Culture, Media and Sport Committee - Minutes of EvidenceHC 421

Back to Report

Oral Evidence

Taken before the Culture, Media and Sport

on Thursday 12 January 2012

Members present:

Mr John Whittingdale (Chair)

Dr Thérèse Coffey

Damian Collins

Philip Davies

Paul Farrelly

Steve Rotheram

Mr Adrian Sanders

Jim Sheridan

Mr Gerry Sutcliffe


Examination of Witnesses

Witnesses: Richard Caborn, former Minister for Sport and Tourism at DCMS, and Tessa Jowell MP, former Secretary of State for Culture, Media and Sport, gave evidence.

Q584 Chair: Good morning. This is a further session of the Committee’s inquiry into the implementation of the Gambling Act and I would like to welcome the former Secretary of State for Culture, Media and Sport, Tessa Jowell and Dick Caborn, the former Minister for Sport and Tourism. Quite a lot of us in this room bear scars from the proceedings on the Gambling Act. Can I start off by asking you your general view today? A lot of ambitions were contained within the Gambling Act, some of which have been achieved, some of which have not been achieved. To what extent do you feel that the Act has been successful?

Tessa Jowell: I always believed that this was legislation that was necessary. Sir Alan Budd’s report made the case compellingly. It was legislation that was subject to an almost unprecedented level of scrutiny over six or seven years before it saw the statute book. However, I think that Richard and I recognised that gambling is an issue that touches very raw feelings in our society more widely, and those were reflected in the context that was set for the debate. What we aimed to do was to modernise what by any measure was outdated legislation and to meet three tests: maintaining the very effective regulation of the UK gambling industry that meant that it was very substantially crime free, compared with other countries; allowing gambling as a legitimate activity in a fair way; but given the proliferation, which has grown significantly since the passage of the Act, ensuring the protection of children, young people and the vulnerable.

So that was why the legislation, the powers of the Secretary of State and the Gambling Commission were constructed in a way that gave them maximum flexibility to intervene and act in light of the evidence of an increase in the prevalence of problem gambling or any other unforeseen consequence. Looking back now over five years, I think that that is the right way to approach legislation in an area in the life of the country that has to be properly balanced. We don’t ban gambling in this country and all the evidence is that if you try to be overly prohibitive you simply drive gambling underground and expose people to greater risk. So this proper balance between public protection and proportionate regulation is what we were seeking. I think we achieved that balance, particularly because of the inherent flexibility of the Gambling Act to respond to changing circumstances.

Q585 Chair: We will obviously look at the different areas of gambling activity in greater detail, but, generally, even though when it reached the statute book the Act was perhaps not as you originally envisaged it, do you think it achieved its three core objectives?

Tessa Jowell: I think it has the power on a continuing basis to meet all of those three objectives. There appears to be a little bit of uncertainty about whether there has been an increase in the incidence of problem gambling, and I hope that that is something that the Committee might seek to interrogate more fully, because it is absolutely essential. Richard and I, and Gerry Sutcliffe subsequently, were very clear that there had to be reliable baseline data that tracked, on an entirely objective and rigorous basis, changes in the nature of problem gambling.

Richard Caborn: If I may add a couple of points on that. You were coming from an Act of Parliament in the 1960s that sought to drive crime out of gambling. Moving on nearly four and a half decades, the nation’s culture and attitudes to gambling had changed, particularly in the mid-1990s when the lottery came on board. The ITC had come on board as well.

If you want to measure the success or failure of it, you also have to look internationally. One of the most profound effects I saw on any of my visits as a Minister was in Australia. I went in 2002, and it is interesting looking at gambling in that sense. I have had to revisit quite a lot of the documentation and my notes from the time. In November, I went back and looked at my notes from 2002. I went to Brisbane, Melbourne and Sidney, and I talked to the regulators. Deregulation has had a profound effect on gambling. I look now at what is happening in Australia a decade on-I have no doubt you have looked at Australia-and they have set up, or have recommended, a ministerial committee to start clawing back what they do.

