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("(c) permitting an excluded person to make a statement to the tribunal before the commencement of the proceedings, or the part of the proceedings, from which he is excluded.")

Lord Sainsbury of Turville: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 323A to Lords Amendment No. 323.

The Bill provides that a Minister may direct that an applicant and his representative be excluded from all or part of the proceedings where the interests of national security require it. We anticipate that the power to exclude from all future proceedings will be used rarely and only in the most extreme circumstances where national security interests could not be adequately protected otherwise. Where an applicant and his representative are excluded from proceedings, the Attorney-General, or in Scotland the Advocate General, will appoint someone to represent the applicant's interests.

At Third Reading the concern was expressed that if the applicant was excluded from all the remaining proceedings he would not have the opportunity to make a statement of his case. Since it is government policy that such a statement should be able to be made where an applicant is so excluded, I undertook to see what needed to be done to ensure that the regulations would provide for this. This amendment is the result. It provides the vires for regulations to be made permitting an excluded person to make a statement to the tribunal. I am grateful to the noble Lord, Lord Razzall, and the noble and learned Lord, Lord Archer, for bringing to our attention this defect in the Bill.

To make the position absolutely clear, the Secretary of State in another place gave a commitment that the procedure regulations will provide that such a statement can always be made to the tribunal where the applicant is being excluded from the remaining proceedings. He also said that in drawing up the regulations he will consult members of the Intelligence and Security Committee.

To sum up, the amendment will ensure that a statement of case can always be made where the applicant is being excluded from all the remaining proceedings. At the same time it does not prevent the exclusion of the applicant from all of the proceedings, which will continue after the statements, in those rare instances where a Minister of the Crown has made a direction to that effect in the interests of national security. Accordingly, I hope that noble Lords will agree to the Commons amendment.

Moved, That the House do agree with the Commons in their Amendment No. 323A to Lords Amendment No. 323.--(Lord Sainsbury of Turville.)

Viscount Thurso: My Lords, this amendment stems from the amendment moved by my noble friend Lord Razzall at Third Reading. We are very grateful to the Government for having taken on board the points made

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and for bringing forward this amendment. I am grateful to see the noble and learned Lord, Lord Archer of Sandwell, in his place because I know that he is going to give us a far more comprehensive explanation of this matter than I could.

However, I express our unhappiness at the fact that the amendment goes only some 60 per cent of the way. While we are extremely happy that at least the applicant now has the opportunity to make his case prior to being excluded, there is not much that he can do afterwards if he chooses to disagree. As my honourable friend Alan Beith said in another place,

    "We remain concerned, however, that the power is not capable of satisfactory review, other than by taking a case to court on judicial review at the applicant's expense".--[Official Report, Commons, 21/7/99; col. 1256.]

Surely, the suggestion made in another place that members of the commission should be empowered to review the exercise of the Minister's powers was a modest and sensible suggestion and one which this Government of all governments might have felt able to consider.

Having stated our unhappiness at that aspect, we are grateful that the first point was taken on board and that this amendment has been brought to us. It is a shame that it is so late in the day that I do not believe that there is anything that I can do about the other part. I am not even sure what the constitutional position would be if I asked your Lordships to do anything about it. So I shall just have to take the hump and leave it at that.

Lord Archer of Sandwell: My Lords, it grieves me to disappoint the noble Viscount, but I suspect that if I were to undertake a comprehensive survey of the position at this point it would not improve my popularity in your Lordships' House.

Noble Lords: Hear, hear!

Lord Archer of Sandwell: My Lords, I seem to have touched a deep note. I thank my noble friend for having listened to our representations. It is not a schedule I would have drafted in a perfect world, which I define as one in which I draft all the Government's legislation. My noble friend has listened and I am grateful for that.

Baroness Miller of Hendon: My Lords, we on these Benches are grateful for the movement that the Government have made in this matter. We were obviously very disappointed when, on 15th July, the noble Lord, Lord Razzall, felt it necessary to withdraw the amendment because we considered that it covered the situation better than the amendments we have seen today, particularly because my right honourable friend in another place, the Member for Bridgwater, tabled the same amendment which the Secretary of State pointed out was not necessary because the Government had gone 60 per cent of the way in their amendment and promised to try to go 100 per cent of the way via the regulations. However, he conceded that it was almost impossible to achieve 100 per cent success.

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We are sad that we are being offered admittedly flawed legislation as regards the 40 per cent we have not got when the Government, in the person of the Prime Minister no less, on receiving the original recommendations from the Intelligence and Security Committee that my right honourable friend chaired, suggested acceptance and the Employment Relations Bill as the vehicle for the amendment.

I am not going to say, like the noble Viscount, Lord Thurso, that I will have to accept it with the hump. We are grateful for the movement made. We would have liked a little more, but never mind.

Lord Sainsbury of Turville: My Lords, I would not want to delay people either on this point. If one looks at the matter carefully, I believe it will be seen that we have far more than 60 per cent. I believe the basic issue is covered of being able to make the statement and that the way in which we are doing it covers the technical point, but that if it was not done in such a manner it might make it impossible to exclude people from the rest of the proceedings. That would not be correct.

