All bets are on: Nick Rust on horse racing’s levy reform

The chief executive of the British Horseracing Authority reflects on the sport’s levy reform, the Jockey Club’s UK£500 million investment plans and voices his opinion on the Pegasus World Cup.

All bets are on: Nick Rust on horse racing’s levy reform

Arguments in horse racing should concern differences of opinions on the sport’s great equine and human stars. Who would win in a race between Frankel and American Pharoah? Are you a Sir AP McCoy or a Lester Piggott man? Was Kauto Star a greater chaser than Arkle?

Unfortunately, in the UK, a protracted dispute between the British Horseracing Authority (BHA) and the Association of British Bookmakers (ABB) over the funding of the sport had run for over a year.  

The volatile disagreement came to an end in January when the UK government’s sports minister, Tracey Crouch, confirmed that all betting operators - including those offshore - will be obliged to return ten per cent of their gross profits from all bets placed on British racing by British-based customers to the independent levy board, which redistributes those resources. The UK government will introduce the new funding mechanism from April this year. 

Nick Rust, chief executive of the BHA, spoke exclusively to SportsPro about the levy reform and how it will ensure financial security for the industry’s future. The Englishman also reflects on some the sport’s wider issues, such as sponsorship, the ever-contentious issue of animal welfare, his feelings on a potential four-pound weight handicap claim for female jockeys and The Jockey Club’s proposed UK£500 million cash injection into British horse racing. 

Of all of the roles that the BHA plays in racing, what would you highlight as the one particularly important business challenge in today’s economic climate?

The funding of British racing is not where the sport would want it to be. 

We have a very strong heritage and many of the other racing authorities around the world have looked to Britain for their lead over centuries. The structure of our funding means that unfortunately the prize money, whilst it is improving and was at record levels in 2016, is ranked at 38th in the world table of jurisdictions for the amount of expense recovery for owners. Excluding their capital costs it stands on average at 26 pence in the pound. In Ireland, for example, it is more than 30 cents in the euro and in France more than 50 cent in the euro. 

Britain has to compete for owners, has to compete with those jurisdictions, and we must improve funding to retain owners in the sport. The sport doesn’t have a problem attracting owners: it is seen as quite glamorous and an attractive thing to do but the issue is that when people start to realise the economics, some can churn off fairly quickly. We need to not only attract owners but make sure that we retain them as well. 

The BHA’s focus has been on restoring the link that was established in 1961 through the introduction of the horse racing betting levy, which said that basically every bet on British racing by a British punter will attract some funding benefit to British racing. That model worked very well for 45 years of the 55 years of the levy. 

Then what should have been a success story for both betting and racing, the digital revolution, actually hit our funding - because in 1961, no one envisaged the internet. The legislation was built in such a way that it was bets placed in Great Britain and, of course, most of the betting through digital sites - even with British brands - is taking place off-shore. 

Although taxation is now covered, the government closed that loophole years ago, up until the government’s announcement of what they are going to do there has been a loophole where all of those bets do not attract funding to British racing. 

Our focus has very much been on co-ordinating the efforts of the stakeholders and leaders around the sport to a concerted effort to liaise with the government to have this loophole closed. It looks like we are going to get there now and Tracey Crouch made a statement a few weeks ago confirming the plans to amend the existing levy approach to make sure the loophole is closed. That will improve our central funding from about UK£48 million this year to UK£89 million. 

Are you convinced that you have got the best possible deal for British racing out of the revised levy? Is it a short-term fix or will there be a loophole to be found out in, say, 20 to 30 years’ time?

I think what this does is stabilise where we are and gives us a platform for growth. Importantly, from racing’s point of view, it means that instead of the annual negotiations, which can be adversarial at times between racing and bookmakers over the levy, it will not be reviewed until seven years’ time. 

What that means is that we should be able to sit down with the betting operators and work with them to deliver growth for us as well as them. More than 50 per cent of betting on racing is now outside of betting shops - escaping the levy, if you like. If we are to be paid on all bets then we need to make sure that we are talking about how we grow betting on the sport. 

Betting on racing has grown over the past couple of years, contrary to what has been asserted. The gambling figures say that betting on British racing has grown but if we are to do that we would have to think about repositioning the fixture list somewhat more towards remote betters. 

Loopholes? I would hope that bookmakers look at the international comparisons and they will realise that although this is an improvement for British racing there has been no rape and pillage here. The proposal amounts to about one penny in the pound in turnover. Now, compare that with Ireland and France, who have a two per cent and five and a half per cent tax respectively, it is very favourable. Some of those operators that are affected here are also operating in those jurisdictions so they are already paying more. I would hope that betting operators would accept this and move on. 

You have previously worked at Ladbrokes, SkyBet and Coral. How has being cast in the role of poacher turned gamekeeper helped in negotiations with the Association of British Bookmakers (ABB)?         

