A heated Treasury Committee session will have only served to increase trepidation around UK tax hikes, as the gambling industry’s enduring mission to warn of the black market threat appears to have fallen on deaf ears.
BGC tax professional Stephen Hodgson and CEO, Grainne Hurst, were under fire from the Select Committee, who in many moments failed to hide their disdain for the gambling sector.
In the opening half of the committee, Stewart Kenny, the former CEO and Co-Founder of Paddy Power accused the industry of ‘scaremongering’, adding that when tax increases in Ireland were implemented in 2019, the tax intake nearly doubled and the black market did not grow.
Following this, Hodgson responded by stating that he ‘couldn’t believe what he was hearing’ from Kenny. Hodgson implied that Kenny had omitted the increasing obstacles for the retail sector in Ireland, which led to the closure of over 120 shops.
This prompted a sharp disparaging statement from Dame Meg Hillier, who remarked that COVID may well have also had a major role to play in the shop closures in Ireland.
Hodgson accepted that this may have been true, but the current climate for bookmakers in Ireland remains incredibly tough. He also underpinned that there are dramatic contrasts in the betting ecosystem from Ireland to the UK and that the comparison isn’t an effective one.
BGC backs betting shops
Dame Siobhain McDonagh was scathing in her attack on the retail betting sector, as she revealed her belief that betting shops have descended from places where people would socialise to hubs for people with drug and alcohol problems that have caused concern in local constituencies. She even escalated this criticism by stating that operators in her constituency are simply unwilling to take this problem on.
Hurst did her best to rally to the defence of retail betting, which prompted a frosty exchange between her and McDonagh and resulted in Hurst agreeing to visit betting shops in McDonagh’s constituency of Mitcham.
The attacks on the high street didn’t stop there, as Hillier also accused the gambling industry of ‘undermining its own shops by making them less welcome’. Hurst was staunch in her defence of the high street though – emphasising that many who work in bookmakers could find easier jobs, but stay in the betting shops as they are passionate about the gig.
Importantly, at a time when the UK high street is starving for footfall and in dire need of economic resurgence, Hurst asserted that 90% of those that play in betting shops subsequently go on to spend on the high street. A factor that should be seen as vital as tax hikes threaten to dwarf the retail betting sector.
Having seemingly exhausted the argument about whether betting shops are a high street plague or not, the MPs moved the conversation on to taxation – specifically whether ring fencing tax rates for different betting products should be considered.
Hurst battled against the logic of this idea, but as pressure intensified she became weary of the lines of the inquiry from the committee. As the debate grew somewhat tedious, with the MPs seemingly intent on catching her in a web of her words,
Hurst was unwavering in her mission not to say anything negative about the regulated industry, but this may have done more harm than good as her arguments became repetitive and fuelled the angst of the panel.
On a number of occasions, Hurst denied that gambling creates social harms. She repeated the fact 0.4% of the population has a problem with gambling, a statistic that inflamed the committee, who accused Hurst of diluting the levels of problem gambling.
Hurst remained consistent that players interact with gambling in different ways, but she is of the belief that it isn’t right to categorise the gambling industry as creating social harms.
A statement from Hillier, underpinned the bewildered reaction of the committee: “While I accept parts of the gambling industry make an economic and cultural contribution to the UK, I am frankly flabbergasted that representatives from the betting sector could not accept that certain forms of gambling, such as highly addictive online casino games, cause social harm for some people. I don’t believe that is a defensible position.”
Dismissing Dutch comparisons
Carsten Jung, who leads think-tank IPPR when it comes to economic policy work, admitted that when it comes to the ‘most harmful forms of gambling’, a tax rise on its own won’t deter a significant amount of players from engaging with gambling verticals.
He was somewhat dismissive of Dutch comparisons, arguing that the way operators react to tax raises can lead to the negative impacts seen in the Netherlands that are so widely cited by the industry.
It is routinely argued by the industry that the Dutch tax raises have driven players away, in turn reducing tax returns and channeling people to the black market.
Jung argues that the blame for this can actually be placed at the door of Dutch operators, who he implied have squeezed revenue from alternative avenues and shortened odds to deter players.
Dr Theo Bertram, Director of the Social Market Foundation, went on to lay an element of blame at the Netherlands’ ‘notoriously permissive’ culture for the country’s black market thriving.
He also emphasised that the tax hikes in the Netherlands came as part of a wide raft of measures for the gambling industry, whereas in the UK they are coming into force as a single measure.
Following his dismissal of Dutch market comparisons, which he described as a ‘unique’ case, Bertram instead highlighted the channelisation rates of Estonia and the Czech Republic.
Bertram and Jung were both aligned in the notion that tax increases could be increased alongside a growth in revenue for operators.
The Dr also underpinned his belief that slots were significantly more harmful than other verticals, however, this was a point that was repeatedly challenged by Hurst stating that rather than a single product being exponentially more harmful, it is rather the way a player interacts with certain products and that problematic players utilise a plethora of verticals.
Tension reigns
There was then an uncomfortable moment for both Hurst and Hodgson, who were forced to distance themselves from the Turkish bribery scandal that has plagued Entain in recent years, dating back to the company’s days as GVC Holdings prior to its December 2020 rebrand.
Once raised, the writing was on the wall for tension between the BGC duo and the committee MPs.
As this was raised, it should have been clear that the writing was on the wall for tension between the BGC duo and the committee.
Hurst and Hodgson did their best to bring the panel’s attention to the black market and the direct correlation of tax rises and the growth of the black market.
Hodgson quoted research that analysed comparisons within a myriad of US states. However this was dismissed by an increasingly frosty committee, who were keen to highlight that said research was funded by the BGC.
There was then an accusation Hurst being ‘disingenuous’ over her neglecting to acknowledge the different risk factors between different customers.
Hurst did her best to defend the industry, praising the progress made around markers of harm; this was quickly shot down by the committee, as they accused it of falling short in terms of actual implementation of protections.
The BGC chief came to the defence of the industry specifically in terms of taking action to block problem players, she also stated that ‘both the retail and remote sector have the highest possible standards’ in terms of safer gambling and intervention.
Liberal Democrat Bobby Dean then seemingly grew somewhat agitated with Hurst, as he sought to agree baseline statistics on where harm happens within gambling and how much gambling revenue was gained from problem gamblers.
Hurst issued a stark warning over the accessibility of non-gamstop casinos, and urged the committee to do their own search for illicit casinos.
Dean however stated that Hurst linking the black market growth to tax hikes was a ‘weak’ argument, dismissing the Dutch comparison and instead pointing to Estonia and the Czech Republic examples.
Hurst was however steadfast in her response, underpinning that ‘we simply shouldn’t be sending players towards the black market’. She warned that the black market has grown in the UK as tax receipts have shrunk from the regulated sector and the framework has tightened as a result of the Gambling Act White Paper Review.
The industry may have cried wolf on this one, as warnings of the black market are wilfully swatted away by Westminster and any comparisons to the Dutch market are dismissed as unfounded.
To use a football analogy, for the BGC this felt like a rainy Tuesday night away at Stoke. In spite of the most valiant efforts of an embattled CEO, it was another PR defeat as number 11’s red briefcase appears odds on to relegate the retail sector to a period of instability and level up the black market to new heights.