Something we are going to come to is FOBTs. The regulation, both voluntary and statutory, on FOBTs came out of my experience down in Australia-why it is four and why gaming machines are tied to it. The position is slightly different in the UK in that gambling and betting were not regulated in the same way. Gambling was regulated, but betting was not, and it was the FOBTs-the fixed odds betting terminals-that changed significantly. It was interesting-I am not making a comment on this in that sense-listening to the news this morning about national lotteries and how certain people are trying to get round the word "national". Well, they got round the word "gambling" through betting on fixed odds, and what they did was very clever. Had we not controlled it with a voluntary agreement between the industry and Government three years before the Act came on the statute book, you would have had wall-to-wall FOBTs in this country, like you do in Australia. The responsibility of the industry and the initiatives that were taken at that time controlled that. No doubt we will come to that, but that was the framework in which we were working. We were trying to bring betting and gambling into the leisure industry in a responsible way. Has it achieved that? By a general measurement, yes it has.

Chair: I think four members of the Committee were in Australia a few weeks ago. I would say that we have a similar impression to the one you did. It was quite an insight.

Q586 Mr Sanders: Do you think that ultimately the 2005 Act was a result of political battering due to the wash-up period, rather than exactly what you really wanted?

Tessa Jowell: It was certainly altered as a result of the wash-up. The proposed number of regional casinos was substantially reduced. But you have to accept the realities of life in government, and this was legislation that was reaching its final stages right up against a general election. What I was absolutely clear about was that we had to secure the regulatory framework and the public protection that the Act was going to create, otherwise there would be quite substantial public risk, as Richard has outlined. So that, quite frankly, was a more significant trade at that time than the number of regional casinos.

Richard Caborn: To a large extent, the whole casino issue was driven by the Daily Mail-from day one, right to end. Tessa and I have a slight difference of opinion here. To be honest, casinos are the safest place to gamble. You can control them more easily than any other area of gambling, yet it is the one that was focused on. I say this honestly: if I had my time again, as a Minister in this context, I would have pushed very hard for it to have been in one place, and that would have been Blackpool. That had universal support. It ought to have gone there.

I have gone through some of the minutes of the committee meetings that I spent many, many hours at and there was a general consensus that Blackpool was the place to do it. My strong advice, Mr Chairman, is never to give to an academic or civil servant something that needs a blob of common sense applied to it, because you do get the wrong answer, thanks to Mr Crow-with all due respect. Blackpool might now be a very good recommendation from your Committee.

Q587 Mr Sanders: I do not think that there would be much dissent in the Committee against Blackpool. How do you respond to claims that parts of the Bill didn’t receive appropriate scrutiny, mostly as a result of the media focus on casinos?

Tessa Jowell: It depends on the source of those criticisms. The Act went through pre-legislative scrutiny. I was looking back at the number of statements I made, the number of debates we had on the Floor of the House, the care with which we set about addressing public concern beyond the Daily Mail’s perfectly legitimate campaign and the public concern-as it was-about casinos. But actually it was much, much more broadly based than that. We knew and the Committee knew, because the Committee was obviously interested in this at the time, that the nature of gambling was changing.

We had an extremely successful national lottery that we were very clear would be outwith the definition of the reach of gambling. We had a regime in this country that was old-fashioned and probably at least 25 years out of date, and we had to move to amend that. Whenever any Government brings forward legislation in this kind of area, it would provoke controversy. You cannot be an effective Minister in government if you are afraid of controversy. I believe that the legislation was carefully conceived, subject to proper consultation and based on evidence. At times, you just have put on your tin hat, fuelled by what you genuinely believe is right and in the public interest, and see it through. Gambling is safer in this country as a result of the 2005 Gambling Act than it would have been, had that legislation not seen the statute book.

Q588 Chair: I am sure you heard what has been rumoured particularly about the casino aspect of the Bill, which was actually where all the controversy lay. It was certainly suggested that essentially this was a No. 10 policy. It was the Downing Street policy unit that were attracted to the idea that somehow we could regenerate all the inner cities by bringing in casinos, but you actually had some reservations about the policy. Is that true?

Tessa Jowell: I was certainly concerned about public protection. I was certainly concerned about ensuring that we did not create the basis for structural alteration in gambling in this country that would cause an increase. I did not want any kind of free market in the right to be a problem gambler. Government has important roles, and one of them is public protection in light of evidence of risk of public harm.

