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Horserace Betting And Olympic Lottery Bill


 

These notes refer to the Horserace Betting and Olympic Lottery Bill as introduced in the House of Commons on 2 December 2003 [Bill 8]

HORSERACE BETTING AND OLYMPIC LOTTERY BILL


EXPLANATORY NOTES

INTRODUCTION

1.     These explanatory notes relate to the Horserace Betting and Olympic Lottery Bill as introduced in the House of Commons on 2 December 2003. They have been prepared by the Department for Culture, Media and Sport in order to assist the reader of the Bill and help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament.

2.     The notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So, where a clause or part of a clause does not seem to require an explanation or comment, none is given.

SUMMARY OF THE BILL

3.     The Bill concerns the abolition of the Horserace Totalisator Board ('The Tote') and the sale of its assets and the abolition of the Horserace Betting Levy Board ('The Levy Board'). Part 1 covers the sale and dissolution of the Tote, Part 2 the abolition and transfer of the assets of the Levy Board and Part 3 the licensing of Olympic Lottery games.

4.     The Bill enables Olympic Lottery games to be established as part of the National Lottery in the event that London is chosen to host the 2012 Olympic and Paralympic Games. It creates the necessary structures for holding the proceeds from these Lottery games and a distribution mechanism that will enable those proceeds to be used to meet expenditure in connection with the staging of the Games.

5.     The main provisions of the Bill concerning the abolition of the Tote and the sale of its assets and the abolition of the Levy Board provide for:

  • The vesting of the Tote's assets in a successor company wholly owned by the Crown;

[Bill 8—EN]     53/3

  • The subsequent sale of that company;

  • The future licensing of horserace pool betting undertaken by the successor company;

  • The future regulation of horserace pool betting by the Gaming Board;

  • The abolition of the Levy Board and its associated Levy Appeals Tribunals;

  • The transfer of its assets;

  • The abolition of the horserace betting levy; and

  • The future regulation of race courses by the Gaming Board.

6.     The main provisions of the Bill concerning Olympic Lottery games provide for:

  • The regulator, the National Lottery Commission, to license Olympic Lottery games;

  • The establishment of a fund to hold the proceeds generated by these Olympic Lottery games;

  • The establishment of a body to distribute money held in this fund; and

  • The money held in the fund to be distributed to meet expenditure in connection with staging the 2012 Olympic and Paralympic Games in London.

BACKGROUND

Horserace Betting

7.     On 2 March 2000, the then Home Secretary made a statement to the House of Commons to announce that the Government had decided to sell the Tote and abolish the horserace betting levy and the Levy Board. Amongst other objectives, the Bill seeks to implement this policy.

8.     Both the Tote and the Levy Board are Non-Departmental Public Bodies (NDPBs) sponsored by the Department for Culture, Media and Sport. Their current powers and responsibilities are set out in the Betting, Gaming & Lotteries Act 1963 ("the 1963 Act") as subsequently extended by the Horserace Totalisator and Betting Levy Boards Act 1972 and the Horserace Betting Levy Act 1981.

9.     Since 1928, when it was established, the Tote has had an exclusive right to operate, or authorise others to operate, pool betting on horse races in Great Britain. Pool betting is a particular form of betting where all the stakes are pooled, and the total pool is divided amongst the winners, less a deduction for the operator. More recently, following successive deregulation, the Tote has developed a significant fixed odds betting operation and is now the fifth largest bookmaker in the country. The business includes telephone and internet betting as well as over four hundred licensed betting offices.

10.     The Levy Board has statutory responsibility for assessing and collecting monetary contributions from bookmakers and the Tote, and for allocating them for one or more of the following purposes: the improvement of horseracing; the advancement or encouragement of veterinary science or education; and the improvement of breeds of horses. This is the horserace betting levy system.

11.     Both bodies also have some regulatory responsibilities. The Tote is in effect the regulator of horserace pool betting and the Levy Board is responsible for issuing certificates of approval for racecourses and also for the National Joint Pitch rules that govern the operation of bookmakers on racecourses in Great Britain.

