we support? I very much hope that the long-overdue consultation paper to test opinion on the impact of the Health Lottery, and the amendments that could be made to safeguard the National Lottery, will see the light of day very shortly.

It is clear that the Bill is one thing, but the many other issues that need resolving as regards the gambling industry, and lotteries and gaming, are another. Can my noble friend confirm in his winding-up today that all these issues are under active consideration, either by his department or by the Gambling Commission? I look forward to his reply.

Photo of Viscount Falkland Viscount Falkland Crossbench 8:41, 17 December 2013

My Lords, this is quite a simple Bill, as other noble Lords have pointed out. I do not know whether other noble Lords have read the Second Reading proceedings in another place. In the past I did not normally have the habit of reading Second Readings, but I read that through twice and very interesting it was, too. It was really a kind of double act between Mrs Grant for the coalition and the department, and the Member for Shipley, Mr Philip

Davies, who is a rising star in another place. I agree with the drift of Mr Davies’s speech that this is entirely a Treasury matter. A lot of the things that have been spoken about in another place and even tonight obviously have connections with what we are discussing, but not very close connections.

If it was foreseeable and acceptable, I would not oppose at all the idea of the Treasury to seek further contributions by introducing this point-of-consumption tax in Europe—provided that the licences are in order and so on—but the mistake that it made, if I may make this comment early, is the one that was made during the discussions we had on the pre-legislative scrutiny committee. The noble Lord, Lord Faulkner, who was in his place and is now elsewhere, was with me on that committee and will remember what killed the whole idea of casinos. When the Budd report came out, the idea that we could restore the magnificence of the seaside resorts by gambling and possibly by resuscitating entertainment and so on seemed rather improbable and fanciful. That appealed to the Government on one basis, which is where they fell down badly. That was that to address the danger of gambling by vulnerable gamblers, those people would have to decide to take money in their pockets and make sure that they had an adequate amount to spend over a weekend when they went up to, say, Blackpool—that was the most discussed place. But it was killed absolutely stone dead as was explained to me by experts from America because there is no way that you could get investment to produce the right project when the Treasury was putting such a high tax rate on it.

As I understand it, the guide is that a tax rate of 15% will be required. It is very interesting that the Treasury should do this. It is short-term thinking but it is also quite dangerous, because if you start putting a tax of 15% on licensed companies, it is going to make it very difficult for them to operate in a way that satisfies their customers. A large number of their customers will leave the well-regulated, satisfactory operators. The online companies that are licensed are extremely satisfactory. It will encourage people to go to places where they will be less secure as consumers, where there will be ability for people who are in danger, with their addiction going and so on. That has not been thought through by the Treasury, although I can see nothing wrong with the basic idea of the Treasury getting its hands on some more income.

Various other things have already been mentioned this evening that spring to mind. The Gambling Commission, for example, will have a great deal of responsibility as a result of this. I do not particularly like quangos of any kind, and I have not been too impressed by this quango so far. It is a poor replacement in terms of performance compared to its predecessor, on which it was based, which controlled casinos from the 1960s. The Gaming Board was extremely successful in that it did not grow unsatisfactorily into a kind of an empire. It seems to me that the possibility of empire-building as a result of this Bill is considerable. They will be flying around Europe inspecting places and so forth.

Certainly in the run up to the 2005 Act, we did not discuss online gaming at any length in the pre-legislative scrutiny committee. One afternoon I went to one of the leading online gaming companies. I have always been interested in gambling, unlike the noble Baroness, Lady Pitkeathley. I was particularly interested in this visit, because I was expecting something quite worrying. But I came away fully persuaded by the way in which that operation was run, how it took into account dealing with vulnerable gamblers, and the excellence of the staff—in particular, as regards protecting themselves from dangerous and vulnerable gamblers. For companies that work online, the last thing they want is those kinds of people. They would rather spend money on weeding them out before having to deal with them. They want regular players who have got the money to do what they do. They act responsibly and check them out thoroughly. They had three or four highly educated young women in that company who had psychology degrees. Their entire job was to follow and trace their customers’ betting patterns so that they could detect at any moment if they thought such and such a person ought to be watched closely. They would then report that to their employers.

I was convinced that these younger operators, these new people in the bookmaking firmament if you will, were extremely dedicated and extremely careful to run proper businesses, because they realised that integrity was what was going to bring them customers, so it was important that that integrity was maintained, even if it cost them a lot to do so. I have no doubt that the same thing will happen under the new conditions that are now being brought in.

I do not think adverts have anything whatever to do with anything. Adverts are just boring. People who are compulsive gamblers will not be watching adverts at any time. Any restriction that you place on gambling, rather like any restriction that you place on an alcoholic, a gambler will find his way around. So the companies that have the screening process that I have just described are doing a great service, really, to the respectable people who play on online sites. I do not know why we should be talking about advertisements, but I do not think that they do any harm—they are just ridiculous. I do not think that they will encourage even children to gamble, the advertisements that I have seen, and I have watched them quite carefully.

When I was a problem gambler in my early 20s—I would call myself a problem gambler, not a compulsive gambler—I got myself in some trouble, and I went along to see my bank manager to ask for an extension of my overdraft. It was a Scottish bank, with a formidable bank manager. After our discussion he looked at me very steadily and said, “We will grant you the extension of your overdraft that you asked for, but if you will forgive me I should like to make this remark. You have been paying one or two large amounts to a particular company. I would just like you to know that the managing director of that company is an important customer of this bank. He is a very rich man, and I would advise you not to follow the path of expenditure that you have been following in this regard”. It absolutely froze me dead, and I closed all my credit accounts. What my story tells you is that the old-fashioned bank manager was probably one of the best guards against improper expenditure.

Perhaps the Minister can tell me—I ought to know, if it has been published—what percentage of public indebtedness is calculated to be down to gambling. It is an interesting figure, and I reckon that it is a very large figure.

I do not want to go on about any of the other things. I think that this proposal will produce some problems later on, as I have described. As for racing, I hope that the noble Baroness, Lady Pitkeathley, has paid a visit to the racecourse, where her daughter may have ridden, which is so wonderfully run by the noble Lord, Lord Cavendish. He may even speak to us a bit about Cartmel, which is really one of the nicest and most jolly racecourses in England, with the kind of atmosphere that she so graphically described.

Gambling is really something that gets worse when you do not indulge in it with groups of other people. As children, we all played penny poker and things of that kind. The problem with racing is that, if you become too interested in it, you burn the midnight oil and become solitary—and when you become solitary as a gambler, your problem increases. There is no doubt about that. I am thinking about online betting, and fixed-odds betting terminals in betting shops, where people play poker and roulette. In a normal roulette situation on the table, your action takes place within about eight or 10 minutes, but it takes 20 seconds on a machine. For people who are in danger with gambling, that is a very strong factor that ought to be taken into consideration.

Racing really does need to have more than the Government reckon that it needs. They seem to have thought that about £75 million is about right, but it needs about double that to do what they do with the tote monopoly in France. I am glad that the noble Baroness, Lady Pitkeathley, told us about the state aid relief, which might well make a big impact; we could get more money—and it is not just prize money but the work conditions and raising the general standard and class of the less financially able racecourses to provide their entertainment.

Racing is historically very important in this country, which is important in the world—British racing is a global brand, if you like, and we have some extraordinary racecourses. People love it and will continue to love it and I think that it needs to be backed. I hope that the Government will seriously look at racing and the problems that it faces. I raised the issue once when I said, I think, in front of the noble Lord, Lord Mandelson, that racing was in a parlous state and he said that he did not know anything about that. I am quite sure that the noble Lord, Lord Gardiner, knows about it and he might be able to give us some encouragement.

Photo of Baroness Heyhoe Flint Baroness Heyhoe Flint Conservative 8:55, 17 December 2013

My Lords, I declare an interest as a member of the England and Wales Cricket Board, but I do not know if today is the appropriate date to mention links with such a sport. I am undertaking counselling clinics for any of my noble friends in here tomorrow morning, along with the bank manager of the noble Viscount, Lord Falkland, if that is possible.

The official world of cricket and, to my knowledge, that of football and horseracing, is at the forefront of the debate about the impact of corrupt betting. Cricket has over many years faced high-profile issues, such as the South African Hanse Cronje and the more recent cases of international cricketers and English county cricketers exposed by national newspapers. Dealing with the impact of these cases has meant that the England and Wales Cricket Board, as with other national governing bodies, has had to invest considerable time and resources to this greatly concerning issue.

