Viscount Astor
To ask Her Majesty’s Government what progress has been made towards the introduction of the Horserace Betting Right.
Viscount Astor (Con)
My Lords, since I put down this Question for Short Debate, events have moved on and the Government have proposed an extension of the levy rather than their original proposed racing right. Much has to be done to succeed finally in bringing a long-term funding solution for racing but it is worth reminding your Lordships that a year ago, the Government proposed the racing right. It was, if one can call it this in Civil Service terms, a bold move which almost immediately ran into opposition from the entire betting industry.
The scene had been set earlier when my noble friend Lord Gardiner of Kimble accepted my amendment to the Gambling (Licensing and Advertising) Act 2014—an amendment originally blocked in the Commons when it was moved there—to extend the right to claim levy payments from bookmakers who had moved their operations overseas. Racing was set to lose about £33 million a year in levy payments but the Government have not yet used this power. As I said, their proposal ran into almost total opposition mainly because the bookmakers feared that if the principle was accepted, other sports would want the same treatment. The Government had to think again and in March announced a new levy scheme.
One cannot blame the bookmakers for inventing the most tax-efficient and profitable system for themselves but to protect the punters and problem gamblers betting on UK racing, it has to be regulated in this country. While the levy is only a small share of the overall turnover of racing—less than 7%—it is a vital part of racing’s income. The levy was running at about £70 million a year, down from the highs of about £100 million, but was forecast to fall to under £50 million. It is fair to ask, as the bookmakers have asked, why this could not be made up by increasing media rights payments. The answer is actually quite simple: most online operators, in what is after all the fastest-growing sector of the market, do not provide television coverage for their customers.
Racing has often been divided in the past but it has come together and the majority of the major courses have agreed an authorised betting partner status, whereby bookmakers who do not contribute to the levy from their overseas operations are not allowed to sponsor races. Racing UK, the television subscription channel, followed suit and announced that it would not renew contracts for on-screen advertising and sponsorship for those firms which had not signed up to the betting partner scheme. Critics prophesied that Cheltenham would be without a major sponsor but that did not happen. New sponsors were found and the festival was a great success. The bookmaking industry complained only because too many favourites won. Of course, when this new plan is implemented this will not be necessary, as under it, all will contribute. Racing has always had the power to influence events. I suppose that an even simpler solution would be for owners and trainers not to enter their horses in races sponsored by bookmakers who do not contribute, but that is probably too much to expect.
There are, if one can use a racing analogy, a number of hurdles to jump and questions that need to be answered. I am sure that the Minister will provide some detail this evening. All British bookmakers betting on British racing, based onshore or offshore, will be part of the scheme and it will no longer be worthwhile to export bookmaking jobs abroad. More importantly, a fair return will need to be put in place from all gambling operators who take bets on British racing. Will that include bets taken by remote operators on British racing but put on from somewhere totally different in the world? There will have to be a separate system, as there is now, for on-course operators. The big questions that bookmakers and those in racing want to know the answers to are: how will the payable rate be set, and how will it be enforced on overseas operators? Will it be subject to an annual negotiation or set for a number of years? How will a fair return be assessed? Will it be on turnover rather than a share of the bookmakers’ gross profits? How will the proposed VAT be set and what will it include? Will it, for example, include advertising?
The money under this new scheme will go to the Horserace Betting Levy Board and then be passed to a new racing authority, which will be responsible for decisions on how the money will be spent. Can my noble friend the Minister say how this body will be set up? Will it be statutory or an entirely independent body? I understand that to bring in the new scheme, the changes required will need secondary legislation to the Gambling Act 2014. Perhaps my noble friend can give your Lordships some details of what will be required. What role, if any, will the bookmakers’ committee have in the future, particularly on multiplatform betting?
