Memorandum submitted by the Department
for Culture, Media and Sport (DCMS)
INQUIRY INTO
ON-COURSE
HORSERACE BETTING
1. There has recently been considerable
Parliamentary interest in the issue of the status of bookmakers'
pitches in racecourse betting areas after 2012. It has been suggested
that bookmakers will lose the existing "tenure" on their
pitch list positions as an inadvertent result of the provision
in the Gambling Act 2005 which removes the system whereby the
Horserace Betting Levy Board issued Certificates of Approval to
racecourses which complied with the National Pitch Rules.
2. As the Committee will know, I clarified
the Government's position on this matter in a Westminster Hall
debate on 4 July this year, and I wrote to all Members with an
interest on 25 July. (The Committee has a copy of this letter.)
Nevertheless, I am grateful for this opportunity to seek to bring
further clarity to the debate.
3. Before addressing the specific questions
in the Committee's call for evidence, I would like to set out
the principles that underpin the Government's position:
— On-course bookmaking is an integral
part of the public's experience of horseracing. That is why, for
example, we have made it a mandatory condition of racecourse premises
licences that suitable areas must be provided for on-course bookmakers
to ply their trade.
— Relationships between racecourses
and bookmakers should be on commercial terms, wherever possible.
This was made clear in a position paper on the Licensing of
Betting Premises published by DCMS in March 2003 which said
that "to maintain to five times charge is also inconsistent
with the general move towards commercial agreements between the
betting and racing industries". The paper also stated that
racecourses and bookmakers would in the future have to negotiate
the charges for entry into the betting area between themselves.
— Modern, mature industries, including
the racing and betting industries, should be given the opportunity
to manage their own administrative affairs wherever possible.
4. These principles underpin our desire
to see the two parties—on-course betting and racing—reach
a negotiated settlement as early as possible. With this in mind
I am pleased to say that having met both parties (racing and on-course
bookmakers), I have agreed to chair a joint meeting at which these
negotiations can get underway.
5. The Gambling Act focused on the three
objectives of keeping crime out of gambling, keeping it fair and
protecting children and vulnerable people. As had been the case
with previous legislation, the Government did not seek to use
the Act to intervene in the day-to-day administration of the sector.
6. A consequence of this approach was the
discontinuation of the system of Levy Board Certificates of Approval.
The relevant regulatory functions of the Levy Board were transferred
to the two regulators, the Gambling Commission and the local licensing
authorities. Administrative conditions attached by the Levy Board
to the Certificates of Approval were not written in to the Act;
nor had they appeared in previous legislation.
7. A central consideration in this matter
is whether the Act removes the pitch list system, inadvertently
or otherwise. It is the Government's view that it does not. Pitch
lists grew up as a voluntary agreement between bookmakers and
racecourses over many decades. It was only in relatively recent
times (1998) that the administrative use of Certificates of Approval
was introduced by the Levy Board, after disputes between bookmakers
and racecourses had caused the earlier voluntary arrangements
to break down. It is an important point that even when the Levy
Board chose to intervene in this way, the pitch list system was
not codified in statute; rather, the Levy Board sought to assist
the industry by agreeing to use the Certificate of Approval system
as an enforcement mechanism to bring the two parties together.
8. A pitch list system operated at racecourses
long before Certificates of Approval were introduced with the
1963 Act, and continued to operate for more than a third of a
century after that. The 1963 Act did not codify such a system,
and the Gambling Act 2005 neither codifies it nor abolishes it.
It remains open to bookmakers and racecourses to reach a mutually
acceptable settlement that reflects their needs in the way that
commercial partners in all sectors of the economy currently do.
The Government will support that process where it is necessary
to do so.
9. There has been considerable discussion
about the financial value of the pitch list positions sold at
auction since 1998. The bookmakers and racecourses have different
views on this question, which the Committee may wish to take into
account in considering evidence. They also disagree over the question
of whether the pitch list positions bookmakers bought at auction
would exist in perpetuity. The bookmakers believe that they have
tenure over these positions (until the racecourse in question
ceases to exist). The racecourses do not believe that this is
the case. Again, the Committee may wish to consider these different
positions and the views of the Horserace Betting Levy Board, which
was closely involved in setting up the auction system under the
National Joint Pitch Council. However, it is worth noting that
the Government believes that bookmakers were given no indication
that they would have security of tenure over their bought pitch
list positions.
