The are calls for the government to hike machine games duty from 20% to 40%.

Photograph: Christopher Thomond/The Guardian Explainer Would a gambling tax rise in the budget really shut shops and cost jobs? Most of the betting industry is urging the chancellor not to double slot machine duty to raise up to £460m more a year Gambling industry kingpins are fuming about reports that the chancellor, John Healey, is considering increasing taxes on high-street slot machines in his first budget.

The influential Social Market Foundation thinktank, the most vocal advocate for a rise in machine games duty (MGD), from 20% to 40%, thinks the measure could raise between £275m and £460m annually on top of the roughly £610m collected last year.

Its proposal is likely to meet with sympathy from Andy Burnham, a vocal and repeated critic of slot machines who has already moved to tighten licensing laws so that gambling firms find it harder to open up new shops.

The billionaire owner of Betfred, Fred Done, is among industry bosses who say such a policy would force shop closures, cost jobs and ultimately fail in its objective, depriving the Treasury of taxes.

But not every figure in the gambling world agrees. Stewart Kenny, the co-founder of Paddy Power who has become a critic of his erstwhile industry, accused Done of “scaremongering”. So who’s right? It’s complicated …What does the industry say?

Bookies might be best known for bets on horses or football but they make big money from slot machines. The Betting and Gaming Council, an industry lobby group, commissioned a report from the accounting firm EY that estimated a duty rise to 40% could close up to 1,470 betting shops (nearly a third of the total 5,617), resulting in 15,900 job losses and a net loss to the exchequer of about £120m. Horse racing, which receives a levy from bookies’ profits, would also take a hit.

Done said he alone would be forced to close about 495 betting shops, nearly half of Betfred’s estate, with the loss of 2,475 jobs and £67m in taxes.

Entain, the owner of Ladbrokes and Coral, has written to Burnham saying it would have to make job cuts across its nationwide estate of 2,300 shops, were the policy to go ahead. Casinos and bingo halls are in the firing line too. Rank Group, which owns Mecca Bingo and Grosvenor Casinos, cautioned that a third of its venues could close, affecting 2,000 staff. Are they crying wolf? When dealing with bookmakers, it is wise to be sceptical.

Back in 2019, Betfred had about 1,620 shops. Since then, the company has threatened to close nearly 1,000 in response to tougher regulation or taxes. While most of the policies it objected to have come to pass, the number of shops has decreased by only about 330. Some of that is down to a broader shift to the web that has led to soaring online gambling revenues.

In one Betfred TV ad, Done encourages punters to “come and see me”. In your neighbourhood bookies? No, at Betfred.com. Meanwhile, the Done family has taken out tens of millions of pounds in dividends, including £50m in 2022 alone Any other examples?

Bet365 does not have high street shops, operating only online. But it recently cited an increase in gambling duties in the former chancellor Rachel Reeves’s budget last year as it announced plans to cut about 300 jobs at its Stoke-on-Trent headquarters.

What it failed to mention is that it has been increasing its use of AI within the business since well before the tax rise. Some staff at Bet365’s Stoke HQ are understood to feel that government policy is a convenient smokescreen for good old-fashioned corporate cost-cutting.

A spokesperson said Bet365 was responding to a “highly competitive trading environment, plus increased regulatory and tax-related costs”. So it’s all a bluff? Well, no.

The UK’s biggest gambling companies, including Betfred, Entain, Flutter and more, have all announced cuts since Reeves’s duty rise. It is impossible to say how much of this retrenchment might have happened anyway, given economic worries and structural shifts within the sector. However, it makes sense that any further increase in costs, in the form of higher taxes on slot machines, will negatively affect the gambling sector.

Simon Thomas, the chief executive of the Hippodrome Casino in London, says that fear of the tax is already hurting investment.

“We have a £6m rooftop expansion plan with full planning permission, ready to go. With MGD up in the air, we’ve had to shelve it,” he said, adding that if MGD goes up to 40%, a third of bingo halls and a third of casinos could close. Does the government want a smaller gambling sector?

Burnham has already moved to limit the opening of new gambling premises. He has voiced particular concerns about 24-hour adult gaming centres (AGCs), high street venues packed with the sort of machines that would be more heavily taxed by an MGD increase. The rise of these “slot farms” is understood to be the main driver for any such move.

But there are question marks over whether AGCs would actually take the hit. They already have much lower overheads and looser regulation than casinos and bingo halls, which have experienced negligible growth. Last year, AGCs managed to increase their takings from £528m to £613m by packing more machines into larger venues.

So if slot machines taxes go up, in theory AGCs are best placed to survive the impact. The AGC operator Merkur has already offered to buy 132 shops that Betfred put up for sale, indicating it is unruffled by the prospect of a tax rise. If others follow suit, just as bookies retrench, an MGD rise could simply lead to bookies being replaced by 24-hour slot farms. As Treasury officials weigh up duty rises, they will have to consider the law of unintended consequences.