The Delay in the FOBT Cap – What Happens Next?

Posted by Harry Kane on Thursday, July 12, 2018

When the government announced that it would slash the maximum bet threshold for fixed-odds betting terminals (FOBTs) from £100 to just £2, many considered this to be indicative of a renewed desire to safeguard vulnerable gamblers in the UK.

While barely four weeks have passed since the proposed crackdown on FOBTs was announced, however, we see that the UK’s leading bookmakers have struck a deal with the Treasury to postpone any legislative changes until 2020.

In this article, we’ll explore precisely what has happened since the crackdown was announced, appraising the reaction within the sector while asking what’s next for the industry as a whole.

Why has the Crackdown been Delayed?

According to the Treasury, the implementation of the FOBT cap has been postponed to enable the government to set up and approve legislation.

While there may be some truth to this, cynics have suggested that the move has been motivated by greed, with the offline gambling industry in the UK set to benefit to the tune of £4 billion based on average revenues. Similarly, it’s thought that the government will be able to optimise tax returns from the industry for another two years, which may prove crucial against the backdrop of Brexit.

The reaction from the majority within the government has been one of shock and disappointment, with Tory member Iain Duncan Smith claiming that Chancellor Philip Hammond will be branded as “morally reprehensible” for postponing the cap. Mr. Smith is in no doubt that the Chancellor has made the decision in a bid to boost interim government finances, allegedly at the expense of vulnerable gamblers who spend hundreds of pounds each day through FOBTs.

There’s no doubt that both the government and prominent bookmakers will profit financially by delaying the cap, with problem gamblers arguably the only demographic to miss out. The decision to postpone the introduction of new legislation also appears to be at odds with the tenacity showcased by the Department for Digital, Culture, Media and Sport (DCMS) when recommending the new betting threshold in the first place, with the government seeming to have succumbed all too easily to lobbying from key industry stakeholders.

For critics, the supposed greed of the Treasury has also been highlighted by the fact that an increase in Remote Gaming Duty had already been proposed to cover any short-fall resulting from the FOBT cap. This hike, which has yet to be clarified by the government but is likely to be unveiled in the financial year starting April 2019, will likely be large enough to plug the gap created by the new legislation and maintain cumulative tax revenues generated through the gambling industry.

As a result, the decision to delay the FOBT seems cynical in the extreme, and little more than a tactic aimed to make as much money as possible from the practice before new regulatory measures and thresholds are applied.

What Happens Next, and What are the Portents for Online Gambling?

Unsurprisingly, themselves Association of British Bookmakers have responded well to the news, while citing the need to adapt to the pending FOBT cap as being central to the UK’s economic stability.

More specifically, it was suggested that postponing the implementation of the new legislation would help to prevent unnecessary job losses, by affording operators the chance to redeploy their resources, adapt their infrastructures and offer a program of voluntary redundancy to employees. Similarly, brands would also be able to renegotiate commercial leases, also minimising the number of stores that would need to be closed (this was previously estimated at around 9,000 outlets nationwide).

This makes perfect sense to some degree, of course, and it’s important to mitigate the economic impact of the FOBT cap. However, it cannot be denied that bookmakers will continue to offer FOBTs with a maximum betting threshold of £100 until the new legislation is finally introduced in 2020, and it’s extremely difficult to marry this with the previous rhetoric of the DCMS and the desire of the UK Gambling Commission (UKGC) to making safeguard vulnerable gamblers a major priority.

The proposed delay also does little to challenge the outlook of online operators, who will still be expected to face significant tax hikes in April of next year. In essence, they’re being required to foot the bill for the FOBT cap, with remote gaming duties and the point of consumption tax both likely to increase for casino and sports betting brands that cater to the UK audience.

One of the issues here is that high street bookmakers such as William Hill may have initially looked to mitigate the impact of the FOBT cap by diversifying their interests and moving of their business online, but may no longer be a viable option given an increase to the remote gaming duty.

After all, this would make it hard for the larger bookmaker chains to recoup their losses, as they’d need to balance any additional revenues against lost earnings and a significantly higher tax levy. This will certainly hinder the industry from growing at its recent rate, while it will also mean that both on and offline gambling are likely to be hit hard in the next two years and beyond.

The Last Word

Previously, we discussed how the FOBT cap could lead onto the introduction of more stringent regulations in the iGaming space.

While this have yet to materialise, online gambling is now set to be impacted by higher tax levies, as the government looks to maintain its own revenues in the near-term.

So, not only is the government being challenged for its decision to postpone the implementation of the FOBT cap, but it is also taking a significant risk by increasing the remote gaming duty and forcing online operators to cover for the financial impact of the new legislation when it is finally unveiled.

Clearly, this has the potential to hinder growth throughout the industry, while it may even encourage some online operators to relocate their business overseas (especially with Brexit on the horizon). This is something that the government or the sector can ill-afford, so some compromise may be required from all parties over the course of the next two years or more.