Examination of Witnesses (Questions 680
- 699)
TUESDAY 20 JANUARY 2004
MR PETER
SAVILL, MR
CHRISTOPHER FOSTER,
MR RUPERT
ARNOLD AND
MR CLIVE
REAMS
Q680 Chairman: Mr Reams, maybe you
can help us with this. From the monitoring that you have done
do you have a view, albeit it may not be based on too much statistical
evidence at this stage, as to what proportion of the use of knowledge
is simply people taking advantage of the fact that they know that
the horse is incapable of winning a particular race and what proportion
is actually race fixing in the sense that there will be some corruption
involved in the running of the horse?
Mr Reams: I think that would be
a very difficult question to answer. I do not think I would be
able to analyse the statistics we have based on the conjecture
that one is race fixing and one is a horse not running to its
merits because it simply was not good enough.
Q681 Viscount Falkland: The Jockey
Club statement, which I do not think anyone would disagree with,
says that "Horseracing is vulnerable to criminal behaviour
and cheating as a consequence of the betting with which it is
inextricably linked," which suggests, of course, that corruption
to some extent is endemic in horseracing. Would you agree that
it may be unrealistic to try to claim that corruption can be eliminated
completely? Going back to Mr Savill's remarks about information
with which I entirely agree, I had an exchange with the minister
when he was here and I am concerned because I do not think I persuaded
him. I said to him roughly what Mr Savill said, that information
is really what makes racing tick, it is either good or bad or
indifferent information, but information is what creates interest
and I do not think I persuaded him of that. Is there not a worry
that the Government and the officials who are preparing the legislation
have got the wrong idea about what corruption actually is within
the sport of racing and how it should be dealt with? It seems
to me at the moment they are looking upon it in the same way that
they look upon corruption in the City.
Mr Foster: Coming back to Mr Arnold's
point, there is a very clear distinction between the misuse of
information and the corruption of an event and racing has always
been vulnerable to both and it will remain vulnerable to both
and the advent of betting exchanges merely highlights the situation.
What we believe is that traditionally betting has been under-regulated
and that there is a limit to the amount that racing regulators
can do without betting being very firmly regulated. That is why
we take a slightly different view to the DCMS about who should
be responsible for seeing that the betting is not corrupted in
sport. The impression given is that it is a matter for the sports
regulators. We believe that while we have done a number of things
and there are still more things we can do, at the end of the day
it is betting which needs to be more firmly regulated and we therefore
strongly welcome the Gambling Commission with its powers and we
see that we can make a better fist of regulation because definitely
both racing and betting need firm regulation if we are going to
deter the criminality.
Mr Savill: I think that this is
all a matter of degree. Mr Foster says that betting exchanges
highlight the problem, but I think betting exchanges exacerbate
the problem. I think we have to be careful about getting too hung
up on trying to find ways to catch the criminals. What we have
to do is to try and limit the opportunities for the criminals
to function. To have this view that the most successful deterrent
to malpractice is to have successful prosecutions is putting it
the wrong way round. I think the most successful deterrent for
malpractice is to enshrine legislation that limits the opportunity
for malpractice. I think those are two very clear distinctions
and I think they have got to be concentrated on as separate issues.
The first one is how we limit the opportunity for malpractice
and the second is how do we go and catch those people who still
will try and find a way to indulge in malpractice despite the
fact that we have limited their opportunity to do so. That is
where we will come on later to the fact that if we just leave
the legislation as it is now I do not think that you are limiting
the opportunity for malpractice because it is just too wide and
it is too inviting to people to indulge in that malpractice.
Q682 Lord Walpole: Can you tell me
what the relative future regulatory roles of the Gambling Commission
and the sports bodies should be? What are the potential resource
implications of such responsibilities and where should the money
come from?
Mr Foster: We clearly see a partnership
approach between the Jockey Club regulating racing and the Gambling
Commission regulating betting, combining our resources and using
the promised gateway for the exchange of information between us.
We see the Gambling Commission as the senior partner because of
its stronger investigatory powers and its power to prosecute the
new law on cheating. We think it is unlikely, going on past experience,
that the police will regard betting and racing crime as a high
priority unless it is involved in serious crime or some other
order. That means that the responsibility is going to fall heavily
on the Gambling Commission to utilise the powers given to it in
the Bill to investigate and to prosecute and that means, from
our point of view, the Gambling Commission needs to be properly
resourced to carry out those functions. As to costs, the Jockey
Club's costs of regulating racing are borne by those whom they
regulate, so I guess that the costs of the Gambling Commission's
regulation would have to be borne by those that it regulates.
Q683 Lord Walpole: Do you see your
own costs going up at all as a result of this Bill?
