Tote
Lord James of Blackheath
To ask Her Majesty’s Government how their plans for disposing of the Tote take account of the interests of horse and dog racing.
Lord James of Blackheath
My Lords, I am somewhat embarrassed to have to start this debate of my choice by apologising for the fact that it was wrongly entitled to include a reference to dog racing on the Tote, which is not an issue because dog racing has already been ceded to the ownership of the various dog stadia. Perhaps there is a lesson in that for us all, as we shall see. This is such a big subject that I am going to trim my words down to the bare essentials of the issue that immediately concern us, given the imminence of what may be an extremely critical and very retrograde decision by the Government following the completion of their invitation to indicative offers for the purchase of the Tote which are due to be completed by Friday evening. We have less than 48 hours to go.
Both this Government and the last Government announced separately their intention to dispose of the Tote. The last Government also said that they would offer to racing half of the realisation value of that disposal. The present Government have set out on a path to explore the potential for the disposal of the Tote, but have made no offer of proceeds going to the benefit of racing. That is not necessarily to say that they are being mean-minded because they may have realised more clearly than the previous Government the problems associated with this disposal. The first question that arises is who owns the Tote. Many people may own the Tote, but the one certainty we have is that the Government do not. So we have the odd situation where both this Government and the last Government are setting out to sell something which they do not have.
I recall a case recently of a bricklayer who tried to sell the Savoy Hotel for a couple of million pounds. He went to prison for theft or fraud. It sounds to me as though the Government, in offering to sell something they do not own, are doing no more than the bricklayer did with the Savoy Hotel. Let us consider the consequences of this. The previous Government, perhaps perceiving this problem, decided that they would put the ownership of the Tote beyond all possible doubt by passing the 2004 Act for horserace betting and the Olympic lottery. That Act remains in place today but has not been fully implemented—certainly not as far as the Tote is concerned—and we now have a situation where, if it was implemented, undoubtedly the Government would be entitled to sell the Tote; but, equally, they would then fall foul of the Brussels controls on state support and would not be allowed to pass any of the proceeds down to the benefit of racing—so racing would be a very big loser.
Let us consider how far the racing industry would be a loser. First, whoever bought the Tote—presumably a bookmaker—would immediately look at the huge burden involved in running Tote operations on the 60 racecourses in the United Kingdom every day of the year, with the need to recruit local staff wherever they were and administer a complex business. It would be only a matter of time before the bookmaker decided that he would be very happy to keep the 550 betting shops and put the potential pool betting benefits into his pocket and to close down, or to so impose charges on the racecourses for running the Tote that the whole of the British racecourse structure would become immediately non-viable and be either forced to close down or to so curtail its activities that the finances of racing would be destroyed.
If that happened, the 2 million or so people who go racing nowadays, and who are attracted to do so by the benefit of being able to bet small stakes of £1 or so at a time instead of the bookmakers’ minimum stake of £5 or £10 for a bet, would be put into a position where they would not wish to go any further and racing would be destroyed at the social level as a reasonable sporting activity for the multitude.
The bookmakers would take their 550 betting shops and consider them as a worthwhile dividend to put in their pockets, and would almost certainly aggregate them within the totality of their existing betting operations and transfer them to either Gibraltar or Spain and outside the fiscal reach of the United Kingdom. This would have grave consequences for revenue generation in the UK economy. That would be an absolute certainty. Furthermore, racing would cease to derive its contribution from the levy of about £10 million a year. In fact the Tote has generated £84 million of direct benefit in sponsorship and levy for the continuation of the racing structure of the UK in the past four years alone; it is a continuing and vital income stream.
If those things were to happen and there were no racecourse meetings because no one was turning up for them, there would be an immediate curtailment of the United Kingdom thoroughbred breeding industry and its big export potential and huge dollar earnings would be squeezed out of existence. No one will breed horses or buy them when there are no racecourses or attractive meetings at which they can run them. So that would go. One hundred and twenty thousand jobs in Britain—comprising 20,000 full-time employees and 100,000 important temporary and part-time workers—would be destroyed. For these people racing is an extremely important part of the rural economy, without which they would otherwise live in straitened circumstances. Everyone connected with racing would lose if one of the bookmakers came in with an attractive bid and the Government decided to take it.
