Lords Sitting of 18 February 1991

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Chelmsford.

NHS Facilities for Mentally Ill Offenders
Lord Harris of Greenwich Lord Harris of Greenwich asked Her Majesty's Government:
Whether they will institute inquiries into the circumstances in which a woman patient at the North Wales Hospital, Denbigh, charged with offences of arson, was remanded in custody on six occasions because of a lack of facilities for mentally ill offenders in the National Health Service.
Lord Reay: My Lords, since criminal proceedings in this case have yet to be concluded, it would be inappropriate for me to comment on the particular circumstances at this time. However, it is the policy of the Government to ensure that mentally disordered offenders receive suitable and timely placements, and where possible are dealt with without resort to the courts, or failing that, the penal system.
Lord Harris of Greenwich: My Lords, I thank the noble Lord for his Answer. Is he aware that I welcome very much, as I am sure all noble Lords do, the latter part of his reply? Is he further aware that this lady, who was a patient in a mental hospital and was charged with setting fire to her bedding and a tea towel, has been in a remand establishment since last November? In view of the fact that the Home Secretary has made it absolutely clear on a number of occasions that it is wholly wrong to have mentally ill patients in Prison Department establishments, can the Minister explain why this woman has not been found a place in a mental hospital as she was a patient at the time of this episode?
Loral Reay: My Lords, the woman referred to in the Question has not yet been sentenced and therefore comment on her case is sub judice under the Contempt of Government Act 1981. I understand that she appeared in court again today and is due again in court on 13th May. My right honourable friend the Secretary of State has established an All-Wales Advisory Group on forensic psychiatry. This is currently considering how the specific needs of Wales for medium secure psychiatric units should be met within the context of the All-Wales Mental Illness Strategy.
Lord Cledwyn of Penrhos: My Lords, is the noble Lord aware that there is deep concern in Wales about the serious shortage of secure accommodation in mental hospitals in the Principality? How many of these units are currently available and how does provision compare with 1989–90? What is the current level of local government expenditure on the provision of secure accommodation? Is the noble Lord further
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aware that I fully agree with everything said by the noble Lord, Lord Harris? This case is causing profound concern in Wales.
Lord Reay: My Lords, the Government acknow-ledge that we need medium secure units in Wales. There is a lack of this type of facility but that situation is now being addressed through the advisory group to which I referred in my reply just now. While this study is going on, work on an interim secure unit at Glanrhyd Hospital, Bridgend, has commenced with a view to admitting patients towards the end of this year.
Lord Ennals: My Lords, is the Minister aware that this is an intolerable situation? This unfortunate woman will now be in Risley, which does not have a very attractive reputation, until May and will have been kept for six months in those circumstances. Surely there must be some hospital in Wales in which she could be accommodated rather than in that remand centre.
Lord Reay: My Lords, according to my information, the woman will be in Ashworth Hospital until she appears again in court.
Lord Harris of Greenwich: My Lords, is the noble Lord aware that, following the incident, the hospital at which the woman was a patient has refused to take her back? Is he further aware that the chairman of the magistrates' court made it clear how concerned was the Bench that no facilities were available for this woman and that that was why she was remanded in custody? Is he finally aware that the Bench also pointed out that there had been a serious delay in the preparation of psychiatric reports? How can that possibly be justified?
Lord Reay: My Lords, I must repeat that it is not proper for me to say anything more about the case at this time. On the broader question, I acknowledge that there is a lack of these facilities in Wales. There need to be more. The problem is being addressed and the advisory group will be putting forward some proposals.
Lord Irvine of Lairg: My Lords, when the noble Lord referred a moment or two ago to the Contempt of Government Act, was that a Freudian slip for the Contempt of Court Act? Is it the Government's fault and not the fault of the hospital that this lady has been held in prison for so long? What do the Government propose to do about it?
Lord Reay: My Lords, the noble Lord is right. I should have said the Contempt of Court Act. He asked what the Government propose to do about it. I have already said what the Government propose to do about it.
Lord Tordoff: My Lords, I hope the noble Lord will correct me if I am wrong, but is it not a fact that the lady has pleaded guilty to this offence and that therefore the sub judice aspect becomes rather different?
Lord Reay: My Lords, the case is at present sub judice because the lady in question has not been sentenced. For that reason I should not comment any further on the matter.
Lord Morris of Castle Morris: My Lords, can the noble Lord give the House some idea of when the advisory group will report? Is he aware that with a most uncharacteristic lapse of memory he has failed to answer the first part of the question put to him by my noble friend Lord Cledwyn?
Lord Reay: My Lords, the noble Lord, Lord Cledwyn, may have asked me about local authority resources. I do not have the answer to that question but I shall look into the matter and let him know. The noble Lord, Lord Morris, asked when the report is expected. It is expected some time in the spring.

London Underground Limited: Finances
2.43 p.m.
Lord Boyd-Carpenter Lord Boyd-Carpenter asked Her Majesty's Government:
What is the current financial position of London Underground Limited, and whether they are satisfied with this.
The Minister of State, Department of Transport (Lord Brabazon of Tara): My Lords, as my right honourable friend the Secretary of State for Transport announced in another place on 14th February, the Government have decided to increase London Transport's external finance limit and grant for 1990–91 by £62.55 million to £510.55 million. This will allow London Underground to meet its immediate cash requirements.
Lord Boyd-Carpenter: My Lords, I thank my noble friend the Minister for that very interesting Answer. However, can he say whether the Government are really happy about the financial management of this company and whether they have in mind appointing someone with financial experience to the board of London Underground Limited?
Lord Brabazon of Tara: No, my Lords; the Government are not entirely happy about the position. London Transport has accepted that, as well as unforeseen economic circumstances, failures in financial control have contributed to its problems. Revised financial systems are being put in place. The finance directors of both London Transport and London Underground Limited have been replaced.
Lord Mellish: My Lords, despite all the criticisms which have been made about the finances of London Underground, does the Minister agree that it is still the finest system of its kind in the world and that it is run efficiently and well? In my view it is a great pity that some people do not spend a little more time praising it rather than denigrating it.
Lord Brabazon of Tara: My Lords, I am not certain as to whether it is the finest system in the world. In my answers to my noble friend I suggested that there are certain aspects of the system which could be better run and I outlined the steps which we are taking to ensure that that happens.
Lord Clinton-Davis: My Lords, is the Minister aware of a statement which was made by the chairman of London Underground about the inadequacies in accounting systems in which he said of the retiring financial director that:
"the gentleman concerned had many talents, but one of his talents was not controlling cash!"
Can the Minister tell the House whether the result of the increased grant aid which is being given to London Underground Limited by the Government will result in their meeting in full the recommendations and requirements of the Fennell Committee as regards the King's Cross accident? If not, what points will not be met, notwithstanding the Government's increased grant aid?
Lord Brabazon of Tara: My Lords, in reply to the first part of the noble Lord's question, that is presumably why that particular finance director has been replaced. As regards the second part, the addition to this year's EFL, which has just been announced, is to enable London Transport and London Underground Limited to maintain safety, and to allow the quality of service standards to continue along with the committed investment projects. Safety remains London Transport's and the Government's top priority; there is no question of skimping.
Lord Tordoff: My Lords, in the light of that answer, is the Minister aware of the increasing number of lost time accidents shown as having occurred on London Underground during the past year? Further, on a slightly different matter, if the gentleman referred to was appointed, can the noble Lord say who nominated him? Do the Government have no responsibility in such matters?
Lord Brabazon of Tara: My Lords, the Government's responsibility so far as concerns London Transport is to appoint the board, to set the external finance limit and the financial targets, and to set the quality of service targets.
Lord Shepherd: My Lords, if it is the Government's responsibility to appoint the board and the board appears to have failed in the matter of the appointment of those who are responsible for the finances, what are they doing about the composition of the present board?
Lord Brabazon of Tara: My Lords, so far as I am aware, neither the present board nor the present chairman has been in post for very long. It is up to the present chairman to put the situation right. I hope that he will do so.
Lord Boyd-Carpenter: My Lords, in the light of my noble friend's two previous answers, will he now answer my question as to whether the Government are contemplating the appointment of someone of financial standing and experience to the board of London Underground?
Lord Brabazon of Tara: My Lords, I very much hope that such a person is already a member of the board of London Underground; indeed, that certainly should be the case.
Lard Clinton-Davis: My Lords, can the Minister translate hope into action so far as concerns this matter? Further, can he give the House some indication of the likely rise in fares for consumers as a result of the current financial position and the action which the Government have taken?
Lord Brabazon of Tara: My Lords, the Government are discussing with London Transport its financial projections for 1991–92. No decisions have yet been reached. Decisions about further increases are taken each year in the circumstances which prevail at the time. The level of fares for 1991 has already been settled, but no decisions will be taken about 1992 for some time.

Medical Negligence: Compensation
2.48 p.m.
Viscount Hanworth Viscount Hanworth asked Her Majesty's Government:
What action they are taking to restrict claims for cases of medical negligence and compensation in the light of the size of recent claims in some other countries.
The Parliamentary Under-Secretary of State, Department of Health (Baroness Hooper): My Lords, the Government fully accept that when a person has suffered harm as the result of negligent actions he or she is entitled to claim, and be awarded, compensation from the person or body responsible for that action. The Government are not taking any action to restrict such claims.
Viscount Hanworth: My Lords, I thank the Minister for that reply. However, I should like to ask her two further questions. First, does she appreciate that the tabling of my Question, just two days before a major debate on the subject is due to take place, was entirely fortuitous and that it was not a planned action? Secondly, do not the Government agree that we must at all costs avoid travelling down the same road as the Americans where negligence is merely a wrong diagnosis and where doctors' fees are probably 40 per cent. more than they would otherwise be to cover the necessary insurance?
Baroness Hooper: My Lords, yes, to the first question. I am aware of, and look forward to, the debate in two days' time on the wider aspects of the subject. We do not expect to see the American experience replicated in the United Kingdom because in this country an award of damages is the result of a careful computation by the presiding judge. That assessment by an experienced professional is based on the needs of a claimant to overcome the precise damage paused and alleviate its financial implications. In the United States, awards are made by juries and may include amounts designed to be punitive rather than restorative. The two systems are vastly different.
Lord Nugent of Guildford: My Lords, is my noble friend aware that there is a genuine danger that consultants' and surgeons' fees generally will escalate unless something serious is done to check the trend? Is
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she aware that in the United States about one-third of surgeons' fees now goes towards their insurance policies to protect them against those punitive damages? Is she further aware that there is a tendency in our courts for such damages to escalate and that it is necessary to take effective action to check that trend?
Baroness Hooper: My Lords, we are aware of the need to take effective action. My right honourable friend the Secretary of State for Health has offered to take steps, in addition to the measures already under way to provide access to health records and improvements to court procedures, which will move forward our practice and understanding in that area; for example, discussions with interested parties to see whether an arbitration procedure could be established within the NHS.
Lord Irvine of Lairg: My Lords, is it not extremely difficult in practice in this country for a patient who has been injured by a mishap in the NHS to establish liability? Does that not suggest to the Minister the need for no-fault compensation for patients and their families who can suffer severely from mishaps in the NHS?
Baroness Hooper: My Lords, as I have already said, the Government fully accept that where negligence is involved no-fault compensation should follow. Where medical treatment has been given with the best will and skill in the world, but has still not produced the expected benefits to the patient or, even worse, has resulted in deterioration, I question whether it is appropriate to divert money into compensation. After all, the first duty of the NHS must be to give treatment to patients in need.
Lord Campbell of Alloway: My Lords, is my noble friend aware that the problem identified by the noble Lord, Lord Irvine of Lairg, has a much wider dimension? Does she agree that it is not limited to the NHS, but is of general application and spills over into defensive medicine, as was pointed out by another noble Lord?
Baroness Hooper: My Lords, recently a variety of anxieties have been expressed about the general effectiveness of damages for personal injuries. That point was the subject of reviews by the Law Commission in 1973 and the Royal Commission chaired by Lord Pearson in 1978. I understand that my noble and learned friend the Lord Chancellor has been discussing with the Law Commission the possibility of instituting a new inquiry into personal injury damages.
Lord Molloy: My Lords, is the Minister aware that her most important reply was that which confirmed that no patients will be restricted from taking action when they think that they have a case. That is a vital right which must be protected. I hope that the Minister will take appropriate action should that right be interfered with in any way.
Baroness Hooper: My Lords, I am grateful to the noble Lord because his supplementary question gives

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me the opportunity to say that in any event we estimate that 95 per cent. of all medical negligence claims are settled before a court hearing.
Baroness Masham of Ilton: My Lords, does the Minister agree that there have been some large claims by severely disabled people but that they have been necessary? For instance, some young women who were paralysed by epidural injections have to raise young children and they may need a new house and a car. Life can be exceedingly expensive if one is seriously disabled.
Baroness Hooper: My Lords, yes. As I hope I explained when responding to the comparison with the United States, the aim of our system is that where negligence is proved the claimants should as far as possible be put in the same position as if they had not been injured.
Lord Ennals: My Lords, does not the Minister agree that the present situation is unsatisfactory? It is a sort of lottery for patients. If they can afford to bring a case and succeed they may sometimes receive a large sum. In most cases they cannot even afford to go to court. Does that not argue the case, as my noble friend said, for some type of no-fault compensation system which is fair to all and does not discriminate?
Baroness Hooper: My Lords, no-fault compensation is not a straightforward or easy option. Serious problems would remain. For example, claimants under a no-fault scheme, although relieved of having to prove negligence, would still have to establish causation, and that could be just as difficult. That scheme could also be seen as being unfair to those who suffer equal disabilities but who fall outside its provisions; for example, the congenitally disabled and those suffering as a result of a progressive illness. A new bureaucracy would be created as a result of many more claims being received. That would lead to an increase in the amount of time spent investigating cases, with skills and resources being diverted from patient care which I am sure the noble Lord does not wish to see.
Lord Irvine of Lairg: My Lords, does the Minister believe that a system of no-fault liability would remove the risk of defensive medicine, to which she referred?
Baroness Hooper: My Lords, there is a difficulty on the subject of defensive medicine. Anxiety about its increase is to some extent misplaced. As recently as December of last year the Royal College of Physicians reported,
"there is as yet little hard evidence to support the view that defensive practices are increasing".
We therefore still base our case on proof of negligence.
Lord Annan: My Lords, is there not a difference between the case of a doctor who in all good faith makes a mistake in the diagnosis or treatment of patients and one where a doctor is negligent in the way that he handles the materials at his disposal? Does the Minister agree that it would be wrong for the doctor in the first case to be made liable in damages?
Baroness Hooper: My Lords, yes. The noble Lord has given an excellent reason for supporting the negligence system.

NHS: Erythropoietin Availability
2.58 p.m.
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
Whether arrangements are being made in the National Health Service in England, Scotland and Wales, to make Erythropoietin available to patients with kidney failure for whom there is no alternative treatment.
Baroness Hooper: My Lords, like other new treatments, Erythropoietin is being introduced progressively across the health service. National Health Service funding is increased to take account of such new treatments. It is for each region to assess its patients' requirements for the drug and to make appropriate plans to ensure that that need is met.
Lord Campbell of Croy: My Lords, I thank my noble friend for her Answer. Recognising that this is an effective new drug which is also expensive, are the Government giving advice, through the respective departments of health, on priorities for its use?
Baroness Hooper: My Lords, no. As always, prescribing is a matter for the clinical judgment of the doctor concerned.
Lord Ennals: My Lords, is the Minister saying that in one case it was a decision of the doctor concerned to stop a number of patients on renal dialysis from receiving that drug? Will she say who it was who took the decision and how many patients were denied that drug while still on renal dialysis?
Baroness Hooper: My Lords, I should be grateful if the noble Lord could furnish me with further details of that case.
Baroness Masham of Ilion: My Lords, is the Minister aware that this drug makes people feel so much better that they can go back to work when they have been away through illness? Does she agree that its use would be cost-effective?
Baroness Hooper: My Lords, clearly the evidence is that the effects of the drug are extremely beneficial to the quality of life of people with kidney problems. However, as with renal services as a whole, we believe that health authorities are not only sufficiently responsible but are also best placed to decide what is needed. Over the lifetime of the Government real resources for renal services in hospital and community health care for the whole country have increased by about 30 per cent.
Lord Campbell of Croy: My Lords, have the Government taken into account the clinical trials in a Dundee hospital which demonstrated that a relapse can occur when the drug is withdrawn from patients? That may be the case to which the noble Lord, Lord Ennals, referred. I understand that it was a deliberate clinical trial.
Baroness Hooper: My Lords, it appears that that was the case to which the noble Lord, Lord Ennals, referred. I understand that patients given Erythropoietin will always relapse if the product is withdrawn because it is a synthetic hormone, replacing one naturally deficient in patients. However, patients who participated in the Scottish clinical trials will continue to be provided with the treatment.
Lord McColl of Dulwich: My Lords, will my noble friend agree that the total bill for the drug to each district health authority amounts to only £70,000 per year? As this is such an important advance, surely it is up to the local and regional health authorities to make sure that the drug is given?
Baroness Hooper: Yes, my Lords; my noble friend points to the practice of leaving the decision to the medical profession.

Business
Lord Denham: My Lords, at a convenient moment after 3 30 p.m. my noble friend Lord Caithness will, with the leave of the House, repeat a Statement that is to be made in another place on the Gulf.

Horseracing Industry
3.3 p.m.
Lord Donoughue Lord Donoughue rose to call attention to the situation facing all involved in horseracing; and to move for Papers.
The noble Lord said: My Lords, first, I must offer to the Chief Whip our great thanks for giving us a day of government time in which to hold this debate. I should say how encouraging it is to see many distinguished Peers with great experience in racing taking part in the debate.
My own role is more modest. I cannot pretend to match the expertise of other noble Lords present. I have simply had a lifelong love affair with racing for 45 years since, as a young boy at the end of the war, I walked from my Northamptonshire village to Lord Hesketh's charming Towcester racecourse.
I also declare an interest today as a member of a highly successful and very good value syndicate in which I own a small part—perhaps near the tail—of several remarkable animals currently catching swallows on the gallops, though as yet untested on the course. I also feel that I am personally a major contributor both to the revenues of the levy board and the huge profits of Ladbroke's.
I propose today merely to try to give a general introduction to our subject, raising the issues currently of most concern. Noble Lords will contribute their expertise to particular issues in greater detail. I shall not mention bloodstock and the curse of VAT as I know that my good and noble friend Lord Carnarvon and others will speak on it.
We all look forward to the maiden speakers who should not, in my personal view, feel too constrained by this House's usual conventions of being non-controversial. Today is a completely non-party
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occasion and we welcome strongly held views on the subject. Even summarising it is daunting, as the landscape of horseracing is complex and full of differing, sometimes contrasting colours. Racing contains many interrelated businesses, trades and occupations based on the approximately 60,000 racehorses running each year at 1,100 fixtures. Racing involves racecourse operators, horse breeders, owners, trainers, jockeys and stable staff, with various ancillary trades such as vets, farriers, auctioneers, bookmakers, journalists from newspsapers and television; and last but not least it involves the punting public.
Racing is a major leisure industry employing over 100,000 people, so it is one of the top employers in Britain. One of its great attractions is that it cuts across classes. The aristocracy and the working classes —if we may still use those terms of distinction—have always shared a mutual passion for racing. Occasionally, the non-conformist bourgeoisie—sadly represented in my own party—disapproves, but we can live with that.
Naturally, many component parts have their own interests which do not always coincide. We accept that they have different voices but it is important that today we move forward together towards an industry-wide consensus on what are the basic choices in solving the problems of racing, but with a common desire for the future prosperity of the industry.
There has been much debate on whether there is a crisis in racing; "crisis" is an over-used word and we need not waste time on semantics. The point is that racing is unquestionably in serious financial difficult-ties. Strictly, it is not financially viable. That has nothing to do with the current economic recession, although it highlights the difficulties. The basic problems are more fundamental; they have long been here and are worsening. These problems are graphically illustrated by the fact that for the average owner there is no prospect whatever of an economic return. We look forward very much to the maiden speech of the noble Marquess, Lord Zetland; he has pointed out that owners pay out over £200 million a year in training costs, while receiving, I believe, only £22 million in prize money. He can correct me if those figures are wrong.
In the UK prize money covers only 20 per cent. of costs compared with over 40 per cent. in France. It should be over 50 per cent. It is estimated that a horse must win on average six times to recover its costs. Not surprisingly, over 90 per cent. fail to do so and also not surprisingly, 25 per cent. of owners drop out each year.
There are not only problems for owners. Something like one-quarter of training yards are said to be for sale, and 50 out of 59 racecourses are said to be loss-making without levy support. Speaking as an investment manager, I ask who would risk investment on such a prospectus? Already an increasing number of our horses race abroad. Ahead lies the freer Europe post-1992. There is a grave danger that British racing will drop out of the international first division.
Racing in Britain continues because it is subsidised not by the Government who benefit from £400 million

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in tax receipts; not by the levy, which is not a subsidy —it is a recycling of racing's own money; and certainly not by the bookmakers who contribute little. The subsidy is from within: from owners with little hope of return; from trainers who barely cover their costs and especially the stable employees who work long hours for unacceptably low wages; and from the punters who pay the levy which was originally meant to be paid by the betting industry. Yet this is an industry which generates £400 million to the Exchequer and over £4 billion in betting turnover. It is indeed a rum world.
What is the scale of the problem? The Jockey Club estimates that the industry needs £100 million to be recycled back into racing. That seems modest. It still leaves little return for those in racing except the love of it, and we do not underestimate that. The key question is how to raise £100 million as the present levy system has almost certainly reached a ceiling at around £40 million.
The Jockey Club has made an interesting proposal to the Home Affairs Select Committee of another place, which has stimulated wider support. It argues that racing has a unique product—the provision, organisation and regulation of competitive horseracing. That product costs some £250 million a year to produce. Others, particularly the betting industry, exploit that product for enormous profit, at present without paying for it. It is therefore suggested that betting should pay commission—a kind of copyright royalty—as happens in other industries and services. That seems fair and reasonable.
How much commission should be paid? Two and half per cent. is suggested. That seems modest. Australian, Japanese and French racing receive respectively 3½ per cent., 4 per cent. and 5 per cent. of betting turnover. British football receives 2¼ per cent. of football betting. Certainly, the current yield of 0.9 per cent on the present yield is ludicrously low, though we are grateful for the magnificent job done by the levy board hitherto. We shall be interested in noble Lords' views on that proposal.
Certain related questions arise. Who should pay? The present levy is paid by the punter. Can we find a framework which ensures that the betting industry pays? Can we discover the profits of bookmakers as they do not publish meaningful figures and the allocation of overheads can always disguise profits? Bookmakers bring choice to the betting public. In my view they deserve a reasonable return. They have always been the most professional body in racing at presenting their case. However, it is surely unacceptable that the bookmakers contribute so little to the racing industry from which they take so much.
If others are to contribute more financially they have a right to ask what is racing doing to set its own house in order. Is the present governance of racing adequate? Are racecourses managed and marketed in a sufficiently professional and commercial manner? Should the government of racing be left with the Jockey Club or should all sides of the industry be integrated into a single racing authority?
The criticisms of the present arrangements from various quarters are well known. It has been said that the industry is too fractured and that the Jockey Club is too complacent, too remote, does not consult sufficiently, is too amateur, too uncommercial and its membership too narrow and unrepresentative. There is much history to support those criticisms and not much time to correct them. However, the criticisms do not seem to me to apply to the new team of the noble Marquess, Lord Hartington, and Mr. Christopher Haines, who have made a most encouraging start. Secondly, the importance of that role in organising racing and guaranteeing the honest administration of racing—its integrity—should never be underestimated. Thirdly, their proposals to reform the levy board provide the vehicle for improving the government of the industry by opening it to wider representation.
The latter point is most important since it potentially bridges the difference with those such as the Racecourse Association who have supported the new single authority originally proposed in the Rothschild Report. It will be interesting to hear how far the Jockey Club proposes going in that desirable process of widening representation in the governance of racing. If it is flexible we may construct a consensus. If it is not and the new regime fails to deliver, more radical solutions may prove irresistible.
Of the other reforms being aired at present, reform of the tote is usually prominent. Many would, in principle, prefer a tote monopoly. The majority of the racing world has such a monopoly. Certainly the £170 million the Pari Mutuel contributes to French racing dwarfs anything that we have here. We do not have a tote monopoly and it may be a waste of time discussing it. Maybe we would prefer, as the Irishman said, not to start from here, but we are here.
Taking a more pragmatic approach, we must ask the Minister, who has a great deal of knowledge of racing, what the Government propose for the tote, whose 5 per cent. of betting turnover and £6 million contribution—a great improvement on earlier years —is still clearly unsatisfactory. If the Government propose privatisation, can the benefits be kept in racing? Will they publish the ageing and very expensive Lloyds Merchant Bank report? Can the tote be made more aggressive with a more commercial board, possibly establishing national pool betting on a major scale? Surely it needs more capital, more commercial management and perhaps to be removed from Home Office control—the mentality that supervises Pentonville is not most appropriate for the tote, although too many of its investors may end up there.
It is also said that racing needs fewer fixtures and fewer racecourses. Reducing fixtures would certainly save some levy expenditure. However, I am wary of a contractional spiral. Marginal racecourses cost little and once closed are never re-opened. It is more important that there should be better management of the courses we have, improved facilities, more sponsorship, and Sunday racing, perhaps with no off-course betting.
Finally, I turn to the Minister for the Government's role in the future of racing. It is true that racing must initiate its own revival. But the Government have a vital and sometimes essential role as legislation is required. There are a number of questions for the Government. Will they assist in providing a new framework to raise revenue from the betting industry, including any necessary statutory change to the levy board? Will they take a decision on the tote, again with any necessary statutory changes? Will they re-open the question of Sunday racing? Will they allow betting shops to open in the evening? Will they consider—though I would not press this—reducing betting duty, as they did with football, to provide capital for investment in better facilities?
We have a great opportunity to make the necessary changes to restore the viability of racing. The timetable is tight. By the summer we need to have agreed a pattern for change in racing. What noble Lords say this afternoon and the undoubtedly positive reply from the Minister will help to shape racing's future prosperity.
My Lords, I beg to move for Papers.
3.19 p.m.
The Marquess of Zetland: My Lords, we are all most grateful to the noble Lord, Lord Donoughue, for the eloquent way in which he introduced the debate. As a first-time speaker in this House I hope that your Lordships will treat me with your usual indulgence.
I wish to declare a number of interests in the racing business in that I am a chairman and managing director of one of our racecourses and a director of two others. I was until recently the chairman of the Thoroughbred Breeders' Association. That position gave me a seat on the Horseracing Advisory Council. I am also a member of the Jockey Club.
Today we are discussing the state of a proud and noble sport, and one in which we have led the world for three centuries and more. It is beyond dispute that horseracing in this country is still looked up to and admired by racing people all over the world, both for the integrity of its administration and for the sheer quality of its bloodstock. That is something of which we can all be extremely proud. Yet hardly anyone who works in the industry would deny that we face a serious and growing financial problem. British racing is grossly underfunded. There is nothing particularly new in that situation. British racing has always been short of money. However, the difference now is that the world is shrinking and we are falling behind. Nowadays it is impossible to visit the other major racing nations in the world such as Hong Kong, Australia, Japan, South America, America and even France, without returning feeling thoroughly de-pressed by the growing difference between those countries and us in terms of infrastructure, facilities and prize money.
It is most important here to emphasise that a proper level of funding in racing terms is not just a matter of increasing prize money, important though that is. It is also a matter of the level of stable lads' wages; the standard of facilities at our racecourses;
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standards of hygiene, of horse care; and of maintaining and improving the quality of all the 100,000 jobs in the racing industry. The noble Lord, Lord Donoughue, referred to the latter point. In short, we must improve the whole infrastructure of the racing industry. Frankly we are beginning to fall desperately short of our international competitors in this respect.
I mentioned prize money. Without owners there would be no racehorses. As the noble Lord, Lord Donoughue, said, we have now reached the stage where £22 million of prize money is annually chasing over £100 million of training fees. A one in five chance of breaking even is not a very encouraging prospect for the new owner. There is clear evidence now that owners in this country are beginning to drop away from the sport at an alarming rate. I believe that that trend can only increase over the coming years. The danger is that Britain, which was once the proud world leader, will find itself becoming a second class racing nation. That would never do.
There is really only one source of serious revenue in any racing industry and that is the off-track betting market. In this country we are talking of a market dominated by the bookmakers. The volume of bets struck during a year amounts to some £4.3 billion. From that sum the Treasury takes 8 per cent.—nearly £400 million a year. It is suggested that the bookmakers take roughly £180 million in net profits. The whole of our racing industry exists on just £40 million a year—that is, under 1 per cent. of turnover —in the form of the levy. One might consider that rather a lopsided arrangement.
One cannot help but be struck by the stark contrast between the state of racing in the other major racing nations of the world and the situation in Britain. In almost every case in those other nations the totalisator, or the pool betting system, dominates the off-course market. As noble Lords will know, profits from totalisator operations, unlike those made by the bookmakers, find their way back into the racing industry.
It is easy to define the problem, but finding a solution is certainly not easy. There are probably only four ways of creating a satisfactory level of funding for our racing industry under the present structure. The answer may be found in one, some, or all of those ways. First, one could reduce the rate of betting duty and return that saving to the racing industry. Secondly, one could charge the punter more. Thirdly, one could divert some of the bookmakers' profits back into racing. Fourthly, one could massively increase the presence of the totalisator, or pool betting system, in the off-course market.
That is as far as I should go within the constraints and conventions of a maiden speech. The last thing I want to do is to run the risk of treading on any of your Lordships' toes. However, I wish to float one thought before your Lordships. During the past week there has been talk of the possible introduction of a national lottery in this country. If that were to come about and if, as I assume, tickets were sold in the high street, a form of legalised gambling outside of licensed betting shops would be introduced. One might then ask

