Gambling

Written evidence submitted by the Association of British Bookmakers (GA 035)

Summary

1. Key points:

· Economic contribution – Licenced Betting Offices (LBOs) make a substantial contribution to the economy, employ about 40,000 people, help to support the vibrancy and footfall of the high street and pay a higher level of tax than any other comparable retail sector. We urge the Select Committee for Culture, Media and Sport (the Committee) to acknowledge our strong economic contribution and endorse our recommendations to mitigate against the heavy tax and regulatory burden which LBOs face.

· Responsibility - Our members take their responsibilities to protect children and vulnerable people very seriously. Whilst we do not accept that there is any widespread problem with minors attempting to gain access to and gamble within LBOs, our industry’s major efforts to improve their compliance results have been publicly commended.

· We clearly offer a mainstream leisure option that is enjoyed responsibly and safely by the overwhelming majority of betting customers. It is right that concern is expressed about problem gambling, but this should be kept in proportion. Our industry is committed to tackling this issue and to that end has pro-actively and voluntarily donated £5 million per annum in helping to fund the education, research and treatment of problem gambling – even though problem gambling remains low compared to international standards. We therefore feel it is justified to invite the Committee to review the positive aspects of betting.

· Regulation - The betting industry is already heavily and disproportionately regulated – a strenuous dual licensing process is in place which we believe could be improved significantly. Electronic Gaming Machines are also tightly regulated even though there is no evidence to link them to problem gambling. We would welcome a reasonable measure of liberalisation in the maximum permitted number of gaming machines in LBOs. The ABB would encourage the Committee to be evidence-led and thoughtful in its analysis when considering the betting industry.

Introduction

2. The Association of British Bookmakers (ABB) is the leading trade association for operators of Licenced Betting Offices (LBOs). Our members include Gala Coral, Ladbrokes, the Tote, William Hill and around 130 smaller operators. Together they manage nearly 7,200 shops, equivalent to about 85% of the UK’s 8,500 LBOs. Further information about the ABB can be found at www.abb.uk.com.

Key recommendations

3. The betting industry recently celebrated the 50th anniversary of the legalisation of its shops on the high street. It is fair to say that the betting experience has changed beyond all recognition since 1 May 1961. Gone are the smoky backrooms and blacked out windows. Today customers walk into a smoke-free environment with state-of-the-art entertainment systems, comfortable furniture, non-alcoholic refreshments and friendly staff. And betting has become part of the fabric of British life as we offer a mainstream leisure option that is enjoyed responsibly and safely by the overwhelming majority of customers.

4. Quite evidently betting remains a popular pastime in the UK. In 2009-2010 just over 1.5 billion bets were placed with off-course bookmakers (average value about £4.50). Why is betting so popular? Betting delivers significant personal and social benefits that deserve to be much more widely recognised. Foremost among these is the entertainment and diversion that betting provides. Additionally LBOs are an integral part of the local community and offer a social opportunity as well as an intellectual challenge (both of which can be especially valuable to older people).

5. In consequence, LBOs tend to improve the physical and mental health of their customers, helping them live longer and happier lives. British, American and Swedish government studies have all found that our customers tend to be more sociable, more neighbourly, and more involved in community activities than their non-betting peers. We feel it is justified to invite the Committee to review the positive aspects of betting and discuss this with us in the oral session.

6. In economic terms, it is important to note that our members run high turnover but low margin businesses which contribute £3 billion annually to the UK economy and provide jobs for around 100,000 people (40,000 directly and 60,000 indirectly through the supply chain), many of whom have few or no formal qualifications. The shops also contribute to the vibrancy and footfall of the high street.

7. The 2005 Gambling Act created dual regulation for the betting industry and significant regulatory obligations. The betting industry is also heavily taxed, paying as much in tax as it generates in profit (£700 million). And this is £400 million more than any other comparable retail sector. No other retailer faces these regulatory challenges and this burden should not be increased. We urge the Committee to acknowledge our strong economic contribution and endorse our recommendations to mitigate against the heavy tax and regulatory burden which LBOs face.

