Taxation, it is said, is one of life’s two great certainties. Predicting the consequences of recent and forthcoming increases in duties for Britain’s online gambling market, however, is anything but a sure thing. Less than a month on from the hike in remote gaming duty – from 21% to 40% of GGR – the balance of evidence indicates that the government may have called it wrong.
The intense and often bad-tempered lobbying that accompanied last year’s Budget statement was marked by a fundamental disagreement on what would happen as a result of increasing duties. As a generalisation, the licensed industry warned of job losses, cuts to funding for sports, a growth in the illegal market and possibly even lower tax receipts.
The think tanks pushing for duty rises likened operator prophesies to the wolverine howls of an adolescent boy – and rather implausibly argued that ballooning tax yields would be accompanied by meaningful reductions in harm from gambling (as if excessive spending is only distantly related to disorder).
The Department for Culture, Media and Sport (DCMS) was unconvinced by think tank logic and – according to documents disclosed under the Freedom of Information Act – advised the Treasury that such forecasts were unrealistic. The Office for Budget responsibility modelled a £500m reduction in spending (versus the counter-factual) as a result of displacement to the black market.
In an interview in January, the recently departed chief executive of the Gambling Commission (GC), Andrew Rhodes, claimed to have provided cautionary information to the Treasury; but according to a Freedom of Information Act response, the GC holds no such information. This raises a question of whether ministers ignored the market regulator as well as the DCMS; or whether the GC, which had previously lobbied for tax increases on licensees, never in fact supplied the information.
News bulletin
We will need to wait until the end of summer for the first government data on impacts. In September, HM Revenue and Customs will release its betting and gaming duties bulletin, which reveals how much tax is collected across the seven different gambling duty regimes. In December, the GC will provide information on consumer spending in the licensed market during the first quarter, post-hike.
The black market for gambling, in common with criminal enterprises in general, tends to be less forthcoming with hard data. Arguments will therefore persist about its scale and trajectory, with half-glimpsed observations being used to prove or disprove prior positions. The questionable proposition that increasing tax reduces harm is unlikely to be subject to any quantitative examination.
Identifying illegal gambling and unpicking the sources of harm from prevalence surveys is challenging even when the surveys are robust (and the GC’s Gambling Survey for Great Britain remains dogged by clear issues of unreliability). In the absence of hard data, the lived experiences of displaced consumers using illegal operators is likely to dominate.
Lead indicators vindicate industry concerns. Industry analyst Vaughan Lewis observed in March: “The consequences are arriving. Entain has recorded a £488m impairment on its UK assets. Evoke is in a strategic review, cutting costs, closing shops and cutting jobs. Bet365 has ended decades of racing sponsorship at Haydock and Newmarket. The Coral Cup lost its 52-year sponsor at Cheltenham. Flutter is restructuring marketing, cutting jobs to drive efficiencies. Smaller operators are exiting the market.”
The truth is, in deciding on such large-scale rises in online gambling duties, the Treasury took an almighty gamble. This is because the behavioural responses – from licensed operators, from unlicensed operators and from consumers – are too complex to model with any degree of certainty. In forecasting what would happen next, the industry at least had the advantage of understanding the effects on margins and what pre-emptive actions would be required to protect them. Everyone else was just whistling in the dark.
It will probably require a regime change (as well as a societal change of mood) to reverse the hike on remote gaming duty, regardless of how deleterious the consequences are; but the die is not yet fully cast on duty for online betting. It would be folly to carry on next year’s planned rise if the wolf really is at the door.
Dan Waugh has been a partner at Regulus Partners since 2014, where he specialises in research into the regulation of the gambling market. Prior to joining Regulus, he held senior positions in the gambling, leisure and hospitality industry with Rank Group and Whitbread PLC. Between 2015 and 2017, Waugh was chair of gambling harm prevention charity YGAM.
The post Cry wolf: is it time for the UK government to start worrying? first appeared on EGR Intel.
Regulus Partners’ Dan Waugh says the Treasury “took an almighty gamble” with hikes to online gambling duties but it could prove folly not to reverse next year’s increase to remote betting duty
The post Cry wolf: is it time for the UK government to start worrying? first appeared on EGR Intel.