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oneself whether totalisator betting could not equally become available in the high street, perhaps under the same umbrella and via the same equipment. After all, the tote is totally accountable to government for its returns. With a potential market of perhaps another £3 billion or even £4 billion a year in due course, both the Exchequer and the racing industry might benefit dramatically from such a development.
There is another matter to which I wish to refer briefly. It concerns the serious question of VAT on bloodstock. I know that other noble Lords will speak on this matter in much greater detail later in the debate. As I am sure most of your Lordships are aware, when we finally join the single market in 1993, VAT on bloodstock sales will no longer be payable in the country of the purchaser but in the country of the seller. With VAT rates at 15 per cent. in this country but only 2.3 per cent. in Ireland and 5.5 per cent. in France, it is quite clear that buyers and sellers will desert our markets for the differential of 12.7 per cent. available in Ireland. Furthermore, Tattersalls, the most important and influential sales company in Europe, will almost certainly be forced to move its operations to Ireland where it already has a complex up and running.
The devastating effect that all this will have both on our hard pressed breeders and on the town of Newmarket and its associated trades and professions can only be guessed at. However, the potential effects are catastrophic. We have two major problems facing our racing industry and our breeding industry. Both of those problems need to be addressed urgently if we are not to lose our place permanently to our world and European competitors.
3.28 p.m.
The Earl of Carnarvon: My Lords, your Lordships would wish me to congratulate the noble Marquess, Lord Zetland, on his excellent maiden speech. I am sure that all your Lordships will wish to see him here frequently on future occasions. I should like to underline and elaborate on the point about value added tax that the noble Marquess has raised. However, before doing so, I wish to convey to the noble Lord, Lord Donoughue, the gratitude felt by those involved in racing and breeding for this debate on racing today.
I also have to declare an interest as a breeder. I have twice been president of the Thoroughbred Breeders' Association. If today one wishes to buy a race horse in England—I hope people wish to do that—one has to pay 15 per cent. VAT. If one buys the same horse in Ireland and brings it back to England, one has to pay the same level of tax. However, in two years' time if one goes to Ireland and buys a similar horse, the tax will be 2.3 per cent. and one can take it wherever one wants without having to pay any further tax within the European Community.
The changes will be more far-reaching as they relate to the English market, which is the leader in Europe. It will no longer be possible for any European to buy a racehorse in England and either race it here or take it home without having to pay VAT at 15 per cent., so
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in future he will buy elsewhere at a lower rate of VAT. That is an example of what will happen in 1993. It follows that the market will develop where the tax rate is lowest, which will be Ireland. The problem will affect the sellers of racehorses—that is, English breeders. They will need to sell where buyers are keen to go, which is where the price is most attractive —that is Ireland.
The introduction of the single market in January 1993 will trigger off the changes. What is most important is that the final tax paid by the buyer of the racehorse (which your Lordships may or may not know is treated as a hobby for tax purposes) will, following the abolition of fiscal frontiers for trade between European Community countries, be the tax applied at the place of sale. There is an additional category of buyer who will also be affected—the flat rate farmers—comprising many breeders, particularly in Ireland and to a lesser extent France.
We all understand the Government's policy of allowing market forces to resolve problems of competition. Faced with that tax differential, it is beyond the ability of those affected to adjust their prices to remain competitive. The rate of VAT is only 2.3 per cent. in Ireland, giving a difference of 12.7 per cent. between their rate and our 15 per cent.
One may ask why the problem should be so critical now as we have lived with VAT since 1973. The answer is two-fold. The single market means the abolition of fiscal frontiers and the loss of the majority of reliefs, such as export undertakings, which have alleviated the problem until now. I am assured by those who have been negotiating on behalf of the bloodstock industry that the Government's representatives, who have been most understanding of the position, are in accord with them as to the extent of the effects due to take place in January 1993.
I must emphasise that if no remedial action is taken by the Government soon, not only will Tattersalls leave this country and go to Ireland, as the noble Marquess, Lord Zetland, has already said, but we shall also see many other related businesses being forced to concentrate their activity in that country, such as bloodstock agents, transporters, shipping agents and insurance agents—all to the detriment of our export trade. The Government will undoubtedly lose tax revenue and see a further increase in unemployment as ancillary bloodstock services leave these shores. Once the move has been made it will be virtually impossible to reverse. It is important to remember that about 40 per cent. of breeders who sell in the English market comprise overseas vendors, principally Irish.
I am speaking of an uniquely British industry which for over 200 years has prospered and earned much money for this country and has never asked for favours or special treatment. All it asks for is the opportunity to compete without an enormous tax disadvantage.
I urge the Government most sincerely to have the courage and foresight to grant the bloodstock industry a special rate of value added tax, say, 5 per cent., on the sale of bloodstock and related services.

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That decision may reduce the present level of tax income but will at least ensure the Government receive some tax.
I and all those for whom I speak in the bloodstock industry most earnestly ask the Government to accede to that proposal. I would be extremely grateful if the noble Lord the Minister in his reply would give some indication of his support for the proposal, which would remove a serious problem for the British thoroughbred breeding industry.

The Gulf War
3.36 p.m.
The Minister of State, Foreign and Commonwealth Office (The Earl of Caithness): My Lords, with the leave of the House, I shall repeat a Statement on the Gulf which is now being made in another place by my right honourable friend the Foreign Secretary. The Statement is as follows:
"Mr. Speaker, with the permission of the House I shall make a Statement about the Gulf.
"The announcement by the Iraqi Revolutionary Command Council on 15th February stated Iraq's readiness 'to deal with Security Council Resolution 660 with the aim of reaching an honourable and acceptable political solution, including with-drawal'. The announcement clearly and explicitly links an undertaking by Iraq on withdrawal to a series of conditions. These include the withdrawal of Israel from occupied Arab territory, the withdrawal of coalition troops from the Gulf within one month, reparations for damage done to Iraq, the cancellation of Iraq's debts, the repeal of all Security Council Resolutions passed after Iraq's invasion of Kuwait and the guarantee of Iraq's territorial claims.
"It is clear that the Revolutionary Command Council's announcement does not commit Iraq to unconditional withdrawal from Kuwait as required by the United Nations Security Council in Resolution 660 nor to the implementation of the other resolutions passed by the Security Council since 2nd August. The announcement was rejected by the meeting of Foreign Ministers of Egypt, Syria and the Gulf Co-operation Council in Cairo. It was also rejected by the overwhelming majority of speakers in the UN Security Council on 16th February. In the view of Her Majesty's Government, it was totally inadequate as a basis for ending the war.
"The aggressor cannot expect to set conditions for remedying the aggression.
"What the world now requires is an unequivocal commitment by Iraq to withdraw its forces fully and unconditionally from Kuwait. When the Iraqi government are ready to comply with the mandatory resolutions of the UN Security Council they should say so unambiguously and match their words with decisive and irreversible proof by ordering their troops to begin withdrawing as quickly as possible.
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"Today, the Iraqi Foreign Minister, Mr. Tariq Aziz, is in Moscow. Mr. Gorbachev has made clear that the Soviet Union stands firmly behind the coalition and the Security Council resolutions. I hope that Tariq Aziz will take back to Baghdad the clear message that only Iraq can decide when the fighting will stop.
"The Security Council will continue its deliberations after Mr. Tariq Aziz's discussion in Moscow. I urge the Iraqi leadership quickly to put an end to the anxiety and suffering which their continued intransigence is causing to the people of Kuwait, to the people of Iraq themselves and indeed to the whole world".
My Lords, that concludes the Statement.
3.38 p.m.
Lord Cledwyn of Penrhos: My Lords, we are grateful to the noble Earl for repeating the Statement. It deals with the Iraqi offer of withdrawal from Kuwait, which momentarily raised our hopes on Friday morning but which also dismayed if not entirely surprised us when we heard the long list of conditions attached to the offer set out in the Statement. Some have pointed to the fact that this is the first time the Revolutionary Command Council has mentioned Resolution 660, or indeed Kuwait as a state. Do the Government think that there is any possibility that Saddam Hussein would contemplate withdrawal followed by negotiation on certain of these issues? I agree that this is a matter for considerable doubt, but would he be prepared to withdraw if, for example, the Palestinian problem was put on the agenda for a major conference?
The Statement goes on to mention the current talks in Moscow between President Gorbachev and Mr. Tariq Aziz, the Iraqi Foreign Minister. It states that it is most unlikely that Mr. Gorbachev would support any moves which departed from the Security Council resolutions. We hope that that will be the case.
Does the noble Earl agree that by now Iraq's infrastructure has been substantially damaged and that, while understandably concentrating on military targets, special care should now be taken to avoid bombing heavily populated locations? I make that point while not dissenting from the conclusions in the Statement itself.
Finally, is the Minister aware that we much admire the patience, common sense and courage displayed day by day by our forces in the Gulf?
Lord Bonham-Carter: My Lords, I too should like to thank the noble Earl for repeating the Statement made by his right honourable friend the Foreign Secretary in another place. I should also like to associate myself with much of what the noble Lord, Lord Cledwyn of Penrhos, said. In responding to peace initiatives of this kind—and there may well be others in the future—we must bear in mind the whole time that, although we may be winning the military battle, it is not so apparent that we are winning the battle for men's minds, certainly the minds of men in moslem states. It is extremely important for winning

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both the military battle and the peace that will follow that we win the political battle and the battle for men's minds.
With that in mind, though I am aware that his right honourable friend is thinking about peace terms, does the noble Earl consider that the time has come to specify rather more clearly than hitherto the kind of peace terms which we hope to establish after the war? I believe that establishing clearly in people's minds what we are fighting for will help us win the battle for men's minds which is so important.
Those issues should include, first, the establishment of long-term stability in the area and, secondly (which is of the utmost importance), the establishment of the authority of the United Nations. It was to establish the authority of the United Nations that we went to war. Thus, it seems to me that this is a UN war and we must make it clear that we want a UN peace. Finally, one of our peace aims—perhaps the most difficult of all to achieve—is to resolve the Palestinian problem and at the same time ensure the security of Israel.
Those are ambitious aims. They will be difficult to fulfil but I feel that unless we make clear—I should like to know how the noble Earl responds to this suggestion—that it is for those that we are fighting, we may not win the battle for men's minds.
The Earl of Caithness: My Lords, I am grateful for what the noble Lord the Leader of the Opposition and the noble Lord, Lord Bonham-Carter, have said. It is debatable whether indeed any of the conditions would be negotiable if they were not linked so specifically, as they were by the announcement. But that misses what I believe to be the main point, which, as I am sure the noble Lord the Leader of the Opposition will be the first to agree, is that Iraq must unconditionally leave Kuwait in line with the Security Council resolutions.
I agree with the noble Lord the Leader of the Opposition that any killing or maiming of civilians by the bombing is to be regretted. But this was a matter which Iraq took into its own hands when Saddam Hussein committed the atrocity of going into Kuwait. Since 2nd August he has had the opportunity to look at the 12 resolutions mounted against him. He has had plenty of time to withdraw. He can still withdraw now. I saw on television this morning, as I am sure did many of your Lordships, that he was promised safe passage if he withdrew.
The noble Lord, Lord Bonham-Carter, raised the point that we were winning the hostilities but not men's minds, certainly not the minds of the moslem nations. We have won many minds in the moslem states. The Gulf Co-operation Council was absolutely solid in rejection of the Revolutionary Command Council's announcement last week. However, I agree with him that with some of the media coverage it is difficult to get across the point.
I have spelt out clearly, as has my noble friend the Leader of the House, the aims of the action that we are taking. They are clearly set out in the Security Council's resolutions. As to the long-term planning, it
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would be wrong to suggest that we could insist on a solution from here. It can only be a lasting solution if it is worked out with all the countries in the area.
3.46 p.m.
Lord Mason of Barnsley: My Lords, is the Minister aware that any conclusions or recommendations that flow from the meetings between Tariq Aziz and Mr. Gorbachev must be within the mandate of the United Nations resolutions—briefly, unconditional with-drawal from Kuwait and no concessions to Saddam Hussein. Those are still our objectives and those of the 28 nations in the coalition.
I should like to ask the noble Earl a question about the Iraqi-controlled reporting of its propaganda to which reference was briefly made by the noble Lord, Lord Bonham-Carter. Is he aware that public opinion declares that our newsmen in Baghdad are Saddam's stooges and that we now have a fifth column operated by the British media undermining the morale of our forces, giving succour to the enemy and aiding and abetting a split in the coalition? What good is such biased and slanted commentary? Does it not itself demean the British reporter, to the delight of Saddam Hussein? I ask the Minister what steps Her Majesty's Government have taken to bring this state of affairs to the attention of the heads of our newspapers and the broadcasting services?
The Earl of Caithness: My Lords, the first question referred to the meeting today of Tariq Aziz and Mr. Gorbachev. We look forward to receiving the details of the Soviet proposal. We welcome any initiative aimed at bringing this conflict to an end on the basis of the full implementation of the Security Council resolutions. We have absolutely no reason to doubt the Soviet commitment to the Security Council resolutions.
With regard to media reporting, the MoD has established reporting ground rules for journalists operating in that theatre. We hope that the media make clear the limitations of their reporting both in terms of Iraqi censorship and what they physically are allowed to see. We know that that puts a heavy responsibility on both the correspondents in the field and editors who are fully aware of the criticisms that have been made. We must remember that we have not seen any television reports of the atrocities in Kuwait.
Lord Molloy: My Lords, a few weeks ago President Bush made his usual State of the Nation speech. It was conveyed to the American forces in the Gulf. Apparently it did them the world of good. Would it be possible for the Secretary of State or indeed the Prime Minister also to make a public statement designed specifically to acknowledge the magnificent work that our services are doing in the Gulf?
The Earl of Caithness: My Lords, my right honourable friend the Prime Minister has recently been to the area and made a broadcast while he was there. However, I shall draw the noble Lord's point to the attention of my right honourable friend.
Lord Boyd-Carpenter: My Lords, following the question put by the noble Lord opposite, will my

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noble friend make quite clear to the BBC and the other broadcasting media that broadcasts from Baghdad, which in the nature of things are trimmed to suit the Iraqi position, and are not free, ought not to be broadcast at all or at least not transmitted without specific and full-length warnings on every occasion that they are not full or balanced accounts? Is he aware that many people in this country, particularly those who have relatives serving in the Gulf, are becoming very angry indeed about it?
The Earl of Caithness: My Lords, I am fully aware of the concern felt by people. I hope that the media and editors take note of what has been said and is being said by your Lordships today. The one aspect that would be very detrimental to press reporting would be for any reports to be made which put in danger the lives of our allies.
Baroness Phillips: My Lords, are the Government aware that many of us are extremely confused by the idea put forward by the noble Lord, Lord Bonham-Carter, that we must win the minds of the Moslems? Bearing in mind that they are under a vicious dictatorship, I cannot see how they can ever exercise their minds. It is only people like us, who are fortunate enough to live in a democracy, who can talk such peculiar rubbish about someone like Saddam Hussein and get away with it.
Is there any record in history of a pause occurring in the middle of a war? I was a historian and I must confess that I cannot remember one. Are we or are we not at war; or are we just playing at it?
The Earl of Caithness: My Lords, I believe that there was a cessation of hostilities in the war between America and Vietnam which led to a regrouping of the Vietnamese. There is no such proposal now.
Lord Hatch of Lusby: My Lords, will the noble Earl expand on a matter that he mentioned in his reply to the Front Benches? I assume that Her Majesty's Government wish to see the cessation of hostilities at the first possible moment, subject to the carrying out in full of Resolution 660 of the United Nations. That includes, above all, the total withdrawal of Iraqi forces from Kuwait without conditions.
However, there is a logistical problem to which I believe the noble Earl referred. If Her Majesty's Government wish Iraqi forces to leave Kuwait, it is obvious that those forces must be assured from the highest authority that they will be free to do so, and encouraged to do so, without being attacked. Will the noble Earl state categorically on behalf of Her Majesty's Government that that is the Government's policy? Are the Government ensuring, via leaflets or any other psychological means, that Iraqi forces know that they are free to move northwards back into Iraq without risk of losing their lives? Is it the policy of Her Majesty's Government that as soon as the withdrawal is seen to be accepted by Saddam Hussein, and is put into practice by his commanders, the Iraqi forces will move without being attacked?
The Earl of Caithness: My Lords, we have made plain on many occasions that should there be an
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unconditional withdrawal from Kuwait by the Iraqi forces—that is, fully out of Kuwait—then they will not be attacked. However, we first need confirmation of such withdrawal.
Lord Elton: My Lords, will my noble friend again revert briefly to the question of the media. Will he take note that it is not only in this country that the operations of reporters have effect? I have recently received a letter from Portugal asking whether some of the coverage provided by the British media is treasonable. I hope that my noble friend is aware of the considerable pressure of concern, on these Benches at least, not only about the source of the information brought from Baghdad but also the editorial handling of it. When the media, in referring to a recent event, does not report that the Americans represent that the killing of civilians was a result of Iraqi activity but that the Americans "try to suggest" that it is, that is a subliminal inference which I believe is propagandist in its nature.
The Earl of Caithness: My Lords, I certainly take note of my noble friend's remarks. I assure noble Lords that I shall draw the whole of this short discussion on the problem to the attention of my right honourable friend the Secretary of State.
Baroness Seear: My Lords, does the noble Earl agree that the BBC, before putting out broadcasts from Baghdad, always reminds viewers and listeners that the broadcasts are made under conditions which are very limiting. I believe that I am correct in saying that that warning is always given.
The Earl of Caithness: My Lords, yes. I have heard those warnings on occasions.
Lord Hatch of Lusby: My Lords, the noble Earl did not fully answer my question. I do not believe that he can expect the Iraqi forces to move out of Kuwait before they are given an assurance that if they move out they will not be attacked. I understand that there is a report that General Schwarzkopf stated this morning that they would not be attacked. A clear declaration by the governments of the coalition is required if they wish the Iraqi forces to leave.
Is that the position of Her Majesty's Government? Once the Iraqi leadership states categorically that its forces will withdraw from Iraq, will the coalition say, "When we see your forces withdrawing from Iraq they will not be militarily attacked"?
The Earl of Caithness: My Lords, I do not know the exact operational details of how the matter will proceed. However, I assure noble Lords that when we receive a firm commitment that there will be a total and unconditional withdrawal from Kuwait arrangements can then be made for safe passage.
Lord Mowbray and Stourton: My Lords, perhaps I may ask my noble friend one final question. Is it right to be allowed to withdraw not only with the equipment with which one went in, but possibly with loot which one acquired during the occupation?
The Earl of Caithness: My Lords, with regard to war reparations, that is covered by one of the 12 United Nations Security Council resolutions.

Horseracing Industry
Debate resumed.
3.56 p.m.
The Duke of Roxburghe: My Lords, I should like to thank the noble Lord, Lord Donoughue, for initiating the debate. It is a subject close to my heart and one in which I should declare an interest. I have a thoroughbred stud in Scotland; I have horses in training; and my family also owns Kelso racecourse.
When a two year-old races for the first time, he is often over-excited, becomes fractious in the stalls and runs out of steam before the end. That is precisely how I have felt all day. I only hope that I can last out my speech rather better than the two year-old his one minute.
It may be only a coincidence that your Lordships are debating the critical state of the British racing industry at a time when this country and many others are at war with Iraq. The fact that time has been found for the debate indicates the weight of the problems that face racing in Britain. It is unfortunate that the debate takes place at a time when the country is in the middle of the worst recession in the last decade: the problems of the racing industry existed long before the recession. Those problems are deep-rooted and radical measures will be required to solve them.
The most fundamental problem is chronic under-funding. I support wholeheartedly the Jockey Club and the Horseracing Advisory Council when they argue that British racing should receive a royalty from the bookmakers which reflects a proper price for the product. I was interested to hear the suggestion on Thursday by a leading bookmaker that the Treasury should look into a fundamental change in the way off course betting is taxed in Britain, although it is difficult not to believe that the bookmakers would be the main beneficiaries.
I have long thought that the Jockey Club and the HAC should commission a report to look into the overall effects of, say, 1 per cent. of betting tax being returned directly to racing. In no other industry is the return from a royalty as derisory as the 0.9 per cent. which racing presently receives for the provision of services to the bookmaking industry.
In the past I have been disappointed to hear that the Government do not accept the argument that a comparison should be drawn internationally between Britain and the other major racing countries. British racing has always been held in great esteem overseas. The quality and competitiveness of racing here is second to none; latterly that has been thanks to the large sums of money spent by the Maktoum family and others. However, if that is to continue and if British racing is to compete with France and, in particular, America, greater funds must be made available to improve the facilities on British racecourses for the racegoer and to increase prize money to levels comparable with those elsewhere. It is
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a pity that in their submission to the Home Affairs Select Committee the Jockey Club and the HAC did not identify those areas which urgently require the extra funds they seek.
The royalty idea may be one very important change. But racing must also seek other avenues to help itself. It already receives funds from television fees, gate money, sponsorship, charges to betting shops for live commentary services, and fees from SIS. An avenue which should be pursued again is the introduction of racing on Sunday. Again by international comparison, it must surely be wrong that with the exception of New Zealand Britain remains the only major racing country where racing is not allowed to take place on one of the two major leisure days in the week. In France the number of people who go racing on a Sunday is more than three times greater than the daily average for the rest of the week; in Ireland Sunday racing has also proved extremely popular. Racing has to compete with other sports such as cricket and football for the public's leisure time. It must be allowed to do so on equal terms.
I appreciate that the proposal was fully debated in this House a few years ago but that it failed in another place. The Jockey Club and all sections of the industry advocated the introduction of racing on Sunday and still do so. The Government's objection was that it would encourage illegal betting, assuming that betting shops were not allowed to open on Sundays. There is little evidence to substantiate that. Indeed, evening racing already takes place on 130 occasions each year after betting shops have closed at 6.30 p.m. and there have been no complaints of illegal betting. If on-course betting only were allowed it would naturally bring bigger crowds to the racecourse and give racecourses the opportunity to market themselves to the expanding Sunday leisure field and to encourage families, in particular those with young children, to attend. The original Jockey Club plan was for racing at three meetings on each of 12 Sundays; hence 36 fixtures out of a total of 1,100. As there are 59 racecourses in Britain it is unlikely that any racecourse will have more than one fixture. Therefore, any local disruption will be minimal. I shall be most interested to hear the Minister's views on that matter.
There are many other problems, especially those confronting owners and breeders, which I shall leave to noble Lords who are far more qualified to debate them. I shall merely reiterate the views of my noble friends Lord Zetland and Lord Carnarvon and say that the implication of the VAT position after 1993 is the most serious problem facing the bloodstock industry. As was said by the senior steward at the recent industry question time:
"If the racing industry does not receive a VAT concession from the Government, then talk of crisis will not be misplaced".
That could not be more true.
4.5 p.m.
Lord Plummer of St. Marylebone: My Lords, I am delighted to be the first to congratulate my noble friend the Duke of Roxburghe on behalf of the whole House. He made an impressive speech on a subject to

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which he had given much thought. I was reminded of a most enjoyable visit to Kelso, which comes within his ownership, and of the beautiful countryside of the Borders. I am sure that all noble Lords look forward to hearing from him on many future occasions.
I too thank the noble Lord, Lord Donoughue, for initiating the debate, which comes at an opportune time. However, I must first declare an interest. I was chairman of the Horserace Betting Levy Board from 1974 I o 1982. Secondly, and more importantly, I must apologise to the House because I have a longstanding engagement which, I fear, will necessitate my leaving before the end of the debate.
The situation now facing everyone involved in horseracing is not dissimilar to that which existed in 1979. However, then there had been a five-year period of rising inflation which had eaten into the ability of the levy, together with contributions from the Horserace Totalisator Board, to meet all the legitimate demands made upon it. Moreover, against a background of steadily increasing costs, it was clear that the recipients of a levy board support could not expect the real value of that support to be maintained in all areas. It was than apparent that, as with every other business, the income was insufficient to meet the overheads and the business must be slimmed down so that essential activities could be maintained and other sources of income encouraged. That view might appeal to the noble Lord, Lord Donoughue, as an investment manager. The noble Lord urged us all to be mildly controversial.
The situation today cannot be said to be so bad. Inflation has only recently reared its ugly head and has not reached the same height as it did in 1979; indeed, it is now falling. In recent years new sources of income have become available to racing. The country experienced boom conditions which resulted in the levy increasing by 115 per cent. during the period 1980–1990 while the RPI rose by 70 per cent. During the 10 years 1981–90 the levy board's contribution to prize money increased by 140 per cent.
However, one significant new overhead has appeared in the form of the Taylor Report. It will involve racecourses in varying degrees of expenditure which in some cases is said to reach £1.5 million. That is money which they are being forced to spend but which they can ill afford. Football clubs which are in a similar position are being helped considerably by the Government's decision to forgo 2.5 per cent. of pool betting duty and return that money to the sport in order that the report's recommendations can be implemented. I believe that the sum amounts to more than £100 million. A precedent has been set and racing must surely have a justifiable case for government assistance.
In order to meet the situation facing all involved in horse racing, in 1979 a committee of inquiry was set up jointly by the levy board and the Jockey Club to review the way in which the levy board's funds were used to support British horse racing. With respect, I suggest that all concerned should study that again as the conclusions are as valid today as they were then. I shall not go into the details now but basically the committee recommended that levy board funds
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should be used more selectively and not merely to provide protection against certain elements of racing going into insolvency. I do not say that more money is not needed but I do not see what can be gained by the racing industry making demands for an enormous increase—2.5 times the present levy—without first making sure that it is spending its present income more selectively and efficiently.
In the past few years a buoyant national economy and the introduction of television into betting offices has contributed to a period of relative prosperity within the racing industry. That has enabled it to expand with more fixtures, prize money and capital investment than ever before. Now for the first time for some years betting shop turnover is growing at less than the rate of inflation, which has suddenly brought to an end the period of expansion. Racing is faced with a slow-down in growth and income. That is no different from any other industry, particularly in the leisure sector. Is this really the time to ask the Government to come to the rescue, except in regard to the Taylor report, and to put right the extraordinary anomaly as regards VAT and horse breeding?
I believe that a positive and constructive approach to the current situation within the present broadly satisfactory legislative framework is now needed, with the interdependent racing and bookmaking industries working sensibly and quickly together to minimise the impact on the long-term future of racing. In that way full advantage can be taken of the upturn when it comes.
4.13 p.m.
Lord Rathcreedan: My Lords, I too should like to thank the noble Lord, Lord Donoughue, for bringing to the attention of the House the serious situation facing horseracing at present. In speaking to your Lordships for the first time, I am conscious of the need to be brief and should just like to put forward a personal plea to all those involved in this large and diverse industry to work together with the help of the Government to maintain Britain's status as a major racing power.
I speak with no significant financial involvement in the sport but for several years have acted as a steward at three racecourses—Kempton, Newbury and Bath—and for more than 30 years have had a fervent and absorbing interest in racing under both flat and national hunt codes. I am sure that in this I am not alone among Members of this House and that these feelings are shared by many thousands of enthusiasts throughout the land who love the sport, not solely for the opportunity of financial gain through betting but to see top class thoroughbreds competing against each other. The substantial underfunding in the industry at present would appear to seriously threaten Britain's standing in the international arena.
Although not the total cause of racing's ills, a good proportion of the current malaise is attributable to the present economic situation which is apparent in all walks of life. The word "recession" seems to be a stock word in our vocabulary these days. Some trainers have told me of their difficulty in finding new owners and keeping a number of their present owners. The owner

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with four horses in training two years ago is not necessarily replacing those which finish their racing careers, and the owner with a single horse is very likely not an owner any more. These single owners, many of whom possibly only have a small share in a horse, are not necessarily the people in the minds of those who condemn racing's rulers as whingeing about lack of sufficient prize money in racing to subsidise their wealthy colleagues. They are people who have spent hard earned wages in experiencing the excitement of owning the whole or part of a racehorse. We must make sure that when more prosperous times return, those people will once again wish to return to racehorse ownership. For them to do so, however, horses with any ability will have to be capable of covering their expenses with prize money more easily than they do today. As has been pointed out, a horse must win several races each season before it can cover its costs.
If competitive racing is to continue, the owner must be attracted to the sport in order that trainers can survive economically and, through them, stable staff can earn a wage commensurate with their hard work, skill and devotion to the animals in their charge. Racing will have to be seen to be progressing and not stagnating. Racecourses will have to be well run and go out of their way to attract the racegoer and make him feel welcome once he is there with first-class viewing, catering, betting and information facilities. A race meeting should be a first-class family day out with every grade one track and possibly more besides having child-minding facilities such as only a few courses have at present. Ascot being a notable exception.
Others now have such facilities and I believe that more racecourses will have them in time. That will encourage families to go racing. As the noble Duke, the Duke of Roxburghe, said, Sunday racing will help to make more possible such a family day out.
Noble Lords may be thinking that all those requirements are very obvious, but how are they to be achieved? As noble Lords who have already spoken have said, they will be achieved only by racing receiving a proper payment from the off-course betting industry for the services provided by racing on which it totally depends. The bookmaking industry has stated an unwillingness to pay any more than it does at present and has threatened that any increase in the levy will be passed on to the punter. That does not seem likely to stimulate betting turnover, and we have seen no substantial evidence from the bookmakers to show that they are unable to contribute any more in the cause of saving the sport on which the majority of their income depends other than a continued statement of their entrenched position and a tendency to mock those who oppose them in any way. In any case, the proposed royalty payment suggested by the Jockey Club and the HAC in their joint submission to the Home Affairs Select Committee last week would be a fair price that the industry should expect for providing the racing framework. Moreover, the figure of 2½ per cent. compares very favourably with the 2¼ per cent. paid in similar circumstances to the sport of
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soccer and the noble Lord, Lord Donoughue, suggested that it is considerably less than that forthcoming in other countries. A healthy racing industry will benefit everyone from trainers, jockeys and stable staff to racecourse staff and other associated industries.
However, fundamental to the whole sport is the horse itself, and we must ensure that the breeder of the horse is adequately catered for in any new blueprint. The current downturn in bloodstock values is serious, and brought about by both recession and overproduction. Overproduction happens periodically in breeding any form of livestock, be it cattle, sheep, pigs, goats or even llamas. A period of prosperity will lead to lack of culling, breeding from inferior strains, and new people being encouraged into the industry, many without sufficient skill and knowledge to carry out the task properly. Every so often the sieve is shaken, to the detriment of the efficient breeders, who find the price of their quality product temporarily affected, but eventually the chaff falls through, and things improve. On this occasion, other clouds are on the horizon for bloodstock breeders. As the practice of breeding racehorses is so similar to breeding other species of farm livestock, and the land used in their production is in many cases agricultural land, I make a plea to the Government that they should consider treating racehorse breeders as farmers for the purposes of taxation. That is particularly applicable at the present time in view of the forthcoming single European market and the question of VAT which the noble Earl, Lord Carnarvon, dealt with so well a moment ago. I know that other noble Lords will speak on that very important subject.
In conclusion, perhaps I may say that if this recessionary period has brought any benefit, it is that it has made us examine the sport in detail, and we hope that answers will be found to the many questions posed. There has been an enormous amount of carping criticism and backbiting in the media between the many factions involved. However, I urge all those in positions of power within the sport to forgive any former inadequacies, forget past differences and try to work together in harmony to maintain British racing in a pre-eminent position.
4.20 p.m.
Viscount Whitelaw: My Lords, it is a special pleasure for me to congratulate the noble Lord, Lord Rathcreedan, on what may be described as an excellent maiden speech. He possesses two of the great qualities for addressing your Lordships' House. First, he has considerable experience in the subject on which he is speaking—not something I claim for myself this afternoon. Secondly, he expressed himself with great confidence and showed that he should speak to the House again; we shall greatly welcome the opportunity when he does so.
I must deeply apologise to the noble Lord, Lord Donoughue, for two errors of both etiquette and behaviour. First, I did not arrive in time to hear his opening speech. I do not believe that I can be blamed for that. I am not sure who should be blamed.

