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Westminster Hall

Wednesday 21 November 2007

[Mr. Peter Atkinson in the Chair]

Horse Racing

Motion made, and Question proposed, That the sitting be now adjourned.—[Steve McCabe.]

9.30 am

Mr. Hugo Swire (East Devon) (Con): It is a pleasure to serve under your chairmanship, Mr. Atkinson. I am most grateful to have secured the debate, but I shall limit my comments, because I know that a number of right hon. and hon. Members feel very strongly about certain aspects of today’s racing scene and I want to give them, if possible, an opportunity to speak.

It is unfortunate, but in a way apposite, that the House is discussing this issue today—the day of the funeral of Sir Tristram Ricketts. Sir Tristram, who devoted his working life to the racing industry, was chief executive of the Horserace Betting Levy Board and a previous chief executive of the British Horseracing Board. Nobody, or few people, contributed more to our industry or worked harder on behalf of British racing. I know that some hon. Members have been unable to attend the debate because they will, quite rightly, be attending his funeral this afternoon.

I share hon. Members’ enthusiasm for this, first and foremost, great sport. However, racing is not just a sport but a thriving industry, encompassing bloodstock, race course businesses and, of course, betting. British horse racing is the envy of the world, but the whole industry needs to come together, perhaps as never before, if racing is to flourish. The overall news is positive. For the first time in 80 years, a new race course will open at Great Leighs. According to the British Horseracing Authority, the industry now employs 88,000 people. In 2007, there have been 9,000 races—it seems at times as though there are almost as many bodies representing different parts of racing as there are races. A total of £10 billion is bet annually at off-course bookmakers.

The following is not a party political point; I hope that the Minister will agree. I shall come to the party political points shortly, so I hope that he will not be too disappointed. What racing does not need is the dead hand of Government, but regrettably this Government’s procrastination and successive blunders mean that the Government are now more involved in racing than ever.

I am a Member of Parliament for a rural constituency—albeit sadly one without a race course, although Exeter and Newton Abbot are temptingly close across the estuary—where racing and associated businesses provide valuable local employment as well as much-loved recreation in the south-west. It is worth remembering that half the 59 race courses in this country are in rural areas and play at times a perhaps disproportionate role in the local economy.

With your permission, Mr. Atkinson, I shall debate two main issues this morning: the Tote and the future of the levy.

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Anne Moffat (East Lothian) (Lab): I just want to make a point before the hon. Gentleman moves off the issue of the local economy. He may be aware that Musselburgh race course is in my constituency, and it is a small and classy course. It creates employment and is great for the local economy in terms of tourism and the like. Does he agree that any reduction in the levy would destroy my local race course and British racing?

Mr. Swire: The hon. Lady has quite properly secured her press release for today. If she will bear with me and allow me to develop my thoughts on the levy, I think that I will answer her and she will not be disappointed.

Pitch positions—a very important issue—were covered comprehensively in recent Westminster Hall debates, two of which were instigated by my right hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith), whom I am pleased to see with us this morning, and one by the hon. Member for Livingston (Mr. Devine), who is also present. The issue is now the subject of a hearing of the Select Committee on Culture, Media and Sport, so I will not rehearse the arguments this morning. However, I would like to ask a couple of questions relating to pitch positions.

Does the Minister now admit that before the Gambling Act 2005, list positions were guaranteed by certificates of approval as issued by the levy board? Does he agree that that Act enabled the Racecourse Association to make its announcement on 14 March this year to refuse to recognise on-course bookmakers’ list positions? Was that an intentional consequence of the legislation?

