Mr Laurence Robertson (Tewkesbury) (Con)
I, too, am surprised that so many Members do not want to hear this timely and important debate. I am pleased to have secured it and grateful to the Minister for staying behind to reply to it. I am also grateful for his genial and informed approach to all the horse racing issues that the Government have to deal with.
I wish to declare two non-declarable interests. I have the honour of being joint chair of the all-party group on racing and bloodstock industries, which is one of the most active, well-attended and important all-party groups in Parliament. I have the honour of being joint chair alongside the hon. Member for Mansfield (Mr Meale), whom I am pleased to see in the Chamber this evening. I also have the honour of representing the great race course at Cheltenham, which by a quirk of the boundaries falls within my constituency of Tewkesbury. It is looking forward to one of the greatest national hunt racing festivals in the world in a couple of weeks’ time.
The debate is timely because the Government have announced their intention to finalise the status of the Tote. It was set up in 1928 to benefit horse racing, and benefit horse racing it has done. Last year, it provided almost £19 million to horse racing through the statutory levy and sponsorship. The Tote sponsors the Cheltenham gold cup, one of the greatest steeplechase races in the world, which will take place in a couple of weeks’ time. It also pays a lot of money in rent to around 60 race courses across Great Britain, and that money is absolutely crucial to racing. The Tote is more than that, however; it is an institution, and it provides the friendly face of bookmaking.
It is 10 years since the right hon. Member for Blackburn (Mr Straw), then Home Secretary, announced that the Government of the day would change the status of the Tote. At the time, it looked as though it would be transferred to a racing trust. Indeed, a shadow trust was set up with its own chairman, Lord Lipsey, but the transfer was never made. One of the big questions that we must ask before getting too far into the detail is this: who actually owns the Tote? That is not an easy question to answer. It was for that reason that in 2004 the then Government passed an Act of Parliament that nationalised the Tote, with a view to moving it on to the racing trust, but they never included that intention in the Bill, which was a problem. My submission is that, if the Government had to nationalise the Tote and obviously did not own it, they in some way had a responsibility to racing, so it would be wrong for them to do anything with the Tote that would deprive racing of its annual income from the Tote.
Lisa Nandy (Wigan) (Lab)
The hon. Gentleman will know that I have the privilege of representing Wigan, where the Tote has its headquarters, and the staff there have lived with uncertainty about their futures for a long time. Does he share my concerns about how their jobs and, in particular, their pensions will be protected, and would he welcome some clarity from the Minister on that?
Mr Robertson
I certainly do share the hon. Lady’s concerns. I shall come to that issue in a moment, but she makes a very important point.
Mr Dave Watts (St Helens North) (Lab)
Does the hon. Gentleman agree that, if the Government are going to assess any bids for the Tote, they should use only two criteria: first, the retention of jobs in the north-west; and secondly, the contribution to racing? Does he not think that those are the two overriding decisions that should determine who gets the Tote?
Mr Robertson
The hon. Gentleman makes a very good point. I have already mentioned the money going to racing, and the issue of jobs is important not just to the Tote. Many people are employed in racing, and, if it loses the Tote’s contribution, those jobs will be adversely affected, so he is absolutely right.
The Chancellor, in his Budget speech, mentioned the intention of moving the Tote on and changing its status, and more recently the Minister here tonight said that, when that happens, 50% of the proceeds of the sale will be returned to racing. That statement is generally welcome, and from a racing perspective it has to be good news, but it is not enough. There are various questions about that 50% figure. How much would it be worth after pension and debt liabilities have been taken into account? Who in racing would get the money? How much would it amount to? Would that 50% satisfy European Union state aid rules? Those questions need to be answered.
My central point—the most important point, which the hon. Gentleman touched on—is that the money that the Tote puts into racing each and every year is more important than 50% of the proceeds of any sale going to racing. As I have frequently said, that could turn out to be like selling one’s house and living off the proceeds: it is okay to do so for a while, perhaps five years, but at the end of that period the proceeds are all gone and then one is left without an asset. More important than that 50% is therefore the Tote’s year-on-year contribution to racing, and I cannot stress that enough.
