Matthew Hancock (West Suffolk) (Con)
I beg to move,
That this House notes that the horseracing industry supports employment of 100,000 people in Britain and that the racing industry contributes £3.5 billion to the UK economy each year; celebrates the contribution the industry makes to the cultural and sporting landscape of Britain; recognises Newmarket’s role as the global headquarters of racing; but further notes that the horseracing betting levy yield has been falling in recent years; further recognises the changing nature of the gambling industry; is concerned that betting operators are increasingly based offshore and so do not fully contribute to the levy; and considers that the Government should bring forward proposals to improve the system of funding for racing and the relationship between racing and bookmakers before the end of 2011.
I am delighted that we have three hours to debate this important topic, because the future of horse racing in Britain is at stake. This golden sport, which brings together man and beast, flat cap and top hat, the rural charm of Bangor-on-Dee and the pomp and ceremony of Ascot—this jewel in the crown of British sporting culture—faces an uncertain future and immediate and urgent woes.
All is not lost. As anybody who has seen today’s Racing Post knows, attendances are up—racing is the second most attended sport after football. Britain’s bloodstock has rarely been of a higher quality, and A. P. McCoy won the BBC sports personality of the year award. However, racing’s finances are at risk, and it falls within the power of the House to support today’s motion, which calls on the Government to act to secure for our nation the future of the sport that is the cause of such pride.
For centuries, since King Charles II took his court to Newmarket twice yearly for a month of relaxation and raucousness, Britain has led the world in horse racing. In the past, racing provided the impetus for the training and breeding of cavalry horses during times of peace, and now it supports more than 100,000 jobs across the country and, in all, £3.5 billion of our economy. It contributes to our culture, and even to our language.
In Newmarket alone, 5,000 jobs are related to that town’s place as the global headquarters of the sport—not only owners, trainers and champion jockeys but modestly paid stable staff, grooms, farriers and those performing all the ancillary services. That complex economy, like an ecosystem, is in delicate balance, and that balance is under threat.
The levy system set up 50 years ago is broken, and the funding that underpins racing is seeping through the holes in that outdated system. I shall briefly set out what has happened, why, and what should be done about it. To explain what has happened, I shall delve into the ecosystem that I described. Money comes into racing from punters who like to punt and owners who like to own. The Tote, which was set up by racing, not by the Government, adds to the pot, and I look forward to its future being secured with the appropriate recognition of racing.
Money comes in from people who spend a day at the races, from media rights and from the levy contributions of those who make a bet. That, in turn, feeds into prize money, which goes partly to jockeys and stable staff—we should always remember that they, too, benefit when their horse crosses the line first—but mostly to owners. It is that hope and aspiration, the golden bauble of the pot of money at the finish post, that attracts owners into the industry and lures them to race. Say it quietly, but the amount of money injected by owners actually outweighs the amount that they win back in prize money by a ratio of about 3:1. If my father-in-law is watching, I hope he takes note of that. Owners, in turn, use their money, some of which they have won back in prize money, to pay horsemen to train and breed bloodstock.
There are many reasons to own a racehorse, as some Members know.
Matthew Hancock
Well, it is not only the triumph of hope over expectation but the glamour of the winners’ enclosure and the thrill of the race. Without the chance for owners to win prize money, racing’s finances are on tenterhooks. Prize money is at the core of racing’s economy—it is the chlorophyll in the ecosystem, or some have called it the lubricant of the wheels of racing. It attracts people in and brings in far more money than is provided for it.
What has happened to prize money? Over the past two years alone, the annual amount that the levy has paid has fallen from more than £100 million to £65 million. Prize money from the levy has fallen, too, from £65 million two years ago to £34 million, a drop of almost half. At Worcester, prize money from the levy has fallen by more than two thirds. Even before that precipitous decline, Britain ranked 38th in the world in prize money, miles behind Dubai and Hong Kong but also behind America, Italy, South Africa, Sweden, Australia, Ireland, Germany and Turkey.
The comparison with our nearest neighbour, France, is stark. Maiden race prize money in 2009 at Longchamp averaged £20,000, whereas at Newmarket it was £8,000. At Deauville, average prize money was £20,000, compared with £11,000 at Ascot. We find a similar contrast at the more provincial racecourses. At St Malo, average prize money was £12,000, but at Catterick it was £4,000—for comparable races, prize money in this country is still lower. At Le Lion D’Angers, prize money was £12,000, but £5,000 at Yarmouth.
Miss Anne McIntosh (Thirsk and Malton) (Con)
I congratulate my hon. Friend on securing the debate. I am closely following what he is saying. What impact has the additional number of race meetings through the year had on prize money?
Matthew Hancock
That is an extremely important point. The amount in the prize pot is falling, but the number of races is expanding, and it is doing so at the behest of the gambling industry, which understandably wants continuous racing throughout the year. Those two dynamics make the consequences for the racing industry even worse, because the amount of prize money that owners get for coming second or third in a race is small, which leads to an even greater problem for people who run their horses. That is an important point.
British trainers are being diverted from running and owning in Britain to France and further, which threatens not only those moving their horses, but the breeding industry in this country, which is undoubtedly the best in the world. Without that first-rate racing, the industry will not survive here for long—it will decline—but it has taken decades to build up Britain’s reputation as the best place for training and breeding bloodstock.
Pete Wishart (Perth and North Perthshire) (SNP)
I, too, congratulate the hon. Gentleman on securing this important debate. I am glad that he mentions transport and travel. Friends of Scottish Racing is concerned about the distances involved in getting infrastructure to race courses such as Perth and the additional costs that must be met by owners and trainers. Has he considered that in the context of the future of the levy and horse racing throughout the UK? What would he say about some of those difficulties with travelling distances?
Matthew Hancock
That is an extremely important point. I was speaking to a successful and wise trainer yesterday who told me that trainers will often not send horses to race in Scotland unless another horse goes on the lorry. Of course, that takes out runners, which does not help the gambling industry—it is a circular process.
I received a phone call yesterday from a Mr Staddon, who owns five horses. He took one to Hereford last week. It jumped all 19 fences and came third. Hon. Members might think that that is pretty good, but his prize money was £205, and it cost him £650 to race and travel. He came third, but did not get even a third of his costs back. He is seriously considering giving up. If he takes his five horses out of training, the trainer will have to cut staff, farriers and all the services that go with stables. He fears job losses in racing on a mass scale.
The task is urgent. We know where the money that is made in racing lies. In Britain, there is a 1% return to racing from betting turnover, compared with 5% in Japan or 8% in the US and France. The gambling industry’s gross win on racing is more than £1 billion a year. Yesterday, we were all delighted that William Hill reported a sharp increase in profits.
Mr George Howarth (Knowsley) (Lab)
I congratulate the hon. Gentleman both on the topic that he has chosen and the way in which he is presenting his argument. He accurately describes some of the difficulties, but does he not accept that they exist under the levy, and that it might well be better for everybody concerned if racing and the bookmaking industry came to a commercial agreement rather than fall back on the Government?
Matthew Hancock
The right hon. Gentleman is an astute Member of the House, as I have learned in my short time here, and he nicely anticipates what I am about to say.
Before I address that point, the second question is: why has that decline in the levy happened? There are four holes in the levy through which contributions are leaking: offshore operators, betting exchanges, thresholds and overseas racing. They are set out in the racing united charter, which I urge all hon. Members to sign—they would be joining not only me, but A.P. McCoy and even a member of Abba.
Philip Davies
I commend my hon. Friend for his initiative in introducing this debate. Before he describes the holes in the levy, will he acknowledge that the amount given by bookmakers to racing averaged out, between 2006 and 2010, according to the independent members of the Horserace Betting Levy Board, at £164 million a year—in TV money and levy combined—and that this year it will be £160 million, which is a drop of only 2.5%? Will he also acknowledge that, at the same time, Arena Leisure’s profits increased by 52%? When he is looking at prize money, will he focus less on the betting industry, which still gives lots of money despite the fact that horse racing is a smaller and smaller part of its business, and look at racecourses, which are not passing on their increased income in prize money?
Matthew Hancock
My hon. Friend makes an important point, but his phraseology lets slip the error in the argument. The betting industry gives no money to racing; it pays money to racing. I want a system in which that is sustainable. Of course, people who watch a sport should pay towards it. How much of the money made from media rights gets to the front line of racing is an important question, and I hope that those rights will be negotiated very tightly by racing in future. The amount of levy has fallen from more than £100 million to £65 million, but the levy reflects the fact that when people make bets, part of their stake is a contribution to the cost of putting on that race. It is appropriate for racing to charge bookmakers for using its output and product. That is the nub of the argument.
The first hole in the levy is offshore betting. UK consumers are reported to spend about £2.5 billion on internet and phone gambling, but operators licensed by the Gambling Commission represent less than a quarter of that—the rest is spent offshore. Three quarters of online betting, therefore, does not contribute to the levy or other taxes, and consumers are not protected under UK rules. Ireland’s recent budget began to tackle that, and I hope that the Minister will follow suit. I am sure that such a measure would have the support of the gambling industry. I spoke to the big gambling organisations in the run-up to this debate. Each firm told me that it considered going offshore only because all the others are doing so. Let us bring all those firms onshore and subject bets to the levy and the appropriate tax here in Britain.
Betting exchanges are the second hole in the levy. Currently, exchanges pay 10% of the levy on profits that derive from commission from winning bets on each market. However, that produces very little for the levy—less than 0.5%—compared with the return from the same activity with traditional bookmakers. According to Betfair, some users of betting exchanges place around 1,000 bets per hour, but pay no levy or tax because they close their bets before the race is concluded. I am delighted that Betfair paid around £6 million to the levy last year, and by its widespread sponsorship, but the loss to the levy from the fact that exchanges are treated inappropriately is roughly £25 million, and I urge the Government to act.
Claire Perry (Devizes) (Con)
I congratulate my hon. Friend on securing a debate that is hugely important in my constituency, where we have a lovely combination of free-draining soil, chalk and turf that does not freeze very easily, hence our important training and racing industry. Exchange transactions are frequently concerned with how many goals will be scored in a football match or whether a player will show up, and other things that do not have a cost associated with them and have almost no benefit to the rural economies we are so proud to represent. Does he agree that part of the reason for securing a change to the levy is so that the industries that employ thousands of people and have a material benefit in our rural communities—they are hugely important—can be adequately supported?
Matthew Hancock
My hon. Friend makes her case with the passion to which we have become accustomed.
The third hole in the levy is that outdated threshold rules exempt approximately two thirds of betting shops from paying the full rate. Thresholds were brought in to protect small independent bookmakers, but because the threshold applies to the shop and not to the company, we have a proliferation of corporate betting shops up and down our high street—in Newmarket, we are about to get our 12th. This allows betting shops to profit from fixed odds betting terminals while avoiding some of the levy. Independent members of the levy board say that this threshold error costs racing some £10 million. They think that it should be abolished, and I hope that the Minister will listen.
Justin Tomlinson (North Swindon) (Con)
As the vice-chair of the all-party group on small shops, I have real concerns about the point that my hon. Friend has just made about the threshold. Yes, many such shops are part of the big national companies, but a lot of them are independents. Even those bigger companies could close down many of their smaller shops, leading to job losses and further pressure on the high street and village shopping centres—it would decimate them.
Matthew Hancock
Job losses in the racing industry, if it does not have a secure future, would far outweigh job losses that my hon. Friend mentions. What is more, large corporate betting shops are often split up to have two shops below the levy. It was introduced to protect independent bookies, and we would all welcome it if they were to be protected under a future scheme. But protecting small shops that are owned by large corporates was not the intention.
