Philip Davies
Main Page: Philip Davies (Conservative - Shipley)(13 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text
Matthew Hancock (West Suffolk) (Con)
I beg to move,
That this House notes that the horseracing industry supports employment of 100,000 people in Britain and that the racing industry contributes £3.5 billion to the UK economy each year; celebrates the contribution the industry makes to the cultural and sporting landscape of Britain; recognises Newmarket’s role as the global headquarters of racing; but further notes that the horseracing betting levy yield has been falling in recent years; further recognises the changing nature of the gambling industry; is concerned that betting operators are increasingly based offshore and so do not fully contribute to the levy; and considers that the Government should bring forward proposals to improve the system of funding for racing and the relationship between racing and bookmakers before the end of 2011.
I am delighted that we have three hours to debate this important topic, because the future of horse racing in Britain is at stake. This golden sport, which brings together man and beast, flat cap and top hat, the rural charm of Bangor-on-Dee and the pomp and ceremony of Ascot—this jewel in the crown of British sporting culture—faces an uncertain future and immediate and urgent woes.
All is not lost. As anybody who has seen today’s Racing Post knows, attendances are up—racing is the second most attended sport after football. Britain’s bloodstock has rarely been of a higher quality, and A. P. McCoy won the BBC sports personality of the year award. However, racing’s finances are at risk, and it falls within the power of the House to support today’s motion, which calls on the Government to act to secure for our nation the future of the sport that is the cause of such pride.
For centuries, since King Charles II took his court to Newmarket twice yearly for a month of relaxation and raucousness, Britain has led the world in horse racing. In the past, racing provided the impetus for the training and breeding of cavalry horses during times of peace, and now it supports more than 100,000 jobs across the country and, in all, £3.5 billion of our economy. It contributes to our culture, and even to our language.
In Newmarket alone, 5,000 jobs are related to that town’s place as the global headquarters of the sport—not only owners, trainers and champion jockeys but modestly paid stable staff, grooms, farriers and those performing all the ancillary services. That complex economy, like an ecosystem, is in delicate balance, and that balance is under threat.
The levy system set up 50 years ago is broken, and the funding that underpins racing is seeping through the holes in that outdated system. I shall briefly set out what has happened, why, and what should be done about it. To explain what has happened, I shall delve into the ecosystem that I described. Money comes into racing from punters who like to punt and owners who like to own. The Tote, which was set up by racing, not by the Government, adds to the pot, and I look forward to its future being secured with the appropriate recognition of racing.
Money comes in from people who spend a day at the races, from media rights and from the levy contributions of those who make a bet. That, in turn, feeds into prize money, which goes partly to jockeys and stable staff—we should always remember that they, too, benefit when their horse crosses the line first—but mostly to owners. It is that hope and aspiration, the golden bauble of the pot of money at the finish post, that attracts owners into the industry and lures them to race. Say it quietly, but the amount of money injected by owners actually outweighs the amount that they win back in prize money by a ratio of about 3:1. If my father-in-law is watching, I hope he takes note of that. Owners, in turn, use their money, some of which they have won back in prize money, to pay horsemen to train and breed bloodstock.
There are many reasons to own a racehorse, as some Members know.
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.
Philip Davies
I commend my hon. Friend for his initiative in introducing this debate. Before he describes the holes in the levy, will he acknowledge that the amount given by bookmakers to racing averaged out, between 2006 and 2010, according to the independent members of the Horserace Betting Levy Board, at £164 million a year—in TV money and levy combined—and that this year it will be £160 million, which is a drop of only 2.5%? Will he also acknowledge that, at the same time, Arena Leisure’s profits increased by 52%? When he is looking at prize money, will he focus less on the betting industry, which still gives lots of money despite the fact that horse racing is a smaller and smaller part of its business, and look at racecourses, which are not passing on their increased income in prize money?
Matthew Hancock
My hon. Friend makes an important point, but his phraseology lets slip the error in the argument. The betting industry gives no money to racing; it pays money to racing. I want a system in which that is sustainable. Of course, people who watch a sport should pay towards it. How much of the money made from media rights gets to the front line of racing is an important question, and I hope that those rights will be negotiated very tightly by racing in future. The amount of levy has fallen from more than £100 million to £65 million, but the levy reflects the fact that when people make bets, part of their stake is a contribution to the cost of putting on that race. It is appropriate for racing to charge bookmakers for using its output and product. That is the nub of the argument.