The Bill, as already stated, proposes that the UK moves to a licensing system based on the point of consumption rather than the point of supply, but sports bodies worry that this Bill fails to address the anomaly of spread betting—as mentioned by my noble friend Lord Clement-Jones—such as on the first no-ball, the first corner, or when England will ever get a first innings lead against Australia this winter. While traditional betting operators are, as already mentioned, regulated by the Gambling Commission, at present spread betting operators are regulated by the Financial Conduct Authority, the FCA, with which there is no equivalent of the relevant licence condition 15.1. This means, therefore, that spread betting companies are under no legal obligation to report suspicious activity. My honourable friend the Minister for Sport, Tourism and Equalities has now publicly confirmed that the FCA will publish new guidelines for spread betting companies, comparable with requirements set out for fixed odds operators under that licence condition 15.1, I hope.

There is urgency for the FCA to publish these guidelines. Will my noble friend the Minister give an assurance that this matter is under serious consideration? Official sports are incredibly keen that spread betting companies must be regulated in the same way as traditional operators. The International Cricket Council was the first international body to have a global anti-corruption unit and the England and Wales Cricket Board has developed an access unit with specific anti-corruption responsibilities.

Illegal betting and match fixing is an activity that consumes considerable resources for national governing bodies. Will my noble friend the Minister therefore urge the DCMS to consider whether this expensive resource could be funded by a levy from betting so that once all offshore-based operators are, as the Bill proposes, regulated within the United Kingdom they must make a contribution? Anti-doping agencies receive around £6 million in Exchequer funding but, at present, sports betting integrity receives nothing. The Government are due to receive additional tax revenue of £300 million from overseas betting operators in 2014; could they not divert as little as, say, 1% of this revenue to sport to aid its fight against corruption, thus enabling national governing bodies not to have to divert resources away from developing the grass roots of their own sports?

The Sport and Recreation Alliance, which represents over 300 governing bodies of sport within this country, wholeheartedly supports the Bill, but with the reservation that all betting operators have a legal duty to share information. It is right that we bring operators based overseas into that remit.

I understand that the ECB recently met the Financial Conduct Authority, which is being urged to introduce guidance on this matter. However, again, the FCA has said that it cannot replicate licence condition 15. Perhaps the Minister can tell us why that is so. It means that information on any betting irregularities need not be given directly to any national governing body. This is a major flaw because those governing bodies need to know of any betting issues immediately so that they can act to prevent a manipulation of any aspect of any match or competition under suspicion. I urge the Minister to consider amendments to the Bill so that spread betting is specifically covered.

I also mention the need for the Government to look more widely at the legislative framework for gambling. Many sports feel that there is a need for specific laws against match fixing. This would clarify the offences for prosecutors and mean that we could have appropriate penalties. Australia—if I dare mention that country again in the context of the current status of the Ashes series—has recently moved to do just that, so surely it is time for the UK Government to follow suit.

We should at the very least welcome this Bill. It is long overdue given that the initial consultation proposing action was launched by Labour in 2010 when the honourable Member Gerry Sutcliffe was Minister for Sport. Professional gamblers will exploit every loophole possible to further their illegal gains. They use sport as an insidious tool to further their dubious activities. I urge the Minister to give every assurance that measures will be taken to give sport the weapons and resources it needs to protect the integrity of genuine sporting conflicts, and to protect the consumer. After all, sports governing bodies should not have to rely on newspaper stings or whistleblowers to reveal betting scams. If the Bill includes legislation to cover the governance of spread betting, as well as traditional betting, the Government will be taking a vital step to protect the integrity of sport.

Photo of Lord Risby Lord Risby Conservative 9:02, 17 December 2013

My Lords, one of the great pleasures of being a Member of Parliament was that as part of my constituency I represented Newmarket, the historic—and still, I hope—world headquarters of racing.

The finances of racing are based on a system which nobody now likes at all and which has repeatedly attracted very reluctant government involvement. Additionally, the levy has shrunk from a high point of £115.3 million in 2007-08 to the current very anaemic £73.9 million. By contrast, the French state-owned Tote monopoly returned €876 million in 2011 to the industry body, and even in Australia a total of £280 million was returned to racing from betting. The comparison is obvious.

While high-quality bloodstock has recently reached staggering price levels and race meeting attendance has grown as the industry has become more consumer-friendly, prize money is now pathetically inadequate—a point made by the noble Viscount, Lord Falkland. Today there are concerns about consequent falling foal production, the best bloodstock leaving the country and the drop in the number of horses in training. I echo the point made by the noble Baroness, Lady Pitkeathley. The imbalances are now obvious.

I welcome the Bill unreservedly, at least inasmuch as it takes us in the direction of some resolution of racing’s dilemmas and introduces clearer consumer protection and the monitoring of possible illegal activity. When the Gambling Act was introduced in 2005, it was hoped that online gambling would remain in the UK with its economic benefits. It was an error by the then Chancellor of the Exchequer to try to secure revenue by seeking to impose a tax and regulatory regime that simply helped to drive almost every operator offshore. At the heart of the Bill lies the objective of trying to secure a level playing field between onshore and offshore gambling by making the point of consumption the focal point of the system. The Bill has been welcomed across the party political divide and endorsed by the Select Committee for Culture, Media and Sport.

Undoubtedly, we hope that this will have some effect on increasing the size of the levy and bring greater transparency to betting activity. If that proves to be the case, and the prize money situation improves, it will be hugely welcome. However, the truth is that the history of contact and agreement between the governing bodies of racing and the bookmakers has been at times fractious and unproductive. Of course, the hope is that with this legislation offshore betting activity will be persuaded at least in part to return home and that levy payments will be automatically paid under the regulatory umbrella provided by the Betting, Gaming and Lotteries Act 1963.

However, there is a view that this is not currently adequately defined and that even after being licensed by the Gambling Commission offshore operators may not contribute to the levy, all of which may be subject to judicial review. The Government have expressed the fear that the introduction of the point of consumption levy would breach EU state aid rules but the French, as we have heard, appear to have been given a green light by the EU Commission to operate their parafiscal levy.

I cannot but believe that the levy ultimately is unsustainable over the long run as the basis for financing a good portion of racing in this country. Therefore, however welcome this Bill is, surely we need to look further, but regard this Bill as an important and significant step towards an enduring, long-term and viable financial structure for the industry. Modern technology and changing consumer habits and practice offer this possibility. I therefore invite the Minister to reflect on the possibility of looking seriously at a sporting right which would give organisers of potentially many sports fixtures the property rights over the outcomes of the event, the product on which bets are placed. This product would be licensable so that any operator offering or accepting bets on the sport would need prior authorisation and pay a fair return accordingly. This would promote a commercial relationship between dependent industries, allowing the value of the products to be determined by a market rather than the Government, creating a level playing field and unlocking funding for horseracing and other sports, particularly at the grass roots level. This approach essentially has been adopted in France and Australia.

Replacing the levy with a true sporting right would represent a major step forward for racing and gambling regulation more widely. Sport governing bodies could determine the market value of their product in line with the move to bring taxation and regulation of remote gambling onshore, as per this Bill. It would also recognise the interdependent relationship between the sports and gambling industries and force them to negotiate in good faith on commercial lines rather than, as in the case of horseracing, bringing about unwelcome government intervention.

In conclusion, I repeat my welcome for this Bill and earnestly hope that it fulfils its sound objectives but I believe that there still needs to be another step forward ultimately to move away from the levy system. Moreover, I ask the Minister, as this legislative process is undertaken, echoing the point made by my noble friend, that this is brought to a conclusion as quickly as possible. There has been the thought of potential delay of up to four years. Big problems are being highlighted in this legislation. I hope and believe that this can move through the legislative process and be applied as quickly as possible.

Photo of Baroness Howe of Idlicote Baroness Howe of Idlicote Crossbench 9:09, 17 December 2013

My Lords, first, I thank the Minister for his helpful and concise introduction of the Bill. Before I make any detailed comments, I should like to set out some of the general principles informing my approach to gambling legislation. While I have no wish to prevent anyone from gambling online who wishes to do so legitimately, I believe in the importance of putting in place proper protections for problem gamblers and the vulnerable. In this regard, I strongly support the commitment to protect,

“children and other vulnerable persons from being harmed or exploited by gambling”,

as set out in Section 1 of the Gambling Act 2005.

The 2010 British Gambling Prevalence Survey shows that the UK problem gambling figure is 0.9%. That may not sound like very much, but it amounts to about 451,000 people in the UK. Problem gambling is a hugely destructive process that destroys lives. In assessing its public policy significance, it is important to remember that since no man or woman is an island, the destructive chaos that impacts those 451,000 people actually impacts a far larger group when we factor in the families and work colleagues of those 451,000 people.

