When the Horserace Betting Levy came into existence some 55 years ago there were already other existing levies on various industries. One that comes to mind was the Eady Levy (1950) on cinema goers, whereby an amount was added to the ticket price so that the money could be spent on funding British films. The result was that lots of films were made that directors and producers wanted to make but which cinema goers did not want to watch! The cinema levy ended in 1985 but the Horserace Betting Levy has persisted and seems set to continue.
The Horserace Betting Levy’s longevity is all the more remarkable because all governments, regardless of their politics, would like to be rid of it. Government ministers dislike it because if the two sides – racing and the bookmakers – cannot agree on the amount of levy, the government becomes the final arbitrator and has to upset one or both parties. A fear of not being able to please everyone demonstrates what modern politics has become.
The current levy has survived so long because of the people who own the racehorses. They are the richest 0.5% in the country and they have used all their influence to persuade government that racing is an important industry employing thousands of people.
The current government now wants to extend the Levy rather than creating “a right to bet”, although it amounts to much the same thing, whatever name it is given – a fee for taking bets on UK horseracing. The Levy has been registered as existing state aid with the European Commission. If the levy was new, it would fall foul of state aid laws but because it already existed when the UK joined the EU it is allowed to continue. But if the existing Levy is changed substantially then it becomes new state aid and will be challenged.
Originally, the Levy took into account a bookmaker’s capacity to pay. It is not certain that a reformed Levy would do the same. Bookmakers have seen several increased costs on their business recently: tax increases, regulatory costs, and the cost of social responsibility which GBGC warned about in its free-to-read September 2015 newsletter. The bookmaker’s capacity to pay has never been so low.
The best solution would be for the government to end the Levy and for bookmakers and racing to enter into a “willing seller – willing buyer” commercial agreement. The 2016 Budget has confirmed this will not now happen.
The UK government has taken heart from a recent decision in France that has allowed French racing to have a levy. To compare the French racing and betting sector with that of the UK, however, is like comparing cheese with roast beef and fraught with danger. France, for example, has issued barely a dozen internet betting licences.
There is a lot at stake here and, however the UK government decides to reform the Levy, the odds at the moment must be on a legal challenge.
GBGC’s CEO Warwick Bartlett will be speaking in the debate on the horse racing levy at the 2016 KPMG eSummit in Gibraltar (21 April 2016).