To be published as HC 1554-iii




Culture, Media and Sport Committee


Tuesday 1 November 2011

Paul Talboys, Kevin Allcock and John Carpenter

Elizabeth Speed, Peter Harvey, Derek petrie, john bollom and leslie macleod-miller

Evidence heard in Public Questions 202 - 328



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Oral Evidence

Taken before the Culture, Media and Sport Committee

on Tuesday 1 November 2011

Members present:

Mr John Whittingdale (Chair)

Dr Thérèse Coffey

Damian Collins

Philip Davies

Mrs Louise Mensch

Steve Rotheram


Examination of Witnesses

Witnesses: Paul Talboys, Chief Executive, Bingo Association, Kevin Allcock, Operations Director, Mecca Bingo, and John Carpenter, Manager, New Coronet Bingo Hall, gave evidence.

Chair: Good morning. This is a further session of the Select Committee’s inquiry into the implementation of the Gambling Act, and we have deliberately chosen to leave the ivory tower of Westminster and come out to see at first hand the Mecca Bingo Hall in Dagenham. I thank Rank and the management of the bingo hall here for their hospitality and for entertaining the Committee this morning. We are going to have two public sessions and then, hopefully, the Committee will be able to stay on to see a little bit of the game this afternoon.

For our first session, I welcome Paul Talboys, the Chief Executive of the Bingo Association, Kevin Allcock, the Director of Operations for Mecca, and John Carpenter of the New Coronet Bingo Hall. Louise Mensch is going to start.

Q202 Mrs Mensch: To start with a very general question to all three of you, in the broadest terms, would you say that the bingo industry is better off or worse off since the implementation of the 2005 Act?

Paul Talboys: I think, in overall terms, the industry would by and large say that we were marginally better. There were ups and downs and, as we are all aware, the Act did not have a smooth passage and things went wrong towards the end. There are a number of anomalies that we would like to address that resulted from that, but broadly the industry welcomes, for example, stake retention. On the other hand, there are some issues around remote gaming that cause the industry problems and we would like to see those mopped up. Broadly, I think we are supportive.

Mrs Mensch: Do you share that view, Mr Carpenter?

John Carpenter: I do, yes. I agree totally with Paul on this.

Mrs Mensch: You, Mr Allcock?

Kevin Allcock: Yes, I would. The 2007 smoking ban hurt the industry particularly badly. It is important not to confuse the two issues-the 2005 Act impact and the impact of the 2007 smoking ban. I guess the only thing that would concern us as an organisation would be the impact of the loss of the section 21 machines associated with the 2005 Act, but other than that, I think overall we are better off as an industry.

Q203 Mrs Mensch: Would you say that the Act has had the same impact on various types of bingo hall, or has it had a differential effect? Obviously, here at Dagenham we are in a large, flagship, very big establishment. Would you say that the Act has had a similar effect across bingo halls up and down the country, or has it affected different types of hall differently?

Paul Talboys: Aspects of it have affected all clubs equally, but probably the single biggest issue-we are very grateful that the Committee are minded to listen to discussion on tax-would be tax. That has had a particular impact on large and small clubs. Perhaps I could ask John to comment on that.

John Carpenter: Yes, for me tax is the biggest problem. It is the inability to invest. At a time when we can see things beginning to turn, I would really like to invest in the business, but with the tax being so high, we just cannot at the moment. That is my main concern-my only concern, really.

Kevin Allcock: It is the single biggest issue we face as an industry in terms of providing a taxation system that gives parity across all bingo revenues. Because of the taxation levels that we face, it does stifle investment. We as an organisation obviously have the support of the overall group, the Rank Group, so we have invested in six of these types of businesses. We can see what can be done with investment. I just think a fairer tax process, a fairer approach to tax and the industry, would help to promote that and would help to encourage investment like this.

Q204 Mrs Mensch: Just to be sure, you have touched then on the taxation and its effect on the industry, but in terms of the Gambling Act having the same impact on the different types of halls, the large and the small, you think it is pretty much of a muchness, do you, across the industry?

Paul Talboys: Broadly yes, I think. Kevin touched on, for example, the removal of what were termed section 21 machines, which were a particularly popular machine in a bingo club. That had an impact that clearly financially impacted on the larger clubs because there would have been more of them, but smaller clubs had their share of section 21 machines and that impact was spread equally across all sorts of clubs.

Q205 Mrs Mensch: You have mentioned both the tax regime and the implementation of the smoking ban as things that have affected your industry. Would you say that you have a problem with getting younger players to come in and play bingo-the future of it? If I look around your hall here, I see it is a very modern environment. You have free WiFi and you are offering different types of gambling environment in your quiet room and a family thing here, but it is still difficult to attract younger players, is it not? How do you feel that is affecting bingo, and what are your plans to remedy that or to make an offer attractive to younger players?

Paul Talboys: I will ask Kevin to comment, if I may, in a second. You are probably looking at a good example of what the industry is doing to address that particular issue. I am old enough to well remember the stereotype that bingo used to have-I think it has dissipated to some degree-of smoke-filled halls and trestle tables. That equated in the general populace to people assuming that bingo was just full of old people. That just is not the case. The demographics do not support that and the environment that you are sitting in today does not support that. The industry would be doing a lot more of what you are seeing today, I think. Again, just being boring for a second and going back to tax, the investment environment is currently so hostile that for these sorts of initiatives, which cost a lot of money, the stimulation is not there and the confidence is not there to make those investments to a huge degree. Maybe Kevin would want to add to that.

Kevin Allcock: Yes, sure. We have invested as a company in the last five years, so since the Act we have invested about £18 million within bingo, within our landbased bingo businesses. We have created six of these, where we see a lower age profile of customers, certainly in the evening. We would call the environment in which you are sitting a shush-free environment where you can have a chat, socialise with your friends and talk while the bingo is being played. In the environment in there, where 70% of our customers enjoy bingo, you cannot do that. The age profile in there would be about early-60s; in here, it is mid-40s to early-50s. Not only have we invested in these £1.6 million, £1.5 million sites, but we have invested quite a bit of money in refurbishing some of our smaller, traditional businesses, modernising the interior and giving them a more modern, fresh feel. That has not necessarily lowered our age profile of customers, but our customers have really appreciated the investment in what is their social experience.

John Carpenter: I would love to do something like this in my club-when I say "I", I am talking for all the owner/operators or a majority, because I am representing them-but because I have used all my reserves just to remain in business, I cannot do that at the moment. That is my problem. I would love to, and I could do it on a much smaller scale, nothing as grand as this, but that would definitely help me to move forward.

Q206 Mrs Mensch: Finally, can you all touch a little bit on both the revenue that you generate and how that has changed since the Act, and also numbers? I have been very interested in my tour today to hear that this particular bingo hall is a sort of high-volume bingo hall-something that the Government would wish to see-with lots of people spending modest amounts of money to enjoy a night out, which is an optimum environment for gambling. How do you feel that the Act has changed both your revenue intake and the numbers coming through the door? For better or worse?

Paul Talboys: Kevin, do you want to take that initially?

Kevin Allcock: Yes, sure. In terms of our own performance, is this wholly attributable to the Act? It is difficult to say, but we have seen a decline of 25% in visitor numbers since 2005. We have seen income and revenue levels drop by between 15% and 20%, including prize funds for customers, and our profitability has dropped by over 40% in that period of time. Again, let us just balance it with the impact of the smoking ban. It is difficult to say how much of it is entirely attributable to the 2005 Act, in fairness. The interesting point in all of that is that the amount of money we pay in bingo taxation has actually gone up. It has increased by 10%. With all those declines within our performance over the last five years, bingo tax actually has gone up by 10%-£2.5 million a year to us-which does not feel quite right. That has broadly been the impact for us.

John Carpenter: I would agree with Kevin. Yes, there has been a 25% decrease in admissions, but I think that is a lot to do with the smoking ban and the recession. We have just been through a huge recession. I do not think I can attribute anything to the Gambling Act itself.

Q207 Mrs Mensch: To the Act itself, you attribute no particular change either way? You attribute your decline in revenue numbers to a combination of the recession and the smoking ban?

John Carpenter: There was a drop in revenue because they took away the section 21 machines. There was definitely a drop in revenue from those, but apart from that I do not think there was a-

Paul Talboys: No.

Kevin Allcock: Just on that point of section 21, from a Mecca point of view, we probably lost about half a million pounds of income overnight and we have worked hard to recover that position as well.

Paul Talboys: I deliberately went last on that one, if you will forgive me, in that the numbers I would have said in terms of the whole industry figure would have more or less exactly married up with the numbers that Kevin gave for Mecca. I would add to that that from the beginning of 2007, just before the Act came in, until now we have lost 109 bingo clubs-about 20% of the total. I certainly concur and most definitely say that that has not been a result of the 2005 Act. It is a result of a combination of factors-certainly smoking, but more specifically, I would say, unfair taxation. It is manifestly mad for bingo clubs in their local communities to be paying 20% tax while virtually all other forms of gambling pay 15% tax. That is mad, it is inequitable and it does cause that environment wherein businesses do not have the confidence to invest and innovate, which is what we must do as an industry.

Q208 Chair: It is apparently a little difficult for people behind you to hear, so if you can raise your voice a little bit, that would be helpful. You have identified specific factors such as the tax regime, the recession and the smoking ban, but over 10 years ago now Alan Budd said in his report that the bingo sector is in longterm decline. That was not because of the specific factors; it was just a trend away from playing bingo to other forms of entertainment. Is that still the case?

Paul Talboys: It certainly has been for the last three to four years, that’s for sure. This year we are seeing significant signs of a stabilisation in terms of volume, so admissions are not-I think it is probably a slight exaggeration to say "not in decline" this year, but they are not much in decline versus previous declines. There is no doubt in my view that the leisure offer, if you like, generally in the UK over the last 20 to 30 years has significantly changed with the advent of computers, et cetera. The consumer choice, rightly, is huge now versus 20 to 30 years ago. I think bingo customers are still coming; the difference is that they are perhaps coming less frequently than they were, but there are still 3 million people who play bingo in the UK and virtually 10% of all adult women still play bingo. The product is good; it is sustainable. What it needs is some help, effectively.

Q209 Chair: This is obviously a very impressive, upmarket venue and I assume that people are attracted to come here because you offer quite a wide range. You can come and have a meal, you can come and have a drink, you can chat to friends and you can play bingo.

Paul Talboys: Yes.

Chair: You have achieved that, as we talked about a little earlier, by investing quite a lot of money here. My question firstly to Kevin is: have you achieved that basically through cross-subsidy? Have your other gaming and entertainment operations essentially subsidised your bingo clubs?

