§ Mr. Richard Spring (Bury St. Edmunds)
I am grateful to you, Mr. Deputy Speaker, for giving me the opportunity to introduce this Adjournment debate this afternoon. I thank my hon. Friend the Exchequer Secretary to the Treasury for being here to reply. This is the first opportunity I have had to congratulate him formally on his new appointment—I know that he will perform the job with his characteristic panache.
In 1668, King Charles II commissioned the construction of a palace at Newmarket. He was the first individual to establish racing stables in the town—the first proper racing and training establishment in the world. Today, Newmarket is synonymous with racing, which has developed there successfully for more than 300 years. I have the privilege to represent the town of Newmarket in this House.
At the State Opening last week, the Sovereign came to the Palace of Westminster in a horse-drawn carriage. The horse has played a central role in our military past, and does so now in our pageantry. At the other end of the spectrum, millions of children have learnt to enjoy riding at pony clubs. Affection for this frail, beautiful and temperamental animal lies deep in the hearts of a wide cross-section of the British public.
Out of all that has evolved the best-ordered racing and finest bloodstock industry in the world. Recently, the industry was threatened by the arrival of the single European market and by unbridgeable VAT differentials. In Newmarket, one in three people are directly or indirectly employed in racing. The potential damage to the town and to the industry in general would have been immeasurable had the battle on VAT been lost. I therefore express again my profound gratitude to the Treasury for facilitating the introduction of the VAT registration scheme. The arrival of Sunday racing also helped.
Last year, in response to the impact of the national lottery, my right hon. and learned Friend the Chancellor cut general betting duty by 1 per cent. I express to my hon. Friend the Exchequer Secretary, on behalf of the industry and my constituents, my thanks for the Government's action, which showed their understanding and support for the industry. It is much appreciated.
What is not clearly understood is the immense economic importance of the British horse racing and breeding industry. It directly employs 31,600 people; if we add all those employed in ancillary services and in on-course and off-course betting activities, the total figure is 100,000 people. Income generated by the industry is more than £600 million, with substantial additional sums being spent by race course visitors away from the course.
It is estimated that exports total £90 million, and that tax revenues, excluding general betting duty, amount to £142 million. Training and breeding employ the equivalent of one in eight agricultural workers. We are therefore debating a highly significant employer and generator of wealth and of tax revenues.
The linchpin, of course, is the race horse itself. It is a simple equation: there has to be some incentive to become and to remain a race horse owner. After the initial purchase price, the average training cost is now £13,700 per annum. Of course, there are those to whom such a 624 sum is insignificant, but they are a small minority. The industry's viability ultimately depends on a broad and deep base of race horse ownership. I have part-owned two race horses, so I speak from personal experience. The blunt truth is that, in Britain, the risk-reward ratio is, absolutely and relatively, disastrously unfavourable and worsening.
It has become fashionable to produce international league tables. This country, for all its long history of racing and the industry's excellent reputation, is now increasingly in the relegation zone. Nothing could more graphically illustrate that than the fact that present or potential British race horse owners are simply voting with their feet.
This week, the second biggest individual British race horse owner announced that he was substantially scaling back the number of horses he has in training, and others, in the past few days, have made similar depressing indications of intent. Indeed, the number of owners with horses in training has fallen since last year, and the number remains below the effective threshold necessary to develop a full race programme.
One especially clear indication that the long-term health of the industry is under threat is the fact that ownership of the key two-year-olds in training is falling. The number has fallen 21 per cent. since 1988. and, tellingly, it has fallen almost 5 per cent. in the past 12 months. About 30 per cent. of owners drop out each year.
The reason is simple: prize money in this country is now ludicrously low, even for our most famous races. The Derby is ranked only 21st in the world. Although £850,000 might seem a considerable sum, it pales into insignificance when compared with the Dubai cup, at £2.6 million, the Japan cup, at £2.5 million, and the United States Breeders cup, at £1.8 million.
Some years ago, the Japanese sent shock waves through the art market by purchasing impressionist paintings for record prices; they are now doing exactly the same in respect of bloodstock, much of it originally British. Today, the average flat race in Japan is worth £170,000, whereas a similar race meeting here might offer prizes of about £5,000—a truly staggering differential. Every other sport, no matter how belatedly, has had to react to the finite life of its participants—even cricket has succumbed.
