The culture of high risk credit is being exploited by betting shops

May 19, 2013 4:00 pm

Since the financial crisis, the perfect storm of recession and banks restricting access to credit has led to the rise of payday lenders. Our high streets are slowly deteriorating from the vibrant, diverse places they once were into an abyss of pawnbrokers, payday loan shops and bookies.

The three feed off of each other, targeting some of our most deprived areas and perpetuating a cycle of despair driven by the need for extra income. Research carried out by Geofutures found there to be 2.4 times the amount of betting shops in areas of high unemployment than in areas of low unemployment, and bookies are clustering as the Gambling Act 2005 limits each shop to four Fixed Odds Betting Terminals, or FOBTs. These machines are lethal, highly addictive roulette and casino gaming machines, upon which it is possible to stake up to £100 every 20 seconds. For this reason, many see it as a quick way to make a bit of extra money.

So why should this concern us? FOBTs have been described as “the crack cocaine of gambling” and there is empirical evidence linking them to problem gambling. The last thing some of our most deprived areas need right now is more social problems. Then there is the economic impact. A report by Howard Reed of Landman Economics found that for every £1bn spent on FOBTs, 7000 jobs were created by the industry but 20,000 jobs were lost in the wider economy as FOBTs are a very “labour unintensive” form of consumer spending. In 2012, I witnessed this first hand when I visited Newham, as what was once a pub, probably employing up to 10 people was now a BetFred employing two or three staff on minimum wage yet sucking more than £3,500 per week out of the area from FOBTs alone. In 2012, £1.4bn was lost on FOBTs across the country, and Mintel project this will rise to £2.2bn by 2018. Landman Economics predict, based on growth in real terms, FOBT revenue will increase to £1.7bn by 2016 and £3.4bn by 2023 – and this is money that’s coming primarily from our poorest areas.

Newham is an interesting case study, as they have 24 betting shops and have recently rejected an application from Paddy Power for number 25. The proposed site is on Green Street and would be situated 100 yards from another Paddy Power and less than 50 yards from a Ladbrokes, which is opposite another Ladbrokes. You really have to see it to believe it. The Council have rejected the application on the basis that the shop will not be used for traditional, over the counter betting – which is what the license is for – but for gaming on FOBTs. Because of the limit of four FOBTs per shop, betting shops cluster to allow for as many as possible, so this is evidence alone that the primary gambling activity in these shops is gaming and not betting. According to Ladbrokes’ most recent accounts, 52% of their profits and 83% of their turnover is derived from FOBTs. The case in Newham is going to Magistrates’ Court on the 10th June, and if they are successful other local authorities will be able to successfully reject betting shop license applications on this basis.

It’s great that Labour have committed to sticking bookies in their own use class if they win the next election, but this looks to have led to the bookies bringing forward loads of capital investment to prepare for that eventuality. As a result, the PLCs Ladbrokes, William Hill, Coral and Paddy Power are planning 245 new shops in 2013. Add BetFred and independents to that and we’re looking at another 300 betting shops this year.

So what can we do? We set up the “Stop the FOBTs” campaign as we believe the proliferation of betting shops is driven by FOBTs, and this is having a parasitic effect on some of our most deprived areas. We’re also concerned about their link to problem gambling, so the Government must reduce the maximum stake from £100 to £2. If you want to set up a local campaign, please get in touch with me matt@fairergambling.org and we can advise you on how to go about objecting to new license applications or building a grassroots movement.

The more people we have on board, the more likely it is we will succeed.

  • Quiet_Sceptic

    Isn’t the issue wider than FOBTs?

    We’ve now got internet gambling so people don’t even have to leave their own homes, if you shut down the FOBTs there’s still lots of easily accessible outlets for those desperate to gamble, it’s just less visible and off the high-street. Plus with the deregulation of advertising we now have gambling companies pushing their betting sites, casino sites, bingo sites (the list goes on…) pretty much at every advert break.

    I think on this issue we need a return to ‘Old’ Labour where the gambling industry is something to be wary off, allowed to operate but heavily regulated.

