Winning Post: Sports funding faces a slippery slope

Regulus Partners observes a week of parliamentary debate on the future of gambling sponsorships. A topic that garners MPs direct attention, who have yet to deliver concrete resolutions on how gambling reforms will impact the future of sports funding.

The complexities of the gambling reform debate were laid bare in Parliament this week as the issues of sports funding and sports sponsorship surfaced in the Commons and in the press.

Rumblings of a ban on gambling sponsorship in sport are nothing new – but this week’s reports in the national news media had the stamp of deliberate kite-flying. We should assume that the White Paper on legislative reform will address the issue in some form – but such matters are far less straight-forward than commonly depicted. One challenge for an outright ban on sponsorship is to determine how to ring-fence it for specific sports or sponsors. If a ban is enacted for professional football, the preservation of sponsorship in other places – notably horseracing – will require legal justification.

Even if this is achieved, the iterative nature of public health lobbying would likely mean that calls for an advertising ban at racecourses would follow in due course (indeed, the Royal Society for Public Health has already backed a campaign to ban all adverts for all gambling in all places). It would also likely pose questions for the National Lottery’s sponsorship of a wide range of sporting organisations and athletes, including the UK’s Olympians (something that would surely have to be factored into negotiations on the award of the Fourth Licence).

The new gambling minister, Chris Philp (Cons, Croydon South) this week set out in the strongest terms his Government’s support for horseracing, saying, “it serves our national interests and the interests of all our constituents to have a vibrant and successful horse racing industry.” Racing clearly remains very well placed in parliament, albeit perhaps in a more defensive than offensive capacity, as evidenced by the key role that racing played in pushing back affordability, but the some of the difficulties encountered in delivering Levy reform (see below).

A minister appreciating the contribution of racing is not necessarily the same as enhancing or even preserving it, especially if policy direction come from a more mercurial Number 10. He will therefore need to tread with particular care around issues of gambling regulation that affect the sustainability of racing and sports more generally.

The minister specifically raised the symbiotic importance of the Horseracing Levy, which channels £90m to £100m a year into supporting the racing industry and equine welfare. In racing, the Levy is part of a much larger package of media rights, streaming, marketing and advertising fees. Where other sports are concerned however, there have been suggestions that a levy could be introduced as a substitute funding mechanism in the event that advertising and sponsorship are banned.

The prospect of betting firms being required to pay in order to not advertise would likely be cheered by some Parliamentarians – but may in fact strengthen rather than weaken the ties between gambling and sport. Codifying the relationship via a ‘betting right’ would mean that organised sports would have more skin in the game where future decisions to tighten or relax regulation were concerned.

The Government does have at least one option for more nuanced and discrete action – the banning of so-called ‘white label’ deals, which allow overseas-facing (typically Asian or African) betting brands to sponsor British teams and events. A legislative fix of this nature would require careful drafting – after all the ‘white label’ licensing classification is very broad and includes legitimate and domestically licensed with large numbers of UK customers – but would perhaps alleviate some of the pressure (for now).

It is not clear, however exactly what problem it would solve. It is difficult for example to see how banning advertising for brands that no-one in Britain uses will reduce gambling harms (or even how it relates to the lazy trope of ‘normalisation’). There are legitimate questions about whether sponsor brands behave ethically in overseas markets but these are not restricted to gambling; while attempts to legislate on behalf of other sovereign nations without their consent may invite suggestions of neo-colonialism.

Advertising will no doubt be high on the list of topics for discussion today in Brighton where SME4Labour, the Social Market Foundation and the Labour Campaign for Gambling Reform will meet to discuss the ‘Future of Gambling Reform’. Party conferences are typically more about rallying than debate and given the nature of the panellists (which includes Swansea East MP, Carolyn Harris and the fun-loving Lord Adonis) it may be wiser to expect reinforcement than discovery.

