President’s blog

By Paul Dixon

May 2010

Racing’s clouds may contain silver linings

Industry better prepared than usual for levy negotiation as factions unite

The darkest hour may be before the dawn for the economics of British racing. With declining income, Levy Board cuts, reducing prize-money and appearance money, all hastened by bookmakers moving their businesses offshore, our industry certainly seems to be close to its nadir.

But is it possible that today’s dire situation will force changes for good? There are straws in the wind to suggest this could be the case.

The fact that levy income and funding is dropping alarmingly has prompted the BHA to commission economists to produce a carefully argued case that shows the betting industry’s contribution to the sport should be £130 million - £150m, rather than the current £90m. This is a positive move, showing that racing is much better prepared than usual for its annual negotiations with bookmakers and especially so if levy determination of the 50th Scheme (2011/12) is put into the hands of Government.

We may have been disappointed before with the inactivity of Governments but, at the very least, it is surely in the interest of any Government to find a way of preventing bookmakers from avoiding paying tax and levy by moving their businesses overseas. Even more important, any Government must be concerned with jobs and standards of living in the rural economy, and it is clear to all that the racing industry has a major influence on this.

There is also the question of the general levy structure and even whether the levy is the best means of funding British horseracing with its abnormal off-course bookmaker system. Racing was badly bitten six years ago when the European Court prevented its new database right funding mechanism from continuing, but we should not be deterred from returning to an examination of this or any other funding system that is sustainable within European and competition law.

The statutory levy may be the safe option but this has to be balanced with what it is delivering for racing – and right now that’s not nearly enough.

We must also, during this period of gloom, look at the position of racecourses and their funding potential. From 2013, many of them will double their earnings from picture rights to a point where the aggregate income might be challenging overall levy income. It is crucial to the Horsemen’s Group that a proper proportion of this money is directed into prize-money and that we have the muscle to exert pressure on those racecourses that refuse to do this.

Relevant to this – and a further example of how dire situations sometimes fuel changes for good – is the fact that the Levy Board is currently in the process of revising various antiquated systems for the distribution of their funds, largely to the benefit of horsemen.

Certainly, by bringing in changes to the way in which the Capital Fund, the Merit Table system and the Fixture Incentive Scheme operate will not at this time produce more prize-money, but it will help to cushion the effects of the latest round of cuts.

The fact that a greater percentage of available money will be directed into prize-money at least recognises that racecourses now have a significant source of alternative income that will grow substantially.

These changes have stemmed from excellent collaboration between all major parties in racing and, although the BHA’s new fixture policy for 2011 and beyond doesn’t go far enough, it heralds a new set of guiding principles that surround the fixture funding process with its myriad of detail. Its central aim, to ensure that the premier levels of our sport are not eroded, aligns with a key ambition of Racing For Change.

All of this recognises that, while racing must work together to maximise its income and well-being, it should not preserve outmoded structures and concepts because they suit one strong interest group over another. Yes, during this gloomy time, we have seen a few glimmers of light.