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Mr. William Cash (Stafford) : The motion invites us to support "the Government's view that a practical and workable Directive would demonstrate Member States' common desire to take vigorous action against insider trading."
I shall not go into all the details, because most of them are in the explanatory memorandum, but a considerable number of ambiguities need to be resolved before 19 June. This excellent document is quite remarkable in its way. It is the first time that I can remember an explanatory memorandum that has gone into such detail. It gives advice to the House, or those who wish to read these things, as to the manner in which the original proposals have been amended as they have gone through the various stages.
The hon. Member for Gateshead, East (Ms. Quin) berated my hon. Friend the Minister for perhaps not reading an article by the Law Society, published on 2 June. Judging by her concluding remarks, I have grave doubts as to whether she has read the explanatory memorandum of 22 May 1989. She referred to one in September 1987, but the important bit is the memorandum of May 1989, which came to the Select Committee on European Legislation, contained those remarks to which I have referred, and made it clear that considerable progress had been made. However, there are still a number of problems with the directive, some of which are inherent in it and some of which, no doubt, can be resolved within the framework when it is implemented under the European Communities Act 1972.
Will the new formulation about knowledge, which is the context in which insider dealing arises, impute knowledge only where Chinese walls have been breached? I appreciate that that is a fairly technical question, but it is important that hon. Members clearly understand it. I welcome my hon. Friend the Minister saying that the directive will enable us to continue to permit takeovers. He also answered my earlier question about whether it would be dealt with under criminal or civil law.
An interesting article appeared in The Economist today criticising the federal court of New York for the manner in which it is trying to impose its sanctions extra-territorially outside the United States under rules devised there. It raises an important question about legal reciprocity. As I said in the Committee considering the Financial Services Bill, on which my hon. Friend the Member for Beaconsfield (Mr. Smith) and I sat some years ago, when dealing with international law--and I made this point in an article that I wrote in "Lloyd's log" as well--if one is dealing with a small global village, there must be some parity between different legislative systems, because at the press of a button one can effect transactions of immense complexity. Insider dealing depends on when and how knowledge was acquired. Courts have experienced difficulty about the meaning of the words "knowledge obtained". I am glad to see the Attorney- General nodding, because an important case was considered quite recently. To fix the liability in a manner that will give rise to a prosecution that will stand muster it is essential, first, that one is sufficiently certain about the law ; secondly, that the prosecuting authority is prepared to act effectively ; and, thirdly, because of the nature of international transactions in a small global village, that there is some relationship between legal systems.
Column 669Serious doubt has been expressed about the vires of the treaty. We are aware of something called the vires committee, which is a forum not of medical but legal diagnosis. I believe that it has been considering carefully the way in which article 100A is being put forward as the treaty base for the directive. If we do not try to restrain the competence of the Commission--the Prime Minister made this point recently about the tobacco industry--when it tries to go beyond the lines of the treaty, we shall be in serious trouble. The European Court of Justice has a tendency towards political integration, as I have said on many occasions. It is essential that we ensure that the treaty base is the proper one.
The legal adviser to the Select Committee on European Legislation criticised the use of article 100A. I understand that the Government gave an assurance to the Committee that they would provide a statement on the manner in which the treaty base was being dealt with. I am not aware that such a statement has been produced, but I hope that it will be before our meeting on Wednesday. If we are to do our job properly, it is important that we are fully aware of the basis on which the treaty will be used, and this includes the Single European Act.
The question is : who does one prosecute? There still appears to be confusion on this important question. Is it the individual or is it the company? It appears from the explanatory memorandum that it is the individual. The British Bankers Association sent me a letter today showing that it thought that it could apply to companies as well. This matter should be resolved. Perhaps there is a simple answer, but there still appears to be some uncertainty.
It is essential that we remove ambiguities and confusion. This measure will be an important ingredient in the fight against criminal insider dealing in the Community. Other countries do not have these laws. We have had them since 1980 and we must ensure that they are used effectively. I congratulate the Government and my hon. Friend the Minister on the manner in which the matter has been dealt with so far, but there is considerable scope for removing much of the remaining uncertainty.