Olympic Lottery games

12.     On 15 May 2003, the Government announced its intention to support a bid to stage the 2012 Olympic and Paralympic Games in London.

13.     If the bid is successful and the 2012 Games are awarded to London, the Government will provide for financial support to the staging of the Games through the National Lottery and, in particular, through the licensing of dedicated Olympic Lottery games forming part of the National Lottery. The decision on which city will host the 2012 Games will be made by the International Olympic Committee in July 2005.

TERRITORIAL APPLICATION

14.     Parts 1 and 2 covering the sale of the Tote and the abolition of the Levy Board apply only to England, Wales and Scotland. Part 3 providing for the licensing of Olympic Lottery games applies to the whole of the United Kingdom.

COMMENTARY ON CLAUSES

PART 1: SALE OF THE TOTE

ECHR considerations

15.     The Provisions of Part 1 of the Bill appear to engage Article 6 (right to a fair trial), Article 1 of the First Protocol (protection of property) and possibly Article 8 (right to respect for private and family life) of the European Convention on Human Rights (the Convention).

16.     The right to take action in respect of a breach of the Convention is afforded to a person who is a victim within the meaning of Article 34, which does not extend to a governmental organisation. This arguably excludes the Tote, but if it is nevertheless to be regarded as a "victim" for purposes of the Convention, the transfer of its property under clause 2 to the successor company could engage Article 1 of the First Protocol on the basis that it would deprive the Tote of its possessions. However, such a transfer is considered to be justified because the Government believes the vesting of the Tote's property in the Tote's successor as part of the creation of a separate company (registered under the Companies Act 1985) prior to its transfer to the private sector is in pursuit of a legitimate aim in the public interest.

17.     The power to issue an exclusive licence to carry on pool betting business on horse racing in Great Britain under clause 8 engages Article 6 and Article 1 of the First Protocol. Article 6 is engaged because under clause 8 the Secretary of State has the power to require the exclusive licence to be revoked by the Gaming Board. However, before doing so she must take into account the matters listed in subsection (1) of clause 9. The Gaming Board also has the power to revoke the exclusive licence for breach of any of the conditions attached to it. In either case, where the Secretary of State requires revocation or where the Gaming Board revoke for breach of a condition, the Secretary of State and Gaming Board are required to state reasons for the decision to revoke. It is considered that the ability of an aggrieved party to seek judicial review means these clauses are compatible with Article 6. As far as Article 1 of the First Protocol is concerned any expectation on the part of the successor company that it will be granted an exclusive licence and that it will remain in force (particularly given the terms of clause 9(1)) does not amount to a "possession" within the terms of the First Protocol. Where the Gaming Board revokes for breach of a condition there is no deprivation under Article 1 of the First Protocol because the successor company does not have a legitimate expectation to continue its pool betting activities otherwise than in accordance with the terms of the licence.

18.     Clause 9 engages Article 6 and Article 1 of the First Protocol during the period of the exclusive licence. Subsection (3) of clause 9 makes it an offence for any person other than the successor company to do anything that the successor company is authorised to do under the exclusive licence except in accordance with an authorisation given by the successor company. The prosecution of the offence - treated as if it were contrary to section 4(1) (restriction of pool betting on track) or section 4A(1) (restriction of pool betting off track) of the 1963 Act - will be heard by an Article 6 compliant court. Where, by virtue of subsection (3) of clause 9, such an offence has been committed then under section 11 of the 1963 Act the court has power to order forfeiture or cancellation of a bookmaker's permit. This provision is compatible with Article 6 since such a power will be exercised as part of the criminal sentence following a court hearing which is itself Article 6 compliant. The clause is also compatible with Article 1 of the First Protocol, because the Government believes that it is proportionate and in the public interest as helping to prevent crime, to allow forfeiture or cancellation in appropriate circumstances.

