National Hunt Racing

HC Deb 14 January 1998 vol 304 cc324-32 1.30 pm

Mr. Laurence Robertson (Tewkesbury)

I am privileged to be introducing an Adjournment debate on the national hunt racing industry. Basically, I want to do three things. First, I wish to draw attention to the importance of the racing industry to the country and to my constituency. Secondly, I wish to highlight some of the problems that, in particular, national hunt racing faces. Thirdly, I wish to suggest one or two ways forward in which the Government might help.

First, I declare an interest. The Cheltenham race course is in my constituency and I am a member of that course, although I am sure that membership of it costs more money than it brings in. I declare also a passion for racing, especially national hunt racing. Most people in this country and many others throughout the world are stirred by the excitement of the grand national and the Cheltenham gold cup, and by many other races that we stage in Britain.

Two million people attended race meetings last year to enjoy the spectacle of racing. It is the third most popular sport in the country. Racing is a large industry, with a turnover of £600 million a year; the turnover is more than £5 billion a year if betting is included in the calculations. The industry's assets total more than £2 billion and it is responsible for £90 million-worth of exports a year. It also contributes £600 million a year to the Exchequer, which is a subject to which I shall return shortly.

The industry generates jobs for more than 100,000 people. It is responsible for providing jobs for one in every eight agricultural workers. There are 500 racing training yards in Britain and 50 race courses, of which 44 stage national hunt racing. At present, more than 12,000 horses are in training.

In my constituency alone, Cheltenham race course has a turnover of £10 million a year. That does not include the massive revenue that is generated in hotels, guest houses, pubs and restaurants by the 173,000 people who attend the three-day national hunt festival in March each year.

It might be asked, if the industry is doing so well, why introduce an Adjournment debate on it? Sadly, racing—especially the national hunt side—has its problems. No one is suggesting that these problems point to a terminal decline, but I want to bring the problems to the Government's attention because, largely, they are caused by the way in which successive Governments have regulated the industry.

The House will be aware that only yesterday Lord Wakeham resigned as chairman of the British Horseracing Board, and that that body has been discussing this morning a financial plan which has been compiled to address the problems of the racing industry generally.

What are the problems facing the industry? They are, of course, financial. The prize money won by guiding a horse to victory in the grand national or the Cheltenham gold cup is well worth having. However, the prize money received by winning a race at Fontwell or Newton Abbot, for example, can be as low as £1,300, out of which the winning owner would have to pay a percentage to the trainer and the jockey as well as his own travelling expenses for that day.

When we consider that, on average, it costs £10,000 a year to have a national hunt horse in training, it does not require a degree in mathematics to work out that involvement in racing costs most owners dearly. On average, owners in Britain recover only 24 per cent. of their costs each season. That compares with 47 per cent. in the United States, 49 per cent. in France, 61 per cent. in South Africa and 90 per cent. in Japan. Of the nine major racing nations, British owners come eighth in the league, with only owners in Ireland being worse off. It is no coincidence that Ireland is the only other country to have a major national hunt programme.

The poor return to owners has a knock-on effect. It means that fewer horses are in training than would otherwise be the case. Given the low prize money, 32 per cent. of races attract fewer than eight runners. That, in turn, means that fewer bets are placed on those races, because each-way betting is not an option. As a result, less money is collected in taxation by the Government. More important, less money is collected by the Horserace Betting Levy Board to return to racing. If less money is returned to racing, prize money will remain low. At that point, the circle begins again.

It is crucial to the industry that smaller courses thrive. The analogy that I would draw is that the Football League would not survive if it contained only the big clubs, such as Manchester United and Liverpool. Those clubs depend on the smaller clubs, such as Doncaster Rovers or Brentford, to supply players. Many players start from such clubs. The same goes for racing: most horses, trainers and owners start from what might be called the feeder tracks before progressing, if they ever do, to Cheltenham and Aintree.

It is vital that attention is given to the problems that are faced by the smaller race courses to enable them to increase the prize money on offer, thereby protecting the fundamental base of the industry.