The next hurdle will be the European Commission. The new scheme, although based on an existing scheme, will require state aid approval as was done for the French levy. The levy has not been subject to an assessment so far under state aid, as it originated prior to this country joining the EU. Perhaps my noble friend the Minister can explain why it is necessary when what is proposed is really only a variation on the present levy scheme. Why is legislation and approval from the EU necessary? If approval is required and there are no issues, responses could be given in two months but I am sure there will be objections from some remote gambling operators. That would then extend the process, while the European Commission’s final decision is subject to review by the European courts. Some bookmakers have produced legal advice, which I know we will hear of this evening, saying that this cannot succeed. Others differ but, as those of us involved in debating the issues around racing know, if they are paid enough lawyers can produce almost any review that the bookmakers or anybody else wish to have. They will satisfy any criteria if they try hard enough.
One should congratulate the Government. This proposal will benefit racing, protect punters, stop the flow of jobs and tax revenue going abroad and, in the long term, be good for the whole industry. Racing is a major industry, providing work for more than 86,000 people, contributing £3.5 billion to the economy and generating £10 billion in betting income. So what is missing from the Government’s proposal? Perhaps they will consider this: racing needs to ensure that standard betting data are available for all. We also need to know what the dispute mechanism will be. As we have seen in the press, internet bookmakers are quite prone to cancelling winning bets.
The racing industry and the bookmaking industry are a partnership—not always a happy partnership, but a necessary one—and I am glad that the Association of British Bookmakers has welcomed the Government’s announcement. It is a major step forward for the industry and racing to work together going ahead. However, betting is not just about racing, as it allows bookmakers to cross-sell other products. Each cannot survive without the other, and these reforms can benefit both. I look forward to my noble friend the Minister’s response.
Baroness Mallalieu (Lab)
My Lords, I congratulate the noble Viscount on securing this important and very urgent debate, and on attracting so many runners, although it means that we will all have to sprint from start to finish. I declare my interests as a former member of the British Horseracing Board and a current trustee of both Racing Welfare, which is the charity for those who work in racing, and their union, the National Association of Stable Staff. I am also president of the Horse Trust which, like the current levy board, makes considerable grants for equine scientific research.
First, I am grateful that the Government have embraced the proposal for a new racing funding mechanism. As I understand it—and I hope this will be confirmed—they are committed to having it in place in 12 months’ time, in April next year. We need to know how this is to be done, and the timetable for it, because the last time an attempt was made to replace the levy it ended in tears in the European Court. We want to avoid that happening again at all costs.
Then, the levy had to be hastily revived, and has continued up to now to do an excellent job against a background of a continuing drop in revenue and expansion of offshore operations, some of which avoid making a fair or any contribution to the industry from which they derive substantial profit. A new, fair, robust system to finance the horseracing industry is long overdue and is needed as soon as possible, before the industry is damaged.
Despite this falling levy revenue, horseracing in this country, to my mind and, I think, most others, remains the best in the world. The breadth, quality and integrity of racing here attract owners from all over the world and enable ordinary racegoers such as me to see most of the best horses in the world run on our doorstep. With, I hope, more prize money generated from the new proposal, I hope we may see even more of those horses. If we cannot produce the money, we shall lose them. For stable staff too—there are 6,500 of them working in yards—an increase in prize money would be welcome, because it means a direct benefit in the form of the percentage they receive from stable winnings.
The Government have said that racing will decide how the new money is to be spent. Some of the objects of the present levy scheme are not for the benefit just of racing but of the wider horse population and included, for example, support for rare breeds. I hope there will be an undertaking from the Government tonight, and from racing in due course, that spending will continue not to be narrow and partisan and confined solely to racing. Racing is inextricably linked with the British horse population as a whole—not just in matters such as a shared need for disease control, but training those who will ride and care for horses later. A healthy equine industry, both people and animals, is an essential part of a strong, vibrant and successful racing industry.
Finally, I also hope that the new fund will be at least as generous in making grants for veterinary science and training as the levy has been—I know that the noble Lord, Lord Trees, will speak about that later—£32 million since 2000. I also hope that those who select the research projects will coordinate closely with the limited number of other equine research providers, so that the wider horse population—
The Earl of Courtown (Con)
My Lords, I beg the noble Baroness’s pardon for interrupting, but can we have the next speaker now? There are three minutes each, and the noble Baroness is on her fourth minute.