Moreover, in considering the challenge of problem gambling from the perspective of this Bill, we must consider that the figure for people gambling online is much greater. Far from being 0.9% of the whole population, the problem figures for online slot machines are actually more than 9% and, measured on a monthly basis, are 17% of those who gamble. It is vital that we approach the Gambling (Licensing and Advertising) Bill mindful of this challenge and mindful of the need to ensure that any changes it makes result in greater protection for problem gamblers. I now turn to my detailed consideration of the Bill.

The first major problem with the Bill, as a consumer protection Bill, is that half of it is missing. The whole point of having a regulatory regime is to protect customers, including the vulnerable, and this depends on being able to enforce that regime. In principle, the idea that all online gambling providers that want to access the UK market should require a licence is excellent. If we are to follow through on this protective measure, however, it is imperative that those online gambling providers that do not have a licence are prevented from accessing the UK market.

If noble Lords scrutinise this Bill, however, they will see that this vital enforcement provision is missing. There is an incentive—a carrot—for gambling providers to get a licence, which is the opportunity to advertise, but there is no stick—no means of preventing unlicenced providers from accessing the UK market. Without a credible enforcement mechanism, the chief effect of the Bill is actually further to widen the scope for online gambling operators to advertise. Bereft of this key component, a Bill that is supposed to be about consumer protection looks increasingly like the online gambling liberalisation Bill.

In the other place, the Minister was pressed as to why the Bill is all carrot and no stick. Specifically, she was asked why there are no provisions in the Bill for either IP blocking or financial transaction blocking. The Minister’s response seemed to be based on a fundamental misunderstanding about these mechanisms. In the first instance, she seemed to seek to refute both financial transaction blocking and IP blocking, through arguments that only really pertained to the latter and which did not provide a reason not to proceed with financial transaction blocking. In the second instance, she seemed to operate on the basis that because neither mechanism is 100% effective they are failures. If we are concerned to protect British consumers from unregulated providers, we should want to avail ourselves of the technology that is available. Even if it was only 50% better, that would be 50% better than doing nothing.

The implication seemed to be that unless blocking technology is 100% successful it is a failure, which is rather like saying that because people wearing seat belts still sadly die in some road traffic accidents, seat belts are ineffective. The truth is that financial transaction blocking has been deemed sufficiently useful to be employed as a tool to protect consumers from unregulated online gambling providers in Belgium, Estonia, France, Hungary, Israel, Malaysia, the Netherlands, Norway and the USA. If the Government are serious in suggesting that the Bill before us today is about consumer protection, they must introduce a clear enforcement mechanism, such as financial transaction blocking, and demonstrate a real political will to protect British consumers from unlicensed online gambling providers.

The second failure of the Bill pertains to the way in which it effectively liberalises gambling advertising without taking any steps to help the problem gamblers, who will be made even more aware of online gambling. To understand that failure, we must understand a failure of current efforts to help online gamblers today, even before the Bill takes effect. One of the accepted standards for helping problem gamblers is self-exclusion. Indeed, a form of self-exclusion is already part of the UK regulatory regime. Problem gamblers have the option of self-excluding from gambling providers for a fixed period of, say, eight months or longer. The provider is then obliged not to serve them for the duration of the agreed self-exclusion period and to take them off any marketing list they may be on. This tool works in that, as well as having weak days, problem gamblers also have strong days. On a strong day, they will be able to get round the four betting shops in their town and thus deny themselves the option of gambling for, say, eight months, during which time they can get help and seek to put their lives back together.

Currently, however, online problem gamblers are effectively discriminated against because, although they can self-exclude from gambling websites, they still have a difficulty. They could self-exclude from four gambling websites that they can access from home, but they will still be able to access hundreds, if not thousands, of online gambling websites. It is simply physically impossible to self-exclude from all those websites. Unlike the problem gambler who, in a strong period, self-excludes from the four bookies on his high street, the online gambler cannot do that for all websites.

The current failure, however, is massively compounded by the Bill, because it proposes increasing the scope for even more online gambling providers to advertise in the UK without doing anything to address existing discrimination against online problem gamblers. Happily, there is something that can be done to address that problem: the provision of a one-stop shop self-exclusion mechanism. The principle is very simple. Any problem gambler should be able to self-exclude just once by contacting the Gambling Commission, and that should cover all gambling providers with a Gambling Commission licence.

Dr Sally Gainsbury, author of, Internet Gambling: Current Research Findings and Implications, published by Springer in the SpringerBriefs behavioural medicine series 2012, states that a significant limitation of self-exclusion is,

“the lack of collaboration between different online gambling sites and venues, so that excluded individuals may find it easy to gamble at another site or venue”.

She argues that the technology is available and points to its feasibility, particularly in the UK due to the current existing licensing conditions and code of practice upheld by the UK Gambling Commission. She states that,

“it is a UK licensing condition to maintain a register of self-excluders, including appropriate record of identification details and payment cards. Although care must be taken to protect customers identity, data encryption programs can be used to protect sensitive details and it may be possible to encourage operators to share details to enable wider self-exclusion programs”.

Gainsbury goes on to mention a program called VeriPlay.com, developed by Bet Buddy, which allows the secure exchange of anonymous data. It allows operators to check whether a player is on a centralised list of players that have self-excluded.

Research presented to the Canadian-based Responsible Gambling Council in 2011 by the British-based GamCare and the University of Salford, along with Bet Buddy, backs the proposa1. A one-stop shop amendment was put down in the other place in Committee and at Third Reading. Although both were defeated, the majority was not great and the Government did not seem to have any compelling arguments with which to oppose. The Third Reading vote was relatively close, at 223 to 283.

The idea can be implemented; it takes only political will. The basic question is: do we care about problem gamblers? Do we care about protecting the vulnerable? The Government could have squarely addressed concerns that this Bill is really all about tax, but they have not done so.

In the absence of a proper enforcement mechanism and a one-stop shop self-exclusion mechanism, this looks like the “online gambling advertising liberalisation Bill”, with no regard for online problem gamblers. Is it not a shame that that is how one can look at it? I strongly urge the Government to amend the Bill and to make provision both for financial transaction blocking and a one-stop shop for self-exclusion.

Photo of Lord Cavendish of Furness Lord Cavendish of Furness Conservative 9:22, 17 December 2013

My Lords, I apologise to the House and to my noble friend the Minister for not being in my place when he rose. I think I only missed about 30 seconds.

I will not pretend to be an expert on gambling; but having read the debate in another place and heard my noble friend, I do not think I have any difficulty in supporting this Bill and I thank him for introducing it so clearly.

I rise this evening only to draw the attention of your Lordships to one aspect of the Bill that affects horseracing. So much of what I want to say has already been rehearsed, and very ably, by the noble Baroness, Lady Pitkeathley, and my noble friend Lord Risby, that I will try to keep my remarks briefer than I had intended.

I must declare an interest. I am chairman of a small national hunt racecourse in south Cumbria called Cartmel; it is owned by my family. Therefore I know a little about jumps racing and almost nothing about the flat. Perhaps I should add that, in common with so many people involved with national hunt racing, in all the years I have been involved with Cartmel I have drawn nothing in the way of fees, dividends or expenses, but I have helped myself to quite substantial lunches on race days. Of course, if any of your Lordships were to come to Cumbria, I would have enormous pleasure in asking them to join me there.

The horseracing levy is sometimes misunderstood and believed to be some kind of subsidy to racing; it is of course nothing of the kind. Put simply, it was established in 1961 with the power and the duty to collect a statutory levy from the horseracing business of bookmakers and the Tote. In effect, the mechanism was a recognition that betting operators owed something to the racing industry for providing the races on which people liked to bet.

The majority of the levy income is distributed, as noble Lords have heard, by the Horserace Betting Levy Board in direct support of horseracing. That will include improving the breeds of horses, the advancement and encouragement of veterinary science and veterinary education, integrity services and improving horseracing. Overwhelmingly, however, the levy enhances prize money, which in turn generates more levy—and so the cycle goes on.

Parliament’s original intention when establishing the levy was to provide a means of compensating racing for the loss of attendance that was anticipated when off-course betting shops were legalised in 1961. As your Lordships have heard, the levy has decreased sharply in recent years. There are a number of reasons for this but by far the biggest factor in the leakage of levy can be accounted for by the bookmaking industry moving to offshore locations to escape the levy. The consequences of this have been so well described by the noble Baroness, Lady Pitkeathley, that I will not repeat them. Suffice it to say that racing is suffering; racing and all the economic benefits that flow from it are threatened.

