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The Gambling Commission's supplementary advice to Government to inform a consultation on the design and implementation of a statutory levy.
Published: 17 November 2023
Last updated: 17 November 2023
This version was printed or saved on: 22 May 2025
Online version: https://www.gamblingcommission.gov.uk/about-us/guide/advice-to-government-design-and-implementation-of-a-statutory-levy
Overview: Government is making progress towards its White Paper commitment to introduce a statutory levy with the Department for Culture, Media and Sport (DCMS) recently publishing a consultation on the statutory levy on gambling operators (opens in new tab) proposing how the levy will be designed and implemented. We welcome the government’s consultation and the articulation of the Gambling Commission’s administrative role within that consultation.
As part of developing proposed legislation for a levy, DCMS asked the Commission to provide advice, primarily on practical issues associated with the administration of a levy, in line with requirements under the Gambling Act to consult the Commission if introducing Regulations. Officials considered the advice as part of developing their consultation.
This document builds on our formal Gambling Act Review Advice to Government which included advice on the topic of wider funding for research, prevention and treatment such as through a levy. We now provide further details on issues associated with the administration of a levy.
This supplementary advice covers some more detailed aspects to aid DCMS’ consideration during the consultation period and beyond and we will continue to work closely with DCMS to understand the outcomes of that consultation and develop the Commission’s administrative role over the coming months.
The Gambling Commission is the independent regulator of commercial gambling in Great Britain. As part of its role, the Commission provides formal statutory advice to the Secretary of State under Section 26 of the Gambling Act 2005 (opens in new tab) (the Act).
From December 2020 to March 2021, the Department for Digital, Culture, Media and Sport (DCMS) conducted a Call for Evidence on the effectiveness of the Gambling Act 2005 (opens in new tab) which sets out how gambling in Great Britain is regulated.
The Secretary of State asked the Commission to provide advice on government policy and legislation in relation to gambling and specifically on each of the topics of the Gambling Act Review. The subsequent White Paper, High stakes: gambling reform for the digital age (opens in new tab) and our Full advice to Government - Review of the Gambling Act 2005 were published on 27 April 2023.
One of the commitments in the White Paper was that government would introduce a statutory levy paid by gambling operators and collected and distributed by the Commission under the strategic direction and approval of HM Treasury and DCMS ministers. Government committed to consult on the details of how the levy will be designed including proposals on the total amount to be raised by the levy and how it will be constructed, ensuring that a rate is fairly and proportionately set, and taking into account the differing association of different sectors with harm and/or their differing fixed costs.
In our formal advice to Government in April 2023, we recommended that ‘the mechanism for funding research, prevention and treatment should no longer be based upon a system of voluntary contributions’ and that ‘Long-term, sustainable funding mechanisms are needed, though these may differ for each of research, prevention and treatment.’ We also noted that the Gambling Act Review provided government ‘with an opportunity to resolve the longstanding issues that are inherent with a voluntary system and implement a more robust approach that will deliver an effective, sustainable, and appropriately funded reduction in harms from gambling.’.
Our advice sets out that despite the additional funding commitments made by the largest gambling operators in recent years, increased funding alone will not fully address the issues or achieve the principles of an effective system for funding research, prevention and treatment which we believe must:
This is why we felt that a new, long-term, sustainable funding approach was needed and why we identified that government may consider it appropriate to have funding approaches that differ for research, prevention and treatment, as long as the core principles of equity of contributions, certainty of funding, funding levels based on need, and independence and perception of independence were met.
We also advised that any new funding arrangement would require more than just a sufficient quantum of funding in order to be successful and that to have the greatest impact, available funds would need to be distributed based on agreed national priorities, and in a manner that is independent, coordinated, and effective with clear roles for each of the organisations involved.
We also recommended that should government decide that a statutory levy will be part of any new funding arrangement, it might be beneficial to convene a working group of key stakeholders to help design the options for implementation.
We were also clear that while the gambling industry is a key stakeholder in the decision of whether or not to introduce a levy, in our view the gambling industry should not play any part in determining how such a levy is collected or how and where it is distributed.
We also recommended that as part of this process government should consider the costs and benefits of the potential options available to it and determine whether and what mix of a statutory levy, the use of general taxation and/or increases in gambling operator license fees should be applied to create a more robust, long-term, and sustainable funding mechanism going forward.
