Andrew Tottenham - October 27, 2016

Backlash – The People Strike Back


No, this is not a piece about the rise of Donald Trump or nationalism in Europe or even Brexit. It is about the move against gambling machines in Europe where we are seeing a rise in opposition to the expansion of gambling similar to what we have seen in the last few decades, specifically, in the United Kingdom, Italy, the Czech Republic and Slovakia.

In Slovakia and the Czech Republic, activities must be specifically made illegal to be illegal. Gambling has not been made illegal and provided a business could meet the basic criteria (no criminal convictions, minimum capital), they can open a gambling establishment. Casinos, machine arcades, VLTs and sports bars have opened everywhere and flourished.

The general public in these countries did not like every high street or town centre chock-a-block with slot arcades and bars full of slots. People complained but municipalities were powerless to reduce the amount of gambling product. In a knee-jerk reaction, the politicians did what they thought would bring gambling under control: they increased the taxes (a taxation to control gambling supply – a complicated subject for another article).

Instead of the desired impact on controlling the number of arcades and slots in bars, the taxes reduced the number of casinos. This did not address the public’s concern, which was more about the “in your face” everyday gambling that they could not avoid, rather than the discreet gambling in casinos. Churches, anti-gambling groups and municipalities continued to lobby parliament to give municipalities the right to approve, or disapprove, of gambling within their area. The initial ask was for municipalities to have the right to ban all gambling. Unsurprisingly, the gambling industry fought back and a compromise was reached; the municipal councils would only be allowed to discuss a ban on gambling if more than 30% of the electorate signed a petition to that effect.

The industry thought it was on safe ground. They figured that it would be impossible for the various anti-gambling groups to ever be organised enough to get sufficient support to force a discussion. Or, if they did, it would only be in the small towns or villages where the gambling machines were not as prevalent and profitable as in the bigger towns or cities.

Unfortunately for them, the anti-gambling groups did get organised in Bratislava, the capital of Slovakia. They managed to have supporters with clipboards at every polling station during their national elections. Consequently, they collected signatures from over 30 percent of the electorate, although there was some debate as to whether they were all valid. Because of their efforts, Bratislava’s council must discuss the matter and decide whether to ban gambling. A portion of the tax from gambling goes to the municipality and, for a large city, removing machines and casinos will put quite a big hole in their budget. There is no requirement in the law that forces a municipality’s hand to undertake a complete ban on gambling, but it is difficult to ignore 30 percent of the electorate.

Elsewhere in Europe, there are efforts to reduce “everyday” gambling as well. In September, the Prime Minister of Italy mentioned in an interview with a local magazine that he intended to reduce the number of gambling machines in shops and bars. A government minister followed up with a pledge to re-regulate the industry and remove around 30% of AWP (amusement with prize) type machines. In Italy, there are two types of gambling machines allowed outside of casinos: AWPs and VLTs. AWPs are a peculiarly European phenomenon; low stakes/low prize machines with a return to player of around 75%. One might think a low payback would make them unpopular but there are currently around 340,000 in operation in Italy. These machines are only allowed in tobacconists (aka smoke shops), bars and similar businesses. In addition, there are over 50,000 VLTs. All told, there is approximately one machine per 150 Italian residents and its hardly surprising that there is a push to reduce that number.

Here in the UK, sentiments echoing our European neighbours are flourishing and FOBTs, or Fixed Odds Betting Terminals, have come under prolonged fire. FOBTs are allowed due to the vagaries of British betting legislation. Essentially, they are machines that allow punters to place fixed-odds bets on the outcomes of random number generators, provided that the random number generator is outside the location where the punter is placing a bet. When the Chancellor changed the method of determining the betting tax from turnover to GGR, the electronic facsimile of roulette was born. The existing regulations didn’t allow a method to control this type of machine which was, to all intents and purposes, a betting device. The regulators’ legal challenge looked doomed until, in a last minute compromise, the bookmakers accepted a limit of four machines per premise and a maximum bet of £100. Due to the lack of competing product and the convenience of their locations on the High Street, these machines became highly profitable. So much so that some bookmakers migrated their shops to more convenient locations from the profits that these machines could generate.