The development of offshore remote betting that escapes the levy is of course disadvantageous to racing. It is also unfair to the taxpayer and very unfair on those betting operators who have chosen to remain in the United Kingdom, as well as those companies which have entered into voluntary agreements that mitigate forgone levy payment. The Bill before us will indeed license all remote gambling in Britain at the point of consumption. What it does not do, as has been said, is to make any provision in relation to racing or the horserace betting levy. It is the strong contention of British racing, and my strong contention, that the Bill provides a perfect opportunity to put this right. Here I pay tribute to Mr Clive Efford, who put in heroic work in another place on this subject. The honourable gentleman indeed tabled amendments which, as your Lordships have heard, would have meant that the levy was once more payable by remote betting operators. The Government, again as your Lordships have heard, rejected these amendments on the grounds, I think, that there were concerns in respect of the EU’s stance on state aid. I will return to that in a moment.

The figures on racing and the huge crowds that it attracts speak for themselves but there is more to British racing than the raw statistics suggest. Racing in this country has a long and fascinating history, whose origins stretch back to the very dawn of time when man first saddled a horse—a point which I think was made by the noble Viscount, Lord Falkland. It is not given to many and it is not, I say with some sadness, given to me to really understand the extraordinary, some would say almost mystical, relationship that has developed over time between the two species of man and horse. I see it and observe it. I talk to people who have the gift and rather wistfully admire it, while feeling a little excluded.

If I may divert for a moment, the closest I ever came to sensing that myself was when, many years ago, I was part-owner of a wonderful mare. One dark afternoon, I watched her run in absolutely vile conditions on a northern track—not my own. It was a good race and attracted good horses, and my mare drifted out in the betting. Sure enough, she struggled to keep up with the field and a mile out, I could see that she looked tired and outclassed. Quite suddenly, coming round the final bend, she gathered herself and headed with visible courage and determination through the driving sleet to win by a short head. She was what is known in racing terminology as a genuine horse. It was impossible not to be moved by the shared triumph of jockey and horse.

I relate that incident because it is one of many thousands that happen every year which make British racing the great romance that it is: the romance that brings men and women of all backgrounds to the racetrack; the romance of town meeting country in the fellowship born of shared interests and pleasures; the romance that causes—in jumps racing, at any rate—thousands of people to support racing through attendance, sponsorship and, especially, ownership with no expectation whatever of seeing a return on their money. I think even those who have no interest in racing would accept that the sport is a valuable and much loved part of this country’s heritage.

On my own little track in Cumbria at the attractive village of Cartmel, we race over seven days. Even there, we welcome 70,000 visitors, many from overseas. We cater especially for families and there is a funfair in the middle of the course. On one of our festival meetings there is a racecourse church service in Cartmel’s lovely priory church where local bookies fervently pray, so they tell me, that favourites will not triumph on the following day. I suspect that we are the only racecourse in England to have a chaplain. We are very much part of the local community and inside the track is home to the cricket club—I think my noble friend Lady Heyhoe Flint would approve of that—the football clubs, the scouts and the agricultural show.

The impact of levy leakage on my track is in line with the problems faced by better known tracks. To spell it out would sound like special pleading. In truth, we are better placed than many because we are so popular and because we have favourable fixtures. I speak in support of racing in general. Former sports Minister Mr Gerry Sutcliffe also contributed with distinction to the debate in another place. The honourable gentleman predicted that the issue would be heavily debated in your Lordship’s House, given,

“the horse racing fanatics that are in the House of Lords”.—[ Official Report , Commons, 19/11/13; col. 141.]

I cannot imagine who the honourable gentleman had in mind. The noble Viscount, Lord Falkland, hardly fits that description, nor do my noble friends Lord Astor and Lord Risby. I do not think the noble Baroness could be described as a fanatic. Sadly I fear that many of our best fanatics have moved on to pastures new, or fresh gallops. I am just a supporter of racing but I hope the Minister can help this evening.

In the course of this Parliament, British racing has received numerous commitments from the Government that they will fully reform or replace the levy which, in the view of the then Minister in the other place in January 2011, was

“if not broken, in the process of breaking”.—[ Official Report , Commons, 20/1/11; col. 1067.]

However, nearly three years later, there has been no material change in this situation, as has been underlined so much this evening. The levy remains ineffective in meeting British racing’s needs and it has required the efforts of both the racing industry and forward-thinking elements of the British betting industry to agree voluntary deals to mask the levy’s inadequacies. This is not sustainable—it is merely a sticking plaster. It is within the scope and remit of this Bill for the levy to be included. Amendments to this effect should be put forward and accepted.

I gave notice, which I hope my noble friend received, of some questions. I urge him to provide a concrete commitment to a consultation early in the new year, as has already been requested, on reform or replacement of the levy to provide a sustainable, enforceable and legally sound solution. Given that my noble friend’s department has also been brooding for some time on the legal position in respect of the recent EU Commission ruling that approved the French parafiscal levy on online horseracing betting, has it reached a conclusion? Might the Government now consider the Efford amendments or something similar as this Bill progresses? Will my noble friend take account of British racing’s own unambiguous legal advice that the collection of levy from remote operators under a point-of-consumption licensing regime does not constitute state aid?

Under this Bill, the Treasury stands to gain substantially. I hope that my noble friend might see that to bring succour to an undeservedly troubled sector, with so slight a change and at no cost to the public purse, can only do good. To do otherwise would be a great disappointment to all of us who have the interest of racing at heart.

Photo of Lord Morrow Lord Morrow DUP 9:33, 17 December 2013

My Lords, the stated intention of this Bill, namely that all online gambling providers wanting to access the UK market, no matter where they are located in the world, should be required to get a UK Gambling Commission licence, is to be welcomed. However, detailed examination of the actual provisions in this Bill has led me to feel that, on balance, the Bill makes matters worse not better. Indeed, in wrestling with this question one is left with a more fundamental question: what is the real purpose of this Bill?

In the other place the Government claimed, as they have today, that this Bill is all about consumer protection. It was suggested from other quarters, however, that the real guiding principle at work was a desire for greater taxation revenue for the Exchequer. The notion that all online gambling operators seeking to access the UK market should get a UK Gambling Commission licence certainly seems like an attempt to protect UK consumers from providers that do not make the grade. In the first instance, we should surely stop depending on the regulatory frameworks of the European Economic Area and the so-called white list jurisdictions, and regulate providers seeking access to the UK ourselves. In the second instance, we should certainly do more to protect UK consumers from providers whose regulatory regimes do not make the grade, rather than simply putting them on a theoretical black list.

However, trading lazily on the regulatory frameworks of other jurisdictions has had an unintended consequence. It has meant that online gambling providers based in the UK could move to the EEA and white-listed jurisdictions, yet still be deemed to be sufficiently regulated to advertise in the UK. In this context, all but one online gambling provider relocated to white-listed jurisdictions where they could pay less tax.

Noble Lords will be aware that alongside the Bill there is a separate proposal that henceforth all gambling providers with a UK licence must pay UK tax. The idea is that we move from regulation and taxation at the point of supply to regulation and taxation at the point of consumption. Of course there is no reason why the interests of robust regulation and robust tax legislation should not go together. I have nothing against making sure that online gambling providers accessing the UK market are properly taxed. My concern, as I shall explain, is that the weakness of the regulatory framework proposed by the Bill is such that it causes me to wonder whether its primary purpose is not actually being a means to the end of providing a framework on to which the new taxation regime can be hung.

Before I look at what I regard as the three main regulatory failings of the Bill, I shall pause to reflect on the sad reality of problem gambling in the UK today, the reason why robust regulation of online gambling is so important. Some people almost dismiss problem gambling as unimportant—this point has already been made by others today—on account of the fact that in 2010 the problem prevalence figure was 0.9%. The truth, however, is that that accounts for approximately 451,000 people in the United Kingdom. Moreover, if we are to compute the real significance of the problem, it is crucial to understand how one person’s problem gambling affects others. Last year the Gordon Moody Association, which treats the most serious addicts, estimated that each addict,

“will have severely affected the lives of at least 15 others in order to support their gambling”.

We have to understand that gambling online has a significantly higher problem prevalence figure than gambling generally, another point that has been made today; the problem prevalence figure for online slots is actually over 9%.

These statistics, though, are all a bit abstract. When I think of problem gambling, I think of people such as Lisa Carville, an accountant from Northern Ireland who stole some £50,000 to feed her online gambling habits between March 2010 and September 2011. I also think of Michael Garner, a financial adviser who stole almost £1 million from friends, a charity and investors to feed his online gambling habit between December 2011 and May 2012. Anna Mackenzie, defending Mr Garner, told the court that he was remorseful and understood that his actions had devastated the lives of himself, his family, his friends and his victims. She added that his marriage appeared to be over and that his matrimonial home, his only asset, had been sold to help to pay off the civil claim made by the investors against him. These are just two examples of the terrible social devastation that can be left in the wake of online gambling habits. Let me be very clear: I am not trying to argue for a split-second that this always happens or that it usually happens. My point is simply that it does happen and that there is a very serious obligation on us as legislators to make sure that the online gambling industry that this Bill addresses is robustly regulated.

