Mr Don Foster (Bath, Liberal Democrat)

Mr Richard Page (South West Hertfordshire, Conservative)

The Minister will remember that on Second Reading a number of hon. Members asked for a Committee stage, as it would be a golden opportunity for him to explain how this part of the purchase of the Tote would unravel and give us a clue as to the Government's thinking.

I support the sentiments behind the amendment moved by the hon. Member for Bath (Mr. Foster), but some aspects of its practicalities worry me, such as the method of valuation. We should consider the complexities and difficulties that lie behind the calculation of such a valuation. The hon. Gentleman refers to an ''independent'' valuation: any valuer would want to know the ground rules before moving into a valuation.

In relation to the process of valuation, the history of the Tote should be borne in mind. We know that the Tote has not given the Government any money directly in the form of a licence fee over the past 76 years, but the Government in turn have given the Tote an effective monopoly for 76 years and have enabled a substantial pool betting system to emerge. The Government could have charged a licence over the years if they had changed the law, but, particularly over the past 10 years, the Tote has put a sizeable amount into racing—about £100 million—which could almost be regarded as a licence fee. If the Tote had not put that money into racing, racing would have suffered. The Government's substantial revenues from various aspects relating to racing, particularly betting, would have been diminished, because extra support would have to have gone into racing. The Government should take that into account.

With the acquisition of the Tote, the Government will be taking it over, but, although the Tote is owned by itself, it has a notional value at present. The argument could follow that this value is greater than any value that the racing trust would have to pay the Government, because the racing trust will pay a licence fee to the Government. One could almost work out that the Government should give the racing trust money to take over the Tote, because it will pay a licence fee. I do not advance that too seriously, as I cannot imagine the Chancellor of the Exchequer accepting such a fair and honest evaluation of the situation. My point is that it is very difficult to reach an independent valuation on the Tote.

The hon. Member for Bath touched on the matter. We have the information that a seven-year licence will be granted. I sincerely hope that, when my hon. Friend the Member for South-East Cambridgeshire introduces the appropriate amendments, the Minister will be prepared to accept that the seven-year licence should be included in the Bill. I suggest that we should work backwards when we come to the so-called independent valuation, because one cannot work out the capital value until the size of the licence fee is known, there is an agreement on the amount of money that will go into racing and it is acknowledged that, during the seven years, the entire operation will have to wash its face. One could keep arguing about the various costs that must be taken into account.

This is a golden opportunity for the Minister to take advantage of a compliant and supportive Committee, given all that we are trying to achieve. I hope that when he responds he will explain the basis on which the valuation will be calculated so that we can continue to work and move forward with confidence in him.

Mr James Paice (South East Cambridgeshire, Conservative)

I largely agree with every word that my hon. Friend and the hon. Member for Bath said. I am in a slightly difficult position, because I, too, considered tabling an amendment in similar vein but was dissuaded from doing so by the Tote itself, which felt that it might not be helpful to include such detail in the Bill. Nevertheless, as my hon. Friend said, this is an opportunity to explore the mechanism by which the Tote will be valued and, at least, to get a commitment from the Minister on 50 per cent. The hon. Member for Bath read out some of the Minister's winding-up speech on Second Reading. The Minister did not go quite as far as specifying 50 per cent. He talked about joint ownership and such things but did not make a commitment, although one could read one into his comments. He is smiling, which leads me to assume that I am right in saying that he fought shy of a final commitment, which I believe is necessary.

Mr Don Foster (Bath, Liberal Democrat)

I apologise for interrupting the hon. Gentleman so early in his speech, but I ask him to reflect on what he just said. I do not know whether he would join me in not wanting the Minister to specify a figure of 50 per cent., other than to say that it was the maximum. Surely the Government would want to have negotiations on some of the issues raised by the hon. Gentleman. That is covered by my amendment.

Mr James Paice (South East Cambridgeshire, Conservative)

I fully recognise what the hon. Gentleman is saying. The right term is probably ''a maximum of 50 per cent.'' The figure that has been used throughout the debates during the past 18 months has been 50 per cent., although we have yet to put it into any context or add substance to it, whether it be a maximum of 50 per cent. or 50 per cent.

