(Except clauses 1, 4, 5, 9, 14, 22, 42, 56, 57, 124, 130 to 135, 138, 139, 148 and 184 and schedules 5, 6, 19 and 25, and any new clauses and schedules tabled by Friday 9th May 2003 relating to excise duty on spirits or R&D tax credits for oil exploration.) - Clause 7 - General betting duty: betting exchanges

Finance Bill – in a Public Bill Committee on 15th May 2003.

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Amendment proposed [this day]: No. 126, in

clause 7, page 5, line 4, after 'one person' insert '(''the bettor'')'.—[Mr. George Howarth.]

Question again proposed, That the amendment be made.

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon 2:30 pm, 15th May 2003

I remind the Committee that with this we are discussing the following:

Amendment No. 127, in

clause 7, page 5, line 4, after 'another person', insert '(''the bet-taker'')'.

Amendment No. 128, in

clause 7, page 5, line 5, after 'third person', insert '(''the operator'')'.

[R] Relevant registered interest declared.

Amendment No. 129, in

clause 7, page 5, line 8, leave out subsections (2) to (4) and insert—

'(2) For the purposes of sections 2 to 5B as modified by subsection (5)—

(a) the bet shall be treated as if it were made by the bettor with the operator and not with the bet-taker, and

(b) the operator shall be treated as a bookmaker in respect of the bet.

(3) But subsection (2) does not apply to a bet if—

(a) the bet-taker holds a bookmaker's permit, and

(b) the bet would not be an on-course bet if the operator were making the bet with the bet-taker as principal.

(4) Section 2 (Bookmakers: general bets) is modified as follows—

(a) in subsection (3) for ''15 per cent of the amount of his net stake receipts for that period.' substitute 'the aggregate for that period of the amounts of duty charged in respect of each individual bet-taker using facilities provided by him.''.

(b) after subsection (3) insert—

(4) For the purposes of subsection (3), the amount of duty in respect of each individual bet-taker in an accounting period shall be 15 per cent of the bet-taker's net stake receipts for that period.

(5) Where there is any doubt as to which of two persons is the bettor and which the bet-taker for the purposes of subsection (1)(a), whichever of the two was the first to use the facilities of the operator to offer the bet shall be treated as the bet-taker.'.

Amendment No. 130, in

clause 7, page 5, leave out line 26.

To save the hon. Member for Spelthorne (Mr. Wilshire) some embarrassment, hon. Gentlemen may remove their jackets.

Photo of David Wilshire David Wilshire Conservative, Spelthorne

On a point of order, Mr. McWilliam. I was told this morning by the lead Chairman that we had his permission to remove our jackets. However, if his strictures are not carried forward to you, I grovel unreservedly.

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon

The hon. Member does not have to grovel. The standing order applies to each sitting individually.

Photo of John Healey John Healey The Economic Secretary to the Treasury

May I welcome you to the Chair, Mr. McWilliam, for this afternoon's sitting? I have no doubt that you will be no less fair and no less firm than Sir Nicholas made it clear he intended to be this morning. I look forward to serving under your chairmanship alongside your co-Chairmen.

With my last breath before sitting down, I was on the last line of my response to my hon. Friend the Member for Knowsley, North and Sefton, East (Mr. Howarth) when I took an intervention from him. He asked whether the majority of betting exchange customers are recreational users and whether the majority of exchange business is recreational. The figures that we have come from commercial companies, so the precise details are confidential. However, I can confirm that the vast majority of betting exchange customers are recreational users, and they account for the vast majority of betting exchange business. I hope that that is helpful.

My hon. Friend's amendments Nos. 126 to 130 would change fundamentally the reform proposed in the Bill, and the exchanges would retain their current volatility. Therefore, I hope that my hon. Friend will consider withdrawing his amendment.

Photo of George Howarth George Howarth Labour, Knowsley North and Sefton East

I welcome you to the Chair, Mr. McWilliam. I know that you have many years' experience of chairing these Committees and that will stand us in good stead.

I shall be brief because we have had a good, detailed and wide-ranging discussion that covered a topic that would not otherwise have been debated.

I notice that the hon. Member for East Carmarthen and Dinefwr (Adam Price) has not made it back to the Committee, but he intervened on me to ask about the relationship between betting exchanges and racing. I understand that it was presumed that the levy for the current year would be around £92 million, but the latest estimate has declined to £75 million, so there is a discrepancy as a direct result of people transferring business to betting exchanges. Racing will suffer proportionately because most of that money, if not all, is used to support racing. I wanted to put the record straight.

Turning to the substantial matter, the key issue between my hon. Friend the Economic Secretary and I is the market. We have different views on who participates in betting exchanges and what is happening—where the money is coming from and where it is going.

I think that my hon. Friend used the term ''leisure participants''. He certainly referred to people becoming involved in betting exchanges in pursuit of a leisure activity. Another way of putting that is punter

to punter. The problem with that analysis is that it is difficult to know whether that is so, because in reality it is stranger to stranger. The person laying the bet is unknown to the person taking the bet, and there is some doubt about what is going on.

My hon. Friend justifiably pointed out that, because of the Chancellor's changes, many bookmakers who had located themselves offshore had come back onshore. He said that that was welcome, as indeed it is. The danger now is that foreign layers could use—I suspect that they are using—the betting exchanges because they have an unfair advantage over UK bookmakers. If that assumption is correct, in the longer term one of two things will happen—or both. Either regulated UK bookmaking business will decline or there will be more and more offshore activity, the very thing that the Chancellor tried to avoid.