The Government’s nationalisation of the Tote was profoundly wrong, and what has happened since has been nothing short of a farce. The Government at the time—it is good to see the previous Minister for Sport, the right hon. Member for Sheffield, Central (Mr. Caborn), present as well—gave cast-iron assurances that racing would not lose out from the sale. Initially, Ministers promised that the Tote would be sold only to the Racing Trust for £50 million, but later they gave a pledge that, in the event of its being sold to another buyer, racing would receive half the proceeds from the sale. However, either by conspiracy or cock-up, it transpired that such a move would contravene EU state aid rules. I now understand that PricewaterhouseCoopers, which is advising the Government, has reviewed racing’s latest offer of £320 million for the Tote and advised that it risked again being blocked by Brussels. Is that the case? If so, what contingency plan does the Minister have in case the Tote is again not sold? How will the Government honour their manifesto commitment to benefit racing? What compromises have they tried to broker? The Government must now decide the future of the Tote, and an indication from the Minister this morning, setting out once and for all the endgame and a timetable, would benefit all.

When licensed betting operators were legalised in 1961, it was with the proviso that a mechanism should exist to recycle some of the proceeds to racing. The levy, it should be remembered, had two criteria: to meet racing’s needs and to take into account the bookmaking industry’s ability to pay. As hon. Members are aware, the European Court of Justice ruling on data rights in
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2004 prevented an alternative revenue stream for racing from the sale of pre-race data to bookmakers, which might have offered a credible alternative to the levy.

The Government then commissioned Lord Donoughue’s future funding of racing review group, which concluded in 2005 that a commercial alternative to the levy would require the Government’s intervention to ensure that any sale of picture and pre-race data rights did not fall foul of competition law. Many of us believe that the levy, in its current form, is not the most desirable or even a desirable way of funding racing, but we are where we are.

The Minister must now make a determination for the 47th levy so that racing can plan for its future. He will be more than aware of the robust discussions going on between the bookmakers and the race courses about the levy. Does he share my view that Turf TV is a commercial decision divorced from the levy and does he believe that it would be wrong and not in the best interests of racing if his decision on the levy had the net effect of competition not flourishing? Hon Members will be aware that the major bookmakers believe that the introduction of Turf TV will lead to an increase in their costs. Does the Minister agree that the rationale used by the bookmakers for a £50 million reduction in the levy, from £85 million a year to £30 million a year, was based on the extra costs associated with receiving Turf TV?

Mr. David Heath (Somerton and Frome) (LD): I congratulate the hon. Gentleman on securing the debate and I agree with what he is saying. I am sure that he will agree that a reduction of that proportion in the levy will not only affect prize money in elite racing, to the detriment of the sport, but be very detrimental to medium-sized race courses, such as Wincanton in my constituency, and there will be a knock-on effect on training yards, which will not be able to stable the same number of horses in the future.

Mr. Swire: The hon. Gentleman makes a good point. Perhaps, if he is lucky enough to be called by the Chairman, he will speak further on it. The number of races has risen, and stakes and prizes are a serious issue. I do not think that a reduction of the nature that I mentioned would be in the best interests of racing, by which I mean race courses and bookmakers alike.

Mr. Richard Caborn (Sheffield, Central) (Lab): Has the hon. Gentleman calculated how many of the 57 race courses would close down in a period of five years if the levy became a commercial transaction?

Mr. Swire: The right hon. Gentleman brings much more experience to this debate than I. Maybe he has made that calculation; I have not. Suffice it to say that I think that a number of race courses would be left vulnerable if the levy were reduced in that way.

What conversations has the Minister had with the Advertising Standards Authority regarding the initial leaked findings, reported in the Financial Times on 6 November, disputing the basis of the bookmakers’ figure? Turf TV believes that its product should cost
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£4 million extra a year for all bookmakers, whereas Satellite Information Services believes that the cost is closer to £50 million. Does he have a view on that?

As I said, the Minister must now decide the level of the 47th levy. Does he not agree that the best thing for racing would be to leave the levy at the same rate? That would undoubtedly fail to please bookmakers and race courses alike, but it would be a credible position for the Government at this time. Once he has made the new determination, will he redouble his efforts to bring all interested parties in racing together to modernise the levy in order to ensure more equitably racing’s long-term future? It is an aspiration that should unite us all.

9.41 am

Mr. Jim Devine (Livingston) (Lab): I congratulate my hon. Friend the hon. Member for East Devon (Mr. Swire) on securing this debate. I say “Friend” deliberately, because when I first came to this place, we served on a Committee together, and he was generous and kind. He has been very helpful in the short time that I have been here. On a personal basis, I think that he is a big loss to the Opposition Front Bench.

