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Session 2008 - 09
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Public Bill Committee Debates



The Committee consisted of the following Members:

Chairman: Mr. Greg Pope
Brown, Mr. Russell (Dumfries and Galloway) (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)
Grogan, Mr. John (Selby) (Lab)
McDonagh, Siobhain (Mitcham and Morden) (Lab)
Malins, Mr. Humfrey (Woking) (Con)
Munn, Meg (Sheffield, Heeley) (Lab/Co-op)
Pritchard, Mark (The Wrekin) (Con)
Scott, Mr. Lee (Ilford, North) (Con)
Sutcliffe, Mr. Gerry (Parliamentary Under-Secretary of State for Culture, Media and Sport)
Twigg, Derek (Halton) (Lab)
Ward, Claire (Vice-Chamberlain of Her Majesty's Household)
Younger-Ross, Richard (Teignbridge) (LD)
Christopher Stanton, Committee Clerk
† attended the Committee

Third Delegated Legislation Committee

Tuesday 31 March 2009

[Mr. Greg Pope in the Chair]

Draft Categories of Gaming Machine (Amendment) Regulations 2009
4.30 pm
The Parliamentary Under-Secretary of State for Culture, Media and Sport (Mr. Gerry Sutcliffe): I beg to move,
That the Committee has considered the draft Categories of Gaming Machine (Amendment) Regulations 2009.
Good afternoon, Mr. Pope. It is always a delight to serve under your chairmanship.
The intention of the regulations is to increase the stake and prize limits of all category C gaming machines and certain types of category D machines. Last year, I received representations from hon. Members on both sides of the House in support of seaside arcades, which were struggling under difficult trading conditions. The economic climate has not improved, and many businesses continue to struggle. Arcade revenue is down 21 per cent., for example, and there have been more than 130 reported closures since July 2007.
Mr. Tobias Ellwood (Bournemouth, East) (Con): I am grateful to the Minister for giving way so early in proceedings. He said that arcade revenue was down 21 per cent. Will he say why that is the case, and tell us whether there is any link between that and the number of B3 machines that they have been after?
Mr. Sutcliffe: I think that I am grateful for that intervention, but if the hon. Gentleman waits, he will hear quite an expansive speech on the issues that the industry faces. I was talking about closures since July 2007, with more than 800 jobs lost. Manufacturing output of gaming machines is down 50 per cent.
Mr. Don Foster (Bath) (LD): I apologise for interrupting the Minister. Will he confirm the number of arcades that he thinks have closed during that time? On my understanding from the Gambling Commission, it is 170—rather more than he said.
Mr. Sutcliffe: I said 130, but I will inquire further to ensure that we get an accurate figure. In the Department for Culture, Media and Sport, we always seek to be accurate with our figures. If I do not mention the number in my speech, the hon. Gentleman will get a response later this afternoon, or sometime shortly.
As I was saying, a serious issue for the industry relates to the manufacturing output of game machines. That has been the case since 2005, and nearly 300 jobs have been lost since 2007.
Mr. Ellwood: The Minister speaks almost with passion about the closure of arcades and the fact that 130 or more of them have been lost in seaside towns, which has changed the image of our seafront. I am confused about why we are taking category C and D machines in isolation and not looking at arcades in their entirety. Surely it would make more sense for us to have a debate involving recommendations that look at everything that goes on in an arcade, rather than salami slicing parts of the Gambling Act 2005 and considering a statutory instrument every two or three months. Why can we not do everything together?
Mr. Sutcliffe: Today we are debating category C and D machines. From the constituency representations that the hon. Gentleman makes on behalf of a seaside town, I know that he is very passionate about these issues. However, he tends to get confused, for which I apologise—I will try to give my explanation slowly so that he understands the reasons why we are doing this.
The hon. Gentleman misses out the fact that the Government have put a lot of seaside regeneration money in place to try to look at what the future of our seaside towns should be. Perhaps there should be further discussion—I would be happy to facilitate it—about the wider issues affecting our seaside resorts in connection with what DCMS is trying to do for tourism, and all the things that we hope will flow from that. Today we are discussing category C and D machines. The hon. Gentleman will know that the industry was keen for us to make progress on those machines.
During the initial consultation exercise, I was persuaded that a modest increase in stake and prize levels was appropriate against the background of the difficult times being faced by operators. I am confident that such an increase will not put at risk the 2005 Act’s licensing objectives on protecting children and vulnerable adults from being harmed or exploited by gambling.