As regards reviewing the Minister's use of directional power, I believe that a judicial review is an appropriate remedy for determining whether a Minister has misused or abused his power. A Minister would have to justify the use of his power in an adversarial context and, much more important, such a review would provide an immediate remedy to the applicant if a Minister was found to have acted improperly.

As regards the funding of the judicial review that is the mechanism for contesting a Minister's use of his power of direction, where the applicant wishes to be represented, depending on the circumstances, he may be eligible for legal aid. On that basis I ask the House to agree with Commons Amendment No. 323A as an amendment to Lords Amendment No. 323.

On Question, Motion agreed to.

The Tote

7.26 p.m.

Viscount Astor rose to ask Her Majesty's Government what is their response to the steering group's recommendations on the future of the Tote.

The noble Viscount said: My Lords, earlier this year, on 12th May, the Home Secretary announced that the Tote should be transferred to the private sector and he rejected the possibility of the Tote being transferred to racing without consideration. In doing so he went back on the clear commitment given by Robin Cook before the last election when he said:

    "There will be no proposal by Labour to sell the Tote".

This recent announcement prompted my noble friend Lord Burnham to ask the Government on 10th June the Question, "Who owns the Tote". The Minister then gave an answer that was so opaque that it would have made

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Sir Humphrey glow with pride. I believe that the Answer is worth repeating. It states,

    "My Lords, the Horserace Totalisator Board is a non-departmental public body whose members are appointed by the Home Secretary. Technically, it is these appointed members who are responsible for the assets owned by the Tote but they do not actually own the assets. Therefore, before the Tote can be sold it will be necessary to introduce primary legislation to change its status and bring it fully within public ownership".

That reply must get the prize in this Parliament for not answering the question. I congratulate the Minister.

If only that were the end of this sorry tale, but, sadly, it is not, because the Minister, with great courtesy, of course, went on to say that the Tote is,

    "a body corporate with perpetual succession and a common seal".--[Official Report, 10/6/99; cols. 1541-4.]

Of course, that is factually correct, but a glimpse of light? Again, sadly, no. The Minister was pressed and asked what did it all mean. The noble Lord, Lord Williams, then fell back on that old standby of turning to page two of the brief and looking for something else to say. He found an answer and announced triumphantly, "We have a steering group report, which made recommendations". He said it once to another question, he said it again and in all he said it three times. But it was obfuscation.

The steering group was composed of seven members. One might have thought that some of these would have been independent or even perhaps represented racing. Not a chance. Of the seven, five were the Minister's own officials from the Home Office; the sixth was an official from the Treasury, all with the vested interests of their political masters. The seventh member, and chairman of the group, was Peter Jones, the chairman of the Tote, himself not without an interest, and heavily outnumbered by officials.

One can picture the scene in the Home Office a few months ago with the Minister saying, "What can we do about the Tote? We want to privatise it but the Treasury want to keep the money". Sir Humphrey replies, "Don't worry, Minister, we will commission a steering group report". The Minister asks, "What if it recommends something we don't want?". Sir Humphrey says, with a big smile and no doubt a conspiratorial look, "Don't' worry, Minister. We will pack it with our own people". That is what we have been given: a report by Government, written for the benefit of Government, by government officials and with a conclusion that I believe is detrimental to the racing industry.

The Minister should be embarrassed by the report. Why? Because it fails to deal with the central issue of who owns the Tote. The report claims that the taxpayer--namely, the Treasury--has an interest, but offers no credible evidence to back up the claim. It is a conclusion that not only do I not agree with, but the majority of those involved in racing also do not agree with it. Why the chairman of the Tote put his name to this report, I do not know.

Perhaps I may remind the House that the Tote was established by a private Act of Parliament in 1928. It was set up to provide pool betting as an alternative to fixed odds betting, and to provide a source of income for racing. It was not financed by government and it

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never has been. It was financed by loans from racing. The Government do not stand behind the Tote, do not guarantee it in any way, and indeed do not own any shares in it.

The report makes the dubious claim that the Government provided the statutory arrangement. That is not true. Parliament, by a private Bill, provided the statutory arrangement. The steering group report claims that a change in the status of the Tote would need to have regard to the interests of the taxpayer. The taxpayer already has an interest as the Tote is very much like any other bookmaker. It is already providing revenue for the Exchequer.

The Tote makes contributions as a bookmaker to the Horserace Betting Levy Board in respect of off-course starting price and Tote odds. Payments to the levy board in the year to 1999 from bookmakers were £52 million, and payments from the Tote in the same year were £4.5 million. The total income to the levy board was around £57 million and the Tote contribution was therefore less than 10 per cent. In 1999 the Tote also returned to racing £2 million in sponsorship and donations, as well as £6.5 million in payments to racecourses for the facilities it uses. Therefore it made a total return to racing, including levy payments, of £12 million. Total racecourse sponsorship is £13.3 million, so the Tote provides about 15 per cent of all sponsorship. The Tote also paid just under £3 million in corporation tax to the Exchequer, as well as its share of betting duties of £21.3 million.

