Memorandum submitted by BACTA
1.1 BACTA represents the British amusement
machine industry. The trade association has 1,200 nominated member
delegates who represent c 600 companies. They comprise 85 per
cent of the industry.
1.2 There are 250,000 coin-operated gaming
machines and 175,000 coin-operated amusement machines in the UK.
They are situated in diverse locations including pubs, seaside
amusement centres and arcades, inland licensed gaming centres,
casinos, bingo halls, members' clubs, licensed betting offices
(LBOs) and motorway service areas.
1.3 In its first year of operation, the
National Lottery impacted on the amusement machine industry and
caused an 11 per cent decline in turnover. Scratchcards in particular
became an immediate competitor to gaming machines.
1.4 Figures produced by the Henley Centre
show a continuing decline in the profitability of seaside amusement
centres and arcades and inland licensed gaming centres (15 per
cent and 13.7 per cent respectively) over the period 1995-99.
1.5 The National Lottery can promote itself
and stimulate gambling in ways that are forbidden to the rest
of the industry. It has played a part in changing the image of
gambling in Britain.
1.6 The Government has been disingenuous
in pretending that the National Lottery is not gambling. It has
used this to justify the unlevel playing field that has characterised
the gambling industry since the Lottery's inception.
1.7 Research shows that the National Lottery
is the most popular form of gambling in the country, yet it is
expressly excluded by the Government for the remit of the Gambling
1.8 The fact that the Lottery supports good
causes or funds Government expenditure, does not justify it not
being subject to the same degree of regulation as the rest of
the industry, not being given special protection that enables
it to compete unfairly with the rest of the gambling industry.
1.9 The Lottery is gambling and should be
regulated as such on a level playing field with the rest of the
1.10 The National Lottery Commission has
intrinsically conflicting functions as both the regulator and
promoter of the Lottery. Commercial obligations can easily outweigh
1.11 There should be one regulator for the
whole gambling industry and the most suitable candidate is the
1.12 More aggressive marketing by the operator
in order to maximize income will further strain the Commission's
1.13 The Commission's obligation to maximise
income for good causes means it has difficulties in preventing
excessive participation and protecting the vulnerable from exploitative
promotion. Equally this will lead to increasingly unfair competition
against the rest of the gambling industry.
1.14 Research commissioned by the National
Lottery Commission, which does not regulate the gaming machine
industry, is considered by BACTA to be methodologically flawed
and may have damaged that industry.
1.15 The age discrepancy between being able
to play all-cash AWP machines (age 18) to win very small cash
prizes (£15 maximum) and playing the National Lottery (age
16) to win millions of pounds is not logical. The ability to gamble
on the Lottery by credit should also be examined.
1.16 It is debatable whether either inspection,
enforcement or penalties regarding the illegal purchase of Lottery
tickets and scratchcards are of the same standards as in the rest
of the industry that is regulated by the Gaming Board.
1.17 The problems of illegal playing of
the National Lottery will worsen if harder games are introduced
to boost flagging sales.
1.18 In terms of promotion and advertising,
there should be a level playing field throughout the whole industry,
including the Lottery.
1.19 The possible introduction of on-line
Lottery games will make age control even more difficult to enforce.
1.20 Relaxing the rules governing the Lottery's
operation by allowing on-line games and harder products should
be equally available to the rest of the gambling industry.
2.1 BACTA (British Amusement Catering Trade
Association) is the trade association for the British amusement
machine business. It represents the operators of seaside amusement
centres and arcades, inland licensed gaming centres, machine suppliers
and manufacturers and distributors.
2.2 BACTA has 1200 nominated member delegates
representing c 600 companies, ranging from large PLCs to many
smaller family businesses. They comprise 85 per cent of the industry.
2.3 There are around 250,000 coin-operated
gaming machines and 175,000 coin-operated amusement machines in
use in the UK, situated in diverse locations including pubs, seaside
amusement centres and arcades, inland licensed gaming centres,
casinos, bingo halls, members' clubs, licensed betting offices
(LBOs) and motorway service areas. Machine stakes and prizes vary
considerably throughout these locations, but the most common type
is the all-cash machine with a maximum prize of £15.
There are 166,600 all-cash machines mostly found
in pubs, inland licensed gaming centres, bingo halls and LBOs.
There are also 1,200 high prize club jackpot machines in casinos.
The highest prize that can be won on these machines is £1,000.
Lesser maximum prizes of £500 and £250 are available
on jackpot machines in bingo halls (200) and members' clubs (around
2.4 Approximately £10.8 billion is
wagered annually in coin-operated amusement and gaming machines,
of which all-cash machines account for £8.6 billion. £8.5
billion is paid out overall in prizes.
2.5 The industry employs 23,000 people and
pays £771 million annually to the Treasury in taxation.
