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Horserace Totalisator Board Bill [H.L.]

8.4 p.m.

Viscount Astor: My Lords, I beg to move that this Bill be now read a second time. The debate will perhaps take place in front of a smaller audience but, I hope, one of just as high quality as that of the numerous academics who seem to be fleeing from the Chamber. I shall let them go, no doubt marking themselves with points out of 10, before I start to consider the Bill.

Perhaps I should begin by saying what the Bill is not about. It is not about who owns the Tote. As your Lordships will remember, the Government's answer to that question from my noble friend Lord Burnham last year was:

I am delighted to see that one of the members of the board, the noble Lord, Lord Lipsey, is here tonight. Indeed, if anyone owns the Tote at this very moment, it is perhaps the noble Lord. I look forward to his contribution.

In answering at that time, the Minister, the noble and learned Lord, Lord Williams of Mostyn, went on to say that primary legislation would be required in order to change the status of the Tote and bring it fully into public ownership before any other changes could be made. Your Lordships will remember that the Tote was created by a private Bill that became the Racecourse Betting Act 1928, which amended the 1853 betting Act.

Prior to the question from my noble friend Lord Burnham, the Home Secretary had appointed a steering group to advise him on the Tote. The Minister at the time promoted a report produced by the steering group to justify the claim that the Treasury should benefit from the sale of the Tote. It is hardly surprising that the steering group came to that conclusion because, of its seven members, five were the Home Secretary's own officials from the Home Office and, indeed, one was from the Treasury.

However, events have moved on. Progress was made when on 2nd March this year the Home Secretary announced that the Tote would be sold to a racing trust. That announcement was widely welcomed within racing and I applaud the Home Secretary's decision. There had been quite an argy-bargy within racing as to whom the Tote should go. Finally, the chairman of the British Horseracing Board, Peter Savill, Sir Eric Parker, chairman of the Race Horse Owners' Association, and Peter Jones, chairman of the Tote, were able to come to an agreement about the composition of the racing trust.

In spite of the Home Secretary's decision, I do not entirely accept the logic that the Government own the Tote or are entitled to all the proceeds. However, in the light of the Home Secretary's decision that he intends to sell the Tote to racing for the benefit of racing,

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I accept that his decision is in the long-term best interests of racing, provided it is sold or transferred to the racing trust at a reasonable price. As always, the devil is in the detail.

The Government rightly say that transferring the Tote to racing requires primary legislation, first, to clear up the ownership issue and, secondly, to allow the Government to sell or transfer the Tote to a private body. The Government have promised a Bill, but they cannot say when. We know that there is a log-jam of Home Office Bills this Session. Some will have to fall as there are perhaps too many for the timetable. As for next Session, who knows? If there is an election next May, there will be more important Bills on the agenda in the short space of time that may be available, including perhaps at least one from this Session.

Even if the general election is put off for a year, will the Home Office obtain a slot in the busy parliamentary timetable for a racing Bill? As we know, home affairs always take more Bills than any other government departmental interest. There is always a criminal justice Bill in every Session and, as I said, probably in the next Session Bills will be added from this Session. As has happened in the past, there will always be a danger that racing's interest will be bumped to the bottom of the list and, finally, off the list.

Therefore, I come here this evening to try to help the Government by bringing forward a simple Bill to do the job. I believe that a private Bill such as this, even if it is not the Bill that is finally used, can be used to transfer the Tote to racing. It will, I hope, receive support on all sides of the House. The Bill could even make progress in another place should the Government care to pick it up.

I accept that the Government are genuine in their view that they want to transfer the Tote to racing, but two issues concern me. That is why I have brought the Bill forward today. My first concern relates to the Levy Board and its future. The Home Office Minister in another place has suggested that the Government, in reviewing the future of the Levy Board, should consider that review at the same time that any proposals for the Tote are considered. I understand that the Government have decided that the Levy Board should be abolished. Can the Minister confirm that today?

