Documents seen by the Guardian cast doubt on whether figures should ever have played part in policy

This article is more than 1 year old

This article is more than 1 year old

The government’s controversial decision not to cut stakes on fixed-odds betting terminals (FOBTs) from £100 to £2 until October 2019 was influenced by a “discredited” secret report commissioned by bookmakers, it has emerged.

The chancellor, Philip Hammond, last week cited the need to mitigate job losses as a key factor in delaying the stake reduction, a decision that sparked outcry among campaigners and triggered the resignation of sports minister Tracey Crouch.

He told the Treasury select committee the industry estimated that between 15,000 and 21,000 jobs would be lost if FOBT stakes were capped at £2, meaning it needed time to prepare. This prompted committee chair Nicky Morgan to claim Hammond was putting gambling industry jobs above addicts’ lives.

Documents seen by the Guardian cast doubt on whether the figures, derived from a report written for the gambling industry by accountancy firm KPMG, should ever have played a part in policy decisions.

The report includes a disclaimer, written by KPMG itself, warning that key assumptions on which it was based were set by the Association of British Bookmakers (ABB).

KPMG said the report was “performed to meet specific terms of reference” agreed with the bookies’ trade body, adding that there were “particular features determined for the purposes of the engagement”.

“The report should not therefore be regarded as suitable to be used or relied on by any other person or for any other purpose.”

It said important estimates of whether customers would respond to FOBT stake reduction by spending on other betting products had been “agreed with the industry”.

Despite KPMG’s warning, the report was circulated among Treasury officials including Exchequer Secretary to the Treasury Andrew Jones MP.

He replied to ABB chief executive Malcolm George to say that the report “will make a valuable contribution to the evidence base”.

The credibility given by Treasury officials to the report shocked gambling company Paddy Power Betfair, which wrote to the prime minister to caution against it being used.

Paddy Power said its own evidence suggested that some of the assumptions in the report were “unrealistic”.

It cited the report’s prediction that just 50% of customers of a shop that ended up closing due to FOBT reduction would migrate to another outlet.

“Our evidence suggests a very high proportion (around 75%-90%) of customers move to other shops,” Paddy Power said.

It also cast doubt on industry claims that losing FOBT income would force thousands of shops to close.

It said that in the medium term “the business is not expected to see an increase in the number of shops that are loss making compared to the current position, and therefore does not expect to close any shops because of changes to FOBT stake limits.”

Paddy Power concluded that while the stake cut would have “some impact” on betting shops, it would be “far less severe than the depiction provided by the ABB”.

Labour MP Carolyn Harris, who has campaigned for FOBT stake reduction to be implemented as soon as possible, said: “The chancellor has apparently decided to delay the stake cut on FOBTs because of data in a widely discredited report.

“This is policymaking of the worst kind, not based on evidence and pandering to a corporate interest at the expense of the public interest and the protection of the vulnerable.”

Matt Zarb-Cousin, of campaign group Fairer Gambling, said: “Philip Hammond has got his sums wrong by basing them entirely on bookie-funded research that hasn’t been made available for public scrutiny.

“The job loss estimates by KPMG are greatly exaggerated, but irrespective of that the chancellor should be aware that FOBT spend yields far fewer jobs than if that spend was diverted to the wider economy as a result of a £2 cap.”

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A spokesman for the Treasury said: “We consulted widely with interested parties – including charities and all parts of the gambling industry – before considering all of the evidence and making a final decision.”

The timing of the stake cut has triggered widespread anger on both sides of the House of Commons.

A cross-party group of MPs seeking to overturn the delay are expected to table an amendment to the finance bill this week, in a bid to get the date of the stake reduction brought forward.

The amendment is understood to have the support of dozens of MPs, including more than 30 Tory rebels led by Iain Duncan Smith.

The nature of the parliamentary calendar means the amendment is likely to go to a vote at the same time as any Brexit deal that Theresa May brings back from Brussels later this month, raising the prospect of multiple bruising defeats for the government.