HL Deb 05 April 2004 vol 659 cc495-562GC

(Second Day)

Monday, 5 April 2004.

The Committee met at half past three of the clock.

[The Deputy Chairman of Committees (Baroness Thomas of Walliswood) in the Chair.]

Clause 8 [Exclusive licence]:

Lord Moynihan moved Amendment No. 10: Page 5, line 16, at end insert— ( ) The exclusive licence shall commence on the appointed day.

The noble Lord said: I hope that this amendment will prove uncontroversial but it is nevertheless important. Its purpose is twofold: to ensure, first, that there is continuity for the exclusive betting licence; and, secondly, that the seven-year licence is not reduced by starting it early. The Tote circulated a most helpful briefing on the matter, which I am sure many Members of the Committee will have received. The Tote seeks reassurance that the exclusive licence for the successor company will start on the same day as the Tote is abolished.

There are two reasons for that. First and most importantly, nothing in the Bill at present requires the exclusive licence to start on the day that the Tote is abolished. That could lead to a situation where the successor company is left to fend for itself without an exclusive licence. Moreover, no time limit is set on that delay. Clause 8(4)(a) states that the exclusive licence can be issued, before, on or after the appointed day". It makes every sense that there be continuity for the exclusive betting licence. There is no case for the type of delay that could result from the legislation as currently drafted. Secondly, at the other end of the spectrum, the Tote is also concerned that the exclusive licence could start before the appointed day. In that event, the period of the exclusive licence would be reduced to fewer than seven years, which would also be detrimental to the Tote's successor company.

I hope that the Minister will take this opportunity to explain why the Bill contains the option to start the exclusive licence before the abolition of the Tote, and that he will provide reassurances of the kind sought by the Tote. I beg to move.

Lord Lipsey

This amendment covers the same ground as Amendments Nos. 11 and 12, tabled in my name. "Before" and "after" are combined in this amendment, whereas in mine they are given as distinct alternatives. I tabled my amendments largely to probe the Minister's intentions in this regard. It seems more logical that the licence should start on the approved day. I shall cheerfully not move my amendments if the Minister can account for these matters in a way that satisfies both sides of the Committee.

The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey)

The issue is certainly uncontroversial, because we intend that the exclusive licence should start at the same time. There is no controversy at all; it is simply that one cannot legislate for things about which one cannot be sure. We cannot be absolutely sure that something might not go wrong.

We would not have the exclusive licence start before the Racing Trust took over because it would quite reasonably object to any shortening of the period of its exclusive licence. That is one of the things that I am sure it will insist on as purchaser of the successor company. We would not wish to have the licence start afterwards either, but let us suppose that somebody was not available for signing, for example. This is purely trivial; there is no intention that there should be any significant distance on either side between the sale and the start point of the exclusive licence. We must simply provide for things going wrong.

Lord Moynihan

I am grateful to the Minister for that explanation. I see his definition of something going wrong as being an issue of no greater import than someone not being available for signature. In those circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 11 and 12 not moved.]

Lord Moynihan moved Amendment No. 13: Page 5, line 24, leave out paragraph (c).

The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 19, 20 and 25, which are grouped together. Sadly, my noble friend Lord Astor cannot be with the Committee today. We know that he made an impressive, useful contribution at the first Committee sitting. Like me, he believes that Amendment No. 13, tabled in his name, and Amendment No. 19, in my name, are particularly important. They have been grouped with a number of similar amendments—not least those of the noble Lord, Lord Smith, and the noble Viscount, Lord Falkland.

Although I am grateful that so many others are also pressing the Government to ensure that the exclusive licence is not limited to just seven years, our amendment perhaps offers the best of both worlds by leaving the decision open for future governments. Our amendments are designed to protect the interests of racing and punters by helping to maintain fair competition within the betting markets.

Furthermore, Amendment No. 19 will ensure that the Bill does not tie our hands now to a decision that should rightly be taken in the future. The government of tomorrow should have the opportunity to make a decision on the merits of continuing an exclusive pool betting operation in seven years' time. I cannot see what benefit is gained from denying a future government that opportunity today.

It is clear to many noble Lords and me that pool betting helps to provide a check on the fixed-odds betting and vice versa. It is a long time since I read economics at university. In the light of the questionable coxing in this year's Boat Race, I am not inclined to say which university. However, what is more important than rowing results—at least in this context—is the way that competition in the market place works, particularly after the Minister for Sport and Tourism accused Her Majesty's Opposition in another place of promoting an anti-competitive policy.

With pool betting and fixed-odds betting, we clearly have two products with a high degree of substitutability between them. While pool betting and fixed-odds betting are, of course, different bets, punters can nevertheless freely and easily switch from one to the other as the fancy takes them. The ability to swap seamlessly between the two products limits the potential downside of a monopoly position in one of the sectors.

However, if we undermine the market for pool betting, the market for fixed-odds betting will lose an important check. My economic argument has a second string, which was eloquently rehearsed in 1995 by my colleagues when they established the National Lottery. That argument is equally valid today. There are certain instances where a monopoly is the most efficient way of organising a market. Thus, there is only one National Lottery. That is the way that we can best guarantee the highest prizes and the lowest administration costs.

The same logic applies to pool betting. As was said in another place, racing will benefit from a bigger pool rather than a multiplicity of "puddle" betting. The danger of puddle betting is that many smaller courses will not have a pool betting service; it would simply not be economical. That would deprive them of significant income. Additionally, the more puddles there are, the higher the relative administration costs for each puddle. Thus, less is returned to the punter and less is returned to racing. So everyone loses out.

The Government seem determined to work against the rule of economies of scale. Yet, at the same time, they want to reduce cross subsidies between the richer courses and the less popular ones for the benefit of racing. I am aware that Ministers have had some difficulty in persuading the Office of Fair Trading of the merits of granting an exclusive pool betting licence. Perhaps future Ministers will have better luck with future directors general of the Office of Fair Trading.

I would stress that nothing in this amendment—or in a number of these amendments—commits the Government to renewing the exclusive pool betting licence. It merely permits a future Secretary of State to make a decision about whether to renew the licence. Can the Minister confirm that that would not offend the Office of Fair Trading? If it would, what would be next? Will the OFT want to abolish the National Lottery? That may be a ridiculous suggestion, but it seems to be in keeping with the OFT's present logic on the exclusive pool betting licence.

The terms that we propose for the extension of the exclusive licence will include a built-in check, but the licence would not necessarily be given to the successor body in seven years' time. Instead, it could be awarded to another company. There is a strong analogy with the National Lottery here. On that basis, I hope and trust that the Minister will consider my amendment and that he will not commit future governments to the abolition of the exclusive pool betting licence, which has served racing well for more than 70 years. I beg to move.

Viscount Falkland

I support the noble Lord, Lord Moynihan, in the substance of what he says. It seems that the finality of the existence of the Tote, as expressed in the licence which may not be renewed, causes great dismay to a number of people. As yet, I fancy that many of those people do not realise what is happening; namely, the regular race goers and so forth who have become used to the existence of a Tote monopoly, as it is described. That is an unfortunate term because it has always brought trouble on those who mention it in Parliament. I was ribbed about it in a debate by the noble Lord, Lord Peston, in a very good-humoured way, but I did not think that it would finally come to be a scourge on those of us who wanted to see the continuance of Tote pool betting as it has existed in this country.

I accept what the Minister said at the previous sitting, which was that it had been a very tough battle to get a licence at all. The three-year licence would have been extremely unsatisfactory, not only for the trust but for everyone involved in racing. I congratulate those who negotiated the seven-year licence. However, it should not be right to say that that is the end and that after seven years we will not have Tote betting.

I am not quite sure that I followed what the noble Lord, Lord Moynihan, said about the checks that exist on fixed-odds betting. After all, a pool is a pool. It probably reflects more on the efficiency and good operating of the bookmakers that prices, by and large, seem to match up with pools dividends, although not at big meetings, which reinforces his point. At Ascot, York and Cheltenham—meetings that gather enormous crowds—one is obviously likely to see larger dividends coming out, because of the size of the pool. That is very popular with punters, particularly those who go only on such occasions and probably bet only once, twice or three times a year on course; they may bet in the Grand National off course.

I do not like the term "puddle betting" and do not know where it came from. Like a lot of terms these days, it is extremely expressive, but it offends slightly. Perhaps it is a question of generation. I shall not use the term myself but I agree with the noble Lord that, if one sets up small pools all over the place, no one will benefit. One needs a maximum pool. If by chance—t seems likely—ote betting ends in this country, who is to say that somewhere else in the globe another pool operator will not offer pool betting, perhaps on the Internet? The pools may be enormous. We will have rejected the concept of large pools, and others will benefit.

As I know from my participation in recent examinations by the pre-legislative scrutiny committee on Betting and Gambling, sophisticated software has quickly altered the whole way in which we view the future of betting. After all, betting exchanges are simply a very sophisticated way of using software when applied to betting person-to-person, when one analyses them. They are nothing more complicated than that. One reason why people will continue to bet on our exchanges and online bookmakers is because, as in the City of London, this country offers integrity. It is integrity that we sell to the world. That is what British racing has. People may snigger and laugh if they read that in Hansard, having read a lot of the enormous exaggeration in the press about corruption in racing. That is always a threat, but it is not at all on the scale presented by the press.

In this country, we have nothing to be ashamed about in terms of the pool. I do not care whether the OFT says that it is non-competitive. Since 1928, the Tote has offered a tremendous alternative service for those who want to back horses, as opposed to backing them with fixed-odds bookmakers. That is not to say that fixed-odds bookmakers have not carried out their business with extreme integrity and efficiency; they also have offered a great service to the public.

The two have gone very well together. Things have been rather better for the fixed-odds bookmakers than the Tote. That is for the obvious reason that, at small meetings, the Tote has great difficulty competing with bookmakers for value. I congratulate the Tote on having done the best it can to hold its head above water against that very unequal competition. In the betting shops that it has acquired, it has been able to create turnover to mitigate against that loss of competitive edge with the bookmakers on its everyday Tote operations.

The Tote is an important institution in this country. It is a brand image of extreme integrity. It is admired the world over. Other totes have based their operations on the example set by the British Tote and yet we view the possibility of there being no Tote in seven years. That is simply accepted and expressed in the Bill. I agree with the noble Lord, Lord Moynihan. I look forward to encouraging remarks from the Minister, although I understand his position. Any encouragement that he can give on this occasion without jeopardising any other positions in which he may be placed would be appreciated.

3.45 p. m.

Lord Smith of Leigh

My amendments in this group are intended to pursue the same objectives as those of other Members of the Committee, so I support their amendments. Their arguments were strong. We learnt last Wednesday about the efforts that the Minister had undertaken to secure the seven-year licence from the OFT. Clearly, that has been hard fought, but we welcome it. I have no intention by my amendment of undermining that agreement. What worries me is its finality: in seven years, we are not sure what the situation will be.

For the reasons stated by the noble Lord, Lord Moynihan, there is an educational task here to ensure that the OFT understands what the Tote is and what it does—that it is in competition with fixed odds betting. It is not a monopoly in that sense, although there is a case that it is a natural monopoly to have a Tote. We may have a rolling, exclusive licence that can be hid for at the end of seven years. That is important.

The issue I want to add to what other Members of the Committee have said is the public interest argument for maintaining the Tote. When I read Clause 9 and the reasons why the Government may require the Gaming Board to issue or revoke the exclusive licence, that seemed to cover the issue of public interest with which I was concerned. It would be in the best interests of members of the public who have a habit of placing bets on horses. We want to ensure that after seven years, punters are protected as much as they are during the seven-year period. That would be in the best interests of the sport of horseracing and would promote the objectives of preventing a source of crime and disorder; ensuring that betting is conducted in a fair and open way; and protecting children and other vulnerable people.

As the noble Viscount said, there has been some unfortunate publicity during the past few months about horseracing and whether it is fair. We know that that has been exaggerated but, in seven years, it may be crucial that the Tote, which is the gold standard and which people genuinely feel is a proper organisation that they can trust with their money, can continue in some way. The Bill is too final by providing for one, seven-year, exclusive licence, which then ends. I hope that my noble friend will think about what has been said; whether the amendments can achieve our objectives as well as what the Government want to achieve, which is agreement with the OFT; and whether we can find some way to ensure that, at the end of seven years, there will be an opportunity to extend an exclusive licence for Tote betting.

Baroness Noakes

I support my noble friend's amendment. I speak today not as a member of the shadow Racing Trust—which is grateful for a half a loaf, as no doubt the noble Lord, Lord Lipsey, will explain with more gratitude and more elegance than I—but from two other aspects. First, there is a need to ensure that the successful transition of the Tote into a racing trust is in the interests of racing. There is a concern that the seven-year licence may not be enough to ensure that a successful and vibrant racing trust can see off whatever the competition may have in store for it in what most people see, other than the OFT, as a single market for betting. Therefore seven years may be a fragile term.

Secondly, we should not narrow the issue to the interests of racing; we should also consider the public interest, as the noble Lord, Lord Smith of Leigh, said. The Government will wish to ensure that the betting market operates in the public interest when the first term of the exclusive licence comes to an end. With the emergence of betting exchanges, there is quite a volatile market at the moment. I do not know what the betting market as a whole will be like in six or seven years' time but it seems to me that the Government should retain more flexibility to reach decisions in the public interest. This simple enabling provision does not commit the Government in any way to extending or renewing an exclusive licence but gives them flexibility to deal with situations as they emerge. I hope the Minister will look kindly on the amendment.

Lord Lipsey

I hope that before seven years have elapsed, one of two things will have happened. First, that the Tote, freed from the public sector and under the leadership of Peter Jones, will have created pools which are positively oceanic in their scale so that any competing pool starting against it will be a mere drop in the ocean. That is one possibility. Secondly, before the seven years are up, either the OFT will repent the extraordinarily ideologically driven—and not very good—economics informing its decision at the present time or, alternatively, Parliament will repent that it gave it such a long rein with which to run about propagating those views and there will be change in this area, as in many others.

Having said that, the position of the trust all along was that seven years was the minimum with which we could give it a go—and give it a go we shall.

Lord McIntosh of Haringey

I appreciate that there a number of people in this country who feel about racing the way that Bill Shankley felt about football—that it is more important than simply a matter of life or death. There may even be people in the Committee who feel that way. Certainly people are putting forward that point of view with considerable clarity and incisiveness.

Alas, we have a deal here—the only one that is on the table. It is not only a question of dealing with the Office of Fair Trading: we are dealing with issues of state aid and competition which go wider than the views taken by the Office of Fair Trading at any one time. On the one hand, we have to establish something that is not so permanent as to offend against, I say to the party opposite, the efficient operation of capitalism. It cannot be a permanent solution; ultimately, we will have to get back to a competitive market. On the other hand, we cannot have a period so short that it will not work. So the deal that we have is seven years and no extension.

My noble friend Lord Lipsey said in January that if we cannot sort things out in seven years then we do not deserve to be in business. He has said virtually the same thing now, and he is right. I am afraid there is no give on this. We cannot go back on something that has been accepted, I thought, with a considerable degree of relief. We can go forward and protect support for racing and pool betting in its present form for a period of seven years, but we cannot allow that protection to continue.

Lord Moynihan

One of our purposes is to put proposals to the Government to learn whether there are strong reasons why the "only deal on the table", in the words of the Minister, should remain the only deal. While I welcome the period of seven years as a step forward in another place, I have not heard any arguments from the Minister which persuade me that there would not be a significant benefit in allowing a future Secretary of State to consider issues such as those set out in Clause 9(1)(c)(i), (ii) and (iii), including the best interests of the punters, horseracing and social welfare. All those matters should be considered at the time an exclusive licence is renewed.

Indeed, that is the precise intention of noble Lords in tabling their various amendments. I have not heard an argument about why there would not be merit in seven years' time in giving some flexibility and freedom to consider such issues to a successor Secretary of State—or even the existing Secretary of State should she still be in post, which is highly unlikely.

If possible, can the Minister explain why this is the only deal on the table and why there is no merit in the cross-party views that have been expressed to allow a future Secretary of State to take into account all the relevant factors when considering a renewal of the exclusive licence for pool betting?

Lord McIntosh of Haringey

The noble Lord refers to cross-party views. It is on a cross-party basis that we are members of the single market. As members of that single market, we have to respect the need to adhere to the rules of the single market concerning the freedom to provide services of any body able to do so. For this purpose, an exception has been made to that rule. It has been negotiated that the freedom to provide services shall be postponed for a period of seven years. That was quite an achievement in negotiation, but it cannot continue forever.

Lord Moynihan

Can I press the Minister a little further? Has he discussed with the Commission whether or not there would be a possibility of removing the prohibition on renewing the exclusive licence for pool betting? Has he sat down with the Commission and asked, within the context of the negotiations over state aid to which he referred, whether the period could have been eight years, three years or 10 years? Has the Commission made it absolutely clear that, to quote the Minister, "within the rules of the single market", there is no flexibility as to the measure on the face of the Bill?

Lord McIntosh of Haringey

One could debate with the Commission any variation we like, but the fact is that we have reached a deal that has been agreed as a success for the successor company, the Racing Trust. Any further extension is not available to us. I shall not go into the detail of the negotiations on any of these particular issues.

Viscount Falkland

For the information of the Committee, in the context of the European Union, what are the plans for any other European Union countries such as France—whose Pari Mutuel system has also operated since around 1928—Germany or Italy? Have similar views been expressed by important bodies that the tote monopolies in those countries are anti-competitive?

Lord McIntosh of Haringey

I do not know. I do not think that is relevant either to this amendment or to our policy making. I am saying that we have a deal here which is acceptable not because it has been forced on us but because we think it is right. We have considered all the possibilities and we have negotiated our position at length. We negotiated between two opposites which, if we had not been successful in our negotiations, could have killed the whole project. In addition, I hope that it will be recognised that our deal, that of a seven-year, non-renewable licence, gives certainty to the successor company, the Racing Trust. What is being proposed would take away that certainty, which would be undesirable in its own right.

4 p.m.

Lord Moynihan

I am sorry that I need to do this, but in scrutinising the clause and the Minister's response, I would be grateful if he could help the Committee a little further. It is absolutely clear that in certain European countries—the noble Viscount, Lord Falkland, was correct to cite the Pari Mutuel—the situation, certainly in France, is one of a national monopoly. That national monopoly is accepted by the Commission, otherwise it would have taken action by now. In his response to the amendments, although I may have been misguided in my interpretation of his remarks, the Minister gave the impression that this was the only deal on the table because, in negotiation with the Commission, there was simply no room for manoeuvre. Whether for reasons of state aid or the nature of the negotiations, there was no room for manoeuvre.