I also understand that the BHB, at the Government's request, is in the process of preparing a plan for the future funding of racing. There seems to be agreement that the Levy Board's central funding role should be transferred to another body, but no agreement yet as to whether that body should be the BHB or some other new entity. However, it is important that the levy is directly transferred for the benefit of racing.

The Levy Board and the Tote are separate issues and should not be linked or confused. To put them together could put back further any timetable for privatising the Tote. There are, of course, obvious links between the two bodies at board level but their functions are totally different. The Levy Board is a

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statutory body under the Betting, Gaming and Lotteries Act 1963. It is charged with the duty of assessing and collecting monetary contributions from bookmakers and the Tote, and then with applying those contributions.

In regard to those contributions, the Government's own paper states:

    "Applying them for the purposes conducive to one or more of: the improvement of breeds of horses; the advancement or encouragement of veterinary science or veterinary education; and the improvement of racing".

The Levy Board does a good job.

In the past, options for the Levy Board have included abolition, privatisation, contracting out some of its functions, or merger. However, I should point out that the Levy Board could also be dealt with by a private Bill--even an entirely separate Bill from the one relating to the Tote.

My second concern and reason for bringing the Bill forward is that the Government have announced a betting and gambling review. I welcome the fact that a review will take place, as do the racing industry and, by and large, the betting industry. However, the bookmakers' lobby is extremely worried. In particular, bookmakers with shops seem to view any possible extension of betting as damaging to their interests; they are obviously concerned that if betting moves out of shops it will devalue them. But we heard those kinds of claims, for example, when the National Lottery was introduced. It is right that the pools industry suffered. However, it found its feet again and found a market. Although its turnover went down by a considerable amount, its profits went down by a much lesser amount. Let us not forget that racing is only a part of the betting business. Other sports such as football and cricket attract significant turnover.

Any extension of betting could be very beneficial to racing. A successful betting industry is crucial to racing--it pays, for example, more than £60 million to the Levy Board, while the Tote at the moment pays less than 10 per cent of that figure to the Levy Board, just over £5 million, although that is only part of the Tote contribution to racing, which includes prize money and other support.

The interests of racing and bookmakers are not always mutual and occasionally conflict. The betting industry is concerned about the transfer of the Tote; the Tote is competition and may become a more effective competitor in the future. The bookmakers have lobbied the Government and have claimed, rather interestingly, that the price the Treasury will receive on the transfer of the Tote to a racing trust will be five times less than its real or market value. I do not know how they manage to substantiate those claims, but they have been made. It is certainly a claim that alarms those of us who support the Tote and no doubt it is being studied carefully by the Treasury.

The price is important. If the Tote is to achieve a real return for racing, it cannot be saddled with too high borrowings. Even at a modest sum, the Tote may need outside capital if it is to expand and improve its

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product to help fill the funding gap that currently exists in the racing industry. The Tote may well need partners.

The betting industry does and must stick up for its corner; there are sound commercial reasons for it to do so. Its primary duty is to its shareholders--but let us all recognise where it is coming from.

The Tote need not be direct competition. If it sold its rather small chain of betting shops and concentrated on Tote Direct, Tote Credit and its on-course facilities, that would be an improvement and fit in much better with the industry. Equally, all of the betting industry should sign up to Tote Direct and share in the benefits of the monopoly pool. For example, Tote pool betting is not currently available on on-line betting sites; nor, therefore, is it available to an international audience.

The worry that I have had all along is that the Home Office, like all good government departments, will encourage its Ministers to think of tidy solutions. One can see the advice: why use up good parliamentary time to transfer the Tote when legislation may be needed for the abolition of the Levy Board, possibly for new rules for casinos, and for the changes that will be needed following the gambling review. One can imagine the sound, sensible advice. But any delay will damage racing. The bookmakers are all rushing off to establish new off-shore operations; the Tote is not able to do that at the moment.

My Bill offers a way out of the dilemma. I should like the Minister to confirm today that the issues of the future of the Tote, the Levy Board and the gambling review need not be so closely linked. Racing cannot afford to wait. If they are linked, the Government should explain why.

