Horserace Betting and Olympic Lottery Bill

HL Deb 31 March 2004 vol 659 cc427-94GC

(First Day)

The Committee met at half past three of the clock.

[The Deputy Chairman of Committees (Lord Geddes) in the Chair.]

The Deputy Chairman of Committees (Lord Geddes)

Before I put the Question that the Title be postponed, perhaps I may remind the Committee about two points of procedure: noble Lords will speak standing and the House has agreed that there shall be no Divisions in a Grand Committee. Unless, therefore, an amendment is likely to be agreed to, it should be withdrawn.

Title postponed.

Clause 1 [Dissolution of the Tote]:

Lord Moynihan moved Amendment No. 1: Page 1, line 8, at end insert "and must not be made unless a draft of the statutory instrument containing the order has been laid before Parliament and approved by a resolution of each House

The noble Lord said: Before I address the Committee on Amendment No. 1, in keeping with my previous incarnation in another place, perhaps I may welcome the noble Lord, Lord Geddes, to the Chair.

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

We normally do not do that.

Lord Moynihan

I know we do not. But I intend to do so because I think it is an excellent tradition. It is one of the few that we can learn from another place. It reflects good manners, which are common throughout proceedings in this House, and is a recognition of the time that the noble Lord is giving us this afternoon.

In speaking to the amendment, I say straightaway that the Bill before the Committee, regrettably, does not go as far as we would like in laying out the detailed provisions that Parliament requires not only for the nationalisation of the Tote but for the valuation and subsequent privatisation of the Tote. The purpose of the amendment is to ensure that Parliament has the opportunity to approve the decision to nationalise the Tote.

It is there because the Bill does nothing more than nationalise the Tote. It stops as a classic, old-style, old Labour nationalisation measure. I deeply regret that. Our duty is to consider in detail what is on the face on the Bill—but what is on the face of the Bill is not what the Government aspire to for the Tote. The noble Lord, who is an honest, straightforward, competent Minister, will tell us that this is a stepping-stone towards the privatisation of the Tote and yet he is unable to demonstrate anywhere on the face of the Bill that that is in fact the Government's intent.

Intentions are not commitments if commitments do not warrant legislative force. Without legislative substance, commitments are hollow. They simply remain, at best, wishful thinking; at worst. a whim. Otherwise, why not give powers to privatise on the face of the Bill? Why simply stop with a nationalisation measure? This is a theme to which I shall frequently return for, in many respects, the Bill is a slice of Emmenthal cheese, a threadbare patchwork guilt, and not a comprehensive measure brought forward for Parliament to consider not only the nationalisation but the nationalisation as a precursor, hopefully immediately, to the privatisation of the Tote.

As it stands, the purpose of Clause I is simply to nationalise the Tote. It can be nationalised and remain in state control ad infinitum. There is no commitment on the face of the legislation to privatisation. If we pass the Bill as it stands, that is potentially exactly what can happen. We understand from the other place and from a whole series of commitments given by Ministers in both Houses that that is not the intention. But, if that is not the intention, let us write onto the face of the Bill exactly what is the Government's intention If we do not do that, we have a duty to ask the Government to come back to Parliament once they have gone through the process of negotiating with the Racing Trust as to the price and the terms necessary in order to ensure privatisation to the Racing Trust. Once that has been done on a fair and equitable basis and in the interests of racing—and this is all about the interests of racing—the Government should return to this House and request its approval.

As I said on Second Reading. those on the Conservative Benches in another place and we on our Benches in this House welcome the principle of the Bill. We are only concerned that we have to take so much of what the Government intend on trust. I add that if we had always taken on trust what the Government intend on matters sporting, we would have got it sadly wrong.

I recall only in 2000, the Prime Minister's intention in sport when he announced that he intended that £750 million would be spent within three years on the development of school sport facilities. Three years passed. How much was spent? Only £8.5 million of a manifesto commitment, backed by an announcement in the year 2000. to support school sport to the tune of £750 million. That was a hollow intent. As much as I understand, recognise and respect that Ministers have stated that their intention is to privatise, the Bill before us is a nationalisation measure and nothing further.

It may be helpful if I place those comments in the context of the most recent statement from the chairman of the Tote who, in the recent annual report, stated that the 12 months covered by that report may best be described as a roller-coaster year. That is a minor understatement, given what is in the Bill, especially in Clause 1. The chairman was right to focus on what is critically important when he stated: The status of the Tote as a statutory corporation created by Act of Parliament is relatively unusual in that no one actually owns the Tote. The first stage of the legislative process will be for the Government to take the Tote into public ownership. It is clear, therefore, that the starting point for the price to be paid by Government is nothing and not full market value as some commentators would suggest. Government has never provided any funding for the Tote, nor has it ever guaranteed or provided the Tote with loans. Equally. Government has not received any money from the Tote other than standard company taxation". Yet in Clause 1, we have a proposal to nationalise the Tote and to pay nothing for it—to pay nothing at all to the Tote and, through the Tote, to racing—in recognition of the fact that the Tote has real and significant value. Indeed, it has so much value that the Government will argue that when they have nationalised it—although that word is to be found nowhere in the Bill—they then want to sell it back to the Racing Trust for a significant sum. If it is 50 per cent of £160 million, it will have been valued at £80 million.

Whatever the figure, it is not to be found in Clause 1, which concerns nationalising the Tote. The Government want to nationalise the Tote and pay nothing in compensation or recognition of the value of the Tote, although they recognise—although this is nowhere to be found in the Bill—at a later stage that it has real value by insisting that the Racing Trust or the successor body pays to acquire it.

None of the detail is in the clause. It simply nationalises one of the most successful Totalisers in the world, one of the most successful businesses in racing, admirably led by Peter Jones, superbly assisted by a first-rate board, to which we will return later, helped no end by the excellent work of the noble Lord, Lord Lipsey, when a member of the Tote and in a seamless transition, I hope, to play a significant future role in the Tote's work. It is a great pity that the Government simply ask our support, permission and backing to nationalise that entity without any recognition of its value and do not intend to return to Parliament when they have had the opportunity to enter detailed negotiations and reach what will hopefully be a satisfactory resolution in the interests of racing to gain the approval of this House.

The purpose of the amendment is to ensure that when the Government finally decide to nationalise the Tote, they will have had time to work with the Racing Trust to ensure continuity in the interests of racing and that they will not, as they can under the Bill, sell it to Ladbrokes or whatever they please or, indeed, not sell it at all and retain it within Government as a nationalised industry.

I would argue that none of those objectives would be anything like as beneficial to the interests of racing as to satisfactorily conclude negotiations with "the" shadow Racing Trust, not "a" racing trust, which was frequently referred to by the Minister in another place. Once the Government have concluded those negotiations, they should return to your Lordships' House and seek, through approval of both Houses of Parliament, a timetabled programme both to nationalise and subsequently to privatise. I believe that that is an eminently sensible suggestion. I trust that the Minister will respond accordingly. I beg to move.

Viscount Astor

First, I apologise that I was unable to be at Second Reading; I was abroad. As some Members of the Committee know, I have had a longstanding interest in the Tote. Some years ago, I produced a Bill that sought to privatise the Tote and pass it to racing, which had a few interesting results. It made the Government concentrate on the issue. It made racing consider the value of the Tote. I think that it caused a great deal of chaos among members of the Tote board. They regarded it as a rather dangerous step from someone on the Back-Benches because they thought that it might ruin the rather cosy relationship that they were trying to build with the department at the time. However, that is history. The Tote board seems to have come around to agreeing that the Tote would be better under racing.

The amendment is important. The Bill nationalises the Tote. It does not give anything to anyone. I do not want to raise the argument about who owns the Tote particularly. I have always agreed with the noble Viscount, Lord Falkland. who said at Second Reading that the Tote is rather like the TSB and its depositors. I rather wish that I had had time today to place a bet on the Tote, so that I could turn up today and say, "Actually, I regard myself as an owner of the Tote". I think that anyone who has a bet with it is probably classified as an owner at the time.

The Government and the Minister in another place said that they fully intend that the Tote should go to racing. But they have scrupulously avoided giving any thoughts to the price, the terms and so forth. There is nothing in the Bill. While I would always accept any assurances that the noble Lord, Lord McIntosh, gives, I am never fully prepared to accept the assurances of the Treasury. which has always had a different agenda. We know that there has been arguments between—as there always is in these matters—the Treasury and the noble Lord's department. I know that the Minister will bat away on behalf of his department and racing when it comes to those negotiations.

The amendment gives the Minister an extra bullet in his defence to try out the Treasury should it be necessary. Everyone knows that at some point this has to come back to Parliament for approval. That is important.

3.45 p.m.

Lord McIntosh of Haringey

Like the noble Viscount, Lord Astor, I apologise to the Grand Committee for the fact that I was unable to be present at Second Reading. I, too, was abroad. But my sorrow at not being present at Second Reading has been diminished by the excellent Second Reading speech that the noble Lord, Lord Moynihan, has given to the Committee. It had nothing to do with his amendment but it was a good piece of rhetoric and I admire him for it.

Unfortunately, it is my duty as the Minister responsible for the Bill in this House to respond to the amendment rather than to the speech because that is what is before us. I shall do my best to do that.

This is one of several amendments that the Opposition have tabled to bring the Government back to Parliament for further approval before various parts of the Bill can be implemented. I understand their motives, which the noble Lord, Lord Moynihan, has made very clear, but I cannot accept that further parliamentary approval is necessary before the Government proceed with the dissolution of the Tote, which is the subject of Clause 1.

By the way, we are not talking about nationalisation of the Tote; the Tote is already nationalised. It was set up in 1928 as a body that is effectively controlled by government through the power to appoint the board. It is a non-departmental public body and therefore a body in the public sector. When the noble Lord, Lord Moynihan, says that there is no reference in the Bill to the powers to privatise, I can assume only that he has not read Clause 5. That is a bit odd, as he proposes to oppose the Question that Clause 5 stand part of the Bill.

The Bill makes provision for dissolution to take place on an appointed day, and for that appointment to be made by statutory instrument without any private parliamentary procedure. That is not unusual in the circumstances. If it had been unusual or in any way controversial, the Delegated Powers and Regulatory Reform Committee, under the noble Lord, Lord Dahrendorf, would have commented to that effect. It is a perfectly normal and appropriate way to proceed; it is not even as though the Government could proceed with the appointed day without anyone knowing, because Clause 3(9) would require the Secretary of State to, consult the Board and the successor company before appointing the appointed day". As I said, the amendment is one of a number that would require the Government to return to Parliament during the process of selling the Tote set out in the Bill. Without making a Second Reading speech, I shall address the general points underlining the amendments. It has been suggested that our reluctance to come back to Parliament for further approval before proceeding with a sale to a non-racing buyer gives the Government an unfair advantage in our negotiations with the Racing Trust. I cannot accept that that is the case. The Government did not have to identify the Racing Trust as the preferred buyer. If our intention had been to seek the maximum possible return from the sale of the Tote, we would have adopted a different strategy altogether.

The Bill as drafted is completely neutral. It puts both sides in the same position when negotiations begin. Any amendment that committed the Government to a set price or model—such as a 50 per cent discount, which is the subject of a later, related amendment—must by definition unfairly strengthen the position of the other side, the Racing Trust, in negotiations. I am more than happy to say again that we will adopt a transparent approach to the pricing of the Tote. The noble Viscount, Lord Astor, seemed to think that we had given no thought to the price. I assure him—it is well known—that we of course took advice on the pricing of the Tote. The Tote and the Racing Trust themselves took advice. We are a good deal further forward than some people are prepared to accept.

The transparent approach will be based on the valuations undertaken both by our advisers and by those working for the Racing Trust. It is well known that a 50:50 split will broadly be the starting point for negotiations, but such commercial transactions are never cut and dried. Our commitment to a sale to the Racing Trust has manifested itself in deeds rather than words alone, and I ask that we be judged on that.

There have been suggestions that we have some ulterior motive to pull the rug from under the feet of the Racing Trust; that is what is implied in the accusation by the noble Lord, Lord Moynihan. that this is only a nationalisation Bill. No one who looked at the evidence could concur with that. Let me give a few examples. Sale to the Racing Trust is a manifesto commitment. We worked over a long period with the Tote, the Racing Trust and the racing industry to bring the sale about. We laboured long and hard within the Government to gain agreement to a seven-year exclusive licence that we intend will be issued only if there is a sale to racing. We set up project groups to begin preparations for the sale. A dedicated liaison group is made up of officials and representatives of the Racing Trust and the Tote, and its first meeting will be before the end of next month.

It has been said both here and in the Commons that we have brought forward the Bill and sought support for it on the basis that it is there only to enable a sale to racing to take place. Indeed, the noble Lord, Lord Moynihan, said just that. I am disappointed if that is the impression that has been given, because we have never said that. Let me make it very clear: we seek Parliament's approval for this part of the Bill on the basis that it will empower the Secretary of State to sell the Tote. Having said that, we are completely focused on the longstanding strategy of selling the Tote to racing. That is not, and cannot be, our only option.

We have been open with the Racing Trust about process and what will be required, but it will have to meet us halfway. We want a fair price for our share of the Tote. That must be right, but beyond that we have never been in the business of seeking to squeeze every penny out of the deal. If we were, we would have proposed a quite different sales strategy.

I apologise for going wide of the amendment. I did so because this and later amendments are inextricably linked. However, I have been talking about amendments that are before the Committee at present, and I have, I hope, given a suitable answer to this amendment.

Viscount Astor

The Minister said that this was not a nationalisation because in effect the Government owned the Tote by virtue of the Home Secretary's having the power of appointment. Does he accept that, when the Tote was set up in 1928, the Home Secretary had the power to appoint the chairman, with one member of the board to be appointed by the Home Department, one by the Secretary of State for Scotland, one by the Minister of Agriculture and Fisheries and one by the Chancellor of the Exchequer? But out of the other members, three were appointed by the Jockey Club, two by the National Hunt Committee, one by the Racecourse Association and one by the Committee of Tattersalls. At that stage, the Government were in a minority, so it has always been my view that the Home Secretary may have had the power to appoint the chairman but has never formally controlled the Tote.

Lord McIntosh of Haringey

It is a non-departmental public body and is classified as such in the national accounts. It is certainly true that there is doubt whether it would be possible to sell the Tote by ministerial action alone; that is why we have come to Parliament instead.

Viscount Astor

I am grateful to the Minister for acknowledging that there is a grey area regarding the Government's ownership of the Tote.

Lord Lipsey

Is the Minister contending that, because something is classified in the national accounts, that determines its status? He will have read the opinion of Mr Kerridge QC and his colleague about ownership of the Tote, which cannot be read as sustaining that view at all. I am afraid that the Office for National Statistics does not yet determine the state of law in this country.

Lord McIntosh of Haringey

I have acknowledged to the noble Viscount, Lord Astor, that there is a grey area, which is why we are coming to Parliament rather than taking ministerial action.

Viscount Falkland

We are seeing the rare machinery of a transfer from a non-departmental body, as the Minister has correctly described it, to the private sector for a consideration. What he said is interesting. I am not sure whether, even now, we are discussing what is in the amendment—perhaps I will be corrected on that.

I do not intend to make a Second Reading speech, but everybody in racing is concerned about what will be the likely consideration. I took the Minister to be saying that we are looking at a normal commercial transaction. That would be a simple matter: you would put a value on the Tote—which should not be too difficult for betting shops and the pool—and other assets that it might hold; you would give a 50 per cent discount, and there would be no problem at all. We are not looking at that; we are looking at a figure that will be plucked from the air by the Treasury, which the department will then argue with or accept and pass on. If the price is too high, the trust will be saddled with a burden that it cannot bear. That would hit very badly at those who contribute to the Tote and those who have done so. In reality, the Tote is owned by those who have contributed to it—the punters of this country—since 1928. I thoroughly approve of the machinery that the Government are putting forward, as I said at Second Reading, but I am not in a position to say whether I support the amendment, because I do not understand how any of the argument so far relates to it.

Lord McIntosh of Haringey

I did at least begin by responding to the amendment that would bring the matter before Parliament again and I ended on it. I concluded by saying that although the Tote is a public body under the 1963 Act—let me make it clear that I am not departing from that—there could be a query whether the Government were entitled to dispose of it without the approval of Parliament. That is what we are proposing to do. Where I contend with the amendment is that because we are seeking the authority of Parliament for this Act, it is not necessary to include the further reference to Parliament that the amendment proposes.

Lord Moynihan

I am grateful to the Minister for his reply. I congratulate him on an excellent speech at Second Reading. It covered many of the issues, and indeed more, that I covered in my brief remarks when I spoke to the amendment standing in my name.

I tabled it because I felt that it was vital that, in the absence of the detail of the privatisation process, the Minister came back to the House with details of what had been agreed. The House could then judge, assess and, if necessary, vote on his words about returning the Tote to racing, because on the face of it, Clause 1 is a nationalisation measure.

What the Minister said was in stark contrast with Mr George Howarth. He stated on 26 May 1999 that the board was responsible for the assets owned by the Tote, but that the Tote itself was owned by no one. The whole purpose of the Bill is to nationalise that and to ensure that it is owned by the state. That is where the Bill stops. That is precisely the point where it stops. The amendment would allow the Minister and his colleagues to conclude the negotiations—not to intervene in them—and then to return to this House and demonstrate that all the good intentions, which are not evident in the Bill, have been satisfied. They would then seek permission from Parliament to move forward with the privatisation of the Tote to the shadow Racing Trust in the interests of racing. That is very clear. That is precisely what my amendment would achieve. I regret that the Minister believes that the Tote is already owned by the Government.

Lord McIntosh of Haringey

I did not say that the Government owned the Tote. I said that it was a public body and that it was therefore inappropriate to describe it as being nationalised by Clause I. The Betting, Gaming and Lotteries Act 1963 makes it clear that all of the board, not a part of it as in 1928, is appointed by the Secretary of State—as we would now say—rather than referring to individual Ministers. Since it was not possible for me to claim that the Government owned the Tote, I admitted a grey area and said that it was appropriate that we should come to Parliament, as we are doing, to dispose of it.

Lord Moynihan

I have to disagree with the Minister. There is no grey area. The Tote is owned by no one. For it to be privatised, I fully appreciate that the Government believe that they need to bring forward primary legislation in order, first, to nationalise it, then to negotiate its sale and then, one hopes, to return it to the interests of racing through an agreed, negotiated sale to the Racing Trust. Unless they come back to this House, the Bill allows them to nationalise the Tote and do nothing further. There is no time limit or price; no successor body is identified. A panoply of clauses is connected with the Government's ownership of the Tote.