It is not fair to say that this was a No. 10 policy forced on an unwilling Secretary of State. I was persuaded by the regeneration arguments-I think we were right-and there were two things. It is interesting to go back over the history books, just very briefly. At one time, it was speculated that we would have 96 regional casinos. That was absolutely ridiculous, because regional casinos relied on creating a market for the range of entertainment that they offered. I have to say that I was at the Westfield shopping centre the other day, where there is a casino, but also lots of restaurants and other leisure facilities, cinemas and all the rest of it. I looked at it and thought, "How would this have been different from a regional casino with shopping malls, restaurants, day spas and so forth?"

Q589 Paul Farrelly: There would be no Olympic park next to it, perhaps.

Tessa Jowell: That is true-you’ve got me on that as well. The point is that that was an argument that got out of control.

To come back to your point, John, this was a policy that at the time reflected other fault lines in the Government, but I did not feel that I was being forced to do something about which I was unconvinced. Richard, who has years of experience in regeneration, looked very closely at the regeneration case. There is an argument for the regeneration case in Melbourne; the argument is less compelling for Atlanta. Again, I say to Paul Farrelly that part of the success of the Olympics was our determination to swim against the tide of what would otherwise have been inevitability. I think that a regional casino intent on regeneration could still be a means of regeneration. I doubt that we will ever see them in this country.

Richard Caborn: There were two schools of thought, as there always are when you take evidence on an Act like this. I am not blaming No. 10, but there were those who saw the regional casino purely as an economic and financial regenerator and there were others who argued that there should be one-in Blackpool. The argument was very strong on the Back Benches.

When I took the Bill through Committee, I had to adjourn the Committee, to take out the number of casinos, and come back. My very good friend, Tony Banks, was there, and he asked me how we came up with a figure of nine-it was one of the most interesting and funny speeches.

Chair: I remember it well.

Richard Caborn: You do. It was absolutely hilarious. Every half an hour, he asked how we had come to nine. I can assure you that, as a Minister having to defend it, it was not the best of defences, but Banks’s speech was far better for its-

Tessa Jowell: It was the number of regions, I think.

Richard Caborn: It was, and it was also about getting the number down to under two digits and things like that-all the psychology. The two arguments were: do you go solely for regeneration, and if so, do you have one destination casino-the Los Angeles type? Or do you have regeneration in a number of areas?

That was a debate that took place. I do not know whether we fell between two stools. On reflection, I think that we ought to have gone for one. I don’t know what Tess thinks, but my view was that we should never have involved Crewe in this. We took a political decision. Even those on the Committee who were very anti the Bill-even Julie Kirkbride, who probably scrutinised me more than anyone when I was a Minister- agreed that it ought to have gone to Blackpool. I got her-in fact, everyone-on board for Blackpool.

Q590 Chair: But when we suggested one, it never occurred to us that it would not be Blackpool.

May I press you slightly? You said that you were persuaded, and you also said that you were not an unwilling Secretary of State, but that does suggest that the genesis of this was No. 10 and that you were then persuaded by their arguments.

Tessa Jowell: I inherited this policy when I was Secretary of State. It was transferred from the Home Office along with the Licensing Act, so quite a bit of the ground work had already been laid. From memory, I think that the then Deputy Prime Minister was also very keen on the regeneration potential of regional casinos. This became, in a way, a disproportionately large decision in Government, because it became in the wider media one of those iconic decisions that allowed people to judge what kind of Government we were. I would have said that, in relation to gambling, we were a Government that sought to ensure maximum public protection and protection for the vulnerable. At the same time, we were recognising that-I do not know how many members of the Committee gamble-it is a legitimate activity, and you have to ensure therefore that people can play in safety, but gamble if they wish to.

Richard Caborn: My mother doesn’t because she is a very strong Methodist, so I have no problems at all.

Tessa Jowell: I don’t think my mother does, either.

