Examination of Witnesses (Questions 819
THURSDAY 20 JANUARY 2000
MR B ECCLESTONE,
819 May I apologise for keeping you waiting?
We have had an extremely useful session this morning and it has
gone on rather longer than we thought. We are most grateful for
your cooperation with this inquiry. I appreciate from the evidence
you have submitted that you have some concerns about being asked
to come. I shall comment in a moment or two as to why we should
be interested in your thoughts. Would you both briefly like to
introduce yourselves to the Committee?
(Mr Ecclestone) I am Mr Ecclestone.
(Mr Mosley) I am Max Mosley.
820 I was hoping you might say a little bit about
your role in the FIA.
(Mr Mosley) Mr Ecclestone is Chairman
of Formula 1
821 I appreciate you were not in on the earlier
session. I assumed you were familiar with our procedures. I beg
your pardon. It is just to help the transcript for the Committee
(Mr Mosley) Mr Ecclestone is Chairman
of Formula 1 Management, which handles the commercial arrangements
in Formula 1 between the teams, the organisers, promoters and
television arrangements, things of that kind, purely commercial
things. I am the President of the FIA, which is, among other things,
the world governing body of motor sport, which looks after all
the sporting aspects and deals with the rules and regulations
of the sport.
822 May I begin by just referring to your evidence?
You say in your evidence that it is difficult to anticipate what
issues the Committee may wish to explore with FIA. May I basically
draw your attention to the fact that the first Committee report
produced in this Parliament related to tobacco advertising and
the proposed EC directive and this was on 26 November 1997 when
our Committee actually re-stated the previous Committee's position.
I will mention what that position was: that in the face of the
evidence now being accumulated the Government can no longer maintain
its position that a further tightening of tobacco advertising
controls is unlikely to contribute to a reduction of the prevalence
of smoking in the UK. The Committee recommended that the Government
adopt as its policy the total elimination of tobacco advertising
at point of sale and the Government should support the directive.
I am sure you are aware of this. The point which is particularly
important in respect of this report is that we said we were particularly
concerned at the Government's proposal to seek an EC directive
which contained provision for a permanent exemption for Formula
1. We believe that Formula 1 should be placed under the same pressure
as other sports to seek alternative sponsorship. What I should
welcome at the outset of our questions is to hear what you understand
the circumstances to be which led to these proposals for an exemption
for Formula 1.
(Mr Mosley) On the text you have just
read out, there is nothing in that with which we would disagree.
What is really important is that we never asked for an exemption
for Formula 1 only. There are very obvious reasons for that, apart
from the fact that it might not be the right thing to do. In an
EU situation where only eight of the 15 countries have a Grand
Prix and where there are a great many other sports, you are going
to have seven countries against you and all the other sports.
So it would have been a mad thing for us to ask for and we did
not ever ask for it. It was an invention somewhere in the Ministry
of Health, but it certainly did not come from us. We would not
disagree with a word of that. The circumstances in which there
was any discussion of an exemption were that we pointed out that
it was necessary to make provision for the Formula 1 teams to
be able to continue operating on more or less the same basis as
they operate now, or did in those days. Essentially, Formula 1
is by far the most high technology, high money, branch of motor
sport and depended then to a very heavy extent on money from tobacco.
It is now less the case, but talking about almost four years ago
which is when this was. If that money were cut off without notice,
quickly, what would happen is that you would not get Formula 1
coming to an end, it would simply run on less money. Because there
was less money available, the highest paid engineers, performers
and so on, involved in the sport would not be concentrated in
Formula 1 and therefore largely, from a technical point of view,
in the United Kingdom, but would start to be scattered. In particular,
they would tend to go to the United States where there was not,
and incidentally still is not, any serious move to ban tobacco
advertising in motor sport because the United States Formulae
would then be able to afford to pay for these people. That would
remove the head from the whole motor sport industry in the UK
and a decline, we feared, would then set in. We said that there
would be no point in having an EU ban as things were at the present
because what would happen, if it succeeded, would be you would
get that decline. The alternative would be that the tobacco industry
would subsidise events outside the EU, which would then be shown
on television in the EU, which again would be pointless. Therefore
some form of exemption was necessary. I do not wish to go on too
long, but just to set the scene. At that point, you then get a
slight divergence of interests between us as the governing body
on the one side and the teams on the other. To be fair to him,
Mr Ecclestone really does not fall into either category because
the teams get the money from the tobacco industry and we, the
governing body, try to run the sport. We are not allowed by contract,
but also for reasons of competition law, to interfere with the
commercial arrangements which the teams make with their sponsors.
