The Department for Culture Media and Sport’s consultation into a horserace betting right only closed on 12 March 2015 but just a week later the Chancellor George Osborne used his Budget speech today (18 March 2015) to say “in the week after Cheltenham [Festival] we will support the British racing industry by introducing a horserace betting right”.
The Chancellor said nothing more about the mechanics of the betting right in his speech and supporting Budget documentation was light on specific details too. It simply stated:
When the consultation was first published, GBGC outlined its thoughts on the proposals:
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 Department for Culture Media and Sport (DCMS) is also concerned at the amount of leakage in the current system. Offshore operators do not pay Levy, they (the bookmakers) argue that many of their customers that bet on various horse race meetings around the world should not be liable to pay levy in a country where they do not live. Racing will argue to the contrary – if you have the pleasure of betting on a sport you should help pay for the cost to run it.
For 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 as a betting proposition.
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 point missed by DCMS is that racing, just like greyhound racing, is not a team sport. It would not exist without betting. The consultation paper is saying that betting needs racing rather than the reverse.
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.
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. While VAT is ultimately a matter for HMRC we believe that payments made under any of the authorisation schemes would be unlikely to attract VAT, principally because there would be no direct link between the fees paid and the authorisation to take bets on British horseracing from British customers. This is because sums raised would be used for the benefit of the horseracing industry as a whole, as a betting product, and not provide any direct benefit to the payer of the fee individually.