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UK government set to introduce mandatory racing contribution in Levy overhaul

Responding to a parliamentary question from Bolton West MP Chris Green, Culture Secretary John Whittingdale confirmed that the government aims to introduce a new funding model for UK racing by April 2017.


“We will create a level playing field for British-based and offshore gambling operators and ensure a fair return from all bookmakers to racing, including those based offshore,” Whittingdale explained.


“Racing will be responsible for making decisions on spending the new fund and we will be making further announcements shortly.”


The new funding model will close the loophole in the current Hose Racing Levy scheme, first introduced in 1961, under which remote gaming operators are not required to make a mandatory contribution to the funding of UK racing.


As more customers bet on horse racing online, industry funding from the Levy has fallen sharply, down from £105m in the 2004-05 racing season to an estimated £53m by 2017-18 under the existing system.


Negotiations over the Levy between the industry and operators have often proved to be fraught, with a number of last-minute deals struck in the past few years. The 2015 Levy has been rolled over into 2016 after the Horserace Betting Levy Board (HBLB) failed to approve a recommendation for the 55th Levy scheme, prompting Whittingdale to step in to ensure a funding agreement is put in place.


The news has been welcomed by the horse racing industry, with British Horseracing Authority (BHA) chief executive Nick Rust describing the move as “truly historic.”


“The new funding model will ensure a fair transfer of funding to British Racing based on all betting activity on the sport – a link that was first established in law in 1961,” Rust explained. “It meets all of Racing’s requirements for a new funding model and can bear fruit in 2017, which is crucial given the significant Levy cliff we face.


“In the longer term, this means greater financial security for the sport, a platform for growth, a huge boost to our participants and more certainty for the tens of thousands of people who rely on Racing for their livelihoods,” he said.


The lack of progress towards a replacement for the Levy had prompted the BHA to launch its Authorised Betting Partner (ABP) programme, under which operators that agreed to give a percentage of profits from racing bets to the horseracing industry would be able to secure commercial opportunities such as sponsorship.


However this has also proved controversial, with the likes of Ladbrokes and Gala Coral criticising the system. The BHA still intends to maintain the ABP scheme as it looks to “smooth the transition to the new funding model and to maintain the current level of Levy funding.”


The DCMS announcement was also welcomed by the Horsemen’s Group, with the organisation’s executive chairman Philip Freedman saying that horsemen would be “delighted” by the news.


“Restoring Racing's income from betting to the levels intended by previous Government determinations, before so much betting had migrated off-shore and outside the scope of the Levy, is an essential step in growing the industry to the benefit of both Horsemen and betting operators.”


The Association of British Bookmakers (ABB), on the other hand, greeted the news with caution, pointing out that the exact details of the new system are yet to be finalised.


“We welcome the Government abandoning the racing right in favour of the adaptation of the existing levy as a new system for the betting industry to fund horse racing,” an ABB spokesperson said.


“We will be working closely with the Government and Horseracing on the critical and so far undecided detail of the new system to ensure that any new levy is both fair to horseracing and the betting industry.


“The amount that racing receives from betting, particularly in media payments has grown by tens of millions in recent years. On top of this, betting shops already bear an unfair burden and the current rate of 10.75 per cent is unsustainable for the retail sector,” it explained. “Any new deal on levy has to be fair to betting shops and should be based on an accurate assessment of the level of subsidy required to support horseracing.”


Any new system is likely to require approval from the European Union as it constitutes state aid, although the BHA said it was confident that the model would be ratified, noting that the European Commission has already set a precedent by approving the French parafiscal levy in 2013.


UK Chancellor George Osborne may reveal more details of the new system when he announces his budget on March 16th.


GamingIntelligence


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