It’s known as the “Racing Right” - the new system the British Government wants introduced to replace the sport’s main funding mechanism, the Levy, by which racing gets a cut from bookmakers’ revenues. Coming up with something acceptable to all parties is, of course, no easy matter, so nobody is holding their breath waiting for the outcome of the consultation process that began in February. But where does that leave the Levy Board, the body that distributes the funds, and has done for more than 50 years? Howard Wright talked to the two men currently in charge of it.
Who, other than perhaps the manager of a football club, would take on a job knowing that his tenure was under threat and could be ended within a few months? Paul Lee did, when he was appointed chairman of the Horserace Betting Levy Board, the primary body that provides direct funding to British racing, in October 2009. So too did Alan Delmonte, twice, first when he became operations director at the Levy Board in July that same year, and then when he was promoted to chief executive in April 2013.
Both remain in position, and the prospect of abolition still hangs over the Levy Board, as the funding mechanism that diverts statutory contributions from UK-based betting operators to racing, which has been in place since 1961, continues to attract scrutiny and approbation in equal measures.
The levy system, which remains unique to Britain internationally and domestically as a sport-specific charge on commercial operators underpinned by parliamentary statute, was introduced following the legalisation of off-course betting outlets, with the purpose of providing a modicum of compensation for what was expected to be an exodus of punters from the racecourse to bookmakers’ shops. Despite regular expressions of opposition, chiefly from within the sport, it has served British racing well for more than 50 years.
Its financial fortunes have fluctuated, starting with a trickle of money from bookmakers’ profits that swelled into more significant amounts when the charging basis of collection was switched from profits to turnover, and more recently being revitalised under the impact of a gross-profits deduction, before being squeezed again as horseracing lost significant market share to other betting products, especially those available online.
However, while efforts to find a sustainable and universally acceptable alternative have so far failed, the levy system itself has come under increasing pressure over the last 20 years.
On one side are critics who say it provides an unjustified subsidy to racing that promotes complacency; on the other are powerful elements who believe it is an outdated mechanism, no longer fit for purpose, and in any case does not raise sufficient funds from betting for racing.
The Levy Board's days have been numbered for years
Somewhere in the middle, urged on by would-be reformers, successive governments have sought to extricate ministers and civil servants from the annual process, in which they are obliged to make a determination if members of the Levy Board – representing betting, racing, and independent appointments – cannot agree by midnight every Oct. 31.
When Rob Hughes stepped down in October 2009, after 11 years in office as the Levy Board’s longest-serving chairman, the forces of abolition were in full flow.
As an indication of how long those forces had been rumbling, British racing put down its first serious marker in 1993, when the new British Horseracing Board took over the sport’s regulatory and governance functions from the Jockey Club and published a set of aims that included: “to secure, in the longer term and in the interests of enabling the future of racing to be decided to a greater degree by racing itself, the legislation needed to effect the transfer to the BHB of at least the distributive functions of the Levy Board.”
In the intervening years, with the British Horseracing Board giving way to the more industry-connected British Horseracing Authority in July 2007, various government inquiries were conducted and reports published, all indicating that the levy system’s days were numbered. Yet no-one had decided what that number would be.
This was the situation when Paul Lee, a career lawyer with a direct interest in the sport through syndicate racehorse ownership, was ushered into Hughes’s seat.
Lee recalled: “I was told at my interview that I may well be the last chairman, and that although I was appointed for four years, it may not take that long to move on and do something else.
“I was happy to take it on, because if you’re given a job to do and you want to do it, you do it under the terms that are offered. If taking a job means living in Cardiff, it means living in Cardiff. If you don’t want to live in Cardiff, don’t take the job.
“I wanted to do this job because I love racing. I knew it was a complex, intriguing, interesting, extraordinary mix of recreation, business, and sport, and that has proved to be the case, as well as being hugely rewarding and challenging, extremely enjoyable, and very life-enriching.”
Despite the peculiar nature of the Levy Board among sporting bodies, Lee believes being chairman at a time of uncertainty does offer comparisons with other businesses. “Quite a lot of people who take on a board position don’t know how long that company will remain independent, because all companies are subject to take-over, and especially if the company is an industry leader,” he explained. “I actually went on to one board for the specific reason that the company had drawn the attraction of another and they wanted help to see how to address the issue.
“A lot of people in my position go on to company boards knowing they may not be there very long. The fact that the Levy Board was, and still is, facing extinction didn’t make much difference.”
The Board 'has made a virtue out of uncertainty'
For Alan Delmonte, who began his career in British racing on a graduate programme in 1994 and worked for the British Horseracing Board for 11 years, before spending a year as executive director of the sport’s commercial arm, the switch to the Levy Board as operations director had all the overtones that his soon-to-be appointed chairman experienced.
But, said Delmonte: “At that point it didn’t bother me, because I didn’t anticipate that any change would come quickly. There was discussion about the issue of the Levy Board’s future but nothing had been formed and there was no consultation process in place.