My hon. Friend said that perhaps the taxpayer should pay the Tote. I believe that that was the way he put it. That might be stretching the point ever so slightly, but the important point is that the taxpayer has never put any money into the Tote itself or even stood by its borrowings. Therefore, there is an intellectual argument that the taxpayer has no right to benefit from the sale of the Tote, other than from the licence fee, which I will come to later, because the taxpayer has never had any financial responsibility for the Tote throughout its existence. Indeed, as I said on Second Reading, the hon. Member for Knowsley, North and Sefton, East (Mr. Howarth) stated clearly in a written answer, when he was the Minister responsible for such matters, that the Tote's assets basically belong to the Tote board, and that the Tote board belongs to no one. That makes it clear that the taxpayer is not viewed as owning it.

In 1999. the British Horseracing Board obtained expert legal advice from Sydney Ketteridge and Margaret Gray, who argued that it was fallacious for the Government to have a share of the money for the Tote. They went on to say that

''the monopoly was vested in a statutory Board in the public interest. The proper control of betting and racing was recognised as a benefit to the nation. The Tote itself derives no benefit from the monopoly rights and cannot sell these rights to a third party for commercial value.''

It is doubtful whether the Government can support their claim to a share in the value of the Tote.

I am sufficiently realistic to understand that the Government will probably insist on a small pound of flesh for the Tote, but there is a strong intellectual argument that they should not receive any money other than the licence fee. What concerns me—this a point that I shall repeat on several occasions during our proceedings—is that none of us can foresee the future. The Minister and the Secretary of State have been completely open and genuine in their expressed intentions about the various aspects of the disposal of the Tote—I do not detract from them at all—and we all know that. Although it is commonplace in Committee to say that the Minister may not be around in few months and that we will have somebody else, that is a reality. We do not know what the future holds.

As I said on Second Reading, it is perfectly conceivable that the situation may have changed by the time the Bill has completed its passage, particularly if, in light of the Office of Fair Trading investigations, decisions are taken to delay some of the actions because the Bill is all-enabling. Therefore, there is an argument for saying that we need a commitment about the mechanism by which the Tote will be valued and a sale price agreed. Of course there are those, the bookmakers in particular, who contend that the value of the Tote is considerably in excess of the sums that have been talked about as a sale price—anything from £50 million to £150 million has been quoted.

Mr Don Foster (Bath, Liberal Democrat)

More than that.

Mr James Paice (South East Cambridgeshire, Conservative)

As the hon. Gentleman says, the bookmakers are quoting figures of double that or more as their estimate of the value of the Tote. I am pleased that in his amendment the hon. Gentleman made it clear that the 50 per cent. figure would apply only if future operating profits were used to contribute to racing. One of my concerns in having that in the Bill was that a future Minister might decide to sell it to somebody else, such as an existing bookmaker, who would then get the 50 per cent. discount. The hon. Gentleman has covered that possibility and I am glad.

I am sure that the Minister will tell us that the amendment is technically faulty. That is the usual response regardless of whether he wants to accept the overall point. The key point is that we need to know how the Minister intends to have the Tote valued, how he intends to deal with its liabilities—including the pension fund—and whether he accepts that the split between the two interest bodies that own the Tote, which he has already put into Hansard, should be 50:50 or some other balance. Those issues are important.

As the hon. Member for Bath has said, the more that the Tote is forced to borrow to pay for itself, the less it will be able to borrow to invest in its growth. As we shall discuss later, its growth during the period of the licence will be critical to its long-term future and

ability to deliver to racing a substantial income flow once the licence ceases to be exclusive—although we shall seek to prevent that—and there is competition in the pool betting industry, as the Government envisage. It is essential that by that stage the Tote has grown to such a size that it can resist not only that competition but can continue to deliver unto racing the sums of money that it is delivering now or indeed, we hope, considerably more. If it is to do that, it must have the resources to expand, and it will not have those resources if it has had to borrow to pay the Government.

I hope that the Minister can offer us considerable assurances on the points made by the hon. Member for Bath in his amendment.

