£2 Stake Limits For Fixed Odds Betting Terminals (FOBTs) in the UK
One of the biggest talking points for the gambling industry in recent times has been the one surrounding the introduction and use of Fixed Odds Betting Terminals (FOBTs) in bookmakers shops. They were first introduced in the UK back in 1999 with a smaller selection of games and a much higher margin than the machines you’re likely to come across nowadays. As a result, they weren’t all that popular, with that fact only changing a couple of years later when alterations were made to the way that gambling was taxed.
Those changes allowed bookies to introduce more games and at the same take a smaller margin, making the machines immediately more popular to bettors using them in shops. As a result, the popularity of FOBTs went through the roof and by 2005 there around 20,000 of the terminals in place around the country. By 2007 that number had increased to closer to 30,000 and the machines had become an integral part of the bookmaker shop experience.
The UK government attempted to limit the influence of these new machines that some believed were so addictive that they were the equivalent of ‘crack cocaine’ for gamblers. They reduced the number that bookmakers could have within their shops, yet they were so profitable that bookies simply opened more shops. It led to the government launching a review into their use and whether or not they should implement a limit to the stakes that players could play with.
The problem for the government has been that the gambling industry is entirely against cuts, if for no other reason than the use of Fixed Odds Betting Terminals actually overtook any other type of bet placed in a physical shop back in 2011. Numerous campaigns had been set up to curb the influence of the machines, such as the one run by Stop The FOBTs. Now, as part of the government’s review, the Gambling Commission have released their recommendations on the issue. This was followed in May 2018 by a final government decision to limit FOBT’s stakes to £2.
UK BUDGET UPDATE
New: FOBT £2 Limit to be brought in on 1st October 2019 instead of April 2019 to coincide with the new 21% point of consumption tax on remote gambling.
Newer: FOBT limit to now be brought back to April 2019 after an embarrassing budget defeat and U-turn by the government following minister resignations and massive public backlash.
FOBT Betting Machine Stakes Cut To £2 May 2018
On the 17th May 2018 the government finally announced the stake limit for fixed odds betting terminals will be cut to £2. Although shocking for the industry, who were hoping for a limit close to £30, it was hardly unexpected news. This is due to come into effect on 1st October 2019.
Both William Hill and GVC (the company that now own Ladbrokes and Coral) expect to lose £70-100M and £160M in the first year alone following the cut, with both threatening to close hundreds, if not thousands, of shops costing potentially thousands of jobs also.
The fact is over the counter betting has been in decline for more than a decade and it is only these machines that have kept the high street betting game profitable. Many who have been campaigning for the £2 limit believe that real world bookies do not have an intrinsic right to exist at any cost, especially if that is potentially exploitative and harmful to some people.
On the other hand others argue this is just another example of the Nanny state, with the government defining further what decisions people can or cannot make. There are also other knock on effects, such as those people who genuinely enjoy using FOBTs, perhaps with £10’s staked sensibly, who no longer can and those, usually older individuals, who still like to bet in shops. Not everyone wants to bet online after all.
The biggest consequence to many will be the potential effect on sports sponsorship, with the bigger high street chains threatening to reduce levels dramatically. In reality much of this will not happen and was said to win favour in what turned out to be a rather aggressive campaign from the bookies against the ban.
Nonetheless there will be some reduction in sponsorship money and sports will have to remoddel to deal with that. It will not effect the likes of football too much where many suitors are ready step in, it is instead the horse racing industry and skill games (darts, snooker, etc.) that face the biggest challenge to revenue. Then again there are many who say, even within the industry, that why should a sport like horse racing rely on virtual machines in the first place?
Although the high-street industry will undoubtedly suffer due to this FOBT limit the overall gambling industry is booming in the UK. Many people who like to play these machines and games can still do so online with limits of £100’s and of course this may also play to the advantage of real world casinos where high stakes games can still be played. It is however worth considering that this review also looks into major changes to online gaming, with further regulation there being the next campaign lined up.
The gambling industry is innovative and will find other ways to compensate for lost revenue. The new £2 stake limit rules also now means criminal gangs will find it much harder to launder money, many had used FOBT’s as a convenient way to wash £1000’s in cash without detection and this was a large factor in the UK governments decision, it’s not just about problem gamblers.
For more about how the £2 bet limit decision was reached, the campaigns and reviews involved and the potential impact to the industry keep reading.
Gambling Commission Recommend £30 Limit
The government had been weighing up several options with regards to the future of Fixed Odds Betting Terminals, with their primary thought being that they could limit the maximum stake from its current limit of £100 to one of £50, £30, £20 or £2. Given that it was possible to bet that maximum stake of up to £100 every twenty seconds when playing casino games like blackjack or roulette, the reduction much below that is likely to have a severe impact on the way that the gambling industry makes its money. The previous £100 limit could see players ‘lose large amounts of money in a short space of time’, as the Gambling Commission has said.
The GC recommendation, therefore, was to lower the maximum stake on casino-style games to £30, believing that this would help those that have problems with their gambling when using the machines but would not impact the industry too badly. Tim Miller, the executive director of the Gambling Commission, said that this would help to ‘to protect vulnerable people from harm’. As far as the other games on the machines were concerned, such as slot-style games, the Gambling Commission felt that a reduction of the maximum stake for those games down to £2 would also help. That’s not all that the Commission has suggested, however. They’ve also recommended that the gambling industry look at introducing limits to things like the amount of time that customers can use the machines for and the amount of money that they can play with in one session.
