The
Committee consisted of the following
Members:
Chairman:
Dr. William
McCrea
Baldry,
Tony
(Banbury) (Con)
Blackman,
Liz
(Erewash) (Lab)
Cairns,
David
(Inverclyde)
(Lab)
Challen,
Colin
(Morley and Rothwell)
(Lab)
Chaytor,
Mr. David
(Bury, North)
(Lab)
Creagh,
Mary
(Wakefield)
(Lab)
Ellwood,
Mr. Tobias
(Bournemouth, East)
(Con)
Fabricant,
Michael
(Lichfield)
(Con)
Foster,
Mr. Don
(Bath)
(LD)
Harris,
Mr. Tom
(Glasgow, South)
(Lab)
Hogg,
Mr. Douglas
(Sleaford and North Hykeham)
(Con)
Morley,
Mr. Elliot
(Scunthorpe)
(Lab)
Roy,
Mr. Frank
(Lord Commissioner of Her Majesty's
Treasury)
Sutcliffe,
Mr. Gerry
(Parliamentary Under-Secretary of State for
Culture, Media and
Sport)
Swire,
Mr. Hugo
(East Devon)
(Con)
Younger-Ross,
Richard
(Teignbridge)
(LD)
Adrian Jenner, Committee
Clerk
attended the
Committee
Third
Delegated Legislation
Committee
Wednesday 4
February
2009
[Dr.
William McCrea in the
Chair]
Gambling
Act 2005 (Advertising of Foreign Gambling) (Amendment) (No. 2)
Regulations
2008
2.30
pm
Mr.
Don Foster (Bath) (LD): I beg to
move,
That
the Committee has considered the Gambling Act 2005 (Advertising of
Foreign Gambling) (Amendment) (No.2) Regulations 2008 (S.I., 2008, No.
2829).
I
am delighted to serve under your chairmanship, Dr. McCrea. It
may benefit the Committee if I first set out the background to my
concerns about the statutory
instrument.
I
am sure that hon. Members are aware that online gambling is big
business. In November 2008, a joint study carried out by The
Washington Post and the 60 Minutes
programme estimated that the worldwide internet gaming market is worth
about £12.5 billion per annum, of which about 11 per cent., or
£1.4 billion, per annum comes from UK players. It is really big
business, but sadly it is poorly
regulated.
There
are about 6,500 internet gambling sites worldwide, approximately 5,500
of which are not regulated. Fortunately, most of the money spent by
puntersabout 80 per cent.goes to the 1,000
or so i-gaming websites that are regulated somewhere in the world. A
key reason for that is that punters wish to have some security that the
business they are dealing with is likely to pay out if they win and
will not misuse their credit card information. The second reason that
the vast majority play on the 1,000 regulated sites is that they are
widely
advertised.
The
statutory instrument is largely about rights in respect of advertising,
particularly in the UK. Three categories of internet gaming website can
be advertised in the UK. First, there are those that are hosted and
regulated in the UK. Sadly, there are far too few of those. The
Committee on the Gambling Bill spent a vast amount of time discussing
the regulation that should be imposed on internet gaming sites hosted
here; however, because of the tax regime in this country, very few such
sites have chosen to adopt our regulatory
regime.
The
second group that can advertise in the UK comprises internet gaming
websites that are hosted and regulated in other European economic area
countries. The third, which we will discuss predominantly today, is
websites hosted and regulated in countries whose jurisdictions we have
approved and given whitelisted status. The question before us is
whether to add another jurisdiction to the whitelist and thereby enable
websites that are regulated by the jurisdiction of Antigua and Barbuda
to advertise in the
UK.
I
want to make it absolutely clear that in raising concerns about the
statutory instrument, I am in no way being critical of Antigua and
Barbudas ability to
regulate internet gaming websites effectively. My
central concern is whether the means are in place for us to know
whether it is performing that regulatory function as effectively as we
would like. I am worried about our lack of knowledge about that
jurisdictions ability to regulate
effectively.