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However, seven hours in a train from Cumbria is a long time. I suspect I know whom I should blame but it would be outside the debate if I were to say so.
Secondly, much to my regret, I shall have to leave before the end of the debate. That is a practice I much dislike, and I always declared my dislike of it when I was Leader of your Lordships' House. However, on this occasion the debate was fixed on a day when I have two prior commitments. In one I must be in the chair. At this stage it would be extremely difficult for me to cancel the engagements. I therefore humbly apologise for my absence.
I was sorry to miss a large part of the speech of my noble friend Lord Zetland, for whom I have a particular affiliation. He comes from the North, and voices from the North are music to my ears in your Lordships' House. I have also a family connection close to his own part of the world which I greatly cherish. I am therefore sorry that I did not hear what he had to say.
I feel that I owe your Lordships a few thoughts on this important subject. I do not speak with any personal interest nor real first hand experience of racing. It is true that on one or two occasions for a limited period of time I shared in the ownership of a number of somewhat undistinguished race horses. That minor experience only served to teach me that the ownership of race horses, even in part, is likely to prove both a disappointing and expensive amusement. I am not sure that in the rest of my life I shall be tempted, as the noble Lord, Lord Rathcreedan, said, to enter into this field again. I enjoyed my time when I was there, though usually with disappointment.
My reason for speaking to your Lordships is that when I became Home Secretary 12 years ago I decided to take upon myself the ministerial leadership of the Home Office responsibility for the racing industry. I did so because I believed that a successful racing industry is of considerable importance to the nation. It gives leisure and enjoyment to many people. It provides substantial employment in racing stables and racecourses throughout the country. It is of vital importance to a successful horse breeding and bloodstock industry which in its turn provides considerable employment and financial benefit to the nation.
Today's debate is most welcome. The racing industry faces longstanding difficulties—as my noble friend Lord Roxburghe said in another excellent maiden speech—which need to be addressed, particularly in regard to finance. I do not believe in spoiling a good case by exaggeration. I was therefore glad that the excellent new chairman of the levy board, Sir John Sparrow, when addressing the Home Affairs Select Committee in another place, insisted that racing was not in crisis. However, he stressed rightly that the various sections of the industry were experiencing a hard time. So are many other people in our country in this time of recession. In seeking solutions to improve the situation, I shall begin with what is often the most important answer of all: what we should not do.
First and foremost, I am strongly opposed to that well-known palliative, a wide-ranging inquiry. Again I
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agree with what Sir John Sparrow said; it will go over the ground already well traversed by the Rothschild Royal Commission; it will be repetitive, and produce nothing that sensible co-ordinated discussion could not produce more quickly. That is where I start. I do not want to concentrate on detailed solutions. Others with more experience have already spoken and will speak better than I of what those should be and what action they should like to see from the Government. Instead I want to concentrate on the organisation required for a sensible co-ordinated discussion which could lead reasonably quickly to action, whether by the industry alone or with the Government. Those are matters to be worked out. It is on organisation that I wish to address my remarks.
I am totally convinced that the Jockey Club should remain officially responsible for the proper organisation, administration and control of horse racing in Britain. The Jockey Club has the great merit of being an independent body and not an interest group. As a result, its decisions are taken by the stewards in the interests of racing as a whole. As a regulatory body it has to take difficult controversial decisions which on occasions are inevitably the subject of criticism. But I ask what regulatory body in any other field or walk of life is not placed in that particular position. Against that background, I do not believe that the integrity of the Jockey Club and its members can fairly be criticised. Nor have I noticed any substantial comments which suggest that it is.
Lord Jenkins of Hillhead: My Lords, if the noble Viscount will permit me, I should like to say that, speaking as a fellow former Home Secretary and, like him, somebody who held that office twice, in my experience, while the Jockey Club may seem an anomalous way of running a major sport, in my view it conducts its difficult duties with conspicuous integrity and considerable efficiency.
Viscount Whitelaw: My Lords, I am grateful to the noble Lord, Lord Jenkins. I am delighted that I agree with him. A long time ago I was the Opposition spokesman for home affairs when he was Home Secretary. I agreed with him far more often than we ever disagreed. That has continued throughout our political lives. I am not sure that it does either of us any good to say so, but it is true. On this occasion we can profoundly agree; I am sure that we would both say that that is something we found at the time we were Home Secretaries, and it is an important factor.
I should like to add another point at this stage. From what I hear and read, the present senior steward of the Jockey Club, Lord Hartington, is much admired and respected in the racing world. That also is extremely important. Therefore with the Jockey Club in the lead it is vital that all the bodies concerned with racing come together in dealing with the problems, particularly of extra finance. During my time as Home Secretary a horseracing advisory council was set up to help in the process of co-ordination. I trust that it is doing that job effectively and will continue to do so.
The Horserace Betting Levy Board has had considerable success in organising money for racing

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under its successive chairmen; for example, my noble friend Lord Plummer who has already spoken in the debate. The late Sir Ian Trethowan, whose love of racing and courage in carrying on with that job when stricken with a tragic illness produced great admiration in many people. Now we have Sir John Sparrow, to whom I have already referred and in whom I have enormous confidence, as I made clear.
Therefore, my first conclusion is that we have the right regulating bodies. We need to encourage and support them and not at this stage try to change them with endless arguments. Time is wasted in arguing about changes. In any event, I do not believe that changes are necessary, so I hope that we shall continue on the present course.
It is important to say that if all of those bodies are to carry weight for the industry, and indeed for the Government, they must come up with solutions which, if possible, can be jointly agreed. That is the only way to get the Home Secretary in a position where he can argue effectively with his colleagues. If he has to put forward a case to the Chancellor of The Exchequer based on disputed proposals, I can only say from experience—not in the racing field but in many others—that you will get nowhere unless the proposals are strongly backed by those who are going to be particularly affected. So I hope that those bodies will get together with the betting organisations, with the tote and the bookmakers, to put forward such proposals. Surely that must be the first and most essential factor. When they have done so, I trust that they will put them forward to the Home Secretary of the day.
There is a final point which I wish to put before your Lordships. These proposals must be put to the Home Office. In my judgment, that is the right department to deal with racing. It has the standing in Whitehall, which is very important; it has done the job for a long time; and there is no reason at all why anybody should seek a change. All sorts of people produce ideas for changing government departments; but in the end, if I may humbly say so, they never seem to work quite as was expected in the first instance. I remember that in the past I advocated amalgamations of departments which not very long afterwards were very properly put apart; so I am not in favour of that process either. I trust the proposals will be put to the Home Office.
It is even more important that the Home Secretary of the day deals with the problems personally, because he alone in the end has the standing and position to put forward the proper arguments and to fight the battle with the Treasury. Of course there are battles with the Treasury. With all the pressures on the Chancellor of the Exchequer and the Treasury, every government department that wants to get something through needs to have a very good case, to present it sensibly and carefully and not to exaggerate it. Nothing is more dangerous than going to the Treasury with a very exaggerated case. They are experts in writing down and getting rid of cases which are exaggerated. They have been at it for years, and they know exactly how to deal with such matters. The only
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way is not to put forward exaggerated cases but to put forward a good case on a united basis. I know that the present Home Secretary, my right honourable friend Kenneth Baker, intends to do all that, and I applaud his interest.
I believe that we have the right organisation for the future of the racing industry. I trust that all those who are connected with it will therefore work closely together and put forward the proposals which are needed for the future; but the proposals must be well thought out, well prepared and well presented. If they are, the industry and the Government will be able to get together to help the industry; and that is much in the national interest.
4.30 p.m.
The Duke of Devonshire: My Lords, I should first like to congratulate the noble Lord, Lord Donoughue, on initiating this debate, and thank him for his extremely kind words about my son. I also thank the noble Viscount, Lord Whitelaw, and the noble Lord, Lord Jenkins, for their kind remarks, which are much appreciated. It makes me a very proud man to be the senior steward's father. I congratulate also the noble Marquess, Lord Zetland, the noble Duke, the Duke of Roxburghe, and the noble Lord, Lord Rathcreedan, on their maiden speeches, which were remarkable contributions to the debate.
This is not my maiden speech. Indeed, there was a time when I addressed your Lordships' House fairly frequently—some might say all too frequently—but with the passing of the years my faculties have somewhat failed me. My eyesight is far from what it was and I find it difficult to read notes. As a result, I fear that what I shall say this afternoon may be a series of fairly incoherent remarks.
First, I should like to make my position clear. Although I have had the privilege and honour of being a member of the Jockey Club for 35 years, and was a steward for three years some 20 years ago, it is not as a member of the Jockey Club that I make these remarks. Indeed, some of them may not be altogether welcome to the club.
I have been fortunate to own racehorses for nearly 50 years and it is entirely as an owner of horses that I make these remarks. I have to differ with those who talk about racing as an industry or as a product. Certain aspects of racing could be described as an industry, such as betting, breeding or owning of racecourses, but from an owner's point of view owning horses is not an industry. It is a sport. For a long time it was called the sport of kings, though with the rather unfortunate misuse of the English language we may now have to talk about the sport of female monarchs.
Because the owning of horses is a sport I look upon its rewards with a somewhat puritanical attitude. One should not seek financial reward from one's sport. Furthermore, as I am sure the noble Lord, Lord Donoughue, would agree, anyone who owns one or more horses, a quarter of a horse, or who is a member of a syndicate owning a number of horses (as is the noble Lord, Lord Donoughue) is a very lucky man. That should never be forgotten.

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There is a genuine difficulty here. On the one hand, the owning of horses is a luxury. One does not expect to make money out of one's yacht or one's grouse moor, so why should one expect to make money out of one's horses? I take the puritanical view that no one should go into owning horses in the hope of making money. Indeed, they would be mad to do so. I do not wish to weary your Lordships with statistics, but I will give as one example the most outstanding sire of the second half of this century; a horse bred in Canada called Northern Dancer. Northern Dancer's progeny were sold for 40 times more than they earned. That is enough to demonstrate the folly of expecting to make money from racing.
On the other hand, without owners there would be no racing. It is true that the punter makes a very great contribution to racing through the levy, but nevertheless the owner is a key figure and without him there would be no racing. As I see it, horseracing is an inverted pyramid with the owners at the bottom, and from ownership come all the other parts such as betting, breeding and use of racecourses. So there is a very real problem. Why should a rich or relatively rich man be subsidised by much poorer people to indulge in a rich man's sport? At the end of the day one cannot get away from the fact that the ownership of racehorses is the perquisite of the well-to-do. I take a puritanical view about the degree of the rewards of racing, while admitting that unless owners are given some reward the sport will die.
Since my time in ownership, racing has been transformed by the institution of the levy. As one noble Lord remarked, horseracing in this country has been going since the 18th century. The levy has been going for 30 years. There was racing before the levy; indeed, we were one of the great racing nations of the world without the levy. There is food for thought in that sentence. I have perhaps said enough about the philosophy of racing. Owners should realise how lucky they are. They should not expect to make money out of their racing and should realise that they race for the fun of it. Fun is a word one hardly ever hears these days in racing. One hears of the product and the industry but racing is meant to be fun. No one ever seems to think about it in that way. Anyway, I have said enough on my philosophy of racing.
I turn now to two individual matters which I think are important and which, speaking as an owner, I believe demand urgent attention. The first is the emotive issue of stable lads' pay. Nothing could be more unbecoming than that stable labour should be seen to be underpaid. Looking at my own back yard, the term "stable lads" can sometimes seem somewhat euphemistic. Not only are horse owners among the more materially privileged people in the country, but the horses the stable lads look after are worth not tens of thousands of pounds but hundreds of thousands of pounds, and in some cases even more. It is very unbecoming to see those who look after these immensely valuable animals, owned by rich people, not being properly paid.
I feel it is slightly odd that stable wages are negotiated by the National Trainers Federation without any representation of the owners. It is true
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that trainers pay their workers; but it is not their money they are paying, it is the owners' money. I should dearly like to see owners, through the Race Horse Owners Association, represented on the negotiating body with the trainers when negotiating stable labourers' rewards. As it is the owners who provide the money, they should have some say in the negotiations.
My second point is of even more importance. It concerns how we can stamp out the practice of owners not paying their trainers. In a recent case a trainer was forced out of business because the owner would not pay his bills. It is a difficult subject but I believe it has a relatively easy answer. At the moment owners do not pay their training fees through the registry office at Wetherby's. Everything else is paid through that body. The jockeys' fees, the prize money and everything else goes through Wetherby's. The training fees are paid separately and directly by the owner. I have no wish to impose a fixed fee for all trainers to receive. That is a matter for negotiation between the owners and their trainers. In some cases the fee is paid partly in kind—oats and hay—but there is always a large cash element. Once a trainer has decided with his owners what he is going to charge, Wetherby's should be informed and payment should then be made through it. That would have the overwhelming advantage that should the owner not pay his trainer's bills for, let us say six weeks, then not only would the owner be disqualified but also his horses. Therefore, he could not pass on his horses to another member of his family or to a friend; nor could he sell them because the new owner would know that he could not run those horses until such time as the previous trainer's fees had been paid.
I know that trainers will not like this situation because, for understandable reasons, they will do almost anything not to lose a horse from their yard. They will put up with far too long delays in payment. There are, I regret to say, among the ranks of owners the bad payers who say "If you are going to force me to pay, I shall take my horses away and send them to someone else". The trainer, particularly the small trainer, is inevitably in a cleft stick. Under this system, by which the money is paid through the registry office, the authorities will know which owners do not pay. They will disqualify those horses from running in whichever name they run, whether it be a new owner or a member of the family of the previous owner. This would stamp out what is an evil slur on the fair name of racing.
I have talked enough. I am afraid that I am a reactionary voice from the past when I talk about the sport of racing. To me it is a sport. Before I sit down I should just like to draw swords with the noble Lord, Lord Wyatt, with whom I worked on the tote board for 10 years. I read in this morning's paper that he described the Jockey Club, of which I speak with pride, as an undemocratic and self-perpetuating body. That is fair comment on the Jockey Club, but surely it is also fair comment on this House itself. It is a classic example of the pot calling the kettle black.
4.46 p.m.
Lord Renton: My Lords, I am sure your Lordships will agree that the noble Duke put the matter into fair perspective when he referred to the owners as the base of the inverted pyramid. When we speak of the financial problems of the industry we must remember that we are thinking of the financial problems of the 100,000 people to whom he referred at the top of the inverted pyramid. That is what I think this debate is about. I am neither an owner nor a breeder of racehorses, only of occasional lightweight hunters as MP for Huntingdon for 34 years until the constituency gained a much better MP. Noble Lords may therefore wonder why I am speaking in this debate. My main reason is that I had the responsibility of helping to prepare and pilot through another place the Betting Levy Act 1961, which is the foundation of the contribution of bookmakers to the improvement of horseracing.
I therefore find this a nostalgic occasion, and the noble Duke, the Duke of Devonshire, will share the memory. We both became Ministers of State in the Earl of Stockton's government. We were two of only four Ministers of State at that time. He will remember that it was not without controversy that we appointed the Peppiatt Committee. That was followed by legislation. It was necessary to put bookmaking and betting on to a proper legislative and workable foundation. We did that first with the Betting and Gaming Act 1960.
As to the 1961 Act, the late Lord Butler of Saffron Walden, when he was Home Secretary, gave me the responsibility of negotiating with the bookies. It was rather tough going. Although the big bookmakers were making a lot of money, there were small bookmakers who were not. After some resistance the bookmakers acknowledged that they had a part to play. They have been playing that part for 30 years. As the noble Lord, Lord Plummer, reminded us, the levy board has given not inconsiderable sums to improve racing mainly, but not entirely, through improved prize money. This year the board is providing £39.10 million and next year the figure will be £41.51 million. But, as my noble friend the Duke of Roxburghe stressed, in his most excellent maiden speech, such sums are derived from less than 1 per cent. of bookies' turnover. I cannot agree with the noble Lord, Lord Plummer, who claims that such payments have kept pace with inflation. The prize money has; but the rest of the payments have not. If one looks at page 34 of last year's report from the levy board, it will be seen that that is so and that the total payments have not kept pace with inflation. Indeed, in one year they actually decreased.
As earlier speakers have pointed out, the racing and breeding industry could do with more money from the bookmakers. Moreover, I believe that the bookmakers could provide that money. However, even if the levy board contributions were considerably increased and, indeed, alternative sources of income were also made to produce more money, the problem
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would not be solved unless something were done about the VAT problem, as the noble Earl, Lord Carnarvon, pointed out so vividly in his speech.
One concedes that, after 30 years of regularised betting and a smooth working levy board, perhaps it would be worthwhile to review the matter. After all, 30 years is a long time for experimental legislation to be given a trial. However, as my noble friend Lord Whitelaw so wisely pointed out, if we had a full inquiry—a Royal Commission or whatever it may be—although I agree with him that it would be a waste of time, and even if we had full and sensible negotiations between the parties concerned and the Home Office, legislation would not solve the immediate problems of the industry. It could not do so. In any event, I would not expect any legislation on the matter to be introduced in this Parliament, even if it were to run its full course.
So what should be done about VAT? That is the crux of the matter. It so happens that Sir Adam Butler, who is the son of my old chief and president of the British Horse Society, suggested to me in a letter which I received today that the breeding and rearing of horses should be classified as an agricultural activity, which of course it is. It is carried on in the countryside by people associated with farming. It is an agricultural activity, although we do not eat horse meat in this country. Sir Adam Butler suggests that "rearing" could be defined as coming to an end when the first sale had been concluded. That may not go as far as some people hope, but it would help the situation.
In my view the various suggestions—an interesting one appeared in The Times today—should be considered by the Treasury. The article on page 31 of The Times states:
"If Whitehall agrees, blood-stock transaction could be exempt from VAT in the transition period to 1997 when harmonisation of the tax is due to be completed".
That suggestion should be taken seriously. After all, in the EC negotiations on harmonisation everything will be, so to speak, thrown into the melting-pot. Presumably—and one hopes that this would be the case—no one would be committed to what takes place at present. The negotiations would concern only what should happen in the future. However, in the meantime, zero rating, at least for some of the time up to 1997, would be a solution to a real problem. Frankly, unless the Treasury deals with the matter, the nation's economy will suffer. I say that because if Newmarket Sales close down, and if the other disadvantages which have been mentioned come to pass there will be an adverse effect on the balance of payments. That ought to be the primary concern of the Treasury.
The great contribution which some of our Arab friends have made to racing in this country should be placed on record. Indeed, that very modest prince, Khalid Abdullah, was the owner of this year's Derby winner. They are having problems elsewhere at present, but I believe that we should acknowledge their contribution towards solving the problems that we have in this country.
4.57 p.m.
Lord Goodman: My Lords, this has been a very distinguished debate. I cannot remember a previous debate where the 10 or 11 speakers previous to me so obviously knew the subject backwards. I am sorry that I may spoil the record by virtue of my own participation. I am intervening in the debate by reason of two conflicting requests: I received a request from the Jockey Club to say something on the matter and I was also asked by the bookmakers to do likewise. I am afraid that I gave both organisations the impression that I would say what they wanted me to say.
I am very pleased to be able to endorse the tribute which has already been paid to the Jockey Club. I became very conscious of its reputation some years ago when I was in South Africa. I was travelling in a plane from Cape Town to Durban. The famous July Handicap was being run in Durban. There were several racing types on the plane. We entered into a conversation and one of the things that I remember most is that all three of them said how fortunate we were to have a Jockey Club. They said that it was the existence of that club which preserved the integrity and honesty of British racing and that they desperately needed such an organisation in South Africa. A more unsolicited tribute could not be found. It certainly impressed me a great deal.
Over the years I have noticed that the Jockey Club has discharged its extremely difficult duties, such as disciplinary duties, without rancour or any suggestion of bias or favour. I became especially conscious of that fact during the course of what I believe became a famous case, but which has now been forgotten. I refer to the case of Relko, the horse which won the Derby some years ago but which was later disqualified because it behaved in a rather erratic fashion at the starting point of a subsequent race in Ireland. That aroused the suspicions of the British authorities who proceeded to declare that the horse had been drugged and was obviously not capable of honestly winning the race.
The events which ensued were really quite funny. It so happened that the owner of the horse was a French lady who had inherited several horses from her husband who was a distinguished owner. The matter of being French was very significant. In the past I noticed that if the Jockey Club made a ruling any English owner would accept this at once without argument. However, that did not apply to a French owner. Indeed the trainer, the stable boy, the lady herself and a variety of other people concerned with the race arrived in this country. They set to work to reverse the finding. The finding was that a particular so-called drug was found in the urine of the unfortunate animal. However, at the end of the day, having called expert evidence, it was discovered that the drug was to be found in grass. Of course, it had to be pointed out that it was not unusual for horses to eat grass.
In the event the Jockey Club gracefully retired and a few days later the Derby stakes result was slipped into the racing calendar showing Relko to be the

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winner. That certainly indicated the extraordinary degree of care which was and is given to such matters. I had a moment of satisfaction, because, as any of your Lordships who have been connected with a publicised matter will be aware, our media, especially the newspapers, are not the ideal people to approach one. I have been badgered by several newspapers for a considerable time. When I arrived at the ultimate hearing, it gave me a great deal of satisfaction to be stopped by various newspaper reporters who asked who I was. Some little while previously, the trainer and the stable boy had arrived. I said that I was the jockey. They recoiled. They thought that that was unlikely and, if I may say so, that did not surprise me.
I have two reasons for believing that the Jockey Club's disciplinary function is beautifully conducted. The first is that it has enormous speed. If any legal process were to be conducted at the same speed, the praise heaped upon lawyers would resound to high Heaven. Secondly, people do not have legal representation. It may come amiss from a lawyer to suggest that that is a good idea, but in relation to decisions that have to be made within a minute, one could not hope to find legal representation which would subscribe to that requirement. For those and other reasons, the Jockey Club's disciplinary function is something that we should bear in mind before we start making any changes.
I do not intend to speak for a long time. I shall be only a minute or two more. I hope that the 10 speakers who follow me will bear that in patience. The bookmakers' case is one upon which I should not comment. The bookmakers and their representatives wrote to me at great length to tell me how wrong it was to suggest that a large sum should be added to the levy. That was a clear representation, and they obviously would not like it if I were to agree with the idea. On the other hand, whether one's sinews are wrung by the fear that bookmakers may not like the proposal, it is something for each individual to choose. It is true that bookmakers in this country have an exemplary reputation.
I was interested to hear what the noble Duke, the Duke of Devonshire, said about the pleasure of owning a horse. I am not sure whether a literary reference should be made in the debate, but I was reminded of a charming story written by the late John Galsworthy called Have a Horse. The story was about a bookmaker who had acquired a horse in payment for a racing bet. His infatuation with the horse, which grew rapidly and entirely changed the course of his life, was beautifully described. If any of your Lordships want to read it, all you have to do is to obtain a copy of the collected stories of John Galsworthy. It was so much in accord with what the noble Duke said that the similarity struck me immediately.
The noble Marquess, Lord Zetland, specified a number of ways in which additional revenue might reach racing. One which was mentioned a little later was a lottery. I hesitate to cast cold water on that prospect, but I have to tell the racing industry that it comes very low within the table of people who are

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expecting to receive great sums from a lottery. The arts are expecting it. Covent Garden is praying every night that there will be a lottery that will rescue it from its ruinous state. The NHS is praying for it. There are probably 20 suitors for the lottery before the racing industry gets a toe in. Hence I suggest that any aspirations towards such a source of income should be put on the back burner.
When there was a Motion before the House many years ago to approve a state lottery, it will be found—if anyone bothers to read what I said—that I opposed it strongly. That was on prudish, priggish, moral grounds. I did not like the idea of people becoming rich as a result of buying a ticket and suddenly finding that they had won a fortune. It did not strike me as a healthy way of doing things. That remains my view. If, however, a lottery comes into existence and rescues Covent Garden from its ruin, enables the English National Opera to repair its roof, and one or two other things happen, I shall withdraw my objections to a lottery.
It is nice to think that many people obtain a great deal of pleasure from racing. I believe owners obtain the least pleasure because the pain and suffering of seeing one's horse lose has, I am sure, accounted for several nervous breakdowns. Leaving that aside, many people obtain entertainment and pleasure from racing. I am a director—hence my presence—of two companies, one of which owns and deals with the most important race in the world. The other has nine or 10 racecourses, none of which is in a state of crisis. I do not want to quarrel with those people who have assessed the present situation as being one of financial despair, but I do not believe it. Both the companies with which I have the pleasure to be associated—incidentally without any form of reward, which is what normally happens to me—are prosperous. They would not agree with the suggestion that there is a desperate crisis that needs to be solved by desperate expedients.
We have had a distinguished debate. It has sent out the message that horse racing is an important industry which should be considered carefully. It should receive wise and sensible judgment from us.
5.6 p.m.
The Viscount of Falkland: My Lords, this has been a wonderful debate. I thank the noble Lord, Lord Donoughue, for giving me the opportunity to speak in it. I developed a passionate interest in horseracing at an early age—perhaps too early. It dominated my life to such an extent that it may have affected the academic life I was supposed to be following when I was at school. It was difficult to place a bet at school or elsewhere. The only way one could place a bet was to be on a racecourse or to have a credit account. I found that the best way to overcome that problem was to become the school bookmaker. I have been a modest owner of racehorses here and in France. I have been not such a modest punter I am afraid. The only period of my life during which I made a profit out of racing was when I was at school and made a book.
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I cannot tell noble Lords—I do not believe that I could work out a percentage at that time—the percentage on turnover. All I know is that during the term I made enough profit to enable me to lose it again in the holidays. I became keen on racing because of the horse. The horse came before the gambling. Many people overlook that fact. People in Britain and Ireland have a curious and close relationship with the horse. It is an affection which may not be found elsewhere. That may explain why the horseracing tradition developed in this country. It is a tradition which was eloquently referred to in one of the three excellent maiden speeches. I pick out the first of those which was made by the noble Marquess, Lord Zetland. He referred to the great tradition in this country which has built up the quality of horseracing, bloodstock and the testing of bloodstock on the racecourse which has been the model for the rest of the world.
It is sad that, as in so many other areas where we have developed a skill and expertise, other countries have adopted it and improved upon it in many respects, although not all, as other noble Lords have said.
I shall speak now about the running, administration and control of racing. I echo the sentiments of my noble friend Lord Jenkins of Hillhead. The Jockey Club has come in for much criticism, particularly in recent times. It received implied criticism even in responses to oral questioning before the Home Office committee. The Jockey Club has run, administered and controlled racing with an integrity which is second to none and admired all over the world. Its weaknesses have been shown in its ability to adapt to modern commercial practices and to changes in the economics of racing.
Recently the Jockey Club has taken on board a chief executive of proved expertise, Mr. Christopher Haines. He is already introducing an interesting commercial outlook which may enable the Jockey Club to continue running racing in the same way, with perhaps a little more ability to deal with the bookmakers. One noble Lord referred to it—and I agree—as a body which has pursued its interests in a most professional way.
Those who wish to replace the Jockey Club with another body should think carefully. In recent history regulatory bodies have been introduced in other areas where large of sums of money have been put into the pot. We have not been impressed by their composition or by their ability satisfactorily to regulate. With the Jockey Club we have a body with a track record of proper control, administration and regulation, with efficiency and integrity.
The British racegoer has a peculiarly deep knowledge of racing which is not reflected in the amount won by the punter from the bookmaker. The punter still loses the same as punters in other countries, as I discovered by examining comparable statistics. However, he is much better informed and has an interest which has been satisfied by an extremely good racing press in this country. I also