Bookmakers pay around £450 million in betting duty, and I should point out that bookmakers also sponsor racing. Furthermore, they pay £3 million in admission charges to racecourses for the facilities they use, and a percentage of turnover of around £1 million. The Tote retained profits of just under £8 million last year--not a dissimilar percentage to that which the bookmakers retained for their shareholders.

I do not mention these figures to be critical of the Tote, but to put its contributions into context with contributions made by others. Bookmakers make an important but arguably inadequate contribution to racing. Others in the racing industry, in particular racehorse owners and breeders, make a larger contribution. I contend that the Exchequer is already protected and that no decent case has been made that the Treasury should be able to collect the money from the sale of the Tote. To do so would be, I believe, a flagrant abuse of power.

In 1961 the Home Secretary acquired the power to appoint board members, in addition to his power to appoint the chairman. That did not give the Government ownership of the Tote. Indeed, prior to this change, racing appointed a majority of seven out of its 11 members. I believe that the Tote is owned in trust for racing, and I believe that its board members know and understand that. The proof of this is that the Government propose to introduce primary legislation to sell the Tote. If they really owned the Tote, they would not need that legislation.

One unique aspect of the Tote that separates it from other bookmakers is the exclusive right to operate pool betting. There, I believe, is perhaps a conundrum. The

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problem is that I do not see how a monopoly can be privatised with no protection either for the taxpayer or indeed for racing without falling foul of competition rules and legislation. A privatised Tote may be a huge success, but what if it was a failure, the pool went down and payments to racing collapsed? As we know, racing needs all the money it can get. It is underfunded and contributions from betting are under threat from the Internet and other bookmakers based abroad who pay no duty.

What could racing do in that situation? It could do nothing but grin and bear it. There would be no protection for racing at all. That is why I am totally against the idea of the present Tote paying off the Treasury and privatising itself. It would be answerable to no one but itself, racing would lose out and the present lack of accountability would be even worse. The Tote should be held in trust for racing and the trustees should be the British Horseracing Board. That follows the recommendations of the report of the Home Affairs Select Committee which stressed the need for an accountable body and one that should be responsible to representative groups of all who work in the racing industry.

Who would run the Tote? It is constrained by its status; it does not have the money for greater investment and it is restricted in its ability to borrow or raise money. The future Tote needs vision to expand its horizons. What I believe the Government should consider is that, in a manner similar to the National Lottery, management of the Tote should be put out under licence from the BHB to competitive tender. The licence period could be five, seven or 10 years. The bidder that offered to invest most and guarantee the largest return to racing over the licence period would win the licence. Racing would win, betting duty would be paid, levy payments would be paid and tax would be paid. The taxpayer would be protected and, most importantly, in recognition of having the monopoly of the pool, the Treasury could receive a share, just as it does from the National Lottery.

Like the National Lottery, the licence would be subject to clear conditions, including protection for existing employees. Thought needs to be given as to whether the Tote betting shops sit well with the pool now that Tote Direct is such a success. If the conditions of the licence were not met, the licence could be withdrawn. I am sure there would be many interested bidders, including the present management.

My proposal has one other great merit. I am advised that it does not require primary legislation. It would be possible to transfer the Tote merely by altering the right of appointment to the board. That would avoid the whole cumbersome process of legislation and a prolonged delay for a slot in the legislative timetable. Even if the Home Office lawyers disagree, as indeed they might--lawyers often do disagree with each other--my proposal could then be achieved by a short private Bill.

I am rather critical of the chairman of the Tote, for one reason: the steering group report. However, let me make it absolutely clear that I believe that Peter Jones is the right man for the job. I think he is running the

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Tote extremely well and I am full of admiration for his enthusiasm and, indeed, his commitment to racing. I would ask him only one simple thing: please do not give in to the Minister without a fight. I welcome the recent affirmation from the chairman of the Tote that it should be kept within racing. I do not mind the creation of a racing trust, but the trustees should be the BHB, which represents the whole of racing.

In the final recommendation of its report published in 1991, the Home Affairs Select Committee stated:

    "The opportunity to acquire the Tote free is a wonderful incentive for racing to put its house in order".

Racing has put its house in order and it deserves the Tote. I have been critical of the Minister and his report. Of course, he is a well-trained lawyer, and, as he said recently at Question Time, he has in the past acted for and also against the Tote. For that reason, I am sure he will see both sides of the argument. I am equally sure that we will not get a definitive answer from him tonight. But I hope we will have a commitment that he will carefully study all the speeches and ideas that have been put forward this evening.

All noble Lords will support the Minister if he is robust with the Treasury. Finally, I hope the Minister will use his well-deserved break in the Summer Recess to go racing. I am sure he will be warmly welcomed on the racecourses, and that he will enjoy his day. If he wants to place a bet, I am sure that the Foreign Secretary will even offer him a tip.

