News & Press Releases
50th Levy Scheme: Bookmakers' Committee Recommendations and Racing Submission(Corrected)14 July 2010
Date: Thursday, 15 July 2010
PRESS RELEASE FROM HBLB
THE 50TH LEVY SCHEME – RECOMMENDATIONS
BY THE BOOKMAKERS’ COMMITTEE (CORRECTED)
1. I am pleased to submit the Bookmakers’ Committee recommendations for the 50th Levy Scheme per our statutory responsibility. We continue to believe that a levy based upon gross profit remains the fairest and most reliable indication of a bookmaker’s capacity to pay and therefore recommend very few changes to the terms of the 49th Levy Scheme.
2. We have noted racings’ submission to the Levy Board, and intend to provide further comment on it by the end of July. However, in making our recommendations, we are cognisant of the fact that the submission by racing deals almost exclusively with its own perceived needs and desires; the impact of economic, fiscal and social circumstances are essentially ignored in the submission. These factors have had a significant, and very recent, impact on the revenues and profits of betting, and therefore on betting’s capacity to pay the levy. We therefore believe the following should be taken into account when agreeing the levy:
a) The significant additional cost (since January 2008) of providing TV pictures into Licensed Betting Offices (LBOs) and the prospect of further substantial increases in January 2011, before the start of the 50th Levy Scheme. The amount received by racing (racecourses) has risen from £38m in 2007/8 to £56m in 2009/10.
b) We now face the worst economic outlook in Britain for many decades. Consumer spending is under extreme pressure and bookmakers’ revenues and profits are under the same pressure. In addition we face a VAT increase to 20%, much of which is irrecoverable by bookmakers, thus putting profits and our capacity to pay under further pressure.
c) The accelerating decline in the popularity of British horseracing amongst LBO clients has resulted in a constant decrease in British horseracing as a share of bookmakers’ revenue and also in absolute terms.
d) The total cost of levy and TV pictures now exceeds the EBITDA made by bookmakers from British horseracing. In 2000 circa 55% of bookmakers’ British horseracing EBITDA was paid in this way; the figure now is circa 110%.
3. In making our submission, we are conscious that the levy was never intended to be a price for a product and it is difficult to see how it could be. Further, it was certainly never intended to be a one-way street via an upward only rent review. The statute refers to a levy mechanism and has never envisaged a guaranteed yield. Racing, like bookmakers, cannot be protected from the impact of economic, fiscal and social circumstances and their resultant impact on both racing’s reasonable needs and the bookmakers’ capacity to pay.
4. The yield from the 50th Levy Scheme will depend as much, or more, upon racing and the bookmakers’ ability to work together, in what is a very difficult economic climate, as it does upon the terms of the Scheme. We believe that by working together on key strategic issues, such as reducing the number of non runners, developing a ‘levy friendly’ fixture list and more effective picture distribution, racing and bookmaking can increase betting revenues and therefore maximise the levy yield.
5. We believe that a ‘gross profit’ levy scheme remains the fairest and most reliable way to balance racings’ needs with the bookmakers’ capacity to pay, by taking into account the social and economic factors affecting the sector at that time; it also protects the consumer by ‘taxing’ bookmakers’ profits, as opposed to punters’ winnings.
6. We are particularly concerned at the impact that a simple ‘roll-over’ may have on smaller LBOs; it is in nobody’s interest for us to see continued closures of community-led LBOs and the associated social problems of unemployment as, even if paying less than the headline 10%, they do contribute to the levy. Additionally, the fact that levy yield has reduced, due to reduced betting on British horseracing with levy-paying bookmakers, is not a reason to increase the amount payable by those bookmakers still subject to levy.
7. We therefore recommend an above inflation rise in the LBO threshold to £123,000. Our calculations estimate that on flat revenues this would reduce the levy yield by circa £8.5m, which equates to only 25% of the additional cost to LBOs as a result of the increased media charges, and only 50% of the additional revenue received by racing (racecourses) each year from the sale of these rights.
8. We do not recommend any other significant changes to the 49th Levy Scheme. In the current economic climate, we see no possible case for any increase in the headline 10% rate of levy for LBOs, Telephone Betting, Internet Betting and Betting Exchanges.
9. In the longer term, we believe that racing and bookmaking should look to further their shared interests by working together to boost betting revenues derived from British horseracing.
10. My Committee and I look forward to your response to our submission.
Yours sincerely
Will Roseff
Chairman
For and on behalf of
The Bookmakers’ Committee 14th July 2010
Print this page