UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 905-i

House of commons

oral EVIDENCE

TAKEN BEFORE THE

Culture, Media AND Sport Committee

Pre-legislative Scrutiny of the draft Gambling (Licensing and Advertising) Bill

Tuesday 29 January 2013

Clive Hawkswood, Sue ROssiter and WES HIMES

Tim Lamb, Paul Scotney, Simon Barker and Lauri Moyle

Evidence heard in Public Questions 1 - 158

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Oral Evidence

Taken before the Culture, Media and Sport Committee

on Tuesday 29 January 2013

Members present:

Mr John Whittingdale (Chair)

Mr Ben Bradshaw

Angie Bray

Tracey Crouch

Philip Davies

Paul Farrelly

Mr John Leech

Steve Rotheram

Jim Sheridan

Mr Gerry Sutcliffe

________________

Examination of Witnesses

Witnesses: Clive Hawkswood, Chief Executive, Sue Rossiter, Director of Projects and Policy, and Wes Himes, European Adviser, Remote Gambling Association, and Managing Director, Policy Action Ltd, gave evidence.

Q1 Chair: Good morning. This is the first of two sessions in which the Committee is carrying out pre-legislative scrutiny of the draft Gambling (Licensing and Advertising) Bill, and I would like to welcome the Remote Gambling Association. You are all from the Remote Gambling Association, right? Very good.

If I can start off by asking you to say whether or not you accept that there is a need for greater control than presently exists from online gambling, and whether, therefore, you accept the general intention, the thrust of the Bill?

Clive Hawkswood: I will begin on that one. The short answer is no-but I will move on to a slightly longer answer-there is a lack of evidence and a lack of clear objectives from the Government in what it is they are trying to achieve. But if the key focus is improved protection, and some of the other, I would say, less important measures that the Government has given as justifications, we do not believe they will be effective. The concern is that, far from moving from what we believe is a well-regulated system, where consumers are not encountering disproportionate problems, we will move to one that will lead to the growth of the grey market, with companies we are not familiar with in jurisdictions that are less well regulated.

At the moment, the British market is wholly dominated by companies licensed in a very few number of jurisdictions. They are-in addition to the UK-Gibraltar, Alderney and the Isle of Man, all closely linked to the UK, all with regulatory systems very similar and in some cases identical. So we are not persuaded the need to change is the longer answer.

Q2 Chair: You will have seen-particularly this last weekend-there has been quite a lot of press coverage about the threat to vulnerable people, of the growth of online gambling and the need for greater protection. Do you accept any of that?

Clive Hawkswood: We accept the need to prevent children gambling, absolutely, and to protect the vulnerable. As I say, the industry, whether it is licensed in the UK or one of those other jurisdictions, implies into it exactly the same principles, without a doubt, and the measures, as I say, that companies adopt, irrespective of where they are, are almost identical. So we do buy into that. We query some of the ways it is being reported. The suggestion that there has been an explosion of problem gambling, and the linkage in some way to the growth of online gambling, is not substantiated, but, in terms of, is there a risk that we need to address? Absolutely, we have always believed that.

Sue Rossiter: The numbers that were quoted in the press over the weekend were a little misleading. The number of people who actually gamble online in the UK is round about 10% to 11%. But if we withdraw from that the people who only gamble in the National Lottery, we are reducing down to about 5.5% of the population and that percentage has been decreasing over the years. What we would say is that the numbers of people who are considered to be problem gamblers is equivalent, whether it is online or offline, and what we would say is that, yes, there need to be serious protections for those people. But that is currently built into the licences that people currently operate under and will continue to do so in the future, if they continue to be licensed in the jurisdictions where they are. The sorts of measures we would be looking at would be things like self-exclusion, daily limits and other limits on amounts of bet and, of course, being able to have on every licensed website a signpost to where people can receive additional support, protection and help.

Q3 Mr Leech: You just said that the number of people that gamble on line is about 10% to 11%. The figures I read suggested 14%, which is quite a big difference. So I am interested to know where you get the figures from. Also, I am very interested to know how big online gambling has become, say, from 10 years ago. What proportion of gambling was online 10 years ago?

Sue Rossiter: If we take the Gambling Commission’s own statistics, so the statistics that they collect through an omnibus data, which is four times a year a collection of data that goes on. If we look at the number of people who have been gambling on line, in 2006, people who did not do the National Lottery but did other forms of gambling was 5.1%, and the year to 2012, which was the period over which this omnibus data happens, is 5.5%, so there has been an increase, but the increase has been from 5.1% in 2006 to 5.5% in 2012.

The increase with online gamblers is similar to what we have seen in the switch between retail and online shopping. So, as more and more people are used to conducting their business on an online basis, it is inevitable that more people will be gambling online, but what we have not seen is any increase, other than that, on the number of people who are problem gamblers.

Q4 Tracey Crouch: Can you break down those figures into what type of gambling, whether or not it is in sporting events or whether it is casino-style games or whether it is other kinds of-

Sue Rossiter: It is quite detailed. The information is available in the Gambling Commission’s omnibus surveys, but we can get that to you as a matter of course. I do not have them all written down here because it is tables and tables and tables of stuff.

Q5 Tracey Crouch: What would you assume has seen the biggest increase? Would it be gambling or sporting events or would it be online poker or-

Sue Rossiter: It is fairly evenly spread, but we will get you that data. I think it would be better if I can get you the actual data rather than a summary thereof.

Q6 Chair: You will have seen the Government’s reasons as to why they want to move to a regime of licensing at point of consumption, and they have given a number of justifications, including the suggestion that at the moment it is very difficult because different bits of equipment may be located in different jurisdictions. Whereas obviously, if we move to a system where, if you can sell to a British consumer you need a British licence, that is a much more straightforward proposition. Do you accept any of that as a reason for the Bill?

Clive Hawkswood: No, I do not think that is what they are proposing. I think the Gambling Commission and DCMS’ line is that companies can have their equipment pretty much where it is currently, as long as the regulator can access it. So I do not think that position will change at all.

Q7 Chair: No, but they are saying at the moment that where it is licensed at the point of supply, it is quite difficult to determine that if you have different pieces of equipment in different jurisdictions.

Clive Hawkswood: Okay, so the question is, how do they determine whether something is actually UK-based or not? I think the Gambling Act 2005 covers that. It is about the location of certain pieces of equipment, and that is for the Gambling Commission to determine.

Q8 Chair: So the Government’s claim that there is confusion in this area, you do not think there is any confusion in this area?

Clive Hawkswood: I cannot say whether the Government is confused, but not from our side, no.

Q9 Chair: Right. I think if not you then others have suggested to us that there might be a problem in terms of future proofing the Bill, particularly in relation to more and more being done from Cloud computing. Do you see that as a potential difficulty?

Clive Hawkswood: I think Cloud computing and other developments need to be closely looked at, but they can be addressed by regulators. The problem going ahead, and where it will affect future proofing, is the downside of those sorts of developments. It gives operators an opportunity, and greater opportunity, to evade the regulatory net, and that is one of the reasons we are so worried about growth of the grey market going ahead.

Q10 Chair: We understand that you would rather stick with the existing regime than legislate at all, but, given the Government is legislating, what specific amendments would you like to see made to the Bill to meet some of your concerns?

Clive Hawkswood: On the Bill itself, obviously very few clauses. There is a specific one that we raised with DCMS as soon as we saw it, and that is the wording around "having facilities capable", and basically that means if you have facilities capable of transacting with UK residents you will require a licence. Our understanding previously would be that the law would be drafted in such a way that it caught companies who actually did transact, not who had the capability of doing so, because, if we say there is somewhere between 2,500 to 5,000 gambling websites in the world, that would potentially catch all of them. Now, explanatory notes refer to, well, if the company in question says they will exclude UK customers then that is okay. Quite how the Gambling Commission assesses that, how they check out these sites across the world, it does not seem realistic. So I think the wording there could be tightened up.

Q11 Chair: Although, arguably, even if they do have facilities they are not advertising to UK customers. If they do not have UK customers, and they do not have a Gambling Commission licence, it does not matter greatly.

Clive Hawkswood: It doesn’t, yes.

Chair: There is nothing the Gambling Commission can do about it?

Clive Hawkswood: That is a wider point. That comes back to the heart of our concerns, which is that if this goes ahead, quite apart from us believing the current system works more than adequately, it will undermine it going ahead because it will take market share away from existing operators and, almost certainly, push it towards companies in less well regulated jurisdictions who do not protect consumers in the same way that we would all like to see.

Chair: We are going to come on to enforcement issues like that, but before we do, Paul Farrelly.

Q12 Paul Farrelly: Clive, nice to see you again. You have probably seen some of my remarks in a debate that we had on Friday, in which Philip Davies took part. Could you just make clear for us-because it is not clear from your evidence-as to whether there are any of your members for whom you are not speaking today?

Clive Hawkswood: No, I am speaking for all of them.

Q13 Steve Rotheram: Including bet365?

Clive Hawkswood: I am speaking for bet365 as well, to the extent that bet365 also do not believe the current tax regime is viable in the long term. I should explain the chief executive of bet365 is also my chairman. He sat next to me last time we gave evidence here and his remarks are on record. I will paraphrase, but I think they are quoted in your own report from a few months ago. It says if they were a publically listed company they could not stay in the UK.

Q14 Paul Farrelly: Yes, but that is by the by. It is known that bet365 is a major employer in my area and currently owns my local premiership football team, Stoke City, of which I have been a supporter since I was a young lad. But bet365 supports the move towards a point of consumption basis in the UK, is that not correct?

Clive Hawkswood: It is not for me to answer individual questions about particular companies, but I think that is fair. But then they are the only company of any size still here. They are atypical, if I can put it that way.

Q15 Paul Farrelly: I think we have the answer to my question then. Okay. Clearly, this Act is the regulatory end of the real business end, which is the Treasury stuff, which is all about tax. I think your case here, if I am correct, would be that this is really all about tax, is it not, for the Government?

Clive Hawkswood: As we say, we do not believe the regulatory measures make a blind bit of difference. It is the tax we are concerned about. Why are the companies not here in the first place? This is a poor fiscal regime to operate under. I am full of admiration for bet365 who have made their business successful here, but it does not work for the vast majority of companies.

Q16 Paul Farrelly: On this point about tax, if it is all about tax for the Government it is really all about tax for you and your members, isn’t it, at the end of the day? If the tax rate was low enough you could live with it all?

Clive Hawkswood: There is a level at which it could become viable. Our problem is this is an international market. Whether we like that or not that is the reality, and that is why we are in the position we are. This was the situation we outlined to the Government before the Gambling Act came into force, and before the tax regime came into force in 2007, this was going to happen. Things have not changed. So how can that be addressed? The only way is to make the UK more competitive, as you were saying, and at what level that would be. We are never going to get down to the level of some of the lower-tax jurisdictions, but it is narrowing the gap so the incentive is not there for consumers to look elsewhere.

Q17 Paul Farrelly: If you read William Hill’s submission, it is very lengthy, it is supportive of yours, it makes additional points and then at the end, in terms of possible solutions, it really effectively says, "Well, if the tax was 5% we could live with all this," and Paddy Power have come up with 5% to 8%. I do not think bet365 have argued explicitly that the tax should come down from 15%, but I am sure, like any company, they would welcome any reduction in tax.

Clive Hawkswood: I would agree.

Q18 Paul Farrelly: Could you explain to the Committee-for all the fears about competition and what you have said about why a lot of your members could not handle the current level-why bet365 is competitive and why your members, some very big names in the UK, feel they could not be?

Clive Hawkswood: I think you should address that to bet365 separately.

Q19 Paul Farrelly: No, could you explain why your members feel that they would not be competitive when bet365 is such a success and is competitive on sports betting?

Clive Hawkswood: Well, of course, you have to look at the company in its entirety and, since you are pressing me on this, bet365’s gambling operation is in Gibraltar, always has been. It is not true that all of their business is in the UK.

Q20 Paul Farrelly: I relate the question specifically to sports betting.