Mr. Win Griffiths (Bridgend) : I support this fairly general, straightforward and simple Government motion on insider trading. As my hon. Friend the Member for Gateshead, East (Ms. Quin) said, I do not think that any of us would deny the need for legislation. As steps are taken towards an internal market, it is obvious that legislation is needed across the Community.
I have never traded on the stock exchange. I have to rely on what others, including Conservative Members, tell me happens there. That is not to say that I believe everything that I am told. It is a fiendish and difficult area in which to legislate. The Government's legislation and the development of explanatory memorandums over the past few years as this proposed directive has been discussed at European level can only reinforce our feelings about the difficulties.
Questions have been raised about the legal base. An extract dated 7 June from the 24th report of the Select Committee on European Legislation for the 1988-89 Session was placed in the Vote Office today. It said that in its 23rd report the Committee recommended "further
Column 670consideration" of two documents--one relating to insider trading, and the other containing amendments to the original draft directive. It asked the Government
"to submit to the Committee, ahead of the debate, a statement of its position on the proposed choice of treaty base and the reasons why it no longer considers Article 54(3)(g) to be appropriate, as its earlier Explanatory Memoranda had not covered this point. This statement has now been received from the Department of Trade and Industry and is reproduced as an Appendix to this paragraph." I will not read out the Department's three-point explanation, but I will say that it seems to be an extremely sensible interpretation of article 54(3)(g) and its shortcomings in covering the draft directive. Article 100A, which deals with moves towards the internal market, seems the most sensible step to take.
In considering the difficulties that still exist, paragraph 35iii on page 9 of the explanatory memorandum mentions
"the uncertainty about the position of authorised stabilisation operations."
As I understand it, they have been custom and practice on the British stock exchange. From what I have read, they seem to be a reasonably harmless way of trying to establish markets for trading in companies that are new to the stock exchange. I would be interested, purely for information, to know what the Minister feels is the likelihood of proposals in the draft directive which would take account of that point, or whether there are any countries that feel so strongly about the matter that they would not consider such proposals. However, as decisions are being made by qualified majority, there will be an opportunity to carry the proposals forward. On the issue of just when insider information is misused, there seem still to be areas that require clarification. I found the explanatory memorandum tremendously helpful in setting out the way in which the proposal and the nuances of earlier references in the directive have been changed. Nevertheless, it is still difficult for a lay person such as myself to follow the memorandum because it is nine pages long. It would be beneficial to hon. Members if the explanatory memorandum took the form of a comparison of the earlier version of the draft directive with the latest version.
Mr. Cash : I share that thought with the hon. Gentleman because I believe that it is important that people should be able to make a reasonable assessment. There is a way of dealing with the problem which is known as a Keeling schedule. It shows, in heavy black type, the amendments made by reference to the original, so one can then see the document as a whole and also the differences that have been introduced. That would be useful for legislation taken on the Floor of the House and for legislation that is taken in the Standing Committees on European Community documents.
Mr. Griffiths : The amended form of the draft directive is presented in the European Parliament papers in the form of two columns. One can read the original directive and any changes are set out opposite. The word "unchanged" is printed where the draft has remained the same. If the Government gave us a copy of the amended directive as a single document, together with all the valuable points that are made in the explanatory memorandum of the way in which further changes have been incorporated following discussions in Brussels, it would be useful in dealing with
Column 671legislation. I found it difficult earlier today and over the weekend to sort out exactly what the proposal was and what changes had been made.
I refer also to the article on insider trading in the Law Society's Gazette, No. 22, which was provided by the helpful research department in the Library and which was posted on the board this afternoon.
I should like to take up a point made by my hon. Friend the Member for Gateshead, East (Ms. Quin) about the extra-terrestrial implications of the way in which the directive is intended to work. The writer of the Law Society article, Dr. Janet Dine, of the Institute of Advanced Legal Studies and a member of the company law committee, is of the opinion that under the terms of the directive as drafted someone who has committed an offence in Britain on the Paris stock exchange may have to be extradited to Paris for the case to be heard.
