More problems could be on the way for the UK’s gambling industry. In addition to stricter regulation and April’s tax increases, there’s the possibility of higher licence fees to pay to the UK Gambling Commission (UKGC).
The Department for Culture, Media and Sport (DCMS) have given details of a consultation period until 30 March on whether the current level of licence fees should be increased. The increase could reach 30%, according to Dailystoke.com, an online magazine covering casino gambling and entertainment.
The possible licence fee increase is being considered as a way to fund a current shortfall in the amount needed to fund the enforcement action that is carried out by the UKGC and their continued efforts against the UK’s black market. The latter is a major concern and consists of companies that do not hold a licence with the UKGC.
Those who will be taking part in the consultation include sites who operate legally in the UK market. Also participating are consumer groups, local authorities, gambling industry trade organisations and the general public. A similar process has been carried out for other possible changes to how the UK’s gambling industry is regulated.
There are three core options that have been included in the consultation which began on 27 January. All of them would see some increase made in the licence fee. The consultation document explained that the operating licence fees had not been reviewed for five years. In this time, the UKGC “has increased its investment in areas including disrupting the illegal gambling market, implementing reforms from the Gambling Act Review White Paper and developing its data capabilities.”
This additional work plus inflation has resulted in “successive annual budget deficits and has eroded its financial reserves.” Hence the need to see an increase in licence fees. Just how much is paid is determined by the use of turnover-based fee bands. At present, a remote casino operator that has an annual gross gaming yield of over £1 billion pays £739,729 a year. In addition, there’s a further £125,000 to pay for every additional £500 million above the £1 billion mark.
The UKGC is in favour of the average 30% increase option. They believe this represents the shortfall that currently exists between the income being received from licence fees and the cost of performing their chargeable functions. It is believed the rise would see an additional £8.7 million being received each year.
This would enable them to fund their current work “at a steady state,” allowing them to “continue to deliver its 2024 to 2027 corporate strategy and subsequent priorities.” However, it does not include any UKGC growth or investment they make in “additional regulatory functions.”
Other options are a 20% increase but that would see the UKGC needing to make savings of £15.8 million and possibly cut staff by 10% in the next six years to 2030-31. If this option goes ahead, there would be a need for the commission to repriortise their work. Some areas of their work would either be slowed down or stopped altogether. That would allow them to focus on core regulatory activities and statutory duties. This could see them being unable to investigate some suspected regulatory breaches.
The other option would see a 30% increase but under certain terms. Annual operating fees would rise by 20% to raise funds for commission-related costs. A further 10% increase (around £2.6 million) would be ring-fenced and used for specific regulatory priorities such as dealing with illegal sites and strengthening enforcement capabilities.
The government is believed to be in favour of this option. It fits in well with their desire to protect players from gambling harm as has been seen in decisions to introduce a mandatory levy and increase remote gaming duty. The consultation document says that they want to “protect the integrity of the licensed gambling market from other criminal threats.”
Once the consultation period comes to an end, the DCMS will then review the responses received. A decision will then be made whether to proceed with the changes. If that is so, secondary legislation would be required with the changes due to be implemented from October of this year.
The results of the consultation period are going to be of great interest to the UKGC and the UK’s online casinos. The UKGC will obviously want to see an increase that allows them to carry out their duties and avoid job cuts. However, an increase in licence fees will be another financial blow for the gambling industry who are already faced with stricter regulation and increasing costs.
If the additional licence funds were used to take further action against the black market, that would be good news for licensed UK online casinos who are losing business to the illegal sites. It will be interesting indeed to read the results of the consultation period and what action will be taken.
