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Westminster Hall

Wednesday 14 March 2007

[Mr. Joe Benton in the Chair]

On-course Betting

Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Roy.]

9.30 am

Mr. Iain Duncan Smith (Chingford and Woodford Green) (Con): I and others requested this debate because of our concerns about the state of on-course betting. As the Minister will know—his officials will certainly have briefed him, and we have had a conversation about it—I have concerns related to a constituent and, beyond that, to wider issues about others who are involved in on-course betting. First, I draw attention to my entry in the Register of Members’ Interests.

The Minister and other colleagues will know, if they have looked back at it, that I held a similar debate two years ago in which I spoke about the problems emanating from the setting up of the National Joint Pitch Council back in 1998. My concerns were that the setting up of that body, which oversees and regulates the ring on race courses, was inefficient and chaotic. Many things were done without good reason and were unacceptable. Many bookmakers lost significant elements of their livelihood, and some lost their livelihoods altogether as a result, particularly in the southern area, which contains some of the most important race tracks in the world, such as Ascot, Newmarket and others that have become household names. At that time, I made the point that an agreement had been made to establish a formula whereby bookmakers would be integrated. It was essentially based on seniority, with any ties that would have been settled going back to starting dates.

I have since looked at the list from that time, and I have had two people do that integration, which was done without any great problem. One of them, Mr. Boden, made it clear that it could have been done in accordance with that formula, which was agreed at the time by the National Association of Bookmakers and the Horseracing Betting Levy Board as the correct way to do it. I showed in the last debate that, in the southern area, that was somehow not done as a result of key figures in the NJPC. That has led to incredibly weak and chaotic management of the NJPC, and bookmakers and on-course race-goers have suffered. That chaos has allowed other forms of betting to come on, and has disguised the fact that such things are often to the detriment of race-goers. I know that others will want to raise issues concerning Betfair online betting and so on. I am concerned that the bending and changing of the rules, and their arbitrary and chaotic nature, has led to the possibility of fraud in the system. It needs to be rectified immediately.

The issues have moved on since I last spoke to the House about them in July 2005. Almost everything that I have discussed since has confirmed my major concern about the behaviour of the NJPC and about its creation. More particularly, I have become much clearer about the extent to which the NJPC, the levy board and others have been prepared to disguise the events that took place and to block any call for a full inquiry.

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Let me deal with some of the points that I raised in that debate; I hope that colleagues have had the opportunity to read the speech. In particular, I want to deal with the chaos and the failure to register some of the issues surrounding VAT and sales. In the last debate, I raised concerns about possible VAT fraud as a result of the chaotic management. Since then, I have spoken to a number of bookmakers. One in particular—I am prepared to give his name to the Minister afterwards—maintained that the sale of his pitch was not registered correctly, and others have said the same. He believes that VAT was not paid correctly as a result.

I have also spoken to a rails bookmaker, who told me that when he sold his position in 1998 he paid a full fee of some 26 per cent., in accordance with the rules, on a sale totalling some £210,000. That amounted at the time to some £56,000. It was at that level because it was not done in the auctions. He went on to say that there is one rule for the smaller bookmakers, but that when it came to the larger ones the NJPC failed to stick by their own rules. In 1998, Morgan Grenfell bought Coral from Ladbrokes for approximately £390 million. It appears that, strangely, it did not incur transfer fees as the individual bookmaker had done. Coral had an official position on the rails at the time and, like Mr. Wallis—the individual to whom I spoke—would surely have been due under the rules to pay such transfer fees.

NJPC rule 17.4 states that on the registration of any change in the shareholding of any authorised bookmaker, when the authorised bookmaker holds a senior position or positions, the appropriate registration fee and transfer fee shall be paid for each seniority position held by the authorised bookmaker. Rule 5.6 makes it absolutely clear that if a case involves

of an authorised bookmaker

That is clear, but Mr. Wallis said that a spokesman for Coral told him that when such a suggestion of a fee was raised by the NJPC, Coral threatened to take the NJPC to court and the NJPC quietly let it slip.

