In George Osborne’s budget speech he announced his intention to extend the horserace betting levy to offshore licensed bookmakers, to look at wider levy reform and at introducing a ‘racing right’ to support the sport.

On hearing this, the rather ecstatic Paul Bittar from the British Horseracing Authority said:
“Today’s announcement by the Chancellor represents a major milestone in our efforts to secure the future finances of our industry.
For too long we have sought a funding mechanism which reflects the nature of the modern Racing and Betting industries. Today’s commitment brings us considerably closer to achieving this goal, and securing the future prosperity of one of the country’s leading sports and a major employer across the country.
We look forward to engaging positively in both consultation processes, on levy extension to offshore operators and wider levy reform or replacement, in the coming months.”
We have been here before. The only new element is that the statement from the Chancellor underlines the government’s commitment to be rid of the levy, where, on occasion, the Minister is asked to become the arbiter when the two sides cannot agree. Something governments hated because you cannot please everyone and normally end up pleasing no one. 

Governments can do more or less whatever they think fit but it is not unknown for change introduced by government to go horribly wrong. They are not right all of the time and I think they may be making a big mistake on granting to racing a right to bet.
First of all, let us look at the tortuous process that has taken place from the government’s original decision to where we are today: 
May 2001: following a Quinquennial Review carried at by the Home Office the government announced its intention to abolish the levy. The statutory mechanism was to be replaced by a commercial structure based on the British Horseracing Board selling database rights to bookmakers.
November 2004: The European Court of Justice ruled that the BHB had no protectable rights in its database. The first attempt to abolish the levy failed. 
January 2005: The Minister of Sport commissioned an independent review into the future funding of racing chaired by Lord Donoughue.
March 2006: the Minister agrees to retain the levy for the foreseeable future. It emerged that the problem with a commercial agreement would cause bookmakers to pay VAT on their payments to racing which would ultimately produce lower income for racing. There were also issues relating to competition law. 
2007/2008: Irreconcilable differences emerged between betting and racing. Racing’s product in the betting shop was in decline but racing wanted more than bookmakers were willing to pay. 
• Betting exchanges and internet bookmaking were growing and the margin which affected affordability deteriorated. The levy yield dropped from £93m to £75m. 
• A phase two report from Lord Donoughue identified three possible alternatives: 
1. A voluntary agreement between the parties 
2. A hybrid commercial/statutory arrangement 
3. Sale of pictures and other available rights
Lord Donoughue recommended option (3) 
• It was not adopted because of concerns of collective selling which would drive up the price bookmakers wanted to pay. 
• Not known to Donoughue at the time, a number of racecourses had grouped together to form AMRAC and Turf TV was born as a competitor to SIS, the monopoly provider. 
January 2011: a “racing right” received a degree of support in a Parliamentary debate. A proposal emerged whereby a deduction of winnings from punters be applied to support racing. 
March 2014: Chancellor announces Government plans to look at a Racing Right.


Problems with a racing right 
The bookmakers would first of all have to agree a price. What would happen if they could not agree and who would determine the outcome? When a right was discussed previously it came with limitations on what products the bookmakers could offer so as to protect racing’s ‘integrity’. Why would bookmakers agree to a supplier telling them how to run their business?
The racing right would be a monopoly provider and although the current levy is imperfect it does have various checks and balances to prevent abuse from either side.
There is no property right payable for anyone to participate in racing so presumably primary legislation would be needed to create one. The Gambling Act allows conditions to be attached to licences that conform with the licensing objectives (crime, fairness, protection young). A racing right falls outside that scope.
The Government has said that a racing right would apply only to horse racing but to do so would cause other sports to complain and bring forward state aid objections. The levy came into being in 1963 and was amended in 1969 which predates the UK’s membership of the EU. It is therefore thought of as existing state aid and thus tolerated by the EU. That, however, does not make it legal and any tampering with the existing system could make it “new aid” and thus challengeable.
The main issue is the 20% VAT that would be chargeable under any commercial arrangement. 
My View 
The racing lobby is clearly very powerful. Why should that be so? Look at the people who own the horses, the richest 0.5% in the country and look at the government in place today.
The levy is not perfect, far from it, but it does carry with it significant tax advantages that would be lost if it were abolished.
Roger Bootle, while discussing housing in The Telegraph, said last week “Politicians are constantly in search of purpose. That is why they meddle in so many things that should not concern them”.
On this issue they should let sleeping dogs lie.