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RACING AND WAGERING Western Australia BILL 2003
Introduction and First Reading


Bill introduced, on motion by Mr E.S. Ripper (Treasurer), and read a first time.

Second Reading

MR E.S. RIPPER (Belmont - Treasurer) [10.25 am]: I move -
That the Bill be now read a second time.
On 21 May 2002 the Government announced a restructure of the system of governance of the racing industry in Western Australia. The restructure involves a merger of the principal club functions of the Western Australian Turf Club, the Western Australian Trotting Association and the Western Australian Greyhound Racing Authority, together with the offcourse betting activities of the Totalisator Agency Board, into a single controlling authority to be known as Racing and Wagering Western Australia.
In the lead-up to the 2001 state election, Hon Dr Geoff Gallop committed a Labor Government to a comprehensive review of all aspects of the racing industry, including its relationship with the TAB. In October 2001 the Western Australian Racing Industry Review Committee, headed by Mr Ray Turner, AM, reported on the future governance of the Western Australian racing industry. In its report the review committee highlighted -

. . . the present governance structure of the racing industry in Western Australia lacks cohesion and strategic direction. It has developed incrementally over many years, changing only marginally in response to significantly-changing circumstances. Structurally, it consists of a collection of separate bodies essentially in opposition to each other. There is neither the motivation nor the means for the three codes to work collaboratively in the interests of the industry as a whole.
Each of the code governing bodies manages its own affairs in isolation. The Minister for Racing and Gaming is both its first and last resort. He or she is the first resort because the quantum of each code's distribution of the off-course wagering profits - its main source of revenue - is set by statute . . . He or she is the last resort because, in the absence of any strategic directions agreed to for the industry as a whole, or any body responsible for the development of the whole of the industry, there is no other avenue through which individuals or stakeholder groups can represent their concerns or needs and seek action. The self interest that inevitably drives such representations exacerbates the existing fragmentation and is not in the interests of the industry as a whole.

The review process invited input from the public, and written submissions were received from a large number of industry organisations and other interested persons. Following the release of the review report, the Minister for Racing and Gaming consulted widely with racing industry representative organisations. This involved the receipt of written submissions and meetings with key industry stakeholders, including the three controlling authorities.
To complement the restructure, it is proposed to merge the Betting Control Board and the Gaming Commission of Western Australia to form the Gaming and Wagering Commission of Western Australia. The merger of the State's two gambling regulatory authorities was a recommendation of the 1998 report of the Minister for Racing and Gaming to the Parliament of Western Australia on the review of the Betting Control Act 1954.

The creation of the Gaming and Wagering Commission will place the regulation of wagering and gaming in Western Australia, other than that conducted by the Lotteries Commission, on a common platform. The opportunity also has been taken to include a number of recommendations emanating from the national competition policy reviews of racing and gambling legislation.

To achieve the restructure, in addition to the Racing and Wagering Western Australia Bill 2003, there are three complementary Bills to be presented to the House: the Racing and Gambling Legislation Amendment and Repeal Bill 2003, the Racing Restriction Bill 2003, and the Racing and Wagering Western Australia Tax Bill 2003.

The Racing and Wagering Western Australia Bill establishes Racing and Wagering Western Australia - which, hereafter, I will refer to as RWWA - as the controlling authority for thoroughbred, harness and greyhound racing in Western Australia. In terms of its structure, the RWWA will not be a crown agency or subject to ministerial direction or the jurisdiction of the Ombudsman; nor will it be a public sector body under the Public Sector Management Act 1994.

Clause 29 of the Bill requires RWWA, in performing its functions, to act in accordance with prudent commercial principles and endeavour to make a profit.

To ensure that proper accountability mechanisms are in place, RWWA will be -

subject to the Financial Administration and Audit Act 1985 and the Freedom of Information Act 1992;
required to report to Parliament;

subject to borrowing restrictions;

required to provide the responsible minister with access to information;

required to prepare and submit for approval an annual strategic development plan; and

required to prepare and submit for tabling in the Parliament an annual statement of corporate intent.

RWWA will be governed by a board of directors constituted by -
a chairperson, appointed by the Minister for Racing and Gaming;
two persons nominated by eligible thoroughbred racing industry bodies;

two persons nominated by eligible harness racing industry bodies;

one person nominated by eligible greyhound racing industry bodies; and

four persons selected by a selection panel for their expertise in management, finance, business or commerce or experience relevant to the functions of RWWA.

One of the latter four persons is to have knowledge of, and experience in, regional development.
The directors of RWWA will not be appointed to represent or be delegates of any nominating organisation or particular code of racing. In fact, clause 18 of the Bill places a statutory obligation on each director to put the interests of RWWA ahead of the interests of the body that nominated the director.

