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Standing Committee D
Tuesday 20 January 2004
(Afternoon)
[Mr. Jonathan Sayeed in the Chair]
Clause 5
Pre-sale issue of shares, &c. to government
Amendment proposed [this day]: No. 33, in clause 5, page 4, line 3, leave out from 'without' to end of line 3 and insert
'(a) the consent of the Treasury and
(b) such disposal having been authorised by the Secretary of State by order by Statutory Instrument, which order shall not be made unless a draft of the order has been laid before, and approved by a resolution of each House of Parliament.'.—[Mr. Paice.]
2.30 pm
Question again proposed, That the amendment be made.
The Chairman: I remind the Committee that with this we are discussing amendment No. 5, in page 4, line 3, at end add:
'; and such disposal shall be authorised by affirmative resolution of each House of Parliament.'.
The Minister for Sport and Tourism (Mr. Richard Caborn): I have had an interesting lunchtime. I have just met representatives of the racing industry, to discuss not the Tote or the lottery but another issue that is exercising their minds: the Office of Fair Trading. Representatives of the British Horseracing Board were there, as were race course owners, the Racecourse Association, the Jockey Club and members of the Trade and Industry Committee. I took the opportunity to reflect on this morning's proceedings, and was reassured that there would be a racing trust and that there would be no falling out within the industry. I hope that that reassures the Committee.
Amendment No. 33 seeks to give Parliament a role in the further approval of the sale of the Tote, and amendment No. 5 offers an alternative drafting to the same end. The legislation is drafted to give the Secretary of State discretion over when and to whom the Tote is sold. We are asking Parliament to accept the Bill on that basis. In the unlikely event that we are unable to sell the Tote to a racing trust, we would need to consider how to give the racing industry the benefit of the stake that we acknowledge it has in the Tote. How we do that will depend on the circumstances: the Government will discuss with the industry how best to achieve that. I therefore ask for the amendment to be withdrawn.
Mr. James Paice (South-East Cambridgeshire) (Con): I cannot say that I am surprised. It has been the lot of Ministers over millennia—not just Ministers in
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this Government—to resist measures to put statutory instruments into Bills. Even though they usually stuff Bills full of statutory instruments for secondary legislation themselves, they always resist any attempt to put one in to constrain a Minister's freedom of action.
I shall leave it to you to judge, Mr. Sayeed, but I think that it is in order for the Minister to comment on the assurance that he has received from the racing industry in the last few minutes that there will be a racing trust. That is tantamount to saying that these amendments are unnecessary, because he is going to get the sale that we all want. I have never been in any doubt about there being a racing trust. I do not know how other members of the Committee feel, but the Minister's earlier comments led me to think that it was he who doubted whether there would be a suitable racing trust to which he felt he could sell the Tote. I have never doubted that there would be a trust and I am glad that he received reaffirmation of that at lunchtime.
However, my concern is not with the Minister in particular. If, as I have said repeatedly—I fear that I shall do so again during our proceedings—for some reason we find ourselves in the hands of a different Minister or Secretary of State before the Committee concludes its business, we may find that this Minister's undertakings, which I readily take at face value, may prove to be less substantial than we should like. However, even I can do arithmetic and I see no point in pursuing the matter to a vote.
I am sorry that the Minister will not give us the fall-back position of a statutory instrument. I take at face value his assurance that, if the Government are unable to proceed to a sale to racing, he will consider carefully what to do and will consult the racing industry. I hope that he will also consult hon. Members in all parts of the House who take an interest in these matters: I include particularly my hon. Friend the Member for South-West Hertfordshire (Mr. Page), who is one of the joint chairmen of the all-party group on racing and bloodstock. In the unfortunate event of there not being a sale, I hope that everyone will be content and will agree on the right way forward. On the understanding that the Minister will do that, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Mr. Caborn: The clause allows shares in the successor company to be issued to the Secretary of State in anticipation of the company's onward sale to the racing trust. It provides the mechanism by which the Tote will be transferred into private ownership. The clause is therefore fundamental to the policy aims of the Bill. Without it, the Secretary of State would have no means by which to sell the Tote. The basic premise of the clause is clear, but it may help if I outline the way in which it will be used.
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The expectation is that the Secretary of State will request the successor company to issue securities to her on the appointed day. That will enable her to sell the successor company on to the proposed purchaser—the racing trust—in the way that we intend. The company will be valued, and the racing trust will pay the Government a price reflecting the stake that racing currently has in the whole Tote business.