If that is the case, it is a drawback in the directive. There should be some way of framing the provisions to allow the case to be heard either in the state where the person concerned lives or where he or she has initiated the offence of insider trading. As I am neither a stockbroker nor a lawyer, I do not know whether the concept of the European legal space, which is referred to so often in the context of the development of the single market and other ideas on closer co-operation, could be useful in a directive of this nature. The Minister said that satisfactory agreement had been reached over exactly what information needs to be published and at what stage when a company is thinking about a takeover bid, but I wonder whether that agreement also covers issues relating to the disclosure of an offence. Article 2(b) of the amended directive prevents a director recommending that his company should bid for another company when he has insider information concerning that target as it would prevent the director of a target company from selling issues when he has similar information. Can the Minister tell us anything about that? I turn to the vexed question of the effectiveness of our legislation. Several articles have been referred to, all of which I have read, if not digested entirely. One in particular struck me as saying something that deserves at least a response from the Minister. It was an article in The Economist on 15 October 1988 relating to the activities in buying options in Consolidated Gold Fields before Minorco's £3 million bid for that company. The Economist was of the opinion that if the DTI had used sections 442, 444 and 445 of the Companies Act 1985, it could have taken action against the insider trading that The Economist claims was happening at that time. Unlike the other reference in The Economist this week, glowing reference is made to the activities of the Securities and Exchange Commission in the United States where nominee accounts can be blocked when there is some difficulty in establishing exactly who is operating on the market. ConsGold tried to get information from Liechtenstein and Liberian banks that were involved in the process but it was unable to do so, naturally enough.
Mr. Tim Smith : Instead of reading articles in newspapers, why does not the hon. Gentleman try reading the Companies Act 1985 and the Financial Services Act 1986? If he did so, he would discover that the Companies Act provides precisely the sort of power that he has been
Column 672describing to disfranchise shares. I understand that that power was used only the other day when the identity of the beneficial owners could not be established. The Financial Services Act contains extremely draconian powers to deal with insider trading.
Mr. Griffiths : I was saying that, on the basis of the powers that are available in the Companies Act 1985, a claim was being made that the Department of Trade and Industry had failed to act appropriately in respect of ConsGold. I am asking the Minister to comment on the accusations that have been directed against the DTI.
Mr. Griffiths : I am checking them out by asking the Minister to tell us exactly what the Department did at the time of the ConsGold affair. Did it think about implementing sections 442, 444, and 445 of the Companies Act? The Economist cannot be described as a mischief maker for the fair operation of free markets. It seemed that there was some weight in what it was reporting or that the Minister would be able to quell the fears to which it was drawing attention.
Mr. Griffiths : I know exactly what I am talking about. I am referring to the claims made in The Economist and I am asking the Minister to comment upon them. A substantial accusation has been made, for we know that the buying options amounted to about £15 million. Against that background, it seems appropriate to ask the Minister whether he thinks that something along the lines of the SEC of the United States would be a viable option on the European scene. 11.33 pm
My hon. Friend the Member for Stafford (Mr. Cash) spoke of the serious defects of the text at earlier stages. I am happy to be able to reassure him that by dint of careful negotiation those defects have been removed. As for Chinese walls, I can give him the assurance that knowledge under the directive is imputed only where it exists. The anxiety which was widespread and justifiable at an earlier stage has, I believe, been removed. My hon. Friend raised another anxiety about whether a company might be found to be guilty of insider dealing under the directive. The answer to that is no. That is another matter which has been resolved satisfactorily.
The hon. Member for Bridgend (Mr. Griffiths) asked about stabilisation. He properly referred to it as a legitimate practice in the market that exists by custom and practice. It is formally legitimised and closely regulated under the Financial Services Act 1986 or by regulations made under that Act. He will be relieved to know that further amendments to the text made during discussions
Column 673remove the anxiety properly felt on that score. The hon. Gentleman made a few remarks about the explanatory memorandum that I submitted. He seemed to criticise it for being excessively lengthy, whereas my hon. Friend the Member for Stafford complimented me on the way--
Mr. Win Griffiths : What I said was that I found the memorandum extremely helpful but that it would have been more helpful if the changes described in the memorandum had been set alongside the appropriate parts of the amended directive so we could see clearly what changes had been made.