The charter proposes payments for customers in Britain who place bets on overseas racing. That hole costs some £13 million, and the independent members of the levy board say that that should be closed—I hope that the Minister agrees.
What should we do? In the short term, the Government can keep the ecosystem of racing alive by plugging the holes in the levy, by finding this year in favour of racing in the determination of the levy, and by fulfilling their promise to resolve the future of the Tote in a way that recognises its support for racing. But all sides agree that the levy is broken and needs radical reform. The bookies think that the levy is broken, racing thinks it is broken, the Secretary of State thinks that it is broken, and Members on both sides of the House seem to think that it is broken. No one wants the annual spectacle of ministerial decision about the funding of racing, not least because it unnecessarily antagonises relationships, wastes time and money and prevents a proper commercial relationship between racing and betting. Anyone who has witnessed the ugly and inaccurate adverts in past weeks can see the waste of money.
We need a system that leaves racing and betting to their commercial future and ensures that racing’s product is appropriately financed and protected. Some say that the levy should be abolished and nothing put in its place. They are saying that gambling should get something for nothing. Racing is clearly an input into betting, so of course betting should contribute to the costs of putting on a race. Everyone would like something for nothing, but no one would say that it is the basis for a commercial relationship, which is what the bookies say they are looking for. So let us have that commercial relationship. Let us formalise what it is that racing sells. If someone invented a new cancer drug, would someone else be allowed to replicate it without paying them for the research that went into developing the drug? We have all seen the scary warnings at the start of rented films saying that piracy is a crime. If hon. Members made a film, would they let someone else print off copies of it without contributing to the cost? Of course not.
Charlie Elphicke (Dover) (Con)
We do not have any racecourses in my constituency, but I have many constituents who like to gamble. If they were listening to my hon. Friend’s powerful argument, they would be deeply distressed that the betting industry does not pay its fair share and agree that it should do so.
Matthew Hancock
My hon. Friend is a very wise man.
Racing is no different from other intellectual property. We need a new, fair structure that keeps British racing the best in the world and ensures that those who profit from racing help to pay for racing, so I support a racing right.
Ian Lavery (Wansbeck) (Lab)
I congratulate the hon. Gentleman on bringing this topic to the Floor of the House. The motion requests that proposals are made on the funding of racing, including the levy and commercialisation. Does he agree that, if we have a wholesale review of the funding of racing, greyhound racing should be included, so that a statutory levy could be introduced to fund that sport?
Matthew Hancock
The hon. Gentleman makes an important point, and the relationship with greyhound racing—in which racing has again lost out in recent years—is an important consideration.
Simon Hart (Carmarthen West and South Pembrokeshire) (Con)
Another form of racing that has not had a mention yet, but which is important in this context, is the amateur version—point-to-point. Some 4,000 horses are in training and it has a huge social and economic relevance to this debate. Will my hon. Friend comment on its relevancy?
Matthew Hancock
Most betting on point-to-point racing happens on course, and bookies who go on course pay for the privilege, so there is a transfer from betting to racing there. I adore point-to-point as a good day out and I hope that it is properly financed in future. It needs to be part of the mix, but we should recognise that most of the betting in point-to-point is on course.
Steve Rotheram (Liverpool, Walton) (Lab)
I congratulate the hon. Gentleman on securing this debate. I am not an expert in this area, although I have been contacted by representatives of Aintree race course, home of the world famous grand national, which backs on to my back garden—[Hon. Members: “Oh!”] Not all of it—my garden is not that big. The racecourse primarily sits in the constituency of my hon. Friend the Member for Sefton Central (Bill Esterson). As people will know, Aintree has world class facilities and race meetings. Does the hon. Gentleman agree that the levy is important even to racecourses at the top end so that they can continue to improve the racing that they offer, which will then attract tourism to cities such as Liverpool and contribute wider economic benefits to the sub-region?
Matthew Hancock
Aintree is undoubtedly my favourite jump course, and I spent much of my youth on Grand National days as a fence judge, catching horses with fallen riders, and occasionally putting the riders back on board—the especially brave ones. So I have a particular love of Aintree, and I agree that this issue is important for every racecourse in the country, especially those at the top.
A racing right, which protects the property of a racecourse that puts on an event, would benefit the racing industry. It would benefit the bookies who survive on a strong racing industry with year-round fixtures. Some say go further. I have been contacted by the Football Association and the England and Wales Cricket Board, which support a betting right for all sports—and I understand that the International Olympic Committee also supports it. I can see the merit and logic in that argument. France does it, Australia does it and the Californians are looking at it. But my focus—and the focus of this debate—is unambiguously on racing.
In horse racing, Britain—and my constituency—is the home of one of the greatest sports on the planet. The sleek beauty of the thoroughbred as he crosses the line, the tough determination of the national hunt, the dedication of the horsemen and the great amphitheatres of the crowd all have their future in our hands. I passionately believe in the future of racing in Britain. I ask this: years from now, will we look back in wonderment at this sport of beauty and skill and speed that fell into ruin? Or will we say that, in the nick of time, we gave this great sport we love the future that it deserves?
Madam Deputy Speaker (Dawn Primarolo)
Order. I remind hon. Members that Mr. Speaker has placed an eight-minute limit on Back-Bench speeches in this debate, which the Backbench Business Committee assumes will end by 3 o’clock, including the responses from Front Benchers. I hope that Members will bear that in mind.
Mr Gerry Sutcliffe (Bradford South) (Lab)
It is a great pleasure to take part in this debate, and I congratulate the hon. Member for West Suffolk (Matthew Hancock) on securing it. As he will know, I was the previous Minister responsible for sport and gambling and, as such, the levy and the relationship between racing and betting are issues close to my heart, and I have sympathy with the Minister and the Department because the issue is back on their desk for them to deal with.
I agree with the hon. Member for West Suffolk that the levy is broken. It has become very divisive, with both sides putting their cases as strongly as they can and perhaps taking their eye off the ball in relation to what is going on in the two sectors. The two sectors are linked—there is no point in saying otherwise—even though the bookmaking and betting industry would say that revenue from horse racing constitutes a lower percentage of its turnover than from other sports. However, the two go together. He might remember the on-course bookmaker pitch problems, which fortunately were resolved through common sense; that common sense has to apply again.
The industry cannot afford to lose the money from the levy, which, as the hon. Gentleman said, has fallen over recent years. The sector cannot rely, and has not been relying, on the levy: it tried the racing for change project, and the various partners that make up racing have been looking to the future. Everybody agrees that the sport is part of the cultural life of our country. Anybody from anywhere can enjoy it at whatever level they want—and they should be able to continue to do so—but the two sides have to come together and, in my view, the solution has to be a commercial one.
What should the Government’s role be? They should try to get out of the levy, if they can, and ensure that something is there to take its place. It has been tried before: in 2006, Lord Donoughue attempted to come up with a solution to meet the requirements. The hon. Gentleman is right to say that time is running out, however, and that we need to sort this out. The betting industry is changing. We have the offshore problem, for example, and I would be interested to hear what the Minister has to say about the review that I commissioned into that and about what might flow from it. Is he able to update the House?
The relationship has to be a commercial one. The nature of betting shops has changed as well, with fixed odds betting terminals now representing more than 40% of their income. The Government should consider what can be done about the FOBTs. The right hon. Member for Bath (Mr Foster) knows that I was looking into that matter—although without great success, I have to say. There needs to be a change in outlook on that.
Miss McIntosh
May I place on the record my admiration for what the hon. Gentleman achieved as a Minister in the previous Administration? Does he think that a proposal to replace the levy with a “pound-per-shop-per-race” fee would be feasible? It would raise £90 million a year, but would not address the overseas problem. Does he think that it could work in this country?
Mr Sutcliffe
I thank the hon. Lady for raising that issue. Everything has to be considered. As a Minister, I tried to bring the sectors together to hammer out a possible solution. There was a lot of good will on all sides among the bodies represented, but we could not decide on the best way forward, so we had to rely on the levy. That cannot and should not continue, and I would be supportive if the Government decided that this is the last time they should have to determine the outcome of the levy.
I am moving towards the idea of a sports betting right. That is now the way forward. The European Union now has competency for sport, and at the meeting of Sports Ministers I attended last year, the idea of a sports betting right started to develop. If a sport offers its services—with all the costs that go with it—it is only fair that a sports right should be considered in legislation. I think that Ministers will move towards a sports betting right, and I would support that campaign.
Philip Davies
May I say to the hon. Gentleman, for whom I have a lot of time, that this is a novel concept for a Labour politician? Most sports betting is on premiership football, so presumably the money raised would go there. It is novel that a Labour politician would want to take money out of poor punters’ pockets in betting shops in order to add it to the wages of John Terry and Carlos Tevez in the premier league. Does that not seem a bizarre redistribution of wealth?
Mr Sutcliffe
The hon. Gentleman knows that I am not going to get involved in John Terry’s wages any more—they are not my problem. However, there are issues about where money from sports rights should go, and about the grass roots and how we fund grass-roots sports. However, the money would go not just to the premier league, but to grass-roots sport as well.
Mr Sam Gyimah (East Surrey) (Con)
First, I thank my hon. Friend the Member for West Suffolk (Matthew Hancock) for securing this debate. A racing right would ensure that gambling contributes to the upkeep of racing, which—I say this in response to the point raised by my hon. Friend the Member for Shipley (Philip Davies)—is essential if we are to keep racing and to keep Britain ahead, as my hon. Friend the Member for West Suffolk said.
Mr Sutcliffe
The hon. Gentleman makes his point, but the gambling industry would say that it already makes a contribution. My Member of Parliament, the hon. Member for Shipley (Philip Davies), is an advocate of what the gambling industry has said about the rights it pays already—television rights, sponsorship and so on.
There has to be an adult relationship and a commercial coming-together. The Tote can help with the way forward. The previous Government made the decision to sell the Tote, and gave a manifesto commitment to give 50% of the money raised from its sale back to racing. I know that defining racing makes that difficult, but it could be a starting point.
Andrew Griffiths (Burton) (Con)
The Tote was enacted by a piece of legislation introduced by Winston Churchill. It is true that in their 2001 manifesto the Labour Government made a commitment to giving racing 50% of the proceeds from the sale of the Tote. Does the hon. Gentleman think that waiting nine years and failing to do that had a detrimental effect on the racing industry?
Mr Sutcliffe
I do not think it had a detrimental effect. The hon. Gentleman will know the history. We were trying to relieve ourselves of the Tote while ensuring that 50% of the profits went to racing. The issue then was about the definition of racing and whom it should go to. However, we held active discussions with the racing sector on how that could happen, and I hope that it is still on the table and that the Minister will tell us what the relationship will be and what further discussions he has had.
We need a fair return for racing, for the reasons that hon. Members have given, including its impact on society through full-time jobs in the racing and gambling sectors. I ask the Minister to consider the impact of the FOBTs and what can be done about it. I also ask him to consider what can be done about the offshore problem and the review we commissioned, and about ensuring that 50% of the proceeds from the Tote sale goes to racing. Then, we should get the sector together and make it realise that Governments of all shades are no longer interested in being the referee—it is now about the sector coming up with the solution. I hope that that will happen. This should be an excellent debate.
