RACING SUBMITS COMPELLING CASE FOR SIGNIFICANT LEVY INCREASE

27 Nov 2007 Pre-2014 Releases

• Racing proposes fair and reasonable 2008/09 Levy yield of £135m to £153m
• Government’s Determination of the Levy Scheme should be based on 15% of gross win on British horseracing
• Betting exchanges to pay on a new and equitable basis

The British Horseracing Authority (BHA) today submitted its full case for the statutory determination of the 47th Levy Scheme to the Secretary of State for Culture, Media and Sport, Rt Hon James Purnell MP, and the Minister for Sport, Gerry Sutcliffe MP.

Despite the best efforts of Racing to seek a resolution, the stance of the Bookmakers’ Committee means that the Levy must now be determined by Ministers for the first time since the 2002/03 Scheme.

The document, submitted yesterday by the BHA on behalf of the entire Racing community, argues that a fair and reasonable levy return to Racing from the betting industry is in the range of £135m to £153m in 2008/09, which is forecast to be between 14% and 16% of the gross win that the betting industry derives from British horseracing.

Tessa Jowell, who was Secretary of State for Culture, Media and Sport when Government last determined a Levy Scheme in 2002, stated that the Levy yield that year should be in the range of £90m to £105m. Updating her conclusions to reflect the changes over the last six years in the needs of Racing and the capacity of bookmakers to pay, BHA has taken into account factors including:

• The increase in fixtures from 1,158 in 2002 to a programmed 1,504 in 2008, an increase of 30% at a cost of £22m

• The £10m increase in integrity and regulatory costs met by British Racing. These were £15m in 2002, and will be £25m in 2008

• Indexation between 2002 and 2008

• The increased capacity to pay of the betting industry since 2002

The BHA submission is backed by compelling new evidence about the value of Racing to betting operators. Finance and economic consultants LECG find that the total value of Racing’s product to betting operators, in a theoretical commercial market mirroring the conditions established by the Levy, would be in the range of £177m to £225m.

The BHA also advocates the introduction of new Levy arrangements for betting exchanges.

Exchanges were small market players in 2002 but are now firmly established and highly lucrative. The BHA submission proposes the introduction of a new formula based on the percentage of the net winnings of their customers. This proportionate approach, which more closely aligns exchanges’ levy payments to their share of total betting activity as measured by net winnings of their customers, would see a £20m contribution from exchanges in 2008/09.

With the new Government keen to promote sport as part of Britain’s social fabric, the submission makes a powerful case to Ministers that the benefits which Racing brings to all parts of Britain should be maintained and enhanced.

The document reminds Ministers that Racing is Britain’s largest sporting employer and demonstrates that Racing can continue to contribute to a number of public policy agendas, from skills training and veterinary research through to tourism and rural conservation, but only if the Levy is significantly increased.

The submission does not address the Bookmakers’ Committee’s contention that certain commercial costs, such as the costs of buying television pictures for broadcast in shops and the fees charged by the Gambling Commission, should be taken into account when calculating their Levy payments. BHA has said previously that this case is without any merit and it has already been rejected by the independent members of the Levy Board and criticised by independent commentators.

Paul Roy, Chairman of the BHA, said today:

“Racing regrets that the intransigence of the bookmakers has forced this issue onto Ministers’ desks.

“Determination now gives Racing the chance to set out a powerful, rational and detailed case for a significant increase in the Levy. In recent years the Levy has become out of kilter with the economics of the betting market and the growing needs of Racing, and Britain’s reputation as the world leader in racing is under threat.

“The BHA has taken a fair and reasonable approach. Our submission calls for a 15% gross win percentage despite our economic analysis demonstrating that we have a strong case for much more. We have taken this route to help the Government to Determine as quickly as possible in the New Year.

“The time has come for the Levy to catch up with the reality of how much money the betting industry now makes. As we saw in a Parliamentary debate last week, Racing enjoys strong support from MPs in all parties and we are confident that Government will accept our case and ensure that British horseracing continues to thrive.”

ENDS

For further information, please contact BHA Acting Communications and Promotion Director Alan Delmonte on 07931 701536

A copy of the BHA’s covering letter to its Determination submission is attached and is available at http://www.britishhorseracing.com

The Hansard report of last week’s Parliamentary debate on British horseracing can be found at http://www.publications.parliament.uk/pa/cm200708/cmhansrd/cm071121/halltext/71121h0001.htm#07112172000001