If that is the predicament and the consequence that racing is facing, what are the alternatives? There are three. I have just described the first one—which is ruinous to racing—where the Tote is sold to the highest bid from whichever bookmaker has the deepest pockets; and then, because of Brussels’ strictures, the Government would not be able to pay any proceeds into racing and would destroy racing’s livelihood by removing the on-course facilities beyond recovery.
The second alternative is a partial disposal of the tote in stages, whereby they offer the on-course Tote facility to the racing industry—either the British Horseracing Authority or the Jockey Club—and leave in the hands of the Jockey Club enough facilities to continue to run each day. Immediately, I suspect, it would be much worse off because there would be considerable extra costs in doing it on its own because the betting shops chain makes a significant contribution to the overheads required to run the Tote on-course. So that would be a loser straightaway. The pool betting operation, which is renewed once every seven years by government licence, would have to go to the racecourses and they would have to establish a system for licensing it for use by other people. That might help a partial recovery but it would be unsatisfactory. Ultimately, a partial disposal would probably be the start of a process that would end up being very similar to the first steps of a total disposal.
The third alternative is that if the Government decided not to fully implement the 2004 Act, they would be free to do what they want with the Tote without interference from Brussels. So give the whole Tote to racing, lock, stock and barrel, and charge nothing for doing so. The Government would then be a bigger financial winner than they would be by selling the Tote. For example, first, the British Tote turnover would not be aggregated with those of companies that have already decamped to Spain and Gibraltar and the Government would continue to receive the fiscal income deriving from the operation of the Tote in the UK; secondly, they would have all the advantages of the corporation tax arising on the various breeding concerns and the profits that they make on thoroughbred breeding activities—they would be on a winner there; and, thirdly, the Tote, which generates £10 million a year for the continued health and vitality of racing through its contribution to the levy, would continue to operate in such a way as would help sustain 120,000 much needed jobs in rural locations. It sounds like a win-win situation to me.
In those circumstances, I hope the Government will now look very closely at the indicative offers they will receive by Friday evening—which will come from bookmakers who are, with two exceptions, already based in Gibraltar and Spain—and decide that the better option is to go along the path of allowing racing to retain its integrity as an entity, with the ownership of the Tote within it. Racing will then, at long last, come out of the dark night of the soul through which it has been going, where it does not know what it is or what its future is to be, and get on with the job of running itself in good order.
The origins of the racing industry go back 350 years. When Nell Gwynn and her lady friends at Newmarket decided they needed a rest from the King and his courtiers in the afternoon, they told them all to go out and ride races. That led to the creation of the Jockey Club and, in turn, the Jockey Club created one of the great glories of British sporting life—the racing industry as it is today. Do not let the Government throw it away. They can keep it and allow it to foster new wealth and achievement and to maintain its place as a leading glory of British sporting life on the world stage. In the words of the Nike ad—“Just do it, Government, please”.
Lord Lipsey
My Lords, I declare a remote interest as a member of the Starting Price Regulatory Commission; in a broader sense as a former director of the Tote; as chairman of the Shadow Racing Trust, which was set up to buy the Tote for racing; and as a former chair of the British Greyhound Racing Board.
I shall start with greyhound racing, to which the noble Lord referred only briefly. I hate to rebuke the noble Lord, because we are grateful to him for raising this subject and bringing his knowledge to the House today, but the Motion refers to “dog racing”. Dog racing is a sport where assorted mutts chase a mechanical lure at a local show. The sport with which I am proud to have been associated is greyhound racing. It is Britain’s fourth largest spectator sport, after football, rugby union and horseracing but ahead of cricket. Some 2.2 million spectators go to watch it each year; there are 5,150 meetings and 64,440 races are run. The noble Lord has probably owned the winners of some of them, although I have not had a good winner since my Tooting Becky last ran some years ago. But greyhound racing it is and some of us adore it.
The second thing that I want to clarify—I am sure that I do not need to clarify it for the noble Lord—is the relationship between the Tote and greyhound racing. The Tote, like most other bookmakers, pays a voluntary contribution towards the sustenance of greyhound racing—0.6 per cent of its greyhound racing turnover—and does a small amount of sponsorship. This is not totally insignificant; it is a voluntary levy that goes to greyhound racing and not all bookmakers pay it in full. If the Government proceed to a sale—we will come back to that in a moment—and the Tote is sold to one of those bookmakers that fail to meet their obligations and do not pay the full levy, that would be a tremendous blow for greyhound racing. Those kinds of bookmaker do not deserve to own the Tote, because they do not contribute money that goes mostly to the welfare of retired greyhounds. I am very tempted this evening to name those that do not pay. They have been warned and I am sure that the Government know who they are.
