The Social Market Foundation is calling on the government to significantly increase Machine Games Duty on Category B electronic gaming machines, arguing that the current tax regime fails to account for the societal costs associated with problem gambling.

A Tax Realignment Argument

Tuesday’s report from the think tank proposed introducing a new duty band specifically for these higher-risk machines, with rates climbing beyond the current 20% baseline. It mirrors the government’s recent approach to remote gaming, where duty rose to 40% in 2025 based on harm criteria.

According to SMF modelling, doubling the MGD rate on Category B machines from 20% to 40% could generate between £275 million and £458 million annually. For each additional five percentage point increase, the Treasury could expect an extra £51 million to £114 million in revenue.

The Harm Question

The Foundation’s analysis reveals a striking disparity in problem gambling rates. Gambling Commission data shows that 26.5% of casino machine users and 16.9% of fruit and slot machine players score as problematic on the Problem Gambling Severity Index, compared with just 4.5% across all gambling activities. The SMF calculated the total annual economic cost of machine-related harms at £2.33 billion, including £669 million in direct fiscal costs to health, welfare, housing and crime services.

There’s a geography angle too. Adult gaming centres and betting shops, which account for 42% of all gaming machines in Great Britain, tend to cluster in the most deprived neighbourhoods. Nearly half of licensed AGCs operate in the bottom 20% of deprived areas, and those numbers keep climbing.

Public Backing, Industry Resistance

SMF polling found robust public support for tougher tax treatment. Some 43% of respondents favoured raising taxes on high-street slot machines, whilst only 11% supported lowering them. The Foundation argued this aligns tax policy with public health objectives rather than treating gaming machines purely as a revenue stream.

The Betting and Gaming Council swiftly rejected the proposal. Higher duty would devastate venues, close betting shops and casinos, and cost tens of thousands of jobs, the BGC warned. A BGC spokesperson noted the report made no attempt to quantify job losses or venue closures that would result from implementation.

The Economics Debate

The SMF modelled three operator responses to tax increases: absorbing costs through reduced profits, cutting operational expenses, or passing costs to consumers via worse odds. A likely outcome, the Foundation argues, would be reduced gambling expenditure redirected to retail and hospitality sectors, potentially creating 24,000 net jobs and adding £311 million to gross value added.

Whether this economic rebalancing justifies the disruption to established venues remains the central point of contention. The debate reflects a fundamental tension in gambling policy between public health objectives and economic interests on the high street.