I do not intend to go into the detail of my Bill, except to say that I hope that it is simple and workable. Clause 1 allows the Secretary of State to bring the Tote fully into public ownership, and Schedule 1 makes provision for the transfer scheme to achieve this. Clause 2 then allows the Secretary of State to privatise the Tote and gives him power to dissolve it. Clause 4 makes provision for the pension rights of people working for the Tote, which is important and is required to avoid the issue of hybridity.

If the Bill needs amending, we could, of course, have a Committee stage, a Report stage and a Third Reading. However, unlike most government Bills that have been brought forward recently, I am rather proud to say--I have to thank the draftsman who helped me--that this Bill has received a clear judgment from the Delegated Powers and Deregulation Committee that no amendment is needed to the delegated powers in the Bill, nor to the parliamentary control provided for those powers. I again thank the Private Bill Office for its help in drafting the Bill.

Racing needs the Tote and needs it soon. It is constrained in its present form. It is almost 10 years since the Home Affairs Select Committee recommended that the Tote should pass to the racing industry. Racing cannot wait another 10 years. My Bill allows it to happen in this Session--it could happen by

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November. With government support, we could have the Horserace Totalisator Board Act. I commend the Bill to the House.

Moved, That the Bill be now read a second time.-- (Viscount Astor.)

8.18 p.m.

Lord Lipsey: My Lords, as the noble Viscount, Lord Astor, said, I am a member of the board of the Tote. I declare that interest straightaway. It is a sad commentary on the social decline of the Tote when compared with the great days of the late Lord Wyatt, that the only Lord on the board should be on this side of the House. I think that would have amused Woodrow quite a lot.

The whole House will appreciate the initiative of the noble Viscount in bringing forward this Bill. It has won the support of all three parties in this House, if not en masse. The interest that the noble Viscount has always taken in the Tote is most welcome, as is the stress he laid on the urgency of the legislation.

The outside critic may ask what is the rush; why the hurry? The Tote is doing well; profits last year before contribution to racing and exceptional items were £21 million, which compares with only £10 million five years ago. I honestly believe that the Tote has become a sharper operator; for example, it has a new joint partnership on the Internet, Totalbet, and its highly successful new bets, the Scoop 6 and the Exacta. We were able to bid for Corals when it came on the market last year, although sadly we were not successful. Our credit operation has a reputation with its customers that is second to none, and the Tote will now lay "thick" bets in a way that certainly was not the case a few years ago.

But these successes have been achieved despite being in the public sector and not because of it. The Tote has paid a high price for its public sector status, and the statutory and non-statutory inhibitions on what it does that go with that status. In 1961, when betting shops were introduced, we paid that high price as the Tote was not allowed to compete because, under the legislation, it could not accept fixed odds bets. If that had not happened, today we might be a winner on the high street, not an also-ran. When numbers betting came in with the introduction of the National Lottery, the Tote was denied entry for 12 months because, under the legislation, it could take bets only on sporting events.

Today, we face a similar problem in the form of competition on the Internet. I shall illustrate that with some real figures. Over the past three years, Tote Credit, the telephone arm of the Tote, has been growing by 25 per cent a year, but with tax-free offshore betting available, some of our best clients have left us. Over the past six months business has declined by 3 per cent, and we are not necessarily at the end of the road yet. As a public sector body it is not easy for the board, with the best will in the world, to move as swiftly and as decisively into some parts of this market as can bookmakers.

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The Home Office, Ministers and officials--I pay tribute to them--are alert to these problems. They are as helpful as they can be. But by their very nature, public bureaucracies can move only so fast, and so fast is not always as fast as commercial imperatives require. The Home Office has more important fish to fry, as the noble Viscount, Lord Astor, made clear in his speech. A change of ownership would benefit the Home Office just as it would benefit the Tote.