There is no plan for the Secretary of State to retain shares in the successor company longer than is necessary to facilitate the sale. However, I reiterate that further details on the mechanics of the sale and, in particular, the identity of the purchaser cannot be provided in the Bill. Parliament is asked to support the Bill on that basis, and the clause must be considered against that background.
Mr. Richard Page (South-West Hertfordshire) (Con): I seek clarification of some of the comments that were made at the Committee's first sitting. We got a bit excited about the difference between ''the'' racing trust and ''a'' racing trust. I gained huge confidence from the Minister's comments about his lunchtime meeting with the dignitaries and power brokers of the racing industry. I sincerely hope that everything that he talks about comes to a conclusion, but it was said that if that did not happen, everything would have to return to the House in order for the process to be restarted. If ''the'' racing trust somehow fails, could ''a'' racing trust come forward and take over the process without the need for a return to the House for all the legislative change to which the Minister referred and to which Opposition Members would object?
Mr. Caborn: It is our intention to sell the company to a racing trust. I hope that we can sell it to ''the'' racing trust. That should reassure the hon. Gentleman.
Question put and agreed to.
Clause 5 ordered to stand part of the Bill.
Clause 6
Accounts
Question proposed, That the clause stand part of the Bill.
Mr. Caborn: The clause provides that the accounts of the Tote at the time of dissolution are to be treated as the accounts of the successor company. The purpose is to provide for continuity of the accounting process in the transfer of ownership. That is in line with the Government's intention to treat the successor company as if it were the Tote in all respects, including for tax purposes. That has crucial consequences. In particular, subsection (5) allows the successor company to treat the Tote's accumulated realised profits as its own. That will enable the successor company to issue dividends if it has accumulated realised profits to distribute.
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The clause therefore makes the necessary provision for the accounting procedures that will enable the Tote to develop commercially as Government policy intends.
Question put and agreed to.
Clause 6 ordered to stand part of the Bill.
Clause 7
Shadow directors
Question proposed, That the clause stand part of the Bill.
Mr. Caborn: The clause provides that neither the Secretary of State nor the Treasury shall be treated as shadow directors of the Tote's successor. The effect is to exempt the Secretary of State and the Treasury from the controls and obligations that are incumbent on the shadow directors, such as those relating to wrongful trading. The role of Government is only to facilitate the sale in line with policy; it is not to become involved in the operation of the Tote's business. It is therefore appropriate that the Secretary of State and the Treasury should not be treated as shadow directors simply by virtue of their role in facilitating the sale. The clause ensures that.
Question put and agreed to.
Clause 7 ordered to stand part of the Bill.
Clause 8
Exclusive licence
Mr. Don Foster (Bath) (LD): I beg to move amendment No. 50, in
clause 8, page 4, line 36, after 'issue' insert,
'an exclusive, renewable licence for a period of seven years from the appointed day.'.
The Chairman: With this it will be convenient to discuss the following amendments: No. 6, in
No. 51, in
clause 8, page 4, line 37, leave out from 'a licence' to 'licence'')'
No. 7, in
clause 8, page 4, line 38, after second 'the', insert 'exclusive'.
No. 10, in
clause 8, page 5, line 8, leave out paragraph (a).
Mr. Foster: From the outset, I acknowledge that the Conservatives' amendments would have a similar, if not identical, effect to ours.
On Second Reading, I argued that the Government's intentions are absolutely clear in many parts of the Bill, but that they had failed to write them into the Bill. We have already had examples of that, which we have discussed. The exclusive licence is an example of the Government's clear intention, but it is
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not stated in the Bill. In part, I disagree with that stated intention and want to change it, which my amendments would do.
To illustrate what the Government propose to do, which they have made clear, I refer to speeches made by the Secretary of State and the Minister on Second Reading, to a written statement, and to a departmental press release issued on the same day—27 November last year. Under the heading ''Tote wins seven year licence to operate horserace pool betting'', it says:
''The Racing Trust—a consortium of racing interests—buying the Tote will have an exclusive licence to run pool betting for seven years, the Government announced today.''
As I said, the Minister has made it absolutely clear several times that the Government intend the exclusive licence to be issued for a seven-year period.