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include a highly developed television coverage of racing here which is probably the envy of other racing nations.
I cannot understand why our close neighbours in France—whose racing industry is well financed for the reasons already mentioned—have not developed such an interest in television, which is only marginal in that country. It is hard to find a decent form book or racing paper in France. Perhaps the interests of the French racegoers are different from ours, which may be reflected by the way in which the tote monopoly has been so readily accepted in France but not here. That shows the deep interest the British racegoer has in his betting and owning of horses. He has been well served in many respects by bookmakers, particularly the on-course bookmakers.
Where the punter has not been well served and thus ultimately racing has not been well served has been when the bookmakers off-course have not put enough back into racing from the profits they make. As other noble Lords said, it is extremely difficult to estimate exactly what the major bookmaking firms make out of betting turnover. They claim that it is between 10 and 15 per cent. gross on betting turnover. Then they say that at the end of the day they make about 3 per cent. net, after all expenses and other deductions. That makes it a not very interesting business. If racing is so unprofitable to the bookmaking firms—and they complain about profitability in supermarkets and other areas—one wonders why they are so anxious to pursue their business in other countries in Europe. They are also anxious to include the French who have an extremely lucrative racing business in terms of the amount of money ploughed back by the tote monopoly into racing. One wonders why the bookmakers should feel that they can make a go of it there when their business is financially so uninteresting. Of course it is worthwhile to them. The difficulty is how one faces them and persuades them to contribute more.
The Jockey Club has put forward an interesting proposal. It relates to copyright and to providing a product on which a royalty should be paid. It has spoken in those terms. The proposal is a carefully worked out programme of revising the functions of the levy board to persuade the bookmakers to produce more. The noble Marquess, Lord Zetland, was scrupulous in observing the customs of your Lordships' House and did not forcefully labour the point. However, I believe that there is only one answer. I am probably the sole speaker to say this so far. If we wish to make racing an activity that flourishes and retains its traditions, pays the enormous workforce and gives owners some chance of a return, that can be achieved only by some form of totalisator monopoly.
I end by giving three figures of comparisons which I obtained from the Jockey Club. They were in French but I have been able to translate them using a rough exchange rate. In this country we have a betting turnover from horseracing of about £4.2 billion. From that, the Exchequer takes 8 per cent. and the levy board extracts just under 1 per cent. which goes back into racing and is distributed in a way with which I can
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find no fault. However, the amount is simply too small to make any great impact on racing. In France, where there is a tote monopoly, with the comparable amount of slightly under £4 billion in turnover from racing, the government take an astonishing 17.2 per cent. in duty from the proceeds of betting on and off course. That is governed through the totalisator pools and from it is taken 10.4 per cent. of turnover which goes back into racing. That is astonishing; it is ten times the amount in this country, and covers not only owners but veterinary costs, research, the improvement of racecourses, and so on.
Australia is another country with a comparable turnover, again of about £4 billion. The government use a totalisator and bookmaker mix: there is a totalisator monopoly off course but bookmakers compete with the totalisator on course. The government take 9 per cent. from the total turnover of £4 billion and 3½ per cent. goes into racing. That is 3½ times the amount which goes into British racing.
I have suggested two ways in which we could go. One is a tote monopoly which has been resisted in this country by the Jockey Club as well as other bodies. The other is a mix. I suggest we examine the mix closely. There is a possibility of compensating bookmakers for the loss of their offices by giving them the opportunity of running totalisator off-course offices and allowing on-course bookmakers to continue their activities on course, permitting the tote to have a monopoly off course. The tote has been unfairly criticised for its operations. In recent times it has become much more efficient, but with competition against the great bookmakers it is hardly surprising that it has been unable to flourish.
The nettle must be grasped early and I anticipate that the Minister, who is expert on the subject of racing, will not even have to consult his brief. That is rare in your Lordships' House. I hope that the Minister will be able to respond positively to all the suggestions that have been made. I should be interested to hear from him whether the Government think that racing can contemplate a mix between the totalisator monopoly and on-course bookmakers in the way that I have suggested. I hope the Minister will also say whether the performance of other countries in this respect is relevant. I look forward to hearing some dozen fascinating speeches. I thank the noble Lord, Lord Donoughue, once again for giving me this opportunity to express my views on this matter.
5.20 p.m.
Lord Vestey: My Lords, I am grateful to the noble Lord, Lord Donoughue, for initiating this debate. The speeches we have heard so far have been extremely interesting and well informed. I wish to congratulate my noble friend Lord Zetland, my noble friend the Duke of Roxburghe and the noble Lord, Lord Rathcreedan, on their maiden speeches. All three are well known in racing circles and in different ways play very important roles. I have worked with them all in the racing industry and I hope we shall hear them speak again in your Lordships' House very soon.
I declare an interest in horse racing in that I have owned racehorses continuously since 1963. I have

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been a member of the Jockey Club since 1979. During that time, I was a steward of the Jockey Club for five years, and for three of those years I was chairman of the disciplinary committee. I am also chairman of the Steeplechase Company, Cheltenham.
I make no apologies for covering some ground that has already been covered by the noble Lord, Lord Goodman, and by my noble friend Lord Whitelaw. They have been generous in their remarks about the Jockey Club. However, looking down the list of speakers, I fear that that situation may not continue. Therefore I wish to make a few remarks about what the Jockey Club has done and is continuing to do.
As most of your Lordships know, the Jockey Club was incorporated by Royal Charter in 1970 and is officially responsible for the proper organisation, administration and control of horseracing in Britain. Its role within that framework ensures the highest standards of integrity. Integrity in horseracing signifies public confidence. Without such confidence horseracing would soon lose its prominent position in the sporting world, and the widespread interest that it generates. Were this to happen, a downturn effect on the sport's lifeblood—betting turnover—would inevitably follow.
The provision of services of integrity therefore is plainly the key to horseracing. In 1989–90 that accounted for 25 per cent. of levy board expenditure, a figure amounting to £9.4 million. That is the highest levy board allocation after prize money. Inevitably the need to invest in new developments, often of a technological nature, makes this provision increasingly expensive to maintain.
The Jockey Club controls and oversees the vital areas where this expenditure occurs. Essentially those areas fall into three broad categories. First, there is drug prevention and detection. The reputation of horseracing in Britain is second to none in controlling drug abuse. The horse race forensic laboratory, which is contracted to the Jockey Club, is a world leader in both drug screening facilities and methods. It maintains the highest analytical standards and fully responds to change in the pharmacological field.
Secondly, there is security and discipline. The Jockey Club provides comprehensive racecourse policing; official racecourse decision-making and expert administrative support. It achieves that through preventive action taken by a field force of security and investigating staff and by appointments such as betting investigating officers, veterinary officers, stewards' secretaries and through a secretariat. Prevention is backed up by a successful disciplinary framework which ensures the sport is kept straight and that any offenders are penalised.
Thirdly, there is the matter of technical services. Effective communication and technical services on racecourses are guaranteed through the Jockey Club's contracted relationship with racecourse technical services. This ensures that every meeting is covered by camera patrol and photofinish equipment, race timing, public address systems, race commentaries
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and closed circuit television. Those facilities enhance the integrity of racing and provide an essential service to the racing public.
All of those areas are geared towards ensuring that the result of any race is beyond reproach and is, above all, a just result. Furthermore, they ensure that the unscrupulous minority, present in any sport, is kept to a minimum. The Jockey Club co-ordinates the total package of integrity on which horseracing depends. As an independent body its decisions are taken in the interests of racing as a whole.
Whatever else may be said about the Jockey Club, the impartiality and fairness of the club is respected by the various associations and federations which make up the racing industry. Other racing authorities around the world also look to it for guidance and leadership. As a result of that respect and through a successful track record in this field, the Jockey Club has created an environment of high public confidence in the integrity of the racing product in this country.
I own a small stud in Gloucestershire where we keep five thoroughbred mares. At this time the horseracing industry faces a number of threats from land use policies in Great Britain. There is one specific and pressing problem at present which is the proposal for a new settlement in Cambridgeshire close to Newmarket. I wish to discuss that matter in a little more detail. In order to meet the forecast demand for housing in Cambridgeshire in the next 10 years, the county council there has proposed the construction of two new settlements. One is to be sited north of Cambridgeshire in the A.10 corridor, and the other is to be situated in the A.45 corridor to the east or the west of the city. Everyone involved in racing is anxious that the provision of housing and amenities for some 8,000 people on the boundaries of these studs poses a severe security risk. In addition, it will restrict any future physical expansion of the studs. The problem is not so much the theft of horses but the effect that an influx of people will have on the well-being of the horses. Thoroughbred horses are extremely sensitive animals and are highly susceptible to disturbance. Experience has shown that people and racehorses do not mix easily.
Despite the best intentions, people stray onto fields that belong to studs without realising the potential danger that such an action poses to themselves and to the horses. It is unlikely that most of those 8,000 people have had any links with horses by tradition. Therefore they will be unaware of the care and respect that are needed when in the presence of horses. The perils of litter, dogs, children and noise will have a major bearing upon these animals. Disturbances of these kinds can cause both physical and psychological harm to these valuable horses. Any attempt to mitigate the problems by constructing boundary fences will be extremely expensive in terms of the capital cost. The National Stud has told me that such a process would cost it nearly £500,000 and that the fence would need to be constantly patrolled. The horseracing industry does not believe that is a feasible proposition.

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We fear that a development on this scale on the borders of Newmarket could lead to a loss of confidence among horse owners and investors. That could lead to a fall in demand for the services of British studs, and owners may choose to make use of studs overseas. If the developments should go ahead, the affected studs would be surrounded by new buildings. That would be the case particularly at Hare Park. That would prevent future expansion of the stud farms and therefore place an unacceptable restriction on the British racing industry.
I very much hope that my noble friend the Minister will pass on to the appropriate department the views of the horseracing industry that, given the six alternative sites available to the west of Cambridge, the Secretary of State should not select a site to the east of the city which would cause great damage to our industry.
5.29 p.m.
Lord Wyatt of Weeford: My Lords, I must declare two interests. I am the chairman of the tote and a member of the Horserace Betting Levy Board.
The noble Lord, Lord Fairhaven, was senior steward of the Jockey Club between 1985 and 1989. In an annual Jockey Club report he remarked:
"Racing is in an exceptionally healthy state".
The noble Lord has been greatly reviled and pilloried for ma king that remark, but he was right and still is. I should like to defend him.
The levy system has improved the health of racing beyond all recognition. In the first year of the levy—1961–62—the levy raised was £900,000. If it had merely kept pace with inflation the levy raised would have been £7.8 million in 1989–90. It was not; it was £36.3 million, a vast amount above inflation. Between 1980 and 1990 the levy yield went up by 115 per cent. compared with an inflation rate of 70 per cent. For the period 1990–91 the levy yield is expected to be £39.5 million. Originally it was forecast to be £40.2 million. In the period 1991–92 the levy yield is expected to be £41.5 million against an original forecast of £42.5 million.
All that money collected by the levy can be regarded as a profit for racing. Some sections of the racing industry, particularly the Jockey Club, have expressed horror that there will be a drop of 1.5 per cent. in the estimated levy yield for the year ending this March and an anticipated fall of 2 per cent. in the year beginning 1st April. There are thousands of businesses in this country which would be greatly relieved to be facing only a 1.5 per cent. reduction in anticipated profits by the end of this financial year and only a 2 per cent. anticipated reduction in profits in the coming financial year.
In 1990–91 the levy yield will be £3.2 million above last year and in 1991–92 it will still be £2 million above 1990–91. Therefore it is extraordinary that people should feel that racing is suffering a cut. It is not suffering a cut, it is just suffering a reduction in its anticipated profit.
It is a little unseemly in a period of sharp recession and rising unemployment, to say nothing of the Gulf
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War, to make such a fuss about that. I ask the racing industry to be patient. There has been a steady improvement in racecourses and in prize money. Only a slight setback is now taking place. Facilities and conditions at racecourses have improved enormously and there has been an improvement in everything connected with racing.
The difficulty with the racing industry, and particularly my friends in the Jockey Club, is that they look with envy at France. French flat and national hunt racing received £100 million from the Pari Mutuel monopoly in 1990. The noble Viscount, Lord Falkland, quoted incorrect figures. I collected my figures in Paris only the other day from the head of the PMU. The turnover of that monopoly in 1990–91 has been reduced, for much the same reasons as betting turnover is lower here. The French equivalent of our racing faces a reduction in its income in 1991 of 2 per cent., just like us.
Our racing has additional income which is not available to racing in France. Prize money sponsorship here runs at £9 million a year. Satellite information services pay racing nearly £8 million a year. Fees for the use of information for punters and others on race information telephone lines add another £300,000 a year. The use of racecourses for exhibitions, dances and so forth, brings in another £2 million a year. In total racing has an income of about £60 million a year, not merely the £40 million which the levy board collects. That is still short of what flat and national hunt racing receives in France because they have no bookmakers.
The Jockey Club could have had a tote monopoly here in 1928 when the tote was set up under a Private Member's Bill promoted by Jockey Club members in both Houses of Parliament. Unfortunately, as the Jockey Club consisted mainly of owners—and still does—it felt that it was only reasonable that if an owner fancied his horse's chance of winning a race, he should be able to make a special price with the bookmaker, which cannot be done with a tote pool. An owner can get a price from his bookmaker which is over the odds in return for information he gives him and his association with the bookmaker but he cannot get anything other than the mathematical odds from a tote pool. That was why a tote monopoly was rejected at that time.
Similarly, in 1961 when bookmakers in the high street were legalised the Jockey Club opposed a tote monopoly. The Jockey Club and many others in racing are in a catch-22 position—they recognise that a tote monopoly is now impossible, and have never wanted it, but they want the benefits of a tote monopoly all the same. They now demand that bookmakers should be compelled by one means or another to contribute £100 million a year to the levy instead of £40 million. That would make our racing somewhat better off than its counterpart in France. It would be a triumph for the Jockey Club. However, naturally the bookmakers resist. As no one else has said a word to defend them today, I shall say a few words to defend them now, although we are not always the best of friends.

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If the bookmakers had to pay more they would be contributing a further 2½ per cent. to 3 per cent. of their turnover to the levy. At the very best bookmakers, however good, are lucky to make a 3 per cent. net profit on their turnover. The explanation is that it is a revolving turnover; it is recycled money. It is not the same as buying a hat in Marks and Spencer on which Marks and Spencer has marked up a profit. It is money which is recycled throughout the afternoon. The only real turnover in betting is the amount that does not go back to the punter, which is about 23 per cent. After paying their expenses, tax and rents—which are very high and going up all the time —it is remarkable if bookmakers can make 3 per cent. net profit.
If there were an increase of 2½ per cent. or 3 per cent. in the levy payment there would be no profit at all for the bookmakers. Inevitably the additional levy payment would be passed on to the wretched punter. Deductions, including tax, would rise to 12½ per cent. and betting turnover would fall. The end result would be lower turnover and a smaller levy yield. One cannot go on helping oneself to more and more of the pot and think that there will be plenty left. There is not.
Such largesse would be very agreeable for racing, but there is no evidence that it is necessary in order to maintain racing in a reasonable state of health. In 1980 there were 472 trainers; now there are 558. In 1975 there were 11,455 horses in training; now there are 13,500. Of course there are fluctuations every year—some owners enter racing and some drop out. Some become disenchanted while others anticipate great glory in racing, which seldom happens. Mr. Robert Fellowes recently retired as the Jockey Club agent in Newmarket. He said that 20 years ago there were 1,000 horses in training in Newmarket and now there are 2,500. Twenty years ago there were 38 trainers; now there are over 70. It does not sound to me like an industry that is in a parlous state.
The Jockey Club and racehorse owners argue that much more prize money is essential and would fructify the whole industry. I doubt it. Seventy-seven per cent. of races are won by only 10 per cent. of owners; 41 per cent. of owners do not even get a horse placed, and only 5 per cent. of horses cover their costs. Nevertheless, the number of owners remains remarkably stable. There is no way that more prize money would benefit stable lads, unless they worked for one of the exceptionally successful trainers and got a share of it in that way. There is no way that more prize money would benefit the thousands of people in the industry who are poorly paid. The level of prize money should be sufficient to maintain a quality of racing which is good enough to attract horses from overseas to race here and to keep the punter in the betting shop interested. It is not true that many punters are prepared to bet on how fast two flies will crawl up a window. Punters are quite interested in the form of the horses, the standard of trainers, the owners and all the rest of it. We must have some kind of quality racing; it is not good enough to race rubbish all the time, otherwise there will not be much by way of levy. But it is a nice balance and I think the
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proportion of the levy yield which now goes to racing in the form of prize money is about right. Well over 50 per cent. of all levy board expenditure goes on prize money. Some argue that that is too much. I do not. It must not be a way of meeting the expenses of the rich who enjoy a hobby that no one ever compelled them to take up. I thought that my old and noble friend the Duke of Devonshire was eloquent and right about it. I know that he would never look for subsidy in any activity in his life, but I am afraid that a great many owners do.
It is true that bookmakers could afford to pay, say, 10 per cent. more levy, and I often urge that upon the levy board. But it is pointless to ask the Home Secretary to award more than that because he is obliged to be even-handed between bookmakers and the racing industry. When the noble Viscount, Lord Whitelaw, was Home Secretary in 1982, he made a most bold move: he increased the levy rate by 11 per cent. It was a sensation. Bookmakers nearly went berserk and racing rejoiced. I do not think there will be such an uplift in the levy rate repeated in future.
Bookmakers have been allowed to be triumphant in the high street since 1961. For 11 years the tote was not allowed to own betting shops giving SP prices. To take away most if not all of the profits of bookmakers by excessive levy payments would cause a justifiable and politically successful outcry from them. They have been accepted as a means of making money, and suddenly somebody comes along and says, "We are going to take your income to zero and make you destitute".
The Jockey Club and others know perfectly well that there is no real hope of getting a levy increase of any substance. They make bizarre proposals. For example, they ask for legislation which no government will ever pass to enable the tote to make higher profits by having outlets in banks, cafes, restaurants, retail stores and so on. Can one imagine any government allowing the tote to do that, while bookmakers are not allowed to have the same? I am sorry to say that such mad proposals emanate from the Jockey Club, which hopes that bookmakers will be tempted to have tote outlets voluntarily in their shops and an absurd rate of commission which no bookmaker would look at. I sometimes think that these proposals come not from the Jockey Club—I hope not—but perhaps from Bertie Wooster and the Drones Club. They are so utterly fanciful. I sometimes think, "Shall I answer the latest idiotic suggestion or not?" I do not have time to answer every lunatic suggestion in the newspapers, but now and again I wonder whether some of these people should not see a psychiatrist.
I do not want to say too much about the tote. Lately I personally have been criticised violently by the new element in the Jockey Club which does not know anything about betting organisation but which thinks it can make much more money out of the tote than we do. It ignores the spectacular growth that the tote has had in the past five years. For example, our contribution to racing including the levy has risen from £2.3 million to £6 million in a year. It ignores the fact that we have started a great new complex at Wigan which has the largest and best computers in the

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world for betting and a huge battery of telephones, which we are now selling at considerable profit to other sources for use in telemarketing. We have doubled the tote turnover credit and have got our course- to-course scheme going as well.
The Jockey Club thinks to itself, "Well, we cannot get any more out of the bookmakers. Surely, that inefficient fellow Woodrow Wyatt must be able to produce more money if somebody sits on his head". You will not produce more money that way because you will stop him thinking! The latest implausible suggestion is that the Jockey Club should charge a copyright to all bookmakers displaying runners and riders at daily meetings. The Jockey Club admit that this would require legislation. Where were Jockey Club members during the 1987–88 Session when the latest Copyright Bill was much discussed in your Lordships' House? That was the time when Jockey Club members could have argued for a copyright fee, and they might have got somewhere. They were absent. I cannot now conceive of any government producing a special new law to please the Jockey Club with a novel and probably unworkable copyright fee. After all, one of the great obstacles would be that newspapers would go on publishing them freely under the Jockey Club determination. How on earth do you get a reasonable price for a monopoly from people who arc not involved in newspapers? The whole thing is fraught with difficulty. I suggest it is one of those Bertie Wooster flights of fancy.
I fear that the Jockey Club, despite having among its members very distinguished businessmen, including my noble friend Lord Weinstock, is most unbusinesslike. If there is a boat to be missed they will miss it, as they did on Sunday racing. When we were trying to get a Bill through this House some of them preferred to have dinner rather than attend a vital vote. The Jockey Club should have done what the tote did with regard to satellite information services which now show races live in betting shops. We helped to organise that and paid £484,000 for a 5 per cent. stake, which is now worth £5½ million. The Jockey Club was ideally placed to come in right at the outset and could have got 15 per cent. or 20 per cent. It could have made proportionately as much money as the tote, but it was not there. The Jockey Club could have supported the implementation of Section 3 of the 1972 Act which is concerned with gambling. After 11 years in the wilderness, the tote was allowed to have betting shops in the high street for the first time. Section 3, which is still in force, was intended to allow the tote to catch up with bookmakers after a start of 11 years by compelling local licensing authorities to allow the tote to start betting shops anywhere it wished despite the authorities considering demand in their areas to be satisfied. It would have made the tote's position unbelievably strong in betting shops. Did the Jockey Club back the implementation of Section 3? It did not and it does not. In its evidence to the Home Affairs Committee of another place the Jockey Club does not even mention it. Yet it could still be implemented.
As many noble Lords have said, including members of the club, the Jockey Club is first class at running the
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rules of racing, in showing that racing is straight and in dealing with the fixture list in consultation with the levy board. I give them full marks for all that. But although it has a number of businessmen in its ranks, it is incapable of a businesslike approach and any suggestion that it makes about betting has to be ignored because it has not the slightest understanding of how the betting market works and how betting is organised.
For example, the two Jockey Club members on the levy board both heartily supported the new type of levy scheme based on the turnover of individual shops. They exactly understood the principle and how to maximise the levy. Now the Jockey Club suddenly decides that the whole thing should be scrapped in favour of another system which would drive 28 per cent. of the 9,600 betting shops out of business because on a low turnover they would not be able to afford the levy that the Jockey Club wants them to pay. They would vanish and so the levy would be lost. No one would buy those shops because they are in such insalubrious places and millions of punters would be deprived of their local betting shop and lose interest in betting.
The Jockey Club understandably aspires to be the leader of all racing interests. Unfortunately, lately it has begun to make enemies of those it needs as friends such as the bookmakers and the Racecourse Association. Parts of it have even been attacking me—an amiable fellow who is friendly with everyone. Far from uniting the racing industry, which includes betting as its most important ingredient, if it goes too far and does not steady itself down now it is in danger of badly splitting the whole of that industry. Perhaps I may suggest that the Jockey Club tempers its brash enthusiasm with caution and remembers Lord Canning's observation to an English ambassador in 1826:
"In matters of commerce the fault of the Dutch
Is offering too little and asking too much".
Lord Weinstock: My Lords, I certainly do not wish in any way to attack my noble friend, but before he sits down perhaps I can get some clarification from him on one point. The company for which I work spends some 10 per cent. of its turnover (maybe £800 million or £900 million) on research and development in order to produce products, goods available to sell. I wonder how much the bookmakers are spending on producing the product that they sell to the public; namely, racing.
Lord Wyatt of Weeford: My Lords, very little I think. We are encouraging them to develop a national pool with us but they want us to pay all the expenses of developing.
5.54 p.m.
Lord Trevethin and Oaksey: My Lords, after that amiable summary of the Jockey Club's merits, I hope that the noble Lord, Lord Donoughmore—I should say, Lord Donoughue—is enjoying the debate. I beg the noble Lord's pardon. Although spelt a little differently, Donoughue is one of my favourite names. I was brought up on Bob Lyle's Brown jack and the great Steve of course rode him. However, I hope that

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the noble Lord is enjoying the debate in which he has so kindly given us the chance to participate. I have certainly enjoyed the speeches, and in particular the contribution from the noble Duke the Duke of Devonshire. He said that racing ought to be fun and he made the debate fun for us with two suggestions. I do not think that they will be all that popular with owners. One suggestion was that training fees should be paid through Wetherby's. The much better suggestion was that owners should appear on the national joint council for stable labour fees. That is the subject on which I want briefly to address the House.
The noble Lord, Lord Rathcreedan, in an eloquent maiden speech, said that we must be careful not to be heard whingeing about the cost of the expensive hobby which some of us have chosen to take up. There has not been very much whingeing today. In any case, I want to escape the charge of whingeing about the cost of our hobby by talking briefly about a section of the racing world which does not often whinge and certainly is neither rich nor over-paid. I mean the stable lads and lasses who comprise racing's labour force.
First let me give noble Lords the good news. The lads would be surprised to hear that there is any good news, but there is—at least for the younger ones and for those who have not yet come into the game. Many noble Lords will know that a major policy of this Government is that industries—I know that that is not a word that the noble Duke likes, and I agree with him—as soon as possible should provide their employees with training for vocational qualifications. Most industries have already done so, with several layers of qualifications. The good news is that the racing and breeding industries are at last and tentatively to begin with setting out down that difficult, expensive but potentially invaluable path. It is very much a pilot scheme but the Jockey Club has at least got it off the ground with financial help from the levy board and co-operation from many other racing bodies such as the Thoroughbred Breeders Association—because this is an initiative for the breeding industry as well as the racing industry and there will be lads and lasses from studs as well as from training stables.
The idea is that in their first year or at any rate the early years of their employment those lads and lasses will be helped by experienced lads. That has always happened but now it will be official, so to speak. The experienced lads who are chosen as assessors (which I guess is another name for teachers) will ensure that the lads and lasses involved in the scheme, of whom there will be about 300 from studs and stables, achieve the basic standard in the skills of their trade. By the end of the year, or the period when the assessors are satisfied, those boys and girls will know that to that extent they are qualified. They will be able to show their parents a piece of paper. That may not mean much and if there is a whirring sound to be heard no doubt it comes from a lot of old-fashioned trainers spinning in their graves like Catherine wheels. Never mind them. Even if we may regret it, their day is past.
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No doubt noble Lords will agree that no one knows whether the scheme will succeed. It is only a pilot scheme, but it is at least a step in the right direction.
How great it would be if I could now tell the House that those young lads and lasses with their newly acquired knowledge and qualifications could then look forward to a progressive career and a ladder of qualifications, knowledge, status and rewards which by hard work they might be reasonably certain to climb. But I cannot tell you any such thing because sadly and shamefully for racing the only ladder at which they can look is one which gradually reaches a weekly wage of £145.69, which includes five hours of weekend overtime. I want noble Lords to keep that sum in mind. It represents an hourly rate of £3.02p, the rate of an unskilled shop assistant, and £40 less than that received by a waste disposal operative—what you and I used to call a dustman.
Even that is a massive improvement. When I started writing about racing, I described a lad with 20 years' experience who was getting £9 a week. Then the noble Lord, Lord Plummer, forced the formation of a national joint wages council for the first time by saying that he would not give racing prize money from the levy if that national joint council was not formed. At that time lads' wages were £30 a week. There has therefore been an increase but not one to be proud of. Just when a lad reaches the prime of his working life —he knows the job, he can ride and can be trusted by the trainer to take responsibility—he marries, starts a family and wants a mortgage. Can one obtain a mortgage on £149.60? Like hell, my Lords! One cannot. The only solution is to leave the sport and to go to another trade. Admittedly, at the moment the recession and unemployment does not make that as easy as it has been. However, if the racing industry has to depend on the pressure of a recession to keep its workforce, then racing should be ashamed of itself.
I do not know how to obtain the money. I have to leave that to more numerate people. It is sad that the noble Marquess, Lord Zetland, was to some extent muzzled in making his maiden speech. It may have been the bookmakers who tried to have him muzzled. However, I totally agree with the noble Lord, Lord Wyatt, about the ineffectiveness of prize money. It is ineffective if one piles it on to the already super-rich races such as the Derby. However, with regard to the smaller races in which the English taxpayers' horses run, such prize money can justify trainers charging a sufficiently high fee to enable them to pay lads a working wage. Many trainers would like to do so. But if they pay the lads £200 a week, they have to charge the owners £200 a week.
The noble Duke called racing a pyramid. At the top, touch wood, are many Arabs. Top trainers charge £250 a week. Believe it or not, my Lords, some trainers charge only £80 a week. If they are paying the minimum wage to their lads, I am a one-eyed Dutchman.
I should have liked to address the House on the iniquitous preference that the levy board gives flat racing over jumping. Prize money is divided up 60 per cent. to 40 per cent. In Britain flat racing is done well; but many other countries are comparable. However,

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no other country except Ireland is comparable to us with regard to horse jumping. Why on earth do we not subsidise that which we do best? When the Derby winner passes the post, it wins its owner £350,000. The horse is worth between £2 million and £10 million that night. When Desert Orchid passed the post in the Gold ('up, having covered three-and-a quarter miles and 21 four-foot six-inch fences it was worth no more that night than that morning. It won its owner a pathetic £60,000. The percentage ought to be the other way round. At the least it should be 50:50.
I do not know whether Sir John Sparrow is present or whether he will read this debate. However, whether the levy board receives more money, I beg him to alter the ridiculous tilt in favour of flat racing.
6.5 p.m.
Lord Manton: My Lords, I too congratulate the noble Lord, Lord Donoughue, on initiating the debate, which I am sure the racing world much appreciates. If the noble Lord had one letter different in his name he would have been my boyhood racing hero. I am sure that many noble Lords would say, "Come on, Steve".
I should declare an interest as a member of the Jockey Club and chairman of the York racecourse. The problems which face racing are longstanding and are not directly attributable to the current recession or the Gulf war, although those undoubtedly have had a knock-on effect. There are 59 racecourses in this country. The majority of them are in some financial difficulty. They are dependent on the levy board support to continue. For example, two-thirds did not return a dividend and less than half made a racing profit in 1989. I know that the situation has deteriorated since then.
It was more in sorrow than in anger that I listened to the noble Lord, Lord Wyatt. If he were to venture a little further west than the offices of the tote at Kingston-on-Thames, and were to talk to racehorse trainers and their lads—a point to which the noble Lord, Lord Trevethin and Oaksey referred—or to breeders, I am sure that he would change his opinion that there is no shortage of money in racing. The noble Lord has missed the point. He states that the levy board's anticipated profit was down 1.5 per cent. It was the estimated levy board yield which was down 1.5 per cent. The yield is not profit, as noble Lords are aware. The noble Lord seems to be living in the past of 30 years ago. I am prepared to agree that the Jockey Club missed its chance 30 years ago when there might have been more chance of a tote monopoly. It is surely no exaggeration to say that the noble Lord has changed over the past 30 years.
Fortunately, since I am chairman of one of this country's great racecourses, York is not one of the unprofitable racecourses. However, one of my main worries is that the supply of good top-class flat race horses may seriously decline. Good horses are an international commodity. If the conditions and returns for them in another country—France, America or wherever—are better than in this country many of our equine stars will move abroad. I fear that that point is not far away.
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That is one answer to the point made by my noble friend Lord Trevethin and Oaksey that more prize money should be given to steeplechasers than to flat race horses. Sadly, apart from the possibility of running in Ireland, from where most originate, steeplechasers have no other outlet and if conditions are not right in this country the good flat race horses will go where they are better.
Many noble Lords have drawn attention to VAT problems. I stress that they are exceedingly serious and disadvantageous to British racing. I draw noble Lords' attention to the help that other countries give to racing. I am sorry that the noble Viscount, Lord Falkland, is not present. I believe that his figure was slightly wrong. In France almost 5 per cent. of total betting turnover is returned to racing. In America the percentage is 6 per cent. In Japan it is 4 per cent. In Australia it is 3½ per cent. In Italy it is over 10 per cent. In the United Kingdom racing receives less than 1 per cent. of betting turnover which is paid by the punter on off-course bets and is only collected by the bookmaker.
Some noble Lords referred to estimated 1990–91 figures. I refer to 1989–90 actual figures. In 1989–90 the levy was £35.3 million. The Treasury receives 8 per cent. tax on all off-course betting and in 1989–90 its return from general betting duty is estimated to be worth over £458 million, of which at least £350 million is directly attributable to horseracing. In most cases the bookmakers deduct 10 per cent. from punters leaving approximately 1 per cent. which they retain to cover their overheads. Again, I stress that different figures have been quoted this afternoon; I am quoting the actual figures whereas some noble Lords have given estimated figures for 1990–91.
During the past 15 years the racing product has been tuned and refined to increase the betting turnover and thus the levy. I refer in particular to the fixture list, with a spread of fixtures and with staggered race timings to suit the betting market. This is often not in the best direct interests of the racecourses concerned; it is done to maximise racing's levy which directly benefits the Chancellor by a multiple of more than eight.
It is 30 years since the levy board was set up and a mechanism established to provide money for the improvement of breeds of horses, the advancement of veterinary science and education and the improvement of racing. That was at the joint wish of racing and bookmaking. It has now become increasingly apparent that this system does not provide a proper balance between those who create the racing product and those who make money from the punter in a betting shop. The Jockey Club and the HAC have submitted to a Select Committee in the other place a proposal to establish a mechanism more suited to the harsher economic realities of the business world. Racing is not only a sport, it is also a substantial industry. the proposals set out a mechanism to allow this industry a direct form of negotiation with the bookmakers. That would be akin to a royalty payment for the racing products which the bookmakers require for their livelihood.

