A lower maximum at FOBT terminals will not stop gambling addiction

A Lower Maximum At FOBT Terminals Will Not Stop Gambling Addiction

The United Kingdom is now planning to cut the maximum bet from £100 to something between £2 and £50. The exact maximum will be decided in 12 weeks, by January 23. The losers will be Ladbrokes Coral Group and William Hill, with some damage to Paddy Power Betfair. The new maximum will probably be a lot closer to £50 than to £2, this from internal government documents indicating that cutting the maximum to £50 would cost £35M over 10 years, but to £2 would see £639M lost.

A Lower Maximum At FOBT Terminals Will Not Stop Gambling AddictionThe projection is silly, but the point of it isn’t the exact number. By releasing these documents the UK government is saying that it prefers a higher maximum so as not to look like it is trying to actively destroy an industry. The projection itself has little economic value because the lost money is going to go somewhere else. Higher stakes in sportsbook, more business at brick and mortar casinos, or more online gambling volume. Paddy Power Betfair seems to be aware of this, and its CEO has urged the maximum to be cut to £10 at most. A shrewd move if the company is trying to stay on the good side of public opinion, but thinks that a major cut in the maximum is inevitable. If this comment adds anything, it’s that the minimum maximum will be £10, so we have a loose range of £10 to £50.

In the long run the move away from FOBT machines will probably end up being a net positive for the UK gambling industry. Since FOBTs are big, hulky, tangible, visible things, blame for the ills of gambling addiction can be pinned on them. It’s an anchor for public ire, like a good luck charm is an anchor for positive thoughts. If someone becomes addicted to online gambling though, there is nothing tangible for public mass hysteria to attach itself to. If online gambling addiction causes poverty, there will be nothing physical to point to in an academic study that can be assigned the blame, and revenues from gambling addicts will keep flowing without as much public protest.

Even the media is admitting that a cut in the maximum FOBT bet is being sponsored by FOBT competitors, who, obviously, will be sucking up the lost FOBT revenues. Except this truth is being buried in the middle-to-end of the articles, with the headlines focusing on the FOBT side inserting its own material into the debate. In The Guardian’s headline piece on the issue earlier this week, the title for example reads “Fears over betting lobby’s influence on MPs in fixed-odds terminal debate,” fooling the reader into thinking that the lobbyists looking to influence are on the FOBT side of things. But that’s not exclusively the case.

One can hardly blame FOBT operators for trying to save their business by trying to convince MPs of their arguments. What else are they supposed to do, really? Then comes the other side, buried deep in the article:

Officials at the Department for Digital, Culture, Media and Sport (DCMS) privately acknowledge that limiting proposals to betting shops may favour amusement arcades, bingo halls and pub chains that have vocally lobbied against betting shop terminals…

The arcades, bingo halls and pubs fund the all-party parliamentary group that has led the fight to clamp down on betting shop terminals. But they have their own types of gaming terminal that fall under what the government terms a B3 licence, on which punters can lose almost as much money as playing those in betting shops.

So there you have it. Both sides are in on it, trying to sway the politicians in both directions. The moralists are simply pawns in the middle being used by one side for public relations purposes. They really have no understanding of the economics behind each side.

One of the more powerful economic ignoramuses in the fight is Newham mayor, Sir Robin Wales. The knight in political armor wants the bookies to close and “give us back part of our high street.” Which raises the question, did they “take” any part of the high street? Or did they rent or purchase it from willing landlords? Wales was subsequently insulted when he was told by Malcolm George, CEO of the Association of British Bookmakers, that the betting shops would be replaced with “grotty amusement arcades,” responding that George had no right to his opinion, and that the shops would instead by occupied by—get this—clothing salesmen and the like.

Which raises another question. If clothing shops would be so successful on the high street, why aren’t they there now instead of the betting terminals? I would venture to guess that the demand for new clothing in poor neighborhoods is not high enough to sustain a clothing business, which means they probably won’t be replaced by clothing shops. Rather, they will be replaced by the closest legally available good to what is now illegal, which would most likely be “grotty amusement arcades” where, in the Guardian’s own words, “punters can lose almost as much money as playing those in betting shops.”

Wales goes on by citing the correlation between the number of bookmakers (A) and the level of poverty (B) in a city, and then assuming that (A) causes (B). His conclusion is that bookies have “sucked £20M out of Newham in a year,” and that bookmakers “targets people who are poor.” This raises yet another obvious question. If bookmakers can just suck money out of whole cities at will and target people so successfully, why do they always pick the poorest cities with the least money and the poorest people? Are they stupid? Why don’t they set up shop in rich neighborhoods and target rich people with more money? Probably because it doesn’t work, and they just set up shop where the demand is highest. The most demand is in the poorer areas, while richer gamblers can afford higher class venues like brick and mortar casinos.

In the end the war over the FOBTs is unlikely to change a thing except the way high stakes gambling is played in poor neighborhoods. Gambling addicts will migrate to something else that satisfies them, but this time it will be less tangible and visible, and more under the radar. Maybe the underground illegal drug industry will burgeon and get some of the lost revenue from FOBTs. Of course, if that happens and cocaine abuse worsens or some such thing, none of those campaigning against FOBTs will blame themselves. Not a chance. It won’t even be an inkling.

The problem of addiction will not be improved, but all those involved in curtailing the FOBT maximum will give themselves a big pat on the back nonetheless and move on to the next issue that tickles their heart strings.