UK Chancellor of the Exchequer John Healey has raised Machine Games Duty (MGD) from 20% to 25% on higher-stakes gaming machines, an increase below the 40% rate floated before Wednesday’s budget.
Lower-stakes Category C and D machines found in pubs are exempt, in line with a proposal from the think tank Social Market Foundation (SMF).
MGD is levied on the profits generated by gaming machines in betting shops and arcades. Healey said the extra revenue will fund an increase in the small business rates relief threshold for retail, hospitality and leisure businesses, from £12,000 ($16,000) to £18,000 ($24,000).
“Madam Deputy Speaker, to pay for this support for our high streets, I’m raising taxes on gambling by increasing Machine Games Duty from 20% to 25% for higher-stakes machines, whilst protecting pubs and seaside arcades,” Healey told lawmakers.
Healey also said he would “carve out Adult Gaming Centres and vape shops from business rates relief,” meaning slot arcades will not benefit.
The plan appears to have had input from Prime Minister Andy Burnham. “I’ve heard calls from members across this house, and a call from one member in particular, the Right Honourable Member for Makerfield,” Healey said.
Months of pressure for a 40% rate
The SMF first called for a substantial MGD increase in June to curb gambling harm and raise public revenue. Reports later indicated the chancellor was weighing a rise to 40%, and MP Alex Bassinger called for a doubling of the duty last week.
A 40% rate would have matched Remote Gaming Duty, which Healey’s predecessor Rachel Reeves raised from 21% to 40%, effective April. The change has led to widespread job losses, and Flutter this month moved to cut its UK&I headcount by up to 16%.
Industry groups argued that doubling MGD would cost more than it raised and damage the sector’s contributions to horse racing. The Betting and Gaming Council (BGC) cited EY modelling showing a doubling could cost up to 16,000 jobs and close almost 1,500 betting shops and 34 casinos.
Betfred co-owner Fred Done said an increase close to 40% would lead the bookmaker to close every one of its nearly 1,300 shops.
SMF chief economist Gideon Salutin welcomed the decision, citing the greater harm of machine gaming. He said the rise, combined with other tax measures, would fund the high public costs seen in crime, healthcare and housing.
“However, today’s rise is relatively limited, and we are sceptical that such a small rise to MGD will have significant impact on industry behaviour,” he added.
Operators warn of closures
The BGC expressed “deep disappointment and concern” at the decision and warned that 9,000 people may lose their jobs, with 1,000 venues at risk of closure. BGC CEO Grainne Hurst said the chancellor had ignored “repeated warnings” about the consequences.
“This is a deeply damaging decision and a blow to the thousands of workers, businesses and communities who depend on Britain’s regulated betting and gaming industry,” Hurst said.
“These venues will not simply be replaced, particularly in places already struggling to attract jobs and investment,” she added.
Sarah Calakovic, regional manager at Buzz Bingo in Kent, told the BBC that a 5% increase in MGD would put around 40% in loss-making territory. Although bingo is the main income source, she said gaming machines are the “secondary source of income.”
Casino groups seek certainty
Rank Group CEO Richard Harris warned in a recent trading update that any MGD increase would raise costs, reduce venue viability, lead to closures and job losses, and cut tax receipts. He added that uncertainty over tax policy had halted further investment.
“If the tax rate on machines goes up, then venues become unviable. We’re very rational people. If you’ve got a non-viable venue that you can’t make work over a three-to-five year time period, that venue closes,” Harris said.
Genting Casinos COO Paul Willcock told a panel event earlier this month that the company was “itching to invest” in the UK, but only with stability.
“If we can get some relaxation or at least certainty on that, then investment will flow,” Willcock said.