By Bill Wilson
BBC News Online business reporter
Commercial rivals would jump at a chance to run the Tote
One of the most enduring symbols of British racing is to be sold off by the Labour government as part of a commitment made in its 2001 General Election manifesto.
The Tote, or Horserace Totalisator Board, was founded by Winston Churchill in 1928 as a safe haven for punters, controlled by the state, and beyond the reach of illegal bookmakers.
It enjoys a monopoly of horse race pool-betting in exchange for a guarantee that money is pumped into the sport every year.
Recently the Tote announced half-year profits had jumped 39% to £9.2m, with turnover up by over 50% to almost £700m.
With privatisation now on the way, and sale to a horse racing trust, the Tote is poised for an even stronger new lease of life.
In 1993 the British Horseracing Board (BHB) was set up, with the takeover of the Tote as one of its founding aims.
"We are delighted that Government has recently reaffirmed its intention to sell the Tote to a racing trust, " says the board's communications manager Alan Delmonte.
"That was the basis of the joint racing-Tote proposal put to the government four years ago.
"We believe that the sale to a trust on appropriate terms is in the best interests of both the Tote and racing, to which the Tote is a key contributor."
Tote chairman Peter Jones also supports the creation of a trust.
As part of the Government's plans for the sale to such a trust, the Tote is looking for a discount of about 50% on its market value, which is expected to be put at around £150m, leaving the Tote to pay £75m.
However, rival bookmakers Coral, William Hill and Ladbrokes believe the Tote is worth more than that, and there are claims the taxpayer is being short-changed, with the true value nearer £250m.
Warwick Bartlett is chairman of the Association of British Bookmakers, and chair of Global Betting and Gaming Consultants.
The winner is paid according to the size of the stake in the pool
The Tote subtracts expenses and tax then pays the remainder equally among winning tickets
The greater the number of winning tickets, the lower the payout to each winner
Last-minute backing of a particular horse can dramatically change payouts
The pot increases with the volume of bets so if nobody wins the jackpot rolls over
There are no limits on prizes
"The government looks like choosing the worst possible of all options - the Tote should be sold at market price and in a way that allows competition, " he recently told BBC News Online.
"There has been a lot of talk about it being gifted at a price below market value, which is unfair on the taxpayer who will in effect be subsidising the sale."
And he is unhappy at the cosy arrangement that appears to have been drawn up by the government and racing industry.
He said: "There is no reason why other bookmakers should not be allowed to bid for it.
"But the Tote does have a lot of support among the racing industry, which wants to get its hands on it.
"They think it is going to be a new Klondike for them, but it has to be run efficiently, and that will take a lot of hard work," he added.
Bookies have expressed a willingness to join in the race for the Tote.
Mr Bartlett says if the Tote is sold to a trust then it should have to face competition and not be given any form of extended monopoly.
He says: "If any bookmaker wants to operate pooled-betting then they should be free to do so."
Peter Jones: "Tote competing across all channels"
Betting group Ladbrokes has threatened to launch a rival pool betting operation if the government does not let it bid to run the Tote.
Ladbrokes has argued that if bookmakers such as itself, William Hill and Coral are not allowed to play a role in the Tote's privatisation, then pooled betting should be opened up to more competition.
But Tote chairman Peter Jones said: "What the other bookmakers have tried to do is bid up the figure and put it out of the reach of the Tote."
In the past six years ago the Tote has grown from 200 to 450 outlets
The installation of fixed-odds betting terminals in 400 of the Tote's betting shops has also been a major factor in increased turnover.
But the Tote still has less than 5% of the betting market, and operators like Ladbrokes believe they could increase the amount of pooled betting in the gambling market.
However Mr Jones says "the Tote keeps getting stronger".
"Our strategy of competing through all the channels (racecourse, high street, phone and internet) and across a range of bets means that we have a balanced business."
The Government has been under pressure from the Office of Fair Trading to scrap the Tote's monopoly on pooled betting.
The Tote is not owned by any defined entity so the government would need to renationalise it then sell it off.
Although the government does not own the Tote it exerts control over it through the composition of the board of directors.
Legislation will probably prohibit the company being sold on in its entirety after privatisation.
However, it could expand by creating a joint venture with a rival betting group or a private equity firm.
"I'm sure the government wouldn't allow racing to make a quick buck," the Tote chairman said.