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Westminster Hall

Wednesday 4 July 2007

[Derek Conway in the Chair]

Gambling Act (On-course Bookmakers)

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

9.30 am

Mr. Jim Devine (Livingston) (Lab): Thank you for allowing us to have this debate, Mr. Conway. First, I congratulate my hon. Friend the Minister on his new ministerial role and thank him for taking time out to come to the Chamber this morning. People might ask why we are having this debate, because bookies do not have a very good reputation with a lot of people. In fact, they are described as pickpockets who pay people the courtesy of allowing them to use their own hands. That is very unfair, because bookmakers bring a lot to racing, particularly through race track pitches. The last time I spoke in a debate like this, it was the week of Cheltenham and I gave out a tip for a horse, which came nowhere. What I did not realise was that half the staff who work in the Palace had bet on that horse, and some have not spoken to me since then.

I want to draw the Minister’s attention to a situation that is of grave concern to all bookmakers operating in the trackside betting industry. Under the Gambling Act 2005, hundreds of bookmakers throughout the United Kingdom stand to lose thousands of pounds in accrued business assets, because the Racecourse Association has decided that, as of 2012, it will no longer acknowledge a bookmaker’s list position. A bookmaker’s list position determines their choice of pitch, or pitches, on a race course. The higher up the list position a bookmaker is, the greater the choice of pitches on any given day. As one would imagine, the position of a pitch on the race course has a substantial effect on the revenue that a bookmaker can hope to make from the day’s racing.

Before 1998, such allocations were made on the system of inherited seniority, which enabled the priority of pitch allocations to remain within a given family of bookmakers. That outmoded practice was abolished in 1998, as it was rightly felt that it restricted access to new blood within the industry. Obviously, the concept of any system of inherited privilege should always be challenged in a just and fair society—I am sure that Members of the other place will wholeheartedly agree with that.

From 1998, the rules were changed so that a bookmaker’s list position, which at the beginning of that year was still based on the outmoded system of seniority, could be traded. Their greatest asset—the order in which they chose their trackside pitch position—could therefore be sold. That allowed bookmakers to realise the financial worth of years, and often generations, of hard work in the industry. To put that into a financial context, an official of the soon-to-be-defunct National Joint Pitch Council—the body that oversees the allocation of pitches—
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recently estimated the total value of bookmakers’ positions to be in excess of £100 million, a not inconsiderable sum of money.

The change in the rules has allowed established bookmakers to expand their businesses and others to enter the industry. As was predicted in 1998, fresh blood is entering the system and it has worked effectively. The RCA is no doubt aware of the worth of the pitches. Although it is right to say that it owns the physical pitch, it has previously had no say in which bookmaker occupies which pitch. If the RCA were to control the allocation of pitches, the accrued worth of years of hard work from bookmakers would transfer to it in the blink of an eye.

Many bookmakers have invested thousands, and in some cases millions, of pounds in their list positions. I do not believe that, when the 2005 Act was first proposed, the Government intended to deprive so many individuals of their commercial equity. An article from The Guardian, published on 21 June, mentioned a man named Barry Johnson who had spent £1.25 million to buy 34 pitches in the south and midlands. If we continue to take the present position, that investment, made months ago, would disappear come 2012.

If the RCA proceeds as it intends, from 2012, all pitch positions will be rented out on any given day to the highest bidder. That will leave independent bookmakers, regardless of their previous list position, to compete with the larger corporate betting companies that will, no doubt, take advantage of the new system. In practice, we could face a monopoly whereby the big three or four bookmakers would determine the prices not only on the high street but on the track as well.

Such a monopoly is not acceptable. To put it simply, many independent bookmakers will have no option but to leave the industry, as worsening pitch positions lead to a loss of revenue. Not only that, but their previous asset, their pitch position, will have zero value. That will render their investment, personal or financial, completely worthless. There is a great danger that our independent bookmakers will be priced out of the market by the larger, corporate betting companies, many of whom would, no doubt, pay whatever cost for the most prestigious positions on a race course. That would have a devastating effect on not only the independent bookmaking industry, but the image of horse racing in general.

For those who purchased their list positions after 1998 from established bookmakers, the position is arguably even more unjust. They have purchased their list position at considerable expense and they are being told, despite assurances in good faith when the purchase took place that their list position was for life, that those assets will be rendered worthless as of 2012.

Modernisation should not result in the loss of millions of pounds worth of accrued assets for independent bookmakers. When a business has been established and built by a family, either to pass on from generation to generation or as an asset to sell at a later date, surely it is only fair that that family can trade that asset itself. The RCA has made no provision for, or even mentioned, any form of compensation for the bookmakers whose assets will be worthless.

Horse racing remains one of the United Kingdom’s best-loved sports and events, such as the grand national, are enjoyed the world over. Our independent bookmakers
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are an essential part of the industry. They bring a lot of fun and competition to the race track. We in both Houses should do everything in our power to ensure that they can continue in their chosen profession.