Mr Laurence Robertson (Tewkesbury) (Con)
I congratulate my hon. Friend the Member for West Suffolk (Matthew Hancock) on securing this debate and on how he introduced it. He made some extremely good points. I would like to declare two non-declarable interests as it were: first, I am joint chairman of the all-party group on racing and bloodstock industries, which is one of the most active and influential—we like to think—groups in Parliament. Secondly, I have the honour of representing Cheltenham race course, and so I take slight issue with his assertion that Newmarket is the centre of world racing. I readily acknowledge that it is a fantastic establishment and the home of flat racing, but I would suggest that Cheltenham is the home of national hunt racing.
My hon. Friend is right to draw attention to the dangerous situation with regard to prize money. It is not a matter of rich owners becoming richer; it is a matter of enabling all owners to continue to own race horses and to race them at the right standard and at the right level. He also pointed out that the important part of the debate is the knock-on effects on stable staff, jockeys and trainers—all the people who are not well paid but who should be able to continue to carry out their essential work. Take them out and the whole sport collapses. That is why prize money is so important, and my hon. Friend is absolutely correct to point out that in many races owners would lose out even if they won. If a horse is at the lower levels of racing—the lower levels are extremely important—they would have to win possibly eight or nine races a season just to break even, and that would be in a good year. However, no horse is going to do that, so he is absolutely right to point out the problem.
The current situation is paradoxical, because as my hon. Friend also pointed out, we have the most tremendous racing in this country—indeed, probably the best in the world. In just a few weeks’ time, we will have the great Cheltenham festival, which is surely the greatest racing festival in the world. We can also boast the grand national shortly after, and then Royal Ascot, and the York week in August—absolutely tremendous racing that is not bettered anywhere in the world—and yet we also have this financial problem. If seems that the two situations should not go together, but they do. Racing has continued to exist because of the generosity—or, as my hon. Friend the Member for Shipley (Philip Davies) said earlier from a sedentary position, the stupidity—of some owners, who have continued to lose money. It would be rather complacent of racing to accept that this situation will continue indefinitely, because I do not think that it will.
Mr Gyimah
Does my hon. Friend agree that one of the problems with not having a stable funding base for racing is the underbelly of racing? A lot of people are attracted to racing out of their passion for it, but there is so little funding available that many live on low incomes, with a lot of suicides among people who want to become jockeys but do not make it. Racing is not just for the wealthy: there is an underbelly of racing, and to resolve that we need a stable funding base for racing as a whole.
Mr Robertson
My hon. Friend is absolutely right. It is not just winning the Cheltenham gold cup that is important. Horses do not start off running in the gold cup; they start off running in point-to-point races, before building up to races where the prize money is perhaps less than £2,000. My hon. Friend is also absolutely right about all the people involved in that. We cannot lose those feeder tracks or what I would describe as feeder racing.
We therefore have a problem, and I have reluctantly come to the view that the levy is an outdated system that has to be replaced. We have the problems of falling prize money, and owners running horses and not getting back a third of what they put in even when they are placed. All those problems exist under the present system, so the present system cannot be right. I have long felt that the existence of the levy does at least two things. First, it divides the people of racing. When I say “the people of racing”, I include the bookmakers, because many bookmakers, whether they are chief executives or work for Ladbrokes or Hill’s, are also racing people. However, each and every year, the levy negotiations serve to divide those people. We end up with this gratuitous violence, from one side to the other, which does racing no good. We saw what can be achieved when the whole of racing got together—for once—to promote Tony McCoy, who became BBC sports personality of the year, a much-deserved award. That is racing getting together—it is racing at its best—but the levy has served to divide it, each and every year.
The second thing that the existence of the levy has done is to allow racing not to address the need to find alternative funding as urgently as it might have done. There are alternative funding mechanisms and routes for money to come in; for instance, media rights is one way, while sponsorship is another. Racecourses take money from the public, and from sponsorship and hospitality. My hon. Friend the Member for Shipley was absolutely right to say that there might be a better income stream for racing from those sources in future. In 2004, when this House passed legislation to abolish the levy, it was not enacted—I understand that it is still on the statute book and can be enacted by a statutory instrument. At that time, there were negotiations and discussions on the then British Horseracing Board’s ability to sell its data rights to bookmakers in order to get money for racing.
That option was seen as a possible way forward. However, at that time, the European Union, being the wonderful organisation that it is, decided that this could not happen. It is now time to revisit that opinion, as expressed by the European Union—and, for the benefit of those reading this in Hansard, I was being sarcastic when I described it as a “wonderful organisation”. That decision has to be revisited, because I see a need to replace the levy. I have thought long and hard about this, and I think that the Minister probably ought to announce that the statutory levy will end in, let us say, three years’ time. That would give racing the opportunity to forge new relationships and develop new income streams, in the knowledge that the levy will no longer be there after a certain point. Setting a date will concentrate people’s minds, so that they have to come up with other funding mechanisms.
Martin Horwood (Cheltenham) (LD)
I warmly welcome the hon. Gentleman’s support for the motion, which is very welcome indeed. I welcome even more warmly his comments about Cheltenham race course, which is the world centre of jump racing—if it is not the favourite jump racing course of the hon. Member for West Suffolk (Matthew Hancock), I am sure that, between us, we can secure him an invitation to the gold cup that will persuade him. However, does the hon. Member for Tewkesbury (Mr Robertson) think that structural changes in the betting industry, the media and even the technology involved in betting have contributed to the levy’s becoming outdated, and that both whatever replaces it and the governance structures that will come afterwards need to be sufficiently flexible to cope with future changes, so that we do not get locked into something that again becomes outdated as both industries move on?
Mr Robertson
The hon. Gentleman is absolutely right. I think that I am right in saying that when betting shops were licensed in 1963, about 100% of their income came from bets on horse racing or greyhounds. Now, if we put fixed odds betting terminals into the equation, the figure is as low as 35% in many cases. We have also had the internet and betting exchanges coming forward. None of that was seen or even thought of in 1963, so he is right. The world has moved on. Racing cannot go back to 1963 and say that it wants the same funding mechanism. I also entirely agree that when we decide on a replacement for the levy, we have to be flexible. That is why I would prefer more commercial arrangements, because they are, by necessity and by their very nature, flexible.
Jacob Rees-Mogg (North East Somerset) (Con)
There is just one question that I would raise, and that is about the speed of change. We have seen some scandals in betting, notably in cricket, but in horse racing there have been remarkably few. It has been very honest, which may be because of the close relationship between the betting industry and the horse racing fraternity, brought together by the levy. It would be worrying if that was broken and if something was not put in its place that would keep the system honest.
Mr Robertson
I understand my hon. Friend’s point, but I think that the levy drives people apart. I do not think that it brings them together. However, the British Horseracing Authority has done a good job of keeping the sport clean, which I accept is essential.
I want to move on quickly, because I have only a minute left. The Minister should give some consideration to announcing the end of the statutory levy, perhaps in three years. I emphasise the word “statutory”, because racing can always come to an arrangement with bookmakers whereby they still get paid for bets or picture rights, or whatever else.
I want just to touch on the importance of the Tote. The future of the Tote has to be secured. I very much hope that the Minister will allow the Tote’s own bid to continue to run the organisation, at least through to the next round. Last year the Tote contributed £19 million to racing, one way or another. If that were lost, racing would suffer a very severe blow indeed. I am not sure that a straight commercial sale of the Tote would provide security for racing, nor would it benefit racing in the way that the Government have promised it would. Let us not forget that the taxpayer has never put a single penny into the Tote, and therefore, in my view, does not deserve any money out of any transfer of its assets. I am always on the side of the taxpayer, but in this case the interests of racing should come first.
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
Before I talk about the horse racing levy and the impact of its decline on Newcastle racecourse, which is in my constituency, I should declare a non-declarable interest in the matter. The racecourse has a proud place in the history of Newcastle and the wider region, but it also has a prominent place in my life. In addition to my own, less frequent, visits to it, it is arguably where my father spends his happiest times—other than time spent in the bosom of his family, of course. His Christmas present for many years has been a family club-together to buy him an annual pass for the races, and his father’s day gift a subscription to Racing Ahead. We recently celebrated his 60th birthday there in style, enjoying the hospitality offered at the race course. I must therefore declare a strong personal interest for the sake of my father and many like him, who I am sure have a deep fondness for, and interest in, the safeguarding of Newcastle racecourse’s future.
There has been horse racing of one kind or another on Tyneside for the past 350 years. Newcastle’s town moor hosted the first recorded Northumberland plate in 1833 and continued to do so until 1881, when the race moved to the now-famous High Gosforth park. The 812-acre High Gosforth park estate had been bought for £60,000 from Newcastle’s prominent Brandling family to be operated by a
“body of speculators actuated with the desire to promote sport in a proper fashion and get a fair return for their trouble and outlay.”
I believe that that summarises the subject of our debate today quite adequately. The Northumberland plate was first run at High Gosforth park in 1882. It is now an annual event anticipated and enjoyed by many people in Newcastle and across the region.
Like the 59 other racecourses around the country, Newcastle racecourse continues to play an important role in the local economy, providing significant employment and acting as a social, commercial and community hub all year long. The racecourse hosts 30 race meetings throughout the year, and employs 26 full-time permanent staff and as many as 250 casual or part-time staff on race days. All those people are from the local area and rely on that full-time or additional income to support themselves and their families.
As right hon. and hon. Members might be aware, I am a passionate supporter of apprenticeships, which is why I have introduced my ten-minute rule Bill, the Apprenticeships and Skills (Public Procurement Contracts) Bill, which is due to have its Second Reading on 11 February. I am delighted that Newcastle racecourse has recently agreed to take on its own apprentice, through the Essential Partners organisation, which works with local colleges to deliver funded apprenticeships for 16 to 18-year-olds in customer service roles.
Newcastle racecourse, with its regional conference and exhibition facilities, makes a vital contribution to the city’s impressive leisure and cultural offering. This is incredibly important, as the growth of the tourism industry and visitor economy in the past decade or so has been one of the real success stories for Tyneside and the wider north-east region. I hope that Ministers at the Department for Culture, Media and Sport will be aware that the increase in visitor numbers to north-east England has been outstripped only by London in recent years, and that the industry in the Newcastle-Gateshead area is worth £1.23 billion and supports around 19,000 jobs. Let me take this opportunity to invite the Department’s Ministers to visit Newcastle and the north-east—which I believe they have yet to do—where they can sample for themselves the excellent attractions and facilities that Newcastle has to offer the discerning visitor. Newcastle racecourse is one of the highlights of the area.
But I digress, Madam Deputy Speaker. I am sure that hon. Members are aware of the purpose of the horse racing levy. The hon. Member for West Suffolk (Matthew Hancock) set out eloquently the arguments for the levy and for ensuring that there is a fair return, and I will not repeat them. I appreciate that the betting industry takes a very different stance from that of Racing United and the British Horseracing Authority on this issue, but the facts of the matter are clear. The mechanism through which British horse racing has been supported since the 1960s, given the significant profits that it affords the betting industry, is producing rapidly diminishing returns. It is argued that the levy system developed 50 years ago simply does not properly account for modern-day methods of betting on horse racing. I agree with the concern of the hon. Member for West Suffolk that the situation is putting prize money at risk, which in turn could make horse racing less viable, as the levy funds half of all the prize money awarded by the British Horseracing Authority.
Matthew Hancock
Is the hon. Lady aware that, over the past year, the contribution from the levy to prize money at Newcastle race course, which she so loves, fell by 41%?
Catherine McKinnell
That concern has indeed been raised with me by Newcastle racecourse, but the situation applies across the board. As the hon. Gentleman has pointed out, Britain is, on average, 37th in the world in terms of prize money awarded. That is a matter of great concern. The declining level of the horse racing levy also threatens to jeopardise the safeguarding of the sport’s integrity and standards, veterinary science and education, training programmes and, indeed, the very future of our racecourses.