Lord Addington (LD)
My Lords, I have an interest to declare that is not as extensive as those of the previous speakers. I live in the village of Lambourn. To anyone who knows anything about racing, that means that you are constantly surrounded by horses. It is one of the few places where, if you are driving a car in the early morning, you will be stopped by a string of racehorses—indeed, more than one, if you time it properly. I fear that my only other connection with racing is a secondary one, because I am the only member of my family who does not ride a horse although, according to my daughter, many a racehorse is glad that I am not trying to get on it.
We are talking about money that goes into racing, and those communities in racing will benefit from the trickle-down. It may not be the most direct way to make sure that those communities remain vibrant, but an entire society and small economy is dependent on that income. We have an industry here—an entertainment industry, but an industry none the less—which sells to its market. People want to get in on it, but those who are buying it, or at least profiting from it, are not contributing to it. Something is wrong.
The Government seem to be taking the right steps. Will they ensure that the move to offshore gambling does not stop that income coming in? As the noble Baroness, Lady Mallalieu, said, the entire equine world in this country benefits from what happens in racing. Everything comes in from it: vets, support, stables and everything else benefit from it. We cannot remove those sections from each other. Indeed, equine activity at the Olympics benefits from expertise generated within racing.
I hope the Government can assure us that they will pursue this with all vim and vigour to make sure they get the money. It is not just racing—although racing is big enough—but the entire equine leisure industry that they will be supporting.
Lord Smith of Hindhead (Con)
My Lords, I rise to make a contribution to the debate which will be—using racing terms, which everyone else has employed—more of a six-furlong gallop than a one-mile chase, with a couple of questions that I suppose could be described as hurdles, as my noble friend Lord Astor did, but, I suspect, ones that are not too high for the Minister to clear. My apologies in advance if I echo some of the points already made, or make some points that other noble Lords were hoping to make.
Like many other members of your Lordships’ House, I support the UK racehorse industry. We all know the figures, but they are worth repeating as they are really impressive. It has almost 6 million spectators per year—the most popular spectator sport after football. Horseracing contributes £3.45 billion to UK plc each year and, of that, the total fiscal contribution from betting to racing stands at about £270 million per year. The combined direct, indirect and associated employment of the industry runs north of 85,000 people.
As horseracing is such a popular British sport, it is only right that we do all we can to ensure that, as far as possible, it continues to be profitable, successful and beneficial for everyone concerned—both centre stage and behind the scenes—who puts on such great sporting entertainment, enjoyed by hundreds of thousands of people every week of the year.
It is for this reason that I support the work the Government have done over the past few years on rethinking the racing levy, a rethink that is long overdue, bearing in mind that the current arrangements are based primarily on the Betting, Gaming and Lotteries Act 1963, as amended. I should point out that I, too, might need to have a long overdue rethink, having had a disastrous Grand National this year, ignoring my grandfather’s advice, which I mentioned in another debate, that the best way to double your money is to fold it once and keep it in your pocket.
Noble Lords who take an interest in this subject are aware that the levy is a complex structure, involving many stakeholders with many different needs, but I consider the Government’s new funding arrangement to be both sensible and fair. I particularly praise Ministers in the other place and my noble friend on the move to include offshore betting operators in the contributions which are collected. These operators benefit from our UK racing, so it is right that they should also contribute to the industry, just as betting operators in the UK have to. For far too long, operators in the UK have been trading at a disadvantage, and I am therefore happy to see the playing field being levelled—something that is essential in any form of fair gaming.
I hope that the principle of collecting contributions from offshore betting operators who benefit from UK players and sports can be extended to other forms of gambling, but I appreciate that that is a debate for another time.
I am aware that there are changes to the role of the Horseracing Betting Levy Board whereby, under the new plan, the board will be responsible only for setting the levy—or, as it will be known, the racing right—and enforcing it. A racing authority will be established to be in charge of distributing funds.
