One week to go: UK gambling Budget debate nears conclusion

In exactly one week, Rachel Reeves, Chancellor of the Exchequer, will deliver her Autumn Budget.

The lead-in period has been 12-weeks and Stephen Hodgson, the Betting and Gaming Council's Tax Policy Adviser, cannot recall a longer one.

In conversation with Global Gaming Insider, he explained: "In 19 years of working in tax, this is the longest lead-up to a budget that I can remember and the first time I've seen gambling tax policy dominate the debate to such an extent. I can't see the Government choosing this approach again in the future."

In consultations prior even to this 12-week eternity, the Government indicated a desire to simplify the tax system - one word bandied around a lot towards the end of the Summer was "harmonisation."

It was this that had British Horseracing up in arms and catalysed the "Axe the Racing Tax" campaign, resulting in unprecedented strike action to warn against the dangers of bringing horseracing bets in line with online gambling and casinos.

This policy would have raised General Betting Duty on the sport from 15% to 21%. Harmonisation, simplification - whatever this strategy was, reports this week have painted a different picture entirely, one of rank confusion.

There has been a sense of deep uncertainty around the budget in all areas since a U-turn on income tax rises was briefed by the Treasury last week. Many wondered what this would mean for the rumoured gambling tax hikes?

Did it mean the Treasury needed to find even more money elsewhere, making severe rises more likely, or are the reportedly improved economic forecasts enough to reprieve both income tax and gambling taxes?

Politicisation

Some reports have indicated that the reforms will now look like this: horseracing will be spared an increase alongside all other sports bets placed in retail stores, bets made online will be subject to a 'slight' increase (excluding horseracing), and an undefined higher rate will be levied on physical machines and online casino.

But why the change of tune? There is a sense that the longer lead-in time has allowed the debate to become more politicised than it would normally have done. The Sun newspaper and Nigel Farage's interventions have certainly played their part here.

There is a mood of exasperation in how the debate has played out for someone like Hodgson, whose concern is very much the detail and economic consequence of tax decisions, not their political currency.

Hodgson and BGC CEO, Grainne Hurst, appeared before a Treasury Committee at the end of October and there was clear frustration in how a debate about "social ills" was the headline-grabbing moment.

Hurst insisted that gambling did not cause "social ills" at the start of the session, though Hodgson tells us: "Grainne was clear that gambling can cause harm to a small minority of people, which is why it's so important that gambling tax policy is designed in a way that keeps customers in the regulated market, where they benefit from a wide range of protections."

The phrase 'social ills' is lesser spotted in the industry than its cousin 'gambling harms,' and it's possible that Hurst saw the phrase as a leading pejorative that needed checking.

The Committee certainly seemed more sympathetic to the points made by the SMF, the IPPR and Stewart Kenny, the penitent former Chief Executive of Paddy Power.

These were the three proponents of increased taxation, outnumbering the BGC representatives, and Hodgson was unconvinced that the line-up reflected well on the seriousness of the taxation debate: "I was disappointed by Stewart Kenny's contribution at the select committee. Stewart Kenny isn't a tax expert and he retired from the industry almost a decade ago so, unsurprisingly, his comments about the effects of past tax increases in Ireland were simply wrong."

Accusations of absolutism and catastrophising could be levelled at either side of the debate, a state of affairs which has left the very real and contingent issues of taxation occasionally by the wayside.

The result?

Hodgson explains that the upshot of this could be a system too complex for its own good.

Some have called for a separation of gambling tax rates based on the addictiveness and harms associated with different types, however as was pointed out in the committee, tax adjustments can be made either to reduce gambling and harms, or to raise more revenue for the Exchequer. There's a clear cognitive dissonance in trying to do both.

If raising revenues is the aim, separating online from retail and horseracing from other sports in the manner mooted, could belie a lack of precision and intent.

These pairs of gambling types feed and feed off each other in myriad ways. Figures like Hodgson would feel more confident in the Government's grasp of this if the carve-outs did not seem so explicitly driven by the party-political aspect of the debate.

Job losses

Where statistical analysis and debate may have fallen away, the more emotionally evocative consequences of action and inaction have been invoked by each side.

For the industry lobbyists, job losses have been held up as a devastating effect of tax rises.

Fred Done, Betfred Founder and Chairman, notably claimed that Betfred would have to close every one of its bricks-and-mortar outlets if retail was hit hard in the budget.

It may be that this element of the campaign has been partially successful, with retail looking as though it may be spared a sports betting tax increase.

But here too, Hodgson sees a disconnect: "There's a misconception that taxing online gambling more heavily has less of an impact on jobs than taxing retail gambling. The reality is that online gambling businesses employ thousands of people in well-paid, high-tech jobs up and down the country. Whether that's Bet365 in Stoke, Evoke in Leeds, or Flutter in Sunderland."

Uncertainty

Uncertainty remains rife, and suspicions are that nothing has been finalised yet.

If the political landscape changes dramatically in the next week, maybe the budget will change with it.

For those concerned with assessing the realities of pulling certain financial levers, this is perhaps a sign that the conversation has become too big and too public, transmuted from an expert-led discourse to another 'culture war.'

If Farage has emerged as a figurehead on the side of the BGC, Gordon Brown has been outspoken in his belief that large tax hikes on gambling could raise over £3bn ($3.92bn) a year.

Hodgson is less convinced, and notes: "It's ironic that Gordon Brown has campaigned so vocally given the current gambling tax system, which has worked so well, was largely designed by him and his team some 25 years ago."

One of these political figureheads may yet emerge a clear victor in this extended public debate, or alternatively the gambling tax system could become a casualty of an overly emotive, often unsubstantiated, shouting match.