The first hole in the levy is offshore betting. UK consumers are reported to spend about £2.5 billion on internet and phone gambling, but operators licensed by the Gambling Commission represent less than a quarter of that—the rest is spent offshore. Three quarters of online betting, therefore, does not contribute to the levy or other taxes, and consumers are not protected under UK rules. Ireland’s recent budget began to tackle that, and I hope that the Minister will follow suit. I am sure that such a measure would have the support of the gambling industry. I spoke to the big gambling organisations in the run-up to this debate. Each firm told me that it considered going offshore only because all the others are doing so. Let us bring all those firms onshore and subject bets to the levy and the appropriate tax here in Britain.
Betting exchanges are the second hole in the levy. Currently, exchanges pay 10% of the levy on profits that derive from commission from winning bets on each market. However, that produces very little for the levy—less than 0.5%—compared with the return from the same activity with traditional bookmakers. According to Betfair, some users of betting exchanges place around 1,000 bets per hour, but pay no levy or tax because they close their bets before the race is concluded. I am delighted that Betfair paid around £6 million to the levy last year, and by its widespread sponsorship, but the loss to the levy from the fact that exchanges are treated inappropriately is roughly £25 million, and I urge the Government to act.
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.
Philip Davies
May I say to the hon. Gentleman, for whom I have a lot of time, that this is a novel concept for a Labour politician? Most sports betting is on premiership football, so presumably the money raised would go there. It is novel that a Labour politician would want to take money out of poor punters’ pockets in betting shops in order to add it to the wages of John Terry and Carlos Tevez in the premier league. Does that not seem a bizarre redistribution of wealth?
Mr Sutcliffe
The hon. Gentleman knows that I am not going to get involved in John Terry’s wages any more—they are not my problem. However, there are issues about where money from sports rights should go, and about the grass roots and how we fund grass-roots sports. However, the money would go not just to the premier league, but to grass-roots sport as well.
Mr Foster
Given the boundary changes, I have to concede that to my hon. Friend. I share the same passion he does for the course’s continued success.
I was explaining that the mutual interdependence has existed for 50 years, but it has become increasingly difficult. It is now critical to find a sustainable future for the link between the racing community and the gambling community. In so doing, we have to remove the involvement of politicians. I entirely agree with the Secretary of State when he said at the end of last year:
“Frankly, the government should never be the last resort in an essentially commercial negotiation”.
A sustainable way forward should not involve politicians, but politicians will have to help find that way forward, which must be based on a number of fundamental principles.
The first principle is to be absolutely clear about what the levy is about. Many hon. Members will have come across a leaflet put out by William Hill, which says under the heading “Real People, Real Jobs”:
“For every additional £1 million that the bookmakers are forced to pay in horseracing levy, 100 industry jobs may be lost for people like this”.
It goes on to provide examples of such people. That is a bit rich from an organisation that has recently moved its internet betting operation—and is soon to move its telephone operation—offshore, losing many hundreds of jobs and about £12 million of tax revenue for the Exchequer. My key point, however, can be seen on the other side of the leaflet, which says:
“Whilst racing can depend on a 1960s state subsidy it will never have the incentive to modernise.”
My clear understanding of the levy is that it is not a state subsidy; it is a relationship between two organisations. It cannot—as some have sought to portray it—be defined as state aid. We must be clear that this is a relationship between two organisations that get mutual benefit from each other. That is crucial to understanding what we are talking about.
Philip Davies
The right hon. Gentleman says that this should not be considered as state aid, yet his beloved European Union—I, of course, want to be out of the wretched thing—takes precisely the opposite view. In looking at the French proposals for a horse racing levy, the Commission said:
“At this stage, the Commission considers that the aid measure contains all the features constituting the concept of State aid. After exploring several means by which the notified measure could be regarded as compatible with the rules in force, the Commission has not found any clear means of regarding it as compatible.”
I am afraid that that is what the hon. Gentleman’s beloved European Union said.
Mr Foster
I am grateful to the hon. Gentleman for reminding me of why I raised the point. There has to be clarification. Personally, having studied the various issues in some detail, I do not accept the definition that we just heard from him. Incidentally, even if he is right, which I do not believe he is, it would not threaten the levy as it was already in existence way before the establishment of those rules. There would not be a problem.
