An Open letter on the Levy
On Tuesday 28th April, the Levy Board approved the terms of the 49th Levy Scheme, after agreement between Racing’s representatives and the Bookmakers’ Committee, with support from the Board’s Government-appointed independent members.
The terms of the Scheme are that British bookmakers will continue to pay 10% of their gross profits on British Horseracing back towards the improvement of the sport. Thresholds for abated Levy payments have also been adjusted to take account of the RPI rate as at 31st July 2009. The Scheme will take effect from 1st April 2010, and run through to 31st March 2011.
As has been reported, the Scheme has been agreed some six months ahead of schedule, and this is a welcome, positive step – particularly in the current economic climate – and a demonstration that Racing and Betting can work together, and will always have more in their mutual interest than finding differences of opinion.
A vital part of the agreement, also outlined in the Levy Board’s announcement on the Scheme, was a new negotiating process, which for the first time gives Racing a platform – outside of a Government determination – to submit its own robust proposals to the Board. This development will initiate the discussions on the 2011/12 Levy next spring, with the Bookmakers’ Committee then being invited to respond. The Levy Board, through the Government-appointed independent members, will continue to oversee the process, and may also consider enlisting specialist external support to assist the parties in reaching a settlement. The Secretary of State will remain the final arbiter in the event of no agreement.
We remain constrained in this regard by the existing legislation – Acts of Parliament from the 1960s – and have been advised that the change in primary legislation required to render the Levy fully fit for purpose is not likely in the near or immediate future. We have therefore worked within the existing framework to achieve interim modernisation measures.
Despite this step in the right direction, the Levy of course remains in real need of full modernisation. Its processes, structures and scope are outdated, discriminating against the sport in many ways, and it is demonstrably unable to cope with a great many facets of the modern gambling environment.
A new Chairman of the Levy Board, soon to be appointed, will carry this modernisation process forward, and the full review launched by the Minister for Sport last March has also reached another significant milestone with the Levy Board having written to the Department for Culture, Media and Sport on a range of important issues at the end of April.
A number of these issues formed the backdrop to and underpinned the discussion and agreement of the 49th Levy Scheme: Racing had adopted a pragmatic approach to negotiations, but also had its own conditions on any deal.
The status and contribution of offshore operators remains of urgent need of attention, and we have made clear previously that such betting organisations are deliberately damaging the sport through their actions. The Levy Board agreed to redouble its efforts in calling on Government – also losing tax revenue – to tackle the situation, and Government has now acted. We welcome strongly the announcement of last Thursday seeking to level the playing field between British-based and offshore operators, which referenced Levy contributions directly.
Steps are also underway to address those operating in the course of business as bookmakers by the nature of their activity on betting exchanges. The current Levy legislation is clear in this regard – a direct contribution is due back from such individuals. With the next Levy Scheme not coming into effect until next April, there is ample time for this issue, and that of offshore operators, to be remedied. This is a separate from the wider impact of betting exchanges on the sport’s finances, which must also be assessed.
The Levy Board has also committed to a fundamental review of the appropriateness and applicability of thresholds for reduced levy payments.
Again, rates adjusted for RPI have been carried forward into the 49th Scheme, but it has become clear that over 50% of betting shops are benefiting from a lowered rate of Levy payment, with the result that the effective Levy rate in betting shops in the last Scheme for which we have data was under 9.2%. The current system no longer performs the role it was designed to – thresholds exists to “assist smaller betting shop operators” according to the Levy Board – and is indefensible, costing British Horseracing over £6m per annum.
As we have long said, the current legislation needs updating, but if we are to continue working within it, then we must work directly from it. Levy contributions are due from all activity that “relates to” betting on British Horseracing, and accordingly the subject of revenues from gaming machines, or FOBTs, must still be settled in the context of the Levy. Sir Philip Otton, whose advice on Levy negotiations and the wider review was called upon at the end of last year by the Levy Board, and whose final reports have been forwarded on to DCMS, found that gaming machine turnover was related to betting on British Horseracing.
Vitally though, as part of the latest agreement, we also look forward to embarking on joint promotional initiatives with bookmakers. Another fascinating Flat season is already underway, and we must ensure we do all we can to maximise the appeal of our flagship events, to all of our customers.
Chairman, British Horseracing Authority