The Tote
Debate between Lord Watts and John Penrose
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.