Clive Hawkswood: They are successful enough, but they could be more successful if they were offshore. Also, they do not have shareholders to answer to. It is really not for me to-

Paul Farrelly: That is their choice.

Clive Hawkswood: To give bet365’s position. What I am saying is you are picking one company as an example. I am picking everybody else. Who do you think is right?

Q21 Paul Farrelly: One is onshore and everyone else is offshore, so the difference is plain. Can we get to a more interesting line of argument that some of your members have advanced? The argument has been made for a lower than 15% gross profits tax, because the gross profits of online companies are allegedly lower than offline in normal operations. Could you expand on that and give some more justification for it?

Clive Hawkswood: Effectively, the online gambling business model is almost one of marketing. The products are very similar. Competition is intense to the nth degree, so there is constant competition to provide the customer with best value, and that has pushed the margins to the absolute limit. If that cannot be offered, consumers move elsewhere. We know that. That is our experience everywhere. We do not have a margin to play with, is the point. We would probably swallow a bit, and that is where we need the economists to do that further work of what an appropriate rate might be, whether it is 5, 10, whatever it might be. But the business model is different because of that intense competition.

Q22 Paul Farrelly: What sort of work are you undertaking at the moment on that?

Clive Hawkswood: A couple of the big consultants have already done work, and I think a Deloitte study done for William Hill was circulated last year. We have asked KPMG to undertake a piece of work on identifying the appropriate level of tax. We are discussing with Treasury what they find most useful in terms of the modelling, and we will commission that and it will begin in two or three months.

Paul Farrelly: Sorry, I did not catch that.

Sue Rossiter: In two or three months it should be completed.

Q23 Paul Farrelly: Two or three months, and you are engaging with the Treasury on their modelling? Because this is not just about tax rates, it is about the overall tax yield.

Clive Hawkswood: What we are saying to Treasury is, what do you need to make a decision? Then we will get KPMG to undertake that work and do that figure work for them.

Q24 Paul Farrelly: That is the business end. It does not necessary affect this Bill but it is what it is all about?

Clive Hawkswood: As you say, what underpins our real concerns is the fiscal hit we will take once this Bill has gone through.

Q25 Paul Farrelly: Would it then be premature to ask you what you think would be a fair rate of tax, Clive?

Clive Hawkswood: I would rather wait for the experts, but, having seen other studies, I think somewhere around 5% is the figure that would do it.

Q26 Paul Farrelly: What do other countries do?

Clive Hawkswood: It depends on the country and, again, we are looking not just at the gambling tax but the overall fiscal burden, so there might be different corporation tax applied, so it is difficult to compare. In terms of gambling, it is also difficult to compare because there are very few mature developed markets. The UK is the most mature. Whereas a lot of the others don’t know what the right rate is because they stick a finger in the air and take it forwards, in the UK we have all those years of experience to go on. So they are not really comparable.

Q27 Paul Farrelly: Final question. Would you go up from 5% to 10%? Would your members accept 10% do you think?

Clive Hawkswood: I think, honestly, there are a range of views within the industry, depending on the mix of your business, where your customers are has an effect, place of consumption, clearly. If you have a bigger proportion of non-UK customers your effective tax bill comes down. That is why we need the economies to come up with a range for Treasury to work on.

Q28 Jim Sheridan: Clive, in your opening comments you said that you seek to protect the young and vulnerable. Young would be under 18s?

Clive Hawkswood: Absolutely.

Q29 Jim Sheridan: What is your definition of "the vulnerable" then?

Clive Hawkswood: I think the same one. This is why we tend to take our lead from regulators. It is whoever they identify, but basically it is anyone who might encounter a problem. So, you are right, we probably all collectively use the word "vulnerable" a bit loosely. We are talking about those people who had or might have had problems, and what we can do to stop them encountering problems and, if they do, to help them and get them to a source of help as quickly as possible.

Q30 Jim Sheridan: How can you identify them?

Clive Hawkswood: It is very difficult. If I point back to the previous gambling prevalence studies, the academics cannot even agree on particular screens so we do come up with two different sets. From our point of view, it is hard from the operator’s end of the fence. There are indicators, so self-exclusion we have mentioned. That is quite a good indicator. Not necessarily points to a problem gambler, but it is an early indicator. It might be people who you can see from their patterns of behaviour might become addicted. You do not know if that automatically makes them a problem gambler, but there are some alarm bells that might start ringing. So I think a lot of this-and again Ian Herne is the expert-is people recognising for themselves that they have a problem, and really, until they do that, there is a limit to what any of us can do in any of the areas of gambling.

Q31 Jim Sheridan: In effect you are doing nothing to protect the vulnerable, are you? You exist to get the pound out of the pocket or, more increasingly, the purse.

Clive Hawkswood: If you are looking for specific things we do, there are a whole range of measures that players can put in place to restrict their levels of gambling, whether that is time, amounts, amounts of deposit, all those sorts of thing, player sessions. Some of the companies will have alerts that come up after you have been playing for a certain period of time. I think one of the problems, again to be honest, we all face is we are pretty much in the hands of the experts about what works and what does not. At the moment we have gone for a sort of scattergun approach, based on what people have suggested will work for problem gamblers. It is completely right for us to say there is a lot more research needs to be done, in terms of problem gambling generally, what causes it, how you treat it. But I think that is a journey in terms of learning that we will all learn. So I am not for a minute saying we have a perfect solution.

Q32 Jim Sheridan: So, room for improvement you would say?

Clive Hawkswood: Yes, absolutely.

Sue Rossiter: Yes.

Q33 Jim Sheridan: So at the same time as room for improvement, in terms of protecting vulnerable people, you are still seeking to increase gambling opportunities for people, making the problem worse?

Clive Hawkswood: One of the issues is there is a lack of evidence that more opportunities lead to an increase in the number of problem gamblers. The level of problem gamblers has barely changed in the UK since the first-

Q34 Jim Sheridan: You represent 30 of the world’s largest licensed remote gambling companies. How many jobs does that create in the UK?

Clive Hawkswood: About 7,000 at the moment.

Q35 Jim Sheridan: 7,000 permanent jobs in the UK. That is pretty good. Can I just finish the question of taxation? Obviously you probably prefer, like everyone else, not to pay any tax. There is a school of thought that says that, basically, you exist to sell your products in the UK without paying any tax or anything towards the infrastructure of the UK, so effectively it is just corporate greed exploiting the poor.

Clive Hawkswood: You will not be surprised that we disagree. Most of the companies are based in other jurisdictions. They access the UK market, of course they do. Our concern is not whether they pay tax. It is whether it is sustainable. It is no good us paying a flat tax one year and then losing market share to somebody else, and the problem just moves to somewhere else. So I think, as other people said, there will be a tax regime that will be attractive for most companies that will enable us to compete. But 15% is nowhere near it. That is just a slow death for us.

Q36 Chair: Can you provide perhaps a little more detail? We established earlier that bet365 is the one UK-based operator. So where are the 7,000 jobs? They are not all working for bet365.

Clive Hawkswood: No. The truth is that a lot of companies will have as many jobs as they can in the UK. They are largely marketing, customer services, legal services, advertising, all those sorts of jobs, and they mount up. I think bet365-who will correct me if I have it wrong-are getting on for 2,000. The other 5,000 are in those sorts of area.

Q37 Chair: If the companies maintain a lot of their consumer service end in the UK, but they just move the actual operating end to Gibraltar or Alderney or whatever, why do you think it is that they have made that choice?

Clive Hawkswood: Purely fiscal reasons.

Q38 Chair: Just tax?

Clive Hawkswood: Yes. When a lot of the companies were established the UK did not have a regime, they chose where they could have a licence at the time. That is why places like Gibraltar, Alderney have first mover advantage in terms of regulation. So there are companies based there.

Some of the companies who tend to draw the public’s attention in this issue, which is more of the UK brand names-like Ladbrokes, William Hill, Betfair-as we know were not in that position and gradually moved offshore because they could not compete effectively. Market forces again had driven them to that.

Q39 Chair: You accept that this is purely a tax avoidance measure to go and put yourself on a White List jurisdiction?

Clive Hawkswood: It is a tax. Like all companies, they go to the countries where it is to their best advantage commercially. They are physically in a different country.

Q40 Chair: You will have heard the controversy recently over Starbucks and Amazon and others. Essentially they are doing exactly the same thing, aren’t they?

Clive Hawkswood: No, they are clearly not. I would not claim to be an expert on Starbucks or Google, or any other companies that you have had issues with, but those are companies in the high street who are doing whatever they do to minimise their tax.

Q41 Chair: But these are still companies that have a lot of British customers, who are spending a lot of money on them, but they are putting themselves offshore so they do not have to pay tax.

Clive Hawkswood: But they are actually international companies. The trouble is they are British brands, but this is an international business. They are trying to target an international market. Yes, they access the British market, but they are trying to access all the other markets as well. If you are an international company, you go to the place that makes best commercial sense for you and where you can compete effectively.

Chair: I think that is what Starbucks said.

Q42 Jim Sheridan: How is that competitive, then? What about somebody new trying to break into the market? How do they do it, compete with people who do not pay tax?

Clive Hawkswood: They do pay tax. They pay tax in the jurisdictions where they are based. They are domiciled in a different country.

Q43 Jim Sheridan: A new, young bookmaker trying to break into the market in the UK it would be very, very difficult because of the anti-competitive nature of your business?

Clive Hawkswood: That is not why they would not be able to compete. The fact they would not be able to compete is because you need an awful lot of money to start. This is a huge, difficult market to get into. It is a bit like saying, "How do I start up a new company competing with Coca Cola and Pepsi?" The market is dominated by-it is a maturing market-fewer and fewer companies, because that is the way the market trend is going.

Q44 Chair: Can I just put to you one other point? I understand you are sceptical, shall we say, about the Government’s reasons that it has given for introducing the Bill, but another one that they have said is that the Gambling Commission has become aware of, "New and emerging European jurisdictions, where online gambling sites have begun targeting British consumers and very little is known about the level of regulation and consumer protection".

Clive Hawkswood: Well, I may hand over to others on this, but as a general point, we have great concern here in how many pages of paperwork has come out from DCMS and the Government supporting the Bill, there are lots of assertions like that. But when we say, "Well, who are you talking about? What is your evidence? What market share do they have?", we haven’t had anything. Now you will be seeing them, so hopefully they will have that information. To our knowledge, we cannot think of any company.

Q45 Chair: It is said the Gambling Commission have become aware of these, so you have said to the Gambling Commission, "Where are these new and emerging countries?"

Clive Hawkswood: Yes, and targeting the UK market. Name me one company in any of those that is taking a bean out of the UK. I don’t know, unless you can show it. Let us say we are heavily involved in lots of international business. We are involved in the regulation in lots of these jurisdictions, development of new laws. We are not aware of any new jurisdiction in Europe that is targeting the UK market, none at all.

Q46 Angie Bray: But there is a potential.

Clive Hawkswood: No, not really. No start up is going to be able to compete with the companies in the current market under the current regime. If the regime changes and that changes our competitive advantage, yes, they could, but not currently.

Q47 Chair: We should be hearing from the Gambling Commission in due course, so we will see if we do better than you in trying to find out.

Clive Hawkswood: I wish you the best of luck.

Q48 Tracey Crouch: A key part of the draft Bill is around advertising. You do not make any specific reference in your submission to the Committee about this. I wonder whether you could give us your views or concerns about the proposed measures.

Clive Hawkswood: Yes, again, we are not sure in terms of advertising what threat these are addressing. This appears to be an enforcement mechanism rather than concern about advertising, per se. The Advertising Standards Authority has no concerns with the current system, nor does the Advertising Association or anyone involved in the advertising world. The Gambling Commission has never expressed any concerns from a regulatory perspective, so I think it is purely there as an enforcement mechanism rather than a reflection of the concern about the regime.

Q49 Tracey Crouch: The Government is clearly stating-going back to the point that the Chair just made-that there is that potential for companies from other jurisdictions advertising in the UK, and that there is confusion from the consumer perspective as to who is regulating those adverts.

