My Lords, Ladies and Gentlemen.
Firstly I would like to thank the TBA for their invitation to speak at this AGM and to say how much I’m looking forward to the Annual Awards ceremony tonight which is always a highlight in the industry calendar.
As always, at any time of year, there are a number of issues facing the BHB and the racing industry. If we look back to the TBA AGM held this time last year we were right in the middle of working our way through resolving the OFT issues. When the OFT served its Rule 14 Notice, there was widespread doom and gloom talked about the future of British Racing with predictions of a fixture free-for-all and British Racing’s imminent demise.
However, by the summer of 2004 we had turned the process around with the OFT. With the launch of the Modernisation of British Racing, we had the blueprint for British Racing’s future, a blueprint which would deliver not only the introduction of competition sought by the OFT but also one which would deliver Racing with a fitter, more professional, streamlined product.
Unfortunately, just as we saw the light at the end of the tunnel with the OFT, along came the unexpected finding against BHB by the European Court of Justice. This has sent shockwaves through the industry affecting not only our ability to proceed with initiatives which have been planned for some time including those within the Modernisation of British Racing, but also potentially affecting Racing’s fundamental ability to finance itself.
In order to act in a prudent fashion in this climate of uncertainty, cost reductions totalling £8.7m in the 2005 budget have had to be implemented. We have to recognise the time that it may take for the necessary legal processes to be completed and it is beholden upon BHB to adopt a very cautious approach at this time.
I will return to those budget cuts in due course – as I know some of them are dear to your hearts – but first let’s take stock of where we are and the likely way forward.
In legal terms the ECJ has given the UK Court of Appeal the legal clarification that it sought. It now passes back to the UK Court of Appeal to interpret that legal clarification in relation to the facts of the case. Although the ECJ also applied the law to the facts of this case, finding in favour of William Hill, that is not their role. That is the role of the UK Court of Appeal.
We will be arguing to the UK Court that, in applying the law, the ECJ misinterpreted the facts. The brief synopsis of the facts they had before them oversimplified the situation and led to that misinterpretation. When the UK Court looks at the actual facts we believe the ECJ clarification will lead the Court to find in our favour.
Of course, any such judgement is unlikely to be reached before mid-year and we should assume that William Hill would seek to appeal further any finding in our favour.
In other words we should not anticipate an early resolution in our favour.
Meanwhile the Levy’s existence is due to expire, in March 2006.
We have therefore been in discussions with Richard Caborn, Minister for Sport, exploring the possibility of extending the Levy until we have an appropriate commercial funding mechanism in place to replace it.
We share the Minister’s understandable reluctance to go down this route as it means a reversal of a long-held mutual ambition to extract government from the administration of our sport, but we do need certainty of funding.
Independent Funding Review
As a result of these ministerial discussions we have this morning announced the setting up of an Independent Funding Review to be led by Lord Donoughue.
This will be an independent review body to examine the options for funding racing, commissioned by BHB but reporting to the BHB, the Levy Board and the Bookmakers’ Committee.
If the solution is to be an extension of the Levy, then the Minister will need to know the exit plan and timetable before going back to Parliament to seek approval. If there is to be an alternative solution then the Government will want to know that it is sustainable and that any dissenting voices or alternative options have been considered in a transparent process.
We are grateful to Lord Donoughue for once again undertaking an arduous task for Racing and agreeing to chair the Funding Review and we plan to make a report to Government by mid-March.
We believe that there is a viable alternative to an extension of the Levy, and we will be making our own proposal to the Funding Review.
Where horseracing differs from other sports, other than greyhound racing, is that betting is an integral part of the sport. In most sports, betting is merely incidental, but horseracing and betting have a symbiotic relationship.
Bookmakers make substantial profits from betting on horseracing and accept the need to make a contribution to the cost of putting on the ‘Racing Show’ and their ability to have access to not just the data but racing in its full format. The ‘betting externality’ as economists like to call it.
We will therefore be proposing the introduction of a Contribution to Racing by betting operators. That is, a contribution to the cost of putting on the racing show – which we suggest should be 10% of gross profits for bookmakers (equal to the Levy) and at an appropriate equivalent level for betting exchanges.
Obviously, this cannot be simply a voluntary contribution. Bookmakers would only pay if all bookmakers agreed to pay and therefore it needs to be enforceable in some way. Our proposal would require a simple statutory instrument requiring licensing authorities to have proof that any betting entity was fulfilling its Contribution obligation before renewing its betting licence. This is similar to the current requirement to be fulfilling the obligation to pay the Levy as a condition to licencing.
We will be developing this proposal so that it can be transparently reviewed by the Funding Review Body – along with any other proposals other parties may wish to make. Whatever outcome results from this process, we will then seek the support of the Minister for the proposed solution, including whatever statutory process is appropriate to provide enforcement.
Ostensibly of course this would only resolve the UK funding replacement for the Levy – which would still put Irish and other foreign income at risk were we to ultimately lose the William Hill case.
Once we establish a mechanism for going forward in the UK we can examine options for extending it overseas.