Mr Richard Caborn (Minister of State (Sport and Tourism), Department for Culture, Media & Sport; Sheffield Central, Labour)

As the hon. Member for Bath said, the Committee gives us a golden opportunity—a golden opportunity to step into reality. First, we have made it clear that we want to sell into a racing trust. Many hon. Members know that discussions have been taking place about getting a fair period of time in which the Tote can consolidate itself and go into the marketplace, and give the punter choice.

Amendment No. 49 tries to evaluate the amount that the successor company will pay, but we should remember that the Government and the Tote say that they do not want that in the Bill. I gave clear assurances on Second Reading and I give them again: an independent valuation will be carried out. There will be, broadly, a 50:50 split of the asset between the taxpayer and the racing industry, because we believe that that is fair.

However, as long as an independent valuation can lead to agreement about the 50:50 split, other aspects must bear greater consideration, such as the length of time over which the payment is made. A series of commercial negotiations is necessary that can determine the survival and development of the Tote. It is far better to leave that to a commercial negotiation, as long as the Government have set out clear parameters, as I am doing now.

It would be naïve to believe that things are not already happening. A dialogue has been taking place for a considerable time between the Tote and the Treasury, so in the real world the Tote is in discussion with the Treasury, the body with which it will negotiate. We have given an absolute commitment that there will be an independent valuation. We have said that, broadly, it will be a 50:50 split, because we think that that is fair to the taxpayer and the punter. But many other aspects are probably more crucial to the Tote and to the way in which it can develop over the seven years—the length of payment, how the debt is raised, how it is paid back and over what period and whether it is back-loaded or front loaded. Many commercial considerations will be necessary. The more politicians keep out of those, the better; and the more they are kept out of the Bill, the better. Therefore, I hope that hon. Members will accept that, by resisting the amendment, we shall be doing the Tote and the Government a favour.

As I said on Second Reading, we must be mindful of the European Union's rules on state aid and understand the point that we have reached on competition. Indeed, we made a manifesto commitment to sell the Tote to a racing trust, and that is what we are doing. We believe that we are living up to our treaty obligations, while retaining the flexibility to get a fair deal for the Tote and put the proceeds into the racing industry. Therefore, I do not believe that the amendment should be included in the Bill, nor that it would be in the Government's best interests to include it.

Mr Don Foster (Bath, Liberal Democrat)

First, I thank the Minister for putting clearly on the record again the Government's intention to sell to a racing trust and for stating again that a 50:50 split is broadly the right way forward because, as he has said many times, he believes that that is fair. I suspect that all members of the Committee are well aware of the discussions that have taken place and no doubt are taking place as we speak. I must say, as gently as I can, that seeking to persuade members of Opposition parties to support him and what he wishes to happen by telling us that we are doing the Government a favour will not endear him to many of us.

Mr Richard Caborn (Minister of State (Sport and Tourism), Department for Culture, Media & Sport; Sheffield Central, Labour)

I have considered a number of Bills over my 20 years in Parliament, and this is the first time that I have been on a Committee in which the official Opposition and the spokesman for the Liberal Democrats have said that they fully agree with the principle of the Bill and want to ensure that it is enacted—probably in a slightly modified form. I thought that we were all of one purpose. In that sense, I was thinking about the ''we factor'': the fact that we all agree that we have to get the Bill through. It is a new experience.

Mr Don Foster (Bath, Liberal Democrat)

If the Minister is so enjoying the togetherness, I look forward to receiving similar emoluments from him for our contribution to the debate so far. I am grateful to him for clearly making commitments. Again, I gently say to him that he suggested that the things that he has just referred to—a roughly 50:50 split, the probability of a racing trust being involved and so on—should not be included in the Bill because there are a number of other important matters. He rightly referred to them: the length of repayment will clearly be important and I mentioned state aid in my contribution. These things will important in respect of the Tote viability. However, I remind the Minister that these issues are not included in my amendment, which carefully covers only those aspects relating to the sale about which the Government have given clear commitments. The amendment deliberately avoids the important additional issues that the Minister has raised.

Mr Richard Page (South West Hertfordshire, Conservative)

As someone who has put a Bill on privatisation through the House of Commons, I am fully aware of the worries in relation to the arguments about state aid. However, is it not rather peculiar for the Minister to worry about that aspect when the Government have given no money to the industry, and

will be receiving money out of it? I cannot see how any aspect of state aid should be applied in this instance.

