Social Market Foundation Advocates for Increased Machine Games Duty on High-Risk EGMs

The Social Market Foundation (SMF), a prominent think tank, has called upon the UK government to significantly increase Machine Games Duty (MGD) on higher-risk Category B electronic gaming machines (EGMs) within the upcoming budget. The SMF argues that the present tax framework inadequately reflects the societal harm these machines cause, shifting the economic burden of problem gambling onto taxpayers.

In a report released recently, SMF chief economist Gideon Salutin and senior researcher Richard Hyde proposed implementing a new MGD band specifically for Category B machines, suggesting a rate beyond the current 20%. They modeled that doubling the MGD on Category B machines to 40%—mirroring the rate set for remote gaming in 2025—could generate between £275 million and £458 million annually. This higher figure assumes no change in player behavior, while the lower estimate accounts for a reduction in play. For every five percentage point increase above 20%, the report anticipates an additional yield of £51 million to £114 million. The think tank also suggested maintaining the 20% rate for Category C machines and 5% for lower-stake Category D machines.

The SMF's rationale is underpinned by data from the Gambling Commission, which indicates a disproportionately high incidence of problem gambling associated with machine-based casino games. For instance, 26.5% of casino machine users and 16.9% of fruit/slot players register problematic scores on the Problem Gambling Severity Index (PGSI), significantly higher than the 4.5% average across all gambling activities. The report further highlighted that adult gaming centres (AGCs) and betting shops, which house 42% of Great Britain's EGMs, are frequently found in economically disadvantaged areas, with nearly half of licensed AGCs located in the bottom 20% most deprived neighborhoods. The SMF estimates the total economic cost of machine-related harm at £2.33 billion per year, including £669 million in direct government expenditures on welfare, housing, crime, and health services.

Beyond fiscal revenue, the SMF contends that a reduction in gambling expenditure, potentially redirected to sectors like retail and hospitality, could spur net job creation. Their modeling suggests a 10% decrease in gambling outlays could lead to 24,000 net new jobs and boost gross value added (GVA) by approximately £311 million. This perspective is supported by public opinion, with polling commissioned by the SMF in April 2026 showing 43% of respondents favored increasing taxes on 'slot machines in high street betting shops,' while only 11% opposed it.

However, the Betting and Gaming Council (BGC) has strongly rejected the SMF's proposals. A BGC spokesperson stated, "We fundamentally oppose any increase in Machine Games Duty, and nothing in this report justifies such a damaging policy." The BGC warned that such a tax hike could severely damage high-street gambling venues, leading to widespread closures and thousands of job losses, thereby weakening local communities. They argued the SMF's report failed to quantify the potential negative impact on venues and employment.

Echoing these concerns, advisory firm Regulus Partners presented a stark forecast, anticipating significant disruption to the retail gambling sector. Regulus estimated that roughly 70% of betting shops (around 4,000 of 5,500) and 90% of AGCs (approximately 1,300 of 1,450 sites) could be forced to close. Despite a potential doubling of average revenues for remaining venues, overall Category B gaming machine revenue would drop substantially, with betting shop revenue falling from £1.2 billion to £600 million and AGC revenue from £550 million to £115 million. Consequently, Regulus projected that applying a 40% MGD rate to a much smaller revenue base would result in overall tax receipts remaining largely static or even decreasing. They also estimated up to 43,000 direct industry job losses, a £100 million reduction in media rights payments and levy income for British horseracing, and a diversion of half of the displaced gaming machine revenue to the black market. The SMF, in turn, contested the notion of a wholesale shift to illegal gambling, arguing that in-person illegal operations are harder to conceal and international data does not clearly link remote gaming tax rates to black market prevalence.