Oireachtas Joint and Select Committees
Tuesday, 7 March 2017
Joint Oireachtas Committee on Agriculture, Food and the Marine
Systems, Governance and Procedures in Horse Racing Ireland: Discussion
4:00 pm
Pat Deering (Carlow-Kilkenny, Fine Gael)
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Members and delegates should note that Deputy Clare Daly will substitute for Deputy Thomas Pringle. Mobile phones should be switched off completely, including in the Visitors Gallery, as they affect the communications system.
I welcome from Horse Racing Ireland Mr. Brian Kavanagh, chief executive officer; Ms Suzanne Eade, chief financial officer; and Mr. Jason Morris, director of racing. I thank them for appearing before the joint committee to discuss with members the systems, governance and procedures in Horse Racing Ireland.
Witnesses are protected by absolute privilege in respect of the evidence they give to the committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or an entity by name or in such a way as to make him, her or it identifiable. The opening statement submitted to the committee will be published on its website after the meeting.
Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable. I invite Mr. Kavanagh to make his opening statement.
Mr. Brian Kavanagh:
I am grateful for the invitation to meet the joint committee to discuss systems, governance and procedures in Horse Racing Ireland, HRI. The committee has always taken a very strong interest in our industry. With the Chairman's permission, we will also update members on some of the current issues facing the industry. I am the chief executive of and Accounting Officer for Horse Racing Ireland, the commercial semi-State body responsible for the development of the thoroughbred horse racing and breeding industries. I am accompanied by Ms Suzanne Eade, our chief financial officer, and Mr. Jason Morris, our director of racing.
Owing to the value of the horse racing industry to Ireland, the State has always taken a strong interest in and legislated for the sector which has been overseen by a State body since 1945. This task was initially performed by the Racing Board which subsequently became the Irish Horse Racing Authority under legislation introduced in 1994 and Horse Racing Ireland in 2001. This level of Government support for and understanding of our industry is central to the international position of the sector relative to other jurisdictions. HRI is a commercial semi-State body the mission of which is to develop and promote Ireland as a world centre of excellence for horse racing and breeding. The thoroughbred horse industry is a sector in which Ireland has genuine claims to world leadership. This has been consistently proved in the marketplaces and on the race tracks of the world. People come from many countries to see how we do things in Ireland.
In many fields, Ireland has led the way for the rest of the world in thoroughbred racing and breeding. It produces more thoroughbred foals than Britain and France combined and is the third largest producer in the world. We produce 45% of the total European Union output of thoroughbreds.
Ireland has legitimate claims to the No. 1 position with regard to quality. Over 65% of our annual production is exported. Last year, Irish horses were exported to 36 countries. I ask the committee to note that the Irish horse racing and breeding industry supports approximately 14,000 full-time jobs that are widely dispersed throughout rural communities. Some charts that are attached to my presentation show the locations of racecourses and training and breeding establishments across the country. They illustrate the nationwide distribution of the industry and its investment and employment. These are not jobs on the east coast or in Dublin; they are in the heart of rural Ireland.
This is the exact type of industry the country needs to protect and develop in the current circumstances. It is rurally-based and labour-intensive. It is probably the most environmentally-friendly agricultural activity we have. It leads to a significant level of international inward investment to Ireland. Horse racing and breeding is an all-island activity. It has always been run on a Thirty-two County basis. Foals born in Tyrone carry the (IRE) suffix after their name, just as foals born in Wexford do. The two Northern Ireland racecourses at Down Royal and Downpatrick operate under the Turf Club's rules of racing, with 90% of runners coming from the Republic.
This industry contributes over €1 billion in economic output to our economy every year and generates more than 80,000 tourist visits to Ireland annually. Our 26 racecourses contribute to sporting and social life and are at the heart of local economies. Festivals at tracks like Fairyhouse, Galway, Punchestown, Killarney and Listowel cumulatively contribute approximately €150 million in economic activity. Summer racecourses like Ballinrobe, Sligo, Bellewstown and Kilbeggan are key elements of the social fabric of their towns and regions. Point-to-point racing, which is the starting point for many great national hunt horses, is rooted in local communities. HRI has specifically increased its contribution to this sector in 2017.
I wish to emphasise the relationship between horse racing and breeding. The racecourse is the proving ground of the thoroughbred, where its true worth is established. If Ireland is to have a successful breeding industry, it needs a successful racing industry. One is the pipeline for the other. Successful racehorses become successful stallions that attract broodmares, many from outside Ireland. This, in turn, stimulates economic activity in a wide range of businesses. Racecourses and farms are more closely linked than many people might imagine. The majority of breeders in Ireland - 92% - have fewer than five horses.
I would like to give the committee a brief overview of the business and governance structure of Horse Racing Ireland. The headquarters of the company are at Ballymany on the Curragh, just outside Newbridge in County Kildare. We have 187 members of staff, 94 of whom are in HRI and 93 of whom are in our subsidiary companies. These staff are the backbone of the organisation. I am very proud of our team. Our board of 14 members acts as the national authority for horse racing by discharging its statutory functions as set out in the Irish Horseracing Industry Act 1994, the Horse and Greyhound Racing Act 2001 and the Horse Racing Ireland Act 2016. Its primary functions under legislation are the administration, development, promotion and governance of the industry.
HRI operates three principal commercial subsidiaries. HRI Racecourses Limited acts as the holding company for the racecourses at Leopardstown, Navan, Tipperary and Fairyhouse and owns the lands at Cork Racecourse in Mallow. Irish Thoroughbred Marketing Limited is an international marketing agency. Its task is to promote Ireland as the best country in the world in which to breed, train, buy and race thoroughbred horses. Tote Ireland Limited operates on-course and off-course totalisator betting services.
HRI and its subsidiaries are audited annually by the Comptroller and Auditor General. HRI also operates an outsourced internal audit function. The Comptroller and Auditor General's annual audit reports have never been qualified. A specific formal audit of corporate governance within HRI by our internal auditors was carried out most recently in 2015 and did not give rise to any significant concerns. That is not to say there is no room for improvement. HRI endeavours to address any issues raised by internal auditors in a timely and effective fashion. HRI's audit and risk committee meets four times a year. A number of the organisation’s functions are carried out through sub-committees of the board, some of which are established under statute and some of which have delegated board authority.
I am aware that the chairman of the board of HRI and some members of the board appeared before this committee in October 2016 to discuss governance processes pertaining to my appointment as chief executive. I regret the issues that arose at that time. Arising from this appointment, the board has taken a number of measures to strengthen governance. It has implemented a succession plan for the chief executive and senior management, introduced management development and training programmes, undertaken corporate governance training for board members and approved a new management structure for the organisation. I confirm that the importance of proper corporate governance is recognised within HRI at staff and board levels. HRI is fully committed to compliance with the new code of governance for State bodies, as published last autumn.
Last year was a positive one for the industry as Irish horses enjoyed unprecedented success on the track at home and internationally. For the first time, the five major races in Britain - the Champion Hurdle, the Gold Cup, the Grand National, the Derby and the Oaks - were all won by Irish-trained horses. In October, Aidan O’Brien completed the unprecedented feat of training the first three finishers in the world's most important flat race, the Prix de l’Arc de Triomphe. Irish-based stallions filled seven of the top ten places in the leading sires table in 2016. New emerging markets were developed for Irish horses last year. A copy of HRI's end-of-year press release for 2016, which contains all the key statistics, is attached to our submission.
Despite this strong position, the industry is facing a number of key challenges. The board and I are determined to address these challenges in a positive fashion with the support of this committee. We believe a long-term secure and sustainable funding base can be achieved for the industry while saving money for the Exchequer. Brexit is a significant issue for us because Britain is our biggest market for bloodstock exports. We also intend to focus on the recruitment and retention of skilled staff within the industry, to broaden the racehorse ownership base and to increase attendance at race meetings in the modern digital landscape.
Notwithstanding these challenges, international successes are very important in underlining the attractiveness of breeding, buying and keeping horses in training in Ireland. Race meetings are major sporting and social occasions in overseas countries. Irish winners deliver a very positive image of our country. I hope we will see further success for Irish horses, trainers, jockeys and breeders at Cheltenham next week. I again thank the committee for giving me this opportunity to discuss the industry. We will be happy to address any questions that members of the committee may have.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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I thank Mr. Kavanagh. The first three questioners are Deputies D'Arcy, McConalogue and Cahill.
Michael D'Arcy (Wexford, Fine Gael)
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I would prefer to interact with Mr. Kavanagh on the matters about which I intend to ask. My questions will flow from his answers.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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We will take it as it goes.
Michael D'Arcy (Wexford, Fine Gael)
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I thank the Chair for his indulgence.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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The same latitude will be given to everybody.
Michael D'Arcy (Wexford, Fine Gael)
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I thank Mr. Kavanagh for attending this afternoon's meeting. His appointment as CEO was contentious. Why were the national governance guidelines not followed in his appointment?
Pat Deering (Carlow-Kilkenny, Fine Gael)
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Yes.
Mr. Brian Kavanagh:
The board members and I have indicated that we have learned some lessons from that process. The Deputy has asked about the governance procedure. Some historic contractual issues relating to my employment were part of the equation. When the appointment came before the board, it went through the correct processes of board approval and decision. I think the timing of those processes was not as it should have been. The board has put processes in place to ensure that will not happen again.
Michael D'Arcy (Wexford, Fine Gael)
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When Mr. Kavanagh refers to "historic contractual issues", I assume he is talking about a contract for difference. Is that correct?
Mr. Brian Kavanagh:
No. There were complexities with my terms of terms and conditions of employment going back to 2009 when I was reappointed in a public competition. Those terms were altered or changed in 2011. I did not want my contract to become a barrier between the industry, my organisation and the Department of Agriculture, Food and the Marine. I signed the contract and reserved my position in the hope that those issues would be addressed over the lifetime of the contract. That led to the situation that arose during the course of last year. The complexities with my terms and conditions of employment go back to 2008 or 2009.
Michael D'Arcy (Wexford, Fine Gael)
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Did Mr. Kavanagh ever invoke the fact that he had a contract for difference, or contract of indefinite duration, with the chairman of the board?
Mr. Brian Kavanagh:
No, my understanding of that is that in order to invoke a contract of indefinite duration, you must use a legal process. I would never want to be in a position simply because I was there and was claiming that nobody could shift me out of that position. I would want to be in a position because people wanted me there and I was doing a job where I felt I was adding value so the answer to the Deputy's question is "No".
Michael D'Arcy (Wexford, Fine Gael)
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If they could not replace Mr. Kavanagh with anybody else with an open contract from an open advertisement for somebody else to apply for the position, how does Mr. Kavanagh know he was the best person for the job? When HRI's chairman presented here last year, he said it never arose because Mr. Kavanagh was the best person for the job and yet it is impossible to know who was going to apply if there was no advertisement and no open competition for that position.
Michael D'Arcy (Wexford, Fine Gael)
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HRI's chairman said he was.
Mr. Brian Kavanagh:
I would be quite happy to participate in any open competition for the position and accept the outcome of that competition. I did that once before. In fact, that is the issue that arose between 2009 and 2011. When I was reappointed in 2009, the reappointment was on the basis that I would be allowed to compete for the position again in the future or be transferred to another job within the organisation. In 2011, that permission was sought to be removed from the contract. As I said, I signed the contract on that basis in the hope that it would be resolved over the lifetime of the remainder of that contract. I would be more than happy to compete for a position. I have no issue with competing for a position.
Michael D'Arcy (Wexford, Fine Gael)
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Did Mr. Kavanagh express that view to the chairman?
Mr. Brian Kavanagh:
I would talk to the chairman regularly. I think the chairman gave evidence on the last day that his concern in the first instance was to establish the position of the Department of Agriculture, Food and the Marine on the issue. If an instruction came back from either the Department or the board with regard to the need for an open competition for that position, that would not have been an issue for me.
Michael D'Arcy (Wexford, Fine Gael)
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Mr. Kavanagh would have competed in an open competition and would not have invoked this contract of indefinite duration.
Michael D'Arcy (Wexford, Fine Gael)
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Mr. Kavanagh did not request that the contract of indefinite duration-----
Mr. Brian Kavanagh:
As I understand it, this must go down a legal route and I am not a legal expert. If the board, the Department of Agriculture, Food and Marine or the Department of Public Expenditure and Reform said that this should be by way of open public competition, I would have competed for-----
Michael D'Arcy (Wexford, Fine Gael)
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To clarify, the documentation we have showed that on two occasions, the board received legal opinion that Mr. Kavanagh was likely to have had a strong case for a contract of indefinite duration. Was Mr. Kavanagh aware of that information?
