Derek Webb Conned ?????
The question marks in the title need to be emphasised as we cannot be certain that the foreign-based multi-millionaire who funds the majority of the UK’s anti-gambling lobby and its so-called “research” has paid for the Social Market Foundation’s (SMF) most recent putrid paid-for offering ‘Fiscally Responsible: The case for reforming Remote Gaming Duty’.[i]
The SMF is less than timely with transparency about who funds their reports, often taking months to declare who has paid for a biased report, but Webb has filled their coffers numerous times previously. James Noyes, the report’s lead author has been funded by Webb so many times that in a parallel universe, Webb could be considered his Sugar Daddy and/or Noyes his protégé.
Upon reading the report, it is very apparent that if Mr Webb did indeed pay for it, then he has most definitely been “conned” as I would suspect he was expecting an intelligent argument for the increasing of remote gaming duty, not what he actually got which looks like a GCSE project by the less able members of the class. It is economically and historically illiterate and has the same argumentative logic of a 3 year-old screaming for ice cream for breakfast.
Its overtly simplistic argument is that online gambling deserves to have its tax rate doubled, as:
This would better reflect the social and economic impact of a sector that has grown substantially in recent years, and is more closely associated with harm than other forms of gambling.
The argument about the social and economic impact of the sector is not only flawed due to the highly biased sources it references but also ignores how heavily these reports have been critiqued for their blatant methodological failings. They reference the House of Lords Select Committee on the social and economic impact of the gambling industry, which was basically just the Webb funded Peers for Gambling Reform, regurgitating anti-gambling zealots as supposed ‘evidence’ and ignoring any neutral witnesses from their inquiry in their report ‘Gambling Harm: Time for Action’.[ii] They also cite the IPPR’s 2016 report, ‘Cards on the Table’ a cost no-benefit report, which is so heavily caveated they basically admit they have pulled numbers out of thin air.[iii] Hilariously, they also include the Office for Health Improvement and Disparities (OHID) and Public Health England’s, ‘Gambling-related harms evidence review: summary’ which is also a methodologically flawed cost no-benefit study of gambling.[iv] This was so flawed it basically had to be re-written and is considered of dubious merit by most in government. Equally rubbish is the National Institute of Economic and Social Research’s (NIESR) 2023 report ‘The Fiscal Costs and Benefits of Problem Gambling: Towards Better Estimates’.[v] I refer you to Dan Waugh of Regulus Partner’s lengthy critique of this twaddle which also shows NIESR has some basic issues with simple mathematics!
The SMF also commit the cardinal sin of using the discredited 2.5% problem gambling rate from the equally discredited Great British Gambling Survey (GBGS). So discredited that the Gambling Commission have ordered people not to use this figure when referring to problem gambling rates. The SMF provides us with exactly why releasing the GBGS was grave folly or cynical politicking by the Gambling Commission, as the SMF apply the flawed 2.5% problem gambling figure to the flawed OHID and NIESR reports which increases their estimates of the social costs of gambling by 400% for the OHID and by 257% for the NIESR. Crucially this takes both estimates of the supposed social costs of gambling from c. £1.4BN they both originally estimated up to £7.1BN for the OHID and £5BN for NIESR. This makes them now massively ahead of the estimated benefit figure for gambling (£3.3BN – the amount of tax revenue) so the SMF can argue gambling is a net deficit on society. Again the anti-gambling lobby is using bullshit estimates to argue for prohibition.
The question is will the Gambling Commission be admonishing the SMF for using the bogus 2.5% figure as they have said they will?
The SMF then try to catastrophise the size of the issue:
The market for remote casino games grew by 71% between 2016 and 2023, and by £800 million over the course of the pandemic.
Using the same stats as the SMF[vi] we see that GGR for remote casino was £2,364M for April 2015-2016 and £4,037M for April 2022 – 2023. This is indeed an increase of 71% which sounds like a lot, but it is over eight years, so it just shows CAGR of 6.9%, which after inflation is hardly a massive increase. To argue that the sector has grown substantially is pushing the limits of the term.
