Horse Racing Levy

Baroness McIntosh of Pickering Excerpts

Thursday 20th January 2011 Commons Chamber

[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.

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[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.

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[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.

[Several hon. Members]

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