Michael D'Arcy (Wexford, Fine Gael)
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A document from 24 October 2016 from Mr. Kavanagh to the chairman stated that he was writing to confirm the provisions of clause two of his contract, that there would be no further contract at the end of this one and that his employment with HRI would cease at that point. This was agreed and minuted at the HRI board meeting on 21 July. Was that matter raised and minuted in the correct manner?
Mr. Brian Kavanagh:
Absolutely. That was the understanding and agreement. I reiterate what I said in response to the Deputy's earlier question, which is that I would not have an intention of staying in a position where I was not wanted or where change would be necessary. In respect of the board making that appointment, it was clearly minuted that there would be no contract at the end of the five years. That has been agreed and as the Deputy said, confirmed in writing. Debates about contracts of indefinite duration and things like that are legal matters. They are not something I am minded to take part in.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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I call Deputy McConalogue. The same degree of latitude is required.
Charlie McConalogue (Donegal, Fianna Fail)
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I welcome Mr. Kavanagh, Ms Eade and Mr. Morris and thank them for making the presentation. I acknowledge some members of HRI's board. Deputy D'Arcy spoke about some of the issues we dealt with at length at a previous meeting. I think we all agree that the process and corporate governance at that time left a bit to desired. It is important that lessons are learned by HRI. I acknowledge the strong role played by the horse racing industry in this country. We have a very proud history in respect of how it has been built up. Those in the sector played a role in respect of that. It is something we need to continue to build upon. As Mr. Kavanagh said, we have every right to be proud of where we stand as a world leader in the horse racing industry.
There are a few points that Mr. Kavanagh might flesh out. Brexit is an important issue, as it is for many other parts of the agriculture sector. Mr. Kavanagh outlined how it operates on an all-island basis so Brexit will pose challenges for the horse racing sector. I would be interested in hearing his perspective on what those challenges are and how we need to meet them. The export trade is significant. What issues do we need to be cognisant of to ensure that the horse racing industry is protected and can continue to grow?
The Curragh and Galway are very fine facilities. Comments have been made about the regional racing network, smaller courses and the investment spread - ensuring there is a good regional spread. Could Mr. Kavanagh comment on that because there is sometimes criticism about whether the investment is spread?
A number of members will have received correspondence and will been contacted about the foal levy. What is Mr. Kavanagh's perspective on that? Could he brief us on the outcome of the recent court case and where HRI currently stands? Some breeders have argued that an alternative structure should be put in place. Could Mr. Kavanagh outline HRI's position on that? Could he comment on the argument put forward by horse breeders that this levy should be based on the paid covering charge as opposed to the listed charge?
Mr. Brian Kavanagh:
Brexit is a huge concern for our industry. I do not think anyone really knows where it is going or what the outcome will be. Our position and that of the British industry are quite well aligned. The two countries have effectively operated as one industry for a number of years. We operate a single stud book so while foals in Ireland and foals born in Great Britain carry different suffixes after their name, they are in the one stud book. As we will see next week, Irish and British trainers, jockeys and horses travel over and back on a daily basis. A hard Brexit will have very serious implications for our sector. We are concerned that we would end up being collateral damage in a situation that may be slightly out of our control. I mentioned earlier that the value of our bloodstock exports is €225 million, which is a significant figure by any stretch. A total of 80% of those exports are to the UK so that is what is at stake for our sector. As I mentioned in my introduction, the situation is further complicated by the fact that we have always operated on an all-island basis.
Two of the racecourses in Northern Ireland, which are under our jurisdiction and get funding from us as well as being under the Turf Club's rules, could be outside the EU after Brexit. All trainers in the North are licensed by the Turf Club, 90% of the runners are trained in the Republic and horses move, for racing or breeding purposes, on a daily basis across the Border. The departments of agriculture in Britain, France and Ireland have a tripartite agreement that deals with the free movement of thoroughbred horses around the three countries and Brexit could affect that by significantly increasing the level of bureaucracy and administration in this area. One of our leading trainers told us he had a nervous horse who was running at Cheltenham last year. To calm his nerves, the horse has a goat for a companion who stays in the stable with him. The trainer told us of the difficulty he had in getting clearance for the goat to travel to Cheltenham with the horse and that the number of forms he had to fill out was frightening. If that is advanced to horses it would be a horror story for us.
While the two industries are complementary we are also in competition. In worldwide investment terms, there is a danger Britain will be freed to bring in measures to make the sector more competitive. If tariffs were introduced for the movement of bloodstock between Ireland and Britain it would create a difficulty, as would tariffs on the movement of labour because many staff in the industry in Britain are Irish. We had a lot of success in Britain last year with 171 Irish horses running and winning a lot of prize money. There are media rights deals whereby we sell pictures of Irish racing to the betting industry in Britain and worldwide and the income from those goes to racecourses. It has been in euro up to now but will switch to sterling in 2019 and there is a risk that the lower rate of sterling will affect that.
These things are all what-ifs and there may also be opportunities, although it is hard to see them. The British racing authorities see the importance of Ireland to them and 75% of Saturday runners in Britain are Irish-bred or French-bred. They will have an issue filling their race programme and providing enough runners for people to bet, which is vital because betting is the basis of the British industry model. The board discussed Brexit yesterday and we will try to commission some work to look at the overall implications. Our main concern is that our voice gets heard, as part of the agricultural lobby and in Europe.
The development of racecourses is taking place around the country and is one of the most exciting things that is happening at the moment. There is a big development at the Curragh at the moment but over the past 25 years less than 5% of funding for racecourse capital development has gone to the Curragh and it has always been waiting for a big development. We introduced a new capital development scheme two years ago in which we were to provide 40% funding if racecourses provided the other 60%. The response has been fantastic and 24 of the 26 race tracks have taken up the option. We are working through evaluations and funding proposals for those. The regional race tracks have shown the most agility in applying for this and whenever I am asked by a person from overseas where to go racing I always suggest Ballinrobe, Killarney, Bellewstown or Kilbeggan because that is where the real flavour of racing is. I do not see a contest between big tracks and small tracks as they are all part of the racing sector and I have very few sleepless nights about the business models of small, regional racecourses. They have the ability to get people through the gate and have huge local support. They have media rights income and most of them race only in summer, relieving them of the cost of keeping staff throughout the winter.
Mr. Jason Morris:
I will give a flavour of some of the racecourse applications that have already been approved. Sligo has plans for a €1.9 million spend. It only races eight times a year but they have a strong local committee and are planning major refurbishments to the grandstand, as well as a two-storey building for a restaurant and hospitality areas. Roscommon is spending €964,000 and Ballinrobe is spending just over €500,000. Listowel in Kerry is spending €1.1 million on a new restaurant facility and has plans to spend a total of €1.5 million. Kilbeggan will shortly evaluate a €2 million development, which is very exciting and will hopefully add significantly to its hospitality capacity and public facilities. Killarney plans to spend €850,000 and Tramore €1.2 million so this is not a scheme for a small number of tracks but one for every racecourse. We try to support them all and have approved the plans of every racecourse so far. We investigate carefully whether they have the financial resources to provide the 60% funding. They do not pay a dividend but reinvest their money back into facilities so that they can continue to attract crowds in a challenging economic environment. Attendances went up last year and that is pleasing and reflects the hard work racecourses do across the country.
Mr. Brian Kavanagh:
We have run the scheme for the past two years. There are many racecourses in Ireland relative to the size of the population and there are a lot of infrastructural needs. We were able to introduce the scheme as a result of the horse and greyhound racing fund but we regard it as a stimulus for the building sector. Horse Racing Ireland provides €400,000 for every €1 million spent on development and the racecourses provide the balance. The tracks are run largely by volunteers on local committees who are passionate about what they do. Sligo is one of the best examples and has a supporters' club of 400 people who pay significant amounts of money each year. The Exchequer recoups approximately €243,000 through VAT and employment taxes and, as is the case with prize money, this is a stimulus to the rural economy and the building sector.
The worldwide success of the Irish horse racing industry was mentioned but it also goes to the heart of the debate on rural Ireland. The industry in this country has natural advantages in the form of our soil, land and climate. We give out about the rain but it works for our business. The climate, the soil and the people are way ahead of what are available in other countries. The importance of developing industries to provide employment in rural Ireland has been emphasised and this ticks all the boxes. We try to spread the capital as widely as possible and racecourses are doing the heavy lifting by putting up 60% of the funding.
When I came into the job at first there were difficulties with some racecourses that had overstretched themselves, in particular, Punchestown and Fairyhouse. We have now put in a rigorous evaluation process for any capital grant because I do not want a racecourse to run into difficulty on my watch. Therefore, it goes through the normal rigorous capital evaluation process that would be expected under the code of governance.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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The foal levy, Mr. Kavanagh?
Pat Deering (Carlow-Kilkenny, Fine Gael)
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In general then.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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Is that okay, Deputy?
Charlie McConalogue (Donegal, Fianna Fail)
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Yes.
Mr. Brian Kavanagh:
The foal levy is an excellent innovation. People sometimes challenge the amount of money the racing sector gets from the State. We would argue that there is a way in which the industry can be funded without recourse to a State top-up. Indeed this committee, in a previous incarnation, recommended that in a report which was issued in January 2016. It said the sector could be fully funded from betting duty. People may question the funding of the sector. Back in 2000, however, breeders came to the Government and said they were happy for a levy to be levied on foals that are born in this country. However, they wanted the levy to underpin the infrastructure of the breeding industry, as well as underpinning funding of the Irish Equine Centre. That is the main centre that protects the herd against disease, in addition to doing research and other good things. They also wanted the levy to fund the breeders' representative association, the ITPA, and the international marketing agency, Irish Thoroughbred Marketing.
Legislation was introduced by the late Joe Walsh in 1999 and the foal levy was brought in for the first time in 2001. It is based on a determined rate for the stallion fee, which is determined by Horse Racing Ireland in consultation with the stallion masters. It has 99% compliance, so out of 8,500 foals born this year, 8,400 will be fully compliant with the foal levy. That is paid by the breeders on a tiered basis with the lowest rate being €35 up to the highest rate of over €600. In terms of the overall cost of producing a foal and getting it to the sales or on to training, the levy is a relatively small element.
We have looked at this issue over the years. The board of Horse Racing Ireland is advised by a foal levy committee. We made some amendments to the levy in 2011, which increased the number of bands, reduced the level of the lowest bands to €35 and increased the level of the highest bands. The proportion of the levy that is generated by the various bands is as one would expect. The lowest bands, which are stallions covering at a rate of €1,000 or €2,000, are contributing. While there is a higher number of foals in those lower bands, the revenue is lower, and likewise at the higher end. Ms Eade can give the figures.
Mr. Brian Kavanagh:
The last question Deputy McConalogue asked was why the rate is not based on the actual stud fee. From our point of view that would be an administrative nightmare because, like any business, a number of different arrangements are entered into by breeders. Some breeders own both the stallion and mare, so they are paying no stud fee. Some get involved in things called foal share whereby they pay half the stud fee and the stallion owner and mare owner agree that they own half the subsequent foal. There are free return arrangements if a mare has not gone into foal the previous year for some reason, and there is the normal haggling that breeders will have with each other over a nomination fee.
Therefore, for a relatively small proportion of the overall cost of producing a foal, to get into each individual transaction would be administratively difficult. The changes we made in 2011 to the foal levy bands have resulted in the difference between one band and the other being approximately €50, so we are not talking about a major issue. We feel that a 99% compliance rate is acceptable. We are required by legislation, including a statutory instrument, to pursue any unpaid levy. Generally, however, we are able to do that through negotiation, discussion and payment plans.
Jackie Cahill (Tipperary, Fianna Fail)
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I would like to welcome Mr. Kavanagh and his staff, as well as the chairman of Horse Racing Ireland and some of the board members. We have had a number of discussions about the appointment of Mr. Kavanagh. It is recognised that not everything was done in accordance with proper governance. However, I, for one, would like to move on to discuss where the industry is going in future. This is a very important industry for the country so we should focus on Mr. Kavanagh's objectives for the next couple of years and how they will be achieved.