Lord Lipsey (Lab)
My Lords, I declare an interest as half-owner of Fearless Fantasy, which takes a chance in the bumper at eight o’clock at Exeter tomorrow, which happens to be my birthday.
The House is indebted to the noble Viscount, Lord Astor, for giving the Government a chance to give a straight answer as to what has happened to the racing right. Noble Lords will remember that the racing right made a cameo appearance in the 2015 Budget speech to give the Chancellor’s friend Mr Hancock something cheery to tell his Newmarket constituents at the general election. That purpose has been served, so, in the immortal words of Monty Python, the racing right “is not pining, it has passed on, it is no more, it has ceased to be, it has expired and gone to meet its maker”. As it was unworkable, unfair, and probably illegal, thank God for that.
What takes its place? In March 2016, the Government published perhaps the thinnest paper in the history of Whitehall, Implementing the Replacement for the Horserace Betting Levy. I have studied it, but I have no clue what it proposes. I commend to the House the briefing by Olswang’s Dan Tench, a leading gambling lawyer, which asks six crucial, fundamental questions that the document utterly fails to address. These include:
“The need and/or justification of any levy or funding for Racing in light of the revenue it now receives in terms of the sale of media rights”.
Even if the Government find an answer to Mr Tench’s six questions, which they show no inclination to yet, they will face the fundamental problem of getting European state aid approval—odds against, if not long odds against.
So here is a puzzle. What is the answer to Mr Tench’s question? Why are this free-market Government proposing a massive new intervention in the market in one case and one case only—horseracing? They are not doing it for greyhound racing, you will notice, but they are doing it for horseracing. I am afraid that the answer is all too simple and predictable. There is one principle which Ministers in this Government hold even more dear than free-market economics: that money should be taken from the poor—that is to say, poor punters in betting shops—and given to the rich owners, such as me.
Lord Risby (Con)
My Lords, I recently became a government-appointed director of the Horserace Betting Levy Board, which has acted as a bridge between betting and racing interests. At times these relationships have been positive and at other times very much less so. It is also my privilege and pleasure to have represented Newmarket in another place, so my interest in all this is very long-standing. However, inevitably, there have been problems for both sides and for the Government in the growth of online betting, a substantial amount of which has been taking place offshore. The traditional betting shop has become less and less profitable—and, of course, there is much greater diversity in betting opportunities. For the Government, at times having to make a levy determination is inappropriate and most unwelcome. For racing, the issue of prize money, relative to the costs of racehorse ownership, remains a source of concern. As a former part-owner, I am acutely aware of this.
The levy board collects levy contributions only on bookmakers located in Great Britain and only on profits generated here. Offshore betting has inevitably reduced the ability of the levy board to pass on resources, and it is very important that in future education and training, veterinary research and other aspects of equine life are to have continuing support. Thus reform affords an opportunity to deal with two key issues—first, to create a structure that will, one hopes, minimise any further disagreement between the two sides and remove direct government involvement. We shall know shortly what data and analysis have been deployed for this new architecture, provided by Frontier Economics. Could the Minister update the House on when that work is likely to be forthcoming?
Additionally, and importantly, I applaud the assurances from all sides that they will work with the Government to develop the details of the new proposed funding system, to broker a deal in practice to their mutual benefit. I look forward to further comments and details about this from my noble friend the Minister. Horseracing gives pleasure to millions; we have the finest racing industry in the world, and the creation of a new structure to maximise its attractiveness and sustainability is to be clearly welcomed. I wish the Minister well in bringing the process now under way to a satisfactory conclusion.
Lord Trees (CB)
My Lords, I welcome the proposals to modernise the current levy system to ensure that the British racing industry receives due revenues from all sources of betting. It will help to maintain the health of the British racing industry, which currently contributes some £3.5 billion per year to the British economy. But I want to focus on the health of something else—the horses, on which the whole industry depends—and to highlight the importance of the support provided by the Horserace Betting Levy Board to racehorse health. Since its inception in the 1960s, the HBLB has contributed some £50 million to equine veterinary research and education. It is vital that such support is maintained by the new arrangements, not only because the industry depends on the health and welfare of its racehorses but because there are no alternative funding sources of such support, with the exception of one or two charities, such as the Horse Trust.
