Memorandum submitted by the Bingo Association
"The whole field of gaming is now totally
inconsistent and upside down because of the National Lottery...It
is very difficult for people in the industry to live with the
problem and the Board are very aware of that". Graham White,
Chief Inspector of the Gaming Board
1. INTRODUCTION
1.1 The Bingo Association represents 111
operators with 540 clubs, accounting for 74 per cent of the industry
as a whole. Our members come from across the spectrum, from the
very large operators with over 100 clubs to many single site businesses.
Bingo in our clubs is licensed, that is to say played under Part
II of the Gaming Act 1968. It is subject to stringent regulation
by the Gaming Board for Great Britain, and liable for duty (currently
10 per cent of money staked).
1.2 Licensed bingo has seen significant
change in the past decade. The industry invested heavily in new
clubs and technology to keep bingo at the heart of a modern leisure
market. The introduction of the National Lottery had a significant
impact on the gaming market as a whole, and bingo in particular.
The industry supported a Lottery in principle, but argued at the
time that it should be regulated along the same principles as
other gaming activities. It regarded the Government's argument
that the Lottery was not gaming, and should therefore be treated
separately, as bogus. That remains our view, and we consider that
events since its introduction have proved this to be the case.
1.3 Extensive debate took place during the
passage of the National Lottery Act on the likely impact of the
Lottery on other gaming, and the need for what was termed a "level
playing field". We do not intend to repeat these points here,
but to put forward the case for correcting some of the obvious
errors in legislation, and draw attention to the most serious
issues raised by the current system of regulation.
2. REGULATION
VERSUS OPERATION
2.1 The Committee will be aware that a wide-ranging
review of gambling legislation is currently taking place. It was
announced in December 1999, with a remit to report in summer 2001.
The bingo industry welcomes this review because it believes that
new legislation is essential for the future health and success
of the gaming sector in this country. However, it is disappointed
to note that in determining the remit of the Review Body, the
Government has failed to include the National Lottery.
2.2 Indeed, the remit set out by the Home
Secretary serves to highlight two fundamental flaws in the current
structure and extent of existing regulation. The Government, in
excluding the Lottery from its review, has sought to maintain
the case that the Lottery is not gaming. It has also reminded
the Review Body of the need to maintain funds for good causes,
and so take into account the likely impact of any changes in gaming
legislation on the level of funds raised. This bias towards maintaining
a legislative, and therefore competitive, advantage for the Lottery
is undesirable, and we would argue, improper.
2.3 Whilst the Lottery is primarily concerned
with raising funds for good causes, it is nevertheless a commercial
activity. It competes with other leisure activities, including
gaming, to attract players. The desire to raise money must be
balanced against the need for fair and effective regulation. It
is no longer tenable to make the argument that the National Lottery
is not gambling. It is the largest single gaming activity in this
country and has fundamentally altered the gambling and leisure
environment. The principle of unstimulated demand, which had underpinned
all gaming legislation to that point, was ignored in Lottery regulation,
leading to a sea change in policy on other gaming activities.
Indeed, much of the recent amendment to existing gaming legislation
has been to address issues raised by the Lottery, or to redress
a regulatory imbalance between it and other gaming activities.
The Gambling Review should have included the National Lottery.
2.4 The Bingo Association believes that
the fundamental principle of gaming legislation should be regulation,
not commercial necessity. The Lottery is gaming and should be
regulated accordingly. Gaming policy should not be undermined
in order to achieve commercial objectives, which is the situation
at present. That the Lottery raises funds for good causes is not
in itself justification for ignoring or bypassing existing policy
on gaming regulation.
2.5 Indeed, it could be argued that the
Lottery no longer only benefits good causes. There was considerable
debate during the passage of the Lottery Act over the principle
of additionality: that Lottery funding should not be used as a
substitute for Government spending. At the time, assurances were
given that all money raised would be used in addition to funds
committed by Government. This is clearly not always the case now,
with money increasingly being allocated to projects which before
its inception would have been funded by Government.