8. The ABB also recommends that the Committee encourages the Government to provide the industry with more support to help grow the business, in the UK and internationally, which in turn is likely to generate more tax yield. As pointed out elsewhere in this submission, we would welcome a reasonable measure of liberalisation in the maximum permitted number of gaming machines in LBOs.

9. The betting industry should be explicitly included in the Government’s growth policies which seek to diminish regulatory pressures and uncertainty as well as increase the sector’s profitability performance.

10. We would encourage the Committee to be evidence-led and thoughtful in its analysis when considering the betting industry on other issues as outlined below.

Request to give oral evidence

11. Turning to the Inquiry’s specific questions, the ABB will highlight our industry’s contributions to those areas of the Inquiry which fall under our remit and in this process we will aim to offer the Committee fact-based evidence and recommendations related to the implementation and operation of the Gambling Act. The ABB would be pleased to submit oral evidence to the Committee on issues raised in this submission and any other areas of policy it wishes to discuss in person.

The Act’s key objectives

Betting-related corruption in sport

12. The ABB works closely with the Gambling Commission (GC) and the European Sports Security Association (ESSA) to monitor for and investigate unusual betting patterns, which might be related to corruption in sport. We believe the GC’s Betting Integrity Unit is an effective mechanism in this regard. When an unusual betting pattern is drawn to the ABB’s attention by a member, we notify other members, ESSA and the GC and confirm that the relevant Sport’s Governing Body has been notified. Equally, we notify ABB members when advised by ESSA or the GC.

13. The industry is well-regulated and our members already operate at the highest levels of probity and integrity. Bookmakers will always have a vested interest in sports integrity, because it is they who are likely to suffer financial loss from betting related corruption. We refer for further details to the RGA’s submission.

Betting shop safety and security

14. Our members also work very hard to ensure that their shops are a safe and secure environment. For example, in May 2010 the Safe Bet Alliance, a collaborative initiative which includes ABB, Metropolitan Police, Community Union and the Institute of Conflict Management, launched its Voluntary Code of Safety & Security National Standards for Bookmakers which provides a single national standard for betting shop safety and security.

15. One year later the Metropolitan Police announced that the number of betting shop robberies in London had declined by 46% in 2010-2011. They confirmed that our members’ adoption of the security measures and procedures - including staff training - recommended in the Voluntary Code was a major factor in explaining the fall in attacks and rise in detection rate. Testament to the quality of the Code is that it has been adopted as a template by other retail sectors, including mobile phones and jewellery.

Protecting children

16. ABB members take their responsibilities to protect children and young people very seriously. Whilst we have never accepted and do not accept that there has been any widespread problem with minors attempting to gain access to and gamble within LBOs, our industry’s major and sustained efforts to improve their compliance results in the GC’s programmes of "test purchasing" since 2009 have been publicly commended by the GC.

17. For example, in September 2009 the five largest LBO operators committed to the High Street Betting Industry Action Plan and Supplementary Code of Practice on Age Verification. This means each of these companies has a board-level "champion" to protect children and young people, deliver appropriate training to LBO staff, post relevant signage in LBOs, commission test purchasing exercises and assess the results in managers’ performance appraisals. The champions also seek to inculcate a "culture of expectation" on both sides of the counter that young-looking people coming into betting shops would be asked to provide proof-of-age.

18. In addition, the ABB convened its first Social Responsibility Forum – Protecting Children and Young People in April 2010. At this all-day event representatives of the GC, Metropolitan Police, Local Authorities, Gam Care, LBO operators, other age-restricted retailers and suppliers of relevant products and services shared perspectives and best practice on customer age verification. As a result, representatives of the 5 largest LBO operators meet quarterly to review performance, identify any potential challenges and share best practice.

19. The ABB and its members are also active supporters of proof-of-age scheme Citizen Card and are represented on the board of the Proof of Age Standards Scheme (PASS) which oversees third-party providers of proof-of-age schemes. In 2011 the ABB made a voluntary donation of £5,000 to help fund PASS.