The impact of the declining horse racing levy and the continued uncertainty about its future were summed up very well by the general manager of Newcastle racecourse in a recent conversation with me. He told me:
“The levy money we receive is hugely important as it underpins our desire to employ more staff, invest in the business and grow the race course in the community. The reduction in the levy means that this is not currently possible and jeopardises our vision for the future. The levy reduction is already affecting our staffing plans for race days in January and February.”
Nigel Adams (Selby and Ainsty) (Con)
Over the past three years, the reduction in the levy’s contribution to the industry has been £50 million, which represents a significant sum of money coming out of the industry. Does the hon. Lady agree that we need to act on this matter quickly? My hon. Friend the Member for Tewkesbury (Mr Robertson) suggested delaying a decision for three years, but I am not sure that the industry can wait that long.
Catherine McKinnell
I would leave to the Minister’s discretion the question of whether this should involve a gradual process or a more immediate emergency response, but I want to make a plea today for an immediate response on the percentage of the horse racing levy that is going to be contributed this year.
Mr Laurence Robertson
Just to clarify the matter, I was not suggesting that a decision should be delayed for three years. I just think that there should be an end date to the statutory levy in order to speed up the examination of other opportunities for funding to horse racing.
Catherine McKinnell
I thank the hon. Gentleman for that clarification; that was my understanding of the point he was making in his speech.
I find the words of the general manager of Newcastle racecourse deeply worrying, not only because of the economic implications at a time when Newcastle and the north-east face difficult times as a result of the Government’s cuts but because of the potential knock-on effect on commercial activity and the tourism industry in the region. I would hope, given this Government’s apparent commitment to supporting regions such as the north-east to grow their private sector in order to replace the thousands of lost public sector jobs, that the Secretary of State and the Minister will be equally troubled by what Mr Lane had to say. It is disappointing that we have reached a stage at which the Secretary of State has had to intervene on this issue, but I would urge him to reach a fair and equitable decision on the levy for 2011-12 as a matter of urgency.
For all the reasons that I outlined earlier, it is also vital that British racing is placed on a secure financial footing for the long term, thereby allowing racecourses such as Newcastle that want to continue to thrive, further invest in their business and staff, and provide entertainment and pleasure to people such as my dad, to do so for many years to come. I look forward to hearing the Minister explain how he intends to secure that outcome.
Mr Don Foster (Bath) (LD)
I congratulate the hon. Member for West Suffolk (Matthew Hancock) on securing this really important debate. As we have heard, there are 60 racecourses in the United Kingdom. They provide 20,000 direct jobs and a further 80,000 indirect jobs. They provide about £330 million in tax income to the Exchequer. Racecourses provide a wonderful range of opportunities for events to be held, they are a significant boost to tourism and, of course, provide a product that is critically important to the gambling industry.
For some 50 years, there has been an interdependence between racing on the one hand and the gambling industry on the other. We know that the racing industry provides its share of the bargain by having a rule book, which is largely determined by the gambling industry. There are some 1,500 racing events every year and about 80% of them are dictated by the gambling industry. If that were not the case, who in their right mind would think of holding a race meeting on a cold, wet, winter’s evening if they were reliant only on attendance money to cover the costs? That is its side of the bargain. As we have already heard, to ensure that bets are fair and clean, a huge amount of money is spent on integrity and other such issues.
On the other side, as part of the independence deal, the gambling industry makes a contribution not only through the levy, but by sponsorship and other forms of support, although it is predominantly through the levy and through the increased money paid for television coverage. The levy provides funds to be used for prize money, which is critical—not least, as we have heard, for far-away courses in Scotland and elsewhere—but it also provides money for developments in veterinary science, for jockey training, education and much more.
Andrew Griffiths
I am lucky to have Uttoxeter racecourse in my constituency—a magnificent historical racecourse that is home to the west midlands grand national. My hon. Friend will know that when it comes to prize money and fees, we have seen a drop of some 38% across the industry. My own racecourse, however, has seen it drop by 61%, which is having an impact on owners and their ability to take part in the industry. Does he agree that, ultimately, that will lead to the racecourse’s demise unless we do something about it?
Mr Foster
I entirely agree, and it is borne out by evidence from the wonderful racecourse in my own constituency of Bath, as it doubtless is by Wincanton, which I was asked to mention by my hon. Friend the Deputy Leader of the House, and indeed by the wonderful course in the constituency of my hon. Friend the Member for Cheltenham (Martin Horwood). That is true because, as we have already heard, since 2003, when the levy brought £110 million into racing, it has fallen to about £65 million. Such a reduction has inevitably had an impact.
Jacob Rees-Mogg
I just want to claim a share of Bath racecourse, which I believe is in North East Somerset.
Mr Foster
Given the boundary changes, I have to concede that to my hon. Friend. I share the same passion he does for the course’s continued success.
I was explaining that the mutual interdependence has existed for 50 years, but it has become increasingly difficult. It is now critical to find a sustainable future for the link between the racing community and the gambling community. In so doing, we have to remove the involvement of politicians. I entirely agree with the Secretary of State when he said at the end of last year:
“Frankly, the government should never be the last resort in an essentially commercial negotiation”.
A sustainable way forward should not involve politicians, but politicians will have to help find that way forward, which must be based on a number of fundamental principles.
The first principle is to be absolutely clear about what the levy is about. Many hon. Members will have come across a leaflet put out by William Hill, which says under the heading “Real People, Real Jobs”:
“For every additional £1 million that the bookmakers are forced to pay in horseracing levy, 100 industry jobs may be lost for people like this”.
It goes on to provide examples of such people. That is a bit rich from an organisation that has recently moved its internet betting operation—and is soon to move its telephone operation—offshore, losing many hundreds of jobs and about £12 million of tax revenue for the Exchequer. My key point, however, can be seen on the other side of the leaflet, which says:
“Whilst racing can depend on a 1960s state subsidy it will never have the incentive to modernise.”
My clear understanding of the levy is that it is not a state subsidy; it is a relationship between two organisations. It cannot—as some have sought to portray it—be defined as state aid. We must be clear that this is a relationship between two organisations that get mutual benefit from each other. That is crucial to understanding what we are talking about.
Philip Davies
The right hon. Gentleman says that this should not be considered as state aid, yet his beloved European Union—I, of course, want to be out of the wretched thing—takes precisely the opposite view. In looking at the French proposals for a horse racing levy, the Commission said:
“At this stage, the Commission considers that the aid measure contains all the features constituting the concept of State aid. After exploring several means by which the notified measure could be regarded as compatible with the rules in force, the Commission has not found any clear means of regarding it as compatible.”
I am afraid that that is what the hon. Gentleman’s beloved European Union said.
Mr Foster
I am grateful to the hon. Gentleman for reminding me of why I raised the point. There has to be clarification. Personally, having studied the various issues in some detail, I do not accept the definition that we just heard from him. Incidentally, even if he is right, which I do not believe he is, it would not threaten the levy as it was already in existence way before the establishment of those rules. There would not be a problem.
Matthew Hancock
My hon. Friend the Member for Shipley (Philip Davies) mentioned the European Commission’s view of the French system, but would it not be better to look at the view of the British system? The levy board does not define the levy as state aid precisely because it is a transfer between two industries. Moreover, a racing right would establish a property right on which our whole constitution is based.
Mr Foster
Since we are getting into this topic, I shall go into a little more detail and omit some other parts of my speech. Having looked at the issue, it is clear to me that levy grants and loans are not paid by the state; by definition, therefore, they are not state aid and they are not provided through state resources. They do not impose a selective advantage; they do not distort or threaten to distort competition; and they do not affect trade between EU member states. On all criteria, this does not amount to state aid.
I hope that we can sort out three things when we come to finding a sustainable future. The first is the offshore issue. I have long argued that we have to do something about that and I was delighted that the hon. Member for Bradford South (Mr Sutcliffe), when he was the excellent Minister with that responsibility, instituted consultation on the issue. I want to see a situation where any firms or organisations regulated offshore—whether they be in the European economic area or are white listed—that want to advertise within the UK must have a secondary licence, which would require them in turn to contribute to the levy and to research, education and treatment for gambling addiction. I hope that we can resolve that issue.
Secondly, we need to resolve the issue of betting exchanges. They cannot be allowed to get away with having no involvement in the levy. As other hon. Members have said, however, I welcome it when some of those organisations make voluntary contributions.
Thirdly—a totally separate issue that is also important—I believe that we need to support our bookmaking industry, particularly the small independent firms that are losing out. I believe that the current charging regime of the Gambling Commission penalises them unfairly. I am worried that the current threshold, which was designed to help them, does not in fact do so, because each individual shop within a large chain reaps the benefit, rather than the small independent bookmakers. The levy board has proposed that we should remove the threshold, but I hope that we will not remove it, but reform it to provide more benefit to the small independent bookmakers.
We need to move forward rapidly, but the deal must be done between the two mutually related independent bodies—the racing industry and the gambling industry.
Ms Margaret Ritchie (South Down) (SDLP)
I congratulate the hon. Member for West Suffolk (Matthew Hancock) on securing the debate. I also join other Members in registering a non-declarable interest: Downpatrick racecourse is in my constituency. The course, which recently celebrated its 275th anniversary, has contributed much to the horse racing industry on the island of Ireland, and the area has exported not only thoroughbreds but many jockeys and trainers to the industry here in Britain.
Speaking as the representative of a constituency with a substantial horse racing industry, which contributes to the local economy and to tourism, I want to see more regulation of the betting industry. That would protect both that industry and the horse racing industry. I am aware that horse racing in Northern Ireland is a devolved matter, but the local betting industry is being undermined by offshore betting, and my constituents and I would deeply appreciate any discussions that could take place with the Irish horse racing board and the Irish Government.
The funding of racing in both the United Kingdom and the Republic of Ireland depends on returns from the betting industry. In both jurisdictions, research has demonstrated that it has decreased significantly owing to the amount of business that is directed offshore. As the hon. Member for West Suffolk pointed out, the offshore betting industry, which includes both betting exchanges and some of the larger bookmaking chains, is taking advantage of loopholes in the system to avoid making a fair contribution. For example, online businesses allow firms to locate a server offshore in places such as the Isle of Man, Malta and Gibraltar, and route the bets by means of “phone to server”. A bet then becomes that country’s bet for tax purposes, as a result of the William Hill judgment in the European Court of Justice.
Those problems need to be addressed, because they are having an impact on our local industry. They have implications for jobs, and for all involved in the horse-racing industry. Many of us hold that industry very dear, because we represent rural constituencies of which horse racing is a central part.
Duncan Hames (Chippenham) (LD)
I agree with the hon. Lady’s critique of levy avoidance, but does she agree with me—and with my right hon. Friend the Member for Bath (Mr Foster) and the hon. Member for North Swindon (Justin Tomlinson)—that any measures to tackle it should not fall disproportionately on small betting shops or, indeed, small groups of bookmakers?
Ms Ritchie
I entirely agree with the hon. Gentleman. I am about to deal with that very point.
The larger bookmaking chains argue that they have moved offshore in a bid to compete with the betting exchanges. Betting exchanges allow unlicensed individuals to lay bets and to incur no gross profits tax or associated costs on their winnings. Like the hon. Member for Chippenham (Duncan Hames), I fear that the smaller bookmakers and gambling establishments in rural towns throughout the United Kingdom and Ireland are deeply affected by that, because the current legislation and, perhaps, the regulations governing it are out of date and do not take on board offshore and online betting. I understand that in the UK, Betfair, one of the online systems, pays duty on the commission that it charges, and that the commission ranges from 2% to 5% of winnings depending on individual turnover. Last week I met representatives of the bookmaking industry on the island of Ireland. They expressed those very concerns, and they were very pleased that we would be debating the issue in the House, because they wanted an opportunity to ensure that their views were articulated here.