Government has recently published its Consultation on the statutory levy on gambling operators (opens in new tab) and officials asked the Commission to provide advice on the following key themes to help inform that consultation and ongoing considerations during the consultation period:
Our advice on this topic from April 2023 remains valid and we have used it as the basis for this supplementary advice to Government on these themes.
As set out in the White Paper and our previous advice, we have restricted this supplementary advice to matters relating to the administration of a levy. This is because matters relating to the quantum, amounts to be paid by gambling operators and the destinations of levy funding are properly matters for government to consider, and they have set out their considerations to date in their recently published consultation.
For completeness, we have also provided some information on other changes that both government and the Commission considers appropriate following the introduction of a statutory levy, including consulting on the removal of paragraph two of the existing Social Responsibility (SR) Code Provision 3.1.1 – Combating problem gambling which currently requires gambling operators to make an annual financial contribution for research, prevention and treatment.
Our key recommendations and considerations are as follows.
The Gambling Commission’s role under a levy would be to collect and distribute the funds in line with the strategic direction of government, as set out in the government’s White Paper, High stakes: gambling reform for the digital age (opens in new tab), and in the government’s recently published consultation on the statutory levy on gambling operators (opens in new tab). The Gambling Act 2005 stipulates that all spending decisions on the levy are subject to Department for Digital, Culture, Media and Sport (DCMS) and HM Treasury approval.
Under a levy system, commissioning bodies in receipt of levy funds must be responsible for ensuring that any applicable reporting and accounting requirements are fulfilled. The Commission should equally be subject to such requirements to the extent that government considers that the Commission should be in receipt of levy funds - for example for the purposes of conducting or commissioning research for regulatory purposes.
The Commission should also be responsible for demonstrating that it has delivered its administrative function appropriately and efficiently. However, the Commission's view is that it should not be responsible or accountable for the spending decisions or impact of other organisations in receipt of levy funds, including those in the public or the third sector as such a role would distort the Commission’s primary function as the regulator of the gambling industry.
An appropriate governance system should be put in place by government to support decision-making and to ensure a joined-up approach across commissioning bodies.
Collection structures and processes must be as efficient and effective as possible to ensure maximum funds are applied for the purposes set out in Section 123 of the Gambling Act (opens in new tab) and to ensure that the core purpose of the Commission as the industry regulator is not disrupted.
In our Advice to Government - Review of the Gambling Act 2005 following the government’s Call for Evidence on the effectiveness of the Gambling Act 2005 (opens in new tab), we stated that it was important to ‘secure funding based on need, and this need must be defined by government.’. This is an area where we consider government will need to consider the issues, in particular the funding needs of those elements which they consider should be funded through a levy. By this we mean that, rather than setting a potentially arbitrary target for a levy, government may wish to build in consideration of the funding needs for each area of research, prevention and treatment and support or other elements of a levy structure in liaison across relevant departments and with relevant public bodies and charities. Government’s recently published consultation sets out their considerations to date on these issues.
In order to inform government's consideration of the proportions that different sectors within the gambling industry should pay, our research and statistics about the participation and prevalence of problem gambling and gambling related harm may be of interest. Any differential rates applied between sectors should be transparent.
Government may also wish to consider how it can ensure some stability over the short-term in order to achieve the desired levy amounts to meet funding needs and allow longer term commissioning, particularly in the transition period between the current voluntary system to a statutory levy. Stability over the short term would also have advantages in terms of administrative simplicity and efficiency.
In terms of calculating the levy amounts due, we understand government has considered calculating it by reference to Gross Gambling Yield (GGY), profits, and other examples.
We agree with the government’s considerations to date as set out in the consultation concerning linkages between regulatory fees and a future levy. The Gambling Commission’s fees are calculated by reference to the costs of regulating a gambling operator of the relevant category and size. It is not directly correlated with the potential harm connected with the gambling offered by that gambling operator. For this reason, we do not consider it appropriate to calculate the levy by direct reference to the Commission’s fees.
The amounts raised by a potential levy are likely to be much higher than the Commission's annual budget (perhaps by a matter of multiples). This means that any changes to regulatory fees would attract interest from stakeholders due, not to the fees themselves, but the consequential impact on levy costs for gambling operators and receipts for organisations. We do not consider this appropriate as decisions on the level of regulatory fees should be based predominately upon regulatory need.