Why is the prize money so low? The answer is that not enough money comes into racing from the most obvious source of revenue, the betting industry. The punters cannot be blamed for that because they, cheerfully or otherwise, contribute about £1 billion a year to the bookies in lost bets. The bookies survive on a profit margin of less than 3 per cent. The problem is the low percentage of betting turnover that finds its way back into racing.

For every bet placed, the punter pays tax at 9 per cent. Of the total bet—the bet plus the tax—the money is distributed as follows: 78 per cent. is returned to the punter as winnings, which is average by international standards, and overheads of 14 per cent. are retained by the betting industry, whereas the international level is about half that amount. The percentage is high in Britain because of the regulated nature of such betting. The 14 per cent. for overheads includes profits for bookmakers of only 2.35 per cent. compared with an international spread of between 4 and 8 per cent.

The betting duty taken by the Government is 6.75 per cent., which leaves only 1.19 per cent. of the total bet to go back into racing. That is the crux of the problem. That percentage compares with 8 per cent. in France, 9 per cent. in the United States and 15 per cent. in Germany. It is no wonder that prize money is so low in Britain.

The ratio of how much the Government take to how much racing receives is 6:1 in Britain. In France it is 1.8:1 and in Germany it is 0.05:1. These ratios clearly demonstrate that the Government are taking too high a percentage of the tax paid by the punter when compared to the amount that racing receives from the tax.

The Minister will be aware that the tax percentage taken by the Government of 6.75 per cent. is not particularly high by international standards and is at about the middle of the range. Nevertheless, government is racing's problem in this country in a number of ways. Although some foreign Governments might charge a comparable rate of tax, the overheads of the racing industry abroad are lower than in this country. The reason is the over-regulation of much of the industry.

For example, race courses in this country are restricted in the activities that they can pursue. Betting on horse races can take place only in licensed betting shops. All this regulation adds to the cost of running the betting industry, which is why overheads are so high.

I have dealt with the problems, but what are the solutions? Much in common with what the British Horseracing Board is suggesting today, I have some proposals which, if taken up, would serve to protect the racing industry and enable it to remain a major employer, a popular sport and a big money spinner well into the next century.

The real way forward for racing is to deregulate much of the industry. At present, racing gets much of its money—about £54 million a year—from the levy board, and that arrangement is regulated by the Government. Because of the present arrangement negotiated at Government level, racing stands to lose £5 million a year from this source for the next two years. In time, the racing industry needs to be able to negotiate the levy arrangements directly with the bookmakers, so that a famine-to-worse-famine situation can be avoided.

The betting industry also needs deregulating to a large extent. Why cannot bets on horse races be made in the same places at which lottery tickets are bought, in common with what happens in other countries? That would cut the industry's overheads, thereby leaving more room for negotiation between the racing industry and the bookmakers. Race courses, too, should be deregulated, to allow them to realise the true worth of their assets.

Without being controversial, I believe that the Government should not cause further problems for the national hunt industry by accommodating legislation that would cause hunting to be banned, as such a move would be very damaging to the industry—a point widely acknowledged in racing circles.

These solutions are for the future. The industry needs an immediate increase in income of £105 million a year to increase prize money significantly, improve its marketing and thereby safeguard the future of the industry and the livelihoods of those who work in it.

The British Horseracing Board has identified ways in which the industry could raise an additional £25 million a year, but that leaves £80 million a year, which must come from the betting industry. Given that bookmakers make less than 3 per cent. in profits, it is incumbent on the Government to change the present betting duty-betting levy ratio, about which I spoke earlier. The ratio is currently 6:1; if it were changed to one similar to that of France, say, to 1.7:1, the racing industry would have the money that it needed, enabling it to double the prize money, which would give the industry a tremendous boost, and the money would find its way into the pockets of trainers and stablehands, as well as owners.