Mr Foster: I do not think I see
our own costs going up as a result of the Bill. I think our own
costs are going up quite significantly to try and provide a greater
response to the emergence of betting exchanges and I would agree
entirely with Mr Savill's view that they exacerbate that situation.
Q684 Mr Meale: Mr Savill, earlier
you questioned the definition which I gave about improperly obtained
inside information but you accepted that this can occur. We have
situations fairly regularly about non-triers. Indeed, there has
even been horse switching in the past through things like Flockton
Grey. There are even instances of information having been obtained
on substances being given to animals which then do not perform.
The reason I raise this is because when the Home Affairs Select
Committee inquiry commenced some years ago we were told that if
you are a layer rather than a gambler it is much more important
for you to have information on what horses are not going to win
rather than which ones are going to win. There is more money in
losers if you are a layer than if you are a backer. You also raised
the issue about what the Government needs to do, but self-regulation
has always been part and parcel of the modern world in Britain
in respect of the strong management of those sports. A fine instance
is football where there has been shown to have been illegal activity
and betting players have been banned for life. I do not think
there is anything quite so prominent being done within your sport.
How do you respond to that?
Mr Savill: If improperly obtained
inside information meant criminal behaviour then yes, of course
there is criminal behaviour and we all know how that needs to
be dealt with and responded to. Self-regulation is fine and of
course people should take responsibility for regulating themselves.
I think what they are entitled to expect is that what they are
being asked to regulate is capable of being regulated. My concern
is that when Betfair phones up Mr Foster and tells them that Mr
Wong of 21 High Street, Kowloon is involved in suspicious betting
patterns, what are the Jockey Club going to do about it? Are they
going to fly out to Hong Kong and knock on the door to find that
there is nobody there? When that account gets closed and a week
later Mr Wong from 197 High Street, Kowloon gets in touch, what
are they going to do, jump on another plane and knock on another
door? I think we have to have in place something that we can regulate
and that is why I come back to this point about saying that the
most successful deterrent to malpractice is to enshrine legislation
that limits the opportunity for malpractice. If you give people
as much opportunity as they want they will find it and the Jockey
Club will be running all round the world trying to put their fingers
in the dyke and trying to stop it. We are more than willing as
an industry to regulate ourselves, but clearly there is an issue
about cost because I am sure just the scope of what I have just
said indicates that the costs could be considerable to do an effective
job of that and who actually pays for that, but the most important
thing here is not to work out how we can actually regulate people
having given them such a broad ability to involve themselves in
malpractice but how we limit the ability for them to involve themselves
in indulging in that malpractice in the first place.
Q685 Lord Mancroft: An outsider listening
to the exchanges for the last ten or 15 minutes might be under
the impression that British racing is inherently corrupt and incapable
of regulating itself. I am not particularly involved in racing,
but I have been a few times and I have many friends involved in
it. I was under the impression that racing in the UK was probably
the least corrupt, straightest and best regulated horseracing
sport in the world. I may be wrong about that. Is there anything
in this Bill that is going to lead to more criminality and corruption
in racing? Is it well regulated and will this Bill enable you
to regulate it better or is there something further you need?
Mr Savill: I think we all want
to have the least corrupt racing industry in the world and I think
that there are arguments for saying that we do. Interestingly,
last year we conducted a review of racing called the "Racing
Review" where we actually said that there were more things
that we could do as an industry to improve the integrity of our
sport and one of the things was that we wanted to create a structure
for our sport where everybody wanted to win and wanted to go up
the system and we looked at that in terms of the meritocracy which
meant splitting horses into clear class distinctions and rewarding
them accordingly. Our whole goal in that review was to try and
create an environment where people actually wanted to win and
go up the system. If we introduce legislation at the same time
that actually, as far as our sport is concerned, encourages people
to find horses that are going down the system, ie are losing races
and people are rejoicing in that fact, then I find that counter-productive
to the basic ethos of what we have been trying to do for some
considerable time.
Q686 Lord Mancroft: Are you saying
that is what this Bill will achieve?
Mr Savill: Yes, unless there are
some limitations put on betting exchanges and how they can function
and how people can lay horses.
Q687 Baroness Golding: Mr Kelly told
us this morning that they have signed up to a Memorandum of Understanding
with the Jockey Club. How far will this go towards alleviating
some of the problems that you see with monitoring abnormal betting
patterns?
Mr Savill: I am sure it will help,
but I do not think there is a feeling that the traditional betting
mechanisms and the way that people have to be licensed as fit
and proper people is really the issue. The issue here is the extent
to which any unlicensed individual anywhere in the world can indulge
in that activity. There is no question that it will be a help
if indeed it is a meaningful Memorandum of Understanding and I
know the Jockey Club has been looking for that for a long time
and I congratulate them on having achieved that, but I think the
issue here is not traditional bookmakers. Obviously bookmakers
like horses to lose races, but everybody accepts that there are
only 3,591 bookmaking permits in the country and there are millions
and millions of people laying horses. That is the difference and
that is the concern.
