Select Committee on Culture, Media and Sport Seventh Report

IV CASINOS

The Government proposals for change

1. The casino industry is a significant sector of the British leisure industry. The latest Gaming Board for Great Britain report for 2001/02 states that the casino industry employs about 12,000 people. British casinos received over 11 million visits last year, and the total drop (money exchanged for gaming chips) was £3,582 million and the House win (total retained by casinos) was £619 million.[69] Casinos pay an average of 25 per cent in gaming duty.
2. Most of the Gambling Review recommendations with regard to the operation of casinos, their licensing and regulation were accepted by the Government. These include:

1. The demand criteria should be abolished.
2. Permitted areas should be abolished.
3. Casinos will be allowed to offer other products such as bingo and betting, and will be allowed to install casino slot machines with unlimited stakes and prizes, which may be linked to accumulate very large prizes. [These machines are considered later in the Report].[70]
4. The statutory membership requirement should be abolished, but positive identification of all those who enter a casino must be made a statutory requirement. The Gambling Commission are to approve a list of documents acceptable as ID.
5. The twenty-four hour rule, whereby members have to have joined the casino for twenty-four hours before they are allowed to play, should be abolished.
6. The rules on advertising should be relaxed, to be monitored by the Gambling Commission.
7. The use of credit cards should be permitted for gambling (apart from direct use in gaming machines)
8. Casinos should be permitted to offer live entertainment
9. Restrictions of alcohol on the gaming floor should be lifted
10. Whilst the Gambling Commission will license operators that have passed the 'fit and proper' test, the licensing of premises will remain a local decision, but will pass from licensing justices to local authorities.[71]

3. Some of these recommendations have already been implemented. As the Minister for Sport told us, the Gaming Board has already modified its advice to Liquor Licensing Justices to remove its general objection to the serving of alcohol on the gaming floor, and the ban on live entertainment is due to be lifted by the end of July 2002.[72] The other proposals will require changes to primary legislation. The Government hope to introduce a Gambling Bill in the 2003/2004 Parliamentary session.[73]
4. The changes made will allow a new style of casino to develop. Casinos will be allowed to offer a different environment from the current one, in which customers will be able to walk off the street into casinos, eat and drink, watch live entertainment and play on a much wider range of gambling products. The Gaming Board estimated that the numbers of casinos could increase either from 123 to 250 larger casinos, or to 450 smaller casinos.[74]

Alcohol on the gaming floor

5. A particular concern of bodies who submitted evidence to the Committee was the lifting of the ban on alcohol on the gaming floor.[75] GamCare believed that the restriction had been a contributory reason in keeping the UK prevalence of problem gambling relatively low. They pointed out that people drinking alcohol tended to gamble less intelligently, had difficulty ending gambling sessions and were more likely to chase losses.[76] The Review Body stated that 'the further mixing of betting (or any other gambling) and alcohol is not something that we could recommend.'[77] The Gaming Board has already modified its advice to Liquor Licensing Justices to remove its general objection to the serving of alcohol on the gaming floor and so we recommend that both the Board and the future Gambling Commission monitor the effect of this change, with the help of the industry to ensure that the change is not to the detriment of the public.

1960s style proliferation

6. The fundamental concern stemming from the relaxation of gambling regulation is that, unless minimum size and facility standards are set, deregulation will allow a 1960s style proliferation of casinos. The Gaming Board has told us that it has some concern that the new Commission would not have the resources to regulate the uncontrolled expansion of casinos which could result from the deregulation.[78] The Committee were told in Aberdeen that, together with a decrease in the quality of regulation, an increase in the numbers of casinos could also lead to casinos adopting sharp practices as they chased smaller pieces of the pie due to increased competition. Professor Peter Collins told us that in choosing between "many small" and "few big" new casinos, the arguments in respect of minimising social impact all tell in favour of "few big".[79]

Local authorities

7. Local authorities, who will have responsibility for the licensing of gambling premises, will not be able to limit the number of casinos using the current 'unmet demand' criteria, and the Government rejected the Gambling Review recommendation that local authorities should be able to impose blanket bans on gambling premises on an area, as they see fit.[80] However, local authorities will be obliged to take into account clear statutory criteria issued by the Gambling Commission. The Government intends that all interested parties will be involved in drawing up the criteria, which are currently under consultation, to ensure that the licensing system is transparent, and that all core principles applied by local authorities when licensing premises are widely known and fully understood in that area.[81] The Government expects that local authorities will integrate planning and gambling licensing when assessing applications to create, as the Local Government Association described to the Committee, a 'one stop shop'.[82]
8. Within the criteria issued by the Gambling Commission to local authorities, we would expect to see:

