Codes present strongly at Racing Bill hearings

by Brian de
Lore
Published 15 February 2020

The first day of the hearings of evidence from RITA and the codes in Bowen House Wellington this past Thursday, before the Transport and Infrastructure Select Committee, was a game of two halves – the first a very shakey and at times indecipherable presentation and Q and A from RITA Executive Chair Dean McKenzie, and the second a well-orchestrated presentation from all three codes on a united front.

It was a well-produced
Facebook live stream and the Select Committee had very obviously done its
homework and were ready with some pertinent questions for Dean McKenzie and
RITA’s Head of Risk and Regulatory Affairs lawyer Jessica Meech who sat
alongside McKenzie throughout the address and Q and A.

The address
by McKenzie was sometimes hard to follow, and the Q & A afterwards produced
a series of convoluted answers that at times bore little relevance to the
question asked.

On the
other hand, the joint submission by the codes was generally fluent, was far
easier to follow, and the Q and A seemed to go a long way towards giving the
Committee a better understanding of the issues in the legislation at odds with
the three codes.

But strange things seem to be happening. A little over two weeks ago in a chat with Minister of Racing Winston Peters, he said he was staying true to his word and giving racing the reform it needed – that was so badly overdue. It was a comforting conversation from an industry perspective. And again yesterday, on radio, the Minister said he knew of about seven things that needed change in the legislation to get it right.

Contrastingly, also about two weeks ago in a written questionaire to McKenzie,  one of the questions was:  “You have stated at your industry meetings that RITA agrees with 80 to 90 percent of the legislation in its current form. Can you please detail the 10 to 20 percent that requires changing?.

McKenzie’s written
reply came back: “While supportive of the Bill, RITA has identified a few
aspects of the Bill which we believe require amending, including (but not
limited to) the following : 

1. Changes to the Offshore Betting
   Charges provision as the legislation does not currently allow the degree of
   flexibility the industry requires. However, as indicated in the First Reading
   speeches, we understand this is an area the Government intends on proposing
   amendments to during the Select Committee;
2. The Bill intends on introducing a
   framework for new products that RITA is not currently able to offer (subject to
   satisfaction of specified criteria). Unfortunately, the wording of the Bill
   potentially reduces the scope of existing betting permissions. This outcome is
   at odds with the intention of the reforms, and in the Board’s view an
   unintended consequence of these provisions. We are engaging with officials on
   this matter and are hopeful of constructive change; 

“Furthermore,
there are a number of amendments required which are technical in nature, but
nonetheless necessary. The purpose of the Select Committee stage is to make
these types of technical changes. 

 “We are still working with the Codes on a few
aspects of the Bill and our preferred position is to reach industry consensus
where possible.”

From that response, and taking into account the 80 to 90 percent agreement with the legislation, one can deduce that RITA is happy with the legislation’s wording for the TAB board appointments, the IP, the Ministerial oversight, the regulation clause for funding distribution to the codes, the RIU, etc. Not only is this a contrary position to the three codes and almost all the participants of racing, but it’s also at odds with what the Minister is saying– why are they not singing from the same song-sheet. After all, the Minister appointed RITA.

During his address to the Select Committee on Thursday, McKenzie also alluded to the same two items mentioned above as important, and towards the end of his address added, “there is also an opportunity for Sport NZ to make representations to the Minister for TAB representation on the board.

“Easter Sunday racing is an issue for RITA in technical changes. The Board of the TAB has the discretion to determine the amount of profit available for distribution to the industry. This was the case for the NZRB board before the Racing Bill Act – RITA has considered the Bill in detail and believes that with the proposed amendments, it will revitalise the racing industry.”

The problem with Dean McKenzie’s position as Executive Chair of RITA may be that he employs the same team of executives for advising him as did NZRBs John Allen, whose legacy to racing’s history books will be devoid of having made any meaningful contribution. If you work for RITA and you want to keep your job, you won’t be promoting cost-cutting or too much change.

A big positive taken from Thursday’s hearing was the attentiveness and knowledge coming from the Select Committee, which paid the racing industry a complimentary degree of respect during the proceedings. This wasn’t just another laborious government process requiring some tempo before moving on to the next item of the agenda.

