Taxpayer is a born loser as racing elite gets the sweetest subsidy of all

I WANT you to imagine the publication of a tribunal report. It’s a report into the way a particular business has been supported and its publication has been long awaited.

The tribunal has made various findings of fact. Their first is the revelation that this business, unknown to everyone, has been receiving vast sums of under-the-counter money. And those sums have come from the Government — a straight transfer of taxpayers’ money to one particular business.

As the story unfolds, it transpires the Government committed itself to giving the business in question a straight subsidy of €47 for every single customer it had.

The deal was that the Government would tax the business as normal, and of course charge VAT to its customers. But then they would arrange to give every penny of it back to the business.

And if the amount of tax collected was well short of the amount needed in subsidy, the Government would top it up from taxpayers’ money, effectively handing over tens of millions to the business concerned every year.

But what really drives the public mad is the discovery, on foot of the tribunal’s report, that the business in question, with the full knowledge of the Government, had been giving more or less its entire subsidy to its richest customers.

And it had been doing so while the revenue from tax and VAT had gone down each year, with the result that the top-up from the Government had to get bigger and bigger.

We’d never need a tribunal like that here, would we? No government would be mad enough to enter into so daft and one-sided an arrangement, would it?

Well, yes, as a matter of fact. Our Government entered into precisely that sort of arrangement with the horse and greyhound industry in 2001. And now, although they’re not telling anyone yet, the arrangement has run into deep trouble.

Here are the facts. In 2001, the Government passed a piece of legislation that effectively ringfenced every penny coming from betting tax and gave it back to the horse and greyhound racing industry as a straight subsidy.

They called it a “fund”. But in fact, when they were passing the original act, they put in a provision that if betting tax didn’t yield enough money, they would top it up from the Exchequer so that the industry would get a copperfastened, guaranteed subsidy each year, no matter how much money came in through betting tax. Almost as soon as the Government entered into this arrangement, it reduced the rate of betting tax from 5% to 2% and then to 1% — thereby guaranteeing that almost nothing would come in from the tax, even though the Government was still committed to giving a fixed amount back to the industry!

By 2004, the Government had given everything that was in the fund — a staggering €258 million. And it was clear by then that it wasn’t getting anything like enough money from the tax. So what did it decide to do in 2004?

Call a halt, maybe? Encourage the industry to scale down its expectations? Call on the people making millions out of the industry to contribute a bit more? No. Instead, the Government decided to put another €300m into the fund.

The then Minister for Arts, Sport and Tourism, John O’Donoghue, who had now taken over responsibility for the fund, went into the Dáil on October 19, 2004 and told the House: “Given their successful track record, both horse and greyhound racing deserve a continued period of support to enable them to reach their full potential. The fund has reached its limit under the existing provisions. However… the draft regulations now before the House, which have the consent and support of the

Minister for Finance, provide for an increase in the aggregate limit of the fund from €254m to €550m. This would allow for continuation of the fund for a further four-year period to 2008. During the next three years, a shortfall in the excise-generated funds will require a decreasing level of subvention up to the end of 2007, at which point predicted rises in the volume of off-course betting will see the fund revert to being fully financed from betting.”

In other words, taxpayers were expected to top up the fund by more tens of millions — but somehow the income from betting tax would shoot up in 2008 and the fund would be self-financing at last.

I wrote here at the time that that was codswallop, and was roundly berated on radio by Government and opposition alike for saying so.

But guess what? In the book of estimates for this year, 2008, there is provision for a full €66m for the Horse and Greyhound Fund (with a further €10m for capital spending).

And the current minister, Seamus Brennan, pretty well admitted in the Dáil last week that there was no money coming in. Intriguingly, he and Olivia Mitchell of Fine Gael speculated about the possibility of alternative sources of funding for the industry. What could they be, I wonder? No doubt we’ll find out in due course. But this is the story right now. Currently, the horse racing industry in Ireland reports annual attendances of around 1.4 million people — and they’re getting €66m this year alone. That’s an average subsidy of €47 for every man, woman and child who goes racing.

To put that in perspective, last year nearly two million GAA supporters attended All-Ireland matches alone. If the GAA were to get a €47 subsidy for everyone who attended a club or county match, in the championship, the league, or any other competition, they would qualify for a minimum of €180m a year. We’d better not include the FAI or the IRFU!

BUT you know what really drives me crazy? Virtually every penny of that extra subsidy, now funded almost entirely out of tax revenue, has gone into horse-racing’s prize fund — which currently stands at €56m.

Incidentally, British racing has a prize fund of about twice that — with a population 20 times bigger than ours and racing attendances more than four times ours.

The lion’s share of the Irish prize fund — tax-free, of course —goes to people who are among the richest people in Ireland.

According to Seamus Brennan in the Dáil last week, the whole thing is going to be reviewed this year. They’re going to have to ask the Dáil for permission to add more money to the fund — and don’t be too surprised if they start suggesting some kind of all-party approach.

The one thing you can be absolutely sure of is that the powerful interests involved in this business won’t want to see the end of the most lucrative subsidy any Irish government has ever handed out.

I wrote here last week that the cuts in public spending were starting now. Since then, there has been a flurry of stories all confirming that essential social spending is going to see its worst year in a decade or more.

Will a rich and successful industry like horse-racing be asked to share some of that pain, or will the ringfencing continue? Watch this space.

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