Clive Hawkswood: I think that is a fair point. There is throughout this a difference, I think, between hypothetical risk and real risk. We have had an established market, so I think we should be looking at what actually happens rather than what might.

In terms of your second point regarding confusion among consumers, again we have said, "Well, how has that manifested itself? What degree? How are you justifying these sorts of measure if it is really about consumer confusion?" I am not sure how that confusion is arising or what the degree is. Every website has at the foot of it a clear reference to who it is regulated by, and, since these players are playing online, you would think they would be fairly familiar with that. But again, we have no idea how many calls the Gambling Commission is getting, what the nature of the calls is. It clearly happens. We are not saying it doesn’t happen, but the degree is unclear.

Q50 Tracey Crouch: Do you think that the current gambling code is strong enough when it comes to advertising? Do you think that it could be improved to protect the vulnerable, for example, who Jim was talking about?

Clive Hawkswood: Two things on that: first, we have seen no evidence linking advertising to any increase in problem gambling. Secondly, above and beyond what the ASA called for, there is an industry advertising code that does go further than is required by law or by the Gambling Commission.

Q51 Tracey Crouch: In what respect? Can you-

Clive Hawkswood: The 9 o’clock watershed, which everyone talks about, is not in the Advertising Authority’s rules. That is in our rules. So that is an industry voluntary measure.

Q52 Tracey Crouch: But that does not apply to sporting events, and, as somebody who sat and watched three football matches consecutively on Sunday afternoon, there were a lot of gambling adverts and the gambling aware slogan, which has to be put across the bottom, is tiny. You actually have to go to your television screen to see it. Would you think that that is an acceptable way of protecting the young and vulnerable?

Clive Hawkswood: I think there are other measures. For instance, in our code, which is not a covered by anybody else-as you know, a lot of sports are sponsored by gambling companies, a number of football clubs-our code also covers that, that you cannot have merchandising on anything for children, for instance. In terms of, is there too much advertising on television? That is more a question of taste rather than a linkage to problem gambling, I think.

Q53 Tracey Crouch: But do you think it is acceptable for gambling companies to be sponsoring big television events, sporting events like the FA Cup, for example, when there is going to be a younger audience consuming those programmes?

Clive Hawkswood: I think Government has accepted that widespread advertising is allowable. I see no difference between that and billboards in the high street and by railway lines. I think it always comes back to, is there evidence this is causing a problem? If there is, we have not seen it. If there is evidence of that, then clearly we would look at it closely. We did not introduce the voluntary code on top of the advertising standards codes for fun. If there is a problem we would look to address it, but nobody has brought that to us yet.

Q54 Tracey Crouch: Last question. You mentioned very briefly the question around sports sponsorship. Do you therefore share the views of the European Sponsorship Association that says that the Bill needs to be amended to clarify those rules? I think the case was a French football club being required to remove its sponsor’s logo from its shirt when playing in Spain. Do you think that this Bill needs to be amended to try to protect those measures where you have companies from abroad sponsoring UK football teams, for example?

Clive Hawkswood: Absolutely. I think sponsorship money for a lot of sports is a very important source of funding. It will make no sense to harm that for no good reason. There is no linkage between that and anything that would undermine the advice and objectives of the Gambling Commission, for instance. So why restrict it? Why take that out of the coffers of the sports? There seems to be no good reason.

Q55 Mr Leech: I want to come on to enforcement, but I would like to pick up on a couple of points you made earlier on. First, you said there was a big difference between the likes of Starbucks and the likes of online gambling. Is there any real difference between the likes of Starbucks not paying their taxes and online arms of high street bookmakers choosing to move their businesses elsewhere to avoid paying that tax?

Clive Hawkswood: I think I am on firm ground in saying it would not have been their first choice; competitive pressure forced them. So, had the Government listened to them it would not have happened, I think, to be fair. It is different because these companies are based in other countries. Some of them you are thinking of may have branches, but they have separate online companies that are physically based and operating out of other countries. This is quite a strange tax where we are going to dip into the pockets of other countries to get money. I am not quite sure what the precedents are. The one we often refer to is VAT. But of course that is harmonised. We do not have that. If this comes in, one of the effects is we will be paying tax on the same bet in two different jurisdictions.

Q56 Mr Leech: You said 7,000 people work based in the UK. How many people are based out of the UK in those operators?

Clive Hawkswood: We do not have a precise figure, but not so many because that tends to be in the technical trading arm of things. The part of the businesses that take up a lot of the jobs people tend to have in the UK if they can-you tend to talk as if they are all British companies; they are not-or they will have them in Germany or Austria or wherever.

Q57 Mr Leech: Do we not need to be a bit more honest about this and just accept that this is basically a British company that is based somewhere else, simply for tax reasons?

Clive Hawkswood: But you are assuming they are all British companies, and they are not. So you are picking on a small minority when lots of our members are Scandinavian or German or actually multi-national. They will all be caught by this.

Q58 Mr Leech: You were arguing that there needed to be a level playing field and some of the online organisations moved offshore simply because it is not a level playing field. Isn’t what the Government is trying to do about levelling the playing field?

Clive Hawkswood: Absolutely. I completely agree with that. What I am saying is it will not work, because if it worked we would already be doing it. We are only in this situation because the Government got this wrong four or five years ago, and what I am saying is this will not change anything.

Q59 Mr Leech: But I am not clear why it is not going to change anything, because if we level the playing field, so that people are paying similar amounts of tax, whether it is online or on the high street, whatever it might be, I do not understand why, if everyone is playing by the same rules, what is the problem?

Clive Hawkswood: That is absolutely at the heart of the issue: you cannot get everyone to play by the same rules. We are not in that world. Technology does not allow that to be the world. If that was the world we would be doing it already. I think that is probably the real question, about the force of mechanisms. They do not work. So what will happen is someone else will come along who will not take a Gambling Commission licence, that you cannot stop, and they will just take market share from the companies who currently have it.

Q60 Mr Leech: So isn’t the key about enforcement and making sure that through the legislation we get the enforcement right? Would you accept that if we get the enforcement right, so that you are not competing with unlicensed companies, that then it would be perfectly reasonable for you all to pay the tax that is due?

Clive Hawkswood: As I say, that is the hard thing. Enforcement does not work. You cannot make it work. With due respect to the Gambling Commission and DCMS, we are the experts in this and we would not be so worried if we thought it could work. It doesn’t.

Q61 Mr Leech: Why can’t enforcement work? What is the problem with ISP blocking, financial transaction blocking and advertising restrictions?

Clive Hawkswood: I will probably take a breather and let Wes take that one.

Wes Himes: Yes, let me give Clive a brief respite. I have worked around Europe in many of the jurisdictions, particularly many of those that have brought on regulatory regimes. Many have predicated these regimes on the fact that they can provide enforcement measures that effectively capture the citizens of that member state before the licensed operators. It simply does not work. But do not take my word for it. Let me quote the Commission’s staff working paper, which was produced when the European Commission provided its communication on online gambling in the middle of last year. If I can indulge the Committee with a quick quote, "However, blocking access to websites does not work as an isolated enforcement tool and can be easily circumvented". This is the issue of ISP blocking. It can be done by consumers, either using anonymisers or proxy domains. It can be easily circumvented by operators who choose not to take a licence. So ISP blocking is a very difficult choice of an enforcement tool. It also has legal ramifications because you are effectively asking ISPs to block British citizens’ access to sites on the internet.

The second one, financial transaction blocking. Financial transaction blocking, as you know, attempts to use the credit and debit card system to block the financial instruments that consumers use. That is also ineffective. The only jurisdiction that has brought that in and has at least two or three years experience in this is Norway. The Norwegian regulator will tell you that they believe that over 50% of the market is still being provided by unlicensed operators in Norway. So financial transaction blocking also has the effect of capturing what would be considered legal transactions, so that effectively, if you were in a jurisdiction where it was quite legal to gamble in an establishment, your card would be blocked because of the rules in your home member state.

The same goes for advertising bans, and the effect of control on advertising bans, and of course the criminality of licensees in providing unauthorised gambling. So these measures, either individually or cumulatively, in essence, do not work and, therefore, the reliance on enforcement measures to capture the market is extremely difficult.

Q62 Mr Leech: But is this not about finding a convenient excuse for a reason why you should not have to pay any tax? Is that not what it is all about ultimately? Surely we can come up with some technological solutions that deal with these issues, because we hear it in other walks of life. We are talking about the potential for introducing plain packaging of cigarettes, and, funnily enough, we are told by the tobacco industry that this is going to be terrible and it is going to lead to more counterfeit cigarettes and problems with the paying of tax. Is this not just the same old, tired excuse?

Clive Hawkswood: Yes, I think we can do no more than refer to people, like the European Commission, who go through a two-year process of reviewing everything that happens and that is their conclusion. It does not work. We can pick lots of other examples outside of Europe, but it does not work. You might like to think there might be technological solutions. What we have instead is more and more technological ways to get round these things. So, far from the likelihood increasing of having better enforcement, the chances are it is going to get worse.

Q63 Jim Sheridan: It sounds exactly the same argument that drug dealers use, and, "The more illegal you make drugs then we will find another way round about it."

Clive Hawkswood: We are not saying we are finding a way round it. What we are saying is that you will create an opportunity for that.

Q64 Jim Sheridan: That is quite an incredible statement.

Clive Hawkswood: Why? Because it is the reality.

Q65 Jim Sheridan: We cannot do anything because you will find another way of doing it? That is what you are saying.

Clive Hawkswood: No, we won’t. Look, let me be clear about our position. Why our members are concerned is they are reputable companies who, if this regime comes in, will all take UK licences. No question. The concern then is that they lose market share to people who do not. So I am not sure what the analogy is with drug dealers, but our position is, if this comes in, we are concerned our members will take licences-because it will be clear in law they need to and they will-then what happens to them two, three, five years down the road, when they come up against companies who do not and they cannot compete?

Q66 Mr Leech: Just one last question. If, hypothetically, the general public became aware that bet365 were the only online organisation that was based here, and everyone started using bet365 because they were paying UK taxes, what do you think would be the impact on other online gambling companies?

Clive Hawkswood: It is a competitive market. If they had to they would come to the UK to compete with bet365, but I cannot really see it happening.

Q67 Paul Farrelly: I want to ask a question of Mr Himes. Can you tell us what the Danish experience is? They have moved to a point of consumption-based tax after opening their market up between 2010 and 2011. It started last year, really. How much of their market is captured by licensed operators and how much goes to unlicensed operators?

Wes Himes: The Danish market is fairly new, so the evidence is only sparse at this point. No. 2, it is very difficult to quantify because you are looking at a slice of the market that is currently outside of the licence regime, but we believe that there are very large percentages that will most likely still reside in the grey market, if you can put it that way-the unlicensed sector.

Q68 Paul Farrelly: Do you have any specific numbers?

Wes Himes: If Italy, Norway and France are anything to go by, then those numbers range anywhere from 50% to-

Q69 Paul Farrelly: Yes, but you need to compare apples with apples, because there is a difference between Italy and France in the way they have liberalised their markets. In Denmark I have heard a figure from a reliable source-and I have not yet gone into it, but we will-of 90% that is captured by licensed operators.

Clive Hawkswood: Can I just chip in? Again, I think we prefer to refer to Government figures if we can. In the Treasury consultation paper, they are working on the basis they will lose at least 20% of the market, which is not a good starting point. We think that is conservative. But even if we stick with the official Treasury estimate, the Government is working on the basis they will only catch 80% of the market.

Q70 Paul Farrelly: Okay. I was asking about Denmark’s experience. My understanding is it is 90% so far.

Clive Hawkswood: I am sorry, but it is a bit like the bet365. You are picking one country; we can pick all the others.

Q71 Paul Farrelly: You have just tried to.

Clive Hawkswood: I think I did.

Q72 Angie Bray: Yes, just really one question. I have been listening very carefully to all of this, and the overriding impression that I am left with-and having heard what you said this morning-is that thanks to technology and the internet, online gambling is always going to be capable of being one step ahead of Government enforcement or Treasury fiscal enforcement. So what you are saying is that there is no way that we can bind online gambling into any kind of regime at all that is going to deliver anything back to its home base?

