President’s blog

By Paul Dixon

April 2010

Levy scheme rollover simply not acceptable

Level of funding required to reflect fair return to racing from betting industry a cornerstone of levy submission which has the approval of top economists

There is something about the next annual levy process that smacks of it being racing’s last throw of the dice. Industry commentators will argue that we have been here before; that this is just another round in the interminable squabble between racing and bookmakers.

There are, however, a number of factors that suggest things are now reaching such a pitch for British racing that a simple ‘rollover’ of the current scheme would be completely unacceptable.

Like many levy schemes before it, the 50th scheme, which relates to funding for the fiscal year 2011/12, will hinge on racing’s ability to convince the Levy Board and probably the Government that racing’s needs and the bookmakers’ capacity to pay are both greater than ever before.

If the route for an agreement between the two parties cannot be found by the Levy Board by October 31, then the outcome will be determined by the Department for Culture, Media and Sport or whatever the appropriate Government department will be called if the Conservatives are then in power.

In the past there has always been an attitude that, if getting a deal between the two sides requires Government intervention, this is somehow seen as a failure. The BHA is, however, determined to change this perception, believing that unless there is significant movement from the bookmakers’ position then it is right that the Government should be brought into the decision-making process. The consequences are, after all, very significant, not just for racing but also for the rural economy.

With the levy yield currently dropping like a stone and prize-money levels for 2010 set to decline sharply as a result, it is small wonder that the racing industry is impatient for change. This has been reflected in racing already putting its case to the Levy Board well in advance of the usual opening salvo that comes from the betting industry.

This submission was presented at the last Levy Board meeting and, although a confidentiality agreement prevents any detail from being discussed, I am breaking no confidences when I say that top economists have been wheeled in and no stone left unturned in racing’s efforts to present its case. The extent to which British racing’s economic standing has deteriorated and the level of funding that is required to reflect a ‘fair return’ to racing from the betting industry are the cornerstones of a document that penetrates the mysteries of racing politics and finance.

There is, of course, already much we do know about this industry without seeking the help of economists. Any owner or trainer will tell you about increasing costs and deteriorating prize-money, while public accounts will reveal the huge growth in profits generated by the betting industry during the last decade.

We also know that, despite the wide diversification within betting shops, racing remains the biggest attraction to entice punters in, though racing does not share in the profits generated by non-racing betting products. We know that two of the major bookmakers have reneged on an undertaking to Government to keep their businesses in the UK by setting up their online operations overseas to avoid paying tax and levy and that this trend is likely to continue.

We know the fixture list has greatly expanded in recent years, largely to satisfy the wishes of the betting industry. We know that this has cost racing – and particularly owners – much, much more than it has received back from betting and that, to rub salt into our wounds, the levy yield in 2009 dropped by 20% from £115m to £92m and continues to be in freefall.

Most of all, however, we know that the 50-year-old levy system is in desperate need of reform, its statutory framework requiring immediate modernisation to reflect today’s realities of racing’s relationship with bookmakers. We know that this is going to be very difficult to achieve with an overloaded post-election legislative programme.

Yet failure to find a route through will simply accelerate the widening disparity between British racing and other major racing nations which enjoy the advantages of pool betting monopolies and funding for their respective industries on a scale that we can only dream of.

We know that, despite all the disadvantages that British racing has endured for many years, it continues to put on the best racing in the world, but we also know that its position on the global stage is simply not sustainable unless a new funding model can soon be found.