We therefore recommended that a different data point is used other than Commission regulatory fees and our starting point is that GGY is the most commonly used reference point for most forms of gambling operators, and the reference point most simple for implementation. This does not apply to gambling operators such as society lottery providers where alternative points of reference are used.
The Gambling Commission considers that streamlining the collection of a levy will reduce the costs and therefore increase the amounts which can be distributed for the purposes set out in Section 123 of the Gambling Act 2005 (opens in new tab).
We consider that the following points are relevant to support ongoing government decision-making.
Data: Aligning with current and future data sources to enable the calculation of levy due. The Commission gathers data in the form of regular regulatory returns, and we consider that allowing this existing data source to be used for the purposes of the levy would be appropriate and efficient. It is important to ensure that the supporting legislation is drafted in such a way as to ensure that the levy system and changes to the regulatory return system that may emerge over time remain in alignment.
Time period: Consideration of current or past-year data. The use of past-year data enables the calculation of amounts due without a complicated forecast and amendment process which is in place for other levies.
Set-up costs: The Commission would require support from government in managing the set-up costs of a levy in its introduction, as well as potentially some ongoing administration costs.
The Gambling Commission gathers data on Gross Gambling Yield (GGY) or equivalent (such as proceeds for the lottery sector) through regulatory returns. Therefore, this reference point may be the most appropriate starting point, from the perspective of administrative simplicity.
Forecasting is much simpler and administratively effective when it is based on past year or past period data points (such as GGY in a previous year). This reduces the need for in-year forecasting and amendments and increases certainty for both gambling operators and commissioning bodies.
It is likely that the Commission’s role in the collection and administration of a levy would require additional resources, particularly around governance and finance, including likely upfront financial resources to cover limited set-up costs we will incur to operationalise the levy. This is most likely to be costs for IT amendments, for which the Commission should not apply licence fee income where the development costs are not incurred for regulatory purposes. There are likely to also be some ongoing administration costs, but a levy design can help to minimise these costs. However, the recently published government consultation includes some proposals which would support efficient implementation - such as referring to existing data collection mechanisms to support levy administration.
While at this stage it is not easy to quantify these costs until final policy decisions have been made following the recently published government consultation exercise, we will continue to work with government as their consultation and proposals develop to ensure that administrative issues are considered and enable the Commission to fulfil this new function efficiently and to minimise associated administration costs.
Further consideration will also need to be given by government to the following:
1A legal term meaning too small to be meaningful or taken into consideration.
We remain of the view, as set out in our Full advice to Government - Review of the Gambling Act 2005, that any new funding arrangement will require more than just a sufficient quantum of funding in order to be successful and that to have the greatest impact, available funds should be distributed based on agreed national priorities that meet an identified need, and in a manner that is independent, coordinated, and effective with clear roles for each of the organisations involved.
We are clear that the Gambling Commission does not have the expertise to advise government or be responsible for decisions regarding the proportion of funds to be distributed across the elements of a levy such as research, prevention and treatment. This is not our role as the industry regulator and we will work with government to develop an appropriate mechanism to set out government’s strategic direction for levy funding and/or the conditions under which government would approve levy spending, in line with the statutory framework.
The Commission's view is that government should set out in directions the basis on which approval would be given under Section 123 of the Gambling Act 2005 (opens in new tab) and the Commission would seek approval for the practical arrangements that would meet these directions, alongside forecasting of levy receipts and reporting on variations. This means that the Commission would secure Department for Digital, Culture, Media and Sport (DCMS) and HM Treasury approval for the extent to which the Commission should only collect the levy dues from gambling operators and distribute them to bodies determined under the strategic direction of government.
We envisage that it would be appropriate for the Commission to be a recipient of a proportion of levy funding allocated towards research, alongside other research bodies. In the case of the Commission, this would be to conduct or commission regulatory focused research. As a potential recipient of levy funds this would be a further reason why it would not be appropriate for the Commission to be involved in setting the level of any levy or determining the destination of funding.
The overriding principle is that collection of a levy should be net zero cost to the Commission, including taking into account the proportion of fixed costs that should be attributable to collection of the levy, which will be administratively more burdensome and resource intensive to administer than other examples such as the Economic Crime Levy. We have not been able to estimate the administrative costs at this time as the levy structure and system is not yet finalised, pending the outcome of the current government consultation exercise. We would expect to be accountable for ensuring value for money in costs of administering the collection and distribution of the levy.