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Racing is a major player in the leisure industry. It has fortunately escaped the "aggro" that has crept into so many rival sports and it is encouraging to see so many women and children spending a day at the races. When last spring my noble kinsman the Minister persuaded Mrs. Thatcher to go racing for the first time in her life her first remark was how surprised she was to see so many families enjoying a day out.
The integrity of racing is of vital importance and, here again, I am sure that in this country it is second to none. However, the many forms of integrity are expensive and are largely paid for out of the levy. My noble friend Lord Vestey listed many of them; for example, dope testing, security, race surveillance, the supply of officials and their aids such as camera patrol, veterinary research and development, and many others are all a call on the levy. Therefore, not enough of the levy cake is left for prize money. Prize money is, after all, the carrot that persuades people to own a horse and then keep it in training in this country. There must be some hope—I emphasise the word "some"—that at the end of the season a reasonably successful horse will pay its way.
About five or six years ago I played a small part in persuading the Treasury to forgo the 4 per cent. on-course betting tax. One of the arguments then was that it would cost the Treasury nothing in that a healthier industry would increase off-course turnover. I am sure that point has been proven many times over. Now there is a real danger that unless steps are taken the golden goose may stop laying £350 million worth of eggs for the Chancellor.
I commend the proposals for some form of royalty payment for racing made by the Jockey Club and the Horseracing Advisory Council. It is the result of a united approach from all parts of the industry in seeking a modern business-like balance between the interests of bookmaking and those of racing. The step that would give racing the greatest shot in the arm to complement these proposals would be a reduction of 1 per cent. in betting tax and a corresponding increase of 1 per cent. in the levy rate. I hope that my noble kinsman the Minister will take note of what has been said here today and draw the attention of the Home Secretary—I was going to add the Chancellor of the Exchequer—to the urgent needs of racing.
6.15 p.m.
The Earl of Halifax: My Lords, I wish to add my congratulations to those already extended to my noble friends the Duke of Roxburghe, the Marquess of Zetland and Lord Rathcreedan on their excellent maiden speeches. I am glad to have the opportunity to echo some of the difficulties which are affecting the bloodstock industry. I am afraid that I must repeat some points that other noble Lords have made but I hope not to take too long in doing so.
At the outset I must declare not one but three interests. My first interest is that of a countryman; my second is that of a breeder; my third is that of a farmer. Many of your Lordships have already highlighted the adverse effect on the breeding industry
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of the very poor levels of prize money resulting from the wholly inadequate payments made to horseracing by the betting industry. The overall level of prize money will determine the level of demand for horses to race in this country and to the extent that that demand is satisfied by domestically bred animals British breeders will benefit.
As a result of the regeneration of British breeding over the past decade, Britain is now firmly established as the home of the world's most competitive racing. Perfectly fair competition can probably never be achieved in the European Community comprising of so many different nations. However, breeding in this country suffers from specific fiscal disadvantages vis-à-vis our major European competitors. As my noble friend Lord Carnarvon pointed out, with the introduction of the single European market, VAT will be charged at the point of sale and breeders selling in the UK will, therefore, be at a significant disadvantage. No producer, however efficient, can compete with a differential between the Irish and British VAT rate of 12·7 per cent. If such anomalies are not eliminated we shall cease to be a competitive force and simply hand over our breeding export market—worth approximately £200 million—to the Irish. Both the Commission in Brussels and our own Government are aware of the situation. I hope that in replying to the debate the Minister will confirm that something will be done about it.
I tend to look at the business of British breeding as being integrated with that of agriculture. If the land is not wanted to produce food, it must be used for something else. Farm incomes have declined steadily over the past 10 years and there is now much stronger pressure on the farmer to develop alternative uses of the land other than set aside which is both unsightly and costly. The role of the bloodstock industry in our rural economy goes beyond that of prolucing racehorses. The industry provides jobs and helps to maintain our rural infrastructure. I farm 1,400 acres of arable land on which I employ two men; that is 700 acres per man. I have a 90 acre stud on which I employ three men; that is 30 acres per man. With today's rising unemployment and the continuing migration of rural workers away from the villages, I suggest that a good source of bloodstock employment is in the national interest. Today 10,000 people are directly employed in bloodstock breeding and it is believed that there are a further 4,000 jobs in ancillary industries.
One way of ensuring a beautiful countryside is to encourage livestock farming which requires reasonably-sized fields with good hedges and trees for shade and shelter. The bloodstock industry provides an attractive use of more than 150,000 acres of land and enables many awkward little fields, permanent pastures, barns and other attractive buildings to be preserved. I have no doubt that my stud farm is a bigger asset to society and to the countryside as a whole than is my arable farm.
The bloodstock industry is little different from our other industries. Times are hard. Breeders are squeezed unmercifully between rising costs, high

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interest rates and falling prices. However, we are entitle3 to have a domestic market for our goods at prices which give a reasonable return for the capital employed.
6.20 p m.
Lord Colwyn: My Lords, I suppose that I should be very surprised were any speaker in this debate to put his name down to speak on a health matter. Therefore, I hope that noble Lords whose names are on the list will forgive a brief intervention from an occasional racegoer whose professional life started in Cheltenham and who for a long time was a member of the local racecourse.
I speak as a person who has no particular expertise in the industry. However, given that there are so many expert points of view on this subject—and we have heard many of them—an outsider's opinion may be of help. I must apologise to the House for the fact that a longstanding engagement may prevent my staying until the end of the debate.
The arguments are often portrayed on a largely financial level as to how the racing industry in this country is funded—perhaps, the racing establishment on the one side and the bookmakers on the other. One could even ask whether the success or failure of racing matters to the country anyway. I believe that it does. It is a significant industry which is already, and will become, even more internationally competitive. Within Europe, France, Italy, Eire, Germany and Belgium have established racing industries which are already organised very beneficially as compared with our industry. There can be no doubt that the structure of our industry is already weakening our international competitiveness. Whichever way one looks at the matter, the funding of our industry is at the core of the problem.
The racing industry receives less than 1 per cent. of off-course turnover via the levy collected by bookmakers. Punters have 10 per cent. deducted from them in betting shops of which 8 per cent. is pure betting tax. The levy represents 0.9 per cent. Bookmakers say that it is unrealistic to expect punters to pay more for racing's product. Bookmakers say also that they are not excessively profitable. However, it is undeniable that they have successfully broadened the base of their business away from bookmaking in an extraordinarily successful way, presumably funded by cash from racing.
The bookmaking industry relies virtually entirely on the facilities of racing to sustain its business. The football industry receives 2.5 per cent. in royalties from the pools companies. Why should racing not receive a similar royalty for its services? A rate of 2.5 per cent. would provide £100 million of the costs of running racing which are estimated at £250 million. In the most recent year, racing received £35.3 million. In case it is thought that the 2.5 per cent. royalty would be excessive, I must point out that that level would represent only half the return which racing enjoys in France and most other major racing countries.
It is often said that racehorse owners are rich men. It is certainly true that at the top end of racing there exist some of the richest men in the world. However,
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there can be no doubt that in Britain there are now significantly fewer people who, on an individual basis, are racehorse owners. The significance of that decline is masked by the rapid proliferation of racing clubs and the growth of partnerships.
Again, international comparisons are striking. In France, owners receive double the return from prize money that is received in the UK. The Race Horse Owners' Association estimates that owners contribute £150 million per year to racing costs through training fees. That amounts to £2,600 per race run, from which only £400 comes back in prize money. A further £800 per run is lost in capital depreciation so that it is hardly surprising that ownership is in decline. It is hardly surprising also that wages in the industry are so poor. As resources diminish, so will the general quality of the British bloodstock and racing industry. We are likely to race far too many mediocre horses in mediocre races for mediocre returns. In the end, our international competitiveness will be seriously affected.
Therefore, it seems to me that there is a case for a royalty in the order of at least 2.5 per cent. to be returned to racing in the form of a levy. There may be even a case for examining also the level of the betting tax. The racing industry is not a small body of elitists but operates as an important industry both domestically and internationally. It was reported by Richard Baerlein in yesterday's Observer that it is this country's fourth largest industry. It simply cannot be right to allow its funding to continue on the current basis.
6.26 p.m.
Lord Cocks of Hartcliffe: My Lords, I too should like to thank my noble friend Lord Donoughue for introducing this debate. As my father was a Congregational minister and I still retain some vestiges of his training and philosophy, I suppose that I come into the nonconformist bourgeois category on this side, to which my noble friend made such pleasing reference in the course of his remarks. However, I must confess to your Lordships that the bourgeois element has rather tended to dominate the nonconformist element when it comes to racing. I must declare an interest as a punter who likes a flutter from time to time.
Indeed, I met my noble friend Lord Donoughue while we were in government and I had an office at No. 12 Downing Street. My noble friend was working at No. 10 and from time to time he would pad down the corridor between No. 10 and No. 12 and give me some information about a horse due to go out that day. I am sure that my noble friend will not mind me telling your Lordships that the quality of his information was not of the same consistently high standard as the quality of the speech with which he introduced the debate today.
I should like to congratulate also the three maiden speakers and in particular say how I thought that the noble Marquess, Lord Zetland, in the course of his remarks about British racing painted a picture which

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we ignore at our peril because the British racing scene is part of the tradition of this country of which I and many millions of people are proud.
In the course of his remarks, my noble friend Lord Donoughue spoke of the wide spread of interests in the job, including the 100,000 people involved. That represents a substantial part of our economy and our efforts to export overseas. I have heard a number of descriptions of the state of the industry—some noble Lords said that it was in a financial crisis or critical and other noble Lords tended to play down the situation. As a comparative layman in these matters, 1 have been following what has been happening in the other place where the Home Affairs Select Committee has been addressing itself to the problems of racing, beginning with the question of the levy.
I was interested in the remarks of the noble Viscount, Lord Whitelaw, when he quoted Sir John Sparrow, the recently appointed chairman of the levy board. He said in the Racing Post:
"If you mean impending catastrophe or near disappearance, there is no crisis".
He went on to say:
"The industry is in recession, not in crisis. If all parties work together, it could be a different kind of crisis—a turning point".
I believe that that was a point made very well by the noble Viscount, Lord Whitelaw, in his remarks.
However, I do not believe that the industry can be entirely protected from economic reality by matters like the levy or other imposts. A number of noble Lords have made the point, including our maiden speakers today, that the industry is substantially underfunded. One could make a case that possibly the industry expanded too much during the good years and did not anticipate the problems which would arise when there was a change in the economic climate.
I agree with Sir John Sparrow—I do not want to be presumptuous, but also with the noble Viscount, Lord Whitelaw—that if there was substantial co-operation and a greater understanding then the problems could be resolved. It has been suggested that the levy could be replaced. But Sir John is on record as saying that if the levy did not exist, it would probably have to be invented. We should all support the efforts Sir John is making in this field.
If the case for more money for racing is substantiated, I have a horrible feeling that in the end it will fall on the punter to provide it. As a consumer, I would certainly resist that. The noble Duke, the Duke of Devonshire, said that without owners racing cannot exist. I agree with that. However, without the millions of people who enjoy a flutter, whether occasionally or on a more regular basis, the industry would also be hard put to exist.
Many kind remarks have been made this afternoon in regard to the Jockey Club, especially by its members. I would therefore like to give them an award for quite the flabbiest answer to the Home Office letter inviting evidence for the committee in the other place to consider. Members will recall that the sixth point was,
"Whether there is a need better to represent the interests of punters and of all those who work in the racing industry?"
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The response from the Jockey Club was,
"As for punters, it can be argued that they are carrying out their purchases within a competitive market with the freedom of choice to take their custom elsewhere if their demands are not satisfactorily met".
Quite frankly, if there are any members of the Jockey Club present who think that that is a satisfactory answer, I should like to invite them to my Labour Club in Bristol.
When the licensing magistrates are granting licences for new betting shops, they take into account the existing geographical distribution of shops and try to ensure that each area is adequately stationed with them. They do not encourage them to cluster together. Imagine the scene therefore where one is enjoying a few pints on a Saturday lunchtime, looking through the racing card, seeing one's fancies and putting something on the first race. One may be lucky and decide to double up and put the winnings on the next race. Imagine people driving their cars two or three miles to the bookmaker down in Bedminster because they do not like the conditions in their local betting shop.
That answer was totally unrealistic. Some members of the committee in another place are already becoming concerned about the lack of representation for punters in the industry. It is difficult to organise such an enormous disparate number of people who bet on so many different bases; but the fact that they are not represented should be taken more into consideration by the people who contribute to and run the industry.
My final point concerns the reference by the noble Lord, Lord Plummer, to the Government's decision to funnel money from the pools' betting duty to the improvement of football grounds. It was said that that was a precedent. I understand that around £100 million is to be released over five years for ground improvements. However, it is not a precedent. Members may recall the saga of the road fund. When that was introduced in the 1920s, Sir E. Geddes, speaking in another place, said that,
"the Chancellor of the Exchequer ought not to be called upon at this stage of the country's finances to improve the roads".
The road fund was therefore introduced.
In 1926 the late Sir Winston Churchill, who was then Chancellor, raided the road fund—I believe for the first time—saying,
"His Majesty's Government have decided to propose to Parliament that £7 million shall be transferred to the Exchequer out of the balance of approximately £19 million in the Road Fund".
That was the first raiding of the fund. The Government are already in receipt of an enormous amount of betting duty from racing. Even a small proportion of that channelled into racing, if the financial need exists, would improve the situation.
There has been discussion on a national lottery. I welcome the idea that taxation raised in specific ways should benefit the arts or sport in different ways. On 11th February the Mail contained a substantial piece about a national lottery. That was followed by an editorial in the Telegraph which spoke of the problems of a lottery. However, there was also a letter to the editor from Sir Hugh Leggatt. That caught my eye because the headline was,

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"Lottery will not save cabinet".
I thought, "Surely the Government are not in such difficulty that they must rely on a lottery to save the Cabinet". On closer reading and after consulting with some of my more intellectual colleagues it appears that this was the Badminton cabinet, which recently sold for over £8 million.
The noble Lord, Lord Goodman, said that racing would have a low priority if funds from the lottery were transferred to other causes. However that is very much a subjective judgment and a matter of opinion. If one wants to please people in this country, substantially more people would be pleased by a little contribution going to support racing than saving a cabinet for the nation, however valuable and unique it may be.
I ask the Government therefore to think about that, and to consider channelling some of the betting duty paid by the punters into racing if the need exists. I ask them also to keep an open mind about supporting the industry because of its great contribution to national life and the enjoyment which the occasional flutter gives to many millions of people in our society.
6.37 p.m.
The Earl of Shrewsbury: My Lords, as a lifelong supporter of horseracing I too should like to offer my congratulations to the noble Lord, Lord Donoughue, for introducing the debate. It is seldom that your Lordships' House has the opportunity to discuss the horseracing and breeding industry and the sport in general. With racing's difficulties receiving press coverage on an almost daily basis, today's debate is not only most welcome but also could not have been more expertly timed. Perhaps I may also add my congratulations to those of other noble Lords to the three maiden speakers for their most eloquent, informative and interesting speeches.
I should perhaps declare an interest having worked in the industry as an assistant trainer, an assistant clerk of the course, a horsebox driver and a permit holder. I rode as an amateur in both point-to-points and under rules, and I am currently a local steward at both Uttoxeter and Wolverhampton racecourses. I might add that my first season's race-riding record is indeed enviable, albeit to those with masochistic tendencies. In 36 rides I experienced 34 falls. One horse pulled up and another refused. In short I was the bookies' friend! If I had had half the common sense of my horses I should also have refused and gone home with the non-runners. Matters improved later in my career and at every stage of my involvement I have derived enormous pleasure from the "sport of kings".
It saddens me to see the great British industry suffering so badly. It must survive and prosper. A long-term solution must be found to the ills that are being encountered. All involved in the industry have been aware of the problems for many years, but they must be worked out as a matter of urgency. The petty recriminations encountered in virtually every sport must cease. All involved in the industry must realise that unless a sustained and joint effort is made to improve standards in every single area there is real danger of this country ceasing to be a leader in the
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bloodstock and racing world. Such a loss both in value to the Exchequer and in terms of credibility is totally unacceptable. Such a scenario cannot be allowed to happen.
I am not qualified to speak on the rights and wrongs of extracting levies from bookmaking interests. I am a non-betting man and know little about the financial aspects of the industry. But I know that without support from that area racing cannot survive. I also know that without racing —and racing in a strong and healthy state—bookmakers would have precious little product and a lean time.
I understand that currently horseracing provides the bookies with somewhere in the region of 70 per cent. of their total turnover.
With the leave of the House I should like to address some matters which have already been covered. I feel it is necessary however to make my points. I apologise for raising the subject yet again.
The first issue is the anomaly of VAT rates in the breeding industry. I am advised by the Thoroughbred Breeders' Association that the rates of VAT applicable to the horsebreeding business in the United Kingdom compared with our European Community partners is most unjust and unfair. While the tax rate in this country is 15 per cent., the French pay 5.5 per cent. and the Irish pay only 2.3 per cent. British breeders cannot operate successfully under such circumstances. Matters will greatly worsen to the detriment of the whole industry and its peripheral businesses when the single market comes into operation properly in 1993.
As we have heard, Tattersalls, the great auction house, are threatening to move their bloodstock auction operations to Ireland. If they make that move, it is most unlikely that they will return. Therefore, it follows that breeders will move to Ireland, and with them will go the ancillary services such as bloodstock agents and all others involved in the business. In that climate new investment will not be attracted. That will have the net result of loss of jobs and a substantial loss in foreign exchange and in revenue to the Exchequer. In short, the total situation will be enormously damaging to both the local and national economies.
The industry requires a level playing field. Every stop must be pulled out by the Government to correct the anomaly before the damage caused is too great to right. I am aware that both the Government and the Her Majesty's Customs and Excise have listened most sympathetically to the case and that discussions have been going on for two years. But it is desperately important that a concrete solution be now found.

Within the problem is a further anomaly. The horse is not classed as an agricultural animal. Yet many farmers are turning to "horseyculture"—a horrific word—in order to boost their flagging incomes. Set-aside land has promoted the situation further. As the noble Earl, Lord Halifax, said, it is unattractive and expensive. My wife, who is greatly involved in the pony world, tells me that that particular branch of the horse world is experiencing unprecedented growth.
The horse enthusiast makes use of a vast range of agricultural products and facilities, and assists the

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rural economy through providing employment which otherwise would simply not exist. It is high time that the animal was reclassified.
Racing is a substantial employer. Like any sport, it attracts both the rough and the smooth in terms of individuals. One of the many problems being encountered at present—the noble Duke, the Duke of Devonshire touched on this point—is the difficulty of cash flow. A public trainer employs the services of many on a day-to-day basis. The veterinary surgeon, the farrier, the feed merchant and transporter all have to be paid for their services, but at present there are many cases of non-payment by the trainer, who in turn bills the owner. These peripheral services rely on the industry on a localised basis for their living, and non-payment seriously affects their own cash flows. Indeed, some even go out of business. This has a considerable effect on the local economy of rural areas.
I believe that the solution is for trainers, on being granted a licence by the Jockey Club, to be required to place an amount as a bond on deposit, managed by Wetherby's, the Jockey Club's agents. Perhaps a scheme of insurance could be set up to safeguard the interests of those providing goods to the racing profession, which in turn would provide confidence in the industry and add credibility. Such a scheme is surely possible. Many companies I know insure against debts, but I suppose that this is a matter for the racing authorities rather than for the Government.
Racecourses provide entertainment for all the family: a great day out in the fresh air with fine competitive sport, and the thrills and spills of an afternoon's racing produced by brave men and bold animals. But facilities at many courses are of poor quality, both for those who look after the horses at the bottom end of the scale, and for sponsors at the other end. There is not the money available for investment; consequently, improvements cannot be made.
I am not referring to the major courses, which are excellent, but to the small country tracks which have a loyal following of local people. To survive and to expand their gates—a desperately needed development—quality races for quality horses must be run. This cannot happen without sponsors. Sponsors require something for their support, quite rightly. But new investment in facilities has to be financed. There is precious little cash available from the levy board and there are too many people chasing what is available.
I take issue with the noble Lord, Lord Wyatt of Weeford, who said that racecourse facilities have improved dramatically. I have personal knowledge of a number of racecourses where the facilities are appalling, and in some cases proper facilities just do not exist.
To be successful and profitable a racecourse must be run as a business. To give my home course, Uttoxeter, a plug as an example of a well-run track, the management there has realised that customer service and quality racing, together with good
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facilities, are essential in order to ensure a profitable operation. Private investment at the course has been large, and a full-time marketing manager ensures that sponsors are approached in the right way and given full value for their patronage. Because of this, the prize money available this season tops £400,000 and the course is attracting better horses, top jockeys and trainers, and larger gates. The future of the track looks good: that is because of professional marketing and sound management techniques.
Many racecourses do not act in the same manner. It is in this area that the industry could help itself. Uttoxeter has a five-year business plan involving much new investment, but the money cannot all be provided by private enterprise. We return to the same subject. The levy board does not have the money available. It cannot assist, although vast sums in the region of £450 million are being returned to the benefit of the Exchequer in betting duty. There seems to be something slightly wrong there.
To address briefly the subject of Sunday racing, I have already pointed out that racing provides a day out for all the family, in decent surroundings and with benefit to their health, although possibly not in financial terms. I am very much in favour of racing on Sundays. The sooner this happens the better, although it may be inconvenient for stable staff, others involved in the industry, and, one must not forget, the stewards. Many classic races are run on Sundays in Europe, where large crowds are attracted for a day out. Alton Towers is open on Sundays. So why cannot its neighbour, Uttoxeter racecourse, be open on Sundays? I am aware that there are many concerns in some quarters. However, it seems illogical that an industry in crisis is unable to compete with other facilities in the leisure industry, to the detriment of the public, the industry and the levy board.
The problems currently faced by the horseracing industry are many and varied, little different perhaps from other industries which are finding times very difficult. Nevertheless, the situation is urgent. These matters must be addressed quickly, and a solid foundation on which to build the future for racing and all involved in the industry must be secured. We cannot allow this great industry, built over many hundreds of years and with a rich history, to be decimated through lack of funding, harsh taxation and unfair foreign competition.
4.45 p.m.
Lord Clinton: My Lords, we have had a most interesting debate on horseracing today, which has been wide-ranging and extremely comprehensive. I do not wish to keep your Lordships too long, but I should like to repeat one or two points which have already been made.
My declared interest as an owner of horses dwells on my experience as an owner who enjoys both the flat and jumping. I am also a steward at a local racecourse, Devon and Exeter. We have been told that racing ownership is a luxury, and that if we can afford it we should not complain and should pay up, that we are a privileged lot and so we should stop complaining

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and get on with it, and if the going gets hot we should leave it and go home. The problem is that if all owners were to give it up and go home there would be little left to support British racing, which would very quickly disappear, and many of the investments would disappear across the channel.
We must not let that happen. I know that in spite of this owners will not all go away, but unless investment made by owners becomes more beneficial to them the industry will contract very seriously. As I see it, racehorse owners need some encouragement to keep their investments going. Like any investor, at the end of the day they need a return on their financial participation. Prize money is their only hope, and it is in the middle of this range that encouragement is needed at least to defray some of the costs. If owners can get a bigger cut of that, they will invest more and benefit this very important industry, which must have investing owners.
I believe that racing, like football, cricket and other sports, is an entertainment and that people who follow these activities need to view them in some comfort with facilities to match. It needs to be a pleasure. Unless more funds are made available to make the industry more self-supporting the position will become more difficult. Unless we are careful, we in this country will become the poor neighbours of France, Australia and Hong Kong, which have been able to keep their houses in order and to benefit considerably. The industry in Hong Kong, with the tremendous betting enthusiasm of the Chinese, has been able to reinvest its turnover. It has been able not only to pay quite considerable sums of money to the government but also to provide a large amount of public sector housing in the colony. I am not suggesting that that should necessarily happen here; I am merely giving your Lordships an idea of what can be done.
The point I should like to make is that, due to the investment made by an owner, he is responsible in some way for the employment of very many people from the day he invests and buys his horse. This will include the bloodstock agent, the stud, the breeder, the auction house, the transport company, and then the trainer and all his staff, the jockey, the racecourse, the veterinary surgeon, the blacksmith and not of course forgetting Wetherby's, the Jockey Club, the tote and the bookmakers. All those organisations employ a considerable number of people. I am sure that this is of benefit to the industry and it certainly gives jobs to people who might not otherwise have them. The spin-off in one year means the employment of 14 different professions. That is no small amount of people.
The racecourses, especially the smaller ones, need the industry's support. That has happened in the past with great effect but there is more to be done. I should like to see that support continue and I hope that somehow this 2 per cent. levy to which we have referred finds its way into this sector. My local course is one of the oldest in the country and, as far as it is able, has done much to be self-supporting, but it has to find income outside racing to keep going. Pressure on safety and hygiene requirements mean that even
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more funds are necessary: £25,000 is needed for stable hygiene and a much larger sum for the safety of the grandstand and the general upgrading of the course. At the same time Haldon racecourse employs seven permanent staff and on race days 80 other employees. It provides 15 very enjoyable days' racing. It would be a great shame if that were to disappear.
I hope that today's debate will encourage all to keep this industry in good heart and that ways will be found to support both the owners and the racecourse management in giving pleasure to the public and allowing owners to get better returns from their investments, thus giving employment to those who make racing the king of all sports and, in my opinion, second to none.
6.53 p.m.
Lord Grimthorpe: My Lords, after so many distinguished speakers, I shall not detain your Lordships for long. Fortunately most of what I was going to say has already been said far more eloquently than I could do it. I should like to congratulate the maiden speakers on their erudite speeches, in particular my godson the noble Marquess, Lord Zetland, and the noble Duke, the Duke of Roxburghe, for whose distinguished father I was fag at a well known public school. He subsequently taught me the rudiments of stewarding at Liverpool and he was very sharp on many occasions. I look forward to hearing much more from both of them and from the noble Lord, Lord Rathcreedan, as well.
I should like to say a few words on three subjects: bookmakers and the tote—I regret to say I am a poor punter with both—small racecourses and the Jockey Club. First, on bookmakers and the tote, I have kindly been asked to lunch by both shortly so I am not beating their drum for them tonight. I include the tote because it is a bookmaker, although the noble Lord, Lord Wyatt, does not look like one. I hope he will excuse those remarks. I have many friends among bookmakers, at least I hope so. With their powerful lobby in another place they are in business to make money for their directors and shareholders. They can diversify into hotels and casinos, both in this country and overseas. They pay a lot to the levy but not nearly enough. Other noble Lords have given the figures and I fully agree with them. I hope that both will continue in business. They may not like the tote but it is good to have competition. My noble friend Lord Wyatt has done a wonderful job popularising the tote. The only unpopular aspect is his small limit of £2 on bets. That is not at all popular.
I shall say a few words on smaller racecourses, a subject mentioned by the previous two speakers. I declare an interest as I am a director of Thirsk. Many people will be very sorry to see the small racecourses close down. Only 10 of the 59 courses showed a profit last year, although many ploughed back their profits to improve their facilities. I fully appreciate what has been done for small places such as Uttoxeter and Devon and Exeter. The courses that help themselves deserve all the encouragement that they can get.

