Among all the demands submitted to the British Government as part of the current review of gambling legislation, the one for a harm prevention levy is often presented as the most straight-forward. 

The idea of putting the current system of voluntary industry contributions on a statutory and prescriptive basis attracts support from campaigners, the industry regulator, and several of the larger licensees.

There is some logic to this as the provision of treatment services for gambling disorder in Great Britain (and likely in most jurisdictions worldwide) needs to be put on a more substantial and sustainable footing.

It is far from obvious however that a new tariff is the best means of achieving this. The case for ‘safer gambling’ levies – as we explore in this article - is more complex than is commonly suggested. 

Introduction

There are three key public interest reasons to be cautious when considering calls for a statutory levy to fund the treatment of gambling disorder and problem gambling (alongside research and preventative measures). The first of these relates to the principle of hypothecation; the second to administrative structure and the third to establishment of need.

Hypothecation

The most important question when it comes to levy proposals is also the most neglected: why is it that the treatment of gambling disorder is not funded on the same basis as other mental health issues, such as alcohol dependence? Why is it not the case that all such treatment services are funded by the state? From a philosophical perspective this is a critical consideration precisely because it is the gambling consumer – and to a disproportionate extent the disordered gambler - from whom these payments are derived. The answer may be that, as the economist, psychologist and philosopher Don Ross has observed, “many people are willing to impose extra taxation levels on gamblers in part to punish them for what is thought to be morally dubious, or at least morally second-rate behaviour.”

If gambling disorder is a serious mental health issue (which it is), a question must be asked as to why treatment should not be provided by the state. If, as is commonly claimed, a public health approach to gambling harm like that for alcohol dependence is required, why does this not extend to funding? Why is the disordered gambler not accorded parity of esteem in this respect with a person with alcohol dependency, substance use disorder or an eating disorder? To put this philosophical question into a real-world context, consider the fact that gambling disorder is often comorbid with other mental health problems. Why therefore should someone receiving treatment for gambling and alcohol related problems be supported by the state for just one of these?

The typical response to such questions is to spout the “polluter pays” epithet; but this is no answer. First, it is far from clear what, specifically, the “pollution” is where disordered gambling is concerned. If a factory pumps chemicals into a river, it ought to be relatively simple to work out the nature, cause, and necessary remediation of the pollution; but matters are apt to be more complicated when it comes to mental health.

Given its prevalence amongst people with gambling disorder, we might assume that depression is an example of “pollution”; but what if (as is often the case) the depression precedes - and perhaps contributes to - the disordered behaviour? Then there is the question of identifying the “polluter”. How should we allocate costs where – as is also common - the person suffering from gambling disorder also has an alcohol dependency or substance use disorder?

How should we think about the causes of “pollution” where disorder is symptomatic of some deeper trauma (often inflicted in childhood) – with the destructive behaviour entered into as part of a process of self-medication? The economist Douglas Walker provides this answer: “If pathological gambling is simply a symptom of some more basic disorder, it is the more basic disorder rather than gambling itself that is the underlying cause of the adverse consequences and social costs of the pathological gambling.”

All of this is not to deny that gambling can involve substantial societal costs or to absolve operators from the need to act in an ethical manner; but identifying the “pollution” is far from an exact science. It would certainly be inappropriate to assume that all the health harms associated with gambling disorder are the result of gambling. It may in fact be wiser to acknowledge the challenges with identifying “pollution”, to accept that psychiatric problems are generally complex and decide that the state should care as much for the wellbeing of someone with gambling problems as it does for those with drink problems or eating disorders.  

After all, where operators are clearly guilty of wrong-doing (causing “pollution” in the metaphorical sense), the Gambling Commission (the Government regulator for gambling in Great Britain and the National Lottery across the UK) has the power to require restitution through substantial fines and financial settlements (even if, as we note below, a more rigorous regime is required to determine who receives such funds and to ensure their efficient use). 

Finally, the “polluter pays” principle was originally conceived (by economists) to provide incentives to reduce pollution (i.e. by making more environmentally friendly business practices margin-enhancing). This is unlikely to apply in the case of a ‘safer gambling’ levy unless it is specifically linked to a set of practices within the gift of licensees to enact. In such a case, a question would have to be asked as to whether regulation of such practices – rather than taxation – might not be the more effective solution. 

Public health advocates of hypothecation point to the Sugar Tax as a model for the Government to follow where gambling is concerned – and this is revealing. The principal aim of the Sugar Tax is Pigouvian in nature - to reduce consumption by making fizzy drinks less affordable. Its application to gambling would therefore be misguided on two counts (assuming the quantum of any levy was sufficiently large to affect consumer behaviour). 

The first is that the policy objective underpinning the Gambling Act’s provision for a statutory levy is to raise funds for treatment services; not to deter consumption.  

The second issue is that – even if the ambition was to discourage gambling in the interests of harm prevention – a levy may well be counter-productive. This is because gambling is consumed in financial units rather than physical ones; and so, increasing the cost of gambling may in fact result in greater financial harm to the disordered gambler while at the same time reducing the value proposition for recreational consumers. As the economist, David Forrest has observed, if as is commonly assumed, demand by problem gamblers as a group is inelastic (an important proviso) then “taxation or restriction on supply that forced takeout up would increase the per-period size of losses suffered by problem gamblers”.