Kevin Allcock: No, I would say not. We have six of these types of environments where we are attracting a younger customer base that spends around about £20 in terms of their overall experience. We are pleased with the returns and the results where we invest, but even in some of the smaller businesses, where we might invest £100,000 to provide a sparkle to the environment, customer reaction has been very positive. Where we have struggled to invest-where we have not invested-those businesses have very much struggled to perform, whether it is in bingo or food and beverage or amusements or cash line performance. All areas of the business are going to struggle in terms of performance without investment. There is no doubt about that. I do not think that is unique to the bingo industry, actually.

Q210 Chair: That brings me to John. You, as the independent operator, were talking about how you were not making the profits you needed to invest back into the business. How much do you think you need to spend? If you do not manage to do so, do you see a bleak future for your business?

John Carpenter: Yes. We increased admissions through the 2000s up to 2007 when the smoking ban came in. They then dropped drastically when the recession really kicked in. We are seeing them bottom out now. I have been through two recessions in the last 30 years, and this would be the time that I would be investing because I can see it kick-starting. £100,000 is a good example of what we could spend on a club to create something similar to this-not as good as here, but it would be a similar experience. That is what I would like to be doing now but I just do not have the money to do it. I do not like to keep on about tax, but if the tax rate were to go down, I could see a light at the end of the tunnel and say, "Right, this is the time to try to invest." So, yes.

Q211 Damian Collins: You have seen tax raised quite a lot. I was a Member of Parliament when the 2005 Gambling Act was going through. Why have you ended up in this position where you have such unfavourable tax law? Were you all sleeping on the job at the time?

Paul Talboys: Thank you for asking the question. If you were to ask Treasury, which we have done, as I am sure you can imagine, "What on earth is the justification for bingo paying 20% when everybody else pays 15%, and if you are offshore you pay nothing at all, or even onshore, you pay 15% if you pay it?" Treasury’s only answer is, "It is historical." I can vouch for that because I have been around some time. I believe it is some sort of throwback to when we used to have double taxation in bingo, i.e. we paid VAT and bingo duty at the time. To cut a long story short, that was changed and converted into GPT, gross profit tax, but the calculation the Treasury did was flawed. They initially put it in at 22%. We argued strongly that that was wrong and they reduced it by 2% to 20%, but still left everybody else at 15%.

There is no logic to it. I was listening to John Whittingdale say the same thing. There is no logic to somebody going into a betting shop or any other form of gambling and paying that 15% while the bingo player, who may be male or female-I take the point of the Committee-pays 20%. It is mad, particularly when you offset that against the good that these clubs, in the main, do in their communities. There is a social impact to bingo that is well proved and I do not think anybody argues that a bingo club, particularly small clubs like John’s, are the hub of their communities. Why on earth would they be taxed beyond anything else that you can think of? It does not make any sense. I know that was not a particularly good answer, but it is the facts.

Q212 Damian Collins: You mentioned betting shops. Obviously, from a tax point of view it is a good argument to make. Are you in competition with betting shops or is this really a very different sort of an offer-you just happen to be in the same industry?

Paul Talboys: I think the realistic answer is not really, no. Your classic bingo customer, shall we say, is predominantly female, predominantly over 50, and predominantly does not do much of anything else, gambling-wise, anywhere else. Some of the guys may pop to the betting shop, but by and large there is not a lot of cross-fertilisation. There will be some, but not a huge amount. Kevin, do you agree with that?

Kevin Allcock: Yes, I would agree with that, Paul. It would not be top of our list of competitors, in honesty, but there is a degree of competition between us in terms of particularly machine play.

Q213 Damian Collins: What is your competition? Is it just other types of evening entertainment rather than other types of gambling, do you think?

Kevin Allcock: It is a really broad church. It is from staying in at home and having an M&S experience £10 meal for two to other gambling operations. It really is as broad as that. We do see ourselves, particularly in these types of environments, as a much broader leisure experience, but even in our traditional bingo businesses, which do operate at the heart of their local communities, we are in competition with staying at home and having a night in and with betting shops and so on.

Q214 Damian Collins: On the community point of view, you mentioned trestle tables in halls, albeit no longer smoke-filled halls, and I can think of a place in my constituency where bingo is still very popular in that type of environment. Do you have a sense of the health of the industry outside of the main professional bingo halls, like this one, in what you call the independent market of bingo clubs and halls?

Paul Talboys: Yes, I think I do. I think John is probably closer to it than I am, so do you want to take that one, John, in terms of bingo elsewhere and then I will come back, if I may?

John Carpenter: Yes. I think the majority of the 109 clubs that have closed will be small traditional clubs and they will be, as I am, in a town of 23,000 people-a small town. If that bingo club closes in that town, neither Gala nor Mecca, the two big organisations, are going to come into that because it is much too small a town for them to operate a club. That town loses that club, and that whole society-everyone-loses that meeting place, because a bingo club is a club. It is where people meet. That is the majority.

Q215 Damian Collins: That matters, and that would obviously be very sad, but would not bingo players hire a village hall and play there on a Saturday morning for cash prizes and they would carry on in that way?

John Carpenter: It is possible they might go to a certain extent, but from my experience, where bingo has closed in a town, that town no longer plays bingo, and no longer has that meeting place where people that have been going for years and years meet up two or three times a week and socialise, which is a lovely thing to do.

Paul Talboys: Coming back to me again, there is no doubt that some of the more proactive customers in that situation, I am sure, will get together and organise something along those lines. The research that we have done-albeit it is fairly old now, five or six years in fact-by the Henley Centre indicated that there is a sense of social loss when a bingo club closes that in the main is not replaced, particularly in the afternoons. It is usually the afternoon customers’ only out-of-home leisure activity and when it is gone, they just do not go out. In the evenings, that is less so; they will perhaps travel and if they can drive, they will drive, so it is slightly less of an impact. Certainly, if there are local clubs-working men’s clubs, institutes, you name it, the village halls even-if they can play bingo, they will, and I know they do. I play in my own village hall, strangely, and the sense of community is palpable even in that environment, because the product is fun. There will be some product played and even that has been impacted, to my knowledge, but it will sustain.

Q216 Damian Collins: How important is the prize money structure for bingo? Do people come for the cash?

Paul Talboys: Again, I will defer to my much more learned colleagues on that, but I think the Association’s answer would be that if you ask a bingo punter in the main why they play bingo, winning prize money is on the list, but it is certainly not number 1 and probably not number 2. Number 1 is virtually always to meet their friends and mates and have a good time; then there would be a couple of other reasons, and somewhere down there would be, "Oh, and I might win some money." Realistically, you might expect that to be a little higher, so perhaps it should be number 2, but I would say it is not number 1.

John Carpenter: Yes, there is a lovely quote in one of the reports that we had from a lady who said that she goes to bingo, she spends £20 and that is the cost of going out. That is how she views it. She does not seem to think she is gambling. She is paying £20 for a night out. She said, if she goes to the theatre, she feels that is a gamble because she is paying £20 for a seat and she may not enjoy it. In her mind, that is gambling. She actually looked at it as the cost of a night out. Winning is a bonus and she just liked the fun.

Kevin Allcock: What is quite interesting is-we are currently undertaking this-I actually spent a full day with a customer in our biggest business in Scotland to understand her experience of bingo. One of the first questions I asked her was, "Why do you come here?" and she said, "Well, yes, I come here to win money but it is not the primary reason. The primary reason is to socialise, to mix with friends and likeminded people. Winning is a bonus. If we don’t win or if I don’t win, it is disappointing for a very short period of time, but actually I come here to socialise first and foremost." That was fresh out of a customer’s mouth, and we are seeing that in all of these emerging experiences that we are undertaking at the moment in Mecca. There is lots of feedback on that.

Q217 Damian Collins: Obviously that is a great side benefit, but it is not why you are in business. From a hall like this, where do you make the money? What are the most profitable areas of a venue like this?

Kevin Allcock: It is kind of spread across all the elements of the proposition, really, fairly evenly. Bingo provides a good income stream for us. It probably accounts for 50% of our overall income. 30% of our income would come from amusement machines and the remainder from food and beverage and entertainment.

Q218 Damian Collins: That is income, but what about profitability?

Kevin Allcock: Amusement machines are the most profitable element of our business, followed by bingo.

Q219 Damian Collins: What percentage of profits would come-I do not want to give away trade secrets, but just broadly speaking-

Kevin Allcock: We are a listed company anyway so-

Damian Collins: -would over half your profits come from the slot machines, for example?

Kevin Allcock: No, no, not quite.

Q220 Damian Collins: Just under? I am just saying, if it is 30% of your income, roughly what percentage-

Kevin Allcock: A similar percentage in terms of profit.

Q221 Damian Collins: That does not quite tally with what you said, because you just said that they were the most profitable area, so that would suggest it is a bit higher than that.

Kevin Allcock: Sorry, I meant in terms of-

Paul Talboys: Single profitable area.

Kevin Allcock: Single profitable area, yes, because bingo is split down into cash line and into main stage bingo where you play games of bingo, which you will see later on today. I kind of lump those two together to call them bingo as one product. If I was to split it all down, probably the single biggest profit contributor would be the machines.

Paul Talboys: If I can add to that, nationally that would be replicated in that, certainly in terms of gross profit, machines would be broadly, universally, about a third of an average club’s profit. It varies a bit depending on city centre versus rural, but broadly that would be the case. Our issue going beyond gross to net is a little more tricky in that the staff cost in these places is quite huge and it does not tend to be directly allocated to particular income areas. It comes off at the bottom end. Clearly, activities like the bars and the diners are quite labour-intensive, as are some of the bingo operations. Machines are not-not particularly anyway. But I think that would be a reasonable average-about a third across the bingo estate-so it is very significantly important.

Q222 Damian Collins: You referenced earlier that the loss of high-stake slot machines has had a big impact on your business. Was this a growth area for profits? When you were taking a view before the Act of where future revenue was going to come from, did you have a view that maybe more money would come from gaming machines as bingo became less popular?

Paul Talboys: Yes, with reservations, in that these particular machines were different to the average in that you could do something called multi-stake. Underneath the stake limits, which I think were £2 if I remember rightly, it made for a much more interesting game. You could not necessarily win much more, but the game itself was much more entertaining. Certainly, when I play machines, wherever I go, I do not play to win. I play just because it can be fun. I do not expect to win and I suspect that is how most customers view it, and that is how they should view it. It should be entertaining. These machines were particularly good at that point and then, all of a sudden, were illegal with the start of the 2005 Act.

Q223 Damian Collins: Just one final question. How many people would come into a club like this just to play machines and not actually play bingo?

Paul Talboys: Definitely one for the operators, but I am going to say virtually none, depending on the layout of the club.

John Carpenter: It is none for me, because we do not have machines on while we are playing main stage bingo. They are around the hall, so there is nobody-

Kevin Allcock: Yes, it is a very small number in proportion to the overall visitor number here.

