Horse Racing Levy

Lord Foster of Bath Excerpts

Thursday 20th January 2011 Commons Chamber

[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]

Will the right hon. Gentleman give way on that point?

[Mr Foster]

I will, but only briefly.

[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]

Will the hon. Gentleman give way?

[Mr Foster]

I will, but I want to finish.

[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.