In both their 2001 and 2005 Manifestos, the Labour Party had pledged to sell the Tote: when in government, it failed to do so. Under the Coalition Government, the process of disposal is underway yet again. Hopefully, the long saga will be brought to an end within the next few months.
The Tote, which was founded in 1928, is a fading force in horse-race betting, with an unimpressive 6% market share. Whilst many traditional book-makers have struggled in recent years, on-line betting has prospered. This trend was highlighted by Betfair’s recent public flotation, with a valuation of well over £1 billion.
As for the Tote, the Government needs to be decisive. Despite proposals to split up the business, the most clinical way forward is simply to auction it. Some obvious interested parties, like Ladbrokes and William Hill, should be precluded from bidding. Otherwise, it should be open house, with a preferred bidder being identified who can then negotiate with the Government. Indeed, a similar system should be used as that applying for selling off railway franchises. Importantly, the Tote’s value has dipped in recent years, as its commercial prospects have been dented by new market entrants such as Betfair.
Nevertheless, a price of c£250 million, as set out in the ASI’s recent publication – Privatisation Revisited – should be achievable. Although such proceeds would be useful for the Government, they will obviously make little inroads into financing an annual public sector net borrowing figure of c£150 billion. After a near decade of navel contemplation, it is high time that the Tote was privatized. To that extent, there are some close comparisons with the Royal Mail.
Both businesses are under serious commercial pressure, partly from on-line competitors, as their market shares erode and their finances worsen.
Hence, the Nanny Goat needs flogging – and quickly.