John Penrose
Main Page: John Penrose (Conservative - Weston-super-Mare)
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.