The Minister referred to Clause 5, but however good the intentions, nothing can be done without Treasury approval. Clause 5(6) and (7) make it very clear and explicit that the Treasury has to approve this. Whatever the good intentions of the Minister for sport in another place and of the Minister here, I have to say that my confidence in the aspirations of Ministers for sport as opposed to my knowledge of how the Treasury can react is such that I would wish to press this amendment at a later stage of our consideration of the Bill. However, for today I am happy to

Lord McIntosh of Haringey

Before the noble Lord, Lord Moynihan, withdraws the amendment, can I respond very specifically to the claim that in not specifying the Racing Trust on the face of the Bill, this is something unusual or unprecedented. I say that because there are a number of precedents for the same procedure. Indeed, the noble Viscount, Lord Falkland, was good enough to say that he supported this way of proceeding. Precedents have been set under governments of both political persuasions. Paragraph 14 of Schedule 2 to the Atomic Energy Act 1995 provided for exactly this sort of procedure, as did paragraph 15 of Part 2 of Schedule 2 to the Commonwealth Development Act 1999—which I had the honour of taking through this House—as did Section 80 of the Postal Services Act 2000. It is not unprecedented for governments to put in legislation the first stage of a process but, for good reasons on which I can expand, not putting in the next stage, rather making clear their intention. Here, this is not only an intention; as far as we are concerned it is a manifesto commitment.

4 p.m.

Lord Wakeham

I have come here really to listen to the Minister's commitment. If I were in his position I, too, would be resisting this proposal. However, it is very important for racing that we get this right. I took it that while the Acts the Minister cited to my noble friend indicate a number of precedents, in each one of those, so far as I can recall—I have not yet had a chance to look at them—the end buyer was not the Racing Trust, as everyone intended it to be in this case. In those other cases, the Government quite rightly took powers to make disposals, but they had an open mind about to whom they would make them. We are concerned most about the commitment to the Racing Trust.

Personally, I would not seek to persuade the Minister necessarily to accept this amendment, but I am concerned about the commitment to the Racing Trust. I want to hear that commitment voiced loud and clear. That would satisfy me that we are going in the right direction.

Viscount Astor

My noble friend has made the same point that I was about to raise. However, I shall go a little further and say that the reason why the commitment is so important, and the reason why I support the amendment moved by my noble friend is that in most cases, in privatisation the aim has been for the Treasury to secure the best deal for the taxpayer; that is, the most suitable body paying the most money which is the most capable of running the business. That does not necessarily mean the highest bid because other factors must be taken into consideration. But, as I have said, the aim has always been to get the best value for the taxpayer.

This case is entirely different. We all know that the value the Government could realise by putting the Tote on the open market is vastly in excess of whatever a racing trust might stand—three or four times. or perhaps even more than that. Therefore this is a very different process. I would support the Minister completely if he were going through with a simple nationalisation and seeking a sale. However, that is not what he is doing. The Government have given a commitment that the Tote will go to the Racing Trust and I accept that.

But the devil is always in the detail, and the detail here is going to be the price. It will not be the market price because we will not find two people who agree on it; rather, it will be an artificial price. On the one hand the Racing Trust will have to decide what it can afford to pay without strapping itself into such a financial straitjacket that it can no longer contribute to the benefit of racing, while on the other hand the Treasury will want to secure best value. That is why the amendment is so important. This is a different scenario from the precedents just mentioned by the Minister.

Lord McIntosh of Haringey

I was in fact too precise in my references to earlier legislation, because I was referring to one aspect of the two-stage process, which was the appointment of shadow directors. I apologise for being too precise on that point, but the fundamental point remains the same. We are transferring a corporation into a company and then selling the shares. The noble Viscount, Lord Astor, is of course entirely right to say that we do not specify the Racing Trust or the price in the Bill. No doubt there will be debate on those points when we reach the relevant amendments.

Viscount Falkland

It will be revealed on close examination of Hansard that there is a basic difference between the Minister and the noble Lord, Lord Moynihan. For clarification, it may be helpful if the Minister would say a few more words about it. That is, the Minister says, if I understood him, that to be a non-departmental public body—within the responsibility of government although operating in the strange way that it does—it is de facto a nationalised company. The noble Lord, Lord Moynihan, said that in no way did he agree with that. It would be helpful for the Committee if we could have that cleared up.

Lord McIntosh of Haringey

I did not say that it was a nationalised company or owned by the Government; I said that under the 1963 Act the Secretary of State is responsible for appointing all the directors of the Tote and that therefore it is a non-departmental public body, but a public body. It is therefore inappropriate to say, as the noble Lord, Lord Moynihan, was saying, that what we are doing is nationalising it.

Lord Moynihan

If ever there was a non-sequitur. I am grateful to the Minister because he is answering a whole range of questions. Perhaps I may pick up on the invaluable intervention of my noble friend Lord Wakeham, not least because in the panoply of historical precedent that has been given to the Committee by the Minister, the one on which he might have best focused was the case raised by my noble friend at Second Reading. That was the 1985 Trustee Savings Bank Act. The format used for that, which was to privatise at zero profit to the Treasury, was legislation that restructured the TSB. The Government knew what existed, where it sought to go, and sought Parliament's approval to go down that road.

We know where we are today with the Bill, we have promises about where the Government want to go—but they are airy commitments; they are not in the Bill—but, unlike the process of restructuring the TSB, which would make a first-rate precedent for what we are attempting to do today, we are going down a nationalisation route with no commitment, as was just said again by the Minister when he stated that he was not specifying that it will be sold to a racing trust. Can the Minister tell us whether it would be perfectly legitimate, should the Treasury and the Government so wish, for the Bill to be used for the sale of the Tote to Ladbrokes at a price to be determined by negotiation? Would that be possible under the Bill?

Lord McIntosh of Haringey

I have said that it is our intention to sell the Tote to the Racing Trust. What I have not said is that we are content for that to be written into the Bill. But it is our intention to sell the Tote to the Racing Trust.

Lord Moynihan

I appreciate that, but I seek to assist the Committee and myself in understanding the Government's position. In fairness, that was not the question that I asked. The question that I asked was: under the Bill, would it be possible for the Government, after consideration and following its enactment, either to retain ownership of the Tote within the new structure as a nationalised industry for as long as they want or to sell it to whomever they so wished at whatever price they so wished? Would that be possible? I think that the Minister knows that the answer to that is "Yes"—I shall not urge him to rise to his feet other than to confirm that I am wrong—and that is how I understand the Bill to be drafted.

I repeat, whatever the good intentions, the job of legislators is to look at legislation for Parliament. Those commitments, however benign, however well intentioned, may mean nothing in six weeks' time or six years' time. If it is the absolute desire and absolute intent of the Government to nationalise the Tote in order then to privatise it and sell it in the interests of racing to the Racing Trust, which exists in shadow form, then why not place it on the face of the Bill? Or why not take the legislation away, review the TSB model, which is an excellent model, and reintroduce a Bill which allows for a restructuring of the Tote so that it can then be returned to the Racing Trust in the best interests of racing? If it is so much the intent of the Government to do this, why should not it be written on the face of the Bill rather than leaving open the prospect, which could happen in the future, of it being sold to whomever, at whatever price, at whatever time?

Lord McIntosh of Haringey

The noble Lord knows very well the answer to his question: we are not going to get a better deal than the seven-year exclusive licence for the Racing Trust. The literal answer to his question is that if we cannot sell the Tote to the Racing Trust we shall have to find a means of recognising racing's share in some way. But I think he will recognise that our commitment to racing's share in this is not in doubt.

Lord Moynihan

Once again I am grateful to the Minister. I shall be covering some of this ground, hopefully, when I oppose the Question as to whether Clause 1 should stand part of the Bill. I simply conclude my remarks on this nationalisation clause by reminding the Committee that the Government have never provided any funding for the Tote, nor have they ever guaranteed or provided the Tote with loans. This surely should be an overt restructuring of the Tote in the best interests of racing. To achieve that, we do not need to leave the legislation so open-ended, nor should Parliament be required to pass legislation which, frankly, goes nowhere near the good intentions stated by the Minister and his colleagues in another place. With that very real concern, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4.15 p.m.

On Question, Whether Clause 1 shall stand part of the Bill?

Lord Moynihan

I am in danger of a mild repetition. If that should be the case, I sincerely apologise. I shall try to restrict my comments on clause stand part to issues that I have not raised previously.

The key issue is the flip side of the coin. My purpose in opposing Clause 1 is because nothing in the Bill commits the Government to privatise the Tote. It is important to lay out the Government's position as stated in another place and, indeed, touched on by the Minister today. In the other place, the Minister stated: A series of commercial negotiations is necessary that can determine the survival and development of the Tote. It is far better to leave that to a commercial negotiation, as long as the government have set out clear parameters". The problem is that there are no clear parameters. And without clear parameters, in my view, it is very difficult to support that Clause 1 stand part of the Bill.

The Minister in another place further stated: Many commercial considerations will he necessary. The more politicians keep out of those, the better; and the more they are kept out of the Bill, the better".—[Offical Report, Commons Standing Committee D, 20/1/04; col. 10.] No one is arguing about contractual terms, debt servicing, pensions arrangements or due diligence. However, we on these Benches are arguing that we need clear parameters within which negotiations can take place with the Racing Trust. I am afraid that I am unable to share the Minister's optimism when I read the Bill before the Committee.

The Government are asking Parliament to approve the nationalisation of the Tote on five key principles. There is the wing and a prayer that the Government will not unduly interfere with the running of the nationalised Tote. There is an aspiration that the Government will not own the nationalised Tote for too long—although we have no idea of the definition of "too long" in this context. It is not a day, a month or a year as no time limit is specified. There is the promise that it will then be privatised, although that is absent from the legislation. There is the wish that the Racing Trust will buy the Tote but consistent repetition in another place of "a" racing trust puts into doubt whether we are talking about the Racing Trust with which the noble Lord, Lord Lipsey, is so intimately concerned. There is the broad commitment that the price in exchanges will be approximately 50 per cent of the market value if it is sold to a racing trust.

Those are interesting promises, but we need cast-iron commitment before the Tote is nationalised under the clause. Many Members of the Committee exchanged views on why they are aware of the difficulties governments can sometimes face in fulfilling their promises. I stress that any lack of trust in the Government delivering on their promises is in no way related to the Minister. That point bears repetition.

It is worth highlighting the comments of the Minister for Sport and Tourism in another place, when again he showed how much we will be taking on trust. He admitted that in the unlikely event that the Government are unable to sell the Tote to a racing trust, we would need to consider how to give the racing industry the benefit of the stake that we acknowledge it has in the Tote. How we do that will depend on the circumstances. The Government will discuss with the industry how best to achieve that.

That is simply unacceptable. If we are going to move forward with the nationalisation clause—Clause 1—we must recognise that we must move forward with equally strong clauses with regard to the mechanism for sale and privatisation at a later stage in the Bill. Having read the rest of the Bill, and in the absence of that, I cannot recommend to the Committee that Clause 1 shall stand part of the Bill.

It is clear that the Government are in danger of making policy on the hoof. It is, frankly, embarrassing that the Government will not commit to sell to the Racing Trust under the chairmanship of the noble Lord, Lord Lipsey, yet have not considered what they will do if they are unable to sell to the Racing Trust or anyone else. It is a shame that the Government are proposing to abolish the Tote, with all its history and its admirable record of returning money to racing without the guilt-edged commitment to what will replace it.

I accept that in the context of our deliberations, this is a probing question. However, I hope that the Minister will respond by saying that should we keep Clause 1 in the Bill, he will come forward with strongly worded clauses, supporting the privatisation process and the commitment of the sale to the Racing Trust at a later stage.

Lord Jopling

I, too, apologise for not taking part in the Second Reading of the Bill. I was representing this House at a NATO committee on Moldova, the poorest country in Europe. I have a primary interest in the Bill with regard to Part 3.

Sitting listening to the discussion, my memory went back to a period 10 years ago when the national lottery was being proposed. I well remember that the football pool companies were in fear and trembling about its implications to the football pool industry. In an attempt to stave off the creation of a national lottery, they created the Football Trust, into which the pools firms promised to put a great deal of money.

Having heard what the Minister said, it occurs to me that the Racing Trust would have to come a long way in the price it paid in order to acquire the Tote. It seemed clear to me, remembering the way in which the Treasury operates, that if it were a one-horse race between the Government and the Racing Trust, the only group with any interest in hiking up the price would be the Treasury. One can imagine the Treasury dogging the Home Office in insisting that a better price was paid.

I can envisage the bookmakers seeing an opportunity to create a different kind of Racing Trust on the lines of the Football Trust which I mentioned. The bookmakers must see the Tote as their principal competitor. I look around the room at fellow Members of the Committee and I am confident in the view that I know less about racing and spend less time on race courses than almost anyone in the room. The Minister and I are joined in that. I have never had an account with a bookmaker and I detest betting. Life is full of gambles, without going into it without thinking.

I can envisage the bookmakers, who I have always thought were an abomination on racing, doing everything they can to forestall a purchase by the Racing Trust of the Tote. I can see clearly that it would be in the interests of the bookmakers to make difficult a sale of the Tote. I hope that in these deliberations the Government will not encourage the bookmakers to create a smokescreen by setting up a pseudo-trust to support racing and then to divert a small proportion of the huge amount of money that that parasitic industry takes out of racing. I hope that the Minister has understood my comments and I shall be interested to hear his.

Lord McIntosh of Haringey

I should make it clear—I thought that I had done so in response to Amendment No.1—that if we were simply seeking to maximise the return to the taxpayer, we would not be introducing Part 1 of the Bill. We would do that in a different, straightforward way by nationalising—we could use the word used by the noble Lord, Lord Moynihan—the Tote and selling it to the highest bidder and no one could do anything about it.

However, the noble Lord, Lord Moynihan, is reading Clause 1 by itself. He is not reading the rest of Part 1 in which the whole argument, in so far as it is appropriate to be placed on the face of the Bill, is set out.

Lord Moynihan

For the sake of the record, it would not simply be a matter for the executive to do that. Any Bill coming forward from the Government would be thrown out by both Houses—I hope that it would be—because there would be no basis for the nationalisation of the industry and sale to the highest bidder without considering the interests of racing. That is the principle behind everything we are considering today and subsequently.

I pause to remind the Minister that the purpose of the legislature is to consider proposals made by the executive and in that case, I hope that he will agree that the proposal should be thrown out without further consideration.

Lord McIntosh of Haringey

That is a political statement which the noble Lord, Lord Moynihan, is perfectly entitled to make. Looking at the history of the Tote since 1928, one sees that racing and the taxpayers have been in it together. The Tote was originally set up in 1928 with an exclusive licence to conduct pool betting. Any exclusive licence—as James I or Charles I would have said—can be worth a lot of money if it is properly exploited. Since then, the Tote has been a beneficiary of that exclusive licence, which was conferred on it by Act of Parliament

The Tote has been able to build its business to the benefit of racing on the back of that exclusivity. When it faced bankruptcy—the noble Lord, Lord Carlisle of Bucklow, will clearly remember, as will the noble Lord, Lord Wakeham—the Government again legislated to enable it to diversify into off-course betting. So the interests of the taxpayers and racing have been involved in the history of the Tote from the beginning.

Largely for that reason, it is not our intention to sell it off to the highest bidder, regardless of the interests of racing. I do not refer to the interests of betting—that is quite different—but we are talking about the racing industry and that is set out explicitly in the Bill.

We have said that if we can proceed with the sale to a racing trust—and it is better not to say "the" Racing Trust because "a" racing trust has been set up and it is logically conceivable that there could be another—we will give that racing trust an exclusive licence for seven years. We can debate the terms of that licence when we come to appropriate amendments.

But the commitment of the Government to protect the interests of taxpayers and racing is without doubt. Clause 1 is the first essential part of that process. If we were in Committee on the Floor of the House and it were successfully moved that Clause 1 should not stand part of the Bill, there would be no Bill.

Viscount Falkland

Again, anyone reading Hansard would be somewhat mystified after the last exchange. At Second Reading, I said that I had great doubts which were allayed by the noble Lord, Lord Lipsey. I consulted with him at length on the matter following the remarks of the noble Lord, Lord Jopling. It needs to be repeated that the commercial valuation of the Tote relates to the 300 fixed-odds betting shops.

I did not know how the Government would proceed on the matter or what attitude they would take. I must say that I have been encouraged and heartened by their attitude and I accept the Minister's remarks that his intention, representing the Government, is that the matter should be dealt with entirely for the benefit of racing. Nevertheless, the interests of the bookmakers would be only in the betting shops. Indeed, William Hill has said that it would like to acquire the betting shops.

One could well take the betting shops out of the deal and sell them separately—and I have been persuaded by the noble Lord, Lord Lipsey, that that would not be a good move because for the future of the Tote it needs the betting shops. He is able to explain the reason for that and he has explained it to me, but it is wide of our present discussion. However, the position needs to be explained so that anyone reading the debate will understand about Tote betting, pool betting, which has a wonderful but somewhat tarnished brand image after the crazy decisions of the Office of Fair Trading about Tote monopolies.

A view is now widely bandied about by people who seem to know about these things—but I doubt it—that Totes are anti-competitive and therefore it is necessary to have many small pools to compete with one another. Only 22 per cent of the pool turnover, as a constituent part of what is being proposed for sale, is represented by the pool betting. The rest is all betting shops. Therefore, when anyone reading our exchanges is trying to understand what on earth we are talking about, I want to come clean on what it is—although perhaps one cannot in parliamentary circles. It is that the Government have found a clever device—and I congratulate them—for getting the Tote into the private sector, into a trust operated by sensible people for the benefit of racing. The only problem is the amount due to be paid to the Treasury for the pleasure of completing the transfer. That is the doubt that hangs over us all.

I do not know what conversations the Minister has had with the Treasury or any of his colleagues. He has better experience of the Treasury than I have. But everyone in this room and in the country is waiting agog to know what the Treasury thinks is the proper amount as a consideration for moving the Tote to the trust via the excellent mechanism that the Government have thought up. And I trust them—if that is the right word—absolutely in their intentions.

Equally, I understand what the noble Lord has said. We live in a world where legislation has to be scrutinised correctly. We must take all the safeguards that we can. I say that only so that those who read this may have some idea of what we are talking about.

4.30 p.m.

Lord Donoughue

Perhaps I may follow up on the very valuable contribution made by the noble Viscount, Lord Falkland. The noble Lord, Lord Jopling, put his finger on a central point. The Minister has outlined again and again his personal and departmental commitments. I accept that completely. As the noble Lord said, the problem is the Treasury. How can we accept the commitments if the Treasury is not accepting? People are looking to this Bill to screw the Treasury down.

