By Paul Leyland, Founding Partner, Regulus Partners
"You may have to fight a battle more than once to win it" - Margaret Thatcher
The UK gambling industry is probably feeling very relieved right now, perhaps even jubilant. Not only have voters returned a surprise Conservative majority, but John Whittingdale has just been announced as Secretary of State for Culture, Media and Sport.
The Conservatives were the only major party not to have a manifesto commitment to increase the regulation of FOBTs. They are also the only major party that was not committed to raising taxes to combat the deficit (albeit no party mentioned gambling taxes explicitly). Finally, Whittingdale has proved himself to be pragmatic and sensible as head of the Culture Select Committee, even presiding over the (stillborn) recommendation to increase the number FOBTs permitted per betting shop in order to alleviate clustering (back in 2012).
As outcomes go, this is probably better than anyone in the industry dared hope for. But is it right to sound the ‘All Clear’ on the sector?
I would advise considerable caution for five reasons.
The first reason is that the Conservatives have only the slenderest of Commons majorities (12), meaning that this will be a parliament driven by consensus, lobby tactics and quid pro quo. The views of the smaller parties cannot therefore be ignored, especially if they coalesce and/or find resonance with elements of the Conservative party. It should be remembered that Labour, SNP, Liberal Democrat and UKIP manifestos all contained references to toughening FOBT regulation. It should also remembered that the highly influential but non-ministerial Boris Johnson came down in favour of tougher FOBT regulation prior to the election.
(for more detail on party policy relating to gambling in the run-up to the election, see the Regulus - Olswang Election Briefing piece here: https://goo.gl/B5bFe8)
Second, the SNP is determined to wield its newfound influence in Westminster. Given his overall majority Cameron may well be tempted to be hawkish and push the English agenda, though a slender majority may tempt a more consensual approach (eg, Smith-plus in return for support on Europe). The SNP are on record that Smith did not go far enough in limiting FOBT numbers via licensing only for new shops: they could get more powers, and if they do the Local Authorities of England and Wales (not least Boris’s London) are highly likely to demand the same.
Third, pressure from external sources is likely to redouble rather than diminish, given that the Conservative manifesto effectively implied that enough had been done. This pressure has proved highly effective in the past (vide the number of manifesto commitments on a relatively narrow issue; as well as ministerial action last year) and it would be dangerous in the extreme to write it off now.
Fourth, Osbourne has made several spending commitments that look unfunded (most notably £8bn extra for the NHS) and is on the hook for material cuts elsewhere. He has limited room for manoeuvre in increasing the major taxes given the Conservative Party’s electoral stance. He is also facing an increased anti-austerity voice from the opposition. In such an environment, any tax rises which are not felt by the wider public or business as a whole are highly attractive. Gambling is an obvious area for raiding on this basis.
Finally, with attention fixed on FOBTs, the Racing Right, and potentially tax, it is easy to forget that there are large swathes of land-based gaming, remote gambling and lottery which are currently ‘below the radar screen’. History has shown that it does not take much to put other sectors in the firing-line and it would be dangerous to be blind-sided by complacency.
Despite these notes of caution I am not necessarily gloomy. The industry has had a very lucky break in being presented with a pragmatic government in terms of gambling policy, that it willing to listen to its side of the argument as well as the anti-lobby. This is good fortune: not a vindication of past errors.
For anything like the regulatory status-quo to remain, the government will have to be confident in defending it, or it will be thrown under the bus for political leverage. The industry must therefore redouble its efforts in being (not just appearing) open, transparent, compassionate and responsible.
The old industry has been given a stay of execution while it reforms; only by maintaining the pace of reform can it get out of the danger-zone.