Although owners contribute the vast bulk of racing's financial input, racing does not have direct control of its financial destiny. Out of 40 countries examined, Britain languishes joint 36th in the prize money league. Expressed as a percentage of keep and training costs, prize money per horse recovered in Britain is only 21 per cent. In Japan the rate stands at 95 per cent., in Hong Kong at 143 per cent and in the United States at 47 per cent: our European neighbours in Italy and France enjoy a rate of 49 per cent., and those in Germany a rate of 45 per cent.—all more than double the UK percentage. In any given year, only 6 per cent. of new owners and 6 per cent. of all active owners cover their costs.
This autumn, Tattersalls in my constituency recorded some remarkable auction prices for bloodstock. There is no doubt that there is more optimism in the world industry. However, 75 per cent. of the turnover was due to foreign buying. Perversely, that will exacerbate the negative impact on Britain flowing from the greater internationalisation of racing. In 1991–95, the number of British-trained horses that won or were placed in overseas 625 race meetings increased by 57 per cent. Here, in the same period, foreign-trained entrants actually decreased by 20 per cent.
With higher prices of quality bloodstock and our low prize money returns, those deteriorating trends will become worse. The warning signs are everywhere. Owners will be less motivated to race their horses here. Ultimately, that will affect fixture lists and crowd attendance, and therefore betting levels. It is a disturbing outlook. No other industry could be more aptly described as having flesh that is willing, but a spirit that is weak.
At the heart of the industry's dilemma is the wholly inadequate return to racing from betting turnover, which is based on a complex system that in practice brings little stability and certainty. The percentage of horse race betting turnover returned to the industry in the United States is 8.9 per cent. In France it is 6 per cent., in Ireland it is 5.7 per cent., and in Germany it is fully 14.9 per cent. In Britain, it is a derisory 1.2 per cent.
The very success of the national lottery has had a negative impact on racing's viability. Some months ago, the Home Office produced a publication called "The Impact of the National Lottery on the Horse Race Betting Levy". It started with a reminder that the Home Office had made a commitment to monitor the impact of the lottery on the levy. The levy board prize money contribution is expected to fall in 1996–97 by £2.7 million to £27.5 million.
In May last year, a survey suggested that three quarters of betting shop customers purchase national lottery tickets, and that between 6 and 7 per cent. now stake less money in betting shops. In consequence, the Henley centre reported that betting office turnover was down by 3.2 per cent. in 1995, or 5.8 per cent. lower than it would have been without the national lottery.
Happily, this year, following the Chancellor's most welcome I per cent. cut in general betting duty in the Budget, the situation has begun to stabilise. Turnover for the first six months of 1996 showed a small rise of 1.8 per cent. on the same period last year. However, the announcement by Camelot last week will effectively eliminate the benefits of the cut and abort any betting turnover recovery. Many hon. Members have greyhound stadiums in their constituencies, as I do, and their future is under a cloud, too.
I have absolutely no quarrel with the introduction of the national lottery. On the contrary, it has produced significant sums for good causes, not least in my constituency. Its inception was long overdue, but it puts an onus on the Government to consider carefully its impact. Because of the lottery, there are 3,400 fewer jobs in the betting industry than would otherwise have been the case, and 4,000 jobs are in jeopardy. By Christmas, 650 betting offices will have closed, and another 1,300 are vulnerable. The second weekly draw probably makes those figures look like an underestimate. Fresh applications for betting office licences are at their lowest since legalisation 35 years ago.
Betting shops should, at a minimum, be able to sell lottery tickets. Equally, there is a clear inconsistency whereby punters can bet on Irish lottery numbers but not on the outcome of our national lottery. General betting duty currently stands at 6.75 per cent., and the effective 626 rate of tax on horse racing is 30 per cent. Some interested parties have called for a cut to 5 per cent.; that would at least bring the effective tax rate down to 22 per cent., compared with the pools and lottery rate of 24 per cent. and the casino rate of 17 per cent.
I have bombarded the Minister with a plethora of statistics. Last year, when Madam Speaker gave me permission to draw attention to this problem in an Adjournment debate, I painted a rather more impressionistic picture, but in the past 12 months, as these figures starkly show, the reality has become all too apparent. The help given by the Chancellor in last year's Budget of a 1 per cent. cut in general betting duty has, to all intents and purposes, been wiped out by the new, second weekly lottery draw. The figures I have presented spell out the severe impact that the national lottery is having and will have on the racing industry.
Some weeks ago, the jockey Frankie Dettori won seven races in a row at Ascot, which resulted in one very happy and exuberant jockey and one infinitely richer punter. But it was also a magical moment for the whole nation—a nation which throughout its history has cherished the horse in whatever shape, size or form. At the top of this equine pyramid stands the British race horse, whose future, I fear, is at best uncertain.
