Machine Games Duty Could Double in the Autumn Budget, The Times Reports

Chancellor John Healey is said to be weighing an increase to the duty on gaming machines, a year after remote gaming duty went from 21% to 40%. A doubling would take the three bands to 10%, 40% and 50%, and analysts have told the Racing Post it would cost nearly 3,000 betting shops and around £70m of the racing levy.

• Chancellor John Healey is considering an increase to Machine Games Duty ahead of the Autumn Budget, according to a report in The Times
• A doubling would take the lower rate from 5% to 10%, the standard rate from 20% to 40% and the higher rate from 25% to 50%
• Analysts have told the Racing Post that a doubling could result in nearly 3,000 shop closures and reduce the horse racing levy by around £70m
• The Treasury is looking for revenue for defence spending and for cost-of-living measures, and Gordon Brown has called for the duty to be raised to fund winter fuel relief
• It follows the near-doubling of remote gaming duty announced in last year's Autumn Budget

The Tax the Shops Actually Pay

Machine Games Duty is under consideration for an increase in the Autumn Budget, according to a report in The Times cited by the trade press. Chancellor John Healey has been publicly non-committal about tax rises generally, and no rate has been proposed. The scenario being discussed is a doubling of all three bands: the lower rate from 5% to 10%, the standard rate from 20% to 40% and the higher rate from 25% to 50%.

The duty is charged on the net takings of gaming machines. That makes it the tax that falls most directly on the land-based estate, and particularly on the licensed betting office, where machine income has for years done the work that over-the-counter betting no longer does. Industry analysts told the Racing Post that a doubling could lead to nearly 3,000 shop closures and cut the horse racing levy, which is funded from bookmakers' gross profits on British racing, by some £70m.

The fiscal context is a Treasury looking for money for defence spending and for measures against the cost of living. Former prime minister Gordon Brown has called for the duty to be increased to fund relief on domestic fuel prices this winter, and a series of politicians have previously argued for gambling tax rises to support the NHS, grassroots sport and child poverty programmes.

The sector is arguing from a recent precedent it did not enjoy. Last year's Autumn Budget saw then-Chancellor Rachel Reeves announce a near-doubling of remote gaming duty from 21% to 40%, and the shop estate has been contracting since: Paddy Power said last week it would close up to 100 shops, a fifth of its estate, and William Hill announced 200 closures in March.

A Report Is Not a Policy, and This One Is Doing Work Either Way

Nothing has been announced, and pre-Budget reports of tax options under consideration are a genre with a poor conversion rate. But the report itself has effects. It gives the racing lobby a number to campaign against, it gives operators a reason to bring forward closure decisions they were already modelling, and it tests the political reaction cheaply. Anyone reading a doubling as settled is over-reading it. Anyone reading it as noise is under-reading the direction of travel, which for two consecutive Budgets has been upwards.

The Levy Number Is the One That Will Decide This

The £70m estimate for the racing levy is the figure most likely to move ministers, because it lands on a constituency the Treasury does not want to fight and because it is the only cost in this story that is not borne by a gambling company. Racing has spent the past two years arguing that gambling taxation is now its funding problem rather than the bookmakers', and a machine duty rise makes that case cleanly: the tax is levied on a product racing has no stake in, and the damage arrives through the shops that pay the levy. Expect that argument, not the operators' own, to be the one made loudest.

Twice in Two Years Changes the Question From Rate to Model

A single rise is a fiscal event. A second consecutive one starts to look like a settled view that gambling is an underpriced source of revenue, and at that point operators stop arguing about a percentage and start rebuilding around it. What that looks like in the shop estate is fewer, larger units in higher-footfall locations, with the marginal high-street shop closing regardless of what the final rate turns out to be. The 3,000-shop figure should be read as a scenario, not a forecast, but the closures already announced this year did not need a doubling to happen.

The Budget will decide the number. The estate has largely decided its direction already.