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6 Jul 2005 : Column 91WH—continued

On-course Betting

11 am

Mr. Iain Duncan Smith (Chingford and Woodford Green) (Con): The Minister may find, as I did, that this issue is immensely complicated; but he will know that on-course bookmaking on an approved race course is rendered legal by reason of the provisions of section 1(5)(a) of the Betting, Gaming and Lotteries Act 1963. As well as responsibility for the administration and conduct of on-course betting rings, the National Joint Pitch Council—NJPC—has a stated aim of encouraging the continuing development of on-course betting markets for the benefit of racegoers, bookmakers, race courses and, through a strong starting price, off-course punters.

Prior to 1998, most in the industry recognised that there was some need to modify the structure of on-course betting. That is why it was recommended by the Horserace Betting Levy Board review committee and agreed by all interested parties that the seniority system used by the old regime to determine pitch positions be maintained in principle, but amended to provide greater flexibility. A system of transferring seniority by auction was then introduced by the expiry date of 7 October 1998. The old regime lists of bookmakers at each racecourse were to be merged into a new methodology for determining the various pitch positions. The NJPC was meant to design this methodology, which had at its heart the existing seniority of bookmakers.

I am concerned, however, because what I have seen and what I have heard from several people suggests that the NJPC utterly failed to implement the methodology fairly, impartially and reasonably.

Ms Celia Barlow (Hove) (Lab): I thank the right hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) for giving way, and I should like to support his raising of the issue by highlighting the case of my constituents Donald and Garry Morrill, who have been adversely affected by the changes introduced by the NJPC. At their home racecourse of Brighton, they had a seniority position of No. 6 in 1998; however, after the changes, they were allocated position No. 14. Such changes have been reflected at race courses throughout Britain, and it has caused my constituents a great deal of financial hardship.

Mr. Duncan Smith : The hon. Lady will find that we have become one family, because one member of that family lives in my constituency. We may be looking across the Chamber at each other, but perhaps we have just joined hands. I hope that in doing so I do not ruin her future career.

I became concerned about this matter, because the more I looked into it, the more I realised that the process had been skewed at the outset. I rarely apply for Westminster Hall debates or for Adjournment debates in the House unless I think that a genuine injustice is taking place, and I really believe that that is the case.

I have become interested in the matter, much like the hon. Member for Hove (Ms Barlow), because my constituent John Morrill, from the same family, and all his other relations to whom she referred, have all been involved historically in the industry. Their livelihoods
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have been damaged as a result of the NJPC's failure to do as it was meant to. However, the Morrill family are not alone. Many more have suffered as well, but they have been unable for various reasons to take up the issue. Part of the problem is that when bookmakers have challenged the process, the NJPC and the Horserace Betting Levy Board have failed to provide any clarity or define why there were discrepancies and why the methodology was not evenly applied to national, consistent criteria, as agreed by all parties.

My constituents and those of the hon. Lady trade under the name H. Murrel and Taffy, and between them they have many years' experience of trading as on-course bookmakers. In 1963, Mr. Don Morrill was granted a bookmaker's permit under the provisions of the 1963 Act. The family business of bookmakers has been conducted by John Morrill's family, Don Morrill's family and now Garry's family since 1929, when their grandfather started the business in his own right. The business has strong family links.

A seniority listing means everything to a bookmaker, so the start date when they commenced trading is crucial. It is vital, and I say to the Minister that until one gets one's head around that point, it is difficult to understand these matters. My constituents and those of the hon. Lady, like all other bookmakers, guard their start dates as most of us would guard our birth certificates. Ultimately, they are the only asset that a bookmaker has.

At the heart of the present failure lies a discrepancy. Although the NJPC agreed that it would incorporate the existing seniority lists from the different bookmakers' protection associations, it has admitted—in part and rather grudgingly—that it did not do that as per the agreement. After it contrived the methodology, it now seems to be blaming everyone else for why that did not take place. For example, I have a letter that was sent by the then chief executive of the NJPC on 6 November 2001 to a constituent of mine. The letter states: "The Southern BPA lists"—the seniority lists—

That is utter nonsense. As I understand it, he is backed up by Mr. Brack—I want to come back to this—who states quite a lot that there is no connection between the bodies and talks about their being independent, yet the words used almost seem like they were drafted by the same person.