I fervently hope that a material cut in general betting duty can be effected on 26 November and that my right hon. and learned Friend the Chancellor will spell out specifically that there should be a clearly defined division between help to the punter and help to racing via the levy. The Minister of all people knows that this is a remarkably successful time in Britain, with the renaissance of so many skills and industries. Sadly, however, the racing industry is proving an exception and its position and world excellence is under real threat from forces that the industry itself simply cannot control.
I appreciate that, at this time, my right hon. and hon. Friends at the Treasury are besieged with requests for special help. I hope that I have demonstrated that racing has an unassailable case that ought to be heard sympathetically. I earnestly beseech the Minister to give the matter his generous and urgent consideration.
§ Mr. William McKelvey (Kilmarnock and Loudoun)
The hon. Member for Bury St. Edmunds (Mr. Spring) makes a most eloquent and unanswerable case for assistance for an industry that he obviously knows well and loves. Perhaps I should declare an interest, because I wish to speak briefly on the greyhound industry. I am chair of the all-party greyhound group and was recently elected as a director of the British Greyhound Racing Board-unpaid, of course. I own and run greyhounds at Shawfield, and although they may not be as expensive to run as horses, I should not like to mention exactly what it costs me to run those three greyhounds, lest my wife reads Hansard some time.
Greyhound racing, like horse racing, has had a difficult time this year. We have lost tracks at Cradley Heath, Ramsgate and Sittingbourne. Middlesbrough is due to close in November, and the threat of imminent closure hangs over Bolton, Canterbury and Hackney. The ground on which the greyhounds run is more valuable for other uses, and we must try to reverse that trend.
The Gerald Eve report makes it clear that greyhound racing has already spent £6.6 million on safety measures, and still has to spend another £4.8 million and 627 £1.1 million a year to obtain certification under health and safety at grounds legislation. The greyhound industry, unlike the owners of football stadiums, has no additional help to meet the cost of those measures.
Once again, the off-course betting industry is asking that a betting duty reduction should go straight to punters. A similar duty cut last year added £27 million to the profits of the betting industry, but that industry still refuses to pay £2 million per year to the British greyhound racing fund, because its contributions are designated by the Government as voluntary. We collect an average of only 65 per cent. of the possible tally that is due.
What I would call the respectable bookies—the big firms such as Ladbroke, Hill and Coral—pay their share, although recently some of them have argued that they may resist paying unless they get their way in some of the fund meetings. The British Greyhound Racing Board seeks a reduction of 1 per cent. in the general betting duty, with the benefits of that reduction being passed to greyhound racing and horse racing. It also wants a statutory mechanism to ensure that all moneys that are intended to benefit greyhound racing are passed to the sport and do not form part of the betting industry's retained profits.
I know that the Government say that they are a liberalising body, but unless we in the greyhound industry have the statutory requirement, bookmakers will resist paying the full amount of money due, and they can always threaten to withhold that fund unless they get their own way.
The British Greyhound Racing Board has been unsuccessful in obtaining a meeting with the Minister and his assistants. May I ask him—I will write to him in any case—to give the board the opportunity for a brief meeting? I know that he has been given all the relevant articles, and I am sure that he has read and understood them, but it is important that such an important part of the racing industry receives the opportunity, just as the horse racing industry has done, for a meeting with him to explain the details of what we are asking.
I am grateful for the opportunity for this short speech; this is an important issue for us in the greyhound racing industry.
§ Sir Fergus Montgomery (Altrincham and Sale)
I congratulate my hon. Friend the Member for Bury St. Edmunds (Mr. Spring) on raising this important issue. I must also declare an interest: I am a consultant to the National Association of Bookmakers Ltd.
My hon. Friend's point is of great importance to bookmakers throughout Britain, because the yearly drop in the number of betting shops causes great concern. I am told that there are about 9,000 betting shops, whereas, in the late 1960s, after betting shops had been legalised, there were about 16,000. The betting industry is having great difficulty in sustaining a profit level. If it cannot sustain that level, there will be more betting shop closures and more job losses.
My hon. Friend cited the example of Franco Dettori the other Saturday at Ascot, who went through the card and rode seven winners. That was phenomenal. A racing tipster studying all the form, receiving information and going through the card on any day happens once in a blue moon. For a jockey to have done that was incredible. I 628 cannot believe the number of people who apparently back every horse that Franco Dettori rides. Some people backed all seven horses, in all sorts of combinations and permutations, and won a great deal of money.