The
debate is also an opportunity to raise other concerns about the rules
and procedures for whitelisting. In particular, why do we allow
websites regulated by whitelisted jurisdictions to advertise in this
country without making any contribution to our economynot even
a contribution to the costs of our vetting procedures? Why are they not
obliged to contributealthough some do, I acknowledgeto
efforts to deal with problem gambling in this country, where many of
their players come from? They are not currently required to pay for
education, research into and treatment of problem gambling in this
country, even for people whose problem is using such
websites.
Mr.
Hugo Swire (East Devon) (Con): How many companies have
been prosecuted for breaching the provisions of the Gaming Act
1968?
Mr.
Foster: According to answers to parliamentary questions,
the answer is zero. That is additional ammunition for my case that we
do not have adequate mechanisms to carry out the critical vetting
procedures. I will develop that point in more detail in a few minutes,
but I am grateful to the hon. Gentleman for the intervention.
I gave the
Minister advance notice of the concerns that I have laid out. I am
looking forward to hearing from him reassurances and, more importantly,
concrete proposals for changes to the existing procedures and
arrangements, particularly to the financial obligations placed on
i-gaming websites regulated by whitelisted jurisdictions, and to our
testing
procedures.
The
detailed and complex rules governing whitelisting are contained in a
lengthy document distributed by the Department for Culture, Media and
Sport. Paragraph 1.8 states that a country seeking
whitelisting
will
be required to demonstrate that its gambling licensees operate within a
robust regulatory environment and that its regulator(s)...(are)
required to operate continual licensing and regulatory enforcement of
gambling operations within that
jurisdiction.
Paragraph
1.9 says
that:
Information
about enforcement systems should include details about the manner in
which technical standards and requirements are effectively enforced,
including details of testing
procedures.
The
key question is: what are the jurisdictions expected to cover?
Paragraph 1.15 makes clearly states:
We do
not propose to prescribe the conditions which a jurisdiction must apply
to its licensing regime in order to qualify for
consideration
to
be whitelisted country.
Neither
do we propose to demand that a jurisdictions regime must mirror
the licensing regime which will be in operation in Britain from
September 2007 in order to
qualify.
It
does not say that websites regulated in whitelisted jurisdictions have
to comply with exactly the same requirements that we impose on those
that we regulate in this country. However, it goes on to say that the
country must
set out in
writing how the issues which the Gambling Commission has addressed
through its licensing regime are addressed with substantially similar
intention and effect in the jurisdictions regulatory regime and
through the obligations placed on the operators it
licenses.
Although
the regime does not have to be identical to the regulatory regime that
we impose on websites hosted and regulated in this country, the country
must operate a regime with similar intention and
effect.
Paragraph
1.17 makes that even
clearer:
In
short, we expect that all those jurisdictions whose representations to
the Secretary of State under section 331(4) are
successful
resulting
in their being whitelisted
to have
embedded within their licensing regimes the values which underpin our
licensing regime, that is to say, that they too regulate gambling in
order to protect children and vulnerable people from being harmed or
exploited; to keep crime out; and to ensure that gambling is conducted
fairly, and that they have the facilities and resources in place to
ensure compliance and enforcement with those values and the regulatory
regime in
operation.
Clearly
we expect a whitelisted country to have a regulatory regime covering
the same values, principles and core concerns as ours, and to have a
sufficiently robust mechanism to ensure continued compliance. The
question, therefore, is whether we can be confident that the existing
and would-be whitelisted countries are meeting those requirements and
that they will continue to do
so.
Clearly
responsibility lies with the regulatory machinery in the individual
countries, but to give us the necessary confidence and assurance,
responsibility for checking up lies with the Gambling Commission, which
uses a variety of tools for conducting those checks, including detailed
analysis of all the paperwork and procedures in place in the individual
countries. However, that includes so-called mystery shopper
surveysfor example, checking whether robust procedures are in
place to prevent under-age people from accessing and
gambling on a particular
website.
My
interest in this issue arose because of a parliamentary question that I
asked some time ago, on 21 July 2008, about mystery shopper tests.
Referring to a press release that the Secretary of State for Culture,
Media and Sport had put out about the Gambling Bill, I
asked:
how
many mystery shopper surveys the Gambling Commission has conducted
since its creation; when these surveys were carried out; and if he will
place a copy of the results in the
Library?