Mr. Kavanagh's submission contains a table with figures I find surprising. Thankfully, virtually all the first page refers to positive increases. The only place one sees negativity is in some of the betting figures. As a person who goes racing, I would not have thought there was an increase in national hunt runners. I am not doubting the accuracy of those figures but we can see that the number of runners, especially in bumper races, has declined significantly. According to that table, however, there has been a 4.1% increase in national hunt runners in the calendar year. While that is welcome, I am surprised by it, although I am not querying HRI's figures.
The figures for on-course bookmaker betting and the betting ring all show negative downturns. I want to ask Mr. Kavanagh a few questions about betting taxes and what he feels is the right direction to take. Is an increase in the betting levy the route to go? If it was increased where would HRI spend the extra revenue?
I have concerns about the survival of track bookmakers. The level of turnover and number of people participating in the trade are dropping dramatically. I live very near a racecourse and 15 years ago the ring would be full of bookmakers on a race day. Now, however, it is only one quarter full. Track bookmakers are an integral part of the industry, yet they are being asked to compete on an unfair playing pitch with the multinationals. It is unfair to apply the same level of taxation to track bookmakers as to Ladbrokes or Chronicle. This matter needs to be addressed urgently because if track bookmakers disappear, we will lose much of the culture and atmosphere at our racetracks. Machines have played a part in taking money out of the ring, but we should incentivise on-course bookmaking. I would like to hear Mr. Kavanagh's views on an increased betting levy and what proposals he has for track bookmakers.
I was glad to hear that Horse Racing Ireland has put more money into the point-to-point sector. Perhaps Mr. Kavanagh can elaborate on that investment because a lot of small breeders take their horses there for a first outing. Hopefully small breeders will have success in selling horses on to major owners from the point-to-point field. I would like Mr. Kavanagh to elaborate on what kind of revenue has been put into the point-to-point sector.
Mr. Kavanagh said that most country courses only operate in the summer months and do not have the expense of winter racing and resultant staff costs. However, some small country courses, including the one nearest my front door, are completely involved in winter racing. Such courses are a very important part of our national hunt industry, although attendances are extremely poor, especially at Thursday meetings. Only for the SIS there is no way they would survive financially. Better track facilities are needed on a cold November or January day than on a summer evening.
I would hope that Horse Racing Ireland would look at those tracks that concentrate on winter racing. I am referring to provincial tracks that provide Thursday racing, which is very important for the horses that will never be heading to Cheltenham but may win a small race on a provincial race track. I would like to see that those courses are not neglected in the overall plan and that there will be something in HRI's proposals to help them to survive.
Mr. Kavanagh talked about Brexit and the impact that decision is going to have on us and on the industry. The bloodstock industry has not featured in our discussions on Brexit. It is something we might want to give more consideration to. Considering the week that is in it next week, with the British handicapper and his treatment of our horses going over to Cheltenham, that might be something that should come into the Brexit negotiations - fair play is good play. If there was one that got through the net and was well handicapped it would be nice to know.
In general, those figures in a time when our country is only coming out of recession and money is still scarce, all those positive figures on the table Mr. Kavanagh provided show that something is going in the right direction. That has to be recognised as well.
Mr. Brian Kavanagh:
I think the industry is coming out of a very difficult few years. The figures for the national hunt runners are right, obviously. It quite interesting. At the middle of last year, all our national hunt indicators were down - horses in training, entries and runners. There was such an uplift in the second half of the year that it overcame the problems of the first half and the overall figures for the year were up. About a year or 18 months ago we saw a lift on the flat. Perhaps that is because there is a quicker turnaround; a horse runs as a two-year-old on the flat, so as the foal crops started to rise again, more were coming into the system, whereas the national hunt runners do not run until they are four or five and the depressed foal crops of four or five years ago were hitting that. I am please to say that those national hunt statistics have continued on into the first two months of this year. That is healthy and we are even getting back to the stage where some people are complaining about being balloted out or taken out of a race. That is an encouraging trend.
On the issue of the betting ring, I fully endorse everything the Deputy has said. The HRI board is very concerned about the long-term future of the betting ring. It is a big problem. Turnover from course bookmakers has fallen away significantly. Technology has caused that. We are seeing growth in attendance at race meetings mainly at the big festival meetings and the summer race meetings. As the Deputy says, it is very hard to get people to go to the winter Thursdays. There is so much racing and sport on TV now.
Years ago, people went to the racecourse because it was the place they could get the most money if they wanted to have a bet, a bookmaker would stand a decent bet to them, they got information on a racecourse that they could not get from sitting at home, and they could see the race. Now the position is almost exactly the reverse. I can sit on my couch and watch the race. I am inundated with information online from racing posts and all sorts of other publications. I can get the best odds on my mobile phone. It is a huge challenge.
The board, led in particular by the chairman, took the decision last year to reduce the charges that on-course bookmakers are charged from 0.5% of turnover to 0.25% of turnover. We would like to see the charges eliminated altogether. That money goes to the racecourses On-course bookmakers pay racecourses five times the admission fee whether they attend or not. That needs to be looked at. It is a very high cost for bookmakers in a falling turnover environment. If we were to lose the on-course bookmakers, Irish racing would lose some of its soul. The members may have raced in countries like France or the United States, which operate tote monopolies. It is a lesser experience than racing here or in Britain, I believe.
With regard to betting tax, the Irish rate is the lowest of any major racing jurisdiction in the world at 1% of turnover. It is significantly lower than the rate of tax in the UK. When the horse and greyhound racing fund was established, the intention was that it would be fully funded by betting tax. Betting tax was reduced progressively in 2001, from 5% to 2%, and in 2007 from 2% paid by the punter to 1% paid by the bookmaker. We believe that was wrong. The intention at the time was to protect small bookmakers' shops in the high street that have to compete with the multiples that were mentioned. That is really the same as in any business. Bigger firms are going to compete, whether it is on tax or on marketing spend or whatever. We believe the rate of betting tax should go up to at least 2% or 2.5%. That could fully fund the horse and greyhound racing fund at a higher level than is currently the case. Members should bear in mind that the funding that goes into the horse and greyhound racing fund is still only at the level it was at ten years ago. In order to develop the industry and look after the key challenges which I outlined in my introduction, we need more money.
We need to invest significantly in the Irish Equine Centre. It has been built by various fundraising efforts and has lived on a wing and a prayer down through the years. It is vital. If there is one thing that will affect our industry more than Brexit or anything else, it is an outbreak of disease. The way the climate has gone, diseases that were previously foreign to Ireland are now becoming more common here. African horse sickness is a particular example. There is a need for investment in that whole area.
There is a significant need for investment in education, training and employment, staff retention, and in racecourse facilities and in prize money. We believe that the Government should not be supplementing the betting tax with money out of central Exchequer funds. The betting tax rate should be high enough to fund horse racing and greyhound racing off its own bat. I am not just saying that from a horse racing point of view but also from a rural Ireland point of view. If we look at what is in the media these days about the decline of rural Ireland, this industry can play a significant part in arresting that decline.
Alan Dukes did a study some years ago on behalf of the breeders' association, in which he spoke about the clustering of employment in rural areas. He examined four towns in rural Ireland representative of the regional spread of the sector: Bagenalstown, Enniscorthy, Navan and Fermoy. They did a survey of the full-time employment equivalents in those areas. Bagenalstown had 428 full-time equivalent jobs in our sector. Enniscorthy had 259, Navan had 324 and Fermoy had 162. When people think of racing they think of the sport of kings, horses racing for prize money, but behind that is a whole network of services. Taking Bagenalstown as an example, that would include the training yards of Willie Mullins and Jim Bolger, and Red Mills horse feed, which employs 150 people in a state-of-the-art plant in Goresbridge and is exporting all around the world. It would include all the local trainers, veterinary practices, farriers, suppliers and all those services. If we are looking at clustering and increasing employment in rural Ireland, this sector is made for it.
The Deputy mentioned his own constituency. I am not going to get involved in refereeing between Thurles and Kilbeggan as to who should get more funding. The Deputy makes a fair point about the tracks that race during the winter having particular needs relative to summer racecourses.
I do not think we can get into a different rate of grant for one track over the other. We apply it across the board. The rate of our capital grant funding to the likes of the track in Sligo is the same as for the track in Punchestown.
However, for tracks such as those mentioned, we have provided funding for other areas that are not as relevant for the summer tracks, including track drainage and so on. We have put schemes in place.
Reference was made to the facilities in some of these tracks. In the first instance we do not want to push racecourses into a situation where they are over-stretched. Thurles, Clonmel and Tipperary are three important tracks in the Deputy's region. Two of them operate during the winter. The facilities could be better. Clonmel is in the system. Those responsible have applied for grants and they are being evaluated.
The situation in Thurles is different. It is the only racecourse in the country that is privately owned. By that I mean it is not owned by a company, trust or charitable society. It is a family farm and there are issues around that. However, without courses such as those in Thurles and Clonmel we would not have winter racing. Thurles was jokingly described as Ireland's first all-weather racecourse. It has a history of racing at times when no other turf racecourse in Ireland or Britain was able to be raced. This is because of the unique soil. We try to help that area as much as possible.
Reference was made to the point-to-point sector. We increased our funding for the sector this year by €728,000 up to €2.2 million. That has been well received. The point-to-point sector suffered badly during the recession. Numbers at all levels were affected in terms of horses with hunter certificates, runners, race meetings, attendances and betting.
Having said that, point-to-point racing is a source of a considerable number of the successful national hunt horses we have produced in the country. Young horses can be tried and can gain experience at these meetings before they go on to race. It has also developed into an important shop window. Many British buyers and, increasingly, Irish buyers will buy a horse there. Many people are buying young horses to run them in a point-to-point race in the hope of winning and getting a good return from one of the bigger trainers who would be prepared to buy a winning horse. Everyone catches the headlines of the one horse that makes the big money. However, to some extent, those dealers have probably bought ten or 20 horses. They need one of them to click to be able to generate a yield.
Point-to-point racing is the soul of Irish national hunt racing. We have increased our funding in three areas. We have increased the prize money for point-to-point meetings. We have increased the grants to the hunts that are staging point-to-point meetings. We have provided funding to ensure that properly trained medical officers attend every point-to-point meeting. They are fully trained to deal with serious accidents and injuries. Those involved in the hunts put in extraordinary work and volunteer time and they need help. Fortunately, we were able to do provide it this year.
This is reflected at grass roots level. Some of our best jockeys have come out of that field, including Davy Russell, Ruby Walsh and Norman Williamson. We have seen some wonderful jockeys down through the years. Those racing at the moment such as Jamie Codd and Derek O'Connor are as good as most professionals in the UK. We are keen to support and encourage the sector.
Deputy Cahill referred to the British handicapper - no comment.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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I am conscious of time. Are members happy to keep going as we are going? Do we want to change or go back to the original format? More questioners have yet to contribute. Deputy Kenny is next, to be followed by Deputy Daly and Senator Lombard.
Willie Penrose (Longford-Westmeath, Labour)
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Chairman, I put up my hand. This is a waste of time. I have been sitting here for the past three hours.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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Sorry, Deputy. If I missed you, I am sorry.
Willie Penrose (Longford-Westmeath, Labour)
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As well you know, I have made more contributions on the horse racing industry than anyone. If that is the way you are going to treat us-----
Pat Deering (Carlow-Kilkenny, Fine Gael)
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No, I am sorry. I missed you.
Willie Penrose (Longford-Westmeath, Labour)
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I am not going to wait around to be insulted by you. I put up my hand a long time ago to make a contribution.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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Sorry, Deputy. I did not intend to insult anyone. If I missed you, I apologise.
Willie Penrose (Longford-Westmeath, Labour)
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That is what you have done. I have made more contributions on this and in respect of the 2016 Bill than anyone else.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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Absolutely, I am well aware of it.
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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I have no difficulty with Deputy Penrose going ahead of me.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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Deputy Penrose, I apologise. There was no intention whatsoever on my part. Deputy Penrose, you have the floor.
Willie Penrose (Longford-Westmeath, Labour)
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I welcome Mr. Kavanagh, his colleagues from the executive and the other board members as well.
I do not intend to go back over ground that has been well ploughed. We have made our points in respect of the situation that occurred. I am looking forward to the development of an industry that is providing more than €1 billion annually. I look forward to the industry continuing to make an important contribution to the rural economy. It is an important source of supplemental income to many dry stock farmers in the area.
Deputy Daly and myself were delighted when we swept two of the major prizes in Britain some months ago, thanks to those wearing the Westmeath colours. Don Cossack and Rule the World are owned by Michael O'Leary. The jockeys were wearing our county colours and we were delighted with that. Annie Power won the champion hurdle and Harzand won the derby. Minding won the oaks, the other big race. We won the five big races there. That was a major success.