Mr Alan Meale (Mansfield) (Lab)
May I remind the hon. Gentleman of the contents of early-day motion 1516, which members of the all-party racing and bloodstock industries group tabled? It talks about who represents racing per se, and the answer is organisations such as the Jockey Club and the British Horseracing Board, the owners, trainers, jockeys, stable staff and their representative organisations. They all support the Tote’s foundation, as he has been describing. The Minister knows that the Government have never given a penny to the Tote, never even acted as guarantor to it, but have gleaned millions from it, so should he not at least listen to the people who have actually made a business out of it?
Mr Robertson
The hon. Gentleman, the joint chairman of the all-party group, makes an important point, which I was going to come on to but shall dwell on now for a moment. The people who run horse racing are well known for falling out over every issue that there is to fall out over. It is almost a standing joke in the racing industry that they cannot agree on anything, but the hon. Gentleman is absolutely right, because on this issue racing speaks with one voice, and it is crucial that the Government listen to it.
I do not remember racing being as united on any issue as it is on this one. The central point that it is making is that whoever ends up running the Tote in a few months’ time should not only be able to pay this contribution to racing every year but guarantee to do so. In other words, the purpose of the existence of the Tote must be to contribute to horse racing, because that is what it was set up to do. If other bidders are considered—of course, the Government have to follow due process and consider other bidders—would the industry be able to ask for guarantees from those bidders that the Tote would continue to look after horse racing? That would provide some difficulty for those bidders because it would reduce the value of the Tote as a business—I understand that—but how on earth would they be able to give that guarantee? I do not think that they could.
When the Chancellor and the Minister further considered the status of the Tote, they said that they would look after racing’s interests and also look after the interests of the taxpayer. I return to what the hon. Member for Mansfield said. The taxpayer has never put a single penny into the Tote, and so, in my view, the taxpayer does not deserve a return from any sale of the Tote. This is very different from the millions upon millions that the taxpayer used to have to put into the old nationalised state industries. I want to see more fairness for taxpayers, and lower taxes. I am always on the side of the taxpayer; I come to this House to represent them. However, on this occasion they do not need any representing.
Mr Meale
While I commend the hon. Gentleman’s words about what contribution is made, I refer back to what my hon. Friend the Member for Wigan (Lisa Nandy) said about the taxpayers of Wigan and the north-west and the contribution that they have made. The fact is that there would be no business whatever were it not for the people who work for the Tote in Wigan, in Lancashire, and up and down the length and breadth of Britain’s high streets where Tote bookmakers operate. These women, in the main, work for the Tote, travel to race courses throughout the UK, and glean the many hundreds of millions of pounds that turn the profit that we are talking about.
Mr Robertson
The hon. Gentleman is absolutely right. It is the efforts of the staff, who have contributed so much towards the Tote as an organisation, that have allowed it to contribute so much money to horse racing.
Yvonne Fovargue (Makerfield) (Lab)
Does the hon. Gentleman agree that much of the value of the Tote lies in the loyal and mainly long-serving work force, who need to be protected? Their needs must be given proper weighting in the bidding process as a reward for their loyal and long service, which has helped the Tote to develop into what it is today.
Mr Robertson
I entirely agree with the hon. Lady. I will touch on that in a moment.
As I said, the taxpayer has never put any money into the Tote and therefore does not deserve any money out of the Tote. Having said that, I fully understand the difficulty that the Minister and his Department may face, because over the years we have seen the Treasury grow in strength, and it wants some money out of this process. However, a bid from a Tote foundation may qualify to be one of the best bids that it could take up, for some of the reasons that have been given. A Tote foundation would of course continue to employ staff, and therefore continue to have a pension liability. It would continue to be responsible for any debts that the Tote may have. All that has to be put into the melting pot. An undiscounted cash payment could be made. If the Tote is to continue as a foundation, or as the Tote organisation, and continue, year on year, to pay money to horse racing, there is no need for the 50% sum to be given back to horse racing because it would be getting something far more valuable—the ongoing amount each and every year. That is extremely important.
Matthew Hancock (West Suffolk) (Con)
I congratulate my hon. Friend on securing this extremely important debate at this crucial time. As he well knows, in my constituency about 5,000 jobs in and around Newmarket are connected with the racing industry. Does he agree, especially given the history of this issue, that the crucial element is the contribution that is made to racing? I strongly agree with his view that an ongoing contribution to racing is vital in terms of the future of the Tote, and that whatever choice of bidders is made, an obligation for a contractual support of the future of racing is required.