My hon. Friend the Member for Stafford was complimentary about the way in which the explanatory memorandum was framed. The difficulty about the suggestion that was made is that the working papers on which discussions are held are confidential, and properly regarded as such by all the member states and by the Commission. That helps to ensure that member states are free to express their views in a sensible environment but means that it is often not possible to make draft texts available.
The hon. Member for Bridgend and my hon. Friend the Member for Stafford made a number of useful and interesting suggestions about the way in which the scrutiny programme might be improved, and I should like, if I may, to consider carefully whether we can give effect to them, because we aim to be as helpful as we can in making the process of scrutiny work.
Mr. Cash : My hon. Friend said that it was essential that we should maintain confidentiality, and gave reasons that we have heard so often before. Does he not agree that this matter is greatly overplayed and that it would be infinitely better if the texts were made available at an earlier stage? I am sure that he will be aware that the Leader of the House is considering whether that could be done. That would allow us--as happens in the Danish Parliament--the opportunity to examine the texts as they emerge so that we did not constantly have to deal with matters that were shrouded in secrecy.
Mr. Maude : I take my hon. Friend's point, and I undertake to consider it seriously, along with the other points that he made. Let me deal with some of the issues raised by the hon. Member for Gateshead, East (Ms. Quin). She asked about the timetable for further progress. I believe that it is intended that the matter should be discussed by ECOFIN next Monday, when the United Kingdom will be represented by my right hon. Friend the Chancellor of the Exchequer. She asked about other countries' views. They must answer for themselves, although I can tell her that a number of countries have had difficulties along the way--many of them similar to the difficulties that I have outlined. Broadly speaking, those difficulties have been resolved, although some important issues remain unresolved. It may well be possible to resolve all those matters so that the measure can be agreed before very long. The hon. Member for Gateshead, East asked who had represented the United Kingdom in the discussions. There have been discussions both in the working group and to some extent in COREPER. Ministers do not attend those
Column 674meetings and it would be impossible for them to do so. Nevertheless, I have kept in close touch with the progress of those discussions. I have made sure that Ministers are informed fully and have directed the process of negotiation. It is by no means uncommon--as the hon. Lady, with her experience of these matters, will know--for something to be agreed without Ministers' attending meetings or discussing the measure formally at any stage. That does not mean to say that it happens without Ministers' informing the process of discussion, as I assure her they have in this case.
The hon. Lady referred to the role of the European Parliament and expressed pride that her colleague the MEP for Derbyshire had produced a report on insider trading. I have to tell her that the European Parliament considered the initial draft, which was, frankly, a mess : it was unworkable, it was too broad, it would not have been effective and it would have jeopardised the position of many perfectly respectable, legitimate and honest people. Yet the European Parliament warmly endorsed the proposal. She might consider whether it would be proper to temper her praise for the work of her colleague in that respect.
Mr. Maude : There have been many drafts. It has been a fact-moving negotiation. The proposal has been subject to constant amendment, broadly in the direction that we have sought, to narrow its scope so that it is both effective and enforceable.
The draft considered by the European Parliament was, by fairly common consent, thought to be hopeless. As I said, the European Parliament warmly endorsed it.
The hon. Lady marred her performance by mounting what she might claim to be an attack on the Government's performance in pursuing insider dealing. She badly misjudged it. She relied only on evidence of remarks by some commentators and she did her reputation no good. I have a very high regard for her abilities, but I feel bound to say that she did not inform herself properly.
Ms. Quin : There were a large number of articles. Can the Minister tell me that all those were wrong, that none of the cases mentioned involved insider dealing, that all prosecutions that should have been made have been made, and that no one has escaped the net of the Government's system? If so, I shall be delighted.
Mr. Maude : The hon. Lady has not referred to any case about which she can assert that insider dealing has occurred and not been pursued, and nor did any of the articles to which she referred. She relied on assertions that there was a certain amount of insider dealing that had not been subject to prosecution. It will not do to make such assertions without the slightest evidence to sustain them. The evidence relied on was the assertion that before some takeovers there were movements in share prices. I have shown conclusively that there is frequently a proper explanation for that--a company may properly be building a platform before announcing its bid. There is nothing improper in that. There is no evidence in anything to which the hon. Lady referred to show that a large amount of insider dealing is not being pursued. She should not make irresponsible assertions.