It has been a difficult time. 

I have been very keen, as has the whole of the sport, to establish a principle. It is a principle that the off-course bookmakers haven’t accepted and they have got used to - and I was part of this culture - not paying the levy on offshore bets. When they have to manage shareholders and business plans to suddenly say, “We’ve not been paying something and we have to start paying it,” the question is always: “Didn’t racing run without it and why do you need to pay this?” 

Obviously it is hard to justify and, yes, there has been a bit of emotion about the fact that an executive from the betting industry has come in here. I hope that I am not seen as someone from the betting industry in this role but, nevertheless, it is an area of expertise for me and I am able to rebut some of the assertions made for positioning reasons as much as anything. 

There have been times in the past year that relations have been strained. Sometimes it has been said that the relations have been worse than ever but, having worked in betting for 29 years, I can tell you that there have been plenty of difficult times. Where I am uniquely placed is that I can not only make racing’s case but afterwards, once we have put hands across the sea, my team and I will be able to work with the betting industry to start to move racing to where they really want it to be.

We have four main things that we want to achieve. One is to grow betting and that covers what we have just talked about. The second is to grow attendances and participation. The third area is the media narrative and making the sport more popular in general - we are the second-highest spectator sport in Britain but we are not in the top ten in terms of popularity. People like it for a day out but how can we grow it? We think that [new domestic broadcast partner] ITV will help and already they have shown an enthusiasm for the sport and it is an exciting, fresh approach. 

The fourth is the efficiency of the sport and making the working conditions for the tens of thousands who work at the frontline better. How can we organise our fixtures better? How can we keep our costs down and be more efficient as a sport? 

Bookmakers have always sponsored horse racing and are currently, in terms of numbers of races, the leading sponsors. In the latter part of the 20th century tobacco and alcohol sponsorship were constants. However, with Hennessy’s longstanding association with the Newbury Gold Cup ending recently – Ladbrokes taking title sponsorship – the scales have tipped. Do you envisage any other sectors coming into race sponsorship in that same way? And if so, what sort of industry would be an ideal fit for race sponsorship?

I do. 

The first thing to say is that the racecourses are the ones that have the rights and sell the sponsorships. They continue to be very innovative and are starting to work very closely together on how you can develop sponsorship and sponsorship categories.

What the sport hasn’t had is an overarching marketing arm, and I don’t think that that we will ever have that because of the structure of the sport. They are, however, all working together on sponsorship with Great British Racing - the sports marketing arm - which has a limited budget. 

There are, of course, opportunities around luxury goods but British racing attracts everyone from the so-called man in the street to the very top of royalty. While we may still have a feeling of heritage and hierarchy in Britain, when you are at the races everyone can experience pretty much the same thing together - we are a very egalitarian sport. 

At the recent Cheltenham trials day, the 2015 Grand National winner Many Clouds suffered a fatal injury in victory. Deaths and serious injuries in horse racing - both animal and human - are, of course, ultimately unavoidable. How concerned are you that the passing of such a ‘people’s horse’ is distorting the perception of the sport by the general public? What are you doing to make sure that the real message is getting across, particularly to sponsors?

It is a valid point around the sponsors and, of course, the public. 

The BHA published its strategic plan with our annual report over the last year; our number one strategic priority is leadership in equine welfare. Any death is regrettable and although we have a tremendous record in this country - over the last decade the numbers of injuries and fatalities has continued to fall and it is less than 0.2 per cent of all runners have a fatality - that is still too much. We have got to do all we can to drive that number down. 

We have just appointed a new director of equine health and welfare called David Sykes. We did have a chief veterinary officer but the difference of title reflects a difference in emphasis. We need to have regulation in horse racing on the veterinary side but it has to go a little bit further. He will have to work on our campaign ‘the horse comes first’ and start to explain to the wider public what happens. Also, [we will invest in] research and development to keep driving that number down to as close to zero as possible. 

If you were to ask me whether zero can be achieved for ten years in a row, I would have to say that it is highly unlikely because accidents happen - but we can keep driving down risk. 

We are very focused on it but we know we have to keep doing more and more on it. In the case of Many Clouds - he was a public horse, a wonderful horse - he literally gave his all. His disease couldn’t have been prevented. His fatality couldn’t have been predicted and therefore steps couldn’t have been taken to avert it, other than let’s not have racing at all, which I am never going to advocate.       

The autopsy stated that Many Clouds died from a severe pulmonary haemorrhage, which affects 0.04 per cent of horses. It is quite possible that the problem occurred at the end of the race but the horse pulled up OK and he beat the Gold Cup favourite, Thistlecrack. He did previously have ataxia - where a horse overheats - but the two issues are definitely not linked at all.

On another topic, but one which also speaks to many of those who work with horses, the BHA has clearly been collaborating very closely with the British government to drive through the levy reform. Do you think that they are now realising the good economic effect the sport has on the economy? And, in addition, that racing is the largest countryside sport in the UK with regards to the amount of rural jobs it provides?  