The noble Lord, Lord Jopling, mentioned what the bookmakers might do. I do not view them with the hostility with which the noble Lord does. Indeed, for many years they have contributed to the standard of life that I enjoy and have come to take for granted. Although it was not picked up at the time, one leading bookmaker floated the thought that the Tote was worth at least £500 million to them. That is all that it said. Closer to the time, there is nothing to stop it thinking that it might be worth closer to £1 billion.

My point is that those of us who know the Treasury—there are people here who know it better than I do—know that the mention of such numbers produce in the Treasury the kind of excitements and palpitations that blue films produce in men in raincoats. At that point, the Treasury will start to think that it is being forced to compromise down. It may think, "My God, we could get £1 billion for this, but we are kindly saying that we are willing to take £500 million".

As the noble Lord, Lord Lipsey, knows, that is not a figure on which the Racing Trust can build a viable business: it would either bust at the beginning or would commit to such debt that it cannot invest in the future. Given that real political situation, I understand that the amendment is trying to pin the Treasury down. Although I consider the Minister a most daunting figure who rightly gets most of what he wants in life, my experience is that dealing with the Treasury, coming from a relatively small department such as the Minister's, is itself a daunting process. I do not think that this is possible other than the way that is being approached through the amendment. Can the Minister tell us how we bring the Treasury in line to accept a figure that is a viable figure for the future of the Tote and the Racing Trust?

Lord Wakeham

Before the Minister replies, I am probably the only person here who has worked as a Minister in the Treasury. In support of the Minister, the fact is that he is here speaking for the Government. He had jolly well better not say something that will be repudiated by the Treasury tomorrow. There would be an awful lot of trouble if he does that. When I listen with bated breath to the assurances that I want to hear—I think most of us want to hear—I know perfectly well that, as a Minister in the Government. he speaks for the Government. The Treasury had better make sure that he does not say what he should not say.

Lord Donoughue

While that is true, having served many years in No. 10 my impression was that the Treasury did not always consider itself part of the Government, and certainly did not take statements made by mere Ministers as committing it in anything.

Viscount Astor

Following the point made by the noble Lord, Lord Donoughue, could the Minister perhaps bear one thing in mind and comment on it. In normal privatisation processes or in normal sales, if I came to buy a business from the noble Lord and we agreed on a price, he would say, "Have you got the money?". It is to be hoped that I would say, "Yes". In this case, the Racing Trust will go along; if it agrees a price, and someone will say, "Have you got the money?". Then it will say, "Of course, we have not got the money". When it walks in the door it will not have any money. It will have to borrow the lot.

That is the difference. That is what makes it even more different and puts even greater pressure on the whole process. The Racing Trust will not have a penny to its name when it goes into those negotiations. It will borrow 100 per cent of the purchase price. If I came along to the Minister and said, "I would like to buy your house but, unfortunately, I've got to get 100 per cent mortgage", I think that I know what he would say to me.

Lord McIntosh of Haringey

I do not think that I shall speculate on that possibility. What the noble Viscount, Lord Astor, has just said is evidence of why we cannot spell out the financial terms in the Bill. That is exactly the case. If we were to negotiate a commercial contract across a Committee, we would be in terrible trouble.

My answer about the Treasury is very simple. If the Treasury had simply wanted to maximise its return—Treasuries have been known to want to maximise their returns—it would never have agreed to the Bill in its present form. In particular, it would never have agreed to the very complex arrangements in Clause 8 about exclusive licences for seven years and all the references to support for racing. Why should it?

Lord Lipsey

I am grateful to the Minister for giving way because 1 shall tell him why it should. The Treasury will get this Bill through because it knows that no other plan to sell the Tote would work. Without a commitment to sell it to racing, the Government could not produce legislation. If they were merely proposing to privatise the Tote, the legislation would not get through both Houses of Parliament, particularly in the face of the manifesto pledge.

The fear of those of us who have concerns in this area is precisely that. The Government will get the Bill through on the first basis. On the day that it is passed, they will move over to the second basis, which is the maximisation of return. That is what the Minister is not addressing.

Lord McIntosh of Haringey

If I were the chairman of the Racing Trust, I would not enter negotiations on those terms. The Government have made very clear the basis on which they are prepared to move towards an exclusive licence for a body that is set up for the benefit of racing, as set out in Clause 8. We have even gone so far as to confirm in a Cabinet decision a figure of 50 per cent. There is no question about our good faith and our ability to adhere to the statements that Ministers have made. It would be unwise for any element that would compromise negotiations to be put in the Bill.

Viscount Astor

I am grateful to the Minister for giving way. He said something very important, which perhaps he could briefly explain. He described a Cabinet decision of 50 per cent. It would be enormously helpful to the Committee if the Minister could explain to what the 50 per cent refers.

Lord McIntosh of Haringey

I have already said that I shall not spell that out on the face of the Bill or in Committee a figure for the sale of the Tote. If a figure was to be put in the Bill or if passing the Bill were conditional on a figure that I stated and, for some reason, that were to go wrong, the legislation would be defective.

Viscount Astor

Obviously, my question was not clear. I was not asking for a figure in terms of an amount of money. The noble Lord referred to 50 per cent. My question is: 50 per cent of what? I do not mean in terms of money, but what does the Minister mean by 50 per cent? What is 100 per cent? In terms of how the Government decide value, what aspects are being considered?

Lord McIntosh of Haringey

In arriving at a value, we are considering the fact that the Tote is historically a collaboration for the benefit of taxpayers and the racing industry. The figure of 50 per cent recognises that the actual valuation is a matter for professional advice. We are taking professional advice; the trust is taking professional advice. Here, we are referring to 50 per cent of the fair market valuation of the whole business. It would be most imprudent of me to go any further than that.

If the noble Viscount, Lord Astor, would like me to write to him about the process by which a Cabinet committee reached that decision, I shall gladly do that.

Baroness Noakes

I was unable to speak at Second Reading. I must declare some interests, which I hope will take me through the whole of the process of the Bill. I am an unpaid independent member of the Racing Trust. I am also interested in the Tote being preserved for racing due to my interest in the four-legged variety, which consume a large amount of my income.

I am keen to press the Minister on this 50 per cent of what. The Minister said 50 per cent of market value. If the market value is to be the large figures that we have heard bandied around—the market value to a bookmaker—that may cause a very significant problem. Therefore, it could cause the Government's intent to transfer to a racing trust to fall apart. The value would be unsustainable. That is why it is crucial to understand the entire parameters.

As drafted, the Bill simply gives the Treasury power to sell. The Treasury is not constrained in any way; it is not constrained by 50 per cent; it is not constrained by 50 per cent of any kind of market value. Therefore, if the Minister can do this from the Dispatch Box, it is extremely important that we pin down the parameters within which it would have to operate.

Those of us who are concerned to see the effective transfer of the Tote for the benefit of racing have severe concerns that there would be some kind of action taken by others who do not want the Tote to be transferred for the benefit of racing to create the impression of a market value that could derail the process of transfer of the Tote. That is why it is extremely important that we should try to button this down in Committee.

Lord McIntosh of Haringey

What the noble Baroness, Lady Noakes, has just said shows why it is so important that we do not button down the price or the terms. Of course, it is the price and the terms that matter. Clearly, the Racing Trust, as established, does not have enough money to pay 50 per cent of the fair market value that I described. We are talking about 50 per cent of the fair market value in a sale to a racing trust. We are not talking about a sale on an open market because we have made it clear that that is our first option. That is not the same as the price on the open market.

The question is: what is a racing trust prepared to pay and able to pay? It will be the combination of a figure and of terms of payment which we will come out with in the end. In practice, we are a very long way towards that agreement, but it is not a matter on which I should comment in Committee. It is not a matter that should be declared in the Bill.

Viscount Falkland

I think that we have moved significantly forward after the Minister's last remarks. Fifty per cent of the market value is too high for the Racing Trust. The Minister has just referred to what it can afford, but it has no money. It will be servicing a debt that will be to the detriment of racing. That is the crucial point.

Perhaps the Minister may go further; I am quite encouraged now. I think that the public may be beginning to understand. Can the Minister go a little further and confirm that he is in full realisation, and that there is an inter-departmental realisation, that the trust is not in a position to pay more than £X because if the amount is more than that, the whole exercise will be pointless because no one will have anything of value?

4.45 p.m.

Lord McIntosh of Haringey

The phrase that the noble Viscount wishes me to emphasise is, "50 per cent of a fair market value in a sale to a racing trust".

Viscount Falkland

It is a racing trust with no money.

Lord McIntosh of Haringey

I do not think that it is strictly true that the Racing Trust has no money. Even so, it is for that exact reason that I am not saying what a figure should be. The negotiations are on a combination of a figure and payment terms. Let us be open: PricewaterhouseCoopers is advising us, and Rothschild is advising the Racing Trust. Do noble Lords think that we should involve ourselves in those negotiations in this Committee or on the face of the Bill? I think not.

Clause 1 agreed to.

Clause 2 [Successor company: transfer]:

Lord Lipsey moved Amendment No. 2: Page 1, line 12, at end insert— ( ) Any transfer to a successor company other than one whose primary purpose is the improvement and support of horse racing shall not take place unless the transfer is approved by a resolution of each House of Parliament.

The noble Lord said: I declare an interest, although it is palpable by now, as the chairman-designate of a racing trust, or the Racing Trust—who knows whether it is one or the other? I am puzzled by the debate that we have had. I thought that the matter had been resolved in the Commons, or so it seemed to me as I sat in the Gallery in another place. Precisely the same arguments were put to the Minister's colleague Mr Caborn, the Sports Minister, who dealt with them with the utmost clarity. He stated: In the event of the Tote's sale to the trust not being completed, we would have to come back to the House with new legislative proposals to secure the Tote's transfer away from public ownership".—[Official Report, Commons, 8/1/04; col. 443.] It does not come much clearer than that. You could say that that might mean a totally new Bill—at which, as chair of the shadow Racing Trust, I tremble a bit—or it might require a positive resolution, as the amendment proposes. But it is absolutely clear that the Minister gave a commitment in another place. We shall return to that.

Unless the Minister says that he has changed his mind since, or that ministerial commitments do not count in this regard, I am not sure why we must debate the matter at this stage. All the Minister has to do is accept the amendment: however, as he does not yet seem minded to do so—I hope that he will after this debate—I wish to speak to it at slightly greater length. Of all the amendments tabled, this is one on which many attitudes to the Bill as a whole will hang.

I do not think that I need to make the case for the amendment. We need to consider the cases against it that Ministers have made. The first, which was put by the Minister in another place, was that the amendment was unnecessary because the Government would sell the Tote to a racing trust anyway. Not everybody in racing feels confident of that. I have no doubt about the motivation of DCMS; indeed, on my good days, I am prepared to give the Treasury the benefit of the doubt. From the Treasury's point of view, selling the Tote to someone else would result in higher revenue; but, on the other hand, selling to the Racing Trust would achieve the certainty of getting it out of the public sector, which it would dearly like to do. I am therefore prepared to believe that the Treasury is going along with the proposal at present.

However, there has always been a minority view in government in favour of a different approach—I am perhaps talking more about Treasury officials than anyone else. Their view has been to flog the Tote to the highest bidder and give some of the money to racing to buy it off—we do not know for how much. The idea was not to sell the Tote to racing but to sell just some of it. That is contrary to the Government's manifesto pledge, but the Treasury does not always worry too much about manifesto pledges.

I believe that the Government still want to sell the Tote to a racing trust, but I cannot say that the Minister gave me as much comfort as I had hoped for today. I heard him say that sale to a racing trust was not the only option, and he talked about the share that racing would get if the Tote were sold to someone else. That shows that the matter has at least been thought about.

Taking his remarks as a whole—one could perhaps read them as a negotiating position, but I shall come to that shortly—I would not like to lay them before racing and say, "That's clear, isn't it? He really is going ahead to sell it to a racing trust". There was more ambiguity in his remarks than would comfort racing or this House.

I shall not dwell long on the Government's second argument. The Minister's noble friend used it at Second Reading; namely, that to seek a positive resolution of both Houses would be a waste of Parliament's time. When governments reverse manifesto pledges or go back on everything that Ministers have said, that is precisely the moment at which parliamentary responsibility must bite. I shall return to that later in my remarks.

The Government's third argument related to their negotiating position. They feel that the amendment would weaken their negotiating position. The absence of my provision would unfairly weaken the negotiating position of the Racing Trust. Any time that they do not like what we say, they can stand up, walk out of the room and say, "Well, we're going to go off and sell to Ladbrokes unless you boys come into line". That is not a fair mode of negotiation. We should be able to say, "Well, if you want to sell to Ladbrokes, you must justify it to the House". If the Government are offering an inadequate price, if they have fallen apart and are not providing good governance, they will be able to justify it to both Houses. That is not a lot to ask. Ministers are very successful in getting their way with both Houses of Parliament, but they must justify it. They cannot just do it as a piece of negotiating bravado.

Moreover, that argument misunderstands the negotiation that I think I am going into. It is not a negotiation between the private and public sector over who gets how much money, with both sides trying to screw each other—although that does not always work terribly well as the air traffic control negotiations showed. In this negotiation, we are trying to find a fair division of the benefits between racing and the Government, with all the various considerations to make the deal work. It is not push and shove. We are trying to find a way forward that is fair to everyone. In those circumstances, to speak of prejudicing one's negotiating power is an entirely wrong approach that will not help us forward.

I turn to my final point. It is quite a small Bill. A number of us have devoted large slices of our life to talking about it and working on it, but as a Bill, it is a rather small element of government policy, though it fulfils a manifesto pledge. However, if the Government resist the amendment, they are turning a small Bill into a matter of constitutional principle. I repeat: manifesto pledge. Let us consider the Minister's statement at Second Reading in another place; our debate and the emphasis that has been put on the sale to the Racing Trust; the suggestion that the Government might be performing a sleight of hand and that, afterwards, they will suddenly change engines and sell to the highest bidder. If all those were to happen and the Government said, "We're not going hack to Parliament", Parliament would be failing in its duty if it did not force the amendment on the Government. It will be failing in its duty to ensure that our constitution works in the way that it is designed to work. If we reach that stage, many of us will elevate the debate beyond the question that is before the Committee today. We will elevate it to a matter of constitutional principle. Even following the press and public opinion that we have heard today, there would be wide dismay if the Government were to be found to be proceeding in such a way.

For that reason, I beg the Minister to look carefully at what has been said to him in our debate and at ways forward—among which the amendment offers by far the most straightforward. Before we get into a constitutional argument in this House and another place, he should make the necessary changes that will bring comfort to those of us who care deeply about Parliament's scrutiny of the executive. I beg to move.

Lord Donoughue

I will not detain the Committee long, but I support every word that my noble friend Lord Lipsey said. He set out all the arguments clearly. He pointed to the potential consequences if the Government were to renege. I have no need to point out the consequences on the Government's own Benches, among their most loyal supporters, who would find it intolerable were the Government to do that. I should declare an interest as the chairman of the Starting Price Regulatory Board, which monitors prices in the fixed odds field, not in the Tote.

Lord Wakeham

I declared all my interests at Second Reading—various things in racing—but the Minister suggested to me that there is another that I had not realised. I was for many years a director of Rothschilds, but fortunately I had retired from that job before its present engagement. I should like to put the problem as I see it to the Minister in a slightly different way. I fully accept that, speaking on behalf of the Government, that is what he intends to do.

However, let us assume that they have negotiated what they consider to be a reasonable and acceptable deal both to the Racing Trust and to the Government. Another offer is very likely to be made by an outside party at a higher level. The Government might then find themselves in some difficulty about what to do. Might not the Government be challenged in the courts? Someone might say, "Here you are doing this quiet, comfortable deal that the noble Lord, Lord Lipsey, with his charming words has persuaded you to do at this price in a successful negotiation; and here are we, wanting to pay considerably more money to buy the assets from the public". The Government may find themselves in some difficulty, challenged in the courts for that reason.

Under the amendment, the Government could say, "But if we have to sell to someone else, we must come back to Parliament for approval". It may well be a reasonable assessment that that will be difficult, if not virtually impossible. So, rather than a hamstring on the Government, I look on the amendment as a possible protection for them to enable them to achieve what they want, despite what would be some difficult times ahead in negotiation. There may be an alternative bid on the table which, in view of their undertakings and in the interests of racing, they would not want to accept but might be pressurised to do so by court action.

Baroness Noakes

My noble friend Lord Wakeham said earlier that he is probably the only person here who has been a Treasury Minister. I may well be the only person in Committee who has been a Treasury civil servant—I was on secondment for a couple of years many years ago. If we consider how civil servants give advice to Ministers, they must cover their backsides—to give the shorthand version. If they are put in a position where the Racing Trust offers something that is modest, in line with its available means, compared with something more extravagant proposed by other bidders, it will be extremely difficult for any civil servant to advise Ministers to accept the lower amount.

We must add on top of that the natural instinct of Treasury civil servants, which others have mentioned before, to maximise the value for the public purse. The Bill contains nothing to say that the right course of action is to transfer to the Racing Trust, so there is nothing that anyone can point to other than the Minister's statements. The Bill is silent, which is why we are looking for some way for the Bill to enable the sale to go through in a proper process without being derailed by the actions of others who may want a different result.

The amendment is one way to do that; there may well be others. If the Minister could find another way to achieve that end result. we would all be receptive. The real problem is that, taken at face value, the Bill simply allows sale to the highest bidder. Indeed, for a Treasury civil servant, it would probably encourage that.

5 p.m.

Viscount Astor

The Minister was helpful in the previous debate when he said that the value would be the value of a sale to a racing trust rather than of a sale on the open market. That was an important statement. However, so much relies on commitments given by Ministers in Parliament. I have to say that I have always been rather dubious about such commitments.

I do not say that particularly as a party-political point because, when we were in government, I saw my colleagues make commitments which I am sure they genuinely believed at the time. But then what happens? There is a reshuffle or circumstances change, a new Minister comes in and the commitment disappears. One then goes along to one's colleague and says, "Your predecessor made a commitment"; he looks blank and says, "I'm very sorry, that was his decision and it is nothing to do with me".

My nervousness is made even worse, of course, when I recall that the former Lord Chancellor, the noble and learned Lord, Lord Irvine of Lairg, made a commitment in the House that he described as being on Privy Council terms—I do not remember the exact words—and the Government broke it almost immediately. I never quite realised that a commitment on Privy Council terms was so very important, but I understand that it is. We have some Privy Counsellors in Committee who I am sure could explain why that is so. However, that commitment was broken just like that, and the current Lord Chancellor said, "I'm very sorry. Circumstances have changed. It's all off".