The period for COVID lockdowns was March 2020 to December 2021.[vii] The table below shows the percentage increase or decrease in remote gaming duty and general betting duty over the last six years:
GGR Remote General
YoY Gaming Betting
Growth % Duty +/-% Duty +/-%
2017-2018 +10% +15%
2018-2019 +6% -10%
2019-2020 +4% +15%
2020-2021 +24% +13%
2021-2022 -4% -13%
2022-2023 +5% 0%
Source: Gambling Commission Industry Statistics February 2024
As we can see, remote gambling GGR grows substantially during the Covid Period. This is hardly surprising as during Covid retail gambling was banned as was live sport. Gamblers, who were stuck at home with more time and money than usual had little resort but to move to remote casino games. As the table shows this was purely a temporary and expected shift.
The SMF then argue:
Online slots players are six times more likely to be classified as problem gamblers than the typical gambler.
This immediately raises some issues. Firstly it comes from the highly critiqued GBGS so believing any number is problematic.[viii] Then it is attempting to rank gambling activities by their supposed chance of being a problem gambling has all sorts of methodological issues and does go beyond the science which shows that its overall interaction with gambling (amount and number of activities) that predict a problem gambler rather than playing on a particular device. Even if all of those red flags, enough for a good parade in Pyong Yang, weren’t enough is the unmentioned statement that from the same data (if you beleive the dubious methodology) is that people playing in a land based casino are almost as likely to be classified as a problem gambler than a remote casino gambler (casino games on a machine or terminal 5.3x, Casino games at a casino 5.2x v Online fruits and slots (?) 5.9x) and that playing online casino games has less chance of you being a problem gambler than playing in a land-based casino (5.1x v 5.2x & 5.3x).
Surely if the SMF were really concerned about using ‘Pigouvian’ taxes (fancy terminology with little evidence of knowledge of application) to reduce consumption of a product they considered harmful, they would be arguing for the doubling of land-based casino taxes as well?
Of course not, as with the IPPR report mentioned in my last article, Webb’s paid biyaches at the SMF aren’t allowed to do anything that might impact Webb’s friends in the land-based casino sector. Anyone would think his campaigning is all about protecting this sector from competition like FOBTs or online and not about preventing problem gambling.
The SMF report gets worse.
It uses the last resort of a desperate lobbyist, an opinion poll. A Survation poll for the SMF of which no reference is given so it can’t be checked in detail, supposedly states that 52% of the public want gambling taxed more. Without any access to the data, we cannot know what questions came before, so how the topic was framed or how the survey sample was collected, are they a paid for online surveys and so unrepresentative of the public – like with the GBSB. The SMF reference a number of surveys commissioned by the Gambling Commission, which show off the issue about gambling surveys, apart from the well-known issues of anti-gambling groups commissioning surveys with dodgy questions and framing, the main issue is a the public’s lack of knowledge about gambling.
In 2019 the Gambling Commission’s conducted its own research into public opinion about gambling policy. They first asked a sample of 2,078 members of the public what they knew about various gambling policies, such as the controls in place to ensure that children and young people are not exposed to gambling and the maximum amount that can be bet on machines in bookmakers. They were given the option of three answers: know a lot about, know a little about and don’t know anything about. The average percentage response was: 3% knew a lot about the gambling policies, 28% knew something about the gambling policies and 68% did not know anything about the gambling polices. Unsurprisingly the majority of the respondents were widely misinformed.[ix] Gambling’s poor public perception is fuelled by a moralistic press fed and funded by the anti-gambling lobby. If the government conducted policy on the basis of simple (and sometimes dodgy) opinion polls, we would have the death penalty and National Service re-introduced.