Mr. Swire: That has done for the rest of my career.

Mr. Devine: Absolutely. It is ruined now.

I want to deal with the poor put-upon pitch bookmakers, but first—recognising the subject of the debate and the fact that a court case is taking place on which we cannot comment—I shall refer to an article written by Barry Dennis, the well-known bookmaker from Channel 4. He pointed out in TheSun on 13 October that he had bet £20,000 with Betfair on a photo finish, the outcome of which he already knew. Within minutes he had earned nearly £2,000. The House needs seriously to look into such practices. Barry Dennis describes them in his article as fraud, and I do not think that that is an unfair description.

I speak in defence of on-course bookmakers, who happily relieved me of all my money at a recent meeting in Ayr. My good friend Frank Carroll managed to pick winners at 33:1, 25:1, 18:1 and 16:1, but sadly I did not listen to him. Bookmakers are important to the colour of horse racing. It is an enjoyable sport. My predecessor Robin Cook said that there were two thumps that he liked: one was the thump of a ballot box on the night of an election, and the other was the thump of horses’ hooves at a race meeting. He was well known as a friend of racing, not just in this place but throughout the United Kingdom.

On 14 March this year, the Racecourse Association announced that it would confiscate assets from on-course bookmakers to which the race courses had never before expressed a claim. It was a bolt out of the blue. It was commercial opportunism, and I shall explain why. Since 1958, through various regulatory regimes, it has always been understood by all interested parties that list positions were assets held in perpetuity subject to the existence of the race course in question. The letter of 14 March was the first that on-course bookmakers, the National Joint Pitch Council, the body responsible for the administration of list positions as of 1998, or the Horserace Betting Levy
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Board, the statutory board responsible for awarding certificates of approval—I agree with the hon. Member for East Devon that there are too many bodies in racing—had heard of the Racecourses Association’s intention to cease to recognise list positions.

The chairman of the NJPC said on 13 November in a Culture, Media and Sport Committee oral evidence session that he was stunned by the announcement, and the levy board representative declared that he was surprised. Neither body could understand the justification for the RCA’s announcement. It had been understood by all parties involved that list positions were held in perpetuity. Not only was it a shock for the bookmakers, but it threatened their livelihood, their retirement and their families. Before the RCA’s announcement, the NJPC valued list positions at £70 million. After the announcement, it valued them at £40 million and falling daily. Those assets, bought in good faith, will be rendered worthless by 2012.

Mr. Iain Duncan Smith (Chingford and Woodford Green) (Con): Does not the hon. Gentleman find it strange, as do I and perhaps many sitting in this Chamber, that those pitch positions were traded from day one of the NJPC’s existence without the Racecourse Association commenting at any point that people were trading positions of which they had no ownership? The Government should make it clear that it was never their intention to allow the race courses to take away an absolute right that was being traded.

Mr. Devine: I agree totally. The right hon. Gentleman and I have both been involved in previous debates on the matter in this Chamber, and I think that our views are as one.

Why was the RCA’s announcement so surprising? In 1998, the outmoded system of transfer through inheritance, or dead man’s shoes as it was called, was replaced by a trading system. On-course bookmakers could finally buy and sell their assets. The post-1998 system was approved and adhered to by all parties involved, including the RCA, which was consulted at every stage of discussions and assented fully to the regime’s establishment. Indeed, the race courses benefited from the system, as substantial sums from the commission and sales of list positions were spent on race course improvement. Everybody benefited.

Interestingly, at the Select Committee’s oral evidence session on 13 November, the RCA said that it was the only party involved in the post-1998 trading system to believe that list positions bought by on-course bookmakers were not assets held in perpetuity.

Mr. Don Foster (Bath) (LD): Would not the hon. Gentleman strengthen his argument further by reminding the Chamber that in 1998 a certificate of approval required that list positions be acknowledged and accepted?