I hope that we on the island of Ireland will be able to undertake further exports such as that of A. P. McCoy, whom I congratulate as a person from County Antrim who has done exceedingly well as a jockey, has made an enormous contribution, and has been an excellent ambassador for the horse racing industry. However, I agree with other Members that the industry needs a sustainable future.
I ask the Minister to consider all the points I have made. I also ask him to make appropriate representations to, and hold appropriate discussions with, his opposite number in the Irish Cabinet as soon as possible to ensure that the industry on both islands has that sustainable future, because it makes a marked contribution to the local economy and also to tourism.
Miss Anne McIntosh (Thirsk and Malton) (Con)
As this is the first debate in which I have participated in my capacity as the newly elected Member for Thirsk and Malton, it would be remiss of me not to pay tribute to my predecessor in the Ryedale and Filey part of the constituency. John Greenway was a stalwart of the racing industry, and the immediate predecessor of my hon. Friend the Member for Tewkesbury (Mr Robertson) as one of the co-chairmen of the all-party parliamentary racing and bloodstock industries group.
The new constituency resulting from the marriage between Thirsk and Malton and Filey contains 31 trainers with nearly 1,000 horses. Given that each trainer will probably employ one member of staff per 3.5 horses, about 270 people are directly employed by trainers. Obviously that excludes those in ancillary professions, such as vets, and many businesses.
Although the subject of the debate—which I am delighted that my hon. Friend the Member for West Suffolk (Matthew Hancock) has managed to secure—is the future of the horse racing levy, I hope that it will be inextricably linked with the issue of a vibrant future for the horse racing industry per se. As a number of Members have pointed out, the industry is struggling. Trainers in particular feel that they are in severe financial straits. I referred earlier, in an intervention, to the reduction in prize money, and a Member representing a Scottish seat mentioned rising fuel costs. The cost of diesel is at a record high in north Yorkshire, and, as we have already heard, it is pushing up the costs of transporting horses, jockeys and stable lads and lasses to race meetings.
Philip Davies
My horses are trained in my hon. Friend’s constituency. I think that this is the first time that Mr Michael Easterby, who has the pleasure of training them, has been described as being in dire financial straits. However, I am sure that he would agree with my hon. Friend, even if no one else would.
Nearly 50% of betting shops make a profit of less than £17,000 a year. Does my hon. Friend have some regard to their dire financial straits as well?
Miss McIntosh
My hon. Friend’s horses are obviously in the right place. I can imagine no better place than North Yorkshire in which to train them, and I hope that that is reflected in their success.
I do not know whether time will permit me to deal with betting shops. Small independent betting shops and chains of betting shops obviously exist in market towns such as Thirsk, Malton, Filey and Easingwold in an average constituency such as mine, but they have alternative means of making a living. They increasingly provide one-armed bandits and other forms of betting, not least on the outcomes of political elections.
Justin Tomlinson
I met an independent bookmaker who is responsible for 11 bookmakers, including some in my constituency. The changes to the threshold rules might mean an increase of 78% in their levy contributions. A lot of extra alternative sources of income would have to be found to allow that business to remain viable.
Miss McIntosh
I am grateful to my hon. Friend for making that point, and perhaps I should say that trainers are struggling financially, rather than that they are in severe financial straits. This is also about the ability of trainers, on an ongoing basis, to sell their wares and persuade the horse owners to stay with the industry, which obviously they love, rather than investing in other areas. Nobody has yet focused on feeding costs, which are putting up the cost of training the horses. The reduction in prize money has been mentioned and I hope that the Minister will address it. I also add that trainers are major employers in rural areas and their businesses support countless other businesses in rural communities, as the hon. Member for South Down (Ms Ritchie) mentioned, so it is vital that they are seen to have a fair return on that.
I welcome the fact that this debate has touched on the importance of racing to the fabric of rural life—to the economic, social and cultural way of life in the countryside—which is particularly true in North Yorkshire. Yorkshire boasts some of the finest racecourses in the country, not least those at Thirsk and neighbouring Wetherby and York. Like all the other 60 racecourses, the one at Thirsk plays a vital role in the local economy, providing employment not only for its staff, but for trainers, jockeys, stable lads and lasses, farriers, vets and breeders. Malton is an internationally renowned racehorse training centre and, along with Thirsk, is home to some of the country’s top racehorse trainers. As I have mentioned, more than 30 trainers are based in just one constituency.
The hon. Member for Bradford South (Mr Sutcliffe) used to be the Minister responsible for this subject, but I put this question to the current Minister: is it possible to replace the levy by a £1 per shop race fee to raise £90 million per year? The right hon. Member for Bath (Mr Foster) made a serious point. I was an intern, as we now call such people—they were rather glamorously called “stagiaires” when I was one—in the Directorate General for Competition for some six months. I understand that for a levy to count as state aid it would have to be shown that there was a direct subsidy to an industry in one member state and thus a disadvantaging of industries in other member states. The right hon. Gentleman and others told us that levies were being sought in other countries as well, so I hope our case will be put, including by some of our powerful colleagues on both sides of the other House who will be able to advise us in this regard. I do not have much sympathy with the argument that the proposed changes to the levy are state aid or would distort trade between member states. I take some comfort from the fact that all of us who take an interest in the industry can reach out to the industry in other member states, using our good offices to make these points to the Commission.
My second plea to the Minister, which other hon. Members have also made, is to keep the Tote within racing. I pay tribute to the previous Government’s acknowledgement of the vital importance of racing, which is undermined by the arguments about state aid. I have addressed that matter and I hope that we can take it forward.
The third point I wish to make to the Minister relates to a proposal to close all the loopholes being exploited by bookmakers and the betting exchanges in order to raise £60 million a year via a percentage deduction transaction fee on all bets on the exchanges. As I said, I represent a host of betting shops and I take some comfort from the fact that the manager of one of them has written to me in the context of this debate. He said:
“The current issues facing the Horserace Betting Levy are less to do with the total amount generated by the levy and more to do with how it, and other income streams, are distributed within Racing.”
That issue has to be addressed. He continued by saying:
“I…support the ‘minimum tariffs’ initiative recently announced by the Horsemen’s Group”.
I wish to place on the record my tribute to the work of that organisation and its pan-industry view, and I hope that its voice will be heard on this matter.
I do not believe that a positive way to bring the industry together is by thinking that the trainers, racehorse owners and all those employed in the industry are on one side, and the betting shops and gamblers are on the other. The danger to the system—this is the challenge the Minister will face—is the offshore aspect, to which my hon. Friend the Member for West Suffolk referred. Addressing that situation is the purpose of today’s debate.
I conclude by saying that all hon. Members who have racecourses and the racing industry represented as strongly in their constituency as I do in mine benefit from such a committed industry. I wish to pay tribute to the fact that racecourses attract enormous amounts of tourism; small racecourses such as Thirsk’s are very attractive. Obviously it meets mostly in the summer months—we avoid the winter months—when the evening meetings are particularly well subscribed, as are the weekend meetings. I also wish to lend my support to point-to-pointing, which has an enormous attraction in rural communities and allows amateur jockeys to benefit. I invite the Minister to recognise the all-pervasive nature, in a very positive sense, of the racing industry. I understand the particularly difficult position that he is in, but I hope that, through him, we can avail ourselves of the good offices of the Secretary of State to make the case in the strongest way to the European Commission and to ensure that all aspects of the racing and gambling industry have a vibrant long-term future.
Madam Deputy Speaker
Order. May I remind hon. Members that seven Members wish to speak and I will be calling the Front Benchers to make the wind-ups at 2.40 pm? There may be an eight-minute time limit, but if every Member is considerate of their colleagues and makes much shorter speeches, and perhaps if those itching to make interventions decide not to do so, we will be able to get everybody in.
George Freeman (Mid Norfolk) (Con)
I shall be as quick as I can. I congratulate my hon. Friend the Member for West Suffolk (Matthew Hancock) on securing this important debate and remind us all that thousands of people in the racing industry are watching us closely in the hope that we will be able to contribute to a settlement.
Mid Norfolk is not a racing constituency, but I wish to major on two key points, the first of which is the importance of racing at its grass roots in the rural economy. My constituency is adjacent to Fakenham racecourse, which is a magnificent centre of racing in Norfolk. A large number of my constituents follow racing closely and there is a strong link with the farming community. Through the magnificent West Norfolk Foxhounds and the local point-to-point facilities, racing at its grass roots is embedded in the rural economy and does not exist in isolation.
My second interest is a personal one, and I hope that the House will indulge me. I grew up in and around Newmarket in a racing family. As some of the more senior Members of the House who follow the sport may know, my father stormed to victory in the 1958 grand national on a brave Irish gelding called Mr What. My uncle served for many years as chairman of the then British Bloodstock Agency and my brother trains in north America, along with a large number of people who want to get into this industry, some of whom do not find it that easy. I have spent some time on the back stretch in America and Canada and have seen how different industries around the world are structured.
My hon. Friend referred to the heritage of racing. The fact that racing is not just an industry is an important point. Racing sits at the heart of what it means to be British: people who do not follow racing have surely heard of Red Rum and Desert Orchid; Bob Champion and the story of Aldaniti is a national legend; and Frankie Dettori is a national figure. I defy those who have not been to a point-to-point meeting, to Cheltenham or the Guineas meeting to say different; people are aware of racing and its part in our national heritage and history.
This afternoon, we are principally discussing racing as an industry—as a business. I want to make the point that it is an important national business. At a time when the Government are rightly putting a lot of emphasis on rebalancing the economy and doing everything they can to promote business and growth beyond the City of London, this giant industry is struggling and we would be well advised to help it. It generates more than 100,000 jobs and a turnover of more than £3.5 billion, as well as a huge local underpinning of that through the trickle-down to farriers, vets and those who sell clothing and equipment—all the secondary industries that feed racing.
So what is the problem? The racing industry as we have grown to know and love it is unsustainable. Its financing model is broken. It is incumbent on all of us who care about it as an industry and about our economy to tackle that. My hon. Friend the Member for West Suffolk and others have spoken at more length and with more expertise than I on the nature of the broken financing system. I want merely to point out three things. In France, the return from betting to the industry is, I believe, in the order of €700 million a year, whereas in Britain it is in the order of £30 million to £35 million. The levy contribution to racing is falling from £100 million to £60 million—a huge drop. The return from betting to racing, expressed as a ratio percentage, is about 1%. In Japan it is 5%, and in America 8%. That is an unsustainable platform for the industry that we have a duty to tackle.
The crucial and central point is that those who depend on racing have a duty—and an interest in that duty—to ensure that it is sustainable. Too many people have been taking too much out and not putting enough in. To stretch a metaphor, rather than force-feeding the goose that lays the golden egg, we are neglecting her. The truth is that one cannot push, as the betting industry has, for more meetings—that is totally understandable, as they want more product—and lower prize money. The industry cannot sustain that. That is symptomatic of the situation across a number of fields of modern life and in other sports. We concentrate too much on the top of the pyramid and neglect the grassroots. We neglect the smaller meetings, smaller tracks and smaller trainers and owners that prop up the more celebrated, well known and better off ones at the top. We do so at our peril.