Levy reform – Great Expectations…

Matt Hancock MP has made his first major foray back into policymaking as a backbencher, having lost his Health Secretary role for breaking lockdown rules in a manner reminiscent of John Major’s Tories a generation earlier. It is unsurprising that for reasons of both genuine – and self-interest, the horseriding MP for West Suffolk (Newmarket) should push for Levy reform. Regular readers of WP and our numerous blogs on the subject will know that we are very keen on Levy reform. However, there are three separate questions to answer, in our view:

  • Should betting be paying more than it currently is for GB horseracing, factoring in the overall transfer of value, including media rights (which have done so much to drive up Prize Money in the last decade, effectively the source of racecourse Executive Contributions)
  • Should betting be paying its statutory element in a mechanism other than a GGR measure on GB racing only (there is a clear case for ensuring lower volatility, there is also a case for Common Interest existing in fungible products, especially those ‘symbiotic’ with GB racing such as racing from Ireland – but these are far from ‘slam dunk’ arguments ‘proven’ by international precedent)
  • How should betting’s value transfer be best spent to ensure efficiency, improve productivity, and reinforce the Common Interest between betting and racing (the lack of any real progress in increasing attendance, broadening the base of ownership, improving field sizes, and driving betting revenues, despite more and more money coming from betting, needs to be explained better than that the ‘more’ that keeps coming through just isn’t enough)

Our issue with Hancock’s intervention is that it conflates the first two necessarily separate questions, while ignoring the third beyond an appeal to ensure that Prize Money is globally competitive (which ignores the massive intangible value of winning Britain’s top races in breeding and bloodstock – which is why most of the billionaires are in flat racing and why flat horse ownership tends to be either rarefied or demoralising). Moving the Levy to a turnover model has clear merits (including solving Hancock’s rather Churchillian “unhealthy perverse incentives”, which presumably means racing winning financially by the best horse losing; this has not yet come up as causing even one real-life integrity issue to our knowledge, though the logic is simple); but turnover taxes can be distortive, counter-productive (as a tax on price and therefore consumers), and needs to carve out exchanges to work (which raises issues of fair competition: exchanges have been all but wiped out in turnover-based market pin-up Australia). Similarly, in Australia turnover-based product fees have tended to keep media rights lower as a percentage of turnover, demonstrating another value ‘symbiosis’ which racing overall may not benefit from, while a big proportion of Australia’s enhanced value transfer from betting compared to Britain comes from retail monopolies: not a model Hancock is likely to espouse.

Even starker, Ireland’s turnover model is a tax on all forms of betting (not just horseracing) of which Irish horseracing gets the lion’s share as a government subsidy. The easiest way to copy Ireland is therefore to hypothecate betting duty to horseracing rather than treat it as a general government tax helping to fund, inter alia, the NHS, – again not a model Hancock is likely to favour. Finally, it is difficult to argue poverty when Prize Money has grown so strongly in recent years, horses in training have remained stable during the pandemic and the Levy Board’s reserve system (coming from bookmakers) has worked as an effective stabiliser during the worst of the crisis. Problems seem to be broader than the levy or even bookmakers’ funding overall.

The question for the racing-betting value transfer should be just as much about how money is spent when it gets to racing as its overall availability: an issue Hancock probably has a lot of relevant experience with through during his previous ministerial post with the NHS – but such a Conservative approach is unlikely to appeal to many of his own constituents when it comes to their own livelihoods and inheritance. It is vital that politicians can make policy ideas simple to make them compelling.

However, by making them simplistic to appeal to only one set of vested interests, they risk undermining a real chance of effective reform. The new gambling and sports minister, Chris Philp’s pushback was rather too easy, notwithstanding he too had not been sufficiently briefed that the underpin of the value transfer is no longer some archaic question of replacing oncourse betting attendance in the 1960s but a thoroughly modern and well-considered calculation of Common Interest from less than five years ago. If racing wants to open the review early, it may have to be more Mr Pirrip than Oliver Twist.

______________________

Featured article edited by SBC from ‘Winning Post’ Sunday 25 September  2021 (click on the below logo to access a full unedited version)

Check Also

BtoBet: Over-regulation and opportunities in the European sports betting sector

Regulatory developments in the European sports betting gaming sector have created both hurdles and opportunities …

YGAM seeks new CEO as founder Lee Willows departs charity

Lee Willows has ended his seven-year tenure as Founder and Chief Executive of YGAM – …

Winning Post: Digging in the Sandbox of privacy

Last week the Information Commissioner’s Office (ICO) granted the Gambling Commission its phase-1 sandbox approval …