Double Whammy Time (if not more)!

The Government has finally announced (see here) its decision on the maximum stake for FOBTs (B2 gaming machines) after a seemingly interminable process which has only served to keep the gambling industry in the public spotlight in a very unflattering way.

Despite the considered and thoughtful analysis of the Gambling Commission and the Responsible Gambling Strategy Board (RGSB) in its advice to the Government in March of this year which gave the Government a range of options for reducing the maximum stake from anywhere between £2-£30 and also included the suggestion of reducing the maximum stake to £2 solely for slot games, the Government bowed to the weight of public opinion, opting for the sledgehammer of a £2 limit for all FOBT games. As the Minister, Tracey Crouch, said in her foreword to the Government's response to its consultation:

“The response to our consultation has been overwhelmingly in support of a significant reduction in B2 stakes. Local authorities, charities, faith groups, Parliamentarians, interest groups and academics all submitted opinions in favour of a £2 limit. The majority of respondents to the consultation agreed and as such we believe this step has strong public approval.”

It had been rumoured that the Treasury was resistant to such a large cut in maximum stakes because of the effect it would have on gaming machine tax receipts and that the Chancellor had eventually agreed to this only on the basis that remote gaming duty (RGD) would be increased from its current level of 15%. That proved correct as the Government’s press release states that:

“In order to cover any negative impact on the public finances, and to protect funding for vital public services, this change will be linked to an increase in Remote Gaming Duty, paid by online gaming operators, at the relevant Budget.”

Thus, the industry is suffering from the feared “double whammy” but, as I wrote here after the Gambling Commission published its advice to the Government, there are other elements of the Government’s response to the consultation which may well have a more enduring impact on the sector. The Commission’s advice included an action plan much of which focused on the online gambling sector which I won’t repeat here but, suffice to say, all of the Commission’s proposed actions have been endorsed by the Government. In particular, the Government echoes a warning previously given by the RGSB and the Commission when it says:

"[Online] operators must use customer data effectively to identify potentially harmful behaviour and target interventions to reduce the risk of harm occurring. We expect operators to act now and trial a range of measures to strengthen the existing protections in place. If operators fail to demonstrate sufficient progress, then the Government and the Commission have powers to introduce additional controls or restrictions on the online sector.”

For those looking for some positive news, at least the Government didn’t follow some of the suggestions made by respondents to the consultation including online gambling being prevented between midnight and 6am.

Although there were many calls for gambling advertising – particularly on TV – to be restricted, no change has been made even though many gambling companies were reported to be happy to confine advertising to after the 9pm watershed. This may well be a reflection of the broadcasters’ much greater lobbying power and their desire not to lose the significant advertising revenues earned from operators. Indeed, the Government’s main response is to ensure that the industry launches “a major multi-million pound advertising campaign promoting responsible gambling, supported by industry and GambleAware”. If the viewing public continues to think that there is an excessive amount of gambling advertising – particularly during football matches – this will no doubt be reflected in the Commission’s survey of the public attitude to gambling.

The position as regards the devolved nations of the United Kingdom is somewhat complex. Plainly, it is intended to apply the Government’s proposals in England in full. Gambling is an entirely devolved power in Northern Ireland and so these proposals are not intended to apply there although the Northern Ireland Executive may well adopt the same or similar measures.

The power to determine the maximum number of FOBTs in any particular shop is a devolved power in Scotland and now Wales but not the power to set maximum stakes. The Government says that it is “committed to working constructively with devolved administrations as we move towards implementation of the £2 stake limit on B2 gaming machines”. While this may give rise to some administrative burden, we would not anticipate the process diluting the proposals to any meaningful degree. The political environment in the devolved assemblies appears no more favourable to the industry than on a national level.

The focus now moves on to timing. The Government has stated (somewhat vaguely) that it proposes to implement the changes through “regulations in Parliament”. We assume (there are alternatives) that these will be simply regulations made pursuant to section 236 of the Gambling Act 2005 regarding the specifications of the various categories of gaming machine.

The Government says it “will also want to engage with the gambling industry to ensure they are given sufficient time to implement and complete the technological changes”. There is some suggestion that this could be a period of up to two years. Doubtless the Government will face competing pressures on the one hand to implement the proposed changes reasonably quickly and on the other hand from the industry to allow time for it to adapt and from the Treasury to delay because of the effect on its tax take.

The online industry will also be concerned about the flagged increase in RGD. The Government appears to be proceeding on the basis that an increase rate of RGD will inevitably lead to an increased tax take. There may be some gambling economists who question this, given the dampening effect higher tax rates may have on volume. The online industry will also want to ensure that any increase in RGD is not brought in significantly before the FOBT changes - something which one could not entirely rule out from a cash-strapped Government, plainly not favourably disposed towards gambling interests. In any event, those operators who are purely online may legitimately feel aggrieved that they are bearing the burden of their retail counterparts’ behaviour.