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15 July 2008 : Column 26WH—continued
“Imagine this. The starting stalls open. Horses thunder down the course. The winning post looms. And then the whole field goes round again. And again. For seven flaming years.”
To some extent, that is the situation we are debating and, before anybody gets up to make an intervention, I can tell them that I have been party to going round and round the course—I was probably the ringmaster. My hon. Friend the Minister—my very good friend—unfortunately drew the short straw and had to take the matter on from then.
We are where we are and it is no good looking back. We must look to the future and I predicate a large part of my argument today on a certainty: Labour Governments were elected in the last two elections on the basis of manifestos that referred to the Tote and how the money from the Tote should go into racing. I believe we are committed to that and I hope that the Government, with the support of the House, can see it through.
David Taylor (North-West Leicestershire) (Lab/Co-op): I congratulate my right hon. Friend on securing the debate. The Tote was introduced 80 years ago and was given the monopoly on pool betting on the basis of a guarantee that profits would be ploughed back into racing. Will the former Minister for Sport tell us if, in any of those 80 years, the Tote has taken a penny in subsidy from the British taxpayer? Does he agree that the Tote is inherently profitable and that it should be kept in public ownership to allow it to feed its surpluses back into racing? The problems experienced during the past seven years have been caused by Brussels and Strasbourg vetoing deals that would provide a significant feedback into racing. Is this not all new Labour tosh?
Mr. Caborn: I do not know whether it is new Labour tosh, but I can tell my hon. Friend what new Labour tosh said in its manifesto:
“We are committed to sell the Tote to a racing trust to allow it to compete commercially, with all long-term profits invested in the sport.”
That was our commitment and by the time I have finished, I hope we can deliver just that and square the circle for all those with a vested interest.
I do not agree with my hon. Friend the Minister’s statement of March 2008, in which he said:
“The overriding criterion for the Tote’s privatisation will be to maximise value for the taxpayer.”—[Official Report, 5 March 2008; Vol. 472, c. 114WS.]
In my view, it is not the overriding principle because, as I said, we won two elections on the basis of a statement that we would put the money from the Tote into racing. I note that the new chairman of the Tote, Mr. Mike Smith—I have never met him—has a reputation that fully fits the mission of the March 2008 statement. He is not there to deliver what I think is an important part of the Government’s commitment—our two manifesto commitments—and we ought to draw some parallels from that.
Let me turn to the future by presenting proposals that I think would satisfy all those who have a vested interest. First, as my hon. Friend the Member for North-West Leicestershire (David Taylor) mentioned, we should deliver our manifesto commitment. We should give the Treasury its money and fulfil the commitment to racing—the 50:50 split on the profits if the Tote is sold in the marketplace. In agreement with my hon. Friend, I think the issue of state aid is bogus, but, nevertheless, I shall mention it.
I hope that my hon. Friend the Member for Wigan (Mr. Turner) will catch your eye, Mr. Hood, because there is an important issue relating to the protection of 600 jobs. It is probably more important to ensure that those jobs are secure but we must also ensure that they can grow in number. The Tote could position itself in the global marketplace to take advantage of what is clearly an expanding market.
How do we do that? First, we decouple the 540 shops of the Tote from the Tote itself. We can then sell them off; Mr. Mike Smith can do what he is good at and take those shops to the marketplace in whole or in part. If we decouple the shops, they can be sold off to the highest bidder and we will get the best return for the taxpayer. Racing should then set up a trust to receive 50 per cent. of the proceeds of the sale of the shops. I not believe that is in conflict with state aid. Why do I say that? Well, as my hon. Friend the Minister knows, we had an agreement with the then Department of Trade and Industry that we had a seven-year period to get the Tote fit for purpose. It should then be put into the marketplace. That was the agreement and I believe that it still stands.
Jeff Ennis (Barnsley, East and Mexborough) (Lab): On the point about the racing trust receiving 50 per cent. from the sale, is my right hon. Friend referring to 50 per cent. gross or net profit from the sale?
Mr. Caborn:
Well, to be honest, I do not know how to get a gross and a net figure on that—perhaps my hon. Friend could explain what he means. I understand that the statement made in the House referred to 50 per cent. of the sale. I would have thought that meant gross. I do
not know why we would net down the figure—although I think there is a top slice, which I will mention in a moment.
