As the long awaited triennial review of gaming machines stakes and prizes looms, it’s seemingly becoming increasingly likely that the result will be a crippling clampdown on the maximum stakes on fixed-odds-betting-terminals (FOBTs).
Since the introduction of the Gambling Act in 2005, the political maelstrom that has engulfed FOBTs has inevitably intensified the levels of tension, and decreased the levels of rationality that have surrounded the debate of how and whether the terminals can be used in a responsible and safe way.
- The introduction of the Gambling Act
The Gambling Act was passed by Tony Blair’s Labour government in 2005 and was enforced two years later. In an effort to safeguard against betting shops becoming mini casinos, the legislation restricted bookmakers to just four machines per shop. In reality, bookmakers had been voluntarily capping the number at four per shop anyway after an agreement between the industry and the then gaming regulator (and precursor to the Gambling Commission) The Gaming Board.
In a fashion, the emergence of FOBTs helped the progression of the Gambling Act as the product demonstrated how unfit the current gambling laws, the Gaming Act of 1968 in particular, were for emerging global technologies.
Interestingly, in a report issued in 2012 the Department for Culture, Media and Sport (DCMS) argued that this led to an increase in clusters of betting shops on the high street and another report by the Institute of Economic Affairs (IEA) suggested that if clustering was a problem, then one way to solve it would be to remove the artificial limit on FOBTs per shop. Unsurprisingly, this suggestion did not go very far.
Although the act was aimed at encouraging increased levels of openness and fairness within gambling, critics perceived it as a complete deregulation of the industry. This is despite the fact that it brought bookmakers under the remit of a central regulator for the first time. However two pieces of deregulation – the permission of advertising and the removal of the demands test for new betting shops – were very visible changes.
Despite this ‘legitimisation’, the DCMS ministers were fond of declaring that FOBTs were still ‘on probation’ and that any problems arising would see the then Labour government come down on them hard. However there was still no change in approach during all Labour’s time in power.
A 2010 prevalence study showed that just 4% of people had used FOBTs, up from 3% in 2007, furthermore, the studies identified that levels of problem gambling hadn’t been greatly altered by the introduction of FOBTs or the enforcing of the Gambling Act.
A 2007 report by the Gambling Commission stated that approximately 0.6% of the country suffered from problem gambling, the same levels as were recorded in 1999. In 2010, this number rose to 0.9%, before falling to 0.7% in 2016.
- Results affirm the importance of the machines
The notion that revenue from FOBTs was of the utmost importance to bookmakers, was affirmed in the financial results published by Britain’s leading bookmakers. In 2011 William Hill found that a 1% decrease in OTC net revenue had been countered by gaming machine gross win growth of 13%, announcing its H1 results a year later, Ladbrokes’ machine revenue had gone up 20%.
A motion put forward by Labour’s Tom Watson proposing that the maximum stakes on FOBTs be decreased was voted down, with 314 MPs voting against it as oppose to 232 MPs voting for it. Nonetheless, the morning following the debate when Prime Minister, David Cameron described the machines as ‘a problem’ and vowed to wait until the triennial report to make a decision on the terminals, shares in Britain’s leading bookmakers took a temporary dip.
- Osbourne’s budget hits bookies hard
Chancellor of the Exchequer George Osbourne announced in his 2014 budget that the tax rate on the terminals would be increased from 20% to 25%. It was a move that resulted in the share prices of bookmakers taking a dramatic decline, with Ladbrokes shares falling 12% and William Hill shares falling 5%.
Following up on a report from the DCMS, the government eased mounting pressure to lower the maximum stakes on the machines, by enforcing new regulations that meant if players wanted to stake more than £50 at one time, they had to inform shop members of staff, or create an account with the bookmaker.
The DCMS stated that: “Account-based play allows players access to up-to-date information which can reduce biased or irrational gambling, and help people maintain control.
“Making payments over the counter rather than onto the machine directly can provide opportunities for intervention which may give players a reality check.”
- Labour lays it on the line as snap election further delays review
The upcoming triennial review of gaming machines stakes and prizes was delayed after Prime Minister Theresa May called a snap election, further delays in the review meant that any alterations to the current act would be unlikely to come into place until October 2018.
Amid much pressure and a pending government review, both The Labour party and the Liberal Democrats made a manifesto pledge to cut the maximum stake on terminals to just £2.
The manifesto read: “These highly addictive machines in bookmakers across the country have become a problem for many families and communities.”
As the political campaign of Labour and Jeremy Corbyn gathered momentum, the pledge inevitably caused a backlash from bookmakers, The ABB (Association of British Bookmakers) described it as a ‘bizarre and unjustified attack on betting shops.’
Adding that: “The Labour Party whose members are among the millions who enjoy their leisure time at their local bookies, have fallen for the spin of our commercial rivals who have a vested interest in destroying Britain’s High Street betting shops.
“There is no evidence to show cutting stakes on gaming machines will help tackle problem gambling.
“Independent research already shows that people lose more money more quickly on an arcade gaming machine than in any other gambling venue at current staking levels.
“This flawed policy would destroy over 20,000 jobs, close thousands of betting shops, cost millions of pounds in lost taxes for the Government and end a popular activity for millions of people – all without helping a single problem gambler.”
- Hung parliament extends period of uncertainty
With the Conservatives losing their majority government, industry fears grew that the looming review would result in a significantly more aggressive approach by the government on the machines, a fear that was exalted by the Conservatives newly formed alliance with the an ardently anti-FOBT Democratic Unionist Party.
An analysis published after the election from Barclays Bank estimated that cutting the stakes on FOBTs to just £2 would have major implications on the annual revenue for bookmakers, with Ladbrokes Coral being hit the hardest losing £439m, William Hill losing £288m and Paddy Power Betfair taking a £58m hit.
Nonetheless, this didn’t stop Paddy Power Betfair chief executive Breon Corcoran writing to the minister at DCMS, Tracey Crouch expressing his belief ‘that only a substantial reduction in FOBT stake limits to £10 or less will address societal concerns.’ It was a move that caused Greg Knight Managing Director of UK independent bookmaker Jenningsbet to question his motives, stating that Corcoran was ‘deliberately undermining the UK retail betting sector.’