The Levy Board looks set to receive another stay of execution after the second stage of the government's levy reforms juddered to a halt on Friday, a setback described by one politician as a "fiasco".
In preparation for the Levy Board's expected demise in April, British racing set up a shadow Racing Authority to take over the responsibility for distributing levy funds, one of the sport's main income streams.
But the development means the Levy Board is likely to stay in operation beyond April and has raised the possibility of the plans for racing to take greater control of its finances being thwarted altogether.
Last year the government introduced the first stage of levy reform, which resulted in betting operators based overseas paying levy for the first time and boosted racing's income by £45 million to a total of £95m in its first year.
The second stage of the reforms, already delayed by a year, would have led to the abolition of the Levy Board with its collection and distribution duties taken on by the Gambling Commission and the new authority respectively.
The government sought to use secondary legislation in the form of a legislative reform order to bring about those changes.
However, the House of Lords Delegated Powers and Regulatory Reform Committee (DPRRC) and the House of Commons Regulatory Reform Committee have told the government that it needs to bring about reform through primary legislation, warning its approach limited scrutiny from MPs and peers and consultation with the racing industry.
Parliamentary grilling raises concerns over second stage of levy reforms
The committees made no judgement on the policy but were unconvinced by the government's assessments of the financial and administrative benefits of the changes.
DPRRC chair Lord Blencathra said: "Horseracing means a lot to many in this country. We were told by the minister that it provided 17,000 jobs and that over six million people enjoyed a day out at the races every year.
"It is therefore vitally important that changes to the way in which the horseracing levy is collected and applied are considered carefully and in detail. In finding this legislative reform order inappropriate, we are not saying that the underlying policy is wrong but that it requires the level of scrutiny and debate afforded to primary legislation."
The government must now decide whether to amend its proposals or bring forward a bill.
The Levy Board was due to be abolished on April 1 and it is unlikely that primary legislation would pass in time for that to happen.
Both committees indicated that, should the government attempt to bring back the draft legislative reform order, they would use their formal veto to block any further progress.
A DCMS spokesperson said: "Our reforms to the horserace betting levy have already resulted in an extra £45m to support the racing industry.
"The government notes the committees' report regarding further administrative changes to the levy and will consider it carefully."
The chair of the shadow Racing Authority Sir Hugh Robertson has not given up hope of the reforms being enacted.
"The most significant element of levy reform has already been achieved with statutory income rising to £95m this year due to the capture of revenues from remote betting operators," he said.
"It was also hugely encouraging that the Commons parliamentary procedure committee was so positive about supporting racing.
"We will now work with government to see how we might complete the structural reforms by other means."
Lord Lipsey, who gave evidence opposing the plans to the committees, described the news as "a good day for parliament, a fiasco for the government".
He added: "Government cannot take parliament for granted. This was an ill-judged attempt to get something which is clearly against the rules and they should be ashamed of themselves."
Levy Board chief executive Alan Delmonte said: "The implications of today’s developments for the Levy Board’s activities and planning will take some time to work through fully but we will do this in a structured and measured way with government, racing and betting."