Betting on the Future of Bookmakers

24 January 2001
Speech to British Betting Office Association Seminar, 23 January 2001

Stephen Timms MP, Financial Secretary to the Treasury

I am delighted to have the opportunity to speak at this seminar today and to be able to discuss with you our thinking on the proposed reform of general betting duty which we are consulting on at present. You won't expect me to make any announcements ahead of the budget, of course, but it is a useful opportunity for me to check out our ideas with this important industry.

Our task at the Treasury is to put in place the policies, which will build a stronger economy and a fairer society, and we see those two aims as being two sides of the same coin. So we want to lock in the new economic stability, which we have enjoyed in the past four years, and build on that stability for faster productivity growth, higher levels of employment and fairer economic outcomes for families and communities. A strong economy and a strong society--how can the betting industry best contribute?

As an industry, I think you are doing well. Turnover is up to £7.3 billion last year, and steady so far this year. There had been fears of serious damage from the drift of betting turnover offshore and the appalling weather, but so far those fears have not been realized. It is a very good picture for an industry which a few years ago felt under threat from the National Lottery. The fact that the industry has continued to prosper is, of course, no accident, but the consequence of a great deal of hard work and commitment within the industry, and I have no hesitation in congratulating you on how well you have met the challenge. You have taken full advantage of new opportunities provided by Government through deregulation, and made the most of new opportunities from increased coverage of sporting events, and in particular the growing international interest in sports like golf, football and cricket. It has been an impressive achievement, and I want to see that success continuing. And there are new opportunities to come: Sports coverage is becoming increasingly international and more extensive; developments like interactive television will generate even greater interest. Online betting is in its early stages, and there are many opportunities there still to be explored. U.K. bookmakers are well placed to benefit from these opportunities: You have a great store of expertise, a skill set unparalleled anywhere else and a world beating industry. The U.K. has more than 70 percent of the world market in fixed-odds horse race betting and more than 35 percent in greyhound racing. The U.K. has a great reputation for integrity, which is a vital asset in attracting online customers, we have world class communications infrastructure, a skilled workforce and in English the language of the Internet.

I hope that you will grasp these opportunities with enthusiasm. Betting could well be the next success story of the British economy. And it is to help build that success that we are considering reform of betting duty; it is because we recognize that the industry has the opportunity to invest, to grow, and to build the foundations for long-term success.

We have set out our goals to raise Britain's productivity and close the productivity gap with our competitor countries over the next 10 years, and to contribute to that by making Britain the best place for electronic commerce. Let me just set out how I see this industry both contributing to and benefiting from the measures we are putting in place to achieve our productivity goal.


Productivity in Britain is too low: There is a 35 percent gap with the U.S., and a 20 percent gap with France and Germany. Over the last economic cycle for every £100 per employee invested by the UK, the U.S. and Germany invested £140, France £150 and Japan nearly £170. In 1997 Britain spent less than half the global average on R&D. And as a result the economy we inherited was one of the least productive of any major country.

There are signs that private sector investment is beginning to respond to the more stable economic environment that has been established, but we need to do much better still. Higher productivity is the way to greater growth and profits for companies, with rising prosperity, and employment for all. So our ambition for this decade is that we should achieve the fastest rise in productivity over competitor countries. To help achieve that, we have taken action on a range of fronts. We have introduced reforms to corporate and capital taxes to help British firms capitalize on their new opportunities, removing the tax barriers to enterprise and creating in Britain the best tax environment for business investment.

So we have reformed and cut capital gains tax for business assets from 40 per cent to 10 per cent after four years. We have cut the main rate of corporation tax, making ours the lowest rate in the history of U.K. corporation tax, and the lowest or all major industrialized countries.

We have also introduced specific measures to help companies invest in IT, and to make it easier for high-tech and online companies to establish themselves. The membership of the BBOA includes a large number of small independent businesses. There are 100 per cent capital allowances fur the next three years for any small business buying computers or investing in electronic commerce and new IT. And so that employees can have a real stake in their own business success, so building their commitment to higher productivity, we've introduced Britain's most generous tax advantaged employee share ownership scheme ever.

Government's role is not to subsidize loss making industries. It is not to pick winners--you know people who are much better at that than we are! Our role is different; it is to create an environment in which companies can invest, and have confidence in the future of their investments-- in the betting industry as in every other. And I am encouraged by the growing evidence that our strategy is working for example in the finding in the UPS survey published yesterday that the U.K. is the best place in Europe to start up an Internet business.

Betting Duty

In the Pre Budget Report in November, we announced that consideration of betting duty reform would be completed in time for an announcement in the Budget this spring. As we said then:

"The Government's objective in considering the response to the consultation has been to assess the scope for a modernisation of General Betting Duty that would deliver a business environment in which the betting industry can compete in both domestic and international markets, taking full advantage of the opportunities offered by the development of e-commerce, whilst ensuring that the future revenue stream from betting is protected."

The PBR announcement indicated we would hold further discussions with the industry about their response to this kind of reform. We have already received a response from the Bookmakers Committee, and I look forward to reading the other responses soon, with a view to making a decision in time for an announcement in the Budget.

Officials are still working on our proposals for a new structure for betting duty, so I can't make any announcements today. More details of a possible structure will be available later this week, following a presentation to the Bookmakers Committee. This is an important opportunity for the industry to influence the design of the new structure, and minimize administration costs and red tape in future.

Many features of the present system serve everybody well, and our aim is to retain those features. Among the changes we are considering is the one outlined in the consultation document: to give credit to bookmakers for winnings which have been paid out to customers. We believe this would make the industry more competitive and expand the opportunity for high-volume, low-yield online betting. But with this or any other measure, it is important that any changes to betting duty are fair to all of the betting industry's stakeholders. We want to be sure that any benefits from the reform are fairly shared with racing and with consumers, and that the exchequer's future revenue from betting is protected too.

We also want to make sure that by making the U.K. industry more competitive, we bring betting back onshore and welcome a new international market to this country. And we want to protect and improve fairness to the customer.

It is also important that we retain the assets that help to snake British betting successful. The quality of British racing is responsible for much of betting's success in the U.K., and we must make sure we give a fair deal both to horseracing, as its relationship with the betting industry becomes a fully commercial one, and to greyhound racing. The health and integrity of the sports on which the overwhelming majority of betting takes place must remain a high priority as U.K. bookmakers reach out towards an increasingly global market for their products.

We also want to ensure a fair return to the exchequer. Some of the options we are considering would involve a reduction in deductions, and in the short term, this could mean the Government would forgo a considerable sum in revenue. Some have been urging us to make that gamble so that, in the medium term, we will encourage the growth of betting in the U.K., and so allow the exchequer to recover its position, but with the industry stronger than before. We would need to consider very carefully the pluses and minuses before proceeding in that way.


We want to introduce reforms that will play to the real strengths of the betting industry in the UK: its integrity, its skills, its experience and the quality of the sporting events it is based on. We want to ensure U.K. bookmakers have the opportunity for long-term success. Only you can turn that opportunity into achievement.

Revenue from betting duty has been steady- indeed it has been growing. But we recognize the reality of the challenges, which you have been warning us about and we want to work with you to ensure that they are successfully addressed.

We are prepared to place a bet on the skills and the abilities of the U.K. betting industry to win in a worldwide marketplace and to achieve long-term growth. It is in our interests, as well as yours, that you should succeed.

Thank you.