20. Recent results of independent test purchasing exercises prove that betting shop staff are just as vigilant about asking young-looking customers to provide proof-of-age as staff selling other age-restricted products and services. In October 2010 independent testing services supplier Serve Legal reported a 74% success rate for LBOs in age-related compliance testing (off-trade alcohol 80%, on-trade alcohol 71%), and with all 3 sectors showing a significant improvement on the previous year.

Protecting vulnerable people – customer self exclusion

21. Under the Act, the Ordinary Code of Practice and Social Responsibility Code set out the GC’s requirements concerning Customer Self Exclusion (CSE) and our members therefore manage a scheme under which any customer may request that he or she be declined service.

22. During 2010, the ABB proposed and obtained the GC’s agreement for measures that would improve the protection that they provide to problem gamblers, specifically:

· Offering a standard CSE period of 12 months;

· Requiring the self-excluding customer to provide a photograph of himself or herself that enables shop staff to recognise him or her;

· Allowing the operator to destroy old CSE forms any time after 6 months have expired after the last date of exclusion – this enables staff to focus on current and recent self-excluders.

Further information on how the betting industry protects vulnerable people by signposting and advertising responsibly can be found in annex A. [1]

Protecting vulnerable people – "clustering" of LBOs

23. We note that "clustering" of LBOs in certain urban areas is sometimes cited as an example of the betting industry targeting vulnerable people. In fact, there has been no net increase in the number of UK betting shops since the Act came into effect in September 2007.

24. Whilst the number of betting shops in the UK has actually remained stable over the past ten years (around 8,500), it is widely recognised that their geographical distribution has been changing. When the Act abolished the "demand test", bookmakers were given more freedom to compete with one another in the high street. On the other hand, as one would expect in any commercial sector, there has also been a decline in the number of shops in other areas. The ABB’s most recent figures show 110 shops closed in the UK overall (with an estimated loss of around 500 jobs) between March 2010 and March 2011.

25. However, we believe that if local residents and other stakeholders have objections to the opening of new LBOs, they are already sufficiently empowered to object to them under the Gambling Act and separately under the Planning Act. This is evidenced by several examples of LBO openings being blocked in a number of London boroughs over the last twelve months. The ABB strongly believes that the existing legislation offers enough protection to local communities through the licensing process and our recommendation to the Committee is that additional action or legislation is neither necessary nor desirable.

Further information can be found in annex A. [2]

Online gambling

We refer to the RGA’s submission.

The financial impact of the Act

26. As outlined above, the GC has worked effectively in a number of areas. Nevertheless, the regulatory burden and associated costs are clearly still too high, especially as far as smaller operators are concerned. We draw the Committee’s attention to the following issues and recommendations:

· The new dual licensing system is more expensive and not a lot better. For example, the cost of betting licences has now become a major issue. Under the previous legislation licences and permits were granted by local magistrates for three years, priced at about £150 with £25 being paid to renew it. Under the Act a single shop operator might now have to pay the GC £1,600 plus a further £600 to the local council annually.

· The GC’s fee structure is particularly onerous for our smaller operators. For example, it discourages operators from expanding their businesses above the ‘50 shop limit’. One of our members could have saved £22,000 by staying under this threshold.

· We recommend that the GC urgently reviews the licensing compliance framework. As part of this review the GC should consider allocating shop visits on an intelligence-led basis and pass on any savings to licence fee payers.

· In addition, many local authorities charge the maximum permitted premise license fees, generating extra income rather than merely covering costs. And as far as the customer is concerned there is no noticeable benefit. The fees appear to be charged on the basis of probable costs involved for local authorities irrespective of whether annual compliance visits are carried out. We have evidence that some authorities do not carry out these visits at all and suggest that their fees be reduced accordingly.