I hope that the Minister, in replying to me, understands that we have a problem in trying to address why the Commission, so far as concerns the United Kingdom, should not allow the renewal of an exclusive licence for pool betting to be on the face of this legislation while at the same time being perfectly content for a monopoly position to continue in France. I may be missing something and if that is so, I apologise to the Minister. However, if he could clarify this particular point, then when we come to future stages of consideration on this Bill, we will know at least what flexibility we have and what room for manoeuvre. If the Commission has taken a specific position on this, one that is clear, set out in writing and beyond which we cannot go, then obviously we would have to take that into account. Clarification on this would be most helpful to the Committee.

Lord McIntosh of Haringey

I am afraid it is obvious that I am not making myself clear. I am not saying that the deal we have has been dictated by anyone, by the European Commission, the Office of Fair Trading or anyone else. The Government believe in competition because we believe in the single market and because we know that rules exist which, if they are breached, create at the very least a risk of challenge. Thus, within government, we have reached this compromise. I am saying that, having reached this compromise which I understand is acceptable to the shadow Racing Trust, it is not in anyone's interest to run the risk of challenge not only from competition authorities, but from anyone not so sympathetic to the cause to which this Committee is devoted. It is our decision. It is the decision we have reached and anything which goes beyond it puts at risk what has been achieved.

Lord Moynihan

I am grateful to the Minister for that clarification. He has moved a long way since his opening response. We are now absolutely clear that this is a position which has been taken by the Government and that they are not constrained by European law or any advice received from the Commission. I think it a great pity that the Government have not allowed themselves the flexibility to remove the prohibition on renewing the exclusive licence for pool betting at some stage beyond the seven-year period when they could take into account the success or otherwise of the operation of the shadow Racing Trust—how much money it has been able to return to racing and how well it has done its job. They would need to consider carefully the issues to which we shall return set out in Clause 9(1)(c)(i (ii) and (iii). It would have been far preferable to provide, on the face of this legislation, flexibility for the government of the day to take all those factors into consideration before coming to a decision on the renewal of a licence rather than simply to prohibit it now.

However, we have had a good debate on this subject and I am sure that we shall return to it at a later stage. Again, I am grateful to the Minister for his comments. With those indications of our intention to return to this matter, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Moynihan moved Amendment No. 14: Page 5, line 32, after "on" insert "such

The noble Lord said: I do not wish to detain the Committee for long, but I want to speak briefly to Amendments Nos. 14 and 15. They are technical provisions designed to ensure that the terms and conditions are those considered appropriate by the successor company to the Tote. Clause 8(5) provides for the successor company to authorise other bodies to conduct pool betting along similar lines to the Tote's current practice. For example, at present the Tote can authorise pool betting operations at point-to-point meetings. It makes sense for that to continue.

The amendments aim to clarify exactly whose terms and conditions will be necessary for the granting of the authorisation in future. I hope that the Government will see fit to accept these technical amendments, so that the successor company to the Tote is freed up and empowered to set its own terms and conditions through the legislation. The Tote first raised the matter with me some time ago, but I note that it has not been included in its latest briefings. However, as always, the Minister's views on the subject would be most welcome. I beg to move.

Lord McIntosh of Haringey

I can be quite reassuring on the amendments, as I am not clear what benefits would arise from them. We are entirely satisfied that, under Clause 8(5), only the successor company may authorise others to carry on pool betting. It is equally clear that, under Clause 8(6), the successor company, in giving such authorisation, may impose such terms and conditions as it deems necessary, including those listed in subsection (6)(a) to (c). That is not an exhaustive list.

Amendments Nos. 14 and 15 are unnecessary drafting changes. I hope that the Committee will accept that Clause 8(6), when read with subsection (5), is sufficiently clear. I understand that agreement on the matter has been reached between my legal advisers and those of the Tote.

Lord Moynihan

I am most grateful. I will take the opportunity following Committee to reflect and make the comparison that the Minister has asked us to make. However, on the basis that that will clarify the position, and unless other Members of the Committee wish to speak, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 15 not moved.]

Lord Moynihan moved Amendment No. 16: Page 5, line 39, leave out from "if" to ", and" in line 40 and insert "a material term or condition of the licence has been materially breached and that breach has not been remedied within 28 days of written notice having been given by the Gaming Board to the successor company notifying it that, if it does not remedy the breach, the Gaming Board may make an order revoking the exclusive licence

The noble Lord said: In moving the amendment, I shall speak also to Amendments Nos. 17 and 18. I intend to concentrate on the group at rather greater length than the one that we have just considered, because Amendment No. 16 is important and would moderate the proposed powers of the Gaming Board to revoke the successor body's exclusive licence. It is an amendment sought by the Tote, and I am grateful that it has drawn it to the attention of the Committee. It may help if I give some background to the amendment and the subsection to which it refers, which is Clause 8(7).

The Tote's present exclusive licence to run pool betting on horseracing was granted in perpetuity under the terms of the original 1928 Act, which created the Tote as a statutory and self-regulatory body. As the Committee will be aware, the Bill allows the Secretary of State, on an appointed day, to dissolve the present statutory body, vesting the businesses of the Tote into a new company owned by the Secretary of State, whereupon the licence ceases and is to be replaced by a new one issued and regulated by the Gaming Board for an exclusive period of seven years.

There is a long history to the exclusive licence, which should not be dispensed with lightly. As drafted, the Bill gives the Gaming Board the ability to revoke the successor body's exclusive licence if it thinks—"thinks" is very important in the context—that, a term or condition of the licence has been breached". I fully share the Tote's view that that is a draconian power. Furthermore, the Bill does not allow the successor body any opportunity to make good a breach in the licence before it is revoked. That brings an end to 76 years of tradition.

A similar amendment was debated in another place. At that time, the Minister for Sport and Tourism said: The Government believe that the Gaming Board will have to act reasonably". He went on to say that, it is likely that the licence would be revoked only when it was clear that a serious and unjustifiable breach had occurred or was occurring … Any such decision would have to satisfy all the usual requirements of public law and would be subject to judicial review". He ended up saying that, that should give the exclusive licence holder sufficient reassurance that the Gaming Board would not act arbitrarily in this matter".-[Official Report, Commons Standing Committee D, 20/1/04; col. 53.] Not for the first time, we are treading somewhat recklessly into enabling legislation, with Henry VIII overtones leading us into the paths of bad legislation. It sounds unclear; it is open to abuse; and it is in need of scrutiny by your Lordships. It is my experience that during the passage of legislation, a government's belief that a certain course of action will be followed as a result of that legislation should ring warning bells. Belief alone, no matter how sincere, provides no guarantees. It is certainly insufficient to prevent a different interpretation of the same legislation in the future, which may well be at odds with what is drafted and what was originally intended.

The best way to prevent that from happening is by ensuring absolute clarity, well before the legislation reaches the statute book. That is what I hope to achieve with this amendment. I was compelled to make the same point last week in Grand Committee, and I do not hesitate to repeat these words of caution. In this case, it is clear that the Tote does not consider the opportunity for judicial review to be sufficient reassurance.

I feel sure that many Members of the Committee will share that view, not least because it is clear from the original drafting of the Bill that only one exclusive licence will be issued. It is simply unsatisfactory for the Government to give an unelected quango—the Gaming Commission—the ability to revoke and exclusive licence solely because it thinks that a term or condition of the licence has been breached. At the very least, the word "think" must be deleted.

I am sure that Members of the Committee with far more legal expertise than I will correct me if I am wrong, but it seems to me possible for judicial review to find that the Gaming Commission was right to think that a term or condition of the licence had been breached, although subsequent investigation might show that that was not the case. What would happen in the six months or so while the successor body waited for the outcome of a judicial review? Surely, that uncertainty cannot be helpful for the racing industry as a whole.

Can the Minister tell the Committee what will happen if the Gaming Board were to revoke the licence and a subsequent judicial review six months down the line found that the licence should not have been revoked? Would it be possible for the licence to be reinstated in such circumstances? I cannot see how it could be in the manner in which the legislation is drafted. My understanding of the Bill—I will look to the Minister to respond on this point—is that once the licence has been revoked, it cannot be reissued. I would be grateful if the Minister could clarify that point.

It is for that reason that sufficient checks and balances in the power of the Gaming Board must be put in place. The wording of subsection (7)(a) provides the Gaming Board with draconian powers. It is simply not acceptable for the Government to say that these are countered by the ability to take decisions to judicial review—as they argued in another place.

The terms of a judicial review should be limited by the primary legislation. It is therefore essential that we make sure the legislation is fit for purpose. It also seems eminently sensible that there should be an opportunity for the successor company to make good a breach in the terms of the licence.

Finally, I want to highlight one further point which Amendment No. 16 seeks to address. Given the severity of the penalty—that is, the removal of the exclusive licence—any breach which would trigger this penalty should at least be deemed to be material. The amendment is thus drafted to include the insertion of the word "material" to describe the breach of any terms or conditions of the licence.

In conclusion, subsection (7)(a) appears to be a casualty of over-hasty drafting. In too many cases legislation drafted in haste gives ample scope for repentance at leisure. I hope that the Government will avoid this pitfall and accept the amendment.

Coupled with this, I have also taken the opportunity to address the important issue of putting in place a parliamentary check on the ability of the Secretary of State to revoke the exclusive licence when the successor body is owned by the Crown. As the Bill is currently drafted in subsection (7)(b), the Secretary of State can instruct the Gaming Board to remove the exclusive licence from the successor body when it is owned by the Crown. I should be grateful if the Minister can explain the purpose of Clause 8(7)(b) and exactly why the Secretary of State needs the power to remove the exclusive licence over and above the powers of the Gaming Board.

Given that subsection (7)(b) can apply only when the successor body is owned by the Crown—which, in the Minister's own words, should be for as little as a few hours—it is surprising that the Government have decided that they need this power. It would appear that the underlying rationale for this additional power is more political than practical. For example, it would apply in the event that the Government change their mind about the desirability of granting the successor body the seven-year licence. If this is indeed the case, it is important that any political decision to remove the seven-year exclusive licence is subject to parliamentary approval. The amendment would put in place the requirement for that approval.

In the whole of this context there are opportunities for us to consider the procedures by which the Gaming Board can revoke the exclusive licence. I touch upon that because it is relevant to the amendment standing in my name. I have come forward with a clear technical amendment, originally suggested by the Tote, which sets out the procedures by which the Gaming Board can revoke the exclusive licence. It is designed to complement our earlier amendment requiring that the Gaming Board gives notice to the successor company before the removal of its exclusive licence.

I note that in another place, the Minister for Sport and Tourism said that there might be cases where an immediate revocation of the exclusive licence would be required for the protection of the pool-betting public. He stated: On the other hand, it is likely that the licence would be revoked only when it was clear that a serious and unjustifiable breach had occurred or was occurring. In such cases, there might need to be an immediate revocation of the licence for the protection of the pool-betting public".—[Official Report, Commons Standing Committee D, 20/1/04; col. 53.]

I should be grateful if the Minister would expand on his colleague's comments to give an example of the kind of breach envisaged.

We need to be very clear on what the powers of the Gaming Board to demand an immediate revocation of the licence would mean in practice. It should not mean that the successor company would no longer run a pool betting operation at all. Rather the market would open to other competitors. It is very unlikely—indeed, I would argue, hardly possible—that the bookmakers or other companies would be able to set up pool betting operations overnight. It would take time to set up such a new operation.

So, even if the exclusive licence was revoked overnight, thereby bringing to an end 76 years of tradition, the successor company would still be able to run pool betting and it is likely that its monopoly would continue for a period of time before other competitors entered the market. Given the harsh nature of the Gaming Board's powers under subsection (7), the proposals from the Tote seem eminently sensible. I hope that the Minister will be able to convince the Committee that this amendment and several others are unnecessary. I am sure that the Tote looks forward to a similar reassurance. I beg to move.

4.15 p.m.

Lord Lipsey

The shadow trust, which I chair, supports the amendments that the Tote has put forward to the Committee. Let me briefly explain why.

The theme of today's debate on the Bill has been, "It is seven years. It is nothing but seven years. It is the whole of seven years". That is what the Minister has rested on and what the Bill has rested on. So when there was a question of whether it started before or after, the Minister reassuringly said, "We intend it to be from the appointed day".

However, we find in the Bill that it is not seven years come what may; it is seven years unless one morning the Gaming Board decides to stand up and say, "It is not seven years after all. Indeed, it stops tomorrow morning". There is a very unsatisfactory logical contradiction in that which the amendments are designed to tackle.

The noble Lord, Lord Moynihan, pointed out that the Minister in another place defended the provision on the grounds that there could be judicial review. However, I was surprised to hear the noble Lord refer to it taking six months; he has obviously had different experiences with the legal profession than I have. It is more six months knocking on 18 months, one might say. What happens if, five and a half years into the exclusive licence that is supposed to last seven years, the Gaming Board gets a rush of blood to its head and throws out the exclusive licence? After seven years, we cannot go on having an exclusive licence anyway. In that case, the seven years sacrosanct in the Bill, because that was the deal, would not be seven years at all but five and a half years, with no protection against it.

The final anorak point that I make is that we have to negotiate the deal. When the deal is negotiated, there will then follow the usual process of due diligence. That will be applied because those who will fund the deal—it will essentially be funded by debt on the Tote's balance sheet—may have to look with extreme clarity at whether the proposals in front of them are watertight. If I were one of those lending the money, I would say, "Hang on, you told me that I was lending on seven years but it turns out that it might be five years, three years or one year, depending on whether the Gaming Board does the right thing or not. I don't think I like that deal". An immense amount of time will be taken that, at the very best, could be more profitably spent. However, if the Gaming Board is fussy and the Minister unyielding, that could make it harder and slower to complete the deal, and we are all eager that we get that done as soon as possible.

I ask the Minister, if not to consider the full letter of the amendments, at least to indicate that he is sympathetic to the problems posed by the noble Lord, Lord Moynihan, and me, and that he and the Government will in some way be willing to come back in future and address them.

Lord McIntosh of Haringey

I always try to be as sympathetic as I can. I acknowledge straightaway that the concerns that lie behind the amendments are understandable. The noble Lord, Lord Lipsey, goes too far in supporting them if he thinks that they will relieve him of the difficulty that he anticipates, as chairman of the shadow Racing Trust, of the possibility of a revocation of an exclusive licence. The amendments would change the conditions under which an exclusive licence could be revoked, but they would not change the fact that it could be revoked.

We all seek the same thing but we are doing so in an arcane area of administrative law that is very difficult to make clear to ordinary people such as myself. I shall start by taking Amendments Nos. 16 and 18 together because they broadly cover the same ground. Amendment No. 16 seeks to introduce the concept of materiality into the Gaming Board's consideration of a breach of licence conditions and to compel the Gaming Board to give 28 days' written notice before revoking the exclusive licence. Amendment No. 18 prescribes the procedure that the Gaming Board is required to follow if the licence is to be revoked.

As I said, I appreciate the concerns behind the amendments but we believe that the Gaming Board will, like any public body, have to act reasonably in any case where it is decided to revoke the licence. Clause 8(9) does not, of course, preclude the Gaming Board giving notice to the successor company to remedy a breach of the licence term or condition. Therefore, one of the provisions that the amendment seeks is already available.

On the other hand, the likelihood is—it is a likelihood; we cannot anticipate every single case—that the licence would be revoked only when it was clear that a serious and unjustifiable breach had occurred or was occurring. In such cases, the revocation of the licence might need to be immediate for the protection of the betting public. I hope it is clear that during the 28-day period to which the amendments refer, the exclusive licensee would continue to trade.

The Gaming Board is a well-known, experienced and well-respected regulator of gaming. It is one of the most experienced and respected anywhere in the world and it has these responsibilities already. For example, it has these responsibilities for casinos—and it may be necessary to close down a casino straightaway. Similarly, it might be necessary quickly to revoke an exclusive licence or to stop an exclusive licence being exercised if there were a severe risk to the gambling public.

I do not think that is what would happen in practice. I think that the Gaming Board would say, "We are minded to revoke this licence". That would be its protection against challenge under administrative law.

As I say, the Gaming Board has a long and successful track record of regulating different sectors of the gaming industry. Without changing the nature of that regulation, the Bill extends these responsibilities to horserace pool betting. These are not unprecedented rules and powers; they apply to all the kinds of gaming already regulated by the Gaming Board. I am confident that any fears expressed in the amendments, that the Gaming Board might behave in a disproportionate and unreasonable way, are unfounded and, indeed, capable of challenge in the courts in the ordinary way. I therefore cannot accept the amendments.

I was asked what will happen if the licence is revoked and that decision is quashed by the court. Of course, if the court overturns the Gaming Board's decision to revoke, the revocation is of no effect. The court will have the power to grant interim relief in the meantime, for example, by restraining the Gaming Board from acting on the revocation. That is why the Gaming Board would, in practice, be likely to say, "We are minded to revoke the licence" rather than to do so immediately.

Amendment No. 17 would require the Secretary of State to seek parliamentary approval before being able to direct that the Gaming Board revoke the licence. Of course, the Secretary of State can issue a direction to revoke a licence only in the very limited circumstances when, as the noble Lord, Lord Moynihan, acknowledged, the successor company is wholly owned by the Crown. I have made it clear that we expect that to be a very short period indeed—it might be a period of only a matter of hours—but we cannot be certain of that.

In making such a request, the Secretary of State is required by Clause 9 to consider the matters listed in subsection (1); namely, whether it would be in the best interest of members of the betting public and the sport of horseracing, as well as promoting certain licensing objectives designed to protect the vulnerable. Subsection (8) of Clause 8 also ensures that the Secretary of State specifies the reason for any decision to revoke. That will better enable the successor company to challenge by way of judicial review the direction to revoke the licence.

In the light of those protections, which are already included in Clauses 8 and 9, as drafted, I hope that it will be considered not appropriate for there to be a reference to Parliament in such circumstances.

Again, I am entirely sympathetic to the motivation behind the amendments. If noble Lords opposite would consider the fact that the Gaming Board is already acting under those rules for other parts of gaming—notably, for casinos—and has done so for many years without challenge, they would recognise that the wording in the Bill is suitable for its purpose.