On-course betting is showing a significant decline. It could be terminal unless something is done soon. Unless we do something, we are going to lose something that is important. I realise Horse Racing Ireland reduced the levy to 0.25%. This is a welcome move. Normally, I argue with HRI and I have spent time at this committee arguing with Mr. Kavanagh over the years. However, I have to be man enough to admit that some of the changes are those we would have argued for. The HRI board is now implementing them. We welcome them. It would be churlish not to welcome them given what is happening.
Racing attendances are up. We know that in the second half of last year attendances began to climb again. The extra economic activity brought people back. Some innovation and new ideas to attract the public were brought to bear. I compliment Senator Daly and his committee. They are continually re-inventing the wheel in Kilbeggan to bring people in and to try to get sponsorship. It is not easy for regional tracks or those in the country to get sponsorship. That is something we should recognise as well. Sponsorship for some of the big tracks is easy to attract. It is not so easy when they are situated down the country.
One major move by HRI was the move to increase prize money by approximately €4 million. It is a question of how it is allocated and spread. That will be crucial. We have to acknowledge that the level of prize money available to races in this country is up to two or three times what is available in England. That is important. There is an increasing focus on lower-handicap races. This suits small trainers, syndicate owners and those who own two or three horses with a €10,000 minimum value. This is a major step forward. A reduction in the cost of entry to those races at the lower end in terms of the handicap has been tackled at last and I welcome the change.
We need to make it attractive to own a horse. We have some high fliers in the country. They own horses and that is grand. They are wealthy. However, others are down at the bottom. Those in syndicates and partnerships are important to the horse racing industry. HRI should continue to work in this area and try to make it attractive to own a horse.
All is not sweetness and light. It is important to ensure that everyone in the industry gets a fair crack of the whip. I am referring to wages for those who work as stock handlers and valets as well as others working in this area. It is important that they are properly looked after and remunerated. Often, they are the spokes of the industry wheel. They work early in the morning and late at night. There are long periods of travel for them and so on. It is important that they are paid appropriately. The last thing we want is any degree of exploitation of that area.
Reference was made to media rights. I am delighted that they are out for the next six or seven years. What is the relevant period?
Willie Penrose (Longford-Westmeath, Labour)
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That is great. Mr. Kavanagh knows the argument I have made in that regard.
Mr. Kavanagh has acknowledged the central role of the smaller racecourses, and I welcome that. They generally attract good attendances at flagship meetings. As I said to him, Senator Paul Daly will outline, as chairman of our local course in Kilbeggan, the tremendous amount of work done there. The course is trying to attract people, including families on group outings, people on business outings and everyone else, while ensuring the ordinary person has a chance to get access to the course for a very reasonable price. The same goes for the courses in Sligo, Roscommon, Clonmel, Thurles and Ballinrobe. I visit them all and they represent good value.
I spoke extensively here about point-to-point and the Horse Racing Ireland (Amendment) Bill. I do not know what Mr. Kavanagh's view is, but I did not want HRI to be controlled in the rigid fashion originally proposed in the legislation. I set my face against it and I am glad I did so. Point-to-point is the seedbed of the national hunt industry, and we welcome the funding increases for it. These are the real stalwarts of the racing industry. They are the groups of volunteers without whom some of our greatest horses would never have been seen. Kilworth and Fowlers Field years ago and the Shillelagh, Castletown Geoghegan, Kilkenny West and Oldcastle are the places where the real racing aficionados are down at the bottom, and it is important that HRI continues to support the point-to-point industry.
As I said, encouragement of syndicates, ownerships and partnerships will be very important, and the reduction of costs in this area is critical. I wish to raise a point with Mr. Kavanagh in this regard. Perhaps he will not agree with me but perhaps he might now that money has become plentiful again. There should be no need for a charge for renewal of colours every year. If one's colours are the same in 2016 as in 2017, why should HRI get any more money for that? There is also a charge to confirm one's trainer even if he or she remains the very same. These are little petty costs on people. The declaration fee is another that drives me mad. Mr. Kavanagh might not think it is much, but one can make a declaration and then the horse gets sick or some other bloody thing happens, and one still must pay. These are irritants, especially during the downtime. They are all very big cuts. I ask HRI to try to do something in these areas. However, I acknowledge and welcome the work that has been done, as I said.
The Curragh is a big development. Mr. Kavanagh said very little money has gone into it up to now and that it will see a significant capital investment. It is a beacon for flat racing.
There have been significant developments regarding Champions Weekend, as I said. I know HRI does much promotion and other work during this fairly important flagship weekend, but the crowd capacity will only be about 6,500, as I understand it. Maybe I am wrong. Is that for 2017? Is that not a failure of forward-thinking? This is the biggest weekend for money promotion. Very often that money goes abroad, but that is neither here nor there. HRI wants Champions Weekend to be a major flagship event. I know HRI has decided all its plans for 2017 by now, but surely to God it can consider this for 2018. I am sure the work will not be finished in 2018, seeing as it is such a major development, but surely HRI can remedy and revise this.
I will finish with this. I thank the Chairman and Deputy Martin Kenny for letting me in.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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I apologise to Deputy Penrose.
Willie Penrose (Longford-Westmeath, Labour)
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That is all right.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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I did not see him earlier.
Willie Penrose (Longford-Westmeath, Labour)
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I appreciate that. I know the full levy and I know HRI is constrained, but I am not, and I wish to make that clear to the witnesses. Mr. Kavanagh pointed out the mechanics and logistics of the method by which the levy is calculated, but it is absolutely mad and absolute nonsense. A four year old child in a school would not come up with it. It is such nonsense that the case in the District Court was lost. I can speak about it. HRI appealed to the Circuit Court, and I know what happened in the Circuit Court. The Circuit Court is seeking clarification on the case from the Supreme Court and, as far as I know, HRI is dead set against it going there. I know the witnesses cannot talk about this but I will raise it because if that is the position, it is an important legal issue. If the Circuit Court, as I understand it, is in a position to seek a determination regarding a legal issue - I know what the legal issue is - one should only be charged on what one actually pays, not on a putative thing whereby somebody says it was €5,000 and it turns out to be only €1,500. Perhaps I am incorrectly informed in this regard, although I do not think I am. This is common sense.
This may not have been introduced by the HRI. It was introduced back in 1999, 2000 or thereabouts. I have raised this in the Dáil already so I am not coming to this after the fact but before the fact, and it is wrong. It must be addressed in the interest in fairness. I know Mr. Kavanagh explained this with tables or graduated it, in fairness, and his colleague at the accountancy end of it says that the lower bands represent 6% of revenue but 27% of foals. Nevertheless, if something is wrong in principle, it is wrong for the small person, the big person and everyone else. We must stop fiddly-faddlying about and get on with this and deal with it.
Other than that, I wish HRI and the board well going forward. I have had my arguments with them, but now it is time we put our heads down to ensure that this important industry continues to progress.
Mr. Brian Kavanagh:
I acknowledge Deputy Penrose's constant support for our industry. I do not mind differences of opinion. He and I sat through, in 1999 and 2000, every phase of the Horse and Greyhound Racing Bill. I observed during debate on the 1994 legislation and the second piece of legislation in 2001, which had cross-party support, that he was an unstinting supporter of the sector, and I wish to recognise that on the record. If people did not have differences, we would never make any progress. I do not think we ever had that many real differences and I worked very closely with a colleague of Deputy Penrose's, Jack Wall, down through the years, who shared his passion for racing. At times when legislation came through, there was support. Deputy Penrose left out from his list Dot Love, who also trained the winner of the Irish Grand National.
Willie Penrose (Longford-Westmeath, Labour)
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Liberty Counsel. Senator Paul Daly and I had enough winners there last year; it is this year we are worried about.
Mr. Brian Kavanagh:
To address the points Deputy Penrose made, I will reiterate what I said about on-course betting. It is absolutely vital we protect the on-course bookmaker. It is not easy to see a solution - I will not hide that - and we are trying as hard as we can to work with the bookmakers on the tracks.
I would like to pick Deputy Penrose up on one point. He said Irish prize money is significantly higher than that in the UK. That is misleading. If one takes the straight average prize money per race, the answer is that it is, but if one considers the cost - and the Deputy has criticised some of the costs surrounding declaration of fees and entry fees - that owners are having to pay towards prize money in Ireland compared to the UK, it is significantly higher. If one nets that prize money out from what the owners contribute and then takes the prize money as an average per horse in training or an average per runner, we are significantly behind the UK and well behind France. Therefore, while on the face of it the prize money might look attractive, when one scratches beneath the figures, we are behind the international competition.
Without trying to sound smart, on the one hand, Deputy Penrose cannot complain that we are charging owners too much but then say the prize money is too high. Part of the reason for this is that the owners are contributing to prize money. As part of the new funding structure, for which we are seeking the committee's support for the industry, we would like to be able to reduce all these costs on owners in order to ensure our prize money remains competitive. We see the money that Horse Racing Ireland, through its horse and greyhound racing fund, puts into prize money as a major stimulus for the rural economy.
Last year we put in enterprise money of €35 million and people will argue that this could go to more worthy causes. However, that money stimulates in excess of €400 million in investment by racehorse owners in purchasing horses and keeping them in training. Over 8,500 horses were in training last year and, taking into account the average cost, including veterinary and downstream costs as well as purchase, this is a high return. The funding should be from betting tax and not from funds needed for general Exchequer purposes, a recommendation the predecessor to this committee made and for which we would seek support from the current committee. To suggest our prize money is significantly better than in the UK is not to look at the full facts.
The Deputy is right that a media rights contract has been signed until 2023. That is good but it is a double-edged sword as racecourses can become dependent on media rights. Some racecourses in the UK have not tied up rights contracts for this year and face losing that income so we cannot be complacent about media rights income. I support everything Deputy Cahill said about point-to-points. There was never a desire on the part of Horse Racing Ireland to have provisions in the legislation to control point-to-points in a rigid fashion. They are part of the industry and we want to support them. The legislation was possibly a missed opportunity to have the type of dialogue we are having now but the board is committed to supporting point-to-points going forward.
The chairman has put owners front and centre and their costs have been reduced by 30%. I do not disagree with the point about colours or the authority to act but when our funding was cut we had to find it from somewhere else. It might be said that we went for the soft targets by implementing charges but we have reduced them by 30%. We have eliminated eight charges entirely and we will continue our programme to do so.
I was asked about the Curragh and champions weekend. We are damned if we do and damned if we do not The Curragh has been starved of development funding and is in dire need of redevelopment. We have come up with a proposal for a public-private partnership which has generated €32 million in investment. We are hoping to raise up to €40 million in private investment to reduce the funding the State is required to put in. The track at the Curragh is central to the flat racing programme and we are too dependent on it. The Phoenix Park and Leopardstown had very high-quality sprint racecourses but they have both gone. The M50 took the sprint track from Leopardstown and the Phoenix Park was lost to development. The Curragh is a unique track that can take up to 30 runners in races over certain distances and to lose that from the flat programme would create challenges. We decided to continue to race during construction, but with a limited capacity. The board met the Curragh chairman and chief executive yesterday and I believe the facilities at both meetings will be very good. It should be remembered that they were not much to write home about before and were decrepit before the works started. This year could even be one of the most enjoyable Derbies ever because of its uniqueness.
I will not get into the specifics of the case relating to the foal levy but there is 99% compliance with the levy. The levy is a fraction of the cost of producing a foal. A stallion might cost €2,500 and production costs could total €6,000 or €7,000 in a year but the levy is €35. None of us likes paying levies or taxes but 99% of breeders comply with it. Deputy Pentose has been a supporter of our game for a long time and it is much appreciated.
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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I welcome Mr. Kavanagh and his colleagues. I read with interest the presentation and its accompanying documents, as well as the 2016 fact book from Horse Racing Ireland. There is no doubt that it is a very profitable and prestigious industry that is doing very well and making great gains. The issue for a lot of people is the fact that a lot of taxpayers' money is going into it. Our responsibility is to ensure that taxpayers' money is well spent. I will go back to the issue raised by Deputy Michael D'Arcy, namely, the difficulties around the appointment of Mr. Kavanagh last year. Can Mr. Kavanagh give us an assurance that we will not be back in this situation in five years' time and that he will not be looking for another five-year contract at that point? Can he give an assurance that there will not be a golden handshake or huge gratuity at the end of that period? I note that he said a succession plan was in place.