19.     Under clause 10, when there is no exclusive licence in force, new section 4 (restriction on pool betting on track), section 4A (restriction on pool betting off track), and section 4B (regulation of horserace pool betting) will replace the current section 4 of the 1963 Act. As far as the offences under new section 4(1) and section 4A(1) are concerned no additional Convention rights are engaged beyond those discussed in the previous paragraph and the same arguments apply.

20.     Section 4B introduces Schedule 1A, Part 2 of which specifies conditions to be complied with by those carrying on horse race pool betting business and Part 3 of which provides for the supervision of pool betting business. In relation to breach of conditions leading to an offence under new section 4 or section 4A, no additional Convention rights are engaged beyond those discussed in paragraph 18 above and the same arguments apply. In relation to the exercise of supervisory powers the only Convention right engaged, beyond those discussed in the previous paragraph, is Article 8 (right to private life), which arguably, might be engaged where the right to request entry, or to request a document, or examine a document is exercised at a person's home because he is conducting a pool betting business there. It is considered that these rights are necessary in the interests of prevention of crime and to ensure proper regulation of pool betting in the interests of the betting public.

21.     Further offences are provided in paragraphs 21 and 23 of Schedule 1A, but no additional Convention rights are engaged beyond those already identified in the previous three paragraphs and the same arguments apply.

Clause 1: Dissolution of the Tote

22.     Clause 1 provides for the Secretary of State to abolish the Tote on an appointed day. It is intended that this will take place as close to the point of sale as possible.

Clause 2: Successor Company: transfer

23.     Clause 2 makes provision for the transfer of the Tote's property, rights and liabilities to a company wholly owned by the Crown. The transfer will occur automatically on the appointed day.

Clause 3: Clauses 1 and 2: supplemental

24.     This clause explains in more detail how the measures contained in clauses 1 and 2 will take effect.

25.     Subsections (1) and (2) ensure that anything done or in the process of being done by or in relation to the Tote is to be regarded as having been done or continued by the successor company.

26.     Subsection (3) operates so that after the appointed day any reference in any document or agreement to the Tote is treated as a reference to the successor company. Equivalent provision is made in relation to members and officers.

27.     Subsection (5) provides that any property, rights and liabilities of the Tote vest in the successor company without any requirement for further legal formality.

28.     Subsection (6) ensures that the Transfer of Undertakings (Protection of Employment) Regulations 1981 will apply to the transfer to the successor company safeguarding existing rights of employees, including the right to be consulted.

29.     Subsections (8) and (9) provide that the Secretary of State shall consult the Tote before nominating the successor company and before appointing the appointed day.

Clause 4: Tax

30.     Subsection (1) provides that for all income tax, corporation tax and capital gains tax purposes the successor company is to be treated as if it had always been the Tote, and the transfer itself will not have any tax consequences.

31.     Subsection (2) ensures that liability to stamp duty does not arise on the vesting of the Tote's property in the successor company, or on certain preliminary transactions.

Clause 5: Pre-sale of shares, &c. to government

32.     Clause 5 provides for the issue of securities in the successor company to the Secretary of State and ancillary matters.

33.     Subsections (1) and (2) enable the Secretary of State to request the successor company to issue securities to herself or her nominee. The request may specify the nature and value of the securities to be issued, the timing, and terms of the issue. Securities are defined in subsection (4) of clause 12 to include shares, debentures, bonds and other securities.

34.     Subsection (3) provides that a request made under subsection (1) which requires the issue of shares must specify the nominal value of the shares to be issued and the shares are to be issued as fully paid. The subsection makes provision for the treatment of shares under the Companies Act 1985 and Corporation Tax Acts as fully paid and subsection (4) makes equivalent provision for the treatment of debentures.

35.     Subsection (5) prevents the Secretary of State making a request after the successor company has ceased to be wholly owned by the Crown.

36.     Subsections (6) and (7) require the Treasury's consent to be obtained before a request is made under subsection (1) and before the disposal of a security issued pursuant to a request under that subsection.