Mr Robertson
My hon. Friend is absolutely right that that is the crucial element. If there is one message that I would like the Minister to receive tonight, it is that we have to be certain of the ongoing contribution. We cannot be certain of it if the highest bidder is simply accepted. Under certain circumstances, we would not even be sure that the Tote would continue to exist as an organisation, because bits of it could be sold off. It is only through this process that I have come to understand what is meant by embarrassment clauses. That is how the Government might ensure that once the Tote is sold or transferred to another organisation or company, it will not asset strip it, sell it the next day and make a massive profit, or cause it not to survive as an organisation.
Ian Swales (Redcar) (LD)
Does my hon. Friend agree that almost every country in the world that has a successful racing industry also has a state-owned pool betting system, and that in many cases that is the only form of legal betting?
Mr Robertson
My hon. Friend makes a good point. I do not want the Government to continue to own the Tote—not that they own it yet, but hon. Members know what I mean. I do not think that it is for Governments to own betting shops; that is not what they are there for. My hon. Friend is right that the model I am proposing, whereby racing gets all the benefit from the Tote, is not unusual, but exists in many parts of the world. Perhaps the system here differs because the Tote, if it continued as a foundation, would be competing with many other companies such as Ladbrokes, Coral and William Hill. However, his central point is absolutely right.
I am coming to the end of my speech, or certainly to the end of the time that I wanted to take, but I want to make one further point. In a debate two or three weeks ago initiated by my hon. Friend the Member for West Suffolk (Matthew Hancock), we discussed the future of the horserace betting levy. It was pretty well agreed that the present system is out of date and that it cannot carry on in its present form. It needs to be reformed or to be replaced completely. Racing will have to generate more commercial opportunities to get more money into horse racing, even if the levy continues as it is. If the Tote were transferred or sold to an organisation or foundation that was there purely to finance horse racing, it would be a move in that direction. Allowing the Tote foundation bid to succeed, for example, would be a step towards a solution with regard to the levy, and the two policies would go forward together.
I started by saying that the ownership of the Tote is uncertain, but one thing that is certain is that racing has a right to the money that comes from the Tote. I ask the Minister to ensure that that continues to be the case.
The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (John Penrose)
I congratulate my hon. Friend the Member for Tewkesbury (Mr Robertson) on securing this important debate. A number of Members have made the point that this is a timely discussion and I am delighted to have the opportunity to respond to the excellent points and questions that my hon. Friend raised. I thank him for describing me as genial. I do not think I have been described as genial before. I shall tuck that away and tell my mum when this is all over. I also compliment him because, as he said, by a quirk of the boundaries his constituency includes the wonderful race course of Cheltenham. It is my hard lot in life to have to go to the Cheltenham festival for two days this year. That is a terribly tough part of my job, but I am rather looking forward to it.
I should point out that we are in the middle of an open market process in which a number of people are bidding for the Tote. I hope that my hon. Friend and the hon. Members who have intervened will understand that I am therefore limited in what I can say at this point. Some people who are bidding to take over the Tote have signed non-disclosure agreements with the Government and the Government have signed them in return. It would not be fair to individual bidders if I started disclosing details of one bid and not another. That would clearly not lead to a fair, safe and equitable disposal process, so I will have to watch my p’s and q’s. I am not trying to be deliberately obstructive or obscure, but I need to be careful
My hon. Friend began by asking a series of questions about the details of the 50% commitment. As he rightly pointed out, the Government have committed to ensuring that we honour the Labour Government’s original commitment that 50% of the proceeds of any disposal go to racing. I will come on to his points about whether that is a high enough proportion.
John Penrose
I thank the hon. Gentleman for that intervention because it leads me on to answering some of the points that he and his co-chairman of the all-party group on the racing and bloodstock industries, my hon. Friend the Member for Tewkesbury, asked. He is right: clearly, these will have to be net proceeds.
There is a series of questions to be answered about precisely how the transfer of the 50% of the proceeds will take place, and to whom it will be transferred. The answer to most of these questions is tightly bound by European law, because we have to ensure that we do not inadvertently trip over concerns about state aid, which have already derailed one or two earlier attempts to deal with the Tote under previous Administrations. There are things that we can and cannot do, and we are examining them and ensuring that everybody understands what they are. However, I would make the point that they apply equally to any of the potential bidders who are interested in taking over the Tote in due course, who will be bound by charity law and so on. It is most likely that the money will end up in some kind of trust that is governed by the requirements of European law, to ensure that it does not fall on the wrong side of the state aid rules. More details are being developed and worked out through the lawyers as we speak, and when the time comes we will obviously need to publish rather more detail.
