Joint Committee on the Draft Gambling Bill First Report


Memorandum from the National Association of Bookmakers Ltd (DGB 181)

  May I take the opportunity to express my appreciation for being invited to give evidence at the hearing of the Joint Committee on the Draft Gambling Bill on 20 January 2004 after initially being excluded from this process by default. The initial response of the National Association of Bookmakers to the Budd Committee Report was subsumed under the Bookmakers' Committee submission. Subsequently, much of the work of the Bookmakers' Committee has been undertaken by the Association of British Bookmakers which is primarily a trade association representing "off-course" bookmakers of which the National Association of Bookmakers is not a member. It is because of this sequence of events that I believe the contribution of the NAB in the consultation process has been overlooked.

  Inevitably the time available at the Joint Committee meeting referred to above was severely limited which together with the fact that the NAB was not invited to submit comment on the Draft Gambling Bill has meant that the views of this association have not been fully presented. As a consequence I would like to expand our views on two issues in particular, namely the abolition of the "5 times rule" ie Sections 13(2) and 18 of the Betting, Gaming and Lotteries Act 1963 and the impact of betting exchanges on racecourse bookmakers.

  The Draft Gambling Bill leaves the question of the "5 times rule" open which from the point of view of existing and potential holders of seniority positions is unsatisfactory. There is unanimous agreement among racecourse bookmakers that this safeguard should remain in order to ensure pitch tenure whilst at the same time maintain competition between bookmakers and other betting outlets on the racecourse. Racecourse bookmakers fear that removal would provide racecourses with an opportunity to price bookmakers out of business which would lead to higher margins among the remaining bookmakers. The incentive for racecourses would be the resulting higher gross profits earned by the "off-course" betting industry from which the racecourses would benefit, the cost being borne by punters. The majority of racecourses would probably not take such action but it would be a real concern with respect to some courses. We understand the aspirations of racecourses to maximise income flows but we would hope that bookmakers charges can be settled by negotiations within the existing framework.

  With respect to betting exchanges we hold equally strong views. Historically prices on the racecourse were determined by leading racecourse bookmakers, who can be described as price makers, using a mixture of form and information data influenced by market forces of supply and demand. What exchanges have done is to provide an opportunity for thousands of individuals, unencumbered by operating expenses, to act as unlicensed bookmakers over a period of 18 hours prior to a race. As a consequence the price makers have become price takers with the resulting reduction in margins making racecourse bookmaking increasingly unviable, particularly at the midweek bread and butter meetings.

  In the initial stages of the above process there was a marked price differential between racecourse prices and exchange prices. As a consequence a few racecourse bookmakers took advantage of these differentials to engage in profitable hedging. However, the use of exchanges either for price taking or hedging has expanded rapidly until today in excess of 50% of bookmakers have direct or indirect connection and this level is likely to continue to expand. Thus the initial advantages to be gained have been substantially diluted as the differentials have narrowed. In addition to this most bookmakers are reporting that the regular £25-£100 punters seem to have disappeared which is probably due to the attractions of bet exchanges. On the reverse side of the impact coin the ability of bookmakers to lay on the exchanges is a dubious advantage. With margins in the 1-2% range it would appear, in theory, to be impossible for a racecourse bookmaker to pay general betting duty, gross profits levy, income tax and national insurance and commission and benefit from this activity.

  The NAB is not opposed to betting exchanges per se but recognises the threat to the integrity of racing, racing finance and the viability of racecourse bookmaking arising out of the failure to treat all layers in a manner which would result in a fiscal level playing field.

  The NAB has firm views on other aspects of the Gambling Bill but the above points are considered to be of paramount importance to our members. If you require any further information concerning our views please do not hesitate to contact me.

March 2004


 
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