The major funders of biomedical research in the UK, the Research Councils UK and the Wellcome Trust, do not generally support equine health research, nor specialist veterinary education, as provided by the HBLB Veterinary Advisory Committee. Over the last 15 years, racecourse horse fatalities have decreased by about one-third, to a substantial extent as a result of HBLB-funded research. Major advances have included the recognition of micro-fractures and their early diagnosis by advanced imaging, which has enabled horses to be retired before the possibility of catastrophic major bone fractures during racing. The epidemiological study of race injuries has led to improvements in course design and preparation, such as the investment by racecourses in watering systems to soften the going. There have also been major advances in infectious disease control. There has not been a race meeting cancelled because of an outbreak of infectious disease among horses for 20 years—a tribute to disease surveillance and the development of efficacious vaccines, such as the equine flu vaccine. In addition to these and many other research benefits, the HBLB has funded the education and training of equine veterinary specialists.
The continuation of this support is essential and should be given through a body that is transparent and independent, analogous to the HBLB Veterinary Advisory Committee. Can the Minister assure this House, first, that the level of current funding for equine veterinary research will be maintained or even increased by the proposed new arrangements and, secondly, that such funding will be administered by a body that is independent? Let us not forget that the health of racing depends on the health of the horses on which it relies.
Lord Suri (Con)
I thank my noble colleagues for securing the time for this debate. This is an issue of great pertinence for me. Before I came to this wonderful country, I had an interest in horseracing. During my stay in Kenya, I used to import weekly racing journals and horseracing papers for reselling through my bookshop. British horseracing has the longest pedigree in the world, and, like our own English Premier League, is widely regarded as the best in the world. Having noted this, I was glad to hear of a change in the law in the 2015 Budget to reform the 1963 horserace betting levy with a new horserace betting right. Some 200,000 people are employed in jobs linked directly to horseracing, as well as all the downstream jobs and multiplier effects; 86,000 are employed in breeding alone. If we want to protect those jobs, which often tend to be concentrated in small rural communities with few other sources of gainful employment, we must secure a viable and long-term funding mechanism.
Many people watched and had a flutter on the Grand National two weeks ago. Whether they were successful or not, many would have placed their bets on non-domicile remote gambling operators, and would have paid nothing towards supporting the industry. This loophole, according to the industry’s own figures, costs around £26 million a year, money that is desperately needed for long-term investment to provide a secure future for British racing. I hope that the Ministers responsible will be bringing forward legislation sooner rather than later, as the industry loses money with every passing event under the current system. I also hope that this new levy will not be taxed by VAT under EU rules, as this will reduce the money paid to racing, or increase the cost to bookies, who will pass it on to the consumer. Also, it would mean that non-EU betting firms would be exempt from VAT, making them cheaper to bet with than our own bookies. This consultation ought to be wrapped up soon, and I look forward to having the opportunity to vote on legislation that will secure a good future for British racing, and remove the Government from the picture permanently by cementing the relationship between racing and betting.
Lord Donoughue (Lab)
My Lords, at a canter, I wish to congratulate the noble Viscount, Lord Astor, on raising this important issue and to declare my interest, as in the register, as chairman of the Starting Price Regulatory Commission and of the report on the future funding of racing which concluded that we should replace the levy, but that it would provoke problems and legal challenges.
Fortunately, much progress has since been made and I welcome the new funding arrangement. I trust that it will maintain the historic balance between the genuine financial needs of the racing industry and the capacity of bookmakers to pay, noting that they are under more pressure than at any time in my lifetime, and that we will resolve any legal challenges and the familiar problem of European Union state aid.