I believe the RCA’s decision to ignore long-established and regulated list positions from 2012 is not in the spirit of the 2005 Act as intended. When the Act was first proposed, much emphasis was placed on the regulation of casinos. Certain consequences for other sectors of the gambling industry, particularly trackside bookmakers, were perhaps not fully considered.

I therefore urge my hon. Friend the Minister to revisit this important issue with the view to retaining the current system of list positions for trackside bookmakers. I fear we are in danger of doing a grave injustice to many individuals who have worked so hard in building up their livelihoods, and I encourage the Government—in particular, my hon. Friend—to address the issue with the utmost urgency.

9.39 am

Ms Celia Barlow (Hove) (Lab): I congratulate my hon. Friend the Member for Livingston (Mr. Devine) on securing this important debate and the Minister on his appointment. I thank him for giving his time to an issue that affects the livelihoods of so many. I wish to join my hon. Friend the Member for Livingston in bringing it to the attention of the House, as I believe that it will have serious repercussions for thousands of people involved in the bookmaking industry.

A bookmaker’s position on a race course has a significant impact on the value of his business. The closer a pitch is to the finishing line, the greater the revenue is likely to be. The bookmaking community has always worked hard to regulate itself to enable the fairest possible system of pitch allocations on race courses. To allocate highly valuable pitches in the fairest manner possible, trackside positions are based on the pick list system, which, as we have heard, replaced the previous seniority-based system in 1998. Under that system, the longer a bookmaker had been operating, the greater their seniority and the better their trackside position.

Seniority could be handed down only from father to son, which adversely affected some of my constituents. That was why that method was felt to be outdated in the modern horse racing industry in the late 1990s. The pick system, which replaced seniority, enabled bookmakers to trade their positions on any given pick list with any other individual or business. In other words, their seniority could be sold.

Many of the bookmakers that make up our trackside bookmaking industry are family-run businesses that have built up their credibility and reputation over generations—in some cases, over more than 100 years of hard work. Their positions in the pick list reflect that. Due to the close-knit community of bookmakers, each one in an area is aware of and respects the positions of the others.

Unfortunately, as in many other family-run businesses that have been established for generations, the younger generation may not wish to continue in the industry. Many long-standing family bookmakers that had operated under the previous system took the opportunity of the
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new rules to expand their businesses further by purchasing positions on the new pick lists as other bookmakers left the industry. Since the most recent rule changes were introduced in 1998, bookmakers have ensured that each allocation is distributed fairly on any given racing day. The pick system has been respected, acknowledged and adhered to by every bookmaker in the United Kingdom.

Whenever there is a change in the law, as was the case with the abolition of seniority, it is right for the House to do all that it can to protect the assets of those affected. Such forethought was applied in 1998, when the initial positions on the pick list were allocated based on a bookmaker’s seniority. As most hon. Members present know, and as the Minister may be aware, there were some disputes about that allocation, but that is not the subject of the debate.

While the change in the law has resulted in much-needed new blood entering the bookmaking industry, it was seen as a natural evolution of the previous system. In fact, most bookmakers welcomed it. Their support was guaranteed because we as a Government had ensured that the value of their accrued assets was protected. In 1998 the Government acknowledged that it would be unfair for accrued seniority simply to vanish and evaporate when a bookmaker wished to cease trading. The Government-appointed Horserace Betting Levy Board allowed the trading of list positions, which meant that a bookmaker’s greatest asset—the position of his pitch on a race course—could be sold. The worth of a pitch position can often run into tens of thousands of pounds or in some cases, as we have heard, more than £1 million. A business that had been established for many years was therefore able to benefit from its accrued seniority by selling its list position. That system has worked successfully for almost 10 years and all the bookmakers work to the rule and respect it.

As we have heard, and as I have been told by several bookmakers in my constituency, the Racecourse Association will cease to recognise list positions from 2012 as a consequence of the coming into force of the 2005 Act later this year. That interpretation of the Act will cause many in the industry to lose assets that often constitute a lifetime’s work. Indeed, they have already done so simply because of the announcement.

Many bookmakers are family-run businesses and a list position can be handed down from generation to generation. The livelihood of children, grandchildren and great-grandchildren of bookmakers has suddenly evaporated, which I am sure was not the intention behind the 2005 Act. Many in the industry see the Racecourse Association’s interpretation of the new rule and refusal to acknowledge pitch positions from 2012 as nothing less than industrial theft. I would hesitate to use such terms, but that is none the less a useful indication of the depth of feeling, as is the number of hon. and right hon. Members here today.

Perhaps a good analogy would be that the situation is the equivalent of owning the freehold on a home, only to be informed that not only has the freehold been rescinded, there are now only five years left on the lease. Any such property would be greatly reduced in value, if not made worthless. The situation has come about because the Horserace Betting Levy Board will no longer take any responsibility for the issuing of certificates of approval for bookmakers. Under the Betting, Gaming and Lotteries Act 1963, the price of admission to a race
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course for a bookmaker has been limited to five times the price of public admission to prevent race courses from charging unrealistic figures for the better-placed pitches.