That is what greyhound racing gets out of the Tote. I should say, for the sake of clarity, that the Tote—the outfit in Wigan that we are debating tonight—does not run Tote pools, the pool betting at greyhound tracks. Those are run by individual tracks. A scheme is forthcoming under which tracks will be able to link their totes in order to offer daily placepot and jackpot bets, which I am sure will yield huge returns for greyhound racing. Unfortunately, the last Government decided to legislate so that tracks would not have a monopoly on providing pool betting after 2012. They did not know, when they chose 2012, that we would still be fiddling around with the Tote so many years later.
That brings me to the core of my remarks on the Motion, which concern the Tote and horseracing. There is a very long history to this. One Prime Minister talked about bearing the scars on his back. The noble Baroness, Lady Golding, can probably see the scars on my back, through my suit, of the Government’s attempt to rid the public sector of the Tote. The last Conservative Government tried to do it, but could not manage it. Gordon Brown, who did not like to be out-privatised by anyone, immediately tried to do it, but he did not succeed. The Shadow Racing Trust, which I chaired, was set up to buy it for racing, but it ran into the roadblock of the European Union, which decided that, if we were to buy it for anything under the market price, that would be a form of artificial state aid. I am afraid that the then Government, like, I suspect, most British Governments, did not have the guts and courage that the noble Lord, Lord James, suggests to the House should be adopted to totally ignore the European Union, the rule of law and all the other things that go with it. So the issue went back into limbo. Gordon Brown, about 15 months before the election, did not want anybody to think that he had given up just because nobody had any idea what the policy was, so he again promised to sell it. This Government have half picked up the baton. They want to do something with the Tote, but they do not want to go as far as our Government did and sell it. In fact, they are not at all sure what they want to do and the policy remains in an appalling limbo.
For more than a decade, the poor old business of the Tote has operated with a sword of Damocles hovering above its neck. Is it to be privately owned, racing owned or something cobbled together? Uncertainty, caused by government dither, is no way to run a railroad. What the Tote now needs, above all, is a period of stability. This could involve a permanent retention of the status quo, which, after all, has worked reasonably well for the business and for racing over the years. If there is to be a change, let us have quick, clear decisions from Ministers, as an act of mercy to the Tote’s board, its management and its superb staff. This matter cannot be left in limbo any longer just so that Ministers can exercise political virility by saying that they are determined to do something about it when it may well be that there is nothing sensible to be done.
Viscount Falkland
My Lords, we are grateful to the noble Lord, Lord James, for introducing the subject. He embarked on his discourse by questioning the ownership of the Tote. I absolutely agree. What business do the Government have to claim that they own the Tote? I had the temerity to bring up the subject at a meeting of the All-Party Racing and Bloodstock Group during the period of the last Administration, on an evening when the Minister for Sport was in a tired and emotional mood. He turned to me rather sharply and said, “You may not have realised—it may have passed you by—that we won the election with a majority of 179”, or whatever it was, “and the reason why we’re going to take the Tote into our possession is political will”. There was no point in further conversation, but I am not absolutely clear where we are now. The noble Lord brought up ownership: I thought that it was, by fair means or foul, in the hands of the Government.
I apologise to the House if the rest of my remarks are in rather simple terms. I am designing them for those who, more and more, zap the television. The last couple of times I have been in your Lordships’ House, I have had people come up to me saying, “I fell upon the parliamentary channel. Your speech was very nice, but I did not understand a word of what you were talking about”. With the greatest respect to the two noble Lords who spoke before me, I wonder whether somebody listening to the debate who does not go racing would know what we were talking about.
It is a very simple matter. Racing, which is an important part of this country’s sporting and cultural life, is in a parlous state. Very few people know that. The all-seeing and all-knowing noble Lord, Lord Mandelson, answered a Question in this House about whether it was appropriate to offer Her Majesty the Queen a race to commemorate her Jubilee, an idea which I thought was charming and which I hope comes to fruition. I asked the noble Lord, in my supplementary, whether a happy event such as this might take one’s mind off the parlous financial state of racing. His reply to that was, “I am surprised that the noble Lord feels that racing is in a parlous state. I had no idea, but I have to admit that I have not given it very close attention”. That was not very encouraging. I wonder whether the coalition has any further ideas as to how this could be progressed; I fancy that the answer is rather less at this stage, but I always live in hope.
