Clause 279 - Exceptions to offences

Gambling Bill – in a Public Bill Committee at 12:00 pm on 14th December 2004.

Alert me about debates like this

Question proposed, That the clause stand part of the Bill.

Photo of Malcolm Moss Malcolm Moss Shadow Minister, Home Affairs

One aspect of the clause is causing concern and consternation in particular quarters. Subsection (3) reads as follows:

''A person does not commit an offence under section 30 or 34 by making or accepting a bet, or by offering to make or accept a bet,''— then come the crucial words—

''if he acts otherwise than in the course of a business.'' 

I understand that those words are included in an earlier Act of Parliament, under which acting by way of a business, in so far as those activities are concerned, required a bookmaker's permit. However, I also understand that the words are not defined in the earlier legislation. The absence of any definition is at the heart of the current concerns.

The lack of that definition is particularly important in the context of betting exchange customers, who, although not holders of bookmaker's permits—or, in future, operating licences—can, it is said by some, operate as bookmakers through the medium of a betting exchange by arguing that they are acting privately and in that sense not acting in the course of a business.

I have no definition to offer the Committee myself. I would not say that this is a grey area, but it is an area of contention. The Government have included the words in the Bill and, depending on how they are interpreted, they can affect two major businesses in this country. Historically, bookmakers have taken bets in the traditional way and paid the general betting duty and, in the case of horse racing transactions, the statutory betting levy. However, the ongoing costs of running their business are well known. On the other side of the argument are the betting exchanges, which are a fairly recent development. They are expanding incredibly rapidly and doing excellent business. They may well be the future. People may not bother to get in their car or walk down the high street and nip into their betting shop; they will simply sit at home operating their computer.

Have we got a level playing field and fair competition between those involved in the betting industry? There are the traditional bookmakers, to whom legislation that involves considerable costs of one kind or another has applied for a long time, and there is the new phenomenon of betting exchanges. I am no expert on these matters, but such exchanges would argue that they do not have the bookmakers' margin and do not gain massively from the activity. They probably take a small turn on the transactions—perhaps 2, 3 or 4 per cent.—that will not be as large as the bookmakers'. In making their book, bookmakers always build in a margin, so that they rarely lose out seriously.

I do not know whether the two activities are that different. As a layman, I think that, if someone sits at home laying off bets that other people take to an exchange, they may lose their house, but they may win a lot of money. The skill is in knowing what prices to offer and what to bet off. If someone is making a small fortune from their activity on the exchange, when and how—at what point—would that cross a threshold and trigger the definition

''in the course of a business''?

The Government have not yet addressed that. During discussions, they have more or less said, ''We do not know the answer. We will allow the gambling commission to sort it out later.'' That is as helpful as nothing to those involved. We shall return to the issue   on Report, and it is a key question for debate in the other place. We need some flesh on the bones of the definition of the phrase

''in the course of a business''.

I am not arguing for one side of the industry against another. I have listened to both sides of the argument, but I am not an expert. However, I am here to scrutinise legislation and to ask questions about the meaning of words in the Bill. People who run such businesses say to me and other Opposition Committee members—no doubt to Government Committee members as well—that they have real problems with that definition because it could set up an uneven playing field, be discriminatory and attack the capital worth of their businesses and their revenue income. It may promote the new businesses, so that they have an advantage.

I do not know the answer to such questions, but I believe that the Government should have such answers and should not leave the matter for the gambling commission to decide at a remove. The uncertainty is such that the period implied—I suspect that it will be two years before it all kicks in—is unacceptable for businesses on both sides of the argument. It is important that the Government make some effort to define what the phrase really means and how it will impact on businesses on both sides of the argument. We shall come back to this point.

Photo of Mr Richard Page Mr Richard Page Conservative, South West Hertfordshire 4:15 pm, 14th December 2004

I want to follow my hon. Friend in saying that I am not coming out on one side or another. We are all seekers after definitions and truth, rather than people advancing particular arguments. The definition of a business occupied the scrutiny Committee for a considerable and inordinate time. It was obvious fairly quickly—even to somebody of my advanced years—that the Committee operated from a basis of extreme ignorance.