The
Ministers unhelpful reply will interest the Committee. He
wrote:
The
Gambling Commission conducted a pilot mystery shopping exercise last
summer on remote sites operated by prospective licensees and others. At
that stage many operators were changing their systems to comply with
the commissions prospective licence conditions and codes of
practice. Using the approach developed in the pilot, the commission now
has an ongoing programme of mystery shopping on remote sites provided
under a commission licence as part of its compliance programme. I will
ask the chief executive of the Gambling Commission to write to the hon.
Member on this matter and to place a copy of that letter in the Library
of the House.[Official Report, 21 July 2008;
Vol. 479, c.
804W.]
The
answer consisted of little more than an assurance that something was
done and the chief executive was going to give me a bit more detail,
which he did by letter. Worryingly, he
wrote:
In
just over a third of cases, deficiencies have been identified that
could, in some circumstances, allow under 18s to
gamble.
In
one third of the mystery shopper tests there was a failure in the way
in which under-age gambling was dealt with.
The Committee
will not be surprised to hear that that caused me some concern. I
decided to find out which jurisdictions and websites were involved. I
tried and I tried. I asked parliamentary questions,
and the Minister
was even less helpful in his response, telling me
that he simply was not going to tell me. I adopted the increasingly
traditional approach to gathering information by using the wonderful
Freedom of Information Act 2000. I submitted a freedom of information
request to the Gambling Commission, asking what was going on and who
was involved. As I mentioned, The Ministers reply said very
little, but the Gambling Commission simply would not tell me anything.
It said that the information was commercial in confidence and that
revealing it would create difficulties in its relationships with the
various jurisdictions and its dealings with gambling
websites.
That was
okay. We had been given some assurances, somewhat confidentially, that
where there had been failures, an attempt had been made to check them
out and all wasperhapsnow well. Even though there had
been failures, no one could tell me who or where, but we were assured
that everything was all right. I thought that was okay, and I was
prepared to accept it. However, I wanted to check that people were
continuing to carry out those tests, to provide continued assurance
regarding things that had gone wrong beforeeven if we did not
know who, where, what or why. We were told that it would be all right
and that such matters would continue to be checked out.
I asked a
parliamentary question about that and, for once, the Minister was very
forthright in his
answer:
The
Commission expects to conduct further testing of operators licensed in
other
jurisdictions,
the
commission expected to do it
but to date all
of those tested since 1 September 2007 under the provisions of the
Gambling Act 2005 are operators licensed in Great
Britain.[Official Report, 17 November 2008; Vol.
483, c.
11W.]
In
other words, since 1 September 2007I do not know whether
anything has happened since this answer, but it was certainly the case
at that pointno further mystery shopper testing has been done
in jurisdictions other than those within the United Kingdom. Why is
that?
Why have we
not carried out such tests? If the regime is to be secure, we need
information about it. I cannot get the answer to my questions other
thanI put this to the Minister in as gentle and tactful way as
possiblean indication that carrying out mystery shopper tests
in other jurisdictions might be breaking the laws of those
jurisdictions. I would be grateful if the Minister intervened to say
whether I am right or wrong, but perhaps he will tell me when he winds
up the debate.
We have a
system whereby we check what people are doing. There is a paper
exercise to ensure that all is well and proper before we give
whitelisted status. Presumably, we have paper exercises at a later
stage to check that all continues to be well. For me, however, the
mystery shopper tests are key. As far as we know, a number of those
tests have been failed, although we do not know by whom or where. No
further tests are being carried out because we might be breaking the
law. Perhaps those difficulties have been resolved and tests have
started again, but we do not know whether that is the case.
The Minister
expects us to say meekly, Yes, we are happy with absolutely
everything; we will allow new countries to be added to the whitelist,
allowing them to advertise within the United Kingdom, without making
any payments and without any assurances.
Frankly,
that is not good enough. We must have some
assurances from the Minister about what is going on with our testing
procedures to give us the confidence we need.