· Part of the costs incurred by local authorities is the preparation of a Statement of Gambling Licensing Policy. Rather than have a single national Statement issued by the relevant authority the Act has multiplied costs enormously by requiring each local authority to prepare their own local statements. In practice most of these statements are identical to each other. It would have involved less bureaucracy for national operators if a single national policy document had been implemented.

· The ABB recommends that the Committee asks the authorities involved to consult on the option of asking one Primary Authority to deal with our industry’s licensing compliance issues, including protecting children and young people.

The effectiveness of the Gambling Commission

27. In terms of value for money and regulatory burden, we would like to raise the following issues:

· In our view, the GC is too heavily focused on its core objectives, rather than pro-actively considering how it might help the industry and provide value for money. We recommend that the GC adds another objective to its remit: providing better industry regulation, which strikes the right balance between consumer protection and business growth.

· Premises Licences now expire on the anniversary of when they were granted. Under the old system all LBO licences were renewed in April. The new system adds unnecessary administrative burdens on both the operators and local authorities who both need additional procedures in place to monitor year round renewals.

· The process of selling a betting shop is very onerous unless the buyer is already licenced. The fact that a new entrant has to have a wide range of policy documents in place is obviously discouraging for new entrepreneurs, to the detriment of both the industry and consumers.

· When a single trader dies the business must close until an alternative person can obtain GC approval. This can take three to six months in which time the business might not recover and, as this is a very competitive market, finds that customers have gone elsewhere.

· The compliance regulations in the Act assume the ‘guilt’ of operators and require our members to prove they are ‘not guilty’. This creates considerable cost for our members as they have to put in procedures to prove their ‘innocence’. For example, maintaining records of ‘Think 21’ challenges to prove that they are doing them when other licensing procedures mentioned earlier should be sufficient.

Casinos

We refer to the casino industry sector in this regard.

The effectiveness of the classification and regulation of gaming machines under the Act

28. We will limit our response to Electronic Gaming Machines (EGMs), which were first introduced to LBOs in 2002. Since then, successive gambling surveys commissioned by the regulator have not demonstrated any causal link between problem gambling and electronic gaming machines. Whilst the 2010 Prevalence Survey showed that many more people are gambling, the prevalence of problem gambling appeared to be linked much more closely to the number of different gambling products used rather than to specific usage of machines or any other betting medium, and with the overall reported increase at the very margin of statistical significance (also see annex C) [3] .

29. EGMs are already heavily regulated, annex B refers [4] . Based on the existing evidence as outlined above, the ABB recommends that the Committee calls for a reasonable measure of liberalisation in the maximum permitted number of gaming machines, as well as maximum stakes and prizes, which will enable our businesses to continue to compete and prosper in a responsible manner.

Impact the Act has had on levels of problem gambling

30. It is right that concern is expressed about problem gambling, but this should be kept in proportion. Three prevalence studies commissioned by regulators over the last ten years have shown that levels of problem gambling in the UK remain low by international standards. The small reported increase between 2007 and 2010 was found to be at the margin of statistical significance, annex C refers.

31. The fact is that a bet is enjoyed responsibly and safely by the overwhelming majority of betting customers. The ABB accepts that for a very small minority of people gambling has become and remains a problem. Our industry is without question committed to tackling this issue and to that end has pro-actively and voluntarily donated £5 million per annum in helping to fund the education, research and treatment of problem gambling. Funds are allocated to specific projects by the Responsible Gambling Fund in the context of a strategy devised and overseen by the Responsible Gambling Strategy Board (RGSB), which includes industry representation. We recommend that this structure and process continue with a focus on value-for-money initiatives, with an increased emphasis on education and treatment.

Other issues

32. The Government recently launched pre-consultation on the Future of the Levy and our response will be made public after 4 July 2011. However, we can state in general that whatever the options Government consults on, we believe proportionality and certainty should be the main goals. We would want to see any change achieved through simplification and, in this context, the choice is either a regulated monopoly (such as a modified version of the Levy) or a free-market, non-statutory commercial arrangement, which would be our preferred solution.

We would be happy to explain our positions on the above issues further in the oral session.

June 2011