“You said you had been in constant contact and in dialogue with the industry ongoing; what’s been the feedback from the industry?” – Darroch Ball to Dean McKenzie

After the
McKenzie address, the Q and A didn’t go so well for RITA when Chair Darroch
Ball began by asking, “You said you had been in constant contact and in
dialogue with the industry ongoing; what’s been the feedback from the industry?

McKenzie answered
with this, taken from the audio verbatim: “As I referred to in our comments,
the change process of the significance has corresponding views on a number of
those key issues around IP, governance, those types of things, and certainly
the advisory committee, and the RITA board since the first of July have heard
both sides of those arguments, and not all cases arguments but discussions, and
have come down in the view that’s in the submission, on balance, there’s been a
lot of robust discussion, and I’m sure you will find there are alternate views,
from the codes, and within the codes, to a lot of the important issues that are
within the Bill.”

Ball
followed with a second question: “When you say there are alternate views, is
that the minority or majority?

McKenzie
responded, again verbatim: “It’s difficult to talk in terms of majority and
minority when they are generational issues, for example, venues – the issues
around venues go back into the late 1960s when the Royal Commission Inquiry was
undertaken for the racing industry; so when you talk about significant systemic
issues that go back decades there are always going to be very contrasting views
even through the generations when it passes through 60 years.

“Venues is
a good example to show the differing views, I think everyone accepts that our
capital base needs reform, that’s its inefficient and antiquated, but then when
you go past that about how we resolve that, and how we get on to tackle that
and move forward with it, there is certainly different views into how that’s
best undertaken, but what I would say is the answer to a lot of those
questions, and the venues example is a good one, then someone would have solved
it in the last sixty years if it was a simple equation.

“They are very difficult, long-standing industry issues that a reform program of this significance has to address. So, when they are addressing such serious, long-standing systemic issues, there’s naturally going to be differing views on that – that’s why they have been what they have been for so long.”

If that answer hadn’t baffled everyone in the room, then nothing would.

 If that answer hadn’t baffled everyone in the room, then nothing would. Darroch Ball, seemingly not wanting to risk further questioning, passed the baton. Pukekohe MP Andrew Bayly, who has a very strong corporate background, later made a very good comment on the replacement clauses for Section 16.

Bayly said:
“You talk about regulation powers, for most MPs regulation powers are the
things that worry us the most because we never get to see them; they never come
back before the committee; they haven’t been posted in the legislation, so we
spend all out time worrying about the legislation and the regulations get made
later, and we never have the oversight

“So, your
arrangements for the distribution are in regulation powers. Is the original
distribution which was agreed between the three codes plus the sporting formula
going to be enshrined from the outset, or do we have a new opening position?”

The Facebook video provides the answer to this and many other questions from the Select Committee. During the next session, the codes gave a very well co-ordinated presentation with all three codes making strong arguments on a united front.

NZTR Chairman Alan Jackson during his address said, “As our major source of income comes from the wagering operator, there is no immediate prospect of any significant improvement in code payout, in our view, and perhaps there is even the risk of further decline

“I trust you can appreciate the industry is at an absolute crisis point.” – NZTR Chair Alan Jackson

“Racing NSW
had the same serious issues as we did, but they addressed the funding issue
front-on and have delivered an 84 percent increase in prizemoney over the last
decade, and they now run 60 races worth $1 million or more.

“The
factors that drove this turnaround are the same factors highlighted in the
Messara Report – a code-driven industry, enhanced sources of income, being
racefields and Point of Consumption tax, and joint ventures with globally
competitive wagering operators. This allowed a strong balance sheet to invest
in the areas key to improvement.

“It was underpinned by clear performance accountabilities and positive government support and action without undue interference. Unfortunately, in our view, the majority of the Bill before us today is an organisational solution to the financial challenge. In its current form, NZTR believes it will not address the key financial challenges to allow the codes to deliver on their potential and may make us worse off than we are today.”

Jackson
went on to talk about NZTRs key issues of concern which were IP, the TAB board appointment
process, self-determination of the codes, the RIU issue

“He
concluded by saying, “Finally and most importantly though, the Bill is excessive
in government involvement and control and there is no clear pathway to addressing
the financial issues

“I trust you can appreciate the industry is at an absolute crisis point.”

The End

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