In a statement in 2004, Mr. Brack said: "The affiliated associations"—I have referred to them already—

One would think that the process could not be undertaken if they did not supply their lists, yet my constituent wrote to those same groups and received a letter stating that

Another letter went on to say that

of the same year.
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Let us take the version from the levy board and the NJPC and compare it with yet another document, which is a letter that was written almost at the same time, in 2001. It was from the same person, Mr. Reams, who was the chief executive who made the previous statement, and was written to a Mr. Overton, who was involved in the industry. Mr. Reams answered a question from Mr. Overton by stating:

That completely knocks the first view on the head. How can there be any seniority if apparently the lists were never received and if they were not in order? Yet, somehow, in that letter, Mr. Reams is able to assure the individual concerned of his seniority. That is utter nonsense.

My constituent and others have been involved in this dispute with the NJPC for nearly six years and are no closer to an agreement. Even a cursory glance at this process suggests that the NJPC is engaged in a protracted attempt to grind down my constituent and the hon. Lady's constituents in the hope that they have a limit to their resources that is less than that of the NJPC.

Perhaps there is a need to explain why this argument over seniority matters so much. I will attempt to do that. From October 1998, the NJPC introduced a new system of seniority whereby the seniority positions held by bookmakers became seniority positions on what is essentially a picking list. That resulted in a modification to the seniority system in that those on the bookmakers' list for a ring became entitled, in order of number on the picking list, to choose their pitch in order of seniority, instead of simply being allocated the next highest numbered pitch available after allocation to more senior bookmakers in the ring.

The 1998 rules also enabled and permitted trading in seniority positions so that a seniority position now had a realisable capital value—I want to return to that later. For my constituent and others, we are talking about something that is significantly less than was the case with the equivalent positions that they held in 1998—the hon. Lady has alluded to this—because they have been given an improper allocation pick from which to choose a pitch. The position of the pitch is all-important. It helps to determine market price and the access of would-be punters.

The relationship between the NJPC and the levy board is well worth considering. I advise the Minister to think carefully about this. We hear constant assurances that they are separated. I know that the levy board is due to be wound up, but I do not think that that has a bearing on the matter because the history of this is part of the injustice. I am concerned about the peculiar nature of the relationship.

The NJPC derives its powers from the certificate of approval granted to racecourses by the levy board. Recently Mr Brack, chief executive of the levy board, said in an interesting statement that it is not

He goes on to say:

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That is interesting, but if it is so independent, how is it that the levy board has the final say on the rules governing the operation of the NJPC? If it is so independent, how is it that the levy board also contributed about £50,000 towards the costs incurred by the NJPC in dealing with Office of Fair Trading investigation?

The NJPC is part of the levy board's pension fund, and when I examined its accounts I was staggered to find it is in deficit by £29 million. How is it that the levy board, which is involved with the NJPC, has decided to sort out, resolve and pay off that deficit with no reference to the fact that the NJPC is a partner and should also make some contribution? It is also a matter of some concern that this money should be used for that purpose in the first place. That is the most peculiar independence I have ever heard of. It is certainly is not the definition of the independence applied to a nation state, and it does not apply here. Those bodies are not independent: they are one and the same.

I am concerned that the NJPC, under that guise, has gone on to create further confusion because it has said that it is not contractually bound or obliged to the bookmakers. Oh really? I thought that was what it was set up for in the first place. Every day, as I understand it, if a licensed bookmaker wishes to operate from the ring, they have to sign the official badge box list and attendance register and pay £11 to the NJPC. One might ask, "What for?" I would like to read what is written on that list that must be signed every day, and on the badge that the racecourse supplies:

It also states that the rules are

On the badge from the racecourse it states categorically that the racecourse

that is, the rules of the NJPC. If it has no obligation or contractual obligation, what is the money for? Why are the bookmakers forced to sign some sort of contract, and what is the point of it all? One might ask what the point of the NJPC is in the first place if it discharges all of its responsibilities by a series of denials.

I turn to another area of real concern about the operation of the NJPC. There seem to be many concerns about the way in which some of the earlier—perhaps even current—transactions and sales of pitches were conducted. That leads me to concerns about the possibility of fraud. As we know, the NJPC retained a monopoly on the sale of pitch auctions: from 1998 to December 1999 it had a sales hammer turnover of £22 million which earned it a commission at 12 per cent.—before it was forced to reduce it—of £2 million in that year. However, I am concerned about how those matters were accounted for, which has led to suggestions of insider trading.

