A report commissioned by the U.K. government has resulted in the British Horseracing Board having to settle for a 9 percent levy on bookmakers' gross profits and no increased payments from the betting industry.
The report, "Determining the 41st Levy Scheme," was conducted by consulting firm Organisation Consulting Partnership. Its evaluation of the levy situation between the bookmakers and the racing industry was used by Culture Secretary Tessa Jowell to determine the new levy arrangement.
Michael Thomas, one of the consultants who worked on the project, said the Department of Culture, Media and Sport was called on to decide the levy amount because the Horserace Betting Levy Board and the Bookmakers Committee could not agree on a levy scheme. The two groups are in commercial negotiations. By law, when the two organizations can't agree, the secretary of state for the DCMS makes the decision.
"The arguments that a large increase is needed in payments to racing are difficult to assess but are in our view far from self-evident," the report said.
It went on to say that the racing industry's other forms of income, such as media rights sales to attheraces, would add £27 million more per year to the industry. Racing had been arguing that it needed funds other than the levy from the bookmakers, including payment for the images and racing information it gives bookies. The report stated that the racing industry could derive enough money from its media rights sales and other forms of income to make an increased payment from bookmakers unnecessary.
"We do not believe that it has been demonstrated that the needs of racing cannot be accommodated within the rise in other income," the report said.
Jowell issued a statement in which she said she understands that the racing industry might be disappointed that she decided to institute a gross profit levy. She also prodded racing and bookmakers to work together toward a solution that will render the levy situation unnecessary.
"I would now like to encourage the betting and racing industries to develop a modern relationship as business partners and move away from an adversarial approach," she said. "This scheme will give them a shared interest in developing their businesses to their mutual benefit. It is, however, clear that the levy system as a whole is flawed, and should not be needed if satisfactory commercial agreements between the parties can be made to work."
The levy scheme, which is expected to raise between £90 million and £105 million for the Horserace Betting Levy Board, will begin on April 1 and end on March 31, 2003.
To view the Organisation Consulting Partnership's report,
click here.