With regard to the form that change should take, first, it seems to me clear that racing should have a major stake in the new Tote. Not only does racing have, as the noble Viscount, Lord Astor, pointed out, a claim on the proceeds of the Tote, but it is also clear that there are major synergies between the aims of racing and the Tote, which will mean that if they work in partnership they flourish best. That is an argument against flogging us off to the private sector.

Secondly, we now have a concrete form for this: the so-called racing trust. It will have a punter's representative and I see a natural candidate sitting below the Bar of the House who would be right for that post. As the noble Viscount hinted in his speech, we did not have an entirely clear run in bringing that proposal forward, but in the end it burst through decisively and the judge, the Home Secretary, declared it the winner in his parliamentary Answer in another place on 2nd March. The trust, or company limited by guarantee, as it is more likely to be, should be an effective vehicle to maximise the future profitability of the Tote for the benefit of racing, combining as it does the ownership pressures of the racing industry with an operational board structure that will encourage continued enterprise in a fast-changing, betting marketplace. Personally I believe that provided it is chaired, as I am sure that it should be, by an independent person of high standing, that will work to the benefit of everyone.

Incidentally--the noble Viscount referred to this matter--I do not believe that the bookmakers are right to be scared of this prospect. I know that there have been worries that the trust may be the poodle of the BHB, but the BHB will not be in a majority on the trust and the chairman will be independent. The Tote does not seek special favours; it seeks lively and fair competition.

Finally, perhaps at the risk of importing a certain controversy to the matter of price, I do not disagree with the noble Viscount, Lord Astor, when he said that the Government have no particular claim to the proceeds; that is, apart from any of the proceeds which may be attributable of the exclusive right to run the on-course pool. However, a certain realism is needed. I speak as someone who, if I understood the noble Viscount aright, is one of the current owners of this excellent company.

There are two facts. First, the Home Secretary can appoint as many directors of the Tote as he chooses, so if he believes that we are running off with the loot, or disposing of it in some way that he does not like, effectively he can overrule us by appointing others who will not do that. Secondly, the price should not be so

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low that a plausible case can be made to Brussels that it should be declared an unacceptable "state aid" to the business. Those two facts alone mean that negotiation is inevitable; negotiation which I am sure will come up with a fair price that also reflects the relatively small part that successive governments have played in the Tote. An amazing amount of Ministers' time was taken up over the late Lord Woodrow Wyatt's reappointment. His glorious reign was extended by successive Home Secretaries until so late in his life.

I should be surprised if the Minister, in his reply, does not refer to some of the ways in which this Bill is imperfect. It does not lay down a new structure for the Tote; it does not deal with the regulation of the pool monopoly, which clearly is necessary; and there are other gaps. However, in no way does that detract from the value of what the noble Viscount has done in bringing forward this Bill. This should be seen as a wake-up call to the Government. The Tote cannot wait for levy board abolition, casino law changes, or for gambling reviews. It needs its freedom now. That way consumers will benefit from sharper competition; racing will benefit from its increased profits; and the country will benefit from a flourishing horseracing industry.

8.27 p.m.

Lord Burnham: My Lords, I am advised that I too should declare an interest. While there is no family that engages less in pillow talk that mine, my wife is a director of the British Horseracing Board and, as such, I may be considered to have an interest.

In June last year, I asked the Government, as my noble friend has said, a simple four-word question, "Who owns the Tote?" I did not receive, and indeed I did not expect to receive, a simple four-word answer. The then Minister, the noble and learned Lord, the Attorney-General, was at his obfuscating and courteous best. I hope that the Minister will find it possible to be a little more helpful today.

In July, in a later debate, the Minister told your Lordships that the directors of the Tote did not, as I suggested, own it. He said that they were able to direct the assets and the conduct of the business but they were not the owners. More helpfully, he added that there was no reason why legislation should not be introduced to enable it to be sold. That is why we are here today.