I believe that the noble Lord, Lord McIntosh of Haringey, has given assurances in entirely good faith. I know that he means them and I accept them. Unfortunately, I do not accept the totality of the assurances given by the Government because I have seen them break assurances before. That is why the matter is important. It is also why the arguments of my noble friends Lord Wakeham and Lady Noakes are important. The amendment would help the process, not hinder it. It would make the Bill better and I firmly support it.

Lord Moynihan

I also support the amendment. I am concerned about the issue of a potential challenge in the courts raised by my noble friend Lord Wakeham. The Minister now has a golden opportunity to respond in some detail to that point.

For the first time we have heard that there has been a Cabinet decision to sell at 50 per cent of the fair market value to the Racing Trust. That decision has been taken by the Cabinet and, I suggest to my noble friend. is important not only in terms of being challenged in UK courts. I had the privilege of serving under my noble friend in the Department of Energy, as it was then, when we were more than aware of the potential challenges in European courts on a whole raft of directives which were specifically put in place in Europe—and which are now trumpeted by Commissioner Monti and his colleagues. We needed to ensure that state aid was not granted in a manner that could be interpreted as being granted under a decision similar to the one that the Government have taken at Cabinet level to sell at 50 per cent of a fair market value to a racing trust. I also fear that the way in which the legislation is drafted would open to challenge in the courts any transfer or sale to the Racing Trust.

We are all aware that excellent work is being undertaken, not least by the noble Lord, Lord Donoughue, on a proposed gaming Bill. It is alleged that bookmakers are not averse to the smooth passage of this legislation given that, if the Government. come forward with a comprehensive gaming Bill in future, the benefit that will accrue to them will be significantly greater than any value conceded in the transaction considered by the Government as their preferred route; namely, a transfer of the Tote to the Racing Trust.

The gaming Bill will not come before Parliament this Session. I hypothesise that a number of leading bookmakers would be less than happy at the prospect of that legislation not being enacted in this Parliament. They may well respond by arguing, on wholly commercial grounds, that the transfer, and in this case the sale, of the Tote to the Racing Trust at 50 per cent of fair market value was ultra vires and capable of being challenged in the courts, particularly the European courts.

Although this has arisen a little earlier than I had thought, I would therefore he grateful to the Minister if he would take the opportunity to clarify for the Committee what consultations have taken place with the European Commission, the detailed outcome of those consultations, on what basis it has accepted that a 50 per cent sale at fair market value to the Racing Trust could be concluded without legal challenge, and when those discussions took place.

I return now to the point that builds on the earlier intervention made by my noble friend Lord Wakeham. Had this legislation been framed in the form of a transfer of ownership, I feel that that would have been by far the most favourable method. The reason for that is that it has already been agreed that this is not a negotiation of normal commercial terms. As we understand it, this is an agreement where, if we take fair market value, which should not take too long to identify, and we come to an agreement on what a reasonable evaluation of fair market value is, at 50 per cent it would be capable of being sustained in terms of debt servicing by the Racing Trust. Legislation could then have been introduced to ensure a smooth and swift transfer in the interests of racing. That would have met with no opposition whatever, I believe, from either side of the Chamber. We could have saved the Minister a great deal of time during which he will have to address these issues, not only in Grand Committee, but also on the Floor of the House.

However, that is not the position. We now have a Bill which, it might be argued, would best be deferred for a number of months until these negotiations have been completed. We must arrive at a fair market value, one that is agreed by both parties with a 50 per cent discount put on that fair market value. We must also have absolute clarity so that there is no risk of legal challenge. If there were such a risk, we should be able to place in the legislation a sufficient comfort to avoid any protracted legal battle that could easily arise. There is no question about the fact that it could occur should an offer of £500 million be forthcoming against a fair market value that might be £160 million, of which 50 per cent would be £80 million. In terms of debt servicing that would be manageable by the Racing Trust—I hypothesise; I do not want to enter into those negotiations, but I seek to give an example to assist the Committee—so that we would then see the smooth transfer that we are all looking for, resulting in a vital and growing business which can serve the interests of racing and benefit from its licence period in order to be a significant contributor to racing, as it has been over the years.

However, that is not where we are. When he comes to respond, I would be very grateful if the Minister can take up the point made by my noble friend Lord Wakeham and address in detail and to the satisfaction of the Committee that there will be no grounds for legal challenge, given the Cabinet decision to sell at 50 per cent of fair market value to the Racing Trust, that being the preferred route even if, as I have hypothesised, that fair market value is £160 million and £500 million was on the table from one of the leading bookmakers.

Turning to the specific amendment before us, I believe that it would help to resolve the problem. For that reason, and with all-party support, I urge the Minister to accept it. I cannot believe that, of all the amendments which have been tabled, this one would not generate the most widespread support across your Lordships' House if it were pressed to a Division at a later stage. My reading of the amendment is that it requires the newly nationalised Tote to be set up as a body which guarantees the return of any surplus in income to horse racing. Such a body sounds very similar to the shadow Racing Trust already in existence and, in that context, is a welcome step forward.

It is also clear from my reading of the debates in another place and at Second Reading in your Lordships' House that Parliament is prepared to provide the Government with a mandate on this Bill—thus supporting their plans for the Tote to be privatised—if and only if it continues to return money to racing. That point is very important and we need more than an oral assurance on it. Unless the Bill contains support for the manifesto commitment, for the words given to the Committee by the Minister here and for the words given to the Committee in another place—that the privatisation will go ahead only if the successor body, which in this case is the shadow Racing Trust, continues to return money to racing—we should not be considering this measure in the first place.

Surely it is right, in a Bill where so much is being taken on trust, that we put in place the appropriate checks and balances. In this case, those are universally agreed as principles behind the Bill, not least by the Minister and the Government. It can only be right that those be placed in the Bill. The amendment will ensure that the wishes of Parliament are carried out.

It is essential that the Government commit to ensuring that, although the Tote is owned by the Crown, it will continue to return money to racing. The amendment does no more than ensure that the nationalised Tote returns money to racing. It does not inhibit negotiations or intervene with the discussions taking place, although they should be very straightforward, particularly in the light of the Cabinet decision that the Minister shared with us. I am slightly concerned that, even if the Government accept the amendment as I am sure that they will, there is little to prevent the Government selling the successor body on to a strictly-for-profit organisation, even within the remit that some of the proceeds from that would be directed towards the improvement and support of horse racing. I would like the Minister to comment on that.

Have the Government considered whether it would be better to establish the successor body as one of the Chancellor's new community interest companies, rather than as a company formed and registered under the Companies Act 1985? The CICs are intended to be a new type of company, designed for social enterprises that want to use their profits and assets for the public good. In my view, the body fits very neatly into that context. Has due consideration been given to that and, if not, why not?

The edifice on which the Bill is built will crumble unless there is clarity in it along the lines suggested by the noble Lord, Lord Lipsey. I warmly support the amendment.

Lord McIntosh of Haringey

I have a minor problem and a number of major problems with the amendment. The minor one is that it does not say what it means. It seeks to ensure that the Tote is transferred under the vesting mechanism to a successor company whose main purpose is the improvement and support of horse racing. Actually, the main purpose of a successor company will be to carry on successful and profitable bookmaking, so that the proceeds go to the improvement and support of horse racing.

The successor company will inherit the Tote's business, and the intention is that it will continue to function as the Tote does but without the constraints that apply to a non-departmental public body. It will continue to function chiefly as a bookmaker. If it were to do what the amendment says, that might be unhelpful to both the Tote and the Racing Trust. That is a minor and picky point that I am sure could be corrected.

The fundamental point needs to be responded to; indeed, I anticipated it in what I said in response to Amendment No. 1. I made it clear then—I shall make it clear again, and it was made clear in the Commons—that the Government intend to sell the Tote to racing interests. Those are currently represented by the Racing Trust. Every action that we have taken over the past few years has been geared towards the sale of the Tote to racing. If we had intended to do anything else, we would not have gone along the path at all.

We would consider an alternative only if that option were closed off to us. I cannot say with 100 per cent certainty that it will not be closed off to us, not because of any change of mind on our point, but because of "Events, dear boy". That is what happens. Legislation has to be framed to protect against the unintended consequences of events that might arise.

The principle is well established that operating the Tote in the public sector is no longer appropriate and is constraining the Tote's development. If something were to go wrong, we would be left with only one viable option: a sale on the open market. Under those circumstances, I fail to see what benefits further parliamentary approval would bring if, as must be the case, the sale were conducted in a legal and transparent manner. In those circumstances—they are not what we desire—the matter would be of real interest to both Houses of Parliament, and of course we would make a Statement to Parliament. As things stand, however, it is hard to see that we will need to go down that route. A sale to racing is our sole aim, and we will do everything in our power to achieve that.

5.15 p.m.

Lord Lipsey

My noble friend said that the Government would make a Statement to Parliament, which of course is welcome. However, he may have overlooked what his right honourable friend said in another place. He said that they would, come back to the House with new legislative proposals".—[Official Report, Commons, 8/1/04; col. 443.] Will the Minister affirm that that remains government policy?

Lord McIntosh of Haringey

I cannot anticipate everything that may arise. That is why we are framing legislation in such a way. If we could predetermine everything that would take place, we would put the provision in the Bill; but we cannot, so we cannot put it in the Bill.

A number of points were raised, and I shall try to deal with them as best I can. The first is that of the European Commission and state aids. We have made the Commission aware of the basis on which we propose to sell the Tote. It has so far indicated that it will be content if a fair market valuation is obtained. That indication has now expired, and we are putting in a new submission to it. Of course we must ensure that we do not breach European Union rules under state aid. We are saying to the Commission in the context of a state aid notification that the market price will be to a non-trade buyer—in other words, not to a bookmaker. The price does not depend on what a racing trust can afford.

I shall not expose the negotiations with the European Union in the detail that the noble Lord, Lord Moynihan, would want. If he were in government, he would not wish to expose such negotiations. We have already been to them, and we have already been given some indication of the Commission's view in principle. We are going to it again to seek more detailed assurances. However, we cannot expect it to give conditional assurances.

Lord Moynihan

Unless I misheard, I am even more worried than I was when I heard my noble friend's speech. I understand that we are considering the Bill when the advice from the European Commission has expired. In other words, there is no live submission from the Commission. The conclusion that one can reach from that is very straightforward: that there is absolutely no current basis that would prohibit a challenge under European legislation of a large bookmaker offering £500 million and having a case heard in court.

Now that the advice has expired it is redundant. It was time-limited, and was before the consideration of the Bill in Committee. As such, I am deeply concerned that the speech made by my noble friend was not only valid, but casts a great cloud over the Government's intention to sell to a racing trust at 50 per cent of fair market value.

Lord McIntosh of Haringey

The Committee can see now why I do not think that we should conduct either commercial negotiations or negotiations with the European Commission in a Committee of the House of Lords. The previous notification expired, but the European Commission has indicated that its view will be the same as before. There is no reason for the fears expressed by the noble Lord, Lord Moynihan.

Lord Moynihan

The issue is nothing whatever to do with conducting negotiations in Committee. It is to do with a comprehensive understanding of the current status as we consider the legislation. Why did the Government not simply get an extension to the advice that they sought from the European Commission, rather than allow it to expire, enter new discussions and hope that there would be no changes to the advice formerly given? Why was that notice not extended, particularly in light of the fact that it would be a serious issue for the consideration of this Committee, given that we are looking at primary legislation?

Lord McIntosh of Haringey

Because the current notification being prepared will be more definite than we were able to be at the time of the previous notification. In other words, we are going further in the current negotiations. There is no difficulty about the matter at all. The conspiracy theory expressed is a little inappropriate for the purposes of the Bill.

The view was expressed that we had done some sort of deal with the bookmakers—that they would let the Bill go through on condition that the gambling Bill went through. On the contrary, the gambling Bill brings new regulation to bookmakers that did not exist before. I suspect that, if we asked them, they would be quite happy if the gambling Bill were not passed, as it would further restrict them.

The position is that we had not clearance from the Commission, but an indication that it would give clearance when it had the final notification. It is the final notification that we are now giving to it. There is no reason to suppose that it will go back on the indication that it already gave. The fact that the previous advice has expired does not affect the issue.

Lord Moynihan

Would the Minister be so kind as to place a copy of that notification, and of the letter that supports his comments, in the Library so that we can examine them in detail and assess the exact position of the European Commission with regard to state aid notification in this context?

Viscount Astor

Perhaps the Minister ought to say when the Government expect to hear from the European Commission. He might also say what would happen if its advice changed—would that bring a halt to the Bill?

Lord McIntosh of Haringey

I shall do what I can to place on record the negotiations that have taken place and are taking place. I am not convinced that everything is necessarily in a form that it is possible for me to place on record, but I shall certainly do my best. I imagine that there will be significant parts of the negotiations that are commercially sensitive and that I could not place on record. That is really the difficulty in which I am placed in Committee. It is not that anyone disbelieves what we plan to do, that we can do it or that we are going to do it. However, Members of the Committee appear to want commercial negotiations and European Commission negotiations to be included in the Bill. That is clearly not a way in which government can work.

Lord Wakeham

I—

Lord McIntosh of Haringey

The noble Lord, Lord Wakeham, of all people knows that.

Lord Wakeham

I am trying to be helpful to the Minister. I accept everything that he said and all the assurances that he has given. I do not know whether he will say something more about a legal challenge, but he has not begun to answer the question that I put to him. In my view, the amendment would be helpful for the Government in dealing with a legal challenge, because they would be able to say, "We are not in a position to sell to someone else unless we go back to Parliament".

I do not want the Minister to reveal all his negotiations, and he is wisely not going to. I do not quarrel with that at all. We are trying to give him as much protection as we can, to help him to achieve a policy of which we approve. All I suggest is that the amendment helps the Government, in the sense that they would be able to say to Ladbrokes or whoever comes along, "I am very sorry, old chap. We are not in a position to do a deal with you, because we would have to go back to Parliament and it will not agree". I am not being difficult; I am trying to be helpful.

Lord McIntosh of Haringey

I have two comments on that. First, remember that what we say in the Bill is that we propose to give an exclusive licence for seven years. The basis of the exclusive licence is a sale to the Racing Trust, which will give money for racing purposes. We are not obliged to give that exclusive licence. If we were talking about someone other than the Racing Trust, which will benefit the racing industry, we probably would not. My second answer is that we are not obliged to sell to the highest bidder. Like any private individual, we can sell to a lower bidder if we wish.

Viscount Falkland

When the Minister told us about the European Commission's views on the matter, the phrase he used was that it would be happy if a fair market value were obtained. There is some ambiguity in that. Will he clarify what he means by "obtained"? Is that the fair market value obtained from the purchaser or from the advisers?

Going back to my remarks earlier, if we simply had a Tote pool as originally in 1928, there would be little problem in transferring that to the private sector. The fact is, however, that we have 300-odd betting shops. I have a fairly clear idea in my mind, as many other Members of the Committee have, of what a fair market value is likely to be. Perhaps I am quite wrong and the Minister can enlighten me, but if the bookmakers see that their shops are being transferred at a discount or a notional price, that raises some alarms on the basis of the discussions that we have had.

Lord McIntosh of Haringey

I think not. The Bill as drafted gives the assurance that we need to resist such a challenge. The noble Lord, Lord Wakeham, knows that we cannot stop there being a challenge. However, on legal advice we believe that the Bill as drafted allows us to do what we proposed. I remind the noble Viscount, Lord Falkland, that I said that we had notified the European Commission that our intention was to sell to a non-trade buyer—that is, not to a bookmaker.

I cannot go much further on the valuation than I have already gone. I have already said that independent advisers will provide a value. It will probably be within a range of prices, and the final price will have to be within that range for there to be freedom from an accusation of state aid.

Lord Donoughue

My noble friend has understandably not answered the question asked by the noble Lord, Lord Wakeham, which was unquestionably and unanswerably true. His was a helpful suggestion. I come back to the simple content of the amendment, which says nothing about having to include the details of the negotiation. I shall really repeat what my noble friend Lord Lipsey said. In January, Richard Caborn said that the Government would come back to Parliament if the negotiations were not completed with fresh legislative proposals. Today the Minister said that they would make a Statement. Those are two quite different things.

What is the current government position? Is it that Richard Caborn's promise and commitment no longer stand—that they are replaced by what the Minister said? If his statement stands, the amendment is useful but quite in line with that. It merely puts into the Bill what Richard Caborn said. If his statement has been replaced by today's statement—that is, that the Government would merely make a Statement in the House—the need for the amendment is much more acute. However, it would help me if my noble friend would tell us what the Government's current position is. Has Richard Caborn's statement been replaced?

5.30 p.m.

Lord McIntosh of Haringey

I think that my noble friend Lord Donoughue is assuming that what Richard Caborn and I said had exactly the same trigger. That cannot be assumed, so it is not possible for me to answer that question. I shall look carefully at Hansard, both for today and for January, and 1 shall write to him and all others who have taken up that point. It is not my understanding that there has been any change in policy.

Baroness Noakes

The Minister spoke earlier about "events, dear boy" taking over. That could happen if the European Commission states that it is not prepared to approve the particular terms of the transfer to the Racing Trust; or it could be that the Racing Trust, for one reason or another, fails to live up to the Government's expectations in negotiations.

Let us assume that, for whatever reason, the sale to the Racing Trust, as we are contemplating it, does not immediately go ahead. As the Bill stands, the Government would then have complete permission to sell the Tote, on pretty much whatever terms they like. Clause 1 would effectively allow them to take ownership of it—my noble friend mentioned the nationalisation element of it—notwithstanding the fact, as was mentioned during the debate on my noble friend's earlier amendment, that racing believes to this day that it has not just a 50 per cent interest in the Tote, but significantly more than that. Therefore, the Bill provides no protection for racing.

What do we say to racing, having allowed Parliament to take full ownership of something that racing believes that it created at least to the extent of 50 per cent? There is no safeguard in the Bill. If, for any reason, the transfer that is being contemplated, which is to a racing trust for the benefit of racing, falls down, what longstop is there in the Bill to meet the needs of racing? We are trying to ensure that the interests of racing are given some protections in the Bill, but there are none. If this amendment is not to provide them, we need some form of protection. Otherwise, we will allow the Government to steal racing's assets. That is how it will be viewed throughout racing. It is a serious issue.

Lord Smith of Leigh

Before my noble friend responds to that, perhaps I may express my agreement with the comments of the noble Baroness. I am confused by the Government's rejection of the amendment. They state that they intend to sell the Tote to a racing trust—that is what Parliament wants—but the Bill does not specify that as the outcome.