Such a transformation in the fortunes of the racing industry can be attained simply by the Government cutting betting duty from 6.75 to 5 per cent., with the difference going to the levy board for distribution to racing. It is estimated that that would cost the Government only about £125 million a year initially, but that money would be regained in the short to medium term through extra tax receipts, which would be taken from a regenerated racing industry. In the longer term, the Government's tax take from the industry would probably increase, just as the previous Government increased their tax take by cutting the rates of tax.

Without wanting to be party political, I should point out that the previous Government helped the industry by cutting betting tax, by abolishing on-course betting tax altogether and by allowing owners to claim back VAT on training fees and bloodstock purchases. It is time for the Government to recognise the problems that the industry faces and to realise that government is the largest part of the problem.

Mr. Richard Spring (West Suffolk)

Does my hon. Friend agree that if, as has been threatened, the largest racing interest in this country, the Maktoum family, withdraws its racing interests from this country—totally out of character, the family have publicly gone on record to say that, if this dire situation continues, they may well do so—the effect on revenues for racing, and indeed on tax revenues and employment in this country and all its ancillary industries, would be catastrophic?

Mr. Robertson

My hon. Friend is absolutely right. When somebody of that gentleman's standing is persuaded to consider withdrawing his horses from British racing, that is a very dire warning of which we should all take notice. His racehorses tend to be flat-race horses, and flat racing is better funded than national hunt racing. If he sees such a problem in flat racing, the problem in national hunt racing is indeed worse.

I ask the Government to recognise that government in general has tended to be the problem in the racing industry. I should like them to consider how they might offer help to the industry. I stress that no one in racing is asking for a Government handout or subsidy; all we ask is that the Government stop taking such a large amount of money out of racing, especially when they treat other forms of gambling more leniently.

A cut in betting duty and a transfer of that to the levy board—a move seen as vital by the industry—would enable racing to continue to provide employment to thousands of people and enjoyment to millions. I ask the Government seriously to consider making such a medium-term investment in an industry which is one of the hallmarks of Britain.

1.47 pm

Mr. Geoffrey Clifton-Brown (Cotswold)

I am grateful to my hon. Friend the Member for Tewkesbury (Mr. Robertson), my neighbour, for allowing me to have a couple of minutes of his Adjournment debate. He presented the case for national hunt racing in a well-structured and professional way, and all of us who are involved and have an interest in racing are incredibly grateful to him for raising this subject today.

Although I have no direct interest in national hunt racing, my family does. Indeed, I must be one of very few hon. Members to have ridden winners under the rules of the national hunt racing industry.

I shall make a couple of points in support of what my hon. Friend said. I was talking the other day to one of the more successful owners in this country, whose horse had just won—admittedly on the flat, and not under national hunt rules—£50,000 on a grade 1 race in Milan. Apparently, in this country he would have won about £5,000 or £6,000. That is the problem. Unless an owner is one of the most successful, the prize money in this country hardly covers the training fee.

As my hon. Friend pointed out, in national hunt racing, which has always been the poorer cousin of flat racing, the situation is even more dire; unless the prize money and general conditions in racing can be improved, the situation can only go downhill. That would be a pity not only for the racing industry and the trainers but for the huge host of associated industries. The stud industry—the pedigree horse industry—in this country is one of the most successful in the world. It would be a great shame if some of the best stallions in the world were not to stand in this country and were to stand abroad, with the implications that that would have on the balance of payments.

My hon. Friend the Member for West Suffolk (Mr. Spring) made the point that one of the foremost interests in the middle east, who has spent some £500 million on the flat racing industry in this country, has threatened to pull out if the situation, particularly the prize money, is not improved. My hon. Friend will be able to attest far better than I, although I was born and bred and brought up in his constituency, the financial multiplier of that money in the Newmarket area in terms of employment and the generation of various economic activities.

Many other associated industries within the racing industry are very successful in this country, notably the horse insurance and finance leasing industry, and the veterinary research in this country is some of the foremost in the world. If we start to lose all those supporting industries, this country will be very much the poorer, because of investors in the middle east not investing in this country, and also because the rich people in this country will have to send their mares abroad for covering by stallions.