4.30 p.m.

Baroness Noakes

Can the Minister help the Grand Committee by giving an example of the circumstances in which the protection of the public might necessitate an immediate revocation of the licence? I am sure that the Gaming Board, which has done an excellent job in relation to casinos for many years, will know what it is looking for in relation to casinos but I am not clear what it will be looking for in relation to the Tote. Can the Government describe the kinds of situations that lie behind their apparent desire to give sweeping powers to the Gaming Board for the Tote as well as for casinos? I think that they are quite separate and should not be put on a par?

Lord McIntosh of Haringey

I do not know that they are entirely separate. I think that the noble Baroness, Lady Noakes, could imagine ways in which casinos could cheat, such as nudging the table. There are all kinds of ways to cheat. It is also possible for a Tote to cheat, such as by mathematically manipulating the pool dividends. After all, mathematical formulae are used. It is as possible to cheat on the Tote as it is on anything else. I am not suggesting for a moment that the Tote has cheated in its 76 years of history, but who knows?

Baroness Noakes

I should like to clarify this. Is the Minister saying that we need the provision because the Tote might be cheating on the application of its formulae in operating the pools?

Lord McIntosh of Haringey

I am saying that the Gaming Board must have protection against that kind of eventuality.

Viscount Falkland

Hell will freeze over before that happens. Perhaps the Minister may give another example. That example is so much in the realms of fantasy that I cannot begin to contemplate it. When dealing with the matters that will go into the Bill, there must be some basis of reality. As far as I am concerned, what the Minister has just said is so extreme and extraordinary that it is virtual reality legislation.

Lord McIntosh of Haringey

This is a very touching faith. I did not say that the Tote would officially be indulging in fraud but any employee of the Tote—or any other organization—can try to beat the system to his or her advantage. These things do happen. The law must be framed to protect against them.

Viscount Falkland

I am sorry to persevere with this. In the event of an employee creating a kind of fidelity crime, the Tote will have the machinery to deal with that. If it does not deal with it, that is a different situation. But the Tote—as in any business—will be perfectly capable of dealing with employees who may be tempted to cheat in some way from time to time. In fact, it has been known in the history of the Tote, when such matters have been dealt with and stamped on immediately. Certainly there would not be any cause for the Gaming Board, or its successor the gambling commission, to revoke a licence should that occur.

Lord McIntosh of Haringey

Again, that is a touching faith. Large city institutions have been brought to their knees by the behaviour of employees that was against the rules and which was not discovered or, for managerial reasons, not discoverable for many years. One must provide against such an eventuality.

Baroness Noakes

Perhaps I may suggest to the Minister that it is rather far fetched to drag in a situation such as Barings—to which I think the Minister was referring—where the actions of one employee in the Far East brought Barings to its knees. It was not protected by any regulator and does not provide any precedent for the kind of power that we are seeking in this Bill.

It seems that we are slavishly applying casino-like rules to the Tote for no very good reason. It would be easier to understand if there were the kind of safeguards implicit in my noble friend's amendment; namely, notices given or periods in which representations could be made. Those are civilised ways in which differences of opinion or clarification of facts can be sorted out. But to treat the Tote as if it were some casino of low repute in this legislation flies in the face of any fact that we know about it. It then puts us in the very difficult position that the Tote would be wholly reliant on administrative law and judicial review.

Ministers in respect of many briefs have to stand at the Dispatch Box and say, "Well, of course, this legislation is all right because we can always rely on judicial review to sort everything out". I am sure that the Minister knows that judicial review is the most unsatisfactory remedy. It is clumsy, time-consuming, can be quite expensive and cannot deal with situations where businesses are being wrecked by the arbitrary actions of an arm of government. I hope that the Minister will look at the matter before Report, because it raises very serious concerns.

Lord McIntosh of Haringey

I am no defender of judicial review. Certainly, I hope that the powers in this Bill will not need to be used. I share the view of noble Lords that the Tote has a very good record over its 76-year history. But I am making two points. First, adding in a 28-day period and the word "material" provides no additional protection. There is still the possibility of revocation; it is just made marginally more difficult. Secondly, even if we are convinced that something is safe, many investors and members of the betting public have been convinced of things that are safe and been cruelly deceived. I hope that the noble Baroness, Lady Noakes, is never cruelly deceived.

Viscount Falkland

Perhaps I may just make another point in amplification, which I mentioned regarding a previous amendment. The Tote has a vested interest in its own integrity. Without that, it would not exist, because people would not bet or place money in that pool. That must be borne in mind when talking about what I consider—I think that the noble Baroness, Lady Noakes, agrees with me—to be totally unrealistic scenarios of situations where the licence should be revoked.

Lord Moynihan

I echo the comments made by noble Lords on that point. There is a clear difference between the opportunity for the Gaming Board to make an order revoking the exclusive licence if it "thinks" that a term or condition of the licence has been broken. I remind noble Lords that the verb "to think" is a very weak legal concept in comparison to recognising that it needs to be convinced that a material breach or condition of the licence has been broken. To say that the concept of a thought—for example, "I had a thought one afternoon at the Gaming Board and I have decided to revoke the licence"—without any further requirements needed and not even saying that there needs to be a material breach is unsatisfactory.

It would not take a rocket scientist of a lawyer to come to the conclusion that this needs to be tightened. The Minister will have heard comments from the Committee that recognise that it is reasonable and totally understood that revocation criteria need to be placed in the Bill. Simply to think that the term or condition of the licence has been breached is unsatisfactory.

The important point is that these amendments recommend a toned-down series of clearly defined powers for the Gaming Board in order that when revoking the successor body's exclusive licence, it will have taken account for what is reasonable. Cases that cannot even come to mind—the Minister mentioned fiddling the books—may be so extreme as to not warrant the rejection of what are very reasonable amendments to the Bill in order to meet with the sympathetic response to a shadow Racing Trust.

I am happy to withdraw the amendment at this stage. I hope that the Minister will consider what has been said and determine whether or not it is possible to come back on Report with wording in regard to the revocation of licences which provides more comfort to all concerned. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 17 to 25 not moved.]

Clause 8 agreed to.

Clause 9 [Section 8: supplemental]:

[Amendment No. 26 not moved.]

On Question, Whether Clause 9 shall stand part of the Bill?

Lord Moynihan

As noble Lords will know, I have given notice of my intention to oppose the question that Clause 9 stand part of the Bill in order to encourage the Government to take the opportunity during our proceedings to clarify the scope of subparagraphs (i), (ii) and (iii) of Clause 9(1)(c).

On consideration a short time ago, there was very considerable interest in the implications of the concept of a fit and proper organisation. My understanding is that those sub-paragraphs replace the requirement that the Tote was a fit and proper organisation. Can the Minister tell us what further requirements the new clause will place on the operation of the Tote after it is nationalised? In particular, how is the successor body supposed to promote the very worthwhile objective of protecting children and other vulnerable persons from being harmed or exploited by betting?

One of the reasons for asking that question is the recent case in Australia where a compulsive gambler sued a casino for allowing him to continue betting even though he clearly had a gambling addiction. That case is particularly worrying because the loser finally beat the casino and the court ordered that the casino had to repay some of its takings to the punter. Can the Minister expand on all those important issues on the face of the Bill, which substitute the requirement for a fit and proper organisation? That is a major change, not a minor change.

Members of the Grand Committee need to be aware of exactly what the Government are trying to achieve. Can the Minister expand on what precisely is meant by "vulnerable persons" within the meaning of this clause? I recognize—I hope that your Lordships also recognize—that children should be protected from gambling, but how does one draw the line with "vulnerable persons"? What is the definition of a "vulnerable person"? Who will determine who is a "vulnerable person" in this context'?

Equally clearly, gambling addiction exists. What role do the Government envisage the successor body will play in limiting the harm that compulsive gamblers do to themselves and to their families'? Those are all very important issues. The wording in the Bill is unprecedented, extremely unusual and very interesting but, before we can go further with this clause, a very clear explanation is needed about why this definition of a fit and proper organisation, in this context, has been placed on the face of the Bill; and about how the Government see first the state and then the successor body satisfying the objectives of Clause 9(1)(c)(i), (ii) and (iii).

Lord McIntosh of Haringey

I rather thought that the noble Viscount, Lord Falkland, was going to answer that series of questions. He is a member of the joint committee that is considering the draft gambling Bill. As he will acknowledge, the draft gambling Bill is firmly based on the three principles set out in Clause 9. The objectives of regulation of gambling will be the elimination and exclusion of crime, ensuring fair play and the protection of children and vulnerable adults. It is my understanding that when the joint committee publishes its report on Wednesday, it will be thoroughly supportive of those three principles. Therefore, the legislation before the Grand Committee will be in line with that to be proposed to Parliament, it is to be hoped, before the end of this Session.

There will be an opportunity for very extensive debate on the objectives of gambling regulation, in which I shall be happy to take part. Indeed, there is a discussion of it at great length in the policy document that was published with the first tranche of clauses of the gambling Bill on 19 November 2003. I hope that the noble Lord, Lord Moynihan, will hold his horses—if that is the right thing to say—until he has seen the report of the pre-legislative scrutiny committee. If he wishes to raise the matter again at Report stage, which he is entirely at liberty to do, I shall be able to give an answer that will not only set out—because I will have been warned about it—the principles behind the draft gambling Bill, but I shall also be able to assure the Grand Committee of the support of the pre-legislative scrutiny committee.

4.45 p.m.

Lord Moynihan

I must put it to the Minister that that was a wholly unacceptable response in the context of this legislation, as admirable as it is as an explanation of the Government's intention within gaming legislation. The fact is that before we have even seen the details of the Government's position on the excellent work that is being done on the gaming Bill, we find a major shift in the gaming legislation that we are here to scrutinise. It shifts from a concept that is understandable by all in law—namely, a fit and proper organization—to a shadow Racing Trust, which will, it is to be hoped, become a Racing Trust, and will have to promote the three objectives, which are admirable, and I thoroughly support them.

I think that they have significant merit, but they are open to wide interpretation. I do not understand what, for example, a vulnerable person is in the context of the Bill. Before we turn to anything else in this clause, I should be grateful if the Minister could give us a definition of a "vulnerable person" in the context of Clause 9.

Lord McIntosh of Haringey

I am a little surprised that the noble Lord, Lord Moynihan, should think that somehow horseracing and betting on horseracing should be treated differently from other forms of gambling. It is part of the spectrum of betting and gaming that is covered by gambling regulation. The noble Lord claims that the concepts of our three objectives are unclear and imprecise. The fit and proper concept has certainly been found to be imprecise and has been explicitly rejected by the Government in their gambling legislation. It would be odd, to say the least, if, in dead seriousness, we pursued the first major review of gambling regulation for something like 40 years and we included in a Bill that is confined to horserace betting a concept that is explicitly rejected in our view of gambling regulation. That would be the oddity which would have to be explained.

Viscount Falkland

The Minister invited me to help over the definition of "vulnerable". I do not think that I would be out of order and revealing anything in the report to be published on Wednesday if I said that we have had some difficulty with definitions in our work. But "vulnerable" is the best that we can come up with. One of the beauties of the English language, as opposed to some of our neighbouring languages in Europe, is that sometimes it is deliciously imprecise. The French would probably come up with a precise definition. However, the word "vulnerable" is good enough and it belongs in this area.

It is a question of applying common sense, which is what the Gaming Board and the gambling commission will do. The same applies to all employers and employees concerned, whether they work in casinos or any other place where gaming takes place. One does not have to stretch the imagination too far to understand "vulnerable" person in relation to the Tote on a racecourse.

If someone who is clearly drunk comes to a Tote window and wants to bet a large amount of money on some improbable horse—one which has not garnered much support—he is a vulnerable person. If someone comes to the window and is manifestly insane, he is a vulnerable person. But someone may come up and be recognised by a member of the Tote staff as having been involved in a criminal activity with regard to the Tote, or in difficulty with his gambling. That is unlikely to happen on the racecourse but it will be so in the casino. I hope that people will be employed in casinos to watch out for those who are vulnerable. I do not mean children—I mean other persons. We were told that the management of French casinos employs people who look out for tell-tale signs and moods in people, because gambling is an irrational activity and has dangers.

After all, anyone who has money and goes to a racecourse, casino or amusement arcade is vulnerable by the very fact that he or she is going to lose money. However, we must take everyone who is able to do so as responsible for their own actions. No one holds a gun to their heads and tells them they have to bet or go to a Tote window. It is a question of common sense.

I say to the officials who drafted the draft gambling Bill and this Bill that I see no improvement on "vulnerable". I have spent many days trying to think of a more precise definition and I must confess that I have failed. I am afraid that I am no comfort to the noble Lord, Lord Moynihan. We must live with the word. We all know what a vulnerable person is and I hope that those who do not have found some value in what I have just said. On this occasion, I side with the Minister.

Lord Moynihan

I hope that the noble Lord goes on to describe other categories in Clause 9, because I have not had the benefit of sitting on a committee that has yet to report. However, here we are looking at legislation and must consider in detail the merits of Clause 9. This has not happened before and it may be wholly appropriate that it does. It may meet with widespread support on both sides of the Committee, but as the noble Viscount pointed out, all punters are vulnerable. I would be somewhat concerned if I were the noble Lord, Lord Lipsey, as chairman of the Racing Trust, about what exactly I am meant to do to prevent the Tote being a source of crime or disorder.

There may be a simple and neat explanation of the proposal. It may be appropriate for the Minister to say that it is clear; that, for the first time, lifting a section from the admirable and detailed consideration of the objectives by a committee whose report we have not had the opportunity to consider can best be managed by explaining in some detail what the state—we are talking about the state nationalising the Tote—or its successor body in the form of the Racing Trust will be expected to do to promote the objectives.

The reason why I make the point so strongly refers back to the previous group of amendments. All it requires for the Gaming Board to take action over the licence of the Racing Trust is simply that it thinks the licence worthy of revocation. It could be, under subsection (1)(c), that it thinks that the Tote was not preventing betting being a source of crime or disorder. I do not want the Tote to be a source of crime or disorder. I simply wish to know, in detail, exactly what that means and what action the Minister expects the Racing Trust to take to ensure that the Tote, unlike any other betting organisation—this does not apply to anyone else; only the Tote—does not become a source for crime and disorder.

I am sure the Minister will give me a wonderfully comprehensive answer to that question, but I am none the wiser about all punters now being vulnerable to losing. As to the concept of "manifest insanity", with the enormous amount of people who put a bet on the Grand National at Aintree, how is the Tote expected to judge the sanity or otherwise—let alone the manifest insanity—of a punter who wishes to place a bet?

Viscount Falkland

Perhaps I can assist the noble Lord. The very fact that the Tote is well run, well organised and efficient removes one of the greatest problems that we have to overcome. I have seen disorder on a racecourse—not in this country—where people have been moved to such rage and desperation by the slowness of the payout at the Tote windows that they have become irrational. I would say that we are increasingly vulnerable people. That likelihood arises when there is an inefficient Tote operation.

In addition to its efficiency and experience in operating, the Tote now has the assistance of the technology of computers and produces details of the payout almost simultaneously with the result of the race. There is therefore no likelihood of delay taking place—and delay of payout is the greatest cause of disorder. The integrity and efficiency of the Tote attracts people to British online bookmakers and. if I dare say so at this stage, draws people to bet with betting exchanges. They know they are going to get paid out without delay and that everything has been scrutinised to the nth degree.

Problems in such areas cause people to behave irrationally. Even if they are not lunatics, they sometimes get bad-tempered and behave like them. It would then be up to Tote staff to deal with the situation should such unfortunate happenings occur. It has not happened under the management of Peter Jones, who runs the Tote, and I am sure that it is extremely unlikely to happen under the management of the Racing Trust. I have the utmost faith in the Tote's efficiency of operation, as do its habitual users.

Drinking on racecourses and while gambling is something about which I am not entirely confident. We have seen an increase in drinking on racecourses and some racecourses have put their houses in order better than others. I think that drink is one of the major problems that the Tote will have to watch out for. It could cause disorder in the queues of people waiting for the payout. If that is of any help to the Committee, I think my time here has been well worth while.

Lord McIntosh of Haringey

It serves me right. I made a debating point about a committee that has not yet reported. The serious point, however, is that we published on 19 November a draft gambling Bill, the single most important concept of which is the licensing objectives set for the gambling commission, which are at the heart of our proposals for gambling regulation. Those licensing objectives, which come before anything else, include the exclusion of crime, ensuring fair play and the protection of children and vulnerable adults. We published a 100-page policy document that goes into detail about what that means. I rely on it rather than on the report, which has not been published.

One of the main reasons for having the licensing objectives is that the gambling commission, and in the mean time the Gaming Board, will be able to embody them in the conditions attached to any licence. I am sure that the Racing Trust operating the Tote will wish to do just that from the outset, even before more widespread gambling legislation is enacted. Unfortunately, I do not think that those who bet on horses are freer from the risk of addiction than other gamblers.

5 p.m.

Lord Moynihan

I am grateful. I shall answer the serious point raised by the Minister. Whatever guidance, consultation documents or draft legislation may or may not have been published by a government, what is relevant is when primary legislation arrives for the scrutiny of a committee in Parliament. For the first time, we are scrutinising an exceptionally important set of clauses that is relevant to the future of gaming in this country because it will establish a precedent under which the Gaming Board can issue or revoke an exclusive licence.

For that reason, consideration of the merits or otherwise of the clause is a serious issue, which is why I asked the Minister further questions. I would certainly like to return to the subject before the primary legislation is enacted by Parliament, because we need far greater clarity. It may assist the House, and any successor body should the Tote be privatised, if the Government established clear guidelines on the meaning of Clause 9(1)(c)(i) to (iii) in the context of racing and the Tote. Clear guidelines would alleviate my concern that in this legislation as currently drafted—for the first time, and moving on from previous wording which has been admittedly rejected in a report yet to be published—we should have absolute clarity as regards the Government's intention. That may prove to be a lengthy debate at a later stage but it would be worth having.

At this stage, I withdraw my intention to oppose the Question that Clause 9 stand part of the Bill. As this is a groundbreaking precedent in gaming legislation—so far as concerns Parliament, rather than in the excellent work done in preparation for the potential introduction of a gaming Bill before Parliament this Session—I wish to return to it at a later stage.

Clause 9 agreed to.