The Minister rightly said that, even with the best intentions, the negotiations may fail and that the European Commission or the courts may intervene. The only outcome then is the open market sale. In the interests of racing and of the Tote as an organisation—I have a personal interest in it, not because I am a member, but because of its activities in my own borough—Parliament would not approve of that. That is a simple matter of fact. Parliament would not approve that as an eventuality.

I and other noble Lords who have spoken, as well as Parliament, would prefer the status quo to a short-term sale where the Government say, "Well, we've no other option now. We've got to sell on an open-market basis". It seems that we will go round in circles until we resolve that problem. Parliament wants to support the Government, to give them the opportunity to fulfil their manifesto commitment and to sell to the Racing Trust, but we are not sure that the legislation will allow that to happen under all circumstances. If that cannot be achieved, for the best reasons, the Government should come back to Parliament and seek approval for plan B.

Lord McIntosh of Haringey

I do not see the benefit of that. What would Parliament's approval of plan B do? We have made it absolutely clear that our sole aim is to sell the Tote to a racing trust for the benefit of the racing industry. The Racing Trust may not work; all its members might be struck down by bubonic plague, including the two present—that is not intended as a threat—in which case it would take a few months to reconstitute the trust.

We cannot force government into commitments about something outside our control. That must be the basis of all legislation. We must give the Secretary of State powers to do what we have declared as our objective. We have set out a number of protections, particularly in Clause 8, for the racing industry; and we should go ahead as best we can with the options. open to us and the intention that we have made clear.

I cannot do better than conclude by repeating Richard Caborn's remarks: The Government's intention is to sell the Tote to a racing trust. If that is not possible, we will explore other sales options. However, I know that the will of both Houses of Parliament is that we fulfil our manifesto commitment".—[Official Report, Commons, 8/1/04; col. 442.] I agree wholeheartedly.

Viscount Falkland

In answer to the noble Lord's first, rhetorical question, the reason that we are concerned is that we want racing to be confident that, if for any reason the sale falls through, we will revert to the status quo. As a result of the discussion today, at least we have some idea of the areas where it could possibly fall through. It is nothing to do with bubonic plague; it is to do with the conditions of the sale that we have envisaged, which I hope will go through, although it may not—I share the hope of the Government and the Minister. Forgive me for being naïve, if I ask a naive question: why is it not possible to provide in the Bill that if, for any reason, the sale founders—whether because of the European Union, bubonic plague or whatever—we will revert to the status quo and sit back and think about what we will do next? That would give confidence to the racing public.

Lord Wakeham

Compared with the situation faced by some of us, the Minister is very lucky; he is surrounded by many colleagues who support what he wants to do. We are absolutely on his side. Earlier he said, wisely, that he would read the debate and consider what was said. Having been around a long time, perhaps I might humbly offer him the following advice: I suggest that he read the debate very carefully with his advisers. Here there is a whole bunch of people with racing's best interests at heart, who do not disagree with the Government's aims, but are concerned that the legislation does not quite meet the circumstances in which we might find ourselves. I would be very surprised if the Government, in all their wisdom and with all their wise advisers—it is more than some of us have these days—cannot find a solution to meet the parliamentary wish to back up what the Minister wants. I hope that he will look carefully at the debate to find a way of meeting the worries expressed so much around the Committee.

Lord McIntosh of Haringey

The noble Lord, Lord Wakeham, is most kind. I have worked with legislation for quite a long time, too; indeed, in my previous position I did almost nothing else for seven years. I am well aware of the implication of saying that I will take something away and think about it further—it is, of course, an easy way out of any debate, because both sides can put off a decision until later. I do not wish to do that unless I have some assurance in my own mind that something practical can be done as a result. I am grateful for the support expressed for the principle of what we are trying to do, and for the expressions of confidence that we mean to do it. I think that I have heard from parts of the Committee expressions of confidence that we can do it. But we cannot ever be certain, and we cannot legislate on the basis of uncertainty. If, having said that, there is anything that I can do in discussion with colleagues on both sides before Report, I will ensure, as I always do, that I have such discussions.

Lord Lipsey

I am grateful for the Minister's last remarks. What he could do practically is accept this amendment. Many of us who have listened with extreme admiration to the Minister in dealing with various Bills know him to be a highly rational man. We also know it to be extremely difficult to tell the difference between when he truly believes the arguments that he has been put up to advance and when he does not. I would not make a firm judgment into which camp those come today. However, if the Minister re-reads Hansard, he will find tremendous force in what has been said.

Perhaps I may delicately make an observation to the Minister: some of the things that he has said about the arguments do not relate to the amendments before the Committee. It was said that we were trying to negotiate in this Committee; the Minister has done quite a bit of negotiation and has said some very useful things about it, but none of us has. All we want to say is what should happen should negotiations break down.

Perhaps for a minute the Minister could put himself in my place as the person conducting the negotiation on one side. He seems to see a weak and timorous government faced with a mighty negotiator able to determine the price. I do not have any money; I have a Bill that enables the Government to decide not to sell the Tote or to flog it to anyone else they might choose at the drop of a hat; I do not have a job if I do not get a deal through; and I have in mind—this is the most serious point—the interests of all those who work for, and benefit from, the Tote. At present, the 70,000-odd people in racing and 1,700 people working for the Tote are in a state of insecurity as regards their future. I must weigh all those factors; it is not an easy negotiating position. I would find it easier if I could at least say to those people that, if the Government decide to do something else, they must go back to Parliament and I can give my judgment.

There would be cases in which I would tell Government not to sell the Tote to me; I would just withdraw from the negotiations. If the racing officials fall out with each other—that has not happened at all; my trust is as harmonious, charming and logical a group as one could hope to meet—I would say, "I am sorry, Minister, but we are in no position to buy. We will have to work out what is most appropriate, and you must come back to the House with the right proposals to do so and I would co-operate with that".

Incidentally, the Minister has disposed of one argument against the amendment. He promised that Ministers would make a Statement to Parliament. If the worst suspicions of racing—I do not share them—were realised, it would be one of the most unpleasant Statements that any Minister had made in either House. However, it would take up just as much time as a process that ended with a vote and a decision—more in primetime. At least that argument has now fallen by the wayside.

I feel sure that when the Minister re-reads the debate and consults his officials, and, perhaps most importantly, when the Treasury re-reads the arguments and appreciates that this Bill's smooth passage is being impeded by this rather theological objection, he will return on Report with an open mind. As a strong supporter of the Government's Bill, I very much hope that that will happen. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

5.45 p.m.

On Question, Whether Clause 2 shall stand part of the Bill?

Lord Moynihan

I had very much hoped to be able to withdraw notice of my intention to oppose the Question that Clause 2 stand part of the Bill, convinced as I was then that the Government would accept the Committee's arguments on the legislative consequences of what they have consistently said. This is an important opportunity for the Committee to be absolutely clear whether the Government have examined all the alternative mechanisms for achieving their aim for the Tote; in that respect, this is a probing measure.

I wish to pick up on a point that may inadvertently have misled the Committee. Everything that I have read about the tremendous work undertaken under John Greenway MP in another place, with significant assistance from experts in this House, is that the Gaming Bill intends to liberalise not restrict the gaming market. Rather than restrict it, there are proposals that create additional commercial opportunities for the industry. But if we are about to see a new Bill that is heavily restrictive of gaming—or gambling, as it is now called—I stand corrected. I would like to know that from the Minister, because it is critically important in the context of horserace betting.

The exploratory issue that I would like the Minister to address is the question of the alternative mechanisms. We have not heard from the Government why the TSB route was not looked at carefully and used. I would be grateful if he could analyse that in some detail in his response.

The second issue is a point that was raised by the noble Lord, Lord Lipsey, in the context of Clause 2 at Second Reading. Here the Government are not remunerating racing for the nationalisation of the Tote. I would be grateful for an explanation of how the Government can justify, through the Treasury. earning a substantial sum of money from the subsequent sale of the Tote, despite freely admitting that it does not own the Tote and has put no money into it. Indeed, the Treasury intends to take a significant profit from the nationalisation and subsequent privatisation of the Tote. Some have argued that that is racing's equivalent to daylight robbery, because the money that would otherwise have to be paid would go back into racing, which was the intent. Others have argued that they have seen a few rogue bookies in their time, but fleecing the Tote for £80 million—I hypothesise on the figure—before they can lay a bet takes some beating. It cuts to the very heart of the Bill.

Will the Minister tell us how the Government justify commandeering something that they do not own, without compensation reflecting the value of something that they have nationalised, and, possibly the very same day, selling it on at a significant profit? In effect, the Government will take the money and run. The price that the Government charge the Racing Trust through negotiations is a charge on every punter and race enthusiast, and every racecourse the length and breadth of this country. In many respects it is another stealth tax. It will have an immense effect on the money that the Tote brings into racing, money that goes to every one of Britain's 59 racecourses. As many Members of the Committee will be aware, the Tote is the largest sponsor of British horse racing. As many noble Lords highlighted at Second Reading, the more the Government charge for the Tote, the more the successor body will have to borrow and the more interest the successor body will have to pay, which means that less is left for the Tote to return to racing.

In the context of our earlier discussions about the reference of my noble friend Lord Wakeham to the TSB legislation and the restructuring that I regard the Bill as being about, I echo the remark that we are all on the same side as the Government if their intent is reflected in the Bill and in their actions: that is, to see a smooth transfer from the existing Tote, in the interests of racing, to the shadow Racing Trust. Why do the Government feel that they can nationalise the Tote on one day, without any compensation or recognition of its value, and then sell it at a significant turn to the Treasury?

I appreciate one point on which the Minister may come hack to me: that there is difficulty in working out who to pay for the Tote, particularly as it is not owned by anyone and is being abolished by the Bill. Again, there are noble Lords around this table who can address that subject and, I am sure, come up with an answer. Perhaps I can help the Government in that respect. I suggest that the same organisations that make up the shadow Racing Trust—the Jockey Club, the British Horseracing Board, the BHB Industry Committee, the Racecourse Association and the Racehorse Owners' Association—should be compensated on the strict commercial undertaking and understanding that those moneys would constitute the value paid to government to privatise the Tote. Appropriate contractual documentation can reflect that agreement.

This is a probing issue, but I look forward to the Minister's response because it is fundamentally the case that the Government have not generated the value of the business. It has been generated by the people who, year in year out, have worked assiduously and highly professionally within the Tote to develop a successful business, which is now subject to this Committee's consideration. The intervention by the noble Lord, Lord Lipsey, on that point at Second Reading deserves an answer. Why have the Government chosen this process rather than a restructuring Bill, which would have been far more appropriate? Far be it from me to speculate that it is a way in which the Treasury seek to make an easy turn, but at least that would be a reasonable explanation. And why have the Government not taken the opportunity to look at alternative methods of avoiding so many of the complex issues that are taking the time of the Committee in bringing forward legislation?

I finish by highlighting the fear injected into any parliamentarian on hearing that the justification of the way in which a Bill is drafted is "Events, dear boy— it is the policy of unintended consequences. That should not be the basis for primary legislation. Exactly what the Government intend to do should be on the face of the Bill. Had that been the basis on which the Government approached the issue, then instead of facing "Events, dear boy", we would have had the outcome—it is to be hoped, successful—to negotiations with the shadow Racing Trust. Furthermore, we would have had before us a Bill that we could consider and then judge whether it is in the best interests of racing in totality.

Sadly, we cannot do that; we have an enabling measure that throws every conceivable possibility up in the air—from nationalisation, no sale, sale at £500 million, possible sale to a racing trust, one that may not be the racing trust chaired by the noble Lord, Lord Lipsey. It is so wide open as to warrant a strong explanation from the Minister of the various issues that I have raised. I hope that all those issues are regarded as they are intended to be: a helpful contribution to enable the Minister to construct this legislation to allow a smooth transfer, possibly at no cost to the Racing Trust, so that the interests of racing can continue to be well served by the Tote, as they have been for many years.

Viscount Astor

I have just one question to put to the Minister; it relates to timing. If the Government get it right and do a deal with the noble Lord, Lord Lipsey, on favourable terms to racing and the trust, we will be the first to applaud them and the result. Our concern is what happens if things goes wrong. One of the difficulties is that we do not have any indication from the Government or the noble Lord, Lord Lipsey, whether they feel that some meeting of the minds has been achieved so far. We do not know. When will negotiations start between the two? Will they have to wait until after Royal Assent? Can they start beforehand, so that there may be some process at least in which Parliament may be involved? Can the Government start the conversations, or indeed reach some agreement, with the shadow Racing Trust before the end of the Bill? When do they intend to start negotiating with the trust chaired by the noble Lord, Lord Lipsey? They may even have started; I would be grateful for clarification. Perhaps the noble Lord, Lord Lipsey, can help me.

Lord McIntosh of Haringey

I think that, in his closing remarks, the noble Lord, Lord Moynihan, gave me all the arguments that I need. He was entirely right to say that you cannot frame legislation on the basis of "events, dear boy". It is precisely because of that that we are not seeking to frame legislation on the basis of things that we do not know and cannot control. If we were willing to do so, to move forward on the basis of matters that we do not know and cannot control, then all the things that Members of the Committee would like to see on the face of the Bill could be put there. But we do not do that and we are not going to do it.

Lord Moynihan

I am grateful to the Minister, who I am sure will forgive my amusement. The point I sought to make was that it should be never be the case that governments bring forward legislation on the basis of "events, dear boy" and their attendant uncertainty. The Government should pause, set out their recommended route, undertake whatever negotiations are necessary, and then present to Parliament legislation which has been framed as a result of that consideration which can then be either approved or rejected. Not for a moment was I arguing in favour of giving the Government a blank cheque to do what they like with the future of the Tote which, I regret to say, in its present drafting is precisely what this Bill constitutes.

Lord McIntosh of Haringey

Again, the noble Lord, Lord Moynihan, is precisely making my point. We have gone as far as we can to place on the face of the Bill those parts of our proposals which we can ensure will take place. We have a Racing Trust which has barely been formed. On what date was it formed?

Lord Lipsey

The full Racing Trust does not yet exist. It is a shadow body.

Lord McIntosh of Haringey

I thank my noble friend Lord Lipsey for that because, again, it makes my point. Of course, when we have a Racing Trust, we can negotiate formally with it, but we cannot put on the face of legislation the nature of our negotiations with a body that does not even exist. Everyone is asking for assurances that cannot be given because the Racing Trust does not actually exist.

I hope that the noble Lord, Lord Moynihan, will not mind my saying that the basis of his request for this is entirely mistaken. He used a phrase to the effect, "take the money and run". The Tote exists because in 1928 the then government gave a monopoly over pool betting to an organisation. Monopolies are worth money. The Government and the taxpayer have put in their ability to create a monopoly, as James I and Charles I used to do, and they have invested in it. The noble Lord said that they have put nothing into the Tote. The then government put the power of exclusivity into the Tote right from the very beginning in 1928. After the war, when the Tote faced bankruptcy, the then government went even further and gave it the right to compete—the public sector, if you please—against private bookmakers. If that is not making a contribution, I do not know what is.

The phrase, "take the money and run", is entirely inappropriate. It has always been the Government's intention that the Tote should reflect the interests of racing in so far as there is an interest of racing and, of course, racing has taken money out of the Tote rather than putting money into it. As I say, that should be reflected in the discount received. Under those circumstances, the procedure we are proposing, starting with Clauses 1 and 2, is the only practical procedure available to us. If the noble Lord, Lord Moynihan, or any other noble Lord wants to propose an alternative, they are welcome to do so. However, I have made it clear that this two-stage procedure is necessary, that it has precedents, and that it is our firm intention that it should end in the result which all Members of the Committee want to see.

6 p.m.

Viscount Astor

The Minister has not answered my question about when negotiations will start.

Lord McIntosh of Haringey

When the Racing Trust comes into being we will start immediately. We do not have a racing trust.

Lord Lipsey

Before I support the Minister, I should like to say that it seems a bit thick for us to pay money for the Government to remove a legislative impediment that has existed for the Tote and for no other bookmaker. That does not seem to us to be the kind of thing you should pay for.

In support of the Minister, I should say that the process will not cause any difficulties to the Tote and the shadow trust. Let me explain briefly where we are. The Government have not yet appointed their advisers formally although I believe they have them in mind. We have appointed Rothschild but it will not be able to prepare a valuation until the Tote's year end figures are available at the end of March. So we cannot do anything much before then.

There is a structure of committees, both internal to government and with the Tote, and there is a liaison committee on which both the Tote and the shadow trust will sit to bring the process together. Its first meeting is scheduled for 26 April.

I hope that the negotiations will not wait until the full trust is set up. There is a parallel process by which the trust/government arrangements are being put into place by the trust. However, the reason for setting up a shadow trust—we all remember the shadow Ofcom—is that everything should not wait on that. To reinforce the point, we do not want the period extended unnecessarily because of the uncertainty and danger to the business it would cause.

The noble Lord, Lord Moynihan, would carry through this process in an entirely different way and is making his arguments for it, hut, as far as the practical arrangements are concerned, we have found from working with the DCMS that the process is perfectly satisfactory.

Lord Moynihan

I am grateful to the Minister. I thought that would be the explanation he would give. It led me immediately to the question of why was it that the Government had not charged for the operation of the monopoly over so many years? In practice, what we have now is retrospective charging for the benefit of having had the monopolistic powers that were granted so long ago. It is a useful clarification.

The Minister did not address the issue I raised in regard to the Trustee Savings Banks Act 1985 and why merely ordering a reconstruction of the TSB is not wholly appropriate in this context, particularly given the unanimity about the direction in which we wish to see the Tote move. There was no need for us to nationalise the TSB, with a promise to subsequently privatise it, but there was an opportunity significantly to restructure the TSB. It would be much appreciated if the Minister could comment on that before I conclude my remarks.

Lord McIntosh of Haringey

The TSB had depositors, The depositors thought that they owned the whole of the TSB and were prepared to take legal action on that point. The Government refunded the depositors their deposits. This caused a great deal of resentment at the time, as some people will remember. In that case there were people who could be compensated. Who should be compensated for the sale of the Tote?

Lord Moynihan

If time permitted, I would be more than prepared to draw on that analogy in the context of racing feeling aggrieved.

Lord McIntosh of Haringey

But racing took the money out. It did not put the money in.

Lord Moynihan

The point I am making, which I think is an explicitly clear comparison with the TSB, is that, through the Tote, this is an ideal way of bringing forward legislation after clarifying all the questions of the "events, dear boy" clause that we discussed earlier—namely, not coming to the Committee and to Parliament without having sorted out all those issues well in advance of bringing primary legislation before the House.

That said, I am grateful to the Minister for his comments and to noble Lords for their contributions.

Clause 2 agreed to.

