When the Funding Stops – the debate over voluntary or mandatory support for harm minimisation

Having simmered away for a number of years, the question of how much gambling companies ought to pay to deal with harm attendant on their business activities is starting to come to the boil.

Earlier this month, the chief executive of the Gambling Commission, Sarah Harrison claimed that at £6.5m per annum, the recent level of industry contributions to the Responsible Gambling Trust (which disburses funds for the purposes of research and treatment) was “nowhere near enough”. If this sounds familiar, it may be because her outgoing chairman, Philip Graf made very similar comments during his valedictory address at London’s Royal Society of Arts in the summer.

The Responsible Gambling Strategy Board (‘RGSB’) is currently pricing the cost of delivering its three-year strategic plan. It seems likely that the final budget will be closer to Harrison’s “ballpark figure of £10m to £11m” than to current levels.

It is clear that Harrison means business; so the question is not whether industry funding will increase substantially, but what mechanism will be used to ensure results.

The voluntary arrangement has been around since the establishment of the Responsibility in Gambling Trust in 2002. A year earlier, the Budd Report had recommended the establishment of a fund (with an initial annual budget of £3m) to commission research and fund treatment on problem gambling. Weighing up the pitfalls of tax hypothecation with the risk that profit imperatives might trump conscience, Budd recommended that Government be empowered to introduce a statutory levy if the voluntary arrangements proved insufficient – and this power was subsequently enshrined in the Gambling Act.

The current funding shortfall appears to be the consequence of two factors: not everyone who should contribute to the Responsible Gambling Trust (‘RGT’) does so; and not everyone who contributes meets the recommended threshold of 0.1% of gaming revenue. Harrison’s “ballpark figure” is uncannily close to the amount that the RGT would receive if everyone paid at the full amount.

‘Levy’ has become a contentious word in gambling, largely as a result of the long-running dispute over the betting industry’s perceived responsibility to fund horse-racing. However, a social responsibility levy would be a different matter from a Government perspective – free from the state aid issues that have dogged support for racing.

HM Treasury’s attitude towards tax hypothecation shifted under Osborne. Economic purists may not like it (on the basis that it is not an efficient means of meeting funding priorities) but the emergence of the ‘sugar tax’ suggests that ministers are well aware of the political expediency of such schemes.

On the face of it, Britain’s major gambling companies ought to welcome the idea. After all, as Sarah Harrison said in her recent speech, “how can it be fair that some operators, large and small, contribute year in and year out while others get a free ride?” Looked at this way, a system where everyone pays their way has clear commercial merit for those already chipping in the suggested 0.1%.

Nevertheless, operators will be wary of a shift from voluntary to mandatory funding. In an industry that already considers itself to be highly taxed relative to general leisure retail (although it’s really only London casinos that can consider themselves to be highly taxed by international standards for gambling) and has been scarred by a decade of successive duty increases, suspicion will arise that a responsible gambling levy would become an upwards-only funding mechanism.

One advantage of a levy is that it might go some way to addressing concerns that the existing mechanism enables the industry to exercise undue influence on public policy debates. Those who allege conflict of interest have so far failed to uncover any evidence of wrong-doing; but the principle that underlies the concern is understandable.

On the downside, increased funding on a statutory basis might lead to further intra-industry tension. After all, those operators that do most to restrict problem gambling (or who for probabilistic reasons simply have lower exposure to it) may feel that their liability ought to be lower than less enlightened peers. By the same token, there is the risk that licensees may revert to considering that they discharge their responsibilities through the simple act of writing a cheque (and of course complying with the law and LCCP) rather than demonstrating effectiveness.

There are, of course ways to add steel to the current voluntary arrangements. The adoption by the major players of an industry voluntary code is an obvious route; but other incentives may be applied also.

In her 2015 book ‘Shame – Is it Necessary?’, Jaqueline Jacquet described how California’s Government had successfully embarrassed a number of the state’s largest tax avoiders to cough up what they owed. Those on the government’s tax hit-list are given six months to pay or face the ignominy of having their names published on a roll of shame. It’s more push than nudge but according to Jacquet, it is has been highly effective, recouping $336m of tax revenue between 2007 and 2014 (Jacquet also cites a similar scheme in Wisconsin which brought in $108m in less than five years). Currently the RGT publishes the names of all organizations which provide funding – but what might happen if the recalcitrant rather than the virtuous were named?

Another option that has been discussed over recent years is whether customer balances in dormant gambling accounts might be directed to charitable causes (notably problem gambling and grass-roots sports) rather than siphoned off to profit. Ronnie Cowan MP (Scottish Nationalist Party, Inverclyde) is particularly fond of this as an option for funding the RGT and secured a Westminster Hall Debate on the subject before Parliament’s summer recess.

Interestingly, Cowan’s SNP is to be found on the roll of RGT contributors, presumably in relation to the party’s practice of fund-raising via raffles. The Conservatives, Labour, Liberal Democrats and UKIP (whose Sovereign Draw lottery is licensed by the Gambling Commission) are all absent from the list – although it is possible that intermediaries pay on their behalves.

So what is the “right amount” that industry ought to be contributing? Sarah Harrison’s comparison between the £120m that gambling companies spent on TV advertising in 2015 and the £6.5m contributed to RGT perhaps illustrates an imbalance in the spending priorities of certain licensees; but it is largely irrelevant in terms of what companies ought to pay.

In New Zealand a country of around 4.5 million people, the mandatory levy system generates $51m (c£8m) a year – something that puts the current situation in the United Kingdom (population, 64 million) into sharp perspective.

As Harrison recognized in her speech, the starting point has to be an evaluation of what is required – and this is the piece of work that the RGSB will deliver later this year.

With the RGSB setting the course and the RGT now putting in an evaluation framework for funding recipients (chiefly GamCare, Gordon Moody Association and the Soho Clinic), we are moving towards a world where funding levels are based upon assessments of need and return rather than bald percentages.

Of course, all of this assumes the perpetuation of the current system, where it is left to the Third Sector to deal with gambling-related harm. The fact that Exchequer contributes so little to the problem and that the Department of Health is (by its own admission) not particularly interested supports the notion that ministers wish gambling companies to care about this public health issue – even if the Government doesn’t.

The cost of dealing with gambling-related harm seems certain to increase – but in the grand scheme of a £12bn industry, it remains pretty small beer. Companies may feel that they have been squeezed in recent years by the costs of doing business (including taxation); but funding the RGSB’s strategy is one cost that all operators (and not just the current crop of RGT supporters) owe it to themselves to accept with good grace.