Horse Racing Levy

Justin Tomlinson Excerpts

Thursday 20th January 2011 Commons Chamber

[Matthew Hancock]

My hon. Friend makes her case with the passion to which we have become accustomed.

The third hole in the levy is that outdated threshold rules exempt approximately two thirds of betting shops from paying the full rate. Thresholds were brought in to protect small independent bookmakers, but because the threshold applies to the shop and not to the company, we have a proliferation of corporate betting shops up and down our high street—in Newmarket, we are about to get our 12th. This allows betting shops to profit from fixed odds betting terminals while avoiding some of the levy. Independent members of the levy board say that this threshold error costs racing some £10 million. They think that it should be abolished, and I hope that the Minister will listen.

[Justin Tomlinson (North Swindon) (Con)]

As the vice-chair of the all-party group on small shops, I have real concerns about the point that my hon. Friend has just made about the threshold. Yes, many such shops are part of the big national companies, but a lot of them are independents. Even those bigger companies could close down many of their smaller shops, leading to job losses and further pressure on the high street and village shopping centres—it would decimate them.

[Matthew Hancock]

Job losses in the racing industry, if it does not have a secure future, would far outweigh job losses that my hon. Friend mentions. What is more, large corporate betting shops are often split up to have two shops below the levy. It was introduced to protect independent bookies, and we would all welcome it if they were to be protected under a future scheme. But protecting small shops that are owned by large corporates was not the intention.

The charter proposes payments for customers in Britain who place bets on overseas racing. That hole costs some £13 million, and the independent members of the levy board say that that should be closed—I hope that the Minister agrees.

What should we do? In the short term, the Government can keep the ecosystem of racing alive by plugging the holes in the levy, by finding this year in favour of racing in the determination of the levy, and by fulfilling their promise to resolve the future of the Tote in a way that recognises its support for racing. But all sides agree that the levy is broken and needs radical reform. The bookies think that the levy is broken, racing thinks it is broken, the Secretary of State thinks that it is broken, and Members on both sides of the House seem to think that it is broken. No one wants the annual spectacle of ministerial decision about the funding of racing, not least because it unnecessarily antagonises relationships, wastes time and money and prevents a proper commercial relationship between racing and betting. Anyone who has witnessed the ugly and inaccurate adverts in past weeks can see the waste of money.

We need a system that leaves racing and betting to their commercial future and ensures that racing’s product is appropriately financed and protected. Some say that the levy should be abolished and nothing put in its place. They are saying that gambling should get something for nothing. Racing is clearly an input into betting, so of course betting should contribute to the costs of putting on a race. Everyone would like something for nothing, but no one would say that it is the basis for a commercial relationship, which is what the bookies say they are looking for. So let us have that commercial relationship. Let us formalise what it is that racing sells. If someone invented a new cancer drug, would someone else be allowed to replicate it without paying them for the research that went into developing the drug? We have all seen the scary warnings at the start of rented films saying that piracy is a crime. If hon. Members made a film, would they let someone else print off copies of it without contributing to the cost? Of course not.

--- Later in debate ---

[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.