Q591 Jim Sheridan: Tessa, notwithstanding the general concerns of the public interest and the vulnerable and so on, on reflection and ignoring the politics of No. 10 at that time, do you think that the Act has had any impact whatsoever on the industry? In particular, the bingo and arcade industry claim that the Act has been a disaster for them.

Tessa Jowell: Five years ago, I would have been looking at these data all the time. I have not been looking at the trend data on bingo and arcades. We did obviously increase the protection and regulation of arcades in part through the devolution of responsibility to local authorities, but in a way that is exactly the point of the legislation. The legislation has the capability to monitor changing trends and, where those changing trends are undesirable, to intervene and act.

Richard Caborn: The refining of the Act, as Tessa has said, is important, but there are changing social trends as well. You know as well as I do. I happen to be the president of the trades and labour club in Sheffield, and I know about the decline in activity there. The change in cultures has made a change. The ITC has had a profound effect not just on gambling, but on all our lives. It has affected every aspect of our lives. What people have tried to do is measure where we were 10 years ago to where we are now and think that society has not changed, but it has. It has changed dramatically. The industry, in some parts, has not changed with it. It has challenged it in many ways, and it will continue to challenge it. I think the great success of the Act itself and the commission is being able to respond to changes in ITC and also changes in the political world and changes in culture, because if you had the old Act-the 1968 Act-to deal with, you just could not do that. You would need primary legislation for everything. There is now an enabling commission there that is able to deal with those changes.

Now, if the commission wants to come back and argue about the sorts of things that may well happen in bingo or the times, stakes, prices or number of machines, they have every right to do that, but the Act gives them the power to do that, not politicians, and that was a fundamental difference between the 1963 and 1968 Acts and what we put in the 2005 Act. It really is fundamental, and it has been followed, as you well know as you have been looking at this, around the world and is an exemplar of a commission or regulator and the policing of that regulation. I think it has been-credit due-quite successful.

Tessa Jowell: I would add that one piece in the briefing that I read in preparation for today made reference to the impact of the change in smoking laws and there being no smoking in many of the places that people would visit to play on machines or whatever.

That has also had an effect, so it is hard to look at the impact of the Gambling Act in isolation from other regulatory change which has also had an impact on the use of facilities.

Q592 Jim Sheridan: We visited a bingo hall as part of this inquiry, and I was pretty sad to see the state of bingo halls in London. It is an age profile thing as well. We do not see as many young women, in particular, going to bingo halls, maybe because there are other attractions and so on.

The other question I would like to ask is about the Budd review and deregulation. He expressed concern that there could be a rise in problem gambling as a result of deregulation, and there is anecdotal evidence that that is the case. Do you think that the Budd review has failed to meet his goals in terms of protecting the vulnerable?

Tessa Jowell: Again, I looked at the figures from the latest prevalence survey and there seems to be some doubt about the extent of the increase and whether it is statistically significant. I think-this would be my strongest piece of advice or recommendation to the Committee-that it is essential to ensure that this baseline of harm is constantly updated, so that the activation of the Secretary of State’s power or the Gambling Commission’s role can be put in place, because that is absolutely central to the whole purpose of the Act.

We will no doubt come on to FOBTs, but the other thing is to understand a bit more about the differential harm that new forms of gambling and their prevalence may create, but you can only do that by rigorous monitoring.

Richard Caborn: Again, the powers are there. You have the prevalence study, and if action needs to be taken in any of these areas-FOBTs are no doubt going to come up; that was a voluntary agreement-that can happen. You have the right to impose a levy, if you want, on the industry, if you want to raise more money in terms of problem gambling. In my view, that has been a great deterrent in many ways, and makes sure that the industry acts properly and not only gives money but also polices those agreements it has come to about, obviously, child gambling, making sure problem gamblers are picked up-whether that is in casinos, betting shops or whatever-and all the actions it has taken with the regulatory authorities on problem gambling.

There has been a marriage there that has been quite successful and reasonably monitored. On the stats I have looked at-and I agree with Tessa that you need to look at the base of those stats from time to time-overall, that has been reasonably successful. Look at the Australian model now. If you look at what has happened in Australia, and again I was looking at some of the stats on that, of a population that is a third of the UK’s, the problem is hugely greater there-hugely. They have real, real problems, to the extent that it is now at a ministerial level and they have set up a ministerial committee to start dealing with it. We are not in that situation. We can, over time, relax some things or pull them back in; and it is proportionate, I think.