Clause 10 [Control when no exclusive licence]:

Lord Lipsey moved Amendment No. 27: Page 7, line 39, at end insert and (c) in accordance with a notice (to be known as a harness racing exemption notice) issued by the Gaming Board under this subsection. (3A) A harness racing exemption notice may only be granted in respect of harness racing run under the auspices of the British Harness Racing Club.

The noble Lord said: Now for something completely different. I declare another interest as president of the British Harness Racing Club. I have been in office for eight days, so I ask Members of the Committee not to probe me too hard. I am the owner of "Goldwood", a slow but game Welsh trotter, who, before I owned him, managed a victory at Tregaron, which is the Cheltenham of harness racing as noble Lords will know.

Harness racing is not as well known as it should be in this country. It is in many ways analogous with point-to-point racing, though rather more localised. It is very strong in Wales; a little group does it around York; races are held at Musselburgh and Wolverhampton; and it is a wildly popular sport in areas where it exists. Indeed, S4C runs a weekly programme on harness racing, which is more than can be said for point-to-point racing. My enjoyment of the coverage is reduced slightly, however, by the fact that it is in Welsh, which makes it hard to follow the detail of the commentary.

I admit fully that the drafting of these probing amendments is not necessarily tickety-boo. They are designed to allow harness racing courses to run Tote operations on the same sort of basis as at point-to-point racing. As noble Lords know, someone running a point-to-point race must write to the Tote and say whether they want to run a Tote on the course—it is not run by the Tote; it is run by organisers on the course. If they wish to do so, they send £20 to the Tote, which gives them a licence and ensures that it is run properly. That is how the system works at point-to-point courses. Many find it a useful source of income to those running the meeting and to the hunt.

The Tote would have two advantages in harness racing. The first and most important would be the benefit to punters on the course. For punters at harness racing, betting is usually at around 210 to 220 per cent, certainly in more open races, just as they might be at a maiden point-to-point race. Bookmakers are necessarily scared that someone who knows something will come along, have a big punt and leave them reeling, so they give themselves plentiful margin for error. That is their business and their decision. A competitive Tote would greatly help small punters in particular. Big punters will always want to place odds bets on harness racing, as pools are unlikely to have the liquidity to enable a big draw. In those circumstances, the Tote would offer much better value to the small punter who does not know anything.

The Tote would also bring more revenue into harness racing, which has been in modest decline as an amateur sport. It is difficult for tracks to continue to raise the money to keep going and to provide modest prize money—again, much the same as at point-to-point races. The Tote would provide a reasonable source of extra income to the tracks.

Some in harness racing have ambitions to develop the sport further, although that feeling is not unanimous. I should never try to pronounce Welsh words, so I shall not say the name of the course involved, but there are ambitious plans for a harness racing track in Pembrokeshire, an area that could well do with the jobs that that would be bring. The project would be tied to proposals for a new national hunt course there. The presence of a Tote to offer value to the public and an alternative source of off-course betting would help those with ambitions to develop the sport.

I hope that the Government will at least be sympathetic to the spirit of the amendments, if they cannot be sympathetic to the words. If it is concluded that the amendment is too ambitious for this Bill, I hope that the Minister will be able to indicate that the Government are not set against it.

Amendment No. 29, which is contained in the same group, is similar to the amendments proposed by the noble Viscount, Lord Ullswater, on point-to-point racing. On some trotting tracks more than four meetings are held. I know of only one, near Wales, that holds up to seven meetings—the Leominster track. Meetings can be more frequent some years, particularly if another track is waterlogged. Meetings take place in a field, and not much is needed: just a rope around the field. Amendment No. 29 would leave a little scope by providing that up to 10 meetings could be held. I beg to move.

Viscount Falkland

I support the noble Lord, Lord Lipsey. I have not been harness racing, although I have seen trotting around the world, which is a relation of the sport. Curiously, it seems to take place only on the Celtic fringe, as it is known, but it has an enormously fanatical following where it is carried out. The noble Lord made the interesting point that, as in point-to-point racing, the bookmakers over-round—the technical description of the profit they build into the price offered on each horse. That is necessarily less advantageous to punters at harness racing than it would be at a meeting such as Ascot or Cheltenham, at the other extreme. The noble Lord made the point that to bet with the Tote would be another way to enjoy a day's racing. The Tote is a pool without such considerations as bookmakers may have.

The bookmakers are quite right to build in a bigger profit on each horse. Perhaps I may explain the system to those Members of the Committee unfamiliar with it. At lesser-attended meetings bookmakers' turnover is lower but their expenses remain the same. To amplify the remarks of the noble Lord, Lord Lipsey, bookmakers perform a service with great jocularity and friendliness, which adds to the atmosphere of the day. That is why in general the public has welcomed bookmakers in this country. I am sorry to see so many traditional on-course bookmakers disappear. They have been somewhat overshadowed by the big bookmakers.

My enthusiasm for racing has waned somewhat over the years—I suppose that it is just a question of age, but bookmakers are very jolly people. I like to play cards in my bookmakers, where I never found any bookmaker trying to cheat me. The other punters did, but bookmakers are scrupulously honest. We played pontoon. For the benefit of those who do not play cards, it is another version of vingt-et-un or twenty-ones and is based on the same principle as the casino game blackjack. I advise all Members of the Committee not to play blackjack, at which they would have no chance; they would have a much better chance betting bookmakers on trains going to race meetings, if such people are now to be found.

Members of the Committee should all be in favour of harness racing. I support the noble Lord, Lord Lipsey, to the utmost. The more racing we have in the country, the more horses we have operating, the more people can be drawn from the towns into the country and the fresh air, and the more opportunities they are given to have an enjoyable day—even if they are vulnerable in so doing the better. I support the amendment.

Lord Moynihan

I, too, support the amendment tabled by the noble Lord, Lord Lipsey, not least because as shadow Minister for Sport I am pleased and delighted to support almost any measure that promotes and protects sports.

However, in the context of what the noble Lord has just said, and our discussion about the possibility of punters being driven to manifest insanity, my concern is that it is not uncommon in harness racing to hold one's horse back. In The BHRC Beginners' Guide to Harness Racing, to which I do not deny that I have had to turn in my research, I was intrigued by the explanation of why drivers sometimes hold their horses back. I learnt the following: A driver must judge the ability of the horse to run a certain time over the required distance of the race. If a driver believes his horse can run a mile rate of 2:05 and no more, a driver may pull back to give the horse a 'breather' and then try to sprint fast to the finish. There's only so much petrol in the tank!". If that is not a classic example of driving a punter to manifest insanity as he watches the race, I do not know what is. Therefore, I am even more concerned. if we agree this amendment, how it will relate in the context of the Question whether Clause 9 should stand part and the amendments that we have just debated.

On a more appropriate note, it seems sensible that the Bill should protect harness racing and the ability of punters to gamble in the sport. I would be grateful if the Minister or the noble Lord, Lord Lipsey, could clarify why the exemption must be included only in Clause 10, headed "Control when no exclusive licence", and not in an earlier clause. It may simply be a drafting issue that we can address later. In principle, I am pleased to offer my support, and I hope that on this occasion the Minister will, too.

Lord McIntosh of Haringey

I had never heard of harness racing, so I come to it with a completely clear and empty mind. We had not considered particularly the issues of harness racing. We are certainly prepared to consider whether there is an analogy with point-to-point racing. In response to an amendment on point-to-point racing I shall tell the noble Viscount, Lord Ullswater, that we are prepared to consider his point about the number of such races at a particular location and discuss it with him before Report. I offer the same to the noble Lord, Lord Lipsey.

5.15 p.m.

Lord Lipsey

I am speechless with gratitude. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Deputy Chairman of Committees (Lord Carter)

I should tell the Committee that if Amendment No. 28 is agreed to, I cannot call Amendment No. 29 on grounds of pre-emption.

Viscount Ullswater moved Amendment No. 28: Page 8, line 1. leave out ", not exceeding 4,

The noble Viscount said

I should declare an interest as this is the first time that I have taken part in this debate, not having been able to speak at Second Reading. I am, and have been for some 20 years, a member of the Jockey Club; otherwise, I am not currently involved with the administration of racing in any way. Although the Minister has almost preempted my moving this amendment, I should explain why I want to do so.

As Members of the Committee probably know, point-to-point races are amateur, mostly run by and for the benefit of the local hunt. To run in a point-to-point race it is necessary to register a hunter's certificate at Weatherbys. Horses qualify for the certificate by going out to hunt for a set number of days in the season. The sport is very popular, and some 4,000 hunter certificates are issued each year, together with about 1,000 rider's permits. There are more than 200 point-to-point fixtures this year, run on 117 different courses.

Currently, the Tote does not run pool betting at point-to-point races. However it is prepared to grant authority to the secretaries of the various point-to-point committees up and down the country to run their own pool-betting operations. Put simply, as the noble Lord, Lord Lipsey, has said, for a fee of £20 the point-to-point can run its own Tote. That is the current system. Eighty-two point-to-point fixtures in 2003 ran their own Tote; so far, 75 have applied to do so in 2004.

The standard of racing is rather varied, as one might expect with the number of amateurs taking part. Bookmakers are not keen to offer long odds on outsiders, as the outcome of the races can be unpredictable. Therefore, it is considered very desirable to offer pool betting whenever the demand is justified. By way of illustration, some years ago I won unexpectedly at a point-to-point at Larkhill where 58–1 was paid on the Tote, whereas the bookmakers quoted the horse at only 8–1.

The Bill provides for an exemption from the exclusive licence offered to the successor body to the Tote for point-to-points. However, it now concentrates on the point-to-point course rather than the organiser of the fixture. Clause 10(1) amends the Betting, Gaming and Lotteries Act 1963 by substituting a new Section 4. The new proposed Section 4(4) allows for a point-to-point exemption certificate to be applied for from the Gaming Board. However, in that application it must state the course, the calendar year during which the notice has effect, and must specify a maximum number of days, not exceeding four, on which horseracing may be carried out. That shifts the responsibility from the individual point-to-point secretary to the venue.

An analysis of point-to-point fixtures for 2004 shows that 58 courses are used once; 37 courses are used twice; 16 courses are used three times; four courses are used four times; one course, Garthorpe, is used five times; and one, Larkhill, is used eight times.

As Clause 10 is drafted, Garthorpe and Larkhill would be unable to take full advantage of the point-to-point exemption notice. I am sure that that is not the intention of the legislation. In 2003, the Tote provided six authorities to Larkhill and four each to Garthorpe, Cottenham and Higham. In Larkhill's case, Although the course is owned by the Army, there are eight different organisers for the eight days' racing taking place in 2004. I could list them but I do not believe that that would be of much interest to the Committee.

The important thing to remember is that we are talking about point-to-point racing only. It should not be confused with national hunt racing, the professional sport operating under a different set of Jockey Club rules at racecourses such as Cheltenham, Newbury, Aintree and many others.

I believe that I have demonstrated that, without my amendment, the organisers of point-to-point races, particularly at Larkhill, will be adversely affected by the new legislation. I reiterate that I am sure that that is not the Government's intention. Things run smoothly at present and the new legislation should recognise that. There is therefore no need for the restriction on the number of days' racing to be included on the face of the Bill. That is what my amendment seeks to achieve. I beg to move.

Lord McIntosh of Haringey

Without curtailing the debate, perhaps I may help the Committee. We are very sympathetic to what the noble Viscount, Lord Ullswater, has said. We are talking actively to the Jockey Club about the matter. The outcome is likely to be a higher limit on the number of days rather than the removal of the limit, which is what the amendment provides for. I am certainly prepared to undertake to come back at a later stage.

Viscount Ullswater

I do not think that I could expect a better reply from the Minister: I fully appreciate it. I am grateful to him for giving us an opportunity to meet at an earlier date, and for allowing me to raise the matter. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 29 not moved.]

Clause 10 agreed to.

Schedule 1 [New Schedule 1A to the Betting, Gaming and Lotteries Act 1963]:

Lord Moynihan moved Amendment No. 30: Page 22, line 18, after "must" insert "in all material respects

The noble Lord said: This amendment would ensure that only serious breaches of operating conditions constitute an offence under Schedule 1, which deals with the conditions attached to the operation of the exclusive licence. The Tote is keen to see this amendment accepted, and I am pleased to raise it on its behalf. It would assist me greatly if the Minister could clarify the purpose of the schedule and its limits.

Given that a breach of the conditions in Schedule I can constitute a criminal offence, only failures that are material should constitute such an offence. For example, if a Totalisator is not in proper working order, or if it is not properly operated, in an immaterial way, that should not be a criminal offence. As the chairman of the Tote, Peter Jones, has pointed out, there was a computer failure at Cheltenham on the Tuesday and Thursday in March 2003. That was in spite of the fact that the new computer system had performed admirably at more than 300 live meetings prior to Cheltenham. To quote the chairman: High profile computer failures in air traffic control, airport check-ins and banking highlight the vulnerability of all of us to systems breakdowns".

To conclude my short supporting speech for the amendment, I hope that the Minister will be able to reassure the Committee that such IT breakdowns will not in themselves be breaches of the conditions imposed in Schedule 1. I beg to move.

Lord McIntosh of Haringey

I understand and respect the motivation behind the amendment, but according to legal advice it would not make any difference at all. We do not intend that the Gaming Board or its technical advisers should use its regulatory powers in relation to minor technical hitches of the kind that operations will face from time to time—that is what I think the noble Lord, Lord Moynihan, wants me to say.

It is our intention that the efficient operation of Totalisators be assessed over a reasonable period. The addition of the words "in all material respects" simply gives lawyers an opportunity to argue about what that means. It would be better to leave the judgment of whether there is any failure to comply with the regulation in Schedule 1A(4) to the good sense of the appropriate authorities.

It is unlikely that the major betting businesses in this country would deliberately choose to operate a Totalisator when it is not in proper working order, if that would impact upon the regard in which they are held by the betting public.

If any bookmaker were to behave in that way, it is certainly right that they should be subject to the scrutiny of the authorities. They should have the powers to carry out their duties of scrutinisation of the operation of pool betting to ensure that there is transparency and financial propriety. It is in the long-term interests of bookmakers that the betting public has confidence in the system of pool betting. We believe that the measures put in place will ensure that pool betting remains popular as an alternative to fixed-odds betting.

I have said enough about the Gaming Board as an efficient and effective regulator accustomed to making decisions on the regulation of gambling. I believe that it can be trusted to be sensible about this matter as well.

Lord Moynihan

I am grateful to the Minister for his response. He will accept that different lawyers will have different opinions on the merits of the amendment before the Committee. Its purpose is to ensure that only serious breaches of operating conditions constitute an offence under this schedule. If those lawyers who have looked carefully at this are uncomfortable with the response given by the Minister, I will come back at a later stage to clarify further whether the Minister is right and, indeed, whether we can find alternative wording to achieve the same end.

In the meantime, I repeat that I am grateful for his explanation and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule I agreed to.

Clause 11 [Preparatory work by the Tote]:

Lord Moynihan moved Amendment No. 31: Page 9, line 15, leave out "it or the Secretary of State thinks" and insert "is

The noble Lord said: Amendment No. 31 has been grouped with Amendment No. 32 for the benefit of the Committee. The purpose of Amendment No. 31 is to limit the actions that the Tote can take before it is nationalised to what is "necessary". In many respects this is a technical amendment, the purpose of which is to put in place a check on the actions of the Tote before it is nationalised and to ensure that, as far as possible, it remains true to its aims until it is nationalised.

I believe that the wording of subsection (1) of this clause may be too broad. The Tote has agreed to be nationalised as a way of ensuring its subsequent privatisation, and for no other reason. Thus it follows that the Tote will want to do all it can to help facilitate such a sale. That begs the question of why primary legislation is necessary for the Tote to prepare for its own sale in the first place. I recognise that certain actions will need to be undertaken to ensure a smooth and seamless transition, but as always there should be sensible checks and balances in place. I do not think it sensible either for the Tote or the Secretary of State to be given carte blanche. It would be helpful if the Minister could explain why the Government feel that they need this clause and why the wording is so wide-ranging.

I am also concerned that Clause 11(2)(b) gives the Secretary of State power over the Tote before it is nationalised. Returning to the point I have just touched upon, I see no reason why this power should be granted to the Secretary of State. As we come to the end of our consideration of Part 1, it is important not to forget that the Tote is prepared to be nationalised on what I take to be the explicit understanding that it is subsequently privatised. If that is the case, the Tote will do whatever it feels is necessary to bring about that nationalisation. If there is any dispute about how best to bring about the nationalisation, I cannot believe that it would be best sorted out by resorting to primary legislation.

If the Secretary of State cannot convince the Tote to do something which is in its own best interests, it is likely that it would not be in the best interests either of the Tote or, indeed, of racing. I hope that noble Lords will agree that, given the knowledge and expertise available on the Tote board, the Tote is better placed than the Secretary of State to decide what is best for itself and for racing. Therefore I ask the Minister kindly to inform the Committee of any circumstance in which he envisages that the Secretary of State might have to use her powers as outlined in subsection (2)(b).

Also, we heard earlier that the Bill makes provision for the sale of the Tote. As we know, there is no deadline for such a sale. If he has not already done so, can the Minister clarify today, as opposed to repeating what a Minister said in another place, whether the Tote will be nationalised as soon as the Bill receives Royal Assent, or whether the Government will wait until a deal has been brokered with the Racing Trust or, under the Bill as drafted, any other buyer? If the Government are unable to sell the successor company to a racing trust, there may well be a delay before the Tote is nationalised.

The Explanatory Note on Clause 11 states: This clause enables the Tote or the Secretary of State to do anything necessary to facilitate the sale of the Tote".

I am not certain that that is necessarily in the best interests of racing, although I look forward to hearing the Minister's opinion and hope to be convinced by his assurances.

It may be opportune to use this amendment to reiterate the position of Her Majesty's Opposition on Part 1. As a result of close consideration of the statements made by the Minister during the first sitting of the Committee and today, the Committee will recall that scrutiny of the Bill demonstrated that there was no current advice from the European Commission regarding the proposed state aid to the shadow Racing Trust, while there is no reference in the Bill to a requirement that the Tote be privatised; nor any limit on the time for which the Tote can remain a nationalised industry; nor reference to a shadow Racing Trust; nor mention of a price or pricing formula to be used in privatising the Tote.

