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House of Commons
Session 2008 - 09
Publications on the internet
Public Bill Committee Debates

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 punters—about 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.
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 economy—not even a contribution to the costs of our vetting procedures? Why are they not obliged to contribute—although some do, I acknowledge—to 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 jurisdiction’s 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 jurisdiction’s 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 surveys—for 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 Minister’s 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 commission’s 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.
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 was—perhaps—now 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 before—even 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 2007—I do not know whether anything has happened since this answer, but it was certainly the case at that point—no 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 than—I put this to the Minister in as gentle and tactful way as possible—an 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 which—not all—goes 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 websites—particularly those that are hosted and regulated in Alderney—make 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 countries—I would go further and include the EEA countries that are allowed to advertise in the UK—should 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 regulations—taxes here are too high, so companies have decided to move elsewhere—and 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 Antigua’s 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.
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