Column 675The directive, which I believe will be agreed before long, provides for a useful addition to our domestic law. It means that we can rely on sensible law being implemented and operated in other member states. It will be supplemented by the Council of Europe convention on insider dealing, which we hope to sign and ratify later this year. All in all, it is a good move forward in the fight against insider dealing. I ask the House to accept the motion.
Question put and agreed to.
That this House takes note of European Community Documents Nos. 7310/87 and 8810/88 and the Supplementary Explanatory Memorandum submitted by the Department of Trade and Industry on 22nd May 1989 relating to insider trading ; and supports the Government's view that a practical and workable Directive would demonstrate Member States' common desire to take vigorous action against insider trading.
Motion made, and Question put forthwith pursuant to Standing Order No. 102 (Standing Committees on European Community documents).
That this House takes note of the proposals described in the un-numbered Explanatory Memoranda submitted by the Department of Trade and Industry on 15th October 1987 and the Supplementary Explanatory Memoranda submitted by the Department on 27th October and 25th November 1987 relating to negotiations between the European Community and Japan under GATT Article XXIV.6, on 15th October 1987 relating to negotiations between the Community and Argentina under GATT Article XXIV.6 and on 21st March 1989 relating to negotiations between the Community and Canada under GATT Article XXIV.6 ; and endorses the Government's view that the agreements with these countries are satisfactory given the Community's obligations under GATT.-- [Mr. Garel-Jones.]
Question agreed to.
Motion made, and Question put forthwith pursuant to Standing Order No. 102 (Standing Committees on European Community documents).
That this House takes note of European Community Documents Nos. 5211/88, Part 1 and the Supplementary Explanatory Memorandum submitted by the Department of Employment on 20th March 1989, 10166/88 and the proposals described in the un-numbered Explanatory Memorandum submitted by the Department of Employment on 2nd June 1989, relating to safety and health of workers at the workplace ; supports the broad thrust of the common position adopted on these proposals by the Council of Ministers as a step towards the establishment of high standards of safety in workplaces throughout the Community ; and endorses the Government's view that United Kingdom law generally achieves the objectives of the proposal.-- [Mr. Garel- Jones.] Question agreed to.
Heath Comprehensive School
Derbyshire county council has proposed to the Department of Education and Science that the Heath school for 11 to 16-year-olds should be closed. Although the council has a good record as a local education authority, this part of its plan for the area is seriously flawed.
I am pleased to present and support the petition, as I was pleased to support my constituents when a deputation met the Minister on Thursday. The petition reads :
To the Honourable Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled. The Humble Petition of the residents of Heath and Holmewood, Derbyshire sheweth that proposals to close Heath Comprehensive school would deprive parents of the right to choose that their children be educated in a modern, well-maintained, purpose-built school of proven worth ;
Cause present and future pupils increased travel problems, particularly in winter ; increase stress and provide no educational benefit ;
Deprive the community of an important local asset of which it is justifiably proud ;
Cause increased social deprivation in an already deprived area ; Divide a community linked by the school.
Wherefore your Petitioners pray that your Honourable House will take measures to prevent the closure of Heath Comprehensive school. And your Petitioners, as in duty bound, will pray that your Honourable House will take measures to prevent the closure of Heath Comprehensive school.
That is signed by Mrs. Sally Holland of, 5 Gorse bank, Heath, Chesterfield and another 1,018 constituents.
To lie upon the Table.
Motion made and Question proposed, That this House do now adjourn.-- [Mr. Garel-Jones.]
Mr. Tim Smith (Beaconsfield) : I am grateful for the opportunity to raise this evening the subject of greyhound racing. I am especially grateful to my hon. Friend the Minister of State, Home Office for coming to the House to reply to the debate. I am glad, too, to see a number of hon. Members present who I know have an interest in the matter, including my hon. Friend the Member for Langbaurgh (Mr. Holt).