1. A minimum floor size for casinos, as recommended by the Gambling Review. However, its recommendation that the minimum floor size should be 2,000 square feet has been declared too small by various interested parties that have submitted evidence to the Committee, including the Gaming Board.[83] We recommend that the Government reconsider the Gambling Review recommendation for a minimum floor size of 2,000 square feet in consultation with the Gaming Board and the industry, and that whatever level of floor size is set is then subject to regular review by the Gambling Commission, when this body is established, to assess how this affects the growth of the industry.
2. A ratio of gaming machines to tables. This is discussed later in the Report in respect of casino slot machines.[84]

9. It appears that the Government and the Local Government Association envisage that the recognition of the needs and desires of the local residents, and the character of the region (what Sir Alan Budd described to the Committee as " the social environment"[85]), will have its place not within the licensing of the premises, but in the planning application stage.[86] A separate planning category for casinos might be a useful consideration. We recommend that the Gambling Commission and Government ensure that the licensing system remains transparent by providing clear guidance to local authorities. This may involve a re-assessment of planning guidance to ensure that local opinion, if not involved in the licensing process, has a voice at some stage during a casino's application. We would also recommend the Gambling Commission allowing the granting of a licence to be subject to planning permission, should a local authority have particular environmental concerns or should local objections be raised.
10. BACTA and BISL have also voiced their concern to us over the arbitrary nature of some licensing decisions made by Scottish local authorities, and local authorities issuing gaming machine licenses.[87] Whilst the Local Government Association told us they were confident that they had the necessary expertise to deal with the new licensing function,[88] BACTA felt that some local authorities did not have sufficiently knowledgeable licensing officers, which could lead to inappropriate decisions being made.[89] We recommend that local authorities must ensure that their staff are appropriately trained before the licensing function is transferred, and that the Gaming Board and new Gambling Commission should monitor and assess how the licensing guidelines and criteria are being implemented. We would expect to see local authorities employ officers with a particular expertise in gambling as well as the 'multi-skilled' inspectors described by the Minister for Sport.[90]

The cost to local authorities of the new licensing system

11. The Local Government Association (LGA) told us that they are confident that the Government will set licence fees which will cover local authority costs.[91] However the LGA acknowledged that, in order to set up the licensing system, it may be necessary to employ more people up front and for this they had already approached Government for funding. Changes in liquor licensing were also anticipated to bring more administration costs to local authorities.[92] The Government has acknowledged that start-up costs will involve training and is currently discussing these costs with local authorities.[93] We recommend that the Government should help local authorities to fund the setting up of the licensing system, particularly in the training of staff on their new responsibilities. The Gaming Board and the new Gambling Commission and existing licensing justices should be included when discussing the nature of training and preparation necessary.
12. The Committee were told in Aberdeen that the local authority struggled to meet the costs of administering the licensing system with the licence fee, and had no power over the level of the fee, which could only be changed by the Scottish Executive. The LGA would like to see the level of the fee set locally,[94] but BISL caution that, if local authorities are allowed to set their own levels, any additional revenue to administration costs should be ring fenced for spending on public services connected in some way to gambling.[95] The Government said that it is considering a graduated approach to setting licence fees, but has not said whether it will allow licence fees to be set locally.[96]
13. Whilst the Government has stated that "licence fees will be set at levels sufficient to reimburse local authorities for the full cost of taking on an enhanced role in this area", the Committee has noted that there may be significant added social costs for local authorities as a result of deregulation. The LGA told us that they had not calculated the likely costs to social and health services, but Councillor Robert Parker told us:

"there will be some social consequences. These consequences in terms of debt will translate into the sort of things that local government, again, gets involved in. Housing rent arrears, for example, potential evictions, problems with social services. I think that this question of adequate resourcing is not just in relation to licensing, but is also in relation to some of the social consequences. For example, legal aid: under the Lord Chancellor's Department there are issues there about debt and debt work solicitors, private practice solicitors and voluntary organisations are funded through the legal aid board and through local government. One cannot help but think there will be financial consequences [that] local government needs to be adequately resourced to deal with."[97]

14. The Minister told the Committee that he had not discussed with the Department of Health how the spread of problem gamblers around the country might be affected by the siting of large casinos, [98] we consider that the implications of gambling deregulation on local social services and health authorities ought to be considered when the Government decides how licence fees will be set. We further believe that the setting of the licence fees should be such as not to leave local authorities in deficit in respect of the impact of their new responsibilities. We recommend that local authorities should be able to set the levels of licence fees and that the revenue generated should be ring-fenced for costs associated with gambling. All of these cost issues should be reassessed after two years in the light of experience.