Q224 Dr Coffey: What impact has online bingo had on the traditional bingo industry?

Paul Talboys: If I was asked that a year ago, I would have said, "Very little." I am being told-I do not run clubs, so I am going by the numbers and the research that we do-that there is now more of an impact and perhaps up to 20% of bingo players have now tried online. There is starting to be an impact, but it is not huge as yet.

Q225 Dr Coffey: Any thoughts from the other witnesses?

Kevin Allcock: Yes. There are roughly 36 million people who are of gambling age that gamble in the UK, and about 6 million would gamble online and in retail businesses. A very small number, 1 million, would purely gamble online, so it is becoming a bigger part of our business. We operate, obviously, online businesses as well as land-based businesses, and what we are looking to do is probably leverage the synergies between the two where we can work closely together with our online partners. Our customers are becoming more and more technology-savvy, internet-savvy, and are therefore much more attracted to online playing of bingo. For us as an organisation, we have an online arm, so it has been healthy competition for our land-based businesses, shall we say, but without having an online business alongside us, we would see it as quite challenging.

Q226 Dr Coffey: As you were saying, you have an online section and I am sure there are other well-advertised competitors to that. How do you think online gaming companies offering products in bingo format to customers should be regulated or taxed?

Paul Talboys: I think they should be both. We have argued this for some time now, and we are not alone, I know. We would welcome with open arms the recently announced review in terms of online regulation by DCMS, and equally and particularly the review of taxation of it by Treasury. The fact that bingo particularly can be offered offshore at no tax and without regulation, whitelist or otherwise, is a matter of concern for us. We would support any measures to bring it back home, effectively, and have a consistent regime across the piece for all forms of gambling, with ideally all taxation being consistent at the same time. To us, it makes no sense for a customer to be sitting at home, able to play bingo via a server thousands of miles away, alone in their home. That is not social, that is not positive, it is not productive in communities and it does not drive anything for UK plc at the moment either. That situation needs to be addressed and regulated at the very least, and certainly, we would argue, taxed.

Q227 Dr Coffey: That is a more general thing about online/offshore, as it were, as opposed to this. In a situation here, you will have breaks between games. Of course, people can play the stuff that is on the tables, yes, but do you have any concerns that online bingo is leading to people playing more, or do you see that in your business revenue? Are people playing for, say, six hours in a go without many breaks in between?

Kevin Allcock: The issue is that we do not have any control over that. We do not see that. We do not have any visibility of it, really. We would-

Q228 Dr Coffey: Do you not see that from your customers and your online customers?

Kevin Allcock: We do, but the issue is that online customers can play wherever they choose, so we are not sure how big a representative sample that is. About 50,000 of our customers who play in a club will play online. That is the kind of visibility we have off a base of 15 million visits and 930,000 customers that visit our land-based businesses. As an operator of online and land-based, we would welcome increased regulatory control and we would certainly welcome tax parity even at 15%. We would welcome that.

Q229 Dr Coffey: Forgive me, I am trying to understand, because I would have thought that, with your customer relationship management that you are trying to do, you would know that Mrs Smith had been on there for six hours?

Kevin Allcock: We do, but what I am saying is that it is a small representative sample, in honesty, because at 50,000 it is not a huge number of customers that we have visibility over. If we had a situation where we could promote the relationship between online and land-based, that would unlock a great deal more visibility for us in that area, but we do not have access to that kind of data.

Q230 Dr Coffey: In terms of stakes that are levied in the two different environments, online and hall-based, what kind of stakes do you see that your customers would be paying? Are people paying a lot more to play, as it were, online, or spending a lot more?

Kevin Allcock: They tend to spend more, yes.

Q231 Dr Coffey: Unless you have anything to add, I just want to ask a very specific question. I understand that when you link up the different bingo halls, you have to have an additional licence for that. What is the cost of that, and is that impacting on profitability as well-the additional licensing?

Paul Talboys: That is one of the anomalies that we seek to address. It is a relatively minor issue, but it does perhaps illustrate what went slightly wrong. Bingo clubs have joined-linked as it is called-with each other for dozens and dozens of years without any problem at all. The 2005 Act arrives and, all of a sudden, that very same process of linking via a telephone line is deemed remote gambling, the same as offshore. Almost overnight, every bingo club had to have initially a full remote gambling licence, although that was quickly changed to what is called an ancillary remote, which I think is the licence you are talking about. Unless things have changed, I believe that is £250 per club, and that has to be renewed for no reason at all.

Q232 Dr Coffey: If Mecca is linking 99 clubs, that is £250 times 99?

Paul Talboys: Yes. It is an annual licence, so it is not each time it is played. May I just go back to your earlier question?

Dr Coffey: Oh, sure.

Paul Talboys: Also, the Association is arguing on another anomaly, which relates directly to your question, in that at the moment it is perfectly legal and acceptable for anybody, our customers included, to play bingo online at home on an iPad or any other equipment or their home PC. It is equally legal for them to go and sit in the House of Commons and do the same. It is also legal for them to go into a bingo club and do that and play whatever game they like, but let us say it is bingo. What would be illegal would be for the operator to see that and provide facilities for it in his own club. That would be illegal.

Q233 Dr Coffey: Would that include the provision of free internet?

Paul Talboys: Yes. Well, he is allowed to provide free internet, but he is not allowed to direct the consumer to anything in particular on the internet. If they find it themselves, that is okay, but if the operator-

Dr Coffey: No big posters around the place.

Paul Talboys: -puts a notice on the top, that would be illegal. We would argue strongly that if people are going to play online, it would be much, much better, coming back to your point, for them to do that in the club, where they are surrounded by other people. They can play online if they wish, but on terminals with facilities, with the lights on and with interaction, in a bingo club. That is currently illegal, and we are asking the DCMS to help us with that particular aspect of it.

Q234 Dr Coffey: Could I quickly just ask a little bit about product development online? Do you end up almost having a Facebook of bingo friends to try to recreate the bingo atmosphere, or is it just very mono-dimensional and you are there against the system?

Kevin Allcock: No. Facebook is a medium that we use to promote and market the business more than anything. Yes, there is still a sense of community, if you will, by playing online bingo wherever you play it, regardless of wherever you play it. We would have chatrooms and so on, so it is not just about playing the game itself.

Q235 Chair: Just going back to your remote licence, as I recall, I do not think it was the intention of Parliament that bingo should be captured by that, so who decided that bingo suddenly should require this?

Paul Talboys: The Gambling Commission must at some point have taken advice that that was legally required by the construction of the Act. We have looked at that and we cannot argue against it.

Chair: When you say you cannot argue against it, what do you mean?

Paul Talboys: Well, the way the Act is written, we cannot argue that it is not remote gambling under the definition of remote gambling. I cannot remember the exact words, but it is "by any means". If the person is gambling outside their own premises, it is remote under the new definition.

Q236 Chair: Even though it was not intended, if we were to remove it, it would require primary legislation to change the Act?

Paul Talboys: Yes, primary.

Q237 Dr Coffey: Or you could make the licence free.

Paul Talboys: Yes, that would work too. Innovative. I had not thought of that.

Q238 Damian Collins: Why do you offer free WiFi in a club like this?

Kevin Allcock: Particularly in the environment in which you are sat, rather than in there, we would like to attract people to come in and enjoy a business lunch in the afternoon and use internet access on their laptops. We see it not that frequently, in fairness, but we do see it in modern environments like this, where I might have a meeting with a couple of colleagues and internet access would be useful, so we offer it primarily for that reason.

Q239 Damian Collins: It is not an obvious audience, though, is it?

Kevin Allcock: Well, it is not an obvious current audience.

Q240 Dr Coffey: McDonald’s offers it, does it not, to try to get people in?

Damian Collins: Yes, but that is different, though, isn’t it?

Kevin Allcock: But it is a service-a facility that, yes, however small the capture that we have, still enables us to capture people who may choose a pub to have a business meeting, because lots of pubs and bars offer that kind of facility.

Q241 Damian Collins: But from what you said earlier, I can sit in here playing bingo online?

Kevin Allcock: Yes.

Damian Collins: As long as you have not directed me to do it, I can sit in the club doing that?

Paul Talboys: Yes.

Kevin Allcock: Yes.

Q242 Steve Rotheram: My question is about when perhaps a bit of fun becomes slightly more addictive. It appears from the evidence that you submitted that you do not believe there is a significant issue of problem gambling. What do you base that assumption on, and what evidence do you have to support your supposition?

Paul Talboys: I am probably light on evidence, to be honest. We would regard any instance of problem gambling as a problem. I will ask my colleagues to comment on their own measures. As an industry, we take the whole issue completely seriously and have done for many years, well before the 2005 Act. We have worked closely with GREaT and GamCare previously and continue to do so.

The main reason I know that to be the case, based on my own experience, is the product itself and how it works. As you have seen, the primary product is bingo itself. You cannot chase your losses in bingo. You do not primarily come to win; you come to enjoy some interaction, and if you win, it is a bonus. It is in my view very difficult to be addicted to bingo other than you just like it a lot. The fruit machines are slightly different; there are potential problems there, of course, but generally in bingo clubs, fruit machines are played when bingo is not played. When the main session is on, the machines are, in the main, silent and quiet and nobody is on them, and then if there is an interval, it is vice versa. It is very interrupted play the whole time. I think it is not an environment that is likely to cause those issues.

Having said that, the industry, as I say, takes it seriously and makes certain that staff are aware of the risks and are looking out for behaviour that might be indicative of an issue, and appropriate measures would be taken at that point. Maybe I could ask you to comment on that, Kevin?

Kevin Allcock: A single problem gambler is a big issue for us, however under control we think we have it. I can give you some numbers from a Mecca perspective. The reality is we had 158 self-exclusions in 2010, and a very similar number in 2009; it will be a similar number this year. That represents 0.01% of our 15 million visits a year and 0.02% of our membership base of 930,000. It is a very, very small percentage, but we do not take this matter lightly at all.

We invest an awful lot of time and money in operating responsible gambling policies. We have a pretty strict training regime for all of our customer base staff and our management teams. We have a "stay in control" website for online and land-based customers to access. In England, we operate a Think 21 policy, and a Think 25 policy in Scotland, so if you appear to be under the age of 21 in England and 25 in Scotland, we will ask you to prove that you are 18 in order to get in. Our environments are well supervised. Even in our amusement area, we would have an amusement team leader working in that environment throughout the trading day and that person is well trained to recognise issues. We share information between all of our businesses, between casinos, and between our land-based businesses, and we take it very seriously, but if you look at the numbers, it is a relatively small issue for us, fortunately.