I discovered that nobody on the Committee had a betting exchange account, although a number had a bookmaker's account. In the spirit of true public service, I opened an exchange account to gain first-hand experience of how it worked. I applied to the Committee for a refund of the expenses involved in the gambling on and operating of the account, but that was refused. That was most unacceptable. One of the troubles of speaking like this is that Hansard will record these events and my saying that it was absolutely dreadful not to be given any expenses to operate an exchange account, whereas, obviously, hon. Members all realise that I am joking—don't they? Well, I think they realise, Mr. Pike.

It has become fairly obvious that we are operating two different systems. To become a bookmaker, you have to be licensed and to go through a series of probity tests. You take the customer's money, hold it in trust and are required to pay out at the end of the day—not that I am suggesting that you are a bookmaker, Mr. Pike, but you can appreciate the argument that I am advancing. 

A bookmaker operates depending on what odds he quotes. Because he makes a book, at the end of the day, he may make 5 per cent. or 10 per cent. of the money he takes in. If he takes in £100 on the race, with any luck, whatever he pays out, he will put £5 or £10 in his pocket. If one goes to Brighton for a two-horse race, one will never find a bookmaker quoting evens on both horses. There is always a shade of the odds to leave the bookmaker with a small amount in their pocket.

Betting exchanges work on a different basis. When one puts one's money on a betting exchange—it is the equivalent of acting as a bookmaker—the overall book is designed in such a way that, if one were to lay that book, one would not win but lose. One's monies would gradually depreciate round after round and one would end up bankrupt. There is a choice: either lose to the betting exchanges round after round, or lose to the bookmakers round after round. The result is the same.

The bookmaking industry has become concerned about whether people are using betting exchanges to gain an unfair advantage. If a bookmaker uses the betting exchanges, he should declare it. He should say, ''This is part of my business. This is part of the trading that I do back and forth against my book.'' A bookmaker could gain considerable advantage by using betting exchanges but, in fairness, whatever profits they make, they have to pay part towards the levy and part towards the tax, which all other businesses must do throughout their operations.

A betting exchange simply takes a turn and acts as the conduit between the money coming in and out. The exchange will take a small amount—perhaps 2, 3, 4 or 5 per cent., depending on the exchange—on which a levy and a tax will be paid. The exchange will have a much greater turnover but, in ratios, make a much smaller amount of money. It will make a turn and, in theory, unless it behaves in a completely crazy fashion, and there are one or two relatively new betting exchanges that have behaved irresponsibly, it will not go bust.

Conventional bookmaking is quite legitimately asking the question that my hon. Friend the Member for North-East Cambridgeshire has asked: what is the definition of a business? There may be some bookmaking businesses that are not declaring what they are doing, and some may be using exchanges and knowledge in an underhand and covert fashion. The exchanges are, however, evolving a code of practice that they can put on record and use in conjunction with Customs and Excise and, in the fullness of time, the gambling commission, in order to ensure that everything is run cleanly and above board.

I do not know the extent to which an overseas bookmaker can tap into the system and use the exchanges and money from abroad to offset their book and to obtain an advantage. What I do know is that the number of people using betting exchanges is growing and the money coming in from overseas is growing. I understand that it is now around 20 per cent. One of the arguments for the Bill is that we need it to deal with new technology and all the changes that have taken place in this modern world. 

That was the question put early on to the scrutiny Committee. It was asked what it saw as the definition of a business. It started off by making a number of recommendations but, as more and more knowledge emerged, it decided to throw the matter back to the Government. That is exactly what I am doing and what my hon. Friend is doing.

Photo of Don Foster Don Foster Shadow Secretary of State for Culture, Media and Sport

I have listened to the hon. Gentleman with considerable interest. He clearly has a much better understanding of how exchanges operate than I do. I will tell him privately my experience of trying to understand them.

In a nutshell, after the hon. Gentleman's lengthy contribution, is he merely asking the Minister to say whether an individual or organisation who lays bets on an exchange is or is not a business? If that is the gist of his question, we could ask the Minister for an answer and then move on.