Interestingly, a year later, when Cinven and CVC bought William Hill, they received no request from the NJPC for a transfer fee. It appears that there is one rule for the big groups and one for the small. I raise that point because it illustrates the chaotic and incredible management of the NJPC, which has led to most of the problems.

Mr. Richard Benyon (Newbury) (Con): Does my right hon. Friend agree that smaller on-course bookmakers have been hit by the closure of silver rings, for example, in places such as Kempton, and the threatened closure of silver rings at other race courses in the south of England? They lose a major capital asset, and the NJPC seems unable to co-ordinate any coherent compensation claim.

Mr. Duncan Smith: My hon. Friend is right. He makes an important point, which is illustrated by what I am saying, and I will develop it for the sake of the Minister. The organisation has been from the outset a complete chaotic mess. The result is damage to bookmakers
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and race-goers. The case that my hon. Friend raises is right; a number of people have said that to me, too.

Another example is the case of an individual trading under the name of Jack West, who told me that he discovered in the first auction in December 1998 that an unlicensed bookmaker—a pitch could not be bought by someone who was not a licensed bookmaker—had been allowed to purchase pitches against the NJPC’s rules. In fact, even worse, the NJPC had used the name of West, without his knowledge, to cover the transaction so that it would not appear that the sites were sold to unlicensed bookmakers. There were all sorts of similar things going on, involving Irish bookmakers and others who were not registered in the UK.

Mr. Brian Binley (Northampton, South) (Con): I had hoped to take part in the debate but sadly I have to leave to chair the Committee considering the Crossrail Bill. It is one of the great joys of my life, but I apologise for that.

My right hon. Friend has already raised two worrying issues. Does he think that the whole matter is a question of incompetence or is there slightly more to it? I have read the speech that he made on 6 July 2005, and it appears that he raised some important issues at that time. Those issues have not been taken note of and I fear that it is more than just incompetence. Something is going on that should be made known to the betting public of this nation who put considerable trust in the regulatory affairs of bookmakers. The issue is vital.

Mr. Duncan Smith: I am sorry that my hon. Friend has to go to chair the Committee on the Crossrail Bill—ever since I have been in the House people have gone to Crossrail and, as far as I can make out, some of them have never returned, which some people may say is a good thing.

The reality is that I do not know the answer to my hon. Friend’s question, but I know what bookmakers tell me and if any organisation in Britain with such an amount of money going through it was charged with running an operation in the way that the NJPC is run, there would have been inquiries from day one. If the stock market was in that position, there would be a hue and cry about it. However, with racing everything is swept under the carpet and nothing is done, which leaves the industry open to fraud. I am concerned that some of the people responsible and who benefited at the time are still around in the NJPC and are elsewhere involved in the decisions to be taken about racing in the future. Again, that would never have been allowed in any other organisation, yet in racing such issues go by the board.

Mr. Kevan Jones (North Durham) (Lab): Does the right hon. Gentleman agree that a key concern should be to protect the consumer—the person who puts the money on at the race course? Will he comment on the practice of laying bets off not on-course, but on the internet, which takes money out of the industry and is completely unregulated?

Mr. Duncan Smith: The hon. Gentleman has raised yet another vital point. I will not go into detail about that issue today because I know that other hon. Members wish to speak about it, but the chaos of the current
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situation has opened the door to exactly such a proposition. I have heard that some organisations offer the opportunity to regular or big punters to get the best price—deals that simply beggar belief, have damaged on-course racing and opened the door to those who are taking the money out, as he mentioned. I know that another hon. Member will make a speech about that issue, but I will say that if the NJPC had been set up and run properly, we would not be in such a position. The Minister needs to take account of that.