Clause 3 [Sections I and 2: supplemental]:

Lord Moynihan moved Amendment No. 3: Page 2, line 39, at end insert— ( ) The Secretary of State shall ensure that the directors of the successor company are the same people as were members of the Board before the appointed day, save to the extent that any individual member does not wish to continue as a director.

The noble Lord said: This matter was raised in another place. I return to it, not least because the answers given by the Minister for Sport were somewhat unclear. I fear that we have a whole raft of conflicting messages given by the Minister for Sport in another place and it is incumbent on the Government to clarify them. It may therefore be helpful to the Committee to reflect on the statements made by the Minister in another place with regard to the purpose of the amendment, which is to ensure continuity by keeping the same board for the period when the Tote is nationalised. I am referring to the board of directors.

On this subject, the Minister in another place made the following three comments on different occasions. He stated: I repeat what I said: the Tote board members on the appointed day of dissolution will continue to be board members of the successor company".—[Officied Report, Commons Standing Committee D, 20/1/04; col. 15] Later that day he stated: For the record, we will not necessarily appoint the Tote board as first directors of the successor company. I may have misread my notes"— I assume that he was referring to what he said earlier— so I want to correct that for the record".—[Official Report, Commons Standing Committee D. 20/1/04; col. 17.]

So the Committee in another placed faced a significant problem. First, the Minister had stated that he wanted to repeat the fact that the Tote board members on the appointed day of dissolution would continue as board members of the successor company, which is what we thought was the position—had that simply been the statement there would have been no need to table the amendment—but then he immediately moved on to say that they would not necessarily appoint the Tote board as first directors of the successor company. What is worse is that the erroneous statement, as I understand it to be, that they would not necessarily appoint the Tote board members as first directors of the successor company, came from his notes. So clearly his officials quickly gave him those notes, which he read, and I, for one, on reading the Hansard transcript, was completely misled. I thought it was absolutely clear that they intend to take the Tote members, put them on a new board and hope to sell it quickly to a racing trust.

Later on the same day, we had that assurance from the Minister when he stated: I reassure the Committee that we intend to take the Tote members, put them on the new board, and, we hope, sell quickly into a racing trust".—[Official Report, Commons Standing Committee D, 20/1/04; col. 18.] Which is true?

I hope the first statement, principally because of the high esteem in which the membership of the Tote board is held and because of the importance of continuity. I very much hope that it is not the Government's intention to take the Tote into state ownership and immediately appoint others to the board without recognising the importance in many respects, which I will cover, of continuity of service among directors.

The purpose behind the amendment is to ensure that when the Tote is nationalised the board of directors remains the same for what we all hope will be a seamless and swift transition to privatisation. The principal reason for this is to ensure continuity of operation for the Tote. I hope everyone supports that principle. Even if the Tote is owned by the Crown for less than an hour, we want to ensure that the board retains the previous directors and that there is a clear corporate chain of responsibility with the necessary experience to deal with any crisis that may occur. In the unfortunate event of a delay in privatising the Tote, it is even more important that we have a board that can best represent the interests of the Tote.

I am not suggesting any mischievous intent on behalf of the Government to replace the existing directors and appoint a wholly new board for the period when the Tote is owned by the Crown. Similarly, I am not for one moment suggesting that the Bill should restrict who the newly privatised Tote should appoint as its board of directors. I am trying to limit the powers of the Government over the newly nationalised Tote. From reading the Bill, we recognise that the Government feel the need to nationalise the Tote but we on these Benches feel duty bound to limit the role of the state in running what we all agree should be a privatised entity as soon as possible which is run in the interests of racing.

In many respects this is a technical amendment but there is a serious reason for wanting to clarify the Government's position. That serious reason is not only to keep the hoard in place to ensure a smooth transfer of staff from the Tote to the successor body but also to cover the very important TUPE arrangements. The transfer of undertakings and protection of employment clauses are on the face of the Bill and I would hope that having continuity of directors would significantly assist in ensuring that those arrangements are adhered to.

For those arrangements to be in place there needs to be continuity of management; there needs to be the continuity of a board overseeing the process from a strong knowledge and working experience of the staff. For example, if the Government were minded to change the directors, could they assure the Committee today that employees employed by the Tote, when the undertaking is nationalised, will have automatically the right to become employees of the new employer on the same terms and conditions? Is it also the case that representatives of employees affected will have a right to be informed about the transfer?

These matters are covered in some detail in TUPE. Again in the interests of time, I simply ask whether the Minister can give a clear undertaking that all the conditions in PL 699, the sixth provision on the transfers of undertaking, are to be adhered to, in full. by the Government, irrespective of whether the conclusion of the Minister in another place—that they will not necessarily appoint the Tote board as first directors of the successor company—is realised and we lack the continuity so essential to a successful transition?

This will be my only opportunity to give due recognition to the quality of the board members who serve on the Tote. It is an admirable board, and I cannot see any reason why it would need to be changed during this process. In terms of Sarbanes-Oxley, the board has financial expertise, a significant and widespread knowledge of the industry, an admirable understanding of M&A transactions, and good. strong legal advice. It is a first-rate board led by a first-rate chairman. It would be remiss not to pay tribute to that board of directors, which has given such excellent service over the years to the Tote and, indeed, to racing.

No doubt the Minister will be able to accept this short technical amendment. If he cannot, at least he will be able to clarify whether it is absolutely incorrect for the Minister in another place to say that it is not necessarily the case that the Government would appoint the Tote board as first directors of the successor company. I beg to move.

Lord McIntosh of Haringey

I start by echoing what the noble Lord, Lord Moynihan, said about the current and former members of the board. There will, in due course, be an opportunity to pay tribute to them more formally.

It is our wish that the Crown should own the successor company for as short a period as possible. If that were to be, as the noble Lord, Lord Moynihan, suggests, a period of even a few hours, it is highly likely that the existing board would carry on. But, of course, as soon as the Crown yields the ownership of the successor company to a racing trust, the Racing Trust will have something to say about who will be the directors. That seems entirely reasonable.

If there is any delay in the transfer of the ownership of the successor company to the Racing Trust—which is not what we want, but we have to allow for the possibility—or if the Racing Trust has a different view, then under those circumstances it would not be the case that all the members of the board would continue as members of the successor board. So both statements made by Richard Caborn were correct.

Lord Lipsey

Perhaps I may add to the Minister's remarks. The shadow trust has considered the question of continuity. It is our intention that the existing members should continue, if they are willing to do so, and be replaced under the terms of our articles of association as their terms of office fall due.

Lord McIntosh of Haringey

That is very helpful. It is not of course a matter on which the Government would seek to intervene.

I forgot to answer the point made by the noble Lord, Lord Moynihan, about TUPE. It will apply to all staff, including the executive directors.

Lord Moynihan

I am grateful to the Minister. He has not clarified which of the contradictory statements made by the Minister for Sport is accurate. I take it from his intervention that, despite the wholly contradictory reports from another place, the Government have no intention of changing the board of directors. But, as he wisely and rightly said, it would be wholly appropriate for the Racing Trust, as it would then be, rather than the shadow Racing Trust, to give due consideration to the composition of the board in the light of its future strategic plans. As a result of those exchanges, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6.15 p.m.

Lord Moynihan moved Amendment No. 4: Page 3, line 2, at end insert— ( ) The successor company shall be wholly owned by the Crown for not more than one year after the appointed day unless a draft order permitting an extension has been laid before, and approved by a resolution of each House of Parliament.

The noble Lord said: Amendment No. 4 seeks to place a check on the Government's ability to keep the Tote as a nationalised body. It is a little more than a probing amendment because we see it very much as a safety measure which needs to be put into the Bill.

As mentioned during Second Reading, the Bill requires the Committee to take a great deal on trust. We accept that it is the Minister's personal intention—echoed again today—that the Tote will be privatised and that the Government believe that this is best achieved by first nationalising it. We also accept that the Minister fully intends that the Tote should remain nationalised for only the briefest period.

However, it is worth reiterating that I can find absolutely nothing in the Bill that requires the Tote to be privatised. nor can I find any limit on the time the Tote can remain a nationalised industry. So I turn, as I so frequently do, to the Minister for Sport in another place to throw light on this subject. He recognised that the situation could occur, which he rather inelegantly described as the "nuclear option", where it is not possible to sell the Tote to a racing trust and the Government would have to go away and think about how best to proceed.

Given the Government's intention to sell the Tote to a racing trust, it may take Ministers some considerable time to work out how best to honour this manifesto commitment—if, indeed, the Chancellor of the Exchequer of the day intends to honour that commitment at all. A new racing trust may have to be developed. All of this could take time.

The intention of the amendment is to place on the Bill a check on the length of time that the Tote can remain a nationalised industry without the approval of Parliament. I have decided on a maximum period of one year, which, in my view, is more than generous. Indeed, I was initially tempted to go for a period of a month. I can assure the Committee that the choice of a year is not because there is likely to be another government in charge at that time—although that is highly likely and would certainly speed up the process—but if in a year they failed to privatise the Tote, there would be a serious case of incompetence added to a breach of faith by the Government.

Before noble Lords protest that such incompetence is unlikely, I should like briefly to reflect on the fact that on many occasions in the sporting world—for which I have the honour to be my party's spokesman—a series of commitments are given which are simply not delivered. I regret to say that one was highlighted earlier today. A sum of £1.5 billion of lottery money has been invested in sport with the intention of' increasing participation. With £1.5 billion spent on sport, one might expect to see a 10 or 15 per cent increase in participation. But what has happened over that period? There has been a 0.3 per cent increase in participation in sport in this country.

So I am hesitant to say that commitments are honoured by the Government. That is a clear case of a commitment that has not been honoured. In this context, it would be helpful to learn how long the Government anticipate the Tote would be a nationalised industry in the "nuclear option" scenario. Similarly, can the Government give the Committee any guarantee that there will be a limit on the amount of time the Tote will remain nationalised? If, as I anticipate, we will have good words and support from the Minister, I hope he will indicate that it is inconceivable that the Government will not get their act together and privatise the Tote within a year and that my amendment can be readily accepted. It would be a useful backstop and in the interests of racing.

I hope that the Minister will say that, because of the competence of the Government, such a scenario is inconceivable and that he will accept the amendment. If he is unable to give such a guarantee, we may have to come hack to the amendment at a later date. Once again that would underline the fact that the Government have very serious worries about seeing through their aspirations and commitments in the context of this legislation—so serious that they are not even prepared to place a backstop on the face of the Bill, which all reasonable men would agree was a very long period. We trust that the measure will never be needed, but the world of racing would sleep more soundly at night if it were known that a check was in place. I beg to move.

Lord McIntosh of Haringey

We do not want to retain Crown ownership of the Tote for more than a day. A few hours was suggested, and that would do very well. There is no reason why we should retain Crown ownership of the Tote for this period; there would be no benefit to us in doing so. This is not nationalisation, as the noble Lord, Lord Moynihan, very well knows. We intend that the sale to the Racing Trust will occur as soon as the Tote is vested, under the appointed day order, in the successor company.

More to the point, we can ensure that that is the case because we will not transfer the assets of the Tote until a deal is ready. So there will be no question of the Crown being the owner of the successor company for a year. Even if there were, referral back to Parliament would not do any good. It would not make any difference because the deal would still have to be done in an open and transparent way.

Lord Moynihan

I am grateful to the Minister for that response. The only issue with which I disagree is his last point. It is unquestionable that, should this scenario of a year take place and the incompetence of the Government were such that we did not have an appropriate plan for the interests of racing to put before Parliament, there would be an outcry on the Floor of the House. It would be absolutely right and appropriate if there were. In such circumstances, the political fall-out and the significance would be very considerable.

I regret that the Minister has not accepted this very tame and helpful amendment. In the circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 3 agreed to.

Clause 4 agreed to.

Clause 5 [Pre-sale issue of shares, &c. to government]:

Lord Moynihan moved Amendment No. 5: Page 4. line 6, leave out subsection (7) and insert— ( ) Where a security is issued in accordance with a request under subsection (1) to the Secretary of State or his nominee, neither the Secretary of State nor his nominee shall dispose of the security without—

1. (a) the consent of the Treasury, and
2. (b) a draft order setting out the mechanism for establishing the price for the security being laid before, and approved by resolution of, each House of Parliament."

The noble Lord said: The amendment seeks to ensure that Parliament agrees that the mechanism for establishing the price of the Tote, and the process for such agreement, is placed on the face of the Bill. I regard it as an exceptionally important amendment.

I fully understand that in the discussions we have had to date it is not possible for the Government to outline the price. I fully appreciate that it is not possible for the Government to reflect details of the commercial negotiations on the face of the primary legislation. But I do think that it is reasonable for the Government to place on the face of the Bill the mechanism for establishing the price and the way in which they are setting out their stall in the context of the negotiations.

It is important that this should be done. It cannot be overestimated how important horse racing is in this country. I have mentioned that there are 59 horse race courses in Great Britain. The arrival of television in the sport in the 1950s and the 1960s, which brought it into the living rooms of the country as horse racing became a regularly televised sport, has led it to become today the second most widely televised sport after football.

It is incredibly important as an industry and a sport. Attendance is increasing as it becomes more popular. There was a drop in the 1970s and 1980s, but racing boasted an attendance figure of 5.5 million in 2002, the highest figure since 1959. In 1996, the horse racing and associated breeding industry employed some 35,000 people, including 11,000 related to the work of race courses, 20,000 in breeding and training, 3,000 on-course bookmakers and about 750 jockeys and support staff.

The reason for stating that is so that there can be no doubt about the importance of the industry and its popularity in the country. Central to the success of the industry and to returning proceeds to racing is the Tote. We have heard a good deal about the Tote today, but the turn-over from the Tote and the importance of pool betting cannot be overestimated in terms of the vital contribution it makes to racing in the United Kingdom.

I seek once again to place as much detail as possible on the face of the legislation to ensure that all the aspirations outlined by the Government are translated into reality and that money is ploughed back into racing, which is such an essential part of our sporting life. Indeed, it is an essential part of community life the length and breadth of the country, particularly towns and villages dependent on racing.

The more the Government charge racing for the Tote, the more damage to such communities there will be. The more the Tote has to borrow to pay the Government for its freedom, the higher will be the annual interest charges and the less there will be returned to racing, on which these communities depend. The amendment would ensure that the House had the opportunity to approve the pricing mechanism the Government will use, which is an essential part of the process of privatising the Tote. We have heard a good deal about it but there is very little detail in the Bill. In fact, there is no detail in the Bill at all on this subject. I believe that there should be.

The pricing mechanism is fundamental to the whole of Part 1 of the Bill, yet in another place the Minister for Sport said, I reiterate that further details on the mechanics of the sale and, in particular, the identity of the purchaser cannot be provided in the Bill. Parliament is asked to support the Bill on that basis".—[Official Report, Commons Standing Committee D, 20/1/04; col. 35.] As has been mentioned previously by many noble Lords, there are reservations about taking the Government on trust. If the pricing mechanism is such that the price required by the Treasury is too high, the whole edifice on which the Bill is constructed will collapse.

What will be tragic for racing is that Parliament will have no say in what happens thereafter. We will have provided racing with firm legislation that relinquishes any parliamentary control or influence over the way that the Government move forward on that basis. In those circumstances, the shadow Racing Trust would be unable to afford the Tote and we shall be left in a situation where the Government must choose between keeping the Tote as a nationalised industry and selling it off to a body other than a racing trust.

Both options would involve breaking manifesto commitments. I firmly believe that the purpose of Parliament is to act as a check on government and to provide our considered responses to proposed legislation. It is not about opposing the will of the other place but about ensuring that the other place does what it promises. I see absolutely no reason why the Minister should refuse to allow Parliament the right to approve the pricing mechanism for selling the Tote. The amendment does not insist that Parliament should micro-manage the sale of the Tote; rather it ensures that a proper pricing mechanism is in place to best look after the interests of racing and taxpayers. I beg to move.

6.30 p.m.

Viscount Astor

I shall speak to Amendment No. 8, which is in this group. I apologise to the Committee because it is not what I meant it to be. It is probably my fault that it does not say the right thing, but the principle is there. I had hoped to cover the issue of pricing in the amendment, but one sentence was missed out. I wanted it to say that the amount the Tote could be sold for would be a multiple of its contribution to racing; in fact the amendment states that it would be its single contribution to racing in that year.

I seek an assurance from the Government about pricing. My noble friend said how important the Tote is for racing. It is absolutely crucial for racing. Racing is under threat at present. The Committee will have noticed that "At the Races" has ceased to exist and that we run the risk of television not covering as much racing as in the past. Although the bookmakers are doing very well, the Committee will also have noticed the rise in the numbers of those who make spread bets. The Minister will know that the Treasury take from spread bets is much smaller than that from normal bets. The greater spread betting grows, the less money goes into racing. So racing needs the Tote.

My amendment is intended to place a maximum price on the sale, although I am not sure that my amendment necessarily provides the right one. I seek an assurance from the Minister, which I hope he will be able to give, that the purpose of the Bill is not only the privatisation of the Tote and its handing over to a racing trust, but to do so in a way that benefits racing. Does he accept that if the price that is negotiated is so high—and we must remember that all the money will be borrowed—the Tote's contribution to racing will be cut? In that case, surely there would be no point in doing it. There would be no benefit to racing and so we might as well leave the Tote where it is.

The assurance I seek from the Government is that during the negotiations they will keep in mind that their laudable ambitions contained in the Bill will not succeed if the trust that owns the Tote is burdened with such high borrowing on the price it has to pay that it must significantly cut its contribution to racing. If that happens, racing will be worse off and we will all begin to wonder why we are doing this. I am sure that the Minister would rather give a helpful assurance than include any words on the face of the Bill. If he can therefore give me an assurance on the terms that I have outlined, I would be happy not to move my amendment.

Lord Lipsey

The case for the amendment would be hugely weakened if the Minister had accepted Amendment No. 2. In that case, the Racing Trust would have had its negotiations obviously with the interests of racing firmly in mind. If we did a deal, I am sure that everyone would expect—coming from where we are and comprising racing bodies—that it would be in the interests of racing. If not, Ministers would have to come back to justify themselves. The most likely reason for negotiations breaking down would be that the Government had asked far too high a price, and they would have to come back to justify that to the House.

The reason that we cannot leave that perfectly excellent mechanism in place is because the Government will not say that they will come back to this House. Therefore the instinctive desire of the House is to tie them down on the mechanisms. I would rather avoid tying them down on the mechanisms.

Noble Lords

Oh!

Lord Lipsey

This is an earnest of the vote we will get on the Floor of the House when we return with Amendment No 2.

I would rather have the flexibility in negotiation, on which the Minister has placed such a strong emphasis today, but we can only have it with a clean conscience if he will accept Amendment No. 2, or something like it, when we reach the next stage.