I still do not accept that the Government have any right to make money out of the Tote. Nor do I accept the validity of the report of the steering group on which, as my noble friend said, only the chairman of the Tote, Peter Jones, was put in to balance one Treasury representative and four Home Office representatives. The Government have put nothing in so why should they get anything out?

If the Tote is anything, it is an institution, like Stonehenge. In France Pari Mutuel has a monopoly of gambling on horses and it is there that the elder Louis Romanet, its former head, said that an attack on the PMU was like an attack on the French Government. The Tote does not hold quite that position in British

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life, but it is nevertheless a major part of it, and, like much of British life, it comes of origins shrouded in the mists of time.

The noble and learned Lord, Lord Williams, asked my noble friend in July of last year whether it was official Opposition policy that the Tote should be disposed of with no benefit to the taxpayer. This was a good catch-22 situation, but it does beg the question whether the Government have the right to sell something for the benefit of the taxpayer that it does not own. If the noble and learned Lord were here today I should ask him that question back.

Having made the remark, the noble and learned Lord-- ignoring the jibe he had just made--said that it would be foolish to treat the Tote as a political football, and complimented my noble friend Lord Astor and myself for not so doing. It is with that in mind that we--and I certainly speak for myself, if not necessarily for my noble friend--have abandoned our sincerely held beliefs that the Government have no right to any money from the Tote. Therefore, we are supporting the Bill tonight, a Bill which assumes such a right.

It is noticeable how the small number of speakers in this debate are distributed equally among the political parties. We all, I believe, have one thing in mind, which is to help the Tote to get into a position where it can do the maximum good for racing. That, I think we all believe, is to get the Tote into the incontrovertible ownership of a trust representing racing. It would not, surely, be desirable to have it owned by a plc which has to pay out, not racing interests, but shareholders.

That being the case, I hope that the Government will realise that the Bill is intended to help to achieve the aim of selling the Tote for the benefit of all. No doubt your Lordships will give it a Second Reading tonight, but since it will probably be quite simple to run it through the remaining stages in this House, I hope that the Government will act to get it through in another place. The noble Lord, Lord Lipsey, commented on the imperfections of the Bill. I am sure that it has imperfections. But of course it has the very simple aim of enabling us to start to get the Tote into the correct hands. When we have achieved the passage of the Bill, as I hope we shall, we shall be able to get down to more important matters like working out the price that the racing trust will have to pay.

In common with other noble Lords, I have heard sums of money quoted, both what the Tote has offered and what the Government are believed to want. I do not intend to quote either, although I may say that within the past three-quarters of an hour one of my noble friends in the Bishops' Bar offered to buy the Tote on the spot at the higher rate which I heard quoted as the figure the Government are looking for. I hope I dissuaded him.

Undoubtedly, if the price settled is too low, the bookmakers will complain about state aid. So it has to be a fair figure, which will enable us all to be happy at the end. I remind the Minister, however, that we have here an industry which is in desperate need of money. If the Treasury is too grasping it will be in no one's

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interest. The Government's take from betting tax is dropping due to the growth in offshore, non-tax paying bets. The Tote itself is seeing a fall in its turnover. Its credit business is being beaten up by offshore betting. Unless the Government do something about betting tax--of course this is a totally separate subject--there will be a serious fall in revenue. The Tote itself may well find that it is necessary to go off into warmer waters. It may well there place itself outside the range of the most grasping taxman. It is only necessary to look west to Ireland to discover how the problem can be solved. But, as I have said, that again is another matter.

Meanwhile, will the Minister assure the House that the Government will give the Bill a fair wind and assist it through all its stages in this House and in another place? It is in everybody's interests that that should happen.

8.34 p.m.

Viscount Falkland: My Lords, I have no interest to declare, except that I have been contributing to bookmakers' satchels now for more than 50 years, and sometimes indeed to the Tote. I should also like to say that although it was published in Racing Post today that I am the sponsor of the Bill, I am in no way a formal or informal sponsor of this Bill. That does not mean that I am against the Private Member's Bill. Indeed, I congratulate the noble Viscount, Lord Astor, on bringing it to this House so that we can discuss the interesting issues which have already been rehearsed. It is, of course, a probing Bill. It is a Bill that seeks to elicit from the Government some more information following their indication that they are intending to pass the Tote into other hands. I shall be as interested as all other noble Lords to hear what the Minister has to say about that.

