Legislation

UK – Social Market Foundation calls for £100-a-month cap on online gaming

By Phil - 11 August 2020

Gamblers should be protected by a new £100-a-month cap on spending to limit the harm that can be done by online gambling, a think-tank recommends today.

The Social Market Foundation also calls for a sweeping overhaul of the way gambling firms are taxed, to put financial pressure on companies registered abroad to bring their operations to Britain.

The SMF, a cross-party think-tank, proposed a comprehensive new framework of regulation and oversight for a gambling sector increasingly dominated by online playing. Its report comes ahead of a Government review of the 2005 Gambling Act, which ministers have said is not suitable for an era of online gambling.

The report recommends new “affordability checks” to protect gamblers from serious financial harm. It proposes a “soft cap” on spending where anyone who wanted to spend more than £23 a week on gambling products would have to prove they could afford to lose the money without hardship.

The majority of gamblers spend less than the proposed cap and would be unaffected (See Note 1) but the SMF said the new limit would protect players on lower incomes from potential harm.

The report also said that the stake limits on online slot games proposed by regulators should be set between £1 and £5. Non-slot online gambling games should face new restrictions on the way they are designed rather than financial limits, the SMF said.

The report also proposes a complete reform of the way gambling operators are taxed, to put greater burdens on firms based offshore in Gibraltar or the Isle of Man, and reduce the tax faced by companies that bring their operations “onshore”.

Gambling operators should be assessed according to their “onshore footprint”, a minimum threshold for their capital, human, social, legal and digital presence in the UK.

The smaller a firm’s footprint, the higher the levels of Remote Gaming Duty and Betting Duty they should face, the SMF said. The proposed system would reward companies that bring their operations to Britain, while increasing the costs of operating “offshore”, the report said.

“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 SMF said.

The report also calls for a comprehensive shake-up of Whitehall and the public bodies overseeing gambling and gamblers. The structures created by the 2005 Gambling Act are “no longer fit for purpose,” the SMF said.

The Department for Digital, Culture, Media and Sport should no longer have sole responsibility for gambling policy, being replaced by a new cross-government Gambling Quartet, the SMF said.

The report lead author is Dr James Noyes, a leading authority on gambling policy and a former adviser to Tom Watson MP.

James Noyes said: “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 consumers 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.”

He added: “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.”

“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, vulnerable.”

The Betting and Gaming Council (BGC) said: “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 acknowledgement 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.”