The Committee will be aware, however, that the Bill does not refer to that seven-year period. That is to be regretted. Some of my amendments would give us the opportunity to write that seven-year period into the Bill; others go further by stressing my genuine concern that no further exclusive licence will be issued once the Government's proposed unspecified licence period is completed. That is the Government's intention, which they make very clear in the Minister's statements on Second Reading and in the press release, which reports the Minister as saying:
''Selling the Tote to the Racing Trust is the right way to fulfil the Government's commitment to sell the Tote. We firmly believe it's in the public interest to open up the pool betting market to effective competition. But we also believe a reasonable period of preparation is necessary in order to safeguard the revenue racing receives from the Tote and its successor is necessary in order to safeguard the revenue racing receives from the tote and its successor.''
The Minister therefore makes it clear that he believes there needs to be an exclusive licence period. He told us, although it is not in the Bill, that that period should be for seven years, as it is necessary to ensure that the Tote is up and running and successful, and that it can guarantee that it will continue to contribute to racing. However, he goes on to say that after that period, which is likely to be seven years, the Government intend to open up pool betting to competition. He says that it is in the interests of racing to do so. My concern is that all the evidence that I and other Members have studied leads us to a different conclusion.
The Committee will be aware that the Home Affairs Committee discussed the matter at some length in 1991. Its report on the Tote made it very clear that forcing pool betting into the open market in seven years' time could lead to a series of small pools and erratic dividends that would undermine public confidence in pool betting. That was the view of the then Home Affairs Committee. More recently, on Second Reading, we heard from the right hon. Member for Livingston (Mr. Cook), who, I expect all hon. Members would acknowledge, has great knowledge of the horse racing industry and sport. He was clear about his view. He congratulated the
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Minister on securing a seven-year period after all the attempts by others, not least the Treasury, to settle on a much shorter one. He continued:
''I find it rather strange that anyone should imagine that opening up pool betting to competition helps the punter, because the whole point of pool betting is that the bigger the pool, the more attractive it is to the punter. The greater the competition and the more pools there are, the less attractive it is to the punter. The logic of that, of course, is that I personally would prefer it if we retained an exclusive licence indefinitely''.
2.45 pm
The right hon. Gentleman is clear in his view that opening up the arrangement will not be in the interest of punters or of horse racing. The Home Affairs Committee—admittedly in 1991—came to a similar conclusion. However, perhaps what is most surprising is that the Government have themselves reached that conclusion. The regulatory assessment for the Bill shows at page 22 that the loss of the exclusive licence could lead to the possible loss of pool betting at some race meetings and race courses, and lower Tote contributions to racing. The Government's own analysis suggests that that is possible or perhaps even likely.
There is little or no debate, apparently, about whether the ending of the exclusive licence could be, or is likely to be, damaging to racing, and will make it less attractive to punters, which could lead to a loss of benefit to horse racing. The evidence is clear: the route is a dangerous one for the Minister to take. That is why our amendment makes it clear that the licence should be exclusive for seven years, and specifies that it should be renewable. The Government should have the opportunity to assess, after the seven-year period, whether the benefits to racing have been secured. If not, there would be an opportunity for the Government to continue to grant an exclusive licence.
The right hon. Member for Livingston clearly explained why the issue should be re-examined at the end of seven years. He said:
''We should be under no illusion how tough the competition will be at the end of that period of exclusivity. I do not mean any disrespect to Ladbrokes when I say that it is likely to enter into competition. I can say that with some confidence because it has made no bones about the fact that it will be its intention to bid for pool betting when the licence expires. If it were to be successful in displacing the Tote as a provider of pool betting, paradoxically, we would end up not with more competition, but with more monopoly and less competition in the betting market. It is therefore very much in the public interest, as well as in the interest of the racing trust, that there should be that minimum seven-year breathing space for it to establish itself.''—[Official Report, 8 January 2004; Vol. 416, c. 453-54.]
The right hon. Gentleman makes it clear that at the end of seven years life will be very difficult. Surely we must at least be certain that during that period all has gone well and racing has received the benefits that it should expect, before we decide irrevocably not to allow a continuation of a monopoly of pool betting.
I hope that the amendment is clear. I know that it is supported by several members of the Committee and its wording is similar to that tabled by the hon. Member for South-East Cambridgeshire and his colleagues. I hope that the Committee will see its way to agreeing to the amendment and allowing me to write not just a postcard, but a letter to Mrs. Foster.
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