Arena Racing CEO urges reform to save racing from gambling tax fallout

Martin Cruddace, the chief executive of the racecourse operator Arena Racing Company, has called for a cut to the rate of betting duty and an increase in the statutory Levy to “make our industry, once again, an incredible growth story reflecting its international status”, and prevent the sport being caught in the fallout from potential changes to the tax regime around gambling aimed primarily at high-risk online slot and gaming products.

The £11bn gambling sector is reportedly seen as a significant source of extra tax revenue by the Treasury before the budget on 30 October. Cruddace, whose intervention has support from racing’s main stakeholder groups, believes it is also an opportunity to reaffirm the distinctions between betting, on racing and sport, and fixed-margin casino-style gaming which guarantees a profit to the operator.

General Betting Duty, on racing and other sports betting, is set at 15% of gross profits, while Remote Gaming Duty, on online slot machines and casino products, is 21% of gross profits. Gambling firms also pay the statutory Levy of 10% of gross profits on British racing bets, which is returned to the sport in prize money and other funding via the Levy Board.

Cruddace told the Guardian that any changes to the tax regime around gambling should not just reflect, but also amplify, the clear differences between betting and games of chance.

“Speaking on behalf of all British Racing’s stakeholders, I can say it is only right that the new government urgently examines how it taxes and regulates betting on horse racing as opposed to online slot machines and casino games,” Cruddace said.

“The predilection for gambling-related harm is wildly different between horse-race betting and online casino games, with British horse racing a world leading industry that makes a major economic contribution to the country.”

Cruddace suggests that the 5% difference between the rates charged for GBD and Levy could be redistributed, with either a straightforward rate-swap, reducing GBD to 10% and upping Levy to 15% or a move to 12.5% for both. The overall charge on firms’ gross profits on racing would remain unchanged, but additional Levy revenue would support racing and its associated industries while the reduced rate of GBD would incentivise operators to shift their focus back towards betting.

His intervention in the debate over gambling taxation also coincides with the publication at midnight on Monday of a report by the thinktank the Social Market Foundation, which argues that RGD should double, from 21% to 42%, raising an estimated additional £900m in tax revenue. The SMF report’s focus is on the online gaming sector, RGD and the huge explosion in online slot machine turnover in particular.

However, James Noyes, a senior fellow of the SMF and the report’s lead author, acknowledges that “the [racing] industry generates £300m annually in taxation and attracts inward investment from overseas”, and that “in terms of jobs, an ecosystem of employment exists within and around racecourses, training yards and stud farms [including] jockeys, stable staff, vets, feed merchants, ground staff and racecourse staff, as well as associated jobs within the wider hospitality sector during events.”

Noyes also notes that “single pre-event horserace betting is qualitatively different in its relationship to harm from other, high-frequency remote gaming activities such as online slots”.

Reports over the weekend that gambling duties could rise sharply later this month, including a proposal by the Institute for Public Policy Research that GBD should rise to 30% with RGD going up to 50%, prompted a warning by Grainne Hurst, the chief executive of the industry body, the Betting and Gaming Council, in Monday’s Racing Post that “any further tax rises now will not only slam the brakes on growth for our sector, but will threaten jobs and completely derail horse racing”.

However, Noyes believes that such comments follow a familiar pattern, in which the body defends the gambling industry’s gaming interests to the detriment of betting.

“For too long, the BGC has conflated the regulation of online slots with the fortunes of horse racing,” Noyes said. “This has been a deliberate and cynical ploy. By hiding behind horse racing, industry lobbyists have resisted calls to reform online casino gaming.

“But people understand that there is a difference between games of skill and games of chance, and that rates of harm are far higher for online slots than they are for other gambling sectors. The minister [for gambling, Fiona Twycross] recently acknowledged this at the Labour party conference, when she said [during an SMF panel] that it is important to differentiate between types of gambling activity.”

Predictions from the gambling industry of imminent disaster for racing as a result of moves to regulate gaming products are certainly nothing new. Throughout the ultimately successful 15-year campaign to restrict £100-a-spin roulette machines in high street betting shops, it was often claimed that a cut to £2-a-spin would result in wholesale closures across the retail sector, and leave a huge hole in racing’s balance sheet. It did not happen.

Cruddace’s intervention in the debate shows the kind of support for betting – and antipathy to gaming – that would have been welcome from racing’s senior executives when the machines were extracting immense, guaranteed profits from Britain’s most deprived communities, and causing untold amounts of harm in the process. If it signals a new willingness by the sport to go into bat for betting, it is certainly welcome and not before time.

A Betting and Gaming Council spokesperson, said: “The speculation on tax increases are the product of fantasy economics which are simply not credible. Recent regulatory changes have contributed to 2,485 bookmakers closing since 2019, with the loss of around 10,000 jobs. Any further tax rises now will not only slam the brakes on growth for our sector, but it will threaten jobs, and in turn, revenues for horse racing. Suggestions the BGC are opposed to reform are wrong, we welcomed many of the measures contained in the gambling white paper including new stake limits for online games.”