When we look at thoroughbred horseracing globally, there are major challenges confronting the sport. A diminution of media coverage, the illegal use of racing pictures and data rights by wagering operators based in tax havens, an apparent decline in consumer interest demonstrated by falling on-course attendance levels and stalled wagering turnover. All of them are challenges which add up to an uncertain future for horseracing. The numerous countries which enjoyed rampant prosperity during the ‘80s and ‘90s are now reeling under the weight of complex problems.

But British Racing is an exception. There is compelling evidence that we have never enjoyed better days. Prize money exceeded the £100 million barrier in 2004 for the first time. The strategic expansion of the Fixture List continues and is sustained by a formidable growth in the number of horses in training. Racecourse attendances reached record levels and betting turnover on British Racing continues to enjoy substantial year-on-year growth. By any yardstick, the popularity of British Racing is unprecedented.

What makes this success so extraordinary is that it is set against the backdrop of the combined turbulence of an Office of Fair Trading investigation, the demise of attheraces 1, and an unanticipated judgement by the European Court of Justice.

Despite the progress reflected in the development and introduction of the Modernisation of British Racing much remains to be done. British Racing leads the world in many respects, yet its investors continue to receive a reward well below international comparisons. We must also find a way through the current legal difficulties confronting the sport in a way which allows Racing to flourish commercially whilst maintaining the traditions and prestige that distinguish British Racing from its international competitors.

It is these issues that dominate the minds of those entrusted with the responsibility of the good governance and commercial health of the sport and are as relevant in 2004/05 as in preceding years. Many of the subjects that I will touch on in this address are covered in more detail in our comprehensive 2004 Annual Report, which is published today – copies will be available for you later.

The sometimes fractured relationship which has existed between the British betting and racing industries over the payment of an appropriate royalty to British Racing in return for providing the betting opportunity to wagering operators has taken a turn to a more constructive dialogue. There is an appreciation from Racing’s side that we must acknowledge the demands of the bookmakers and their important role as intermediary between racing and one of our two most important customers, the punter. This is often misconstrued as the racing and betting industries living in each other’s pockets, a misconceived premise which has gained notoriety since the Government’s decision in 2001 to institute a taxation policy built on gross profits rather than turnover. A mutuality of interest does not constitute a conspiracy against the punter.

The reality is that British Racing generates vast profits for wagering operators and there must be an appropriate reward for the sport. It seems unfair that a misconceived ruling by the ECJ can have the possible ramification of denying British Racing a revenue stream for a product that has delivered vast reward to those who have bled the sport for years without paying a proper financial consideration.

British Racing has an enviable reputation internationally for its integrity and quality, attributes which remained unexploited commercially to any great value until 2002 when BHB initiated contractual arrangements with Irish bookmakers. British Racing has always been recipient of monies from the Caribbean, Sri Lanka and continental Europe, albeit small change. The challenge is to extract true value of British Racing’s worth from all betting operators, nationally, simultaneous to the full exploitation of British racing’s intellectual property rights on the international arena.

When we look at ourselves on an international scale, a significant improvement has been made but we fall well short on a comparative basis with other nations in terms of the ratio of prize money to owner investment in keep and training costs. There is £400 million a year invested in training costs alone and, even when discounting capital investment, the return is less than 30%, an anomaly symptomatic of the prize money malaise which has prevailed since the promulgation of the Betting and Gaming Act 1960. The paradox is that I believe Britain has the most energised betting market in the world, one that encourages innovation, but one that pays a derisory royalty far from commensurate to British Racing’s true value.

In that respect, betting exchanges continue to exercise our minds. The three key areas BHB is concerned with are Integrity, Taxation and Contribution to Racing. Racing can only manage the first and last of these imperatives. As the Chairman has said, it is for those responsible within the sport to ensure that the integrity problems that do exist are more than compensated by the advantages of a better audit trail.

Betting exchanges’ contribution to racing is inordinately low. The price to enable betting operators to bet on British racing must be set by British Racing and not be dictated by the business model of the wagering operator. We could see the farcical situation of a betting exchange driving down its commission rate to ward off competitors with a consequence that racing would receive an ever-diminishing return. We have initiated discussions that will ensure that racing’s future revenue from betting exchanges is not compromised by the present fallacy of establishing a price in a market where there is a non-existent commercial tension between competitors.

We await the decision of the Court of Appeal, in the light of the ECJ’s judgement, in summer 2005, as does Bernard Donoughue’s Future Funding of Racing Review Group. My view is clear, that even if the Court of Appeal follows the ECJ ruling, racing must continue to explore commercial answers in order to secure a proper long-term and viable financial structure for the sport.