John Carpenter: As far as we are concerned, you have to take it very seriously, of course. Since the Act came into force, we have to keep a record of any interaction we have. I only have reports on two people that I have had to interact with in the last four years. One was a lady who was spending too much that night, but she did not have a problem. She had had a couple of drinks too many and she just was spending more than she wanted to. We had a talk and I talked to her the next time she came in. That was not a problem. The other lady did have a problem gambling and she had lost a lot of money, not with us but elsewhere-casinos and bookie shops and online-and was trying to get money back via a fruit machine. We did stop that particular lady playing the fruit machines for six months after having full discussions with her, but that is the type of thing we do. We take it very, very seriously, as indeed I know Kevin does.

Q243 Steve Rotheram: Is your belief based on experience rather than evidence?

John Carpenter: Absolutely, yes.

Q244 Steve Rotheram: I am not in any way indicating that all gambling is habit-forming-people have a flutter on the Grand National and it does not mean that they go into a bookies’ shop and bet every other week-but in an environment like this, can that taste of perhaps winning on those fruit machines get people into the habit of gambling?

John Carpenter: Not in my experience, but-

Paul Talboys: Realistically, if that is what you want to do, you would find somewhere you would be able to do it in easier. That is a pure guess, but if you look at the British gambling prevalence study that is done every three years, I think I am right in saying that the incidence of problem gambling in this country is close to 0.07%. That was the same before the Act came in. It has not really changed. That equates to probably 3 to 4 hundred thousand problem gamblers in the UK, which should be a manageable number. It is still 3 to 4 hundred thousand too high, but those are the sort of numbers we are looking at. I do not believe you are going to find too many of those in a bingo club.

Q245 Steve Rotheram: It seems that you are being quite dismissive, actually, because in our notes-I have only got them today, and it gives you the statistics-Professor Hancock argues that the increase in problem gambling is internationally recognised as a robust significant level, so it has been identified as being an issue and a problem.

Kevin Allcock: In the UK?

Steve Rotheram: Where is Professor Hancock, John?

Chair: Well, the prevalence study has shown that it has gone up to 0.9%, but there is an argument about whether that is a statistically significant increase. The professor thinks it is, but not everybody, I understand, in the industry necessarily agrees.

Paul Talboys: She will certainly know more than I, so I accept that.

Q246 Mrs Mensch: Just to chime in on this, when we hear from many people in gambling, there is always a reference to self-excluded gamblers. These are people who have identified their own problem and excluded themselves. The obvious corollary strikes me. What happens to people who have a gambling problem but do not exclude themselves? They are not on the self-excluded list. They have a problem, but they do not choose to address it. They are not reformed alcoholics. Presumably, there must be a coterie of people who have a serious gambling problem who do not put themselves on self-excluded lists. What do you do about identifying those people who have a problem and who have not voluntarily excluded themselves from gambling?

Paul Talboys: I will defer to my colleagues in a second, but I think all you can do is try your very best through your systems, procedures and training to identify those people. They have to be identified through either behaviour or perhaps spending patterns, if you are able to analyse those. If you cannot identify them through either of those two, it is really hard unless they put their heads above the parapet in some way that can be identified. My colleagues may be able to answer that better than I can.

Kevin Allcock: The specific examples you give in our experience are few and far between because of the effort that we put into training our people to identify those types of people who potentially are heading in that direction. In terms of your question about what we do to help them, it is about discussion. It is about consultation with individuals. It is about putting an arm round the shoulder. Literally, we do that. Our people are trained to do that.

Q247 Mrs Mensch: Do you retain the right to ban people from your premises if you feel that they are problem gamblers and they are not self-excluding, and you will then put them on some sort of a watch list?

Kevin Allcock: Absolutely.

John Carpenter: Yes, absolutely, yes.

Q248 Mrs Mensch: In your experience as an independent operator, has that ever happened?

John Carpenter: It has not happened to me. In the two incidents I told you about just now, we resolved the issues with discussion and pointed them in the right direction of help. If they actually point-blank refused help, then I would stop them coming in, yes. I would feel duty-bound to do that.

Q249 Chair: In a pub, the landlord obviously watches and says, "You have had enough." Now, the speed with which the Committee managed to lose £20 on a B3 machine earlier was quite striking, actually. Do you have a similar arrangement whereby somebody will say, "Look, I think you have probably spent enough this evening"?

Kevin Allcock: Yes is the honest answer to that, but it is perhaps not as visible as you would see within a licensed retail environment where somebody has had too much to drink. It is done discreetly and with concern for the individual, rather than escorting somebody to the door. It is more of a consultation and discussion process with our trained teams.

Q250 Chair: If somebody either, as Louise says, self-excludes or is deemed to be a person who should not be gambling, to what extent is that information passed around to all operators?

Kevin Allcock: We share that with all 99 of our clubs and with our online business and, indeed, with our casino business.

Q251 Chair: But you would not share it with other operators?

Kevin Allcock: I do not believe we currently do.

Q252 Chair: There is nothing in principle why you could not say to John Carpenter, "This chap has self-excluded. If he happens to be in your neck of the woods, don’t let him in"?

Kevin Allcock: It is the mechanisms to make that happen, but it is certainly something we would look to do.

Q253 Chair: Finally, I mentioned B3s. To what extent do you feel that you should be entitled to more B3s or that it is unfair that you are only allowed B3s and, for instance, next door you might have a bookmaker with B2s? Is that a big issue for the industry?

Dr Coffey: Can I add, would you want section 21 machines back?

Paul Talboys: Thank you. The short answer is no, we would not necessarily argue for section 21 back. Times move on. What we would argue for, and have and will, would be the ability to deploy whatever machines our customers demonstrate they would like to have. They are grown-ups in a grown-up environment and this is a well supervised environment, so I think we are well equipped to operate any machine, but we are not arguing for that at the moment. Equally, latterly the DCMS have improved the B3 allocations and we are grateful to them for that. That has yet to fully manifest itself out in the estate, so it is too early to be talking about numbers. We are broadly comfortable with those. Neither do we have any comments to make about FOBTs. They appear to work satisfactorily. If our customers show us there is a demand, then that is different, but at the moment that is not the case.

Q254 Chair: You are not pressing to have B2s in bingo?

Paul Talboys: No. What we will make a case for would be prize level increase on the machines generally as part of the also recently announced triennial review from the DCMS.

Q255 Philip Davies: Just coming back to online gambling for a second, you are saying you lose customers from here to online. Was I right in saying that?

Kevin Allcock: Do we currently lose customers? Is that your question?

Philip Davies: Yes. Well, the thing I am struggling with is that earlier on when you were asked why people play bingo, it was because it was a social event, a night out, all the rest of it. If that is the reason why people are playing bingo, why would you lose people from a night out and the social experience to play online? Surely, from what you said at the start, I would have imagined that you would have two totally separate groups of customers: people who would play online, where your competition would be other online forms of gambling, and that you would not be taking people from a club like this to go online. I do not quite follow how those two things are compatible.

Paul Talboys: By and large, that is absolutely the case. There are clearly different motivations in terms of the activity, but there is some middle ground that initially was very small but latterly appears to be a bit larger. I am talking anecdotally as opposed to having any demonstrable data. I think the reasons for that are manifold, but perhaps it is that whoever it is has been out once this week does not particularly want to go out again and might do that instead, or is ill, or any one of a number of reasons why leaving the house-

Dr Coffey: Kids.

Paul Talboys: Yes, kids could be another one. There are numbers of reasons, and I guess the amount of TV advertising would be another one.

John Carpenter: But I do not see that as my competition, online gaming or online bingo.

Q256 Philip Davies: You do not see it as competition?

John Carpenter: No. My competition is Strictly Come Dancing and X Factor. That is my competition, to be honest.

Q257 Philip Davies: Fair enough. Kevin, you have your clubs where people are all playing in your 99 clubs around the country, all playing for the same big prize on occasions?

Kevin Allcock: Yes.

Q258 Philip Davies: If I play online, can I tap into that same game? Can I play for that same big prize in the same way? Can I join in exactly the same game as they are playing in the club?

Q259 Kevin Allcock: No.

Q260 Philip Davies: You cannot?

Kevin Allcock: Legislation does not allow that at the moment.

Q261 Philip Davies: Are you not allowed to do that?

Kevin Allcock: No.

Paul Talboys: That is what we are asking for.

Q262 Philip Davies: But you would like to be able to do that?

Kevin Allcock: Yes.

Paul Talboys: Yes. I see no reason why not.

Q263 Philip Davies: Fair enough. In terms of the problem gambling, how much does the bingo industry contribute to the GREaT Foundation?

Paul Talboys: I am afraid I cannot give you the numbers as we do not have those. The vast majority-in fact virtually all-of our members, contribute in excess of the minimum requirement, but I am afraid I cannot give you any numbers on that. Certainly we communicate frequently with GREaT, and when we get data on that, we would action data and talk to members.

Q264 Philip Davies: Are you happy with what you pay? It is voluntary, so presumably you are.

Paul Talboys: I think so, yes. Certainly our members have always been happy to contribute because clearly there is a social need there and it needs to happen. We are happy to play our part.

Q265 Philip Davies: In terms of your other contributions, it seems from the evidence that you have submitted that one of the things that you are not happy about is the amount of money that you spend to the Gambling Commission, that you think that it is not as effective as the old Gaming Board and it is more expensive, and it gives poor value for money. I think those were the words that you used. Why do you say that? What evidence do you have to back up that it provides poor value for money and is less effective than its predecessor?

Paul Talboys: To a certain extent we have been a little overtaken by events in that once again another consultation has been announced by the Commission on the specific matter of fees, and we will certainly be contributing to that. I suspect, if we were to write our response to you now, that would impact on what we said, but you cannot escape from the fact that to run a bingo club under the 2005 Act it is virtually three times more expensive than it was under the 1968 Act. Is that value for money? I guess that is a subjective decision. The industry was well regulated before. It is certainly well regulated now. Nothing much has changed, so I think, certainly if you speak to the smaller operators, the licence fee they pay probably does not represent good value for money. There is a number of solutions to that, but I think that would mean dialogue with the Commission and resolving it maybe in terms of cost efficiencies.

Q266 Philip Davies: Just as an illustration, John, what did you pay before the Gambling Commission was established and what do you pay now?

John Carpenter: I pay £1,750 now-about three times more than I used to, which I think was about £600.

Q267 Philip Davies: Mecca, what did you pay before and what do you pay now?

Kevin Allcock: I do not have the exact figures to hand but I do know it is about two and a half to three times as much now. I do not want to misquote numbers, so I would need to check the number.

Q268 Philip Davies: Do you get more visits now than you did before? What happens? What do you get for your money that you throw into the pot?