I shall draw the attention of the Minister to some documents that I have. When the NJPC conducted its business the rules were very clear. It was not supposed to deal with people who did not have a bookmaker's licence. However, I have a letter from the NJPC to a
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Mr. Nickels and an invoice that shows that the sale of what was essentially a bookmaking business took place to a Mr. Hyman. The NJPC confirms that:the sale of what was essentially a bookmaking business took place to a Mr. Hyman. The NJPC confirms that. It states:

The sale took place in December 1998—one year before that. So, the NJPC broke its own rules. It also broke its rules because it is supposed to sell not to an individual but to a registered company, which did not happen in this case. Furthermore, I have seen documents relating to much of the same process that show that the amount that the business was sold for did not go through the books properly. We are talking about a private sale—not the sale of a company—for £25,000, yet the invoice received from the NJPC, which includes its commission, demonstrates that the business was sold for a lower price.

I do not have reams of evidence, but I suggest that there are real problems and issues concerning what took place in the early years. There is a general undercurrent of feeling that if such things were happening in the City of London, we would not tolerate them. We would have looked into the problem. It would be referred to as insider dealing, which is not acceptable. However, because it is affecting racing, nobody really cares.

My last concern, which I want to explain to the Minister clearly, is about the way in which the new process for selling pitches opens the door to abuse, without proper checks and balances in the form of an organisation that we have respect for and believe has responsibility. I do not believe that the organisation has responsibility. Criminal money, possibly from outside the country, may be used. We hear stories abounding about Russian money and about others intent on perverting processes for their own ends. There is lots of money available. We have seen money travelling in a way that was not seen previously.

If an organisation gets control of certain pitches by the rails, it can begin to control the starting price. Controlling the starting price can lead to a skewing of what is, essentially, a marketplace. There are no checks and balances in which I have confidence. I have confidence in the organisation that is meant to be looking after the issue, but what I have read so far demonstrates that it is an organisation in which we can have little or no respect or trust. That is what my concern is about. Opening the door to large sums of money and possible future control without real checks and balances could be an absolute disaster.

The view of punters is much the same. They believe that the reduction in the number of those doing business in the ring leads to lack of real competition. The OFT agrees with that. Michael Singer, the former chairman of the National Association for the Protection of Punters, has said that

There is no other course but for a proper investigation of what is going on. The running and control of betting should be of serious concern to us. The concerns are that
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the industry is not under control. I understand why the NJPC is doing its level best to draw a veil over its early operations. It knows that once those operations are opened up to scrutiny, many bookmakers will apply to have their damaged careers rectified by the NJPC. It is blocking that.

The concerns about possible criminal involvement in the sale and purchase of pitches will grow. We need to do something about it now. Newspapers—the News of the World and others—are full of such stories. That is why I say to the Minister that an inquiry is required. The running of an important industry cannot continue without proper checks and balances. Were this any other important industry in Britain, that point would be accepted.

More particularly, those in my constituency, the constituents of the hon. Member for Hove and others demand natural justice. If the House stands for anything, it is to ensure that people such as those constituents, who are not big individuals in the business world, cannot be crushed by others and have their access to justice swept aside by those who refuse to give them proper redress. Those responsible for the issue are also responsible for decency, fairness and ensuring that the industry deals with such cases in a proper and reasonable manner. My constituents, those of the hon. Lady and many others demand that they get a proper hearing. I believe that we, and the people of Britain who take an interest in the matter, have the right to demand that an inquiry should take place before things get out of hand.

11.20 am

The Parliamentary Under-Secretary of State for Culture, Media and Sport (Mr. David Lammy) : In initiating this debate the right hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) has usefully drawn attention to a subject that is of tremendous interest to his constituents and to the constituents of my hon. Friend the Member for Hove (Ms Barlow), who made an intervention earlier. Some serious allegations have been made, and it is right and proper that I use the 10 minutes available to me to address them.

The issue is sensitive, and it would be inappropriate for me, as the right hon. Gentleman knows, to comment on the particular allegations that he made, particularly because those allegations are currently before the courts. There is a strict rule in the House that Ministers do not refer to matters that are currently before the courts.