Of course, we might avoid many of these problems if we take the free market approach so lucidly expressed by my noble friend Lord Lipsey. His experience is greater than that of most Members in this House. I have worked with him as a colleague and friend for 40 years, and I usually take his advice and recommend his racing tips, as at Exeter tomorrow. On this issue, I will not tangle with his arguments but will simply say that I am reluctant to ignore the guaranteed financial aid for the sport of racing, which I love. I am confident that that money will eventually go to very capable hands in the modern racing industry with its modern leaders—I have in mind people such as Nick Rust and Simon Bazalgette—among a new breed of professionals running the racing industry so well today. I have confidence in them.
In proposing this extension and simplification of the levy, it is now most important that the DCMS meets the April 2017 deadline to deliver its levy solution. That tired departmental horse needs a heavy whip over the final furlong to the winning post. It is much more practical to resolve the offshore tax problem than to pursue the complex journey of the original racing right, which I, too, never understood. We may face difficult but familiar legal challenges, including European state aid and negotiating a tax rate that bookmakers can afford, but I trust that they can be overcome, together with all the very pertinent questions raised by the noble Viscount, Lord Astor, so that racing can benefit and the often maligned bookmakers can continue to flourish so that each can benefit when both prosper.
Baroness McIntosh of Pickering (Con)
My Lords, it is often said that racing is the sport of kings, and I can think of no better time to debate this than on the eve of Her Majesty’s birthday. Racing makes a massive contribution to the rural economy of north Yorkshire and many other parts of the country in terms of employment, tourism and enjoyment of the countryside. It is obviously a source of concern that the yield from the horserace betting levy has fallen from an average of more than £106 million a decade ago to a forecast of approximately £55 million in 2015-16. This puts real pressure on the future of funding for racing. Yorkshire has nine of Britain’s 59 racecourses. Thirsk, Malton and Middleham represent some of Britain’s largest racehorse-training centres. They have been synonymous with racehorse training for 300 years and are home to some 45 licensed trainers and approximately 1,500 racehorses as well as to many stable lads and lasses.
I hope we can have an assurance from the Minister this evening that the Government will stick to and respect the very tight timetable and that a statutory instrument will be presented to both Houses to be voted on using the affirmative procedure before the end of this year after clearance by the Commission, following the precedent of the ruling on the French parafiscal levy on online horserace betting. When my colleague Matthew Hancock was elevated to the government Benches, I was delighted to steer an embryo Bill, which unfortunately did not pass all its stages, in the House of Commons. I am delighted that the Government have run with this. I hope that it will end the move to offshore betting and will secure the future for racing for many years to come.
Lord Collins of Highbury (Lab)
My Lords, I hope that tonight, unlike in recent days, the Minister and I will be able to agree. I, too, thank the noble Viscount, Lord Astor, for initiating this debate. When the House debated the Gambling Bill two years ago, I was pleased to add my name to the noble Viscount’s amendment on the horserace betting levy. The debate reflected genuine cross-party support for the levy and the principles that underpin it. There might have been cross-party support, but there was some dissent within the party, and we have heard that tonight.
Our achievement was followed by consultation processes on extension, reform and the new right. The Chancellor announced in his March 2015 Budget that the Government would,
“support the British racing industry by introducing a new horse race betting right”.—[Official Report, Commons, 18/3/15; col. 776.]
While we have not received what we hoped for, the Opposition welcomed the Government’s announcement last month and the further detail published on 16 March to ensure that all betting operators contribute to racing. Labour has been calling for action for a number of years and I am pleased to see that the Government are finally acting. Despite the potential opposition from the betting industry, we believe that the Government should use this opportunity to consider a wider sport betting right to support the grass roots of sport to ensure that all sports are compensated by gambling for the use of their intellectual property.
What is often overlooked is the work on training, education and employment initiatives that the levy supports. Also overlooked is the broader picture of how the racing industry has a direct link into building sustainable rural economies, as we have heard in tonight’s debate. There are a number of brief points that I would like the Minister to address, particularly on the EU Commission clearance that is required. It is important that the racing industry is properly consulted during the notification process.