I will turn first to category C gaming machines. The maximum stake for a category C machine is currently set at 50p, with a maximum prize of £35. The regulations will increase the stake limit to £1 and the prize limit to £70. Members will know that my Department consulted publicly on several options in August 2008, with the preferred option being to increase the stake limit to 60p and the prize limit to £60. I felt at the time that a 100 per cent. increase in stake and prize limits might be difficult to reconcile with our precautionary approach with regard to the implementation of the 2005 Act as a whole.
I was concerned that a prize of £70 or more might take category C machines in the direction of harder gaming machines, unless that was accompanied by additional restrictions on game speed and features. I did not want to see the erosion of the important distinction between harder and softer gaming machines. However, the responses to the consultation made it clear that a £60 limit would not benefit the operators of seaside arcades or machine manufacturers in the way in which we hoped.
Mr. Ellwood: I am concerned that the Government actually believed that a 60p stake would work. Is the Minister aware that a 60p piece does not exist and that recalibrating all the machines for a sum that cannot be inserted as a single coin would cost the industry more than such a subtle change would be worth? I am aware that he received a deputation on that, and am glad that he did not end up selecting that proposal, but I am astonished that he now admits that he still wants to push a 60p stake.
Mr. Sutcliffe: I am afraid that the hon. Gentleman is confused again. I tried to explain that the issue is not about the 60p stake. We have changed the proposal that was put to us—hopefully he will support our position—because I am aware of the impact that that would have on machine manufactures and suppliers. Market research showed that moving away from the current stake-to-prize ratio of 1:70 would deter players. As well as being unattractive to players, those limits would be too low to provide any incentive for manufacturers to develop new machines or for operators to replace legacy machines.
We held discussions with several of the trade associations, to which I am grateful for explaining the exact details of the issue. Also, when I first became the Gambling Minister, the hon. Member for Bath advised me about the definitions on and discussions about the categories of gambling machines because the situation was very complex. I now feel that I am getting somewhere in understanding the issues, so I thank him for his advice in those early days.
Following the discussions with the trade associations, I accepted that a £1-£70 limit on category C machines would be more practical and economically beneficial to operators and manufacturers. The fact is that the availability of high-prize category C machines is more likely to encourage operators to replace their legacy machines with new ones, which will help to reinvigorate the manufacturing market and enable manufacturers to provide a range of appealing games as an alternative to the higher-price category B machines. By not alienating players who might be interested in multi-stake and multi-prize machines, a £1-£70 limit offers a real incentive to operators of soft gambling environments, such as seaside arcades, to refrain from splitting existing premises to gain a high proportion of category B machines.
Finally, I took into account the Gambling Commission’s advice that, in the wider context of problem gambling, changes in the stake up to £1 would not cause a significant threat to the licensing objectives. We will provide appropriate controls on machine standards—the Gambling Commission is doing just that—and I am confident that the revised standards will help to allay any concerns raised during the consultation.
I now turn to category D machines. The regulations do not affect money-prize machines—the lowest category of fruit machines. Instead, they are intended to increase the stake and prize limits for crane grabs and coin-pushing machines, which are also known as penny fallers. Those machines are a much-loved element of seaside arcades, and playing them forms an enjoyable part of many family seaside holidays. Currently, coin-pushing machines have a maximum stake limit of 10p and a maximum total prize of £8, of which £5 can be cash, with a non-cash prize given up to the value of £3. That has enabled the operators of such games to include small, non-cash prizes to vary the offer of those machines.
Mr. Foster: Such as teddy bears.
Mr. Sutcliffe: Indeed.
During the first public consultation, there were no representations in relation to coin-pushing machines that warranted any change to my original view. I remain satisfied that any increase will not jeopardise the licensing objectives. Therefore, under the regulations, the maximum stake for coin-pushing machines will remain at 10p, while the maximum prize will increase to £15, of which £8 can be a money prize—or, indeed, there can be an even bigger teddy bear.
For crane-grab machines, the maximum stake is currently set at 30p and the maximum prize value is £8. The regulations will increase the stake limit to £1 and the prize limit to £50. Back in August, my Department consulted on a revised mix of 50p and £30 for that type of machine. The primary reason for the lower amount was caution, given the appeal of these machines for children. Following the consultation, it became clear that while such a proposal would not endanger the licensing objectives, it would not provide the benefit to seaside arcades that I had hoped. After discussions with a number of trade associations, I accepted stake and prize limits that were higher than those initially proposed that would enable operators to offer more attractive prize items, such as PlayStation and Xbox games, mobile phones and iPod shuffles.
