FOI papers show DCMS warned gambling duty rise could backfire as Treasury pressed ahead
Freedom of Information documents suggest DCMS warned the UK Treasury that large gambling duty increases could miss revenue targets and boost illegal play through behavioural change, but Treasury pressed ahead as the Finance Bill enters a key parliamentary stage.
• Newly disclosed Freedom of Information papers indicate DCMS raised concerns about large gambling tax increases before the Budget, but Treasury proceeded.
• The documents show officials challenged assumptions in a July 2025 Social Market Foundation paper, including projected revenue gains and harm reduction claims.
• DCMS warned behavioural change could reduce receipts, with risks including lower returns to players, fewer offers, operator retrenchment, and movement to illegal gambling.
• Officials questioned claims that horse racing betting is materially less harmful and warned racing could still lose out without wider levy changes.
• The disclosures land just ahead of the Finance Bill report stage, as the sector faces imminent duty changes and heightened black market warnings.
Freshly revealed documents suggest the UK Treasury dismissed internal warnings from the Department for Digital, Culture, Media and Sport about the risks of large gambling tax increases, including the possibility that the measures could fall short of revenue forecasts and unintentionally strengthen illegal markets.
City AM, The Sun and The Racing Post have published coverage based on a bundle of Freedom of Information documents that record DCMS concerns about the assumptions underpinning proposals for higher gambling duties. The papers emerged ahead of the Finance Bill report stage next week, a parliamentary milestone viewed by some in the sector as one of the final opportunities to soften or reverse elements of the planned tax approach.
The documents, which are heavily redacted, relate to DCMS commentary on a July 2025 report by the Social Market Foundation. That paper argued for a differentiated tax increase across gambling products under a polluter pays framing and proposed an approach that would exempt horse racing. The analysis became a prominent reference point in the lobbying contest ahead of the Budget, particularly as campaigners sought to separate racing from the wider political debate around gambling reform.
According to the material cited, a DCMS official warned that the headline revenue estimates used in the Social Market Foundation modelling should be treated as an absolute maximum and adjusted for how both operators and customers would respond. The official highlighted potential behavioural effects, including reduced investment in the Great Britain market, operators passing cost increases to customers through lower returns to players and other changes, and customers moving spend to unlicensed providers.
In that context, the DCMS analysis concluded that revenue would likely rise after adjustments, but said it was highly unlikely to reach the levels projected by the Social Market Foundation. The documents also cast doubt on claims that higher duties would meaningfully reduce the fiscal costs of gambling harm, arguing that those already experiencing harm may be the least likely to reduce gambling spend. Officials warned there was a real risk that customers with higher indicators of harm could bear the burden of the tax increase, even if overall consumption fell at a population level.
Illegal gambling displacement was a recurring theme. The DCMS official noted that while the Social Market Foundation described black market warnings as an industry argument, the paper did not convincingly rebut the risk. The official added that the government did not have strong evidence on how much gross gambling yield could migrate to illegal operators in response to price rises, worse odds, fewer bonuses, or lower returns to players.
A second DCMS document questioned assumptions around horse racing. The official said there was not sufficient evidence to claim horse race betting is significantly less harmful than other comparable products. They also warned that an increase in sports betting duties could still damage racing due to low margins, unless an exemption was paired with changes to the Horserace Betting Levy, something the Social Market Foundation suggested but which could require additional legislative steps. Without mechanisms to ring fence any tax savings for racing, the official argued there would be no guarantee operators would support the sport, and funds could instead be shifted towards promoting other products.
The disclosures arrive as the industry prepares for the implementation of the first phase of duty changes from 1 April, with Remote Betting Duty rising to 40 per cent. Operators have already begun to quantify the financial impact. Entain said in its full year 2025 results that the changes contributed to a £488m non-cash impairment charge, widening its annual net loss. Evoke, owner of William Hill, has launched a strategic review, with industry observers suggesting a break-up outcome is possible.
Regulators have also signalled concern. The Gambling Commission has warned that it faces an inequality of arms against illegal operators backed by criminal gangs, increasing the focus on how policy decisions affect channelisation. Meanwhile, parts of the racing sponsorship landscape have shifted, with major operators' backing of certain events reportedly withdrawn, as relations between lobbying groups have cooled.
Despite hopes in sections of the industry for concessions, including calls for bonuses to be excluded from aspects of the duty changes, government messaging has remained firm. A Treasury spokesperson told City AM that reforms are intended to reflect the modern industry and its impacts while raising over £1bn per year to support wider priorities.
These papers matter because they show the internal policy argument was not simply industry versus campaigners. DCMS officials appear to have raised the same practical concerns operators have voiced publicly: revenue forecasting that assumes gross gambling yield remains static is fragile, and behavioural change is the whole point of a tax signal. If customers face worse value and fewer offers, displacement is not hypothetical; it is a plausible outcome in a market where illegal supply is one click away.
The most significant policy tension is the unresolved relationship between duty rates and harm reduction. A tax increase can reduce consumption at the margin, but it can also shift the burden onto those least able to afford it, while pushing more price-sensitive customers towards unlicensed alternatives. That is why the evidence gap flagged in the documents is so important. Without credible estimates of displacement, the government is effectively operating blind on the channelisation trade-off.
Racing is the political microcosm inside the wider debate. Attempts to carve out horse racing to reduce political resistance may not protect the sport if the surrounding duty regime changes operator economics and marketing incentives. If the system cannot ensure that any relief is actually reinvested into racing, the sector risks ending up with the worst of both worlds: higher costs in the regulated market and reduced sponsorship support, with no meaningful insulation from broader consumer shifts.
Sources
Why This Matters
iGaming Times analysis: FOI-disclosed inter-departmental disagreements are the cleanest evidence that the duty-rise decision was politically rather than analytically driven — DCMS, the sponsor department for licensed gambling, going on record warning of channelisation risk while the Treasury proceeded confirms the policy was set against the sector-evidence base rather than alongside it. The political durability of the duty rise weakens once the receipts data validates DCMS's warning; expect the FOI material to feature prominently in the next legislative-review cycle.
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