Photo of Mr Peter Pike Mr Peter Pike Labour, Burnley

Order. Before I call the hon. Member for South-West Hertfordshire (Mr. Page), I must tell him that he is pushing me to the extreme. I am listening to him carefully. The clause covers exceptions to offences and, so far, he is in order, but he is pushing me to the limit, so perhaps he will keep himself in order.

Photo of Mr Richard Page Mr Richard Page Conservative, South West Hertfordshire

I would never want to push you to the limit, Mr. Pike.

I must apologise for not making the point more clearly. Because of the open audit trail of betting exchanges, it is easier to trace and to identify offences, but there is concern that all is not fair and above board and that all is not cricket, which is why I have been going through the scenario for the Committee. The hon. Member for Bath—I was going to say my hon. Friend.

Photo of Mr Richard Page Mr Richard Page Conservative, South West Hertfordshire

One never knows. After the next election—[Interruption.] Is the Minister going to intervene or is he getting a drink?

Photo of Mr Richard Page Mr Richard Page Conservative, South West Hertfordshire

After the next election, we may need the support of my hon. Friend the Member for Bath to drive this great nation forward to even better and other things, or we may not.

To return to where we were. The Government need to go beyond what is in the clause. We want to understand the thinking behind the Government's way of going forward. It is not just a definition of a business that is needed. What will be the definition of customers who use betting exchanges? Will there have to have a certain volume of activity and transactions for registration? What will happen if there is a large overseas bet? Will that require any record keeping? Will passports and utility bills have to be provided to discover whether money laundering is involved? This is a can of worms and the Government must provide clear guidance for the industry on where we go from here. 

You are right, Mr. Pike. The question, ''What is a business?'' is just the tip of the iceberg. The Government have avoided tackling the problem in the clause. They have ducked it, but I am now looking the Minister fair and square in the eye—it is no good him grinning and smiling at me—and asking him how he will deal with the severe problems that will arise.

Photo of Richard Caborn Richard Caborn Minister of State (Sport and Tourism), Department for Culture, Media & Sport

If that were the tip of the iceberg and we kept going, the iceberg would melt. I was going to quote another metaphor about cricket and taking a catch, but, as a good Yorkshireman, I will not.

The clause allows people to take part in and provide facilities for private betting and gaming, as defined in schedule 12, without committing an offence under the Bill. It is important to ensure that the Bill does not outlaw perfectly acceptable gaming and betting that takes place in private. The limits under the existing law are being preserved.

Subsection (3) contains protection for those who bet but are not doing so in the course of a business. It allows people to place bets using the services of a betting operator or a betting intermediary on a non-commercial basis without the need for a licence. It also allows private bets between friends and others to take place without any need for authorisation and without committing an offence.

I shall try to answer some of the specific questions that have been raised. The issue is not an easy one. As the hon. Member for Bath said, it has been bouncing around.

First, on the money limits to which hon. Members referred, precise boundaries would not be helpful as there will always be people who bet recreationally but in large amounts—people will know who they are. They would be caught, whereas people who want to evade a limit could always find a way to come under the threshold. Therefore, we do not believe that money limits would be helpful.

Betting exchanges are licensed as bookmakers under the same test. The Bill provides a specific licence with a specific test that protects the consumer. As the hon. Member for North-East Cambridgeshire acknowledged, bookmakers already live with a business test in section 55 of the Betting, Gaming and Lotteries Act 1963. The test is defined in that Act.

Otherwise,

''in the course of a business'' is a question of fact. It will be about the amount of activity carried on and whether the person holds themselves out for business. Given the possible variations, we think that it would be best to leave the matter for the commission. It is difficult to come up with a foolproof definition of all circumstances, as the hon. Member for North-East Cambridgeshire said. Therefore, we need a combination of common sense and flexibility, which is why we believe that the new   commission, which is the regulator, ought to and will have powers to make a decision on

''in the course of a business''.

Photo of Mark Prisk Mark Prisk Conservative, Hertford and Stortford 4:30 pm, 14th December 2004

Presumably, therefore, someone must demonstrate that they are making or are seeking to make a profit from the activities.

Photo of Richard Caborn Richard Caborn Minister of State (Sport and Tourism), Department for Culture, Media & Sport

Not necessarily. In the course of business, the person running the business is one consideration. The people who are laying the business also need protection, so I would not think that the definition would rely solely on whether they make a profit on a particular transaction.

