Dangerous Liaisons
Was the Gambling Commission complicit in lobbying for higher gambling taxes?
The increase in taxation rates for online gambling in Great Britain, announced in last November’s Budget statement, is besmudged with fingerprints from a variety of the ‘usual suspects’ – from anti-gambling think tanks to a notoriously joyless former Prime Minister. There is one set of ‘partials’, however, that appears to belong to an organisation that should be nowhere near anti-gambling activism – the market regulator.
According to secret meeting notes from the Gambling Commission’s now defunct Advisory Board for Safer Gambling (‘ABSG’), the regulator may have been involved in lobbying HM Treasury to increase the tax burden on licensees (and consumers) as far back as 2021. Minutes from a meeting of the ABSG in March 2022, released under the Freedom of Information Act, include the following passage:
“[Gambling Commission CEO] Andrew Rhodes had noted that things have never been more favourable for a levy than now in terms of stakeholder and Government support. The blocker is the Treasury – there is little that the Commission and ABSG can do to influence that aside from pointing out the cost of gambling harm”.
The minutes go on to highlight “an opportunity around regulatory settlements” to address this ‘blocker’, which may be a reference to the regulator’s decision seven months earlier to award £140,050 in regulatory settlement funds to the National Institute for Economic and Social Research (‘NIESR’) for an assessment of the benefits and costs of gambling. This report was subsequently used to lobby for higher rates of gambling tax.
The NIESR report was eventually published in April 2023, having shifted scope from a cost-benefit analysis of gambling to a cost-benefit analysis of gambling harms (a patently absurd concept). The think tank estimated that there were £1.4bn in annual fiscal costs associated with harmful gambling in Britain (a figure it described as “conservative”). In a competitive field, the think tank’s report remains one of the worst policy papers and one of the most egregious wastes of regulatory settlement funds (which are supposed to be used to alleviate suffering) of the Gambling Act Review period. NIESR based 60% of its cost estimate on a dataset that contained no information whatsoever about ‘problem gambling’; and relied on manufactured diagnostics to produce its figures. It assumed, without any substantiation, that anyone who had won £500 from gambling over a two-year period and was out of work due to ill health was an ‘at risk gambler’ (i.e. it supposed that winning money was a greater indicator of risk than losing it); and that people who had never gambled could be classified as ‘problem gamblers’. Several of its calculations were mathematically incorrect, to boot.
The NIESR report was pointedly political, in contravention of settlement rules which stipulate that awards must not be used for lobbying or campaigning. Complaints were made to the Gambling Commission at the time of the report’s publication; but the regulator refused to act, claiming it had no resources to investigate or claw back misspent funds.
While the Gambling Commission did not call for tax increases in last year’s Budget, the episode is significant for several reasons. First, the ABSG notes (as well as earlier public statements by the Commission’s former chair, Bill Moyes) indicate that the regulator may have been involved in behind-the-scenes lobbying for a statutory levy. This would be a breach of the Regulators Code, which stipulates that regulators must not seek to impose unnecessary costs on those they regulate. Second, a question of self-interest is raised by the fact that the Gambling Commission is itself a beneficiary of the new levy (with a portion of the tax being retained by the regulator for research funding). Third, the NIESR report has been used – and misused - in support of anti-gambling activism, both in Great Britain and the USA. The Social Market Foundation misrepresented NIESR’s claims as part of its lobbying to increase taxation (for online and land-based operators) in the run-up to the 2024 and 2025 Budgets. Its error was to assume that costs correlated with problem gambling are the same as costs caused by problem gambling (as inept as NIESR’s analysis was, at least it didn’t claim this). The SMF report was co-authored by Dr James Noyes - who also chaired NIESR’s expert panel - and should therefore have known better[1].
The Office for Statistics Regulation upheld a complaint against the SMF for misrepresenting Department of Health figures as part of the think tank’s tax lobbying (see: Health Warning - Dan Waugh); but the Gambling Commission refused to act when complaints were lodged about the misuse of research that it had facilitated. Instead, the regulator decided to fund a further study by NIESR and the University of Glasgow (via an additional £402,184 settlement), which is expected to be published shortly. According to NIESR’s Dr Adrian Pabst, it will show that heightened regulation does not cause gamblers to transfer their spending to the black market - a contention increasingly at odds with channelisation data drawn from across Europe. Why the Commission considers either of the NIESR projects to be an appropriate use of quasi-public funds is anyone’s guess.
According to the regulatory expert, David S. Norman, “KYC [Know Your Customer] regulation demonstrates that existing requirements already incentivise black market migration among certain consumer segments; the taxation increases will compound this dynamic”. He describes the £26m awarded to the Gambling Commission to address this risk (itself, a dividend from the Budget) as “wholly inadequate to prevent this outcome”. It seems possible therefore that Britain’s gambling market regulator may have contributed to lobbying, the effect of which is to increase the prevalence of criminal activity in relation to gambling (in contravention of one of the three licensing objectives enshrined within the Gambling Act).
Over the last five years, Britain’s gambling market regulator has funnelled millions of pounds into anti-gambling activism, misrepresented research in public consultations, withheld evidence on the basis of convenience, published unreliable data on gambling harms, and promoted anti-gambling views (for example, the claim that people are harmed if they spend money on betting rather than going to the cinema) and anti-gambling speech codes. As we have seen in other domains, public bodies can get away with misbehaviour for quite a long time – and may even start to consider themselves untouchable. The longer this goes on however, the harder they fall in the end. As the New Year begins, the Gambling Commission would benefit from a period of honest introspection every bit as much as its licensees.
[1] Dr Noyes is a member of the Campaign for Fairer Gambling, which commissioned a report by Nera (another think tank) on remote gambling in New Jersey, in a report that also misrepresented NIESR’s claims.