I also understand that the Government have commissioned Frontier Economics to undertake an independent analysis of the common interest costs between racing and betting. Does the Minister expect that report to be concluded by the end of this month? While I appreciate that the Government recognise the urgency with which a new funding model for the sport is required, there remains a significant amount of work in order to meet the April 2017 deadline. Like other noble Lords, I would welcome further information on the specifics within the timetable and on what contingencies will be in place should the timetable begin to slip.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills and Department for Culture, Media and Sport (Baroness Neville-Rolfe) (Con)
My Lords, I thank noble Lords for their valuable contributions to this informative debate. I particularly thank my noble friend Lord Astor and the noble Lord, Lord Collins, for the amendment they moved to the Gambling Act 2014 which underpins our proposed changes. In a sense, they were the midwives to the proposals in the paper that we have recently issued.
The racing and betting industries in this country have a unique interdependency going back more than 200 years. For most racegoers, their day out would be incomplete without a bet on the horses; it is a major part of British cultural life and heritage. While preparing for this debate, I was watching the Grand National, which is the toughest betting race. How happy the bookies must have been as Rule the World overtook the favourite; I am very sorry that my noble friend Lord Smith had a bad day.
There are almost 60 racecourses spread across Britain. This is my first debate on racing but I have been to quite a few racecourses. I have been to York—I did not know that there were eight others to go to in Yorkshire. I have also been to Ascot, Newmarket, Salisbury, Wincanton—and Chepstow, for those of us who love the Welsh. Each course plays a part in supporting local communities in driving inward investment, which is very important, and creating jobs. From recent stars such as the wonderful Golden Horn—see my Twitter account—to classic names such as Frankel, the British racing industry continues to produce exceptional talent. To ensure that this great British success story continues to prosper, it is vital that the entire betting industry makes a fair contribution to a sport from which it profits.
The mutually beneficial principle of transferring funding to racing from the proceeds of betting under statutory arrangements dates back to 1928. But the current levy system is, I think we all feel, broken because it does not apply to bookmakers who are based offshore. Following the introduction and rapid growth of online gambling, this has meant that more and more potential funding is falling outside the scope of the levy.
We have an unsatisfactory, two-tier system where British-based bookmaker A must pay the levy, whereas bookmaker B, based offshore but otherwise in identical circumstances, does not. Statutory contributions have declined steadily, as has been said, and amounted to just £60 million last year. However, a number of bookmakers make voluntary contributions, which I welcome.
Last month we set out our plans for new funding arrangements for British racing. This will ensure a level playing field and a fair return to racing from all gambling operators, regardless of where they are based. The funds will be passed to racing to make spending decisions and will benefit all those who play a part in enabling horseracing on which betting takes place. This includes racecourses, breeding groups, veterinary groups, trainers and, of course, stable staff.
Investment in the equine veterinary profession, disease control, watering of courses and the role of the HBLB—I may have got that wrong—is very important; it was raised by the noble Baroness, Lady Mallalieu, and some of my noble friends. It will be for the racing industry to make decisions on the spending of funds. It is in the interests of racing as a whole that the funds raised benefit the entire industry. The current levy has supported the advancement of veterinary science, and I very much hope, as do other noble Lords, that that will continue.
As my noble friend Lord Astor rightly said, racing is a huge industry contributing £3.5 billion to the economy. There are 85,000 direct and indirect jobs associated with it, including the 6,500 stable lads and lasses whom we heard about from the noble Baroness, Lady Mallalieu. Attendance rose to 6 million last year, so we are talking about a very popular sport. My noble friend Lord Suri added his own experience to that picture.
My noble friend Lord Astor also mentioned the oncourse industry. Oncourse bookmakers have a distinct and unique position in the betting and racing sphere; they have a vital role in providing better services for customers at the racecourse. We are considering how best to factor oncourse bookmakers into the new arrangements, and we will hold further discussions with that sector on this issue.
As to how the rate will be set, the rate payable by bookmakers will be informed by independent economic analysis and further consultation with betting and racing. I will say a little more about that later. That will take account of all sources of revenue, including media rights, to pick up a point made by the noble Lord, Lord Lipsey. I did not agree with every point that he made on this occasion; I do not think that he meant it seriously, but a purely voluntary environment would mean that not all betting operators would continue to contribute.
