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47th Horserace Betting Levy Scheme

Volume 472: debated on Wednesday 20 February 2008

As the Horserace Betting Levy Board was unable to accept the Bookmakers’ Committee’s recommendations for the 47th levy scheme, covering the year commencing 1 April 2008, the matter was referred to me to determine under Section 1(2) of the Horserace Betting Levy Act 1969.

In considering the next scheme, I have taken into account submissions from the independent members of the Levy Board, the Bookmakers’ Committee and the British Horseracing Authority. In the interests of fairness and openness, these bodies were given the opportunity to comment on each others’ submissions. I have also noted submissions from the Remote Gambling Association, the Sporting Exchange Ltd (Betfair) and the Independent Bookmakers Association. I have taken account of independent advice from Organisation Consulting Partnership (OCP) on those submissions. I am depositing copies of OCP’s report in the House Libraries and sending copies to those who provided submissions, and it is available on my Department’s website. I have also considered carefully the many other representations that have been made to me on this subject by Members of Parliament and others with an interest in the racing and betting industries.

The criteria which have customarily applied to the setting of levy schemes include the needs of horseracing and the capacity of bookmakers to pay. I can confirm that I have taken account of these considerations, among other factors I consider relevant which I refer to below, in reaching a view about how much bookmakers should be required to contribute in order to enable the Horserace Betting Levy Board to give effect to the improvement of horseracing and its other statutory purposes.

The exercise of my responsibility to determine the 47th scheme has been made particularly difficult by new considerations introduced by both the British Horseracing Authority and the Bookmakers’ Committee. These include the effect of the growth of betting exchanges, the concept of a fair return to racing given the cultural and economic importance of the sport, the increase in the number of racing fixtures and in integrity costs, and the potential impact on bookmakers’ ability to pay the levy of Gambling Commission fees and subscriptions to the new Turf TV pictures provider.

I have been able to reach a view on some of these new considerations. First, I have concluded that it would not be appropriate to seek to impose the levy on the turnover of betting exchanges rather than on the commission charged on betting transactions. In reaching this conclusion, I was mindful of the Treasury’s conclusion, when assessing whether to impose Gross Profits Tax on betting exchanges turnover, that it was correct to apply GPT on commission only because the commission is the operator’s gross profit and the consumers’ net spend. The Treasury concluded that there was no real justification for changing exchanges’ tax base or tax rate, and I have taken the same view in relation to the levy. Furthermore I am satisfied that any move to broaden the scope of the levy scheme in this way would necessitate a full consultative process, which has not occurred.

Secondly, on the matter of a fair return to racing, I fully accept the cultural and economic value of racing to the life of the nation. However, I consider that this was implicit in the initial creation of a statutory levy scheme.

Thirdly, I have borne in mind the British Horseracing Authority’s claim that the needs of racing have grown, principally due to a sharp increase in the number of fixtures. However, I note that this increase has not resulted in any commensurate growth in betting on horseraces. I am therefore not persuaded that I should make any adjustment in the level of the levy on the basis of the increase in fixtures.

Fourthly, on the matter of the betting industry’s desire to offset the cost of Gambling Commission fees from the levy, I have concluded that to accede to this would be in effect to pass the regulatory costs of the Commission on to customers in betting shops. This would clearly not be within the spirit of the Gambling Act and I therefore reject this application.

Finally, turning to the issue of Turf TV, I accept that an argument can be put forward that bookmakers’ subscriptions to the new service constitute a commercially based flow of money to racing, albeit only from certain bookmakers to certain racecourses. I therefore accept that it may have a material effect both on bookmakers’ ability to pay and on the needs of racing. However, it is apparent from the failure of the Bookmakers’ Committee and the levy board to agree, and from the OCP report, that bookmakers and the racing industry hold widely divergent views on the status of Turf TV and the impact that it should have on the level of the levy. In time its full economic impact on bookmakers, racecourses and on horse racing generally may become clearer. However, at this stage I consider that it would not be appropriate to take Turf TV into account in setting the level of the 47th levy.

Despite thorough consideration, I have not been wholly persuaded by the submissions of either the Bookmakers’ Committee or the British Horseracing Authority, nor have I been able to reconcile their starkly contrasting approaches. It is therefore my decision on this occasion to revert to the 46th levy scheme, being the last occasion on which all parties achieved consensus, and to direct that this be rolled over, with adjustments for inflation where appropriate, into 2008-09. This decision is provided for in Section l(3)(b) of the Horserace Betting Levy Act 1969, and in making it I have placed weight on the valuable advice of the independent members of the Horserace Betting Levy Board as a non-departmental public body of my Department.

Accordingly, for off-course betting through licensed betting offices or media platforms—cash, telephone or internet—showing a gross profit on British Horserace Betting Business (BHBB) of £85,700 or more per year, a flat percentage rate of 10 per cent. will apply. Abated charges will apply to any LBO or media platform with gross annual profits of less than £85,700. A minimum payment of £2,144 will apply. The levy for on-course betting will be charged at a flat fee of £188 plus a fixed ring charge of £4 for the silver or minor rings and £8 for all other rings for each racecourse attendance. On-course bookmakers who use and/or operate a betting exchange will also be liable to pay the levy at a rate of 10 per cent. on their gross profits derived from BHBB. The levy payable by bet brokers including betting exchanges will be charged on a basis equivalent to 10 per cent. of their gross profits, defined as commission on BHBB deducted from the winnings paid out to bettors and bet-takers. Spread betting business will be charged at 2 per cent. of gross profits, and bookmakers who conduct betting on point-to-point and/or harness racing and/or trotting events will pay a fixed levy contribution of £150.

The determination concluded, I wish to add that it is a matter of serious regret to the Government that we have again found ourselves in the position of having to make a determination when it would clearly have been more appropriate for the betting and racing industries to have agreed a suitable settlement between themselves. We have repeatedly encouraged the two industries to develop a modern relationship as business partners and move away from an adversarial approach. Representatives of both sides now need to proceed to detailed commercial negotiations without delay. To this end I am convening a meeting, under the auspices of the all-party racing and bloodstock industries group, to initiate discussions on a wide range of issues.