It is important to put the seven years clearly into perspective. It is a transitional period for taking the Tote from where it is now. It was nationalised, but as has been mentioned, it was not run by anybody before that. We had to nationalise it, which we did—I took the Act through Parliament—and it is now being put back into the private sector. We have had seven years in which to get the Tote fit for purpose, so that it can go into the marketplace.
It is important to give the Tote a firm foundation on which to grow—it is in everybody’s interests to do that. I will come back to that point. The setting up of the trust and payment of the 50 per cent. gross or net into the trust should carry with it an agreement that the Tote can operate on all race courses in perpetuity. It is important for that statement to be made because it underlines, in part, the security of the Tote itself. The new Tote trust, as I call it, would have responsibility for the pool, the credit line and the internet part of the operation. The shops would go, but those three elements—the pool, the credit line and the internet—would be the business of the new Tote trust.
The trust’s board would be composed of the executive directors of the Tote itself, representatives from the Horsemen’s Group and the bookmakers and non-execs. The terms of reference would be to consolidate the Tote in the UK and take advantage of the growing international business. Even with the Tote’s limited resources and the difficulties of continuing to run it during the uncertainty in which it has been wrapped, there is no doubt that major advances have been made in the international marketplace. For example, the lottery has gone Europe-wide, and the information communications technology that now exists means that there is a fantastic opportunity to grow the Tote. In the UK, we probably have the best regulatory regimes anywhere in the world. People respect that and the integrity of those regulations is revered around the world. That can be used to develop the international Tote, based in Wigan.
The Australians, the French and others, particularly in the far east, are considering such developments, which are highly possible because of the ability to move information electronically in a way that probably was not possible even 10 years ago. The staff of the Tote and the way in which they have operated, particularly in the past three and a half years, in growing the international part of the Tote’s business leads me to believe that, given fair investment, which is important, and the ability to build up with certainty a strong Tote UK, it could be the centre for an international operation as well. Taking a proportion of the proceeds from the sale of the shops to invest in the Tote should be part of the agreement, too.
Mr. John Grogan (Selby) (Lab):
My right hon. Friend is setting out a very attractive proposal. Does he agree that racing itself is best able to exploit on-course facilities and internet betting and that in any case the private sector is probably most interested in the shops? Does he think that his suggested compromise, as well as attracting a great deal of support from Members on the Government Benches and, we hope, elsewhere in the House, would have attracted the support of the late Robin Cook? He
thought deeply about these matters, and I think my right hon. Friend’s proposal would have appealed to him.
Mr. Caborn: Very much so. We all reflect on Robin’s interest in—indeed, love of—racing. If we wanted to call the new Tote trust anything, we could call it the Cook trust. That would go down extremely well.
To underline the point made by my hon. Friend, the take of the Tote is split 40:40:20. Forty per cent. is on-course, 40 per cent. is off-course and 20 per cent. is international. The international part has probably grown by 4 or 5 per cent. in the past two or three years. The 40 per cent. off-course is important as well. That 40 per cent. comes through the betting shops. They have an interest in ensuring that that part of the business grows, because they receive a 14 per cent. return, with little risk attached, so it is a good deal for them. It is important that we ensure that the various components—the betting industry, the sport of horse racing itself and the Tote—are brought together on the executive board of the new Tote trust.
That proposal gives us an opportunity to consider the issue further. One thing that has bedevilled the industry is the question of the levy. There are those who have been trying to get shot of the levy—most people say that it would be right to get shot of the levy. The levy was brought into being to protect on-course bookmakers when off-course betting started, which was some years ago. Unfortunately, these things evolve over time and are used for totally different purposes from those for which they were originally set up. That may be right or wrong. I do not know. I am not giving a view on that, but I believe that it is necessary to take the Government out of this area of sport. If the opportunity arises to do that, we should take it.
Racing has evolved in the recent past and the sport now has a fairly good regulatory arm, through the British Horseracing Authority, which has brought in the Jockey Club and so on. The BHA is the regulatory part. We now want to build a financial vehicle to be able to continue to fund the sport in the medium to long term. What are the two incomes for the sport? One is the levy and the other is the profits from the Tote. It is a not-for-profit organisation; the profits go back into racing.
