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At first appearances, it might seem that the gambling industry hit the jackpot in the General Election...
The electorate returned to
power the only major political party which had not pledged to get tough on
gambling (or more specifically, FOBTs); the Prime Minister appointed as
Secretary of State for Culture, Media and Sport an MP with genuine interest in
(and empathy for) the sector; and the Labour Party’s post-mortem recriminations
have hinted at a return to the Blairite brand of politics that provided such a
benign environment for gambling in the first half of the last decade.
As my colleague, Paul Leyland has argued in his
post-election article (‘General Election 2015: Sounding the All Clear?’), any relief felt
by the bookmakers or belief that a bullet has been dodged may well be
premature; but it has also distracted attention from what is a far more
significant development for the whole industry – the potential devolution of
Britain’s gambling laws.
If the Smith Commission opened the door on the question of
localised regulation by recommending that Scotland be given specific powers to
control machines in new betting shops, the SNP’s election landslide may well
have knocked it off its hinges. Indeed, Nicola Sturgeon’s party has already
called for devolved authority on all gambling (not simply FOBTs) – something
that would appear to be one of the simpler concessions for David Cameron to
grant.
The suggestion that FOBTs alone should be a matter for devolved
regulation was a choice piece of political fudge - carving out one isolated
aspect of the industry’s activities never made a great deal of sense in the
real world. If Holyrood is to control 50% of gambling in a betting shop, why
not the other 50%? If there are to be Scottish laws governing roulette machines
in betting shops, why not Scottish laws for roulette wheels in casinos?
Whether the SNP recognised these shortcomings or whether its
desire for wider powers is simply another instance of doubling down on
devolutionary concessions, specific gambling laws for Scotland are now a
distinct possibility.
If it comes to pass, the stakes for gambling companies may
be much higher than simply the welfare of their northern-most businesses. For
two reasons, the development of a Scottish system of regulation may prove to
have far-reaching consequences for British gambling at large.
The first and most obvious of these is that localised
control of gambling may be extended to other authorities – to the Welsh
Assembly, the Greater London Authority or to George Osborne’s putative
‘northern powerhouse’ – as part of a more general trend to decentralisation.
The second is that change in Scotland (for the good or ill
of the industry) might trigger successive reappraisals of gambling laws across
the rest of the United Kingdom.
The domino effect has been an observable characteristic in
the development of the global gambling market in recent decades. Perhaps the
most obvious example has been the expansion of gambling in the United States of
America. In 1968, New Hampshire broke ranks with the rest of the Union in
launching a state lottery to support public spending. In the years that
followed, state after state followed suit until only Hawaii and Utah were left
with gambling prohibition intact. Similarly, Nevada enjoyed a nationwide
monopoly on casino gambling for almost half a century before New Jersey
licensed casinos on Atlantic City’s Boardwalk. Today, no fewer than 23 (and rising)
states feature commercial casinos while 28 host tribal gaming casinos (39
states have some form of casino gaming). A number of companies are banking on
this pattern being repeated in remote gambling in the decade ahead.
To take an example closer to home, the gambling laws of
Spain have undergone radical transformation over the course of the last few
years - most notably the opening up of sports betting and remote gambling
markets and the creation of a regulatory (and importantly fiscal) framework for
resort casinos. The fact that gambling in Spain is largely a matter for the 17
regional autonomous communities has been central to this process. Had it been a
matter for the federal government, it is unlikely that these modernising
proposals would have progressed as far or as fast.
The domino effect works in gambling because regulatory
reform is quite simply easier to achieve at a local level than at a national or
federal level. There are three reasons why this is so. The first is that the
expansion of gambling in one state will often be accompanied by tax leakage in
neighbouring states as citizens are forced to cross borders in order to gamble.
In such instances, the logical response is to protect revenue by correcting the
regulatory imbalance.
The second reason relates to political risk. Normalisation
of gambling, based on visibility, familiarity and proximity is the most
effective means of addressing societal fears of gambling-related harm (chiefly
problem gambling and crime). Put simply, the best way to defuse the political
risks of gambling liberalisation is to see it expand (profitably, cleanly and
responsibly) in a neighbouring state.
The third reason is that while gambling tends to be a fairly
trivial economic activity at a national level, it can be significant at a local
level where there is greater awareness of the jobs and taxes (if also devolved)
it brings. Of course this can cut both ways and it’s worth reflecting on the
fact that the current FOBT controversy became a national issue in large part due
to agitation by local councillors and constituency MPs.
There are of course a number of reasons to be wary of a decentralised
gambling market. There is a danger that fragmented regulation would lead to a dilution
of regulatory expertise and effort and that this in turn would involve risks
for the consumer. Companies are also likely to be concerned that localised
regulation would give rise to greater operational complexity and higher
licensing and compliance costs. Some would undoubtedly prefer the preservation
of the status quo - no matter how unsatisfactory – than run the risk that
change might be negative.
Yet life is about the risks we take. As unlikely as it
seems, changes to gambling laws in the land of John Knox and Gordon Brown might
just crack open the door for a more vibrant and enterprising gambling market
for Britain as a whole.
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