The SMF then argue that a major part of the justification for doubling Remote Gaming Duty is that they consider gambling to be under-taxed because it is VAT exempt. They explain:
Normally, VAT is an additional charge on a good or service based on a percentage of the price. But the price of a gamble is difficult to determine, and constantly in flux. Given the complexities of measurement and valuation, regimes like the EU have tended to judge that it is simpler to exempt gambling.
The definitional issue is very true, as gambling does not fit in to the usual definitions of suppliers of goods and services and transaction taxes. What the SMF forget to include either for brevity for an absence of knowledge was that VAT was introduced to the then Common Market as a flat rate sales tax which would be the same on all goods for all members. Exemptions were made where definitions were complicated but also where member states were already taxing the activity. Gambling has been taxed in the UK since 1966 and when it came to joining the EEC in 1973, imposing VAT was one of the mandatory requirements. The EEC had decided to harmonise member states turnover taxes in the First and Second Directives of 1967 which laid out the structure[x], but it wasn’t until 1977, with the Sixth Council Directive that VAT as we know it was enacted. Article 13 B (f) gives the exemption for ‘betting, lotteries and other forms of gambling, subject to conditions and limitations laid down by each Member State’.[xi] Other exemptions listed include negotiating credit and debit, foreign exchange transactions, share dealing, postage stamps and insurance. The exemption makes it into British legislation, the 1994 Value Added Tax Act, where Section 23A (2) provides a list of gambling exemptions to VAT which are basically any form of gambling that has a gambling duty applied.[xii] The exemption for gambling would be updated in the EU with the Council Directive of 2006 (Article 135 1 (i)) or the VAT Directive.[xiii] This provides member states with the power to tax exempted activities if they so choose, but as the 2024 Judgement of the EU Court shows, there are complex issues to consider when the notoriously anti-gambling Belgian government tried to impose VAT on gambling except lotteries. [xiv]
The SMF then act rather disingenuously by arguing that it is possible to impose VAT on top of gambling duties as that is what happens in Australia and New Zealand. What they don’t reveal is the reason for this double taxation is that in both countries, gambling taxes go to the State exchequer, while the General Sales Tax goes to the Federal Exchequer, this is how both levels of government get some of the gambling pie. In the UK, we don’t have regional governments taxing gambling directly.
The SMF then argue that in the UK we have duties on tobacco and alcohol as well as levy VAT on them, so it could be possible to do this with gambling. Continuing the SMF theme of historical illiteracy, they fail to point out that the reason why cigarettes and alcohol have VAT on them is that what was required upon joining the EEC, cigarettes and alcohol were not exempt from VAT, being tangible products being sold. Duties on alcohol go back as far as 1643[xv] and on tobacco go back to 1660[xvi] but were also uniformed and set by the 1977 Sixth Council Directive (Article 33) of the EU. So the reason why we don’t have VAT on gambling and the reason why we have VAT and duty on tobacco and cigarettes is simply down to the EU.
The SMF then use their bogus estimations of the cost of gambling using the illegal 2.5% figure applied to the methodologically flawed OHID and NIESR reports which fantastically now suggest that gambling costs almost twice what it brings in with taxes. The SMF does not provide its calculations but considering both reports apportion a large amount of the supposed costs of gambling on a farcical assumption of the supposed number of gambling-related suicides, one can only assume that their reticence to provide their working is because their number would probably show every single suicide recorded in the UK as being due to gambling. They argue that rather than adding VAT, which would prove insufficient in tax take, Remote Gambling Duty should be doubled to make up for this magical shortfall. To add to the research-based clown show they refer to the Webb-funded NERA report ‘Economic Assessment of Online Gambling in Great Britain’.[xvii] This is a copy of the SMF’s own 2021 report, ‘Double or nothing’[xviii] both of which make the economically illiterate argument that because gambling has a short supply chain, thus money spent with it has a relatively small economic multiplier so people should be steered (with taxes) away from expenditure to spend their money on items which have longer supply chains. Both reports ignore a key economic concept, consumer choice, and the fact that people will just source their gambling from the Black Market and as if to exemplify how these anti-gambling fanatics have no self-awareness, how short-supply chain businesses make up much of the service-led British economy and some of the most shortest supply chain businesses are biased-reports for sale business like NERA and the SMF.