John Carpenter: Under the Gaming Board we would have four or five visits a year from our local inspector, whom we got to know very well. I have only had three in 30 years. They would spend the whole evening with you, the whole session or the whole afternoon, three or four hours, go through the books, talk to the customers, talk to us and talk to the staff. In the last four years I have seen our inspector twice. He is a very nice chap and I am sure he is happy that we are running things properly, so I do not have a problem with that, but I am saying that as far as maybe value for money-

Q269 Philip Davies: You do not see what you are getting for your money?

John Carpenter: Yes. I am thinking that.

Q270 Philip Davies: One of the things that people in the gambling industry say to me about the Gambling Commission is that they do not know much about gambling. Is that your experience of the Gambling Commission?

John Carpenter: Oh, putting me on the spot here. I would say that under the Gaming Board the inspectors were extremely knowledgeable, with encyclopaedic knowledge of the law.

Q271 Philip Davies: I did not ask you about the Gaming Board people.

John Carpenter: I was trying to get out of the question. I am sure they have the knowledge that they need to do the job.

Kevin Allcock: I would agree with that.

Q272 Philip Davies: Will you be more forthcoming than that?

Kevin Allcock: No, I am not going to be more forthcoming than that.

Q273 Philip Davies: Are you petrified of these people?

Kevin Allcock: Not at all, not at all. I think the Gambling Commission are effective in what they do. I hear what John is saying and I kind of echo what he is saying. Do they represent good value for money? Well, I guess the jury is out on that, but we would not be overly critical.

Paul Talboys: What we do not see at the moment, and I think universally people would agree with this, is a champion of the industry. For that money and perhaps the lack of visibility at the sharp end, we would like to think the Commission takes a view on some of the issues that are a problem for the industry-and they can be a multitude-and argues with us if we are wrong; but if we are right and they agree then they should be our best advocate. If that is happening, it may be happening under the radar, but we certainly do not see it. I think we would all welcome that.

There has been a change in terms of philosophy. The Gaming Board was a policeman; the Gambling Commission is not a policeman. It is a regulator and it assumes that there is compliance going on. That is a major change, and I guess maybe we are going through an adjustment period. We have an excellent relationship with the Commission, have done in the past and will continue to do so, but times are really tough out there on the streets and we want to see that we are getting value for money for a licence fee that is three times what it was.

Q274 Chair: Finally, while you may not feel that you have a sympathetic ear in the Treasury, do you feel at least you have a sympathetic ear in the DCMS?

Paul Talboys: Latterly particularly, the DCMS have announced the consultations that I have referred to, and that is great news. That is a solution to some of the industry’s problems. I guess the same comment might apply in terms of championing. I am well aware of the difficulties that we all have with the Treasury, and somebody has to look after the nation’s purse, but this industry is not looking for a handout. It is looking for fairness. We have done significant research, particularly with Ernst & Young, and shared that with DCMS; it clearly says that if you put bingo back on 15%, not only will it not cost HMT anything, it will actually produce a benefit of £65 million over the next three or four years through a better investment environment and the closure rate of clubs falling to zero. Those two factors alone increase investment. We would just love DCMS to be much more active in helping us get that message across.

Chair: That is a good note on which to draw a line, I think.

Kevin Allcock: Could I just add one final thing?

Chair: Yes.

Kevin Allcock: I think it is particularly encouraging that you have taken the time to come out here today and see what potentially the future of bingo can look like. I speak for obviously everybody on this panel and everybody in the room who is associated with bingo. We think it has a really, really bright future. I hope you can see that from today. This is an example of it, and we thank you for making the journey here today.

Chair: Thank you.

Examination of Witnesses

Witnesses: Peter Harvey, CEO, Talarius, Elizabeth Speed, Group Solicitor, Noble Group, John Bollom, Trustee, BACTA (and owner of Mumbles Pier), Derek Petrie, President, BACTA and Leslie MacLeod-Miller, CEO, BACTA, gave evidence.

Q275 Chair: I would like to welcome Leslie MacLeod-Miller, Chief Executive of BACTA, Derek Petrie, the President, John Bollom of Mumbles Pier, Peter Harvey, Chief Executive of Talarius, and Elizabeth Speed of the Noble Group.

Perhaps I might begin by asking you to give a view of the current state of the industry. You have obviously seen a quite significant fall in the number of both adult gaming centres and family entertainment centres. Has the situation stabilised, or are you still seeing a continuing decline?

Derek Petrie: We saw a manufacturer close last week, and that is the reason people are not buying machines.

Q276 Chair: A manufacturer of machines?

Derek Petrie: One of the oldest ones standing closed their doors in Cardiff last week. In reality there are only two or three manufacturers left, so I don’t think we are out of the woods quite yet.

John Bollom: I would like to add that I think it has continued the perfect storm of impact on this sector of the industry, in terms of the Act, the smoking ban and the recession. It has all added: income has been squeezed, particularly by the smoking ban and the Act, and costs have increased dramatically over the last three years, with additional fees and general inflation.

Q277 Chair: You identify the Act as a contributor to the problems. Can you give a little bit more detail as to how the Act has made things harder?

Derek Petrie: I think the Act has almost destroyed our industry. It took away a stake that was popular with the customer, and at the same time took away a machine that was popular with the customer and replaced it with something that was not.

Chair: Can you speak up a little bit?

Derek Petrie: Yes, surely. It took away a stake and a machine that were popular with the customer and, more importantly in my view, it took away some of the technical standards or imposed new technical standards on machines. Technical standards are the way machines are played, the speed of play, the features they can offer, whether you can gamble once you have won, and how the machine plays generally, and the customers just walked away from them. They did not like them.

I will give you an example. In the four years and one month since the Act came in, I have operated 48 category D fruit machines and 18 category C. I have bought one new category C and two new category D, and the reason I bought those is because the machines I replaced them with are falling apart. They do not do very well and the customers do not like them. Four years down the line, some action has been taken on that, but I fear it may be too late for our industry.

Q278 Chair: What action?

Derek Petrie: The Gambling Commission have just at last agreed to replace the speed of play and the technical standards.

Leslie MacLeod-Miller: Could I just give a snapshot that deals with both of your questions? Firstly, of the state of the industry we say that arcade revenues are down somewhere between 20% and 30%. There have been more than 200 closures of arcades. Manufacturing was at 85,000 machines in 2004. It is now down to 12,000 machines. That gives you an idea not just of the downturn, but also what impact this has on families, jobs and communities. This industry existed before the Act. You will recall that during Parliament it was said that the existing traditional industry was well regulated, had a worldwide reputation for probity and that the Gaming Act was needed in order to introduce flexibility to deal with remote and to provide a regulator that was sufficiently empowered to deal with the new regime that would follow, which was to bring remote into Britain, have a Las Vegas-style casino regime and ensure that we had a regulator of the size and resource to deal with that.

Now we have a falling traditional industry. We do have a gold-plated regulator and it is an issue. We do not enjoy the same relationship we had with the previous regulator, which I think is regrettable, and we need to do something about it. It is also important to recognise that this legislation was formed in a wash-up, and like every wash-up, the sacrifice was of general regulatory principle. Issues such as consistency and evidence base are not reflected in the current legislation, and this is our opportunity to address it.

Q279 Chair: Can I ask this of the bigger group?

Peter Harvey: Yes. Can I give you an operator’s perspective? The Act, first of all, with the banning of the machines, took a section of our customers away to other gambling organisations, so that immediately took away some of our sales. We lost 30% of sales, and we are a largely fixed-cost business so that dropped through to the bottom line. We lost 75% of our profit that first year and we only managed to keep it there because we had to take out jobs, effectively. On top of that, the Act has also given us a 12-fold increase in terms of our costs of licences and so on. As I say, we have managed to survive because we have closed shops consistently over the years as they become unprofitable and we have lost over 250 jobs.

Q280 Chair: Is that trend going to continue?

Peter Harvey: I am still closing shops. It is slowing down. We are starting to see some turning but, like the whole of the UK, it is very fragile at the moment.

Q281 Chair: How many shops do you have?

Peter Harvey: We have 168. We are currently the UK’s largest AGC operator.

Q282 Chair: How many of those are making money?

Peter Harvey: I would say probably in the region of 80/20; 80% of them are making money, but it is very geographically specific.

Elizabeth Speed: I would echo what Peter has said. We have seen a 40% reduction in sites since the Act was introduced and have shed 355 jobs. Profits have been hit and our regulatory burden, and particularly regulatory cost, has gone through the roof. To give you a feel for that, one of our divisions had a cost before the Act came in of around £11,000 a year, and the first year the Act came into effect, that went up to £800,000.

Q283 Chair: Do you see the restrictions on machines as being perhaps the most damaging aspect of the legislation?

Derek Petrie: On numbers?

Chair: Numbers and types.

Derek Petrie: Yes, it didn’t make any sense why a 400-square-foot high street shop and a 20,000-square-foot seaside amusement arcade could have four machines. It just did not make sense of the footfall, so we subdivided premises. The Minister, who, I am happy to say, now understands seaside businesses, has taken action on that and allowed us to have more of a percentage of the machinery, which always made sense. If you had 1,000 machines, you should be allowed to have a percentage of those, not four.

Q284 Chair: Are you now up to 20%? Has that solved the problem?

Derek Petrie: Now 20% of the machines on the premises can be D3s, whereas the Act only gave us four.

Chair: Has that now solved the problem?

Derek Petrie: It has gone a long way to doing it and it has taken a long time, over four years, to do, but I am pleased to say the Minister now understands seaside businesses and has taken some action.

Leslie MacLeod-Miller: We are very grateful to the Minister, John Penrose, for being such an effective advocate for our industry, and because he is located at Weston-super-Mare he does understand it. That is a tremendous thing for our sector, and rare. It is true that the B3 change is welcome, but it will take a long time for the benefits of that to come through. There are some businesses for whom that will just be too late, and of course that is regrettable, but what the B3 change did was reverse one of the changes that the Act brought in, which was done without evidence, which was to take away the section 16 and section 21 machines.

What it still has not addressed, though, is a basic lack of consistency with regulation, and we need to carefully consider whether it is appropriate that there are some adult premises that have a different form of entitlement to machines than other adult premises. Why is that the case, and where is the evidence for it?

Peter Harvey: Commercially, I want to provide the sort of gaming machines that my customers want. In some instances that will be significantly less and probably in one or two instances it might be more, but we need to take a commercial view. I would like the opportunity to compete equally across all of the sectors in gaming machines and just give the customers what they want in our locations.

Q285 Chair: Now the limit has been raised for B3, are you putting B3 machines into all your venues?

Peter Harvey: I have increased them in some venues but, in fact, in some venues I have actually reduced them because they are not commercially viable. it really is what is right for each of those locations and those customers.

Q286 Chair: So more B3s is not necessarily going to solve the problem?

Peter Harvey: I don’t believe the increase in stake has increased the problem. The increase in number in some sites has been a welcome change. The technical changes, which Derek was referring to earlier, still have not been changed in the category B machines, so there is more room there.