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I shall now say a few words on the Jockey Club. I have been a member for more than 15 years. I still believe that it does a wonderful job. I am delighted to see so many of its stewards and secretariat sitting wide eyed up in the galleries, though after reading the media —including Logan —one might think that it is defunct. I fully support the remarks of the noble Viscount, Lord Whitelaw, who could not have stressed it better. It may move slowly but even it has a chief executive now. For nearly 200 years it has, with its secretariat, controlled racing in the United Kingdom honestly and without too many scandals.
Is there a crisis? I suppose there is because the newspapers, with very little to write about except the Gulf and the snow, have gone on about it over the past few weeks. It is all about money, as noble Lords will know and as they have heard too frequently this afternoon, yet more horses are in training than ever before. With permission, I shall read a letter from today's Sporting Life. It is from a trainer who, regretfully, had to give up on Saturday. It is headed "Slow Payers", and states:
"Ninety five per cent. of trainers are troubled by late settlement of accounts and the five per cent. who say they aren't must be good liars.
The real trouble is there's no way the knockers can be stopped. You put on the pressure and in the end it just leads to hassle and either the owner takes his horse away or leaves it behind and you're left with a horse that nobody wants eating its head off".
I hope the Jockey Club will be able to do something about that.
I feel that the Government know more about the racing industry than ever before. When have your Lordships been so well served on the Front Bench? There is one member of the Jockey Club, the noble Viscount, Lord Ullswater. The noble Baroness, Lady Trumpington, is a formidable steward at Folkestone, and two owners of small racecourses, Cartmel and Towcester, are both in their places on the Front Bench. I should add the noble Duke, the Duke of Athol], for Perth, and, as noble Lords have heard, the noble Duke, the Duke of Roxburghe, for Kelso. Finally, I close my remarks by saying that I hope my noble friend Lord Hesketh, who is to answer for the Government, will listen to all the suggestions he will hear today and will come up with a winning combination.
6.58 p.m.
Viscount Head: My Lords, when I started training steeplechasers in 1968 the top National Hunt trainers were charging their owners 14 guineas a week and paying their lads £12 a week. Today they are charging their owners £175 a week and paying their lads £153 a week. In 1968 the total pool of prize money was £3.9 million; in 1990 it was £47.8 million. All those increases are more or less in line and look all right until one realises that in 1990 2,200 more races were being competed for. That means that the prize money was being spread much more thinly. A simple calculation will show that for 1990 prize money to equate with the 1968 prize money in real terms another £15 million is needed.
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Before it is said that increasing the amount of prize money is just lining the rich man's pockets, it is worth looking at the matter of prize money, as indeed has been done so well in the report of the noble Marquess, Lord Zetland. In 1990 owners put £275 million into racing. In return for that, they were racing for a prize of £47.8 million of which £10.5 million would go to the trainers, the stables and the jockeys of the successful horses. Owners have become accustomed to recognising prize money as being a bonus. But, nonetheless, it is appreciated. I believe that racing has an obligation to reward owners for the horses which they produce to race. However, if that reward becomes derisory it is unacceptable. I believe that racing is failing in its obligation properly to reward owners.
The attraction of our racing is that it takes place on a variety of 59 racecourses which are scattered all over England, Scotland and Wales. On average those racecourses stage 17 days' racing per year. No business could survive by opening its doors to trade for only 17 days of every year. Clearly they have to rely on the levy, despite the fact that they are exploiting their amenities as best they can in non-racing activities. The books just do not balance. Many of our racecourses have archaic buildings; indeed the grandstands are draughty and uncomfortable places and the stables are dilapidated. A huge building programme awaits completion. The levy board must have the funds to carry out this programme on schedule. The longer it is left the more expensive it will become.
The noble Lord, Lord Trevethin and Oaksey, talked about the training of stable lads. There are currently 6,500 stable lads working in stables, of which 3,700 are actually looking after the horses which go to the races. They are the kernel of the racing world. We ignore their well-being at our peril: they are poorly paid and inadequately trained. Their pay must remain a matter between themselves and their employers, but I believe that the Jockey Club must take vigorous steps to improve the quality of their training.
The noble Lord, Lord Trevethin and Oaksey, did not mention the school at Newmarket which produces about 100 trained lads and girls per year. However, that number is woefully short of that which is necessary. Nearly 300 or 400 new stable lads and girls come into stables each year to look after the horses, but there is a very high turnover. When I was training, I remember that when these youngsters first came to the stables they were given equipment and a pitchfork and shown by the head lad for half an hour what they had to do; but after that it was up to them. It was a rough and ready method and it produced rough and ready lads. Such training should be a matter of priority for the Jockey Club. Indeed much more money needs to be spent on it.
Racing is unacceptably underfunded. It enters an economic recession in a parlous financial state. It is not yet clear how much money racing needs in order to secure its future. The question is, how will this money be raised? I believe that it must be raised through the levy. The levy has served racing well for 30 years. It is well tried and well understood. It should be discarded only if its replacement is patently better.

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In 1975 the levy was based upon horserace betting turnover. At that time the bookmakers chose to pass the levy wholly on to the betting public. My contention is that as the bookmakers decided to absolve themselves of any responsibility for the levy —and they still do—they must be adjudged to have weakened their position in the levy negotiations. I should like to see the betting public better represented in those negotiations in the future.
It is said that the betting public cannot pay any more and that 10 per cent. is the limit. However, the historical evidence does not suggest that to be the case. In 1966 the Government introduced a betting tax of 2.5 per cent. Since that time they have increased it at various intervals. In 1970 and in 1974, when there was an increase turnover perversely increased. I believe that there is room for the levy to be increased and for the money that racing so urgently needs to be found. There may not be a crisis in racing, but all the ingredients for such a crisis are only too clear to see.
7.7 p.m.
Lord Newall: My Lords, as the outsider in a field of 23, I feel that I have much catching up to do. However, I believe that I have something slightly different to say on the matter. For many years I have taken a great interest in the affairs of horseracing. It is a sport which I very much enjoy as a racegoer and a past amateur jockey. As we have already heard, it is a noble sport and one which has much in common with my own sport of greyhound racing. Many of your Lordships may know that I serve as chairman of the British Greyhound Racing Board. During the course of my remarks I hope not only to alert the House to the close ties between the two sports, but also to the impact that greyhound racing increasingly exerts on the fortunes of horseracing.
Both horseracing and greyhound racing are concerned with the excellence of the breed. They both provide substantial amounts of revenue to the Treasury from off-course betting turnover. Moreover, they are much enjoyed by the racing public and, indeed, attendances at all horserace meetings in a full year are almost equal to attendances at all greyhound meetings; that is to say, around 5 million attendances. Government statistics show that greyhound racing is just ahead of horseracing, after football, as a spectator sport. The Jockey Club and the National Greyhound Racing Club, which on its formation 63 years ago based its rules on those of the Jockey Club, are both concerned with the integrity and quality of their product.
I recall seeing in a recently published history of greyhound racing a wonderful picture of the famous racehorse, Golden Miller, side by side with the great greyhound, Mick the Miller. For me, that photograph perfectly illustrated the affinity that each sport has for the other. It is an affinity that the off-course betting public also has—as we have seen during the past two weeks when horseracing has largely been frozen out by the snows blowing in from the East. In the absence of horseracing on the turf, the nation's betting offices reported "business largely as usual" with 70 per cent. of their turnover coming in primarily from greyhound
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racing. That is an important point and one which is entirely relevant to this debate about horseracing finances. I say that because the share of off-course betting turnover taken by greyhound racing materially affects the amount of off-course betting on horseracing and therefore the amount of money that horseracing can derive from the horserace betting levy.
Over the past 13 years—that is to say, since the Royal Commission on betting and gaming reported in 1978—there has been a significant trend in off-course betting in favour of greyhound racing in preference to horseracing. That commission was the last Government inquiry into the relationship of off-course betting with greyhound racing and horseracing, and the situation has changed radically since then.
I make no excuse for quoting the relevant figures. Whereas in 1977 greyhound betting accounted for only 17.6 per cent. of the market, the latest figures for 1990 show a figure of 27.9 per cent. of the total off-course market. In other words, there has been an increase of 79 per cent. in greyhound betting over the period while betting on horseracing has declined by 4.3 per cent. If that trend continues, there will obviously be a further decline in revenue from the horserace betting levy to be returned to horseracing. Last year, horseracing and greyhound racing together accounted for more than £5.5 billion of betting in the high street shops, of which 69.8 per cent. was on horserace betting, according to the levy board's report and the figures from HM Customs and Excise. That amounts to a huge £4 billion, although we learn that it produced no more than £36 million in levy to horseracing. That primarily is what the debate is about.
It is the almost universal opinion in the world of horseracing that off-course bookmakers are not returning enough for the use of the racing product. I agree with that opinion, but I can also put my finger on one of the key reasons why it is happening. I hope that my noble friends who speak for horseracing will not mind if I remind them of one important fact: horseracing finds its revenue from off-course betting reduced because of the impact of public betting interests in greyhound racing—a situation (which I am sure they know) that the bookmakers have brought about because they can collect levy payments from greyhound bets without having to pass on the money to greyhound racing.
Perhaps I may point out that 28 per cent. of the total off-course betting last year amounted to a not inconsiderable £1.6 billion bet on greyhounds in the betting shops. In simple terms I shall explain how the horserace levy is affected. First, bookmaker deduction from punters in the betting shops is the same (10 per cent.) from punters' winnings on horse and greyhound bets. Secondly, general betting duty is 8 per cent., and bookmakers continue to claim that they need the extra 2 per cent. to cover the collection of tax and levy. Thirdly, the statutory levy of approximately 1 per cent. (0.9 per cent.) applies to off-course bets on horseracing only. If that is derisory, as the noble

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Duke, the Duke of Roxburghe, said, then a zero return is obviously wrong, because greyhound racing does not receive a levy and bookmakers therefore profit from the amount they deduct above the 8 per cent. on greyhound bets; in other words, an artificial levy on greyhound racing to the benefit of bookmakers only.
My interest in the debate is not solely to score points for greyhound racing, although I hope that your Lordships, with your inherent fairness, will listen to what I have been saying and take full notice of the disparity between the ways in which these two racing sports are treated by government regulation. I hope that I have shown how the marketing of greyhound racing by the off-course bookmakers, together with the profits they are making from the artificially applied levy on greyhound betting, hugely affects turnover on horseracing in the betting shops. As the horseracing levy depends on the amount of turnover on horserace betting, and only that, the impact of one sport upon the other is entirely relevant to the debate.
In 1988 I took a Bill designed to amend the betting and greyhound racing legislation through all its stages in the House. The Bill introduced an all-sports levy. It was passed by your Lordships but foundered in the other place. If greyhound racing were to receive a levy in future, as I have suggested in the House many times, the trend towards increased betting on sports other than horseracing would be arrested: bookmakers would no longer have an incentive to promote greyhound racing in their betting shops and both sports would enjoy equal treatment. That might be only part of a solution to what has been called the crisis in racing. Various other suggestions for generating further income for both horseracing and greyhound racing are being discussed by a Select Committee in another place and in the press.
One of those ideas concerns the possibility of establishing tote outlets in betting shops to offer both horse and greyhound tote odds and a national daily tote jackpot pool on both sports. To do that, it will be necessary to gain the co-operation of the off-course betting industry to place tote terminals in its shops. That might mean seeking changes in the law to oblige bookmakers to offer the alternative of tote betting to customers in betting shops similar to the statutory duty imposed upon racecourse promoters to provide facilities for on-course bookmakers. Your Lordships may have noticed that Ladbroke's is now trying to break the monopoly of the Pari Mutuel in France, so attempting the same process in reverse.
A large tote pool offering high daily dividends from a modest outlay would not just stimulate the public's interest in both sports but should also provide greyhound racing and horseracing with an excellent marketing tool for encouraging punters to the track. Racecourse promoters must somehow establish a foolproof market mechanism for gaining access to a larger proportion of the ever-increasing off-course betting turnover.
Whatever new mechanism can be established or reformed, it must make sense for horseracing and
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greyhound racing to work together so that neither attracts or detracts from the earning capacity of the other. I urge the Government and the Home Office in particular to allow an open race, and not one with a handicap so great that one side can never win.
7.16 p.m.
Lord Peston: My Lords, I too wish to thank my noble friend Lord Donoughue for giving us the opportunity to have this debate, but I must warn him that I am sure that I shall make many mistakes in what I say. I look forward to receiving enlightenment from the Minister when he replies. As noble Lords are aware, on most topics about which I speak to your Lordships, I rather fancy myself, but not on this occasion. Indeed, as I have sat listening to all the expertise and declarations of interest, I do not know what I am doing here. However, there is one statement which I can make which is incontrovertible; namely, I know less about this subject than anyone else who has spoken today. If anyone doubts that assertion, its correctness will become abundantly clear within the next few minutes.
Although I started from a position of ignorance, I have learned a great deal from those of your Lordships who know about these matters and who have spoken. the debate has been fascinating. My initial grumpiness—I do not disguise it—at having to sit through it all, was rapidly replaced by a desire to hear more. I believe that I could now attempt an examination question of the type: describe the economics of the horseracing industry and comment upon the policy problems that arise. I could not only attempt the question, I could probably obtain a C or a C-plus. For that I thank your Lordships.
I exaggerate my ignorance a little. My late father was a compulsive gambler. He took me with him to the races. he would tip me when he had a winning bet but he never asked for any money back when he lost. He also bought me an excellent lunch. I recall that occasionally we even looked at the horses. So my memories of going to the race track are all happy ones, and my response today is intended to be sympathetic.
Let me advert to the maiden speakers. I can say with total sincerity that I found all three speeches extremely interesting. Again, I have no difficulty in saying how much I should like to hear from them again. The noble Marquess, Lord Zetland, speaking at the beginning of the debate, struck the right note among the many good points that he made when he reminded us that we need to think about this matter internationally. I also thought that the noble Lord, Lord Rathcreedan, was right to emphasise that we must not merely look at the present economic position but take a much longer view of the place of the industry in the British economy.
The noble Duke, the Duke of Roxburghe, made a number of points. I was struck that he felt able in a non-controversial maiden speech to refer to racing on Sunday. One or two other noble Lords also mentioned it. I am aware that racing on Sunday is an open question. Speaking for myself—I emphasise that, considering the row we had only last week—I have no

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difficulty with it at all. I note that professional soccer as well as cricket is played on Sunday. There is Sunday racing in countries with religious traditions and degrees of observance which equal or are even greater than cur own. Therefore I cannot see why we cannot have Sunday racing in this country.
The correct point of departure was emphasised by many noble Lords: namely, horseracing is an industry. I am aware that the noble Duke, the Duke of Devonshire, said that he also thought of it as a sport, but the two are not remotely incompatible. Nowadays all sports are industries, and the two go hand in hand, so I slightly disagree with him there. However, I took very seriously his broader advice. If I were tempted to make any money from my yacht or my grousemoor, I should have no intention of risking it in the future.
Reverting to the industry, horseracing has many images. We should never forget that it is part of our country heritage and has attracted many of our best artists. In the past, perhaps it could be seen somewhat as just a country pursuit dominated by rich men, but it always involved others of more modest means. It retains some of that quality, but we would be quite mistaken if we ignored its wider economic significance. Although it would be exaggerating to say that horseracing is a crucial part of the economy, it is not trivial. The British economy has gained from it in the past and it would be a pity if, from avoidable neglect, we allowed it to disappear in the future.
Perhaps I may here put on my economist's hat and warn against the fallacy of dismissing the relatively small. I do not refer to the "small is beautiful" cult which I do not support. I am concerned with arguments of the form that such and such an activity is only a tiny fraction of the British economy; therefore if it disappeared, no one would notice the difference. All these tiny fractions make up the whole economy. What applies to one, applies to all. To say that if anything that is relatively small goes, it is easy come, easy go, is a fallacy. One could then end up with no economic system at all. That is why we must take this industry seriously as well as all other industries.
I noticed that arising from the question of my noble friend Lord Donoughue on 15th January, one Member of your Lordships' House suggested that if horseracing were suitable for taxpayers' support, so was any industry. The noble Lord, Lord Reay, said:
"We consider that racing cannot … be exempt from the economic restraints to which other industries are subject". —[Official Report, 15/1/91; col. 1084.]
Of course he is right; but the converse is also true. Horseracing should not be treated worse than other industries. There is no advantage in moralising on this. If industry policy is to depend on a division between goods and services of which we approve or of which some of our moralists approve and those of which we disapprove, then the British economy will end up in an even bigger mess than at present.
It was right therefore for noble Lords to place horseracing in its proper context. To reiterate the point, as the noble Marquess, Lord Zetland, said, its proper economic context is of intense international competition for racing and breeding. That gives us our usual dilemma: if other countries recognise the value of the industry and give it their support, it puts unfair
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pressure on our industry, especially if our own Government fail to follow suit. The present Government do not care to give direct support to industries. Some of their supporters have recently pointed out in your Lordships' House that the Government seem to have gone out of their way to hinder industry rather than to help it. However, that debate is for another day and it is also one which we have already had.
Even on our side, although we are less doctrinaire, we may feel that in the best of all possible worlds we would have other priorities and leave horseracing to stand on its own two—or I cannot resist saying its own four—feet. In a world of unfair competition, our Government have a duty to help industry. I use exactly the same metaphor as the noble Earl, Lord Shrewsbury. They have a duty to help the industry at least to the point of keeping the playing field level.
This leads me to a difficulty which many of your Lordships raised and I must admit that I am in two minds on it: the VAT problem. My usual judgment on VAT is that we should have a straight rate. On the whole, I do not believe in exceptions. Again, I speak for myself. We require a straightforward tax. Nevertheless, I entirely accept the point that noble Lords made that if other countries do not use VAT that way, it puts us in a difficult position. It is rare for me to say so, but I do not know the answer to the question. Being a typical economist, on the one hand I want everyone to pay 15 per cent. VAT, but on the other hand I do not want our industries to be damaged because we cannot respond to what other industries do.
I take the two points that the noble Viscount, Lord Whitelaw, made. First, we do not need committees of inquiry but we need a deeper investigation of the VAT problem. Perhaps the Jockey Club is spending money on that, I do not know. However, I am slightly at odds with the noble Viscount in that because of the VAT, I am not convinced that the matter can be viewed entirely in Home Office terms. The people who must be convinced are the Treasury and work must be done to produce economic arguments that will convince them.
As regards bookmakers and the tote, we must not be naïve. Bookmakers are not in the racing business but the gambling business. Noble Lords have talked as though bookmakers had a completely different set of values and objectives. They are in the gambling business and their research and development work is to do with gambling not racing. I do not see why one should be silly about it. It may be appropriate to tax them and use the money for the benefits of racing, but to misunderstand what they do would be a great mistake.
I fully understand the contribution of the noble Viscount, Lord Falkland, but I was taken aback by one of his remarks. I know why he argued it. The noble Baroness, Lady Seear, was sitting next to him, as she is now and may correct this, but unless I misheard him, he said that he favoured a tote monopoly. I did not believe that I would live to hear from the Liberal Benches any suggestion of monopoly

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in any field. Therefore on that I cannot follow him or other noble Lords. I would not support any monopoly in this industry. My worry is the reverse: it is whether there is enough competition in bookmaking. That is another matter which we have not discussed.
The Viscount of Falkland: My Lords, I am grateful to the noble Lord for giving way. I said that I favoured a mixture between the tote monopoly and bookmakers. I favoured a tote monopoly on off-course betting but with bookmakers taking their proper place on the course to add variety to the sport.
Lord Peston: My Lords, I thank the noble Lord. That is slightly better; but I still do not agree with it. I favour competition tout court. I have long since given up betting, but betting with a bookmaker is infinitely more interesting than betting on the tote. That is extremely boring.
I shall save most of my remarks on lotteries for another day, I welcome a debate on them. What I have seen of lotteries makes me feel that their benefits are much exaggerated. I entirely echo the point made by the noble Lord, Lord Goodman: if all the people who expected to win money from the lottery were added together, they would end up with about 3p each. We must consider that subject in a much more direct way. I hope that I can return to the subject of lotteries in another debate.
I had great difficulty in following the speech of the noble Lord, Lord Wyatt of Weeford. Perhaps when my mind is fresher tomorrow, I shall be able to raise my intellectual level and ascertain what the noble Lord meant to convey in his speech. However, on the matter of listings, the noble Lord may be correct. I have considered that matter, and I wished to raise the matter of the listing of runners and riders. I had understood that the copyright of the listings was held by the Jockey Club. I wanted to ask the Minister whether the Jockey Club was maximising its income from what I had understood to be its ownership of the relevant copyright. The noble Lord, Lord Wyatt, either implied that the Jockey Club did not own a copyright, or that it could not, as it were, use that copyright.
The noble Lord referred to a need to amend the relevant statutes. I should like to know much more about this matter. I should like to know whether I am mistaken in believing that the Jockey Club owns a copyright. I should also like to know whether I am mistaken in believing that the Jockey Club can exploit such a copyright. If I am correct that the Jockey Club owns a copyright, and is able to exploit the listing of runners and riders, I should like an explanation of why the club is not obtaining a great deal more money from that source rather than from other areas. I hope the Minister can comment on that.
I must say a few words about employment in the industry. Many noble Lords, including the noble Lords, Lord Newall and Lord Trevethin and Oaksey, have commented on that. They have referred to stable lads. Perhaps, speaking from these Benches, I should refer to them as stable persons. Clearly many young
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people become besotted with horses and are keen to work with them. However, that is precisely a state of affairs in which they are likely to be exploited, not only in regard to pay but also as regards conditions. People employed in stables are vulnerable, not least to arbitrary dismissal.
I did not know until I prepared this speech—other noble Lords have mentioned this matter—that the real incomes of stable lads have hardly changed in the past decade. The Minister is always emphasising to us that average real earnings have risen considerably in the economy at large during that period. While I support proper union recognition for the stable lads, I am aware that the Stable Lads Association is not all that strong. I am concerned that some trainers clearly do not encourage their staff to join even the Stable Lads Association. As I understand the position, some trainers, as employers, bargain strongly in what they consider to be their own or their owners' best interests. Noble Lords have referred to that. I find that quite deplorable and I was delighted to hear other noble Lords express the same feelings.
In returning to my opening remarks, I should say that many noble Lords taking part in today's debate are leaders in this industry. They have a responsibility in this matter. It should not be left to a weak body, such as the Stable Lads Association, to fight these battles. A fortiori, it should not be left to the young people themselves. I was gladdened to hear one or two remarks made by noble Lords in support of my feelings. I hope this matter will be taken further. If stable lads are not treated properly in the racing industry, noble Lords who are leaders in the industry must share some of the blame. I hope that one outcome of today's debate will be an improvement in that area.
One issue that has emerged from the debate is that those in the industry are extremely keen to manage their own affairs without undue statutory interference. I am extremely sympathetic to that point of view. They are right to want to do so. However, I hope they are aware that that stance severely limits the extent of the support that they can possibly ask from government. I return to a point made by the noble Earl, Lord Shrewsbury. What the industry needs, and the most it should ask for, is a level playing field. But from that point on, it must be on its own. In that connection, I certainly wish the industry well.
7.35 p.m.
The Minister of State, Department of Trade and Industry (Lord Hesketh): My Lords, I suspect this will probably be the only time in my career at the Dispatch Box that I shall have the pleasure and privilege of following three outstanding maiden speeches. Those speeches of my noble friend Lord Zetland, my noble friend the Duke of Roxburghe, and the noble Lord, Lord Rathcreedan, respectively, all contained interest and topicality but remained within the conventions of your Lordships' House.
Even the occasional student of the sporting life will have noticed that there has been regular and topical debate on this issue. I have a copy of Racing in Crisis

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which contains page after page of debate on this matter. It is perhaps significant that the first page of the document, contains an interview with my noble friend Lord Zetland. In reply to the first question my noble friend states:
"People say that we shall talk ourselves into a worse crisis, but I do not regret what I have done. Until people understand the problems better, we will never solve them".
Those are particularly cogent remarks. The remarks made by my noble friend in his maiden speech today were also particularly apposite.
My noble friend the Duke of Roxburghe remarked very modestly that he felt nervous and like a young two year-old. I felt rather that my noble friend gave a Gold Cup performance over a far greater distance. We are lucky to have been present on such an occasion.
Finally, the noble Lord, Lord Rathcreedan, contributed some telling remarks. He referred to the product of racing as being something that people must want to attend. I believe that all noble Lords who have taken part in today's debate agree with that. I am sure they also agree with the noble Lord's further remark that to make the product attractive would cost a lot of money. The three maiden speeches were excellent contributions. I cannot wait to hear further from all three speakers sooner rather than later.
I have an interest to declare as regards Towcester Racecourse. The noble Lord, Lord Donoughue, used to attend that racecourse in his youth. I first attended a race meeting when I was one year old. I remember little of that event. However, there is photographic evidence of a very unattractive child trying to eat the racecard. I suspect that the noble Lord, Lord Donoughue, was also present on that occasion at Easter 1951. Therefore, we have waited 39 years for me to reply to his Motion tonight.
The subject that has been discussed today is wide and complex. That is because—as has been pointed out—horseracing is not a single industry. It is, in fact, a number of interlocking businesses and interest groups. It includes racehorse breeders, owners, trainers, jockeys, stable lads, racecourse owners and the betting industry. And at the heart of this complex of interlocking interests, as in any business, is the customer—whether racegoer or punter—on whose satisfaction the health of the business must ultimately depend. The many excellent contributions to this debate have reflected the breadth and complexity of the subject all too clearly. But they have shown equally clearly that there is no single or simple answer to whatever difficulties these various industries may face.
Before dealing with some of the issues raised in this debate, I should make quite clear the limits of the Government's role in these matters. Horseracing is a traditional part of British life. I personally, and the Government as a whole, hope that horseracing will always be a part of our national life. But let us be quite clear; the Government do not run horseracing.
If horseracing is to survive and flourish in the future, it must find its own solutions to its own problems. There are some issues to do with general gambling policy or taxation where the Government
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clearly have a direct interest. In those areas, we shall listen carefully to any arguments which are put to us for change. We shall judge those arguments on their merits and against the wider issue which any government must take into account. Where we believe that change is justified we shall act. However, racing cannot expect special treatment. It must stand on its own feet. Its future size and shape are matters for the industries themselves, not the government.
Therefore, in the terms of the Motion, what is the situation facing all involved in horseracing? In particular, is there a financial crisis? In any industry there are always businesses which at any particular time face a financial crisis. Looking at racing as a whole, is there compelling evidence of a crisis? More particularly, is there evidence of a crisis demanding government intervention?
Key indicators obtained from the levy board all show an improvement over the 10 years ending in 1990. Total prize money increased, the number of horses in training increased and the number of people attending races increased. I shall not repeat the figures which have been placed before your Lordships' House this afternoon. I accept that those are the 1990 figures and that in the current recession there may have been a fall in some of those figures, but the Government have to act on the figures that are available and have been published. Nevertheless, one must not place too much emphasis on broad statistics such as these. There have been fluctuations, and fluctuations are occurring now.
However, the statistics may help to explain why there are so many differing views about whether there is a crisis and, if so, how best to tackle it. It is not really for the government to form a view on these matters. What is surely beyond doubt is that racing, like any other industry, is having to come to terms with the present economic recession. Racing cannot expect to be immune from the economic climate. It must look closely at its own operations to see how efficiency can be improved and new revenue generated. The extent to which it is successful will determine how well racing survives the recession.
Racing has many sources of income, most of which are outside the statutory arrangements to which I shall shortly refer. For example, racecourses benefit from gate receipts, from on-course catering and from commercial sponsorship. There may well be scope for generating greater income from sponsorship and by using racecourse facilities for conferences and other leisure purposes. As the noble Viscount, Lord Head, pointed out, most racecourses operate for very few days each year. Betting also produces substantial income by way of payment for its coverage of horseracing, race sponsorship and admission fees. It is estimated that in those ways bookmakers contributed over £13 million to racing in 1989–90.
However, the main method by which betting contributes to horseracing is via the levy. The levy is expected to produce some £38.5 million in the current financial year which, compared with 10 years ago, is more than would have been required just to keep pace with inflation.