This fever dream of anti-gambling onanism continues with the SMF arguing that online casino gambling deserves a 100% tax hike because it is mostly offshore. It makes little reference to why this is the case and references its own 2020 report, where they ‘called for a review of tax avoidance schemes connected to the remote sector, with particular focus paid to offshore gambling operators active in Britain, and argued that the government should encourage the onshoring of these operators through tax incentives’.[xix] Four years later and these tax incentives have turned into a 100% hike!
To remind readers why the online gambling industry is mostly offshore (the exception being Bet365) is due to legislation primarily, then taxation. Between the start of online gambling in 1995 and the implementation of the Gambling Act 2005 in 2007, online casino gambling was illegal in the UK. This was because the Gaming Act 1968 clearly stated that casino games could only be played in a bricks and mortar licenced casino. The Betting, Gaming and Lotteries Act 1963 which governed betting was slightly more ambivalent and so online betting was allowed. This meant that online bookmakers who wanted online gaming moved offshore and as the obvious demand for online gambling grew so did the offshore industry in places like Alderney, Gibraltar, the Isle of Man and Malta, made attractive by having licensing regimes and attractive tax rates. By 2007, the vast majority of the UK facing online industry was offshore and its lack of any taxes paid into the UK became more of an issue. It would be the crisis caused by the Commission’s invitation to the widely-perceived corrupt island of Antigua to join the White List of countries allowed to host operators who were allowed to target the UK, the compromise for accommodating offshore online gambling, that would make DCMS do something about the situation. Gordon Brown had set Remote Gaming Duty (RGD) at 15% and General Betting Duty (GBD) at the same rate which signalled that he didn’t want to attract the online industry onshore. When the new Tory government took over the plans from DCMS, they introduced the Gambling (Advertising and Licensing) Act 2014 which made it mandatory for any online gambling company targeting UK customers to be licensed with the UK regulator and pay gambling taxes. There was no attempt to make operators locate and operate from the UK and so pay corporate taxes here. This was probably due to a mixture of an acceptance that this industry was now firmly established offshore, that they could target the UK easily from the Black Market if licences meant expensive and onerous UK establishment and there may have been some consideration for British overseas territories that were deriving a large amount of their GDP from hosting these companies.
Yes, the majority of the offshore industry is based offshore and doesn’t pay corporation tax, but to imply this is some nefarious act of tax avoidance is unfair. The industry has gone to where it could to do what it wanted to do and as the SMF pointed out in their 2020 report, if the government wanted them to come onshore they could use tax incentives. They haven’t so far and if a government were to become so ignorant and stupid as to implement the SMF’s current report’s recommendations, offshore is where the whole industry will stay and they will just dump their UK gambling licenses and join the Black Market. As we know from Bet365’s offshore activities in the Far East, there is no defence governments can deploy to prevent the online gambling Black Market.
I don’t want to give the impression that everything in this SMF report gives the idea that a handful of retarded monkeys had been given a typewriter and instructions on how to write the word Pigouvian and then let loose with SMF branded paper. They make valid points about the Digital Services Tax could be imposed on gambling operators and that there is an issue about Asian Facing operators getting a UK licence so they can get football shirt sponsorship but then go and spoil it all by stating the historically dubious and unreferenced:
When the government introduced the point of consumption principle in 2014, it accepted the principle that it can levy consumption taxes like gambling duty to replace avoided corporation tax. The government should revisit this principle and look to raising Remote Gaming Duty.
As someone who was attending the Select Committee hearings on the 2014 Act and briefing the members of the Parliamentary All Party Betting & Gaming Group and my own business clients on its substance, this definitely isn’t my understanding of what happened. It was a decade ago and memories can be untrustworthy, but I would like to see the SMF’s evidence for this statement.