Clive Hawkswood: In terms of tax regulation it is difficult. I think we have to split regulation and tax here.

Angie Bray: I thought you said that one was preparing the way for the other.

Clive Hawkswood: We are afraid it is, yes. As I say, we do not-

Angie Bray: So perhaps you might take them both together?

Clive Hawkswood: Okay. You can address the regulatory issues. We do not have a problem at the moment. We are not sure what this Bill is seeking to address. How it will improve the current situation. If you are talking about fiscal advantage, the Government can take measures. It will take this through and they will be subject to UK tax. They will catch them in the net. That is our position. The problem is then, are we all sitting here again in another five or six years saying, "What do we do now, because those guys have lost their market share to somebody somewhere else?"

Q73 Angie Bray: That is what I was saying, so effectively the online gambling industry, one way or another, will continue to escape?

Clive Hawkswood: Some people will. Where there is an opportunity people tend to take it, yes, and our concern is you risk moving that from reputable operators to less reputable operators.

Q74 Chair: Bluntly, if we bring this in you are saying that the danger is people will go to illegal, unlicensed sites?

Clive Hawkswood: It is how you describe them, but there are people who hold licences in Central America, which are not worth the paper they are written on. They are sold a licence, but all the things we are talking about, there is nothing there.

Q75 Chair: There would be some people who are probably stupid enough to go and place a bet on a site based in Central America, but the vast majority of people are not that stupid. All right, you will capture the overwhelming majority of the market and, yes, there may be a small number who do go on to an illegal site, but if you make it as difficult as possible for them to do so, surely you have gone a long way to achieving the objective?

Clive Hawkswood: That is possible. The trouble from our side is this is the Government gambling with our future. If this goes well we are all happy. If it goes wrong we are the only ones who lose out, and Government can look at this again in a few years and the businesses are ruined.

Q76 Chair: You see, this is very reminiscent of the discussion that we had over the Digital Economy Act, and the fact that the ISPs argued that the Government’s proposals for the website blocking of pirate sites could be circumvented and that they would not work. Well, the music industry argument to us that even if it was possible to circumvent, nevertheless, it would probably stop 80% of people going there, and that was an awful lot better than the present position. Surely that is the same argument to you. Yes, if you really try hard enough you will overcome any technological barrier and you will manage to reach some illegal site, but for most people they will not and, therefore, you will have them remaining within the licensed market and also created a level playing field.

Clive Hawkswood: We query whether in the long-term you will stop them because it comes back to our experience in other countries, and why this scares us, to be frank, is that has not been our experience in most other jurisdictions. If you look at the US, which, let us face it, is pretty tough when it comes to enforcing things, they changed their laws in 2006, effectively brought in financial transaction blocking. It did not make a blind bit of difference. What happened was all of our members pulled out of the US market. A couple of small companies stayed in and one of them is now bigger than anything we have. We do not want to see that happen again and, all right, I am only talking for our part of the industry, but that is all I can do. There is a huge cliff we can fall off if we are not careful.

We sympathise with the Government wanting to maximise tax revenues, of course we do, and the regulatory objectives we are completely on side with. What we are saying is the regulatory objectives in this Bill are very vague. It is not clear what they would achieve or whether they are necessary, and the potential tax hit we will take following on from this could cause us damage we could not recover from.

Q77 Paul Farrelly: Just a couple of supplementaries on that. If we take the 90% figure that I understand is correct for Denmark at the moment, without any complicated enforcement methods, isn’t the reality that they take 90% and then you take a view on proportionality of what you do, depending on how much is leaking to whom, but at the same time they are capturing tax from those based in Denmark?

Clive Hawkswood: The Denmark regime has been in place a little over a year, and in the same way the Treasury is saying, "All right, we will discount 20% from the UK market, and the Danes are happy to discount 10%." I am not talking about what happens in 12 months. We are talking about three to five years and longer. Denmark may not be in this position in five years’ time.

Q78 Paul Farrelly: If we are going to abstract this from tax for the moment, which we cannot clearly, one of your arguments is 100% of the UK market is captured at the moment by those people either licensed in the UK or Gibraltar or the Isle of Man. My understanding is that the Gambling Commission and this legislation that applies are not going to seek to redo all the work of reputable gambling commissions elsewhere, such as in those jurisdictions, but might very well be more sceptical of something based in Guadalajara or South America. So my question then is, what is your problem?

Clive Hawkswood: I think there is a general question of proportionality, which is if we say, "First, 100% of the market is in those jurisdictions"-

Q79 Paul Farrelly: But it is happening now. Your argument is arguing from no licence whatsoever, anywhere at any time.

Clive Hawkswood: Sorry, could you rephrase that?

Paul Farrelly: Your argument is about licensing, will drive people into unlicensed hands.

Clive Hawkswood: No, we are not. No, the licensing is figurative. If this was just about licensing we would sign up to this now because it makes not a blind bit of difference, that is the truth. What that Bill offers is no change. It is good for the Gambling Commission, but what it does is pave the way for the tax regime to come in.

Q80 Paul Farrelly: Absolutely, which is your fundamental objection.

Clive Hawkswood: If the requirement in this country was lower, say like the tax regime in Gibraltar, everyone would have UK licences already. We would not be having this talk now.

Q81 Philip Davies: Before I start. I do not think I have any interests to declare, but, just in case anybody thinks I have, then I refer people to my Register of Members’ Interests, in which people will see a subscription from Peninsula Business Services, which has absolutely nothing to do with gambling. It is an employment services company, but it happens to be owned by Peter Dunn, who is the brother of Fred Dunn, who owns Betfred and the Tote. It might seem a tenuous link to you, Mr Chairman, but there we are, just in case anyone thinks it gets to the core of the matter.

Just following up Paul’s questions on two points, two simple questions. First of all, if this Bill were to come into effect, how many of those companies that have gone offshore would move their operations back to the UK?

Clive Hawkswood: I would suspect none would be rushing to do it. As I say, this does not really change anything from that perspective.

Q82 Philip Davies: I think you said earlier that you speak up for bet365 as well. They are one of your members. You may not be able to answer it, but if you feel you are in a position to, if this Bill came into effect and bet365 became a public company and had shareholders to account to, would this Bill stop them from going offshore or would they still be financially better off moving offshore than staying onshore?

Clive Hawkswood: All the companies are financially better off offshore.

Q83 Philip Davies: Even if the Bill came into effect?

Clive Hawkswood: Unless the tax regime changes, yes.

Q84 Philip Davies: In terms of the regulation, you said at the start that the regulatory regime in Gibraltar and Alderney was very similar to that in the UK. How does it differ?

Clive Hawkswood: That is much harder to answer. I will take the two easy ones there. If we talk about Alderney and the Isle of Man, they are on the Government’s White List. That is for advertising. To get on that White List, the Government and the Gambling Commissioner had to say they had regimes that were at least comparable to those of the Gambling Commission. So, in effect, they have already signed off on those two. In Gibraltar you would struggle to push a piece of paper between them. The gambling laws in Gibraltar are largely a cut and paste of the 2005 Gambling Act. The way they are implemented, the detailed regulations are slightly different, but they are very, very similar. The head regulator in Gibraltar was recruited from the Gambling Commission, so there is another read-across there. For practical purposes, I would say no difference at all.

Q85 Philip Davies: You might say that, but somebody like Barney Curley may say something different, maybe not. Because of course Barney Curley-I am not sure when it was, Mr Chairman, probably a year or so ago-landed a huge coup. He ran four horses. Well, three of them were his and one was a horse he used to train. He put them in multiple bets and three of them won, and the one he thought most likely to win lost inexplicably. But even though only three of them won, he estimated he had won somewhere in the region of £3 million on his bets. We ended up, if I remember rightly-and please correct me if I am wrong, because I am only basing this on recollection-with the rather bizarre situation that companies like Betfred paid out Barney Curley in their shops in the UK, because that is what they were obliged to do, yet Betfred in Gibraltar refused to pay him out for some considerable amount of time, because under the regulations there they were not obliged to and they felt that he had behaved in a way that was not becoming, so to speak. I do not know what he had done wrong according to them, but they thought he had done something. Win is presumably what he had done wrong. But they were not prepared to pay. So when you say that there is not a paper between the regulation in the UK and Gibraltar, Barney Curley could be forgiven for thinking there is rather a big difference, because if you do not get paid out by one and you do get paid out by the other, that is a big difference, isn’t it, really?

Clive Hawkswood: I will not make a value judgment about which regulator is right in those circumstances. We are not saying they are exactly the same. We are saying, in terms of the key licensing objectives and how they approach them, they are the same. British consumers are protected to very similar standards. Are all regulators going to approach specific cases in the same way? No. We could say, "Look at the Gambling Commission," and point to where they have been inconsistent in their own approaches. So I think different regulators sometimes do have a different spin on things, but on the key issues-protection of consumers, transparency, fairness of games, combating crime-they are all on the same page.

Q86 Philip Davies: But this is about protection of consumers, isn’t it? It is about if you put a bet on you want to know that you are going to get paid out. To me, as a punter, that is the top protection. On the rare occasions when I back a winner I want to know I am going to get my winnings back. I do not want somebody invoking some bizarre offshore rules to say, "Oh by the way, I’m sorry, I think you’ve been up to some jiggery pokery there, and we would rather not." This is about player protection, isn’t it?

Clive Hawkswood: But again, they are gambling under a set of rules. Whatever forum you gamble in you abide by that set of rules. Now, effectively-I won’t speak for Fred Dunn’s organisation and whichever company they have gambled with-they have placed two separate sets of bets under two different sets of rules. If there is some confusion that is not helpful, but the rules are clear in both circumstances.

Q87 Philip Davies: No, absolutely. I do not disagree with that, but that is the point, isn’t it? The rules are different in different jurisdictions. That is the whole point. When you say that the regulations, there is nothing in it, they are different. That is the whole point. On the other point, again, if you could let me know because you are the experts not me, but in terms of if I put a bet on with Victor Chandler in Gibraltar, could they send me an email shortly before the off and say, "Oh by the way, I know you have staked your bet, I know it is placed and all the rest of it, but actually we have looked at it and we have decided we don’t want this bet," in a way that you could not do in the UK?

Clive Hawkswood: That is such a detailed question that it would have to go to the Gibraltar regulator. I could not comment on what is legal there or whether that is something the Gambling Commission would allow here, because in terms of the Gambling Act and the Gambling Commission rules, I do not think there is anything that would prevent that happening here, so the difference may not exist.

Q88 Philip Davies: One thing that may be different is the disclosure to sporting bodies, in terms of unusual betting patterns that may indicate some kind of match fixing that is going on. How does that differ between the UK and Gibraltar?

Clive Hawkswood: So for the UK, if you have a Gambling Commission licence, it is a licence requirement, you must share that information. Mainly to the sports betting intelligence unit at the Gambling Commission. Clearly, if you are offshore that does not apply because you are not UK licensed, so that is the difference. The Gambling Commission’s recourse then is to go to the regulator and try and get that information. The sticking point I think the Gambling Commission has cited is the data protection laws, that clearly each country may have slightly different data protection privacy laws, and that is true. But again, this Bill does not address that. Even if you have a UK Gambling Commission licence, if you are physically in another jurisdiction you are still bound by those laws, and the Gambling Commission cannot indemnify you against that. So that will not improve. Our suggestion is the Gambling Commission needs to take a multilateral approach, which is what all the international sports bodies want, to work with all the other regulators to try and exchange as much information as they can.

Q89 Philip Davies: So your point would be that if people want to think that we need UK regulation and licensing of betting operators, to ensure that this information is shared, that this Bill will not help?

Clive Hawkswood: We have asked the Gambling Commission to explain how it will help, but I do not say it gets around data protection laws that they cite as the major problem. I suspect the major problem is that they find it quite bureaucratic going through other regulators, but we know, for instance, in relation to money laundering, there are official channels to get that information and that is where they should pursue it.

Q90 Philip Davies: Finally, could you explain why you and your members believe-or some of your members believe-that this Bill would break EU law.