Mr Foster: If I could just add
to that and say that I think it is a very helpful step to have
signed a Memorandum of Understanding with traditional bookmakers.
There has been reluctance in the past by bookmakers to provide
us with sufficient detail of their concerns for us to be able
to take effective action. What this new memorandum opens up is
the possibility, where we are dealing with criminal activity,
of personal data on punters being provided to us and that is a
considerable step forward because we should not lose sight of
the fact that racing is vulnerable right across the betting spectrum
and so we are still extraordinarily interested in having a good
relationship with traditional bookmakers and obtaining information
from them. This is a step in the right direction.
Q688 Viscount Falkland: Could I ask
Mr Foster a hypothetical question which may help the Committee,
and those of us who go racing a lot may have experienced a similar
situation. Let us say you meet someone on a racecourse who is
a stable employee and this employee says to you that such-and-such
a horse has been off its feed for the last couple of days and
he is not sure whether it will run up to its expectations. You
go off to the betting exchange and you lay that horse knowing
full well that it is a favourite although it probably has not
got the favourite's chance that the general public would expect,
has a criminal act taken place and, if not, has a corrupt act
taken place? At what point does that corrupt act come into play?
Mr Savill: My view would be that
there has been no malpractice because, as we said earlier, horseracing
and betting on horses is very much tied up inextricably to inside
information. The moment you arrive on a racecourse there will
be 50 people coming up and telling you what is fancied and what
is not and all the reasons. Probably the best rule is to back
the ones you are told are not fancied and to lay the ones that
are.
Q689 Chairman: I have often found
it better to use my own judgment.
Mr Savill: Inside information
in that sense, if a horse is off its feed there is no certainty
that the outcome that you think may occur will actually occur.
I think that in life inside information and what you can find
out is accepted as part of trying to do your best at whatever
you are trying to do. Where the line comes between using inside
information and benefiting from it and actually knowing that a
horse will not win or cannot win, which is what Mr Reams referred
to earlier, is clearly where the criminal element comes in. The
sorts of things that are of concern are situations—and we
had one earlier this year with Hawk Flyer in the St Leger—where
a horse did a piece of work during the week at about eight o'clock
in the morning and died at the end of the gallop. That horse was
laid from the exchanges out from 9/2 to 49/1 before it was officially
withdrawn at about three o'clock in the afternoon. That horse
did not have an awfully good chance of winning the St Leger at
the point in time that it was drifting on the exchanges. If you
then went along to try and actually nail somebody, the sad thing
is that it would still be incredibly difficult. If you found you
could link whoever had the bet to somebody in the Michael Stoute
Yard but that person says, "Well, I didn't know, I wasn't
there at the time", unless somebody actually says, "I
saw Mr So and So who knew that horse was dead"—and
then you can get a direct link from that person to the person
who laid it—you are probably not going to get a prosecution.
That is the difficulty—that it is so hard to prove these
cases.
Q690 Chairman: Fine. Could we just
concentrate on one or two specific possibilities. You have said,
in a very similar fashion to what the bookmakers said earlier
this morning, that effectively the layers of these bets probably
should be regulated as fit and proper persons. That gives rise
to two questions: firstly, going to your point about the gentleman
in Kowloon, does that not drive that activity; he will still want
to have his bet to an exchange outside the United Kingdom which
we could not regulate?
Mr Savill: It depends whether
those overseas jurisdictions could be persuaded (and this is one
of the initiatives within the International Federation of Horseracing
Authorities) to prevent people operating in those jurisdictions.
There are pressures that can be brought to bear, whether it is
through credit card companies or those sorts of things. That does
not mean to say that an exchange will not set up offshore and
try and encourage people to do that. I think the fact that one
is frightened an exchange might go offshore is not a reason for
not introducing what one believes is the right legislation in
the first place.
Mr Reams: From the regulation
point of view, it makes far more sense for us to license those
people who are laying on the exchanges because the current situation,
is effectively if you have a credit card or cheque book you can
set up as a layer on the exchanges very, very quickly and lay
very large sums of money to do so. That is essentially the problem
we have—accessibility to going on exchanges and laying horses.
The point you raised about the stable lad is probably a side issue
to that, because the key issues are those horses which are not
effectively trying. What I looked at essentially were races which
fit four criteria, and it was very hard to get through that set
of criteria to get on the list; and one of those essentials was
criterion four, which was actually looking at how the horse ran
and various things surrounding that. It was not really looking
at horses which probably did not run up to form. These are horses
which have probably been used with different riding tactics, different
headgear, taking tongue ties off and that type of information,
and that has been on the increase looking at the figures. The
figures now are up to 218 cases.