Why not put the levy board into the new Tote trust so that the new Tote trust is the body that becomes the financial vehicle for the sport? It will have two income streams: one is the Tote, which it will be running, and the other is the levy, which could be taken over. At the end of the day, it is a levy on bookmakers to pay money into the sport. The new Tote trust could be charged with determining, collecting and disbursing the levy on a non-statutory basis.
The question that has been asked for God knows how many years is what happens when people cannot reach a determination. I suggest that we could set up an arbitration mechanism within the arrangement that I have described. It would be fairly simple to bring in something like the Copyright Tribunal, which would involve the great and the good who had no vested interest in racing. If the sport and the industry could not come to an agreement, a mechanism could be brought into play to achieve it. That would get rid of bureaucracy. Two bodies would be brought into one.
The whole structure of racing would be simplified by having on the one hand a regulatory body—the BHA—and on the other the financial arm, developing the Tote and collecting the levy. With the new Tote trust, we would have on the stage all the main actors with a vested interest in ensuring that the system works. If the trust could not collectively do that, it would refer the issue to a mechanism like the Copyright Tribunal.
Conservative Members are good at getting shot of red tape. They want to ensure that they streamline everything, and I am absolutely with them on that, so they should seriously consider what I am saying, which is that such arbitration is possible. We would simply have regulation on the one hand and financial streams on the other. If we really want to make progress and make horse racing a fit-for-purpose sport, with fit-for-purpose governance and a fit-for-purpose stream of financial input to the sport, it would make a lot of sense to follow the route that I have described.
How does that proposal relate to the original proposition? I believe that it gives the Treasury the money it wants— 50 per cent., which is what the Treasury has been saying it wants in terms of the sale of the Tote. The shops are the asset, and the Treasury can have its take from that. Then there is the 50 per cent. going to racing. Racing would have not only the moneys from that, but an ongoing revenue stream from the profits of the Tote. The proposal secures the existing jobs and, indeed, lays the foundation for more jobs in Wigan than the 600 that are there already. It brings in the bookies, who would have an enlightened self-interest in ensuring that the activity levels of the Tote increased, because 40 per cent. is already going through their outlets, on which they get a 14 per cent. yield that is pretty much risk-free. The Government gain by the Tote being taken to the marketplace, as it would be in seven years. It ends the statutory levy, which the Government, including the Minister and his colleagues at the Treasury, want. Importantly, it delivers the manifesto commitment as well.
What is the timetable for implementation? It could take place very quickly. There is no reason why we cannot decouple the shops from the Tote pool and give the responsibility for selling them to Mr. Mike Smith. He could take them to the marketplace as and when he believed it was the right time to do so. That leaves the pool and racing to come together in a small working group, which should report back before the end of the year. Both the operation of the Tote and the levy should be determined before the 48th levy, which will be in 2009. The proposal could become operational on 1 January 2009.
The Parliamentary Under-Secretary of State for Culture, Media and Sport (Mr. Gerry Sutcliffe): Does my right hon. Friend not think that there are some issues in racing—for instance, the current court case in relation to Turf TV—that might affect his time scale?
Mr. Caborn:
That is true, but I believe that aspects of the problems with Turf TV and other issues are symptoms, not the cause. We have to deal with the cause. In the new Tote trust, we will have three actors on the stage who make determinations in terms of data and pictures and the operation of such things. That would take place outside the arena of the courts. Under the arrangements I am proposing, I hope that the problems will wither on
the vine, because it would be a case of enlightened self-interest for all three parties—the bookies, the Tote and the sport itself, which will be growing a product, with all the profits going back into racing. It would, therefore, be in everyone’s enlightened self-interest to grow it in the UK—nationally—but also to create a base for it to be delivered internationally. I believe the current problems are a product of the uncertainty in racing and, I am bound to say, the vested interests and to some extent the bunker mentality of some in the sport of racing.
Mr. Alan Meale (Mansfield) (Lab): I declare my interest in the Tote, Mr. Hood. I am not connected with its finances, but I have an interest in racing and the sport of racing.