The fact that the Office of Health Inequalities and Disparities (formerly Public Health England) is openly considering ways to make gambling “less affordable” is revealing in terms of its true agenda (to prevent gambling rather than gambling harm) and startlingly inconsistent with the Department for Digital, Culture, Media and Sport and Gambling Commission concerns that, for too many, gambling may already be unaffordable. 

Administrative structure

The second objection to the creation of a levy is administrative. We already have a long established and generally efficient system of tax collection, which amongst other things pays for our medical services. If it is deemed necessary to finance gambling treatment services through a toll on consumer spending, why not use the existing revenue raising system? Why create a bureaucratic mechanism solely for gambling? HM Revenue and Customs already collects around £3bn a year in gambling duties (in addition to other gambling-related taxes) – a figure substantially higher than would be collected under VAT. These funds pay for a wide range of public services, including healthcare - but one thing they absolutely cannot be spent on is treatment of gambling disorder. 

This is worth emphasising. It is the deliberate policy of the British Government that duties raised from gambling consumers may not be spent to alleviate the suffering of those with a gambling disorder. It is this question that Don Ross addresses when he asks whether “the public authority, if it tolerates and profits from gambling, should be obligated to help people who think that gambling is a problem to themselves.” 

Even if a suitable explanation can be provided for the state’s unwillingness to provide support (and one certainly should be given before a levy is considered), it would not explain why the existing tax system might not be used to raise additional ring-fenced funds for the National Gambling Treatment Service. Construction of a separate levy system is inefficient and would lead to diversion of funds away from front-line services and the perpetuation of politicking on who gives and who receives. Those who think that a levy will depoliticise funding are not thinking things through.

Where research is concerned, there is an existing funding system in the shape of Gambling Commission licence fees (which already funds a range of research studies, including the flagship gambling prevalence surveys). An explanation is therefore required for why this mechanism might not be used to raise money for a suitably robust and coherent long-term programme of research (with divestment perhaps ceded to a competent and impartial research council if one can be found). Why the Gambling Commission has neglected a solution within its gift – while at the same time jumping aboard the levy bandwagon - requires explanation.

Establishment of need

The third issue is that – to date – no-one has managed to produce any detailed spending plans for the money to be raised by a levy. This is a shocking reflection on the state of the Gambling Commission’s National Strategy to Reduce Gambling Harms. A strategy without a budget is unlikely to have an operational plan in which case it is not in fact a strategy. In 2017, the Responsible Gambling Strategy Board indicated that funding for research, prevention and treatment might need to rise to as much as £76m a year but this was more a high-level guesstimate than a detailed budget. Discourse on the levy has generated considerable heat over recent years but precious little light in terms of assessment of need.

Such lax approaches to budgeting raise a related issue with hypothecation – that the money raised will not be valued. This is the ‘magic money tree’ risk that no-one will care whether funds raised are put to efficient use precisely because they are perceived to be ill-gotten gains. Indeed, it is common for proponents to make the case for a levy on punitive grounds – an act of penance without absolution – and this may give rise to perverse incentives to waste money. After all, the more that is frittered away, the more will be required. 

An economic cost arises if misspent funds might have been put to better use elsewhere. This is illustrated using funds generated by regulatory settlements. Since March 2019, a little under £36m has been awarded to organisations claiming to support the National Strategy. The process for awarding settlements is opaque, evaluation is almost non-existent, and it is far from clear who is responsible for ensuring that these investments are used effectively.

The development of the NHS Long Term Plan and a more coordinated National Gambling Treatment Service ought to bring a genuine strategy within our grasp – and this in turn must provide a detailed budget. Until that time, discussion of what proportion of customer expenditure operators should direct towards treatment (where the work is largely carried by hard-working charitable organisations and not the state) is likely to remain deeply subjective.

To levy or not?

There is a range of other issues too often ignored in the debate on levy. For instance, a simplistic requirement for all licensees to pay 1% of their revenues into a fund will lead to a system of double taxation with a tariff imposed both at the point of supply (B2B) and at the point of consumption (B2C). 

A levy is likely to impose additional costs on segments of the hard-hit hospitality industry (bingo clubs, casinos, seaside arcades and pubs) which may impede recovery (a small percentage of revenue can constitute a substantial part of profit). There are also critical questions of governance to ensure that the actions of any levy board are sufficiently scrutinised and that funds raised are used for their intended purposes and not for the pursuit of ideological or self-interested ends.

All of this is not to deny the need for a better, more sustainable system for funding prevention and treatment. If a coherent plan for research can be presented – one that roots out the problems of research as advocacy that have tainted so many institutions – then we might add that to the list too. The problem is however that the question of funding is almost always dealt with at the level of politics or dogma - often precluding intelligent, detailed analysis. The fact that so many different stakeholders appear to support a levy may be less indicative of common sense and more of a failure to tease out practical issues of why we need one and, if we do, how it should be operated.

Governments may decide that distinct levies are required to fund gambling disorder treatment and research – but the process of determination should address honestly the many challenges to the proposition. Failure to do so is likely to perpetuate rather than resolve dysfunction.

Note: This article refers to Great Britain rather than the United Kingdom. This is because gambling matters for Northern Ireland (except for the National Lottery) are not covered by the Gambling Act 2005, which contains the legislative provision for a statutory levy.

We are grateful to Regulus Partners, a global strategic advisory business focused on the sports and leisure sectors, for contributing this guest blog.