I could not agree more with the right hon. Gentleman, however, that on-course bookmakers must, like all other sectors of the gambling industry, be properly regulated. In particular, I agree that it is essential that gambling should be crime-free, and carried out in a fair and open way. Those were the key objectives of the Gambling Act 2005, on which there was cross-party consensus. The Act will, for the first time, bring bookmakers within the jurisdiction of a new national regulator, the Gambling Commission. I want to return to that point but, given what the right hon. Gentleman has said, it would be useful for me to start my response by outlining the history of the establishment of the National Joint Pitch Council, the involvement of the Horserace Betting Levy Board and the Government's association with those bodies.
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As the right hon. Gentleman will know, the levy board is a non-departmental public body established by the Betting, Gaming and Lotteries Act 1963. Its main functions are to collect payments from bookmakers and to use them for the three statutory purposes set out in the 1963 Act: the improvement of breeds of horses; the advancement and encouragement of veterinary science or veterinary education; and the improvement of horse racing. Since 1972, the board has also had the responsibility for issuing certificates of approval to race courses, and providing for the location of betting rings for on-course bookmakers at those race courses.

At that time, the National Association of Bookmakers had responsibility for the administration of betting rings, under agreement with the Racecourse Association. However, in 1997, after seven years of disputes, that agreement was terminated by the Racecourse Association. In order to ensure that the betting rings were properly administered, the levy board instigated a review. Following an extensive consultation with all parties, it recommended that a new administrative body, to be known as the National Joint Pitch Council, should be established. It is a condition of the levy board's certificates of approval that race courses observe the national pitch rules that the board has endorsed. There are extensive rules on the conduct of those races—I do not know whether the right hon. Gentleman has studied them.

It is important to say that the NJPC is not a public body. Its functions are essentially administrative, and relate to the conduct of bookmakers on the race course. In a sense, it replaced an old perceived evil of the system being dead men's shoes—that is someone has something for life, passes on and someone else comes in. It was an administrative commercial arrangement between bookmakers on the race course. The NJPC introduced modernisation into betting.

Mr. Alan Meale (Mansfield) (Lab): I appreciate the Minister's explanation of matters, but I do not agree. I pay tribute to the right hon. Member for Chingford and Woodford Green (Mr. Duncan Smith). He made a marvellous introductory speech. The changes were less about new administrative rules and more about race courses selling pitches to the highest bidder. The fear that was expressed about the opportunity for people to move into racing to launder money is a real threat. Indeed, some one-day pitches were sold for enormous sums, such as £50,000, £60,000 or £70,000. My hon. Friend the Minister cannot slip aside such matters by saying that such practice was the result of new administrative measures. That was not the truth; it was about getting large sums to race courses.

Mr. Lammy : Such a practice was clearly used to change the old arrangement, which was dead men's shoes. It established an auction and is a commercial
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administrative arrangement. Of course, it is important to bear in mind that all bookmakers are licensed by magistrates throughout the country. The right hon. Member for Chingford and Woodford Green will know that, whenever there is a commercial arrangement, there is money behind that arrangement.

The right hon. Gentleman made serious allegations about the nature of the money. Of course, the Government are concerned about money laundering and bad money, but there has been an Office of Fair Trading inquiry. As for the particular case referred to by the right hon. Gentleman, two court cases have been lost or dismissed. In that sense, it is important that the Government deal with matters on the basis of the material that is available to us. He suggested that the introduction of the open auction of on-course betting pitches has allowed potential fraud or crime to infiltrate the market. He further implied that the NJPC is complicit in that infiltration.

It is important, as the intervention of my hon. Friend the Member for Mansfield (Mr. Meale) indicated by, to say that the auctions are open auctions for pitches that have been implemented by the NJPC at the request of the levy board to ensure greater freedom and transparency.

Mr. Duncan Smith : The auctions are not all open auctions. There are now private sales. The document to which I referred earlier covered unofficial private sales that no one has checked. It is that failure to keep a proper check and balance to which I draw attention.

Mr. Lammy : I am grateful that the right hon. Gentleman made clear the nature of the matter that he has introduced today. I took the opportunity to study the existing auction rules. They are extensive and they are available. I also contacted the levy board and asked whether the matter had been raised by the right hon. Gentleman in the past year with its chairman, Robert Hughes, former chief executive of the Local Government Association, and its deputy chair, Sir John Robb. There has been no such relationship in the past year, but the rules stand as they are; they are there to be interpreted.

The right hon. Gentleman will know that the Government have brought forward legislation and have said that they want to regulate gambling with the Gambling Commission, which will take over from the Gaming Board. An allegation of fraud or corruption must rightly be considered by the courts, the police and others and, to date, that has not led to a prosecution or conviction. When rules exist, individuals will choose to challenge them to say that they are unfair.

11.30 am

Sitting suspended until half-past Two o'clock.

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