The Minister made the valid point that outstanding matters may still affect the levy. Perhaps my right hon. Friend should reflect on the present state of the financial markets. If we include other outstanding elements such as the ongoing legal battle about Turf TV, it might be better for the sale of the Tote to be set aside for a given period to allow those matters to settle down and the markets to recover. If 50 per cent. of the sale price is to go to racing, the amount might be higher than could be extracted at present.
Mr. Caborn: That is absolutely right, but I can tell my hon. Friend that in my view the status quo is not an option. If we are not careful, we will lose—indeed, we are losing—some of our best people in Wigan. If we are to take advantage of the international marketplace, we must do so now. The worst thing in business is uncertainty and we have massive uncertainty in Wigan. The Tote is a very good product, and it has proved itself time and again. It has definitely proved itself in the international marketplace.
From my discussions with people outside the UK, I believe that they would look to the UK to run the international Tote. We cannot leave things in the status quo position. We have to take decisive action. We can do one of two things. We can do what I suggest and flog the shops and set up the Tote; or we can make a clear statement that nothing will happen for X number of years. We cannot leave the Tote in its current position. The Tote is haemorrhaging, which is undermining it. At the end of the day, it will wither on the vine.
I am as much to blame as anyone for what has happened, but not wholly so. Neelie Kroes of the European Commission was involved as a result of a challenge raised in Europe. The situation is also a result of our not being more constructive in trying to find a solution, so I take part of the blame. However, I have spoken to a lot of people over the last week or so, and I honestly believe that there is a will to move forward, and that everyone agrees with the basic formula, which includes decoupling the shops.
Mr. Meale:
May I point out that instability is to be found everywhere in the high street and in business at present? Yes, it is true that advantage might be taken of certain financial situations, but I ask my right hon. Friend to consider the fact that the instability in Wigan may be caused by such outside factors. The threat to people who work there is that their jobs may be sold off.
They might not be best served by participating in a fire sale, which would result in less money coming back into the Tote, of which 50 per cent. could be redistributed into a racing trust. Now might not be the right time to do it. As the Minister suggests, a little delay might be helpful.
Mr. Caborn: I obviously have not explained myself clearly. We should put the shops into the for sale category and put Mr. Mike Smith in charge, as he is extremely skilled in taking such things to the marketplace. If his judgment is that we should not sell, we should not sell. However, that should not preclude us from decoupling the rest of the Tote from the sale.
We can put the shops into a package and ask Mr. Smith to sell them when he thinks it right. That might be in 12 months, 18 months or whenever, but the only reality is that 50 per cent. of the profit will go into a racing trust at some stage. We can take the decision to decouple now, leaving the shops where they are if that is the judgment of the experts in the marketplace, which I am not. If they say, “Do not sell,” we should not sell.
We should keep the present arrangements until those people decide that it is time to sell, but that should not preclude us from setting up the Tote, the credit line and the internet parts. That will stop the haemorrhaging, so we will be able to start building the Tote nationally, and we will be able to take advantage internationally, which is most important. The two are not mutually exclusive. We should set the shops apart, leaving them and not flogging them until they can achieve the best market return. It is for others to decide when that is; it will not be my judgment. However, it will bring stability back to the Tote.
I predicate my argument on the basis that we should live up to commitments given in two manifestos. I do so because when I go to church club on a Sunday night I know that the people I represent believe that the Tote is an institution that should be kept within betting. It is the right product for the betting arena. It gives more competition, but it is a type of betting where people bet against themselves, because after a cut their return is the total pool.
Mr. Laurence Robertson (Tewkesbury) (Con): The shops are the more profitable part of the Tote. If they are sold to someone not connected with racing, how can we guarantee an ongoing income from them? The money from the Government will be a one-off. The Tote cannot live off that. The right hon. Gentleman may suggest that a further Tote business could be set up, but I cannot see that idea getting past Europe.
Mr. Caborn: I can see why it would not get past Europe. I shall be honest about this hang-up over Europe. I think that a number of people hide behind Europe—their definition is that state aid distorts trade across international boundaries. Someone is saying that a Tote sold back to racing in this country will distort trade across Europe, but that is the biggest load of baloney I have ever heard. Civil servants and those in the Treasury want to duck and dive all the time. I have been on the inside track so I know what they are talking about. People are using Europe to fulfil their own objectives and blaming others.
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