2.6 The Gaming Board for Great Britain has
regulated the gaming industry since the 1968 Act and has proved
to be a vigilant enforcer of its principles. Its remit includes
advising the Government on changes required to update legislation,
and in recent years it has taken account of the need for change
where this was possible. As a body independent of commercial influence,
it has balanced the needs of the gaming industry against its regulatory
obligations. This separation of operational and regulatory imperatives,
however, is not evident in the regulation of the National Lottery.
The National Lottery Commission has a fundamental conflict of
interest in meeting its obligation to maximise funds for good
causes and acting as regulator. The result has been that commercial
considerations have tended to outweigh regulatory concerns, with
no effective regulatory control over new lottery games being brought
online.
2.7 The Association has raised these concerns
with officials at the Department for Culture, Media and Sport.
In particular, the fact that the history of lottery development
elsewhere suggested that turnover would only be sustained by the
introduction of new games with a more aggressive marketing push.
The current process for scrutiny and approval of new games is
not sufficiently robust to counteract this trend towards harder
games. The National Lottery Commission has no remit to consult
outside bodies when considering requests for approval of new games
from the Lottery operator. In addition, it has fairly narrow criteria
on which to judge any game put forward, and does not do so from
the perspective of a body concerned with preventing excessive
participation.
2.8 Indeed, from a gaming policy perspective,
the Lottery is not expected to withstand the same tests or meet
the same criteria as other gaming sectors. Games such as Pronto,
which were deemed by the Home Office and the Gaming Board as undesirable
because of the encouragement of rapid play would not be subject
to the same scrutiny if they were put forward by the Lottery operator.
The National Lottery Commision's obligation to maximise funds
for good causes is not always compatible wth preventing excessive
participation. In such cases, maximising funds is its overriding
concern. Indeed, there does not seem to be any clear picture of
what "excessive" would be defined as in any such deliberations.
2.9 Press speculation over future proposals
from The People's Lottery confirms the trend towards more aggressive
games and marketing. There has been the suggestion that scratchcards
will be paying a £1 million guaranteed prize, linked to a
TV quiz-style game, to revive flagging sales. Scratchcards are
hard gambling and should be regulated as such. The introduction
of a significantly higher prize will undoubtedly encourage excessive
participation and target the more vulnerable sectors of the market.
There are no safeguards in place to prevent excessive play, but
the NLC seems to regard such concerns as secondary. All these
issues were debated at length during the passage of the National
Lottery Act, in particular the aggressive nature of scratchcard
development. Warnings were given about the likely pattern then,
and are being borne out now.
2.10 The bingo industry believes that the
conflict of interest inherent in the National Lottery Commission's
remit should be corrected. We consider that a single regulatory
body, governing all gaming including the national and other lotteries,
should be established. This could be the Gaming Board with a widened
remit, or a new body. Monitoring of the commercial activities
and obligations of the lottery operator could remain with the
National Lottery Commission or with a government department. To
ensure consistency, this body should report to a single government
department.
3. THE IMPACT
OF THE
NATIONAL LOTTERY
Background
3.1 Bingo works on a similar principle to the
National Lottery: the accumulation of small amounts of stake from
large numbers of people in order to generate a main prize. The
top prize in bingo is currently £200,000 (Sundays on the
National Game), with daily prizes of £100,000. The National
Game is currently played once per session, with a total of eight
games per week. Normal house prizes in a licensed club range between
£10 and £700, depending on the size of the club.
3.2 The Gaming Act 1968 separated hard and
soft gaming. As a result, the emphasis in licensed bingo was on
soft gaming, with a growing social emphasis. Bingo clubs now are
viewed as safe and comfortable places to go, particularly for
women. Companionship and the chance to make and meet friends are
cited as reasons why people play, often in priority over the chance
to win money. Research conducted by Talbot and Dixey in 1982[3]
showed the clear social benefits provided by licensed bingo clubs
across the country. Clubs were seen as a valuable social amenity,
providing one of the few leisure activities in which someone,
regardless of age or sex, could participate. This was reinforced
by research in 1997,[4]
which confirmed that despite new style clubs and higher prizes,
the social emphasis of bingo remained. Under 4 per cent of those
surveyed cited financial aspects as the primary reason for attending
their local club, with over 96 per cent giving one of a variety
of social reasons.
