The Betting Levy: Pros and Cons

The Betting Levy.

Whether you’re a politician, gambling company or just a supporter of British horse racing, you’ve probably got a view.

Debates have spanned over the last few decades, but in April this year, the government announced significant changes to how they go about collecting the betting levy.

Up until last month, the levy system, created in 1961, only required UK-based operators to pay a 10% levy on their profits. While offshore firms were asked to make voluntary contributions towards British racing, despite it not being compulsory.

However, after the European Commission approved the legislation last month, all operators which take bets on British racing from customers based in Britain, will have to pay 10% of their gross profits above the first £500,000.

This directly affects a large majority of sports bookmakers who have their main customer base in the UK, but their digital arm based offshore in places such as Gibraltar and Malta. There’s even talk of the Football Association pushing for a similar style levy.

But what are the pros and cons OF this new legislation?

Positives

Thumbs up for British Horse Racing

The main positive under the new ruling falls with British Horse Racing and the British Horse Racing Authority itself. It’s a sport that creates jobs for a huge amount of people, from the stable staff who look after the horses, to the trainers and jockeys that help them to perform to the highest level on the racecourse.

The increase in the levy will make a significant difference to those above, with more money being brought back into the sport and spread out among all of its significant stakeholders.

The hope from there would be that the money spent from the levy would improve the overall quality of the racing around the country, and therefore encourage more people to come racing and invest into the sport through ticket sales or even ownership of horses at the very top level.

Minister for sport, tourism and heritage, Tracey Crouch, said that the legislation would “make a profound difference to the British racing industry and to the thousands of hard-working stable staff, jockeys and trainers and all those who make racing what it is today” while ensuring that British racing “can continue to be the home of the best quality racing in the world for years to come.”

Future Proof for Racing

Following on from the point above, the increase in the levy is all to help the sport of racing in the future. In the landscape of sport, we are predominately seeing those with the most money rising to the top and becoming more popular.

Just look at cricket as an example. While the more traditional format of Test match cricket is in decline, the T20 format which attracts massive TV and sponsorship deals is absolutely thriving. All proving the point of why racing needs to constantly transform itself to meet the needs of the modern customer.

One of the most publicised examples of this already happening in racing is the planned closure of Kempton Park racecourse by the Jockey Club. The intention is to sell the land for development, but only if more than £100m is raised and a new all-weather circuit is given the go-ahead in Newmarket. Much like the increase in revenue from the levy, the sale of Kempton is all supposed to help racing progress into the future.  

On securing the new levy legislation, Nick Rust, chief executive of the BHA, said: “Today is a very important day for British racing as the new levy will make a significant contribution to securing the long term health and growth of our sport. While there remains much more to do in this regard, the levy replacement in itself is a huge achievement, and one that could not have been achieved without the determination and leadership demonstrated by Tracey Crouch and her team of dedicated officials at the Department for Culture, Media and Sport.”

Negatives

Off-shore nerves

As Brexit has already brought about nervous times for bookmakers based in places such as Malta and Gibraltar, the increase in the betting levy is unlikely to improve their desire to stick around.

Many people would argue that the majority of the bookmakers based in these locations are doing so to avoid the high rates. But with the new changes, you would have to ask, what’s really the point in them being there?

Some bookies have already expressed concerns and are likely to have plans in place to relocate back to the UK if they feel the need.

Of course, that would have a negative impact on places like Gibraltar, where the gambling industry plays a huge part in their local economy, with many employees living on the island or commuting across from neighbouring Spain each day. 

Bye-bye Racing

Several bookmakers already have a precarious relationship with the BHA, so their major part in changing the betting levy is unlikely to make that relationship any stronger.

The introduction of the Authorised Betting Partner scheme saw some bookmakers turn their back on sponsoring some of the biggest events in the sport, with Betfred’s Fred Done even threatening to walk away from the sport altogether in late 2015.

Done said, “I think relations between the betting industry and racing are worse than they’ve ever been. There’s no trust.”

Now so far, bookmakers like Betfred and Ladbrokes/Coral are yet to fully walk away from racing, but earlier this year they did refuse to take up a content contract from Arena Racing courses. This means that they don’t show live pictures in their shops or on-line from 16 UK race courses, including Doncaster and Royal Windsor.

That’s a significant snub to the sport, especially when the bookies are yet to confirm any signs of their profits decreasing due to their customers not being able to see the action. Other sources of revenue are being looked at as possible replacement, so don’t be surprised if bookies start promoting their casino and games, a lot more than they do this afternoon’s big races.