Since our sitting this morning I have been informed, although I have not spoken to it directly, that the Tote is concerned about the provision and supports the arguments that I put this morning. Therefore, the argument is finding wider favour, certainly among the bookmaking community.

My hon. Friend asked me to consider seeking to withdraw the amendment. As he is aware, I have always been prepared to do that. However, because there is a disagreement between us about exactly who is involved, I ask him to meet our leading bookmakers before the Bill completes all its stages, to see whether their version of what is going on can be squared with his. If he undertakes to do that, I should be more than happy to seek to withdraw the amendment.

John Healey indicated assent.

Photo of George Howarth George Howarth Labour, Knowsley North and Sefton East

I see by the nod of his head that my hon. Friend signifies his agreement to do that. With those assurances, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of John Healey John Healey The Economic Secretary to the Treasury

I beg to move amendment No. 102, in

clause 7, page 5, line 28, after first 'in', insert 'paragraph (a) of'.

As my hon. Friend the Member for Knowsley, North and Sefton, East said, we had a full and wide-ranging debate on his set of amendments.

The context of amendment No. 102 is clearly our recent evaluation of the gross profits and tax on betting and the submissions that we have received from the industry as part of that evaluation. The amendment is to the part of the clause that puts in place the change in the way in which betting exchanges are taxed.

It became clear from studying the changes that the law requires further clarification. The clause was intended to remove betting exchanges from the provisions of the existing law relating to bet brokers, and to change the basis on which their liability is calculated to a general betting duty. That required, among other things, an amendment to section 5C(1)(a) of the Betting and Gaming Duties Act 1981, but the clause could be interpreted as requiring an amendment

also to section 5C(1)(b), which is not the intention of the reform. Amendment No. 102 was prompted by questions from the trade, which pointed out that the clause could be interpreted as needing an additional and unnecessary amendment to the law.

More broadly, I understand why mainstream bookmakers wanted us to adopt a different system, but, despite a tripling of the tax rate for betting exchanges—taken as a percentage of commission, exchanges have had a tax rate of around 5 per cent. during the 12 months of the new regime—the change has been welcomed by exchange operators. Mark Davies of Betfair, one of the market leaders, has said that his company

''have consistently argued that a gross profits tax should be charged on the basis of a company's gross profits, and Betfair makes its money by charging its customers a commission that is stated up-front.''

With those remarks, I hope that the amendment will be welcomed on both sides of the Committee. I commend it to Members.

Photo of Stephen O'Brien Stephen O'Brien Shadow Paymaster General

May I welcome you to the Chair, Mr. McWilliam, in your role as co-Chairman of the Committee? First, I seek your guidance. As we have had a wide-ranging debate on the amendments, and knowing that Chairmen generally consider whether that can eliminate a stand part debate, can I ask whether you are thinking about doing that? If so, may I just introduce one idea now on which I had hoped the Government might table an amendment?

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon

It is extremely difficult for me to take that view because I was in the middle of taking advice. However, it seems to me that the amendments pretty well cover the clause anyway, and my instinct is to do just that. I suggest to the hon. Gentleman that if he wants to go wide, and treat this as a clause stand part debate, that is probably in the interests of the Committee as a whole.

Photo of Stephen O'Brien Stephen O'Brien Shadow Paymaster General

I am grateful, Mr. McWilliam. That entirely accords with the determination that I had hoped you would make.

My party supports the Government amendment and raises no objections to it. It is clearly a sensible tidying-up. My point, which is brief, relates more to a stand part debate because it is on something that we hoped would be included in a Government amendment, but does not appear. I do not find it clear from the drafting of the Bill what the consequences will be if a provider provides both a betting exchange and premises. I understand that in the case of premises exclusively, the service involved is better understood; but it would be helpful if the Minister could clarify what happens if there is joint provision. Why have the Government not thought fit to introduce a further amendment on that?

That aside, we are happy with the current Government amendment.

Photo of John Healey John Healey The Economic Secretary to the Treasury

Perhaps the hon. Gentleman will allow me to write to him on that narrow point.

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon

I call Mr. Jack.

Mr. Michael Jack (Fylde) rose—

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon

Order. The Chair may have seemed a little prescient there, but I was worried about the right hon. Gentleman getting back in time.

Photo of Michael Jack Michael Jack Conservative, Fylde

I welcome you to the Chair, Mr. McWilliam. Thank you very much for your kind consideration.

I may have missed something, but perhaps the Economic Secretary could explain to me, before he closes his notes on it, precisely how the amendment works. Unless something is missing, or it leads to some greater mystery, I cannot see, having examined line 28, how the amendment fits into it. Can he explain how it will work and rather more precisely what it means? If after the word ''in'' we inserted ''paragraph (a) of'', which is on the amendment paper, we would then have the words

''of the course of a business''.

I do not understand that.

Photo of John Healey John Healey The Economic Secretary to the Treasury

My belief is that the amendment works perfectly adequately, but I shall have a look at it. If I change my view on that—

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon

Order. I think that we are getting our ''in''s mixed up—or perhaps we visited some at lunch time, I have no idea. Perhaps the right hon. Gentleman should read from the first ''in''. I can understand it, and I am not that clever.

Photo of Michael Jack Michael Jack Conservative, Fylde

I think that I have got the wrong ''in'', Mr. McWilliam. Let us say that I shall be out, and thank you very much.

Amendment agreed to.

Clause 7, as amended, ordered to stand part of the Bill.