Clive Hawkswood: Do you want to take that?

Wes Himes: Certainly. We are trying to figure out what problems this proposed Bill addresses. Are there issues of public order? Are there issues of social responsibility? None of the evidence or statistics indicates that there is a significant problem that would justify this new regime, and, therefore, not having the justification, which is up to the member state to prove, would therefore be empty and therefore there would be a question of whether such a regime would be compliant under EU law.

Q91 Philip Davies: So, if the Government introduces this legislation, and it passes through Parliament, are you saying that you or any of your members will challenge it in the courts?

Clive Hawkswood: I think our starting point is nobody wants to challenge Governments if we can avoid it. But other parties have put counsel opinion to Government, setting out exactly where the concerns are and what action they might be forced to take, if necessary, and that does lead to an EU challenge if necessary, yes.

Q92 Philip Davies: Is the challenge dependent on what the rate is?

Clive Hawkswood: No. It is on whether the licence proposals are acceptable. It has nothing to do with the tax.

Q93 Jim Sheridan: Very briefly, Chairman, it seems to be the suggestion that if this Bill is introduced and it paves the way for fairer taxation, you seem to be saying that your members will pick the ball up and leave. I would like to put a bet on right now that they don’t.

Clive Hawkswood: No, I think quite the contrary. The concern of our members is that they cannot pick up the ball and leave. If they need a licence here they will take one out. Our concern is that someone else will take the ball and leave or actually will just create a new pitch completely.

Q94 Jim Sheridan: I bet they don’t.

Clive Hawkswood: That is an ante-post bet, we will have to talk about that separately.

Q95 Paul Farrelly: In your evidence, Clive, one of your bullet points is, "If this social policy legislation applied to every operator it will open the door to the introduction of an extraterritorial tax regime that will place a huge additional fiscal burden on our industry", but the reality is that the door has already been opened in other countries, hasn’t it, to such extraterritorial tax regimes, and what they are doing is their Treasury is reaping tax and our Treasury is not?

Clive Hawkswood: The Treasury is not reaping tax. As Wes has already said, most of them are struggling to hold on to the current market share of what base they have.

Q96 Paul Farrelly: The barriers to entry are not low on online gaming these days, are they?

Clive Hawkswood: No, they are not.

Q97 Paul Farrelly: The barriers of entry in terms of IT are pretty high now.

Clive Hawkswood: They are, but if the reward is there people invest.

Q98 Paul Farrelly: Can we just come back to our danske venner, our Danish friends? They opened the market. There was an EU investigation into whether they could charge lower online tax rates than the offline, and that came not from your members, because they were liberalising the market, but from the casinos and gambling halls. That was all approved and their gross profits tax is 20%, isn’t it? So that is higher than the UK.

Clive Hawkswood: Yes.

Q99 Paul Farrelly: Are there any of your members, as far as you are aware, that take bets from Danish citizens that do not have a Danish gambling licence?

Clive Hawkswood: Not that we are aware of, but then, as I keep saying, we are not the at-risk group.

Q100 Paul Farrelly: Right. But that 20%?

Clive Hawkswood: Are you saying they do or they do not?

Paul Farrelly: They do. As far as you are aware, are any of your members-

Clive Hawkswood: A number of our companies are licensed in Denmark. A number are licensed wherever they need to be to enter the market. But whether those are economically sound in the long term is unclear.

Paul Farrelly: Okay.

Clive Hawkswood: Do any of our companies still take bets from Denmark since that regime was introduced? No. If the regime was changed in the UK, I am absolutely certain none of our members would move into the grey market and try to access it there.

Q101 Paul Farrelly: My final question. Your other point about restriction in trades between EU states, notwithstanding what has happened in other countries, there is the implied threat of a challenge there. It became a little bit harder in your answer to Philip Davies’ question. So can we be precise? If these changes go through, probably with a few tweaks, as far as you are aware are any of your members likely to mount a challenge early on, albeit last-minute?

Clive Hawkswood: I would not know about the timing of a potential challenge, but the Gibraltar Betting and Gaming Association have looked into this in great detail and they advised Government that they would consider a legal challenge.

Q102 Paul Farrelly: But any of your corporate members?

Clive Hawkswood: Not through the RGA. If they are planning to do it individually, that would be a decision for them.

Q103 Paul Farrelly: Who are those parties who have put counsels’ opinion to the Government?

Clive Hawkswood: Primarily the submission put in by the Gibraltar Betting and Gaming Association.

Q104 Paul Farrelly: So it is Gibraltar?

Clive Hawkswood: The association representing the companies there, yes.

Paul Farrelly: Thank you.

Q105 Angie Bray: Just one question. A number of gambling companies do put some funding into educational programmes. I think the point is that at the moment that is on an entirely voluntary basis.

Clive Hawkswood: Yes.

Angie Bray: Were these measures to come into force and were these gambling companies who do at the moment fund those kinds of educational programme to feel under further financial pressure as a result of these measures, would that funding be likely to dry up?

Clive Hawkswood: Following Philip Davies, I should declare I am also on the board of the Responsible Gambling Trust, which raises that money and allocates it. No, I think that funding is seen as a priority.

Q106 Angie Bray: Is sacrosanct, basically?

Clive Hawkswood: It is budgeted for. Well, nothing is untouchable if pressure comes over them, but I do not think we are suggesting that in order to pay tax we would stop making contributions.

Q107 Chair: Can I just ask you about one final issue? We have touched on problem gambling. This Committee has spent a lot of time looking at the gambling industry. There is no question but that gambling addiction and problem gambling are causing great concern, as has been reflected in the press coverage. First of all, do you accept that, by its nature, online gambling carries a bigger risk of addiction and creating problems than other forms of gambling?

Clive Hawkswood: It depends. When you say "bigger than", bigger than what? Certainly we would accept it is above the average. It is comparable to equivalent land-based products. So we believe the rate for an online casino is the same as land-based casino betting. It is comparable. Of course it is one of those forms of gambling that is at the harder end, but not disproportionately so.

Chair: But there is clearly a significant risk to some people who indulge in online gambling?

Clive Hawkswood: There is a risk with all forms of gambling.

Q108 Chair: The final quote in the two-page article at the weekend, the Government believes the new proposals are "an important step to help address concerns about problem gambling". You see no justification for that at all?

Clive Hawkswood: I can’t find anywhere in the DCMS papers that would lead me to believe that, no.

Q109 Chair: Did you say you cannot find anybody who believes it?

Clive Hawkswood: Anywhere in the DCMS papers where it explains how that would happen and what change would happen.

Chair: All right. I think that is all we have. Thank you very much.

Examination of Witnesses

Witnesses: Tim Lamb, Chief Executive Officer, Sport and Recreation Alliance, Paul Scotney, British Horseracing Authority, Simon Barker, Professional Footballers' Association and Professional Players Federation, all of the Sports Betting Group, and Lauri Moyle, Gambling Policy Consultant, CARE, gave evidence.

Q110 Chair: We now move to our second session. I welcome representing the Sports Betting Group, Tim Lamb, Chief Executive of Sport and Recreation Alliance, and Paul Scotney of the British Horseracing Authority. Mr Barker, I am not sure where you are from. Where are you from?

Simon Barker: Professional Players’ Federation.

Chair: Professional Players’ Federation. Thank you. Also Lauri Moyle, who is representing CARE. Philip Davies is going to start.

Q111 Philip Davies: Obviously, you were here listening to the evidence we have just received, so you heard it just as well as we did. In what ways do you think the proposed Bill in front of us will help to reduce levels of match fixing?

Tim Lamb: First of all, can I just thank you, Mr Chairman, and ladies and gentlemen, for giving us the opportunity to present oral evidence this morning to back up what we have already submitted in writing?

Perhaps before I answer your question, Mr Davies, I could just make a couple of general points about the importance of integrity in sport. I have been lucky enough to earn a living in sport in one way or another for nearly 40 years, so I feel quite well qualified to talk about the importance of upholding integrity in sport.

As we said in our written evidence, it is one of the key functions of all sports governing bodies to uphold integrity because sport is based on fair competition and it is absolutely essential that all competitors are genuinely competing to win. No lesser lights than Jacques Rogge, Michel Platini and Hugh Robertson have all, just in the last few months, stated just how risky is the threat posed by irregular betting and match fixing. I think the key point is to have consistency across the piece, a level playing field. The reason why it is so important to have that consistency relates to the effectiveness of licence condition 15.1 since it was introduced. It is absolutely essential that there is an information flow to assist sport to maintain its integrity. It gives the sport a right of access to betting information rather than leaving it to the discretion and good will of the betting operators. It also places a duty on the betting operator to proactively record any suspicious betting patterns. As my colleague Paul Scotney will confirm, perhaps later on, we did see an increase in referred cases immediately after the introduction of licence condition 15.1, so it does work and it is effective. I think the key thing that the proposals in the draft Bill will achieve is that there will be a single system that is easier for everybody to understand and easier to apply. We believe it is totally unfair to expect sports bodies to potentially have to understand and deal with a whole variety of jurisdictions, so I think consistency and a level playing field are absolutely crucial in this. The stakes are extremely high. We cannot rely on the good will of a handshake. Integrity in sport is far too important for that.

Q112 Philip Davies: The RGA have said that the Bill does not make any difference, it will not compel people based overseas to do it.

Paul Scotney: Maybe I can just give an example. I thank you for your contribution earlier in the example you gave with the Barney Curley scenario because that is exactly the heart of what we are trying to say, that it is an unlevel playing field. You were talking in relation to punters being paid out in this country by Betfred but not in Gibraltar and you are absolutely right. People just did not understand why that was the case. That is the situation we face at the moment in relation to information sharing. We have a mixed bag of what happens. We only have one betting organisation that across its whole business has to share data as a matter of its licence and that company, which is bet365, has already been talked about. We have other companies that do share data across their businesses voluntarily. There are a number of those. We then have another category of companies that share data on suspicious betting from their businesses here, but then say they cannot do it for their businesses offshore and that you will have to go the respective gambling commissions over there to get that. You have another category of a betting organisation that does not know what to do because it is offshore entirely, does not have shops here, they do not know how they comply and they worry about data protection issues. Then there are probably one or two in a final category that just do not co-operate at all. There are one or two companies offshore where, in my time working in betting-rate corruption in nine years, I do not know of a sport receiving anything from them. So the scenario you painted there in terms of the way the punter is either paid out or not paid out is exactly how it is on the data sharing. We are reliant on voluntary agreements or in some cases we just do not get it at all.

Q113 Philip Davies: I take all that and I will come back to some of those points in a second, but the bit I am trying to press you on is that according to the Remote Gambling Association, none of that will change with this Bill.

Paul Scotney: That is simply not the case. If the Bill, as it says, has a condition of licence the same as 15.1, it means that the betting company will have to share directly with the sport’s governing body any suspicious betting that they see. Let me give you a specific example. If on a Saturday morning bet365 sees suspicious betting activity, I suspect what they would do is report it directly to the sport’s governing body and that gives the sport’s governing body a chance to be proactive. If that happened with some other companies and was online, we would not hear about it because they would have to go to their respective commission over there and I know for a fact that that commission would not share it directly with us. That would then have to go through to our Gambling Commission and what you are talking about is a delay of up to three, four, five days, maybe weeks. So it would change because under the new system what would happen is if it was the same as 15.1, if any only-online company saw suspicious betting, they would have to share it directly with the sport’s governing body. That then gives a sport’s governing body a chance to do something before the event. So I think that is a tangible difference.

Q114 Philip Davies: How many of these businesses offshore refuse to share the information?

Paul Scotney: When we say "refuse", I cannot say any have flatly refused. We have had some that say it is too difficult and you have to go through the Gambling Commission. We have one that I do not think has really been asked the question.

Q115 Philip Davies: The thing is that the victims of match fixing are the betting operators, are they not? They are the ones who are the victims because what is happening is people are placing huge bets on the outcome of any event in order to win money. Who do they win money from? They win it from the betting companies. So I would not have thought that there would be a great deal of resistance from betting companies to try and eliminate this kind of match fixing because ultimately it is the betting companies who are the main victims.

