There is no doubt to my mind that the bookmakers are being punished. Bingo asked for 15% tax and got 10%. I believe that the message from Government is that bingo has behaved and this is their reward, take note.
I am at a loss to understand why the bookmakers are being punished. The 2005 Gambling Act abolished the demand test. This came from the Budd report that saw competition as the best protection for the consumer. He was right – the payout to punters has never been higher. They are not being swindled by the market. They have never had it so good.
The competitive environment was created by Government. Bookmakers are driven to compete or lose market share to a competitor who will soon trade next to your locations if you do not trade first.
Limiting the supply of FOBTs to four per shop added to the frenzy of getting more locations. The Government is now reluctant to change the 2005 Gambling Act and re-introduce the demand test which would be perceived as anti-competitive. Instead it opts for the tax system to cause closures of shops.
MPs fell out with bookmakers because so many of them love horse racing and see the FOBTs as a distraction from horse racing revenue in the betting shop. A simple fact is that without FOBTs many shops would close and racing would get less. Even though the horserace levy is paid on bets taken only on horse racing, bookmakers are more inclined to treat the negotiation leniently if they are making money elsewhere.
With such pressures on time it is easy to forget that most company revenue still comes from the UK and the moment you let the likes of the Daily Mail fill the vacuum you are in trouble. The Daily Mail is delighted with the tax increase on FOBTs and has proclaimed it a victory for its campaign.
Martin Waller who writes the Tempus column for The Times said “Ladbrokes’ market capitalisation has fallen more than £400 million and William Hill’s by more than £500million. Political risk is by its nature unpredictable. I would steer clear of the sector for now.”
That is a lot of money lost by just two companies – add in Paddy Power, Bet365, Gala Coral, Betfred and all the others and you could be looking at a capital loss of up to £2 billion.
That is quite a lot of money to be lost through a petty tax increase that has completely undermined confidence because of the long list of reviews and potential impositions that await an industry that is seemingly out of favour.
There is another message in the fall in value. For all the hype about Internet gambling that has caused managements to focus away from betting shops, the loss in value created by a tax on the ‘old sector’ caused the biggest drop in share prices.
Every industry which chooses to expand overseas needs a secure home base. My fear is that by undermining the UK’s domestic market the prospects to expand abroad will be diminished.
Although many operators are based offshore for e-gaming, they all employ substantial staff in the UK. These operators have developed world class businesses that are of real benefit to the UK.
We run very good gambling businesses in the UK. We are good at this.
In my lifetime I have seen Government overtax businesses simply because business does not vote. I saw it all through the 1970s and 1980s when we destroyed our manufacturing base.
The UK casino industry suffered over regulation and high taxes since it was legalised. When the last Labour Government thought it a good idea to have “Super Casinos” they invited the US operators to show us how. Our domestic industry did not have the resources to make such large investments. I hope betting is not going the same way.