Debate on Future of “Broken” Levy
The future of the horserace betting Levy occupied several hours of parliamentary debate on Thursday 20 January as the argument about how to fund UK horseracing rumbles on.
As GBGC has written about previously, racing and the bookmakers failed to agree a Levy in November 2010 and the decision passed to the Minister for determination.
The motion for January’ debate was made by Matthew Hancock MP (Con, West Suffolk) and read: “This house is concerned that betting operators are increasingly based offshore and so do not fully contribute to the levy, and considers that the government should bring forward proposals to improve the system of funding for racing and the relationship between racing and bookmakers before the end of 2011”.
The debate was attended by about two dozen MPs, mainly those whose constituency contained a racecourse or a major training centre.
It was generally agreed that the Levy, created by the Betting Levy Act 1961, was pretty close to being broken and that a “normal, commercial” relationship between racing and the betting industry was preferable. One system that received support was a “betting right” which is a concept being seen in some European markets such as France. One supporter of this was former Minister for Sport Gerry Sutcliffe MP, who has experienced first-hand the difficulties of getting racing and betting to agree.
The debate listed four “holes” in the current Levy:
Offshore companies – racing argues that Internet companies based in offshore jurisdictions do not pay Levy contributions on the bets they take on UK racing
Betting exchanges – the mechanism by which they pay Levy is based on their commission. There is also the supplementary issue that individuals can back and lay selections on the exchanges, effectively acting as unlicensed bookmakers and paying no Levy on their activity
Levy thresholds – thresholds were put in place designed to exempt smaller bookmakers from paying Levy before a certain level of gross profit. Removing these thresholds could see their Levy payments rise between 50% and 100%
Overseas racing – no payment is received on bets on overseas racing shown in the UK. A Levy on these bets would obviously increase the amount of money going to UK racing
The betting industry is understandably opposed to many of these “holes”, not least any extension of the Levy to try and include offshore companies and the removal of thresholds.
In the run up to the debate in the House of Commons the betting industry received some apparent indirect support from the European Commission (EC) on the issue of applying a Levy to support racing.
The EC has been considering French proposals for a Levy on Internet horserace betting to fund the “improvement of equine species and the promotion of horse breeding”. In its preliminary ruling the EC concluded:
“At this stage, the commission considers that the aid measure contains all the features constituting the concept of State aid … the Commission has not found any clear means of regarding it as compatible [with the rules in force]”
“To conclude, at this stage the Commission has doubts as to whether the notified measure can be declared compatible with the single market”
Following this decision, the Remote Gaming Association (RGA) warned that any move to extend the Levy to include offshore operators would face a legal challenge on the grounds that it would constitute State aid.
Not surprisingly, the “ayes” had it when the motion was voted on at the end of the debate. But whilst it might be possible to “bring forward proposals to improve the system of funding for racing and the relationship between racing and bookmakers” before the end of 2011, getting all interested parties to agree to the proposals is likely to take much longer.
The issue of the horserace Levy is just one of a number of key decisions being made at the start of 2011 that could determine the short-medium term fortunes of the UK gambling industry. Other key events include:
The publication of the third British Gambling Prevalence Survey in February
The sale of the state-owned Tote Changes to the UK Internet licensing regime and advertising restrictions
Publication of draft legislation for switch to Machine Games Duty (MGC) from AMLD