Mr. Devine: The hon. Gentleman makes a good point, which I may not have included in my speech. It adds to my argument, and I am grateful for it.

The NJPC, the levy board and, most importantly, bookmakers—both buyers and sellers—thought that list positions were held in perpetuity, but the RCA said that it did not. That cannot be so. At the time, race
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courses had to recognise list positions to receive a certificate of approval from the levy board. The RCA could not have predicted a change in that arrangement. Like all other parties involved, it must have based its decisions on the assumption that the regime established in 1998 would continue. The only change that it might have predicted relates to the five times rule—the rent—which is an entirely separate issue. That is an important point. Furthermore, as Tom Clarke, the chairman of the NJPC, said, the RCA did not mention a time limit or raise the issue of list position tenure until the 88th meeting between all the parties involved. I repeat that it was the 88th meeting before the issue was first raised.

At the meeting on Wednesday 7 November between the Federation of Racecourse Bookmakers and the RCA, held under the Minister’s auspices, the FRB asked the RCA to explain the timing of its decision. It asked why the RCA had waited until March 2007 to make the announcement given that, until then, the race courses had been perfectly happy with the status quo—the post-1998 system—and had never questioned the tenure of list positions. Something must have changed. In response to that question, one of the RCA representatives explicitly stated that the decision was made in March 2007, just after the new regulations came into force in February. If that is not an admission that the proposed theft—that is what it is—of bookmakers’ assets had been facilitated by the Gambling Act 2005, then I do not know what is.

It is clear that the Select Committee was thoroughly unimpressed at the Racecourse Association’s evidence. Although the other parties that gave evidence, including the NJPC and the levy board, understood that bookmakers held their list positions in perpetuity, the RCA said that it did not, despite having representatives on all statutory bodies. That does no credit to the race courses that are members of the RCA.

The RCA’s chief executive disingenuously referred continually to property rights with regard to list positions, despite knowing full well, because he had been told on a number of occasions, including in front of the Minister, that on-course bookmakers had never argued that list positions conferred a property right. It has been explained to the RCA on numerous occasions that list positions are assets held in perpetuity, subject to the existence of the race course in question. Furthermore, I remind the House that the dispute is over the status of list positions—bookmakers’ assets—and not the rent. It is important to make that point because of attempts to cloud the issue.

Issue 10 of the RCA’s update for racecourses states that the proposal to move the five times rule to commercial arrangements between racecourses and bookmakers was originally made by the Government in March 2003. That statement disingenuously failed to recognise that the position papers of the Department for Culture, Media and Sport had recommended movement to commercial arrangements only from the five times rule. The Government’s position on list positions, as stated in paragraph 2.6 of the DCMS paper, was that we had already seen the removal of the “dead man’s shoes” on horse race courses and a move
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to fully commercial sale arrangements for pitches. Again, highlighting that point shows that the argument is flawed.

The RCA is effectively advocating the move to fully commercial arrangements, with all the implications that it would involve for racing. I am sure that the House will agree that it is an interesting proposition, as it totally undermines its argument. We already have fully commercial sale arrangements—on-course bookmakers buy and sell their list positions. The only problem for the RCA is that the race courses are not directly involved in those transactions. They want to be involved. They want more money. That is what they mean by commercial arrangements. However, although wanting more money is acceptable, it does not justify theft.

The RCA is disingenuously attempting to use the umbrella term “commercial arrangements” to refer to both rent and assets when they are, and should, remain entirely distinct and separate. As the Select Committee pointed out again and again, it is extremely difficult to understand why the race courses could not recognise bookmakers’ list positions and at the same time undertake negotiations over the rent. That is what should have happened. On-course bookmakers have always been willing to negotiate over the rent. However, they also want their pitches back. Rent and assets are separate issues. We should not let the Racecourse Association muddy the water.

I call upon the race courses to disassociate themselves from the comments and actions of the chief executive of the RCA. I call on the RCA fully to recognise the list positions of on-course bookmakers. Failing that, the Government should bring in secondary legislation that invests the duty of preservation in a statutory body.

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