Elizabeth Speed: I would echo that and again emphasise that machines are what we do as a sector-we are the arcade sector-and yet, for some reason, even though we are adult-only premises and we have all the same social responsibility codes and compliance obligations, we are not able to provide our customers with B2 machines that betting premises can without any additional obligations or social responsibility codes in place.

Leslie MacLeod-Miller: It is also true that the industry is suffering, not just from social regulation but from taxation regulation. I know that this has been raised in other sessions, but we are suffering from a sort of "death by consultation". Again, our gross profits tax has been mooted since 2003 and it was decided in 2003, after extensive consultation, that the industry was too fragile and there was too much uncertainty to change something as fundamental as your tax regime. This has come back through successive Finance Ministers, most recently Chloe Smith. We have undertaken a report from Ernst & Young that says that their plans could fundamentally destroy many small seaside businesses because of the issue of partial exemption, which we might go into further detail about later, but it is certainly a huge factor for businesses with the uncertainty of a potential announcement in December that could fundamentally change their business model.

Q287 Damian Collins: Elizabeth Speed, following on from the comments you made about B2 machines in betting shop, what evidence do you have that the industry is losing customers to betting shops ? That is, customers who want to play on those types of machines?

Elizabeth Speed: The evidence is largely anecdotal and it is what we experience on the ground.

Q288 Damian Collins: Has your business has not looked at changing customer behaviour, loss of customers, and inquired as to what that might be? You have not done any analysis of your own business in that regard?

Elizabeth Speed: We have spoken to customers and we know that they go to play the machines that they would like to play, and unfortunately we cannot offer those in our adult premises.

Damian Collins: For the other members of the panel, is that common with your businesses ? A re people leaving a dult g aming c entres to go and play on B2 machines in betting shops?

Derek Petrie: Very much so. On 1 September I had customers say, "Well, why can we only play for a pound today?" and I said, "Well, the Government has changed it." "Don’t talk nonsense. The Government wouldn’t do things like that." They soon found out that they could go and play for the same stake in the LBOs, and if I want to see those customers today, I know where to find them. I walk along the street to the LBO and they are playing.

John Bollom: Can I say that, in terms of numbers of premises as well, my experience is in a small village just outside Swansea that had one betting shop for as long as I can remember. It now actually has three, all with four B2 machines in, and that is where a lot of our elder customers have migrated to.

Peter Harvey: Sorry, can I just add that you focus on the B2, but we also have cat C and cat D machines as well, so the profile of our customers isn’t just those that play the B2 machines. When the Act came in, the evidence that we had was that 30% sales loss, which was those section 16 customers that just went, but as you look at our venues-I think the Bingo Association were talking about the social community-you still get a lot of that on the 10 key machines in our venues and that is a big part of what we do, but the evidence we have to rely on is customers that have walked and not returned.

Q289 Damian Collins: Is that a particular segment of your customers or, in your experience, do people play a variety of machines if they are in a gaming centre?

Peter Harvey: In our experience, those that play the old section 16 machines were a particular segment that went and have not come back. The balance of the customers varies by site, to be perfectly honest. It really is location-specific. For instance, in one site you could track the profile of the day where you get a lot of older people coming in in the morning to get a free cup of coffee, pay the 10p slots, meet their friends, do the whole social thing, and as you go through the day, you see the different profile of the customers that come in.

Q290 Damian Collins: For a certain type of customer, the important thing is not the environment they are in, but access to the machines that they want to play on, isn’t it?

Peter Harvey: I think that you have a slightly distorted view of an AGC, because there is a complete mix of customers that come into our venue. Those that play section 16s have definitely gone, but the rest of them just flit around the arcade playing-

Damian Collins: Yes, but that is why I ask. To some customers , the environment is secondary to the machines they want to play on , and that is what you are saying is the case?

Peter Harvey: Those customers are no longer in our venues, so-

Damian Collins: So that was the case.

Peter Harvey: Yes.

Derek Petrie: Possibly the games that they were enjoying have gone, and the technical standards are different now and they just don’t like them.

Damian Collins: No, so they have gone to where they can play them.

Derek Petrie: They have gone to where they are satisfied.

Q291 Damian Collins: Do you think the amusement industry has benefited from the Government prohibition on gaming machines, with the restrictions on venues such as cafés and taxi cab offices? Has taking them out of there helped you at all, or have people gone to where they can find them again?

Derek Petrie: I don’t think that made an awful lot of difference, quite honestly, but firstly, to the manufacturers, they were always the bottom end of the market. They put in machines that no one else wanted, that had been in the pubs for eight weeks and another one for eight weeks, and were possibly two or three years old, and people didn’t stand there and gamble, in my experience, where I have ever seen them. They would go in while they were waiting for their takeaway to be done or while they were waiting for their food to be cooked. They might put £2 or £3 in the machine, but I have never known people who would stay there all day playing them.

Q292 Damian Collins: People just follow the machines. People don’t want to play unless t hey can follow the machines.

I want to ask Elizabeth Speed again, does Noble Group have both betting shops and adult gaming centres? Would you have a strategy, or do you think people have a strategy, whether you pursue it yourself? Other operators might have a strategy of locating betting shops near to adult gaming centres where they can offer the type of machines that are not available in the gaming centres.

Elizabeth Speed: We have three betting premises so it really is very-

Damian Collins: But in general , if there are new betting shops opening up - peopl e have referred to that today; w e have heard evidence on that so far in this inquiry -d o you think that is something that is being done ? Are people opening betting shops near gaming centres where they know the sort of machines that were available there are not available anymore and, therefore, can meet that demand in a different environment?

Elizabeth Speed: Yes, I think you would find that would be the case. High streets, yes, and where we do have our limited number of betting premises, we have are exactly same policies, procedures, standards, training and records maintained there as we do in the AGCs.

Q293 Chair: When it comes to the competition that you face from betting shops, is your position that you would rather betting shops did not have B2s or that you would rather adult betting centres should have B2s?

Leslie MacLeod-Miller: I think our position is-I will defer to my colleagues after this-that regulation should follow Hampton and best regulation principles, which means it should be evidence-based and consistent. If there is evidence that B2 machines are a problem, they should be addressed. If the evidence is that they are not, they should be provided in all adult premises.

John Bollom: It should be the same. We have the same controls and physically the same or very similar premises. I don’t understand why there are different machines. Whether it goes up or whether it goes down does not matter, as long as it is the same.

Peter Harvey: In giving oral evidence, both the casinos and the bookies have said they welcome competition. We cannot currently compete on the same level. We just want the opportunity to be able to do that.

Q294 Chair: What about online gambling? How significant a problem do you see that being in terms of competition?

Leslie MacLeod-Miller: I think there are two issues with remote. Firstly, it is fundamentally unfair to have two games that are identical, which can be watched on television or on your mobile phone and without any regulation at all, and another that is provided in our premises with a regulatory burden but, rightly, with correct procedures in place to protect the vulnerable. There is also a problem with tax. It is unfair for a taxpayer that there are companies that are offshore, monetising British taxpayers and not paying towards the infrastructure.

You will be aware that the recent Danish case said that in order to bring these companies onshore, you should provide them with a preferential rate. I am certain that is not the answer. We need to have consistency again in regulation and taxation. Remote is just another form of distribution. It should be subject to the same regulation and the same tax structure.

Q295 Chair: Do you worry about online?

Peter Harvey: It is the same competition rules for us, really. We are all chasing the leisure pound. We would just like to see parity in terms of taxes, costs and operating in the UK customer market.

Q296 Mrs Mensch: You have talked a little bit about the regulatory environment, especially your social responsibility. You will be aware that there are different views across the gambling industry about how much problem gambling is a problem, particularly for adult gaming centres. How do you see the issue of problem gambling in your centres? How big an issue is it for you?

Elizabeth Speed: One problem gambler is too many for us, and you will have heard throughout the sessions you have attended that the industry takes it very seriously. We have policies and procedures in place; all our staff are trained, the training is refreshed frequently, and failure to adhere to those policies and procedures is a disciplinary matter. We take it extremely seriously.

You heard a little bit this morning about self-exclusion and the interaction that we are obliged to and indeed do undertake with customers that we see may have an issue, whether they come to us or whether we approach them. There is an issue, and I think that has been proven, but it needs to be kept in perspective of the number of people: 73% of the adult population gamble and the proportions of problem gambling need to be viewed in that context.

Q297 Mrs Mensch: In terms of keeping an eye on it, you need to have some data, don’t you? What levels do you perceive and what records do you keep of the prevalence of problem gambling in adult gaming centres? I am particularly interested in how that compares to other gambling products and other gambling offers, because many of your competitors argue that it is a bigger problem in adult gaming centres because machines-just machines-are more addictive than a more sociable environment, let us say a bingo hall. How do you respond to those concerns and what data do you keep on the prevalence of problem gambling in adult gaming centres?

Elizabeth Speed: We are obliged to-and indeed we do-keep full records of all interactions with customers, so the data on the extent to which we have conversations with them and whether we perceive that there are any issues is fed back into the Gambling Commission through annual returns.

Q298 Mrs Mensch: How big are the levels? How big are the levels at adult gaming centres?

Elizabeth Speed: I don’t have the figures with me, I am afraid.

Q299 Mrs Mensch: Do you know?

Peter Harvey: I don’t know the numbers but I would like to come in, because your premise is that gambling machines are problems. We do not see that in our venues because socially responsible processes are in place. Elizabeth has already talked about the training-the induction and ongoing training that they do. We do the same; we also have an ongoing live document in the venue, which is used every day in the way the staff work with the customers and record any instances like that. It is our people who uphold the principles of the LCCP, and that is an ongoing core principle of the way we operate our AGCs.

Leslie MacLeod-Miller: I think it is important to note, because it is all about evidence, that the best evidence we have apart from our social responsibility procedures, which we have run for over a decade-well before we had the new Act-is that the prevalence study said that slot machine use was down. There were other sectors where there was an increase, particularly betting moving from 3% to 9% on matters that were not racing related, out on scratch cards, on the lottery. I think the evidence shows that slot machine use is down, and there is no evidence to say that our particular sector is increasing in its problem gambling profile. In fact, I would be very surprised if it was, because we have made such an investment in dealing with problem gambling. We helped set up GamCare. We run GamCare training. We have members of the industry on the GamCare board and we contribute. As an industry, we contributed £22 million-it is not that much, is it-towards research, education and treatment since 2004/2005, and a contribution towards research, education and treatment is a condition of membership.

