Comment: The racing tax would be desperate grab for revenue that would come at the cost of one of Britain's last remaining global success stories

The government's shambolic climbdown on welfare reform – the latest in a series of blunders that have squandered political capital for no gain – has left the Treasury facing a £5 billion hole in its forecasts and made the prospect of tax increases in the autumn statement a near-certainty.

The fear now is that, like a drowning man, prime minister Keir Starmer will cast about for any life raft that could save him and his chancellor from a financial crisis of their own making. In the process, they could cause untold damage to British horseracing.

• BHA issues call to arms to oppose the 'racing tax' over fears of £66 million hit to the sport's finances  

The Treasury is currently consulting on proposals that would see the tax rates on online gambling move to a single rate. An innocuous sounding policy, but one that is deeply flawed in concept, as it would result in the same tax rate being levied on betting on racing as that which is due on casino betting or online slots – demonstrating a fundamental misunderstanding of the differences between these forms of online gambling.

Racing and sports betting is currently taxed at a lower rate than casino and slots. That is a sensible approach, as unlike gaming, betting on racing supports a major industry: £350 million annually flows from bookmakers to the sport, powering rural jobs and global clout.

The impact of the government implementing what the BHA has dubbed as the racing tax would be dire. It would raise the overheads on an expensive gambling product still higher and have the perverse impact of incentivising operators to promote casino products over racing.

Bookmakers would also increase their margins on racing to pay for the new tax, offering worse odds, withdrawing promotions and tightening restrictions on successful punters. These trends are already happening – a consequence of the disastrous affordability checks policy – but would accelerate further with tax harmonisation, as would the flood of punters to black market operators, drawn by betting odds and fewer intrusive checks.

In turn this would mean further falls in betting turnover (already down a fifth in just two years) and so less money flowing into racing via media rights, levy and sponsorship. The sport, already under real financial pressure, would be dealt another blow.

And for what? The tax that would be gathered by increasing the rate on racing from 15% to 21% is estimated at £40 million annually – a drop in the ocean compared to the billions being sought, and a pittance when weighed against the economic, social and sporting value horseracing creates for Britain.

The government said it would drive growth and fix the economy. It has failed to deliver on this promise, and now faces a financial reckoning in the autumn as a result. But Keir Starmer and his ministers must realise that a racing tax would be the worst kind of solution to their predicament: a desperate grab for revenue that would come at the cost of jobs, heritage and one of Britain's last remaining global success stories.

Read these next:

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'Give them pain and discomfort' - British racing told to make life tough for government as battle lines are drawn over tax consultation 

'It will wreck racing' - government's 'mad proposal' for online gambling duties compared to infamous pasty tax

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