UK raises machine games duty to 25% on higher-stakes machines

UK Chancellor of the Exchequer John Healey has raised Machine Games Duty (MGD) from 20% to 25% on higher-stakes gaming machines, according to the budget announcement. The increase is below the 40% rate that had been floated before the budget. Lower-stakes Category C and D machines in pubs are exempt, in line with a proposal from the Social Market Foundation (SMF).

The duty applies to profits that gaming machines earn in arcades and betting shops. According to Healey, the money raised will pay for lifting the small business rates relief threshold for retail, hospitality and leisure firms from £12,000 ($16,000) to £18,000 ($24,000). He also pledged to "carve out Adult Gaming Centres and vape shops from business rates relief," which leaves slot arcades without that benefit.

Healey told lawmakers: "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." He said he had heard calls from members across the House, and from one member in particular, the Right Honourable Member for Makerfield. The plan appears to have had input from Prime Minister Andy Burnham.

In June the SMF urged a large rise in MGD, arguing it would both reduce gambling harm and boost public funds. Later reporting suggested the chancellor was considering 40%, and last week MP Alex Bassinger backed doubling the duty. Such a rate would have been level with Remote Gaming Duty, which Rachel Reeves, Healey's predecessor, lifted from 21% to 40% with effect from April.

That earlier change brought significant job losses, and Flutter moved this month to reduce its UK&I headcount by as much as 16%. Trade bodies contended that a doubled MGD would take more than it brought in and harm what the industry gives to horse racing. EY modelling cited by the Betting and Gaming Council (BGC) put the potential toll of a doubling at up to 16,000 jobs, almost 1,500 betting shops and 34 casinos. Fred Done, co-owner of Betfred, said a rise near 40% would prompt the bookmaker to shut all of its nearly 1,300 shops.

Gideon Salutin, chief economist at the SMF, praised the outcome and pointed to the heavier harm caused by machine gaming. In his view, the increase alongside other tax steps would cover the large public costs arising in crime, healthcare and housing. He added: "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."

The BGC reacted with "deep disappointment and concern," cautioning that 9,000 jobs could go and 1,000 venues could shut. Its CEO, Grainne Hurst, accused the chancellor of disregarding "repeated warnings" about what would follow. "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," she said, adding: "These venues will not simply be replaced, particularly in places already struggling to attract jobs and investment."

In an interview with the BBC, Sarah Calakovic, a regional manager for Buzz Bingo in Kent, said a 5% MGD rise would leave roughly 40% of venues making a loss. Bingo brings in the primary revenue, she explained, while machines provide the "secondary source of income."

In a recent trading update, Rank Group CEO Richard Harris cautioned that any MGD rise would push up costs, weaken venue viability, cause closures and job losses, and lower tax receipts. Tax policy uncertainty, he added, had already stopped 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," he said.

Paul Willcock, COO of Genting Casinos, said at a panel event earlier this month that the company was "itching to invest" in the UK, though it needed stability first. "If we can get some relaxation or at least certainty on that, then investment will flow," he said.