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11.12 pm

The Parliamentary Under-Secretary of State for the Home Department (Mr. Mike O'Brien): I begin by congratulating the hon. Member for Banff and Buchan (Mr. Salmond) on raising an important issue. Horse racing and betting on horse racing have a long and honourable history in Great Britain. He is one of many hon. Members who have taken an active interest in racing--attending race courses and, no doubt, betting either on or off course. I also congratulate him on his decision to retire. I hope that he has a long and honourable retirement and spends a lot more time at the races rather than in this place causing problems to Ministers.

I am glad that the hon. Gentleman has brought this issue to the attention of the House, because there is much concern about it. The turnover on horse race betting is an important matter for the Government and for the economy as a whole. It helps to support 8,000 licensed betting shops in Britain, and a growing internet and telephone betting industry in which many people are employed. The total amount staked on horse races with off-course bookmakers in 1999-2000, including bets with the Tote, was about £5 billion. That is an indicator of the widespread popularity of horse racing, its importance and its value to the Exchequer as a source of revenue.

As hon. Members know--some to their cost--the tax on off-course betting stands at 6.75 per cent. Government revenues from off-course horse race betting therefore approach £350 million a year. What happens in the industry is important to the Government.

I make no secret of my concern at what the hon. Gentleman has said tonight. There has been a debate in the racing industry and in the media for some time on an issue that I have monitored closely, including by watching the estimable John McCririck, the racing commentator, in full flow on television on a number of occasions expressing his concern about the dangers to the integrity of the industry and the need to protect the punter.

The way in which on and off-course betting is organised developed over the years and has largely stood the test of time. It has a reputation for integrity. It is plainly important that the majority of punters, who place bets in the betting shop rather than on the race course, know that they are getting a fair deal. It is also important that off-course bookmakers can run a commercially viable operation. There is therefore a balance to be struck.

The organisation of off-course betting is not always understood by those who know little of the industry. Leaving aside betting on the Tote, which is a separate system, it is up to the punter at the betting shop to decide whether to back a horse at starting price or at whatever odds the bookmaker offers. As a race approaches, betting shops will offer fixed odds, based on early shows of the betting on the course. For some races, they might offer fixed prices throughout the day. In some cases, especially for major races, such as the National or the Derby, the bookmaker will offer ante-post prices on the horses for days, weeks or even months in advance. The odds that the betting shop offers on a horse will move up or down according to the state of the market.

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Betting shop customers have a choice and can place their bets at fixed odds. However, many choose not to do that; instead, they place their bets at the starting price--the odds given by the bookmakers at the race course when the race is about to start. When punters place their bets, they do not know exactly what the starting price will be and therefore how much the bookmaker will pay them if they win.

The key question, to which the hon. Member for Banff and Buchan has rightly drawn attention, is the maintenance of public confidence in the way in which the starting prices are worked out. It is important that punters who bet on the starting price get a price that fairly reflects the prices that are available on the course just before the off, and that the way in which the price is calculated is transparent.

Arrangements for working out starting prices depend on starting price returners at the race course. They note the varying prices that bookmakers offer in the betting ring just before the start of the race. They must decide on representative prices for each horse and notify betting shops around the country of them. The task is organised by the starting price executive, which brings together the three major media companies--the Press Association, Trinity Mirror and Satellite Information Services--which employ the returners.

The arrangements have never been directly a matter for the Government. Nevertheless, as the hon. Member for Banff and Buchan said, some recent changes have been made; I understand that the executive made them in May. The aim was to offer a more transparent, accurate and efficient method of assessing starting prices. The returners had previously tried to take account of the prices offered by a wide range of bookmakers in the ring. That is difficult to do properly and fairly, especially in the limited time available in the run-up to a race.

The starting price returners now concentrate on a smaller sample of bookmakers. Allegations have been made that that reduces the starting price, of which the starting price executive notifies betting shops around the country. If that were so, it would shade odds at which off-course bookmakers paid their starting price customers. The bookmakers would be richer and the punters would be poorer. Tonight and on other occasions, I have heard arguments to support that proposition.

It is said that other changes that the National Joint Pitch Council made to controls on the betting ring a year or two ago led to a more customer-friendly betting market on the course. It is suggested that the restructuring of the on-course betting market led to an overall increase in the starting prices of which betting shops are notified, and that there was therefore an incentive for off-course bookmakers to do something about circumstances in which their profits were being cut.

Off-course bookmaking interests have always hedged their bets with an on-course bookmaker to manage their liabilities. Consequently, the weight of their money may affect the starting price. However, it has now been suggested that, because the new starting price system takes account of fewer on-course bookmakers, who are thus easier to identify, the larger off-course bookmakers may be able to hedge their bets more strategically with a view to manipulating the starting price in a way that is favourable to their business.

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I have listened carefully to the comments of the hon. Member for Banff and Buchan and other observers on the matter. I understand their anxieties and I am watching developments with great care and not a little concern. If the punter is being ripped off by the bookmaker, the Government may need to express their views strongly to the industry. I am well aware that early signs show an apparent decrease in the starting prices at some races compared with those returned for the same races in previous years. The position will vary from course to course and race to race. However, I am advised that it is too early to say that the evidence has conclusively proved that there is a problem in which we need to intervene. We are monitoring developments with a great deal of concern and care.

Our job as a Government is to ensure that punters are not ripped off. However, we will not intervene in the market unless the evidence is clear. I am watching matters with interest and concern, but the true effect is unlikely to be apparent yet.

Mr. Alan Meale (Mansfield): I congratulate the hon. Member for Banff and Buchan (Mr. Salmond) on raising an important matter. I draw the attention of my hon. Friend the Minister to the evidence given to the Select Committee on Home Affairs--of which the hon. Member for Banff and Buchan was a key member--by Mr. Peter George, the then chief executive on betting of Ladbrokes, who admitted openly that the company was proactive rather than reactive in terms of hedging bets on race courses. The major bookmakers already have considerable influence on the course in lowering the price for off-course betting, which the large bookmakers control. In terms of the geographical remit to which my hon. Friend refers, the problem will not show up, as the large bookmakers have that remit right across Britain. I take this matter very seriously and it is an important example of how, yet again, the big bookmakers are trying to take advantage of the ordinary punter by hedging bets even further before there is a return in the betting shop.

Mr. O'Brien: My hon. Friend puts his point strongly and it is right that Members should express the concerns of constituents. As it stands, the Government have no legal base on which they can intervene in this market. If we wanted to intervene, we would have to take powers and pass legislation. However, I am sure that the industry and the bookmakers will listen with great care to what is said in the House.

Mr. John Greenway (Ryedale): May I also congratulate the hon. Member for Banff and Buchan (Mr. Salmond) on raising this matter, which is an issue of concern? I have a great deal of sympathy with what the Minister has said. I do not see a basis on which he can intervene. However, if the matter persists--quite apart from the prospect of considering whether, as an outcome of the gambling review, this may be a matter for legislation--would he consider referring the matter to the Secretary of State for Trade and Industry and the competition authorities? If the consumer--the punter--is being disadvantaged by this kind of practice, the House ought to unite behind a call to do something about it.

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