Bookmakers volunteer extra 18m for racing in historic Levy deal

The major bookmakers have signed a groundbreaking four-year funding deal with racing. Photograph: Jason Alden/Rex

Britain's four largest off-course bookmaking chains will make voluntary payments to the Levy scheme for the first time under the terms of a groundbreaking, and potentially historic, deal between the racing and betting industries which could see prize money reach a new record total of 120m in 2014.

The addition of voluntary payments due to start in April 2014 with the 53rd Levy, the mechanism by which money is returned to the sport from off-course betting, is a significant step towards the eventual abolition of the statutory basis to racing's principal funding mechanism.

William Hill, Ladbrokes, Coral and BetFred will contribute 4.5m a year for the next four years to an incentive fund, overseen by the Levy board, which will aim to produce more competitive racing and, by extension, more Levy revenue. The total of 18m in voluntary funds is in addition to payments required by law, which will remain at 10.75% of gross profits on British racing earned in the country's betting shops.

Bets placed on British racing in the rapidly expanding online sector, all but a fraction of which are placed via the major firms' offshore operations in Gibraltar and Malta, will remain outside the reach of the Levy system. Yet it is still highly significant that, for the first time, bookmakers will be paying money to racing not because the law forces them to do so but because it will be good for business.

The deal for 18m in voluntary funding over four years follows a deal struck between the sport and the Betfair betting exchange in 2012, under which Betfair – which operates entirely online and offshore – will make a voluntary payment of around 7.8m to the 2014-15 Levy scheme. As a result the scheme is expected to yield 80.2m, a 10% increase on the estimated yield of 72.9m of the current Levy scheme when it was agreed 12 months ago.

The four bookmakers involved in the deal said in a joint statement on Thursday that the incentive fund will be "used to improve the competitiveness of the racing product, making it more appealing to both racegoers and betting office customers alike". The statement added: "We look forward to working closely with our colleagues from racing over the next four years and maintaining, and enhancing, Britain's status as the number one horse-racing nation in the world."

Paul Bittar, the chief executive of the British Horseracing Authority, said that the "arrangement has the support of the principal organisations in the sport, including the Racecourse Association and Horsemen's Group, and represents a positive step forwards in the prevailing circumstances. This additional funding … brings a degree of certainty and considerable upside in the coming years".

Annual wrangling over the amount that would return to racing from the betting industry has been a feature of the Levy system throughout its history. Several schemes have been referred to the government for determination after the two sides failed to agree on a figure, much to the annoyance and exasperation of the politicians concerned.

The new framework brings far more certainty, and offers a basis too for further progress on the issue of offshore betting revenue. If, as intended, the incentive fund boosts field sizes and competitiveness, it will also make British racing more attractive to backers abroad.

"This has all been achieved with no major structural reforms, through negotiation and a lot of goodwill from lots of parties," Bittar said. "Racing and betting having a good relationship has to be a good thing, and in terms of a platform this is a good opportunity for growth while we also pursue the right long-term mechanism for the sport."

Menawhile, on the track on Thursday, Tony McCoy made good headway towards securing 4,000 winners over jumps by riding a brilliant five-timer at Carlisle.

McCoy now needs just 16 winners to set yet another record in a truly remarkable career. His first four winners came in the green and gold silks of his boss, JP McManus, with three of the horses trained by Jonjo O'Neill.