3. ISSUES OF
3.1 BACTA is grateful to the Committee for
conducting this inquiry. The issues of concern to the association
are the following:
the impact of the National Lottery
upon the betting and gaming industry and the unfair competition;
the role of the National Lottery
the enforcement of the age limit
for purchase of Lottery tickets; and
the promotion and public image of
the National Lottery.
Impact of the National Lottery upon the betting
and gaming industry and the unfair competition
3.2 The National Lottery has had a profound
effect upon the whole gambling sector. In its first year of operation,
its impact on the amusement machine industry caused an 11 per
cent decline in turnover. Scratchcards in particular became an
immediate competitor to gaming machines. Scratchcard sales peaked
at £44.5 million per week in May 1995 and have since fallen
back to the current figure of between £9 million and £11
3.3 However, the effects of the Lottery
on the amusement machine business continue to be felt. Figures
produced by the Henley Centre for seaside amusement arcades show
that profits (in £ millions) which were £10.7 in 1995
have fallen to £9.1 in 1999 (a decline of 15 per cent which
does not take inflation over the period into account). Henley
also shows a decline of 13.7 per cent in the profitability of
inland amusement centres over the same period. These declines
have resulted in the closure of some smaller family-owned types
of arcade, as the National Lottery, with its unrestricted advertising
and promotion, captured the punter's imagination at the expense
of more established forms of gambling such as machines.
3.4 The legislation that established the
Lottery allowed it to actively promote itself and stimulate gambling
in ways which are strictly forbidden to the rest of the gambling
industry by the 1968 Gaming Act. The name "National Lottery"
has identified gambling in the public mind as being sponsored
and approved by Government. The Lottery has introduced many people
to gambling, who would never have entered a traditional gambling
establishment. The fact that the odds of winning are around 14
million to one against has not deterred players, even though expenditure
and activity seem to have levelled out at current levels. These
have remained constant for some time. The image of gambling as
a vice to be condemned has changed completely and the whole industry
is now recognised as an important part of the leisure and tourism
sector. The National Lottery has played a part in that change
3.5 However, the fact that the Government,
when establishing the National Lottery, went out of its way to
emphasise that participation in it was not gambling is clearly
disingenuous. Promoting the idea that the Lottery was not really
part of the gambling industry justified the unlevel playing field
in the regulation and operation of the Lottery, when compared
to the rest of the gambling industry. The sweeping aside of the
principle of "unstimulated demand", which had governed
all previous gambling legislation and still applies to the rest
of the industry, exemplifies the Lottery's unique and unfair position.
3.6 The Government's attitude on this issue
persists. For example the Committee will be aware that the Gambling
Review Body (established by the Government earlier this year),
is expressly excluded in its remit from examining or making recommendations
about the National Lottery. It is only permitted to consider "the
impact on the Lottery of any proposed changes to gambling laws,
including an assessment of the potential effect on the income
to good causes". Yet the recent comprehensive survey into
gambling in Britainthe British Gambling Prevalence Study
carried out by the National Centre for Social Research on behalf
of GamCarestates "the National Lottery is by far the
most popular gambling activity in the country". The Gambling
Review should not have excluded the Lottery and we are grateful
that the Culture, Media and Sport Select Committee is examining
3.7 Money raised from the Lottery was originally
intended only to fund "good causes". However, changes
made by the present Government have channelled Lottery money into
funding some Government expenditure. It is a spurious argument
to say that because money raised from the Lottery goes to good
causes or funds Government expenditure, therefore the Lottery
is not really gambling. It cannot justify the Lottery not being
subject to the same degree of regulation as the rest of the industry,
nor the protection it enjoys nor the competitive advantages.
3.8 The Lottery competes with established
forms of gambling on an unlevel playing field. It was established
under completely different legislation, has its own regulator
and comes under a different Government department from the rest
of the industry. The Lottery is gambling and should surely be
treated the same as other gambling activities.
Role of the National Lottery Commission
3.9 Although the National Lottery Commission
has a different structure than its predecessor, Oflot, its statutory
duties remain the same. To share responsibility among a five member
board is an improvement on having a Director-General with sole
responsibility. But as with Oflot, the Commission is charged with
the responsibility of regulating the Lottery, appointing the operator
and ensuring that the operator (currently Camelot) produces the
maximum income for good causes, which effectively means the promotion
of the Lottery. These are intrinsically conflicting functions.
Commercial obligations can easily outweigh regulatory concerns,
especially as the proceeds are now being used to replace taxation.
The problems experienced by Oflot over its relationship with Camelot,
focused on GTech, exemplify this. Had the Gaming Board with its
decades of experience in the gambling industry been the Lottery
regulator, it is unlikely these difficulties would have arisen.