With this in mind, I suggest that the Bill has three major weaknesses. The first problem is that this legislation provides no credible enforcement mechanism. You cannot say on the one hand that we want to protect British consumers and so require all online providers that want to access the UK market to get a UK licence, and at the same time do nothing to prevent those who do not have a licence accessing the UK market. Such a strategy is nothing more than an exercise in wishful thinking.

When presented with a proposal for financial transaction blocking or IP blocking in another place, the Minister rejected both, at least for now. I found her approach profoundly unconvincing. In the first instance, the Government seem to conflate IP blocking and financial transaction blocking as if they are the same and have the same results. Let me be very clear: they are not and they do not. Evidence suggests that financial blocking is significantly more robust. Indeed, it works well, as has already been stated, in places such as Belgium, Estonia, France, Hungary, Israel, Malaysia, the Netherlands, Norway and the US, which deem it worth while.

In the second instance, I find the notion of mixed success in the context rather troubling. I assume by this the Government mean that it does not always work, which is certainly true, but if in this imperfect world we rejected all public policy solutions that were not always successful we would greatly restrict what we could do. The world would be much poorer on account of the misguided commitment to make excellent the enemy of the good. If we had a mechanism available that could protect UK consumers from 50% of transactions with unregulated websites, it would be a significant step forward—one we should take.

Moreover, it is important to remember that financial transaction blocking is likely to be more successful in the UK than anywhere else, because in other jurisdictions where there is a closed market with a limited number of licensees or a semi-open market that allows any number of licensees but only for some forms of gambling there is a great deal more that needs to be blocked than in the UK. In these environments, gamblers have incentives to try to bypass blocking to access forms of gambling that are not permitted. However, that would not be the case here in the UK where we do not prohibit any form of gambling and allow anybody who meets our regulatory standards to access our market.

If we do not back up the licence requirement with financial transaction blocking, the simple truth is that the primary implication of the Bill will be simply to allow more gambling providers to advertise in the UK. All those located in EEA and white-listed jurisdictions can currently advertise, but after this Bill all providers that get a licence will also be able to advertise regardless of whether they are based in what is currently an EEA white-listed or black-listed jurisdiction.

It is concern about the implication of the Bill for advertising in the absence of a credible enforcement regime which takes me to the second major worry about this Bill. While it proposes making problem gamblers in the UK more aware of online gambling opportunities that can get them into difficulty, it introduces no compensatory measures to provide problem gamblers with additional help in the context of the new environment. To really understand this deficiency in the Bill, however, one must understand the problem with the current system.

One of the key accepted mechanisms of helping problem gamblers is through the provision of self-exclusion. Put simply, self-exclusion allows someone with a gambling problem to take control by self-excluding from gambling providers for a certain period; say, five or six months, or whatever it might be. This mechanism is credible in an offline environment. It recognises that people suffering from a gambling addiction will have days when they are stronger and able to take steps to try to break free. On such a day it would be possible for a gambler to visit all five betting shops in his town and self-exclude for five months, providing him with an opportunity to get help and to try to put his life back together.

This, however, simply does not work in an online environment because, after you have self-excluded from five online gambling websites, hundreds if not thousands of sites are equally available. Denying online gamblers a credible self-exclusion mechanism is, I believe, a matter of discrimination, one that exists without the Bill before us today. Mindful of this current injustice, I find it quite inconceivable that the Government should consider introducing the Bill, which proposes widening the scope for problem gamblers to be made aware of online gambling opportunities, without at the same time providing any compensatory help for online problem gamblers. We should, at the very least, provide online gamblers with a credible self-exclusion opportunity.

When the Minister in another place was confronted with this idea, she had nothing of any great substance to say. She suggested that the industry was doing a good job and that she wanted to give it more time, although she failed to outline what it needed time to do. She did not say that she had asked the industry to introduce a one-stop shop for self-exclusion. The Minister also made the assertion that introducing a one-stop shop would be complicated. I have no doubt that introducing a one-stop shop would present some challenges, but I do not believe that there is any evidence that they cannot be dealt with. The question that we have to ask is: can we be bothered to do the additional work to protect online gamblers? One would hope that the answer to that question, in considering a Bill that the Government say is all about consumer protection, would be a positive yes, but apparently not, at least in the other place.

As others have noted, Dr Sally Gainsbury, author of Internet Gambling: Current Research Findings and Implications, published by Springer in the SpringerBriefs in Behavioural Medicine Series 2012, states: “Significant limitation”—of self-exclusion, that is—

“is the lack of collaboration between different online gambling sites and venues so that excluded individuals may find it easy to gamble at other sites or venues”.

Gainsbury follows through on this by making two important subsidiary points. First, she argues that the UK system particularly lends itself to the provision of a one-stop shop because of our licensing framework:

“It is a UK licensing condition to maintain a register of self-excluders, including an appropriate record of identification details and payment cards. Although care must be taken to protect customers’ identity, data encryption programs can be used to protect sensitive details, and it may be possible to encourage operators to share details to enable wider self-exclusion programs”.

Secondly, Gainsbury is very clear that the technology is present to deliver a one-stop shop. She cites a program called VeriPlay.com, already referred to in this debate, developed by Bet Buddy, which allows the secure exchange of anonymous data. It allows operators to check whether a player is on a central list of players who have self-excluded.

Gainsbury also argues that collaborative efforts would help strengthen self-exclusion and that,

“regulatory efforts may be required to prompt operators to enact such measures”.

A one-stop shop amendment was tabled in the Commons in Committee and on Report in the other place. Although both were defeated, the majority was not great, and the Government did not seem to have compelling arguments with which to oppose them.

I very much hope that the Government will reconsider and recognise that if their claim to have regard for problem gambling and the suggestion that this Bill is about consumer protection is to have any credibility, they must, at an absolute minimum, ensure that the core advertising proposal in this Bill is complemented by a strategy to help online problem gamblers in the form of credible self-exclusion.

My final problem with this Bill relates to the detail of the general UK regulatory framework. If this legislation becomes law, those websites currently supplying UK customers that are subject to the regulatory regimes of the EEA or white-listed jurisdictions will instead be subject to UK regulation. At the moment, if they decide to relocate back to the UK, player protection will in some cases be eroded. It is therefore important that our licensing is amended to provide the same level of regard for the problem gambler as the licensing regimes of the best EEA or white-listed jurisdictions.

Alderney, a jurisdiction to which some UK online gambling providers relocated, offers player protection that is superior to the UK licensing regime. The Alderney Gambling Control Commission gives any player the right to tell a company the limits on their gambling that they want to set themselves. This means they can inform a company that they wish to set such limits to the amount that they can deposit during a specific period, or to how much they may lose by reference to a number of gambling transactions or a period during which the amount can be lost. Setting such personal limits is one way in which gamblers can ensure that they gamble within their means, without chasing their losses and without spending too much time gambling. Those are all signs that a problem is developing.

Just last week, I visited Sweden on a different matter altogether, but I want to draw the House’s attention to what happens there. Players in Sweden are given the option to make use of a technology called play scan. This helps and guides players in their gambling activity, warning them about increased addiction or significant changes in their behavioural activity. The prompts are in the form of green, yellow and red-light indicators. When a player’s behaviour changes, a message informs them immediately.

A further example is in the area of online poker, a style of gambling which the Swedes have designated as being particularly related to problem gambling. In Sweden, a player needs to apply for a card, which has a specific number associated with it. Gamblers authorise the transfer of funds from a linked account to the card, and any winnings are paid automatically into the gambler’s account. To play, customers are required to set time and money limits. The setting of limits is the main function of the card, but it also offers play management features—including a summary of player history for the previous 12 months—allows for a “time out” and offers risk assessment.

In October, the Prime Minister said that he wanted,

“a fair and decent approach that prevents problem gambling”.—[ Official Report , Commons, 23/10/13; col. 299.]

But the approach given in this Bill is neither properly fair nor decent. I very much hope that it will be amended to deliver financial transaction blocking, a one-stop shop for self- exclusion and a regulatory framework that is at least as good as the best EEA or white-listed jurisdiction with respect to care for online problem gamblers.

