THE GCF WRITE TO PARLIAMENTARIANS WITH WARNINGS OF AN ESTIMATED 17.5% DROP IN HORSERACING PRIZE MONEY AS A RESULT OF AFFORDABILITY CHECKS
The Gamblers Consumer Forum have calculated how much the horse racing industry stands to lose as a result of gamblers exiting the market due to intrusive and illiberal affordability checks.
By calculating a potential loss from the Horserace Betting Levy, either as a result of customers leaving the regulated market or forgoing betting altogether, the Gamblers Consumer Forum estimates a staggering 17.5% drop in prize money. This is disastrous news for the horse racing industry, given that the 2019 (using a pre-Covid year) prize money yield of £166m already leaves us trailing well behind the likes of France, USA, and Japan.
Figure calculation
The Gambling Commission maintain that a small amount of individuals are responsible for the largest amount of gambling, as evidenced by work undertaken by the University of Liverpool and the National Centre for Social Research, entitled Patterns of Play. As part of this research, 140,000 accounts from seven different gambling operators (20,000 each) were analysed over a 12-month period from 1st July 2018 to 30th June 2019. From this data they extrapolated to show that the British online gambling population was 10.2 million customers, of which 5.9 million bet on horseracing. Critically, the report shows that just 5% (298,872) are responsible for 83.87% of stakes laid, and for 77.68% of bookmakers’ horseracing revenue. The bookmakers’ revenue (GGY) was estimated to be £493 million, so this 5% of customers accounted for £382.9 million of this.
It is therefore definitely arguable to propose that a significant proportion (77%) of Levy Yield is attributable to just 5% of horserace bettors. For the case of the last year with Horserace Betting Levy Board accounts, 2021-22, where Levy Yield was £100.6 million, this would mean £77.5 million due to the top 5% of punters.
The Betting & Gaming Council have declared that: “European countries applying tough sanctions on betting, including restrictions on stakes, blanket affordability checks and curbs on advertising, have witnessed an increase in black market betting.”i Norway’s black market now accounts for over 66% of all money staked, in France it is 57%, while in In Italy 23% of money bet is on illicit sites’.[i] We are certain that our overzealous regulator is destined to lead the UK into the same territory.
Our figure is based on a more conservative of 66%, and not the 70-80% anecdotal figure recently uncovered by the Racing Post. Assuming 66% of the top 5% of horseracing bettors leave the regulated market, this would imply a reduction in the Levy, based on 2021-22 figures of £51.1 million (66% of £77.5 million) or roughly halving the amount of Levy.
Using a pre-Covid year prize money yield of 2019, where of the £161 million of prize money, 35% (£56.3million) came from the Levy.[ii], halving this levy contribution would mean a Levy contribution of only £28.2 million and total prize money dropping by 17.5% to £132.8 million. This is the equivalent of what total prize money was in 2015.[iii] This figure does not include any gamblers who choose to exit the market outside the top 5% of gamblers, nor the impact it will have on racecourse revenue as a result of people potentially abandoning the sport if they cannot place a bet.
Abbie MacGregor, Head of Communications for the GCF, said: “This is a startling figure to contemplate. Prize money is essential to maintaining Britain’s prestige on the world stage, and is the pollinator for our job-providing training and breeding industries. It is vital we retain higher class horses in the UK in order to keep our product and market competitive, particularly in relation to field sizes.
The horse racing industry heavily relies on betting turnover to fund the sport, and therefore heavily relies on a healthy population of bettors spending their hard earned money in the regulated market. Prize money has long been an issue for British horse racing and everyone involved is going to great lengths to reverse this declining trend. Indeed, in 2019, the BHA proposed the Government consider extending the levy to overseas racing, a reform the GCF wholeheartedly support. However, it was estimated by the BHA that this would raise £15 millioniv, yet the figure we have just uncovered, that would potentially see the Levy contribution drop by £28.2 million, dwarfs the benefit of the proposed levy reform.
It is clear to us that the Government urgently needs to relook at the impact of affordability checks on the horse racing industry – a industry whose iconic sporting moments have become part of our national heritage. Not only do affordability checks display a fundamental lack of understanding about how addiction operates, they also damage industries which 99.6% of gamblers use without issue.
If horse racing is to have a future, it needs to present itself as the modern, innovative, and exhilarating sport we all know it is. That is an impossible goal to achieve with poor prize money, falling prize money, and dwindling audiences as a result. Now is the time for horse racing to maximise its assets at all levels, and the White Paper threatens to undo that in one fell swoop.”