Q593 Jim Sheridan: One of the problems we have as a Committee is trying to get a handle on exactly what the stats are in terms of problem gambling, because there are variations and different opinions of what they are.

Tessa Jowell: Exactly right.

Q594 Steve Rotheram: I think this is a question constructed on the back of your 2002 Adjournment debate on the draft Gambling Bill, Richard. It is not a test of memory, but do you know of or can you point to any evidence of how to support a ban on children using canteen machines?

Richard Caborn: To be honest, we took 6,000 machines out of chip shops. Was it 6,000, Tessa?

Tessa Jowell: And minicabs-minicab offices and chip shops.

Richard Caborn: When people on estates were waiting for fish and chips to fry up-I am not saying that socio-economic As, Bs and Cs do not eat fish and chips, but it tends to be Cs, Ds and Es-they were all playing slot machines. We took 6,000-it was 6,000?-out of the shops. We even, when we got to advertising, went into whether to put it on kids’ shirts: if you have Bet365, or whatever it is, do you put that on kids’ kit? So we went into great detail to find out where we could protect children and the vulnerable; we really did.

If I may say-I am slightly digressing-we were the first, in 2006, to put integrity into sports betting. We had a conference at Twickenham. What the IOC is doing now is what we did back in 2006-the 10-point plan on integrity of betting in sport. We looked at all those areas; we took it very seriously indeed. Vulnerable people and children had never been in such an Act before. We took that very seriously. According to the evidence that I have read, I think that we have protected children and the vulnerable.

We did take out fish and chip shops. The biggest argument is whether the seaside arcades affect kids. I don’t think they do. That was all the evidence we were shown. There is still a raging debate about that one. We were under pressure to ban all the arcades. I used to go to Cleethorpes as a kid and it never affected me and I don’t think it affects my grandkids now. Those were the arguments at the time. Did we get it right? Broadly speaking, I think we did.

Q595 Steve Rotheram: Following on from that, the Gambling Commission’s figures show 70,000 occasions in 2009-10 when a person was tempted to gamble in a licensed betting shop but was unable to prove their age. Perhaps that reinforces what you are saying. Has the Gambling Act, therefore, ensured that there are sufficient measures to protect under-age people from gambling?

Tessa Jowell: That is a very good illustration of the Gambling Act working in practice. The licence is tied to compliance, so every single gambling premises knows that its licence is at risk if there is evidence that it is allowing young people who are under-age to gamble. That is a very powerful deterrent. I was not aware of that figure, but the fact that so many under-age people have been identified is evidence that the power is working.

Richard Caborn: There is an area that did worry me and still does. When you are face to face, when you are physically going into a premises, you can do that. Remote gambling is the problem. I went to Gibraltar and they assured me that the access to plastic-a credit card-is the controlling gateway that you have there, but young people get access to those. That is a problem. I don’t know the magnitude of it; I don’t think it has been quantified. It is an area that could do with a light shone on it.

Tessa Jowell: I know you are aware of the difficulty of regulation in this area. Online gambling has the power to expose a lot of young people to risk, as Richard says. We did introduce very rigorous tests. For somebody logging on to a UK-registered site, proof of age is one of the key requirements. The prevention of under-age gambling obviously extended to that as well. Again, I think this is an area of enormous complexity to which to extend the protective reach.

Richard is absolutely right that a 15-year-old is more at risk from sitting gambling in their own bedroom, using money on a credit card they have procured but cannot meet, than in many other circumstances. I remember as part of the casino debate the argument being put, not by the casino operators, that casinos were a safer environment, if people were going to gamble, because casinos are highly regulated. We intended to ramp up the level of regulation, learning very much from the tricks of the casino industry in Las Vegas, for instance. There is sensory blank-with no clocks, pumped oxygen, that sort of thing-that keeps people gambling and risking money at a point when they may not be able to afford to. There are all those issues. However, if you are gambling in a casino, you are visible to other people. If you are a 15-year-old sitting in your bedroom, you are very vulnerable.

