The SMF Report – unlikely to meet with industry approval but well worth a read

Non-partisan think tank, Social Market Foundation (chaired by Mary Ann Sieghart), has today (5 August 2020) published a report  entitled “Gambling review and reform: Towards a new regulatory framework” (that you can download below) that puts forward a series of policy recommendations ahead of the Government’s forthcoming review of the 2005 Gambling Act.

You can also download below:

The authors of the the report are James Noyes (former advisor and speech-writer to Tom Watson, Deputy Leader of the Labour Party until December 2019) and Jake Shepherd.

In a nutshell, the report recommends:

  • Gambling licences
    • The introduction of a British gambling “kitemark”.
    • The end of the white label scheme.
    • The introduction of Personal Functional Licences (PFLs) in the remote sector.
    • The introduction of a transparent system of Gambling Commission sanctions.
  • Gambling content
    • A new categorisation of gambling content.
    • The introduction of limits online.
    • A review of the evidence base on gambling-related harm.
  • Gambling affordability
    • The introduction of a multi-operator affordability model.
    • The introduction of weekly ‘soft cap’ thresholds on net deposits.
    • Placing the new Gambling Ombudsman in charge of affordability.
  • Gambling tax
    • A review of gambling taxation.
    • The introduction of a minimum ‘onshore footprint’ threshold for remote operators.
    • A review of the 2014 Gambling (Licensing and Advertising) Act.
  • The regulatory framework for gambling
    • The end of the tripartite arrangement.
    • The introduction of a new Government ‘Gambling Quartet’.

Introducing the report, SMF states as follows on its website:

The Government has described the need to bring an “analogue Act” into line with the “digital age.” Online gambling – increasing both in popularity and profitability – is not subject to the same controls as equivalent land-based content. Following a series of high-profile interventions in Parliament, this report sets out the next steps. It is a roadmap for reforming the gambling industry. Its recommendations are designed to create fairness in the market, better regulation, and ensure that fewer people are subjected to the pain of gambling-related harm.

Key points

  1. Gambling licenses – The integrity of British gambling licences has been eroded by a combination of regulatory failure and industry malpractice. The report makes recommendations for how confidence and credibility in British gambling licences can be regained. Specifically, it proposes the introduction of a mandatory kitemark for all licensed operators; it calls for an end to the so-called ‘white label’ scheme; and it highlights the need for a transparent system of regulatory sanctions, in line with best practice in other sectors.
  2. Gambling content – The report advocates the introduction of a system of controls for remote gambling, based around limits on the stake and speed of play. For online slot content, the report acknowledges the regulatory reality of stake limits within a now-established spectrum of possibility of between £1 and £5. For online non-slot content, the report accepts that similar limits would make that content commercially non-viable, and the authors advocate limits to game design instead.
  3. Gambling affordability – The report puts forward a working definition and model of affordability based on an analysis of income and living standards. Drawing on analysis of this data, the authors recommend the introduction of a ‘soft cap’ limit of £100 per month on net deposits. This cap reflects the reality of what the majority of gamblers already spend, accommodates a ‘socially acceptable’ threshold of leisure spending, and ensures that gambling spend does not exceed poverty thresholds for lower income households.
  4. Gambling tax – The report recommends that Government should review all gambling taxation since the 2014 Gambling (Licensing and Advertising) Act. Government should make an assessment of potential changes to gambling duty in relation to the onshore ‘footprint’ of operators, defined in terms of a minimum threshold of capital, human, social, legal and digital presence in the UK.
  5. Regulatory framework for gambling – The authors argue that the existing tripartite regulatory arrangement (Gambling Commission, Advisory Board for Safer Gambling, and GambleAware) should be replaced with a new cross-departmental ‘Gambling Quartet’. DCMS would no longer be the sole government department responsible for gambling. The new Quartet would include the creation of: a Gambling Licensing Authority (replacing the Gambling Commission), sponsored by the MOJ; a new Gambling Ombudsman, sponsored by BEIS; the funding and commissioning of Research, Education and Treatment channelled via a statutory levy through the NHS and UK Research Councils, under the sponsorship of DHSC; and the oversight of advertising, the Lottery, and sporting and cultural events relating to gambling retained under DCMS.

James Noyes is quoted in the media release as saying:

For too long, gambling operators have talked about the need to protect their customers, but have not worked together in order to make affordability checks a reality. A fixed cap that applies across operators is the only way that con can be protected from harmful spend. Our proposed threshold sets the bar low enough to protect everyone, including those on low income, but is high enough to reflect the vast majority of gambling activity among the general population. Gamblers should be free to spend more than this threshold – but only after they show that their gambling is neither unaffordable nor harmful.

On the issue of tax, he adds:

We need to see an end to the problem of offshore gambling tax avoidance. Gambling taxation should be redesigned around a system of incentives which reflect a company’s level of onshore presence. This means that operators could still decide to base their headquarters in locations like Gibraltar, the Isle of Man, or Alderney, but that decision would carry significant tax implications. The message to online gambling operators should be clear: if you want to benefit from the British market, then make a commitment to being based in Britain.

On the need for reform, he concludes:

Our gambling laws were determined by a legislative review that is now almost 20 years old. Since then, online gambling has transformed the industry’s financial and social impact beyond recognition. The forthcoming Government review should be seen as an opportunity for a radical overhaul. Our laws and regulations need to catch up to ensure that British taxpayers get a fair deal.

The Betting and Gaming Council has responded to publication of the report as follows:

This is a thoughtful study ahead of the Government’s Review of the Gambling Act – a review we fully support. We welcome the fact that, in contrast to the siren voices of prohibitionists who claim problem gambling is high and increasing, this report rightly states that there is no evidence of a rise in problem gambling and that levels have been stable around 0.7% for nearly two decades.

Although we do support many of the measures contained in the report, the authors share the BGC’s determination to raise standards and we welcome the important acknowledgment that our members have taken action to drive higher standards, especially during the Covid-19 crisis. We fully endorse the concept of a British gambling kite mark as a sign of operators’ commitment to fairness, quality and integrity and the BGC would welcome the opportunity to lead on the development of this concept.

But it is vital that the Government’s Review is evidence-led and avoids the dangers of unintended consequences. Some 30 million people enjoy an occasional bet, whether that’s on the Lottery, bingo or sports and gaming, and the overwhelming majority of them do so perfectly safely. We already carry out robust and improved affordability checks, and regularly intervene on customers to ensure they gamble within their means. We disagree with the suggestion of an arbitrary and random low cap on spending and can think of no other area of the economy where the government determines how much an individual can spend. We must avoid measures that see safe regulated betting being driven to unregulated, offshore, illegal black market operators online who don’t have the same checks, interventions and high standards that apply to regulated BGC members.

Measures must be proportionate, evidence-led and fully thought through so as not to jeopardise the 100,000 jobs the industry supports or the over £3 billion in tax revenues it generates for the Exchequer.

Although we understand why most UK licensed operators will support the above views expressed by the BGC, whose argument that the Gambling Act review must be evidence-led is clearly correct, the SMF report should not be dismissed out of hand. It represents a seriously considered and well-intentioned contribution to the forthcoming debate that is likely to be seized upon in certain parliamentary quarters and, as such, is well worth a read.

P.S. The following extract from the “acknowledgments” section of the report will not be missed by keen-eyed readers of the report: “The SMF’s financial supporters include Derek Webb, who is also an associate member of the All Party Parliamentary Group for Gambling Related Harm”. However it adds that “neither he nor the APPG have had any role in the research or writing of this report. The SMF retains full editorial independence over all its work”.