Mr Don Foster (Bath, Liberal Democrat)

The Minister may wish to intervene to comment on that. I suspect that he would say that some might consider a new body receiving assets potentially at half price and then going into a marketplace would be worth challenging in the European courts. I understand that the Government have already had preliminary discussions with the European Union, and were they to follow the route that they are clearly planning, but not prepared to include in the Bill, we would probably be all right. We might get clear confirmation from the Minister in the stand- part debate. Nevertheless, it appears that he is not yielding. There is not the likelihood of even a postcard to Mrs. Foster, and she will be bitterly disappointed by that. Certainly, many people in the racing industry will be disappointed that the Government are not willing to include in the Bill what they have said that they are clearly going to do.

Mr Richard Caborn (Minister of State (Sport and Tourism), Department for Culture, Media & Sport; Sheffield Central, Labour)

I want to ensure that when the hon. Gentleman writes to Mrs. Foster she has all the facts in front of her. I stress the detail in which the racing trust and our financial adviser, PricewaterhouseCoopers, are doing the preparatory work. A methodology for valuing the business prior to the sale has been established, and broadly agreed with the racing trust adviser. The methodology of valuing the business has been broadly agreed, and therefore I think that we are moving in the right direction. That should assure Mrs. Foster that everyone would get a fair deal.

Mr Don Foster (Bath, Liberal Democrat)

I suspect that if Mrs. Foster were to read the transcripts of the debate—it is extremely unlikely that she will: she has better things to do—that would come as no reassurance to her whatever. The Minister makes my point very effectively; he has dug himself into a hole. He has just told the Committee that we are well on the way to having agreement about moving to a racing trust that will be 50:50, but we appear to be in agreement about some of the other extremely complicated, important issues. We could put the whole lot into the Bill since we appear to be in such agreement.

For some bizarre reason, which has not manifested itself in the Minister's contribution, the Government are not prepared to include those points in the Bill. I was going to say that I know when I am flogging a dead horse, but in the context of our deliberations I thought that that would be inappropriate. I know when I am trespassing on the Committee's valuable time and I know also when it is time to give up, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Mr Richard Caborn (Minister of State (Sport and Tourism), Department for Culture, Media & Sport; Sheffield Central, Labour)

The clause gives power to the Secretary of State to abolish the Tote on a given date, which provides the flexibility required to ensure that the Tote is abolished only when everything is in place for a speedy transfer of its assets to the new owner. Consequently, this measure will be implemented as close as possible to that point of sale.

Mr Don Foster (Bath, Liberal Democrat)

There are a couple of points I would like to raise with the Minister. He has said that debates are now ongoing, and he said a minute ago that discussions on the methodology were well advanced. I wonder whether the Minister would tell us the Government's view of the current pension fund deficit in relation to that evaluation. I know that it is subject to formal review, but I understand that there is a pension fund deficit of about £4 million. The question is whether that will be covered 100 per cent. by the Government, or will it be treated as a negative asset in the calculation? I would be grateful to hear what the Government's intentions are in that respect.

Mr Richard Caborn (Minister of State (Sport and Tourism), Department for Culture, Media & Sport; Sheffield Central, Labour)

That will be part of the valuation, and whatever deficit exists should be covered in the negotiations on the price of the Tote.

Mr Don Foster (Bath, Liberal Democrat)

No, the Minister is not answering the question. It will obviously be taken into account in the valuation—that is pretty obvious. My question was whether it will be subject to the 50:50 rule, or whatever the precise percentage will be. Do the Government believe that the new body responsible for the Tote should have 50 per cent. of responsibility for that debt, or, given that the debt has been accrued under a different form of ownership, should 100 per cent. be paid for by the Government?

Mr Richard Caborn (Minister of State (Sport and Tourism), Department for Culture, Media & Sport; Sheffield Central, Labour)

If it is part of the evaluation, the answer would be yes, but in the real world it will form part of the negotiation. That is why it would be wrong to tie the matter down as tightly as the amendments specify. It is also why I hope that there can be an agreement on that issue, and others. That is part of the negotiations, and the discussions about the valuation of the Tote.

Question put and agreed to.

Clause 1 ordered to stand part of the Bill.