Photo of Mark Prisk Mark Prisk Conservative, Hertford and Stortford

So someone who is self-employed, who clearly is not an enterprise in the corporate sense, would be included in the definition.

Photo of Richard Caborn Richard Caborn Minister of State (Sport and Tourism), Department for Culture, Media & Sport

Yes.

Bookmakers based abroad should be licensed in that country. If they are based here and are acting in the course of business, they need an operating licence. Again, if someone has an operating licence here, they can advertise and do all sorts of things. If they are licensed abroad and trying to ply their business here, they will not get the same advantages as a business licensed in this country.

How are users who act in business identified? The commission and betting exchanges will work together to identify parties who may be using exchanges to run a business, and a commission code of practice could also be developed.

Photo of Mr Richard Page Mr Richard Page Conservative, South West Hertfordshire

I am sorry to ask this just as the Minister is drawing to an end. We have a real problem, in that one cannot lay a book on a betting exchange. A bookmaker can make a book because they can actively control the odds, whereas on the betting exchange the odds are on the screen, and one has no control over them. That is a fundamental difference.

The worry is whether there are people who are able to manipulate those figures from outside and using outside influences that may not always be honest—hence, my question about overseas bookmakers. Bookmakers in this country who are using betting exchanges and not declaring that are doing something unlawful, and they would be in severe trouble if they got caught; they could lose their bookmaker's licence. However, with regard to the other systems I am talking about, I wonder whether we should try to get some definition a little ahead of the gambling commission coming forward because, as my hon. Friend the Member for North-East Cambridgeshire says, that could take two or more years.

Photo of Richard Caborn Richard Caborn Minister of State (Sport and Tourism), Department for Culture, Media & Sport

I think that I follow the logic of that. The hon. Gentleman is saying that people would want to lay bets from abroad on to the exchanges, and he is asking whether that would be in breach of the law. One would have thought so. The hon. Gentleman's premise   for his scenario is that odds cannot be given on the betting exchanges. That is not true; odds can be offered on the betting exchanges.

Photo of Mr Richard Page Mr Richard Page Conservative, South West Hertfordshire

I thank the Minister for giving way. If someone goes to lay a bet on the betting exchanges, there are odds. If someone were to go through the piece of all the odds being offered, whatever happens—and we assume that they get the winner or loser as the case may be—if they had invested £100 they would come away at the end of the day with £92. They would not come away with £110. That is because in these circumstances a book cannot be laid in the same way as a bookmaker can make a book. At the end of a race, a bookmaker should be able to put some money in his pocket because he has got active control of the odds. However, if one goes on to the betting exchanges, one cannot control the odds; they are there for an individual to accept or reject. That is the difference.

Photo of Richard Caborn Richard Caborn Minister of State (Sport and Tourism), Department for Culture, Media & Sport

That might be the difference, but I do not know what point the hon. Gentleman is making. Someone might want to have a fixed-odds bet and the bookmaker might want to make his 5 per cent. or 10 per cent., but as far as I understand it on the betting exchanges it is those who are matching the bets up who get the commission in any case. Are we talking about the definition of what a business is, rather than trying to define what the betting regimes are—whether they are fixed-odds or on the exchanges? I do not follow the argument; I do not even know the question that the hon. Gentleman wants me to answer.

Photo of Mr Richard Page Mr Richard Page Conservative, South West Hertfordshire

I fully accept that my inarticulate stuttering has not got through to the Minister, and I apologise for that. What I am endeavouring to say is that if one uses the betting exchanges to lay bets, it is impossible to run a business that will not eventually go bust, and, as I understand it, the objective of most businesses is to make a profit. That is why my hon. Friend the Member for North-East Cambridgeshire has perfectly legitimately asked whether the Minister would care to develop the definition of what is a business so that we can see where this is all leading, because the scrutiny Committee initially got itself into quite a muddle on the matter and, listening to the Minister, I can understand why.

Photo of Richard Caborn Richard Caborn Minister of State (Sport and Tourism), Department for Culture, Media & Sport

I can understand why it got into a muddle, because I have been got into a muddle as well.

