HC 1554 Gambling

Written evidence submitted by Geoff Banks (GA 086)

My name is Geoff Banks. I am a 30 year career independent Bookmaker. I have been involved fully in Racing since I was very young having followed my Father into the business and taking it over when I was 25. I am now 48.

I operate a substantial set of high value pitches on course at the following tracks-Ascot,Cheltenham,Newmarket,Windsor,Sandown,Kempton,Goodwood,York,Newbury. These pitches are usually sited in the same betting positions as firms such as Ladbrokes and Hills, carrying great market influence.

I also own and operate a credit telephone betting business with around 200 clients. I have maintained this level of clientele consistently because it keeps the service personal and effective.

I would like to make the following points to the committee to consider in it’s dealings with the DCMS regards the Gambling Commission.

Fundamentally I would question the necessary nature of the GC. It should be remembered that many of the areas of Betting now covered by the GC used to be perfectly well regulated and certainly there was extremely little evidence of problems in sectors such as my own. Bookmakers were regulated successfully by the NJPC and off track by such as the Levy Board and Customs and excise. Many of the laws relating to betting were well established under the 1963 Act. The 2005 revision has served only to complicate and confuse matters with areas such as on course pitch ownership ill-considered, or poorly thought out, in legislation.

Many of my colleagues are frustrated by the GC’s apparent defence of matters such as ‘in running’ betting. Allow me to discuss this briefly. Legislators appear to have made room in the 2005 Act for the occasional wager between bettors which may have already taken place. i.e. Who won the 1963 cup final? This has twisted to become an entire sector of gambling in running actively encouraged by exchanges, racetracks and even picture providers. All consorting to producing pictures shown ‘as live’(the clock in the corner still showing real time- but pictures actually up to an incredible 11 seconds late) In the meantime traders have set up offices with software valued at six figures in corporate boxes on Attheraces racetracks, with the specific purpose of negotiating bets on horses, which are very often, already beaten. It should be noted bets being negotiated after the horses have passed the post or fallen. The picture providers benefit from fees from these in running traders at home and of course exchanges gain large amounts of commission on these activities. In effect the general public are being deceived by such delays-the length of the delay can vary from day to day, a conscious decision of ATR and the like. To summarise this constitutes fraud on a grand scale and it is defended as lawful by the Gambling Commission, who have a responsibility to provide ‘fair and open’ gambling. In response this the commission states ‘On the first point, when considering the legality of in running betting it is helpful to first look at section 9 of the Gambling Act 2005. This section of the Act allows a transaction to be a bet despite the fact that one party to the transaction knows the outcome. Simply put, the law states that it is legal to make a bet even when one party knows the outcome already; laying fallen horses is not illegal.’ Was it the intention of the 2005 act to sanction this type of activity?

Further to my knowledge the GC have never successfully prosecuted or challenged any individual or company for acting as a Bookmaker, despite the fact that there are many individuals and companies actively running business’ on Exchanges. Negotiating thousands of bets a month or week, running BOTS effecting often millions of lay and back bets a year. Information now in the public domain and reported to the Levy Board)Traders who openly work on racetracks 7 days a week in running – negotiating their activities on exchanges. These same exchanges have indicated they are only too happy to share their data with authorities such as the GC. It is therefore a simple matter to check whether there is effectively illegal Bookmaking going on by undeclared individuals who should be subject to GC fees and customs and Levy payments in the same manner as those who lawfully declare their activities. Betfair have recently introduced premium charges of 25 and even 60% on these traders. A clear admission that people are running business’s via the exchange. Pictures of trading rooms have appeared in national newspapers, reports in the Racing Post and such. Despite this mountain of evidence the GC has incredibly failed to challenge anyone with regards to their actual status. This situation would never have occurred or been tolerated in the world formerly controlled by Customs and Excise, whose mandate was clear under the 1963 version. These days such authorities appear paralysed by the wide nature of the 2005 Act. The Gambling Commission wrote to racetracks expressing concern as to such activities – but in the same letter left it up to the racetracks to decide if they were acting legally. GC officers incredibly haven’t visited these trading rooms as yet, despite constant reminders as to the activity therein – they see it as the responsibility of the license holder! The issue of ‘in the course of doing business’ and as to whether certain individuals or companies are acting outside the laws has been answered by the commission in a letter dated 2nd June 2011, where they state ‘"In the course of business" is essentially a tax definition. In the vast majority of cases the classification is an obvious one. Where it is not so clear-cut – and some point to layers on exchanges as an example – we look to HMRC to identify anyone who might fall into this category. I should say, however, that HMRC do not expect to identify many, if any, individuals liable for tax in this way.’ Essentially the Gambling Commission is passing the buck. A scandalous situation to be sure given their responsibilities.

On course we now have a situation whereby an operator can sublet his pitch to any other individual, raising serious concerns as to such issues as money laundering. Again unchecked or controlled.