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The amount raised by the levy is not primarily a matter for the government. It is a matter for negotiation between the bookmakers and the levy board. Only if the board cannot agree on a scheme is the Home Secretary required to make a determination. Distribution of the money raised by the levy is entirely a matter for the levy board in accordance with its statutory duties.
It has been suggested that one of the ways of easing the financial difficulties faced by racing is for the bookmakers to pay a "fairer price" for the service they receive from racing; in other words, that the levy should be increased. That is a matter which should be negotiated between bookmakers and the levy board, with the Home Secretary intervening only if they cannot agree. This year's scheme and the one beginning in April were agreed without such intervention and so, one might assume, represented some sort of agreement that a fair price had been struck.
However, let us ponder for a moment how a fairer price might be established. It is very difficult to define or quantify the proportion of racing which the levy can be said to buy. The present arrangements seek to strike a balance between the needs of racing and the capacity of the bookmakers to pay. It has never been the intention that all or even a major part of racing's income should come from the levy.
Some might say that the bookmakers can afford to pay more. That is not a judgment for the government, other than in the context of a disputed scheme; but it is wrong to assume that a major part of total off-course betting turnover of about £4,300 million is available for return to racing. Bookmakers have to meet all their liabilities from that turnover including winnings, running costs, general betting duty and the levy.
I intend to quote only once this evening, from the Royal Commission on gambling of the late 1970s, which stated:
"As Jane Austen might have said, it is a truth universally acknowledged that bookmakers make too much money".
That same Royal Commission looked at bookmakers' profits but concluded that they were not excessive. A more recent study by the Monopolies and Mergers Commission was told that net profits were about 3 per cent. of turnover. That is an average figure. Noble Lords will no doubt have their own views on whether it is accurate, and many of those views have been stated today. However, we have no evidence at present to suggest that it is wildly inaccurate. If so, that 3 per cent. figure perhaps provides a better measure against which to compare average levy liability of just under 1 per cent.
Finally, any assessment of a fair price must take into account the interests of the punter. It is, of course, the bookmaker who must pay the levy but, as in any business, all his costs have to be met by his customers. Any substantial increase in the levy may well increase the price of betting and adversely affect the industry's long-term interests.
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It is not for the government to come to any conclusions on these matters. I mention them to illustrate that there is no obvious means of achieving a fairer price than that which is already achieved under the present arrangements. It is for racing to make its case and to negotiate with the bookmakers. I know that the new chairman of the levy board, Sir John Sparrow, is keen to see a more open exchange of information between racing and bookmaking so that, when the annual scheme is considered, there is a better understanding on both sides of what is fair and what is possible. He will also be seeking to move towards agreements covering a number of years rather than just one in order to make planning easier and to reduce uncertainty.
A number of your Lordships mentioned the return from betting to racing in other countries. I fully accept that there are higher levels of return in other countries. However, it is very difficult to make any meaningful comparisons between the figures because the structure of betting is quite different from what we have here. Many of the countries mentioned today operate a monopolistic system of betting which is contrary to the traditions of this country. There can be no question of our going down that road. In this country, the levy is the primary means for negotiating the return which betting makes to racing.
So far as the Government are aware, the principle of a statutory levy continues to enjoy the support of racing and bookmaking. It provides statutory backing for what is basically a voluntary agreement. We have no present plans for legislation to change the levy arrangements but a detailed inquiry into the levy is now under way by the Home Affairs Select Committee of another place. The Government look forward to its report and will naturally give very careful consideration to any proposals which it makes.
What of the tote? Surely it can be the means of salvation for racing. Ever since it was announced in September 1988 that Lloyds Merchant Bank was to undertake a study on the feasibility of privatising the tote those concerned in or on behalf of racing have sought, understandably, to identify ways that this could be used for the benefit of racing. It may therefore be helpful if I set out clearly the Government's present position on the tote.
First, I have to say with regret that I am not in a position today to announce a decision on the future of the tote. In the time-hallowed phrase, the future of the tote is under active consideration. That is the simple truth. However, whatever happens to the tote, I can be quite clear on what will not happen. There is no possibility that the tote will be transformed into a body which makes a substantially larger contribution to racing than the present organisation. In particular, it is unrealistic to think that we could go the same way as some other countries and give the tote a monopoly of all betting on horseracing, or all off-track betting, as the noble Viscount, Lord Falkland, suggested.
As I have already remarked, international comparisons are not useful here. Our racing and betting industries have developed in different ways from, for example, France or Hong Kong. The result

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may be less money directly to racing but a considerably more varied system of betting which the customers have shown quite clearly that they value. There is no going back now. By all means let the tote continue to compete, or perhaps compete even more keenly, for betting revenue with other forms of betting. That is good for all concerned. The tote's recent development of "course-to-course" betting can be seen as part of that process.
I said that it is unrealistic to see the tote as the future sole provider for betting. The tote is small, though important in its contribution to racing. After all, it has only 140 shops out of an industry total of 9,600. While it has the exclusive right to run or to authorise pool betting on horse races, this is primarily a service taken up by those on course, which is a fraction of the total betting public.
Finally on the tote I should answer those who have asked why a decision on its future has been so long awaited. I mentioned earlier the various complex strands of betting and racing. The tote is small, but it is important, and it is equally important we get the solution right. There are also competition and deregulation issues involved here. Perhaps most relevant of all in the context of tonight's debate is the part that the tote plays in the present financing and future health of horseracing. To extricate and redesign the tote within that context is not as simple as it may perhaps appear on preliminary inspection. The Government have been conscious from the start of the uncertainty such a review is bound to cause, but that is not a good reason for precipitate action. The feasibility of privatisation is under consideration, but noble Lords should not expect an early announcement here.
The noble Lord, Lord Trevethin and Oaksey, referred to his views on the distribution of money in racing between those races under National Hunt rules and the flat. He was immediately followed by my noble kinsman Lord Manton who took the opposite view as to the distribution of finance. However, I am sure that mercifully for racing the Government have no part in this great debate.
The noble Viscount, Lord Falkland, referred to his ability in his youth to run the school betting service —a service which, I have to say remorsefully, was not present at the educational establishment I attended.
The noble Lord, Lord Vestey, drew your Lordships' attention to the integrity, quality and professionalism of the running of British racing; an example not only for this country but for the world. He also referred to the adverse effects of proposed development in Cambridgeshire. I can assure the noble Lord, Lord Vestey, that I will bring that matter to the attention of my noble friend in the Department of the Environment.
The noble Duke, the Duke of Devonshire, referred, quite rightly, to sport. I too believe that the age of the Corinthian Casual is important for the preservation of Englishness itself and that amateurism is an ideal which, when lost, will destroy sport itself.
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My noble friend Lord Colwyn referred to the fact that racing should itself look at ways of generating additional income. I am sure we all agree with that. The noble Lord, Lord Cocks of Hartcliffe, referred to an industry which should care about its customers. I am sure that no noble Lord disagrees with that.
The noble Lords, Lord Goodman and Lord Peston, and certain other noble Lords, referred to a national lottery. I think it fair to say that those who feel their hand would be outstretched to participate in such an undertaking would be in a rather similar position to those under an English scrum at Twickenham.
Noble Lords made reference to Sunday racing and the Sunday and evening opening of betting offices. Perhaps I may approach those in reverse order. Work has been done on looking at evening opening of betting offices. I am sure noble Lords are also aware that on that issue small bookmakers and the greyhound lobby are not at all happy on certain scores. As regards the Sunday opening of betting offices and Sunday racing, which are inevitably combined if we are not to have illegal bookmaking, I remind noble Lords that a number of Private Member's Bills have been proposed but as yet have proved unsuccessful. I suspect that a successful conclusion of that issue would provide the answer for which noble Lords are searching.
The noble Lord, Lord Peston, asked about the Jockey Club's right to copyright. In a way, that is probably a question for the Jockey Club. However, I took advice of a legal nature and am reliably informed that the Jockey Club do own the copyright. The noble Lord, Lord Peston, also made an important contribution to this evening's debate, being the first noble Lord to draw attention to the artistic contribution created, if I may say so, from Stubbs to Sartorius—probably in reverse order on their dates.
I now move to what is probably the most important part of what today's debate has been about. One need only look at the length and breadth of the speaking list to appreciate the importance of the debate. The fact that we had a remarkably unrepetitive debate shows the huge amount of work that went into making this the kind of debate to which your Lordships contribute so well. My noble friend Lord Whitelaw referred to the truest fact; what will make this debate important, is not so much the Government's response as to whether it provides a foundation. The key to any case when put to government is presentation. I should like to think that participating in today's debate has provided a classic example of how you lay the foundations for a presentation of an all-party viewpoint to government. As noble Lords have made quite clear, it is also a case that spreads way beyond the Home Office to the Treasury, my department—the Department of Trade and Industry—and even the Ministry of Agriculture. The one assurance I can give tonight is that I will ensure that every Minister in every department of state involved will receive not only a copy of the Official Report but also a letter from me at the same time pointing out the length, duration and importance of the debate in your Lordships' House today.
Lord Renton: My Lords, before my noble friend sits down, would he be so good as to comment on the view expressed by a number of noble Lords that the economy of the country will suffer through lack of contribution to the balance of payments if we are no longer the centre of thoroughbred sales? As has been pointed out, that is due to the 15 per cent. VAT. According to some of us who spoke, that is the crux of the debate.
Lord Hesketh: My Lords, as my noble friend Lord Renton is probably well aware, the Jockey Club recently indicated its desire to make a detailed presentation to the Treasury on the financial difficulties facing the racing industry. The Treasury responded positively, and we await the presentation by the Jockey Club.
7.56 p.m.
Lord Donoughue: My Lords, I am sure it will be agreed that this has been an excellent debate which does great credit to this House. I join others in commending the three remarkable maiden speeches.
Perhaps I may begin on a personal note. Referring to the speech of the noble Lord, Lord Manton, I was aware of the cry "Come on, Steve!" very early in my childhood. My father was nicknamed Steve throughout his life after the great jockey. I was aware that Steve Donoghue had seven Derby winners long before I knew who was Chancellor of the Exchequer.
I thank the Minister for his characteristically lively, if predictably cautious, response. The heart of the debate has been finance, and I think there has been majority support for some new structure to recycle money back into racing investment. There was dissent, mainly from the betting side of the industry. The noble Lord, Lord Wyatt of Weeford, is not here, but his views on racing, as on Prime Ministers, are strongly held but are ultimately minority views.
Racing is under-financed, and I think that stable staff are the most acute, direct victims of it. I agree with everything my noble friend Lord Peston said about it.
On the governance of the industry, the Jockey Club has been widely defended. I think that we are somewhat in fear of their massed ranks. I think that credit is due to the achievement of Lord Hartington's new regime. That partly reflects the representative nature of this House. They have worked hard and I think the Government should give them the legislative tools to finish any job they have to do.
I would just mention Sunday racing which I think is one among many important subjects.
On VAT, I did not quite hear the noble Minister's response to the important points made in that area, especially by the noble Earl, Lord Carnarvon.
Finally, the noble Duke, the Duke of Devonshire, whose contribution I thought was very valuable—a Whig view to a former professional historian—seems to assume that only the rich can own horses. I do not accept that. It is a false dichotomy between the fun of the sport and racing as an industry. Without a prosperous industry there would be no sport.
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My Lords, I beg leave to withdraw my Motion for Papers.
Motion for Papers, by leave, withdrawn.

South Africa and Sanctions
8 p.m.
Lord Hatch of Lusby Lord Hatch of Lusby rose to ask Her Majesty's Government what criteria they will use for the removal of sanctions on South Africa.
The noble Lord said: My Lords, I very much welcome the fact and indeed I am honoured that the noble Lord, Lord Acton, will make his maiden speech in the debate. When I was at Cambridge I was an avid reader of his grandfather's works. I look forward very keenly to hearing his contribution.
Let me start by making two cardinal points around which the whole of what I ask is centred. The first is that we all welcome unreservedly the statements made by the President of South Africa last year and this year. We particularly welcome the statement made on 1st February in which he announced that his government would be removing the Group Areas Act, the Population Registration Act and the Land Acts. Those are the three remaining legislative pillars of apartheid. We are glad that the president has shown both courage and foresight in announcing their removal. We note —as expressed by ministers of the South African Government, including the president —that one of the factors leading to this revolution in the political history of South Africa was the imposition of sanctions. Another factor was the internal pressure organised among the African majority population.
The second point that I want to emphasise is that so far it is the intention that has been announced. We await its completion by the removal of the three Acts. We hope and expect that they will be removed before long. But when they are removed the African population of South Africa will still have fewer political rights than it had when first I visited South Africa in 1950. At that time the Africans in the Cape had a limited vote in elections; the Africans throughout the country had a limited vote for the senate. So when those important legislative pillars of apartheid are removed, South Africa will still not be politically back at the stage that it had reached in 1950.
I want to emphasise yet again, as I have done so many times in this Chamber, that the removal of what is commonly known as apartheid does not mean a democratic society in South Africa. Long before the word "apartheid" was coined there was a discriminatory society in South Africa. There will still be a discriminatory society in South Africa when those Acts are removed. I ask the Government: what are the criteria that are being used and will be used? Only this weekend the Commonwealth Prime Ministers have been meeting in London. They are to meet again in New Delhi at the end of April and will no doubt be preparing for the meeting of Commonwealth Heads of Government in Harare at the end of October. I hope that the Minister who is to reply will not simply read

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a Foreign Office brief but will answer the specific points made this evening. We are entitled to know the criteria that the Government will use.
I wish to make some suggestions. In the first place it cannot be emphasised too strongly that the political situation in South Africa is paramount so far as concerns the accepted objectives of the imposition of sanctions. At the United Nations, in the Commonwealth and in the European Community it has been emphasised from the start that the object of sanctions was to produce a democratic situation in South Africa which would be irreversible. It will not be irreversible until the majority within South Africa has the, vote. That is the only final test of its irreversibility.
It is the political constitution which will determine whether or not that section of South Africa's society which comprises those forces still existing in South Africa which oppose the reforms initiated by President de Klerk is still able to turn back the tide which at the moment is flowing in the right direction. I remind noble Lords of a number of statements made on behalf of both the Government and the South African Government. I start with the statement by the Foreign Secretary in another place on 14th February 1990 that,
"There is no question of reviewing the arms embargo or associated military sanctions until there is a full democratic constitution in South Africa".—[Official Report, Commons, 14/2/90; col. 283.]
That is clear and unequivocal. Later—last July—the then Prime Minister, Mrs. Thatcher, in an interview in The Star newspaper of Johannesburg, said that South Africa would be accepted back fully into the international community,
"once a new democratic constitution is in place and the remaining apartheid legislation is removed".
That again, it seems to me, is an unequivocal assertion that until the constitution is changed so that it is democratic and based upon one person one vote, the object of sanctions has not been achieved. To reinforce the views of those two members of the British Government, Gerrit Viljoen, the former head of the Afrikaner Broederbond and the chief negotiator of President de Klerk, said:
"Apartheid will only be gone when the new constitution is implemented".
That is the burden of my case.
Sporting sanctions have a special importance in South Africa. I say to politicians, "Keep off". Political interference over the readmission of South African sports to the international community could be fatal. It could be desperately counter productive. South African sporting associations are today engaged in talking to each other, forming new organisations and trying to weed out the remains of the apartheid system within the different sports. Let them get on with the job. When those associations are satisfied that their sport has become genuinely non-racial let them apply to the appropriate international organisations. Do not interfere politically!
If white countries such as Britain, Australia and New Zealand try to force the pace and start to issue invitations —the point is apposite to both rugby and cricket, the two main sports in South Africa—the
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result will be a backlash among those of all races now trying to get rid of discrimination and prejudice and create non-racial sporting relations.
The central issue remains. Last summer it was believed that the reforms which President de Klerk had set in motion were likely to be achieved in the near future. A number of conditions that were accepted by both the government and the African organisations at that time have not yet been fulfilled. There is still a state of emergency, detention without trial and political execution. There are still exiles who have not returned. Some who did return have been arrested. There are still political prisoners in South African gaols. The Internal Security Act remains. Above all, it is the white government and the white security forces which are still in control of every form of life in South Africa. The South African parliament addressed by President de Klerk did not have a single black African in it. Nelson Mandela, now an international figure, does not have a vote. He still cannot live wherever he wishes in his own country.
I am glad that the Land Acts are to be abolished. They go back to 1913. However, that will not return the land which was stolen from the Africans to African ownership. There has to a great economic revolution as well as a political revolution. There must be a political revolution which states directly and unequivocally that every South African, whatever the colour of his or her skin, has an equal right to determine, and to participate in, the future of the society in which he or she lives. Until that becomes established in a new constitution the reforms will not be irreversible, the trend will not be irreversible, and the South African population will continue to live in a discriminatory society.
Until the society becomes democratic I strongly suggest that it is essential for the international community to maintain sanctions. As specific moves are achieved, and specific rungs of the ladder are stepped upon, it may be felt that sanctions can progressively be reduced. However, until that democratic society has been established within the constitution, sanctions will still be necessary. If we are concerned to safeguard our belief in democracy, it will be necessary to retain economic sanctions, not for punishment, nor for impoverishment, but to enforce and to reinforce political will. Sanctions have begun to do so. They cannot be removed until the process has become final.
8.16 p.m.
Lord Acton: My Lords, I am most grateful to the noble Lord, Lord Hatch of Lusby, for asking this important Question on the criteria that the Government will use for the removal of sanctions on South Africa, thereby giving me the opportunity to make my maiden speech. I should like to thank noble Lords for the very kind welcome that I have received from all sides of the House since the day I took my seat. I realise that for the most part this kindness stems from the generosity that would be shown any newcomer. However, I like to think that a part results from the nomadic course my family has taken in your Lordships' House. My great-grandfather sat as a

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Liberal. My grandfather sat on the Labour Benches. My father was a Conservative; and now I am a Cross-Bencher. My family has at least had the opportunity to make friends on all sides of the House.
I was brought up in Rhodesia and after independence lived for a time in Zimbabwe. Inevitably, South Africa has been part of my life since my childhood holidays. In 1966 I worked in Durban for six months and thus was given the opportunity for a close-up view of apartheid. I disliked it intensely. Little did I realise that at the same time the South African Government were taking a close look at me, and apparently disliked me with equal fervour. Soon after I left South Africa I was declared a prohibited immigrant by that country. No reason was ever given.
From that time I have closely followed events in South Africa and have been a strong supporter of the international sanctions campaign as an alternative to what looked like inevitable bloodshed between the races. During the sterile years of Verwoerd, Vorster and Botha I often despaired of the future of South Africa. When President de Klerk came to power with his talk of reform I took a cynical view of him. He has proved me totally wrong and I wish to pay tribute to the truly remarkable statesmanship that he has shown during the past year.
It is almost unbelievable how much has been achieved. I refer to the freeing of Nelson Mandela and his senior colleagues, the legalisation of the ANC, the PAC and other banned organisations, and the regular contacts between President de Klerk and Nelson Mandela, the government and the ANC. Legislation has been repealed enabling hospitals to be opened to all races, and segregation outlawed in public facilities such as swimming pools and libraries.
I submit that President de Klerk has already made sufficient progress to warrant the lifting of some sanctions; possibly sporting sanctions would be the most suitable. Thereafter, I should like to see a step-by-step approach. President de Klerk has recently promised to repeal the Group Areas Act, the Land Acts, and the Population Registration Act; they are the cornerstones of apartheid. When these repeals take place more sanctions should be removed to encourage still further reform.
President de Klerk and the ANC have just reached an agreement on the release of political prisoners and the return of exiles to South Africa. When these pledges are fulfilled more sanctions should be removed. There will then remain the great issue of a new constitution and the franchise. President de Klerk has repeatedly promised that he will put any constitutional agreement to the white voters, either in an election or a referendum. It is crucial that he win that test of opinion against his Conservative opposition. It is crucial that the white voters have been encouraged to reach that stage by the progressive lifting of sanctions. It is equally crucial that some sanctions remain to help persuade white voters to back the new constitution, thus leading to the final removal of all sanctions.
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President de Klerk has set South Africa on a new course. I hope that Her Majesty's Government, together with their European Community and Commonwealth partners, will use the raising of sanctions to assist him with this historic task.
8.22 p.m.
Lord St. John of Bletso: My Lords, I am grateful to the noble Lord, Lord Hatch of Lusby, for introducing the debate and for having given my noble friend Lord Acton the opportunity to deliver a fine maiden speech on this most topical issue. Apart from concurring with the content of my noble friend's speech, I am delighted to have another colleague who has spent so many years in southern Africa. After his schooling in what was then Rhodesia, my noble friend completed his education at Oxford. Later he returned to Zimbabwe as the legal adviser to the Ministry of Justice. With his experience in the legal profession, the manufacturing industry, the banking profession and currently as an historian in the United States, my noble friend is truly an all-rounder. Now that he has opened his innings in your Lordships' House, I hope that we shall hear a great deal more from him on his special interest of foreign affairs.
I had hoped that after the restriction order on the noble Lord, Lord Hatch of Lusby, was lifted last year he would have visited South Africa to see at first hand the dramatic developments unfolding in that country. I returned this morning from a two-month visit to South Africa, where I met members of all political parties and business and trade union leaders. If ever there were any doubts on the irreversible nature of the reform programme the state president's speech made on 1st February put the record straight. It outlined his manifesto for the new South Africa.
Like my noble friend Lord Acton, I warmly welcome the proposed repeal of the last vestiges of legislative apartheid. This has laid the foundation for a multi-party conference to be convened to negotiate a constitution that will provide for a truly democratic South Africa. I sincerely believe that that is achievable in the foreseeable future. Therefore, I find it hard to accept the calls of Nelson Mandela and the ANC for the international community to remain steadfast in its stand on sanctions. Surely, as my noble friend said, now is the time to ease sanctions. Equally, I too do not support the total lifting of sanctions; I call only for their phased lifting.
With the ANC's call for a constituent assembly and an interim government I cannot help but feel that the goal-posts are being moved. So why are the ANC executives so adamant about sanctions? I put it to your Lordships that for most black people in South Africa life in the townships since 2nd February last year has steadily deteriorated. Perhaps I may repeat a few of the demographic statistics of the country in order to make my point. More than 60 per cent. of the people in South Africa are below the age of 23. In excess of 40 per cent. of the economically active population is unemployed. There is a shortage of 1.2 million housing units in urban areas, mostly among black people. The squatter problem has risen to about 7 million and overcrowding is rife. That, coupled with

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inadequate education and healthcare, has been in part the catalyst behind the tragic escalation in violence in the townships where last year more than 3,500 black people were viciously killed. With a population growth rate of a little more than 2.3 per cent. and negative economic growth rate, that will place increasing pressure on the infrastructure in South Africa.
I believe that the greatest challenge facing the new South Africa is the enhancement of economic growth. Reducing poverty and economic disparities to tolerable levels is the priority. If the growth rate remains at 1 per cent. per year, close to the average since 1980, South Africa will on average be 23 per cent. poorer by the end of the 1990s. The easing of sanctions by the international community would have a profound effect on the creation of new jobs. I take as an example the steel industry. South Africa is one of the world's lowest cost producers and therefore is very competitive in steel production. Two of the three biggest markets in the world—that is North America and the EC—have been closed to South Africa. With access to those major markets the business can be expanded providing the much-needed extra jobs. That, together with the demise in the gold price of late, has meant that many marginal mines have had to be closed resulting in many redundancies.
Calls by the liberation movement in South Africa for an equitable redistribution of economic wealth must therefore be coupled with economic growth. All too often I hear the call for distribution through growth. That is a recipe for disaster. There must be distribution and growth. If there is no economic growth redistribution will only increase racial and other tensions without ensuring that the living standards of the whole population continue to rise.
My real fear for South Africa is that the aspirations of the so-called emancipated are far higher than any government—be it PAC, ANC or nationalist party—could possibly achieve. It is noteworthy that the South African Government are directing more of the state budget towards social services. Last year that amounted to 26 billion rand. From just over 30 per cent. of total state spending in 1985–86, the comparable figure is now 40 per cent. In addition, two development funds have been established for extra spending on social infrastructure needs. Those funds have been complemented recently by additional moneys from the business community within South Africa.
I welcome the most recent and successful visit of Her Majesty's Government's development Minister, Mrs. Lynda Chalker, to Southern Africa. Her constructive dialogue with the ANC and other political parties as well as Her Majesty's increased contribution to development aid in the region are most necessary. Obviously I welcome also the recent meeting between Chief Buthelezi and Nelson Mandela. We all hope that this will be the start of a cessation in the violence of the townships. However, I feel that those meetings must be on a regular basis and
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there will need to be a joint commitment of all parties—not just political parties—for there to be a continued stability in the townships.
On the issue of sanctions, the release of political prisoners and the return of exiles have been quoted as preconditions to the easing of international sanctions. The recent accord between State President de Klerk and Nelson Mandela last week on activities related to armed action should expedite the release of the remaining political prisoners. It is likely that an accord on exiles will soon be reached. With the easing of sanctions, South Africa's export trade will improve considerably, thus enhancing much needed economic growth. The removal of financial sanctions, allowing South Africa to obtain foreign loans, is also integral to the growth programme.
Clearly, even if sanctions were to be lifted now, it is unlikely that international investors would invest in the country until there is stability both in the labour markets and the townships and until an economic policy is agreed clarifying the issues of nationalisation and repatriation of dividends.
Disinvestment has led to irreparable damage in South Africa. I believe that few of the companies that were forced to leave will ever return. On a rather bleak note, I believe also that should international sanctions not be eased, there is a very real risk that the extreme Right Wing may destabilise the reform programme in the country. Only last week I visited Armscor and was astounded to find that South Africa is one of the largest arms-producing nations in the world. We all know of the presence of Right Wing elements in the police force and army. I do not for one moment say that there is a risk of a military dictatorship but there is always a risk that, should the international community refuse to ease sanctions, the Right Wing may lose patience with State President de Klerk.
One of the greatest challenges facing the erstwhile liberation forces in South Africa is to transform themselves from resistance movements to effective party political machines. The debilitating effects of decades of apartheid-driven disempowerment of popular mass-based structures, such as the ANC, are only now starting to become clear. Far from being well structured and efficient political machines, the liberation movements are suffering severe structural, leadership and infrastructural shortages. That is hardly surprising.
Having said that, I am extremely optimistic about the potential of a new democratic South Africa. I am confident that a constitution agreeable to all political parties will be attained. Compromise and co-operation are needed. With a well established infrastructure, South Africa will play a vital role in the uplifting of the Southern African region.
In summary, what is needed is an all-party agreement involving trade unions and business and political organisations on the question of a post-apartheid investor code which will jointly promote economic growth. For these reasons, I fully support the policy of Her Majesty's Government towards the easing of sanctions in recognition of the reform programme.
8.35 p.m.
Lord Pitt of Hampstead: My Lords, I too am grateful to my noble friend Lord Hatch for giving us the opportunity to debate this subject this evening. I want to congratulate the noble Lord, Lord Acton, on his maiden speech which was first class.
I am glad that I am speaking at this stage because the first two speakers are banned persons in the South African setting and therefore illustrate the political problems of South Africa and the reasons that it was necessary to impose sanctions. The third speaker, the noble Lord, Lord St. John, gave us the economic and social case for removing sanctions. In effect, we must balance the two sides.
I have here the Commonwealth Accord on Southern Africa. That called on the South African Government to take five specific steps: to declare that the system of apartheid will be dismantled, and specific and meaningful action be taken in fulfilment of that intent; to terminate the existing state of emergency; to release immediately and unconditionally Nelson Mandela and all others imprisoned and detained for their opposition to apartheid; to establish political freedom and specifically lift the existing ban on the African National Congress and other political parties; and to initiate, in the context of a suspension of violence on all sides, a process of dialogue across lines of colour, politics and religion with a view to establishing a non-racial and representative government.
What we need to do—and I hope that the Government's criteria will be based on this—is to decide to what extent the South African Government have achieved those objectives and therefore whether it is now time to lift sanctions. It is fair to say that when the group areas Act, the population registration Act and the Land Acts have been repealed, and when the negotiations between the government and the other elected organisations—the ANC and other political organisations—have started, then the South African Government will have met those conditions.
Therefore, I suggest a programme. Nothing whatever must be done until those Acts have been repealed. However, when they are repealed, certain sanctions should be lifted. I agree with the noble Lord, Lord Acton, that the first and easiest action to take is as regards the sporting links. That measure is the easiest to monitor and to use in order to influence what goes on. The conditions can be laid down that the ban on any sports links with South Africa will be based on the South African sport being non-racial. Therefore when South African sport is non-racial, a ban on it can be lifted. That would be a good first step when those Acts have been repealed. There are others, such as cultural bans; those can be easily monitored and should therefore be lifted at the same time.
The important next stage is when financial sanctions and the ban on investment are lifted. We cannot wait until South Africa is a democratic government before lifting financial sanctions. Financiers invest where they believe there is opportunity for a good return. It is easy to continue sanctions for too long. When the democratic government is elected the habit of not investing in
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South Africa may be too strong to be changed. There is a balance to be found and one needs to find it. My own view is that we should say that when the dialogue is taking place, if the members around the negotiating table agree among themselves that we should lift those sanctions, then they should be lifted.
That is my programme: that sports and cultural sanctions should be lifted when the group areas Act, the Land Acts and the population registration Act have been repealed. The other sanctions, particularly the financial ones—the arms embargo and so forth can wait, I do not believe that there is any need to worry in that regard—should be lifted when those people taking part in the negotiations agree that it is time to do so. What is more, we should indicate that that is the programme. In other words, we state that the sporting and cultural bans will be lifted when those Acts have been repealed. We state that when we are asked to lift the financial sanctions by those negotiating the new situation in the country, we shall take steps to lift them.
I regard that as the correct programme. In the meantime, we do not need to wait for the removal of sanctions to take certain actions. The most important matter at this moment is for the Commonwealth to provide a programme of education and training which would enable the disadvantaged people in South Africa to be able, when the time comes, to take advantage of the new opportunities. That is something that the Government can emphasise at Commonwealth meetings. Unfortunately, the Government have played their cards very badly on this issue in terms of the Commonwealth, and may not have the influence that they should have in the matter. However, that ought to be attempted. I am certain that there are sufficient places of learning in all the Commonwealth countries to absorb the large number of intelligent and able black South Africans so that they are ready and able to take over when the situation arises. The situation could be dealt with in that way, keeping in reserve the arms embargo and so forth. There may well be other actions that we need to take, but we need to find the balance.
I end as I began. We need a balance. We need to indicate that as the political situation improves, we are prepared to remove some of the barriers. However, the situation must improve before we do that. We also need to show that we are willing to help in the development of South Africa so that it can play its full part in the life of the community of nations.
8.46 p.m.
Lord Monson: My Lords, I congratulate my noble friend Lord Acton on a splendid and well-balanced maiden speech, the more so given that an inevitably nerve-racking occasion becomes more fraught the longer it is postponed to a late and uncertain hour. It was also pleasing to hear from my noble friend Lord St. John with his extremely up-to-date—one might almost say "hot off the presses"—analysis of the situation on the ground in South Africa at this moment.
Given the lateness of the hour I shall not take issue with the noble Lord, Lord Hatch, on a number of