It is important to explain to those who tune in to the parliamentary channel that the Tote is a brand name. I say with the greatest respect to my friend, the noble Lord, Lord Lipsey, that when he talks about the Tote, he is talking about two things. He is talking about the betting shops that were acquired over a period of years, thanks to a former head of the Tote who found that he could borrow money to create some bottom-line profit to the totalisator organisation—these shops compete with the other betting shops owned by the major chains—and he is talking about the pool.
It is the pool that interests me, because, when the sale comes about, if it does come about, the shops will have quite a considerable value, though not as considerable as the value was three or four years ago. Some people were talking about £400 million. I doubt whether it would be anything near that today, for all kinds of reasons, notably because people are not betting on horses in betting shops in the way that they were; they are betting on other sports. The turnover and profit of bookmakers have suffered to the extent that the levy, which is the machinery designed to get a contribution from the bookmakers for allowing them to take bets on horses, has sunk to a level at which it is impossible to maintain the funding of racing. Other solutions have been sought and the sale of the Tote is part of those solutions. We have been discussing this for years, as the noble Lord, Lord Lipsey, says. Part and parcel of the whole business of dealing with racing at the moment, I am afraid, is that it has been impossible to find any consistency or common direction of thought among racing’s constituent parts. I shall be interested to see what the next move is.
The pool itself came about in the 1920s to run alongside bookmakers, who were allowed to continue with their profession, but in betting terms it has always been the poor partner in the business of accepting bets from people who are foolish enough—I have been one—to bet on horses on a regular basis. If the pool has a future, we cannot have a Tote monopoly. We cannot even talk about one any longer. Most other countries decided, though, that a Tote monopoly was the way to go; it was the only way in which you could fund racing. Curiously, and I do not know whether the Minister can respond on this, within the past few years, I am not quite clear by what means—I do not know whether the bookmakers had an influence on the Office of Fair Trading, because they are very good at what they do—the OFT came out with what seems to be an utterly ridiculous decision. It said that the totalisator pool operations—I think that that is what they meant, not the betting shops—were non-competitive because of the monopoly. No one said that about the lottery, so far as I am concerned.
For a pool to work properly, you have to have a lot of people paying into it—in this case, a lot of people who bet on horses at race meetings going to the Tote in large numbers. It is no good carving it up, giving it to racecourses and saying, “You run your own Tote”. I wonder who made the decision at the Office of Fair Trading and what the motive behind it was. We still have this hanging over us, and I hope that the Minister will tell us if there is any way in which we can get that decision revoked. You cannot sell the Tote for anything if it has a lifespan of—it was seven years originally—only three years to go.
In the long term, though, the pool is the interesting part of race betting because we have new technologies and wider markets. People around the world are interested in British racing and may well want to bet into totalisator pools here. If enough energy and funding were put into setting the ball rolling, that might be the answer to a lot of our problems. People may think that I am again advocating a Tote monopoly. Maybe subconsciously I am, but I know that it is not a possibility. You cannot tell the bookmakers to go; they would have to be recompensed and that is not something that a Government would tolerate. Still, I would like an answer on that from the Government if possible.
It is amazing how the racing world is split into various compartmentalised interests. We now have a campaign, on which a great deal of money has been spent, called Racing for Change. That is complete nonsense. It is trying to get a whole new public to get interested in racing, when those of us who are already interested in it know that racing is like coin collecting or bridge—you become passionately fond of it and obsessed by it. You get interested in every part of racing. I do not see how Racing for Change, in getting lots of young men to go out and drink in the afternoons at Kempton Park, is going to alter that position substantially. I think that the horseracing authority is mad to pay £6 million, or however much it is.
My conclusion is that the Government must understand this subject, as I hope that anyone who is listening to me on the parliamentary channel will have done, and that they really must try to get a grip of this thing and decide which is the best way to go. I will lay my position on the table: the Tote should remain where it is, in a relationship with the Government. Sell the betting shops and get what you can for the Government—I suppose that the Treasury will take the greater part of that—but put the rest of the money into developing the Tote pool, because there you have some hope. Then I will not have go to the meetings with the All-Party Racing and Bloodstock Group, where everyone looks at each other, repeats themselves endlessly for years on end and we get nowhere.
