Affordability Checks

If you believe the rhetoric coming from within the racing industry this will be a pivotal week for British horse racing as politicians are set to debate the proposed ‘affordability checks’ on punters in Westminster today (Monday 26 February).

The debate is happening on foot of a 100,000 signature petition orchestrated by the British racing industry which has triggered this parliamentary discussion. The industry is claiming that if these restrictions on punters come into force, in their present form, they will have a catastrophic impact on the sport.

Both sides in this argument are bombarding us with often outlandish claims and statistics that don’t appear to add up.

The British Government’s White Paper which was compiled on the back of 16,000 submissions from stakeholders and interested parties was published last April and is largely based on the headline assumption that “300,000 people in Great Britain are estimated to be experiencing problem gambling.”

According to the White Paper “a further 1.8million people are identified as gambling at elevated levels of risk.”

These figures look to be some way off the mark as the gambling industry's currently accepted percentage of bettors with a problem gambling is 0.2% of punters. The population of Britain over the age 18-years-old is approximately 56.5 million which equates to less than 113,000 people with problems gambling, presuming every adult gambles.

The actual percentage of adults that gamble in Britain is 44% of the adult population which would indicate that around 50,000 people are problem gamblers rather than the 300,000 suggested by the Government paper.

According to the White Paper “no financial risk checks would be required for 75% of (online) accounts. Most of the checks will be frictionless with little interruption to the customer journey and the provision of documents by the customer will only be a last resort for the highest spending minority.” Anecdotal evidence would suggest that the final portion of that statement is not happening in practice by the operators that have already adopted the new guidelines.

Overall the Government is estimating that all the new measures included in the White Paper will reduce the online operators’ Gross Gambling Yield (GGY) by a maximum of 14% (around £1 billion) per annum. The GGY is the amount of money retained by operators after paying out winnings, but before their costs are deducted.

There is also an expectation that the GGY for land-based operators such as high street betting shops and on-course bookmakers will actually increase by between 2% and 5% as people betting in person will not be liable to the same restrictions as online bettors.

Sports betting, including horse racing, has a far lower GGY than Slots and Casino for the online operators, so the impact of these measures would potentially have a smaller impact on the profits derived from horse racing, particularly for those traditional operators that retain a large retail presence in Britain.

Taking everything into account it seems unlikely to me that the British horse racing industry’s claim that up to 1,000 rural jobs will be lost if these affordability checks are implemented is accurate. That is basically saying that 1 in every 7 stable staff will lose their jobs.

Horse racing in Britain receives revenue from gambling operators in three ways - Media Rights payments, Sponsorship and a betting levy. This equates to approximately 21% of the annual income generated by the sport which adds up to £309m.

According to the British Horseracing Authority (BHA) these affordability checks, if brought into law, “could cost the sport of horse racing up to £50 million per annum.” That number represents over 16% off all income the sport of horse racing receives annually from gambling operators.

The Government's White Paper, however, estimates the reduction in horse racing’s annual income derived from gambling operators to be a maximum of £14.9m.

Irrespective of which sets of statistics are the more accurate, it is enlightening that the sport is finally recognising that the gambling habits of a plumber in Inverness has a direct impact on the livelihood of a trainer in Newmarket.

Then again, who would have thought that someone making crystal meth in a cookhouse in Antwerp would put the participation of an Irish-trained runner at Cheltenham in doubt, but that is the crazy world we find ourselves in.

Lastly, I’m not totally convinced by the argument that these ‘affordability checks’ will suddenly drive customers underground to illegal bookmakers. Racing Post has published an article today which, according to its editor Tom Kerr, exposes “one illegal bookmaker that has operated with impunity for years with staff openly using real names and claiming to serve more than 1,000 customers.”

The big bookmaker chains all have customer numbers in the millions. This illegal bookmaker, who we are told has been operating for seven years, still only has a little over 1,000 customers.

This is the equivalent of a fella with a poitín stil in Kerry. He poses zero threat to the likes of Diageo regardless of the Irish Government’s minimum pricing for alcohol. The guy with the poitín knows that as long as he keeps it small and local he will most likely be left alone. The same premise applies to the illegal bookmakers who have been around in one form or another since long before the big corporate betting companies came on the scene.