So it would not be right for us to seek to do that. However, as
the leaders of the sport we seek to persuade and we have sat down
with the teams, and I have sat down with them on a number of occasions,
saying that we must be very careful because at the moment we have
more moneyagain three years agofrom the tobacco
industry than we could if we had to get the same sponsorship money
on the open market. The tobacco people really have nowhere else
to go, not really, whereas in every other area you are competing
with every other sponsor. However, my argument ran, that situation
will not continue for ever. We risk being down a cul-de-sac with
the tobacco industry while the main stream of sports sponsorship
continues and eventually overtakes us. Far from having more money
we will have less. That was met with two arguments from the teams,
which are fairly strong. First of all they said the obvious point:
there is nothing illegal about what they are doing and also, as
far as they know, there is no evidence that they cause anyone
to start smoking. To that we said, okay, we would see whether
we could get the evidence to demonstrate that. Their second point,
and it is one on which the Committee might be able to help us,
is that if the EU is serious about trying to stop the publicity
from tobacco, they could do so overnight because the EU currently
subsidises the growing of tobacco to the tune of 998 million ecus,
the 1997 figure, which is probably in the order of two to three
times as much money as the whole sponsorship of Formula 1. By
contrast, they pointed out to me, not only are these 998 million
ecus going to grow tobacco, the total EU budget for combatting
cancer is 14 million ecus and for health initiatives generally
823 We have looked at this in some detail in
this inquiry, as you might imagine.
(Mr Mosley) Good. I just wanted to make
824 It is a very important point; we understand
(Mr Mosley)that I had difficulty
in convincing the teams that their position is morally difficult
when confronted with this action by our Government.
825 Let us be clear about this. The suggestion
that the FIA asked for an exemption was, in your words, an invention;
it was not the case basically.
(Mr Mosley) Absolutely.
826 May I come to Mr Ecclestone on this because
clearly a lot of press coverage was given to this issue and a
lot of suggestions as to why this change took place not long after
the new Government had been elected. We have a concern that as
far back as 1954 in this place the Health Minister stood up and
said there was a clear link between lung cancer and smoking. Since
that time six million people in this country have died through
smoking related disease; 120,000 die every year. What concerns
me particularly is that we have only recently started to address
the health risks. If one looks at the political processes which
have delayed this place tackling smoking seriously, looks at the
register of interests in recent years and sees the number of people
with tobacco related interests who are Members of Parliament and
senior Members of Parliament, there are reasons why we have been
slow to address these issues. If the political processes have
been manipulated on behalf of the tobacco industry until recently,
some of us actually anticipated that in 1997 there would be a
fundamental change, some accept there has been. The concern I
have and the reason why the Committee looked at this area was
that it seemed to be backing away from what the Labour Party,
my own party, had said in Opposition in respect of what it would
do over smoking in particular, over advertising and in particular
over sponsorship. The word was of course that because of your
donations to the Labour Party, Mr Ecclestone, somehow the Government
backed off. We are told that it was an invention by Mr Mosley.
Do you see it as an invention? Is it a nonsense to suggest that
your donations influenced the direction of Government policy on
this very, very important issue, this life and death issue?
(Mr Ecclestone) I sincerely hope that
you are not suggesting for one moment that that is what it was
827 I am suggesting nothing. I know what the
press were suggesting. I know what journalists were suggesting
to me at the time.
(Mr Ecclestone) If you did not suggest
that you would be absolutely correct.
828 You have nothing more to say on that point.
(Mr Ecclestone) I have just answered
829 The suggestions in the media that your donations
to the Labour Party influenced this whole area, this very important
area, are nonsense from your point of view.
(Mr Ecclestone) Absolutely.