3.3 Bingo club numbers peaked in 1974, when
there were over 1,800 clubs licensed.[5]
During the 80s numbers gradually declined and by 1989, club numbers
had dropped to just over 1,000.[6]
Gaming Board figures show that at 31 March 2000 there were 727
bingo clubs licensed and operating, a decrease of 24 clubs (3.2
per cent) on the previous year. This means that there has been
a 15 per cent drop in the number of clubs over the past five years.
The impact of the National Lottery
3.4 Figure 1 shows National Game ticket sales,
often a barometer of general industry performance, during the
1990s. The direct impact of the National Lottery is clearly visible:
ticket sales dropped markedly on the introduction of the main
Lottery game in November 1994, and then fell again with the introduction
of scratchcards in April 1995. Bingo was particularly badly affected
for several reasons: the similarity of the games; a propensity
of bingo players to spend more than the average on the National
Lottery; and the use of pocket cash for the purchase of scratchcards,
affecting the spend in bingo clubs. Because the industry is geographically
disparate, it has found it difficult to quantify the impact for
bingo. In recent years it has commissioned the Henley Centre to
provide detailed analysis on industry performance in order to
rectify this problem.
The Henley Centre study
3.5 The Henley Centre has been providing
data and analysis now since 1996, providing a more accurate picture
of trends within the sector, and also more detailed breakdown
of financial information. It looks at various elements which are
indicators of industry performance, including admissions, turnover
and profitability.
Admissions
3.6 Admissions are crucial for the success
of bingo: a downward trend in admissions means less money staked
and lower prize levels, leading to a less attractive product.
The decline in admissions has been a critical factor in the fortunes
of many bingo clubs in the past decade. Despite considerable investment,
the total aggregate number of admissions has not increased. Latest
figures for 1999 show an estimated total market of around 95 million
admissions, with a continued overall decline.
Turnover and profitability
3.7 The past five years have seen a steady
decline in the total number of clubs licensed and operating. The
critical factor for many licensed clubs has been a question of
profitability: even where total turnover has increased, profitability
for clubs has declined. This means that loss-making clubs inevitably
close, even where total money staked (the amount on which duty
is levied) has increased.
3.8 Figure 2 below gives a summary of profitability
for 1996-98. It shows that between 1996 and 1997, profitability
dropped overall from £78.9 million to £69 million. As
a result, the industry saw further consolidation and cost-cutting,
which, combined with loss making units closing, led to an overall
rise in overall profitability.
Figure 2 OVERALL
PROFITABILITY OF THE BINGO INDUSTRY 1996-98 INDUSTRY
REVENUES AND
COSTS 1996-98 (£ MILLION)
|
| 1996 | 1997
| 1998 |
|
| Revenues | |
| |
| Main stage bingo par fee | 129.9
| 102.3 | 105.1
|
| Other gaming revenues | 334.5
| 404.8 | 423.5
|
| Food and drink | 88.5
| 95.8 | 95.6
|
| Admissions (box office) | 43.7
| 45.9 | 45.6
|
| Other revenues/incomes | 3.8
| 4.8 | 7.2
|
| TOTAL | 600.5
| 653.7 | 676.9
|
|
| Costs | |
| |
| Licences | 11.6
| 10.8 | 13.7
|
| Added prize money | 29.8
| 34.5 | 37.5
|
| Advertising and promotions | 32.6
| 51.6 | 46.0
|
| Property costs | 70.0
| 74.6 | 86.3
|
| Total staff costs | 182.2
| 202.1 | 188.0
|
| Other costs | 195.4
| 211.1 | 225.2
|
| TOTAL | 521.6
| 564.7 | 596.6
|
| NET PROFIT | 78.9
| 69.0 | 80.4
|
|
Source: Henley Centre.
3.9 The Henley Centre analysis enables the industry to
identify those sectors within it which are most at risk of closure.