Paul Scotney: I think I need to correct you slightly on that because that is not necessarily the case if you are betting on an exchange. It is another member of the public. A large proportion of the market is through betting exchanges.

Q116 Philip Davies: Betfair have been one the main people who have helped you in the British Horseracing Authority.

Paul Scotney: Absolutely.

Philip Davies: I commend the work you did in bringing to justice people involved in stopping horses and that kind of thing in racing. You only could do that with the support of Betfair.

Paul Scotney: Absolutely. It was Betfair and it was Ladbrokes. It was through their work in 2004 that helped us get where we were. But in 2009 when we had the section 15.1, we then saw a tangible change. Now we are in the scenario where, as I have said, it is not the case. It is that some companies do not know what to do; some companies do not want to do it; some do it voluntarily. The danger with a voluntary arrangement is that it is only as good as the individuals that introduce it at the time. People move on from organisations. So a voluntary arrangement that one person introduces at a company can change when someone else takes over.

Q117 Philip Davies: What I am getting at is that where the public are ripped off in the sense that because they are betting against each other on an exchange, the main exchange, Betfair, already give you all the support that you need in terms of sharing that information, which is why lots of people have been brought to justice. Recently, we have had Andrew Heffernan on a 15-year ban as a jockey for being involved in fixing. So that is all working fine. The only other possible victims are the betting companies themselves, so I do not really see why any of them would want to be resistant.

Tim Lamb: I would like to take issue there. The biggest victim is sport itself and the people who follow it. I was chief executive of England and Wales Cricket Board at the time of the major match-fixing scandal involving Mohammad Azharuddin and Hansie Cronje. It is sport that has to pick up the pieces whenever there is damage to its reputation.

Q118 Philip Davies: I am glad you have mentioned that. Obviously, your main claim to fame is voiced through cricket and the work that you did there. Would you not accept that most of, maybe even all, the examples of match fixing and all of the scandal around betting activity on cricket where no-balls were being bowled, or whatever it might be, was nothing to do with the online companies that are regulated either here or in Gibraltar or that would be tied up by this legislation, because most of that was fuelled by illegal betting in the subcontinent and the Far East? What this Bill will not change is any kind of illegal betting in the subcontinent and the Far East, so it will not make a blind bit of difference to all of the stuff that you are referring to just there.

Tim Lamb: I would accept that in terms of cricket you are right. But it is over eight years since I was chief executive of cricket. I am now the chief executive of an organisation that represents about 100 sports and the fact of the matter is that although cases of irregular, suspicious and corrupt betting on the much more heavily regulated markets in this country are thankfully rare, they do still happen. There are examples in sports like football, rugby league, darts, boxing, tennis, snooker, and even bowls, for goodness’ sake, where there has been a whiff of suspicion. It is not just a question of what has happened in the past. It is a question of what might happen in the future. As Kate Miller from William Hill said in a Guardian article only yesterday, "The reality is that tackling corruption is an ongoing task; there will always be people who want try to take advantage of the system."

Q119 Philip Davies: That is fine, but you will accept that using the cricket ones is not particularly helpful in the context of this because it will not make any difference to all of that.

Tim Lamb: The point I was making is that when there is suspicious or corrupt betting, it can do untold damage to the reputation of the sport and I would say that snooker has suffered greatly from that just in recent years.

Q120 Philip Davies: You said at the start that what was important was consistency across sports. We have just recently had the case that I referred to with Andrew Heffernan as the jockey banned for 15 years for being involved in race fixing. One of the people he was doing it at the behest of was somebody who is a professional footballer, Michael Chopra. He has been found guilty by the British Horseracing Authority of being involved. He has been warned off because he has been involved in cheating in horse racing. What are football doing about Michael Chopra, given that he has been found guilty of cheating and fixing in horse racing? What are the football authorities doing? Presumably, if it is all about consistency and it is all about the integrity of the sport, Michael Chopra will be banned from playing football.

Paul Scotney: I think the consistency we are talking about here is the consistency of getting us to the point of where we are keeping the sport clean. I think in fairness to football, they have been handed the details of that case and that really is entirely a matter for them to decide what to do.

Q121 Philip Davies: The point is that if what you believe is that the most important thing in the whole world is the integrity of sport-and I am not disagreeing that that is what you believe-and it is all about consistency and it is all about stamping this out and everybody doing their bit to stamp out cheating, why on earth is Michael Chopra still allowed to play football when he has been found guilty of cheating and match fixing in a different sport? If integrity is the be-all and end-all, surely this man should be out of that sport.

Simon Barker: Personally, from my situation-I work for the Professional Footballers’ Association, as well as being a director of the Professional Players’ Federation-the issue with regard to Michael, and he has probably gone underneath our education programme, is we talk about football rules and what footballers can do within football, which is specifically that they can bet on football as long as it is not a match within their competition. So we speak about all that information. One of the things that we do talk about is, "Do not bet on your own sport. If you have to gamble, then gamble on another sport." It is another issue.

Philip Davies: I am sure you say gamble on another sport, but I am sure you do not say cheat on another sport, fix an event on another sport.

Simon Barker: I agree with that. Nobody is going to tell him to cheat on another sport, but ultimately the FA will have a look at it and they will decide themselves whether they are going to charge him on that basis.

Q122 Philip Davies: Do professional footballers want known cheats to be involved in the sport? If it is all about consistency and integrity and it is the most important thing in the world to you all, I do not understand what he is still doing there, why you still have him as a member of the Professional Footballers’ Association.

Simon Barker: I think it is a side debate.

Philip Davies: Not really, because it is what it is all about.

Simon Barker: When we talked about what you talked about with regard to why the 15.1 licence condition is going to make any difference, there are certain bookmakers that might, for commercial reasons, take bets from people who they know are betting against their rules of their own sport. But they do not have to provide that information. I am not saying that they do not do it, but they do not statutorily have to provide that information, because it might be commercially convenient not to do that because he spends a lot of money there. Sometimes he wins, sometimes he does not. What this does now is make sure that the betting operators have to provide that information. I would have thought that would be a good thing.

Q123 Philip Davies: The point I make is that perhaps you should take the log out of your own sport’s eyes before you try to start taking the speck out of the gambling industry’s eyes. That is probably the point I am trying to get to.

But just finally, last year we had the London Olympics, which was the biggest sporting event this country has ever seen. Was there any evidence of any match fixing at the London Olympics?

Tim Lamb: Not as far we are aware, but in our experience corruptors are not particularly keen to target heavily scrutinised and well publicised global events, whereas maybe other minor sporting events that are less in the public eye, particularly certain instances that have happened in football involving the likes of Weymouth or Accrington Stanley, are more susceptible to corruption because they are less high-profile.

Q124 Philip Davies: That did not apply in cricket, did it, when we were talking about test matches?

Tim Lamb: It did not, sadly, and cricket took a long time to regain its reputation after that particular scandal.

Q125 Angie Bray: You obviously think that there are further measures that the Gambling Commission would need to take to be able to enforce effectively. Could you perhaps outline what you think some of those measures are? Also, do you think that the Gambling Commission has the resources to take up the new responsibilities that you think it should?

Tim Lamb: I think the question of resource is extremely important. From our understanding in dialogue that we have had with the Gambling Commission, they are concerned about the lack of resources. It is interesting that UK Anti-Doping receives something like £6.5 million a year from the Government to carry out anti-doping programmes in this country. Sports Betting Integrity receives precisely nothing. So there is a resource issue and I know that that is something that the Gambling Commission is concerned about.

Q126 Angie Bray: What sort of further methods do you think they should be adopting, as well as perhaps financial transaction blocking and ISP blocking? What sorts of thing are you looking at that they should have?

Tim Lamb: Well, I don’t think we see it as our role, nor are we equipped, to enforce the law. But what I can assure you is that if there are moves to beef up the enforcement procedure, sport will be very happy to co-operate with those measures.

Paul Scotney: I think the main thing we want, though, is for all of them to have to adhere to 15.1. I don’t think that would be a massive amount of extra work for the Gambling Commission. I am sure the Gambling Commission would welcome that because I am pretty sure that they have a frustration about when they want information out of overseas bookmakers, they have difficulties getting it. So the change that we would want to see is that they all comply with 15.1.

Tim Lamb: I think as I have said before that there is no doubt that 15.1 was effective in changing the behaviour and practices of bookmakers and that is why we want it introduced across the piece.

Q127 Angie Bray: But you have heard, and you will have heard my comments when we were hearing the previous evidence, that technology is always going to allow people to be one step ahead of the regulations and the tax regime, however you want to apply it. The Gambling Commission is going to have its work cut out, is it not, to be able to keep ahead of technology, basically? So it is going to have to be significantly extra resourced, is it not, if it is going to take this on?

Tim Lamb: Yes, absolutely, which led me to make the comment about the funding that UK Anti-Doping gets in comparison with the Gambling Commission. It is not sufficient. We have had recent discussions with the Gambling Commission where they have raised the lack of resources as a matter of concern with us. It can take something like £100,000 just to pursue one case. It is a very expensive procedure and more funding needs to be provided.

Q128 Angie Bray: What kind of funding do you have in mind? Do you have any idea about what sort of funding you think would be appropriate and indeed where do you think that funding is going to have to come from?

Tim Lamb: We certainly believe that there is a strong case for public funding. We also believe, as we said in our written evidence, that there should be a contribution from the betting operators towards the cost of maintaining integrity. Obviously, if they had to comply with the licence conditions, there would be contributions there. I am very keen that this Sports Betting Group deals principally with issues around integrity. That is the reason why we were set up, as a result of a specific recommendation from Parry. There are other discussions going about the creation of sports betting rights and things like that. But I think that is for another forum. As chair of the Sports Betting Group, what we are concerned about is maintaining and upholding integrity and giving every assistance to our member governing bodies in order to do so.

Q129 Angie Bray: Would you want to mention a ball-park annual figure?

Tim Lamb: I would not like to be tied by a figure, but certainly, bearing in mind that one case alone can cost a huge amount, depending on how complex it is, there needs to be more resources. We would be very happy to work with the Gambling Commission to provide an estimate of the sort of costs that might be needed. There is a resource issue.

Simon Barker: Just personally, is it the right thing to do? If it is the right thing to do, you bring the Bill in, you bring the law in and then you look at what resources you need to bring that in. But whether it is the right thing is really important-15.1, has it worked? We believe it has worked and it is important that betting operators provide that information to sports so they can look after the integrity of their own sport and keep that sacrosanct. That is why we believe it is the right thing to go ahead with it. We will wait and see.

Tim Lamb: Mr Hawkswood did say in the earlier evidence, he did concede, that the regulatory regimes in this country, compared to territories such as Gibraltar, Alderney and the Isle of Man, are not exactly the same. If you read the submissions from the betting operators they talk in terms of "similar to", "comparable to" and "very little difference between". The problem is that they are not the same.

Q130 Angie Bray: It is quite important when you are talking about taxpayers’ money you are not prepared to name a figure, but you are indicating that it might be quite a lot. Given that there is some question over whether they are simply going to drive the problem further away by making it less likely they will want to sign up to a regime in this country, the taxpayer will need to know that they are funding something that is going to work rather than something that is simply going to drive more stuff underground.

Tim Lamb: There is no evidence that suggests that it would be driven underground, although we are aware of that as a counter argument. I think I would answer that by saying, "How important is sport in our society?" It is what ordinary people talk about all the time in the pub, in the workplace, in the home. It matters a great deal. It makes billions of pounds worth of contribution to the economy. I think everybody would agree that if you do not have fair competition, you do not have sport. If that is not an argument for public funding for sport, I don’t know what is.

Q131 Angie Bray: What sort of percentage do you think that the industry itself should stump up?

Tim Lamb: I think we feel strongly that sport has been put in this position through no fault of its own. When I talk to people in the sport and recreation sector, it is amazing how many people don’t realise that governing bodies of sport have absolutely no say whatsoever on what types of bet can be placed on their events. I think it is right that governing bodies should make a contribution, but they do not have the resources to be able to make the contribution that is required in order to resolve the problem entirely.