(Mr Mosley) May I help there? Mr Ecclestone wrote
on 13 November 1997 to The Times, which is a matter of public
record. The letter was published. It might help if I just read
the one paragraph which dealt with that issue. "I made a
donation to the Labour Party because I believed Mr Blair to be
a person of exceptional ability who, if free to act, would to
an outstanding job for our country. This I thought depended on
independence from old-fashioned vested interests in the Labour
movement. My gift was intended to contribute to this. There were
no strings attached. I have just paid an annual personal tax bill
of £27 million for the simple privilege of living in England
rather than a tax haven. With so large an investment it is reasonable
to pay a million or two extra as a contribution to a free and
independent Government for my country. When Mr Mosley and I visited
Mr Blair to discuss tobacco advertising, we had already secured
the support of several EU governments. Our case was overwhelming.
A ban in the EU would have undesirable side effects but achieve
no reduction in Formula 1 publicity for tobacco, while on the
other hand the FIA could offer a significant compulsory worldwide
reduction in return for an EU exemption. My donation did not come
into it. The case made itself, just as it had elsewhere in the
EU. I am all in favour of reform in political funding. Governments
should be free from the influence of special interests, be they
trade unions, businesses or single issue pressure groups. But
until these reforms are in place I should enjoy the same rights
as everyone else. These include the right to make donations to
any political party I choose. Anything less implies that I have
done something wrong and is a gross, insulting and irrational
restriction of my freedom".
830 How much money actually does Formula 1 get
from tobacco sponsorship? Do we know?
(Mr Mosley) Nobody knows exactly, but
it is probably in the order of £200 to £300 million.
I am sorry to say this again but it is certainly well within the
EU subsidy for growing tobacco.
831 You are at liberty to keep quoting that,
but it is not very relevant.
(Mr Mosley) It is if it is diverted.
832 If you diverted that it would have to go
into social payments to those peasants growing the crop.
(Mr Mosley) It would depend on the EU
governments; that would be their decision.
833 That is a different argument. If we take
the upper figure of £300 million, what percentage is that
of the total cost of running a Formula 1 circuit?
(Mr Mosley) It really is very difficult
to say because obviously the teams are very secretive about their
money. Probably tobacco provides something in the order of 20
to 30 per cent of the income of the teams. That is a guess; it
is definitely not a figure. If you wanted to know, you could ask
the teams and they would probably tell you. We do not know closer
834 Have you been monitoring whether in the last
few years the proportion of income from tobacco has changed?
(Mr Mosley) Not in the sense of monitoring
accurately, because we do not have the means to do that. Anecdotally
it is perfectly clear that this is happening. The trend at the
moment in Formula 1, the whole structure, has changed dramatically
since all these matters came up in 1996. Then it was more heavily
dependent on tobacco than it is now. Now the motor industry, the
world motor industry, is becoming much more heavily involved.
Companies like Jaguar are coming in, Toyota are about to come
in who have never been in Formula 1 before, BMW becoming much
more heavily involved. I think I am right in saying that next
year there will be six tobacco sponsored teams out of 11; last
year it was seven. The trend now is decline.
835 Surely you have a role in monitoring that?
If you were negotiating with governments on behalf of Formula
1 sport generally, then I am surprised that you do not have more
direct control over what happens within the teams.
(Mr Mosley) I wish we did. It is always
suggested to us, particularly in Brussels, that we should regulate
the sport and the business should be allowed to conduct itself.
836 Are you confident that the postponement time
you have got is being used productively by the industry to stop
(Mr Mosley) Do you mean the motor racing
(Mr Mosley) I would not put it quite
like that. The thing is these people are running a business. Each
team runs an independent business, independent from all the others.
They will obviously do what is commercially best for them, within
a framework which we regulate. When we had a meeting and I said
to them, "If I could demonstrate to you that children take
up smoking because of what you are doing, would you voluntarily
give it up?", the reply was yes. Most people have small children
themselves and anyone will support that position. There is no
dispute from our side that tobacco is unhealthy and bad for your
health. The problem I then had was getting the evidence. I wrote
to every single
838 I am sorry, I am not really at this stage
interested in morality, I am interested in the business side of
things. The reason for my questioning is that you made a very
cogent argument, very persuasive argument for not introducing
the ban in 1999 or 2001 because the industry needed time to restructure.
I find it totally amazing that you have new teams coming in 100
per cent dependent on tobacco sponsorship.
(Mr Mosley) Which one did you have in
839 I am thinking about British American Racing.
(Mr Mosley) First of all, they were not
a new team coming in. What happened there was that a tobacco company
bought an existing team. Secondly, the only new team which is
coming in is Toyota and I suspect they have the resources to run
a team without tobacco.