Changing gear back into stupid mode, the SMF then make the argument that compared to other jurisdictions online gaming is relatively lowly taxed, providing a table showing the supposed remote casino slots gaming tax rates of the nine jurisdictions with tax rates lower than the UK (whose tax rate is for all casino games) and the twenty with higher rates. I cannot say if these are real rates, I have no reason to doubt them apart from the source cited as SMF analysis of multiple sources, which leaves me un-easy such is the amount of horse manure published by the SMF in the past. Even if they are completely accurate, these rates mean little by and of themselves. Tax rates are ultimately political decisions and they reflect the gambling politics of when they were set and also what other gambling tax rates are. The fact that RGD is 21% is simply because Treasury wanted to make up the foregone tax due to FOBTs being effectively abolished. GBD and RGD were both originally set at 15% to be the same rate and land-based betting because Gordon Brown didn’t want to invite the industry onshore. Tax rates around the world reflect the gambling political history of their jurisdictions and also the political lobbying of anti-gambling fanatics, who exist, like all forms of mental illness, everywhere.
The most important issue though, is the size of the Black Market these tax rates support. All the jurisdictions the SMF mention as having higher tax rates than the UK also have much larger Black Markets. Jurisdictions which have been successfully lobbied by Puritans have the biggest Black Markets, as the fanatics don’t actually care about the harm found there, they just want prohibition.
Maybe this argument is here to really prove to the world that the SMF doesn’t understand economics at all – apart from the word Pigouvian obviously – because if they had kept awake during their Remedial GCSE Economics they would have learnt about what happens when taxes are too high and displacement occurs. You can dismiss the Laffer Curve all you want but you cannot dismiss the basic truths that if you over tax and/or over regulate a market, a Black Market will happen and you will lose both tax revenue and the protection of players. The whole of Europe with its over regulation and high gambling tax rates suffers from very significant Black Markets already – a 100% increase as proposed by the SMF would very quickly send British gamblers and the gambling companies that serve them outside the regulated industry.
Further proof that the SMF is economically illiterate is their belief that gamblers presented with the outcome of higher gambling taxes (worse odds, less bonuses) will purchase other, in their mind economically more beneficial goods and services rather than feed their desire for gambling via the Black Market. All they have to do is look at the statistics for when FOBTs were abolished – in 2018/19 there were 32,652 FOBTs in British betting shops, in 2019/20 there were just 429.[xx]Did these FOBT players go off to buy goods with long supply chains as the crack smokers at NERA and the SMF suggest? A look at the growth of remote gaming duty and general betting duty (table above) over this time period rather suggests they just switched their gambling. The fact that DCMS/Gambling Commission did no follow up research on this suggests that the anti-gambling element in these organisations don’t want to see evidence that over regulation/taxation just causes displacement not a significant change in consumer behaviour.
In a final section that can only be considered as a ‘covering our arses for the obvious mistakes we’ve made’, the SMF sees the options for over taxed gambling operators as either to just swallow the increase in taxation and decrease profit, or to reduce costs by less marketing and media rights or to pass on the costs to the customer with worse odds. They don’t contend with the obvious consequent push to the Black Market, apart from dismissing it by saying that a report commissioned by the Betting & Gaming Council showed the Black Market as only being estimated at only 2.5%.[xxi] They don’t seem to have the IQ to realise that this is because we currently have a fair tax rate and only the start of over-regulation (affordability being trailed). They try and use the example of the RGD being raised from 15% to 21% as an example of a tax rise that didn’t have any obvious unforeseen consequences. Nowhere do they fully appreciate that they are suggesting an unprecedented 100% increase in RGD which will probably give most operators the choice of going bankrupt or going illegal. Their blatant ignorance of basic economic home truths is evidence of how far the credibility of the SMF has fallen and how consumed they have been in their fanaticism for anti-gambling.
