Reviewing the Gambling Review - part two: Economics
Derek Webb
| Campaign for Fairer Gambling
Derek Webb from the Campaign for Fairer Gambling writes the second of five articles on the DCMS Review.
One of the main points in the introduction of the “Review of Gambling Machines and Social Responsibility Measures” is that the gambling sector employs over 100,000 people and in 2015 contributed £10.3 billion to the economy, 0.6% of GVA (Gross Value Added). This DCMS document states that the government supports a healthy gambling industry that generates employment and investment.
However, Gambling Commission statistics for the year up to September 2015 showed 108,063 employees in the gambling sector but a UK gross gambling yield of £12.6 billion. So why the £2.3 billion discrepancy? This is because most losses on remote (online) gambling are to sites located overseas.
The UK is exporting gambling losses and importing gambling harm. Requiring sites that obtain losses from UK gamblers to locate in the UK and pay UK taxes would be a strong move to help the economy that government could easily make.
With Brexit pending, there cannot be any confidence that sites located in Gibraltar, Alderney or the Isle of Man will have access to EU markets, unless they move to locate their servers in the EU. There is no reason that this historical anomaly of the UK allowing offshore sites access to UK gamblers has any merit in being continued. This applies particularly when considering that the Gibraltar Betting and Gaming Association is using the courts to try to avoid paying point-of-consumption gambling tax in the UK.
One of the other historical anomalies of the 2005 Gambling Act is that bookmakers were allowed FOBTs at stakes of up to £100 per spin. This has created an economic advantage for the bookies of a protected market monopoly, as gaming machines in many venues, other than betting shops or casinos, have a maximum stake per spin of £2 or lower.
There are approximately 170,000 gaming machines in the UK generating over £2.6 billion and the bookies’ FOBTs make up just 20% of those machines yet generate 66% of the revenue. Other sectors combined (including casinos) have 80% of the machines but generate just 33% of the revenue. This translates to revenue to machine ratios of 3.3 for the bookies and 0.4 for all other sectors combined, an eightfold advantage to the bookies. It is an unhealthy economy that creates protected market monopolists to the detriment of other sectors.
All spending in the leisure and entertainment sector will generate employment, investment and taxes. This type of spend should generally be from disposable income, as should gambling spend. If spend on gambling does not generate at least the same levels of employment and investment as other leisure and entertainment activities, then legalised gambling has questionable economic benefits.
The two primary reasons to allow legalized gambling are to prevent the successful operation of illegal gambling and to generate gambling tax revenue. An important caveat to this, often ignored, is that gambling taxes raised must exceed the socio-economic cost of the associated harm. Whilst this can be estimated across all gambling sectors combined, it makes more sense to assess it on a sub-sector by sub-sector basis.
The leading analyst on this subject matter is Howard Reed of Landman Economics, who was previously the Chief Economist at the Institute for Public Policy Research (IPPR) and a Program Director at the Institute of Fiscal Studies (IFS) which has been described as the "gold standard" for economic analysis by David Cameron.
Mr Reed has conducted investigations, research and evaluations across a range of areas relevant to FOBTs. This research has consistently shown that losses on FOBTs are having a negative economic impact on local economies, with job losses and a net loss to the Treasury. This is because machine gambling is labor un-intensive. So even before the cost of the socio-economic harm is considered, there is no benefit to the economy of 35,000 FOBTs across 8,800 betting shops.
Malcolm George, CEO of the Association of British Bookmakers (ABB) has been quoting from a KPMG report that implies that there is an economic benefit to FOBTs. Curiously the ABB does not want to make the report publicly available. They’ve learned that scrutiny of their “evidence” often results in its dismantling.
The ABB cannot expect to keep this report confidential if relying on it in their evidence submission to DCMS. The Campaign looks forward to exposing all the flaws in the bookies’ self-serving economic "evidence".
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