Lord McIntosh of Haringey

Amendment No. 5 would require us to specify the price mechanism of the Tote presumably in an affirmative order that would have to come before Parliament. Amendment No. 7 would require us to dispose of the security at a 50 per cent discount to the market value. Amendment No. 8 would not allow the Tote to be sold for a sum exceeding £11 million. The noble Viscount, Lord Astor, has agreed that that is not what he intended.

Viscount Astor

However laudable.

Lord McIntosh of Haringey

We really are seeking to put in the Bill, or, in this case, into regulation, matters that should be part of negotiations. Indeed, I can assure the Committee that they are already part of negotiations. I said that the Racing Trust had appointed Rothschild. We have already appointed PriceWaterhouseCoopers. Those advisers are working on the negotiations. The valuation will use methods known to both parties and already used by both of them. There is nothing underhand about it. That is the way in which negotiations should take place. They should not take place in Parliament. They should not be, and could not be, the subject of debate on an affirmative resolution. The Select Committee on Delegated Powers and Regulatory Reform did not suggest that that would be an appropriate matter for an affirmative resolution and I hope that we will agree with it.

Viscount Astor

I do not seek in any way to negotiate in this Committee or to bind the Government only to the terms of negotiation. I seek from the Minister a confirmation of something that I think that the Government believe; namely, that when they go into the negotiation, their aim will not be to conclude the negotiation in a manner by which racing would be worse off as a result. That is my simple point. The aim of the negotiation should be that racing is no worse off. The whole process should be for the benefit of racing. Therefore, will the Minister offer me some words of comfort that that is the case? I am sure that nobody would want to see the Tote's contribution to racing severely diminished as a result of the Bill.

Lord McIntosh of Haringey

The noble Viscount, Lord Astor, is being helpful by saying "as an aim". It is our aim that the outcome of these negotiations for an exclusive licence for seven years should be that support for racing from the Tote continues. Whether it can continue at exactly the same level depends on the commercial success of the Tote under the Racing Trust's ownership, so we cannot guarantee a figure, but our intention is that it should continue on broadly the same basis.

Viscount Astor

I am extremely grateful to the Minister. That is very helpful.

Lord Moynihan

I am slightly disappointed by the Minister's response because he has missed an opportunity, particularly in light of the comments of the noble Lord, Lord Lipsey, about the Committee's regret at the Government's unwillingness to accept his Amendment No. 2. The noble Lord said that we should find alternative opportunities to place in the legislation what we assumed was agreed by everyone concerned with this privatisation, and particularly by everyone who was concerned to ensure that the maximum return for racing could be made.

In the context of Amendment No. 7, the Minister for Sport stated in another place that there would be broadly a 50:50 split of the asset between the taxpayer and the racing industry, because he believed that that was fair. He went on to say that the Government have given an absolute commitment that there will be an independent valuation. Should that commitment be included in the legislation, it does not seem that it would impact in any way on the negotiations. On the contrary, it would give far greater comfort to all Members of the Committee if that were the case.

My noble friend Lord Astor took an equally strong position. In the absence of any other protection, it is right that the Committee should put a ceiling on the amount of money that the Government charge for selling something that they do not own. I therefore regret, once again, that the Government are resisting amendments to clarify their intentions. They should not in any way intervene in the negotiations. but should make it extremely clear in the legislation how best they can achieve a maximum return for racing as a result of the privatisation process.

As the Committee will be well aware, and as my noble friend helpfully pointed out, the Racing Trust must pay for the Tote with money that it will have borrowed and the interest payments will come directly from money that would otherwise he returned to racing. My noble friend has done a huge amount of invaluable work on the subject right back to his Private Member's Bill in 2000 and should be congratulated not only on his foresight about the importance of privatising the Tote but on his consistent representations on this subject and his expertise.

It is therefore with great regret that our sensible set of amendments could not at least be accepted in principle by the Government, taken away and brought back on Report in the form that would meet the Government's expectations. After all, they reflect everything that the Minister has been saying. I am even more disappointed about Amendment No. 7, because it is self-evidently clear that we should place the 50:50 split, the 50 per cent discount, in the Bill which, we are now told, is a clear commitment by Cabinet. That is not even an aspiration of the Minister for Sport, however important he may be in another place; that is something that has been to Cabinet and is now policy at Cabinet level—not Cabinet sub-committee.

Lord McIntosh of Haringey

The DA Cabinet committee.

Lord Moynihan

Well, there was absolutely no reference to the Cabinet sub-committee in an earlier intervention from the Minister. Some rapid historical revisionism may take place, but it was the Cabinet that was referred to. I see nodding around the Committee. A sub-committee of Cabinet is second best, but I hope that that at least should give the Government sufficient comfort to place in Clause 5, which goes right to the heart of the Bill, the appropriate parameters that would reflect the will of both Houses to maximise the interests of racing in the whole process.

I am disappointed. I fear that there may be a vote on the amendment tabled by the noble Lord, Lord Lipsey, although I took careful note—again, I hope that I have not misheard what was stated earlier—that the Minister was at least willing to take it away to consider it. He said that he would reread the transcripts of the debate that took place on that important clause. I hope that that rereading and consultation with his advisers will allow him to come back on Report and reflect the will of both Houses. After all, that is the whole basis on which the legislature is here: to assist the executive and the Minister. In the absence of that, I will certainly again raise these parameters—not intending in any way to intervene in the negotiations—on the Floor of the House later. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6.45 p.m.

Lord Moynihan moved Amendment No. 6: Page 4, line 8, at end insert— ( ) Where a security is issued in accordance with a request under subsection (1) to the Secretary of State or his nominee. neither the Secretary of State nor his nominee may dispose of the security unless satisfied that any surplus of income arising from the use or exercise of the security will be used for the purposes of the improvement of horseracing.

The noble Lord said: Amendment No. 6 is very interesting. It relates to ensuring that when the newly nationalised Tote is sold, it is sold to a body that will continue to invest the profits in racing. We have covered this issue, so I can brief. But my brevity will not detract from my strong view that we want to ensure that the improvement of horse racing is paramount in this legislation, and that it is the heart of the Government's intention and the will of Parliament to ensure that that is reflected. It is important that the Government's commitments in public are in the Bill.

We have a duty to ensure that the Bill does not undermine the unique contribution from the Tote to racing. As has been pointed out, that was worth more than £10 million last year. As the noble Lord, Lord Davies, said at Second Reading, the Bill, provides for the vesting of the Tote's assets in a successor company wholly owned by the Crown and then the subsequent sale of that company.—[Official Report, 2/3/04; col. 553.]

There is nothing in the Bill about to whom the successor company will be sold. There is nothing to stop the Treasury deciding that it needs to maximise its revenue, which it will certainly do if it continues with its spending plans, and sell the Tote to the highest bidder, regardless of the benefits to racing.

Noble Lords will be only too aware of instances where the Government have not always honoured their commitments. I know that eyes were raised towards the screens in the Committee Room noting that there was a classic example of a manifesto commitment that has slipped being considered in another place; namely, on the question of tuition fees. The amendment does not suggest that there should be only one potential buyer, as the noble Lord, Lord Davies, feared at Second Reading. Rather, it would ensure that the Tote is sold to a not-for-profit body, which will return a surplus of income to racing. There could be any number of such bodies wishing to bid for the Tote.

I should very much like to tie the Government's hands tightly so that there is only one potential buyer. But I appreciate that it is not Her Majesty's Government's wish on this occasion. Nevertheless, given that there is disagreement on that and that we shall not reach accord on that point, we have a duty to ensure that the legislation reflects what the Government intend. We would very much welcome the Government's clarification of a point raised in another place when the Minister for Sport and Tourism said: If we cannot sell it into a racing trust, and the House of Commons has said that it wants to sell the Tote. we will be in some difficulties. We would have a piece of legislation instructing us to sell the Tote, and would therefore have to consider options".—[Official Report, Commons Standing Committee D. 20/1/04; col. 26.]

First, does the Bill instruct the Secretary of State to nationalise and then sell the Tote or does it merely make provision for the sale of the Tote? I believe that we all know the answer to that, but it is worth reinforcing in the context of the amendment before the Committee.

Secondly, can the Minister confirm that the Government are clear that they want to retain the right to sell the Tote to whomever they so choose? Again, in the context of the clause, I regret that that is the case, which mitigates against all the commitments t hat have been given. I am strongly of the opinion that it is the responsibility of the House to hold the Government to their promise to sell the Tote to a shadow racing trust. That is what my amendment seeks to achieve. I beg to move.

Lord McIntosh of Haringey

I have little to add to what I have already said. The noble Lord, Lord Moynihan, admitted that he had very little to add to what he had already said, although he did add it. We made it quite clear that the Government intend to sell the Tote to racing interests. Currently, those interests are represented by the Racing Trust. Every action that we have taken over the past few years has been geared towards the sale of the Tote to racing. If we had wanted to do something else, we would have had a different Bill. We would consider an alternative only if that option were closed off to us.

In those circumstances, we would know that we have two choices; either to keep the Tote in the public sector—we have discussed how that is undesirable—or to sell it to someone else. The principle is widely accepted that state control is not appropriate. The only viable option would be to sell in the open market. For the life of me, I cannot think what benefit there would be to have a prohibition of this kind, the only effect of which could be that if there were no alternative that helped racing to keep it in the public sector.

A sale to racing is our only aim. We will do everything in our power to achieve that. But we cannot put a statement of this kind in the Bill.

Lord Moynihan

Again, I am disappointed. I regret that there will be a consistent theme running throughout our discussions of the Bill or, rather, Part 1—we will be relieved from the consistent theme when we reach Parts 2 and 3, where we have more substantial issues of disagreement. It is all well and good to accept the principles, but it is inadequate for legislation to pass through Parliament without as high a degree of clarification about intent as possible. That is bad law. It does not reflect the will of Parliament. It is an enabling measure. It is a blank cheque.

Here, we have an opportunity to write into the Bill modest indications of direction—indications of direction that have been made patently clear by the Minister and in another place and would be completely comfortable, if I may use that rather unusual legislative expression, in the Bill. So it is deeply disappointing, in the context of broken promises elsewhere in another Chamber concerning manifesto commitments, that we cannot have a clarification that there could conceivably be no broken promise on the Bill. But so be it. We have the opportunity to return to the subject later. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 7 not moved.]

On Question, Whether Clause 5 shall stand part of the Bill?

Lord Moynihan

I do not hesitate to address the subject as frequently as I can because I believe very strongly that it is in the interests of racing to encourage the Government to clarify in the Bill their position on the sale of the Tote. However, I shall take a different approach, a different angle, on clause stand part. My approach is again probing and offers the Government the opportunity to think about the points that have been raised.

I shall do so by recapping the comments made by the Minister for Sport in another place when he was asked by the MP for Bath whether there were any circumstances in which the Government would be prepared to sanction the sale of the Tote to a body that did not intend to put its profits back into racing. I have heard from the Minister this afternoon that the answer to that is no: the Government absolutely intend the sale of the Tote to be made to a body that will put its profits back into racing. The Minister for Sport said yes: The answer is yes, we would sell into something. If we cannot sell into a racing trust, and the House of Commons has said that it wants to sell the Tote, we will be in some difficulties. We would have a piece of legislation instructing us to sell the Tote, and therefore we would have to consider options".—[Official Report, Commons, 20/01/04; vol. 26.] That drives a coach and horses through the Bill. Members of the Committee have said, rightly, that they would prefer to have the Tote as it is today than to move to a position where it was not sold to a racing trust. The Government are on record as saying, "Yes, it is possible that if we do not sell into a racing trust, because we are mandated by the legislation to nationalise and because it is our policy to sell, albeit that we will be 'in some difficulties', the answer is yes, we would sell into something". That "something" is not defined. I assume that they would take the best market price when it came to an offer from one of the big bookmakers. That quotation from the Official Report should be repeated, analysed and considered again on the Floor of the House because it does not say, "We will leave the Tote as it is with all its benefits if we cannot sell it on agreed terms to a racing trust in the interests of racing". It says, "Yes, pass this legislation and we will sell it"—to something, anything, nothing defined. That is absolutely unacceptable, as I shall argue later. The Minister in another place then got very upset. He became agitated and emotional, saying: If people want to debate this matter in the Oxford debating society, that is fine but this is not the Oxford debating society; it is the real world. I am not prepared to tic the hands of our negotiators so that they are limited in their negotiations".—[Official Report, Commons, 20/1/04; col. 27.] Indeed, it is the real world. The fact that the Minister for Sport could say that the answer is, "Yes, we would sell it into something. If we cannot sell it into a racing trust and the House of Commons has said that it wants to sell the Tote, we will be in some difficulties", is extremely serious. I suggest to the Minister that if that statement cannot be comprehensively refuted, we should draw up an amendment stating that if it is not sold to a racing trust, it will not be sold.

This issue has arisen as a result of some extremely helpful contributions this afternoon. It is important and, in the context of Clause 5, I suggest that we give it further consideration if the Minister cannot give an absolute undertaking that the Tote will be sold in the interests of racing. If he can give that absolute undertaking, let us find a way to write it into the Bill, because there is no reason not to. My reading of the Long Title is that it makes provision for the sale of the Tote. In making provision for the sale of the Tote, I hope that the Government would not be prepared to sell it to a private company that does not return any profits to racing.

The Committee deserves a categorical statement to that effect. Because of the comments made by the Minister for Sport in another place, if a categorical statement to that effect cannot be written into the Bill, we will need carefully to consider the further passage of the Bill on Report and Third Reading. At least one of Parliament's roles is to focus on such points. This clause stand part debate gives us the opportunity to hear further clarification from the Minister. I hope, unequivocally, that the Government would not sell the Tote and change its current status if it meant that the profits and proceeds would not go back into racing. If they cannot say that, much of the good will and support that has been expressed in Committee for the Minister will evaporate.

Are the Government really saying that their negotiators must have a free hand to get the best price possible, irrespective of the impact on racing? Surely, and hopefully, Ministers have told the negotiators that they would not countenance selling to any body other than one which would ensure that money goes back into racing and that that is the only way in which the ministerial team would approve the negotiations.

Lord Lipsey

This is yet another debate that we would not need if the Minister had only accepted Amendment No. 2. If it had been accepted and if the Government were going to sell the Tote to someone else, they would have had to come back to Parliament. make their case and explain how racing would benefit from an alternative method of sale. That would be fine and there would be no point in discussing it now because we hope that we would not go down that route. We enter all this time-wasting complication simply because of the Government's failure so far to see the desirability of the change proposed in Amendment No. 2.

Lord McIntosh of Haringey

I do not think that I have anything to add to what I said a few minutes ago. I said that our intention is to sell the Tote to racing interests, which are currently represented by the Racing Trust. In response to the previous amendment, I said, "I think the principle is widely accepted"—now I have to say that I thought the principle was widely accepted that state control is no longer appropriate and is constraining the Tote's future development. That means that we would be left with only one viable option: a sale in the open market.

If the noble Lord, Lord Moynihan, thinks that returning the Tote to its existing state is better than an onward sale, failing a sale to a racing trust, he should table an amendment to that effect. Removing Clause 5 would not achieve that.

Lord Moynihan

I immediately respond to the Minister by saying that I understood that that was the Government's position. Let me put the question bluntly and directly: are there any circumstances in which the Government would be prepared to sanction the sale of the Tote to a body that does not intend to put its profits back into racing? The answer is "Yes" or "No".

Lord McIntosh of Haringey

It is not possible to answer questions with a "Yes" or a "No" just because it is convenient to ask them in that form. Any betting operation, in a sale on the open market, would then have to bring money into racing because it would have to pay for access to race courses and pictures. I n any case, we have always said that racing will be compensated in some way, and we still take that view. There is no possibility of holding a sale which would not bring some benefit to racing.

7 p.m.

Lord Smith of Leigh

Will my noble friend concede that, along with the interests of racing. there are the interests of the Tote as an organisation and an employer? Clearly, if a sale was made to a third party which we do not know, it could well be that the organisation is broken up and the Tote itself closed down. The buyer could simply asset strip the organisation. That is why noble Lords are unwilling to give the form of blanket approval required here.

We know what the Government would like to do and we concur with that. But if it does not happen, for whatever reason, I am afraid that, in my view, the alternative is worse than the status quo. Perhaps we should take a little time to come back with a different plan from the one put forward.

Viscount Astor

I rise to support the noble Lord, and I refer back to the previous amendment. The purpose of what we are doing is for the benefit of racing and the Tote: to enable it to expand and do all the things that it cannot do while constrained in its present form. The Tote should be able to grow and thus benefit racing.

Should the scenario arise, for any reason, in which a sale to the Racing Trust does not succeed, there would be no benefit in a sale to a third party for whatever the sum of money. The Minister has said that racing would in any case get some money. Perhaps the Government would hand out a sum of money. but who is to know what that would be? Would it be some millions, or even hundreds of millions? However, we do not know who to hand it to and we do not know how racing would benefit from it.

The Minister has also talked about how a sale to a third party would benefit racing because of data rights and television rights. However, we have just seen a total collapse in the value of television rights. "At the Races" has ceased to broadcast. Everyone thought that the rights would be hugely valuable, but what happened was quite simple: the programme producers thought that when they broadcast live pictures, viewers would then click and use their betting service; however, while everyone watched the programme, they would use their own telephones to contact their spread-betting bookmakers and thus did not use the television betting service. No income came in and that is why we no longer have "At the Races".

So all those data rights which form part of extremely complex negotiations being conducted at the moment between the BHB, the racecourses and so forth are going forward when their value is an unknown quantity. The only thing we do know is that whatever was the value put on them a year ago, it is a great deal less now.

I support the noble Lord who has just spoken. Racing would not benefit in any way from a sale on the open market, however much a third party paid and even if the Government stepped in saying, "We have done brilliantly. We have sold the Tote for much more than we ever thought possible. So, here you are, horse racing interests, that is your pot of money". Who would get the money, how would it be spent and what good is that to racing in the long term? On that basis, racing would not benefit at all.

Viscount Falkland

I want to add my piece to this debate. I support the noble Lord because it is obvious to me and to other Members of the Committee that should the sale founder, the interests of other buyers would lie in the betting shops which form 78 per cent of the overall turnover of the Tote. At present, aside from taxation, all the profits from those betting shops are put back into racing. If they were acquired by other parties, their profits would go into international hotels, casinos and God knows what else. So there is obviously an interest within racing, one that is reflected in the almost unanimous views expressed in this debate, that should this sale not take place, racing would suffer.

This has been a useful debate because we have been able to identify at least a shadow of the problems that may arise. As I have said before, if the sale does not take place, the most reasonable thing to do would be to go back to square one and consider the position. I cannot see why it is not possible for the Government to embrace this concept in the Bill.