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.
Philip Davies (Shipley) (Con)
I appreciate that time is short and so will be brief, although I will probably be the only Member to argue on the other side of what we have heard today. I should declare an interest as a former bookmaker, although I have no interest in bookmaking any more. I do, however, have an interest as an owner and breeder of horses and as someone who contributes to bookmakers’ profits.
Considering that background, one might assume that I would want the maximum amount of income to be given to the racing industry from bookmakers, but I take exactly the opposite view. One reason why is that, as an owner, on the rare occasions when my horse manages to win a race, I know that the last thing I am interested in is how much prize money it has won. That is not even a factor in my hobby: it is a hobby, and I do not expect other people to subsidise it; I expect to pay for it myself.
The reason I am not interested in prize money levels is that in the 2009 flat racing season, one fifth of the £71 million prize money pot was concentrated in the hands of just 10 owners, many of them not just millionaires but billionaires. My hon. Friends failed to mention that, and why on earth we should want poor people in betting shops to subsidise the hobby and sport of immensely rich people throughout the world is beyond me. The bookmakers give as much money now to the racing industry as they have done in recent years, because of TV rights, yet they take less and less money on the sport.
I shall briefly touch on Betfair and betting exchanges, because the other side of the argument has to be put. People cannot operate as traditional bookmakers on Betfair. A bookmaker—I should know; I was one—takes bets on any horse in the race at the prices fed through from the racecourse, but on Betfair they would go out of business in two seconds if they tried that approach, because there is no margin. They can lay only individual horses, or two horses in a race at the most. If someone bets against a horse, however, it is just the same as betting for a horse: they act as a punter, not as a bookmaker; and it would be absolutely outrageous if punters on Betfair began to be treated as bookmakers.
The arguments of the racing industry and independent members of the levy board do not hold water. They have first decided how much money racing should get, and then tried to find some way of raising it, but that is like saying, “I’ve decided how much money I’m spending next year, and I need a 25% pay rise.” The world does not work like that. We should decide on a fair mechanism by which bookmakers can pay the money, and racing, like everybody else in this age of austerity, should cut its cloth accordingly.
The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (John Penrose)
To begin, I echo a common thread throughout the debate by congratulating the hon. Member for West Suffolk (Matthew Hancock)—I nearly called him the Member for Newmarket, but his constituency is of course broader than that. I also congratulate the Backbench Business Committee on choosing what is clearly a well selected debate, given the breadth, depth and variety of the contributions. That shows what an important issue this is.
The motion calls for the Government to come forward with proposals by the end of the year. I am happy to accept that as the challenge and the target, and we will aim to meet it. I cannot make announcements right now, it being only January. The consultation that was kicked off by the last Government has been completed and there were a large number of submissions on the future of remote gambling and offshore gambling, which is a broader issue than the horse race betting levy, but is none the less important to the levy. We will respond to that consultation, and I am currently in the process of considering the responses.
A range of other interests have been laid out ably and well in this debate. I will not recap them all, partly due to lack of time. I want to ensure that I respond to some of the points that were made, rather than just repeat them. It is absolutely right for the House to urge the Government to come up with concrete proposals before the end of the year, and I am happy to accept that challenge, in line with the mood of the House.
I will have to tread a little carefully because, as I said, we are still considering the details of our proposals. I am happy to give as much detail as I can on the direction of thinking and the principles that underlie what has to be done, but beyond that, I shall rely on a quotation from Alan Greenspan, a former chairman of the Federal Reserve in America, who said in a speech to the Economic Club of New York in 1988, when asked about the future direction of interest rates, on which he was obviously not allowed to opine:
“I guess I should warn you, if I turn out to be particularly clear, you’ve probably misunderstood what I’ve said.”
I will be a little careful on that basis.
What I can say on the principles underlying this matter is that it is absolutely right, as everybody has agreed, that there is a strong symbiotic relationship between racing and bookmaking, and rightly so. It is clear that each of the two cannot exist without the other. Racing needs the income from bookmaking. Bookmaking is perhaps less dependent on horse racing than 10, 15 or 20 years ago, but it is still a tremendously important part of its income. We must recognise that.
