Tote sales goes on open market after government's £400m price tag defeats racing consortium

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Labour pledged in its last manifesto to sell the institution - which employs 4,000 - to a racing industry consortium.

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Tote: Government made a U-turn over putting it on sale on the open market

But last night ministers rejected such a bid because it did not match its £400million price tag.

Sports minister Gerry Sutcliffe said the offer was being declined with "great regret" and a traditional privatisation would go ahead.

Without a sale to the sport, the Tote could be broken up, with rival bookmakers cherry-picking its 500 High Street shops.

The Tote was set up in 1928 by Winston Churchill as a monopoly of pool betting at race courses, with profits poured back into racing.

Since 1972 it has also taken bets on other sports.

A bid team - including the Racehorse Owners Association, the Racehorse Association and Tote bosses - has been in talks for more than a year to buy the Tote, but its final bid was £80million short of the Government's target.

Advisers will now prepare a sale strategy for the Tote by the end of April. It will be Gordon Brown's first privatisation.

Betting chain Coral and racehorse-owning boss of stockbroker Cenkos Securities Andy Stewart have been linked with a possible bid.

The Government said it would stick to its pledge to share half the net proceeds of the sale with the horseracing industry.

But Paul Dixon, president of the Racehorse Owners Association, said: "This should mark the time when everyone in racing backs a campaign to keep the Tote within racing. It is not acceptable to have a bookmaker owning it."