I will try to deal with this. It is not possible to have a book on a betting exchange. I do not know where the hon. Gentleman is coming from and what he is asking me to define. I have defined what a business is, according to the legislation. I have also tried to explain how that applies to the exchanges and the bookies. There are some grey areas, and I have said that, within the context of this legislation, the regulator, with a dose of common sense on one hand and realism on the other, should be able to make a judgment; that is what the regulator is there for. 

I have tried to give a definition of business and of exchange—and of exchange with regard to the bookies as well. I believe that my explanations will hold up well when the legislation is enacted.

Photo of Malcolm Moss Malcolm Moss Shadow Minister, Home Affairs

We have had a reasonably good debate. I am not a betting man but I suspect that if people were listening to the debate and offering odds on whether the industry is any wiser at the end of it than it was when we started, generous odds would be given.

There is no definition in the 1963 Act. The same words are used, but no definition is given. That is the point that I made. We are no further forward than we were then. There may be an accepted definition or appreciation of what the words mean. It would be helpful to hear that from the Minister—whether the definition has been tested in court, there is case law on it, or whatever we need. It is my understanding that no clear definition is given in the 1963 Act or in the Bill.

The Minister agreed that the issue was contentious and difficult, that there were grey areas and that there was a division of opinion in the industry. However, he was determined to leave the issue to the gambling commission. I think that doing that is a cop-out. The attitude is, ''There are problems, so we'll leave them to one side. Let's not get too fazed about it.'' These provision will affect some of the biggest businesses in the country and allow an unelected group—of which nobody knows who the members will be—to decide the fate of such businesses on the basis of the definition of the words in front of us.

The Minister also suggested that somebody operating on a betting exchange might be trading—if that is the word—by offering bets on a regular basis. That person might be turning over huge amounts. Is the Minister saying that that does not matter because it is a private transaction between individuals at either end of a terminal? It would be helpful to know whether that is the definition.

Is running a business to do with advertising? Is it to do with running accounts? Should people be registering as a limited company or as a trading partnership? Those who do not wish to be caught up in a net of taxation or a levy, or to pay for the privilege of having a licence, will obviously not be communicating those factors to anybody. The betting exchange might give them the opportunity to trade on a massive scale. They take their losses as well as their gains. If the Minister is happy for somebody to make huge amounts of money doing that, let us hear him say so. If advertising is a component of running a business, then people are also off the hook if they do not advertise. That area must be addressed at some point. It is not best left to the gambling commission a few years hence.

Photo of Richard Caborn Richard Caborn Minister of State (Sport and Tourism), Department for Culture, Media & Sport

To a large extent, the hon. Gentleman answers his own question. On one hand, he wants everything to be laid down in the Bill, including the definition of business. On the other hand, he asks how we will deal with circumstances that may arise. What we have said is that, to future-proof the Bill and make sure that we can respond to the new electronic age, where information is passed electronically at a speed   that would have been unimaginable 20 or 30 years ago, we must provide flexibility and powers so that a body that can respond to those circumstances as they arise.

The example that the hon. Gentleman gave was that, if the commission believed that someone was working outside the confines of the law and what is laid down in the Bill, it would have the power to intervene. I do not see anything wrong with that. The ultimate responsibility is with Parliament. As I have said, again and again, we are taking what was in the 1968 Act and enshrining it in a much more flexible way—taking the principles but making them more flexible and moving them into a modern setting. In doing that, we must invest some sovereignty in the regulator—the gambling commission—to allow it to deal with the fast-moving world in which we live. I see nothing wrong with that as long as the accountability lies with Parliament, which it does. We have therefore got the right to intervene.

This is a classic example of where, if we were to try to tie the matter down in the Bill, we would be outmanoeuvred in the space of a few weeks by those people who are incredibly bright, incredibly flexible and who will take Parliament all over the place. That is why we want experts in a regulatory position with powers to act fairly quickly if the need arises. That is why we are doing what we are doing.

Question put and agreed to.

Clause 279 ordered to stand part of the Bill.

Clauses 280 to 283 ordered to stand part of the Bill.