Horserace Betting Levy (Hansard, 11 March 1994)

§ Mr. Howard

I have today sent the following letter to the chairman of the Horserace Betting Levy Board and written similarly to the chairman of the Bookmakers Committee. A copy of the scheme has been placed in the Library of the House. The letter readsFollowing the Levy Board's and the Bookmakers' Committee's failure to agree the scheme for the 33rd Levy period last October, the scheme fell to be determined by me. I have now reached my decision and I enclose a copy of the Scheme which I have determined. 415W The main feature is that the cash and credit rates remain unchanged. In other words, the scheme rolls over from 1993–94 with indexation of the other elements in the Scheme. In reaching my decision I have taken into account the submissions made to me by the Government-appointed members of the Levy Board and by the Bookmakers' Committee, together with other submissions, including those from the British Horseracing Board, on which the Board members and the Committee were afforded the opportunity to comment. The cash yield from the Scheme will depend on the leviable betting turnover. I have taken as my starting point an estimated £4,358 million in 1993–94. It seems unlikely that there will be no growth in turnover in 1994–95. Representations have been made in regard to the possible adverse effect of the National Lottery on betting turnover, but I doubt whether the National Lottery will have a significant effect in 1994–95. In all the circumstances, my view is that the needs of racing justify a yield in the range of £50 million-£53 million and that such a yield is within the capacity of bookmakers to pay. It is a long accepted principle that I should take into consideration bookmakers' capacity to pay I have given careful consideration to the arguments put to me in this regard. The scheme which I have determined does not increase the cash or credit rates payable by the bookmakers. This reflects my view that an increase in rates is not necessary to meet racing's current needs nor could it be justified. Furthermore, the first slice of turnover on which a fixed fee is charged has been increased in line with inflation. The bookmakers have put forward arguments for a reduction in the cash rate. I am not convinced that in the present circumstances any such reduction is justified. In reaching this view on the cash rate, I have had regard to the bookmakers' contention that falling profitability is a factor which should be taken into account in determining their capacity to pay the Levy. I am not convinced that the position has been reached where any erosion of profit margins is such that it impacts significantly on the bookmakers' capacity to pay the Levy. My attention has been drawn to the structure of the scheme whereby the larger bookmakers are, in affect, subsidising the smaller concerns with detrimental effects on the profits to be made from additional turnover. However, the way the scheme is structured in order to benefit the smaller bookmakers is a matter of choice by the Bookmakers' Committee. Nor am I convinced that the overall effect of the Scheme is such that there would be a real effect on capacity to pay the Levy at unchanged rates in the coming year. I have been asked whether falling profit margins are a matter which should be taken into consideration in setting the Levy. I could not accept the argument that it is completely irrelevant to the question of "capacity to pay". On the other hand, the fact that some bookmakers may not recover the costs of the Levy in full from punters is not an argument in itself for reducing cash rates. The levy is a liability on the bookmaker, and it is up to him how he chooses to meet that obligation. In my view, however, it is reasonable to expect the Horserace Betting Levy Board, in discussing future schemes, to have regard to the likely effect of the Levy, amongst other factors, on the ability of bookmakers to manage their businesses effectively. As a matter of general principal, it seems to me very much more preferable that disputes over the Levy should be settled without reference to me. There are matters which most intimately concern the horseracing industry and bookmakers and should, given goodwill, be capable of resolution between them. I should be greatly concerned about any tendency for requests for my determination of the levy to become the norm rather than the exception. Were this to happen, I should want seriously to consider alternative proposals for settling Levy disputes.