7.40 p.m.

Lord Sandberg: My Lords, We are indebted to the noble Viscount, Lord Astor, for introducing this matter. It is of vital importance to the health of the racing industry in this country. We are debating the future of the Tote in the 21st century rather than its importance, which is clear to us all and was set out in the noble Viscount's speech.

We may have missed a trick a few years ago, when we could have allowed the Tote to have an off-course monopoly. But that is now water under the bridge. We now have to square the circle of more for the Treasury, if that is possible, and more for racing. The former problem for the Treasury has been highlighted by the recent move offshore by a prominent bookie, with perhaps more to follow. The latter problem is that racing, like every other sport in this country, is always in need of funding.

The Tote is indeed a strange animal. No one owns it. As a generality, it is owned by the country. I do not take quite such a jaundiced view as the noble Viscount. In 1928, when the Tote was formed, people did not think that far ahead--the more the pity. That is a fact of life with which we must live. Matters have moved on since then. Significantly, and probably without precedent for institutions owned by the country, the Tote received no start-up capital from government, and has never received government funding. On the other hand, it brings in tax to the Treasury.

The Tote has grown in recent years from dealing merely with pool betting on the racecourse to cover telephone betting and high street outlets. It also takes

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bets on other sporting events. In March this year, its profit before contribution was nearly £24 million. Racing received about £22 million from betting levy, course admission and sponsorship. That means, in effect, when one leaves out all the figures, that the Tote is racing's fourth largest benefactor--after gate receipts, betting levy and media rights.

The future of the Tote has become a matter of fascination in the Home Office in recent years and for successive governments. In the past 10 years alone, there have been four inquiries and major reviews. The matter has always been just too difficult, and nothing has been done. Last year's review was prompted by the Treasury, which, as we know, is always looking for more money. The view of the Tote management--and I agree--is that the Tote should remain within racing, for the benefit of racing, as has been the case in the past. I should have thought there is a fair amount of consensus on that. I feel strongly that the Tote should not merely be thrown on the market, regardless of where the subscriptions for such a sale would come from. Inevitably, over the years it would end up in the maw of the bookies. Equally, I believe that there would be a conflict of interest were it to end up solely in the hands of the British Horseracing Board.

To regularise the present anomaly of there being no legal ownership, as the noble Viscount pointed out, the Tote could possibly be sold off to a trust, which itself could be formed from a variety of interests, not merely the BHB, within the racing industry. That is a tentative, rather than a firm proposal. I am sure that there are all kinds of problems which the legal eagles will bring to our attention, but it is a start. Certainly, with bookies moving offshore, we must get to the bottom of the matter quickly. The idea that the matter is all too difficult and should be left for the time being, or left to someone else, is no longer tenable.

The Treasury will know that the present duty of 6¾ per cent is now vulnerable. If something is not done, the Tote's income could fall. The ideal--and I can see Treasury officials wincing--would be a reduction in the duty, offset by an increase in turnover. I do not expect the Treasury to have much enthusiasm without proof that turnover would go up. However, if the business were run by a new trust and pushed fully, income would indeed rise. If there were some sale proceeds, if a trust were formed and some money were put up by racing interests, those proceeds could go to the Treasury and mitigate slightly its loss of income.

I have no magic solution. My suggestion of trustees is neither new nor the only solution. The matter is of some urgency and is of great importance. A solution needs to be found soon.

7.46 p.m.

Lord Burnham: My Lords, my noble friend Lord Astor and I have been exchanging notes with regard to this debate. At least I am confident that I shall not nearly make the monumental error that I made last week, when, to my horror, a noble Lord on the Government Benches made a speech identical to the one that I was about to make. It turned out that we had received the same brief from a Conservative Member of Parliament.

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The Tote is a bookmaker, like any other. It is nothing like as large as the big boys, Ladbroke's and Hill's, or even Coral, which it attempted to take over until the Monopolies and Mergers Commission slapped it down. As such, there is little reason to argue that its constitution should be changed, unless it be to confirm and underline its status as a body holding a monopoly over pool betting on horse racing.

My noble friend gave a large number of figures. It is very relevant that, last year, the Tote paid general betting duty of over £21 million--and it receives no concession on account of the fact that it comes to some extent, so the Government say, under government control. Its only difference from any other bookmaker is its monopoly on pool betting. It should be noted that its turnover this year is 25 per cent up on last year.

The existence of the Tote comes from the time in the mid-1920s, when Winston Churchill, and subsequently the Labour Chancellor, Philip Snowden, tried and failed to introduced a betting duty in the Budget. There is nothing in either the Racehorse Betting Act 1928 or in the Betting, Gaming and Lotteries Act 1963 which tends to show in any way that the Government have, or should have, any control over the Tote. The only evidence of that comes from the fact that the Home Office appoints the directors, and the directors would seem to own the Tote.