The selection panel that is to select four of the directors of RWWA is to comprise -

one person appointed by the Minister for Racing and Gaming whom the minister considers has knowledge of and experience in human resource management and senior executive recruitment;
one person nominated by the board of RWWA - except that the first nomination will be made by the minister;

one person nominated by eligible thoroughbred racing industry bodies;

one person nominated by eligible harness racing industry bodies; and

one person nominated by eligible greyhound racing industry bodies.

For the purpose of the RWWA board of directors and the selection panel, member nominations are to be made by eligible thoroughbred, harness and greyhound racing bodies as determined by RWWA. For the first appointments to the RWWA board and the selection panel, however, the eligible bodies are listed in transitional provisions in the Racing and Gambling Legislation Amendment and Repeal Bill 2003. In this regard, consultation has occurred with racing industry bodies.
Clause 10 of the Bill outlines the circumstances that render a person ineligible to be nominated as a director. These include -

a member of staff of RWWA, not including the chief executive officer;
a RWWA agent or a person employed in an RWWA agency;

an employee or officer of a racing club;

an employee or an officer of a body declared to be an eligible body for the purpose of nominations for appointment to the board of directors and the selection panel; and

a person licensed under the Betting Control Act 1954.

Where a person nominated for appointment to the RWWA board or the selection panel is a member of the committee or other controlling authority of a racing club or of an eligible body, the Bill requires the person to relinquish that membership prior to taking up the appointment.
With respect to governance of the racing industry, clause 35 of the Bill provides that the functions of RWWA will include -

to control, supervise and regulate racing in the State;
to foster the development, promote the welfare and ensure the integrity of metropolitan and country thoroughbred, harness and greyhound racing in the interests of the long-term viability of the racing industry in Western Australia;

to undertake and manage industry strategic planning, promotion, marketing, sponsorship and administration;

to supervise racing clubs and their affairs;

to determine the race meetings on which RWWA will conduct offcourse wagering;

in consultation with racing clubs, to establish policies for stake money levels and race conditions and programs; and

to establish policies for, and manage the provision of, programs for apprentice jockey, trainee driver and other industry training requirements.

Insofar as racing regulation is concerned, RWWA will -
control, supervise and regulate the conduct of thoroughbred, harness and greyhound racing in Western Australia, including responsibility for steward and drug-testing activities;
make rules for the conduct of racing in Western Australia and, in all respects, perform the role of principal club;

register racing clubs and racing animals and license race meetings, race venues and participants;

undertake handicapping; and

set race dates in consultation with racing clubs.

For the purpose of regulating the conduct of thoroughbred, harness and greyhound racing in Western Australia, clauses 36 to 38 of the Bill stipulate that RWWA has all the powers as principal club under the respective national racing rules.
As is currently the case with the three principal clubs - the Western Australian Turf Club, the Western Australian Trotting Association and the Western Australian Greyhound Racing Authority - the Bill provides RWWA with the authority to make rules of racing, which can be a combination of national rules and local rules.

Clauses 47 to 49 of the Bill provide for the establishment of an integrity assurance committee within RWWA whose function will be to have primary oversight of such matters as stewards, drug testing, licensing and handicapping. RWWA is to determine the qualifications and disqualifications for membership of this committee and, in doing so, is to have particular regard to the need to minimise conflicts of interest such as might arise from a person's horse or greyhound ownership, professional involvement in race preparation, or professional or commercial dealings with any person who holds a licence issued by RWWA or by a racing club.

An important aim of this restructure is to establish a closer relationship between the TAB and the racing clubs in order to overcome the lack of cohesion and strategic direction identified in the Turner committee's report. The legislation provides for the TAB board to be abolished and responsibility for the provision of TAB offcourse betting services to be transferred to RWWA.

Part 5 of the Bill sets out RWWA's functions as an offcourse wagering operator, including the ability to conduct totalisator and fixed-odds wagering, and to operate a combined totalisator pool and joint fixed-odds wagering system with other gambling operators similar to the arrangements that the TAB currently has with SuperTAB. It has been recognised, however, that it may not be practicable for RWWA to assume responsibility for the conduct of offcourse betting from commencement.

The transitional provisions will allow RWWA to commence its controlling authority and wagering profit distribution functions when the legislation is proclaimed to come into effect. This is expected to be 1 August 2003, to coincide with the commencement of the new racing year.

RWWA will assume responsibility for the conduct of offcourse wagering at a later date. This later date is to be determined by the minister and is referred to in the Racing and Gambling Legislation Amendment and Repeal Bill as the appointed day. On the appointed day, the Racing and Gambling Legislation Amendment and Repeal Bill provides that all of the TAB's assets and contractual rights and obligations will be transferred to RWWA.