As we stated in previous advice the key objectives for the levy should be around fairness and transparency of contributions, sustainability of funding, the ability to plan longer-term in a more coordinated way and greater trust in the system.
Government may wish to consider whether there are different structures for the different components or elements of a potential future levy framework for addiction, harm, and the licensing objectives more generally.
The governance and accountability needed for a levy, including decisions on destinations and commissioning are a matter for government.
We would expect the Gambling Commission to have Managing Public Money (MPM) and Value for Money (VFM) responsibilities in respect of administering the collection of levy funding and any levy monies used for our own purposes for example, regulatory research. However, we would have concerns should the Commission have MPM and VFM responsibilities for spending decisions made by wider organisations within the levy system, including other public bodies. We will continue to work closely with government to ensure clear lines of accountability are provided ahead of the implementation of the levy and that any MPM and VFM responsibilities are appropriately fulfilled.
If we were required to put additional governance apparatus around the levy, the Commission would need to employ significant new resources to undertake this work and would require specific and specialised expertise we do not possess.
We consider our role within the levy system should be limited to ensuring gambling operators meet their obligation to pay the levy and take appropriate enforcement action where they do not.
Ensuring that levy funding is only applied for purposes that are legitimate and lawful (as set out in the statutory framework) should be a priority for government in the final design and administration of the levy.
The Commission should not be providing oversight for the levy system as a whole, as this is a matter for government, our oversight should be limited to the collection of levy dues from gambling operators and administering its distribution in line with the strategic direction from government. We also do not have the expertise to advise on this issue over and above recommending that any non-public body in receipt of levy funds should be held to the same standards as public sector commissioners. Any non-public sector body who is not willing or able to be held accountable in this way should be ruled out of receiving levy funds.
We wish to emphasise the point made previously that in considering the design and implementation of the statutory levy, the implications for what this might mean in relation to the White Paper, High stakes: gambling reform for the digital age (opens in new tab) commitment to review the Commission’s fees framework is not overlooked, and that any decisions on both are consistent and complementary.
Based on our experience of implementing the Economic Crime Levy (which was announced in September 2021 with the first payments not due until September 2023) we recommend government give due consideration to an appropriate timescale for implementing the statutory levy.
Once the statutory levy is brought into force, paragraph two of the existing Social Responsibility (SR) Code Provision 3.1.1 - Combating problem gambling requirement will become obsolete. This provision requires gambling operators to make an annual financial contribution to one or more organisation providing research, prevention or treatment to bodies on a list of organisations for operator contributions set out by the Gambling Commission. Under this requirement, the amounts paid by the industry are voluntary and the Commission publishes data about the destinations of such funds. In the context of a levy, the Commission currently considers that the requirement and the LCCP RET list will no longer be relevant.
We currently envisage that the intended change to remove the current requirement would come into effect either at the point at which the statutory levy comes into effect, or at the beginning of the relevant financial year to avoid the potential for two RET funding processes running concurrently which could create confusion in the system. We will continue to work closely with the Department for Digital, Culture, Media and Sport (DCMS) to ensure effective transition to the levy system and alignment with final policy decisions on the levy’s operation.
The Commission intends to consult on removing paragraph two of the existing Social Responsibility (SR) Code Provision 3.1.1 – Combating problem gambling, and on the timing and approach of a removal of the requirement.
Regulatory settlements which include an element of financial payment for socially responsible purposes following enforcement action should not be seen as part of the core funding system for research, prevention and treatment.
When the Commission takes regulatory action against a gambling operator, an outcome of that action can include a payment in lieu of a financial penalty applied for socially responsible purposes in line with the Statement of principles for determining financial penalties. The Commission reserves the right to review the destination of regulatory settlements to ensure that they meet the criteria set out in this statement.
Destinations must be for socially responsible purposes which address gambling related harm or other Gambling Act 2005 licensing objectives and should demonstrate how they will accelerate progress to reduce gambling harms, how they will publish any research findings and ensure that meaningful evaluation will be conducted.
It is important that regulatory settlement funds are not seen as part of the core funding system. However, should there be any such future regulatory settlements following enforcement action, the Commission will consider the process for approving the destination of such settlements in view of the final levy system. This means that we would consider, working with government, how any regulatory settlement process can, as far as possible, ensure the coordination of commissioning with the new levy system and avoid a dual system or duplication of work being funded by the statutory levy.