Photo of Viscount Astor Viscount Astor Conservative 9:53, 17 December 2013

My Lords, I welcome this Bill. It will mandate all remote operators in the British market to provide governing bodies such as the British Horseracing Authority with information on suspicious betting patterns. However, it is a pity that the Bill does not go further with regard to racing, and I hope that the Minister will be able to give us some comfort particularly on the levy.

At this stage, I should declare my interests: I do not think that I have problem gambling; I have owned a few problem horses, particularly the last one, which last year managed to canter down to the start rather faster than she came back—that is certainly not what they are supposed to do. However, I always remain an optimist and I have a leg in another horse, which will be running next season, and I can assure your Lordships that it is bound to do better—it cannot do worse anyway. I should also say that I once rode a winner over the jumps, but that was quite a long time ago.

Offshore betting operators do not contribute to the levy. The Government have in the past used concerns that the European Commission would use the concept of state aid as a reason not to act, but following the ruling from Brussels on the French levy those concerns have disappeared. The European Commission approved the French parafiscal levy on online horseracing betting, so we now know that that reason is not an obstacle to action. Reform of the levy would not constitute state aid, and neither would a point of consumption licensing regime. The omission is costing the racing industry about £20 million a year in lost revenue.

This has been a complicated issue, whose solution has defied Governments over the years. For as long as I can remember being in this House we have discussed replacing the levy—and I have been here quite a long time. This Bill would be the perfect vehicle not to reform the levy but to close the offshore gambling loophole.

The racecourses, and racing itself, could act. If the racecourses did not accept prize money or sponsorship from gaming companies that do not pay the levy, that would force the issue, as bookmakers need to be close to their customers. Two amendments were tabled in another place, but were rejected by the Government. There is an opportunity for us to rethink here; after all, we are a revising Chamber.

I am sure that the Minister will say that the levy is 50 years old and needs fundamental reform. We know that; as I said, we have been discussing it for quite some time. Now there is an opportunity to make some progress in the meantime. The Government have said that they will consult, and come to Parliament with a proposal. However, when the Minister in another place summed up, she said that she was not,

“prepared to risk jeopardising the financial stability that has been achieved by the four-year voluntary agreements by extending the levy to offshore bookmakers”.—[ Official Report , Commons, Gambling (Licensing and Advertising) Bill Committee, 19/11/13; col. 141.]

But there is no financial stability, because offshore bookmakers are not paying any levy. We have an opportunity to put an amendment before your Lordships in Committee that will allow the Government, if they wish, to extend the levy to offshore bookmakers. That would give them the opportunity to consult in Europe and to do, in effect, what the French have been doing. Racing is missing out. That is a point that has been made by almost everyone who has spoken this evening.

The second issue I want to raise concerns casinos. It is similar to the issue raised by my noble friend Lord Clement-Jones. The Bill will mean that online gaming companies selling into the UK market are licensed and regulated at the point of consumption, rather than where they are based. This is a major improvement, which I welcome. However, there is an anomaly here. Punters can play on remote internet sites on their mobiles or computers while at home or on the move, in any public place, or even inside a casino. But casino operators, who often also hold a remote licence, are not allowed to show or advertise their products in their casinos, or to show that there is an opportunity to use a computer. This makes promoted online gambling in a casino illegal—yet not illegal if unpromoted, if it is on one’s own mobile or computer. That seems a strange state of affairs. As casinos are the most highly regulated and inspected of any gaming premises, it looks bizarre. Many of them already provide their customers with laptops, iPads and other computers.

I understand that the Minister in another place said that the anomaly could be corrected by secondary legislation. It would be helpful if the Minister, when he sums up, could say whether there has been any progress on this, because if secondary legislation is not going to work, this Bill provides an opportunity for us to change that anomaly. I very much hope that the Minister will be able to look carefully at these issues.

Photo of Lord Stevenson of Balmacara Lord Stevenson of Balmacara Shadow Spokesperson (Business, Innovation and Skills), Opposition Whip (Lords), Shadow Spokesperson (Culture, Media and Sport) 9:59, 17 December 2013

My Lords, I thank all speakers in the debate, which has been a bit of a ride round the various possibilities that gambling opens up to us. It has been a bit like “Gambling Anonymous” from time to time. I was interested to hear some of the comments that have been made, and I am grateful to the noble Lord, Lord Cavendish, for his invitation to lunch, which I am sure many of us will want to take up at some time. I am not sure whether I was pleased with the tips given to us by the noble Viscount, Lord Astor; I could not quite tell whether he was telling us to avoid his horses or to follow them—but I shall certainly reflect on what he said. An even more startling observation has unfortunately not yet reached your Lordships’ ears, but I am sure that it will come out in Committee. Just as I was standing up, my colleague on the Front Bench, my noble friend Lady Jones, confessed that her main ambition when she left school was to become a jockey. I had not expected that; however, we are of course very grateful that she has managed to avoid that career choice and join us here.

The Bill has been a long time coming. Online gambling was first regulated in the United Kingdom in 2007. Since that time all but one of our major online betting companies have moved offshore, primarily to avoid taxation. They have justified that decision by claiming that it was necessary to remain competitive. Underlying a lot of the comments that we have heard this evening has been a concern that tax and other issues ought to be paid by those who make a living out of offering gambling services in this country. However, we should recall that that was the justification behind the decision when they left in the first place in 2007. As has been said, the consequence is that those operators are outside UK regulation, which is an unacceptable situation and needs to be tackled. However, as my noble friend Lady Pitkeathley reminded us, there is a downside for the white list jurisdictions, many of which have operated to very high standards for so many years. We will have to pay some regard to those as we make further consideration of the Bill.

The need for changes in the licensing of remote gambling operators was identified by the previous Government, and much good work on that issue was done before the last election. Therefore given what I have said, it will be clear that we support this modest Bill, in principle, although there are many areas which we think need to be strengthened, and there are, as has been pointed out during this debate, a number of rather alarming gaps.

In 2009, the then Minister for Sport, Mr Gerry Sutcliffe MP, ordered a review of overseas gambling operators which advertised in the UK. In 2010, the previous Government began the consultation on extending Gambling Commission licensing to include online gambling operators which offer services in the UK. Consultation responses were published after the general election in July 2010, but it took a full year before the Government issued a Written Statement on the plans to legislate. The draft Bill was published in December 2012, and the Select Committee published its report on the draft Bill in May 2013. Therefore it took four and a half years and four Ministers, but we have finally got the Bill, even if it is rather slim pickings.

What was all the waiting about? As the noble Lord, Lord Clement-Jones, identified, clearly the loss of taxation revenue is the real driver of this regulation move. When he comes to respond, perhaps the Minister could say where things have got to. In August 2013 there were reports that a deal had been done, and the figure of 15% was mentioned. Of course it would be quite inappropriate for a mere Minister in a department to mention taxation, which is a matter reserved for the Chancellor of the Exchequer. However, perhaps a hint about where we are on this might not go amiss. The noble Viscount, Lord Falkland, made the point that this shift to a point-of-consumption basis for operating the regulatory function parallels the change to a point-of-consumption taxation. At least in his words, that is what is driving the Bill. In order to get the tax take of about £300 million, which has already been scored in the Budget accounting, a deal has to be done to introduce light-touch regulation, otherwise we will frighten the horses—I am sorry about that metaphor. I hope that we will learn about that in the Minister’s response.

We have before us—and we can only discuss—this rather slim five-clause Bill that deals with the licensing of remote gambling at the point of consumption. That is not contentious: virtually everyone, including large parts of the gambling industry, although perhaps not those in the white list countries, is in favour of that. The delay in bringing the Bill forward could be understood if it addressed many of the issues that have come to light since 2007, but it does not do so.

The Gambling Act 2005 was a major piece of legislation that has largely stood the test of time. When the legislation was put in place, the then Government said that the issues in the Bill would have to be kept under review. A number of areas have subsequently come to light, such as online gambling, which has grown exponentially over the past few years, and we accept that revised regulation is necessary. However, the Bill deals solely with matters that have been under consideration for four years or more, and over which there is pretty much unanimous agreement. It is a matter of some regret that the Government have not taken the opportunity to deal with the many other issues mentioned tonight that have boiled up in the intervening period and which need to be addressed.

Gambling is enjoyed by more than 56% of the population, and the figure rises to more than 70% if the purchase of lottery tickets is included. One should include that; I think that as the noble Lord, Lord Clement-Jones, mentioned, there are still some concerns about other lottery operators, which could be considered within the Bill. As we said, we welcome the move to create a level playing field between the operators which have remained onshore, and those which have moved offshore, and we would like to make sure that the approach which removes the divide between them is pursued. But as the noble Baroness, Lady Howe, and the noble Lord, Lord Morrow, have mentioned, we are worried about the paucity of sanctions included within the Bill, which are neither financial nor operational. It was the noble Baroness, Lady Howe, who said it was all carrot and no stick. We will be pushing for amendments in Committee which will perhaps bring in some of the blocking technology to which she referred.

