Should operators be forced to pay a problem gambling levy?

Shares in GVC Holdings, William Hill and Paddy Power Betfair all fell on Thursday 9 May, with GVC the worst-affected of the bunch, down some 6%. That in itself was nothing unusual of course; gambling stocks have been getting pummelled for a couple of years now (Hills shares are currently at a five-year low), but it was the cause of that day’s sell off that was telling.

Several analysts linked the dip with a new British Medical Journal (BMJ) report which called for a mandatory levy on operators for the prevention of gambling-related harm. Dr Heather Wardle, lead author of the BMJ report, claimed Britain was “woefully under-resourced” in terms of research, education and treatement (RET) funding for problem gambling.

She added: “The statutory power to impose a compulsory levy on industry exists, but successive governments have been unwilling to enact the levy. This is despite the industry regulator, their advisers, and even some industry actors themselves supporting a levy.”

If the operators, advisors and the regulator do indeed support such a levy, it seems like a no brainer. However, it is far from that simple, and in speaking to several firms for this article, the consensus was that there was no need for a compulsory levy at present for a variety of reasons.

The first problem is simply the lack of clarity about what needs to be funded, how much those services need, and who should be paying. It’s even unclear how much is already going toward RET services. The industry is expected to donate 0.1% of GGR to GambleAware, which most operators do – reaching £9.3m of a £9.5m target in 2018/19. The charity also received £7.3m in regulatory settlements via the UK Gambling Commission, leading some in the industry to tell EGR that GambleAware is already running at a surplus.

Benchmarking

Operators also give funds to a host of other gambling charities including YGAM, the Senet Group, Betknowmore, Gamcare and Gordon Moody. These donations aren’t tracked and published as transparently as GambleAware donations, and at present the industry isn’t really given credit for this support. The Gambling Commission has estimated that an additional £3m may be contributed to RET organisations, while Regulus Partners estimates total spend to all RG efforts could be as high as £30m.

“We need to benchmark what we’re already working with and then we can work out what more needs to be done,” says Wes Himes, the acting CEO of NewCo, the online gambling industry trade body.

Source: GambleAware Annual Review 2017-18

Himes also points out that operators including Sky Bet, William Hill, Flutter Entertainment and Kindred are all investing in models and algorithms of their own to pinpoint and appropriately treat problem behaviour. “The scope and reach of these programmes simply wouldn’t be available today if all donations solely went through a single funding body,” he says.

“GambleAware is one of many charities that gambling companies provide funding to and there is currently no requirement from our regulator (the Gambling Commission) for all donations to go to just one charity.”

A target to aim for

Once these donations and investments have been collated and benchmarked it might become clearer exactly what level of funding is needed. Gambling Commission chairman William Moyes, recently called for the imposition of a mandatory levy, citing a funding target of £70m as being the minimum level to ensure “a sustainable and more long-term approach” to problem gambling in the UK.

However, industry insiders suggest that figure isn’t rooted in quantitative research. “We’re really waiting to see what the evidence tells us and what the requirements are for RET but there doesn’t seem to be a basis for those numbers other than extrapolations,” Himes says.

As Regulus Partners analyst Dan Waugh notes, the industry really needs bottom-up budgets based upon thorough examinations of current need and graduated expansion. “Ratcheting up funding without a clear idea of what to do with the money or how effective it is seems likely to result in waste,” Waugh said in a recent blog post.

Work is indeed being done here. GambleAware has commissioned research into treatment effectiveness; theoretically highlighting what areas are most effective and therefore need more funding. The NHS is also expected to publish details about its Long Term Plan, including more gambling treatments, this summer.

Money well spent?

The industry is particularly leery of coughing up more cash when there are also significant question marks over whether it will be spent wisely. The recent Bet Regret campaign from GambleAware has been criticised for shaming problem gamblers rather than encouraging them to find help, and the recent live stunts – including a No Bet Inn and an RG mobile barbershop – have prompted much criticism online and behind closed doors.

https://www.youtube.com/watch?time_continue=3&v=48tdz9oR-lY

The No Bet Inn, where punters were asked not to bet in-play was criticised by Sky Bet CEO Richard Flint as an “ill-considered and poorly targeted stunt” and a “shameful waste of RET funding”. GambleAware has since pointed out the campaign funding did not come from operator donations.

There’s also a sense among operators that the National Lottery somehow escapes scrutiny despite contributing some £3bn of annual GGR to Britain’s annual total of £14bn, yet not even contributing the recommended figure of 0.1% of revenue to GambleAware.

As Waugh notes: “The government and regulator may have good reasons for agreeing a low level of funding with Camelot; likely the need to accommodate high taxation and donations to good causes… but those who fail to mention this in their analysis are either lazy or dishonest.”

So where does government stand on this issue, since they ultimately have the power to make it so? UK Sports Minister Mims Davies has voiced her support for the continuation of the voluntary system, saying it was capable of delivering sustainable funding that could “meet the increased targets that will be set as evidence of needs emerges”.

However, Davies also sounded a sharp warning for the industry, adding that “if it turns out that the voluntary system is not capable of meeting current and future needs, we will look at alternatives. Everything is on the table”.

What next?

The consensus from within the industry then is that a responsible gambling levy at present would not be a beneficial thing. “A statutory levy would be slow to introduce and create another layer of bureaucracy,” says one senior exec at an operator. It also seems unnecessary to force operators to ramp up contributions without a clear plan for exactly where that money will go and exactly how much is needed.

That said, the industry needs to do more to show what it is doing, starting by tallying up exactly how much it is collectively spending across it investments and donations to various RG causes. There is also a strong argument to be made for the industry taking the initiative itself and coming together to create a pot of money for the provision of gambling harm treatment. That approach would give firms more control over how money is spent and could means those funds are allocated more efficiently thanks to the insights reaped from customer data.

Of course, this kind of collective move needs a strong industry body, something which is still a few months away, or perhaps the biggest operators coming together to an agreement and urging the sector’s smaller players to follow. As with many facets of only gambling, it looks to be in the industry’s best interest to self-regulate before regulations are forced upon it.