In order to highlight the issue, The GCF are writing to Parliamentarians in order to warn them of the potential consequences of these proposals which is reproduced below:
[i] https://bettingandgamingcouncil.com/news/ey-report-22
[ii] https://www.racingpost.com/news/features/series/prize-money-how-do-other-nations-fund-such-bigger-pots-than-britain-a3rnD9s24e5M/
[iii] https://www.britishhorseracing.com/wp-content/uploads/2018/02/2017_12_Full-Year.pdf
iv Government looks at extending levy to bets placed in Britain on overseas racing | Racing Post
Dear Parliamentarian
We, the Gamblers Consumer Forum, write to express our deep concern regarding the new regulations currently subject to consultation by the Gambling Commission, and the devastating impact they will have one of the most successful, homegrown, and job-providing industries in Britain – the horse racing industry. The UK’s horse racing industry is responsible for some of the most iconic events on the sporting calendar, and is part of the rich tapestry of this country’s cultural heritage, from the racing itself, all the way down to its pollinating industry, the British thoroughbred bloodstock industry.
We believe these highly controversial and intrusive ‘affordability checks’ will not just be detrimental to the part of the gambling industry associated with horse racing and their consumers, but because betting turnover is so intrinsically tied to the sport itself, that it will have a catastrophic effect on prize money (caused by a reduction in the Horserace Betting Levy), and by extension, will have disastrous consequences for the ownership and breeding industry. These are industries that rely on perception of prestige of the product of British racing, and poor prize money devalues this national product both literally and figuratively.
The Gambling Commission is currently undertaking a consultation on proposed new regulations, opened on the 26th July 2023, entitled ‘proposed changes to Licence Conditions and Codes of Practice (LCCP), Remote Gambling and Software Technical Standards (RTS), and arrangements for Regulatory Panels’ which will close on the 18th October 2023.[i]
This consultation includes proposal for the controversial implementation of financial or affordability checks on gamblers as recommended in the DCMS White Paper, High stakes: gambling reform for the digital age which was published on the 27th April 2023.[ii] These financial/affordability checks were recommended to Department for Culture, Media, and Sport by the Gambling Commission in Advice to Government – Review of the Gambling Act 2005 which was also published on the 27th April 2023.[iii]
The proposed financial/affordability checks are summarised as follows:
|
Financial Check |
£125 net loss rolling 30 days £500 net loss rolling 365 days |
Supposedly “friction free” credit check to look for bankruptcy or CCJs |
Estimated 21.2% of accounts (6.1m) to be checked |
Checks repeated annually Under 25’s checked at 50% of threshold |
|
Binge Gambling |
£1,000 net loss per rolling 24-hour period |
Enhanced financial check (customer must supply bank statements etc.) |
Estimated 2% of accounts (600,000) to be checked |
Checks repeated after 6 months Under 25’s checked at 50% of threshold |
|
Significant Losses Over Time |
£2,000 net loss per rolling 90 days |
Enhanced financial check (customer must supply bank statements etc.) |
Estimated 3.2% of accounts (1m) to be checked |
Checks repeated after 6 months Under 25’s checked at 50% of threshold |
Source:[iv]
The apathy shown by the Gambling Commission towards the horse racing industry is nothing short of apparent. The data used as evidence to substantiate these proposals appears to be purely anecdotal, based on account data that was collected during Covid lockdowns when there was no live sport and based on little evidence of being an effective tool for preventing gambling addiction. The more detailed data is even more concerning, given that most of the evidence used to support these proposed regulations are based on ‘problem gambler’ rates – a sub-clinical term that does not equate to a clinical diagnosis and one whose very definition means they do not exhibit any detectable or identifiable symptoms of a clinical gambling addiction. If nothing else, they show a flagrant disregard for the crown jewels of our national sporting heritage; there are also no considerations to what these arbitrary figures will mean for events such as Cheltenham, The Grand National, and Royal Ascot. The Gamblers Consumer Forum therefore has serious concerns about the impact of these measures, that if implemented, will have on the future survival of British horseracing.[v]
The Gambling Commission and other like-minded activist groups, such as Gambling with Lives, seem far more interested in inflating their figures with sub-clinical terms to create an exaggerated analysis of gambling harm than protecting an industry such as the racehorse breeding, that is responsible for the creation of 80,000 jobs the length and breadth of this country. The Gamblers Consumer Forum supports the urgent need for addicts to get the support they deserve, but science based in cognitive evidence suggests that measures such as affordability checks will be fruitless substitutes for the real solution: specific clinical treatment from those with a specialisation in addiction recovery, prompted by harm markers that focus only on clinical signs of addiction and not an individual’s spending habits. By way of illustration, addictions such as alcoholism see recovery based around proven psychological methods such as Alcoholics Anonymous – there is no instance where the Government are snatching the proverbial bottle out of the hands of addicts.
