Nick calls for action to support the racing industry

Gimcrack with John Pratt up on Newmarket Heath, c.1765 © Fitzwilliam Museum, University of Cambridge

Question for Short Debate

Lord Herbert of South Downs

To ask His Majesty’s Government what plans they have to support the horseracing and bloodstock industries.

My Lords, I am grateful for this opportunity. I declare a minor interest in owning a tiny fraction of an infuriatingly inconsistent horse of moderate ability. However, my real interest is as a lover of the sport of kings, and I know that my passion is shared by millions of others. Racing is the country’s second-largest sport—only football is bigger. It welcomes 5 million racegoers annually to 59 racecourses across England, Scotland and Wales and the industry generates £4.1 billion a year for the UK economy, supporting 80,000 jobs in the rural economy. This is not just a pastime. It is really important to the country. I sometimes wonder whether racing receives the political attention such a major sport and industry deserves.

Despite its size and prestige, there is much to be concerned about for the future of racing in the UK today. It is a global sport and must be competitive to attract owners, runners, racegoers and betters. Yet prize money levels in British racing are far lower than in rival countries. The average per race in Britain is £16,000; in Ireland it is £22,000, in France £24,000, in Japan £53,000 and in Hong Kong £155,000. This already large gap is widening fast. The clear and present danger is that there will be an exodus of equine talent from our country and horses running in other countries where prize money is higher. That is happening already. Stallions are already going abroad rather than staying here. Horses are not being kept in training here. There is a worrying mismatch between the reputation of British racing as the best in the world and its financing, which is among the worst. This gap is simply unsustainable.

The Government say that the levy is not the only source of funding for racing, representing just 6% of racing’s total income last year whereas owners and breeders contribute nearly two-thirds between them. That is true, but owners and breeders rely on the prize money, which is provided by the levy, so the level of the levy is a key concern for the future of racing. It is a vital source of income for the sport, delivering £80 million to £100 million of funding annually. However, that is way short of the £133 million annual target agreed by the Government in 2017. The current level has simply not been enough to keep pace with inflation or growing costs in the industry.

To take a step back, racing receives a return of less than 3% from the more than £13 billion bet every year by punters in the UK. That is a tiny percentage, the lowest of any major racing nation. Ireland’s return is 8.4%; even Australia’s 3.4%, not much above our current yield, would mean a £174 million levy yield going to the UK industry, far higher than it is currently. The centralised funding models in places such as Japan and Hong Kong lead to much higher returns still to racing, such as 16.6% in Japan. We do not have such models. Instead, we have profitable betting companies, which is why the levy is so important.

I welcome the Government’s review of the levy because three key reforms are urgently needed. First, the rate must be increased, as I think all sides now recognise. Secondly, it should be linked to inflation to ensure that it maintains its value and to provide certainty. Thirdly, we must close the loophole so that the levy applies to all bets by British customers, including on international races, which is not how it works at the moment. In fact, Britain is the only major jurisdiction not capturing domestic betters betting on international racing. That has not always been the case, as the levy captured British betting on international racing prior to 2004. This is a very important gap to plug, because a fifth of the money bet by British punters is staked on races abroad, so the industry is simply losing a lot of money that it would have accrued before.

However, there is a further risk to the financing of racing that is not external. I am afraid that it comes from government itself. To deal with problem gamblers, the Government and the Gambling Commission are proposing affordability checks on remote betters. The Government themselves say that this will impact on racing’s finances but that the checks will be minimal. However, the industry calculates a far worse impact than the Government suggest: an 11% reduction in levy income and a consequent loss of value to media rights deals, reducing funding by 15%. The overall effect could see racing lose millions of pounds a year. The industry can ill afford this at the moment.

I am afraid it is no good to say that the checks will be frictionless, because the technology to deliver frictionless checks does not exist at the moment. Checks every six months and no thresholds, which are already far too low, will effectively mean onerous checks for everyone. That is a clumsy, one-size-fits-all approach that will bludgeon punters.

We know how these institutions will apply these rules —with a sledgehammer. Just look at how the banks have applied the politically exposed persons regulations. It is not just the banks. In July, I received an email from Bet365, with which I have an account, which said:

“Dear Sir Herbert … we have identified that you are a politically exposed person”.

It went on to demand that I identify the source of funds through bank statements, proof of annual income and so on and so forth. Those are immensely onerous requirements, yet I can assure noble Lords that the sums I was betting were tiny: a few pounds a year. These checks were completely disproportionate, so we know how the betting companies will apply any rules. We have a good idea of how they would apply affordability checks. We are already seeing a reduction in betting turnover as bookmakers begin their own checks and high-profile betters say that they will quit.

This reform is doubtless well intentioned but it will not work in practice because it will simply drive punters to the unregulated black market. I am afraid that the Gambling Commission is in complete denial about that. However, I also think that these checks are wrong in principle. People should be allowed to spend their money in ways that they judge is right for them. Would we seriously propose affordability checks for alcohol or tobacco? We might take measures to deal with problem drinking and problem smoking; we might tax these products and so on, but would we actually say to people that if they cannot afford them we will not allow them to purchase them? It is an extraordinary suggestion.

For the state to decide whether someone may place a bet based on their job title or postcode is discriminatory. Actually, I would argue that it would be an outrageous abuse of state power. If there is an issue with problem gambling, affordability checks are an unwise and blunt instrument that will not deal with the issue. I suggest the Government drop these checks and focus instead on measures that are targeted on those most at risk: the problem gamblers.

‘I suggest the Government drop AFFORDABILITY checks and focus instead on measures that are targeted on those most at risk: the problem gamblers.’

There is a very important point here: there is no point in increasing the levy, if the Government finally decide to do that, which would be very welcome, only for any gain or even part of it to be cancelled by another government measure. That would be to give with one hand and take with the other, and racing would be the loser.

Finally, I will raise the issue of the proposed solar farm at Newmarket—2,500 acres of solar panels, the largest in the country. The visual impact from the Limekilns training grounds in Newmarket would be appalling. I should say that I live five miles from the centre of Newmarket but in completely the opposite direction. I would not be personally impacted by this solar farm. I have no vested or private interest in opposing it, but Newmarket does.

Newmarket is the centre of flat-racing in not just the UK but the world—it is known as its headquarters. Historically, the rail tunnel was put under the gallops. The gallops were not dug up in the war for food; special planning protection was given to Newmarket. That has protected it as the international centre of flat-racing, and we cannot be casual about losing these protections or that special status.

The 77 acres of batteries are just a device to obtain planning permission. I believe that solar panels should be on the roofs of public buildings, not on high-grade agricultural land. This proposal is opposed by all local councils, as well as the racing community. I appreciate that there is a public inquiry on it and that Ministers are taking a quasi-judicial decision, but I urge them to reject the proposal if they possibly can.

In conclusion, responding to a similar debate initiated last year by my noble friend Lord Risby, the then Minister said:

“The Government remain committed to supporting British horseracing and related businesses, which are vital to the lifeblood of the rural economy”.—[Official Report, 17/11/22; col. GC 232.]

The Government must mean what they say. If they are committed to supporting racing, they cannot bring in damaging and pointless affordability checks, knowing that the sport’s finances will be shredded. If they are committed to supporting racing, they cannot allow the erosion of our global competitiveness when a key solution—increasing and reforming the levy—lies in their hands. If they are committed to supporting racing, they cannot just ignore the concerns of the global centre of the sport and allow a development which would go against centuries of protection. I am grateful to the Government for acknowledging the importance of racing; their actions must now match their words.

You can read the full debate, including Baroness Harding of Winscombe’s speech and the Minister’s reply, here.