The barber I go to in Victoria street does the horses, and he told me, in great rage, that he had backed only six of Franco Dettori's horses. The barber had spent about £5. If he had backed all seven, he would have won £15,000. Because he had backed only six, he won £2,000. I told him that, if I ever won £2,000, I would be grateful, because I had never won anything like £2,000 on the horses, the football pools, the national lottery, the premium bonds or anything. I can only think that I must be lucky in love.
There is a need for a further cut in betting duty. My hon. Friend has stressed the concern over the proposed second weekly national lottery draw. The national lottery has had a devastating effect on the betting industry, but there is a simple solution, and I do not know why it has not been tried. It would help enormously if betting shops could sell tickets for the national lottery.
I cannot understand why we cannot allow bookmakers to take bets on the national lottery. It is amazing that I can go into a betting shop, see the fact advertised that I can bet on the Irish national lottery, but not be able to put one on the United Kingdom national lottery. It does not make sense; if betting shops could sell tickets for the UK lottery, it would give bookmakers an enormous boost, and help to keep some of them in business.
I am grateful for this chance to speak in the debate.
§ Sir John Cope (Northavon)
I make little apology—but I do make a little one—for taking a little of the Minister's time, because the real reply to this debate will come on 26 November, from my right hon. and learned Friend the Chancellor of the Exchequer. I was the Treasury Minister involved in the VAT change to which my hon. Friend the Member for Bury St. Edmunds (Mr. Spring) referred, so I have an interest in the matter. I am chairman of a joint taxation committee of the British Horseracing Board, the British Horse Society and other equine interests.
My hon. Friend has set out well what, in some respects, is a specialised example of the problems of globalisation in many other sectors, but when I was in the Treasury, we thought that it was important to preserve horse racing in Britain and to adjust the taxation system to achieve that end. Horse racing is something that we do extremely well. As he pointed out, it is of great economic importance and many jobs depend on it. It is in the national and, ultimately, in the Treasury's interest that my hon. Friend the Minister and his colleagues should consider carefully the arguments that have been advanced.
§ The Exchequer Secretary to the Treasury (Mr. Phillip Oppenheim)
May I first thank my hon. Friend the Member for Bury St. Edmunds (Mr. Spring) for his kind words? He is recognised in the House as a tireless and effective advocate for the horse racing industry. He said that he had made an unassailable case. I must warn him that that adjective has been somewhat devalued in not so distant years, but I catch his drift and agree that he made a strong case.
629 I also thank my hon. Friend the Member for Altrincham and Sale (Sir F. Montgomery), my right hon. Friend the Member for Northavon (Sir J. Cope), my predecessor, in a manner of speaking, and the hon. Member for Kilmarnock and Loudoun (Mr. McKelvey). I should be delighted to meet the British Greyhound Racing Board. I am just about old enough to remember when dogs ran at Stamford Bridge when I was a child, so I have a particular love for that industry.
I acknowledge the importance of the racing industry, in all its various forms, in our national life. It is an intrinsic, colourful and particularly beautiful part of our national life. It is important and has been a success.
I am grateful for the acknowledgment by my hon. Friend the Member for Bury St. Edmunds of what the Government have done in recent years. The allowance for owners to register for and to reclaim VAT has been important. The duty cut in the last Budget has been mentioned, and the deregulation of betting shops, which can now open on Sundays and weekends, has also been important. Many of the points that have been made have been put to me in representations from the British Horseracing Board and other parts of the betting industry.
I want to touch briefly—to the extent that I may—on the points made about the national lottery's impact. I hope that hon. Members will understand the limitations on what I can say, because this is primarily the responsibility of my right hon. Friend the Secretary of State for National Heritage. I am aware of the many arguments that the lottery has been given special privileges, and that it unfairly distorts a sector of the economy. I think that everyone acknowledges the money that has been given to good causes as a result of the lottery, but, at the same time, it has created a large vested interest.
There are also people who say that a Government who believe in open markets and free choice should perhaps be more sympathetic to allowing the laying of bets on lottery results. The anomaly has been raised that it is legal to take bets on the Irish lottery, but not our own. I merely report those views rather than endorse them, because, as I hope my hon. Friends understand, the difficulty of my position is that I am not directly responsible for that sector, but I hope that the Secretary of State for National Heritage will carefully consider hon. Members' points on those issues.
I hope that the House will understand that, with the Budget only four weeks away, there is little more that I can say, but I assure hon. Members on both sides of the House that their comments will be taken into careful consideration in the run-up to the Budget.
§ It being three minutes to Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.
§ Sitting suspended, pursuant to Standing Order No. 10 (Wednesday sittings), till half-past Two o'clock.