Q132 Angie Bray: Do you want to comment on best practice amongst the regulators in other jurisdictions that you have been able to identify?

Tim Lamb: I think Mr Scotney would like to comment on that.

Paul Scotney: Well, it is slightly different. It differs in every jurisdiction you go to. To say that one is better than any other is very difficult, but certainly Australia have a very good system. The fundamental ones that are good are the ones that have the information-sharing systems. You cannot investigate corruption in sport unless you can get to the heart of who the people are behind it. So you could even talk about France where there is a strong regulatory regime. We have a regime at the moment that is mixed. In some cases we get the data we need and in some we do not. You talk about how much it is all going to cost. At the moment, I think if we feel as if it is right that we should have evidence of suspicious betting, then I think we should do that. I do not see how it is going to create a lot more money. Surely it is the right thing to do. If a betting operator offshore sees that one of our events is not right because of suspicious betting, then it should be right that the sport’s governing body is told as soon as possible.

Tim Lamb: I think the other thing is that education is absolutely the key and Simon Barker on my left is a representative from the Professional Players’ Federation and Professional Footballers’ Association who has been heavily involved in education programmes for sportsmen and sportswomen.

Q133 Angie Bray: Which are of course partly funded by the Gambling Commission?

Tim Lamb: Yes, they are, but under voluntary arrangements. As we said in our written submission, these arrangements are short term; they are not statutory, they are at risk of being withdrawn at any time.

Q134 Angie Bray: Again, we heard this morning that that does not seem necessarily to be entirely likely.

Tim Lamb: It is not necessarily the case, but if they are voluntary agreements they can be withdrawn at any time and I think we have reason to believe that one or two may be withdrawn. They certainly do not provide a long-term sustainable solution.

Simon Barker: Just with regard to the education, we were part of the Sports Betting Integrity Panel that came together drawing experts from the betting operators, sports, police, Gambling Commission, players, supporters, and there were a lot of disagreements in that panel, but the one main thing that everyone agreed on was education of the participants because if you are going to fix a match there is only really the players, maybe the officials, who can be part of that. It was so important. It is true we had a funding agreement with bet365, with Betfair, with Ladbrokes and the RGA. It was a three-year agreement. It could be stopped at the end of each year. It worked really well. We used that money to good effect with regard to football, cricket and rugby. It was great.

The issue we have, as Tim said, is that they are voluntary agreements and they can walk away from them at the end of each year, which is a real downside to that point. Also we know that it is only three sports that we have been able to do it for, but what we have been able to do is provide best practice and speak to the participants at a level that they can understand what is going on and talk about gambling addiction, talk about whistle-blowing, talk about the rules and the integrity of the sport, the real important issues with regard to sport. That has been really good. We did a survey with regard to this 25% churn for sportsmen within a sport. So it is not just a one year thing; right, we put that to bed; integrity sorted. It is on a yearly basis and it does cost money and it has been good with regard to our agreement that we have had. It would be good, maybe, if the Committee thought about the funding of that and whether that could be continued, whether it be statutory or whether it be on a voluntary agreement, but something that-

Angie Bray: Extended perhaps in terms of the time that it operated?

Simon Barker: Possibly, yes. We are already in negotiations and it looks like bet365 and Betfair are going to continue with that, but there is a number of betting operators who I would say may be freeloading on the basis of that. There are responsible gambling operators, without a doubt, but there are a number of others that probably would not get up to those levels.

Angie Bray: Thank you.

Q135 Jim Sheridan: Thank you. Like most punters I have often had the occasion to question the integrity of horse racing, none more so than on Sunday when I had a significant interest on a horse on a starting price of 100 to 31. It got beat by a 10 to 1 shot and I then questioned its integrity. But my question is this: for the sake of the punters, when that happens, such a significant difference in prices and so on and they get beat, at the end of the race is the jockey questioned? Is the horse tested? Or is the horse questioned and the jockey tested? What safeguards are there to ensure that the punter is not getting ripped off?

Paul Scotney: I think it goes right to the heart of why we need the betting companies to co-operate fully. In relation to Sunday, what I can say is that we have people at British Horseracing that are livetime-monitoring the markets every day, so that race would have been monitored. We would look at the bets. We would look to see whether there was anything suspicious and all of the things you have said might have happened. But if there were not any suspicious bets to raise concerns and the ride was in the rules, then probably nothing would happen. But what I will give you some comfort in is that we are livetime-monitoring betting markets every day and a number of sports are having to do that, which is why we are here today for this. It is because we need to work with the betting industry-and we do work very well with the betting industry at the moment-to allow us to get the full picture that you talk about. What would be the downside, of course, is if some of the bets were offshore with companies that do not share data with us. I do not think that is the case, but it is not beyond the realms of possibility that the piece of evidence that we need that shows there is something wrong went through an offshore operator and was not shared with us.

Q136 Jim Sheridan: But there is no guarantee that the horse would be tested at the end of a race?

Paul Scotney: There is no guarantee, but if we have some suspicions then we will proactively get the horse tested, yes, and we can do that. We can phone the stewards and the horse will be tested and we do do that and we do it on quite a regular basis. If there is any suspicion on anything to do with a horse, we will get it tested, yes.

Jim Sheridan: Any retrospective payments? No? Sorry, Chair.

Q137 Philip Davies: It seems to me that what you are asking from the gambling industry is half understandable and half, in my opinion, totally unacceptable. On the one hand, you are asking for the betting companies to share their information and data, which seems to me to be a perfectly reasonable request in order that you can do something about the integrity issues in your sport. That seems fair enough. I do not have a problem with that. But then, Tim, it seems that you then want to go on. We have already ascertained that the bookmakers are the victims of fixing matches for betting purposes. This flies in the teeth of a "polluter pays" principle, because you want the victims of the particular crime, the betting companies, to then pay again for you in sport to, in effect, clear up the fact that you have a load of cheats as umpires, referees and players in your sport. Why on earth should the gambling companies that are the victims of this pay for you because you have corrupt cheats in your sport?

Tim Lamb: When you said that we ascertained that the betting companies are the victims, I disagreed with you. I strongly made the point that the biggest victims are sport and the people who follow sport. I have already said that we have got to the situation where any event can be bet on. In this country, it seems we are the world centre of gambling. You can bet on anything and everything in this country. Sport has had no say about what bets can be placed on its events. The gambling industry is making billions of pounds’ worth of profit on the back of sport and therefore I think should make a contribution. I am not saying that sport should not make a contribution. I also made the point that this should be public funding because of the stature and the status of sport in this country.

Q138 Philip Davies: Maybe the betting industry might want you to compensate them for the fact that they are losing money because you have corrupt people in your sport. It might be that they feel that they are the ones who are in need of compensation for the corruption that is going on rather than the other way round.

Tim Lamb: Can I just come back on that and just say that although we are obviously on opposite sides of the fence in today’s hearing, there is an awful lot of co-operation between sport and the betting industry, as Paul has already alluded to? We do sit round the table and share these issues with sport. We set up something called a tripartite group, which is representatives from sport, the betting industry and the Gambling Commission, and if we are going to properly tackle the issues and the threats posed by corrupt and suspicious betting and match fixing, it has to be a co-operative approach. So while we are disagreeing on this particular Bill with the RGA and the betting operators, there needs to be co-operation and there is co-operation.

Paul Scotney: Can we give another example, Mr Davies, as well, where what you say about the betting companies being the victims is not correct? We touched on it earlier. That is to say with the betting exchanges. One of the infamous suspicious matches in recent years was the tennis match of Davydenko versus Vassallo Arguello. A lot of the corruption took place on the betting exchanges and that ran to hundreds of thousands of pounds. The victims in those cases were not bookmakers. They were individual punters.

Philip Davies: No, indeed. Absolutely.

Simon Barker: It is not always match fixing, as well. It is sometimes just betting integrity, betting on the sport, not because you are trying to fix the match, just betting on your sport when you should not be, and that brings integrity issues with regard to the perception of the sport by supporters.

Q139 Philip Davies: When you said there were no resources to deal with this, that is not quite true, is it, because the Gambling Commission has a sports integrity unit? So clearly they do have resources to put into this.

Paul Scotney: But limited resources. It is a sports-betting intelligence unit, not an integrity unit. So while it does do some investigative work, it does not do a great deal, and I do not mean that as a criticism. We are also faced with the fact of a reluctance by police forces to get involved in these areas, which is why sport has to deal with them itself. The British Horseracing Authority had set up its own integrity infrastructure because if we did not do it, no one else was going to do it for us, and that is what other sports face. So we do have the issues of where we bear the financial burden and we face the fact that other bodies cannot help us in the way that we would like, so we have to do it ourselves.

Tim Lamb: I would also refer the Committee to the comment that I made earlier. At the last meeting we had with the Gambling Commission, the lack of resources was by far the most serious concern that they had. It can take an awful lot of money just to deal with one case. They are complex, difficult cases and it is amazing how much one case can eat up the resources at their disposal.

Q140 Chair: Just before we move to Mr Moyle, who has been extraordinarily patient, can I just ask you one final question? You have laid great stress this morning on 15.1 as being the great step forward if this legislation is passed. Can you give any specific examples of whether either the sport’s governing body or the Gambling Commission has sought to obtain information about a specific incident from an overseas gambling authority and been unable to get it?

Paul Scotney: I think I am unable to quote specific cases because my dealings have mainly been with horse racing and the predominance of horse racing betting is that they have co-operated. While I cannot talk about a particular case, I can give a scenario where we went to one of the major bookmakers identifying a particular race that we thought was suspicious. We outlined why. They said, "We can give you the data on that race from the shops in this country, but we can’t give you the stuff from the ones in Gibraltar." That would have then been referred to our Gambling Commission or to the Gibraltar Gambling Commission, which would have taken an awful lot of time.

Q141 Chair: Why did they say they would not give you the information?

Paul Scotney: Because they would say that they had concerns about data protection issues in relation to Gibraltar. I can remember the incident where we say to the guy, "We would like to know about this particular race," and he clearly said, "We can give you the stuff from the shops in this country, but we can’t give you the stuff from our online operation in Gibraltar. You will have to go through a different route to get that."

Tim Lamb: Could I quote from page 14 of the draft Bill? "Some operators do share some information with the Gambling Commission in addition to their home regulator on a voluntary basis. However, this is often of insufficient detail to be used in an investigation and limits the Gambling Commission’s ability to conduct thorough investigations. There have been instances where the Gambling Commission has not received relevant information and has been unable to obtain the information from the overseas licensed operator or regulator. In some cases the Gambling Commission is told the refusal to provide information is because of overseas data protection requirements."

Chair: All right. We may wish to pursue it further with the Gambling Commission when we see them. Can I thank the three of you and hand over to Tracey Crouch?

Q142 Tracey Crouch: Mr Moyle, you say in your written submission that you think that there are current weaknesses in the legislative framework. Would you like to expand on that?

Lauri Moyle: Yes. I think there is a structural weakness and we are certainly calling for a review of the licensing conditions and codes of conduct. So we welcome the draft Bill and we see it as a mechanism whereby, hopefully in the future, if evidence appears that there is a significant problem with problem gambling in the United Kingdom, that that can be taken care of in the UK rather than having to deal with different jurisdictions.

I do not want to say anything negative about the Maltese Gambling Commission, but it is a different Gambling Commission from the British system. I think previously mentioned were Alderney and Gibraltar. As far as I can tell they are operating in a similar consistent way as the United Kingdom, but there are other jurisdictions that are probably not quite as robust.

Tracey Crouch: Such as?