Lord Patten
My Lords, given the choice, I would choose to address the House rather than the Parliament Channel. I was interested to hear that the noble Viscount get perilously close to suggesting that, because of the allegedly parlous state of the racing industry, there might be some government support. Indeed, I was about to get to my feet and ask him about that, but I did not want to interrupt his performance on the Parliament Channel. Perhaps he will tell me later whether that was indeed his intention.
I have no financial or institutional interests in racing of any kind, although I would have a hide as thick as a rhinoceros if, living where we do in the West Country, a few miles away from the epicentre of National Hunt training in Paul Nicholls’s stable at Ditcheat, a certain amount of racing had not entered my DNA. It is certainly much in the local area, so much so that the excellent shoe and boot mender in Wincanton, a local market town, when not mending shoes and boots, owns a leg of a horse here and a couple of legs of a horse there. Notoriously, three weekends ago a number of us went to collect our orders on Saturday but there was a large sign in the shop saying “Gone racing. Have a horse running today. Sorry”. Everyone understood, and no one demurred at all from his decision.
We are lucky to have him in Wincanton high street, by the way. So many high streets in market towns are struggling against the depredations of large superstores put by unwise councils on the edges of towns, dragging the centre of gravity away from such market towns as still struggle on. I wish that the local district council had not done so in that particular area. I am happy to be in coalition with my noble friend Lady Garden on the Front Bench, but I certainly do not regard myself as being in coalition with South Somerset District Council and her dotty Liberal Democrat friends down there; I have signed no pledge in that respect. However, that is a matter for another day.
I move from the destruction of market towns to selling off the “nanny goat”, as the Tote is sometimes inelegantly referred to on some racecourses. This has been going on for far too long. In the mid-1980s, as the noble Lord, Lord Lipsey, referred to, the Tories had a good look. Merchant bankers were actually employed, at some price, but the process ran into the sands after a number of years. From 2001 onwards there was the Labour manifesto commitment, which has already been referred to. Once again, advisers were employed at huge cost, although the so-called merchant bankers of the 1990s had in the mean time been transmogrified into the renamed “investment bankers” of the early noughties, though their trade in essence remains exactly the same. Heaven knows how much money has been spent on advisers since the 1980s and how much Civil Service time has been taken up by what to do with the Tote. How many special advisers have given their special advice to Ministers, unable in the end to get the business through? Shedloads of time and money have been expended, to no avail.
So I applaud the coalition and its pledges. The most recent announcement was from the Department for Culture, Media and Sport on 15 September, launching the open market process this autumn. I congratulate the coalition Government on sticking to their seasonality because “the autumn” is an infinitely expandable and extendable term, sometimes going well on into the new year and into the year after that. The process, however, is happening and the bidders are putting their bids in, as my noble friend said in his introductory speech. That announcement followed the pledge by the coalition in July 2010 that over the next 12 months it had the intention to,
“resolve the future of the Tote in a way that secures value for the taxpayer”.
I seek confirmation from my noble friend Lady Garden on one thing when she winds up tonight. Is the timetable of the resolution of this issue—the dusting and selling off of the Tote by July 2012—still in place? Is there any room whatever for delay, yes or no? As the noble Lord, Lord Lipsey, said in his speech, this process has been going on for far too long. It needs to be resolved. The selling off of the Tote will soon turn into flogging a pretty dead nanny goat for its share of horseracing betting is in decline—it has now about 5 or 6 per cent of the market left in the face of competition from much bigger players, not least the online providers. So the answer better be “yes” in reality. Unless we get on with it, there will not be much left to sell; no one will want this beast. Value is being exhausted by the month.
So is it all worth it? Should one go through this whole agonising process for a very low number of hundreds of millions of pounds? The answer is, yes, we should, because this country is in great difficulty. Every little helps. We have the desperate need to re-establish equilibrium between government, corporate and personal debt in this country and to reduce all three. We can do a lot to reduce government debt. We can sell assets. For example the lands that are in the ownership of many government departments will produce very substantial sums. At the same time smaller assets like the Tote will not produce very much. However, they are all assets and in this process there can be no special pleading. If we are serious about reducing government debt over the life of this Parliament—as I know my noble friend Lady Garden is—we have to raise all the money that we possibly can. This is particularly the case in racing. Some people in racing may be in difficulty but an awful lot of 50 per cent taxpayers in racing are in no personal financial difficulty of any sort at all. My friend, the Wincanton cobbler, does not come into that tax bracket.
