Insights Nigel Fairbrass

A weak hand

The UK gambling sector has been on a dismal losing streak.  Seemingly mired in perpetual tabloid scandal, the sector has become a byword for consumer exploitation.  Lurid headlines about children gambling, addictive products, suicides, and the appropriation of sport for commercial gain have provided the backdrop to a slew of new and proposed market restrictions.  With pressure building to introduce onerous personal financial protection measures, such as affordability tests and an industry ombudsman to arbitrate over disputes between bookies and punters, the betting industry risks becoming an off-shoot of the financial services sector, rather than a mass-market entertainment proposition.

These agonies may only be the beginning, however.  In the coming weeks, the government will launch its review of the 2005 Gambling Act.  Conceived before the advent of the smartphone and a wholesale shift to betting online, the Act ushered in a number of market liberalisations that now look set to be rolled back.  Alongside the ability to sponsor sports and advertise on TV, the industry’s freedom to take large bets online will be central.  Since introducing a £2 stake limit for fixed-odds betting terminals in shops two years ago, the government is under pressure to bring internet gambling into line.  But with little evidence to support the imposition of a specific £2 limit in shops in the first place, the decision to extend it online will be a purely political one, dependent on the government’s inclination to stick it to an unpopular sector.  In this respect, news that Number Ten is taking a direct interest in the gambling review should only increase the sense of apprehension among operators.

If the sector wanted to point the finger for this deep predicament, it does not have far to look.  A number of political miscalculations in recent years has been matched by an equally damaging commercial agenda.  In a UK market that appears to be ex-growth (on the basis of declining participation rates), operators have seemingly driven profitability by chasing a smaller and smaller pool of more ‘lucrative’ customers.  The acquisition and retention of these customers, sometimes the least savvy and most vulnerable, encouraged the development of business practices that now look predatory at best.  Management change and the clarifying effect of swingeing regulatory fines have certainly encouraged a more enlightened view, but the damage has been done.

The sector has also chosen its enemies poorly.  Rare is it to see high Tories, Labour MPs, the Church of England, the Daily Mail, The Guardian, and the public health community united on the same side of a debate.  Central to this unlikely alliance is the public health community, which has successfully co-opted the gambling debate by redefining it as a ‘public health emergency’, such that calls to shift gambling regulation from DCMS to the Department of Health are being taken seriously.

This public health strategy towards gambling follows three broad aims.  Objective number one is to induce a sense of moral panic, in which evidence-based policymaking can be legitimately jettisoned in favour of more immediate ‘precautionary’ measures.  In this respect, the gambling sector was an easy mark.  A chronic lack of data in vital areas of player welfare created a vacuum in which pseudoscience and bogus academic insight could go unchallenged.  The resulting ‘hidden epidemic’ of gambling harm is a classic of the post-truth genre.  Impossible to disprove without substantial evidence, but where a lack of proof becomes itself confirmation that the epidemic is hidden.

Priority two for the public health community is to demonise the sector to such a degree that it loses its ability to influence the policy debate about its own sustainability.  This prohibition, executed with a religious fervour, extends to anyone who might partner with the sector or receive money from it, no matter how noble or justified the cause.  The effective isolation of the industry from the debate about solutions to problem gambling frees public health professionals to contemplate a range of proposals without the inconvenience of having to justify their cost or practicality.  These solutions are inevitably population-based in nature, involve substantial monetary payments towards perceived healthcare costs, and are indifferent to the loss of utility experienced by people who may enjoy gambling and are not experiencing any harm whatsoever.

The final goal in the public health approach is to propose measures which restrict the pricing, availability, and promotion of products.  Whether that is a reduction in stakes and prizes, affordability checks, advertising bans, or warning labels, the aim is to de-normalise and commoditise the products and services the industry offers.

Faced with this formidable array of challenges, the gambling sector is not indifferent to what’s at stake, yet it continues to make a fundamental error.  In highly regulated businesses, it’s an ever-present risk that the instincts and awareness necessary to respond to changing social expectations become dulled over time.  The hard work and expertise necessary to chart the shifting sands of stakeholder interests are outsourced to the regulator or trade association, and the muscle necessary to change a business atrophies, into one that can only drive compliance.

It is precisely this compliance mindset that bedevils the gambling industry and stifles ambitions for radical change.  But this would not be a problem if the sector had a strong regulator that could defend its long-term interests.  Unfortunately, the Gambling Commission is itself in thrall to the public health lobby.  Its strategy is focussed exclusively on reducing gambling-related harms, leaving it commercially ignorant and politically weak as it lacks the insight to counter the more extreme attacks on industry conduct.  Subject to increasingly hostile briefings, the Commission is under growing pressure to demonstrate that it can bring operators to heel.  This has resulted in the regulator appeasing the industry’s critics by backing policies that have very little evidence to support them.

For their part, operators appear unable or unwilling to break the mould.  In seeking the comfort blanket of working through the Commission on key initiatives, they blind themselves to the Commission’s willingness to trade the industry’s interests for its own survival.  They also mistake their challenges as being just another political arm-wrestle that will result in a grand bargain and a return to the status quo ante.  Instead, the sector needs to build or rebuild its ability to not only diagnose social issues with its products and services but to demonstrate that it can effectively self-regulate where necessary.

In this regard, the appointment of Tom Watson as an adviser to Flutter Entertainment is a promising sign.  As deputy leader of the Labour party, Watson was a noisy critic of the industry, but he was also the proponent of some progressive policy ideas that are rapidly becoming mainstream.  In contrast to many parliamentarians, who appear about as ill-informed on the issues as they are willing to be heard on them, Watson and co-author Dr James Noyes demonstrated that they are more interested in government than campaigning.  In appointing Watson, Flutter is therefore clearly committing to a business change programme and Watson himself is gambling his own credibility on being able to author those reforms.

Some will argue that society’s attitude towards gambling has always ebbed and flowed according to the far stronger tide that runs between personal freedom and paternalism.  And that gambling faces obstacles in almost every country that enforces regulations.  Yet compared to another vice such as alcohol, gambling has failed to define a convincing argument around social value.  It may employ a hundred thousand people, contribute billions to the national exchequer in taxes and bankroll British horse racing, but the transactional nature of the sector has eclipsed its recreational value.  It has been too easily associated with the rentier economy, an exploitative industry that preys on the feckless and the vulnerable.

The long-term solution for the UK gambling sector is to redefine its purpose as a mass-market recreational activity.  As an entertainment proposition gambling should embrace consumer safeguards and recognise it has a clear duty of care to its customers.  If promotional freedoms outlast the forthcoming review, gambling should recognise a greater responsibility towards the sports and events it partners with, enhancing rather than obstructing fans’ enjoyment.

In no other consumer sector do you find the kind of antagonism that exists between a punter and a bookie.  Even the most ardent defender of gambling will delight in bankrupting his turf accountant come Saturday afternoon.  Gambling’s challenge is to retain that tension and the thrill of putting money at risk but accept that a sustainable future will probably be a less profitable one.  And only then might it break this losing streak.