Levy reforms blamed for Tote's hike in pool deductions
The Tote are set to increase deductions from their win and place pools from the end of the month, blaming the change on the reforms to the levy introduced by the government in April.
From June 29 the win pool deduction is set to increase to 19.25 per cent from 16.5 per cent, while the place pool deduction is to increase by two percentage points to 20 per cent.
The move means that racegoers using Totepool for win and place bets will receive poorer dividends than previously.
Deductions from all other pools including Jackpot, Placepot and Scoop6 are to remain unchanged.
The government's reforms of the levy were signed into law in April, extending the funding mechanism to operators based overseas. However, in order for the plans to have a chance of gaining state aid approval from the European Commission, the reforms had to apply equally across all sectors.
The Tote's owners Betfred said they had previously not had to pay the levy on their on-course operations, instead contributing to racing through commission and rent.
They said that Totepool on course was actually loss making for the firm – profits coming instead from off-course and international routes – and that the additional cost of the levy would therefore have to be passed on to customers to cover their losses.
Betfred founder Fred Done said on Monday: "The Tote, with the exception of two years in the 60s, has never paid levy on racecourses.
"Currently we lose around £2 million a year on racecourses. Unfortunately we are unable to shoulder any additional losses and, without passing this levy deduction on, our losses would increase to around £3.5 million a year. I think the words 'unintended consequences' apply."
From July next year Betfred lose the exclusive pool betting licence the company won when winning the race to buy the Tote in 2011.
More than 50 British racecourses have come together to set up their own pool betting operation to rival the Tote, although Done has expressed strong doubts about its ability to compete.
He added: "Next year when we lose our exclusive licence on the majority of racecourses, with the exception of Chelmsford and Ascot who we will still be working with, racecourses themselves are going to have pay the racecourse levy deduction and, given the level of profitability and liquidity they have, I don't know how they are going to fund it."
It is the second time the Tote have increased win pool deductions since Betfred took over ownership of the operation.
In October 2012 deductions rose to 16.5 per cent from 13.5 per cent, the first change since the-then Tote chairman Peter Jones reduced it from 16 per cent in March 2003.
The reason given then was that by bringing deductions more into line with overseas tote betting operators, it would drive turnover from the co-mingling of pools internationally.
Betfred Group chief commercial officer Phil Siers added: "We have tried our very best to mitigate these increases to deductions and have limited it solely to the win and place pools.
"All the other pools such as exacta, trifecta and placepot will remain on the current standard deductions."
Course bookmakers, who had previously paid a flat fee of £240 per year, must also now pay the levy at a rate of ten per cent of gross profits.
However, as there is a £500,000 threshold before any levy is paid, most course bookmakers have been taken out of the levy net altogether.
Betfred, however, have applied that £500,000 threshold to their betting shop estate and so will pay levy on all the Tote's gross profits.