There should not be any special pleading in reductions of Government expenditure in the matter of the hypothecation of certain sums because it would be nice to help this or that special interest. If we go down this route, we will not get anywhere close enough to reducing debt in the way in which we should in the lifetime of this Parliament. I expect that the Chancellor, the Chief Secretary and, in this place, my noble friend Lord Sassoon, should set their faces like iced marble against blandishments to the contrary and should not allow special pleading of the sort that we have heard across the Chamber this evening. They will have my strong support if they do.
I also hope that the noble Lord, Lord Evans of Temple Guiting, who is winding up for the Opposition and is a distinguished private banker, who understands matters about balance sheets in his bank as much as balance sheets in the national account, will take the same robust approach. The proceeds of the Tote sale should go in toto to paying down financial government debt. We should not give in to the blandishments of special pleading.
Lord Evans of Temple Guiting
My Lords, I rise not as a private banker but as somebody who has listened with enormous interest to this debate. I knew very little about the Tote before I started the research for this evening. I found the speeches fascinating. I congratulate the noble Lord, Lord James of Blackheath, on initiating this debate and in particular on the very interesting ideas that he came up with during his speech. Some of the number of topics that I wish to question the Minister on have been raised obliquely by other speakers. I will try to be as direct as possible.
John Penrose MP, the DCMS Minister, said that the Government would seek bids for the Tote this autumn—as we have heard. We now know that the bids have to be in by Friday. The noble Lord, Lord Patten, said and wants confirmation that the Tote will be sold next June. Fascinatingly, the noble Lord, Lord James, suggests that the Government do not have the right to sell the Tote because they do not own it. I would be particularly interested—as I am sure you all would be—in an answer to that question.
Given that the operating profit of the Tote was £13 million, up considerably on the year before, it is critical—and I disagree with the noble Lord, Lord Patten—that the money from the proceeds should go back into horseracing. Related to that, will the Minister confirm what will happen with any sale proceeds? George Osborne said in a Budget Statement that the Government would,
“resolve the future of the Tote in a way that secures value for the taxpayer while recognising the support that the Tote currently provides the racing industry”.—[Official Report, Commons, 09/10/10; col. 41W.]
It is a rather different view from that of the noble Lord, Lord Patten.
What commitment can the Minister give in regard to the staff who work at the Tote’s headquarters in Wigan and the other 4,000 estimated staff who work for the Tote? The Government must say what they plan to do with the Tote to resolve the uncertainty for the staff and management as well as the horseracing industry. One of the themes that has emerged this evening is the lack of certainty about the future.
My final point is one that was raised by the noble Lord, Lord James. How will the Government satisfy the EU that any money from the sale ploughed back into horseracing will not be ruled as an illegitimate state aid to the horseracing industry? Again, thank you all for such an interesting and informative debate. I look forward to the Minister’s reply.
Baroness Garden of Frognal
My Lords, I join in the thanks to my noble friend Lord James of Blackheath for securing this debate. He will be aware that the Government announced in the Budget on 22 June that they would resolve the future of the Tote over the next 12 months in a way that secures value for the taxpayer and recognises the support that the Tote currently provides to the racing industry—which is a point that has been picked up by a number of noble Lords in their speeches. The noble Lord, Lord James, set out his concerns about this very clearly in his opening speech. I hope that in the course of my remarks some—if not all—of those concerns will be addressed.
As we have heard, the Tote is the key provider of funds to the racing industry, providing approximately £11 million per annum in the form of commissions, sponsorships and grants over and above the statutory levy that all bookmakers pay. As noble Lords will know, the previous Government were also fully committed to removing the Tote from Government ownership and put in a very considerable effort over a 12-year period to achieve that aim. This length of time has been referred to in noble Lords’ comments. However, a combination of factors, notably market conditions and European competition rules, worked against them. We recognise the challenges that selling the Tote presents but we believe that the conditions are right to remove the Government from involvement in the Tote. The Government reaffirmed their resolve to do so in a Statement to the House of Commons on 15 September.
I am happy to confirm that the Government remain firmly on course to achieve the objectives set out in the Budget by resolving the future of the Tote by June 2011—about which my noble friend Lord Patten asked for specific clarification In line with that objective, the Government launched an open market process last month, inviting proposals from interested parties. As we know, the closing date for submitting proposals to Lazard, the Government’s financial advisers in this process, is Friday, 10 December. The process is open to all organisations that have an interest in the Tote. We recognise the uncertainty that this long, drawn-out process has generated among those who work for the Tote.