Q300 Mrs Mensch: That answers the next question about what measures you are taking to reduce the risk of problem gambling, but if we go back to the evidence base, I was struck in this session and the last how heavy on anecdotes things are about problem gambling and how light on data the industry appears to be. If we are talking about an evidence-based problem, my colleague Mr Rotheram referred to Professor Hancock’s evidence. She cites your industry revenue figures-and I am quoting here-as, "a 7% rise in profits, £87 million of which comes from B3s in adult gaming centres," so she sees the significant rise in profits coming from machines as problematic. To give you another comparative, Rank Group in its evidence to the Committee has suggested that the prevalence of gaming machines outside a sociable environment may contribute to solitary gaming and that would provide a high risk of problem gambling.

Other people have submitted evidence. Quaker Action on Alcohol and Drugs have given us written evidence that it is "the combination of density of machines as well as easy access" that contributes to a problem gaming environment. While you have cited the one study that I am aware of, which your industry produces in its defence, the most recent studies say it is a concern. How do you counter that evidence from both academics and an organisation as big as Rank that suggests that it is a problem, and do you accept that overall you have more of a problem than other types of betting products but that you are making strides, or do you not even accept the premise that your particular form of product is more conducive to problem gambling than, let us say, a social environment at the bingo hall?

Derek Petrie: Let me just say one thing. The figures we have given you are from the Gambling Commission’s prevalence study, nothing else.

John Bollom: That is where our evidence goes. As an operator, I am obliged to keep logs of every incident that happens in my premises, any interaction with a customer whom we think may have a problem and any self-exclusions. Those are fed back through our annual returns to the Gambling Commission. They are the ones that collate those and produce the figures that you have just quoted. It is very difficult for us to know individually all the different operators in this sector when it comes from there, and the figures that come from the Gambling Commission-as far as I am aware-show that there is a problem there but it is a very small one.

Q301 Mrs Mensch: Do you not accept that they are actual industry revenue figures that have a 7% rise in profit, and £87 million of that is coming from B3 machines, and that is hard evidence that there is a lot more gambling going on on these machines and might be hard evidence of problem gambling?

Derek Petrie: I certainly wouldn’t accept that, and I would cite the arcades closing and the manufacturers closing down. If I had money to spend on new machines and they were right, I would buy them.

Peter Harvey: You have to go back to what we are. Our revenues have dropped in the first instance. We are a low stake venue. You do not go to an AGC to try to chase a big win. There are other gambling environments that you can go in and lose your week’s wages very quickly. It will take you a very long time to lose a lot of money in our venues, and our staff are trained to help the people that do that.

Mrs Mensch: Do you agree with that, Ms Speed?

Elizabeth Speed: Yes, I do.

Leslie MacLeod-Miller: Can I point out that, of course, academics have their own particular wish to analyse any data and create their own profile, so we need to be very careful about understanding the motivation for comments such as that. You will find there are many academics with different points of view. What we are interested in is objective evidence and that objective evidence in the prevalence study. That prevalence study said that playing on slot machines was down, from 14% down to 13%. There is actually less play on B3 machines.

Q302 Steve Rotheram: Following on from the last question, I understand the importance of seaside resorts and the arcades. I live about 10 miles away from Southport, where I go with the kids; and when I was a young child myself, my aspirations were to go to Blackpool. Now, apparently, it is a Vegas-I was speaking to Louise here earlier-so, how times have changed. In regard to the steps that the industry have taken to ensure that children do not play on inappropriate gambling machines and stick to category D, so that category D games are on your premises, should they be able to play at all on any machines given that the rest of Europe prohibits it?

Derek Petrie: I have a small seaside amusement arcade and I have had it for 25 years. When I was a kid, the only place we could play them was at the seaside, and I used to go with my old grandmother once a year. I firmly believe that because children can play them, and it is the only country in the civilised world where they are allowed to play them legally, it teaches them early on that you can’t win on them. It is harmless amusement.

John Bollom: Anything above a category D machine is in an adult supervised area. There are no children in there, and there shouldn’t be, and if there are, they are logged in to register and that is far back. Remember, when you talk about the category D machines, it is not just fruit machines. We are talking about penny pusher or tuppenny pusher machines, teddy bear grab machines, things like that, which are gaming machines. Going back to before this Act, under the old 1968 Act, those machines were termed "amusement with prizes". They were under section 34 of the old Act. The way it is with the current category and, I think, with the proposals perhaps on the tax regime, it is bringing a lot of those smaller redemption and novelty games into a more gambling regime, which I don’t think is a very good thing to do.

Leslie MacLeod-Miller: This matter was discussed at great length during the parliamentary debate, which is why we have section 59 of the Act, which says that if there is evidence of an issue with children playing on category D machines, the Secretary of State can prescribe specific machines or specific ages at which children can play. Following intensive parliamentary debate, it was decided that it was appropriate by Parliament that children in this country should be entitled to play. After all, in our country, while they do play, we have one of the lowest records on problem gambling in the world, of which we are very justly proud.

Q303 Chair: Derek, I am quite interested, in your comment that it teaches them that they cannot win. I never saw anybody actually get a teddy bear with a grabber, but occasionally somebody did.

Derek Petrie: I spend £20,000 a year on teddy bears, so somebody does, and in our business, as I say, many machines don’t pay. If people see people winning, they will carry on winning, and I am proud to say that no one ever leaves my arcade without a prize; if they do not win one, we give them something.

Chair: Oh, really?

Derek Petrie: Yes.

Leslie MacLeod-Miller: Where is that arcade?

Derek Petrie: In Somerset.

John Bollom: At the seaside, a lot of it is actually selling time. It isn’t necessarily about the gambling and the winning. It is entertainment on a machine, and children enjoy seeing tuppenny coins falling down off the shelf, and yes, they win a few and it all goes back in, but it isn’t actually gambling as such. They do not set off with the premise of walking away with a lot more money than they came in with.

Q304 Steve Rotheram: I don’t necessarily agree with that. That is exactly what I think-

John Bollom: I don’t at all. I think the-

Steve Rotheram: With the excitement of the lights and that-I just said it when we walked into there-I felt almost obliged to put a couple of pounds into the slot machines, because that is what arcades are. They are very enticing and they do pull you in.

John Bollom: No, I was talking specifically about children and lower-level machines, like the redemption ticket machines, the pusher machines and the teddy bear machines, not the type of machines you are seeing across the-

Derek Petrie: In family arcades, we are selling time, really. They will bring the kids out for a couple of hours in the evening or if it is raining and they can’t go on the beach they will come in. Two or three pounds would last them the best part of an hour and a half.

Q305 Steve Rotheram: The best way to do it so that you don’t lose a ny money at all-I know this because I was absolutely skint but I took the kids there-is if you give them £1 and they put it in the change machine for 5p and you get £1 outright , and then you go and change it for the £1 and they think that they have won all the time.

Derek Petrie: So that is where they are coming from.

Mrs Mensch: I used to do exactly the same thing. I find it works an absolute treat. I am interested because, I must say, I never actually thought of the teddy bear machines as gambling machines and, having three children with ages between eight and four, I use these machines all the time in a sort of soft play centre.

You say it teaches the children that they never win, and as a mother I can tell you it can be pretty frustrating dealing with the tears of a child when they don’t get the teddy bear. I am encouraged to see the new generation of machines where you always win something. The toys are very small and very cheap and your child cannot walk away without winning something. They may not win the one they want, but they will get a little plastic toy.

John Bollom: That really is a vending machine, actually.

Q306 Mrs Mensch: Yes. Do you put those in or do you specifically stick to the machines where you might win a teddy or you might lose a teddy, or do you get the winning every time thing? They are not quite gambling machines.

Derek Petrie: We have both, for exactly the reason you said. If your children are in tears, you can go to that machine and you can pay £1 and you can get them a toy, and that is my family business.

Mrs Mensch: Yes. A lthough it is not strictly a gambling thing , it strikes me as a socially responsible thing to put in for all the mothers with an overtired child at the seaside and fathers at the seaside. That is good to know.

Q307 Philip Davies: Coming back to problem gambling, can you explain to me from your perspective what a problem gambler is and how you identify a problem gambler in your business?

Peter Harvey: I think the answer to that is we don’t see that many. We generally do not.

Q308 Philip Davies: What are you looking for? If you had one, how would you know you have one?

Peter Harvey: If you go back to largely what an adult gaming centre is, it is typically a place where people come for fun, enjoyment and slots, and look for a good atmosphere. Most of our staff know most of the customers who come in because it is about community, and they recognise behavioural changes and they can pick up on that and they can talk to them. I think the Bingo Association talked about being discreet in some of the conversations that they have had with people who are displaying unusual behavioural patterns, if I can put it like that, and then they will work with them.

Q309 Philip Davies: People who might normally come in and spend-I don’t know-an hour at a time on a machine all of a sudden are now in there for five hours at a time. Is that in effect what you are talking about?

Peter Harvey: I would believe that if somebody came in and started doing something like that and there was a complete change of behaviour, the member of staff would engage with them and they would work with them.

Elizabeth Speed: Yes, I concur with that-any display of high emotion, any display of extreme upset, for example, in the outcome of their gambling. Yes, staff are trained and, as Peter says, these are generally return customers, so staff and the customers have a very good relationship.

Q310 Philip Davies: Leslie, you were rattling off a load of figures earlier. I might have missed it, but how much does your sector provide to the GREaT Foundation?

Leslie MacLeod-Miller: We used to. That figure isn’t available to us anymore. While as an industry, we put together an amount of £5 million, we used to collect the amount on their behalf. That changed so that those figures now go directly to GREaT, and the way it works is that GREaT contacts our members directly, and then, if there is a problem with collection, they come back to us, but contribution to GREaT is a condition of membership.

Q311 Philip Davies: So you do not do a survey of all your members to find out how much they contribute or anything like that?

Leslie MacLeod-Miller: We work with GREaT, and you will understand that the management of GREaT has recently changed and we are still engaging with the new management.

Derek Petrie: You could get those figures. It is a condition of your Gambling Commission licence that you make a contribution to research, education and treatment, and on the annual return it is, "How much have you made and how have you made it?" So the Gambling Commission would have those figures.

Q312 Philip Davies: Do you think that the money that you give to GREaT is well spent? Do you hand it over painstakingly or do you hand it over willingly?

Leslie MacLeod-Miller: It is a huge issue for us. The Gambling Commission has suggested that in their view there should be a tripartite system rather than having a statutory levy. We said that was inappropriate and that it was symptomatic of a regulator that was accustomed to a great bureaucracy around them, and that instead of spending £500,000 on administration for research, education and treatment, we should have a slimmed-down version. We now do have a slimmed-down version that has only been recently announced by GREaT with, I understand, the support of the Minister, and we believe that we need to look very closely at what we do with this £5 million. What is value for money? What are we trying to achieve in research, education and treatment? Set those parameters and assist both the regulator and the Department to reach those.