Indeed, attempts to set parameters for the privatisation of the Tote were rebuffed when the Minister rejected an amendment in the name of the noble Lord, Lord Lipsey, supported, as it was, across all political parties participating in Committee. Accordingly, we give notice to the Government that we on these Benches consider that the Tote's future may be best preserved in its current form, rather than by being thrown on the mercy of the Treasury to sell to whomever it wishes at whatever price without a statutory commitment to ensure that racing benefits from the privatisation, which is what we seek.

We very much hope that we will not need to recommend that approach, but we fear that we will. If we do, we will return to the House later with a clear commitment to privatise the Tote and to ensure that racing remains the beneficiary. I beg to move.

5.30 p.m.

Lord McIntosh of Haringey

The noble Lord. Lord Moynihan, certainly broadened out the argument on what is a pair of rather limited amendments. I do not want to go over what I said on the first day of Committee, other than to confirm it. The changes will be implemented only once we are ready to finalise the sale. That is the response that he seeks. Oddly enough, the amendments are based on a misunderstanding—it is not simply a question of whether they are necessary.

Amendment No. 31 would deprive the Secretary of State of the power to help the Tote in confirming its powers to undertake preparations for the sale, where there could be some doubt as to the Tote's powers or what actions are necessary for the sale. The intention of Clause 11(1) is to provide the Tote with sufficient vires to prepare for its own sale and demise as a public body—actions which are not, of course, in the Tote's powers and functions as described in the 1963 Act.

Clause 11 also provides for the Secretary of State to have a role in preparations for the sale where there might be some doubt about the Tote's power to undertake preparatory actions. In those circumstances, the Secretary of State could inform the Tote that she believed that it could undertake particular actions and that would be enough to give it vires, even if the Tote board had doubts. The clause is intended to help the Tote, not to interfere with its actions.

Amendment No. 32 would remove the Government's power to direct the Tote to make preparations. I think that the noble Lord, Lord Moynihan, will acknowledge that all governments, now and in the past, have always had a positive relationship with the Tote. There has never been any interference by government in the operation of the Tote business, and this Government do not want to interfere now. The review of the Tote was driven forward by the chairman, Peter Jones, and the Government have fully respected the expertise of the Tote's board and leadership.

The powers that we propose in Clause 11(2) are precautionary. The Government expect to continue their effective working relationship with the Tote and to proceed whenever possible by consensus. 13ut it would be irresponsible not to take powers in the Bill that may, in extreme and unlikely circumstances, be necessary to protect the interests of the taxpayer and the public.

Clause 11 will therefore ensure that all the required preparatory work done in connection with the sale can be undertaken. It is important for the smooth passage of the sale as soon as possible. It would be irresponsible to accept the amendments.

Baroness Noakes

Can the Minister help the Committee to understand what those extreme circumstances might be? My noble friend suggested that they were in effect to enable the Government to sell the Tote other than to the Racing Trust. Such extreme circumstances are a cause of concern. Do the Government have any other extreme circumstances in mind?

Lord McIntosh of Haringey

No. I answered that question several times during the first day of Committee. Yes, in the end, if a sale to the Racing Trust falls through, there is a reserve power to sell the Tote on the open market. But that is not our intention; we would not do that to the disbenefit of racing.

I heard the noble Lord, Lord Moynihan, repeat his threat that he would prefer the Tote to stay as it is than for it to be sold other than to the Racing Trust. That is a dangerous position to take. I will gladly debate it with him at Report stage, but it is not appropriate for me to do so by repetition. That is not what is involved in the amendments. Extreme circumstances would arise if something went wrong with the relationship between the Government and the Tote. That has not happened, but it could go wrong due to changes of personality or personnel. All sorts of things could happen and we must provide for them in legislation.

Baroness Noakes

The Minister should understand that it is not only my noble friend Lord Moynihan who would rather have the Tote stay as it is if a sale to the Racing Trust fell through; probably the whole of racing would prefer that. So it is not an extreme position on the part of my Front Bench colleague.

Can I clarify that paragraph (b) of subsection (2) is there only to deal with the circumstance of the Government needing to direct the Tote for a sale other than to the Racing Trust? The Minister has not offered any other circumstance in which that power of direction would be needed. Is that power of direction there only to facilitate a sale other than to a racing trust?

Lord McIntosh of Haringey

Clause 11 is headed, "Preparatory work by the Tote". We have made clear, and I have repeated it today, that we will not make those changes following preparatory work until we are ready to proceed with a sale. We have made clear that we intend to sell to a racing trust.

Baroness Noakes

I understand that and I am grateful to the Minister for saying it again, but I am probing why the Government need a power of direction to tell the Tote to do something. The Minister mentioned extreme circumstances and the only extreme circumstance about which I have heard is in connection with selling the Tote to something other than a racing trust. I am trying to probe that power of direction. A power of direction is never there to help another organisation; it is there to tell that organisation what to do when it does not want to do it. Even if the power is not actually used, the existence of the power to issue a direction is often used as an effective threat. That is why we are probing why the power of direction is needed.

Lord McIntosh of Haringey

The negotiations are between the Tote and a racing trust. Suppose that something goes wrong in the negotiation between the Tote and a racing trust. Someone must have power to protect the taxpayer and the public interest, and that is what the clause provides.

Lord Lipsey

In support of my noble friend, first, the issue of what should happen should a sale to the Racing Trust fall through has been raised. My view is that we should tackle that at the time depending on the circumstances that caused it. If the circumstances that caused it were that the Government were totally unreasonable about the price, that would be one situation.

However, the circumstances might be that the shadow trust was unable to proceed, perhaps because the noble Baroness, Lady Noakes, and I changed the habits of a lifetime and fell out irreconcilably. I cannot believe any such thing, but that would lead to a different set of circumstances. Without knowing the circumstances, I could not take the view that it would necessarily be best for the status quo to remain; it might be best for there to be a sale with a large share of the proceeds going to racing. I hope that we will never reach such a second best situation, because I think that we would get the best situation, with the protection that we debated at such length in our previous sitting under Amendment No. 2.

As for the clause, I find the width of the Secretary of State's discretion rather comforting. The Tote board has been concerned about its powers to fund certain kinds of spending, for example. Those concerns may not be well-founded. Having read through more pages of the legal advice on the subject given to the Tote board than I care to remember, I would not like to express a definite view. But the clause enables the Secretary of State to set at rest the Tote board's mind by saying, "I am telling you to do this, so do it". It would not have to worry any more about advice from Slaughter and May or anyone else.

In those circumstances, it is helpful for the sale if that wide discretion is given to the Secretary of State. I therefore urge those who favour the sale to support the clause as drafted.

Lord McIntosh of Haringey

My noble friend Lord Lipsey helpfully confirms what I just said: that the clause as drafted is intended to help the Tote in circumstances where it may not be sure whether it has power. His intervention is also helpful because he has, perhaps without realising it, corrected me. The negotiations are between the Government and a racing trust. The problem that could arise would be if the Tote, which must be involved, had difficulties with the negotiations or any agreement arrived at. That is why the reserve powers are necessary. However, as my noble friend says, the likelihood of their being exercised is small.

Lord Moynihan

I had not intended to, but must pick the Minister up on one comment. At no time did I make a threat to the House or to the Committee. The threat to racing is to nationalise the Tote and sell it off to whomever the Treasury so decides at whatever price and under whatever circumstances it so wishes. That is the threat to racing. Under those conditions, racing would no longer be the beneficiary of the Tote.

I simply state clearly that our policy is to seek to protect the successor body to ensure that racing remains the beneficiary. Under Part 1 as drafted, that is not the case. When we return to debate this on Report, I underline for the record, as I did by going wide of the precise amendment but very much on purpose, that if the Government intend to continue with drafting that removes from the successor body the necessity that it operates in the interests of racing, the Committee should be aware that we on these Benches cannot support the Bill. That is no threat; it is a clear definition of policy, which I hope I have made clear.

As for the narrow amendment, we had a useful exchange of views. I was deeply disappointed that the Minister could not come up with a better example than the very concern that exists on these Benches about the future of the Tote—namely, that it may not be sold to the Racing Trust, but could be sold off to another body at a significantly greater price without protection either for the pool betting system that that Tote currently operates or for racing. I am very disappointed that that was the only example that we were given, but we will return to the matter. We must return to the matter on Report because, as I mentioned in my opening remarks, it is critical. It is fundamental to the future of racing. Part I needs to be far more explicit about protecting the future interests of racing. As drafted, it is unacceptable. We will table further amendments and I will, wearing a "lover of racing" hat, as shadow Minister for Sport, and as a strong and consistent supporter of the Tote, look to Parliament to ensure that the future of racing is protected by Part 1 and not, to use the Minister's word, threatened. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 32 not moved.]

Clause 11 agreed to.

Clauses 12 and 13 agreed to.

Schedule 2 agreed to.

Clause 14 agreed to.

5.45 p.m.

Clause 15 [Abolition of levy]:

Lord McIntosh of Haringey moved Amendment No. 33: Page 10, line 33, at end insert— ( ) An order under subsection (1) shall be subject to annulment in pursuance of a resolution of either House of Parliament.

The noble Lord said: In its seventh report, the Delegated Powers and Regulatory Reform Committee offered views on the delegated powers in the Bill. It made one recommendation for an amendment to Clause 15.

Clause 15 enables the Government to commence under order-making powers the abolition of the horserace betting levy system. No parliamentary procedure was specified. Clause 15(2)(c) as drafted enables an order under Clause 15(1) to make consequential provision that can include amending enactments.

The committee was concerned that consequential amendments could be made to primary legislation without Parliament having the opportunity to consider the amendments. It considered that such a power should normally be subject to affirmative procedure but, given that the power was limited to consequential provision, it recommended that the appropriate level of parliamentary scrutiny should be the negative resolution procedure.

The Government accept that recommendation, and the amendment in my name provides that the negative resolution procedure will apply to all orders made under Clause 15(1). I beg to move.

Lord Moynihan

We begin Part 2 in agreement. That is welcome. I appreciate that the Minister and the Government have responded to the useful work of the Delegated Powers and Regulatory Reform Committee in considering the Bill. We are pleased to share with the Government the concern that its recommendation be reflected in the Bill. I am pleased to say that the Minister's amendment places some small check on the Government's power to abolish the levy. In that context, we support it.

On Question, amendment agreed to.

Lord Moynihan moved Amendment No. 34: Page 10, line 33, at end insert— ( ) The Secretary of State shall not make an order under subsection (1) unless satisfied that long term contractual arrangements are in place for the funding of the protection and promotion of equine rare breeds.

The noble Lord said: Amendments Nos. 34 and 35 cover two important aspects of the invaluable contribution made by the Levy Board. It is important and appropriate for the Committee to pay tribute to the work of the Levy Board under the chairmanship of Robert Hughes and, in particular, to the dedicated work of its staff and the chief executive, Rodney Brack.

On the important issue of rare breeds, we heard from my noble friend Lord Soulsby drawing on his experience as chairman of the veterinary advisory committee to the board for some 12 years. Perhaps it would be useful for the Committee if I briefly recap what my noble friend Lord Soulsby said on 2 March; he will no doubt elaborate on the point. For the record and the assistance of the Committee in considering the amendment, he said: Support for the Rare Breeds Survival Trust would, to my mind, play an important part in maintaining our national heritage and we should not lose sight of that in this major reorganisation of the levy system. The new legislation does not specify what shall be funded, neither does it give any guarantee that funding will be safeguarded in either the short term or the long term".—[Official Report, 2/3/04; col. 568.]

To expand on that, the Levy Board supports the improvement of the thoroughbred horse through the breeders' prize scheme for British breeds. It also supports rare, native non-thoroughbred horses and ponies by making grants to the breed societies of the breeds concerned. The breeders' prizes scheme was introduced in 1993 under a scheme operated by the Thoroughbred Breeders' Association in conjunction with Weatherbys. Its aim is to improve the quality of the British thoroughbred racehorse by upgrading the quality of breeding stock in Britain. Under the scheme, the breeder of the winner of a qualifying race is paid a prize computed by reference to the minimum value of the race category concerned, where the winner is a British-bred horse. The allocation to the breeders' prize scheme in 2003 was substantial.

Grants for non-thoroughbred breeds are also important. The Levy Board has supported non-thoroughbred breeds since the early 1960s. The grant is made by breeders' societies and the aim is to improve and maintain the quality of pure breeding among Britain's native breeds of horse and pony. Current policy is to support the native breeds that are recognised as rare by the Rare Breeds Survival Trust and the funding exists in preserving those breeds as well as maintaining their quality.

Breed societies use their grants to preserve and improve their breeds in a variety of ways, principally through stallion and mayor premiums, young stock grants, DNA testing or blood typing and inspectors' training, among other things. That is clearly important work, and it is right and proper that we put safeguards into the Bill to protect and promote that vital aspect of the Levy Board's work.

Amendment No. 35, which is grouped, seeks to put in place long-term contractual funding arrangements to ensure that the excellent work of the Levy Board in funding vets at racecourses is continued. Again, thanks to my noble friend Lord Soulsby of Swaffham Prior, we have heard about that work.

It is clear that the amendment does not cover all the areas of work that the Levy Board funds to improve veterinary science; nor is it intended to. Briefly, to recap on the work that the levy funds for veterinary research, it has wisely provided research scholarships, clinical scholarships, travel grants, codes of practice for some particularly virulent equine diseases that relate to breeding—among other things—and a laboratory approval scheme for testing the health of breeding mares and stallions. That is supported by regular newsletters and equine research projects.

It would be helpful to learn what plans the Government have to ensure that the good work of the Levy Board in that area continues and that long-term contractual arrangements are in place. As I mentioned earlier, the Government's fine words are appreciated, but there is nothing in the Bill at present to match those intentions. I beg to move.

Lord Soulsby of Swaffham Prior

I have great pleasure in supporting these two amendments tabled by my noble friend. The first would deal with the funding of protection and promotion of equine rare breeds. That is an area of our national heritage that should be supported and not lost sight of. As my noble friend mentioned, without the amendment, the Bill does not specify what shall be funded. Neither does it give any guarantee that funding will be safeguarded in either the short or long term.

We in the United Kingdom have more native breeds of horses than any other country in the world. Some of our famous breeds—the Suffolk Punch, the Shire, the Clydesdale and the Cleveland Bay—are in decline. Support from the existing Levy Board to the tune of £130,000 a year is an important source of funding to keep the interest going. Unfortunately, the interest is in the older end of the farming population, who sometimes keep those horses almost as companion animals, rather than as workhorses. Anyone who has been connected with these heavy horses—in my young days as a veterinary surgeon, I did a lot of work with them—will know that they are marvellous creatures.

I hope that the Minister will attend to that lacuna in the Bill through the amendment. I should of course declare that I am a veterinary surgeon and it is possible that I should not be speaking to the fact that my colleagues should be present at a horseracing ground. However, I am sure that your Lordships will recognise the importance of having an animal medical expert at racing grounds. There is often more to be done than appears in the news or on television. Having done it myself, some time ago, I know that those people are extraordinarily busy attending to all things. Someone with expert knowledge should be there.

Both amendments are logical, and I hope that the Minister will respond positively to them.

Lord McIntosh of Haringey

I am grateful for the way in which the amendment has been spoken to and I hope that I can give a good deal of reassurance about it.

Clause 15 provides for the abolition of the Levy Board and the levy scheme. That is at the heart of our plans for reform. That is not in question when we consider the amendments. It will enable us to implement a longstanding policy of withdrawing from statutory involvement in the administration and financing of horseracing. We have had a great deal of consultation and debate on the matter with the betting and racing industries, so we will not continue with a statutory scheme of the sort that we had before.

However, Clause 16(6) contains full protection for the existing work of the Levy Board. It ensures that, any property or rights transferred will be used or exercised for the purpose of—

  1. (a) the improvement of breeds of horses,
  2. (b) the advancement or encouragement of veterinary science or veterinary education, or
  3. (c) the improvement of horseracing".
Those are exactly the same words as the existing requirements on the Levy Board, and we see no need to be more prescriptive in the Bill than we have been satisfactorily for many years. But I assure the Committee that we are in discussion with the BHB about areas in which we would like funding to be maintained. Rare breeds—I am not sure whether it is all rare breeds or rare native breeds—the attendance of veterinary scientists and the issue of long-term-contracts are certainly among those areas.

The noble Lord, Lord Moynihan has raised other matters that need to be considered. Let me assure the Committee that nothing will be lost and that the comments that have been made today will be taken very seriously.

Lord Moynihan

I am grateful to the Minister for that response. On Clause 16(6)(a), (b) and (c), we are concerned that the Government should be restricted from using the abolition of the Levy Board to benefit from the transfer of those assets. However, that will be covered in Amendment No. 39 later and it would be inappropriate to raise that now, especially in the spirit of the Minister's supportive comments on the amendments. We will return to that later. In the meantime. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 35 and 36 not moved.]

On Question, Whether Clause 15 shall stand part of the Bill?

Lord Moynihan

The purpose of giving notice of my intention to oppose the Question that Clause 15 stand part of the Bill is to encourage the Government to provide an update on discussions with the OFT and horseracing about the Rule 14 investigation. I agree with the Minister's opening comment. The Opposition, as well as the Government, accept that in today's world, the levy is anachronistic, especially in respect of the Government's role in determining how much the bookmakers should pay to racing in the event of an impasse in the bookmakers' committee.

However—and this goes to the heart of our consideration of Part 2—this is a period of great uncertainty for the racing industry, with decisions of the Office of Fair Trading and the European Court of Justice outstanding. Those decisions could have a fundamental impact on racing. That uncertainty has not been helped by the collapse of the "At the Races" television deal and the need to set up a new television service. There is widespread concern, particularly outside the House, that the OFT may not have a proper understanding of racing and the interdependence of its many elements. The original Rule 14 notice of April last year would, if carried through, lead to the loss of significant income to raing and the closure of many smaller courses.

