In the recent Budget, Chancellor George Osborne increased the duty on FOBTs - betting shop roulette machines - from 20% to 25% of gross profit. He nominally tackled the FOBT issue but has created a wider gap in the already divided government approach to gambling in general and FOBTs in particular.
Mr Osborne advised Parliament that FOBTs are "highly lucrative". Considering FOBTs were introduced illegally and were legitimised based on misleading representations, it is absolutely right that at least a minor extra portion of this bookmaker windfall should be scooped up by the Treasury.
Mr Osborne must have read the bookies’ unreliable form and knows this extra tax is not an economic danger to the sector. He will be aware that the bookies claimed there would be 2,600 shops "at-risk" when he made the change last year to a 20% rate. Well there are more shops now than a year ago – approximately 288 according to Geofutures. The bookies find it easy to identify "at-risk" shops that are not at-risk. But they find it difficult to identify "at-risk" gamblers who are at-risk!
Looking at Gambling Commission statistics for April 2012 to March 2013 provides insight to assess this change. The after-duty win for all machines for bingo, adult gaming centres and family entertainment centres combined is just over £4,000 per year, per machine. This compares to an average after-duty win for betting shop FOBTs of nearly £35,000 per year, per machine.
What do the bookies do with all that extra cash? It's not all spent on shop staff, as many shops are mostly single-manned, with many staff on salaries close to minimum wage?
Section 1.190 of the Budget states the change is "to bring [FOBT] profitability more into line with other gaming machines on the high street". Well 25% is nowhere near the line - it would need to be around 90% to achieve that result.
So-called “sin taxes” can have a deterrent effect if the cost is passed on to the consumer. This does not apply though to a casino game such as roulette as a winning number will still pay 35 to 1. It was adjustment to a profit share tax that allowed bookmakers to introduce roulette onto FOBTs in 2001. Therefore the bookies will become more aggressive in their marketing of FOBTs, creating exactly the opposite impact of using a vice duty increase as a deterrent.
Look out on Grand National day for shops being fully staffed and for staff pushing FOBTs to convert even more horse-race gamblers to FOBTs and subsequently, convert infrequent in-control gamblers to regular at-risk gamblers.
The real dilemma for government regarding gambling, which cannot be ignored forever, is the inadequate provision of research, education and treatment. Although problem gambling is recognised as a mental health issue, there is treatment at only one NHS clinic, at which 61% of the patients cite a problem with FOBTs. There is still no research planned into the socio-economic costs of FOBT problem gambling.
If FOBT revenue to the Treasury is exceeded by FOBT socio-economic costs, which the Campaign estimate it is, then the Chancellor is clearly unbalanced on FOBTs in his budget provisions.
Derek Webb is the Founder of the
Campaign for Fairer Gambling
.