In some ways the two issues of the ECJ and the OFT are interrelated. A successful and concerted campaign by the Betting Industry had kept British Racing off-balance and ensured that the sport received a disproportionately low royalty. BHB’s former Chairman Peter Savill was the pivotal force in attempting to redress an imbalanced financial relationship that had existed since the legalisation of off-course bookmakers in 1960. The revisionists who denigrate Peter’s ambition to install an appropriate financial structure for the sport in lieu of the subservience of the past not only let down the sport of which they are part, but limit our aspirations for the future.

As BHB developed a commercial mechanism to replace the statutory levy, the Betting Industry – doubtless encouraged by the modern day infatuation with competition law among the legal fraternity and economists – could not resist making representations to the OFT that BHB had “abused its dominant position” as proprietor of British Racing’s database right.

Yet British Racing reached agreement with the OFT, whose investigation was incapable of sustaining the assertion of an abuse of dominant position, which surely would not have been the situation if the case had been underpinned by sound law, economics or factual appreciation. I am continually perplexed and discontented that an antagonist can fuel an OFT investigation without recrimination and financial accountability.

MBR was not only the basis for agreement with the OFT, but in its own right provided a vision and template for British Racing. It is in places a radical document which challenges the sometimes complacent and rigid attitudes that pervade Racing jurisdictions around the world.

MBR remains, in my opinion, the blueprint from which the sport can continue its prosperous run. It must be acknowledged that there will be a delay in the application and implementation of some of its recommendations. However, the fundamental principle of BHB relinquishing its commercial role and establishing British Horseracing Enterprises as the body to exploit British Racing’s commercial assets and intellectual property rights remains as strong and vital as when the MBR was formulated. Similarly, the importance of a prize money contract which fixes a set contribution to prize money from income derived from intellectual property rights, the establishment of two separate fixture matrices, one for Jumps racing and one for Flat racing, a triennial fixture allocation system based on a bidding process and the provision of a Development Fund are all matters which apply as equally to 2005 and beyond as they did when announced at this time last year.

An integral feature of any accord for the future, in my opinion, is the establishment of a formula that distributes income in direct proportion to the betting turnover generated by each Racecourse Fixture. The continuation of the subsidy culture is out of place in the commercial era. This model, backed by a properly resourced Development Fund to maintain a varied and quality racing programme, is a critical aspect of the modernisation programme and I encourage racecourses, owners and all other participants in the sport to support it.

In order for hypothecation to work we need access to betting turnover information but this is proving an obstacle difficult to negotiate. We have given assurances to the bookmakers that the information will be disseminated anonymously so as not to compromise their commercial integrity. We remain confident that bookmakers have an appreciation of the importance of betting turnover data for the move to modernise British Racing and that we can clear the last hurdle safe in the knowledge that the commercial aspirations of racecourses and racing itself are not stymied by an unwillingness to make available this fundamental information.

The OFT announcement this week a year ago that it provisionally accepted BHB’s proposals was predicated on the sport committing to a modernisation programme. But the stimulus for change emanated not from the OFT, but from BHB. It was accompanied by an acceptance within the industry that we are in a highly-competitive commercial world and that British Racing goes beyond being just a sporting institution. Change was inevitable, but the key was to bring about an inclusive, progressive outcome. We said throughout that the sport required modernisation and not fragmentation.

We know that the Levy is being abolished in 2009 and it is no secret that BHB favours a commercial mechanism if we are to realise the true value of the sport’s rights. The Court of Appeal hearing later this month could conceivably deliver a conclusive verdict supporting BHB’s contentions, obviating the need for the Future Funding Review Group to continue its work. Of course, there are other intellectual property rights that reside within the sport and these will be fully explored should the Court of Appeal find for William Hill.

If we are able to achieve a commercial outcome, it is important that Racing and BHB’s shareholders understand that the overall interests of the sport are best represented by a central governing authority which takes into account the intricacies of the sport and places equal weight on maintaining the prestige and quality associated with British Racing and an appropriate exploitation of the sport’s commercial rights. We spent four years convincing the OFT that this is a collaborative sport and not the domain of sectional interests consisting of one or two constituents to the exclusion and possible detriment of all others. BHB will continue to represent the broader perspective that has delivered the unparalleled success enjoyed by British Racing during the past five years.