I have spoken to a number of trainers and those involved in racing in the past few days and weeks. A number of them made the same point as my hon. Friend the Member for Thirsk and Malton (Miss McIntosh): with the cost of living and fuel prices rising as fast as they are, a number of smaller owners and trainers cannot even afford to get to the races; it simply does not make sense when prize money is as low as it is. Of course, one group of people who suffer from that underinvestment at the top when horses are winning races, which by definition most do not, are those at the bottom—the often lowly paid stable lads and others who prop up the industry. We cannot properly improve the quality of their lives and incomes without improving the prize money at the top. It says something about the state of the industry when a legend as highly regarded and skilled as Pat Eddery decides that the game is not worth the candle.
Accelerating my speech, I want to support the comments of my hon. Friend the Member for West Suffolk about the importance of some new settlement for the industry. I urge the Minister to take those comments very seriously. I have worked in biomedical research, where intellectual property rights sit at the heart of the industry, protecting the interests of those at the bottom. That concept works well and I commend it to the House. It could give us a chance to create a new settlement for this great industry and ensure that it is sustainable for the generations that follow.
Peter Aldous (Waveney) (Con)
I congratulate my fellow Suffolk MP, my hon. Friend the Member for West Suffolk (Matthew Hancock), on securing this debate. It provides me with an opportunity to participate in a debate on the future of a sport in which I have had a lifelong interest. At the outset I should mention some non-declarable interests.
Although I am not a horse breeder, I am a member of the Thoroughbred Breeders Association so that I can receive its useful publications, and for many years I have been an annual member at Newmarket.
I have gone racing in other countries and although days at Santa Anita, Saratoga and Longchamp are never to be forgotten, nothing quite matches what is on offer in Britain, whether it is at Aintree or Epsom, the homes of our two most famous races, under the trees of the pre-paddock at Newmarket or at the very special atmosphere at the Cheltenham Festival, which commentators such as Hugh McIlvanney have observed has no equal in the sporting world.
What has always intrigued me is that British racing has continued to lead the world despite the very low levels of prize money on offer. In national hunt racing, I think that that is because the love and passion for both the spectacle and the horse is ingrained in so many people, while in flat racing the prestige associated with winning the major races means that there is a clear incentive for the major international players to continue to race here. At this stage, I should mention the Maktoum family and Khalid Abdullah, as well as other owners who have made such an enormous contribution to and investment in British racing over the past 30 years. Without them, racing would have faced its day of reckoning much earlier.
Some might say that that day of reckoning has not arrived and that racing has cried wolf before and has always survived and carried on. It is wrong to say that now. Prize money has fallen to such a low level that urgent action is required. Without decent prize money at all levels, owners will leave the sport, trainers will give up and grooms who work in the yards will be laid off or will have to work harder for a wage that certainly cannot be described as “living”. It is prize money that oils racing’s wheels and keeps the whole show on the road.
Although I was born in 1961 and do not have a full knowledge of the negotiations that took place then, in my view the levy was flawed from the outset. I accept, however, that I say that with the benefit of hindsight. In most other racing countries, there is a monopoly whereby all revenue derived from pool betting goes back into racing. As a result, in those countries, the majority of racing’s revenue comes from betting.
The yield from the levy has fallen dramatically from £115 million in 2007-08 to £65 million in 2010-11. The British Horseracing Authority says that action is needed in four key areas to ensure that racing gets a fair return on its product. I shall consider each in turn. First, the betting exchanges that have grown up in recent years should pay a proper commercial return to British racing. To me, that argument is compelling. Secondly, bookmakers who have moved their operations offshore should be included in the levy. Again, that sounds logical to me: if they are using a British racing product they should pay for it. However, I note from today’s Racing Post that such a move might be open to legal challenge. Thirdly, horse racing wants to abolish the threshold rule that currently exempts 60% of betting shops from paying the full rate of the levy. If the major bookmakers are exploiting that loophole to avoid paying their full dues, it is right that the anomaly should be addressed. However, one should have regard to the plight of the smaller independent shops, which, like so many high street traders, are struggling. They should receive some assistance to help them compete against their larger rivals. Finally, British racing wants to reinstate payments for customers in Britain placing bets on overseas racing. I want to receive more information on that argument as my immediate reaction is that overseas racing is not the industry’s product to sell.
Although racing has a strong case to receive a higher price for its product, it needs to look at the package that it provides, not only to meet the requirements of its buyer, the betting industry, but to look after the interests of its various component parts, whether that is racecourses, owners, breeders, trainers, jockeys or—not to be forgotten —the stable staff who keep the whole show on the road in often trying circumstances and very poor weather.
To be fair, racing has not done a bad job in recent years. As reported in today’s Racing Post, just under 5.8 million people went racing in 2010, a rise of 0.9% on 2009 despite the bad weather that wiped out most racing in December. The various racing festivals that take place throughout the year remain extremely popular and are well marketed. There are also those courses that show imagination and flair and put on other attractions, such as music, that help them to attract large crowds to their meetings. Newmarket “nights” are a must on the East Anglian social calendar.
More needs to be done to enhance racing’s attraction and to look after the interests of those working in the industry. The following areas could be considered. First, the fixture list needs to be reviewed. Too much racing is being put on to please the bookmakers at present, which has led to an increase in racing’s cost without a commensurate increase in income. The cost of policing has risen from £16.2 million in 2002-03, to £25 million in 2009-10. In the same period, owners paid an additional £6.5 million in increased transport costs. Having wall-to-wall racing in the afternoon, at dusk and at night, seven days a week, places unreasonable pressure on those who work in the industry. Racing needs to have regard to sustainability. We need a fixture list with a good spread of meetings across the country each day. On opening the paper in the morning, one often finds meetings at Lingfield, Ascot, Warwick and Wolverhampton. Racing needs to go across the country on a daily basis and an all-weather course in the north should be considered, as should a day off once a month, perhaps on a Monday.
One of the main attractions of British racing is the large number of diverse courses—60 in total, all of which are unique in their own way—but racing must look at ways of rewarding those courses that show ingenuity and imagination in putting on attractive meetings. It should also look at ways of rewarding courses that look after themselves through promotion and sponsorship, invest in their facilities and do not just rely on the levy. The days of the levy junkie should come to an end.
There is also a need to look at ways of making racing more appealing to the public. Perhaps bullet races over two to three furlongs could be considered as racing’s version of 20/20.
That brings me to the way forward, the future and my conclusions. There is no one simple solution to the host of problems that need to be addressed. First, the levy should be abolished and replaced with a fair funding mechanism that collects from as broad a base as possible. Secondly, the Government should work with racing and the betting industries to establish which methods of payment are permissible from a legal viewpoint, and they should negotiate with the EU as necessary. In the forthcoming sale of the Tote, the Government must do all they can to look after the best interests of racing. I would like to see the Tote run by racing for racing.
Ian Swales (Redcar) (LD)
Each of our 60 racecourses plays a vital role in the local economy, providing employment and a social hub. My local course at Redcar attracts people from far and wide and is particularly attractive to trainers who like our flat, straight mile. The course is right in the middle of the town, so any threat to it would not just cause an economic problem but might become an environmental issue.
Racing and betting are inextricably linked. The sport’s fixture list, scheduling, volume and even rules are largely dictated by bookmakers. Last year, I tabled an early-day motion with wording very similar to that in the motion. It was given the number 999, strangely enough, which was very appropriate because this is an urgent problem. I shall not repeat statistics others have given, but I shall mention one that has not been given: some 5.8 million people a year attend race meetings, so it is a huge spectator sport. It is imperative that the mechanism to transfer value between betting and racing is brought up to date and gives sufficient protection to local racecourses. As we have heard, the levy contribution to prize money is falling dramatically this year, down to £65 million. Redcar’s prize money is being cut by 50%, which is a massive problem for the management at the racecourse. As we have heard, smaller racecourses face cuts of up to two thirds and are therefore clearly under threat.
Another important area that has not been mentioned but could be seriously affected is the number and pattern of fixtures, particularly at smaller courses. There has been a reduction from £6.9 million in 2009 to £2.1 million in 2011 in the fixture incentive scheme, which is paid to racecourses to incentivise them to hold fixtures on days when gate receipts are low. They do that so that bookmakers and the levy have a continuous horse race betting product. Some racecourses might abandon those important bookmaker and levy-friendly fixtures and move fixtures to Saturday afternoons, for example, when gate receipts would be higher. However, that would starve other parts of the week and bookmakers might have a problem with that.
If things do not change, there will certainly be a reduction in the annual fixture list of perhaps 400 fixtures next year, as they would not be financially viable for racecourses. That would further reduce the levy to the Horserace Betting Levy Board, clearly risking a vicious circle. The loopholes we have heard about cost racing millions of pounds a year. It is especially important that the threshold from which more than 60% of betting shops benefit should be reviewed rather than scrapped—I agree with that point. The vast majority of those shops are, indeed, owned by major operations. It is equally important to address the offshore betting issue.
The Tote should continue to operate as a pooled betting system. We see such systems in pretty much every other racing country in the world, and it is worth remembering that in some countries that have successful racing industries, a Tote-style system is sometimes the only legitimate form of betting. The chief executive of my local racecourse has pointed out that before we sell the Tote we should ask ourselves who owns it. The Secretary of State for Culture, Olympics, Media and Sport has previously stated his desire to
“ensure that funding for racing is fair, and collected from as broad a base as possible.”—[Official Report, 8 November 2010; Vol. 518, c. 41W.]
Unless the levy is reformed, we cannot claim that either of those criteria is being met.
It is worth considering what might happen if we do not address the dramatic decline in the levy. In many ways a chain would be set up, many aspects of which would be irreversible. There might be racecourse closures with owners walking away. Some owners, including leading international owners on the flat, might transfer their horses to other countries, especially France, and other owners, especially at the lower end, would leave the industry. Some breeders might choose to go out of business or produce fewer foals, all of which would lead to a smaller industry with direct job losses to jockeys, trainers and stable staff, as well as indirect job losses in dependent businesses, including bookmakers. Local racecourses are often at the centre of their communities.
While methods of betting have advanced and become more modern, the levy has remained stagnant and become outdated. It needs to be urgently revised if we are to maintain this country’s fine racing reputation and heritage. I understand the Secretary of State’s stated wish to remove his Department from this issue, but the Government’s historical involvement in the Tote and levy system means that they cannot just walk away. It is imperative that they leave an effective and sustainable system that will protect the diversity of racing in this country for the long term.
Mr Robin Walker (Worcester) (Con)
I congratulate my hon. Friend the Member for West Suffolk (Matthew Hancock) on securing the debate and I support the many excellent points that he and other hon. Members made. I thank him particularly for mentioning Worcester. I am fortunate to have in my constituency one of England’s best-loved racecourses and to represent one of the few cities to have a racecourse right at its heart. Members of a literary bent will be interested to know that it recently featured heavily in Jilly Cooper’s blockbuster, “Jump!”
The Pitchcroft racecourse in Worcester has seen racing for more than 200 years and provides vital green space at the centre of the city. It is one of the many wonderful things about Worcester that the city is rich in green spaces—not just formal parks but woodland, playing fields, the prettiest cricket ground in England and one of its finest racecourses. As the Member of Parliament for Worcester, I have vowed to protect those green spaces, and ensuring our racecourse remains viable is an important part of that.
Mr Graham Stuart (Beverley and Holderness) (Con)
My hon. Friend’s inspirational words about green spaces take me to the Beverley Westwood, which has been protected by the pasture masters of Beverley for hundreds of years and prevented from being developed, and in it sits the famous Beverley racecourse. So, like him, I wish to see the racing industry and our racecourses maintained for the benefit of the environment and the economy of the areas in which we live.