It has also been pretty much universally agreed in today’s debate that the current levy system is old fashioned and, if not broken, in the process of breaking. It is a solution that to modern eyes and ears feels corporatist. It feels peculiar to have political intervention, lobbying and decision making on something that feels as though it ought to be a normal commercial relationship. As a number of hon. Members stated, the challenge is not whether we accept that premise—most hon. Members have accepted the basic premise—but in working out what a normal commercial relationship will look like and how we can get from where we are today to that point, and on a sustainable basis.
John Penrose
I am afraid that I have to be extremely quick and will not be able to take any more interventions due to the pressure of time, but my hon. Friend’s speech was very short so I shall give way to him.
Philip Davies
I am very grateful. May I suggest that that commercial arrangement is simply between bookmakers and racecourses? Often, the problem is that too many people are pitching in, when in fact all the bookmakers want to do is buy a product from the promoter of the racing product, so to speak, which is the racecourses. Surely it should be up to the racecourses to put up prize money levels to attract owners in the first place. The commercial arrangement should be a simple one.
John Penrose
That illustrates one of the difficulties in designing a sustainable system for the future. My hon. Friend is quite right that that is one potential solution, but I think many people would have grave problems with it. I hope that Members will wish me luck in coming up with a solution that pleases everybody, or at least does not displease too many people. Many people in the Horsemen’s Group and other parts of racing would be extremely worried by my hon. Friend’s suggestion, but I take his perfectly legitimate point.
A flier has been going around from William Hill, and I believe the substance of it also largely appeared in an advertisement in the Racing Post last week. It states:
“What is the answer, then? Simple. Replace the levy with a normal commercial negotiation.”
Amen to that, and many people would say the same thing. The difficulty is, what exactly does a normal commercial negotiation look like given that at the moment, we do not have a willing buyer and a willing seller? Racing has nothing to sell—it does not have the type of property rights that my hon. Friend the Member for West Suffolk talked about. I am not sure whether William Hill is proposing a property right, but if it is, I suspect that many people in other parts of the bookmaking and gambling industry will be concerned about that. That is another problem that we face. There is no obvious compromise, and if we are to get one, there will have to be a great deal of good will on both sides and a willingness to discuss the matter.
We have already taken our initial steps. We intend to take powers in the Public Bodies Bill to remove the Secretary of State’s role in the levy determination process. That is a step in the right direction because it takes politicians and politics out of the individual levy determination, but it does not go nearly far enough towards revising the system fundamentally, and that is the point that we have to get to.
Whatever solution is proposed—as I said, I intend to take up the challenge of bringing solutions forward for discussion during the course of the year—it has to produce a level playing field in a number of ways. First, there has to be a level playing field between betting exchanges and bookies, which are two fundamentally different business models. It is clearly no responsibility of any Government to start dictating which business models they prefer within a particular industry, so we should not play favourites between betting exchanges and traditional bookmakers. However, we should ensure that there is a level playing field in the contribution to racing of those two business models, and then one or the other will presumably win out in due course by the normal rules of free commercial competition.
Equally, it is essential that we have a level playing field between British horse racing, other sports and events that are bet on—given the innovation in the industry, it seems that we will be able to put a bet on many more things in future—and foreign racing. It would clearly not be in the interests of British racing if a significant, or even modest, contribution was inherent in the cost of placing a bet, but was not applied to other events on which people could place a bet in a bookmaker’s. We have to understand whether we can either whittle that differential down or get as close to a level playing field as we can, so that we do not disadvantage British racing.
As a number of colleagues have said, we must also have a level playing field between people who place bets with domestic bookmakers and betting exchanges and those who do so remotely or overseas through operations based offshore, including through the internet. We are clearly a long way from that at the moment.
As I said earlier, when I consider the responses to the previous Government’s consultation, I will bear in mind the broader issue. Important though a level playing field is, there is also the question of consumer protection. At the moment, people who place bets in Britain, with domestically regulated exchanges or bookmakers or through any other type of gambling, are protected by the Gambling Commission. If someone places a bet on equivalent games that are regulated offshore, their protection may be severely lower or in some cases zero. That clearly has implications such as the potential for problem gambling.
I have heard what Members have said and am happy to pick up the challenge. As I said, I hope Members will wish me luck. They will have heard from the debate that the different positions are quite wide apart at the moment, and in some cases deeply entrenched. That is a major problem that we have to solve, and I look forward to bringing forward our proposals as requested in the motion.