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Cards on the table

Failure to reform problem gambling is harming millions and costing us billions

Will the government reform harmful gambling? After a three-year review and repeated postponements, it finally published the White Paper on new gambling regulation, promising to “match words with deeds”. Yet key policies aimed at protecting people from gambling-related harms — such as maximum stakes for online gambling, greater affordability checks and a statutory levy to fund treatment of addiction — have been kicked into the long grass of further consultation.

This is despite the evidence reported in the White Paper that “around 300,000 people in Great Britain are estimated to be experiencing ‘problem gambling’, defined as gambling to a degree which compromises, disrupts, or damages family, personal or recreational pursuits, and a further 1.8 million are identified as gambling at elevated levels of risk”. Moreover, “6 per cent of the population are negatively affected by someone else’s gambling (for example through relationship strain or financial hardship) and women are overrepresented in this category”. 

That makes four million people who are “affected others”, on top of the two million who experience more or less severe gambling-related harms — from debt via poor physical and mental health, to homelessness and crime. In a report published last week and co-written with my colleagues at the National Institute of Economic and Social Research, we estimate that the total cost to the public purse of the harms from problem gambling amounts to at least £1.4 billion per year.

How did we get to a situation where, in the words of the government itself, “gambling-related harms can ruin lives, wreck families, and damage communities [ … ] and even lead to suicide in extreme cases”? Is it market failure? Or is it the fault of the state — whether the legislator or the regulator?

The answer is akin to the conclusion to an Agatha Christie novel. They all did it.

Conservatives have done little to tackle the excesses of online gambling

Building on the Tories’ Big Bang deregulation of the City, New Labour liberalised the betting and gaming industry when it passed the 2005 Gambling Act, which still governs gambling to this date. A super-casino in every provincial town was meant to modernise Britannia and replace the old, long-destroyed industries with new shiny service sectors. What we got instead were pay-day loan companies, pawn shops and boarded up businesses on every high street up and down the country — not to mention the 2008 financial crash.

For the past thirteen years, the Conservatives have done little to tackle the excesses of online gambling. True to their Thatcherite creed of low business taxes, the Tories stood by as remote gambling operators based parts of their activities in offshore territories such as Gibraltar and thereby avoided certain taxes and duties that land-based operators have to pay. James Noyes has documented this in a recent essay. The fact that they are registered at the same number on the same street in Gibraltar is surely a coincidence.

Meanwhile the Gambling Commission, the industry regulator, lacks the power and resources to prevent repeat breaches of the rule of fair and transparent gambling by offshore operators. It rarely revokes licences, and the fines it can impose are a tiny fraction of annual profits.

For its part, the Competition and Markets Authority (CMA) faces an increasingly concentrated market (followed by a wave of mergers and acquisitions) with large offshore international players beyond the reach of national agencies. Calls for new laws to regulate the ownership and operation of online gambling behemoths have so far fallen on deaf ears.

Amidst dithering and delay, the failure to reform harmful gambling shines a cold light on the deep dysfunctions of Westminster politics and the UK’s economic model. Much of the political class has been captured by a toxic mix of liberal-libertarian ideology and vested interests. Liberalism imposes an impoverished conception of liberty that reduces freedom to the absence of constraints on private consumer choice — a fun fiver on a flutter. 

This idea of personal autonomy goes hand in hand with the vision peddled by the industry lobby of a small state that gets out of people’s lives and lets them maximise their individual happiness. It is the same industry lobby that not only extends hospitality to leading politicians in all political parties, but also feeds lines to MPs for interventions in parliamentary debates on gambling.

The worst excesses of the industry are a microcosm of the macro-economy

The tragic irony is that watering down regulatory reforms leaves intact the industry’s power to deploy online algorithms that target vulnerable punters. Just as technological tools turn supposedly free-choosing consumers into digitally controlled automatons, so liberty turns into unfreedom.

Gambling reveals something fundamental about the UK economy. The worst excesses of the industry are a microcosm of the worst tendencies in the macro-economy: speculation rather than the production of value, the accumulation of personal debt rather than the growth of national assets, oligopolies enjoying entrenched excess profits rather than competition in an open, fair market. 

The part of gambling that creates addiction is based on a logic that privatises profit in the hands of an oligopoly. Composed of global players, it nationalises losses and socialises risk. Take the case of Bet365 founder and CEO Denise Coates who was paid a salary and dividends totalling £471 million in 2020, £300 million in 2021 and £260 million in 2022 — taking the total since 2016 to nearly £1.5 billion. That’s the same as the NIESR estimate of the annual cost of harm from problem gambling to the Exchequer.

Or consider the case of the UK company William Hill, fined a record £19.2 million for what the Gambling Commission described as a series of “widespread and alarming” failure to comply with existing regulation to protect customers. One of three firms owned by William Hill allowed a customer to open a new account and spend £23,000 in 20 minutes without any financial affordability checks. 

Whilst profits accrue to operators, the losses are borne by the taxpayer, and the risks spread to society as a whole.

At its best, gambling is sociable, provides enjoyment and supports the economy both directly through taxes, job creation and consumption and indirectly through entrepreneurial activity linked to increased risk-taking. At its worst, it destroys both livelihoods and lives. Regulatory reform needs to be based on the true number of people experiencing gambling-related harm, the true costs to the public purse, and a richer conception of both human agency and well-being beyond consumer choice.

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