I have two
more points. First, the Minister will be aware that I have expressed
considerable concern about the fact that the Gambling Commission, on
our collective behalf, is carrying out at least some tests; I suggest
that those should be far more rigorous than they are at present.
Presumably, that is costing the Gambling Commission and therefore the
UK taxpayer a great deal of money. However, we make no charge
whatsoever to those whitelisted jurisdictions, or to the websites they
regulate, to meet the cost of those compliance activities. That seems
totally wrong.
The internet
gambling business in this country is worth £1.4 billion, the
vast majority of whichnot allgoes outside this country,
with no apparent benefit to this country, but costing it a great deal
of money. I am sure that the Minister would agree that that is not
acceptable and that a change must be made. At the very least there must
be a charging mechanism so that we recoup the cost of giving
whitelisted countries internet gambling sites the opportunity
to advertise in this country and make significant and lucrative
profits.
The final
concern relates to money to help with research, education and treatment
of problem gambling in this country. We have in this country something
like 11 per cent. of all internet gamblers; the vast majority of them
spend their money on websites based overseas, whether in EEA or
whitelisted countries. Surely an obligation should be established to
ensure not only that they give money for research, education and
treatment somewhere in the world, but that we get our fair share of the
money in this country. I said earlier that I am well aware that some
websitesparticularly those that are hosted and regulated in
Alderneymake contributions to the Responsibility in Gambling
Trust. However, there is no obligation for them to do so. There should
be.
I
am well aware that the issue will become even more complicated if the
Secretary of State goes ahead with his plans for a mandatory levy. If
there is to be such a levy, the whitelisted countriesI would go
further and include the EEA countries that are allowed to advertise in
the UKshould make a contribution,
too.
I
am unhappy. I am not confident that we have an appropriate checking
system in relation to the regulatory procedures adopted in whitelisted
countries. I am concerned that no payment is required to meet the cost
of the checking procedures that we currently have, and that there is no
obligation on the relevant websites in whitelisted countries to
contribute to research, education and treatment relating to internet
gambling problems in this
country.
Technology
is now available that would enable us to block any website that did not
meet our requirements. I am sure the Minister is aware of such
technology. It is perfectly possible to ensure that those who are not
prepared to play ball and cough up where that is appropriate cannot
advertise their product to people in this country. I hope that the
Minister will consider that.
At the
moment, I am minded to vote against the statutory instrument, but I am
prepared to listen to the assurances that I hope the Minister will
give, and to commitments to make significant changes in procedures in
the
future.
2.54
pm
Mr.
Tobias Ellwood (Bournemouth, East) (Con): It is a pleasure
to speak in this important debate under your tutelage, Dr. McCrea. I am
grateful that we have an opportunity to debate the regulations because
the Government tried to sneak them under the radar. We are here to give
them scrutiny. The measure will amend the Gambling Act 2005 to expand,
as has just been mentioned, the list of approved countries that can
advertise their gambling services in the UK by adding Antigua and
Barbuda. The relevant provisions are in part 16 of the Gambling Act
2005, at section 331.
The original
purpose of the Act was to make Britain attractive as somewhere for
gambling companies to be based to keep above board matters of the kind
we are discussing today. The Government will concede that their
attempts to achieve that have failed, partly because of tax
regulationstaxes here are too high, so companies have decided
to move elsewhereand also because of the amount of regulation.
Why bother signing up to operate in the UK when the benefits of a
British audience can be reaped if the company is based in a place on
the whitelist such as the Isle of Man or
Alderney?
Let
us look at Antiguas legislative package. The hon. Member for
Bath said that he had no problems with what had been put forward by
that country, and I agree with him to some extent. There are some
differences between the British and Antiguan legislation. An immediate
example, which will concern everybody, can be seen in the restriction
of underage gaming and wagering guidelines published by the Financial
Services Regulatory Commission of Antigua and Barbuda. Paragraph 2.2,
on the age requirement, states
simply:
There
should be a display establishing the minimum age requirements on entry
or registration
screens.
In
the UK, in comparison, it is against the law for somebody who is
underage to apply. That completely different approach is not reflected
by the guidelines in Antigua and
Barbuda.