Mr. Kavanagh did not say he had a contract of indefinite duration but I got the impression that there was a possibility of one being put in place. If that were the case it would appear to me that Mr. Kavanagh and others on the board, including the chairperson, engineered a situation whereby their own reappointment would take place. What are his comments on that?
HRI got €60 million in Government funding last year and €64 million this year. We do not know its other income streams and this is most inappropriate. I asked Mr. Moloney about the media deal, only to be told it was commercially sensitive. That is not appropriate either. Given that the Irish people put so much money into this industry, it would be appropriate to disclose how much the media deal was worth. Who negotiated it and how was it negotiated? What percentage goes to HRI and what percentage back to the various racecourses?
Mr. Brian Kavanagh:
I answered Deputy D'Arcy's question about my own situation. It is clear that I have tried to do what is right for Irish racing during my career and I have given a commitment that I will not seek another contract, which is in the minutes of a board meeting. I have a passion for Irish racing and it is dear to my heart. However, I fully accept the need for change at senior levels so we have put in place a new management structure, which is designed to bring new blood and new thinking to the senior management team. We will hopefully fill places in that structure in the near future and it is proposed to allow the new people to be contenders for the position of chief executive, although that does not mean the appointment will be from within the organisation. The timing for this has been approved by the board.
I do not believe that the chairman and I engineered our reappointment. Everybody acted with the best of intentions, and it must be remembered that there was a hiatus in Government for five months, at a critical time, and there was no Minister between February and May. The appointment of the chief executive is a matter for the board and that was approved by the board. It was not the intention to do this without telling anyone. The chairman told the committee that he wanted to ascertain the position of the Department of Agriculture, Food and the Marine and the Department of Public Expenditure and Reform before going back to the board.
I certainly have no intention of engineering anything. As I said to Deputy D'Arcy earlier, I would have been more than happy to compete for the position and if I was successful, fine and if I was not successful, I would accept that. I have competed previously and I think that would be fair. That was the basis on which I was appointed in 2009. The concern about my contract was the fact in 2011, this clause was removed from the contract which I signed noting my concern because it is very difficult for a chief executive to be in dispute with a Department that is providing funding to the industry and I would not want my contract to be a block to that relationship.
I cannot disclose matters relating to the media rights deal. The Deputy asked for HRI's other sources of income. They are in our annual report and Ms Eade will be quite happy to go through it with the Deputy. HRI generates about €5 million from the media rights deal. The bulk of the deal goes to race courses but it would be inappropriate for me to disclose the value of it because it is a commercially sensitive area. Mr. Morris and I negotiated it together with the chief executive of the Association of Irish Racecourses, Paddy Walsh. That was effectively over a three or four-month period and required a lot of knowledge and understanding of the media landscape in the UK and the time to take the right opportunity. As I said earlier, there is a race course group in the UK that has no media rights deal so there was a day when no pictures from that group were shown in any betting shops in Great Britain, Ireland or any of the betting shops owned by three of the major chains because they had not concluded a deal. If we were in that position, it would render the race courses very vulnerable so the legislation requires HRI to negotiate the media rights. That is because one will always maximise the value one gets for those rights by selling them as a package rather than Punchestown thinking it can do one deal and Listowel thinking it can do another one. That came under the guise of the HRI media rights committee. The executive work was done by Mr. Morris and I along with the chief executive of the Association of Irish Racecourses. It was a tender process with interested parties so we invited applications from the various interested parties.
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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So there was a procurement process?
Pat Deering (Carlow-Kilkenny, Fine Gael)
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A tendering process.
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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A tendering process.
Mr. Brian Kavanagh:
There are two main players in this business in the UK. To some extent, the division in the UK between different bands of media rights provides an opportunity from an Irish point of view because there is a demand for it. One group of British race courses sell the rights under one banner, another group sells them under another banner and then Irish rights are available. The landscape has changed completely. If one goes into a betting shop now, South African racing is on television. There is racing from the US on television. Most racing is now streamed live on the Internet by bookmakers. If someone wants have a bet, they can watch a race on their phone or IPad. It is a complex area. I am not being evasive but I do not believe I can say what deal we did. It is a commercial deal. The only thing I would add is that it is fundamental to the survival of many race courses in the country.
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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HRI owns some of the race courses and could be accused of favouring its own courses with regard to that. The Indecon report highlights the fact that some race courses are owned by HRI, which acts as the licensing and regulatory authority while the same time being involved in the industry. It throws up a lot of conflicts. In addition to that, we see the situation regarding the development of the Curragh. A number of prestigious individuals are also involved in that deal. It gets very murky to somebody looking at this from the outside who sees a lot of public money going in there and all these guys up to their necks in it. HRI is in the middle of it all. A lot of people are very concerned because €64 million of taxpayers' money is an awful lot of money to put into what is on the face of it a very wealthy industry.
Mr. Brian Kavanagh:
HRI and I take very seriously the obligations relating to taxpayers' money. In respect of the Deputy's point about HRI owning some race courses, I understand the issue and if things are murky, it is my job to clarify them at events like today's meeting. I can meet the Deputy and go through it privately or through the media. There is no differential between HRI-owned tracks and private tracks in respect of the allocation of capital grants, prize money and marketing grants. They are all dealt with equally. Senator Mark Daly will know this. We have three categories of race track. HRI owns a track in both category 1, Leopardstown; category 2, Navan; and category 3, Tipperary. Those tracks are dealt with the same way as other tracks in those categories. One of our functions under the legislation involves operating race courses we own. HRI really became involved in race course ownership because we had to. I mentioned what happened in the Phoenix Park or Baldoyle earlier. As a property, Leopardstown is worth many multiples of what it is worth as a race course so it is logical for the racing authority to own that race course because if it was owned by private individuals, their duty as shareholders of a company would be to maximise the return from that and it would not be through horse racing.
We became involved in owning Fairyhouse when it was effectively bankrupt about ten years ago. This is the home of the Irish Grand National, one of our most prestigious races. HRI had to put together a rescue programme. In my contribution, I mentioned that Punchestown and Fairyhouse overstretched themselves. We get involved in those race courses in the same way as the FAI and rugby authorities own and operate the Aviva Stadium or the GAA operates Croke Park. I understand the point made by Deputy Martin Kenny, namely, how this tallies with private ownership. The only thing I can say is that this is the same as happens in other countries, particularly France. The racing authority in France owns nine of the principal race tracks. Perhaps there is a need for greater clarity or transparency around some of the issues we are dealing with or some of the ways in which we are spending our money. If it is not clear to the Deputy then I must take it that we are not getting the message across and we will have to work on getting that message across more clearly. There is certainly no favouritism regarding HRI-owned tracks and other tracks. I can understand how that would be a perception and we probably have work to do to address that perception. I would welcome the opportunity to meet with the Deputy to discuss the industry in general but also that specific issue because it is a fair point.
With regard to the other point-----
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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Indecon raised it in its report.
Mr. Brian Kavanagh:
Throughout my career in racing, I do not know of one race course that has paid a dividend to its shareholders. I said earlier that race courses are hanging on or clinging on to some extent. That is the wrong expression but they are surviving by virtue of the media rights money. We have seen how attendance at the GAA football championship has gone down by 28% in the past ten years. That is not happening in racing. Our attendances have held up but they have held up because of our big events, not our run-of-the-mill events. It is the same as rugby. More and more sports are being consumed and watched from the couch rather than at the live event. It is a real challenge to get attendances at those race meetings. The alternative to taking over Fairyhouse was to let it go into liquidation and be sold as a potential property play at the time when "funny money" was being bandied about for land all around the country.
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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Is Fairyhouse one of HRI's category 1 race courses?
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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And is the Curragh?
Mr. Brian Kavanagh:
There is no real logic in this differential other than for prize money purposes so a maiden hurdle at these tracks would be worth a certain value because a type of horse runs there which might be a better quality horse than one that runs at a category 2 or category 3 track.
The five category one tracks are Galway, Punchestown, Fairyhouse, Leopardstown and the Curragh. There is a second tier of category two tracks, many of which are the ones Deputy Cahill referred to which race all year round. They are Gowran Park, Naas and Navan and Listowel, which has a big festival. There is a third tier of tracks which, as I said earlier, cause me the fewest sleepless nights. They are Sligo, Kilbeggan, Bellewstown, Ballinrobe and Killarney. They are very successful. Sligo racecourse is a place to be really proud of. Ten or 15 years ago the track was struggling but it now has a local committee behind it. They built a fabulous new stand, which is really beautiful. There is a theme to each of their race meetings during the season so, for example, they have student days and country and western days and the crowds are vibrant. If one goes to a race meeting in Sligo, there is a buzz about it because it is still something of a carnival and there is great local pride in it. I feel that is where the focus of our industry should be; it is a very important element of the industry.
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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Mr. Kavanagh cannot disclose how much money they get in category one but how does it compare to category two? Is it half or a third of the amount?
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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I am referring to prize money or the money they get for media rights. Categorising gives the impression that the tracks in the lower categories are not as well looked after. That is the sense I am getting and I am hearing it from people. We do not come here and ask the questions without people coming to us with them. That is the reason for it.
Mr. Jason Morris:
There is very little differential in terms of the tiering of prize money. A main race at Leopardstown might be worth €14,000 compared to €12,000 at one of the smaller tracks so there might be a €1,000 or €2,000 difference in basic values. They are all handicapped to work for exactly the same so a similar quality of handicap run at Sligo is worth exactly the same as the same race at Leopardstown or the Curragh. It is relatively modest. Better quality racing tends to be put on at higher quality racetracks with better racing surfaces. In terms of the way the prize money is allocated between racecourses, the levels are fundamentally very similar in the different tiers of race track.
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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What about the media rights? Do they get a lot more?
Mr. Jason Morris:
It is the same. There is a slight tiering but it is not majorly significant. Grade one tracks receive slightly more than grade two and grade three tracks but overall the standard payment per race is the same for every race whether it is run at Leopardstown, Sligo or Ballinrobe. There is an element within the media rights structure that is differentiated by tier of racetrack but it is only a relatively small element within the total sum.
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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Irish Thoroughbred Marketing is a section of-----
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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How much money is spent on marketing?
Mr. Brian Kavanagh:
I do not want to sound smart but not enough. Ms Suzanne Eade will give the exact details. Irish Thoroughbred Marketing is a wholly owned subsidiary and is funded partly by Horse Racing Ireland and partly by the breeding industry so a contribution of funding from the foal levy goes into Irish Thoroughbred Marketing. The sales companies pay a percentage of their turnover, the stallion owners pay a fee and Horse Racing Ireland puts €800,000 into Irish Thoroughbred Marketing.
Ms Suzanne Eade:
The figure from the foal levy is €425,000. This year there will be €1.095 million going into the Thoroughbred marketing team. We have to look at what they do. They are like a mini IDA. Much of their time is spent out and about travelling in Europe and Asia and bringing people to visit stud farms and sales companies. That is what we are talking about when we talk about marketing. They are feet on the ground bringing people back in to drive purchases in Ireland.
Mr. Brian Kavanagh:
That is to cover the entire world. We look with pride on what organisations such as the IDA and Bord Bia do to promote Ireland overseas. That is what Irish Thoroughbred Marketing does. It has a relatively small team with a staff of nine. They are very hardworking and do a lot of travel around the world. If we take last week for example, the Minister, Deputy Creed, was on an agri-food trade mission to the Gulf. We were able to take part in that and he very kindly hosted and spoke at a reception for Irish Thoroughbred Marketing in Dubai with Dubai trainers and Dubai-based owners about the advantages of buying horses in Ireland. Last year, 25% of the horses that won races in Meydan, which is the main racecourse in Dubai, were Irish bred. They were born here. Last year, seven of the first ten finishers at the Prix de l'Arc de Triomphe were born in Ireland. The Melbourne Cup in Australia has become a big market for stayers, which are horses that run over longer distances. Three or four years ago, eight of the first ten in the Melbourne Cup, the biggest sporting event in Australia, were Irish. They had "Ire" after the horse's name. Irish Thoroughbred Marketing is out there trying to encourage and promote these successes to get buyers to buy horses at the horse sales in Ireland, to have horses in training in Ireland or to base their breeding operation in Ireland. Compared to some of its international counterparts, it is run on a shoestring. I am not belittling €1.8 million because it is a decent amount of money but if we were able to spend more, it could do a lot more.
