Winning the egaming vote
What will a change of UK government mean for online gambling companies? eGaming Review seeks the answers.
WHEN arch-rivals Ladbrokes and William Hill decided to move their online operaÂtions offshore to Gibraltar in August last year, it marked the two BritÂish bookmakers resigning themselves to the fact that a government that had once looked so promising for the egaming industry is no longer its friend.
Yet fast-forward six months and Labour, the political party that has for 13 years ruled the first major regulated online gamÂbling market in Europe, is weeks away from its most serious electoral challenge yet.
A two-horse race?
For those unfamiliar with British politics, power is dominated by two main parties “ centre-left incumbents Labour, led by prime minister Gordon Brown and by Tony Blair before him, and the centre-right ConÂservatives led by David Cameron.
Pro-free market and libertarian, the ConÂservatives (or ‘Tories’) would once have been seen as the obvious choice for the egaming industry, but the choice became less clear when Tony Blair succeeded in shedding Labour’s reputation for ‘tax and spend’ economic mismanagement ahead of its electoral success in 1997.
And with the advent of the party’s Gambling Act 2005, which created Europe’s first major reguÂlated egaming market, the choice became less clear still.
“A change in sentiment for Labour ocÂcurred under the Blair government, 
which saw gambling as mainstream entertainÂment,” says Warwick Bartlett, head of gamÂbling data business and consultancy GlobalBetting and Gaming Consultants (GBGC), pictured right.
By 2007, however, egaming’s love affair with Blair’s ‘New Labour’ began to fizzle out when his chancellor, Gordon Brown, who was “ and reportedly still is “ far less well-disposed to the gambling sector reÂplaced Blair as prime minister.
One early indicator was the scrapping of a licence scheme for Las Vegas-style desÂtination ‘super casinos’ contained in the Gambling Act; while onshore bookmakers found that appeals for a more competitive tax rate went unanswered.
And lobbyist and online gambling consultÂant Steve Donoughue adds that the restrictions placed since have been mild, considering the level of Brown’s opposiÂtion.
Sports minister Gerry Sutcliffe, the minister with the gambling brief, “has done a great job defending gambling given that his boss hates it”, Donoughue says. “Gordon Brown hates gambling and the minister can only do stuff under the radar; stuff that isn’t big or that doesn’t require significant primary legislation.”
However, Charles Cohen, chief executive of mobile gaming business Probability and a former speech writer for the Liberal Democrats who now describes himself as “a card-carrying member of the ConservaÂtives”, argues that the rift for future dealÂings between government and egaming began earlier, shortly after Labour’s elecÂtion in 1997.
“You have to go back to the early days, around when Victor Chandler moved offÂshore [in 1998], and UK operators, particÂularly the UK bookies, realised that they couldn’t compete with them, did a deal with [then chancellor] Brown that he wouldn’t set the gross profit tax too high and they would stay onshore,” he says. “But Brown set the GPT at 15% because he doesn’t like the sector.”
Compassionate Conservatives?
Cohen says that under a Tory government, business could see tax rates lowered and the tax regime simplified, which would also apply to egaming. He thinks the inÂdustry should welcome this on the general principle that “what’s good for the econoÂmy is what’s good for the industry”.
However the shift is unlikely for two reasons, he adds. First, “even though we’re all comfortable with it, the people aren’t, so it’s not a vote winner.” Second is the question of priorities, including not only Britain’s fragile economic recovery, but its £180bn budget deficit.
“The next government has an £180bn hole to fill, and messing about with the gaming industry won’t help fill that hole. A specific policy that helps or hinders the gaming industry is unlikely because they simply haven’t got time,” Probability’s Cohen concludes.
John Barker, partner and head of UK acÂcountancy firm BDO’s betting and gaming unit, however, predicts product unitary regulation similar to that adopted by Italy will be introduced. “It will bring with it the consequence of higher local taxation and the need for companies in the sectorto expand access to regulatory and taxaÂtion expertise away from their currentop
erating centres to those unitary locaÂtions,” he says.
One hope is that government will reform, or even abolish, the ‘White List’ of approved offshore jurisdictions.
“Everyone believed in the White List until they allowed Antigua to join it,” says lobbyist Donoughue, who predicts a Tory minority government.
“We all knew that the Isle of Man and Gibraltar have regulaÂtions that are as tough as those in the UK but when they allowed Antigua to join they proved themselves not capable of keeping the system going because Antigua’s rules are obviously not as tough,” he says.
Agreeing with Cohen, Donoughue conÂcludes that “the number one question is whether the Tories will bother with it”.
“When you’re in government you try and do all, or most, of your ‘big stuff’ in the first six months. And gambling isn’t on the list.”
GBGC’s Bartlett, who also expects a Conservative victory, tips that “you should expect much the same under the Tories as you have seen under Labour.”
And while all this might seem a depressing concluÂsion for the sector, Charles Cohen offers some consolation: at least things won’t get worse. “There are a few MethÂodist votes in it, perhaps, but other than that gambling is not a big deal,” he says. “I can’t see people deÂmanding greatÂer restrictions on it.”
Two and half parties
The UK has what is sometimes referred to as a ‘two and a half party’ system “ the Labour and ConÂservative parties are the two main contenders for power, with the third party Liberal Democrats a significant minority.
However, a dip in the Conservatives’ earlier lead in opinion polls raises the possibility of either of the two main parties winning the election only as a minority government “ meaning that they will be forced to do deals with other parties in order to get laws passed.
“Polls suggest a Tory minority government,” says consultant Steve Donoughue. “This means the incoming government would be forced to make legislation other parties agree with or don’t care about.”
Given the reluctance of either of the two main parties to do deals with their main opponents, this leaves the Liberal Democrats “ the most paternalistic of the three parties, and the one most hostile to the gambling trade “ as kingmakers.
This is bad news for the industry, particularly given that smaller departments such as the Department for Culture, Media and Sport (DCMS), which controls gambling, are likely to be given to the Lib Dems as part of any power-sharing deal. “The DCMS in political terms is rubbish,” says Donoughue. “It’s the department with the smallest budget and the smallest team but some of the biggest problems to deal with.”
New Labour, old danger? 
In common with its libertarian and pro-busiÂness outlook, the Conservative Party has traÂditionally been less keen to restrict the gamÂbling industry than Labour.
It was a Conservative government that legalÂised gambling in 1961, and a Conservative government that introduced the UK National Lottery run by Camelot in 1994. “The Tories don’t have an ideological problem with gamÂbling,” says Steve Donoughue, a gambling lobbyist and consultant.
By contrast, it was the then Labour ChancelÂlor of the Exchequer James Callaghan that introduced betting tax in 1966, and the 1968 Gaming Act that reduced the number of caÂsinos from circa 1,000 to circa 120. But the Gambling Act 2005 regulating online gamÂbling marked a major “ if temporary “ turning point for the party.
“A change in sentiment for Labour occurred under the Blair government, which saw gamÂbling as mainstream entertainment “ which is how the public see it,” says Warwick BarÂtlett, founder of Global Betting and Gaming Consultant. “But The Daily Mail newspaper did not, and gambling later became politically toxic, and has remained so since.”