I have raised the subject because I am a great enthusiast of greyhound racing. I have attended several meetings recently and they have been most enjoyable occasions. It may be that my hon. Friend has not been to a greyhound meeting in the recent past and I urge and thoroughly recommend him to take the opportunity to attend one. Next week's derby, worth £30,000 to the winner, will be watched by more than 10,000 racegoers and will be followed avidly by millions of people via the media. No, it did not take place at Epsom a week ago--this is the classic of the classics, the Greyhound Derby. It is the culmination of six rounds of competition among 200 runners, and it will be run at Plough lane, Wimbledon.
This is the start of the greyhound festival week and it is an appropriate time to look at the sport of greyhound racing and how it has fared over the past 10 years.
Greyhound racing is popular, but under-financed. Attendances are going up on the more popular courses, but smaller ones are still under threat from property developers. Ten years ago there were 48 courses, but today there are only 35, which race under the National Greyhound Racing Club rules.
Crowd violence and drunkenness have never been a problem and most tracks in recent years have become much more upmarket and can offer a sophisticated dinner and evening out. Nonetheless, the underlying tendency is that the sport is getting poorer while the off-course bookmakers, through their betting office chains, are getting richer. Standards countrywide for racegoers and the greyhounds are not improving as fast as they should.
The heart of the problem is that greyhound racing, as with horseracing, is unable to extract a fair price from the off-course betting shops for the use of its product. The situation is exacerbated for dog racing, which gets no levy and only totally insignificant sums from the off-course betting industry, despite the fact that the sport now provides nearly one third of off-course betting revenue for the bookmakers. As horseracing receives an off-course betting levy administered by the Horserace Betting Levy Board, so should greyhound racing receive an off-course betting levy.
The bookmakers argue that most greyhound race meetings take place in the evenings, when betting offices are closed. However, that does not prevent punters from placing their bets on evening dogs during the daytime when the shops are open--and thousands do.
The bookmakers say that almost all their greyhound business is conducted on the afternoon meetings. That may be true, but those afternoon meetings-- although the bookmakers own some of the tracks--are all part of NGRC greyhound racing and subject to NGRC rules, stewardship, licensing and discipline. All the greyhounds,
Column 678their owners and trainers are NGRC- registered. The meetings could not be run in the absence of a supervisory authority for greyhound racing whose integrity is assured by independent stewards to the satisfaction of the licensing authority and the Home Office, which has overall responsibility for the conduct of betting sports. All off-course greyhound betting takes place on the results of racing at NGRC-licensed tracks. It amounts to more than a £1 billion turnover for the off-course bookmakers. In betting offices the same 10 per cent. deduction is made for a bet on a greyhound as for a bet on a horse. That permits the bookmaker to recover betting duty and levy. Since greyhound racing has no levy, however, that part of the money taken from greyhound punters, supposedly to cover the levy, is not passed on to greyhound racing. The bookmakers keep it and the punters do not know that. In effect, the bookmakers make a levy charge on greyhound punters and keep the proceeds to boost their own profits. Because the bookmakers are able to exploit greyhound punters in that way, it makes sense for them to maximise their greyhound racing betting, which is what they have been doing. Between the years 1977 and 1988 the amount of off-course betting turnover on greyhounds increased from 18 to 27 per cent. of the total. Betting on horses went down from 82 to 72 per cent.
As long as bookmakers are able to charge greyhound punters for a levy that does not exist, the composition of off-course betting will continue to change to the detriment of horseracing and therefore to the detriment of the horseracing levy.
The statutory 8 per cent. betting duty applies just as much to off-course greyhound betting as to off-course horse betting, so the Government have an equal interest in both. But the greyhound betting public is not being protected in the same way as the horserace betting public because greyhound racing has no levy income to help fund veterinary work, or to improve security and dope testing, particularly in the increasing use of steroids. It has no equivalent to the equine research centre or the Racecourse Security Services companies, both of which are funded by virtue of the horserace betting levy. Why should the punter who bets on a dog and pays 8 per cent. to the Government not be protected in the same way as the punter who bets on a horse and pays 8 per cent?
