President’s blog

By Paul Dixon

June 2010

Funding crisis call for radical solution

Government will listen if racing’s decline puts rural economy in jeopardy

At a time when the news on levy funding goes from bad to worse, we must act quickly. Of course, nobody could sensibly suggest that horseracing will figure high on the government’s list of priorities, but we must continue to hammer on their door with all the right arguments.

Governments listen when you talk about the economy and jobs. Racing is a significant employer in rural areas and its general well being, or otherwise, impacts on the rural economy. This must be our starting point.

Nobody should underestimate just how serious racing’s funding problems are. We simply cannot go on seeing prize-money levels decline without also seeing a serious fall-off in ownership and the number of horses in training. This will impact on racecourses and across the whole industry.

The racing industry has recently spent untold hours agonising over the detail of a 2011 fixture list made up of 1,500 fixtures.

The expansion of the fixture list in recent years has been justified on the basis that, without these fixtures, the levy will suffer because bookmakers will not have sufficient racing ‘product’ to fill the betting slots they require.

But ‘the more fixtures, more money’ argument has fallen flat on its face. In 2002 we had 1,158 fixtures and a total levy yield of £80 million. And in 2010 we have 1,500 fixtures with a levy yield that is beginning to look remarkably close to – guess what – £80m.

Even putting inflation to one side, the additional costs, largely falling on owners, to service over 300 more fixtures leaves us in a position that is nothing short of scandalous.

Very few of these additional fixtures are good earners for owners and, although they would generally attract poor attendances and sponsorship, racecourses have at least had the advantage of receiving additional picture rights money for them.

But the key point is that these 300 fixtures have been put on largely to satisfy the appetite of bookmakers and now we discover the betting industry is paying the same levy for a fixture list that has expanded by 25% as it was paying eight years ago.

How has this happened? It has happened because the levy system is not fit for purpose. This is not a reflection on the levy executive, but it is a reflection on the fact that the levy system allows bookmakers to exploit every loophole in the book.

They have gone offshore to avoid tax and levy on internet betting; they have been able to wriggle out of paying levy on overseas racing shown in British betting shops; they have found a way of expanding the so-called ‘threshold’ system so that nearly 60% of betting shops are now paying less than the statutory 10% of gross profits; and all the while they have cleverly directed more of their custom towards non racing activities, such as FOBTs, on which no levy is paid.

At the same time, the betting exchanges have created a situation where a significant number of exchange big-hitters act as unlicensed bookmakers and, in so doing, pay only a small fraction of their levy dues.

It is clear this industry can now take only one of two routes. We can either go to the new government with a shopping list of fixes for the levy which, through amending the legislation, will address all these points and more.

Or we can look, again with government, at an alternative system of funding through some form of commercial, rights-based mechanism.

While the levy system does give us the certainty of a statutory body, if that certainty is now providing little more than the prospect of a slow death, then it is time for this industry to look for a radical solution. But it is a solution that we can only find with the help of government.