'A reckless thing to do' - proposal to double betting duty would have devastating effect says leading industry analyst

A leading gambling sector analyst has condemned "reckless" calls from two prominent think tanks for the government to dramatically increase taxes on bookmakers in this month's UK budget.

The proposals reportedly being considered by the Treasury were roundly condemned by both the BHA and the Betting and Gaming Council (BGC) as posing a significant threat to the finances of both the racing and gambling industries.

The Institute of Public Policy Research (IPPR) and the Social Market Foundation (SMF) have urged chancellor of the exchequer Rachel Reeves to introduce double-digit tax rises across the gambling sector in order to help fill the gap in the public finances. The suggested measures, according to Dan Waugh of Regulus Partners, are born of an antipathy towards betting as a legitimate leisure pursuit.

Last month, the IPPR's Commission on Health and Prosperity issued a wide-ranging report titled Our Greatest Asset, which encouraged the government to double general betting duty to 30 per cent, as well as increasing remote gaming duty and taxes on land-based casinos.

The report places gambling alongside fatty and sugary food, alcohol and tobacco consumption as burdens on the NHS, and recommends it should be taxed under what it describes as the 'polluter should pay' principle.

Waugh said: "Their public health view is like religion reinvented. It's a group of people who want to control how other people live their lives. They don't want us to eat pizza, have a bet or drink a beer."

The new Labour government has warned there will be painful choices in its first budget but has pledged not to raise direct taxation on individuals as it seeks to plug a reported £22 billion hole in the public finances.

The IPPR has called for general betting duty to be doubled from 15 per cent to 30 per cent in the UK's next budget on October 30

The IPPR claims the panel of rises across five of the seven categories of gambling duty could bring in an extra £3bn in 2025, rising to £3.4bn in the final year of this parliament. However, Waugh poured cold water on the report's claims about how much revenue the proposed hike in tax rates could yield.

He said: "In order to understand what the change in yield to the Exchequer is going to be when you change the tax rate, you need to understand two different sets of behaviour; you have to understand the behaviour of the operators and also of the consumer. If you double duty, do the operators simply say, ‘There go our margins’? Any business that is hit with a tax rise will look to offset it somewhere else.

"So if the chancellor was minded to make a big increase in gambling duty, then the operators would look to recover that elsewhere. That might include making people redundant, it might include changes to marketing or advertising. There are only so many levers that operators can pull."

Turning to how consumer behaviour could be affected by operators changing their offer in the wake of tax rises, Waugh said: "If gambling firms change the consumer margins – let's say bookmakers start to change the odds they offer because of higher taxes – and consumers feel that they are getting worse value, they might feel they can get better value elsewhere.

"The black market argument can sometimes be overdone if used simplistically, but if you create such a huge tax differential that unlicensed operators are able to offer consumers far more value, then you will see some of those consumers go to the black market. That's basically unarguable."

The IPPR report calls for a doubling of general betting duty from 15 to 30 per cent, while the SMF's report, expected to be published at 6am on Tuesday, will propose doubling remote gaming duty from 21 per cent to 42 per cent, which it claims will generate an extra £900m in tax yield.

One leading think tank proposes a doubling of general betting duty from 15 per cent to 30 per centCredit: Mark Harvey

Waugh is hopeful Treasury officials who will advise Reeves on the budget will be more cautious than the approach anti-gambling think tanks have proposed.

He said: "There is a mismatch here because the Treasury will look at this in a very sensible, balanced way in terms of what is best for the economy, without any sort of moral overtones, whereas I think the IPPR really have the attitude that 'we don't like these things, therefore we should tax them more heavily’. That's not really a grown-up way of looking at taxation.

"From a political point of view gambling has always been a relatively soft target, particularly when it's getting a bad press. But I think the Treasury will look at this sensibly and I think they will recognise that suggestions such as doubling the tax on bookies in high streets would seem to be a pretty reckless thing to do."

Differentiating sports and casino betting should be a key focus for any tax changes, Arena Racing Company chief executive Martin Cruddace told the Guardian on Monday, with "the predilection for gambling-related harm wildly different between horse-race betting and online casino games".

Following the news of a potential tax hike, shares in gambling giants Flutter Entertainment, Entain and Evoke dropped on Monday.

Shares in Flutter, the parent company Betfair, Paddy Power and Sky Bet, closed at 17,430p, down 5.99 per cent on the London Stock Exchange, having dropped by eight per cent on the New York Stock Exchange on Friday.

Shares in Entain, the parent company of Coral and Ladbrokes, dropped 8.03 per cent to 705.4p, while shares in Evoke, the parent company of William Hill and 888, also fell 14.38 per cent to 55.65p.

A report from equity research company Jefferies said: "The proposals apparently being considered would all but wipe out bookmaker profitability in the UK, per our estimates. In the event of a tax rise, we would expect operators to mitigate via reduced marketing and promotional activity, cutting sports sponsorship and offering less favourable odds to customers."

Read more:

'It will derail racing' - industry sounds stark warning following report Treasury is considering gambling tax hike 

Gambling operator share prices fall sharply following reports of potential tax hike 

A high-regulation, high-tax environment would spell disaster for British racing 

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