With regard to whether the rate will be assessed against a bookmaker’s turnover or gross profits, this is a point that we will be discussing with the industry. The current method, based on gross profits, has been in place for more than a decade. It is consistent with the approach taken to general betting duty. With regard to VAT, respondents to the consultations on the future of the levy raised serious concerns around the application of VAT to the racing right model. I am pleased to say that, as with the current system, whereby levy payments do not attract VAT, the new model will retain this key benefit. The racing authority will be set up by the racing industry and will be responsible for making spending decisions in line with the overall purposes of the scheme, and with an appropriate reporting mechanism. This body will be referred to in legislation but it will not be a statutory body.
The necessary changes will be made by secondary legislation, as has been said, using powers in Section 2 of the Gambling Act 2014. The regulations will, of course, be subject to the affirmative procedure and will therefore require debate and approval here and in the other place. I am not sure whether I can promise to hit the 2016 timetable referred to by my noble friend Lady McIntosh, but I can take the House through the timetable as I see it.
This is spring 2016—it is wonderful outside—and following analysis from Frontier Economics, we will begin discussions with betting and racing industries to inform the level of contributions from betting. To reply to my noble friend Lord Risby, Frontier Economics is due to report to Ministers later this month, and I think that it is reasonably on track.
Secondly, we have set aside summer and autumn this year for the state aid notification process with the European Commission. A good point was made about how it can be valuable to consult during that process. This particular area is not one that I am dealing with ministerially but I will feed that back because, having dealt with other areas, I know very well how valuable stakeholder engagement can be in getting the right arguments and moving things forward efficiently.
We are planning to publish the statutory instrument and a full impact assessment by the end of 2016—which the noble Lord, Lord Stevenson, who I see is in his place, will be glad to hear. That will enable us to bring the new funding model into force in April 2017, which is what we are hoping to do. There will be no formal role for the Bookmakers’ Committee in the new system, but racing and betting have shown that they can work together and I hope that such co-operation will continue.
My noble friend Lord Astor also asked what dispute mechanism would be in place. With the rate set by the Government, there will be less room for disputes in the new arrangements. However, we will retain the existing dispute and enforcement mechanisms, which I think are well respected.
I come back to the important subject of state aid. The levy has not been subject to an assessment under state aid rules because, as I think has been said, it originated before our accession to the European Union. The new arrangements will also cover the offshore market, and we want to ensure that the new system is sustainable and can last for a number of years. It is therefore prudent to seek clearance, which will provide certainty for all parties.
On the subject of timing, we have already begun informal conversations with the European Commission. That is why we believe that April 2017 is both a realistic and an achievable target. I think I have already said that we will ensure that the industry is kept in touch as that process takes place. I was given some comfort when talking this morning to the officials who are involved in the early stages of that state aid process.
I thank my noble friend Lord Risby for his valuable contribution. I have already explained the timing and said that Frontier Economics is making good progress. Following consideration of the report, the Government will meet the betting and racing industries to discuss the level of contributions from betting to racing.
The noble Lord, Lord Lipsey, asked about other sectors, particularly greyhound racing, which I know he is very passionate about. I have not been to greyhound racing for a very long time, and this reminds me that that is something I should try to do in my ministerial role. He may be disappointed to know that we have no plans to widen the scope to apply to other sports. However, we have expressed a desire, which I very much endorse, for both industries to agree a mutually beneficial voluntary arrangement that demonstrates a fair and just return to that sport. I should perhaps confirm that the Government have no plans to introduce a sport betting right.
With the extraordinary growth of online betting, the current levy system is fair to neither betting nor racing. The new funding model that we have discussed today will create a level playing field between all gambling operators. It will provide a fair return to racing and will ensure that our proud and vibrant racing industry can continue to produce world-class racing for generations to come. I thank my noble friend for securing this debate and look forward to discussing these issues further with him and other noble Lords in the weeks and months ahead.