Q313 Philip Davies: Is it important that it stays as a voluntary levy and does not become a statutory, or does it not matter to you whether it is voluntary or statutory?

Leslie MacLeod-Miller: I believe it is, because after all, part of being socially responsible is that you make a contribution. If you are then required to make that, so that it becomes a mandatory levy, how does that demonstrate your social responsibility? It is not very "big society", is it?

Mrs Mensch: You could always pay extra.

Q314 Philip Davies: Yes, I am sure they wouldn’t turn it down.

What about the Gambling Commission? What is your sector’s view of the Gambling Commission? I read in your evidence that you were not particularly complimentary about the Commission in terms of the value for money aspect. Why do you not think they provide value for money?

Elizabeth Speed: I have referred to the figures in our first-year increase, which is an astronomical increase in fees for no noticeable difference in the regulation. We have a very good relationship with the Gambling Commission. They have some very good people. We are a large organisation and the Commission knows that everything is centralised; all our policies and procedures and so on are kept internally. We have an annual meeting, as I dare say Peter has, with our main Commission contact where we go through absolutely everything. It is a two or three-day meeting. Why then do we also need repeated visits to sites on the ground when it would appear, from the evidence I have heard today, that smaller organisations very rarely see compliance officers? We are in contact with them a great deal.

One of the other issues that we do have with the Commission is lack of consistency, nationally among the compliance officers, to a degree, but also in their treatment of particular issues centrally. We have had a discussion with the Commission recently on a particular operational matter, which we have discussed. We had different views on a particular issue. Another operator takes exactly the same view as we do, but the Commission does not appear to have engaged with them in the same way they have with us.

Q315 Philip Davies: Just remind me again. What did you used to pay under the Gaming Board and what do you pay now?

Elizabeth Speed: One of our divisions for a year under the old regime was about £11,000 annual cost. When the Act came in-and some of these costs are one-off-the conversion fees we are looking at were about £800,000.

Q316 Philip Davies: What did you used to pay?

Peter Harvey: We have seen a 12-fold increase in terms of cost, but for us again I think the Commission have been on a bit of a journey. The first year I think they were floundering a little bit. The second year they were restating the guidelines and principles about the Gambling Act and what they were trying to do, but I think the biggest issue is one of enforcement at the moment, whereby the Gambling Commission does not have the teeth to be able to enforce a lot of the Act. It is down to local authorities who don’t have the experience and knowledge. We deal with 107 local authorities and there is absolutely no consistency across any of them.

Q317 Philip Davies: What sort of fee do you think you should pay to the Gambling Commission? What do you think would be a fair amount for you to pay?

Elizabeth Speed: That is not an exercise that we have conducted, but it must be less than that. We were regulated, in our view, perfectly adequately under the old regime.

Q318 Philip Davies: Is half what you think would be a fair amount , or would you still complain about that?

Peter Harvey: Again, I sound like a broken record. I am going back to the same point. It should be fair and consistent across all of the sectors and we should all contribute equally.

Leslie MacLeod-Miller: It is interesting to note that the old regulator had 75 staff at a cost of £4.1 million a year. The new regulator has 203 staff at a cost of approximately £14 million a year. It is difficult because people always say the regulator is too expensive, but we were regulated before, so it is not from a blank sheet of paper. There is a real feeling that the regulator has suffered, as has the industry, from not being formed when people understood what the environment would be in Great Britain. The regulator was formed thinking that Britain would be the gateway to gambling, and it is clearly not. When they formed their policies and procedures and formed their structure, they believed that the gambling industry would be enormous and that they would be looking after remote-that people would be piling into Las Vegas-style casinos.

They went around to every country taking the delectable regulatory titbits from the regulatory tables, so we are suffering from a sort of regulatory obesity, but we are wafer-thin and we need to try to get them back to some sort of proportionate risk-based approach. It has resisted countless reports. There was the Hampton review that said, "Yes, you must try harder." There is no practical implementation of Hampton, and then nothing. The All-Party Betting and Gaming Group called the Commission to answer, "Are you good value for money?" They refused to appear. There is a sense in which they are unaccountable and we no longer enjoy the collaborative approach that could help drive down costs and be truly effective.

Peter Harvey: Could I add to that? Because we are the largest, the Gambling Commission does talk to us and there is now a two-way dialogue between us that works pretty well. Actually, from what I have seen and what I have heard, the smaller operators have less visibility to the Gambling Commission, and perhaps that is where they are feeling it more than we are.

Q319 Philip Davies: My final question is that from your evidence, both written and today, there have obviously been a lot of disputes about your regulation compared to betting shops and all the rest of it. Do you think the gambling industry has suffered by different parts of it squabbling among themselves about what the right regulation is, rather than supporting each other to try to promote gambling across the board? Do you think you have been held back by trying to be like Dick Dastardly and trying to do down another part of the gambling industry, rather than all promoting each other?

Leslie MacLeod-Miller: The industry and Britain has been done down by legislation of this nature made in a wash-up. If you have legislation that is basically inconsistent, which does not allow adult premises to provide the same consumer offer, you will inevitably have a situation where people are fighting for their livelihoods and then justifiably complaining about it. The answer is, yes, it is damaging. It is very difficult for Government to bring about changes when you have an industry without a united voice, but if the basic regulatory environment that is visited upon a pre-existing industry is unfair and does not follow the Hampton principles, I think it is an inevitable result.

John Bollom: That used to be the case before 2007, before this Act was implemented. There was a pretty unified voice across gambling. The changes that were brought about by the 2005 Act and the disparities between the different sectors have caused this.

Peter Harvey: It is regulatory and taxation, to be clear.

Q320 Chair: Can I just say to Leslie, it is true that the final stages of the Gambling Act have taken the wash-up, but unlike, for instance, the Digital Economy Act, which was done in the wash-up with no debate in the House of Commons at all, or barely any, the Gambling Bill went through weeks and weeks at the Committee stage? I endured it, so I do not think it is true to say it did not get properly scrutinised. That the policies change every five minutes is perfectly true, but nonetheless, it was examined.

Leslie MacLeod-Miller: It is true that it was examined, but there was always the hope that at the end, evidence-based regulation would prevail, and while we are grateful for the Scrutiny Committee and their report, there were some fundamental elements of lack of consistency that were never properly addressed.

Chair: They were highlighted; they were not altered.

Leslie MacLeod-Miller: But they were not addressed.

Q321 Chair: They were not addressed, but I don’t think that was lack of time. It was lack of will on the part of the Government.

Leslie MacLeod-Miller: No comment.

Q322 Damian Collins: Do you think you are being ripped off? It sounds to me that you are being asked to pay money to treat problem gambling that you don’t really believe exists, or that you believe you can deal with through your own premises, and for regulation that you don’t need. Is this all just some great big ruse to deal with the media obsession with problem gambling that may not exist?

Leslie MacLeod-Miller: I am sorry, I am going to pass to my colleagues, but we take problem gambling very seriously. We do believe that we should pay. We have always paid. We helped to form GamCare and provide funding for it, so it is certainly not a ruse. Problem gambling is an issue. As Elizabeth said, if we have one problem gambler, it is one problem gambler too many. We have consistently supported GamCare and the Government and the regulator in any initiatives in relation to problem gambling and we will certainly continue to do so.

Q323 Damian Collins: But everyone says that and then everyone says, "Well, problem gambling is very rare. We rarely encounter it. We don’t see very much of it and the official statistics suggest that it is a tiny percentage." We could question the methodology behind that data, but the question I am really getting at is, do you think what you are being asked to pay is disproportionate to the size of the problem?

Peter Harvey: Let me answer from an operator end. We are the largest UK operator. We are more than happy to contribute to the Foundation. If you look at our revenue as a percentage of the total gambling market, we pay a bigger percentage than we are in terms of the market and we are happy to do that, but what we could see more of is more people across the sectors, which I think the LBO called for a week or so ago, to contribute more to the fund as well.

Q324 Damian Collins: Do you think you should probably be paying a bit less, with other people chipping in?

Peter Harvey: No, I am happy with what we are paying, but I just think more people could pay more across the whole of the gambling sector.

Derek Petrie: I am also happy with what I pay. In fact, I am going to be paying more than we are supposed to. Not much more, £1,500 more depending on what sort of season we have, but I am happy to pay it.

Q325 Damian Collins: Are you happy with how the money is being spent?

Derek Petrie: Yes.

Leslie MacLeod-Miller: I think what you mean is are we happy that it is being spent on research, education and treatment to deal with problem gambling? There have been serious concerns, which we have aired previously, about value for money and what we are trying to achieve, so the concept of £500,000 being taken up in administration, rather than dealing with treatment, was something that we complained to the Minister about, and we are grateful that that seems to have changed, but there are still issues. For example, we have been asked to trial a freephone help number on machines in tandem with the existing GamCare number. There is no evidence that that is going to make any real change to really benefit research, education and treatment, and surely we could be using our money and our resource in a more targeted way.

Q326 Chair: Can I put a final question to you? You have painted a pretty bleak picture of the current state of your industry. We come here to what is a very impressive, state-of-the-art bingo club. They have reinvented it, so now it is not just the old traditional bingo; it is family entertainment with drinks, meals and socialising. To what extent do you think your industry is capable of changing your offering to bring customers back, or is it the case that actually you are dying?

Derek Petrie: First of all, we can’t offer drinks. We can’t offer inducements to gamble. Are we dead? I don’t think so. I hope not.

Q327 Chair: Do you think there is still a bright future, though?

Derek Petrie: I think that the strongest have survived. I just hope we can carry on and get somewhere from it.

John Bollom: I can take you to examples in our sector similar to this, a bright new shiny state-of-the-art premises. There are piers at Weston-super-Mare and all these sort of things that I am sure you have read about, where operators have made the investment there. Again, it is very specific in terms of operators with the capital and wherewithal to do it and the right locations, but I think we will go forward-there is no doubt about that at all-but it is a shame that the basis on which it was built on for so many years, and so successfully, was changed in 2007.

Peter Harvey: The way we have survived over the last four years is we have continued to invest in our properties to make a lighter, brighter, more airy, more social environment. We have continued to invest in machines. We are one of the few operators that have consistently paid millions of pounds’ worth of cash for new machines over the course of the years, and we have continued to invest in our people and we keep redefining the model. I go back to what I said earlier on. We are not able to offer the breadth of gambling products that the other sectors are able to do, and we would like to have the choice of whether to do that or not.

Q328 Chair: But your view is that even though we now have Xboxes and PlayStations for children and online gambling for adults, the traditional seaside-type arcade still has a future?

Peter Harvey: Yes.

John Bollom: As long as we are not taxed out of existence.

Chair: Oh, indeed.

Peter Harvey: There is a future, but it has to continually evolve.

Chair: I think that is all we have, and I thank you all.

Prepared 9th November 2011