A full industry summary by category for the past three years is
given as an Annex. The survey confirms that one of the most vulnerable
sectors is that including smaller traditional clubs. These neighbourhood
clubs form 29 per cent of the industry total, and over half of
them are single site operators; many of them are family businesses
with everything invested in one club. Obviously, companies of
this size cannot sustain continued losses, however small, on an
ongoing basis.
3.10 The balance of large and small clubs within the
industry has shifted in recent years. This is in part due to bingo's
inability to adapt because of legislative restrictions, and because
of the impact of the National Lottery on the gaming sector in
general. As a consequence, smaller community clubs have struggled
and many have closed. The Association has made strong representations
to government to reduce the duty burden on clubs in order to secure
a better future for bingo, and in particular these clubs. Further
closures will mean the loss of a valuable social amenity and a
decline in government revenues.
3.11 There is no doubt that the Lottery was a major contributory
factor in the decline of many, particularly small clubs. Its introduction
was heralded by a huge advertising push at a time when bingo clubs
were prevented by law from similar advertisements. Its huge prizes
had a significant impact on the discretionary spend available
amongst bingo players, leading to a reduction in average spends
per head, or a drop in the number of visits per week (or a combination
of the two). It was several years before the legislative framework
under which gaming activities operated was revised to take account
of the Lottery, during which time it enjoyed a massive competitive
advantage. Indeed, some aspects of this advantage remain, and
are actively protected by the Lottery operator.
Developing the National Bingo Game
3.12 In order to keep pace with changes prompted by the
National Lottery, the National Game (NBGA) proposed changes to
the legislation governing multiple bingo. These were the subject
of extensive discussion with the Gaming Board and Home Office,
and were designed to make the game more competitive and offer
greater operational flexibility. The proposals are: no limits
on stakes or prizes; the ability to retain a proportion of stake
in order to generate a "rollover" effect for prizes;
and no limit on the frequency of games.
3.13 All of these proposals mirror principles already
operating for the National Lottery and had the support of the
Gaming Board for Great Britain. However, progress on these measures
as a Deregulation Order was impeded by objections from the DCMS
on the grounds that their success could affect money raised for
good causes. Whilst the NBGA was flattered that the Lottery considered
it to be a serious rival, in practical terms it is clear that
such complaints are excessive and anti-competitive when the Lottery
has such a clearly dominant position.
3.14 The Association considers it outrageous that such
action should be taken under cover of protecting funds for good
causes, when it is a clear attempt to maintain the current legislative
and regulatory advantage enjoyed by the Lottery operator. The
Gaming Board is the responsible authority for advising government
on appropriate change for licensed bingo, and following discussion
it supported the proposals. The Deregulation process is designed
to ensure proper parliamentary scrutiny before these proposals
could become law, during which time the DCMS and/or Lottery operator
would have had ample opportunity to put their case.
3.15 However, it appears that the Lottery is not only
to be exempt from proper scrutiny according to the principles
of gaming regulation, but is able to gain unfair advantage by
impeding the fair and proper development of other gaming activities.
For the Lottery to seek to influence the proper progress of proposals
which have the support of industry and the regulator is wholly
inappropriate. Indeed, in general terms it might be argued that
the Lottery is seeking to abuse its dominant position in the marketplace,
a clear breach of competition policy.
3.16 The Bingo Association believes that such behaviour
clearly demonstrates the need for decisive action to separate
the operational and regulatory functions of the National Lottery
Commission, and the need for Lottery regulation to be the responsibility
of a single gaming regulator. Such steps should be taken as part
of the Gambling Review to ensure consistency of regulation across
all gambling activities.
4. AGE LIMITS
4.1 The age limit for most forms of gaming is 18. One
of the issues raised by the Gambling Review Body in its request
for evidence is the matter of age limits and whether there should
be a single age limit for all gaming.
4.2 The bingo industry has submitted in its response
that there should be a single age limit of 18 for all gaming.
This includes the National and other lotteries. The recent study
by GamCare into the prevalence of gaming indicated that the youngest
age group (16-24) were most likely to purchase scratchcards. It
also showed that the prevalence of problem gambling overall was
highest among this age group.[7]
This is supported by studies commissioned by the Lottery regulator
in 1998 and 2000, which demonstrated a clear problem with under
16s buying scratchcards and Lottery tickets illegally.