Q691 Chairman: Surely all of the
layers should be licensed, or are there still some layers recreationally?
Where do you draw the line?
Mr Savill: In an ideal world my
view would be that all layers should be licensed. On the other
hand, I do think if you look closely at the 1963 Act it was quite
clear from the way the legislation was worded then that they did
want to draw a distinction between someone who was effectively
a bookmaker and somebody who was just having a recreational bet.
In those days it was very simple to draw that distinction because
the recreational bet had to be between friends in a pub or whatever.
Technology now has made the blurring of recreational and proper
bookmaking and proper laying a distinction which is very difficult
to draw, because the technology is there that encompasses both.
Our view would be that if all layers were not to be licensed,
at the very least, there should be in the Act a distinction between
the recreational layer and what we would regard as the person
doing it for business and the person who would be deemed to be
doing it for business. I think that would have to be done through
consultation. The proper mechanism would be, first, to make the
decision that there should be that split. I think the split has
to be done in a way where it is done either on the size of the
bet or the frequency of the bet, or preferably both. Once you
go over that limit you cease to be a recreational layer. If you
give people the opportunity only to make a small amount of money
out of malpractice then you will have infinitely less malpractice
than if they had the opportunity to make a large amount of money.
Q692 Chairman: Mr Arnold, your memorandum
to us says that there is a case for those who lay horses being
registered. Do you take the view that it should be all layers,
or do you share Mr Savill's attempt at a distinction?
Mr Arnold: I think it is very
difficult to draw a distinction. I recognise the difficulties
there. If it were possible to have a system in which all layers
were licensed that would be preferable, but I recognise the difficulties
involved in that.
Mr Reams: My view is that all
layers should be licensed.
Q693 Chairman: Briefly, you may have
heard my exchange with the previous witnesses about clause 22
subsection (2) of the Bill which effectively exempts layers unless
they act "otherwise than in the course of a business".
Would you like to see "in the course of a business"
defined on the face of the Bill? Do you think that would go some
way to dealing with the problem you have outlined?
Mr Savill: I think you are going
to have to define what "in the course of a business"
is. It is extremely difficult.
Q694 Chairman: It is not clear from
the Bill what it means?
Mr Savill: No, it is not. I think
it has got to be defined. I would say that you define the parameters
of "size of bet" and "frequency of bet" and
that becomes "in the course of a business", regardless
of whether someone can say "I am actually doing it recreationally".
I think the damage to the integrity of racing doing it any other
way is too great. You have got to draw that distinction in terms
of "in the course of a business" otherwise you will
have too many problems.
Mr Arnold: I would just like to
make one comment on behalf of an important sector of the industry
that is subject to the regulations—so I feel unique sitting
here really. It just worries me that some members of the Committee
have chosen the word "endemic" about corruption in racing.
I really want to highlight a point we have made that it is more
a case of vulnerability rather than it being endemic.
Q695 Chairman: And then perception?
Mr Arnold: Certainly from the
point of view of those who are regulated, we all earn our livelihoods
from racing and it is in our interests, as much as anybody, that
it is correctly regulated and strongly regulated.
Q696 Lord Wade of Chorlton: How would
the provision in the Bill of a clause relating to the voiding
of bets affect horseracing? Does it alleviate some of your concerns
about betting exchanges?
Mr Savill: I am disappointed that
there was not time to ask this of the bookmaking industry.
Lord Wade of Chorlton: We did ask.
Chairman: We have not got the clauses
yet—they are coming later.
Q697 Lord Wade of Chorlton: We got
an answer from them.
Mr Savill: I think our view is
that it would be extremely difficult and very controversial to
introduce anything like that. I just do not see how it will work.
Q698 Lord Wade of Chorlton: They
thought it was an impractical thing to try and put into practice?
Mr Reams: I think it would be
impractical. We looked at one in seven races as in some way having
an irregular betting pattern. If you were to void one in seven
races you would almost certainly create a situation where the
length of time it would take to investigate it would be the equivalent
of a six-month Stewards' Enquiry.
Q699 Mr Meale: Gentlemen, what you
have asked for today is strong regulation and restrictions on
betting exchanges, but there is one group we have not discussed
today and those are the customers. What about the statutory right
of appeals for customers over contested bets, which is not there
at the moment in the industry? What would your reaction be if
this was placed in the Bill?
Mr Savill: I think it would depend
on how it was placed in the Bill. In principle I can see some
benefits in that.
Chairman: We need to see what the clauses
say and ask you some questions in writing on those clauses.
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