I hope that the Government will take notice of what my hon. Friend the Member for Tewkesbury so expertly said. It is really a question of cutting off our nose to spite our face if we cannot bring about a little more deregulation in the betting industry in this country, and if we cannot ensure that a little more money goes back into the industry, through some mechanism from the betting industry, but particularly from the betting levy tax. It is not a huge amount of money from the Government's coffers, but if it were sensibly done I am sure that the advantage to the balance of payments, and indeed the multiplier effect of the turnover from racing increasing, would be very beneficial for this country in the longer term.

1.49 pm

The Parliamentary Under-Secretary of State for the Home Department (Mr. George Howarth)

I congratulate the hon. Member for Tewkesbury (Mr. Robertson) on his account of the industry's problems, and his description of its contribution to our national life. I may be corrected, but I do not remember a similar debate in the House over the past decade, so it is all the more important for us to take as much advantage of today's debate as possible. [Interruption.] The hon. Member for Tewkesbury says that my memory is bad. If there has been such a debate over the past decade, I apologise, but I certainly have no recollection of it.

The hon. Gentleman placed particular emphasis on national hunt racing. I think it is true to say that no other country has a national hunt or jump racing system that is anything like ours. The grand national—which takes place in my constituency—is watched by many members of the public, both in this country and abroad. I shall say more shortly about Aintree and its role in national hunt racing.

The hon. Gentleman chose to highlight the problems faced by the industry, which is fair enough—and, as he pointed out, topical. The issues surrounding racing have been debated hotly in the past few weeks, in different forums, but, although the debate has focused on the problems, we should bear in mind the positive developments that are taking place. Cheltenham race course, in the hon. Gentleman's constituency, is both charming—I know that, as I have visited it—and successful: indeed, I understand that it is doing so well that last year it had to limit the number of admissions. We should not paint too gloomy a picture.

The Tote—whose profits go to racing—has reported an increased turnover, and is in a healthy financial position. As hon. Members who take an interest in such matters will know, it is set to expand. Racing benefits considerably from the Tote's activities. Race courses receive a 5 per cent. commission on Tote turnover, and the last Cheltenham festival, for instance, generated a record turnover of £7 million. That gives some indication of the benefit that flowed from it. Racehorse owners benefit from sponsorship, which boosts prize money. The Tote will be providing sponsorship at all 59 race courses in 1998.

It is clear that the Tote is going from strength to strength. Racing has welcomed its strategy to maximise its own long-term profits for the benefit of racing and everyone associated with it. The Tote chairman, Peter Jones, summed up the position very well in his recent Gimcrack speech—made on the same occasion as the speech by Sheikh Mohammed, to which the hon. Gentleman referred; for obvious reasons, it was probably less widely reported. Mr. Jones said: British racing is in its best shape for many years. I consider that a fair reflection of the conclusion that would be reached by a number of people with a balanced approach.

However, Mr. Jones also referred to a need for improvement. As my right hon. Friend the Foreign Secretary tellingly said to a racing audience last week, there is no room for complacency. I do not want to convey the unbalanced view that we do not accept that there are difficulties and cases that must be considered, and I certainly feel that the racing industry and the bookmakers can build on their successes to help in the boosting of racing's share of the betting market.

Mr. James Paice (South-East Cambridgeshire)

Will the Minister give way?

Mr. Howarth

Briefly; I have very little time.

Mr. Paice

I thank the Minister. I will be brief.

The Minister has mentioned bookmakers, and the share of the money that goes back to racing. I realise that he will have to discuss the matter with the Treasury, and that it is not necessarily his direct responsibility, but will he talk to the Treasury about the levels of betting duty on different forms of betting? I understand that this is one of the few countries in which everything that takes place in a betting shop is taxed at the same rate, whereas tax on the lottery is already at a different level. Will the Minister consider the possibility of relating tax more to the margins that bookmakers are making on individual betting products? He may find that it is possible to replace the money that the racing industry is seeking by reducing that amount.