Recently in this House I asked the simple Question, "Who owns the Tote?". The Minister was answering, so I should not have been so foolish as to expect a sensible--no, "sensible" is unfair; I withdraw the word totally--a direct and informative Answer. I asked the Question on the grounds that it is a matter that must be answered before any government action is taken to decide what to do with the Tote. As I say, my noble friend Lord Astor and I did not receive an answer. In the process of his replies, the Minister demonstrated that he had no idea of an informative answer. As usual in such circumstances, he exercised his sense of humour in saying that the report was balanced--four officials from the Home Office were balanced by one from the Treasury. I suggest that he would have shown more balance by admitting that the only representative of racing interests was the chairman of the Tote himself, who must be a little close to the subject to show much balance.

But who does own the Tote? My theory, which I am not prepared to defend against much argument, is that the punter owns it for the period between when he hands his money over the counter and receives a ticket to the point his fancy passes the finishing post and he either wins or loses. On that theory he, and nobody else, is an investor in the Tote. This argument at least has the merit of setting up somebody who has such an investment, which is more than can be said of government. It is more likely that the owners of the Tote are the directors and they should be able to do with it as they wish.

The report lays down that the privileged position of the Tote is due to its exclusive licence

    "which amounts to a statutory arrangement".

The gift of the Tote to racing in whatever form, in the words of the report,

    "ignores the legitimate interest of the taxpayer completely".

But what is the "legitimate interest of the taxpayer"? In the past 71 years the taxpayer has never put anything into

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the Tote and is currently taking £21 million a year out, plus a further £2 million in corporation tax. The report states that the,

    "Tote has always been a partnership between government and racing".

It goes on to say that,

    "Tote profits should remain [for] the benefit of racing even if Government get a return for the taxpayer".

Jolly decent! Anyone who reads the report must be led to the conclusion that the last observation is due to the fact that civil servants outnumbered racing representatives on the committee by five to one. Of course racing should benefit from the Tote. Government apart, there is no justification for anybody else doing so--certainly not the shareholders in a public company that might buy and privatise the Tote. This hardly needs saying. All the profits now go to racing. If it was sold in the way suggested, racing would get only what was left over after the shareholders' interests had been satisfied. Fortunately, even the signatories to the report, considering, as they do, that the Government should get their cut, do not contemplate that.

In their four conclusions the signatories state their agreement that the whole of the Tote business should be sold as a unit. Few, except possibly the bookmakers, particularly Hills who will not play games with Tote Direct, would disagree with that, or that it should have an exclusive licence to conduct pool betting on horseracing. This last is the most important point. With the growth in distribution of the British racing product round the world on a 24-hour basis, any trust that is established must be acceptable and responsible to the racing industry as a whole.

This evening I shall not comment on which body in racing should control the Tote; if I did so I might have to declare an interest, but it must be a body that acts on behalf of racing and is in some way in racing. In the past year the Tote has contributed £12.3 million to racing, which is an increase of 62 per cent since 1996, in spite of the setback as a result of the refusal by the Monopolies and Mergers Commission to agree that the Tote should take over Corals. The financial strength of the Tote is emphasised by the fact that, while its bid for the Coral betting shops did not succeed, it came a good second. I seldom bet for a place but this was a promising run. My noble friend Lord Astor commented on the financial restrictions that prevent the Tote from raising money for capital improvements. At least it could do so in order to buy Corals.

In spite of the report, it is hard to argue that the Treasury should demand money for adapting the present licence purely to underline the Tote monopoly. In order to support this view it is necessary to accept that the Government should have a right to a bit of everything. The case is similar to that of the Trustee Savings Bank when the courts decided that the TSB belonged to depositors, not the government. Sadly, racing seems to have got it wrong several times: betting shops, SIS and in the off-course betting monopoly. Therefore, it is essential that the Tote's monopoly over pool betting must be confirmed on behalf of racing. If its status is changed, the bookmakers may challenge this monopoly,

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particularly in the light of the spread of betting as an industry, and spread betting. This would be most damaging. The Tote must be reserved for racing.

In its last paragraph, the report suggests that it is more important to get it right than to do it quickly. Another informed commentary on the future of the Tote says much the same thing. Effectively, both say that one should delay any action as long as one can. With the pressure on the Government to implement all the 100 or so statements in their manifesto, about which they have, as yet, done nothing, there is a reasonable chance to sort it all out, particularly the decision as to into whose hands the Tote should fall. Let us not do a Dangerous Dogs or Firearms Bill.

7.55 p.m.

The Earl of Huntingdon: My Lords, I too should like to thank the noble Viscount, Lord Astor, for initiating this important short debate on a subject that is current and, because of recent events, even more meaningful than it may have seemed when he first tabled this Question. I must declare, if not strictly an interest, perhaps a relationship. As a racehorse trainer, albeit now on a sabbatical--having spent three times the normal required span to trigger some leave--I and my family have been closely connected with horseracing as a sport and a business for three generations. My grandfather, Aubrey Hastings, who I believe was the only person to have ridden and trained a Grand National winner (Ascetic Silver) had just bought Brown Jack in Ireland when the original Racecourse Betting Act which created the Tote was passed in 1928. It provided a safe haven of state controlled pool betting for racegoers, some of whom may have distrusted bookmakers in an age when illegal bookmaking was rife. It also had a remit to raise money for horseracing and improvement of the sport and breed.

