Contribution
We are debating the measures in this Bill, which was introduced by this Government. I was not involved in the changes that the hon. Gentleman refers to, and I certainly would not have supported hitting the horseracing sector in the way that was proposed. I do not remember that being in a previous Finance Bill introduced by a previous Government; it is this Government who sought to bring forward those measures, but they were roundly rejected, because horseracing supports around 85,000 jobs and contributes £300 million in tax revenue every year.
Despite the Government’s climbdown in exempting horseracing from the higher rates, the industry could still feel the consequences of this Government’s approach to gambling duties. When the online betting sector is squeezed, sponsorship is likely to be reduced, and because racing’s funding depends heavily on those partnerships and that sponsorship, we could see an impact on racing. In my area of Norfolk, we are very fortunate to have Fakenham races—I went there to support the British Horseracing Authority’s campaign against the Government’s plans. That venue is synonymous with the area and its identity, and is a source of local employment, not just at the track itself but for the farriers, the pubs, the hotels and the whole ecosystem that supports racing. That is why these clauses in the Bill continue to pose a risk to the sector and other sports, and that risk needs to be accounted for.
I now turn to the black market, an issue that was raised by the hon. Member for Stoke-on-Trent Central (Gareth Snell) and my right hon. Friend the Member for Stone, Great Wyrley and Penkridge (Sir Gavin Williamson). The Government have acknowledged the risks associated with taking this approach, which is why they quietly set aside £26 million for the Gambling Commission to combat expansion of the black market, but the same EY analysis suggests that over £6 billion in stakes could migrate to the black market, doubling its current size and undermining the progress that has been made through the existing regulatory framework. The Office for Budget Responsibility has identified potential leakage of around £500 million in lost revenue as activity shifts away from properly regulated markets. Those projections—which again could be wrong, but could also be right—raise legitimate questions about the overall effectiveness of the Government’s approach.
When taxes rise too far, behaviour can change and the yield can go down, which is what we will see with a number of the tax rises that the Government have included in their Finance Bill. Rather than reducing demand, activity will move to unregulated markets where consumer protections are weaker, fraud risks are higher, and tax revenue is not collected. I am not sure we have heard a convincing response from the Minister about how that will be addressed and whether those risks have been taken properly into account.
Let us look at what happened in the Netherlands, where the Dutch Government raised their remote slots tax rate to 34% last January. Within months, gross gaming revenue fell by a quarter and gambling tax receipts dropped to just 83% of the previous year’s figure, leaving a €200 million shortfall from the projections. Somewhat predictably, the Dutch regulator then reported a huge growth in the number of people accessing unlicensed domains, rising from 200,000 to a million. That should serve as an example of why we should be cautious about the Chancellor’s plans. Experience suggests that changes have unintended consequences, and those risks must be carefully assessed. In winding up, will the Minister provide a bit more clarity about how that will be monitored and what steps the Government will take if there are unintended consequences and those projections prove to be accurate?
There is some debate and confusion in the sector and some of the professional bodies about the treatment of free bets and free plays. The sector and those bodies have raised concerns about that. The Budget costings document calculates gambling duty using the gross gambling yield, which is the revenue retained by operators after paying out winnings to customers. However, current law uses a wider measure, which also counts the value of free bets and free plays. That means there is a potential mismatch. Will the Minister clarify that? I am sure she has had representations on it directly.
We need to strike a balance with the levels of taxation. The industry is warning that these increases will impact on sports and lead to job losses and more black market activity. New clause 25 seeks transparency and an answer to those concerns. It asks the Chancellor to assess the impact of these rises on horseracing, the black market, jobs and the public finances. That is the minimum that Parliament should expect, and I hope Members will support our new clause.