A gam­ble too far Nils Prat­ley

The Guardian - - FINANCIAL -

The gam­bling firms’ de­fence of fixed-odds bet­ting ter­mi­nals has failed. It is now an odd­son prob­a­bil­ity that the gov­ern­ment will cut max­i­mum stakes from £100. How did this hap­pen to an in­dus­try that, de­spite com­pelling ev­i­dence of so­cial harm done by their machines, seemed to have might on its side?

The book­ies could point to the sub­stan­tial sums of tax they pay the Trea­sury. They warned, with jus­ti­fi­ca­tion, that thou­sands of em­ploy­ees could lose their jobs if more high-street premises be­come un­eco­nomic to run. They ar­gued – again, soberly – that lower stakes on the high street might drive some prob­lem gam­blers to­wards the wild west of the in­ter­net.

It hasn’t worked. The only live ques­tion is whether the gov­ern­ment re­duces max­i­mum stakes to about £25 or grants cam­paign­ers’ wish and set­tles on £2. Ei­ther way, the sums that the book­ies col­lect from the fixed-odd machines – Brits lost an as­ton­ish­ing £1.8bn last year – seems set to fall.

The book­ies have only them­selves to blame. Roulette, the machines’ core of­fer­ing, is a nasty prod­uct in the sense that it is a game of chance where the house’s edge is set in stone. It is dif­fer­ent in char­ac­ter from tra­di­tional book­mak­ing, where the bookie must weather the oc­ca­sions when Frankie Det­tori wins all seven races at As­cot.

If New Labour, when it al­lowed the machines on to the high street, didn’t un­der­stand the dif­fer­ence, the book­ies had no ex­cuse. The “crack co­caine of gam­bling” la­bel has stuck to the machines be­cause it is ba­si­cally cor­rect: roulette, es­pe­cially in elec­tronic form, has a par­tic­u­lar power to en­cour­age some play­ers to chase their losses. The ar­rival of the machines was a mo­ment for the gam­bling in­dus­try, if it val­ued its own long-term in­ter­ests, to en­sure its fine words about en­cour­ag­ing “re­spon­si­ble gam­bling” meant some­thing.

No in­dus­try is per­fect, but some of the cock-ups have been ex­tra­or­di­nary. The firm 888 copped a £7.8m penalty from the Gam­bling Com­mis­sion last month af­ter 7,000 peo­ple who had vol­un­tar­ily banned them­selves from gam­bling were still able to ac­cess their ac­counts. Last year, the com­mis­sion re­ported that Paddy Power had en­cour­aged a prob­lem gam­bler to keep bet­ting un­til he lost five jobs, his home and ac­cess to his chil­dren.

Or try yes­ter­day’s tale about the grubby mar­ket­ing tac­tics em­ployed by “af­fil­i­ates” chas­ing finder’s fees for de­liv­er­ing pun­ters to the doors of the big firms. The book­ies could have closed down that racket years ago by pay­ing only prop­erly vet­ted af­fil­i­ates.

Not all the scan­dals have in­volved fixed-odds machines on the high street – the 888 one didn’t. But they have all eroded trust and forced the con­clu­sion that stakes must be cut be­cause the in­dus­try can’t run an or­derly house.

The tale could have been dif­fer­ent. The firms could have ex­pended less en­ergy on bel­liger­ent lob­by­ing and more on con­tain­ing the dan­gers from the machines. Too late now.

Burst­ing bit­coin’s bub­ble

Jamie Di­mon, boss of JP Mor­gan, says bit­coin is a fraud that is only fit for use by drug deal­ers, mur­der­ers and peo­ple liv­ing in North Korea. He’s right.

The idea that govern­ments are go­ing to stand idle in­def­i­nitely and al­low bit­coin and its cryp­tocur­rency im­i­ta­tors to by­pass bank­ing sys­tems and reg­u­la­tors is surely fan­ci­ful. As Di­mon ar­gues, coun­tries like to con­trol their cur­ren­cies and their money sup­ply, which means en­sur­ing that a cen­tral bank and a legal sys­tem stands be­hind the process.

His other point is that bit­coin looks to be a bub­ble. That is al­most unar­guable. One unit of a nor­mal cur­rency should not surge in value from $500 to al­most $5,000 in lit­tle more than 18 months, as bit­coin has. This is spec­u­la­tion upon spec­u­la­tion. The end will ar­rive when the late ar­rivals get burned in the crash. Stay well away.

More is bet­ter at Sky

They be­lieve in bet­ter at Sky, or should that be more? Jeremy Dar­roch has emerged yet again as one of the best­paid chief ex­ec­u­tives in the FTSE 100. He col­lected £16.3m last year as a longterm in­cen­tive plan came good and paid out £11.8m.

Dar­roch is an ex­pe­ri­enced op­er­a­tor and Sky, what­ever you think of the Mur­dochs’ plan to own 100% of it, is an im­pres­sive com­mer­cial beast. But the pay com­mit­tee may have for­got­ten that the broad­caster’s share price was stuck at a three-year low be­fore 21st Cen­tury Fox turned up with its of­fer.

The near-£12m award may be jus­ti­fied by the per­for­mance con­di­tions (they al­ways are), but it’s a hell of a sum in the cir­cum­stances.

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