At the outset one needs to say something about racing as a whole before one speaks about the Tote. Over many, many years--decades and longer--racing in this country has been, and is, a model for the rest of the world. It is known throughout the world for its variety, for the enthusiasm of those who follow it and for the dedication of those who work in it. That is real dedication because many of those who work at the lowest levels in racing--those, male and female, who look after horses--are extremely badly remunerated for the work that they do. The central problem about our racing has been the continuous lack of adequate and predictable funding. In fact, the engine for funding in racing is, of course, betting, and in this country that engine has developed in a way peculiar to the United Kingdom.

I say at the outset--I shall elaborate on this point in a moment--that the one outstanding asset that British racing has, despite various hiccups, and hiccups in recent times, is its integrity. The integrity of British racing is important because we are dealing with very large sums of money, and we are dealing with a very wide sector of the British public. That integrity has been safeguarded over the years by successive governments, by the Jockey Club and by other bodies.

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But it is not good enough that that integrity exists; it has to be seen to exist. It has to be perceived. The perception of what goes on is so important. The perception of the integrity of racing, thankfully, both here and abroad, has been maintained at a very high level, and those bodies which I have mentioned, which include the Home Office, must over many years take a good deal of credit for that.

I know that people talk loosely about how we must get rid of all regulation and why should not people be allowed to do what they want. I do not know whether I am the oldest person here, but I do recall--and I have mentioned this before--that when I first started going racing--which was just after the Second World War when there was that rare hiatus in this regulated integrity that we have because of the war--that for a while we had race gangs operating at Brighton, a place well known to the Minister. That was quickly dealt with and we got back on track again. I do not want to hear anyone again saying that if you free up racing and you free up gambling in this country--and the gambling review body will deal with that--it is not going to attract those kind of elements which will bring down that integrity which racing holds in the eyes of the British public and abroad.

Racing is well served by press and television. Here enthusiasm for racing is enormous. In France, where I go racing fairly regularly, racing is well organised and well run, but no one goes. So far as I can see, one finds there only the international rich and illegal immigrants. Indeed, one day I was talking to a French racing friend of mine--he is a trainer--and I asked, "How do you deal with the heckling that comes from certain sectors of the crowd around the paddock?". They enjoy that at French race meetings. He said, "Thank God for it. I don't care if I'm insulted. It livens things up". In France the scene is steady because of a Tote monopoly and various aspects are better funded. Here, where everyone is keen on racing, we have all kinds of troubles that do not exist anywhere else.

I turn to the Tote itself. I am surprised that neither the noble Viscount, Lord Astor, or the noble Lord, Lord Lipsey, has sought to define what is the Tote. The Tote is a mixture of pool betting and straightforward bookmaking betting through betting shops and offices. We all know that the Tote arose because of historical circumstances. All credit to the bookmakers. They were given the opportunity to remain operating. The Tote was brought into existence to give the working man, who was not able to bet in large sums or did not want to bet with bookmakers, an alternative way of betting. But the Tote was always going to struggle against the competition from bookmakers.

For the regular racegoer and the larger punter it has always been an unattractive prospect to bet with the Tote. They prefer to go to bookmakers. The bookmakers say quite rightly that, as it exists at the moment, the Tote does not give choice and does not give value. I think that it gives choice. I am not sure whether bookmakers give value. One can find value if one goes racing every day. Over 50 years I have found it very hard to find value with bookmakers. Recently, curiously, one has been able to find value. The new

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pitch arrangements and so on have meant enormous competition among bookmakers. In fact, it has probably been the best period for people to back horses in the history of racing in this country. But that has resulted in the major bookmakers seeing a loss in profit on their turnover.

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