John Penrose
I am happy to come on to the issue of Tote staff, but I actually meant to describe a slightly different type of trust, in that the money that is paid to racing will need to go into a carefully bounded trust that is constrained by EU state aid rules. That may or may not be helpful to the future of the staff, but it is a parallel and separate issue.
The principal point made by my hon. Friend the Member for Tewkesbury to which I wish to respond was that the value of the 50% share would almost certainly be less than the value of the ongoing income stream that there has been from the Tote to racing year on year. I completely understand the basic point that he was trying to make, which was that if someone is given a large lump of capital in year one and they fritter it away, or even spend it on terribly valuable and useful things, they will be left with nothing else unless they have a yearly income as well.
However, it is not necessarily true that the ongoing annual income is worth more than the value of the up-front capital. It rather depends on how much that ongoing annual income will be under the various potential future owners of the Tote. Without revealing details of all the different bidders—as I said earlier, I cannot do that—I can tell everybody that the various people who are bidding for the Tote are coming up with an interesting and rich variety of proposals for how to treat the level, structure and so on of that ongoing income stream. They are not all the same, and some are better for racing on an ongoing basis than others. However, we need to value the best and worst differentials alongside the value of the capital. It is not true that the value of the differential will always be bigger and more valuable than the up-front capital. In some cases, it could be that 50% of the proceeds properly invested could yield a very significant return. It is not a straightforward calculation, so I caution the hon. Member for Mansfield (Mr Meale) on how he makes that comparison.
John Penrose
I am afraid that if I answer that question, I will fall the wrong side of the line that I described earlier. The people who are bidding are making a variety of pledges and proposals on that, which must all be valued, addressed and compared. Some are notably better than others, and that is one factor that we will take into account.
Hon. Members on both sides of the House have said that 50% is not enough, and that 100% of the proceeds should go to racing. As Minister with responsibility for racing, nothing would give me greater pleasure than to sign up to that proposal, but that is not where this Government are, and nor was it where the previous Government were—they passed the legislation that allows us to dispose of the Tote by passing it into public ownership and eventually on to a bidder.
The Chancellor made a commitment in his Budget on 22 June, and used a phrase that is emblazoned on my heart—I suspect that it is well known to all hon. Members in the Chamber. He promised to
“resolve the future of the Tote in a way that secures value for the taxpayer while recognising the support the Tote currently provides the racing industry”.
Given the current state of the national finances, I am afraid that it will be extremely hard—or completely impossible, in my view—to argue that we should do more than a 50:50 split. I appreciate that there are deeply held views on both sides of that argument, but that is the situation that, to a large extent, we inherited. We have honoured the previous Government’s commitment to 50%, but I fear that it would be extremely difficult to go any further at this stage.
The Government are extremely pleased with the quality and quantity of the interest and bids that we have received for the future of the Tote. It is a matter of public record that the number of bids in the first round was in the high teens. We have whittled that down with an initial assessment and are now in phase 2, with a smaller selection of people, but we still have a pretty wide range.
John Penrose
I have a very short amount of time left. I will take the hon. Lady’s intervention because I have already taken one from the hon. Gentleman.
Lisa Nandy
Will the Minister at least tell us what relative weight he has given to the continuing employment of existing Tote staff?
John Penrose
I apologise. I did not mean to gloss over that and the hon. Lady is quite right to pick me up on it. I am afraid that I cannot quantify the relative weights, but the Government will apply three crucial criteria: return to the taxpayer; return to racing; and pledges on the future of staff, including those in Wigan. Those three factors will be crucial in our evaluation of the different bids. As I said, the structures of the bids are widely different, and we must calculate carefully if we are to make like-for-like comparisons.
To return to my point, we have a strong, wide and powerful range of people who are through to round 2. They are currently involved in due diligence, crawling through the books with a fine-toothed comb and ensuring that they understand all the issues. In due course, we will whittle the bidders down still further to a final smaller group, which we will endeavour to take through to completion.
The good news is that because we have such a strong field of runners and riders, we stand a very good chance—although one can never be sure of these things—of bringing this to a successful conclusion. All in our collection of bids are of high value in respect of all three of the main criteria that I just described. That is our best guarantee of a successful outcome. If we have a good choice between those three different values, we stand an excellent chance of success.