On the specifics of my last speech, I believe that the Department has been casual about this issue for too long. For years, the NJPC denied that when it was set up, it was meant to integrate the list for the southern area for reasons that I will come to in a moment. It denied that the full list of relevant seniority was passed by the southern area to the then general manager and chief executive, Mr. Clive Reams, in 1998. Although the denials of the levy board and the NJPC were emphatic at that time and at the time of my last debate in 2005, they have now had to do a complete volte-face and accept that those lists were provided exactly as they should have been and in sufficient detail to enable the integration in accordance with what was then the correct formula—the Stevenson formula. The levy board and the NJPC maintained in sworn statements in two court cases that those lists were not provided—that is a form of perjury. No one has raised that issue at all although it materially changed the cases in which they were involved. It is outrageous that for a period of time those officials continued those falsehoods and knew that their statements were not true.

We have also discovered that a bookmaker, Sam Harris, was at the same time threatening the NJCP with court action. The reason I have raised that important point is to ask why the NJCP and the levy board were maintaining that the changes made to the Stevenson formula—and we can prove that those changes happened—were done because the lists were not provided, which we now know not to be true. The answer is because the only rationale and reason for changing the formula was that the lists were not provided. Once that reason is eliminated, a pattern of events unfolds in which an individual has arbitrarily changed the rules. That individual, Mr. Reams, spoke to a journalist, and I have a note of the conversation in which Mr. Reams made it quite clear that he had changed the lists. He said that the change was put to the levy board yet it was clear that the board was told that it was necessary because the list was not provided correctly. He went on to say that many bookmakers lost out during the course of the change, which was not approved by the National Association of Bookmakers. I will show that not only was it not approved, but the association did not even know about it.

If the changes were not made because the lists were not given to the NJPC correctly, why were they made? I believe that that is linked to the case of Mr. Harris. In September-October 1998, Mr. Harris made the calculation that his pitch position at Ascot would not be correct as it was not good enough. He has clearly told me that he threatened Mr. Reams and the NJPC with legal action and, in the midst of that process, Mr. Reams arbitrarily changed the way in which disputes would be settled from starting dates to pitch positions. That had never been the agreed formula and no other areas had integrated
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bookmakers in that way. That would have benefited Mr. Harris and others. It is clear that in advantaging one or two people, many others were disadvantaged, including my constituent, Mr. Morrill.

Since then the Department for Culture, Media and Sport has carried out a cursory examination of what it described at the time as the timelines because, following a request from us, the Department had to decide whether an inquiry was necessary. I was astonished that despite the evidence given to the Department, we received a whitewash statement saying that everything was all right because changes had already been agreed. When I read the DCMS’s report I was astonished because I know that the views of those who were party to what happened did not bear it out. The key conclusion of the report is that the situation was okay because Mr. Reams had the power to make the changes and because the levy board was informed. However, we know that the levy board was not informed about the real reason why he made the changes and that there was no discussion with the National Association of Bookmakers, which was party to the original Stevenson agreement. It is an incredible supposition that those changes were ever agreed.

I remind the Minister that the NJPC had full responsibility for the integration of all bookmakers in accordance with the Stevenson report. Every other area did what it was requested to do by the NJPC and they all did so under the Stevenson formula. The one exception was the southern area, which did not because the NJPC acting under Mr. Reams, who decided arbitrarily to change the process, did so. Someone cannot change a formula applicable to the whole of racing in this country just for one area, without informing anyone they have done so or discussing whether others should also do so. What a chaotic mess. I cannot imagine any other national organisation acting in such a way.