Mr Walker
My hon. Friend makes an excellent point.
Like other Members, I feel I should declare a non-declarable interest at this point, because although I have no personal connection with either the racing or the betting industry, my sister worked for many years as a groom and horse exerciser for a race yard in Shropshire. Being horse mad, a competitive spirit and one of life’s natural risk-takers, she relished the opportunity to work with difficult horses and became a specialist in retraining some of the most challenging, not to say dangerous, horses in racing. Like many people in the industry, she worked for very low wages to pursue a passion. That passion is shared by many of my constituents who enjoy a day at the races at Pitchcroft and make the most of the public amenity provided by the racecourse.
Meetings at Worcester regularly attract up to 3,000 race-goers and are popular with local residents as well as visitors from miles around. On Derby day, Pitchcroft can attract crowds of up to 7,000. That brings business to the city, with people shopping and dining out after their day’s racing, and can be a major economic boost for Worcester. The course provides not only racing, but an important venue for meetings, conferences, Worcester’s annual Campaign for Real Ale beer festival, and many charitable events. However, all this is under threat for two reasons. The first, which is beyond ministerial control, is the power and might of the River Severn. The second is the decline in the levy.
Confident as I am in the Minister’s powers, I would not ask him, Canute-like, to turn back the waters of the River Severn. However, I would ask him to take note of the special circumstances in which it places Worcester’s racecourse. The very fact that it is on the floodplain is perhaps what has protected this green space in the heart of the city from development, but it also brings its challenges. Most years, there is some flooding of the course, and that can lead to cancelled races and days lost. However, in the summer of 2007, when Worcester was struck by its worst floods in decades, the racecourse was submerged under feet of water for many weeks. Major flooding of this sort has made plans to upgrade facilities and a one-time plan to invest in a course-side hotel unviable, and has posed a major financial headache for the course’s management. As a result, Worcester is probably more dependent than many other racecourses on the money it receives via the levy to make racing sustainable and to attract trainers with prize money.
It is tragic, therefore, that this course of all courses should have suffered the biggest single cut in levy funding of any course in the country. The £300,000 reduction this year in Worcester’s levy funding for prize money represents not merely the average 38% cut, nor the 61% cut that one of my hon. Friends mentioned, but a massive 68% cut in the funding from the levy board, and poses a significant risk to the long-term financial viability of the course and the many trainers, stables and jobs that it supports. In a period where racing attendances have been higher, and where the overall betting on British horse racing has remained strong, it seems extraordinary that we should see such cuts, and for a racecourse as popular and well attended as Worcester, for all its challenges, it seems deeply unfair.
Horse Racing UK has set out a four-step programme that it believes could replace over £100 million of revenue lost by the levy board. My ambition is more simple: to stem the sharp decline that has seen the levy yield almost halve since 2004, and Worcester suffer even more. Clearly there is a challenge for racecourse owners and managers to make up revenue in other ways as well—commercialising pictures and using the opportunities presented by the internet to grow their own revenues—but it is reasonable that the betting industry should pay its fair share. I urge the Minister, as he looks into these matters, to ensure that there is a system in place to make all bookmakers pay their fair share for the benefits that racing brings them. I note the cross-party interest that we have heard during this debate in the idea of a racing right. Any solution should take into account the need to maintain a diversity of courses in different locations around the country, to support those courses, such as Worcester, where racing has taken place for generations, and which support a wide network of racing stables, and to rebuild a healthier relationship between the gambling and the racing industries.
I share with the Secretary of State the disappointment that he has expressed that these two industries were unable to agree a mutually beneficial settlement this year, and I applaud his belief in free markets and his intention to remove Government intervention from the process. However, I would urge both the Secretary of State and the Minister, who will be looking at a new system of funding, to come up with solutions that take account of both the challenges and the opportunities of an online world, and make racing viable, not just for this year, but for hundreds of years to come.
Guy Opperman (Hexham) (Con)
I must declare an interest at the outset as a jockey. I hold a category B amateur rider’s licence. As hon. Members will see as I strain to do up my jacket, I have a bit of problem. I blame Gordon Brown and the last election for many things, but in particular it put a stone on my weight, such that the winners I rode in 2009 I could not necessarily ride today. I have ridden out for and helped a variety of trainers, including Stan Mellor, Brendan Powell, Bob Turnell and Tim Reed. I probably would not have got through my school days had I not been able to run a small bookmakers at my school, aged 12, where the Friday ration of unlicensed booty was other children’s sweets, which seemed miraculously to find their way into my pocket. I represent the wonderful constituency of Hexham. It is over 1,000 square miles and an especially wild and wonderful place, with, I venture to suggest, a better racecourse than those of Cheltenham and Liverpool, and all the others that proclaim that they are great.
This is a pivotal time. Racing is one of the most important, successful and world-renowned sports, and that can be said of few sports today. One would be unable to list more than five sports in which we are at the top of the tree, which we definitely are in racing. The levy has assisted in that, but if we fail to support it at this crucial time we will, without a shadow of a doubt, become far less successful and will regret the day we made that decision. We are 38th in the league tables—league tables are very popular these days—but that is a very poor place to be. The 1% return on investment compares with 5% in Japan and 8% in the USA.
Everyone accepts that it is an outdated model, and businesses exploit it. One could talk at length about the great merits of Betfair and others. I was certainly interested to receive a letter recently from a gentleman called Mr Hawkswood, who represents the Remote Gambling Association, a particularly august organisation that represents more than 30 internationally recognised remote operators. To us, that means that they are offshore and do not pay any of the wages or individual contributions that we would like to see, and that is to the detriment of racing. I particularly like the following point that he made. He said that if we change the law that
“would be in breach of EU law and open to challenge in the courts.”
He was also quoted extensively in this morning’s Racing Post. If that is the case, bring it on, because we need to stand up for racing. A failure to do so would lead to a much lesser thing.
Every one of us could identify important race courses. I have ridden at Hexham, Cheltenham, Kempton and many others. There has been a 58% fall in individual receipts at Hexham, and a 60% fall at Towcester—I will never forget the scary down-hill fence there. The reality is that those courses are really struggling and need our support. I believe that the offshore situation is key. Either we address this, get organised and make the point, or we will really struggle. We must also look at betting exchanges. These issues are of prime importance. Simply doing nothing on an ongoing basis is a non-starter.
My hon. Friend the Member for West Suffolk (Matthew Hancock) and I started making that case in the Adjournment debate before Christmas, and he has done very well. He made the point that there is a real need for a racing right. Whether one calls it a sports betting right or a racing right, the bottom line is that the ability to run this on an ongoing basis is absolutely key. If we do not get supportive of this, with a cross-sport application of the individual things it involves, we will struggle. It is of prime importance that we do that. The present system might be broken and facing great difficulty in the way ahead, but we must address that on an ongoing basis. To fail to do so would be to fail the greatest thing, in terms of sport, that we have ever produced.
Philip Davies (Shipley) (Con)
I appreciate that time is short and so will be brief, although I will probably be the only Member to argue on the other side of what we have heard today. I should declare an interest as a former bookmaker, although I have no interest in bookmaking any more. I do, however, have an interest as an owner and breeder of horses and as someone who contributes to bookmakers’ profits.
Considering that background, one might assume that I would want the maximum amount of income to be given to the racing industry from bookmakers, but I take exactly the opposite view. One reason why is that, as an owner, on the rare occasions when my horse manages to win a race, I know that the last thing I am interested in is how much prize money it has won. That is not even a factor in my hobby: it is a hobby, and I do not expect other people to subsidise it; I expect to pay for it myself.
The reason I am not interested in prize money levels is that in the 2009 flat racing season, one fifth of the £71 million prize money pot was concentrated in the hands of just 10 owners, many of them not just millionaires but billionaires. My hon. Friends failed to mention that, and why on earth we should want poor people in betting shops to subsidise the hobby and sport of immensely rich people throughout the world is beyond me. The bookmakers give as much money now to the racing industry as they have done in recent years, because of TV rights, yet they take less and less money on the sport.
I shall briefly touch on Betfair and betting exchanges, because the other side of the argument has to be put. People cannot operate as traditional bookmakers on Betfair. A bookmaker—I should know; I was one—takes bets on any horse in the race at the prices fed through from the racecourse, but on Betfair they would go out of business in two seconds if they tried that approach, because there is no margin. They can lay only individual horses, or two horses in a race at the most. If someone bets against a horse, however, it is just the same as betting for a horse: they act as a punter, not as a bookmaker; and it would be absolutely outrageous if punters on Betfair began to be treated as bookmakers.
The arguments of the racing industry and independent members of the levy board do not hold water. They have first decided how much money racing should get, and then tried to find some way of raising it, but that is like saying, “I’ve decided how much money I’m spending next year, and I need a 25% pay rise.” The world does not work like that. We should decide on a fair mechanism by which bookmakers can pay the money, and racing, like everybody else in this age of austerity, should cut its cloth accordingly.
Ian Austin (Dudley North) (Lab)
This has been an absolutely fascinating debate. Today we have seen the House doing exactly what it should do: examining a complex and detailed issue from all sides of the argument. Members from both sides have demonstrated real, detailed expertise. Let us look at the previous two speeches: one from someone who has run a bookmakers; and the other from someone who participated in the sport as a jockey. How many other debates enable hon. Members from both sides to bring personal and detailed knowledge of a complex issue to the House? It has been absolutely brilliant.
We have heard people speak up on behalf of residents and businesses in their constituencies, whether racing fans or trainers, operators of betting shops or racecourses, owners or others who make such a huge contribution to the economy. So, let me congratulate the hon. Member for West Suffolk (Matthew Hancock) on securing this debate. It is fair to say that we have heard him stand up for the interests of his constituency, and for the jobs and prosperity that racing brings to Newmarket.
We have heard fascinating contributions from all parts of the House, and it is no surprise that so many Members have taken part, when we consider the hugely important role that horse racing plays in Britain’s sporting and cultural life. With about 60 racecourses throughout the country and annual attendances of well over 5 million, it contributes about £3.5 billion directly to the economy, providing 100,000 direct and indirect jobs and generating £325 million in taxes.
Horse racing plays a major role in the tourism industry, attracting visitors from around the world to major events such as the grand national, the Derby, Royal Ascot and the Cheltenham festival, as well as of course to Hexham, Worcester and so on, as we have heard. What is more, it is a truly global sport, but one in which Britain plays a leading role, with world-class courses, training, breeding, bloodstocks and sales.
The intrinsic link between racing and betting means that, in every country where the two take place, there is a mechanism to allow funding to go from the betting industry to support the racing industry. Here in the UK, the levy was established in 196l, and today it funds prize money for participants, the governance of the sport, the maintenance of its standards, veterinary science, training programmes, racecourses and other matters concerned with horse breeds and standards of care.
The levy is based on the betting industry contributing 10% of its gross profits to British horse racing. It is set by the Horserace Betting Levy Board, which has not so far been able to arrive at an agreement for next year, meaning that the Government are due to take the decision imminently, although the Secretary of State has said, like others before him to be fair, that this is the last time he wants the Government to make the decision.