4.3 Scratchcards, are a harder form of gaming than the
main Lottery. The opportunity for chasing losses and reinvesting
winnings is higher than in many other activities that are more
stringently regulated. It is therefore inappropriate that under
18s have access to them. The introduction of higher prizes (see
paragraph 2.9) would make this situation even worse.
5. CONCLUSION
5.1 The Bingo Association welcomes this timely inquiry
into the National Lottery's operation and regulation. It considers
that firm steps are now required to ensure that the Lottery is
properly and fairly regulated, and that conflicts of interest
currently inherent in the National Lottery Commission's remit
are resolved.
5.2 The bingo industry believes that further steps should
also be taken to redress the legislative imbalance between the
Lottery and multiple bingo, without the exertion of any undue
influence by the DCMS or Lottery operator.
5.3 The current age limit of 16 for National Lottery
ticket sales should be increased to 18 to bring it into line with
other gaming activities. This would clarify the Lottery's status
as a gaming activity, to be regulated as such.
6. EXECUTIVE SUMMARY
6.1 The Bingo Association represents 111 operators of
bingo clubs licensed under Part II of the Gaming Act 1968. These
range from large companies with over 100 clubs to many single
site owners.
6.2 The bingo industry supported the Lottery in principle,
but argued at the time that it should be regulated along the same
principles as other gaming activities. It considered arguments
then, and now, that the Lottery is not gaming, as bogus.
6.3 This submission does not repeat past arguments over
a level playing field, but puts forward the case for correcting
some of the obvious errors in legislation, and draws attention
to the most serious issues raised by the current system of regulation.
6.4 The Bingo Association welcomes the current Gambling
Review, but believes that the Lottery should have been included
within its remit. Its exclusion seeks to maintain a legislative,
and therefore competitive, advantage for the Lottery which is
undesirable, and we would argue, improper.
6.5 Whilst the Lottery is primarily concerned with raising
funds for good causes, it is nevertheless a commercial activity.
It competes with other leisure activities, including gaming, to
attract players. The desire to raise money must be balanced against
the need for fair and effective regulation.
6.6 The fundamental principle of gaming legislation should
be regulation, not commercial necessity. The Lottery is gaming
and should be regulated accordingly. Gaming policy should not
be undermined in order to achieve commercial objectives, which
is the situation at present. That the Lottery raises funds for
good causes is not in itself justification for ignoring or bypassing
existing policy on gaming regulation.
6.7 Despite assurances given during the passage of the
Lottery Act, the principal of additionality is being eroded and
funds are now being allocated to projects which would previously
have been funded by government.
6.8 Unlike the rest of the gaming sector, which is regulated
by the Gaming Board, there is no separation of operational and
regulatory imperatives in the regulation of the National Lottery.
The National Lottery Commission has a fundamental conflict of
interest in meeting its obligation to maximise funds for good
causes and acting as regulator. The result has been that commercial
considerations have tended to outweigh regulatory concerns, with
no effective regulatory control over new lottery games being brought
online.
6.9 The current process for scrutiny and approval of
new games is not sufficiently robust to counteract an inevitable
trend towards harder lottery games. Indeed, from a gaming policy
perspective, the Lottery is not expected to withstand the same
tests or meet the same criteria as other gaming sectors. Not only
does the need to raise funds supersede the requirement to prevent
excessive play, there is little clear picture on how "excessive"
would be defined.
6.10 Any move towards introducing significantly larger
prizes for scratchcards would be detrimental. Scratchcards are
hard gambling and should be regulated as such.
6.11 The bingo industry believes that the conflict of
interest inherent in the National Lottery Commission's remit should
be corrected. We consider that a single regulatory body, governing
all gaming including the National and other lotteries, should
be established. This could be the Gaming Board with a widened
remit, or a new body. Monitoring of the commercial activities
and obligations of the Lottery operator could remain with the
National Lottery Commission or with a government department. To
ensure consistency, this body should report to a single government
department.