To return to the earlier point about Brexit, if it becomes a problem we will be challenged very strongly to look for new international markets. The difficulty we have is that national hunt racing, which is the side that produces many of our foals, it is an activity that is restricted to Ireland, Britain and France. The flat scene is where the global market and global buyers are. We will have to travel the world a bit further. There is great opportunity there. American buyers are now looking to Europe because pedigrees have gone stale in America. There are difficulties in America with the use of medication on horses. There are people questioning the toughness of the American breed and they are coming to buy horses in Europe now and particularly in Ireland in order to bring them into their pedigrees to strengthen them. To do that, we need to get feet on the ground around the world, as Ms Eade said.
Deputy Martin Kenny:That is helpful. The other issues that come to mind and which were mentioned earlier are the betting tax, the number of people who are at the tracks and the amount of on-course betting that is going on. I mentioned the last time when Mr. Keeling was here that there was an issue with Dundalk and the bookmakers. There was a court case going on around that. Mr. Keeling assured me at the time there were no other court cases happening. Is that still the case?
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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Are there other court cases?
Mr. Brian Kavanagh:
In our response to the last query, we outlined the legal cases we are involved in at the moment. There are three cases ongoing that HRI are involved with. We are not involved in the Dundalk case. That is between the bookmakers and Dundalk. We do not own any of the ordinary share capital of Dundalk. We have a preference shareholding in Dundalk and we have the right to appoint three directors. We would love to see that case brought to a conclusion. It was heard in the Court of Appeal last week or the week before because Dundalk appealed the decision of the High Court. A judgment on that is expected in the next four to six weeks. The two other cases we are directly involved in are some small cases on the foal levy. They are District Court and Circuit Court cases and involve debt collection of relatively small amounts. There is an ongoing legal case involving Leopardstown racecourse and one of its tenants who operates a leisure centre and gym which has been in the courts for some time. It was heard in the Supreme Court in January and a judgment on it is expected before the end of June. Other than standard insurance claims as a result of falls, trips and accidents at racecourses, there is nothing else.
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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What about the Denis Carey case?
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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There is no need.
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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I was surprised the board did not seem to be aware of it. That is what surprised me the last day and that is why I have brought it up again.
Paul Daly (Fianna Fail)
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I welcome the delegation and members of the board. I have been mentioned here on numerous occasions in the past so it is not a secret but I will put on the record that I am chairman of Kilbeggan racecourse so I have a vested interest in this area. I have been a member for 36 years and it is a great honour for me to be chairman for the past ten years. My heart is in what we call the provincial tracks; we do not like being called the weaker tracks. I had no intention of getting parochial until Deputy Cahill tried to pull the rug from under Kilbeggan in favour of Thurles.
Jackie Cahill (Tipperary, Fianna Fail)
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The way I look at it is share and share alike.
Paul Daly (Fianna Fail)
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Mr. Kavanagh mentioned a few things in passing, such as that he does not like having different percentage rates when it comes to grants. I would like to see that change in the future. At national hunt race meetings run during the summer our disposal income is an issue, as it is with other tracks. I should not only refer to our track. It is hard for me; it was a slip of the tongue as much as anything else.
The provincial tracks that are running in off-season with limited meetings do not have the same disposable income to put up their 60% in order to draw down the 40% of the taxpayers' money or the share of the media rights that is being held for grants. There is a well-known saying that the weaker the patient, the greater the care required. The value and importance of the provincial tracks with regard to employment and tourism in rural Ireland has been pointed out by many speakers this evening. Deputy Cahill referred to racing during the winter when nobody else can race because of ground conditions. In our instance we organise racing during the summer and provide national hunt racing for the weaker type of horse that will not be going to the Cheltenhams of this world. We provide that service to the paying public in the area who like being able to attend the local rural country race meeting with a family atmosphere like that being created in these tracks. Providing the facilities will cost more in some ways than the bigger tracks who will have the cashflow because they have festivals. Mr. Kavanagh said he does not like doing that. I am being very parochial. My question is would Mr. Kavanagh consider looking at that differently in future? He also said he does not have any sleepless nights over the category 3 racetracks. I wish I could say the same to Mr. Kavanagh.
Paul Daly (Fianna Fail)
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Many of the questions Mr. Kavanagh has been asked and many of the statements that have been made are about how we have got to where we are. I would like to hear what plans we have going forward. From my perspective, I would like to hear what is in mind for the provincial tracks.
I am known in those circles so I had a lot of people on to me about the foal levy. It has been covered but I want to put it on the record for the people who brought it up with me. Will it be revisited pending the outcome? I know Mr. Kavanagh is not in a position to speak and I am not as qualified as Deputy Penrose is to talk about it. If it goes to the Supreme Court, will it be looked at again? It is there and is somewhat controversial so there must be some issue. Will Mr. Kavanagh revisit it? My big concern is that the provincial tracks feel we cannot afford to get an equal share of the 40% that is available because of our cashflow situation more so than anything. We are not really on a level playing field in that regard.
Mr. Brian Kavanagh:
The foal levy is constantly under review. The board will always listen to sensible suggestions. We have had meetings with a number of interested parties on the foal levy. We have concluded that the current basis is the best basis for the time being. That is not to say the committee will not look at it in the future. It is a success story. It raises €1.8 million that we are not seeking from the Department and it has 99% compliance.
Tiered grants are something that could be considered. It is not easy. I accept the Senator's point that he worries about Kilbeggan. I do not really worry about it. We want to reward success. We can look at tracks such as Ballinrobe, Sligo and Kilbeggan. In Ballinrobe, every race was sponsored last year and all the facilities are new. Have they been there 15 years?
Mr. Brian Kavanagh:
It is a model racecourse and is the only racecourse in County Mayo. It is keeping the industry going. It has thriving crowds and Kilbeggan is the same. It is the only racecourse in Westmeath. It is a different offering from other tracks. I do not see it in a big track-small track, us and them, context. I see them all as part of the tapestry of Irish racing. If we are trying to sell or promote Irish racing, we are promoting a whole variety of things, whether it is the racecourse experience, the breeding industry or tourism. Tiered grants is something the board will look at. We have a strong desire to get the funding structure we spoke about earlier in place. The current capital grant scheme will run out in 2019. Most of that money has already been earmarked for racecourses and we are working with Kilbeggan and other racecourses to finalise current plans. We hope to put in place a further grant scheme thereafter. I have no compunction about looking at the idea of tiered grants but it is not easy. There is not one group or one body that comes through the front door of our office that is not looking for something. When we give something to some area, it means taking away from another area. I would certainly be open to it.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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We have two speakers left. I will take both of them together. Is that okay?
Clare Daly (Dublin Fingal, Independent)
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Yes. I am sorry for having to leave the committee room. We clashed with the Dáil schedule and I had to speak so apologies. The points I will cover have not been covered. Mr. Kavanagh is very welcome.
We are here as a consequence of dealing with governance and of the manner in which the debacle around Mr. Kavanagh's reappointment was handled. He said earlier to Deputy Kenny that he did not engineer anything in that situation with the chairman of the board. Will Mr. Kavanagh explain why he drafted a letter to the Minister, Deputy Creed, last September, which he gave to the chairman to sign saying the board was supportive of "retaining the expertise and experience of our chief executive for the significant challenges and opportunities which we will face in the coming years"? When Mr. Kavanagh drafted that letter and passed it to the chairman to sign, was he cognisant that the decision to reappoint him was a matter for the board and not something that he decides and gets the chairman to sign off on? Was he further cognisant that lobbying on his behalf is not permitted as per the Public Appointments Service code of practice?
Mr. Brian Kavanagh:
"Yes" is the answer to the latter question. That letter was drafted after my appointment. It was written in September. I draft letters for the chairman as a matter of course, both the current chairman and previous chairmen. That is a normal way that chairman-chief executive relationships work. The letter the Deputy is referring to was a letter from my chairman to reflect a board decision. I do not have the detail to hand but in terms of the sequencing of things, my appointment was approved by the board at a July board meeting, which I think was 21 July. I am well aware, as was the chairman, that it was a function of the board to appoint the chief executive. I was not in the room at the time but there was a long debate at that board meeting about the appointment and ultimately the appointment was approved. I am speaking from memory because I do not have the record in front of me. There were at least two board meetings in September at which the board reconfirmed the appointment. At the second of those board meetings, there was an instruction to issue a statement to the media and write to the Minister to outline the decisions that were taken. That is the letter the Deputy is referring to. It was to reflect a decision that had already been taken by the board. The chairman was not bypassing the role of the board.
That was certainly not anyone's intention. That letter largely reflected what was in a press statement agreed unanimously by the board at its meeting. I cannot remember the specific date. I believe it was around 11 September or 12 September. A press statement was issued thereafter that was actually drafted by the board itself. It finalised the wording. The letter was to update the Minister, Deputy Creed, on the situation. I believe it was before he was coming before this committee. It was drafted by me and signed off by the chairman and deputy chairman on behalf of the board.
Clare Daly (Dublin Fingal, Independent)
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Does Mr. Kavanagh not consider that to be lobbying? I am curious why, if the decision had already been made, a letter was sent urging the Minister to support the position.
Clare Daly (Dublin Fingal, Independent)
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What Mr. Kavanagh is saying is that the board asked him to write the letter he sent in September-----
Clare Daly (Dublin Fingal, Independent)
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It asked Mr. Kavanagh to draft a letter, which Joe Keeling sent.
Clare Daly (Dublin Fingal, Independent)
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But Mr. Kavanagh was doing that on the instruction of the board.
Clare Daly (Dublin Fingal, Independent)
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I heard that. Mr. Kavanagh was doing it on the instruction of the board; that is fine. Obviously, out of these issues, governance issues have arisen for the board. When Mr. Kavanagh's colleagues appeared before the committee earlier this year, they got media training for their attendance here. Did Mr. Kavanagh get media training or communications training for the session here today? I am curious about that.
Mr. Brian Kavanagh:
No. I do a lot of media work. I had a session with our PR firm on Friday. I do not believe I would call it media training. I do a lot of sessions before this committee or various Dáil committees, and I do a lot of television and radio coverage. I have not availed of training in that respect.
Clare Daly (Dublin Fingal, Independent)
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So it was a normal part of-----
Clare Daly (Dublin Fingal, Independent)
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I take on board the points Mr. Kavanagh made on the steps the board has taken to try to deal with some of the governance issues. Mr. Kavanagh said he has introduced a succession plan. As part of that plan, and in dealing with this exit, did Mr. Kavanagh request that Horse Racing Ireland fund an upskilling programme, a university course, for him when he stepped down?
Mr. Brian Kavanagh:
Not when I step down. The course I was referring to was a course in corporate governance, which would potentially benefit not just me but also the organisation. As an organisation, we would have a policy for all staff to try to encourage them to take on as much training and education as they can. We have assisted staff members at all levels with-----
Clare Daly (Dublin Fingal, Independent)
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Absolutely. So it was a university degree in corporate governance for Mr. Kavanagh to do while still CEO, not for when he leaves.
Clare Daly (Dublin Fingal, Independent)
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Is that a full-time course or an evening course? How long is it?
Clare Daly (Dublin Fingal, Independent)
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Mr. Kavanagh already has a quite heavy schedule. He is on five sub-committees and probably has a large brief already. In any case, in terms of dealing with succession issues, was there any discussion of Mr. Kavanagh's severance payment? Obviously, given that his salary is in breach of the guidelines, which was a topic generating public disquiet, was there any discussion of the opinion that he should receive generous payments based on his length of service when he completes his term? Was there any such proposal put to the board?
Mr. Brian Kavanagh:
No, not to the board. Naturally enough, I inquired about what would happen at the end of my contract, particularly in regard to my pension and whether there would be any recognition of my service. The remuneration committee considered that and said it was not appropriate to consider that at this time, and that it was a matter to be considered down the line. It pushed back on that. It is natural enough to seek clarity on matters like that.
Clare Daly (Dublin Fingal, Independent)
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This is related to the point Mr. Kavanagh made about the course for himself on corporate governance. He made the point that measures were introduced to deal with corporate governance training for the board, which is very important. What sort of training has been undertaken? Have external courses been funded? Has this been done internally?
Clare Daly (Dublin Fingal, Independent)
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For the board.
Mr. Brian Kavanagh:
The board has started a programme of governance training on an annual basis. It had a half-day session on the new code of governance, which was published in September. It was given by our retained lawyers at no cost. That was part of the agreement with William Fry when it was successful in the tender for legal services. It was agreed it would provide a certain number of services free of charge. This is one of them of which the board availed.