This important signpost was repainted in 1961 when the Betting Levy Act established the Levy Board. At that time my father, Peter Hastings-Bass, was training at Kingsclere, one of the legendary private stables and gallops in England. Another milestone was reached in 1972 when I was assistant trainer to Sir Noel Murless in Newmarket, when the Horserace Totalisator and Betting Levy Boards Act gave the Tote the chance to take on off-course bookmakers. During all this time, the Tote was seen as a proactive friend of racing's interests. Many people in racing would bet with the Tote because they felt that they were at least helping racing while they were losing their money. As soon as I was legally allowed to bet and open a credit account, I too bet with the Tote. Like most others, I too have helped racing.

I make no secret of the fact that I am no fan of our general system of betting. My noble friend, and previously successful owner in my stable, Lord Sandberg, knows what a benefit to racing a pool system of betting without bookmakers can be. When he was a member of the Royal Hong Kong Jockey Club, two days' racing a week at Sha Tin and Happy Valley enabled it to generate more money for racing and charity than the Levy Board is able to do for British racing on seven days a week with 59 courses.

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However, to bring the greatest benefit to both racing and the punter there is no need for a Tote monopoly, as an exemplary system exists in Australia. There one has a strong tote, the TAB, which has a monopoly of off-course betting, with outlets in betting shops and pubs, and a strong on-course presence. Bookmakers are licensed on courses, are extremely competitive, stand large bets and have been at the forefront of technological advances.

The result of the structure of our betting industry, with the cake being cut into too many slices, is that 1.2 per cent of betting turnover is returned to racing, as compared with between 4.4 per cent and 15 per cent in other major racing countries. In the unlikely event of an off-course Tote monopoly, the best alternative has always been the strengthening of the Tote so that it can compete with the three big bookmakers. The Tote board and executive is a strong professional body well able to build around the charismatic ethos and political legacy of the late Lord Wyatt. It was unlucky not to acquire the 133 betting shops from the Coral-Ladbrokes deal, but it has significant reserves, which puts it in a very strong position for future acquisitions.

Racing needs a strong Tote that is not emasculated by government attempts to realise a profit by an asset sale which has only a short-term viewpoint. Clearly the British Horseracing Board would love to gain control of the Tote as it has no significant income stream. I feel that the ownership is less important than preserving the Tote's opportunity to continue to benefit racing and maintain its exclusivity of pool betting. Government and the taxpayer are obviously entitled to their interest, but racing (both horse and greyhound) needs to be the shareholder.

I mentioned the recent events which have made the noble Viscount's initiative even more relevant. I refer to the recent publicity surrounding the High Court ruling which allowed Victor Chandler to advertise his Gibraltar-based service on Teletext and via the fax. The burgeoning off-shore betting business was always going to be a nettle that needed grasping. What serious punter--the average bet in Gibraltar earlier this year was £2,500 from Far East clients--can fail to be attracted by a 3 per cent deduction, or service charge, as opposed to the usual deduction of 9 per cent in the United Kingdom? Ireland has already reduced betting duty to 5 per cent, but ours remains at 6.75 per cent, and it is all too easy for Victor Chandler to offer a voluntary 1.5 per cent levy on every British racing bet struck in Gibraltar.

Even if the High Court ruling is overturned, enough publicity will have been generated to alert most punters whose bet is over £20 to the attractiveness of a free phone call to Gibraltar or other off-shore betting centre. Obviously the Tote's credit business will be adversely affected and its clients' loyalty to it and its longstanding position as racing's closest ally will be severely tested. By the time the Tote's status is resolved, how weakened will its position be unless something is done rapidly to counter the growing threat of the Internet and off-shore telephone betting?

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As Peter Jones, Chairman of the Tote, said in his annual speech,

    "If the Chancellor of the Exchequer is to achieve anything for the taxpayer out of a change in the status of the Tote, then he had better make sure he has something left to sell".

In the wider picture, future levy income is threatened, as Rob Hughes the Levy Board chairman has pointed out strongly. Perhaps the committed Tote monopolist, wherever he or she may be, will see that the only way for the Government to counter this threat of uncontrolled betting will be to introduce some form of off-course Tote monopoly. Punters are going to bet under the lowest tax regime. The Government should not bury their heads in the sand over the issue. They should ensure the continuing strength and well-being of an accountable Tote and attract worldwide punters by having as low as possible a tax rate.

8.3 p.m.

Lord Rowallan: My Lords, I, too, thank my noble friend Lord Astor for introducing this important debate at this interesting time. The Tote is the biggest single potential saviour of British racing. We can make a terrible mistake in the next six months, nine months, year or so, if we make the wrong decision now.