6.12 Bingo clubs have a strong social emphasis, and are
regarded as the soft end of the gaming spectrum. The number of
clubs has declined since a peak in 1974 when there were over 1800
clubs. Gaming Board figures show that at 31 March 2000 there were
727 bingo clubs licensed and operating, a decrease of 24 clubs
(3.2 per cent) on the previous year (and a 15 per cent drop in
the past five years).
6.13 The direct impact of the National Lottery is clearly
visible on ticket sales for the National Bingo Game (a good barometer
for the industry as a whole): ticket sales dropped markedly on
the introduction of the main Lottery game in November 1994, and
then fell again with the introduction of scratchcards in April
1995.
6.14 Admissions are crucial for the success of bingo:
a downward trend in admissions means less money staked and lower
prize levels, leading to a less attractive product. The decline
in admissions has been a critical factor in the fortunes of many
bingo clubs in the past decade. Despite considerable investment,
the total aggregate number of admissions has not increased. Latest
figures of 1999 show an estimated total market of around 95 million
admissions, with a continued overall decline.
6.15 The critical factor for many licensed clubs has
been a question of profitability: even where total turnover has
increased, profitability for clubs has declined. This means that
loss-making clubs inevitably close, even where total money staked
(the amount on which duty is levied) has increased.
6.16 Smaller traditional clubs have been most vulnerable.
These neighbourhood clubs form 29 per cent of the industry total,
and over half of them are single site operators: many of them
are family businesses with everything invested in one club. Obviously,
companies of this size cannot sustain continued losses, however
small, on an ongoing basis.
6.17 There is no doubt that the National Lottery was
a major contributory factor in the decline of many, particularly
small, clubs. The Association has made strong representations
to government to reduce the duty burden on clubs in order to secure
a better future for bingo, and in particular these clubs. Further
closures will mean the loss of a valuable social amenity and a
decline in government revenues.
6.18 In order to keep pace with changes prompted by the
National Lottery, the National Game proposed changes to the legislation
governing multiple bingo: no limits on stakes or prizes; the ability
to retain a proportion of stake in order to generate a "rollover"
effect for prizes; and no limit on the frequency of games.
6.19 All of these proposals mirror principles already
operating for the National Lottery. All had the approval and support
of the Gaming Board for Great Britain. However, objections from
the DCMS on the grounds that their success could affect money
raised for good causes prevented them being proposed as a Deregulation
Order. Such complaints are anti-competitive when the Lottery has
such a clearly dominant position.
6.20 The Association is outraged by such a clear attempt
to maintain the current legislative and regulatory advantage enjoyed
by the Lottery operator, thereby bypassing proper parliamentary
scrutiny of the proposals. For the Lottery to seek to influence
the proper progress of proposals which have the support of industry
and the regulator is wholly inappropriate. Indeed, it might be
argued that the Lottery is seeking to abuse its dominant position
in the marketplace, a clear breach of competition policy.
6.21 Such behaviour clearly demonstrates the need for
decisive action to separate the operational and regulatory functions
of the National Lottery Commission, and the need for Lottery regulation
to be the responsibility of a single gaming regulator. Such steps
should be taken as part of the Gambling Review to ensure consistency
of regulation across all gambling activities.
6.22 The age limit for most forms of gaming is 18. The
bingo industry has submitted it to the Gambling Review that there
should be a single age limit of 18 for all gaming. This includes
the National and other lotteries.
6.23 Recent research shows that the 16-24 age group are
most likely to purchase scratchcards and also has the highest
prevalence of problem gambling. Studies by the Lottery regulator
also show a clear problem with under-age playing of scratchcards
and the Lottery. A consistent age limit of 18 would be more appropriate.
3
Women, Leisure and Bingo, Margaret Talbot and Rachael Dixey,
Trinity and All Saints' College, 1982. Back
4
The Four Towns Study, Faith Freestone, Worcester College, 1997. Back
5
Report of the Gaming Board for Great Britain, 1975. Back
6
Report of the Gaming Board for Great Britain, 1990. Back
7
Gambling Behaviour in Britain: Results from the British Gambling
Prevalence Survey, Sprotson, Erens & Orford, 2000, Back
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