We had a board meeting yesterday and the board discussed the structure of committees and sub-boards or boards of subsidiary companies, and it has asked the executive to come back to the next board meeting with a paper and a series of recommendations in that area with a view to clarifying terms of reference of all these committees and updating terms of reference. There are some new committees as a result of the legislation that was enacted last year. The board is also committed to taking annual corporate governance training. Ms Eade can fill members in a little more on the detail of that.
In accordance with the new code, the board has committed to full compliance in all aspects. One of the outcomes of that is that our audit committee has now become an audit and risk committee. It is chaired by a former Secretary General of the Department responsible for sport. It involves three externals and three non-executive directors. It will meet five times per year, rather than four, as was the case up to now. The internal audit function - I hope this does not sound like a contradiction - is outsourced to an external audit firm, Capita, that carries out a programme of audit work during the year. The area of governance is commanding a lot of the board's attention and it takes it seriously. There have been two new ministerial appointments to the board. They are strongly focused on that area also.
Clare Daly (Dublin Fingal, Independent)
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The actual training undertaken by the board is over a half day.
Clare Daly (Dublin Fingal, Independent)
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Bearing in mind the course for Mr. Kavanagh, has anybody availed of external training?
Clare Daly (Dublin Fingal, Independent)
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Is it something that the board would encourage? It should be funded, to be honest, externally-----
Clare Daly (Dublin Fingal, Independent)
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There are only two areas with which I want to deal. One is that which Mr. Kavanagh pinpointed. One of the key challenges for the industry is the recruitment and retention of staff. I am very glad Mr. Kavanagh has recognised that as a factor. What does he believe are the reasons? There are 14,000 full-time staff in the industry. How can this be squared with the fact that there is just short of €5 million sitting in a pension fund that cannot be distributed to stable staff because there is simply fewer than 1,000 people whose names have been submitted as earning an income of over €12,000? Where do the 14,000 full-time staff come from? How many of them are stable hands in the circumstances I have described?
Mr. Brian Kavanagh:
A relatively small, but very important, element of the industry comprises the staff at the coalface. They are the backbone of the industry. The pension information reflects a particular category of employment within the industry. As I stated earlier, the industry is much broader than that. When one broadens it out to include the breeding sector, the staff working on stud farms, the veterinary sector, the betting sector, including the on-course betting sector, and the catering and services sectors-----
Clare Daly (Dublin Fingal, Independent)
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How many stable staff would the witness say there are?
Mr. Brian Kavanagh:
There is a transient nature to that business. Off the top of my head, the Turf Club issues employee cards, which give access to stable yards and ensure security, to approximately 2,800 workers. Some of them are casual, some are students, some ride out horses at the weekends. The number may include people leading up horses. A core of the 2,800 employees are full-time staff who work for the major yards around the country. There is no doubt they have been under pressure over the years. They work very hard.
One of the drivers of the industry's success is the horsemanship of Irish people. They are good with horses. I am sure the Deputy knows this herself. It passes on from generation to generation. This links back to what was said earlier about the point-to-points. There is a tradition of horses there. There is a danger that could be lost if we do not look after staff.
We are the only racing authority that I am aware of that has stable staff representation at senior board level. The legislation brought in last year recommended a statutory sub-committee of the board specifically to look after the welfare of those employed in the industry. That committee is being set up. It will involve representatives of stable staff, union staff, jockeys and others employed in the industry.
Clare Daly (Dublin Fingal, Independent)
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The witness makes an interesting point. The legislation and the Horse Racing Ireland (Membership) Act does not mention the Irish Stable Staff Association, ISSA, it just says a board member representing staff. As Mr. Kavanagh knows, the ISSA is not a registered trade union. If it has no membership, why does Horse Racing Ireland view it as the representative of the stable staff? What level of governance does Horse Racing Ireland have over the ISSA, given that the ISSA were given about €110,000 by HRI last year?
Clare Daly (Dublin Fingal, Independent)
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The board issues the directive on where the pot of money goes.
Mr. Brian Kavanagh:
That is correct. That directive was in place before Horse Racing Ireland was established. There are deductions for the ISSA and there are deductions for the stable staff bonus scheme. The ISSA is not an organisation that we identified. From memory, the legislation provides that the board will contain a representative the Minister deems to be representative of stable staff or those working directly in the industry. I think that is the wording. There is a second staff member on the board who is deemed to represent those working in the industry. It is a subtle distinction. The second representative is a union representative. There are two representatives of staff on our board, one representing stable staff through the ISSA, which is the designated body-----
Clare Daly (Dublin Fingal, Independent)
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Is the witness saying the Minister is responsible for that and decided that the designation be the ISSA?
Mr. Brian Kavanagh:
That is correct. They are the group that represents stable staff with us or with the Turf Club or bodies like that. When a vacancy arises for the second seat on the board, ICTU is asked to put forward a name for that seat. That has rotated between Mandate and SIPTU. That is quite unusual and------
Clare Daly (Dublin Fingal, Independent)
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It is incredibly unusual and it is incredibly unregulated. I have not gotten my head around it but I am learning more every day.
Mr. Kavanagh has correctly identified retention of staff as a key problem for the industry. It is obviously a key problem for the people working there as well.
The witness has said that Irish people are good with horses and love horses. That is true. However, I am sure he is aware that the Irish Racehorse Trainers Association is lobbying two Departments to allow the re-issuing of permits to staff from outside the European Union. Could the witness explain that? Does that not verify the casual conditions of employment? If one wants to retain staff, one should pay them well and respect them. How can that be squared with the fact that Horse Racing Ireland brokered a deal with the ISSA, which has no members and did not vote on that agreement, to bring in a new pay deal which contains a patently illegal clause and argues for a breach of the Organisation of Working Time Act, an exemption which has no basis in law? How could that be? Brokering a pay deal with the ISSA sitting on the board is like having a football match with one side owning the referee and the other side's coach. How could that possibly benefit the stable staff?
Mr. Brian Kavanagh:
I do not think that is right. Staff retention and staff longevity in trainers' yards is strong. We have stable staff awards every year, where staff with 20 or 30 or 40 years service are recognised. Trainers running their business properly look after staff well. There is a transient nature to the staff. Trainers trying to get overseas staff to work for them is a big worry for the industry. There are a combination of issues.
Getting a proper funding structure for our industry and not requiring recourse to taxpayer funding is an ambition of ours. This would be an increase from the current level of funding, which would enable us to invest in development of people throughout the industry. There is a need to develop that side of the business.
Clare Daly (Dublin Fingal, Independent)
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Is Mr. Kavanagh not aware of good trainers out there who are trying to do the right thing but are being undercut by others in a race to the bottom? Would that be news to the witness?
Mr. Brian Kavanagh:
That may be the case in some instances. I do not have direct knowledge of it. The licensing of trainers is a matter for the Turf Club.
The second issue in the stable staff crisis is that people are getting heavier. Almost all riders on the track or in training centres in the US are South Americans. I suspect that is part of what the trainers are looking at. That is a real worry to me. It is a real worry for the industry. It is difficult to argue that this is part of our heritage, that we are good with horses and use it as a unique selling point and then say that we need to develop staff from overseas. That comes back to us. Ms Eade has some information on this area.
In the last two years we have appointed Carol Nolan as our first executive with specific responsibility for industry training, education and staff development. She is working with the breeders' associations, the trainers' associations and individual trainers to look at best practice. She was involved in that deal. That deal is a minimum arrangement to try and put some structure on terms and conditions of employment for staff.
Although I am not an expert in this area of working time directives and derogation, I understand that there was previously a joint labour agreement covering stable staff. That agreement included a derogation from the minimum working time directive. The agreement was then set aside, and a new agreement was reached between the trainers' association and the stable staff association in regard to minimum wages. The derogation was continued in that agreement. The negotiations between the trainers and the stable staff reached an impasse in the final quarter of last year. Carol Nolan got involved and was able to broker an agreement.
The wording on the minimum working time directive was continued through into the agreement.
In terms of compliance with legislation and tax codes, HRI is in a position where it would not condone any non-compliance. Equally, the nature of our business is unusual. It is not the only unusual business in terms of the times and seasons people work, but it is a question of working with the relevant authorities to-----
Clare Daly (Dublin Fingal, Independent)
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I am conscious of the lateness of the hour, but perhaps Mr. Kavanagh might do some homework. There was no derogation. A derogation is not whimsical, rather it has to come with substantial compensatory provisions. They are not included. In that sense, I put it to Mr. Kavanagh that the agreement was unlawful. Nonetheless, he has said his staff are the backbone of the organisation. Has any instance of bullying and harassment of HRI staff by other staff members or the executive been recorded?
Mr. Brian Kavanagh:
No. I understand the Deputy asked some parliamentary questions on this issue. We have trawled through the records back to when HRI was established in 2001. Our payroll records only go back to 2006. Ms Carol Nolan answered questions on the two disputes that had been settled locally without using the machinery of the State. There were three disputes that were referred to what was then the Labour Relations Commission, none of which involved bullying.
Clare Daly (Dublin Fingal, Independent)
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Mr. Kavanagh is saying there has been no settlement in any case which involves bullying. As a matter of interest, why are the payroll records not available for the period prior to 2006?
Clare Daly (Dublin Fingal, Independent)
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I will be very happy to meet Mr. Kavanagh, but he comes from an industry in which I have never seen so many people discontent, be they owners, trainers or other staff. I would have to give up my day job and stop dealing with every other issue to listen to everything they would have to say. As it is, I am learning more and more from them all the time. I will be better informed having met my roundabout standing commitments to them. We will certainly have a meeting.
Clare Daly (Dublin Fingal, Independent)
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The redevelopment of the Curragh racecourse involves a lot of money. The fact that the racecourse has been kept open and races are not being moved has caused significant disquiet. The tripartite arrangement between HRI, the Turf Club and private developers is concerning in terms of the governance of State bodies and the code of practice. Has HRI taken all reasonable steps to ensure the venture will comply with the principles of corporate governance applicable to semi-State bodies generally? Did it confirm to the Minister that this had been done? It is a requirement in this regard because this is a significant venture in monetary terms, one that is probably controversial. There are potential conflicts of interest and so on. Did HRI square it with the Minister beforehand?
Mr. Brian Kavanagh:
We wrote to the Minister. It is a major project. The Deputy asked what kept me awake at night. It is not Kilbeggan racecourse. The development at the Curragh represents a great opportunity. I would not describe the shareholders as private developers. They are people who have been investing in our business for over 30 years. Most of them are from overseas and have put a lot of people in high-quality jobs via their operations in Ireland. They have got behind the current project.
The reason there is a tripartite arrangement is there was a previous attempt to develop the Curragh racecourse before the Celtic tiger era. Thankfully, it failed, if that does not sound stupid, because it would have been a white elephant. It was typical of what was planned at the time. While certain moneys were lost, including by the owners of the Curragh racecourse at the time, no State money was lost in the project. That was down to the ethos we pursued in capital development programmes.
I am sure the Deputy is familiar with the Curragh racecourse. I do not know if she was in the room for my earlier remarks, but in the past 20 years less than 5% of the capital investment in racecourses has gone into our primary racecourse. It is not a good showpiece for the industry. When I attend a match in the Aviva Stadium or Croke Park, I am proud of these venues. The Curragh is the track that receives the most overseas visitors and we want to show off to them. We set up a company with a three-way split. The Turf Club which owned the site did not have the funds to develop it and agreed to put the asset into a new company. On behalf of the State, we agreed to provide funding for the redevelopment of the site. We sought and are still seeking private investment in the company. We generated €32 million in private investment quite quickly, money the State will not have to put in.
I do not think it is correct to refer to private developers. I am very conscious of the points the Deputy is making about the mixture involved, of which we need to be mindful. I stand over the organisation's track record in terms of the previous development and what happened at Punchestown and Fairyhouse which we were able to rescue from the brink of financial difficulties. We need to apply the same thinking to the Curragh racecourse. We took serious cognisance of this and were conditioned by the Department of Agriculture, Food and the Marine and the Department of Public Expenditure and Reform to participate in the company. In order to participate in it, as a State body, we required ministerial approval from the two Departments, which we sought and received, subject to a number of conditions, with which we have complied. We evaluated our investment in the company through an independent evaluation process which was chaired by and involved three external parties which comprised someone from Deloitte, the chairman of our audit committee and a retired staff member. They put the process through the ringer, brought it to the board and recommended that the investment proceed, subject to the Curragh company satisfying nine conditions, all of which have been satisfied. It is a very complex project which has been chaired by Mr. Padraig McManus who is involved on a voluntary basis. While it is very exciting, it needs to be watched carefully.