Clause 6: Accounts

37.     This clause deals with the preparation of accounts by the successor company. The effect of this clause is to take, for accounting purposes, the value of the assets etc. in the Tote's accounts at the end of the last accounting period before dissolution and apply those values to the successor company's accounts. It is also provided, by virtue of subsection (4), that any movement in those values, for example through sale or disposal, between the end of the Tote's last accounting period and dissolution will be reflected in successor company's accounts by treating whatever was done by the Tote in that period as having been done by the successor company.

Clause 7: Shadow directors

38.     Clause 7 disapplies the provisions in the Companies Act 1985 relating to shadow directors in respect of the Secretary of State and the Treasury whilst the successor company is wholly owned by the Crown.

Clause 8: Exclusive licence

39.     Subsection (1) allows the Secretary of State to request the Gaming Board ("the Board") to issue to the successor company an exclusive licence to carry on pool betting business (in any form) in connection with horse racing in Great Britain and to conduct betting on terms determined by reference to pool dividends.

40.     Subsection (2) enables the Secretary of State to specify the duration of the licence and other terms and conditions.

41.     Subsection (3) makes provision as to when a request made by the Secretary of State may be exercised. In particular, once a licence has been issued under subsection (1) she may not make a further request for the issue of another exclusive licence. The intention behind this provision is to ensure that where, for example, an exclusive licence has been issued and subsequently revoked, the Secretary of State is not to have the power to request the Board to issue another exclusive licence.

42.     Subsection (4) provides that the successor company may authorise other persons to conduct pool betting along similar lines to the Tote's current practice. For example, those who wish to organise a totalisator at point to points will have to be authorised by the successor company. Paragraph (b) makes it clear that no person other than the successor company or a person so authorised may do anything that the successor company is authorised to do under the exclusive licence.

43.     In relation to authorising others in respect of pool betting under subsection (4), subsection (5) allows the successor company to give an authorisation on terms and conditions, including as to payment.

44.     Subsection (6) enables the Board to revoke the licence if so required by the Secretary of State or if they think a term or condition of the licence has been breached. They may also be required by the Secretary of State to revoke it, but only as explained in paragraph 45 below. Subsections (7) and (8) require reasons to be given for any revocation.

45.     Under subsection (9) the Secretary of State may only require revocation under subsection (6) while the successor company is wholly owned by the Crown and during a period of 14 days after it ceases to be wholly owned by the Crown. A 14 day transitional period has been provided for in case there should be any serious problems with the transaction emerging after the sale. Subsection (9)(b) provides that the Secretary of State's power to revoke after the sale has taken place during this 14 day period is subject to any undertaking which may have been given in order for the sale to proceed, for example as to any adjustment that may be made to the price.

46.     Subsection (10) provides that the exclusive licence may not be renewed. It may also not be issued or revoked otherwise than in accordance with the provisions described above.

Clause 9: Section 8: supplemental

47.     Subsection (1) sets out the matters the Secretary of State must consider in making a request for the issue or revocation of an exclusive licence. These embody the government's key aims for the legislation relating to the exclusive licence and certificates of approval, namely protecting the interests of those who bet on horse races, and of the sport of horseracing, as well as the objectives of preventing crime and disorder, ensuring that betting is fair and open and protecting children and the vulnerable.

48.     Under subsection (2) while the exclusive licence has effect, the restrictions on pool betting on and off track in the 1963 Act (currently in section 4 and subsequently as substituted by clause 10) will not apply in relation to anything done by the successor company in pursuance of the exclusive licence and anything done by any person authorised by the company under that licence.

49.     Subsection (3) provides that while the exclusive licence has effect the successor company and anyone authorised by it will be able to apply for a betting office licence, under section 9(2) of the 1963 Act, in respect of the activities covered by the exclusive licence. The subsection goes on to make clear that a betting office licence held by another operator will not override the protection given by the exclusive licence in clause 8 to the successor company and authorised persons. The effect of paragraph (c) of clause 9(3) is that in the case of the successor company and authorised persons the disapplication of section 1(1) of the 1963 Act (restriction on use of premises for betting) which results from holding a betting office licence will only extend to the activities covered by the exclusive licence.