On match fixing, the European Parliament has just called on all EU Governments to make match fixing a criminal offence. This has been supported by the Sports Rights Owners Coalition and David Collier, the chief executive of the England and Wales Cricket Board, who, through his sport, is at the forefront of trying to ensure that every country across the world has an effective a regime as possible. The noble Baroness, Lady Heyhoe Flint, made good points on this matter that we think we would support; we hope she will consider putting down amendments in Committee. We wonder why the Government have not used or looked again at the Gambling Act 2005, as the power in that Act to tackle match fixing is too loosely defined, and indeed was not used in the recent case of the Pakistani bowlers, who were prosecuted under fraud laws.

In this context it is surprising, as many noble Lords have mentioned, that the Bill contains no measures to ensure that spread betting is licensed in the same way as other forms of betting. It is my understanding that this is because spread betting is seen as primarily a financial transaction rather than betting in the way it is interpreted in the Act. Therefore the consequence would be that the regulation should lie with the FCA. But the logic of this escapes me. Surely it is better for one body to have overall control in this activity, particularly as we realise that spread betting is now being provided by companies that also provide betting services. As was argued in another place, the Bill should deal with the issue both in terms of principle and practicality. If there is not to be single responsibility, there should be a common approach, such as licence conditions mentioned by the noble Baroness, which we support. Otherwise the information about the cancer of match fixing will never be obtained.

A number of Lords, including the noble Viscount, Lord Falkland, and the noble Lord, Lord Clement-Jones, mentioned pre-watershed advertising. The noble Viscount, Lord Falkland, says it does not matter about advertising. I fundamentally disagree on this point. Anybody who has watched television recently would be aware that the amount of advertising, and the sharpness of it, has now much increased. Although we had a recent report from Ofcom which described the volume of advertising and the limits on it due to the restrictions on the watershed, it is clear that there is a big loophole which needs to be looked at. This is the situation affecting games that are sports fixtures that start before 9 pm, for which advertising is allowed, and therefore which reaches not only problem gamblers but also children. We think there is a need for an amendment in this area, and would be interested to see whether there would be support for that around the House.

A number of noble Lords have picked up on problem gambling. The figures are difficult to find. This is primarily because the gambling prevalence survey, which last took place in 2010, has been abolished, so we have very little empirical evidence. But I think we are agreed. My figures said 450,000, but the common consent for those other people who have mentioned it is 451,000 people who seem to be affected by problem gambling. I am sure the 1,000 will make a big difference to our thinking on this matter. On the one hand we have an NHS which provides support for those who have addiction problems with drink and in other areas, but does not deal specifically with gambling. In this situation we have to be careful, as we tread a difficult path between a wish to promote an industry from which people gain a great deal of pleasure, and the responsibility to protect the vulnerable.

As has been mentioned, online gambling is of particular concern. It is possible for vulnerable adults to indulge their addiction without leaving their homes, and hence to suffer alone while running up debts that they cannot hope to pay. The figure that the noble Lord, Lord

Morrow, gave about those who had suffered under this was shocking. It is surely our duty as legislators to make sure that we create a safe and well regulated environment in which people can enjoy the pleasure that they experience from gambling, but not suffer the consequences if they have an addiction.

The noble Baroness, Lady Howe, mentioned the worry about advertising, and the way in which that reaches those who already have vulnerability. A number of noble Lords also picked up the need for a proper self-exclusion system. This is something we are sure we will return to in Committee.

The horseracing betting levy has been a problem for successive Governments over a number of years. I listened with interest to those with more expertise in this area than I will ever have about some of the ways in which we might address this. The problem that was picked up in another place was that the Government do not seem ready to come forward with proposals; they are not relying on the existing model but are not yet sure about which one they would like to pick. Of course, Governments do not pick winners; it might be worrying if they did start to do that, particularly in this area. But, levity aside, this is obviously something that needs to be resolved, and it would be interesting if the Minister could do so when he responds.

On the one side, there are the points that my noble friend Lady Pitkeathley mentioned about the vibrancy of the existing situation, which has been supported by this recirculation of cash. But of course many industries could argue that the betting or gambling industry takes from them the benefits and intellectual property, as it were, of the activity that they are involved in but does not in any sense put back sufficiently into grass roots or other activities. So there is a broader discussion here as well as the narrow one about what to do about the levy. Clearly, something must happen in this area, whether within the Bill or some time in the very near future. At least the Minister could give us some advice about where he is on this; that would be helpful.

On the list of issues that we might want to come back to in Committee there is a question that has not yet been mentioned, which the Government have said that they would act on—the question of unclaimed winnings and dormant accounts. We are talking about bets that are void because the horse did not run, about unclaimed winnings and about the accounts of people who have left money sitting in them for more than a year. That seems to be part of a category of unused funds which in many areas there are plans to begin to use, and it is equally true in the area of gambling. The money could be put to use for treatment for problem gambling, or support for education about gambling, perhaps even into grass roots. If the Government are not ready to legislate for this issue, although they have said that they would like to, I suggest to the Minister that we require some information here at least, perhaps from the betting operators as part of the licence, to record exactly how much and what they hold in dormant betting accounts and unclaimed winnings, so that, when or if the Government decide to legislate, they will be able to do on the basis of sure and certain knowledge.

In conclusion, we welcome the Bill as far as it goes, but as I hope I have made clear tonight, it needs to go much further. I hope that the Minister will recognise that this is not at heart a partisan issue, but something on which we think we could work together, because there is a need for a rethink on a number of issues. We need to consider seriously some amendment to come from all parts of the House, which would make for a good Committee stage—and from that would come an improved and refined Bill. There is good work in the 2005 Act, which is the basis on which we operate, but we want to improve it where we can, and this Bill will help us to do that. We look forward to working with the Government and others in this House to create a licensing system that is the gold standard for the world.

Photo of Lord Gardiner of Kimble Lord Gardiner of Kimble Lords Spokesperson (Department for Culture, Media and Sport), Lord in Waiting (HM Household) (Whip) 10:12, 17 December 2013

My Lords, I start by thanking all your Lordships for the wide-ranging and informative debate that we have had tonight. A number of questions have been raised, and I hope that your Lordships will forgive me if I try to gallop through as briskly as I can. I will write, as so many points have been raised during the debate.

First, on the betting levy, a number of your Lordships have raised this. It was extremely useful to have the arguments aired. It is undoubtedly the case that racing, which is the second most attended sport after football in Britain, is immensely important to many people. I should declare an interest in that there is a point-to-point course on the family farm in Kimble and I am very much aware of amateur racing—so I was particularly interested in the racecourse of my noble friend Lord Cavendish, where I remember a horse of my grandfather winning. I also remember the fairground, which was going merrily while the racing proceeded. It is clear that training yards and racecourses up and down the country are playing their role in what is a huge part of the rural economy. The noble Baroness, Lady Pitkeathley, mentioned members of her family. I have sat on horses and ridden, probably behind a pack of hounds, with her son-in-law. The horse is hugely important in the way of life for many hundreds of thousands of people in Britain, whether they spectate, ride horses, or admire everyone that prepares horses.

The levy is a complex issue and the Bill is not the right vehicle in our view to achieve what I would like and what many noble Lords seek. The levy itself is now over 50 years old and it is widely agreed that it is in need of reform. We must look beyond simply extending a system that it is agreed is out of date and we need to reflect a vastly different set of circumstances from those that existed 50 years ago.

My noble friend Lord Cavendish, the noble Baroness, Lady Pitkeathley, my noble friend Lord Clement-Jones and the noble Lord, Lord Risby, raised the recent European Commission ruling in relation to the French parafiscal levy. This is a potentially interesting development and its impact is being assessed currently by the department. It does not mean, I am advised, that the UK would not similarly be required to seek similar EC approval. My advice is that an amendment of the levy reform raises state aid issues and will need the approval of the European Commission. I reassure your Lordships that the Government are committed to taking the opportunity to consider genuine levy reform and to consult widely on any sustainable, enforceable and legally sound options that emerge. My noble friend Lord Risby mentioned the consideration of a sports betting right. The Government will consult on any legal, sustainable and enforceable option for levy reform. At this stage it is unclear whether a racing right might meet these tests but I would not rule out the matter.

