A high-regulation, high-tax environment would spell disaster for British racing
Few industries have been as battered and bruised by government mishandling as British racing over the past few years.
First, a chaotic Conservative government endorsed imposing financial checks on individuals seeking to spend their own money by formally adopting the Gambling Commission's policy of affordability checks.
The impact has been a wholly predictable exodus of business from the regulated market, with vast damage dealt to horseracing's finances by double-digit percentage declines in betting turnover and the loss of racegoers and owners disillusioned by the fact their pastime has become an invasion of privacy.
By embracing affordability checks, the Tories led racing to the scaffold. Now reports suggest that Labour is considering enormous tax rises on gambling, which would put the noose around the sport's neck.
Labour's first 100 days have been dominated by scandals around party donors and its hunt for cash to fill the so-called £22 billion budget 'black hole'. Having been backed into a corner by a campaign promise not to increase income tax, national insurance or VAT, the Treasury is casting about for options to fill its coffers and gambling is squarely in the crosshairs.
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Inevitably, many will consider huge tax increases on bookmakers and casinos as an easy win. The betting industry is a soft target.
Yet massive tax hikes would not just imperil the betting sector, which contributes £7.1bn to the economy, pays £4.2bn in tax, supports 110,000 jobs and is about as close as Britain gets to having a world-leading digital industry. They would also deal another grievous blow to racing.
Since affordability checks led to racing turnover falling off a cliff, the sport's profitability for bookmakers has plunged. Flutter UK & Ireland chief executive Ian Brown warned in these pages earlier this year that his firm no longer makes any money on racing. The Levy Board last week said that gross profit (the money bookmakers earn from racing before costs such as tax, media rights and marketing) is falling, despite the layers' push to increase margin.
Racing is caught in a vice. Bookmakers pay racing handsomely for the right to bet on and broadcast the sport, yet turnover and profitability are declining. This can end only one way – in racing's incomes declining further – and the more bookmakers' costs are increased, such as through tax rises, the less there is available for racing.
Even if the government opts to leave sports betting duty untouched, or raise it modestly from the current 15 per cent rate, a whacking great rise in gaming rates will create a crisis for the sport. Bookmakers may not be happy about paying handsomely to carry racing, but when other parts of their operations – such as football betting and casino gaming – are profitable it is at least viable.
But if bookmakers have to shoulder up to £3bn in new tax rises, that money has to come from somewhere and everything would be cut to the bone. Optional spending on racing offers, sponsorship and marketing would be on the chopping block. Future media rights deals would inevitably be on worse terms. Racing, already facing an uncertain future, would be dealt another hammer blow.
The government has repeatedly stated its desire to foster growth, committing to making Britain the fastest growing economy in the G7. It does not take a Milton Friedman to understand that a high-tax, high-regulation environment leads not to growth but contraction. The 'easy win' of taxing bookmakers to the hilt is nothing of the sort – and would spell disaster for British racing.
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Published on inTom Kerr
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- Alastair's love of racing sang from every line - and his ability to tell the story of a race was unmatched
- Bold promises fizzle out as British racing's leaders struggle to deliver on radical change
- Was Julie Harrington a good leader of British racing? It's complicated
- New code on affordability checks is a hard-won victory, but concerns remain
- MPs must not underestimate how bitterly bettors resent checks or the damage being done to racing