There are many other issues and concerns raised by legitimate operators, paying fees and duties. It is a widely held view in Gambling industries that the Gambling Commission is wholly ineffective and unnecessary, to boot expensive and that legitimate concerns are dealt with in an entirely muddy and unsatisfactory fashion.

It is surely time to consider abolish the commission completely, and return regulation to bodies such as the AGT and Levy Board, who represented fairness and clarity.

FEES

Currently the commission’s budget stands at circa 15 Million pounds. The GC employs 200 people. 9 million annually is staff costs-including 1.2 million in pensions. The chief executive takes home £188,000, far more than the Prime Minister! She brings little real-time experience of Gambling to the table and cannot possible effect changes in the same way as the Prime Minister can. Yet she draws a greater Salary! Like any other quango – reporting to Government, it seeks to justify its very existence by producing reports into Gambling. At a recent forum held by the commission its officers reported that the vast amounts of data operators remained to be collated. Operators are mandated to produce these reports annually, an extremely time consuming exercise – added to an operators traditional annual reports. What is the point in operators working to produce such reports? Is it to report people are still gambling but may have migrated from telephones to internet and the like? To my mind, and of those I represent, it’s a mindless justification of the commission’s very existence.

In the annual report of March 2010, and with regards specific to ‘betting’ The gambling commission in its report reported zero prosecutions, and 5 no further actions, with regards to criminal activity. So there is no illegal activity taking place in the UK? Whilst reassuring, I would suggest that the truth is the commission is either inept or working to laws so unclear it simply cannot enforce them. With regards to regulated license holders there was exactly 27 revocations, excepting those who failed to settle their fees. As of march 2010 there were 3275 operators and around 12900 personal license holders. Totalling 16175. Which makes the level of successful revocations 0.17% of the total licenses held. In what other regulated business would one seek to justify the existence of an expensive commission to an industry that apparently functions to 99.83% satisfaction or compliance?

My own fees for my telephone betting business amount to £2037. If I offer my own clients the facility to traffic their bets through a website – I would be asked to foot a bill of a further £13500. Total £15537. Put another way it represents £76 in fees per cient. William Hill for example, with its vast empire of shops, Bingo, Poker and gaming sites foots a bill from the GC of £384580, with their advertised 40,000 phone customers alone this equates to £9.60 – let us not forget we are only talking about their telephone customer base- not their passing trade. Obviously organisations such as Ladbrokes and Betfair would face similar charges. Betfair advertise 5 million customers and pay 7 pence per customer. Clearly they all have massive compliance issues facing them daily. My own organisation runs no FOBT’s, casino products, Gaming or the like. There’s no danger of underage gambling. I suppose the major issue facing my company would be the control of credit. Yet according to the Gambling Commission my little business is effectively 4% of William Hill! My annual gross profit last year was £88,000. I am therefore being asked to pay 18% of my GP to fund the commission, a fantastic sum. When one considers William Hill last year paid 0.14% of their profits to the GC I should, by the same token be asked to pay £123.

A shop operator with 1-4 betting shops pays 14 times the fees of Ladbrokes for the same number of shops. In fact Ladbrokes and companies alike meet a mere 2.9% of the GC’s entire annual budget. It follows the independent operators are footing the lions share of the budget. One cannot be surprised at this as meetings to determine fee structure included such organisations as William Hill and they would hardly argue their burden upwards!

The GC view is that such companies run their own ‘compliance units’. Therefore the commission can treat the William Hill shops as one entity. Indeed capping the fee structure banding at 200+ shops. Never has ‘economy of scale’ been so distorted or unfair. Betfair as an organisation, by its very nature should arguably shoulder a far higher share of the compliance burden. A man can, after all, sit and fund his Betfair account using every credit card he owns, playing casino products or the exchange, with no control whatsoever on what he spends. Not to mention the continuing well-documented reports of nefarious activities routed through exchanges.

In the last four years, for fees approaching £10,000 – I have seen the Gambling Commission officers just once, for one hour. I have received no other visits or compliance telephone calls. What possible justification can there be for such a burden on my business. It cannot be the function of good governance to ask me, and those in businesses alike, to be put out of business –or forced offshore, by unpayable fees. What controls were put in place by DCMS to ensure the fees would be affordable and fair? It would appear none. I have raised these concerns with the GC. Their response has always been the structure is governed by DCMS. My view is the GC should work to make their fees tenable and fair and not once again pass the issue onto another department.

Finally, when I started out in business, I knew what my cost of business with regards to licensing would be. £20 annually. With the imposition of the Gambling Commission I was immediately required, in the 1st year to pay £5500 – just to stay in business. Failure to do so would have meant my license being revoked. In what other business in the view of the DCMS, would one industry be faced with such exorbitant costs and little other choice but to pay or face being forced out of business? It surely cannot be the function of Governance to force people such as myself either out of business – or abroad.

I would, of course, if required be delighted to appear before the select committee – if called, to discuss these and many other concerns. I earnestly hope the committee will reconsider this expensive and unnecessary quango and vote with business.

September 2011

Prepared 20th October 2011