Fred Done's £66 million snub to owners came as no surprise

Done cancelled the Tote’s sponsorship of the members of the Racehorse Owners Association’s colours, which is a significant financial snub.

Without sponsorship, the owners’ ability to reclaim approximately £66 million of VAT a year on the cost of having horses in training is jeopardised under a deal agreed with HM Customs and Excise.

News came on Friday that the ROA has taken over the sponsorship, which is laudable but does not alter the fact that Done’s hostile gesture makes a mockery of the empty words he simpered into the ears of Government’s ministers whilst assuring them of his eagerness to work with racing.

In fairness to Done, he isn’t the only bookmaker trashing the financial return to racing. When Secretary of State Jeremy Hunt adjudicated on the 50th Levy Scheme last year, he anticipated that the amount it would yield to racing would be £70 million. The bad news is that when that scheme comes to fruition at the end of next March, the actual return may be as low as £55  million. A disastrous shortfall.

So what thoughts will go through Hunt’s mind when, as sure as eggs are eggs, the 51st Levy Scheme falls without agreement on his desk in November?

It will be glaringly obvious to him that bookmakers moving their businesses offshore have made a mockery of his projection last year, for two reasons. First, and most obvious, if gaming operators are based in Gibraltar, they’re not bound to pay Levy in the United Kingdom. Second, and much more important, bookmakers avoiding the 10.75% Levy payments by being offshore can use that money in marketing campaigns to suck in more customers. Those campaigns involve offering punters increasingly attractive terms such as 'Bet with us, and if the favourite wins we’ll give you your money back’.

Whilst those offers are great for punters, they also squeeze the margins of all bookmakers to the point that the Levy, currently based on profits, increasingly contracts.

Hunt, however, will also be mindful that the bookmakers will be paying racecourses more money for the picture rights of races than they have in the past – the Arena Leisure courses alone will pick up an additional £10  million next year. But he needs to bear in mind that the Levy losses far outweigh the picture right gains.

His conclusion, I am sure, will be to do very little and continue to encourage John Penrose, the Gambling Minister, to consign the current Levy system to history as soon as possible. In Westminster that means the spring of 2013 if one has a fair wind and not too many Liberal Democrats getting in the way.

Quite how many horses there will be in training by then is another matter. Forty per cent of races fail to attract the optimum eight runners needed to generate attractive each-way betting and the rate of decrease in the number of horses racing is estimated to double in 2012.

In 2007 the foal crop in Great Britain and Ireland was roughly 18,500. This year that will fall to around 11,300. Of course, horses can be imported, but the economic sense of doing so has disappeared out of the window. There is also the issue of who will be able to pick up the bill for training these horses, let alone buying them, given the stagnation of the economy.

In 2012 the cost of keeping the racehorse population in action will come to around £330 million a year. That figure is set to rise sharply given the upward pressure on the price of labour, diesel and forage.

It is this rising cost base that will cause the number of horses in training to collapse further – unless more of that cost can be recouped from a fair return from betting via a commercial deal.