BACTA believes that promotion by the Government of one form of
gambling at the expense of other parts of the industry is unfair
and that there should be one regulator for the gambling industry,
including the Lottery. The most suitable candidate is the Gaming
Board. This would ensure a level playing field for everyone.
3.10 The Commission's split role is likely
to come under further strain as the pressure mounts to maximise
income. This can only be achieved by more aggressive marketing
and the introduction of new harder games. The award of the new
Lottery licence could well intensify this trend, as the new operator
will have to justify it. The example of the attempt to introduce
Prontoa hard and rapid frequency form of gambling, akin
to Kenointo Britain is instructive. Once the hard gambling
nature of Pronto was apparent, the Home Office and the Gaming
Board acted to prevent it. In a similar situation, the National
Lottery Commission could not necessarily act in the same way,
as it would have to give equal consideration to maximising income
as well as to regulation. This obligation means that the Commission
cannot always prevent excessive participation or protect the vulnerable
from exploitative promotion in the way the Gaming Board is able
to do. Clearly the Government needs to examine these conflicting
duties inherent in the National Lottery Commission's remit. The
answer is to have one regulator for the whole gambling industry,
which should be under one Government department. Monitoring of
the Lottery operator's commercial activities could remain with
the National Lottery Commission.
3.11 The National Lottery Commission regularly
commissions studies on young people (12-15 year olds) and gambling.
The research details the (illegal) buying of scratchcards and
Lottery tickets by these young people. The other main activity
it details is their playing of gaming machines, which is not illegal
where the cash prize available is £5 or less. BACTA has complained
several times that this researchcommissioned by a regulator
that has no responsibility for the amusement machine industry,
nor involvement or expert advice from that industryis methodologically
flawed. Our complaints have been ignored and the same format and
type of research continues to be employed. The National Lottery
Commission since 1998 will have produced three reports on young
people and gambling, (the next is expected in November/December
2000). BACTA has never been consulted about and has had no input
into these reports, even though they can materially affect and
prejudice the amusement machine industry. Equally, the last report
concluded that 23 per cent of these children had entered and betted
at a betting shop (illegal for under-18s) and 24 per cent had
played bingo at a bingo club (of which around 96 per cent prohibit
under-18s). This further demonstrates the flawed methodology.
These results negatively impact on the reputation of other parts
of the gambling industry and BACTA cannot accept that this situation
should be allowed to continue. Clearly it is necessary for the
Lottery's regulator to know if under-16s are buying tickets and
scratchcards, but that should either be the remit of the research
or they should consult with the other parties involved. They should
in any case improve the research methodology, if it is shown to
Enforcement of the age limit for purchase of Lottery
3.12 It is illegal for anyone under the
age of 18 to play a gaming machine with a cash prize of more than
£5, yet perfectly legal for a 16 year old to play the Lottery
and win a prize of millions of pounds, or to buy scratchcards
which are similar in effect to gaming machines, except the stakes
and prizes are much greater. Furthermore when that Lottery player
reaches the age of 18 they can use their credit cards to gamble
on the Lottery, which is strictly banned for every other form
of traditional gambling. This age discrepancy and the ability
to gamble on credit need to be addressed.
3.13 The amusement machine industry is subject
to the toughest standards of regulation by the Gaming Board, the
police, local authorities and Customs & Excise. Powers of
enforcement are thorough and penalties severe for the traditional
gambling industryeg an amusement centre can lose its licence
to operate if it is discovered that under-18s are playing all-cash
machines (ie those with a cash prize of over £5 and up to
£15). It is debatable whether either inspection, enforcement
or penalties are the same standard regarding the illegal purchase
of the much higher prize Lottery tickets and scratchcards.
3.14 The problems associated with the illegal
playing of the National Lottery by under-16 year olds will be
worsened if harder games are introduced, as seems likely with
the award of the new licence to an operator, who will have to
be pro-active to deal with the pressing demands to revive flagging
sales and maximise the money for good causes.
Promotion and public image of the National Lottery
3.15 The Lottery is allowed to promote itself
through broadcast and press advertising almost without any restrictions.
This promotion is likely to increase substantially with the award
of the new licence. The rest of the gambling industry is hidebound
by the tightest restrictions on advertising and promotion. If
there is to be a level playing field, then either there should
be a tightening of the rules for the Lottery or a loosening for
the rest of the industry.
3.16 The need to maximise income from the
Lottery will become ever stronger. This means that the Lottery
will need to pursue more aggressive promotional techniques and
introduce harder games to increase the rate of play and meet its
income targets. This is almost certain to take the form of on-line
Lottery games, which would make age control even more difficult
3.17 On-line gambling is illegal for the
rest of the UK gambling industry and allowing the Lottery to go
on-line would make the playing field even more unlevel than it
currently is. The answer is to allow fair competition between
gambling products in terms of their promotion and operation and
to stop the protectionism that surrounds the Lottery.