Under the new Act there is no provision for a set amount to be paid by bookmakers to secure a pitch. That has allowed race courses to state their intentions to determine in commercial negotiations with betting operators the terms by which they will stand in relevant areas and where they will stand relative to one another. The result is that following the five-year “grace period” allowed for in the Act, from 1 September 2012 race courses will not recognise lists or transfers of picks between betting operators, and the current system of a pick list based on bookmakers’ seniority will be set aside in favour of one awarding placements to the highest bidder. Many family-run businesses will find themselves unable to compete with the larger bookmakers, which are very large organisations. Despite the positions of the family-run businesses on the pick lists, they will find themselves further and further down the track, with the correlating substantial loss of earnings and of the true flavour of the track.

For those who have bought their list positions from established bookmakers for considerable sums, the situation is even more distressing. Those who bought them at auctions held by the National Joint Pitch Council were given a clear indication that the placements would be secure for their lifetimes.

The Parliamentary Under-Secretary of State for Culture, Media and Sport (Mr. Gerry Sutcliffe): I am sorry to interrupt my hon. Friend’s speech, but this is a crucial point. What is the evidence that the NJPC told people that their pitches were for life?

Ms Barlow: The basis of the auctions that were held from the beginning of the 10-year period was that they were, in effect, selling freeholds. The people who bought pitch positions were not given any indication that they were buying them for 15 years. That is the basis of my argument. I appreciate the Minister’s point, but I challenge him to ask anyone who bought a pitch position in an auction whether they believed that they were buying it for a set term, or any term. If they were buying them for a 15-year term, not informing them of that at the time is tantamount to fraud.

The clear indication is that the bookmakers who are currently in good positions on a race course through their seniority, or through having paid for their pick placement from someone in such a position, could find their assets worthless. As I have said, they believed that they were buying their pitches in perpetuity. The 2005 Act makes no provision for protection of people in either scenario.

I wish to highlight the case of my constituent Adrian Pariser of Pembroke crescent, Hove, who trades as an on-course bookmaker under the name of Sam Harris. Mr. Pariser has an extensive family history in the bookmaking industry. He recently contacted my office to express his grave concerns regarding the soon to be implemented Act. He had problems at the introduction of the period and successfully challenged the position that he was given. I have already outlined how his concerns are echoed by many in the bookmaking industry. My constituents Don and Gary Morill are in a similar
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position. They have been in dispute over their original pitch positions for the past 10 years. They now feel that they have been hit by a double whammy—please forgive my unparliamentary language, Mr. Conway—as the value of even their disputed pitch will be taken away.

With pitch allocations switching to the Racecourse Association, the subsequent worth of the pitches will also transfer to the association. To put it simply, the association stands to make millions of pounds at the expense of the accrued assets of the very people who, arguably, are their most regular and long-standing customers. Ironically, the NJPC has been selling picks and gaining 6 per cent. commission on the auction sale, as I informed the Minister, plus a transport allocation of £150 a sale. Those sales continued up to and into this year. However, Caroline Davis, the Racecourse Association representative on the NJPC, said in an article in the Racing Post on Tuesday, 3 April, that the legislation that paves the way for change has been around for two years. During those two years, the NJPC has continued to auction pitches based on pick seniority, taking the commission and transfer fee.

I would also like to draw the attention of hon. Members to comments made in a letter written by John Stevenson, the chairman of the National Association of Bookmakers. Hon. Members may be aware that I have been critical of Mr. Stevenson in this very Chamber in the past. However, no one can doubt his depth of knowledge. In a draft letter to MPs, Mr. Stevenson estimated that the current value of pitches based on the pick lists is in excess of £100 million. Following implementation of the Act, those pitches would have no marketable value whatever. Mr. Stevenson’s conclusion is that the failure of the Act to redistribute the authority to provide bookmakers with a certificate of approval will allow a race course to confiscate bookmakers’ positions as of 1 September 2012. He also concludes that that could not have been the original intention of the Act. I am sure that most people in this Chamber would agree with that.

With the Act coming into force later this year, it is of vital importance that any potential avenues for genuine misunderstanding or even potential corruption be considered and addressed. I would therefore be grateful if the Minister, who is new to his post, could investigate the situation as a matter of urgency, and make it a high priority to identify what measures can be put in place to ensure that the agreed procedures for establishing placements for bookmakers can be continued.

The principle at stake is one of fairness for businesses that have for many years abided by current regulations and recognised the system of seniority. With the value of the pitches running to millions of pounds, it should not be the case that years of hard work by families or commercially-run businesses could be rendered virtually worthless. The intentions of the Racecourse Association will surely discourage many from entering the industry, contrary to the rationale behind the new rules that were introduced 10 years ago. If the Racecourse Association needs to raise greater revenue from bookmakers, there are alternatives that many consider to be more appropriate and fair; for example, a variation of the commission on sale position.

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