We have to accept that tastes have grown more sophisticated over the last decade. Allowing seaside arcades to offer such prizes will go a long way towards helping them to address their current difficult economic position, and that was why I felt that the £1-£50 limit would be more appropriate. I am confident that the increase, when considered in the overall context of the regulatory regime, will not undermine the licensing objectives. Raising the limit of crane grabs to £1 will not be a price increase in the conventional sense; operators will continue to offer a range of stakes and prizes from a 10p stake and £1 prize upwards, with the average stake likely to be 33p or less. That will give the operators the opportunity to offer the choice that customers expect.
I know that some hon. Members will express their concern about such an increase to the stake and prize limits for category C and D machines. I understand those concerns and would like to address them. I would first like to reiterate that the protection of children and the vulnerable from the potential harm of problem gambling remains central to the Government’s approach to gambling and gambling regulation. It was for that reason that I decided to consult again on the revised proposals in December last year. I thought that it was important that all stakeholders who might be concerned about the risk of problem gambling should have another opportunity to voice their opinions. My Department specifically invited representatives from faith groups to a meeting during the consultation period to listen, at first hand, to their concerns. I took those views into account when deciding on the proposals before the Committee.
Increasing the stake and prize limit for localised gaming machines does not represent a relaxation of the regulatory regime, and the proposals should not be viewed in isolation. They must be considered in the context of the robust regulations put in place by the Gambling Act 2005. All categories of gaming machine must comply with strict regulations on technical standards to ensure that the distinction between category C and the higher category B gaming machines does not become blurred. The Gambling Commission is proposing to amend the technical standards regarding speed of play and link games for category C gaming machines, and revised standards to that effect were notified to the European Commission on 10 March.
I sought the advice of the Gambling Commission early on in the process. Its view is that in the wider context of problem gambling, changes in stakes limits of up to £1 will not pose a significant threat to the licensing objectives, provided that the appropriate controls are put in place. Through operating licences, the Gambling Commission regulates all those who manufacture, supply, install, maintain, adapt or repair gaming machines. In addition, further protection for consumers is secured through the Gambling Commission’s licensing conditions and code of practice, which include specific provision on underage gambling and problem gambling through requirements relating to supervision, access, staff training and self-exclusion.
Some stakeholders, including faith groups, have been critical of the proposals, but the concerns expressed have been taken into consideration and addressed. I have listened to the case made by the gambling industry and have also taken the concerns about the regulations raised by other bodies on board. It is important to reiterate that, for the majority of people, gambling is an entertaining pastime that does not cause any problems. The regulations are designed to ensure that operators at the softer end of the gambling industry—in particular seaside arcades, but also pubs and clubs—are able to manage in difficult trading conditions, but only in so far as the licensing objectives are preserved. That is why I wish to make it clear that continuing to increase stake and prize levels is not the only answer to the pressures faced by operators and manufacturers.
The industry must explore other ways to freshen its appeal, but we, as a Government, are in a position to provide some limited help. We recognise the need to protect jobs and support an ailing industry in unprecedented times, but there is also an obligation on us to ensure that vulnerable people and children are protected from the potential harm that gambling can cause. The licensing objectives are non-negotiable. I am increasing stake and prize levels for category C and certain types of category D machines to assist the industry only because I am satisfied that the licensing objectives will not be prejudiced in the process.
I can assure hon. Members that we are not being cavalier towards the concerns that have been raised, including by faith groups. I have taken those into account, and I am satisfied overall that the changes that I propose to deliver will give the industry the genuine lift it needs, without undermining the precautionary principle that we adopted in implementing the 2005 Act. For those reasons, I commend the regulations to the Committee.
4.46 pm
 
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