Tote

Lord James of Blackheath Excerpts

Wednesday 8th December 2010 Lords Chamber

Asked By

[Lord James of Blackheath]

To ask Her Majesty’s Government how their plans for disposing of the Tote take account of the interests of horse and dog racing.

[Lord James of Blackheath]

My Lords, I am somewhat embarrassed to have to start this debate of my choice by apologising for the fact that it was wrongly entitled to include a reference to dog racing on the Tote, which is not an issue because dog racing has already been ceded to the ownership of the various dog stadia. Perhaps there is a lesson in that for us all, as we shall see. This is such a big subject that I am going to trim my words down to the bare essentials of the issue that immediately concern us, given the imminence of what may be an extremely critical and very retrograde decision by the Government following the completion of their invitation to indicative offers for the purchase of the Tote which are due to be completed by Friday evening. We have less than 48 hours to go.

Both this Government and the last Government announced separately their intention to dispose of the Tote. The last Government also said that they would offer to racing half of the realisation value of that disposal. The present Government have set out on a path to explore the potential for the disposal of the Tote, but have made no offer of proceeds going to the benefit of racing. That is not necessarily to say that they are being mean-minded because they may have realised more clearly than the previous Government the problems associated with this disposal. The first question that arises is who owns the Tote. Many people may own the Tote, but the one certainty we have is that the Government do not. So we have the odd situation where both this Government and the last Government are setting out to sell something which they do not have.

I recall a case recently of a bricklayer who tried to sell the Savoy Hotel for a couple of million pounds. He went to prison for theft or fraud. It sounds to me as though the Government, in offering to sell something they do not own, are doing no more than the bricklayer did with the Savoy Hotel. Let us consider the consequences of this. The previous Government, perhaps perceiving this problem, decided that they would put the ownership of the Tote beyond all possible doubt by passing the 2004 Act for horserace betting and the Olympic lottery. That Act remains in place today but has not been fully implemented—certainly not as far as the Tote is concerned—and we now have a situation where, if it was implemented, undoubtedly the Government would be entitled to sell the Tote; but, equally, they would then fall foul of the Brussels controls on state support and would not be allowed to pass any of the proceeds down to the benefit of racing—so racing would be a very big loser.

Let us consider how far the racing industry would be a loser. First, whoever bought the Tote—presumably a bookmaker—would immediately look at the huge burden involved in running Tote operations on the 60 racecourses in the United Kingdom every day of the year, with the need to recruit local staff wherever they were and administer a complex business. It would be only a matter of time before the bookmaker decided that he would be very happy to keep the 550 betting shops and put the potential pool betting benefits into his pocket and to close down, or to so impose charges on the racecourses for running the Tote that the whole of the British racecourse structure would become immediately non-viable and be either forced to close down or to so curtail its activities that the finances of racing would be destroyed.

If that happened, the 2 million or so people who go racing nowadays, and who are attracted to do so by the benefit of being able to bet small stakes of £1 or so at a time instead of the bookmakers’ minimum stake of £5 or £10 for a bet, would be put into a position where they would not wish to go any further and racing would be destroyed at the social level as a reasonable sporting activity for the multitude.

The bookmakers would take their 550 betting shops and consider them as a worthwhile dividend to put in their pockets, and would almost certainly aggregate them within the totality of their existing betting operations and transfer them to either Gibraltar or Spain and outside the fiscal reach of the United Kingdom. This would have grave consequences for revenue generation in the UK economy. That would be an absolute certainty. Furthermore, racing would cease to derive its contribution from the levy of about £10 million a year. In fact the Tote has generated £84 million of direct benefit in sponsorship and levy for the continuation of the racing structure of the UK in the past four years alone; it is a continuing and vital income stream.

If those things were to happen and there were no racecourse meetings because no one was turning up for them, there would be an immediate curtailment of the United Kingdom thoroughbred breeding industry and its big export potential and huge dollar earnings would be squeezed out of existence. No one will breed horses or buy them when there are no racecourses or attractive meetings at which they can run them. So that would go. One hundred and twenty thousand jobs in Britain—comprising 20,000 full-time employees and 100,000 important temporary and part-time workers—would be destroyed. For these people racing is an extremely important part of the rural economy, without which they would otherwise live in straitened circumstances. Everyone connected with racing would lose if one of the bookmakers came in with an attractive bid and the Government decided to take it.

If that is the predicament and the consequence that racing is facing, what are the alternatives? There are three. I have just described the first one—which is ruinous to racing—where the Tote is sold to the highest bid from whichever bookmaker has the deepest pockets; and then, because of Brussels’ strictures, the Government would not be able to pay any proceeds into racing and would destroy racing’s livelihood by removing the on-course facilities beyond recovery.

The second alternative is a partial disposal of the tote in stages, whereby they offer the on-course Tote facility to the racing industry—either the British Horseracing Authority or the Jockey Club—and leave in the hands of the Jockey Club enough facilities to continue to run each day. Immediately, I suspect, it would be much worse off because there would be considerable extra costs in doing it on its own because the betting shops chain makes a significant contribution to the overheads required to run the Tote on-course. So that would be a loser straightaway. The pool betting operation, which is renewed once every seven years by government licence, would have to go to the racecourses and they would have to establish a system for licensing it for use by other people. That might help a partial recovery but it would be unsatisfactory. Ultimately, a partial disposal would probably be the start of a process that would end up being very similar to the first steps of a total disposal.

The third alternative is that if the Government decided not to fully implement the 2004 Act, they would be free to do what they want with the Tote without interference from Brussels. So give the whole Tote to racing, lock, stock and barrel, and charge nothing for doing so. The Government would then be a bigger financial winner than they would be by selling the Tote. For example, first, the British Tote turnover would not be aggregated with those of companies that have already decamped to Spain and Gibraltar and the Government would continue to receive the fiscal income deriving from the operation of the Tote in the UK; secondly, they would have all the advantages of the corporation tax arising on the various breeding concerns and the profits that they make on thoroughbred breeding activities—they would be on a winner there; and, thirdly, the Tote, which generates £10 million a year for the continued health and vitality of racing through its contribution to the levy, would continue to operate in such a way as would help sustain 120,000 much needed jobs in rural locations. It sounds like a win-win situation to me.

In those circumstances, I hope the Government will now look very closely at the indicative offers they will receive by Friday evening—which will come from bookmakers who are, with two exceptions, already based in Gibraltar and Spain—and decide that the better option is to go along the path of allowing racing to retain its integrity as an entity, with the ownership of the Tote within it. Racing will then, at long last, come out of the dark night of the soul through which it has been going, where it does not know what it is or what its future is to be, and get on with the job of running itself in good order.

The origins of the racing industry go back 350 years. When Nell Gwynn and her lady friends at Newmarket decided they needed a rest from the King and his courtiers in the afternoon, they told them all to go out and ride races. That led to the creation of the Jockey Club and, in turn, the Jockey Club created one of the great glories of British sporting life—the racing industry as it is today. Do not let the Government throw it away. They can keep it and allow it to foster new wealth and achievement and to maintain its place as a leading glory of British sporting life on the world stage. In the words of the Nike ad—“Just do it, Government, please”.