They argue that land-based casinos and general betting duty shouldn’t be touched as those who pay these duties employ people, pay corporation tax and support the horseracing industry. They don’t answer why, if the purpose of the exercise is to prevent gambling harm, they don’t want to increase taxes for the land-based casino industry as their rates of problem gambling are almost the same as online casinos – but that would be going against their paymasters wishes and that after all, is all this verbiage really is. A desperately thrown together exercise in puritanical fanaticism that depends on a series of Webb funded methodologically flawed research papers to make the most weakest of arguments for something that will never happen.
Fortunately the grown-ups in His Majesty’s Treasury, even the interns and probably the catering an security staff too, can see this for what it is, economically illiterate, poorly argued fanaticism. I just hope Derek Webb kept his receipt for this used toilet paper of a report, because he’s wasted his money if he thinks this will convince anyone who has actually been trained in economics. It would appear that this tax expert agrees with me.[xxii] I am also very certain that come the biggest budget in a generation we wont be seeing a 100% increase in RGD, if we do than this country will have far more serious problems than just an online gambling industry going bankrupt and a Black Market exploding.
[i] https://www.smf.co.uk/publications/raising-remote-gaming-duty/
[ii] Select committee on the social and economic impact of the gambling industry, "Report of
Session 2019-21: Gambling Harm: Time for Action" (House of Lords, 2 July 2020).
https:/ /committees. pa rl ia ment. u k/pu bl ications/1700/ docu ments/16622/ def au It/
[iii] Craig Thorley, Alfie Stirling, Edison Huynh, "Cards on the table: the cost to government
associated with people who are problem gamblers in Britain" (IPPR, 13 December 2016).
https://www.ippr.org/articles/cards-on-the-table
[iv] Office for Health Improvement and Disparities and Public Health England, "Gambling-related
harms evidence review: summary" (OHIO, 11 January 2023).
[vii] https://www.instituteforgovernment.org.uk/data-visualisation/timeline-coronavirus-lockdowns
[ix] Gambling Commission. (2020g). Gambling participation in 2019: behaviour, awareness and attitudes. Gambling Commission. https://www.gamblingcommission.gov.uk/print/gambling-participation-in-2019-behaviour-awareness-and-attitudes#:~:text=Our%20research%20found%20that%20overall,(46%25%20in%202018).
[x] https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A31967L0228
[xi] https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:1977L0388:20060101:EN:PDF
[xii] https://www.legislation.gov.uk/ukpga/1994/23/section/23A
[xiii] https://www.legislation.gov.uk/eudr/2006/112/article/135
[xiv] https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:62023CJ0073
[xvi] https://en.wikipedia.org/wiki/Tobacco_Duty
[xvii] https://cdn.sanity.io/files/42ezp3kj/production/01361ed79749fb32bbd9e992b6bf849fd25a8b51.pdf
[xviii] https://www.smf.co.uk/wp-content/uploads/2021/03/Double-or-nothing-March-2021.pdf
[xix] James Noyes, Jake Shepherd, "Gambling review and reform: towards a new gambling framework" (Social Market Foundation, 5 August 2020). :https://www.smf.eo.uk/publications/gambling-review-reform/
[xx] Gambling Commission. (2006a). Annual Report 2005/06,. (HC 1226 SE/2006/94). London: The Stationery Office. Gambling Commission. (2011). Industry statistics April 2008 to March 2011. Birmingham: Gambling Commission, Gambling Commission. (2022). Statistics on participation and problem gambling for the year to Sept 2022. Gambling Commission,. Retrieved 06/03/2022 from https://www.gamblingcommission.gov.uk/statistics-and-research/publication/statistics-on-participation-and-problem-gambling-for-the-year-to-sept-2022
[xxi] https://bettingandgamingcouncil.com/news/shock-new-study
[xxii] https://taxpolicy.org.uk/2024/10/18/the-tax-longlist-35-ways-rachel-reeves-could-raise-22bn/