50.     Subsection (4) ensures that during the period of the exclusive licence the successor company and persons authorised by it are not, by virtue of the exclusive licence alone, to be treated as bookmakers. This reflects the present operation of the 1963 Act in relation to the Tote.

51.     Subsection (5) provides that any person who, without the authority of the successor company, purports to do anything which that company would be able to do under the exclusive licence is to be treated as having committed an offence under new sections 4 to 4A.

52.     Subsection (6) provides the successor company with a statutory right, subject to the procedural rules specified in subsection (7), to enforce in the civil courts an infringement of its licence. This right is similar to that provided in section 14(2) of the 1963 Act.

Clause 10: Control when no exclusive licence

53.     This replaces section 4 of the 1963 Act with three new sections: new section 4, section 4A and section 4B and a new Schedule 1A. Under new section 4 a person commits an offence if he carries on a pool betting business on track unless:

  • it is in connection with horse racing which is carried on -

    —     by the holder of a bookmaker's permit,

    —     on an approved horse racecourse,

    —     as long as horse racing takes place on that day,

    —     in accordance with the regulatory regime in Part 2 of Schedule 1A, or

  • it is in connection with horse racing which is carried on -

    —     in accordance with a "point-to-point" exemption notice, issued by the Gaming Board to a single course, on which horse racing is carried out on no more than four days a year and to which the Gaming Board may attach other conditions relating to the operation of the totalisator and the publication of betting arrangements.

  • it is in connection with dog racing which is carried on -

    —     on a dog racecourse which is a licensed track,

    —     by means of a totalisators operated -

  • in accordance with section 16 (totalisators on licensed tracks) of the 1963 Act, and

  • by the occupier of the track or by a person authorised by him in writing.

54.     Under section 4A a person will commit an offence if he carries on pool betting business otherwise than on a track, unless:

  • it is in connection with horseracing and is carried on -

    —     by the holder of a bookmaker's permit,

    —     in a licensed betting office,

    —     in accordance with the regulatory regime provided for in Part 2 of Schedule 1A,

  • the person is a registered pool promoter in accordance with Schedule 2 (registration and conduct of business) to the 1963 Act,

  • the pool betting business is carried on in accordance with a licensed inter-track betting scheme under Schedule 5ZA (licensing of inter-track betting schemes) to the 1963 Act.

55.     Section 4B introduces a new Schedule (Schedule 1A) which provides for the regulation of pool betting business in connection with horse racing.

56.     The effect of subsections (2) and (3) of new section 4B is that where a condition imposed by Part 2 of Schedule 1A requires action by a person after the conclusion of a race or set of races and that action is not taken he will be treated as not having carried on a pool betting business in accordance with Part 2 of that Schedule. The consequence of this is that in relation to pool betting on track an offence is committed under new section 4(1) (read with new section 4(2)(d)) and in relation to pool betting off track under new section 4A(1) (read with new section 4A(2)(b)).

57.     The effect of subsections (4) and (5) of new section 4B is that where a person who conducts pool betting in connection with horse racing fails to comply with a requirement of Part 3 (supervision) of Schedule 1A he will be treated as having failed to carry on a pool betting business in accordance with Part 2 of that Schedule. The consequence of this is similar to that explained in the previous paragraph, namely that an offence will be committed by virtue of new sections 4(2)(d) or 4A(2)(b).

Clause 11: Preparatory work by the Tote

58.     This clause enables the Tote or the Secretary of State to do anything necessary to facilitate the sale of the Tote.

59.     Subsection (2) gives the Secretary of State the power to request information or assistance and to direct the Tote in connection with the sale of the successor company.

 
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Prepared: 3 December 2003