This leads me to the sale of the Tote. The untimely announcement by the European Commission that it intends to institute a State Aid investigation into the proposed sale of the Tote to a Racing Trust is a further example of the successful tactics employed by British Racing’s adversaries in keeping it poor and indebted to the betting industry. Racing and the Shadow Racing Trust are now compelled to reassess our position, and will do exactly that in the forthcoming month. I don’t intend to speculate either on the outcome of the State Aid investigation or indeed the future strategy of the Racing Trust but it is accurate to state that Racing has forfeited profits generated by the Tote in the past. The Tote has either distributed all its profits to Racing and/or reinvested in growing its business. Further, it is important to recognise that the Government has not provided funding for the Tote nor guaranteed or provided loans to the Tote. Nor has it received any money from the Tote, other than normal taxes such as betting duty and corporation tax, etc.

This has been the case since the inception of the Tote in 1928. It is racing which has sacrificed its dividend in return for investing in the future of the Tote by ensuring that it remains a competitive betting alternative to fixed odds operators. Once again the sport is embroiled in a protracted investigation, one that is more than likely instigated by the betting industry in its preoccupation with preventing Racing from capitalising on its assets.

But, as I have said, British Racing overall maintains its impressive run of form. We saw further significant growth in the number of owners, horses in training, fixtures, races and runners. Pleasingly, growth was apportioned equally between Jump and Flat Racing. Total racecourse attendance saw another record of 6.05 million racegoers, up 17% on 2000’s 5.16 million.

The success of Racing cannot be gauged by statistics alone. One of the most important initiatives instigated by BHB during its 12 year history was the formation of the Stable and Stud Staff Commission involving an appraisal of one of Racing’s most important assets, the workforce. Its report provided a template for the sport to modernise the working conditions for stable and stud staff.

We indicated at last year’s Annual Review that we would provide a synopsis of the progress made by the Stable and Stud Staff Steering Group, ably chaired by Ann Mallalieu. The issues which they have concentrated on during the first 12 months are recruitment, training and career development, pay and benefits, staff accommodation and recognition and respect. I am pleased to advise that Baroness Mallalieu’s steering group has made giant steps, most notably in its efforts to bring contemporary practice to the working lives of stud and stable staff. They continue the important role of managing change.

There are many initiatives that are being worked on throughout the industry in a spirit of ‘can-do’ – such as anti-bullying campaigns, pensions, training programmes, career development programmes, racecourse facilities and staff accommodation.

One of the major recommendations in last year’s Report was that there should be greater recognition and respect. I am pleased to say that the Stable Staff of the Year Awards luncheon held earlier this year was one of the most uplifting and satisfying days during my 20 years in racing, whether in Australia or the UK. It was a most humbling experience to witness the heartfelt thanks of those people lucky enough even to be adjudicated as finalists for the various awards, let alone the overwhelming joy of the winners of the respective categories. Racing has an unfortunate tendency to focus on the negative but these Awards accentuated the goodness at the heart of our sport and of those who make such a contribution to British Racing. It must be said that the Awards would not have proceeded without the magnanimity of Sheikh Mohammed and Godolphin. Additionally the Racing Post and the drive of Brough Scott were integral in developing this wonderful initiative, which was organised and carried out with great professionalism by the BHB marketing and communications departments.

As you can see the Stable and Stud Staff Report has had a profound impact and continues full steam ahead during 2005. At this point I would like to acknowledge the role played by David Ashforth and the Racing Post. At this event two years ago I expressed disappointment at the way in which the Post had chosen to draw attention to issues concerning stable staff, but it cannot be disputed that change was needed, and change is now happening.

One of the most exciting innovations in recent years has been the enhancement of the British Pattern. The depth and quality of British Racing is best exemplified by the numerical strength of the British representation in the World Thoroughbred Racehorse Rankings.

But I do have a concern with the expansion of the Pattern system. There has been a proliferation of the international Group and Listed racing schedule. The European Pattern has stood the test of time, but if Pattern status is to continue to be meaningful, there needs to be a stricter appraisal of applications so that the conferring of black type genuinely reflects a race’s true quality.

The characteristics that distinguish British Racing’s Pattern events from the remainder of the world’s are unquestionably quality and diversity. What other nation provides opportunities for horses of all ages, at distances ranging from 5 furlongs to 2½ miles and an examination of the thoroughbred’s resilience and brilliance at racecourses as searching and diverse as Newmarket, Ascot, Epsom, Goodwood, York and Chester to name a few?

My greatest concern is the emerging trend which has resulted in a drift away from promoting the Classic-type horse in deference to milers and 10 furlong horses. The proliferation of mile and a quarter events in the world calendar and the blind acceptance that a Classic winner must also win over the shorter distance to be regarded as a commercially attractive proposition can only lead to one thing: the further diminution of influence of the Classic thoroughbred.