Mr. Boden is a highly respected figure and was chairman of the National Association of Bookmakers when the Stevenson formula was set up. He subsequently became chairman of the Racecourse Association and SP Bookmakers Association—the midlands equivalent of the southern area Bookmakers Protection Association. He is absolutely clear that he and others who used the formula carefully applied it in their areas, as they had been requested to do. They did not make arbitrary changes as they knew that they were not allowed to do so. In the case of the southern area, for internal reasons relating to illness, the NJPC was requested to make the integrations. As we have established, it provided the list and the only reason for Mr. Reams seeking to change the formula would have been if he had received incomplete lists—we now know that he did not. Therefore, he must have had other reasons for changing the formula, which we are certain were linked with individual requests from bookmakers. However, worse than that, despite changing the formula he applied the Stevenson formula to some people and the new formula to others. Some people have benefited because they had pitch positions that are key and others have been left with seniority. In other words, not even the whole of the southern area was treated in the same way; some people were treated in accordance with Stevenson and, halfway through, Mr. Reams decided to do it differently for others.

A crucial letter was sent to the Department from Mr. Stevenson, in which he rebuts the series of statements
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made in the DCMS’s report and completely dismasts it. The letter shows that approval was never granted by the National Association of Bookmakers. In its report, the Department said that the integration of the southern area was carried out by Mr. Stevenson of the NAB and Clive Reams, the chief executive. In January, Mr. Stevenson responded to the report, saying:

He had nothing to do with the integration of those lists; it was left to Mr. Reams. It is amazing that that letter was not used to change the report.

Furthermore, the DCMS report maintained that Mr. Reams had faxed a letter to the southern area BPA referring to a revised formula that referred to the changes in the lists. In his letter responding to the report, Mr. Stevenson made it absolutely clear that he had

He made it clear that he had no understanding of that, and he went on to deny the DCMS statement that he had any knowledge that the so-called revised formula had been structured.

Worse than that, the Department’s report then made a significant number of sweeping statements saying that the number of appeals in the southern area was between 20 and 30, and that the appeal panel had judged them against the revised formula. Actually, there were some 300 appeals. Mr. Reams arbitrarily decided that only 20 or 30 should go forward to the appeals panel, at which he produced his summary statement—there was no other documentation—so that the panel could decide who should have been accepted and who should not. The panel accepted his statements. How remarkable.

Simon Hughes (North Southwark and Bermondsey) (LD): One of the problems seems to be that the appeals system is run by the original decision makers and that cases cannot be reviewed further by anyone independent of them. I referred a constituent’s case to the ombudsman, who said that he could not deal with it. He said that although he could deal with levy board decisions, the case involved an NJPC decision; the NJPC was responsible for appeals and there was nowhere else to go.

Mr. Duncan Smith: The hon. Gentleman is absolutely right. The biggest problem was that the people hearing the appeals were all rooted in the original process and had no independence. Mr. Reams sat in front of them and gave them the summary documents. One member said later that he thought it was all over pretty quickly and that he did not know what the hell it was about. They certainly were never told that a new formula was in place. I have an interesting point to make about that later. The hon. Gentleman has hit the nail on the head.

The key is that there were more than 20 or 30 appeals, and Mr. Reams had arbitrarily ruled the others out. It is remarkable—one could not imagine it happening in any other organisation—that those hearing the appeal were unable to draw on any minutes because no minutes were taken during the appeals process. How lucky! It is staggering that an appeals tribunal took place with no minutes taken; certainly none were in the files—very convenient, say I.

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Mr. Stevenson said in his letter—a letter that the DCMS refuses to pass on to my constituent—that to the best of his knowledge the national formula for the construction of the NJPC, unless it was the Stevenson formula, was not altered by anyone, and to suggest that the methodology was altered with his knowledge and agreement was “preposterous”. Here we have it. One of the key figures on the appeals panel, who was stated by the Department to have been present when the original changes were made, knew nothing of the changes or of a new formula. He was making decisions about bookmakers’ appeals on the basis of a formula that no longer existed; it had been changed but no one knew about the changes.

The DCMS is wrong. Mr. Reams did not give the correct reasons for the changes to the formula—and he did not inform the NAB that any changes had been made. As far back as September 2000, Mr. Marriott, the chairman of the NJPC, said that

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