“I recall being told at the interview that the levy could disappear, maybe within four years, but I think the expression used was ‘By that stage you’ll be ready for a new job anyway.’ Luckily for me, when that time came, it was the chief executive job!”
Lee believes the board has made a virtue out of uncertainty. “A degree of stress is not all bad,” he said. “One man’s uncertainty is another man’s change, and if there is uncertainty, it’s a reason to look at things and assess the justification for what we do and how it might be done differently.
“As for the team, they are high quality, extremely professional, very efficient, and a pleasure to be with. Where I think we combat uncertainty is in a magnificent sense of esprit de corps and pride in our own organisation.
“There are a lot of other jobs our people could do, but they are here, doing a worthwhile job very well, and are well led, in an industry that is interesting, with a huge level of job satisfaction.”
Delmonte added: “People say you can live with anything but uncertainty, and we recognise this is not an easy time for the staff, because there won’t be certainty for a little while.
“In terms of the impact on staff, the board is very mindful that, since the many changes and upheaval that occurred after a review five years ago, we have had a more settled staff, and we would hope this has given some reassurance to racing and betting. Therefore the board is mindful of the desirability of keeping staff committed and motivated.
“There is a separate issue, though, which is a lack of appreciation of the organisation in racing, which is endemic, because of the view that there is something better just over the horizon. That’s just a feature of life, which we’re very honest about with our staff. We’re never going to get garlands from a lot of people in racing, because they simply don’t think we should be there in the first place.”
The Levy Board, and the funding system it operates, do remain in position, however, and the board and its executives have to carry out a planning schedule as if the future held no fears.
Delmonte said: “Practically, over the last few years we have tried to eliminate possible areas where people could have criticised us. For example, cutting out perceived duplication of effort with other bodies, reducing costs, which are 40 percent lower in real terms than six years ago and the lowest in at least the last 20 years, providing independence and quality of service, and most importantly engaging with racing.”
Lee added: “There’s a much greater level of engagement with our stakeholders, racing and betting, than was previously the case, and I believe we enjoy good relations with all of them, which I don’t think was the case six years ago. That’s been deliberate.”
Delmonte steers the engagement policy. He said: “Not everything is formalised, but by and large, as far as the distribution of funds is concerned, we are a grant-giving body, and therefore the executive and the board agree the correct principles and then say to racing, ‘How do you best propose that the money we have can be applied to fit those principles?’
“We don’t have all the answers, but we can drive some ideas, ask questions, and evaluate what we get and can contribute, but to a greater extent it’s right that the onus should be on racing, collectively but funneled through the governing body, to be able to say what it proposes.
“Otherwise it puts the Levy Board in a very difficult position, where on a less-than-informed basis it has to take the lead. The board would be less perfect if we didn’t have the input of racing in the first place. But ultimately, as our lawyers remind us from time to time, it is for the board itself to take the decisions.”
It's still business as usual despite the unsettled future
Lee describes the uncertainty of a long-term future as “a challenge but not a problem,” adding: “It doesn’t stop us planning, and we can still think long term, because we don’t know we’re going to be abolished. So our mindset is still one of continuous improvement, in what we do and in the context of what we’re delivering.
“We might have a project which may take three to four years to deliver. If we’re not here in four years, we won’t have delivered it, but if we are here in four years, it will be delivered because the preparatory work started four years previously.”
In one sense the Levy Board has always worked with uncertainty, because it operates to a funding scheme that is agreed annually and under the system of payments does not know exactly how much it will receive from betting operators from one year to the next. Hence at the board’s May meeting the decision was taken to publish a business plan, based on latest income forecasts, that included a £4 million reduction in expenditure next year, with a warning of a further, deeper cut in 2017.
Delmonte explained: “Planning on the budget has not changed because of the uncertainty, not least because, as the levy is an annual scheme, the board generally only looks one to two years ahead on its expenditure plans.
“It’s an unsettling time, but even in a difficult period the board has still been able to maintain its prize-money contribution and Britain will have record prize-money this year. We still have all the relevant fixture slots filled; we have been able to maintain our support for veterinary research and new projects are coming, and the board is still playing a full role in all the areas to which it is committed.
“In other words, having taken advice from our auditors, the board believes there is no reason that the position should be anything other than business as usual.”
He added: “In six months’ time this conversation could be different. When the possibility of change or abolition or conversion is just theoretical, we go on as we are. When something says, ‘Here is a date when you might not exist,’ that’s the point when the approach to everything becomes different.
“We will provide all the assistance that government requires, because although racing and betting will no doubt have significant input to future plans, a government-run process will ultimately decide the future of the board and the levy, and any timings.
“In the meantime, we can’t be seen to be, nor should we be, looking to protect the levy or the Levy Board. We are a creation of government, so if parliament wants to put a new body in place, that isn’t something you will find us resisting as long as the decision is taken after looking at all the angles and all the facts. Our concern would be if it looked as though racing and betting’s longer term interests would be worse if change was driven by a mantra that simply says there has to be something new."