Robert Hughes said in his chairman's statement from the board's annual report and accounts for the year ended 31 March last year: Timing, as the great comedian Jack Benny once said, is everything. It is, therefore, somewhat unfortunate that, just at the moment when civil servants are preparing the draft legislation for the abolition of the Levy Board and the sale of the Tote, the whole future structure and governance of the industry should be thrown into doubt by the intervention of the Office of Fair Trading. The Levy Board, mindful of the Government's legislative timetable, has committed itself to ensure that there is a smooth transition from the statutory Levy to a full blown commercial system for funding racing. This continues to be our aim and will be doubly important whilst the implications of the OFT's findings are worked through by all the parties concerned. I, and my fellow directors, are intent on playing whatever part we can to help resolve the many issues which now face the industry. The Levy Board's only concern is that both the racing and bookmaking industries should continue to thrive and develop, so that they can continue to make a full and positive contribution to our national life and economy". There is great uncertainty at the moment—the Minister is nodding in assent. The European Court of Justice is considering a reference by the Court of Appeal following a robust High Court judgment in support of the British Horseracing Board's database rights. I understand that that judgment is not expected until the autumn, when it will go back to the Court of Appeal, so the issue may not be resolved until late this year. Those investigations are undoubtedly complex, and it is unclear how they will report. What is clear is that they could have a significant impact on the amount of money that the bookmakers return to racing. In some respects I believe that this Committee, and indeed the House, may have looked differently at Part 2 had it not come concurrently with this huge uncertainty regarding the decisions of the OFT and the European Court of Justice. But we are where we are. In these circumstances we need as much clarity as possible from the Minister about how he sees the future of racing unfolding, particularly the aspects to which I have referred.

We welcome the one-year extension of the levy until September 2006. In parentheses, I would be interested to know how that squares with the Minister's undertaking on the first day of Committee as to tying the hands of future governments. I look forward with interest to hearing, when the Minister reflects on what he said about tying the hands of future governments when we last met, how he sees that square with the extension of the levy until September 2006 and the unfolding of the legislation thereafter.

As we debate this provision to abolish the levy, can the Minister update us on how discussions between racing and the OFT are progressing? I refer in particular to an article published in the Times as recently as 16 March, the first day of Cheltenham, entitled: Secret deal to save racecourses". It referred to the negotiations between racing and the Office of Fair Trading: A breakthrough in negotiations was confirmed yesterday by Whitehall sources". It continues: Senior figures in racing and at Westminster declined to discuss the details of the deal because they do not wish to jeopardise the settlement. But the mood among pro-racing ministers and MPs is upbeat". The Minister has certainly confirmed his pro-racing colours. In that context, I would be grateful if as part of the Committee's consideration of the future of the levy he could clarify as much as possible the status of discussions, his perspective on how they will unfold and thus how racing will be secure in the future.

Against that background, I give notice of my intention to oppose the Question that Clause 15 stand part of the Bill but do not intend to add anything further at present.

6 p.m.

Lord McIntosh of Haringey

Let me say straightaway that those are entirely legitimate concerns. I shall start with what I hope is common ground; if it is not, we are in serious trouble. Although the levy has served a very useful purpose for more than 40 years, it is no longer appropriate to have a statutory scheme and we must move towards commercial arrangements. We do not have any comparable system for any other sport on which bookmakers take bets, and we know that it can be replaced by a fully commercial system. That will be based on the sale of racing's picture and data rights to the bookmaking industry and, indeed, anyone else who wants to use them.

We then have problems. Although contracts to achieve that are already in place, we accept that the OFT inquiry has cast a shadow over those contracts. The implementation of the Competition Act is, of course, the responsibility of the OFT and the Competition Commission. As the noble Lord, Lord Moynihan, rightly says, we have said that we will retain the Levy Board until September 2006. By that stage, the final results of the OFT inquiry will be known, any appeals should have been resolved, and, if necessary, new contracts should be in place. I have no doubt that those revenue streams, and others available to racing, will ensure that it thrives and continues to be an important nationwide sport.

I do not have any up-to-the-minute update on the situation with the OFT, but I undertake to write to the noble Lord and anyone else concerned immediately before Report with the position as we know it at that time. That should help him with any action that he wishes to take on Report. It is more appropriate for me to do that than to attempt anything now.

Lord Moynihan

I am very grateful to the Minister for that undertaking. It would be helpful if that letter could be distributed to Members of the Committee so that they would be able to consider it.

Lord McIntosh of Haringey

Strictly speaking, Members of the Committee means the whole House. However, I shall distribute it to those who have attended our sittings.

Lord Moynihan

I appreciate that but, recognising that there are noble Lords who have a particular interest in the subject, I urge the Minister and his officials to ensure that they receive copies of his letter as soon as it is available.

Clause 15 agreed to.

Clause 16 [Property of the Levy Board]:

Lord Moynihan moved Amendment No. 36A: Page 11, line 7, leave out "may" and insert "shall

The noble Lord said: These two amendments are probing, being designed to find out how much influence the Government want over the transfer of the Levy Board's assets. They will ensure that, when the Secretary of State directs the Levy Board to draw up a transfer scheme, she also tells it which assets she wants to go where.

We do not intend the Secretary of State's directions about the transfer scheme to be binding. That is why we have also introduced an amendment to give the House the ultimate approval in the event of a disagreement between the Levy Board and the Secretary of State. In drawing up the amendments, I have also thought about removing paragraphs (b) and (c), so that the Secretary of State should have no power to say which assets should go where in her initial directions to the Levy Board.

The reason for deciding on the wording of the amendments is to help to protect racing from the Office of Fair Trading looking to overturn any decisions about where the assets eventually end up. My understanding—I would welcome clarification from the Minister—is that the OFT would be reluctant to intervene where Ministers have given clear directions. The important point raised by the amendments is to make it clear to Parliament who is responsible for deciding where the assets of the Levy Board will be directed. I beg to move.

Lord McIntosh of Haringey

The important way to look at the amendments is to read subsection (3) in conjunction with subsection (2), which gives the Secretary of State the power to direct the board to make and submit to the Secretary of State a transfer scheme. The expectation is that the Levy Board, together with its advisers, will draft the transfer scheme. We do not anticipate that the Secretary of State will need to involve herself in the detail of the transfer scheme as the Levy Board will know its own property, rights and liabilities better than the Secretary of State. However, the provisions give the Secretary of State the option to specify which assets are transferred and to whom.

The provisions are not particularly new. There are many other examples in other legislation, such as in Section 2 of the Atomic Energy Authority Act 1995, which I have already quoted. Subsection (3)(b) and (c) avoids making it a mandatory requirement for the Secretary of State to specify what property, rights and liabilities are to be contained in a scheme and to whom they should be transferred. That is left to the good sense of the Levy Board and its professional advisers.

The Secretary of State will look to the Levy Board to ensure that the best interests of racing are safeguarded under the terms of the scheme, and subsection (6) imposes on her an obligation to check the scheme so that the property, rights and liabilities will be used for the purposes specified in that subsection. Subsection (3) is designed both to allow the Secretary of State to leave the Levy Board to decide what matters are to be covered by the scheme and the person to be specified in it as transferee; and to allow her to specify in the direction the transferee, the activities or undertakings. the property, rights and liabilities to be transferred.

We think that the drafting of the amendment properly identifies the responsibilities of the Levy Board and the Secretary of State, with a back-up for the protection of racing in subsection (6).

Lord Moynihan

Once again, the Minister is being extremely helpful to the Committee. That was a very clear analysis, in view of which I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 36B not moved.]

Lord Moynihan moved Amendment No. 37: Page 11, line 10, at end insert— ( ) shall specify that the Horseracing Forensic Laboratory shall not be able to carry out drug tests on anything other than horses and dogs.

The noble Lord said: Again, this is a probing amendment. There is such unity on both sides of the Committee about most of the issues concerning Part 2 that the majority of points that the Opposition wish to raise are probing. The amendment's aim is to press the Minister on the future prospects of the Horseracing Forensic Laboratory once it is transferred to the British Horseracing Board. That is particularly important given the potential for the HFL to test human samples in the near future.

The levy operates the Horseracing Forensic Laboratory, the anti-doping agency for horses, which is one of the most experienced and accredited animal drug-detection agencies in the world. It is not an overstatement to describe the HFL as having achieved the gold standard among such agencies. It is a body of which we in this country can be rightly proud.

It is worth drawing the Committee's attention to the excellent work undertaken by the HFL. It is a research laboratory that conducts high integrity drug analysis in a wide range of biological matrices. Since 1963, the HFL has successfully provided drug surveillance services to British horseracing, thus helping to maintain the integrity of the sport for participants and the betting industry. There is an experienced team of more than 25 people who between them have hundreds of years of cumulative experience and knowledge.

The HFL has three principal business areas: drug surveillance for racing bodies in the UK and further afield; bioanalysis to support pharmaceutical drug development; and research programmes in association with racing bodies and the UK Government. The HFL is based within a purpose-built laboratory complex on a 30-acre site near Cambridge. The laboratories are compliant with ISO 17025 and GLP, and operate to containment level 2 as standard.

As the Committee is aware, it is intended that the Horseracing Forensic Laboratory will be transferred to the British Horseracing Board. Members from the various bodies responsible for the sport, including directors from the Jockey Club and the Racehorse Owners Association, sit on that board. That raises the question of whether there would be a conflict of interest as a result of the horseracing authorities themselves owning the horseracing anti-doping laboratory. That point is not specifically covered by my amendment, but I would be very interested—as would the Committee as a whole, I am sure—to hear the Minister's view on that potential conflict of interest.

The Committee may also be aware that recent reports have suggested that the Horseracing Forensic Laboratory is seeking accreditation from the World Anti-Doping Agency—WADA—in order to be able to carry out drug testing on humans. Indeed, I understand that the HFL has carried out drug testing on human athletes in the past. WADA clearance is expected in May, and I ask whether the Government have any intention of seeking to establish the equine laboratory as an anti-doping testing centre for humans in the future. How would the structure of reporting work, to both the British Horseracing Board and UK Sport? If an issue conflicted between the priorities and objectives of those two organisations, what structure would be in place to resolve it?

As I said, at this stage of our consideration the amendment is probing, but the issues that it raises are important. I look forward to the Minister's response. I beg to move.

6.15 p.m.

Lord McIntosh of Haringey

We can start with having a good deal in common. I am happy to endorse what the noble Lord says about the Horseracing Forensic Laboratory. Of course, by far the most significant assets of the Levy Board are the Horseracing Forensic Laboratory and the capital fund. For the record, I repeat that our intention is to transfer those assets to the British Horseracing Board.

The noble Lord is right about the laboratory, which is a world-renowned centre for equine drug testing and provides an excellent service to the Jockey Club and its clients. We expect that the majority of its work will continue to be for horseracing. However, we see no reason to restrict the flexibility of the HFL to diversify its activities and become even more successful. He is right to say that the HFL has applied to the World Anti-Doping Agency for permission to test human samples. We await its decision, but we see no reason why the Government should stand in the way of its reasonable ambitions on that.

Indeed, there could be human rights considerations if we were to take legislative powers to interfere with how a private company lawfully conducts its business. Of course, UK Sport will consider whether it wishes to use the HFL, but that is a matter for UK Sport, not the Government. In the interests of light regulation, the racing industry and the HFL, we do not support the amendment.

Lord Moynihan

I listened with interest to what the Minister had to say on the subject of anti-doping, and in particular to his view that there may be human rights issues such that the Government would not wish to intervene. Of course, that is diametrically at odds with the overall position taken by UK Sport on anti-doping. A football club is a private club yet, to be in receipt of international recognition by the International Olympic Committee, for example, it is incumbent on the FA to accept principles laid down by WADA. Without accepting those principles, it would not be possible for a country to submit for consideration a football team to compete in the Athens games this summer.

We are talking about an important laboratory. The interesting development since consideration of the Bill in another place was the decision taken by the Government that it should become part of the wider UK Sport testing for humans. That decision opens it up to a whole series of important questions on how that function will relate to the British Horseracing Board, what the structure will be, how it will be funded and how it will be organised. That comes within a highly topical and controversial area of government intervention; namely, the extent to which they should determine the anti-doping regulations in the country for sport in its wider sense.

A Minister says that that is not the business of government, but I argue very strongly that it is. Indeed, it is incumbent on the Government to recognise that they have signed up to the WADA code, which at its inception focused on three critical issues—that any anti-doping agency should be transparent, accountable and independent. In other words, one should not be in a position whereby the people who own racehorses oversee their testing the following day. For an anti-doping agency to be effective, it has to work independent of owners or those who could be conflicted by virtue of having another role in racing.

Exactly the same logic applies within UK Sport. I hope that, so far as UK Sport is concerned, the Government will move to a position in which it will simply not be possible for a football club to determine who tests or is present for the testing of a footballer. We had an absurd situation in December last year, given that we are meant to have an independent anti-doping agency. It determined that Rio Ferdinand would be tested and the independent testers went along to Manchester United's training ground, but were not allowed to carry out their work of getting on to the ground, finding Rio Ferdinand and taking his test. Had they done so, we would have avoided a great deal of the problems that have subsequently occurred.

The point applies to all sports including racing. If the Government are to continue to adhere to their commitments to the World Anti-Doping Agency, to which they have signed up, those key principles of transparency, independence and accountability must be fulfilled in all work undertaken by the anti-doping agency.

The amendment is probing. We shall refer to the issues in greater detail in a moment. I hoped that the amendment would elicit from the Government an absolute commitment to those three principles, and then an explanation of how the Government best saw their being adopted by the Horseracing Forensic Laboratory, for tests not only on horsing but on athletes. I would very much like the Minister to respond to those comments.

Lord McIntosh of Haringey

A large number of the comments that the noble Lord has made are very wide of his amendment. I have responded to the amendment, and I think that I should be content with that. Some of what he talked about was nothing to do with anything in the Bill, let alone the amendment, but if there is anything of wider significance that is nevertheless the subject of the Bill I shall write to him about it.

Lord Moynihan

I am very happy to continue this dialogue, because it absolutely goes to the heart of my amendment. I thought long and hard about how best to draft an amendment that covered the fact that the Horseracing Forensic Laboratory was about to test on humans. The moment that it does so, it will be within the remit of UK Sport's anti-doping policy. My amendment states very clearly, at end insert … shall specify that the Horseracing Forensic Laboratory shall not be able to carry out drug tests on anything other than horses and dogs". That would prevent the Horseracing Forensic Laboratory, if accepted, testing on humans.

It is therefore perfectly legitimate to elicit a response from the Government on that, because UK Sport has gone to the World Anti-Doping Agency specifically within the terms of Part 2 to enable the Horseracing Forensic Laboratory, by name, to test on humans and thus on something other than dogs or horses. Therefore it is completely reasonable to ask the Minister to give an explanation of why he believes that the Horseracing Forensic Laboratory should be involved in such testing, and how it will work managerially if he believes so. I am sure that he does; I do as well. We need to know about the relationship between UK Sport and the Horseracing Forensic Laboratory on, for example, the prioritisation of samples, as well as the overall management. That is what I sought to elicit from the Minister.

Lord McIntosh of Haringey

It will be the responsibility of the new owners of the Horseracing Forensic Laboratory to know what they can do with their laboratory. That is the issue raised by the amendment. The amendment and the Bill do not raise the legitimacy of any testing; that comes completely outwith our considerations.

Lord Moynihan

I very much regret that the Minister has been unable to respond to the questions that I have put to him in this context, and I shall return to them at a later stage of our deliberations. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Moynihan moved Amendment No. 38: Page 11, line 10, at end insert-— ( ) In exercising his responsibilities under this section, the Secretary of State shall ensure that the Horseracing Forensic Laboratory ("the laboratory") is not transferred to the successor company or to UK Sport, and that the laboratory is established as an independent agency with the same aims and purposes as it has at the time at which this Act is passed. ( ) In particular, the agency shall be required to provide a drug testing service to the Jockey Club for samples taken from horses at race meetings for the purposes of the control of doping under the rules of racing and such other drug testing services as the laboratory provides at the time at which this Act is passed. ( ) The Secretary of State may make payments to the agency to ensure that there is no charge to the Jockey Club for the drug testing service provided to it by the agency.

The noble Lord said: I do not think that we will make much further progress than we did on Amendment No. 37 if the Minister's responses are similar. Members of the Committee will be aware of my commitment to drug-free sport, and the view of Her Majesty's Opposition that there should be an independent anti-doping agency. The Horseracing Forensic Laboratory was mentioned at Second Reading, and I am glad that there is a chance to focus discussion on this important amendment. However, at this stage I do not intend to speak at length, as I would have done had I had an acceptable response from the Minister to Amendment No. 37.

All that I shall say is that I hope that a few key principles of the Government's anti-doping policy can be placed on record at this stage. I hope that the Minister will agree with three points: that it is fundamental to the integrity of sport and fair competition, including racing, that sport remain drug-free; that the present situation on drug testing in sport is riddled with conflicts of interest and needs to be changed—the Government have recently commissioned outside consultants on the subject, who have fudged the issue; and that there is a need for the HFL and the British Horseracing Board to adopt an anti-doping policy that is independent, transparent and accountable. I would be grateful if the Minister accepted that there should be a separation of powers between the judiciary, executive and legislature from the work of the laboratories.

Perhaps it would be a little unfair of me—it is not often that I state that—to press the Minister on those points at this stage, in view of his response to Amendment No. 37. If he wishes to hold fire and keep his powder dry until we return to the matter, I shall be happy to withdraw the amendment, having made clear some of the issues to which I shall return. As he is looking eager to respond to at least one point, if not more, I am delighted to beg to move.

Lord McIntosh of Haringey

I am in the usual position of responding to amendments, although I can hardly respond to the speech, which was nothing to do with the amendment. However, I do my best.

Let me make it clear, in response to the amendment, that no one in government has suggested that the Horseracing Forensic Laboratory might be transferred to UK Sport or the successor company. That is not the Government's intention. Although we have not reached a final decision on that, our approach has been to look to the British Horseracing Board, as the governing body of the sport, to be the most appropriate home for many of the assets held at present by the Levy Board. The BHB is the guardian of the sport.

The other part of the amendment would defeat the Government's policy objectives—I do not think that the noble Lord is disputing them—and would involve the Government withdrawing from a modest form of statutory involvement for which there is no charge on the public purse to another which would involve a charge on the public purse. That seems perverse.

I agree that it is desirable that racing should be drug-free but, beyond that, the noble Lord is asking me to respond in regard to conflicts of interest and whether our consultants fudged issues about the role of the judiciary and the legislature. Such issues are not raised by the amendment.

6.30 p.m.

Lord Moynihan

I completely disagree with the Minister. The issue goes to the centre of the amendment because it questions whether the Horseracing Forensic Laboratory should be transferred to a successor company or, indeed, to UK Sport. It questions the appropriate status for anti-doping within racing.

I was delighted that there was a volte face between Amendments Nos. 37 and 38 and that the Government now accept that there is statutory involvement. We did not have that acceptance under my previous amendments, so we are making progress. I was very interested to learn that no final decision has been made. That means that some of the issues are still open for debate and discussion. That was not the case under Amendment No. 37, so good progress has been made.