The biggest problem facing the Tote is its total lack of funds. The pool is too small. Anyone who wants to bet in a big way changes the odds so dramatically that he is forced not to put his money with the Tote but to go to a private bookmaker instead. The situation is getting better. Tote betting is becoming more available on the high street. But there is a big problem in the betting industry. Most towns have far too many bookmaker shops. For instance, Newmarket has seven, costing perhaps £80,000 in total to run. If the number were cut to two, there would be a big saving. Like the noble Earl, Lord Huntingdon, I believe that the time has come to think in a different way about how off-course betting should take place.

We need to be able to bet in more convivial surroundings. We need cafeterias in the shops--and why not in the pubs? On-course bookmakers have had a tricky year, paying up to £100,000 for a pitch at Cheltenham or Royal Ascot. The bookmakers do not contribute nearly enough to racing, one of Britain's major pastimes and sports. But the Government also have their role to play. The Government contribute little or nothing, but they have a bigger and bigger say. We have the smallest return from the betting industry of any country in the world. The owners put far too much into the industry. We need as soon as possible to drop the betting tax to at least 5 per cent so that it is level with Ireland.

I agree with my noble friend Lord Astor that the best answer is for the Tote to be put into a trust arm of the British Horseracing Board as soon as possible. It should then float it on the stock market to raise money. And as quickly as possible with the money it then raises, it should buy one of the big chains so that it has a ready-made industry. But, in order to benefit from its own strength, it is essential that the Tote buys rather than is bought. If it slips out of the hands of the racing industry, that could benefit the private pockets of just a

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few. As the noble Earl, Lord Huntingdon said, we need seriously to concern ourselves with Tote-only working off-course, and a mixture on-course. That works well in Australia; and there is no reason why it would not work well here.

We hear many politicians saying, "The cost of compensation for closing all the bookmaker shops around the country will be enormous." But if we are not careful, are we not in danger of shutting our eyes to the big problem: no racing through lack of funds. We have killed off many industries without compensation. So why are the bookmakers to be treated differently?

To improve racing, we need the Tote to invest more in racing. The Tote needs money to buy itself the strength to service the industry of racing. We must raise the money and invest it for the benefit of the sport. But do not let the Tote fall into the wrong hands, and so sell Winston Churchill's 1928 treasure chest for racing. Through Jack Straw, this Government said that they would never sell the Tote. Now they have accepted that they will. The Peter Jones report advised them that that is not too bad a thing to do. We must be responsible for the future of horseracing, one of Britain's most respected and popular sports. The report states that the status quo is not an option. I agree with that, unless there is a huge increase in funds. An increase in funds is essential so that the pool industry can work.

The report also states that the split between pool betting and Tote Direct should not be separated. Again, I agree wholeheartedly. The sale of the Tote to the trust about which I speak should be expedited as soon as possible in order to alleviate the uncertainty of the present situation. If legislation is necessary, it should be introduced as a priority in the next Session of Parliament. Over the years there have been too many reviews. None has been decisive. Most have been extremely disruptive. They have been unsettling for the industry.

We can change all that, and change it we must. Times are a-changing, with betting moving to Gibraltar and elsewhere. We have a man there at present--he is probably there on the back of some of my bad bets--and large chains will surely move there soon. Such a move is irresistible because of the lower rates. I hope that the Government think very hard about what they do because they have the future of this great industry in their hands.

8.10 p.m.

Viscount Falkland: My Lords, this has been an interesting debate with some eminent speakers. I put myself forward as a reformed reprobate. I bet a few times a year but, as I calculated before I entered the Chamber, I began in 1946 at the age of 11. I then had my first bet on the Tote; it was for two shillings and got three shillings back. That did not seem to be good value, but the race was a point-to-point. It set me off on the road to a misspent childhood at school--I became a bookmaker for a while and made a small profit, but turned to punting thereafter.

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I thank the noble Viscount, Lord Astor, for introducing this challenging debate. If I may make an invidious choice, I was most attracted by the speech of the noble Earl, Lord Huntingdon, because he did what I wanted to do. When noble Lords have mentioned the Tote, they have failed to distinguish between pool betting and fixed-odds betting. Pool betting was created in this country in the 1920s in order to give punters a choice. I refer in particular to new punters, those who place small bets and those who bet occasionally. Like a mutual organisation, it contributed a large amount to racing rather than contributing to shareholders, as bookmakers do should they be lucky enough to make a profit.

Often, bookmakers tell us that they make little profit. The small bookmakers such as those with whom I used to play pontoon on the train in my early teens, do not make much profit. They are the ones who go on to the racecourse and have the most difficult time, and they are the ones who lend colour to racing. As I have stated in your Lordships' House in the past, I profess to be a Tote monopolist. In a previous debate in this House, the noble Marquess, Lord Zetland, and I clearly stated that in an ideal world we would wish to have a Tote monopoly in this country. We regret that the chance was not taken in the 1920s and 1930s to go down that path. The countries which have done so have reached a degree of affluence in sport and it has returned to racing a high proportion of the turnover of betting. That is reflected in prize money and in the welfare of stable staff and so forth.