Mr. Howarth

I hope to make some comments on the Treasury's responsibilities shortly, but I am not sure that it is accurate to say that there are not different rates for certain kinds of bet. Forecasts, for instance, are exempt from certain tax rates—I think; if I am wrong, I will come back to the hon. Gentleman. In any event, his general point deserves to be considered.

The British Horseracing Board's off-course betting development group has shown what can be achieved. Last year, prize money in Britain topped a record £60 million. The case of the hon. Member for Tewkesbury is that the prize money is inadequate in many lesser races, but I repeat that the total has reached a record level. [Interruption.] There are international comparisons to be made. I am simply commenting on the scale in this country now.

On behalf of the racing industry, the British Horseracing Board has prepared a financial plan. It was presented to the industry forum this morning, and I look forward to studying it in detail. Hon. Members will, I think, accept that it would be premature for me to comment on its contents before I have had an opportunity to read them, and I will confine myself to a personal comment. It has been widely reported that Lord Wakeham resigned as BHB chairman yesterday because he could not agree with the plan. On a personal level, my right hon. Friend the Home Secretary and I very much regret his departure. Such disagreements will occur; it is unfortunate that this disagreement led to Lord Wakeham's decision to resign. It now falls to the board to appoint a successor, and I hope that that successor will work—and that Lord Wakeham will continue to work—for the best interests of all who are involved in racing.

Mr. Clifton-Brown

Will the Minister give way?

Mr. Howarth

Very briefly.

Mr. Clifton—Brown

Does the Minister agree that one of the reasons why the need for reform is so urgent is the increasing internationalisation of the horse racing industry, and the fact that people who participate in it have more freedom to take their horses wherever they wish if they do not like the regime in this country?

Mr. Howarth

That is absolutely true, in terms not only of that side of the market but of the punters' considerations. Those in the betting industry are very shrewd: they realise that at certain times of the year it is useful to take bets on races in South Africa and elsewhere.

Aintree race course, which is in my constituency, is very successful. On 4 April—this is just one more piece of good news—it will open a new £6 million grandstand, which forms part of a £15 million investment programme. The levy has played a part in that.

The hon. Gentleman referred to betting deregulation. He felt that there was too much regulation, and rightly said that the last Government had moved towards deregulation. There were welcome developments in that regard, and I am willing to consider approaches that are made to us, but I must add that our approach must be consistent with the rest of the Government's attitude to gambling. With that caveat, I do not rule out any further deregulation measures.

The hon. Gentleman rightly said that the betting industry had benefited from previous Home Office deregulation measures relating to print advertising, changed arrangements in shops and the introduction of amusement with prizes machines. All those measures have improved turnover. Not many industries have the support that the levy affords: as I think the hon. Gentleman said, it contributes £54 million a year to racing. So far, no one has come forward with a better mechanism, although I am willing to look at any suggestions.

The hon. Gentleman mentioned betting duty, which he rightly said was a matter for the Chancellor. I know that he will study the BHB's plan carefully; we have an on-going dialogue with the Treasury on such matters.

I shall refer only briefly to the ban on hunting, because it has already been debated thoroughly. I accept—as I accepted on Second Reading of the Wild Mammals (Hunting with Dogs) Bill—that there will be an effect. Whether it will be as severe as those who oppose the ban claim remains to be seen, but it is no good pretending that there will be no effect.

Many of the issues raised by the hon. Gentleman need to be considered further. It is important for those who care about the future of national hunt racing and racing in general—throughout the House and elsewhere—to reach the best possible consensus. If we can reach agreement across the industry, across the House and in the Government about what can be done sensibly, what is in the best interests of the racing industry and what is in the best interests of the general public who support it in many different ways, we will have done everyone a service. It is not simple, but, if we can establish some good will and understanding, and if we can engage in the sort of friendly but well-informed debate in which we have engaged this morning, I am sure that we can make progress.

It being Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.

Sitting suspended, pursuant to Standing Order No. 10 (Wednesday sittings), till half-past Two o'clock.