Even if the Minister thinks he is wide of the mark, I can assure him that he is not. Anti-doping within racing goes to the heart of the Jockey Club rules, the role of the BHB and the work of the Horseracing Forensic Laboratory. What the Minister has failed to grasp—perhaps he has not been briefed on this by his colleagues—is that there are widespread and far-reaching ramifications from this laboratory also being used by UK Sport for humans. I accept that he may not have been briefed on that because the decision was reached only after consideration of the Bill in another place.

As I have pointed out, we will need to consider all these issues in greater depth to ensure that not only is racing drug-free and that we have the best possible anti-doping agency in the country for other sports, but that there are no conflicts of interest and we can work together to ensure that we have achieved an independent, accountable and transparent anti-doping agency for sport in the United Kingdom. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Moynihan moved Amendment No. 39: Page 11, line 22, at end insert— ( ) A transfer scheme under subsection (4) shall not be made unless a draft has been laid before, and approved by resolution of, each House of Parliament.

The noble Lord said: As drafted, Clause 16(4) seeks to provide the Secretary of State with powers to overrule the Levy Board in designing the transfer scheme for its assets. It may be that the Levy Board and the Government are unable to agree how those assets should be transferred. That possibility exists and I can understand why the Secretary of State would want to have such powers. However, in this case it is important that the House has the opportunity to consider any such decision.

The ECHR considerations are outlined on page 11 of the Explanatory Notes to the Bill, where it states: The power of the Secretary of State under clause 16 to direct the Levy Board to transfer its property and rights under a transfer scheme would engage Article 1 of the First Protocol only if the Levy Board were to be regarded as a 'victim' for purposes of the Convention". I would argue that it is doubtful that the Levy Board is a victim but, if it is, the transfer of such property and rights can be justified in the public interest".

I suggest that if the Secretary of State wished to overrule the wishes of the Levy Board, it could be described as a victim. It seems sensible that the Government should protect themselves by ensuring that the Secretary of State's actions "in the public interest" are supported by Parliament. This might be particularly important if the Secretary of State materially benefits from the transfer scheme, which is something that would seriously engage ECHR considerations.

The Committee may be aware of previous parliamentary Answers from the Minister for Sport and Tourism. On 23 February this year, in a Written Answer to the MP for Bath, Mr Foster, he said: We will continue to assess the progress being made by the new Board of the Stud, with the support of the Levy Board, towards the point at which such a transfer could appropriately take place, with the proviso that closure of the Stud and sale of the assets remains the fall-back option".—[Official Report, Commons, 23/2/04; col. 38W.]

I assume that such a transfer relates to a new independent charitable trust at no cost.

The Minister may recall that he provided me with a Written Answer in which he stated that the Government hoped to be able to transfer for no consideration the National Stud, which is the sum of its assets, to a new independent charitable trust, and that it is not the intention to sell the assets. He further stated: No conclusions have been reached about the use of proceeds in the event that a sale becomes necessary".—[Official Report, 22/3/04; col. WA 83.]

That is the critical point.

In other words, the Government are again asking the Committee to provide them with powers to abolish the Levy Board and transfer its assets, including the National Stud, without an assurance about what they will do with those assets. Will the Minister give the Committee a cast iron commitment that the Government will not retain the proceeds from the sale of the National Stud?

During our previous sitting we discussed at great length whether the Government would sell the nationalised Tote to the highest bidder if the Racing Trust were unable to buy it. I hope this will not be a repeat of that. There is nothing to prevent the Government going down this road. If that is the case, it is unacceptable.

The Minister may argue that there is a check already in place under subsection (6), but the sale of the National Stud to another stud operator for a profit could fall under the improvement to breeds of horses—I may be wrong—and I would be grateful if the Minister could clarify the position. I hope the Minister will ensure that there is a check in place on the Government's ability to overrule the Levy Board in drawing up a transfer scheme. I beg to move.

Lord McIntosh of Haringey

Again I have the unenviable duty of responding to the amendment and not to the speech, which are rather different things. Clause 16 establishes the procedures that will have to be followed when the time comes to transfer the Levy Board's assets. A lot can happen between now and the time of the Levy Board's closure and we have to keep our options open. Therefore Clause 16 does not stipulate to whom or when the assets will be transferred.

As I have already said, the most significant assets are the Horseracing Forensic Laboratory and the Capital Fund. Our intention is to transfer those assets to the British Horseracing Board, but we need to maintain the flexibility to do what is appropriate in the circumstances prevailing at the time. As is clear from subsection (6), we intend that the British Horseracing Board should use the assets for the same purposes as they are used now. With all the assets, we will adhere to the principle that they are required to benefit racing and should continue to do so for the future.

Our intention is clear. The British Horseracing Board, as the governing body for racing, is currently best placed to administer these assets for the good of the sport as a whole, but if that position changes we will reassess the situation.

As to the amendment itself, I should point out that the Levy Board does not need parliamentary approval now to dispose of its assets. I do not see any need to subject a transfer scheme to another layer of parliamentary approval when our purpose is quite clear. I am confirmed in that view by the fact that the Delegated Powers and Regulatory Reform Committee, having considered the Bill, did not recommend that there should be this additional level of parliamentary scrutiny.

Lord Moynihan

I am grateful to the Minister. I said before that we have brought forward a series of probing amendments on Part 2. The Minister has been very clear in his response. I have a great concern about the principle of maintaining flexibility in Part 2, but nothing like as great a concern as I had with regard to Part 1 The Minister's response has been comprehensive and helpful. In that context, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Moynihan moved Amendment No. 39A: Page 11, line 22, at end insert— ( ) Neither the Secretary of State nor the Treasury may materially benefit from the sale of any specified property, right and liabilities of the Levy Board arising from the transfer scheme.

The noble Lord said: We are making good progress and I am sure that the Minister will be equally helpful with Amendment No. 39A, which is designed to ensure that the Government do not use the abolition of the Levy Board to benefit from the transfer of its assets. We have already briefly touched upon the Written Answer from the Minister for Sport in another place, where he admitted that the Government might sell the National Stud and had not yet decided on the use of the proceeds from such a sale.

This is intended to be a simple amendment to ensure that the legislation prevents the assets of the Levy Board finding their way into Treasury pockets. It would, at the same time, he helpful if the Minister could make a statement on what will happen to the £50 million or so Capital Fund which is presently operated by the Levy Board and to which he referred in passing.

Let me give some of the background of the fund. During the past year, the Levy Board approved by way of loans some 10.9 million towards capital projects at racecourses and capital grants of £24.3 million for use in racecourse improvement schemes. Interest-free loans were made available to 12 racecourses in respect of a number of projects involving the improvement of racecourse facilities. The most significant of these were the replacement, refurbishment or extension of grandstands at Chepstow, Sandown Park and York, with smaller schemes at Bath, Brighton, Market Rasen and Uttoxeter.

I feel sure that the Minister will recognise that we seek to ensure that there is no possibility of this money leaving racing. I fully appreciate where he is coming from on this issue—I have heard his commitment to that end—but I am concerned. I have read the response from his noble friend the Minister for Sport in another place and I hope that the Minister will understand my concern.

It is understood that in 2000, from memory, the Levy Board intended that the Capital Fund would be transferred to the British Horseracing Board and that the BHB would then transfer it to a trust under the joint direction of the BHB and the Racecourse Association. Is the Minister able to provide an update—and, it is to be hoped, a categorical assurance—on what will happen to the fund?

I raise this issue in particular because, as I said. at an earlier stage in the Commons the Minister for Sport, Richard Caborn, implied that due to the uncertainty arising from the OFT investigation and the possibility for restructuring the governance of the sport and its commercial activities, it would not be wise to tie the Government's hands by removing flexibility wit h the amendment.

It is for these reasons that I look to the Minister to clarify the position of the Government today and, I hope, give the assurances that we seek. I beg to move.

Lord McIntosh of Haringey

I have already given many of the assurances that the noble Lord, Lord Moynihan, seeks, but I shall gladly give them again.

It is not our intention to sell the assets of the Levy Board. We intend to transfer them, without consideration, under the terms of the scheme to the appropriate transferee. It is certainly not the case that the Government would deliberately arrange matters so as to benefit from a sale of assets. They were developed for the good of racing and we want to see them continue to be used for the good of racing. We are proposing, subject to everything that I have said already, to transfer the bulk of the assets, including the Horseracing Forensic Laboratory and the Capital Fund, to the BHB, which is in the best position to fulfil the objective. We saw no reason to make this explicit on the face of the Bill because no one has ever suggested that we are trying to make a profit out of it.

As to Amendment No. 39B, paragraph 4 of Schedule 3 is there as a necessary precautionary measure. It would allow the Secretary of State, with the Treasury's consent, to sweep up any rights or liabilities that have somehow been missed by the transfer scheme or in the case that there was no transferee who wished to take on these liabilities. A further example is that the power might be used to settle any potential legal claim that might exist. Paragraph 4 ensures that in these circumstances the Secretary of State has sufficient vires to take on such rights or liabilities.

We cannot predict in the legislation how the transfer schemes will operate in practice or what circumstances will require at the time. It is therefore sensible—indeed, necessary—that the Secretary of State should have this power. I repeat, we are not intending to use this clause for the Government in some way to profit from the dissolution of the Levy Board.

6.45 p.m.

Lord Moynihan

I am once again grateful to the Minister. I hope he will understand that the reason I am tabling these probing amendments is to place on record the intention of the Government, which he has made explicitly clear. For that I am very grateful. I also recognise that, in the context of Amendment No. 39B, which I have not addressed, these rights and liabilities are brought about by agreement. I thank the Minister for focusing on the rationale behind that and for his very clear statements, which are a good deal more lucid than those made by the Minister for Sport in another place. It will be helpful for racing to have the opportunity to reflect upon the statements he has made. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 16 agreed to.

Schedule 3 [Horserace Betting Levy Board: Transfer of Property]:

[Amendment No. 39B not moved.]

Schedule 3 agreed to.

Clause 17 agreed to.

Schedule 4 [Abolition of the Horserace Betting Levy System: Consequential Amendments]:

Lord Moynihan moved Amendment No. 39C: Page 35, leave out lines 43 and 44.

The noble Lord said: Again, this is a probing amendment. It is designed to satisfy my interest in why the Secretary of State should still retain power over the setting of the fees for approval of racecourses. There may be a very good and simple reason for this—I may have missed it—but, on reading the Bill, it struck me as rather strange that, given that I thought we were all agreed that the Government's role in racing should be scaled back, this remained on the face of the Bill. I thought the cutting back of the Government's involvement was the whole purpose of Part 2 of the Bill.

I may have missed the specific reason for this when I was reflecting on the amendment and I should be very grateful if the Minister will explain why the Secretary of State should still set the fees for the approval of racecourses by the Gaming Board. Why cannot this responsibility be passed down for the Gaming Board to decide? It does not help that the Explanatory Notes to the Bill do not seem to cover Schedule 4.

One of the reasons I am worried about giving the Secretary of State the power to set the licence fees is because of recent experiences with the Licensing Bill. The Government have consistently delayed issuing guidance to local authorities. However, the Minister may be able to give a simple explanation to the Committee. I beg to move.

Lord McIntosh of Haringey

It is certainly the case that the Levy Board does not charge racecourses for their certificates of approval, but the board exists to benefit racing and it has opted to take this approach as part of its service to the sport. That is its privilege.

The Gaming Board is a completely different body and its successor body, the gambling commission, will in due course also be a completely different body. It will take on a new regulatory burden in addition to its current responsibilities. It seems to the Government wholly appropriate that the Gaming Board should be able to charge racecourses for the necessary regulation of betting activities carried out at racecourses for the protection of the public. This will put racing exactly on a par with all other forms of gaming and, when the gambling commission is formed, all other forms of gambling.

In case anyone should think that the Treasury is making off with the fees, the Gaming Board will receive a notional amount from the department's vote to cover the cost of regulation. The fees charged will cover those costs and they will go back into the Consolidated Fund or appropriated in aid of the department's vote. That is what happens with other regulatory functions exercised by the Gaming Board, which of course was set up by the Gaming Act 1968.

It is an important service, one comparable to other regulatory services provided by the Gaming Board and is the means by which bookmakers are able to stand at courses. It cannot be unreasonable for the Gaming Board to charge for it.

Lord Moynihan

I am very grateful. I thought I may have missed something. When the Minister has the opportunity to read Hansard he will see that my interpretation was that the Secretary of State would set the fees rather than the Gaming Board. It has now been made extremely clear to me by the Minister that my objective is already satisfied on the face of the Bill. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 39D not moved.]

Schedule 4 agreed to.

Clause 18 [Tax]:

Lord Moynihan moved Amendment No. 40: Page 12, line 26, at end insert— ( ) The Treasury shall make regulations providing that the payments from bookmakers for purposes conducive to any or more of the following—

  1. (a) the improvement of breeds of horses,
  2. (b) the advancement or encouragement of veterinary science or veterinary education, or
  3. (c) the improvement of horse racing, shall be subject to a zero rate of Value Added Tax."

The noble Lord said: I am happy to speak to this amendment, which is very similar to that tabled by my noble friend Lord Soulsby of Swaffham Prior. However, I am grateful to the Chairman of Committees for clarifying my error.

In explaining the reasons behind these amendments, perhaps it is best to quote from page 28 of the Government's own regulatory impact assessment: The abolition of the statutory levy will have benefits for the Government. Commercial payments will generate VAT receipts. The 42nd levy scheme is projected to yield approximately £94 million. Were these payments made commercially, there would be a VAT charge of £16.4 million".

While everyone recognises that the levy is an anachronism in today's market, its abolition will, first, reduce the moneys going to racing from the bookmakers because they will have to pay VAT and, secondly, increase tax revenue to the Exchequer. It seems a tad unfair to describe this as a stealth tax, but nevertheless racing and the bookmakers who help to support racing will have to pay an estimated £16 million in extra tax.

While of course I am concerned about the financial situation of bookmakers and the value their business brings to the UK economy, what is of greater concern is the effect of these measures on horseracing. It is likely that the new tax liability of £16 million will mean that bookmakers reduce their payments to racing by that sum. The purpose of my amendment, therefore, is to encourage the Treasury to recognise that this £16 million a year windfall is money that would otherwise have gone to racing and to consider its position accordingly.

I am all too well aware that this House should be reluctant to interfere with tax matters since the other place has precedence in the area. Nevertheless, I am also aware that there may be problems with European laws about VAT and that there is a danger that this amendment may not be permitted. If that should be the case, then I look forward with interest to learn the Minister's own standpoint, irrespective of European law. I say that because it is important to draw this increased taxation to the attention of noble Lords. I hope that the Minister will surprise us with a positive response.

I am also very pleased to note that my noble friend Lord Soulsby of Swaffham Prior supports this amendment. I anticipate—rather later in the day than I had originally imagined—that my noble friend would deal with the greyhound racing aspects of this matter covered in the grouped amendment. I beg to move.

Lord McIntosh of Haringey

There is very little that I can say because the noble Lord, Lord Moynihan, knows the position. This is not particularly a matter of the relationship between the House of Lords and the House of Commons. We are perfectly free to express our views, but we are slapped down when they go back to the Commons. Here, however, the noble Lord has really answered his own amendment.

Amendment No. 40 proposes a zero rate. However, we have longstanding agreements with our European partners that we do not introduce any new zero rates and we do not seek to extend those that already exist. There have been and are exceptions under Article 8, or Article H, of the Sixth Directive, but they have been very well publicised and our negotiations in most cases have been unsuccessful. That is for the simple reason that once we open that Pandora's box, we are likely to lose more than we gain, something which we are not keen to do.

I turn to Amendment No. 41. Payments made through the existing statutory levy scheme are outside the scope of VAT, as the noble Lord, Lord Moynihan, rightly pointed out. They are not commercial payments for supplies that the bookmaker receives. As such, they are different from commercial payments made by the bookmaker in order to exploit data rights.

Under the fundamental principles that govern the VAT system, it would not be appropriate to treat a commercial consideration for the exploitation of data rights as if it were a statutory levy. VAT is chargeable on supplies of data rights, as it is for the vast majority of goods and services purchased commercially in the United Kingdom.

I am afraid that the same difficulty arises with Amendment No. 40A, with the additional problem that it proposes an exemption for greyhound racing. This is a horserace betting Bill and it cannot be used to introduce provisions relating to greyhound racing.

Lord Soulsby of Swaffham Prior

I should like to speak to Amendment No. 40A. I am glad that my noble friend Lord Moynihan has dealt with the issue of value added tax. I am no expert on those matters.

I have tabled the amendment to support the very worthy enterprises associated with racing. While I take the Minister's comments that this is a horseracing Bill, a very substantial proportion of the income of bookmakers is derived not from horseracing but from greyhound racing. Through the Bookmakers Afternoon Greyhound Service—BAGS—system, substantial funds are generated through races associated with greyhounds.

Amendment No. 40A seeks, among others things, the improvement of breeds of horses", an issue which was dealt with earlier. It covers also, the advancement or encouragement of veterinary science", which could apply both to racehorses and greyhounds; and, the improvement of horse racing". Through the Horserace Betting Levy Board, a conscious effort is made to deal with the improvement of racehorses and to address the fate of horses when their racing life is over. Some 4,000 horses per year leave the tracks and go into retirement of one form or another. The vast majority are well cared for, but some rely on charitable intervention from the charity, Retraining of Racehorses, which receives support of £50,000 per year.

I have added a paragraph relating to, the improvement of greyhound racing", because both horses and greyhounds are racing animals. Greyhounds form the primary alternative to horses but, to my knowledge, no effort is made to help with retired greyhounds after they have spent two or three years on the racetrack. Indeed, there is great dissension among greyhound authorities about how to deal with the welfare of animals following their racing career.

Mr Tom Kelly, the chief executive of BAGS, stated in a recent article in the Greyhound that: It is common sense that the provision of good facilities for the dogs, good veterinary care and good post-racing care is both desirable and a matter that should be high on the sport's list of priorities. But sometimes, when an issue becomes as politicised as this one, the obvious can be overlooked". I think that the "obvious" which has been overlooked here is that some accommodation should be made for greyhounds following their useful track life. Given that so much money is generated in the betting area by bookmakers, it is realistic and only fair that an improvement to this aspect of greyhound racing should be accommodated. Greyhounds should be supported following their retirement from the racing track.