The biggest threat internally to the structure of the British Pattern is undoubtedly the misperception that staying events are not commercially viable. There is no substantive evidence to support this view and we continue to encourage racecourses to programme events that offer a test of stamina. We have a responsibility to frame the race programme that encourages breeders to invest and promote stallions renowned for their eminence over the Classic journey. The emergence of Montjeu is exhilarating. BHB will play its part in maintaining the eminence of the stayer and we intend to champion the classic horse on the international stage by encouraging other nations to recognise that the diversity of breed is a paramount issue. British Racing can lead the way by remaining true to the principles of a diverse and high-quality Pattern.

Turning to Jump Racing, there can be no doubt that the 2004-05 Jumping season excelled in terms of the quality of racing and the publicity surrounding it. The emergence of Kicking King, Well Chief, Inglis Drever and others meant that the established stars such as Moscow Flyer, Azertyuiop, Best Mate and Baracouda had their pre-eminence challenged.

I am convinced that the joint initiative promoted by BHB and racecourses, the Order of Merit, energised the Jumping season and all parties are to be congratulated on a series which received near-universal acclaim. Inglis Drever is just the type of horse that the Order of Merit was designed to reward – high-class, consistent and versatile. I would like to express my appreciation to the owners and trainers who took up the challenge and made the first Order of Merit such a success.

On the marketing front, BHB hosted the British Flat Racing Awards and their Jump counterparts. These have been tremendously successful events which we are proud to have initiated and organised.

I am pleased to announce today that BHB is to establish a new Jump Racing Committee with specific responsibility for race planning issues relating to Jump Racing. The importance of Jump Racing to the sport is very well appreciated by BHB. British Racing consists of two strong and vibrant codes and we intend to keep it that way. To the doom merchants who preach that All Weather Racing will bring about the demise of Jump Racing, we say you are wrong; your dire predictions will not be vindicated now or in the future. Flat Racing, Turf and All Weather, and National Hunt Racing co-exist and the many changes which we have initiated in recent years to National Hunt Racing can only strengthen the jumping code from both a marketing and financial perspective.

The pressing issue of the day is undoubtedly the negotiations between Channel 4 and British Racing. BHB Board member and RCA Chairman, David Thorpe, has had the responsibility to frame an industry response to the commercial demands of Channel 4 and he continues to explore opportunities that will hopefully result in Channel 4 maintaining its excellent coverage of British Racing. We should not lose sight of the fact that there numerous examples of sports which have been marginalised by the loss of terrestrial television coverage.

The only cautionary word is we should not devalue the sport’s intellectual property rights – if we abandon this principle then the value to purchasers reverts to nought. There cannot be an erosion of value in order to reach an expedient conclusion. We thank David and wish him well in the run to the finishing post.

The emergence of Racing UK and At The Races (2) and the strategic alliances both parties have forged with the telephony industry and as a consequence the interactive opportunities synonymous with 3G are equally valuable developments. Racing must take the long term view of appreciating that the value of its intellectual property rights is going to increase, particularly as interactivity on mobile telephony services becomes de rigueur.

Another issue of great importance to the financial future of the sport is the retention of the VAT Registration Scheme for Racehorse Owners. The BHB’s VAT Registration Working Group was reformed in 2004 under the guidance of Jeff Ennis MP in preparation for a further review by Customs & Excise of a Scheme worth over £20m a year to Racing. We await good news at the end of 2005. I am delighted to welcome Jeff here today, along with John Greenway, who, with Jeff, jointly chairs the All Party Racing Group. We are again very grateful for all the work that the Group has carried out for Racing’s benefit over the past year.

I also extend sincere appreciation to those committed souls involved in Retraining of Racehorses (RoR), particularly Di Arbuthnot, Annie Dodd and its Chairman, Andrew Parker Bowles. The sport has a responsibility to look after the thoroughbred whose racing days are over and RoR is recognised as being without peer in looking after the “star of the show”.

Finally, I wish to extend my sincere appreciation to the invaluable team that comprises the executive of BHB. I have often said that the BHB executives and staff are the most stimulating group of people that I have had the good fortune to work with.

In closing, my message is simply that British Racing is doing well but that challenges remain. I look forward to working with everyone in British Racing in bringing about greater prosperity for the sport as part of a Governing Authority which is not riven with sectional interest or dominated by one or two shareholders to the exclusion of others, but one which is strong, respected and seen to be working for the wider good of the sport. We will meet our responsibility to work collaboratively with those who invest their money and, more importantly, their time, passion and energy in the greatest sporting institution known to mankind – British Racing.