    • MrSauce

      In the age of the Interweb, regulation will be impossible.

      • Richas

        The Gambling Bill (Licensing and Advertising)Bill that is in parliament now is going to have a good try at it with every supplier of gambling in the UK obliged to get a license and play by the rules. This is an important consumer protection that Labour is backing. It will also allow taxation, stopping the offshore tax avoidance by mainstream UK bookie brands.

        It is a lot more important than this fanatical anti FOBT campaign which is really about protecting the US patents of the campaign founder and funder Derek Webb.

  • JoeDM

    Remind me. Which was the party of government that wanted deregulation and the huge expansion of ‘super casinos’ back in 2006?

  • Richas

    Matt you did not set up Fairer Gambling or Stop the FOBTs their current offshoot, you work for them. Derek Webb founded Fairer Gambling along with his partner and they fund the campaign. They can afford to do this because Derek invented three card poker and patented it in the US. He also had a range of other gambling and remote gambling patents which he sold to Galaxy Gaming for $23m. $800k in shares of Galaxy Gaming and the rest via two promissory notes (one in $ the other £) which have many years to go before they pay out in full.

    Derek started his campaign against FOBTs when he found one using a version of three card poker(brag) that he could not get licence money for. In part this was that the game was a little different but mostly it is that in the EU you cannot patent games at all. He and Galaxy Gaming only have copyright protection for their brands in the UK. If the FOBT brands for these self same games are stronger the casinos will choose them over Galaxy Gamings products and Derek’s $23m is at risk of never being paid. This is the reason for the foundation of the campaign as becomes very clear when you analyse Fairer Gambling’s input to the DCMS consultations where they lobby for lower casino tax, easier planning for casinos, removal of licence checks on dealers in casinos and much more for the casino industry and Galaxy Gaming.

    You quote two bits of research. The geofutures one was done for the Dispatches programme Fairer Gambling were involved with. I suspect Derek funded it. Fairer Gambling certainly funded the Landman Economics work which you quote but has not been published so I can check it. All the research you quote is not independent it is from Derek’s urging or pocket. Actually both tell us very little. Bookmakers cluster like all other retail outlets in high streets. ATMs, self checkout tills or machine gambling are not labour intensive. We know this. Both studies are examples of research paid for to find out what we knew already. That is why they were paid for.

    The Stop the FOBTs campaign would be better categorised as the stop competition with casinos and Galaxy Gaming campaign. There has been no sudden rise in FOBT numbers in the past 4 years. The number of bookmakers has been stable for a decade, they are just more visible now on our high streets. The modest rise in FOBT takings over the past 3 years comes from more choosing to use them but bookmakers revenues are down in real terms over the past few years. There is no sudden plague, it is a myth created in part by this campaign and in part bookmakers moving from side street to high street locations.

    Matt you are clearly a bright guy and a good communicator. It is nice that Derek has hired a couple of Labour Party members to front his campaign but Galaxy Gaming the source of that money is having some problems. They have just been refused a licence in California and are under investigation in Nevada. The long and sordid tale is detailed in the link below but if Galaxy Gaming loses its Nevada licence because of the CEOs financial woes (as seems likely) then the cash for this campaign is likely to dry up. I suggest you dust off your CV. The campaign has been effective Mail, Independent, Guardian, Panorama, Dispatches, Express, loads of local paper coverage too,. TV stuff in the regions. A great PR campaign, everyone has heard it. me I am sick of it and it makes me question the diversity of our media but best use the CV value it adds soon.

    http://www.vegasinc.com/news/2013/may/17/board-tells-las-vegas-table-game-maker-stay-out-ca/

  • MonkeyBot5000

    the Government must reduce the maximum stake from £100 to £2

    Because then it will be the same as the lottery and the National Lottery definitely isn’t a math tax, honest.

    This is the result of Labour’s legislation so you can’t really complain about it. If you want to stop gambling, you need to start in schools. Gambling is a great way to teach kids about maths and get them to understand that the only guaranteed way to win is to run the book.

  • disqus_lfcFemAKi5

    If Labour had not removed the Demand test, high streets would not be saturated

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