Lauri Moyle: Yes, one of them is the Dutch Antilles. The reason I say that is simply that they are not on the White List, but according to this they regulate 376 websites, in comparison to Gibraltar, which is 304; Alderney, 112; Malta, 547. Let me explain that the reason why I mention the Dutch Antilles is because there is a company based in Cyprus called Unimaster Limited that runs City Club Casino. So it is based in the EU. Presumably it is therefore legal to provide services to UK citizens because of that. But its regulator is the Dutch Antilles. So there is something going on there that is quite confusing to somebody like me. I do not gamble online, but after Friday’s debate I just thought I would have a look and see what is going on. I googled casino gambling and one of the first hits that came up was toptenonlinecasinos.co.uk and City Club Casino was on that list. So if you think of a punter, an individual, wanting to go and find a new casino that they have not gambled in, they might go there and they might not necessarily think about looking for the little flag right at the bottom of the page that says where they are regulated. In this specific instance, the flag was so small I could not tell what it was, so I went into the terms and conditions and had to dig and find where they were regulated and how they were owned. So that is a case study of perhaps lots of different websites. I do not have the capacity to do this, but I am assuming that the DCMS and the Gambling Commission have thought about it a little bit so I am looking forward to your interactions with them. That is the kind of big line structure issue of how regulation happens in the UK versus how it happens elsewhere.

In 2008 Jawad and Griffiths produced a study in which they reviewed the 20 most popular gambling websites and found that of those websites that are accessible in the UK, and they may or may not be licensed by the Gambling Commission in the UK, 60% of the websites provided problem gambling information and/or a link to help service websites.

Q143 Tracey Crouch: That is quite outdated research.

Lauri Moyle: It is.

Tracey Crouch: Five years on and I imagine that a lot has changed within the gambling-

Lauri Moyle: As far as I am aware, that kind of study has not been done outside of the DCMS or the Gambling Commission, so I am just relaying that information. Four big companies were very responsible, but that only represented 20% of the whole sample. I take your point it is old research, but let’s have more of it.

Q144 Tracey Crouch: Your reference about vulnerable persons, and we had this conversation earlier about protecting vulnerable people, who do you define as vulnerable?

Lauri Moyle: Again, that is hard. One of the examples that was used here beforehand was somebody who self-identifies. I am not an academic in this area; I take the academics and try to inflect policy, but I think doctors and researchers would say that there are a couple of stages before somebody might self-identify in which they are exhibiting behaviour that could lead to a severe problem. We are asking for a one-stop shop self-exclusion mechanism and that is simply because we think that people who have the impetus to self-exclude should be able to do that in a way that is robust and simple. There is a reason why we are asking for a one-stop shop self-exclusion mechanism. I have talked to folk who have called me up saying, "Can you help?" We are not a service provision organisation, but they have told me they self-excluded from four or five websites and it just does not work because they have to self-exclude from all of the websites that are available to them.

Q145 Tracey Crouch: Therein lies the problem, does it not, because it is unenforceable? I have been to visit William Hill in my constituency and I have seen the way that they ensure that somebody who self-excludes-

Lauri Moyle: That is a very fair point. I am specifically talking about remote gambling self-exclusion and the reason why I am saying "remote gambling" is precisely because of the problems that it might bring up terrestrially. Again, there is research in this wonderful book that shows that there are technological mechanisms whereby if the industry agreed to share a list, a central list, somebody who self-excludes from one gambling website or self-excludes through the Gambling Commission or through the Remote Gambling Trust, or whoever that body is, will then be self-excluded from all the websites that are licensed and function through the UK existence. I think it is possible. Let me just read an extract from this book, "This collaborative effort by the gambling industry would help protect vulnerable gamblers, although regulatory effects may be required to prompt operators to enact such measures". I am leaving it to you to decide whether it is the Government’s role or self-regulation or the Gambling Commission. This is really something that could help a whole host of people who stop self-excluding because it just does not function for them any more.

Q146 Tracey Crouch: Do you think gambling companies should be doing more to protect vulnerable people online?

Lauri Moyle: Yes. This is anecdotal, but again I point you to the research that I have already quoted. When I go to websites randomly, like through this search, the front page usually doesn’t contain any information that stands out about problem gambling. I think that would be a great mechanism, to bring about a mechanism for protection. The other thing that does not seem to be happening is the kind of co-operation that I was talking about there in terms of how different companies work together, ensuring that people who have problems can self-exclude. I think the lynchpin there is self-exclusion. It is a weakness and I think the websites that currently are not regulated by the Gambling Commission are probably not doing enough because they simply do not have the pressure from the UK Commission to provide a safe service.

Q147 Tracey Crouch: You heard earlier we were talking about advertising provisions within the Bill. Do you have any views or concerns about-

Lauri Moyle: Yes. We view this Bill as being something that on the one hand makes the regulatory regime more robust and, on the other hand, liberalises law and it does so in the sense that it allows anybody who wants to access to the British market without having to be based in the jurisdiction that is currently White-Listed or in the EU. It is a liberalising mechanism, but it does provide clarity and it does provide a new, even playing field. Advertising is one of the elements that companies who cannot currently advertise in the UK will be able to.

Our concern about advertising, again take it from the big arc of what we are doing here in terms of general legislation to the specific individual, is that there is a problem gambler who has accounts on two websites, has the courage and strength up to self-exclude from two of those websites, and there will be more advertising around, the trigger to go back and gamble again might happen when he sees an advertisement by a company he wasn’t aware of previously. By having more advertising in general you might create the situation where more people will be accessing websites they had not previously been aware of.

Q148 Tracey Crouch: Is there any evidence of that?

Lauri Moyle: I am assuming that that is the case. I can’t cite-

Q149 Tracey Crouch: But you do not have any evidence to suggest that?

Lauri Moyle: No. Again, I can quote from this wonderful, lovely little book if you give me just a second to find the section; it does mention advertising. Yes, this is research produced by the National Research Council in America and the Productivity Commission in Canada. The author of this book says about that, "Increased availability of gambling opportunities typically result in a simultaneous increase in gambling behaviour and problem gambling". Then further research by Monaghan and Derevenski in 2008 said, "Constant availability of gambling from any location, accompanied by increases in advertising, may normalise this activity, resulting in increased participation and less perception of potential harm". What we are saying is advertising does not necessarily cause problem gambling, but it does heighten the problems that are associated with problem gambling and that people are more aware of it. I cited both of those specifically because they relate directly to remote gambling because of the increased availability and the ability to gamble anywhere, rather than a specific venue.

Q150 Jim Sheridan: Just two very brief questions, Mr Moyle. There are certain elements in the press who like to have a pop at the gambling industry, the bad guys in the gambling industry, while they themselves promote and advertise gambling, in terms of they print horse race cards, dog race cards, fixed odds, Bingo, all these kinds of thing. There is an element of double standards there and if these so-called newspapers did not print the race cards and everything else, would that help gambling, the problem gambler?

Lauri Moyle: I can’t say. But I will say I was asked for a quote for The Independent on Sunday and they did not choose to use my quote, I don’t know why. I agreed with the content of the article, but I think it was a little bit alarmist. I hope I didn’t insult the journalist who wrote the piece. But my quote was a lot more staid, if you like, but I am worried because it is a real problem for lots and lots of people. While the statistics are touch and go, I think there are clear signs that problem gambling has increased, and in relation to remote gambling that increase has happened as well.

Q151 Jim Sheridan: I would not worry about trying to insult journalists; it has been tried and failed. The second question, I know it was alluded to earlier on in terms of figures from the The Independent on Sunday about problem gambling when it was claimed that the figures misrepresented the situation because of the lottery in the UK. Given the fact that the lottery is now doubling in price to £2 a ticket, there are two arguments. One argument says if you spend £2 buying two tickets, just buy one ticket now. But the other argument says if people play the numbers game, that is they have the same numbers every week, so therefore, they are going to be doubling the amount of money they are paying in the lottery, that again could create problem gambling. Is that an issue?

Lauri Moyle: I have not researched the national lottery. I am aware that there might be problems related to scratch cards. I have seen on numerous occasions people buy six or seven scratch cards, run them through and then go back into the shop while I am still in line and get back in line behind me. Then I am thinking I might stand here and watch what he does and he buys another couple. That is anecdotal-

Q152 Jim Sheridan: But the argument is that the increase in the lottery or scratch cards, or whatever it may be, it is mainly the less well off that buy then because they have that dream of getting to become a millionaire. It is them who are most affected and is that where of the problem gambling lies in those less fortunate than the rest of us?

Lauri Moyle: Right. I think it is certainly disproportionate in terms of income. If somebody is a problem gambler and they make less money, obviously the proportions are more problematic for people who make less money. I would say that in terms of remote gambling, I think the Gambling Commission’s survey, the most recent big survey, found that in terms of remote gambling it is people like me who are young, male and have a university degree and then also, in addition, people who are self-employed and run their own business. They are the natural risk takers, the people who do things, get things going and gambling is a mechanism. They enjoy the risk that they may be reflecting in other sorts of behaviour. The people who are at most risk for non-traditional forms of gambling remotely are those and for people who are on a lower income, the "tax on the poor" national lottery is called that for a reason, and I support and agree with that.

Q153 Mr Leech: Mr Moyle, I would like to bring you back to the issue of the one-stop shop for self-exclusion. In principle, the idea of an easy way to avoid being bombarded by different sites and being able to access different sites seems like a good idea. But have you any idea what proportion of problem gamblers fall into that category where they have reached the stage that they want to do something about their gambling and want to self-exclude?

Lauri Moyle: The statistics and research on this are hard to do because, on the one hand, if you have research that shows that there is a relatively low amount of people who want to self-exclude, they will also tell you that, "Why should I self-exclude? It doesn’t make any difference because I can just go and gamble on a different website." Any numbers we have that relate directly to self-exclusion and the probability that people will choose to self-exclude face the other problem in that gamblers do want to self-exclude, but they do not think it will work. With this one-stop shop mechanism I think it will provide an opportunity for them to make it work.

Q154 Mr Leech: The concern for me is not that this is a good idea, but that it is a sledgehammer to crack a very small nut out of the whole number of people who have a problem with gambling. Is there no research that has been done to suggest how many or what proportion of problem gamblers this would help?

Lauri Moyle: It would help all of them.

Q155 Mr Leech: But surely it would only help those problem gamblers who recognise they have a problem and want to do something about it?

Lauri Moyle: Yes. I am not aware of statistics, but I will say that GamCare-and I am not speaking on their behalf in any sense, I could not-and research from the University of Manchester, Salford, and a company that provides the mechanism to do this self-exclusion, Bet Buddy, who have developed a mechanism and have initially a financial interest in this, they have presented on the issue and they obviously think it is a good idea.

GamCare is one of the primary providers of care for problem gamblers. Even if the choice was not necessarily an individual’s to self-exclude, and the problem gamblers we are talking about are people who have already recognised-there are 450,000 problem gamblers in the UK. Those are people who are beyond the pre-stage of being possible problem gamblers. These are people who are very likely to know that they have a problem. Their families probably know about it and they are probably doing something about it in relation to GamCare. I don’t have statistics, I don’t have research, but it seems to make sense to me.

Q156 Mr Leech: Are there any other solutions that your organisation has that would have a positive impact on all problem gamblers, not just on ones that have reached that stage?

Lauri Moyle: Yes. Again, somebody mentioned previously that in isolation the enforcement mechanisms that the Government is proposing will not work in the same way, in isolation, a one-stop shop for self-exclusion does not necessarily provide a solution for problem gambling. It seems to us to be the spearhead of a practical solution that goes along with all the other good things that the Gambling Commission, the Responsible Gambling Trust and so on are doing already and will continue to do in the future as research comes out.

Q157 Mr Leech: There is nothing else potentially within this proposed legislation that you would like to see that you think would make a difference, a positive difference?

Lauri Moyle: I think it is a big ask so we didn’t go beyond that. But if you want me to come back to you about possibilities, I am happy to do that.

Q158 Chair: I think that is all the questions we have, thank you.

Lauri Moyle: Just on enforcement, just one small point. I think the important issue, as I think has been pointed out, is that the UK is an open market. That is the main difference between most other jurisdictions that apply financial transaction blocking or ISP blocking. Whatever that means for the open markets, it is hard to compare the failures of other jurisdictions, but I think the success rate will be higher. Because of the work that is going on in the Commission to harmonise regulation in the EU, however that happens, whether it is voluntarily or through a directive, we are heading in a trajectory that is more positive than a murky grey area might suggest.

Chair: Thank you.

Prepared 8th February 2013