4 Purpose of the
proposal
14. The proposal is intended to allow more flexibility
for the players and operators of jackpot and higher-value AWP
machines.
15. The changes it proposes in respect of jackpot
machines are as follows:
a) enabling such machines to accept payment by banknotes
and by means other than cash, such as smartcards, as well as by
coins
b) allowing such machines to pay out prizes in banknotes
and in non-cash form
c) dispensing with the requirement that such machines
should be able to accept payment for a single game
d) allowing players, at their discretion, to retain
winnings in such machines for further play (jackpot machines are
presently required to pay out all winnings automatically).
16. The changes it proposes in respect of higher-value
AWP machines are as follows:
a) enabling
such machines to accept payment by banknotes and by coins, but
not by any non-cash means
b) allowing such machines to pay out prizes in banknotes
as well as coins, but not in any non-cash form, and
c) dispensing with the requirement that such machines
should be able to accept payment for a single game.
The proposal would not allow higher-value
AWP machines to store winnings for use in further play.
17. The Government initially envisaged reforming
the regulatory regime applying to higher-value AWP machines in
the same way as its proposed reforms to the regime applying to
jackpot machines. To amend the law in this way would, however,
involve amending provisions of the 1968 Act which were amended
less than two years previously (in December 2001), and would therefore
be prohibited under section 1(4) of the Regulatory Reform Act
2001 (the 'two-year rule'). This issue is discussed further at
paragraphs 31 to 36 below.
Operation of the new gaming
machine systems
18. The Department intends that the operation of
the new machines is to be governed partly by the law set out in
the 1968 Act as amended by the proposal, and partly by means of
non-statutory and non-binding guidelines issued by the Gaming
Board of Great Britain, which already issues guidelines for the
operation of gaming machines which operate under the 1968 Act.
The Gaming Board is a statutory body established under the 1968
Act charged with the regulation of gaming and lotteries in Great
Britain. The issue of the Gaming Board guidelines is discussed
further at paragraphs 106 to 133 below in relation to necessary
protections.
19. The Department has set out in detail how it expects
the new systems to work for machines accepting smartcards and/or
banknotes, as appropriate, and paying out by means of credit notes,
tokens, cheques, smartcard credits and/or banknotes, in addition
to cash. A detailed explanation of the intended operation of these
systems is set out in paragraphs 74 to 93 of the explanatory statement.
Play meters and bank meters
20. The Government proposes that most machines accepting
smartcards and/or banknotes would be required to have two separate
meters:
- the play meter: a meter displaying the
sum committed to play, which could not necessarily be retrieved
on demand
- the bank meter: a meter displaying the
sum stored in the machine (both initial credits and winnings),
which could either be committed to play or retrieved on demand.
21. The player would have to commit no more than
£2 of the value inserted into the machine to playing the
game at any one time, and could commit less. The remainder of
the value inserted would be stored on the bank meter. The player
could commit further money to play by transferring up to £2
at a time from the bank meter to the play meter. The exact sum
which the player could switch from the bank meter to the play
meter would be determined by the manufacturer and the operator,
who could either fix a sum of up to £2, or could offer the
player a choice of sums not exceeding £2.
22. The player would be able to use the sum on the
play meter to play the game, at the standard cost of a single
play (that is, up to 30p for a higher-value AWP and up to 50p
for a jackpot machine). When the amount of credit remaining on
the play meter was not sufficient to pay for a single play, the
player would be able either to commit a further
tranche of up to £2 from the bank meter to the play meter,
or to collect the sum displayed on the bank meter (subject
to the possible retention in the machine of sums less than £1).
23. The player would not necessarily be able to collect
the residue on the play meter if it were less than the cost of
a single play. This residue would remain on the play meter and
would be available for the next player to use.
Payment by smartcard
24. The Department envisages customers in casinos
and clubs being able to buy smartcards for use in jackpot machines.
These smartcards would operate in much the same way as a phonecard:
they would be pre-loaded with credit at a terminal controlled
by the operator, and could be inserted into a card slot to pay
for play on any suitably-equipped machine on the operator's premises
(including amusement machines not used for gaming). The same smartcard
could be used in a range of premises owned by the same operator.
25. Jackpot machines accepting smartcards would be
able to credit payments directly to the smartcard, or make payment
either in cash (notes or coins) or by means of credit notes, tokens
or cheques. The form in which money was inserted into a jackpot
machine would not necessarily determine the form in which money
was paid out.
26. Smartcard credits would be redeemable on demand
on the operator's premises for cash or cheque, or a combination
of the two. No other method of redemption would be acceptable,
although a player would be able to use the credit on a smartcard
to pay for other services on the premises. Operators would be
required to pay out the exact amount of money which was shown
as a credit on the smartcard. They would not be able to offer
other credits or prizes in lieu.
27. Players inserting a smartcard into a jackpot
machine would be able to transfer up to £20 of the stored
value to the machine. The machine would automatically commit up
to £2 to the play meter, and would leave the residue on the
bank meter. The machine could then be played as set out above.
A player wishing to commit more than £20 at a time would
have to withdraw and re-insert the smartcard for each sum up to
£20.
Timing and handling of
the proposal
28. We have examined three issues surrounding the
handling of the proposal and its proposed timetable.
The Gambling Review and
the Gambling Bill
29. We note that the period from the launch of the
consultation document to the laying of the proposal appears unusually
long for what is a relatively short proposal. The Home Office,
which was then responsible for gambling legislation, issued its
consultation paper on the proposal in March 2001, under the deregulation
procedure. Departmental responsibility for gambling issues was
transferred to the Department for Culture, Media and Sport following
the 2001 election. The Government responded to the Gambling Review
undertaken by Sir Alan Budd by publishing its policy paper, A
Safe Bet for Success, in March 2002. This set out how the
Government would take forward the recommendations of the review
in a Gambling Bill.