17,500 people are directly employed in the sport and, according to a 2013 Deloitte report, tens of thousands more people that rely on the sport for a source of income. I think, yes, we have got our point across. The sport generated a GDP of UK£3.5 billion back in 2013. We are an important rural employer and our employment is spread across the country but usually in rural constituencies, which has helped get the message across to the government. 

People see the benefits of the sport in terms of physical exercise and how we can get more people involved in riding. The BHA is involved in regulations for pony racing and point-to-point racing, which is a more grassroots way of getting involved in the sport.        

The month before the last general election, [former UK prime minister] David Cameron said on Warren Hill in Newmarket: “British horseracing is part of the heritage of this country, is a vital rural employer, and this government intends to support it.” The new government has continued to support us. 

With the creation of entry fee races such as Australia’s turf race, The Everest, and the American dirt race, The Pegasus World Cup, both of them offering world record prize money, can UK racing compete? Does it have any plans to run such races?

This was year one of The Pegasus and we will see what happens in the future. Obviously it wasn’t a very competitive race in the end with the world’s greatest racehorse, Arrogate, winning the US$7 million, which was good for him. I think it will affect British racing in that if you have a good enough horse you will give it a go there because there is a lot at stake, so maybe at the top level.  

I think the nice principle of it was that horsemen are promised - if they enter - some share in ancillary benefits from the commercial side of the race, which is an interesting concept and is perhaps something that racecourses here might look at in terms of attracting entries. 

I am sure some will look at the principle of higher staking levels. In some ways it is back to the old days - when racing started it was always a case of: “I’ve got a thousand quid. You’ve got a thousand quid. My horse will beat yours!” 

France has recently announced that female jockeys will be able to claim four pounds back in weight handicapping in competitive races. What do you think the potential benefits of this are and is this something that the BHA might enforce in the future? 

The obvious benefit would be that women would get more rides. However, the downside for me would be that we are one of the very few sports where women can compete equally with men. I mean this and I really think they do compete on an even footing.

We have got more female apprentices now on the flat now than we have ever had, which is a good sign. In terms of them breaking through right at the top, we have a great chance with last year’s champion apprentice Josephine Gordon, who has lost her claim, and is getting loads of rides now. 

I would favour something a little different, which is perhaps what the National Trainers’ Federation has been talking about, in maybe giving an allowance to female apprentices for longer, to allow them to have a claim for longer so that they get more rides and become more established. So, once they have made it, they have made it!

We do want to encourage women through and we are seeing a growth in the number of female trainers and, as I say, flat apprentices. 

I am just concerned that if you give Nina Carberry, Hayley Turner or Josephine Gordon a four-pound claim against the top men they will beat them all the time because they are good enough to anyways. That is the beautiful thing about our sport = if you are good enough, you are good enough.

The Jockey Club, which owns and operates a number of the UK’s leading racecourses, recently proposed a UK£500 million cash injection into all aspects of the industry. How do you feel that it will improve the sport?

I genuinely think that we are at early stages. The Jockey Club have been looking at their plans, they always have a five-year plan, and they have got some things in mind that they would like to do. 

They have seen that there is potential for a housing development in the borough concerned, where Kempton racecourse [which the Jockey Club may put up for sale] is situated, and they had to throw their hat into the ring or not by early January. They wanted to throw their hat into the ring and see what may come out of this. 

I think that they have done the right thing by not keeping quiet about putting in their application for consideration. I feel that if they hadn’t said anything and it had emerged it would have been very difficult for the Jockey Club to have explained themselves if they hadn’t come out on the front foot, which they did. 

They have a vision for putting more into equine welfare, facilities, and trying to improve their overall contribution to racing. They have a plan that has been made in good faith and it sees an increase in what they would have spent, from something like UK£378 million across those years to the UK£500 million. That alone - if you don’t look at any other aspects - is good for racing. They mean it and they are well intended.

I think that if the Kempton deal does happen, and there is a lot of water to go under the bridge, the BHA has statutory responsibility to decide where all the Group and Graded races go. Our board will decide where those races go. Of course the Jockey Club would like them to go to Sandown but I am sure there will be other interests and we have to consider it on the wider basis for British racing.

They have announced that they want to open an all-weather track in Newmarket and we would have to approve that. Given competition law and established precedent we would have to have good reason to say no to them if they wish to open the racecourse. If they want to have additional fixtures at the racecourse, they will have to apply for them through us. So we have a lever there to consider.

Those are all of our specific involvements but if this plan did go ahead, I think that we have a role to make sure that we hold the Jockey Club to account in terms of making its additional commitments on investments in facilities, equine welfare and on the human side of the sport as well. That will be our role. 

I think that there is a lot of water to go under the bridge yet before the plan can come off.