Racing’s right to bet could go horribly wrong
By Warwick Bartlett
Bookmakers could see a massive rise in their payments to UK horse racing if the current proposals outlined in the Government’s consultation document are allowed to pass.
Chancellor of the Exchequer George Osborne announced in his last budget that he would bring forward proposals to give the horse racing industry a ‘”right to bet” as a funding mechanism for the sport. This means that bookmakers would be charged a rate by horse racing to take bets on races.
The Government has become tired of the current arrangements run through the Horserace Betting Levy Board. If the annual negotiations over the amount of Levy to be paid fail because the two sides – bookmakers and racing – do not agree, then ministers are called upon to determine the result. The politicians’ fear is that whatever decision they make they will upset one or both sides and please no one.
The determination of the Levy has been regarded as one of the worst jobs in politics.
Racing, for its part, always wants more money and has been urging the Government to replace the Levy for many years.
The Government has now put its proposals out to consultation, which are likely to become law in George Osborne’s pre or post election budget.
The consultation document can be found here.
The DCMS has attached to the main consultation document a risk assessment, which can be found here.
The table below taken from page 13 of the risk assessment demonstrates the uplift in value from a “right to bet” for horse racing from remote betting.
The DCMS in its current paper is relying on each side to be pragmatic in negotiation. The bookmakers certainly will. They will not wish to unnecessarily disrupt the pattern of trade in their businesses without good reason. But racing is a different matter. For many owners and breeders racing is a hobby. They have made their money elsewhere and they can afford to be obstinate in negotiations to the point of working against the consensus.
Racing throughout the world is in decline for a number of reasons, one of which is that the owners and breeders have taken too much out of the sport with scant regard to the rest of the industry. Many racecourses are in a poor state of repair and attendances are down. This is not the case in the UK where the Levy Board has acted as honest broker to see that the bookmaker’s payments are spent equitably across the industry.
The lure of prize money today over industry investments for the future carries the day with owners. The negotiation will be totally lop-sided. On the one side you have the bookmakers with institutional shareholders and on the other side you have people where racing is a hobby.
Where does that leave the bookmakers?
Paying 30% plus of gross profits to racing plus 15% gross profits tax and the rising cost of media rights makes horse racing uneconomic.
Some may choose not to take the product, some may choose to take the product but pass the liability on to the customer. Will the customer pay? Doubtful – he has been weaned on Internet betting where the payouts are high. Will he choose to desert racing and bet on another product?
I suspect that the consultation paper has been heavily influenced by the racing lobby. The emphasis is that racing will act reasonably in negotiation because it is in their interests to do so and that bookmakers need the racing product.
The DCMS has totally ignored the horse race betting punter. There has been no assessment as to whether or not a punitive charges on bookmakers will influence the value of the bet or if the punter will continue to bet on horse racing.
My fear is that the careful balance between value and disadvantage over other betting products will set racing on a course of terminal decline. The opposite of what the consultation document is trying to achieve.
Then we have the question of Value Added Tax (VAT). VAT does not apply to the current Levy. The consultation paper says as follows:
Payments made for goods and services attract VAT unless it can be demonstrated that they do not attract VAT, or they fall within an existing VAT exemption.
Fair enough. But if you are going to change an entire system you need to be sure and a clear unequivocal statement in writing from Treasury should be sought before proceeding. VAT will cause the product to bookmakers to rise twenty percent and racing will lose out. After three consultations on the very same subject I would have thought this at least would have been bottomed out.
It must be hoped for all concerned that new BHA boss Nick Rust retains some of his bookies’ pragmatism.