A levy for greyhound racing would provide the necessary financing to improve protection for the public. Annual betting turnover on greyhounds now exceeds £1.3 billion and a levy for the sport similar to the horseracing levy would yield between £10 million and £11 million. It would also remove the bookmakers' incentive to exploit betting on greyhounds at the expense of the horseracing levy. Many people are now beginning to question the fairness of the present situation, which leaves greyhound racing out in the cold. In the absence of a levy, much thought has been given to some alternative funding mechanism to provide a proper balance between the supplier and the retailer of the betting product. The ideal alternative would have been the control by the greyhound racing and horseracing authorities of the satellite communications company which distributes betting information and live television picture commentaries from the greyhound stadium to the off-course betting shops. But here again there is a marked imbalance. Control of Satellite Information Services Ltd., known as SIS, rests with the
Column 679bookmakers, who appear to have no intention of relinquishing that control, or of allowing greyhound interests to have any stake in the company.
In the first placement of SIS shares the big four bookmakers took 45 per cent. of the 60 per cent. which were allocated, the Horserace Tote took 5 per cent. and the Racecourse Association 10 per cent. This put the bookmaker in the driving seat during the vital period when the company was being established. The result has been, as we see in the latest announcement relating to the imminent placing of the remaining 40 per cent. of SIS shares, that the big bookmakers are calling the shots once again. They are saying that none of the unplaced shares will be allowed to go to horseracing or greyhound racing, at least until 1992, when there is the vague promise that the company will go public. That means that if bookmakers have their way, racing will have to join the queue for shares with everybody else. Since Sears Securities has sold its William Hill betting shops chain to Mecca Bookmakers, a new allocation of shares has been announced. Ladbrokes, the combination of William Hill and Mecca, and Corals, the big three, are to share between them 45 per cent. of SIS, and the Tote's holding will be increased by 1 per cent. to 6 per cent., giving bookmaking interests 51 per cent. Sears Securities is to keep just under 13 per cent., leaving only 26 per cent. for the outside world. The Racecourse Association, representing horseracing, remains with its handout of 10 per cent.
Clearly the bookmakers have no intention of letting other partners into SIS and horseracing may find its negotiating hand rather short of trumps in years to come. Greyhound racing, meanwhile, holds no cards at all despite the fact that two greyhound race meetings are beamed live every afternoon into off-course betting offices. The merger of Mecca Bookmakers, owned by Grand Metropolitian plc, and the William Hill Organisation is presently the subject of a Monopolies and Mergers Commission inquiry. The merger serves only to aggravate the situation and give the big three bookmakers and their associates a bigger stake in the control of the only means of distributing betting information to betting shops.
The merger will also further restrict competition in the betting market and strengthen the influence of the major bookmaking companies over the Bookmakers Afternoon Greyhound Services company which was established to obtain from NGRC licensed greyhound racecourses a racing service for off- course outlets during betting office opening hours. That might have developed into the ideal mechanism for paying to greyhound racing a proper price for its product. Unfortunately it has not, because the big bookmakers have also managed to usurp the sport's position there.
Two of the big three bookmakers, Coral and Ladbrokes, now own and operate four of the eight greyhound tracks which, in 1988-89, supplied the greyhound service to betting offices. A fifth track supplying the bookmaker service is Newcastle, which is owned by Ladbrokes and leased to a private company to operate. A sixth is Hackney, whose owners, Brent Walker Ltd., purchased 119 betting shops from William Hill at the time of the merger with Mecca. Bookmaking interests control six out of the eight tracks which supply greyhound racing to bookmakers.
Column 680When the law governing the control of betting at greyhound tracks was enacted it became an offence for the proprietor of any greyhound stadium to run a book or have any interest in bookmaking at that stadium. The public interest objective was to prevent organisers of races from offering betting odds against runners. The offence is now to be found in section 19 of the Betting, Gaming and Lotteries Act 1963, which remains in force today. The law applies only to on-course betting. Thus, bookmakers who are also track proprietors can run a book in their betting shops on the racing taking place at their tracks. In other words, the law does not extend to the bookmaking companies which now organise off-course betting on greyhound racing, taking enormous numbers of bets on races that they and their employees arrange at the tracks which they own.