This means, whatever the outcome of the Funding Review, we still need to budget very prudently in the short-term which brings me back to the budget cuts that I mentioned earlier.
An early casualty of the cuts was the Development Fund. This is a real concern for all of us as this is a key method of ensuring races that don’t necessarily get much betting support but are essential for the proper development of the horse, are kept on the racecard. We will in future be more dependent on the goodwill of racecourses to maintain these races. Clearly the reinstatement of the Development Fund will be an early priority.
Owners’ Premium Scheme
As you will all now know, from 1 Jan 2005 the Owners’ Premium Scheme has been suspended – in 2005 it had been forecast that payments of £3.2m would be made during the year. It has not been terminated however and the plan is hopefully that this suspension could be lifted after 12 months when the picture regarding funding and ECJ position is more clear.
Please be assured that, given the time and effort invested by BHB in the creation and promotion of the Scheme, we would not have considered suspending it unless we were in a particularly extreme situation. We have had to take this step, as well as making other budgetary cuts, to ensure that BHB remains in a position to fulfil its obligations as the governing body of British Horseracing.
Some people have been understandably mystified – indeed miffed – that the suspension was made without giving three months’ notice. To clarify the situation about three months’ notice period, the suspension was made under Order 1 (vii) which gives the BHB Directors discretion to act in the context of an emergency or expeditiously demanding case. This is not an Order we would use lightly but the Directors felt that this situation warranted it.
Under Order 1 (vii), suspension of the Scheme may be with immediate effect but requires the BHB to publicise the fact in the Racing Calendar. A short notice with regard to the suspension of Instruction J20 (the payment provisions for the Scheme) was rushed through for publication in the 16 December issue of the Calendar, with a fuller notice printed in the issues published on 23 December and 6 January. By suspending the Scheme under this order, this has taken precedence over Order 197 which only allowed for termination (rather than suspension) of the Scheme on 3 months’ notice.
You can imagine that we are as frustrated as you that suspension has been necessary, just when the Scheme appeared to be bearing fruit, with the number of mares that have been kept in Britain rather than exported increasing and the number of coverings in Britain increasing relative to Ireland. We also have evidence that people have changed their behaviour on the basis of the Scheme since its existence in 2004 with nearly 15% fewer GB mares visiting Irish based sires in 2004 over 2003.
I would therefore reinforce that the Scheme is not being terminated, but suspended for the year and, as I said when the suspension was announced, would like to think that, in 12 months’ time, the suspension could be lifted.
I should mention that there are currently moves afoot to seek to have this suspension rescinded. These moves are being led by members of the ROA and TBA, albeit recognising that the ROA and TBA members on the BHB supported the suspension.
Obviously we would discourage any thought of litigation – let’s face it, this industry has seen enough of that – but let me say, that I believe we should keep an open mind on suggestions that lead to a different distribution of prize money. If the ROA were to put forward a proposal that further reduced minimum values – principally for lower-quality races – in a manner that could fully compensate for a reintroduction of the Owners’ Premium Scheme at some level – not necessarily the current level, we would be willing to examine it.
This would be a reversal of past ROA policy but, provided it led to the agreed £3.2m budget reduction, we are prepared to be flexible and consider it and discuss it with the Levy Board.
In any event, the ROA will be encouraged to survey their members to see whether there is support for reducing prize money so as to fund an Owners’ Premium Scheme for 2006 as a fallback option.
I think I need to clarify my position on Breeders’ Prizes. I have been accurately quoted as calling them ‘haphazard subsidies’ and that Owners’ Premiums were more appropriate than Breeders’ Prizes in terms of making British breeding more competitive with other nations.
I would add that your own President reminded members at last year’s AGM that, when both schemes were up and running, that both schemes would need to be reviewed.
The question which the TBA needs to ask itself, and what the BHB will want to know the answer to once the Levy Board is dissolved and responsibility for Breeders’ Prizes passes to BHB is what is the purpose of Breeders’ Prizes?
The very name suggests muddled thinking. Once a breeder sells a horse why should they receive prizes? If the buyer subsequently sells the horse on, the original buyer doesn’t expect to receive a share of future prize money earned.
I think what we’re really talking about is Breeders’ Incentives.
Currently the Breeders’ Prize Scheme is funded by the Levy Board to the tune of £1.9 million in 2004 and this year will see the funding for this Scheme rise to £2.4 million.
We should ask ourselves what we want to achieve with this money.
Do we want to breed more horses when we already suffer from over production or do we want to incentivise breeding of certain types of horse?
With the current trend to speed – do we really want to breed more 7 furlong horses so we can ballot them out more frequently?
Do we want to eventually find ourselves following the French and reducing the Derby to 1m 2f because there aren’t enough horses to fill a Mile and a half race?
Or do we want to incentivise breeders to forsake the higher price that’s on offer for ‘fashionable’ distance horses in order to retain the sport’s diversity – help the sport retain its charm – and give breeders support for breeding what we want to see on the racetrack. In other words, encourage them to produce the Persian Punches, the Ouija Boards and the National Hunt stars of the future.
