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By Matthew Hancock MP - 13th July 2011
Matthew Hancock MP calls for the government to close a loophole in the Gambling Act, before the racing industry is put at risk of "terminal decline".
Racing is a sport that is at the very heart of UK culture. As the MP of Newmarket, the home of British horseracing, I know how much racing part of its heritage and indeed the heritage of the country.
Visit Newmarket early in the morning, and you will see strings of horses parading through the heart of the town from their training stables to the sweeping gallops that symbolise the town.
But in Newmarket, and across the country, racing is suffering from a flawed funding system, creaking as more and more of the gambling industry who rely on the sport move offshore to escape their responsibilities.
Racing is in part funded by a levy imposed on the betting industry. The principle is simple: the gambling industry derives a huge proportion of its profit from bets on horseracing. So gambling should in turn contribute to racing, on which it relies. Not to do so would be to free ride on racing, and get something for nothing. The arrangement worked well when it was established, but a lot can change since it was introduced 50 years ago.
The last three years have seen a dramatic decline in the amount of money coming to racing, despite an increase in the amount of betting. The figures speak for themselves. The average levy payment from 2003 to 2007 was £106.2m. In the three years to 2010, this fell to a low of £59.5m, a drop of 44 per cent. Jeremy Hunt's most recent levy determination was meant to correct this downward trend, and should have returned the figure to around £75m. But even in the few months since then, the forecast has fallen to as low as £58m.
The key reason behind this fall has been the steady stream of betting operators moving offshore. In an abuse of a loophole in the Gambling Act, betting operators can leave Britain and base themselves in Gibraltar or other tax havens around the world. They can advertise and transact in the UK without paying any tax or any contribution to the Levy.
Thanks to the savings these firms make from being offshore, they are able to offer far more competitive rates than those who have loyally remained onshore. So they artificially drive down the market, which makes it harder for firms remaining onshore to survive. Meanwhile, the money coming to racing continues to dry up, which threatens the future of the very sport that underpins betting firms' existence.
The government must act to reverse this change now, before the racing industry is put at risk of terminal decline. There needs to be a level playing field, both between racing and betting and between betting organisations themselves. In the first instance, like France, we should end offshore betting, by making it a condition of taking a bet in the UK that the bookmaker pays tax and Levy in the UK. Like everyone else, not paying tax on a bet should be illegal, and offshore bookmakers would not be able to operate or advertise in the UK. Operators would have a level playing field: they would all be treated the same, as they would all pay tax and Levy.
This is why I have secured an adjournment debate on this subject today. We need to make sure that the sport that has played such an important part in our past and present is firmly secure for the future.
Matthew Hancock has been Conservative MP for West Suffolk since 2010.
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