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points, which I should dearly like to do at some future date. However, I agree that he is correct in pointing out that apartheid to a large extent merely codified in an obsessive bureaucratic form what was already existing long-standing practice. He is right in pointing out that the Land Acts are 78 years old and persisted throughout the time of the British Empire and the much-revered General Smuts. Therefore not every ill in South Africa can be laid at the feet of the National Party.
Now to sanctions. I shall not mention sports sanctions: frankly, spectator sports are something I can take or leave. I find it difficult to put myself in the position of someone who would change his political allegiance in order to watch a rugby football match. However economic sanctions, in contrast to a voluntary boycott—to which no one could object—are a decidedly hostile form of action, falling only just short of war. From the point of view of consistent abstract principle I ask why sanctions are continuing to be applied to South Africa at this time, when so much has improved, while not being applied to the numerous other countries whose governments we disapprove of and whose current human rights position is far worse than that pertaining in South Africa.
It cannot be due to the absence of a true universal-suffrage multi-party democracy governed by the rule of law. If that were so more than half the member states of the United Nations would have sanctions applied against them. In Hong Kong we are at the moment deliberately retarding the introduction of true democracy at the insistence of the communist Chinese. It cannot be due to disparities of wealth, which are as great or greater in many African, Asian and Latin American countries. It cannot be due to the tiny degree of residual official discrimination. There is one Commonwealth country which officially discriminates against its Chinese minority and another which officially discriminates against its Indian majority.
It cannot be due to residual racial classification. Her Majesty's Government recently made it compulsory to classify oneself by race in the forthcoming census. Indeed it will be a criminal offence to list one's race incorrectly.
It cannot be due to the fact that South Africa—not recently but within the past five years or so—sent its armed forces into neighbouring countries in hot pursuit of guerrillas, sometimes killing innocent civilians in the process. After all, Israel does this the entire time, and bombs Arab villages as well on the supposition that Arab guerrillas are hiding in the villages, without falling foul of sanctions. It cannot be due to the belief that matters are remorselessly getting worse for the black population of South Africa because precisely the reverse is true.
The first time I went to South Africa was in 1965 in the course of a long journey throughout southern, central and part of east Africa. At that time the position of the black population was quite appalling. They were poor, although admittedly not quite as poor as in most neighbouring countries, badly dressed, sullen and suspicious, with good reason.
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Wage disparities were enormous; there was grossly unequal pay for equal work, particularly in state industries; it was not so bad in private enterprises.
Apartheid penetrated into every nook and cranny of everyday life. One might be taking a walk in a large forest remote from anywhere and suddenly come across a clearing with a bench and table and a notice saying in English and Afrikaans: "Picnic place. Whites only". Needless to say, there were no corresponding picnic places for people of other races. It was a breath of fresh air to get out into Rhodesia, Angola, Mozambique and Kenya where people were perhaps slightly poorer but certainly freer and much more cheerful. Yet at that time sanctions were minimal. Indeed I understand that Mr. Denis Healey was actively engaged in organising the selling of arms to South Africa.
When, somewhat hesitantly in view of my previous experience, I returned to South Africa 20 years later the situation was totally transformed. Africans were cheerful, well-dressed, affluent, self-confident, and their real standard of living had risen by leaps and bounds. A lot of apartheid had disappeared officially, and what still remained officially was largely disregarded in practice. Yet sanctions seemed to be becoming more rigorous the more things eased up, which seemed totally illogical and wrong.
The continuation of sanctions cannot be justified on the grounds that millions of people either have escaped the country, as from Afghanistan, or would like to have escaped the country, as from Eastern Europe prior to the demolition of the Berlin Wall. Although there are said to be 40,000 ANC exiles, against that there are 1.6 million black Africans who have come of their own free will to live and work in South Africa. In other words 40 times as many want to come in as want to leave. Contrast that with communist countries, with Haiti and other countries where precisely the reverse situation applies. Indeed, the figures there are probably 1,000 wanting to leave for every one who wants to enter.
Anyone who opposes double standards—and I am sure that all of your Lordships oppose them—is forced to the conclusion that continuing sanctions have no basis in abstract morality. What other reasons can there be for maintaining them? There is horse trading, there are considerations of domestic electoral advantage and considerations of trade advantage. It appears that South African coal is becoming too competitive with Australian coal for the likings of some Australians.
In the case of the United States there is an additional consideration. When I was periodically in the United States in the 1940s and the early part of the 1950s, there was far more discrimination in many American cities, including the capital city of the United States, Washington DC, than there was in Johannesburg, Cape Town and Durban in the latter half of the 1980s, and with far less excuse since American whites were never seriously in danger of being numerically overwhelmed as are South African whites. I believe that for Americans the maintaining of sanctions is a form of atonement for their past

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misdeeds. South Africa plays the role of a useful sacrificial goat. I can say this, being part American myself.
I suppose that the main reason for upholding sanctions is two-fold. The first is a genuine misreading of the current situation, which is understandable in people who have not set foot in the place recently. The second is the supposition that, even if there is no moral basis for sanctions, their maintenance is effective from the purely practical point of view of securing a peaceful future for South Africa. However, such notable longstanding opponents of apartheid as Mrs. Helen Suzman, Chief Buthulezi and Mr. Gavin Reilly of Anglo-American, think quite the opposite. I suggest that their combined economic expertise is greater than that of the ANC leadership.
It is far too easily assumed—and here I think I may have to disagree with my noble friend Lord St John—that the South African economy is a crock of gold or a milch-cow to be plundered without fear of medium or long-term consequences. In fact, the South African economy faces a great many problems. With the gold price at under 370 dollars per ounce—and it looks as if it will stay there —25 per cent. of the gold mines are running at a loss. Several million people are dependent on employment in the gold mines.
In my view, although others may disagree, there are very few things that South Africa can manufacture that South East Asia cannot manufacture just as efficiently and probably more cheaply. There is a world surplus in many agricultural products, including, for instance, wine. Many of my South African friends assume that South African wine does not sell well in England because of sanctions—but one can buy South African wine almost anywhere. The point is that it is non-competitive with Australian or Chilean wine on the basis of value for money.
There is a chronic water shortage, which will become more acute as the population grows and as industrialisation proceeds. As has been touched upon by my noble friend Lord St John, there are between 1½ million and 2 million angry, relatively unskilled, relatively poor whites who are terrified of the future, who do not have internationally marketable skills which they can use in other parts of the world as the more educated whites can, and who may resort to violence. Even if they do not resort to violence, it has been said that a general strike of whites could cause South Africa far more economic damage than could a general strike of blacks. Last on my list is the massive population explosion which we all know about and with which it is very difficult to cope.
Then—getting into a rather narrower field—the word "empowerment" is much used by sociologists and others. The end of sanctions would mean more black prosperity, which would lead to more black financial muscle, which in turn would lead to more black political muscle. I think that that answers some of the points of the noble Lord, Lord Hatch. As people used to say crudely in the old days, money talks. When I first went to South Africa the idea of a black consumer boycott was a joke because after
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paying for the essentials of life the blacks had nothing left over with which effectively to boycott anything. Twenty years later it was a very different matter, when black consumer boycotts caused great hardship to many white traders and caused them to revise their political opinions.
I suggest that there are at least 10 unsuccessful multi-cultural countries in this world for every successful one. Indeed, success in this field is only remotely possible in conditions of reasonably full employment and reasonably growing expectations of prosperity. As the noble Lord, Lord St John, said, we have to cope with the revolution of rising expectations. The removal of sanctions is a prerequisite for this, although in the present conditions of world recession almost certainly that will not be enough.
Finally, I should like to put a question to the Minister. If by some misfortune—we hope it will not happen, but who can tell?—a future black or largely black government were to become an oppressive tyranny eroding human rights once again, would sanctions be reimposed by Her Majesty's Government, by the Commonwealth and by the European Community? I do not expect that I shall get a concrete answer to that, but I think it is worth asking the question all the same.
9 p.m.
Baroness Seear: My Lords, to anyone trained, as I was, in the Cambridge history schools, Acton is a hallowed name. The best compliment I can pay to the noble Lord is to say that his speech was one which could have been expected from an Acton. I only add that I hope before very long the noble Lord will recognise the political wisdom of the greatest of the Actons —the first—who sat on these Benches.
The subject today is one of the greatest importance and topicality. My party agrees with many speakers who have spoken this evening that the time is not yet ripe for the abolition of sanctions. We have to wait until the promises have been turned into firm legislation and the legislation is being put into practice. However, we agree with the majority of tonight's speakers that when that time comes, what is required is a gradual step by step elimination of sanctions.
The changes that have to take place in South Africa will not come all at once. They will come stage by stage, and to match those stages there should be the diminution of sanctions. There are a number of reasons why that diminution of sanctions should take place, preferably—though it may not be possible—with the full agreement of all parties in South Africa. But even if that agreement cannot be reached, that step by step process must go on.
It must go on because we must recognise that President de Klerk has been extremely brave and far more successful than many of us dared hope. But he cannot yet be secure. He cannot be sure. So many disastrous reversals take place in politics, as we all know and as we have seen again and again in only the past 12 months. The process may not go ahead in the future as well as it has gone in the past. He needs to

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be able to show results. He needs to be able to show to the no doubt wavering and uncertain members of his own party—let alone the people who have left his party and joined the parties of the extreme right—that he is achieving results which in one way or another will bring benefits to all concerned. The lifting of some sanctions on a step-by-step basis will give him reinforcement and encouragement—the reward for the courageous actions which he has undertaken. It must have been extraordinarily difficult for President de Klerk to pull his party out of the mood and the stance it has occupied and to bring about the reversal of so many of the attitudes that have bedevilled South Africa for so long.
There is another reason why I think we have to use the gradual elimination of sanctions as a tool for getting the results we all want to see in South Africa. We have only to look at the experience of the past few months in the USSR and in Eastern Europe to realise that political change and economic improvement are inevitably interlocking and that political progress will not go ahead unless it is matched by some degree of economic advance. We all know that at the moment the hoped for changes in the USSR are teetering on the brink of collapse because of failure on the economic front. The same may well be true in South Africa. If in that great country there is to be real anti-apartheid, and if there is to be anything like approaching equality of opportunity, let alone equality, there has to be economic progress and success. We have heard some figures which show the enormous demands that will be made on that economy. To raise educational standards and to give the blacks anything like the educational opportunities that they need and which the whites take for granted—that surely is a great basis of any genuine movement towards equality—will alone cost an enormous amount of money. The needed improvements in housing, social security benefits and health, will, as we all know from our own experience, run up enormous bills. If we want to obtain and to maintain political change in South Africa it has to be accompanied at the same time by economic progress. The gradual lifting of sanctions is probably the most effective way immediately in which we can play our part in the improvement of the economic position of the country.
Perhaps first and foremost the country needs trade. No great country can flourish without the opportunity to sell its goods overseas, but sanctions prohibit that. The country also needs loans for the development of new economic ventures. Finally, it needs investment. However, as other noble Lords have said, that investment will not be forthcoming unless would-be or possible investors can see the prospect of economic stability and economic progress in that country. I would claim that the case for a gradual lifting of sanctions, as we see progress on the political front taking place, is a very strong one indeed for those combined political and economic reasons. If we are to avoid a reverse on the political front there must be a strengthening on the economic front. We very much hope that the Government will do all in their power to see that those economic developments move in the right direction.
9.7 p.m.
Lord Cledwyn of Penrhos: My Lords, my noble friend Lord Hatch of Lusby has initiated an important debate and expressed the strong views that we know he holds on the subject. Other noble Lords who know South Africa well have also made interesting contributions to the debate. I am sure that we all appreciated the thoughtful maiden speech made by the noble Lord, Lord Acton, based on his experience of Southern Africa. We hope to hear from him again frequently; that is, if he can manage to get here, given that he lives well to the west of Wales.
Significant changes have taken place since we last debated the problems of South Africa in this House. They have been due to a number of factors, including the continuing and persistent pressure for reform from within the country itself, the effect of sanctions and the pressure of public opinion in the international community and, lastly, the response of a new leader, President F.W. de Klerk, to the crisis facing his country. Like the noble Lord, Lord Acton, when he was elected to succeed President Botha I did not believe that Mr. de Klerk would be the liberal and reforming leader which he has proved to be. In a short period of 12 months, the scene has changed dramatically. I believe it is right that we should join my noble friend Lord Hatch in paying a warm tribute to Mr. de Klerk for the courage and initiative that he has shown.
The release of Mr. Nelson Mandela 12 months ago after his long years of captivity was also an historic event, and the dignified and moderate way in which he has resumed his leadership of the ANC is immensely to his credit; there has been no recrimination, no malice and no talk of vengeance in his public utterances. He is a leader of the highest quality. He and President de Klerk have had meetings in an atmosphere of mutual respect. I believe that they have the qualities to achieve a solution within a reasonable period of time. The objectives of this and other governments should be to encourage and help them to complete the task.
We know that that task will not be easy because there are forces, both radical and conservative, on the extremes of the political spectrum which will conspire and fight to destroy a settlement. Those of us who have been in politics for a long time know how destructive those forces can be. The brutality of clashes between the ANC and Inkatha supported, as has been said, by the police, has shocked everyone. There is deep concern that the police may have intervened on the side of Inkatha. I hope that that is not true. I do not know whether the noble Lord is able to help the House on that issue, but it would be very depressing and upsetting if there were any evidence in favour of that belief. As the noble Lord, Lord Acton, said, many thousands of blacks have died in this violence. There are also the Right-Wing paramilitary groups and the unyielding party of Mr. Andries Treurnicht. We are told that these are not too significant in size or influence, but one hesitates before dismissing them out of hand.

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We must recognise, and sympathise with, the political difficulties facing both leaders. On the one side, Mr. Mandela's ANC, which is crucial to a settlement and which has been faithful to its cause over many years, is not well organised and is blamed—to a large extent unfairly—for a rocketing crime rate: on the other side, Mr. de Klerk is finding it hard to negotiate on the question of the release of political prisoners and the release of exiles.
One thing is clear; namely, that the future depends on a continuing mutual trust between the two leaders and also a better relationship between Mr. Mandela and Chief Buthulezi. But we must not allow these very real obstacles to cloud the progress which has been made. In their speeches noble Lords have dealt with the president's historic statement on 1st February committing himself and his party to repeal the three remaining pillars of apartheid legislation—the Land Acts, the Group Areas Act and, most important of all, the Population Registration Act, the cornerstone of all statutory racial discrimination.
I was glad to note the optimistic tone of the speech made by the noble Lord, Lord St. John of Bletso. Like him, I think that Mr. de Klerk made a very impressive speech to the South African Parliament. He announced the release of a,
"manifesto for the new South Africa",
designed to unite the whole country behind,
"a common set of values and pursue the goals of peace, prosperity, progress and democracy".
He then added that,
"the basis of a new South Africa should be justice".
It was at that point in the proceedings that the Conservative Members of Parliament marched out of the Chamber. They did so because the effect of the scrapping of the legislation will be very far reaching. For example, it will mean the end of the special legal privilege granted to whites to own 87 per cent. of the country's farmland without threat from black purchasers.
The House knows that the world reaction to that speech was favourable. It was in fact welcomed by the African National Congress, although it believes that sanctions should remain in force until real democracy has been established in South Africa. Of course, that is the nub of my noble friend's Question. Will the repeal of the legislation be sufficient to justify the abolition of sanctions, or should they be retained until the further crucial step is taken? My noble friend was quite right to say that returning to the status quo of 1950 is not enough. I believe that President de Klerk understands that perfectly well.
As noble Lords know, that issue has been the subject of debate in a number of organisations over the past few weeks. The European Community at its meeting on 2nd February made a positive response, stating that sanctions will be removed only when reforms are formally tabled and that:
"these reforms opened the path towards the complete and irreversible abolition of apartheid and the establishment of a united, non racial and democratic South Africa".
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The African front line states and the OAU took a much more cautious line at their meeting on 10th February, saying that sanctions should be lifted only when there is a clear mechanism to transfer power to a democratic order. The ANC took a similar decision. Finally, on Saturday last, the Commonwealth Committee of Foreign Ministers concluded that sanctions should be loosened only after the implementation of reforms, and that it was not yet the time to relax economic sanctions. We noted that this country was not represented on that committee at the time.
The scene is therefore clear: a general welcome for President de Klerk's proposals, and, as my noble friend Lord Pitt suggested, a desire to see them on the statute book before sanctions are modified or lifted and, further down the road, a refusal to concede on sanctions until a democratic system, based on one man, one vote regardless of colour or creed is clearly in the process of implementation.
I say again that I admire President de Klerk and welcome his initiatives, but I too believe that it would be a mistake to abandon sanctions at this moment. They were reviewed here in London on Saturday, and they should continue to be reviewed as matters develop in South Africa, but Mr. de Klerk himself will not be helped in his efforts if pressure for the one essential reform is seen to slacken. Furthermore, I hope that the Minister will agree that it would be wrong for this country to take unilateral action. We must move with our friends and allies and take particular note of the views of our Commonwealth colleagues. Later this year, the Commonwealth summit will be held in Harare, and no doubt this subject will once again top the agenda. Our policy there must be clear, reasonable and practical, and in framing that policy we must not forget that this country has been fighting for democracy for more centuries than any other country. We must hold firmly to that principle in Harare.
It is also a time for international statesmanship. Both Nelson Mandela and Mr. de Klerk need our help and encouragement. I have great admiration for Donald Woods who recently returned to South Africa after 12 years of exile. In an article in the Observer, he describes the changes which have taken place during his absence and what he calls the,
"massive sea change in white attitudes".
He takes the view that the new constitutional formula cannot be long delayed, as delay in the process harms the National Party and the ANC equally.
The following words by Mr. Woods must be taken seriously:
"The longer they take to achieve a settlement, the more their support will erode the more extreme groups, and both de Klerk and Mandela are aware of that danger".
We cannot expect to see the economic growth referred to by the noble Lord, Lord St.John of Bletso, and the noble Baroness, Lady Seear, unless there is political stability in South Africa. In their different roles, both men deserve our constructive support, for the hope of

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achieving a stable society in South Africa depends upon their ability to reach agreement over the next few years.
9.18 p.m.
Lord Reay: My Lords, I am sure that we are all grateful to the noble Lord, Lord Hatch of Lusby, for giving us the opportunity to discuss South Africa. It is a country where a remarkable process of reform has gathered momentum since President de Klerk came to power in September 1989. I have listened to the debate with great interest. I shall try to deal with the points that have been raised, but where I fail to do so, I shall write to noble Lords. The noble Lord, Lord Hatch, said that he hoped that I would depart from my brief. He can of course live in hope, but I am here to speak for the Government and I welcome the opportunity to set out briefly the Government's approach and their record on the question of sanctions.
President de Klerk began in 1989 to restore most of the conditions of normal political life. In 1990, he unbanned political parties, lifted press restrictions, ended the state of emergency and released Nelson Mandela and other prominent political prisoners. He removed the legislative basis of "petty apartheid". He and the ANC agreed on the phased release of political prisoners and return of exiles while the ANC suspended its "armed struggle". All that in little over one year.
Then this year, on 1st February, President de Klerk took another historic step forward: he announced the repeal of legislation determining land ownership and residence on racial lines. He plans also to abolish the Population Registration Act under which everyone in South Africa has been classified according to race. These steps will mean an end to statutory racial discrimination in South Africa. We hope that, with other measures, they will pave the way to early negotiations towards a constitutional settlement.
The latest agreement between the South African Government and the ANC announced in Capetown on 15th February is welcome news. It provides for a sensible implementation of the ANC's undertaking last year to suspend armed action. It recognises the ANC's right to demonstrate peacefully in support of its views. If properly implemented, the agreement will greatly facilitate progress towards negotiations.
At the same time, the South African Government announced that they had released 262 political prisoners so far and that examination of a further 760 cases was at an advanced stage. Over 2,000 exiles had already received indemnity enabling them to return to South Africa. The two sides are now closer than ever before to an agreement on the removal of all obstacles to negotiations.
Our policy towards South Africa—shared by many others, of course—has always been based on an abhorrence of apartheid. It was morally wrong; it did not work; and the sooner all traces of it are swept away, the better. So our aim has been to encourage a peaceful transition to a pluralist, non-racial, democratic and economically successful South Africa.
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I am grateful to the noble Lord, Lord Acton, for recalling in his exceptional maiden speech his own direct personal experience of apartheid. We are all here tonight because we agree that apartheid must go. His voice added authority to our arguments.
To this end, we have consistently maintained a policy of pressure and encouragement. We agreed to a series of international measures in the United Nations, the Commonwealth and the European Community. But we also used our contacts with the South African Government to persuade them to adopt reforms. We opposed all-out economic sanctions on two grounds: first, that they would impoverish the very people we wanted to help, the black community; and secondly, that they would entrench white opposition to reform.
We believe that our consistent policy has paid off. We have retained influence both with the National Party government and with the black political groups, notably the African National Congress and the Inkatha Freedom Party. I do not want to exaggerate our role, but we have been in a position to work for the good of South Africa as well as for the good of our own interests. I should say in passing that our interests in South Africa remain considerable. There are well over 300,000 British passport holders in South Africa. Our exports to South Africa increased to £1,000 million last year and our invisible earnings were also well over £1,000 million. We need to play a substantial part in encouraging the new South Africa to emerge. We hope that we are well placed to do so.
As part and parcel of this approach, our policy since President de Klerk began his remarkable reform process has been to use the lifting of sanctions as a means of encouraging further progress. I agree very much with what the noble Lord, Lord Acton, said. There is scope for the repeal of some sanctions now and thereafter there should be a step by step approach.
We lifted the voluntary measure discouraging cultural and scientific agreements in response to President de Klerk's 1990 speech. We responded to the release of Nelson Mandela a year ago by lifting the voluntary new investment ban and the voluntary Commonwealth ban on the promotion of tourism. We persuaded the European Community also to begin the process by lifting the ban on cultural and scientific agreements at the same time.
Lord Monson: My Lords, I am sorry to interrupt the noble Lord. I know that he is not responsible for inventing the phrase, but can he tell me what Her Majesty's Government mean by "voluntary ban"? There could be a voluntary boycott as opposed to a boycott enforced by intimidation. However, one cannot have a voluntary ban. A ban is either compulsory or it is nothing.
Lord Reay: My Lords, I believe that the ban was voluntary in the sense that there was no legal obligation behind it. Then, in June last year, the European Council agreed at Dublin that there should be a gradual relaxation of restrictive measures in response to further progress towards reform. The European Council accordingly decided at Rome in December to lift the new investment ban it had agreed

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in 1986. Heads of Government also agreed then to respond to further reforms by lifting the other 1986 measures. Now that President de Klerk has announced repeal of the Group Areas and Land Acts, the Community is to respond to the tabling of the repeal legislation by lifting the other two 1986 measures which cover iron and steel and gold coins.
The European Council lifted the investment ban in December to encourage further reforms. But the Community also wanted thereby to help combat unemployment and improve the economic and social situation in South Africa. Future relaxations of restrictive measures should, we think, take account of their probable effect on the South African economy. Financial and economic sanctions have, with other factors, curbed South Africa's economic growth in recent years. Lifting them is, in our view, now essential: without growth, the people of South Africa may not perceive the benefits of the transition to non-racial democracy. The noble Lord, Lord St. John of Bletso, has arrived hotfoot from Africa and has radiated across the Chamber the reflection of the African sun. He put his finger on the fact that there needs to be economic growth. The noble Baroness, Lady Seear, also reflected the view that political reform requires economic underpinning.
As Nelson Mandela recently argued, peace and stability will depend on visible social and economic progress for which foreign investment will be essential. This is why the Government are in close touch with the United States Government to explore opportunities for returning South Africa to a normal commercial and financial environment. We are also urging the Commonwealth to take account of President de Klerk's remarkable achievements by agreeing to begin lifting sanctions. Commonwealth Heads of Government agreed in 1989 at Kuala Lumpur that the Commonwealth should investigate how the international financial institutions could mobilise resources for South Africa once it has achieved clear and irreversible change. Now is the time for that study to be completed.
President de Klerk has set an irreversible reform process in motion. In our view it is no longer necessary to maintain all sanctions. It would be too late to wait until the new constitution is in place. The population is growing at nearly 1 million a year. Some 320,000 extra school places are needed each year. To deny South Africa economic growth would leave any future South African Government with an even more daunting task.
I should like to turn now to the question of sporting links with South Africa. In the Commonwealth, we stand by the Gleneagles Agreement of 1977. The organisation of sport is a matter for non-governmental bodies and for individuals. We have accordingly discouraged sporting contacts. But now some sports' governing bodies are racially integrated in South Africa. More will follow. My right honourable friend the Prime Minister wholeheartedly welcomed the Australian Prime Minister's suggestion that, where integration has been achieved and
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recognised by international sports bodies, it no longer makes sense to apply the Gleneagles boycott. We will accordingly encourage our Commonwealth partners—and international and national sports bodies—to catch up with the remarkable progress South Africa is making. It would be absurd to continue to behave as if nothing had happened.
Sadly, the Commonwealth Committee of Foreign Ministers which met on 16th February was unable to begin lifting sanctions immediately. The Foreign Ministers put off that decision until after 30th April. They in fact went only a little further than the wait-and-see approach adopted by the Organisation of African Unity meeting in Harare on 7th February.
The UK is not a member of the Committee of Foreign Ministers. We had nonetheless hoped that the committee would adopt our approach which will benefit the black community in South Africa. We will continue to argue for early action to begin lifting Commonwealth measures, especially in trade, finance and sport. We hope for progress well before Commonwealth Heads of Government meet in Harare in October.
I wish to respond to some of the points that were raised during the course of the debate. The noble Lord, Lord Hatch, asserted that Africans have no political rights. At present the Africans do not have the vote. However, they enjoy the right of assembly; the right to demonstrate to express their views, and the right to join or form political parties.
The noble Lord also asked what criteria we would use to determine whether democracy had arrived. The details of the new constitution and of the method of its adoption are matters for all South Africans to decide. We welcome President de Klerk's proposal of a Bill of rights which he made on 1st February. The adoption of such an instrument would be a major sign that South Africa had embraced the principles of democracy.
The details of the new constitution would be a matter for the South Africans themselves to decide through free negotiations in an open and peaceful political climate. However, we do not see how in the modern world one can have stability except where all adults have the vote. Hence we were glad to see in President de Klerk's speech of 1st February a commitment to universal adult suffrage.
The noble Lord, Lord Pitt, quoted from the report of the Eminent Persons Group of the Commonwealth. We welcomed the report and we are grateful for having been reminded of it.
Lord Pitt of Hampstead: My Lords, I did not quote the Eminent Persons Group but the Commonwealth accord on South Africa.
Lord Reay: My Lords, with our European Community partners we have begun to dismantle sanctions before the repeal of all the apartheid laws, but in other respects we share the emphasis placed by the noble Lord on early action on sport and on financial sanctions.
The noble Lord, Lord Monson, asked me a very hypothetical question concerning what would happen

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if a black government became a tyranny and whether sanctions would be reimposed. No political system is immune from change, sometimes for the worse. I could not be drawn into speaking on behalf of the whole of the Commonwealth or the European Community, as he invited me to do, particularly on such a hypothetical matter. We prefer to look forward to the very real hopes that many share for the establishment of freedom in South Africa.
The noble Lord the Leader of the Opposition asked me if there was police bias in favour of Inkatha. Individual policemen may be at fault, but we do not believe that there has been any officially supported campaign. Prime responsibility for the maintenance of law and order rests with the South African Government; but all parties must play their part in helping to end violence between their supporters. With other noble Lords we welcome the ANC-Inkatha agreement of 29th January.
I can tell the noble Lord that we do not propose to abandon sanctions now. Our policy, with our European Community partners, is to promote change by gradual action. We hope that the Commonwealth will subscribe to that principle and act without waiting for the Harare meeting of heads of government. I can
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assure the noble Lord that we shall maintain our international commitment scrupulously, and we are proud of our record.
I hope that I have said enough about the way forward on economic and financial sanctions and in the Gleneagles sphere. I have outlined our policy of a measured response. That does not mean that all sanctions will go quickly. As the noble Lord, Lord Hatch of Lusby, quite rightly said, there is no question of reviewing the arms embargo or associated military sanctions until there is a fully democratic constitution in South Africa.
Before I end, I should like to remind your Lordships that we have taken positive as well as restrictive measures to mitigate the effects of apartheid and to prepare the generation that we hope will inherit a post-apartheid South Africa. Our bilateral aid currently amounts to more than £8 million annually and we make a further £4 million annual contribution to the European Community programme for the black communities in South Africa. We shall continue to take a series of measured and balanced steps to contribute to a peaceful solution in South Africa.
House adjourned at twenty-six minutes before ten o'clock.