My noble friends Lord Astor and Lord Clement-Jones raised casinos and spoke about restrictions on remote gambling in casinos. I welcome the opportunity to confirm the current position. Customers are able to use their iPhones and iPads in casinos to use remote sites as they can everywhere else. This is about casinos being able to promote and encourage play, and that is why it is properly managed within gaming machine regulations. The Government have agreed to review the issue of remote gambling provision in casinos, but this must be progressed in a considered and balanced way, and subject to proper consideration, impact assessment and consultation. It may be that there is a case for some relaxation subject to certain safeguards, but we must ensure that existing controls on stake and prize limits are not undermined. Discussions with the industry have commenced and will conclude by the end of March of next year. My noble friend Lord Clement-Jones mentioned the portability of casino licences. The Government are in discussion with the casino industry over a range of proposals to provide greater regulatory flexibility. Portability of casino licences forms part of these discussions.

The noble Lord, Lord Stevenson of Balmacara, and my noble friend Lady Heyhoe Flint raised the issue of sports integrity. It is absolutely clear that match fixing undermines the very essence and integrity of sport and there is no place for it in any sport. This Bill will ensure that overseas operators selling into the British market are required to obtain a Gambling Commission licence. This will mean that the protections of the Gambling Act—in particular those afforded by licence condition 15.1 on reporting suspicious betting activity—are applied on a consistent basis to all operators active in the British market, regardless of where they are located. More generally, the Secretary of State had a really positive meeting last week with the big sports governing bodies and the Gambling Commission to discuss what more can be done to tackle this. A number of actions have been agreed and further discussions will take place in the new year.

My noble friend Lady Heyhoe Flint and the noble Lord, Lord Stevenson, also raised the issue of sports spread betting and the requirements on spread betting operators. The Financial Conduct Authority is in the process of preparing guidance to the principal two sports spread betting firms operating in the United Kingdom to reinforce the current requirements. It is the FCA’s intention that where parity with the Gambling Commission licence condition 15.1 can be achieved, the individual guidance to sports spread betting operators will reflect this. I confirm that this guidance will be published in the new year.

A number of your Lordships mentioned problem gambling, and the noble Viscount, Lord Falkland, asked for some costs relating to that. My understanding is that GamCare has calculated that every problem gambler costs the state £8,000 each year. The noble Baroness, Lady Howe of Idlicote, and the noble Lord, Lord Morrow, particularly highlighted the distress and upset that it causes to wider family members, and we must not forget that.

A number of issues were raised concerning self-exclusion lists. My understanding is that the Gambling Commission has already asked the Responsible Gambling Strategy Board to look at the effectiveness of self-exclusion as a tool, and the Responsible Gambling Trust work programme is also taking forward work in this area. In addition, the Remote Gambling Association convened an industry cross-sector meeting earlier this month to improve co-ordination and collaboration on developing options in relation to self-exclusion. The European Commission’s expert group is also looking into this matter.

The noble Baroness, Lady Howe of Idlicote, mentioned a one-stop shop. We are not ruling that out in the future, but the truth—and it may be an inconvenient truth—is that it would involve certain complexities and practicabilities. Although at this stage we would not wish to legislate, we want to look into the matter, and perhaps, in the series of meetings that I referred to, there is a discussion to be had on that with the noble Baroness. This matter was raised, in particular, by the noble Lord, Lord Morrow. I reassure your Lordships that the Government take the problem of gambling extremely seriously. The figure that I stated suggests that any Government should and must take it seriously. Indeed, operators are required by licence conditions to commit to contributing, and say how they will contribute, to the identification and treatment of problem gamblers.

The gambling industry has committed to bring in a number of enhanced player protection measures, including for users of fixed-odds betting terminals, such as voluntary time and monetary limits—for example, after 30 minutes of play a machine will pause. These measures will be in place by 1 March next year. We expect the industry to implement these new measures swiftly and to monitor their effectiveness closely.

One of the three licensing objectives set out in the Gambling Act 2005 is to protect children and other vulnerable adults. It is a condition of an operating licence issued by the Gambling Commission that an operator must have, and put into effect, policies and procedures to prevent underage gambling. This Bill will mean that all remote operators wishing to sell to or advertise in the British market will have to comply with that condition.

I was intrigued by the views of the noble Viscount, Lord Falkland, on advertising. The Government acknowledge the growth in gambling advertising that has occurred since the Act commenced in 2007 following the introduction of greater freedoms. The Government are examining what impact this might be having on the licensing objectives of the Gambling Act and whether the current arrangements remain adequate.

The Committee of Advertising Practice and the Broadcast Committee of Advertising Practice are about to publish significantly expanded guidance on gambling.

The help note will include new, specific guidance on free bets and bonus offers to make explicitly clear the requirements on those marketing such offers. It will underline the need for them to give appropriate prominence to any significant conditions associated with their offers. Therefore, I assure your Lordships that the Government take this matter extremely seriously. Work is under way and we need to keep that under review.

My noble friend Lord Clement-Jones mentioned a kitemark. The Government are committed to ensuring progress on the work that the Gambling Commission has already commenced to make sure that consumers can quickly and clearly establish that they are transacting with a British licensed site.

A number of your Lordships, including the noble Baroness, Lady Howe, and my noble friend Lord Clement-Jones, mentioned blocking. The Government want to continue to develop understanding of this important emerging area. We do not rule out blocking in the future should it become appropriate, necessary and demonstrably effective. I would very much welcome discussions with those of your Lordships who would be interested in exploring this further. Where illegal operators attempt to target British consumers, the Government and the Gambling Commission are confident that action can be taken through existing enforcement mechanisms to disrupt and stop unlawful gambling. These include action on illegal advertising, player education and, ultimately, prosecution.

Turning to the point made by the noble Baroness, Lady Pitkeathley, about the Channel Islands and her championing of the islands, I understand that the Gambling Commission is working very closely with the Alderney Gambling Control Commission to ensure that there is minimal disruption and minimal burden on operators. Following on from that, my noble friend Lord Clement-Jones asked about transitional arrangements for white list licence holders and EEA holders. The repeal of the white list will not create disruption for operators who have an existing entitlement to operate in Britain under an EEA or white list jurisdiction licence. They will be granted a continuation licence for their existing activities if they apply for an advanced application before the cut-off date.

The Government have been working closely with the Gibraltar Betting and Gaming Association to seek a remedy in the best interests of British consumers. Officials have met with the Chief Minister of Gibraltar and the GBGA, and there will be further meetings to discuss these matters. The Government have also hosted delegations from the Gibraltar Government and the GBGA in London. The Government very much look forward to continuing a positive and productive relationship with Gibraltar.

My noble friend Lord Clement-Jones asked me quite a lot of questions. If he will forgive me, I shall address his points in a letter, which would be the best way to ensure that your Lordships do not have such a late night. We are confident that the Bill is compatible with EU law as a proportionate measure for achieving the legitimate purpose of consumer protection. The Government have been clear that this Bill is independent of any tax changes. My noble friend also asked about the Full Tilt case. Consultation by the Gambling Commission on the protection of customer funds closed on 4 December. The commission is analysing the responses and will publish its response to the consultation in the new year. It is vital that the society lottery consultation considers carefully the impact on all society lottery operators and not only the Health Lottery. In that regard the Government are still considering the nature of proposals and will set out their approach soon.

I am sure that a number of your Lordships would like to draw me on taxation but tax matters are for the Treasury and continually kept under review. From a regulatory point of view, whatever the tax rate adopted by the Treasury, the key issue is whether the Gambling Commission has all the necessary enforcement tools at its disposal to minimise any illegal activity. The Government are confident that the Gambling Commission has the right tools to take effective action against illegal operators and deter unlicensed companies from entering the market.

The noble Lord, Lord Stevenson of Balmacara, mentioned dormant accounts, which is an important issue. This Bill will make significant changes to the manner in which a large number of betting accounts, including those that are currently dormant, are regulated. That is why the Government have been clear that it would be appropriate only to consider the recommendations from the report once our proposals for remote gambling have been implemented.

I say to the noble Lord, Lord Morrow, that this is a small and significant Bill. Its intention is about protection for remote gambling consumers based in Great Britain. It will also ensure that all remote gambling, wherever the operator is based, is licensed by the Gambling Commission and subject to its robust and consistent standards and controls.

It has undoubtedly been a debate in which a wide range of points were made. I fully confess that I have not been able to respond in the detail that many of your Lordships might have preferred. These are important issues that we need to consider further. I hope that many of your Lordships will come to further meetings before Committee, during which time the Bill team and I would be happy to give further explanation and listen to the points raised to see what progress we can make. But for the purposes of tonight, I commend the Bill to the House and ask for it to be given a Second Reading.

Bill read a second time and committed to a Grand Committee.

House adjourned at 10.30 pm.