30. The measures proposed here are in effect interim
measures pending the introduction and passage through Parliament
of a Gambling Bill. The Budd Review specifically endorsed the
proposals set out in the March 2001 consultation document, and
the Government said, in A Safe Bet for Success, that it
would take the proposed measures forward in advance of a Gambling
Bill.
Operation of the 'two-year
rule' (section 1(4) of the Regulatory Reform Act)
31. The Home Office consultation paper initially
envisaged making similar provision for both jackpot and higher-value
AWP machines. In the event, the proposed amendments relating to
higher-value AWP machines are less far-reaching than those envisaged
for jackpot machines. The Department explains that this modification
to the initial proposal is necessary because the relevant sections
of the 1968 Act relating to payments into and out of higher-value
AWP machines—sections 34(5C) and (5D)—were amended
in December 2001 by an order which increased the maximum prize
which could be paid out by a higher-value AWP machine from £15
to £25.[11]
32. Section 1(4) of the Regulatory Reform Act 2001—the
'two-year rule'—prevents the amendment of any legislative
provision by means of regulatory reform order if that provision
has been amended by Act or by subordinate legislation less than
two years before the date on which the order is to be made. The
Department considers that the elements of sections 34(5C) and
(5D) which set the maximum value of the prize to be delivered
by a higher-value AWP machine form part of the same legislative
provision as the elements which lay down the means whereby the
prize is to be delivered.[12]
The amendments to the former elements have therefore effectively
forestalled, for a period of two years, the amendment of the latter
by means of regulatory reform order.
33.The Department has explained that the likely difficulty
created by the two-year rule came to light only in 2002, when
detailed consideration was given to the drafting of the order
which would give effect to the proposals in the Home Office's
consultation paper. Until then, specific consideration had not
been given to the particular amendments required to the 1968 Act.
Even when the difficulty was initially realised, the Department
considered that the issue was not clear cut, turning as it did
on the exact interpretation of the extent of the provisions in
the sections which it was proposed should be amended.[13]
The Department argues that even had the problem been appreciated
in December 2001, it was by no means clear that the Government
would have then decided to delay making a prize uprating order,
for which the industry was pressing, in favour of a prospective
regulatory reform order which had at that point not yet been drafted.
34. The benefits to the industry if the order is
made in its present form are estimated to be £1.85 million
annually, far less than the estimated annual benefit of £9.5
million were the order to be made in the way envisaged in the
consultation document. Given the substantial reduction in estimated
benefits, we asked why the Government had decided to press ahead
with the proposal at this time and in this form. In response,
the Department said that it "sees no reason not to proceed
now with a modest package of reform that will immediately deliver
small, but real, advantages to the industry".[14]
It indicated that the existing regulatory regime will in any case
be comprehensively overhauled by the prospective Gambling Bill
which it hopes to introduce in the next Session.
35. The Department expects to be able to lay the
draft order for final scrutiny in late June, and, depending on
the availability of Parliamentary time, the Minister expects to
make the order before the summer recess (that is, according to
the present parliamentary calendar, by 17 July).[15]
The Department believes that the earliest an order could be made
in the terms envisaged by the consultation document would be 9
December 2003, a delay of five months.
36. It is of course open to the Department to delay
making its order until the restriction imposed by the two-year
rule has expired. If the Department had not indicated that it
intended to reform the whole regime by means of a Gambling Bill
in the next Session, we would not have hesitated to recommend
a delay in making the order to ensure that it could deliver the
benefits originally envisaged. We trust that the Government's
confidence in pressing ahead with this limited reform now is matched
by its ability to deliver a more substantial reform next year
by means of primary legislation.
Notification to the European
Commission
37. The Department states that there is nothing in
the proposal which is incompatible with any obligation resulting
from membership of the European Union. However, it indicates that
the order and the accompanying Gaming Board guidelines lay
down technical standards which are within the scope of EU Directive
98/34/EC, a directive governing the operation of technical standards
across the EU. As the draft order and the guidelines both fall
within the scope of the Directive, they must be notified to the
European Commission. EU rules stipulate that a period of between
three and six months must elapse between notification of a new
technical standard to the Commission and its coming into force.
38. The Commission received the necessary notification
on 7 March 2003.[16]
A three month standstill period must operate before the regulation
is made or brought into force, to provide an opportunity for the
Commission and other Member States to comment if they consider
that the proposed regulation has the potential to create a technical
barrier to trade. The standstill period in respect of this order
ends on 9 June 2003.[17]
39. The Department states that if there is any change
to the terms of the draft order, or to the accompanying Gaming
Board guidance, as a result of consideration by this Committee
or by our counterparts in the House of Lords, it will renotify
the amended version to the European Commission.[18]
Any renotification will require a further three month standstill
period.
11 Amended by the Gaming Act (Variation of Monetary
Limits) Order 2001 (S.I., 2001, No. 3971), made on 8 December
2001. Back
12
Appendix B, para 69 Back
13
Appendix B, para 68 Back
14
Appendix B, para 66 Back
15
Appendix B, paras 71-72 Back
16
Appendix B, para 74 Back
17
The notification, number 2003/0088/UK, can be viewed on the European
Commission website at http://europa.eu.int/comm/enterprise/tris
Back
18
Explanatory statement, para 160 Back
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