I leave it to the TBA to review the role of Breeders’ Prizes and persuade the BHB that the current scheme is achieving its objectives if they really believe that to be the case – or make recommendations for changes to incentivise different breeding responses if that’s what is needed.
Don’t assume Breeders’ Prizes will be retained – but don’t assume they will simply be phased out either. Make the case.
Veterinary Research Funding
We recognise the importance of veterinary research to the grassroots of the industry, in particular the breeding industry, and the Levy Board continues to provide financial support for this research. I can confirm that BHB is also committed to giving this research a high priority within its funding responsibilities and this will be reflected when BHB takes over the Levy Board’s responsibilities in due course.
The funding of the Equine Fertility Unit and the Equine Genome Project by Equine Genetics Research are obviously projects which we have had to consider when looking at the requirement to reduce our budgets. It was planned that each be funded to the tune of some £250-£300,000 per annum. We recognise that pressure dictates that we review our plans in these areas, in taking a prudent approach to BHB’s financial situation. Our approach has been to initiate discussions with each party with the objective of maintaining the current infrastructure.
As a result of these discussions, it has been confirmed that the EFU can be kept alive with continuing TBA funding in the short-term, and yesterday’s BHB Board meeting authorised a budget allocation of £100,000 to keep the Equine Genome Project alive in the first half of 2005.
Stable & Stud Staff Training
The Stable & Stud Staff Steering Group has been considering eight key issues: Recruitment, Training and Career Development, Pay and Benefits, Health and Safety, Recognition and Respect, the Stable Lads Association, Stud Staff Support, and Accommodation. Following our Board Meeting yesterday the BHB will be issuing a press release giving a detailed update but perhaps I could just touch on a few areas of progress.
First, and most importantly, let me assure you all that this issue remains a high priority and is not suffering as a result of the cuts.
A dedicated recruitment brand and marketing campaign will be planned and a careers website will be created to offer information on all aspects of stable and stud staff careers. Careers literature will be created for use in schools and colleges and a network of speakers will visit not just equine colleges but careers and recruitment fairs and exhibitions.
Training Review Groups have been set up by the TBA and NTF to carry out an analysis of the training needs of the industry. Looking specifically at stud staff, the TBA are to be congratulated for recruiting a full time project manager to assist with the development of training policies, stud staff database and other employment matters specifically relating to stud staff, but I implore you to give the training needs analysis the appropriate sense of urgency.
BHB will then formulate the strategy for the provision of that training which will then be discussed by training providers to ensure the appropriate programmes are put in place. Pilot schemes for any new training initiatives will be put in place following the reviews. Given the transient nature of many stable and stud staff a Skills Passport is being investigated which will mean that employees can have a recognised record of their achievements and skills level.
Turning to pay and benefits, a review of the current pension provision for stable staff is due to report later in the month. The recent pay deal for staff has been widely reported but it seems to me that the overtime payment situation is still unsatisfactory and remains to be tackled. The NTF assures me this is work in progress as part of a broader review.
Heath and Safety seminars have been carried out nationally by the BHB and the NTF are currently setting up an approved network of Health & Safety consultants to which trainers can refer.
In terms of recognition and respect, I anticipate an announcement very shortly about the launch of the 2004 Stable Staff Awards.
The NTF are currently working with The Andrea Adams Trust, a UK charity dedicated to tackling bullying in the workplace and are looking at initiatives which can be introduced for the racing industry. Also a national helpline to offer emotional support for staff is being developed by Racing Welfare. The SLA and NTF have been discussing racecourse facilities for staff and the NTF will be conducting a survey to get staff feedback on facilities.
The Stable Lads Association is going through a review to modernise its organisation and discussions are being held with the TGWU to discuss recommendations and implementation which will also be communicated at the 8 regional branches recently set up by the SLA.
With regard to staff accommodation, four specialist consultancies have been approached with a request for proposals on developing an action plan to address accommodation issues in the racing and breeding industries and they are due to respond in March.
I am sure you will join me in taking this opportunity to thank Baroness Mallalieu and the members of the Stable & Stud Staff Steering Group for their excellent progress to date across such a wide spectrum of issues.
May I conclude by thanking the TBA again for giving me this opportunity to update you all on the current situation.
Yes, the situation is serious – but that doesn’t mean one should be despondent. I look to the Funding Review as a mechanism for resolving the short-term funding situation. Retaining the Levy is one option – but only one. We must consider others and you have heard our own suggestion for how this could be resolved.
We remain convinced of our rights to charge for data internationally – but recognise we have still to convince the courts. Whatever the case, we shall be seeking the means of getting foreign bookmakers who profit from our racing to contribute to the costs of putting on the show.
You have heard my views on issues close to your hearts and I hope I have clarified the BHB position on Owners’ Premiums and Breeders’ Prizes.
I hope you are also encouraged by the progress made by the Stable & Stud Staff Group.
Despite the regrettable interruption to progress in implementing the Modernisation of British Racing blueprint, necessitated by the uncertainty brought about by the ECJ ruling, I am encouraged that all sectors of racing have expressed their support for continuing to make as much progress on implementation as soon as practically possible and I thank them for that support.