Perhaps my hon. Friend the Minister will agree that the law appears anomalous and should be brought up to date. I am suggesting that the spirit of section 19, if not the letter of the law, is being contravened because no safeguard exists for the off-course betting public such as that which exists for racegoers. The spirit of section 19 is being abused by all the major bookmakers. Would it not make sense, in the greyhound punters' interests, to take a leaf out of horseracing's book and prohibit bookmakers from using their own greyhound tracks to supply any form of greyhound racing and betting service to their own betting shops? If the law was changed in this way, and the sport of greyhound racing was given some form of enforceable copyright in its race results, market forces might prevail.
The Government-appointed members of the Horserace Betting Levy Board have made it clear that they believe that there should be a direct market mechanism between racing and the betting industry. In the absence of this mechanism, horseracing and greyhound racing should be treated equally.
I conclude that the existing horserace betting levy should be extended to include greyhound racing and, indeed, other sports on which off-course betting takes place, although I understand that, pro rata to the two racing sports, the other sports account for only about 1 per cent. of the total. I also conclude that there should be an inquiry into off-course betting's unhealthy influence over afternoon greyhound racing.
The Minister of State, Home Office (Mr. John Patten) : I welcome the opportunity which my hon. Friend the Member for Beaconsfield (Mr. Smith) has given us to respond to some of the anxieties of the greyhound racing industry and of those who enjoy the sport. I sometimes think that issues of dispute between the racing and bookmaking industries may appear to the outside world a little arcane, but the way in which my hon. Friend addressed the House this evening was a model of clarity--much more so perhaps than some of the technical and often heated exchanges that we see in the racing press, which are hard for the average person to understand. Now the greyhound industry has taken its campaign to the pages of The Times, in which it is advertising. That newspaper may or may not be read more widely by hon. Members than, say, The Sporting Life. Racing and betting are major industries in this country. They are the major passions of some people and they are among the diversions, if not passions, of a good many
Column 681more. Incidentally, I welcome the presence in the Chamber of my hon. Friend the Member for Langbaurgh (Mr. Holt) who takes an interest in these matters.
My hon. Friend the Member for Beaconsfield ended by speaking of the need for an inquiry into the problems of greyhound racing and of betting on it. I shall begin by responding to that point, and then try to deal with as many of his detailed points as I can in the time available. Those that I do not answer now I shall try to deal with immediately in writing.
I can confirm that my right hon. Friend the Secretary of State and I are carefully considering whether to hold an inquiry, and, if we hold one, whether it should include horse and greyhound racing. The need for an inquiry has been urged on us not least by the British Greyhound Racing Board, to which my hon. Friend referred. The House will know that last year, alas, the Horserace Betting Levy Board and the Bookmakers Committee failed to agree the terms of the horserace betting levy scheme for the current financial year--the 28th scheme. My right hon. Friend the Home Secretary was therefore called upon to determine the scheme.
In their submissions about the levy dispute, the three Government-appointed members of the levy board recommended the establishment of an inquiry into the long-term funding of racing. My hon. Friend referred to these three people, who served the board with such distinction. When my right hon. Friend announced his determination of the scheme on 22 March this year, he said that he understood the arguments for this recommendation--meaning the need for an inquiry. He also explained that the possible privatisation of the Horserace Totalisator Board is a factor relevant to reaching a conclusion on the need for and the scope of an independent and objective assessment of the issues within the recommendation. My right hon. Friend added that he would announce his conclusion on an inquiry when we had received and considered the advice of Lloyds merchant bank on the feasibility of privatising the Tote. I am not in a position to announce our conclusions on that issue, but we are making progress in considering the complex issues involved and at the end of April we received Lloyd's advice on the Tote. In addition, we have assured the chairman of the Betting and Greyhound Racing Board that whether or not the funding of greyhound racing should be included in such an inquiry is most certainly among the considerations that we are taking into account. I am happy to repeat that. In our view, that is certainly the right approach. It does not seem sensible to pursue an inquiry into greyhound racing alone. Mr. Richard Holt (Langbaurgh) rose --