The statutory framework governing the Government’s right to sell the Tote is found in Part 1 of the Horserace Betting and Olympic Lottery Act 2004. In broad terms, the Act provides that on a day appointed by the Secretary of State the Tote will cease to exist and all its property, rights and liabilities will transfer to a new company known as the successor company, being a company limited by shares and wholly owned by the Crown. The 2004 Act also provides that the Gambling Commission may, if the Secretary of State so requires, issue to the successor company an exclusive seven-year licence. The exclusive licence will grant the successor company the right to carry on pool betting business in connection with horseraces on approved horserace courses. I hope that gives some reassurance to my noble friend Lord Falkland, given his enthusiasm for the pool betting side of the business. It is expected that, as a condition of the licence, the successor company must ensure that adequate facilities for pool betting are made available in all areas of each approved horserace course on days when horseracing takes place on that racecourse. The exclusive licence can be granted only once. After the seven-year period has expired, the pool betting business will be open to competition.
I am sure noble Lords will appreciate that in advance of the closing date by which proposals have to be submitted, and for reasons of commercial confidentiality, I am not in a position at present to comment further on the process by which we intend to resolve the future of the Tote. Nevertheless, I stress that the Government are very keen to secure a successful outcome to this process in a timely fashion and are working closely with all the main parties involved. Naturally, the Government are continuing to liaise closely with the board of the Tote and with racing interests as the process unfolds. We want to remove government from direct involvement in an industry that it regulates in a way that secures value for the taxpayer and recognises the support which the Tote provides to the racing industry. Its financial importance has been stressed by my noble friend Lord James, the noble Lord, Lord Lipsey, and others. In removing that direct involvement, we want to give certainty to the Tote to enable it to grow as a business. We also want as far as possible to respect the interests of the employees who work for the Tote and those of the local economy in Wigan where the Tote is based. The Government expect to be in a position to update Parliament early in the new year once we are clearer about the outcome of the current market process.
My noble friend Lord James expressed his concerns on a number of fronts. The Government do not anticipate the dire consequences of removing themselves from the Tote that he suggests. I am afraid that the Government cannot simply hand over the Tote to racing; the Tote being a statutory corporation. To do so would undoubtedly constitute a state aid. I can also confirm that any new owner of the Tote will still be obliged to pay levy at the going rate. The pool betting, too, is a profitable business which we expect will continue to flourish and grow in any new ownership. However, I stress that final decisions have yet to be taken. The process that is under way has received a wide range of proposals and the Government will carefully analyse all of these before reaching their decision on the way forward.
The noble Lord, Lord Lipsey, talked about the Greyhound Racing Trust and the greyhounds, which did not feature so prominently in other speeches. We all recognise the popularity of greyhound racing in communities, how important it is to many people and the enthusiasm that it generates. In 2010, the Tote made a donation of more than £400,000 to the Greyhound Racing Trust. We hope that the Tote’s successor company will continue to make these charitable donations. However, I am sure your Lordships will understand that we cannot, of course, make this a condition of the open market process.
I am happy to clarify for the noble Viscount, Lord Falkland, what will happen to the Tote’s statutory monopoly on horserace pool betting. As I mentioned, any new owner will be granted an exclusive seven-year licence to run pool betting, and will be required to do so on all racecourses. After seven years, the pool betting will be open to competition, but on terms that will need to satisfy the Gambling Commission. However, the owner of the first and only exclusive licence will be in a good position in that respect at that distant point in the debate.
I think that I have responded to the point made by the noble Lord, Lord Patten, about the date. I am delighted that he mentioned that he was glad to be in the coalition, at least in this Parliament. I am sorry that he has differences with his local government coalition partners, but we hope to continue to carry forward the coalition in friendship, at least in these Houses of Parliament.
I think that I have answered most of the questions asked by the noble Lord, Lord Evans. As regards his specific question about the EU, the Government have not yet reached a decision on how to proceed, so it is premature to speculate about what might happen to the proceeds of any sale. However, any sharing of proceeds will need to comply with EU state aid and competition rules. We shall have to await further notice on those.
If there are questions that I have not answered, I shall pick them up in Hansard and undertake to write to noble Lords. I renew my thanks to my noble friend Lord James, for initiating this debate. It has, indeed, been enlightening for me as well as for the noble Lord, Lord Evans. I thank all noble Lords who have taken part in it. We shall see what happens after the offers for the Tote come in.