However, we must accept what we have. Although in many debates I crossed swords with Lord Wyatt of Weeford, we must congratulate him and the present chairman of the Tote, Peter Jones, on dealing with a difficult situation in terms of pool betting. It is difficult for a pool betting operation to compete with fixed-odds bookmakers. Regular backers of horses prefer to bet with bookmakers. If one bets in reasonably large sums in this country, doing so on the Tote on a day-to-day basis makes no sense. One has only to look at the returns and the statistics.

On the other hand, people attending the big meetings as casual racegoers--for instance, Ascot and Cheltenham--or attending Sunday race meetings, which I hope will become frequent, go to the Tote because it is less complicated and needs less explanation.

In the idea of privatising the Tote, we face a problem. I have supported the idea of privatisation, but wanted to privatise only that part which acts as a fixed-odds bookmaker. We have used the term "Tote" to embrace both pool and fixed-odds betting, but it has become a rival to the main fixed-odds bookmakers. The pool has become a minority operation, the least profitable, because of its handicap in competing on a day-to-day basis and achieving the turnover which will make it attractive to people to queue up at the Tote windows.

It is right that the Tote should be privatised in one form or another. I do not want to discuss the methods which we may consider appropriate or to discuss the Government's approach. I hope that they will come forward with a reasonable conclusion, but so far we

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have had little clue. However, I hope that they recognise that the Tote pool, which is the method of betting for the little man, the novice and family racegoer, and which attracts new people to racing is very important. As the noble Earl said, it is attractive to professional trainers, for example. He said that if he wanted to bet--he probably does not do so, even during his sabbatical--he would prefer to bet on the Tote. Other professionals in his sport would also prefer to do so because they know that the money goes into a pool which contributes to the good of racing. The good of racing ought to be the Government's primary object in considering how to privatise the Tote.

Racing in Britain is a marketable product. I was told only today by the chairman of the Tote, who was kind enough to telephone me about what I intended to say in my speech, that punters in Singapore are more interested in the racing at Southwell. I am sure that the management of Southwell will not mind me saying that it is a relatively minor racecourse. The new technology enables British racing to be beamed out to Africa, to the Far East and all over the globe, and the pictures are provided by the organisation known as SIS. SIS is owned by bookmakers, but no one controls the way the images are used. People can create their own Tote pools and fixed-odds betting on our product.

My advice to the Government would be to take the Tote away from the bookmakers, sell off the shops and then create an environment in which the Tote can operate in the way it was originally intended; that is, as a beneficiary to racing, to the small punter and to the family racegoer. They should give it an environment in which it can flourish. If we can achieve the Australian system, so much the better, but I doubt whether it is possible. I love the idea of a Tote monopoly for off-course racing and having my old friends who taught me to play poker and pontoon on the train remaining on the course to provide a bit of atmosphere. I believe that I should have had a rougher run today had I been known to play those games. For some reason, during the gloomy post-war years such people had pity for a young boy, obviously unhappy at his public school, wishing to risk his pocket money while travelling on a dirty train to Newbury races.

The possibilities in the long term are excellent. We congratulate the Tote on what it has done to hold together the pool betting, albeit dragged along in the wake of fixed odds betting. That was the only way it could survive and I do not blame the Tote if it tells me its feelings. However, I hope that it does not do so in a newspaper, as happened the last time I made a similar controversial statement. Luckily, it was a newspaper not seen in your Lordships' House, as it is more notable for its ladies than its horses. Its report had as its headline "Falk Off", in bold letters and it accused me of being a dotty Peer and of insulting the Royal Family. I suggested that betting shops should not open late at night without proper safeguards for their staff and that apparently was insulting Her Majesty the Queen Mother. That is the press for you.

I suggest that the Government look very closely at the value of the original Tote pool and if the bookmakers do not play ball and contribute to the Levy Board as

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they should--I should point out that I am great friends with bookmakers and I love them, especially those who ask me to lunch at various racecourses--it should not be too difficult to take the iron hand out of the velvet glove and say that if they do not behave the Government will pay much more attention to the Tote pool. That can be done and I hope that the Government will do it.

I hope that the Government will make use of one of the greatest images of racing in the world. After all, we started it and most countries took it from us. If we can make racing more prosperous, all parts of racing will pull together. At the moment they are all at each other's throats. Those of your Lordships who read The Racing Post every day will know it is like a novelette with someone sticking the knife into someone else or contradicting them on how we should proceed. All that would go.

Racing in Britain is a wonderful sport. It has been an example to the rest of the world--although it can be dangerous, because it involves large sums of money and we have had some scandals--but it can only remain the best if the Government take a proper and carefully considered position at this vital stage. If they get it right, the whole of racing will benefit. It will become prosperous, and we will congratulate ourselves on doing a good job.

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