Casino resort hotels

15. The Government's proposals would allow the development in this country of large leisure resort premises, of the type seen in Las Vegas and Atlantic City, offering accommodation, entertainment and conference facilities as well as gambling. We have received several memoranda from companies interested in developing resort casinos in the UK, and from a local partnership keen for such a development to take place in Blackpool. Blackpool Challenge Partnership claimed that resort casinos would bring in investment to the economic infrastructure of Blackpool that would save the resort, and the region, from the degeneration that it was currently suffering.[99] The Partnership was keen to see the Government phase deregulation of casinos, and allow Blackpool to have pilot status in the development of resort hotels.[100] Neither the Gambling Review Body nor the Government considered that there was a case for granting preferred or pilot status to any particular area.[101]
16. The LGA was confident that casinos would bring economic benefit in their regions, through business rates charged, and the potential for visitors to be attracted all year round,[102] but admitted that the association had not considered the impact of resort casinos on existing local businesses.[103] Local action groups had told the Committee of their concerns over the development of resort casinos, principally that social cost would be too great and the economic impact on existing small hotels and boarding houses could be devastating.[104] The Government has confirmed that it has no plans to hypothecate the tax raised in a particular area to public expenditure in that area, [105] and so there is no likelihood that Blackpool, or other resorts, would be able directly to tax a resort casino in order to invest in the regeneration of their town—as had been the case in Atlantic City and Biloxi in the United States. We agree with the Government that pilot status should not be given to a particular area. We consider that it will be for local authorities to develop the most beneficial strategy for licensing and approving planning for resort casinos, and to align, as the Local Government Association suggests, new gambling facilities with other business, cultural or social housing developments so that resort casinos contribute to the area in which they are built.[106]

Taxation

17. The Government told us that HM Treasury and Customs & Excise are currently considering the implications of the proposed regulatory reforms for all of the revelant gambling duty regimes. Evidence submitted to the Committee by the British Casino Association and leisure development companies suggested that the top rate of 40 per cent marginal duty on the gross gaming yield of casinos was not internationally competitive and unlikely to encourage investors in resort casinos in the UK.[107] Evidence from Atlas Property Consultants referred to the examples of France and Switzerland, who passed legislation enabling the development of resort casinos, but neither of which saw the expected expansion of resort casinos. This, it has been suggested, was due to the high rate of tax in both countries.[108] We recommend that the Government considers the experience of other jurisdictions when determining the proper rate of duty for casinos.

 

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69   Report of the Gaming Board for Great Britain 2001-02, Department for Culture, Media and Sport, The Scotland Office, The Scottish Executive, HC 1016, 11 July 2002. Back

70   See paragraphs 75 to 97 Back

71   A safe bet for success, pp 59-63 Back

72   Q 346 Back

73   Q 346 Back

74   Ev 86 (Vol III) Back

75   Ev 42, 49 (Vol II) and Ev 3 and Ev 7 (Vol III) Back

76   Ev 3 (Vol III) Back

77   Gambling Review Report, p. 128 Back

78   Ev 86 (Vol III) Back

79   Ev 12-16 (Vol III) Back

80   A safe bet for success, p. 9 Back

81   Ev 108 (Vol III) Back

82   Ev 109, 72 (Vol III) Back

83   Ev 45 and 86 (Vol III) and Ev 36 (Vol II) Back

84   See paragraphs 77 and 78 Back

85   QQ 231 and 232 Back

86   Q 41 Back

87   Ev 129, 125 (Vol III) Back

88   Q 200 Back

89   Ev 125 (Vol III) Back

90   QQ 359-362 Back

91   Ev 72 (Vol III) Back

92   Q 197 Back

93   Ev 109 (Vol III) Back

94   Ev 142 (Vol III) Back

95   Ev 129 (Vol III) Back

96   Ev 108 (Vol III) Back

97   Q 200 Back

98   QQ 369-372 Back

99   Ev 34 (Vol II), Ev 147 and 43 (Vol III) Back

100   Ev 44 (Vol III) Back

101   A safe bet for success, p. 19 Back

102   Q 210 Back

103   Ev 142 (Vol III) Back

104   Ev 19 and 66 (Vol II) Back

105   Ev 107 (Vol III) Back

106   Ev 73 (Vol III) Back

107   Ev 38 (Vol II), Ev 52 and 148 (Vol III) Back

108   Ev 149 (Vol III) Back

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Prepared 24 July 2002