In 2003-04, the levy contributed £110 million to racing, but that declined over the next three years to £99 million, and to £65 million this year as betting preferences have changed to new forms of gambling, and some betting has moved offshore. Racing argues that these developments have hit the sport hard, and that has led to the identification of several areas that would address the problems and increase the income received from the betting industry. The betting industry, on the other hand, argues that the amount that it contributes by having the right to broadcast races through media or picture rights and sponsorship has increased over the same period, and says that the total amount from the levy, TV picture rights and sponsorship payments from betting to racing has remained stable in recent years. The average total of these payments was £164 million between 2006 and 2010, and in 2010 it remained at £160 million, as the hon. Member for Shipley (Philip Davies) pointed out.
As we have heard, this is a hugely detailed and complex issue. The horse racing industry, bookmakers and other interested parties have widely differing views about how betting should fund racing and by what amount. As the Government consider how to put the relationship between betting and racing on the stable footing for the long term that we all want to see, and to decide what contribution bookmakers and others should make to the sport, there are a number of questions and areas on which we would like further detail or clarification. For example, can the Minister tell us what assessment the Government have made of the impact on the growth of offshore betting on the racing industry? When will the Government announce their response to and the outcome of the document, “Consultation on Regulatory Future of Remote Gambling in Great Britain”, which my hon. Friend the Member for Bradford South (Mr Sutcliffe) launched last year and which concluded in June?
Betting is taking place in a different context as a result of new technology and the resulting globalisation of the industry, and that has had a major impact on the sport as a whole, its structure and its finances. What discussion has the Minister had with the Treasury about the sport and the betting industry over the past few months? Is he considering no longer permitting betting operators to advertise to and transact with British consumers in a way that allows them to avoid the levy?
Ian Austin
I shall come to our views shortly. Our role at this point, four and a half years away from an election, is to listen to all sides of the argument, as in this debate, and to interested parties outside, and that is what I want to do. Then, at some point, we will arrive at a view. The Government are going to make this decision in the next few months. [Hon. Members: “What do you think?”] I think it is my job to listen to all sides of the argument, to ask the Government questions about their intentions, and at some point—not now, with four and a half years to go until an election—to arrive at a view on this and on all sorts of other issues.
What consideration has the Minister given to ensuring that betting exchanges and the professional bookmakers who use them, but do not pay full tax and levy, make an adequate contribution to British racing, or the same contribution to British racing as the rest of the onshore betting industry?
Several right hon. and hon. Members have queried the threshold rules introduced by the previous Government. Does the Minister believe that those should be altered? Racing argues that payments for customers in Britain who place bets on racing overseas should be reinstated. The betting industry argues that thresholds were previously reduced substantially in exchange for removing the levy on foreign racing, and that it would be odd to charge a levy payable to British racing on events that are nothing to do with British racing. What thought has the Minister given to this issue?
Labour Members recognise the enormous contribution that horse racing makes to Britain and to so many of its communities in so many ways, particularly in rural areas, and we want to see the sport strengthened and placed on a secure and stable financial footing for the long term. Our manifesto promised that as betting on sport increases, we would bring forward measures for consultation on generating a fair return to sport based on a contribution from the profits of the betting industry. We will work with the levy board to ensure that all operators taking bets on British races pay to support British horse racing.
As I have said, the Government have to establish next year’s levy, but we want a wide-ranging discussion that develops proposals to put racing on to a secure financial footing for the long term. We believe that ordinary racing fans want to see racing thrive in Britain, funded by the industry’s profits. We want plans to be developed to reform and modernise the funding arrangements for racing.
The Labour Government made the commitment that half the proceeds from the sale of the Tote would go back into racing. We also want the Tote, under future arrangements, to make a permanent contribution to racing. We want its ownership to be transferred into safe hands to ensure racing’s financial future.
I will conclude my remarks on that point to give the Minister his full 10 minutes. I congratulate again the hon. Member for West Suffolk on securing this debate, and all hon. Members who have taken part in what I have found to be a fascinating and informative discussion.
The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (John Penrose)
To begin, I echo a common thread throughout the debate by congratulating the hon. Member for West Suffolk (Matthew Hancock)—I nearly called him the Member for Newmarket, but his constituency is of course broader than that. I also congratulate the Backbench Business Committee on choosing what is clearly a well selected debate, given the breadth, depth and variety of the contributions. That shows what an important issue this is.
The motion calls for the Government to come forward with proposals by the end of the year. I am happy to accept that as the challenge and the target, and we will aim to meet it. I cannot make announcements right now, it being only January. The consultation that was kicked off by the last Government has been completed and there were a large number of submissions on the future of remote gambling and offshore gambling, which is a broader issue than the horse race betting levy, but is none the less important to the levy. We will respond to that consultation, and I am currently in the process of considering the responses.
A range of other interests have been laid out ably and well in this debate. I will not recap them all, partly due to lack of time. I want to ensure that I respond to some of the points that were made, rather than just repeat them. It is absolutely right for the House to urge the Government to come up with concrete proposals before the end of the year, and I am happy to accept that challenge, in line with the mood of the House.
I will have to tread a little carefully because, as I said, we are still considering the details of our proposals. I am happy to give as much detail as I can on the direction of thinking and the principles that underlie what has to be done, but beyond that, I shall rely on a quotation from Alan Greenspan, a former chairman of the Federal Reserve in America, who said in a speech to the Economic Club of New York in 1988, when asked about the future direction of interest rates, on which he was obviously not allowed to opine:
“I guess I should warn you, if I turn out to be particularly clear, you’ve probably misunderstood what I’ve said.”
I will be a little careful on that basis.
What I can say on the principles underlying this matter is that it is absolutely right, as everybody has agreed, that there is a strong symbiotic relationship between racing and bookmaking, and rightly so. It is clear that each of the two cannot exist without the other. Racing needs the income from bookmaking. Bookmaking is perhaps less dependent on horse racing than 10, 15 or 20 years ago, but it is still a tremendously important part of its income. We must recognise that.
It has also been pretty much universally agreed in today’s debate that the current levy system is old fashioned and, if not broken, in the process of breaking. It is a solution that to modern eyes and ears feels corporatist. It feels peculiar to have political intervention, lobbying and decision making on something that feels as though it ought to be a normal commercial relationship. As a number of hon. Members stated, the challenge is not whether we accept that premise—most hon. Members have accepted the basic premise—but in working out what a normal commercial relationship will look like and how we can get from where we are today to that point, and on a sustainable basis.
John Penrose
I am afraid that I have to be extremely quick and will not be able to take any more interventions due to the pressure of time, but my hon. Friend’s speech was very short so I shall give way to him.
Philip Davies
I am very grateful. May I suggest that that commercial arrangement is simply between bookmakers and racecourses? Often, the problem is that too many people are pitching in, when in fact all the bookmakers want to do is buy a product from the promoter of the racing product, so to speak, which is the racecourses. Surely it should be up to the racecourses to put up prize money levels to attract owners in the first place. The commercial arrangement should be a simple one.
John Penrose
That illustrates one of the difficulties in designing a sustainable system for the future. My hon. Friend is quite right that that is one potential solution, but I think many people would have grave problems with it. I hope that Members will wish me luck in coming up with a solution that pleases everybody, or at least does not displease too many people. Many people in the Horsemen’s Group and other parts of racing would be extremely worried by my hon. Friend’s suggestion, but I take his perfectly legitimate point.
A flier has been going around from William Hill, and I believe the substance of it also largely appeared in an advertisement in the Racing Post last week. It states:
“What is the answer, then? Simple. Replace the levy with a normal commercial negotiation.”
Amen to that, and many people would say the same thing. The difficulty is, what exactly does a normal commercial negotiation look like given that at the moment, we do not have a willing buyer and a willing seller? Racing has nothing to sell—it does not have the type of property rights that my hon. Friend the Member for West Suffolk talked about. I am not sure whether William Hill is proposing a property right, but if it is, I suspect that many people in other parts of the bookmaking and gambling industry will be concerned about that. That is another problem that we face. There is no obvious compromise, and if we are to get one, there will have to be a great deal of good will on both sides and a willingness to discuss the matter.
We have already taken our initial steps. We intend to take powers in the Public Bodies Bill to remove the Secretary of State’s role in the levy determination process. That is a step in the right direction because it takes politicians and politics out of the individual levy determination, but it does not go nearly far enough towards revising the system fundamentally, and that is the point that we have to get to.
Whatever solution is proposed—as I said, I intend to take up the challenge of bringing solutions forward for discussion during the course of the year—it has to produce a level playing field in a number of ways. First, there has to be a level playing field between betting exchanges and bookies, which are two fundamentally different business models. It is clearly no responsibility of any Government to start dictating which business models they prefer within a particular industry, so we should not play favourites between betting exchanges and traditional bookmakers. However, we should ensure that there is a level playing field in the contribution to racing of those two business models, and then one or the other will presumably win out in due course by the normal rules of free commercial competition.
Equally, it is essential that we have a level playing field between British horse racing, other sports and events that are bet on—given the innovation in the industry, it seems that we will be able to put a bet on many more things in future—and foreign racing. It would clearly not be in the interests of British racing if a significant, or even modest, contribution was inherent in the cost of placing a bet, but was not applied to other events on which people could place a bet in a bookmaker’s. We have to understand whether we can either whittle that differential down or get as close to a level playing field as we can, so that we do not disadvantage British racing.
As a number of colleagues have said, we must also have a level playing field between people who place bets with domestic bookmakers and betting exchanges and those who do so remotely or overseas through operations based offshore, including through the internet. We are clearly a long way from that at the moment.
As I said earlier, when I consider the responses to the previous Government’s consultation, I will bear in mind the broader issue. Important though a level playing field is, there is also the question of consumer protection. At the moment, people who place bets in Britain, with domestically regulated exchanges or bookmakers or through any other type of gambling, are protected by the Gambling Commission. If someone places a bet on equivalent games that are regulated offshore, their protection may be severely lower or in some cases zero. That clearly has implications such as the potential for problem gambling.
I have heard what Members have said and am happy to pick up the challenge. As I said, I hope Members will wish me luck. They will have heard from the debate that the different positions are quite wide apart at the moment, and in some cases deeply entrenched. That is a major problem that we have to solve, and I look forward to bringing forward our proposals as requested in the motion.
Matthew Hancock
It has a been a pleasure to hear today’s debate and the passionate declaration of support for the racing industry. I declare my support for, and support from, the racing industry. That passion has shown the value of this Backbench Business Committee debate.
What have we learned today? There is a broad consensus on the need to reform the levy and clear support for the need for a fair return. The Minister joined us in recognising the value of a property or racing right in that respect. For him that was one option, but for me it is the preferred option. We also heard of a previous Minister’s support for a sports betting right, which is significant. Finally, it was a great pleasure to hear the Minister refer in the terms that he did to the impact of offshore betting on the industry. The symbiotic relationship between betting and racing can be improved by a commercial relationship, but only if that is based on what racing has to sell and its right to sell it.
Lastly, the level of support, the fact that speeches have had to be short, and the number of people who have spoken show how important and urgent the issue of the racing levy is. I am delighted that the Minister accepts the motion and that he is prepared to take up the gauntlet—I will ensure that he does, and that it fits when it is finally put on.
Question put and agreed to.
Resolved,
That this House notes that the horseracing industry supports employment of 100,000 people in Britain and that the racing industry contributes £3.5 billion to the UK economy each year; celebrates the contribution the industry makes to the cultural and sporting landscape of Britain; recognises Newmarket’s role as the global headquarters of racing; but further notes that the horseracing betting levy yield has been falling in recent years; further recognises the changing nature of the gambling industry; is concerned that betting operators are increasingly based offshore and so do not fully contribute to the levy; and considers that the Government should bring forward proposals to improve the system of funding for racing and the relationship between racing and bookmakers before the end of 2011.