Speaking to the BBC’s Radio 4, Mr. Miller suggested that the research done by the Gambling Commission didn’t automatically suggest that limiting the maximum stake on the casino-type games would automatically make things better for punters. He said, “For many people it would help them to be restricted to a £2 maximum stake, but for some people there is a risk that if they can bet smaller amounts they can spend longer playing and engage in riskier behaviours, which is why we are advising this comprehensive package of recommendations”. He went on to essentially hedge his bets, saying, “If the government wants to go lower than a £30 maximum stake that will be perfectly consistent with our advice, as we are recommending a maximum stake of £30 or less”.
What Has The Reaction Been?
Despite Mr. Miller’s insistence that the Gambling Commission ‘have proposed actions that will tackle both the risk of harm and provide solutions that are sustainable in the longer term’, it has not been enough to satisfy the critics of FOBTs. Labour’s Shadow Digital, Culture, Media and Sport Secretary, Tom Watson, has long been a fierce critic of the machines. He responded to the Gambling Commissions recommendations by saying that he was ‘deeply disappointed’ and suggested that the organisation appeared to have ‘caved in’ to pressure from the industry. He said, “These machines are at the heart of the UK’s hidden epidemic of problem gambling. The Government must cut the stake to £2 on all FOBT machines including the highly addictive roulette style games, as well as increase the delay between each play”.
His Labour colleague, Carolyn Harris, chairs an All-Party Parliamentary Group that has been looking into Fixed Odds Betting Terminals and she was also disappointed in the Gambling Commission’s advice, suggesting that the ‘moral argument’ has been to limit stakes to a maximum of £2 on all of the games on the machines. She said, “The problem is that these machines are addictive. It has got to be £2, nothing else is acceptable. It is now for the Secretary of State to make a decision”.
Perhaps somewhat unsurprisingly, the Association of British Bookmakers seemed relieved that the Gambling Commission’s recommendations weren’t more severe. They released a statement after the Commission’s advice was released that read, “The ABB is now considering the extensive and wide-ranging advice and recommendations made by the Gambling Commission. We fully understand that there is public concern and that there will be a stake cut to reduce the levels of losses on machines in betting shops”. They went on to talk about the other areas of ‘responsible gambling measures’ outlined in the Commission’s advice and that in the meantime they remained ‘committed to introducing further measures to address problem gambling’.
That is very much the opposite of the opinion of John White, the chief executive of the anti-FOBT trade lobby Bacta, who said, “Whilst a stake reduction is a step in the right direction, merely reducing this to £30 is still dangerously high. This conclusion from the Gambling Commission is drawn from a narrow interpretation of a limited range of evidence and focuses on the theoretical rather than the reality. With a 20-second play duration on FOBTs, the proposed £30 stake will generate a loss of £90 within one minute. Within 10 minutes it is £900. Such comparable high losses to the original £100 stake does not do enough to protect those consumers who are vulnerable”.
In terms of the markets, they reacted positively to the news. On the day that the announcement was made, shares in Ladbrokes Coral, one of the country’s biggest bookmakers, rose by just shy of 3%. William Hill shares rose by 4%, leading ETX Capital analyst Neil Wilson to say that it should be a ‘relief’ for the sector. He said, “The worst-case scenario looks to have been avoided. Ministers will now have to justify a cut below £30 on grounds of significant risk of harm”.
Are Bookmakers Concerned About Reduced Stakes?
In 2017, Fixed Odds Betting Terminals generated over £1.8 billion in tax revenue. As mentioned earlier, the amount of money brought in by FOBTs has exceeded that earned by more standard bets in recent times, so the loss of money that a reduction in the maximum stake would see occur is a genuine concern for the industry. The Association of British Bookmakers claim that reducing that maximum stake down to £30 could see as many as ten-thousand job losses across the industry and a closing of more than two-thousand shops. After all, if the machines aren’t making the same money then the overheads of the addition shops that companies opened in order to house them will suddenly become too much for them to pay. It’s a thought backed up by a Betting and Gaming analyst at EY called Grant Humphrey, who said, “A £30 maximum stake may lead to shop closures and job losses and could lead to a wave of industry consolidation”.
It’s not just bookmakers that are concerned about a cut in the maximum stake, either. The British Horseracing Authority is concerned that cutting the maximum stake to as low as £2 could impact the horse racing industry by as much as £55 million. That’s largely owing to threats made by the likes of Ladbrokes that the may have to cut the sponsorship that it invests in different industries on a yearly basis if the stakes are cut too low. The media manager for the BHA, Robin Mounsey, said, “The BHA fully supports the government’s consultation objectives of achieving a balance between a gambling sector which is socially responsible and does all it can to protect consumers and communities, and which can grow and contribute to the economy”.
What Next In The FOBT Maximum Stake Debate?
Ultimately the advice of the Gambling Commission is exactly that – advice. It wasn’t heeded by the government and ministers for the Department for Digital, Culture, Media and Sport who have now decided to go for a £2 stake limit. They weighed up all of the evidence that has been gathered during the consultation period and wrote to other governmental departments that were likely to be affected by the decision. Once all of that was done, the DCMS made the final decision which will now likely come into effect towards the end of 2019.
The interesting thing about Matt Hancock, the Secretary of State for Digital, Culture, Media and Sport, is it is believed that he personally was the one who seriously considered the possibility of lowering the maximum stake on all Fixed Odds Betting Terminal games to £2, if for no other reason than the Labour Party is likely to make a commitment to do so in its next manifesto and this gave him an opportunity to remove one stick that the opposition will be able to beat him with. Despite the Treasury encouraging him to make a much more gentle decision regarding the maximum stake, thanks to the £700 million in revenue derived from FOBTs on a yearly basis.