The GCF’s prize money loss forecast
The Gambling Commission maintain that a small number of people are responsible for the largest amount of gambling and refer to the work by the University of Liverpool and the National Centre for Social Research, entitled Patterns of Play.[vi] As part of this research, 140,000 accounts from seven different gambling operators (20,000 each) were analysed over a 12-month period from 1st July 2018 to 30th June 2019. From this data they extrapolated to show that the British online gambling population was 10.2 million customers of which 5.9 million bet on horseracing.[vii]
The critical point that this report shows, is that when it comes to betting on horseracing, just 5% of customers (298,872 customers) are responsible for 83.87% of stakes laid and responsible for 77.68% of bookmakers horseracing revenue.[viii] The bookmakers revenue (GGY) was estimated to be £493 million, so this 5% of customers accounted for £382.9 million of this. It is therefore definitely arguable to propose that a significant proportion (77%) of Levy Yield is attributable to just 5% of horserace punters. For the case of the last year with Horserace Betting Levy Board accounts, 2021-22, where Levy Yield was £100.6 million, this would mean £77.5 million due to the top 5% of punters.[ix]
The Gamblers Consumer Forum is concerned that this top 5% of punters will undoubtedly be ensnared by the affordability checks that the Gambling Commission propose due to their relatively high level of staking. These bettors will also be subject to numerous checks as they bet with numerous accounts and be subject to numerous checks as they bet frequently. To add insult to injury, professional/robust gamblers will also be subject to lengthy financial checks because as with those retired, the self-employed and company directors, their financial situation is generally not as clearcut, and thus, friction will almost inevitably be incurred. Furthermore, as the Gambling Commission is not allowing winnings from the prior 7 days to be counted when assessing what net loss is, these gamblers are even more likely to be caught by the restrictions.
As the Racing Post has recently identified, there has been much public uproar at the idea of having to provide bookmakers with financial data due to legitimate privacy concerns.[x] It is a serious concern that these gamblers will refuse to provide the financial information that bookmakers will be forced to require. There is anecdotal evidence that with the existing affordability rules, 70-80% of punters are refusing to provide documentation and consequently having their accounts closed.[xi] The consequence of this is a bleakly binary one: either, they turn to the black market, in an arena that does not contribute to the Levy Yield, or they forgo the activity of betting altogether, and therefore reduce the overall supply to the Levy Yield.
The Betting & Gaming Council have pointed out ‘European countries applying tough sanctions on betting, including restrictions on stakes, blanket affordability checks and curbs on advertising, have witnessed an increase in black market betting. Norway’s black market now accounts for over 66% of all money staked, in France it is 57%, while in In Italy 23% of money bet is on illicit sites’.[xii]We are certain that our overzealous regulator is destined to lead the UK into the same territory.
We think it is fair to assume that a conservative 66%, as opposed to the 70-80% of anecdotal evidence, of the top 5% of horserace betting punters will find the proposed financial/affordability checks so onerous and intrusive and will therefore leave the regulated market. This would imply a reduction in the Levy, based on 2021-22 figures of £51.1 million (66% of £77.5 million) or roughly halving the amount of Levy.
Taking 2019 as an example, British horseracing offered prize money of £161 million of which 35% came from the Levy (£56.3 million).[xiii] If this Levy contribution was halved, as we estimate will happen when 66% of the top 5% of punters disappear, this would mean a Levy contribution of only £28.2 million and total prize money dropping by 17.5% to £132.8 million. This is the equivalent of what total prize money was in 2015.[xiv]
There are many in the horse racing industry trying desperate to turn the already bleak situation of poor prize money around. The BHA are encouraging the Government to consider extending the levy to overseas racing, and increasing it to 1.5% from 1%. However, they predict this will result in a yield of £15 million, yet the figure we have calculated dwarfs that sum completely. British horse racing’s decline cannot be made to continue. The number of British bred horses currently in training in Britain is already falling sharply – the Gambling Commission’s overzealous affordability checks will only make an already incredibly precarious situation far, far worse.
The Gamblers Consumer Forum does not yet have the resources to undertake the necessary research to provide estimates of the financial impact these changes will have on all these impacts, but we can be certain of the following:
- A reduced levy yield will result in poorer prize money through, having a cataclysmic impact on the prestige of British racing, compared to the likes of Hong Kong, France, USA, and Japan.
- This will result in fewer horses in training in Britain, meaning a continuing drop in field sizes.
- Fewer horses in training means less employment for trainers, stable staff, farriers, veterinarians, feed suppliers etc, and a reduce demand for bloodstock.
- A continuing drop in field sizes will mean less interesting racing from a betting perspective
- Poorer racing means lower attendances at racecourses
- Poorer racing means less bookmaker interest, equating to less sponsorship and advertising, which is often critical to our crown jewels of racing, such as the Betfred Derby.
- Poorer and less competitive racing means less TV coverage and media fees
Overall, the Gamblers Consumer Forum think that these unevidenced, over-reaching, and ill-advised regulations have the potential to at the very least demote British racing to a second division status and at the very most, prove an existential threat to the sport. The Jockey Club and its leadership did an superb job in eliminating the threat of dangerous protest group, Animal Rising, to see the 242th Derby go ahead in spite of the threat. Now horse racing faces a threat bigger than that. We hope you will consider this letter when undertaking any votes relevant to forthcoming gambling legislation, and encourage your Commons colleagues to do the same. We would ask you do all you can to urge the Government to give these proposals a drastic rethink. The future of Britain’s horse racing and thoroughbred breeding industry depends on support from lawmakers to secure its future. Yours sincerely, The Gamblers Consumer Forum.