10. In conclusion, the Government encourages
the racing and betting industries to negotiate a satisfactory
post-2012 arrangement, or indeed a number of arrangements to be
implemented as local conditions require. They have five years
to reach agreement, but we believe that constructive discussions
should start without further delay. We understand that the Racecourse
Association is prepared to explore a range of options on a without
prejudice basis, and that it plans, after initial meetings with
the bookmaker associations, to provide guidance to member racecourses
to assist with their commercial discussions with bookmakers. There
is some evidence that individual racecourses such as Ascot have
already begun negotiations with local bookmakers; bookmakers'
representative organisations now need to follow the example of
these local bookmakers and embark on meaningful discussions with
the Racecourse Association.
(i) What the likely effects would be of allocating
on-course betting pitches on a purely commercial basis, as has
been proposed by the Racecourse Association
11. This is likely to depend on the precise
nature of the commercial arrangements put in place. However, the
Government's starting point is that the five times rule is inequitable,
with every bookmaker paying a similar amount regardless of the
scale of the business. It also works to prevent racecourses developing
new opportunities to improve the experience for the racegoer.
This is why the Government used the Mandatory and Default Conditions
under the Gambling Act to abolish the Five Times Rule in 2012,
following a five-year interim period to allow a suitable commercial
relationship between bookmakers and racecourses to be put in place.
12. As previously stated, we can see no
satisfactory long-term alternative to such a commercial arrangement.
However, we do not see an inherent contradiction between a robust
commercial arrangement governing access by bookmakers to a racecourse,
and a system for allocating pitches on that racecourse that reflects
the seniority that individual bookmakers might have inherited
or acquired. There is no reason why, with goodwill, good business
sense and constructiveness on both sides, a long-term commercial
model should not be found which reflects the advantage of a higher
list position (this was suggested by the Government as early as
2003, in its position paper on the licensing of betting premises).
But it is for the industries working together to identify such
a solution, not for Government.
(ii) What indications on security of tenure,
if any, were given to those buying positions on bookmakers' lists
in recent years?
13. No indication was given that there would
be security of tenure over positions bought at auction. Indeed,
those buying pitch positions were advised in the National Joint
Pitch Council's pitch auction rules to exercise due diligence.
Paragraph 5 stated: "The Buyer will be deemed to have knowledge
of all matters which he could reasonably have been expected to
find out given his knowledge as an Authorised Bookmaker and the
exercise of due diligence." Paragraph 18 stated: "Authorised
bookmakers are advised to be aware of the full implications of
the forthcoming Gambling Act before buying or selling any List
Positions."
(iii) What the role of the Government should
be in the process of agreeing on a future framework for allocation
of on-course pitches for bookmakers
14. The main role that the Government can
fulfil is in bringing bookmakers and the racing industry together
to negotiate. In this spirit, my Department set up a Working Group
as a forum for all interested parties to discuss and make proposals
for the long-term regulation and administration of on-course bookmaking.
Whilst the group has produced imaginative proposals for arrangements
for a regulatory apparatus to replace the National Joint Pitch
Council and most of the National Pitch Rules, and has been consulting
the sector on these, it chose not to consider the issue of pitch
list positions. My Department suggested that the terms of reference
of the Group be adjusted specifically to enable discussion of
this issue to take place is necessary, but this was not adopted.
15. The Government remains committed to
facilitating discussions between racing and betting. On 8 October
2007 I met both sides individually in order to persuade racing
to develop practical options for discussion, and to persuade bookmakers
to meet the RCA in a constructive spirit. I will be chairing a
round table meeting for both sides in the next few weeks and I
hope that this will at last produce if not a solution to the pitch
tenure issue, at least a realistic roadmap towards further substantive
discussions.
16. This completes the Government's written
submission to the Select Committee. I stand ready to answer any
further questions Committee members may have at the oral evidence
session on 13 November.
October 2007
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