In recent months, the Campaign for Fairer Gambling (a strange name if ever there was one) and other anti-gambling groups (including other sectors of the UK gambling industry) have wrong- footed the bookmakers with a prominent media campaign rounding on the addictive nature of machines and the “clustering” of bookmakers’ shops on the High Street, especially in deprived areas. If they want less bookmakers’ shops they could increase the number of FOBTs allowed per shop. The two solutions currently being proposed to diminish the personal and societal harm are to reduce the maximum stake from £100 to £2 and increase the tax paid on revenue from these machines. We have already seen that incremental tax increases have been thus far ineffective: the tax was increased from 20 percent to 25 percent of GGR in 2014 but with hardly any consequent reduction in the number of machines.

The bookmakers appeared frozen like rabbits in headlights, unable to sensibly respond to the emotionally charged and irrational media campaign that says that these machines are causing gambling addiction. By the time they did, it was too little, too late; responsible gambling and a national exclusion scheme have only now come to the fore. Politicians are sensing blood and have joined the fray. Only the Treasury, which enjoys almost £430 million per year from FOBTs and will need every penny in a post-Brexit world, can save them.

According to the UK Gambling Commission’s annual surveys of gambling participation and the prevalence of problem gambling1, rates of problem gambling have remained fairly constant in the UK. That is despite “an explosion” of FOBTs described, in words borrowed from the US campaigns against VLTs, as “the crack cocaine of gambling”. If these devices do cause addiction, one might expect the rates of problem gambling to have increased dramatically. But they have not; the UK Gambling commission’s studies strongly suggest otherwise. Either the hypothesis is wrong or the methodology for measuring problem gambling prevalence is faulty.

In most countries gambling is regulated in silos. There are differing rules for the different sectors: online gambling, betting, casinos, bingo and arcades. A favourable change to the regulations of one sector is seen as unfair competition from the others. For as long as I can remember, the number of machines, stakes and prizes in casinos, bingos and arcades have been strictly controlled. Along comes new technology, in this case internet connectivity, and a change to the basis of betting tax and suddenly FOBTs are possible. The number of FOBTs has grown from zero to over 34,000 in a few years and now represent over £1.7 billion per year or 56% of the GGR generated from retail betting shops; more than is generated by all the casinos in the UK. It is no wonder that the other sectors are upset (and presumably jealous).

Some in the UK gambling industry lobby for the government to further control FOBTs and at the same time reduce the restrictions on the type of machine that they operate in their competing sectors. I believe these people live in a fairy-tale land. Politicians and the public do not make distinctions between the types of gambling machine (of which we have far too many types in the UK), nor do they understand the difference in locations. In their eyes, all gambling machines are bad. I cannot see any government increasing control on one type of machine and relaxing them on another.

There is a further risk; if the anti-gambling groups get their way they will have tasted victory. I believe they will not simply stop at FOBTs but machines in other sectors and online gambling might be at risk. It is a bit like the story we were told as children in our history lessons, how the Romans easily conquered Britain because the clans did not unite but stood and watched as they were picked off, one by one.

It is not surprising that these campaigns have gained traction. People do not like “in your face” gambling despite efforts to normalise the activity. Those sectors of the industry that have been attacked are ill-prepared and respond with the same old mantra; “problem gambling rates have not increased”, “the vast majority of our customers gamble responsibly” and other factual but increasingly disbelieved statements. It is true that the arguments are complex and statistics are not sexy; our media likes nothing more than to present genuinely heartrending accounts of the awful impact that gambling has had on some peoples’ lives as though they represent the norm. But the lesson from the rise of Trumpism and Brexit is that in general people do not want the truth and certainly not if it is complex; they want and will believe a simple story, especially if it is told by a charismatic person.

1. http://www.gamblingcommission.gov.uk/docs/Survey-data-on-gambling-participation-YEAR-TO-September-2016.xlsx