7 p.m.

Lord McIntosh of Haringey

It occurs to me that I have been unjustly dismissive of that part of the thinking behind the amendment spoken to by the noble Lord, Lord Soulsby. It was necessary for me to repeat that this is not a subject in which we can opt for a zero rating of VAT, just as it was necessary to make the point that greyhound racing is not covered by this Bill. The noble Lord was good enough to recognise that.

However, the welfare of greyhounds is a serious issue and deserves close attention. Not only my department, but Defra too is very much concerned with this matter. Officials are holding discussions with representatives of the betting and greyhound racing industries, looking at ways to provide extra funds for what is undoubtedly a worthwhile cause; that is, the future life of greyhounds when they finish racing. I acknowledge the work of the noble Lord, Lord Soulsby, in this area and I am grateful to him for raising the issue, even though I have to say that it is formally outside the scope of the Bill.

Lord Lipsey

I apologise for the discourtesy of being late for the speech of the noble Lord, Lord Soulsby. In declaring my interest as chairman of the British Greyhound Racing Board, perhaps I may add briefly that within the next 24 hours, an announcement will be made of bookmakers' support for greyhound racing which will show an extremely substantial increase in the sums available, including the funds available for the cause so close to the heart of the noble Lord, Lord Soulsby.

Lord Moynihan

If nothing else, this afternoon has allowed both Members of the Committee and the public to learn a great deal about what is coming in the future.

Lord McIntosh of Haringey

And it has allowed me to know!

Lord Moynihan

I am delighted that the Minister has joined this happy club. On a more serious note, I am equally delighted at what the noble Lord, Lord Lipsey, has just had to say. In the light of that and of the comments made by the Minister, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 40A and 41 not moved.]

On Question, Whether Clause 18 shall stand part of the Bill?

Lord Moynihan

The purpose of rising on this occasion is to place on the record the comments made by the Committee on Delegated Powers and Regulatory Reform, which focused on this clause. I shall quote from its report: Clause 18 provides for the Treasury to make regulations (subject to negative procedure) altering what would otherwise be the tax position as a result of a scheme transferring the property of the Horserace Betting Levy Board. The taxes concerned include income tax, corporation tax, capital gains tax and stamp duty. The need for the power is explained at paragraph 26 of DCMS's memorandum. Both this paragraph and paragraph 74 of the Explanatory Notes say that the purpose of the provision is to enable transfers to be made tax neutral. But the power in the bill is open-ended (almost skeletal) and can be used to affect the substantive tax position in other ways. The House may wish to invite the Government to provide some assurance that this provision will be used for the purposes specified in the Explanatory Notes". There is little I can add to the above except perhaps to say that it is a shame that VAT on the sale of rights is not included. However, I invite the Minister to provide further assurances to those that he already began to give the Committee when responding to the previous group of amendments.

Lord McIntosh of Haringey

I am grateful to the noble Lord, Lord Moynihan, for giving me an opportunity to provide the clarification which the Committee on Delegated Powers and Regulatory Reform advised noble Lords to seek about the use the Government intend to make of the wide powers provided for in Clause 18.

The purpose of the clause is not to safeguard recipients from future tax liabilities they will normally incur. That would be wrong. But it will mean that the Government do not receive any windfall taxes simply as a result of transferring the assets away from the Levy Board.

The aim of the clause is to ensure that a transfer is tax neutral and the recipient inherits the tax history attaching to whatever he receives. That is the limited purpose that the Government intend for the use of this clause. I believe that that is what the Committee is seeking.

Lord Moynihan

That is exactly right and I am grateful to the Minister for responding accordingly.

Clause 18 agreed to.

Clauses 19 and 20 agreed to.

Clause 21 [Licensing of Olympic Lotteries]

Lord Moynihan moved Amendment No. 41A: Page 13, line 16, at end insert— ( ) This section shall only have effect once the Secretary of State has laid before Parliament a report setting out in detail the cost of hosting the Olympic and Paralympic Games in a United Kingdom city.

The noble Lord said: We move on to Part 3. I think that I will be on target for how far we intended to progress this evening, which is more than I can say about tipping winners of the Grand National on Saturday. Before addressing the amendment, perhaps I may say how grateful I am to the Minister and his officials for the very hard work they have undertaken on Part 2 of the Bill. Although we have no eyes to see them, I know that the officials who may have left at the close of our proceedings on the previous part will read the record and see our thanks for the very professional way they have approached both Part 1 and Part 2. I thank them in particular for their advice to the Minister on Part 2, in which we are in much broader agreement than was the case on Part 1.

Turning to the separate and new subject of Part 3, there are a number of reasons why I have tabled Amendment No. 41A. First, surely it is good practice that government and Parliament are completely aware of the commitment they are making in bidding to host the Olympic Games. Let us not forget that the London 2012 bidding document states clearly that: The Government [will also] be the ultimate guarantor of Olympic funding should [there be any] shortfall between Olympic costs and revenues". Indeed, it is a requirement in bidding for Olympic Games that governments must provide a covenant for the bid.

It is also helpful to recap on what the Minister, the noble Lord, Lord Davies of Oldham, told the House at Second Reading: As for transfer or raiding of lottery funds for the Olympics, both my noble friends arc right to draw attention to the power in the Bill, but I would have to define it as a precautionary measure. We have no intention of raiding good causes to provide for the Olympic Games. That is why there is specific provision in the Bill for money from the alternate structure". He went on to say: However, we must hear in mind that should we win this bid—every noble Lord who spoke expressed the hope that we be successful—we will then be committed to substantial expenditure. Especially as this is likely to be the only legislation that will underpin the Olympic Games bid—it is certainly the only Bill that will be passed in time for the long run-in to the games that is necessary—it would be remiss of us not to include a reserve power in the Bill for alternative funding. However, I think that my noble friends would recognise that we regard the use of that power as being only for dire extremis [a mixture of languages here] concerning receipt of lottery funds from the Olympic Games lottery".—[Official Report, 2/3/04; cols. 585–86.]

The Minister said that in early March, but I am afraid that I do not share his view that the £410 million that is due to be diverted from the other good causes will be required only in "dire extremis". That is the reason why I have tabled this amendment to ensure that Parliament receives, a report setting out in detail the cost of hosting the Olympic and Paralympic Games in a United Kingdom city". I refer to "a United Kingdom city" because, as we shall see in a later amendment, I am keen for the Bill not to focus exclusively on London 2012, but provides the framework for parliamentary support for future cities which may have the good fortune both to bid for and win the right to host the Olympic and Paralympic Games in future years, be it 2016, 2020 or 2024. That may not be necessary—I hope that we will win in 2012—but it is important that Parliament provides the right framework for supporting bids which the British Olympic Association of the day seeks to put forward.

This is about contingency funding. There are four sources for the contingency as set out in the Olympic funding memorandum of understanding between the Government and the Mayor of London. These funds intend to be drawn down in a specific order, starting with money from the lottery good causes. The order is as follows: first, £410 million from the lottery good causes; secondly, an additional £75 million from the Olympic council tax precept; thirdly, £250 million from the London Development Agency; and, fourthly, the Mayor of London and the Government remain the ultimate guarantors, with the Government indicating that they will meet their contribution through the lottery. Lots of Treasury funding is put through the lottery.

In other words, the £410 million to be diverted from other good causes is the first contingency fund to be employed. I therefore ask how the Minister can say that diverting money from the other good causes will be used only in dire extremis. It may be useful to recap briefly on the experiences of other cities hosting the Olympic Games.

I take evidence from the Minister for Sport, Richard Caborn, who said to the CMS Select Committee on 15 January last year: On the financing, one point that was very interesting on our visit to cities that have already run Olympics was that in broad terms on the costs everyone of them has doubled from the first figure that was given".

Secondly, evidence submitted by the DCMS on 17 January last year to the CMS Select Committee shows that for the Sydney 2000 Olympics the public subsidy was six times more than was initially estimated and the cost of the games doubled from £1 billion to £2.3 billion.

Thirdly, it was similar to Athens. The original cost of £ 1 billion had increased to £1.23 billion by January last year and it is still rising. I should add that the figure of £1.23 billion does not include the £2.75 billion government spending set aside to cover the cost of building and refurbishing Olympic venues. Here in the UK, the Secretary of State for Culture, Media and Sport told the CMS Select Committee on 15 January last year that the Commonwealth Games in Manchester more than doubled in cost.

I return to the purpose of the amendment. It is apparent that it is important to ensure that Parliament is fully aware of the costs and commitments that accompany an Olympic bid. By accepting the amendment, we have the opportunity to ensure that that is the case. I hope that my noble friend will agree that it is important that Parliament has the opportunity of receiving a report setting out in detail the cost of hosting the Olympic and Paralympic Games in a United Kingdom city.

One of the main reasons why I want that to be on the face of the Bill will be apparent at a later stage of our deliberations: namely, if Parliament is convinced that a contingency will have to be raided, the implications for other causes and for starting the Olympic game earlier than at the time we win the bid in Singapore in July 2005 is far more compelling.

If Parliament is not persuaded of the merits of that argument, and if Parliament takes the view that the chances of raiding a contingency fund are negligible—indeed, are non-existent—the case for starting the game next summer is a good deal stronger.

I have kept the introduction brief because I cannot believe that we will not return to the subject in far greater detail at a later stage of our proceedings. However, I hope that I have clearly demonstrated that there are few, if any, cases of an Olympic bid being granted to a city and being funded within the original budget available for the consideration of this House. On the contrary, every recent example concludes that raiding a contingency is inevitable, even when, as the Government would be proud to announce, the size of the contingency they have made available is so great.

Those are the reasons why I have proposed the amendment standing in my name and so ably supported by my noble friend Lord Luke. I very much hope that it meets with the agreement of the Minister and that we will have the opportunity of having a report laid before Parliament setting out in detail the cost of hosting the Olympic and Paralympic Games, be it in London for 2012 or in any other successful city in the future. I beg to move.

7.15 p.m.

Lord McIntosh of Haringey

I am grateful to the noble Lord, Lord Moynihan, for having tabled this amendment in order for him to make that wide-ranging and clearly well-informed speech. It has little to do with the amendment, but—

Lord Moynihan

I have the greatest respect for the Minister as we move through the proceedings of the Committee. However, I have noticed that whenever I speak precisely on the amendment—whenever I get to the core of the argument—his initial comment from the Dispatch Box is that my remarks have been completely wide of it. I know that I have the Minister running on this one and I am confident that as a result of those opening remarks he will accept the amendment. I hope that he will do so with widespread support from my Benches and those of the Liberal Democrats.

Lord McIntosh of Haringey

I am of course interested in the views of the noble Lord, Lord Moynihan, in particular those on the inability of cities bidding for Olympic Games to hold the cost within their original estimate. Undoubtedly, the evidence given to the CMS committee by Richard Caborn and Tessa Jowell has to be taken seriously.

The question that arises is: what help is given by a report to Parliament setting out in detail the cost of hosting the Olympic and Paralympic Games? The questions which then arise are: at what stage should that report be submitted to Parliament; what should it contain; and what action should Parliament take as a result?

Clause 21, to which the amendment refers and which would not come into force until the report had been laid before Parliament, sets out the arrangement for the licensing of Olympic lotteries. It does not set out the arrangements for the total range of funding for the Olympic Games. Subsection (1) allows for a Section 6 licence issued by the National Lottery Commission under the 1993 Act to promote a lottery to be designated specifically as an Olympic lottery.

Subsection (2) provides that the main Section 5 licence under the 1993 Act, which authorises the running of a National Lottery and is currently held by Camelot, must include a provision for determining the proportion of funds raised that are attributable to Olympic lotteries.

Subsection (3) ensures that a lottery designated as an Olympic lottery under a Section 6 licence may be so designated only if the Section 5 licence contains a provision for determining the proportion of proceeds of lottery gains that are attributable to Olympic lotteries.

Subsection (4) allows the National Lottery Commission to make that variation to the Section 5 licence after consulting the Section 5 licence holders. These provisions are in line with the existing arrangements for the licensing of the lottery under the 1993 Act.

I believe that the appropriate levels of scrutiny are afforded through existing parliamentary powers and I am confident that they would be exercised. The Select Committee for Culture, Media and Sport has already demonstrated a close interest in the London Olympic bid, and the noble Lord, Lord Moynihan, has been quoting from the evidence to it. We welcome that and I am sure that it will continue to do so.

London will be required to submit its candidature file, containing full details of its proposals, to the International Olympic Committee by 15 November this year. That will include a detailed budget for the 2012 Olympic and Paralympic Games. I am not sure whether it is that information which the noble Lord, Lord Moynihan, is seeking should be submitted to Parliament. Clearly, it is possible that that document, which will have to be signed off by all the stakeholders—the Government, the Mayor and the British Olympic Association—could be laid before Parliament. I am not promising that it will be, but it could be. I should be interested to know whether that is the information which the noble Lord is seeking.

However, even if we decide to lay it before Parliament, the costs and revenues will need to be monitored and reviewed on an on-going basis. That is the point which the noble Lord, Lord Moynihan, was making about the inadequacy of forecast. To place a requirement to lay a single report detailing costs before licensees does not help Parliament very much. The other extreme—to ask for reports on costs to be laid on a continual and updated basis—would be impractical and it could restrict the operation of the Olympic lottery games. Under those circumstances, I suggest that the role of the CMS Select Committee is entirely appropriate for that kind of investigation.

I should be interested to know which of these alternatives the noble Lord prefers.

Lord Moynihan

The Minister has given me many ideas, which is always welcome. First and foremost, the Select Committee investigations into the hosting of the Olympic Games in London in 2012 are welcome. They have been in depth and their analysis has been invaluable. The committee's current assessment of the overall financing and the future of the game has been invaluable to me in preparing for the work on the Grand Committee. It is therefore appropriate and right that the Select Committee continues to monitor performance and to take evidence to that effect.

However, the amendment goes much further than that. It recognises that while the work of the Select Committee is important, there is a strong argument that a report should be laid before both Houses of Parliament, covering in detail the costs of hosting both the Olympic and Paralympic Games, first, for the London 2012 bid and, in the context of the drafting of the amendment, for all future cities hosting those games in the United Kingdom.

The Minister has made a number of useful recommendations. In returning to the amendment at a later stage, it would be advantageous to the House to detail how frequently the report setting out the detailed costs is laid before your Lordships' House and another place. I flag up for the Minister the suggestion that that presentation should be annually. We need the opportunity, in advance of the formal adjudication of the bid in Singapore in July next year, to review the costings which will form part of our formal bid on 15 November this year. It is wholly appropriate that Parliament has the opportunity to consider and review those costings and it is hoped that time will be found in government time to debate the matter. I say "in government time" because, given the strong support that they have demonstrated for the Olympics, it would be appropriate for them to share in detail all cost implications, not least the implications for the precept on Londoners that they have in mind in order to support the funding of the games in London in 2012.

I accept the Minister's admirable recommendation that a time basis should be placed on the amendment. At a later stage, I shall ensure that it is on an annual basis, starting from the baseline with the proposed costings included in our formal documentation, which will be finalised by November this year.

The Minister also pointed out that there would be an additional benefit in this; namely, that it would be able to reflect changing circumstances. I am acutely conscious, in reviewing the cost of the Athens games, about the significant increase in the cost of security. The involvement of NATO to provide support for security services during the games has an interesting ramification in terms of the cost contribution that individual NATO countries will be making towards the security of the games in Athens. One of the benefits of an annual report would be to consider in some detail the changes that take place—in particular, changes in security arrangements and the cost of security of hosting the games, which would need to be reflected.

The Minister has led me to the conclusion that there would be merit in the Government coming forward with their financial costings of the games. At present, for example, we do not have in the Red Book any costings for security associated with a successful bid. I anticipate that the Minister may reply by saying that there are two reasons for that. First, we have not been successful in winning the bid to host the Olympic Games yet. It would be unusual in the extreme—or to quote from the Minister's noble friend on the Floor of the House "in extremis"—for the Treasury to come forward with costings on security for an event that has yet to be won. I assume that that is the principle reason why to date we have had no Treasury costings with regard to security. But there may be another reason.

The second reason the Minister may give to the Committee is that Treasury projections do not go to the summer of 2012. If my memory serves me right, they stop shortly before that time. That may be a very good reason why we do not have costings from the Government.

One of the purposes of ensuring that there is a report laid before Parliament setting out the costings in detail is to elicit this kind of detail from the Minister. We would then be in a position to question the validity or otherwise of the costings that have been placed before Parliament. It is critically important that we have that opportunity. In the closing minutes of today's proceedings in debating this amendment, and before everything that we shall discuss tomorrow on the London 2012 bid, it may be appropriate to reiterate that there is absolute support from the Conservative Benches for a successful bid to host the London 2012 Olympic and Paralympic Games. Indeed, we were ahead of the Government when we came out with our support. We led a debate in your Lordships' House that was unanimous—well ahead of the Government—in determining its widespread support for hosting a successful Olympiad in London in 2012.

All the amendments and recommendations that I shall make to the Committee for its consideration come from a passionate belief that a successful hosting of the Games in London in 2012 is our top priority in terms of sports policy. With my noble friend—a celebrated Olympic gold medalist—sitting on my left to support me, I am sure that between us we can persuade the Minister of the wisdom of accepting helpful, constructive amendments on the lines proposed.

Lord McIntosh of Haringey

Before the noble Lord, Lord Moynihan, concludes his remarks, I should like to make two points. First, it is enormously helpful that he has made explicit what he means by reports—he is talking about an annual report. The question is: who would lay it? Perhaps the Government or London 2012 may do something. There is a whole range of issues. Let us talk about it before Report. Of course, there will parliamentary activity. I have emphasised the role of the Culture, Media and Sport Committee, but there could be other parliamentary activity. We are very happy to discuss the matter with him.

Secondly, he made a point about security costings. I can assure him that London 2012 is already working on that with the Home Office and the Metropolitan Police. Security costs will have to form part of the November bid.

Lord Moynihan

I welcome the initiative taken by the Minister for further discussion on this point. In view of the time and his helpful contribution, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 21 agreed to.

Lord McIntosh of Haringey

This would be an appropriate moment for the Committee to adjourn until two o'clock tomorrow.

The Chairman of Committees (Lord Brabazon of Tara)

The Committee stands adjourned until two o'clock tomorrow.

The Committee adjourned at half past seven o'clock.