Currently, the TAB board members are chosen and appointed by the minister. This process provides the assurance of the integrity of persons appointed to manage the activities of a major gambling service provider.

The proposed restructure will see RWWA assume the TAB's role as a major gambling service provider and, given the limited involvement of the Minister for Racing and Gaming in the appointment of RWWA board members, the Bill includes provisions that will require members of the RWWA board and any other person employed by RWWA in a managerial capacity or empowered to make decisions in relation to the conduct of the wagering business, to be licensed.

This licensing function is to be the responsibility of the Gaming Commission from the commencement day, and then the new Gaming and Wagering Commission from the appointed day.

With respect to the distribution of TAB profits, the Turner committee's report states -

The proportion of Totalisator Agency Board profits to be distributed to each code in Western Australia is fixed by statute. Whilst this situation ensures security and stability of income for each code, it offers no incentive to clubs to develop innovative product in the interests of the consumer and of increasing wagering turnover and market share. The percentage of the distribution specified for each code is seen to have a certain arbitrariness about it, perhaps because it does not bear a direct relationship to market share. Besides, there is no apparent means of regularly reviewing whether the distribution formula is just and best serves the needs of the industry as a whole.
An almost mendicant mentality prevails within the industry, which is a strong disincentive to its becoming more entrepreneurial.

Clause 105 of the Bill sets out that, for the period until 31 July 2005, the current arrangements contained in the Totalisator Agency Board Betting (Modification of Operation) Act 2000 for the distribution each year of the first $50 million of offcourse wagering profits after taxes and expenses are to be maintained. The distribution of profits in excess of $50 million is to be at the discretion of RWWA.
The allocation of the first $50 million of net profit is currently fixed by the Totalisator Agency Board Betting (Modification of Operation) Act as follows -

Thoroughbred racing: 55.26 per cent
Harness Racing: 29.76 per cent
Greyhound Racing: 14.98 per cent,
with intra-code distributions to be as follows -
at least 28.09 per cent of the thoroughbred allocation to non-metropolitan thoroughbred racing clubs and the remainder to the Western Australian Turf Club; and
at least 20 per cent of the harness racing allocation to non-metropolitan harness racing clubs, with 17.5 per cent of the remainder to the Fremantle Trotting Club and the balance remaining to the Western Australian Trotting Association.

Effective from 1 August 2005, clause 106 of the Bill provides that net wagering profits are to be distributed at the discretion of RWWA. RWWA is required to use its best endeavours to ensure that the amount paid or credited to any racing club in any year is not less than the revenue, after taxes and expenses are deducted, generated from wagering conducted by RWWA on races conducted by that club.
With respect to wagering on sporting events, the process for the determination and distribution of offcourse sports wagering revenue is set out in clause 107 of the Bill. The process requires that 25 per cent of net sports wagering revenue after tax and before expenses is to be credited to the sports betting account managed by the Gaming Commission from commencement, and then the Gaming and Wagering Commission from the appointed day. This contribution can be varied by regulation in response to any change in circumstances. These moneys will be available for grants on the direction of the minister of the Crown responsible for sport and recreation.

Basing the return to the sports betting account on a share of net revenue after tax will mean that a guaranteed share of sports betting revenue will be available for grants, regardless of the level of expenses associated with conducting the activity. The benefit to RWWA from this arrangement is that it will share in the profits and hence have an incentive to promote sports betting and minimise expenses.

I turn to unclaimed dividends and refunds from offcourse wagering. Clause 104 of the Bill provides that in respect of unclaimed dividends and refunds from wagering on thoroughbred, harness and greyhound racing, these will now become general funds of RWWA. As the portion of these funds that originate from wagering on thoroughbred and harness racing is currently directed to the racecourse development trust, the trust will be abolished and responsibility for racecourse development in all three codes of racing will be a function of RWWA. Unclaimed dividends and refunds originating from wagering on sporting events will be credited to the sports wagering account.

In its role as controlling authority, it is important that RWWA communicate effectively with racing industry organisations, and in this regard clause 82 of the Bill places a statutory obligation on RWWA to establish procedures for consulting with prescribed racing bodies that have an interest in the racing industry with regard to prescribed operations of RWWA.

I am pleased to say that despite this restructure representing the most significant change to the racing industry in its long history, the establishment of Racing and Wagering Western Australia as the single controlling authority has broad industry support, and this will be an important factor in its success. I commend the Bill to the House.

Debate adjourned, on motion by Mr A.D. Marshall.