Lord Moynihan

I, too, am grateful to the noble Lord. I am slightly surprised, as I had thought that the Government had accepted everything that he has said, and which has been repeated around the Committee. I had thought that the absolute principle of moving ahead with this nationalisation—the Minister objects to my using that word—was that the subsequent privatisation arising from the sale of the Tote would be to ensure that it smoothly transferred to a racing trust because the principle of putting profits back into racing was a fundamental of the Government's approach to the sport. I had thought that that was a condition. It may be difficult to write such a condition into the legislation, but I had thought that it was an absolute commitment made by Ministers.

That is why I was so worried that, when the question was addressed in another place by the Minister for Sport, instead of responding immediately by saying "No, we do not intend to sanction a sale of the Tote to a body that does not put its profits back into racing", he said, "Yes". I find that unhelpful to the Committee—to use parliamentary language suitable to the House of Lords rather than the Commons. It is unhelpful that the Minister is not prepared to give a "Yes- or "No" answer. If he could repeat what his colleagues have been saying, except for what I assume was just a slip of the tongue on the part of the Minister for Sport on 20 January, and if they said that the Government would not be prepared to sanction a sale of the Tote to a body that does not intend to put its profits into racing, and that they would not be prepared to sanction a sale to a body that would asset strip the Tote, get rid of pool betting and maximise the value of the shops, we would be satisfied. But if the Minister is not prepared to stand up and make those two commitments then he is driving a coach and horses through all the other commitments that we have been given both this afternoon and in another place. That would be unacceptable.

Does not the Minister recognise that all he has said mitigates towards a successful sale to the shadow Racing Trust and, in the absence of that, neither he nor this Government will countenance a sale to any body that does not put the profits back into racing or is prepared simply to asset strip for a cheque that will go to the Treasury? That will deeply damage the future of racing, because we will lose £10 million after £10 million—even more under the licence, it is hoped—of funds on which the sport so desperately depends. It is not a difficult question. Can the Minister give a clear commitment to the Committee that the answer to the question whether the Government are prepared to sanction a sale of the Tote to a body that does not intend to put its profits back into racing is "No"?

Lord McIntosh of Haringey

I have given the answer already. It is our intention to sell the Tote to a representative of the racing industry, being the Racing Trust. If that were not possible for reasons beyond our control, we would have to consider the possibility of a sale on the open market. To say other than that would be to tie our hands in negotiations in a way that would be quite unacceptable.

To say that one would rather that the Tote should stay in public ownership than be sold on the open market is to express a legitimate point of view, one that I understand and am prepared to deal with in debate. But that is not what would be achieved by deleting Clause 5.

Lord Moynihan

This is very important. I shall press the Minister until we are absolutely clear. If I say something with which the Minister disagrees, I hope that he will intervene. What he has just said is that, ultimately, this is a privatisation that will take place irrespective of whether or not racing benefits from it. This is a straightforward sale. The Minister hopes that it will not be. The aspirations of all Members of the Committee are based on the hope that it will not be, but there is no position beyond which the Minister and the Government will not go to sell the Tote, irrespective of the benefits that will or will not accrue to racing.

I say to the Minister that that is now very clear to the Committee. It mitigates against all the aspirations that have been expressed, because the position is now overtly clear: the Government are prepared to sanction the sale of the Tote to a body that does not intend to put its profits back into racing rather than continue with the status quo. I am grateful to the Minister for making that clear.

Lord McIntosh of Haringey

What is clear is that the Government cannot legislate to control things which are beyond their control. They cannot legislate for other people; only for their own decisions.

Lord Moynihan

But the Government have every opportunity to establish control over the sale process. They can do that on the face of this legislation. There is nothing to stop them from coming forward with an amendment saying, "We will not sell the Tote to any body that does not put the profits back into racing". That is absolutely within the control of Ministers. Officials can write a dozen amendments to that effect, all of which, if presented to Parliament, I anticipate, would be well received. I repeat, that is totally within the control of the Minister. To say that it is not within his control is to be misleading.

I know that the Minister would never wish to mislead the Committee, but he has every opportunity to table amendments to this legislation which would ensure that under no circumstances would the Government sanction a sale of the Tote to a body which could asset strip the organisation, pocket the profits and proceeds from a sale of the shops—which is where the real financial benefit accrues to whoever owns the Tote—and the pool disappears overnight. Given what the Minister has said, that would be perfectly possible.

It would be equally possible for him to draft amendments to prohibit any future government, acting on the basis of this primary legislation, from so doing. Instead, he could accept the proposal made by his noble friend which would allow—in circumstances which we very much hope will not arise—the Minister to come back to Parliament and say, "We have not concluded a successful negotiation. The status quo at the Tote will continue".

Lord McIntosh of Haringey

Apart from the fact that no government can legislate to bind their successors, which I am sure was just a slip of the tongue, the Government cannot legislate to secure a buyer who will devote the proceeds from the Tote to the racing industry. They cannot do that because it is not within their control. All that the noble Lord, Lord Moynihan, is saying is that if that is not possible, he would rather the Tote were kept in public ownership. That is a legitimate point of view.

Lord Moynihan

I have to press the Minister on this. Why cannot the Government introduce an amendment to that effect?

Lord McIntosh of Haringey

The Government cannot produce a buyer for the Tote. That is not within our control.

Lord Moynihan

I am not asking the Government to do that. I am asking for conditions for the sale of the Tote to be put on the face of the Bill, which the Government are absolutely entitled to do. I hope that they will do so because, in various circumstances, we have been pressing for that all afternoon.

For the Minister to say that he cannot do that implies that there is some legal reason why it is not possible. There is no legal reason why the Minister cannot come before the Committee with amendments which seek to place on the face of the legislation the conditions which the Government are proposing to Parliament should apply to the sale of the Tote. I have to say to the Minister that that is a fact. The Minister says that the Government cannot come forward with amendments to that effect. Would he be kind enough to explain to the Committee why not?

Lord McIntosh of Haringey

If no one comes forward with an offer that delivers a return of the profits that would benefit the racing industry, there are then only two alternatives. The first is that the Tote is sold on the open market; and the second is that it is kept in public ownership. The noble Lord, Lord Moynihan, is saying that he would prefer to see the Tote kept in public ownership rather than he sold on the open market. He is entitled to his point of view, but Clause 5 does not secure that.

Viscount Astor

I do not expect an answer today, but had the Minister accepted Amendment No. 2. moved by the noble Lord, Lord Lipsey, we would not need to go over this point so often because it would all be irrelevant. We have come down to one important issue—I hope I have got it right; the noble Lord will correct me if I have not—and that is that should a sale to a racing trust fail then, rather than keep the Tote in public ownership, the Government would prefer to put it on the market and sell it to the highest bidder. If that were to happen, can the Minister tell Members of the Committee how racing would benefit? Would it benefit from the money accrued, a point to which the Minister alluded earlier? I ask that because, ultimately, we are all trying to do something that will be of benefit to racing.

If the Minister is offering that alternative, he must be clear. He must say how racing will benefit from a sale to a third party which may do anything with the Tote. How would racing benefit in future?

Lord Lipsey

I am sorry that this is holding us up so much. No doubt it is very annoying for the Minister, too. I have explained my diagnosis of why we are getting so bogged down. I can imagine that if the Racing Trust fails—if they all fall out with each other—Ladbrokes offer £1 billion for the Tote and the Government say that racing can have half the money, racing may decide that that is preferable to the status quo.

I can imagine another situation where the Government sell the Tote to bookmaker X. Bookmaker X announces that it is closing the pool operations of the Tote which, under present rules, would make racing impossible. The Jockey Club rules state that the Tote must be present at every racecourse. The Government might say that they will give £50 million of the offer to racing, in which case the status quo would be infinitely more desirable. That is a judgment that can be made only in the light of the full facts at the time.

We have been forced into this ridiculous position of trying to make judgments about hypothetical circumstances because the Minister will not give the commitment to come back to Parliament and say, "Here is the deal. Do you support it or not?", if there cannot be a sale to the Racing Trust. This will take an awfully long time if we are to keep having this debate.

7.15 p.m.

Lord Moynihan

It would not be in the interests of the Committee to pursue this matter further. The position has been clearly established. The contributions to this clause stand part debate have been invaluable. It is something that will tax our minds later. I conclude by thanking the Minister for his ever-robust and professional manner in answering the points that I have put to him. I also remind Members of the Committee that I have never argued that the Tote should be a state-owned enterprise on the grounds that the Tote is owned by no one. We should consistently remind ourselves that that is presently the case with regard to the Tote. It was made very clear in parliamentary Answers by the Government. We should not continue to take the rather erroneous view that somehow it is currently owned by the state. It is not. It is made explicitly clear that it is owned by no one. That is the reason for the nationalisation proposals in Clause 1. As a result of the interesting exchange of views and the time, I thank the noble Lord.

Clause 5 agreed to.

[Amendment No. 8 not moved.]

Clause 6 agreed to.

Clause 7 [Shadow directors]:

On Question, Whether Clause 7 shall stand part of the Bill?

Lord Moynihan

This should be less controversial, not least because it is a probing objection to ensure that the Secretary of State and the Treasury retain their responsibilities as shadow directors. I fully appreciate the distinction between shareholders and the role of directors. For that reason this is a probing objection to elicit a response from the Minister.

Effectively, Clause 7 exempts the Secretary of State and the Treasury from their responsibilities as shadow directors under the Companies Act. In another place, the Government argued that because the Government only owned the Tote to facilitate its sale, Ministers should not have any of the obligations incumbent on shadow directors. That is an argument with which I could have some sympathy.

However, if there were a guarantee in the Bill that the Tote would not remain within the ownership of the Crown for more than 24 hours, I could see the reason for Clause 7. But, as we have heard in another place, there may be instances when the Tote remains a nationalised company for a significant period. As the Minister for Sport and Tourism, again on the famous date of 20 January, stated: If the time involved lengthens … there may be a point at which new directors have to be appointed to the board".—[Official Report, Commons Standing Committee D, 20/1/04; col. 18.] It is that combination of a prolonged period of state control and the chance that directors would change as a result of the Secretary of State's appointments that leads me to seek continuity about the roles of the Secretary of State and the Treasury to be placed in the Bill. It may be very helpful to learn some of the responsibilities that the Companies Act will place on the Secretary of State for the period when the Tote is nationalised. I look forward to the Minister's response.

Lord McIntosh of Haringey

As the noble Lord, Lord Moynihan, rightly says, the purpose of the clause is to secure that neither the Secretary of State nor the Treasury should be treated as shadow directors of the Tote's successor. There are precedents for that; I cited them in more detail than I should have done previously. If the noble Lord looks back in Hansard to my references to the colonial development corporation Act and the United Kingdom Atomic Energy Authority, he will find that I cited specific places in the Act, which I do not now have in front of me. that are precedents for the exemption of the Secretary of State and the Treasury from shadow directorships. That means that the Secretary of State and the Treasury are exempted from the controls and obligations incumbent on shadow directors—those relating to wrongful trading.

The noble Lord rightly referred to the proceedings in the Commons on the role of government, which is only to facilitate the sale in line with policy, not to become involved in the operation of the Tote's business. I have already given an assurance that goes further than anything said before by saying that it is our intention not to transfer the Tote's assets to the successor company until a deal is ready. The scenario that he puts forward of a lengthy period in which the Tote's assets are in the hands of a Crown-owned successor company will not happen.

Lord Moynihan

The undertaking given earlier was exceptionally helpful, and for it to be repeated in the context of Clause 7 is of significant value to the Committee.

Clause 7 agreed to.

Clause 8 [Exclusive licence]:

Viscount Astor

moved Amendment No. 9: Page 5, line 16. leave out "seven" and insert "ten The noble Viscount said: After being pressed, the Minister in another place put the length of the licence into the Bill; when the Bill first arrived in another place, it was not there. The licence is for seven years. My amendment suggests 10 years, but I am not wedded to any particular time. It is really a probing amendment.

We know that there were extensive negotiations between the Office of Fair Trading and the Department of Trade and Industry, which wanted a rather short licence. With its competitive hat on, it argued for three years. Presumably the Treasury had a view, although I do not quite know what it was as one could argue two ways. One could say that the longer the licence, the more valuable it was, so the greater the money that the Racing Trust might pay. Alternatively, one could say that if one cut the period down to a year, one could auction it every year and that might be even better. 1 do not know what angle the Treasury came from, but the Minister's department pressed for as long a licence as it could get away with. I commend it for getting seven years; I wish it had been and think it should be longer, but seven years is not too bad.

We will come on to another amendment—I thought that it was grouped with this one, but it is not—about whether the exclusive licence can be extended. I do not see why the Government so categorically say in the Bill that the exclusive licence can never be renewed. That seems a mistake. That decision should be made by the Government depending on the circumstances in future. They should not categorically now say that it can never he extended. If that later amendment were accepted, this amendment would not be necessary.

Therefore, I commend the Government. The seven years, rather like my 10 years, is an arbitrary term that was achieved out of negotiation between government departments. What consideration did the Government give to whether the seven-year term is compatible with any European legislation or European rules on competition? Given that a seven-year licence will be granted to the new entity, which will no longer be a public body—that body will be the Racing Trust—will the Minister assure us that the Government are confident that nobody will seek the opinion of the courts on whether it is right to give the new body an exclusive licence? Will they offer some assurance that they have received robust legal advice on both UK and European law? That assurance would be enormously helpful. I beg to move.

Viscount Falkland

Although it is not particularly relevant to the amendment—the noble Viscount, Lord Astor, said it was a probing amendment—I add my support to the questions that he asked. When the Racing Trust comes into being, as we hope it will do in light of the discussion that we have had, the licence will last for seven years. The trust will no doubt operate it with great efficiency and great success and then the end will come. All that will happen, therefore, is that the Tote will become the punters' bookmaker, if that is not a contradiction. That is all that will be left.

It seems extraordinary to the man in the street—or men on the turf—that that should be the case. The Tote has been an institution in this country for many years. The idea of a Tote monopoly is accepted throughout the world. Only here do we see it as uncompetitive. It has similarities with the lottery. If one reduces the monopolistic characteristics of the lottery, one does not generate the profits that in our case go to good causes. In the case of a Tote monopoly, one does not see the big pools and no one is interested in the slightest. Everyone bets with fixed-odds bookmakers and the whole thing withers on the vine. The whole business is very sad. It represents a crazy. British academic view, far removed from reality.

To bang on the head with a ridiculous theory of this kind the history of this country, where the Tote and racing have worked so well and been modernised together since 1928, is a disgrace to the public. Apart from regular betters, there are those who bet on the Derby and the Grand National. The Grand National is soon upon us. I doubt that very many people in this country could follow the logic of what has happened. I support—in vain, I suppose—the entreaties of the noble Viscount, Lord Astor. More in hope than expectation, he pressed the Minister to confirm that there is a possible scenario in which the licence could be extended.

Lord Lipsey

Perhaps I may add a point from the perspective of the shadow Racing Trust. The seven-year term was not arbitrary; it was the minimum. We would not have bothered, I hope, to debate the Bill if we had not been granted a seven-year licence, because a transaction for any substantial price would not have been fundable. That was the clear advice of Rothschild and the financial advisers. Nothing less than seven years would have been feasible. That is why it was so important that the Government granted the seven-year term. I have made the theoretical argument for an eternal licence and I sympathise with the arguments of the noble Viscount, Lord Falkland, but we are where we are. We can live with where we are.

The trust sometimes comforts itself by saying that at least there is the advantage that it concentrates minds on a rather short-term horizon in which we can still develop the pools and build them up, as we have great ambitions to do, so that after seven years they are impregnable. That gives us an incentive to get on with the job. My basic point is that without the seven years we would have had no Bill.

7.30 p.m.

Lord Moynihan

It is always good to finish four hours' intensive consideration of a Bill with brilliant. incisive rhetoric from all three parties of your Lordships' House, making yet again a compelling argument that will be irresistible to the Minister. I am pleased to support the amendment. It complements the others that we have discussed and will discuss on the subject. It is clear that most of the Committee would like to see scope in the Bill for extending the time limit for an exclusive pool betting licence. If, sadly, the Minister is unable to accept the amendment as it stands, I feel sure that at least we will have the opportunity to come back to the issue at a later date.

Lord McIntosh of Haringey

Those who want to secure racing's finances on a long-term basis want a longer licence; those who want to introduce an element of competition to pool betting want a shorter licence. This is a deal between the two. The noble Lord, Lord Lipsey, was good enough to say in print a couple of months ago that if the Racing Trust could not get its act together within seven years it did not deserve the licence. He has not quite confirmed that but is very close to doing so. This is the only deal on the table; there is no alternative. I cannot give an absolute assurance that there will be no challenges, but our best legal advice is that we are well placed to resist any challenge under British competition law or European law.

Viscount Astor

I am grateful to the Minister for his answer. He has given me more determination that when we debate Amendment No. 13, tabled in my name and that of my noble friend Lord Moynihan, we will be robust in our arguments.

Lord McIntosh of Haringey

I will be using the same arguments.

Viscount Astor

Then we shall have to be even more robust and even cleverer in deploying our arguments.

Lord McIntosh of Haringey

Is this the Conservative Party preferring to protect racing against competition? I just want to be sure.

Viscount Astor

I can best answer that by quoting one of the noble Lord's colleagues in another place, Robin Cook. He said that, the whole point of pool betting is that the bigger the pool, the more attractive it is to the punter. The greater the competition, the more pools there are, the less attractive it is to the punter".—[Official Report, Commons, 8/1/04; col. 453.] I agree with those sentiments.

Lord McIntosh of Haringey

Robin Cook is free to prefer racing to capitalism; the Conservative Party is not.

Lord Lipsey

Let us be careful here. The Labour Party appears to be giving full reign to the forces of capitalism against very sound arguments concerning the public realm, natural monopolies and so on that have always so appealed to we socialists.

Viscount Falkland

The Liberal Democrats as a party do not pay an enormous amount of attention to Totes, gambling or anything of that kind because they are so clean living. I hope to persuade them that the idea of competition between pools does nothing but cut throats and reduce the efficacy of the pool.

Viscount Astor

I am delighted to confirm to the Minister that we do not believe that by having a multitude of pools there will be either any benefit to racing or any competitive improvement to the punter.

Lord McIntosh of Haringey

This may be a convenient moment for the Committee to adjourn until 3.30 p.m. on Monday.

The Deputy Chairman of Committees (Baroness Lockwood)

The Committee stands adjourned until Monday 5 April at 3.30 p.m.

The Committee adjourned at twenty-six minutes before eight o'clock.