Clare Daly (Dublin Fingal, Independent)
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It does and I am not referring solely to the big guns. I am also concerned about the relationship between HRI and the Turf Club and the fact that governance arrangements for the Turf Club are due to change under the Act passed last year. There is an interim period. I have no doubt that we will return to that issue.
My last point concerns the foal levy. I do not accept that HRI cannot talk about it because of a court case because nobody is asking its representatives to talk about it. I want to know how much money it spent in defending the indefensible. We have to be clear on the amont. Mr. Kavanagh said only a sum of €50 was involved and that it was not really an issue. What led to the court case was a sum of €150 for an owner awarded by the small claims court. We will call it a victory, one which was celebrated across the industry. People were delighted because of the discrepancy highlighted by other Deputies. HRI spent a significant amount of taxpayers' money in launching an appeal against that decision and then turned up in court with the biggest possible legal guns to block the case from being taken to the Supreme Court. I read the coverage in local newspapers. The case could have been taken with the approval of HRI and so on. It did not have to state anything but it spent a lot of money in trying to block the case. How much was spent in doing so? I do not accept the point that the foal levy system would be an administrative nightmare if the case was abandoned. It would not be. It is like everything else that people buy in shops. They do not pay VAT on the advertised price. If a person buys a can of Coke in a shop, he or she receives a receipt which shows the price actually paid which includes VAT. I do not know why the foal levy would not be included in the actual stud fee charged rather than an arbitrary figure orchestrated to protect larger players in the industry.
Horse Racing Ireland has spent and will continue to spend a great deal on the legal costs of those contesting that legal action. I would like to know how much has been spent on legal fees, when such a small amount of money is involved? That has alienated owners. I wonder how that impacts on the development of the industry and getting more owners into it given that 92% of people have fewer than five horses. It is only those with a few horses who suffer.
Mr. Brian Kavanagh:
No, Deputy. That is not correct. I do not believe the decision was celebrated throughout the industry. I mentioned earlier that there is 99% compliance, that is a levy was paid for 8,400 out of 8,500 foals.
As regards the specific amount that was spent on the court proceedings, one must bear in mind the Horse Racing Ireland had made every effort to resolve this before it went to court - and I will not say any more than that - but the costs that were incurred, I do not have the exact figure but I will get it for the Deputy, were not as the Deputy described. We used a small local firm of solicitors; our solicitor was Cairbre Finan of Wilkinson & Price and we had a junior counsel for one day. The idea that we would participate in a case stated to the Supreme Court on a levy on which there is 99% compliance and would then base a future levy on the actual stud fee rather than what is deemed to be the fee, generally applicable on the 14 February of a particular year, which the current legislation would require, makes no sense.
There are significant legal costs in taking a case to the Supreme Court. It would require the chief financial officer, Ms Suzanne Eade, to take on two or three extra people in her department to administer it. I do not think that would be an efficient use of money.
Clare Daly (Dublin Fingal, Independent)
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I was not asking Mr. Kavanagh to do that. I am questioning why Horse Racing Ireland felt it necessary to strenuously object to a case taken.
Clare Daly (Dublin Fingal, Independent)
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The judge is saying that he would like to take the case in the public interest. The judge was open to referring the case, but the problem was that the applicant felt he would be exposing himself to serious costs.
Clare Daly (Dublin Fingal, Independent)
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The judge is considering whether in the public interest, this is a matter for a case being referred to a higher court, where the costs would be-----
Pat Deering (Carlow-Kilkenny, Fine Gael)
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I would issue a word of caution in regard to this issue.
Clare Daly (Dublin Fingal, Independent)
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Mr. Kavangh will get me the figure for the fee. Is Mr. Kavanagh trying to tell me that HRI only appeared in court once?
Mr. Brian Kavanagh:
We appeared before Judge Zaidan in the District Court in Naas for a couple of hours on one day, effectively a referral from the small claims court. An appeal, which was less than one hour was heard in the Circuit Court in Naas. I was not present at the hearing but the HRI company secretary, who is present today, was there. There was a short hearing in Bray. There was junior counsel at each of the hearings.
Clare Daly (Dublin Fingal, Independent)
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I ask Mr. Kavanagh to send me the details of the legal costs.
Clare Daly (Dublin Fingal, Independent)
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Mr. Kavanagh uses the argument that people have to pay, they need to register the foals. They must pay to register the foals, but that does not mean they are happy about it.
Clare Daly (Dublin Fingal, Independent)
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The person who took the court case pays it. He is compliant.
Mr. Brian Kavanagh:
It is dissimilar to the situation with a car, if one sees a Ford Mondeo in a showroom that is advertised at €20,000, but in the course of haggling with the dealer ends up paying €15,000, one does not pay motor tax on a Ford Focus, one pays it on a Ford Mondeo. If one is fortunate enough to be able to negotiate a better rate for the covering, bearing in mind it is a small fraction of the overall cost of producing that foal, then the levy is based on the deemed rate by Horse Racing Ireland.
Clare Daly (Dublin Fingal, Independent)
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That is the point I am making. Mr. Kavanagh stated that HRI tried everything it could to resolve the matter so that it would not go to the court. However, HRI is missing the point that there is an ideological difference between what many people in the industry believe and what the board of HRI believes.
Clare Daly (Dublin Fingal, Independent)
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Contrary to what Mr. Kavanagh stated earlier, that HRI was introducing what a previous Minister had brought it, that HRI did not have an opinion on it.
Clare Daly (Dublin Fingal, Independent)
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The point I am making is that HRI has a developed opinion on supporting the present arrangement. It is a yes or no answer. HRI has a very developed opinion on defending the status quo.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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Finally, we come to Senator Lombard. I thank him for his patience.
Tim Lombard (Fine Gael)
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Chairman, it is great to be last.
In fairness it is late. I appreciate that the staff have been here for four hours as well as Mr. Kavanagh and his team. I will not be long.
I do not pretend to be an expert, like Deputy Penrose or my Seanad colleague, Senator Paul Daly. I wish to raise three issues and I hope the HRI can clarify them.
Mr. Kavanagh made a statement that HRI increased the funding for point to points by €1.5 million this year, rising from €728,000 to €2.2 million. That was a very significant and in many ways a very appropriate increase. From my knowledge of the industry, it is the key issue that comes up on a daily basis in my part of the world. This is a significant issue on the point to point circuit in south Cork, Waterford and Tipperary. It is probably one of the most important investments in that sector of the industry. Has Mr. Kavanagh a plan to maintain or increase the budget at this level? Is this a once off increase?
Mr. Brian Kavanagh:
No. I think it goes back to the point I made earlier about funding. We are looking for the support of members of this committee on the funding issue. That is just one area. Deputy Clare Daly has spoken about staff and we spoke of other areas that need further investment. I believe that further investment will generate a significant return for the country if we can move away from the perception of a sport to an environmentally friendly natural industry. Our intention is to increase the funding for point to point meetings, if possible. In order to do that we need an overall funding solution for the industry and we believe we have that solution. I am always wary of somebody from Cork who is claiming that he or she does not know that much about something, but Senator Lombard is from the heartland of point to point. It was good to be able to do something for the point to point sector this year. A good case was made for funding and fortunately we were able to do that. I think that will produce a good yield. It will benefit local communities. If somebody has a horse running in a point to point, people in the village or the town will go to see the horse. Those horses then graduate on to the racetrack. It is a huge nursery for Horse Racing Ireland at all levels. If we can address the funding issue, it will be our intention to continue to fund and increase funding for point to point meetings. It has been very well received and was badly needed.
Tim Lombard (Fine Gael)
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Absolutely. The key issue is that it is badly wanted and it is a great initiative.
Mr. Kavanagh raised an interesting point on Brexit. I think the mention of Brexit makes us perk up our ears like a horse. The Chairman launched our report on Brexit last week. One of the major issues that we might have missed would be the thoroughbred industry. That is a significant worry. I am assuming the Chairman will take that point up later on. We will have to address at some stage.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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It was an oversight.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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On that point, the Seanad has a committee that will be up and running dealing with Brexit. It will focus on agriculture in the next two weeks. Would HRI have something in advance of that? I know that is putting a time pressure on HRI.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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That is perfect.
Tim Lombard (Fine Gael)
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We will have it for the first meeting of the Brexit committee
Mr. Brian Kavanagh:
It is a major issue and we need to have our voice heard. The live exports of bloodstock are €225 million, which is second only to cattle livestock exports.
It is higher than sheep, pigs or chickens. Sometimes it is perceived to be a niche area but there is significant downstream value.
Tim Lombard (Fine Gael)
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The Seanad Select Brexit Committee is on Thursday in 15 days from now. Mr. Kavanagh has some time but it is one of the key issues we need to raise when the select committee meets. I believe that would be very helpful.
Another issue Mr. Kavanagh raised was the betting tax and how it could be a significant driver in funding the industry. Could he elaborate on that please?
Mr. Brian Kavanagh:
Yes. As I said earlier the horse and greyhound racing fund was originally set up to be fully funded from betting tax but the yield from betting tax has dropped. If one sets aside the needs of horse racing and greyhound racing, one must bear in mind that in 2001 in this country betting amounted to approximately €1.3 billion and the Exchequer got €68 million. Betting in this country last year amounted to approximately €5.5 billion and the Exchequer got €50 million from it. It only got that €50 million because the Government introduced legislation to capture tax from offshore betting in 2015, which is now yielding €20 million. It seems illogical that a sector that was generating tax of €1.1 billion 17 years ago has now increased fivefold and it is generating a lower yield.
In the very good report it published in January 2016, the committee said that it recognised that Ireland has the raw materials in terms of land, climate and knowledge to maintain a world class equine industry and to grow it in terms of employment. The committee believes there should be a national plan for the development of the industry and that the necessary extra funding required to implement it should be raised through increased revenue from the betting levy. The report went on in the specific recommendations to refer to increased funding being made available for the development of the thoroughbred sector by increasing the revenue derived from the betting duty. As I understand it, that issue will be addressed. The Government said the first thing it would do in relation to betting was look at the tax that was being avoided by offshore companies and that was addressed in 2015. It said once the system was up and running it would look at the rate of betting tax. Again, we can provide the committee with any assistance it requires in terms of our knowledge and experience of other countries. I feel there is cross-party support on this issue.
Tim Lombard (Fine Gael)
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Just on that point, is the betting tax to which Mr. Kavanagh referred on all bets?
Tim Lombard (Fine Gael)
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It does not matter whether the bet relates to GAA or soccer.
Tim Lombard (Fine Gael)
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It is an interesting scenario that Mr. Kavanagh proposes that a bet on one's local GAA match would go to fund the local horse racing industry. That dynamic would have to be thought out to some degree.
Mr. Brian Kavanagh:
It will. It is not exceptional. Hong Kong is a good example. It has probably the most sophisticated betting sector in the world. People are only allowed to bet on horse racing and soccer and tax revenue goes back to fund the horse racing sector. It is a case of how one looks at it. The sector gets no real supports other than the horse and greyhound racing fund compared to other agricultural sectors. The total fund that goes into horse and greyhound racing fund is 2.7% of the annual budget of the Department of Agriculture, Food and the Marine. It is 5% of the voted expenditure. Of the money that comes from the EU, and the money that comes through the Department or through the Vote, it is a relatively small percentage. The food sector, fisheries and forestry get direct support. There is a logical argument that there should be direct support for this sector, in particular in terms of the arguments about rural areas. If we are serious about supporting rural Ireland, the Vote should support this sector because it is a bastion of the rural economy and it presents a good image for Ireland internationally.
The system worldwide is that betting funds racing. The horse and greyhound racing fund was set up and the betting tax was ring-fenced for horse racing and greyhound racing. The bulk of betting still takes place on horse racing and greyhound racing, in particular in betting shops. The betting that is not on horse racing and greyhound racing is largely on events that are outside Ireland anyway. Senator Lombard is correct that it needs to be looked at. There was a three-stage process - first, get the offshore issue addressed; second, look at the rate; and, third, look at the distribution of the rate. That is certainly something on which we would like to engage with the committee.
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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There is also the argument that some of the funds from the betting tax could be used for addiction services because there is a significant problem in that regard.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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I thank members for their patience. Likewise, I thank Mr. Kavanagh and his team for their very comprehensive response to the questions.