Richard Caborn: I went to Gibraltar-I don’t know whether you have been to Gibraltar-to look at the system there.

Chair: Gibraltar comes up next, after you.

Richard Caborn: Right. What I saw there with the main companies was very responsible. There is no doubt that they were using ITC very effectively and they could, via the surveillance that they have, very easily pick up problems that were arising. I just want to clarify that what I saw there was very responsible indeed, and they complied with all the licensing arrangements that we had asked them to put in place. They were able to monitor and police very effectively. The difficulty you have got is who holds a piece of plastic. You do not see the person who is holding the piece of plastic, so you can only assume that it is the right person. That is a difficulty. I spent a couple of days in Gibraltar and what I saw there was very effective. It is not a regulatory issue; it is a tax issue, in my view, which is the problem.

Q596 Mr Sutcliffe: Thank you very much for the legacy of gambling in my time as Minister. I want to go back a bit to betting shops, FOBTs and B2 machines. I would be interested to hear what the thinking was on the voluntary arrangements and why you felt that that was a route forward. The numbers of FOBTs have become a major issue. Some betting companies are trying to get around the voluntary arrangement by doing things such as extending floor size and doubling the size of machines. The casino operators are concerned because they see that B2s are in the betting shops, but they do not have the same opportunity. Even you have said that the casinos are the best regulated in terms of being able to see what is going on. Can you tell us the story of the deal on that? A side issue, which is being discussed in Parliament now-a private Member’s Bill has gone through-is the proliferation of betting shops on the high street, and what powers local authorities might have.

Richard Caborn: I will give you my take on it, and Tessa will give you hers.

Tessa Jowell: You may get a slight difference on this between the two of us.

Richard Caborn: I went to Australia in 2002, and I came back absolutely convinced that we had to tie the number of machines to something, whether it was shops, tables or whatever. That was absolutely clear in my mind. In 2002, we started to see FOBTs being put in-the definition of betting as against gambling created this problem, because the FOBTs were fixed-odds betting terminals-and I came back and asked my officials what powers the Gaming Board, as it was before the Gambling Commission, had. They said, "You’ve none, Minister." I asked what we would do, and was told that we could not do anything. I said "That’s just not good enough," because FOBTs were starting to emerge. Talking around it, as you do, it was clear that even the most responsible of the companies were saying "If they go down there, it will be a race to the bottom."

That was the danger we were in, three years before we got an Act on to the statute book. We had a problem because of the definition and because of technology coming in, and we could have had wall-to-wall FOBTs across the country. We had no laws and no powers to stop that. I called four of the companies together and said, to put it quite crudely, "If you continue to race to the bottom, I shall make sure that that bottom is taken away from you when we bring an Act two or three years down the road. So I think it is a good idea if we all sit round the table and do a deal." That is how the deal was done. The deal was done for four in a shop, and we did it against the background of stakes and prizes, frequency of operation and numbers and-very importantly, because Tessa particularly was concerned about this-the effect it would have on problem gambling.

The prevalence study came in at that time, before the Act was introduced. It was a voluntary agreement, and if anyone wants to look at a good voluntary agreement, I think that was one. Whether we got it right on allowing four-whether it should have been three or four-I do not know, but that was the discussion at the time. That arrangement was negotiated between the officials and the betting industry and it held, in my view, right up to the Act, then it was confirmed in the Act itself. That is how it arose, and because of that, the debate on casinos became about the ratio of tables to machines. Whether that is right at the end of the day is still up for debate, but that was the way it was. That really came out of seeing what they did in Australia, which had quite an effect on our thinking and was translated into what we have got here.

Q597 Mr Sutcliffe: Was it linked to opening hours?

Richard Caborn: That is different.

Q598 Mr Sutcliffe: It always surprised me that the only day with no racing is Good Friday, yet the betting shops are open on Good Friday. That is because of the impact of the machines.

Richard Caborn: They would argue not. That was an argument. It was that betting shops were not open at the same time as racing was open. I don’t know what view you take on that, Gerry, but it was probably half of this and half of that. That is how the deregulation of betting shop hours came about, and they were also complaining that other betting organisations could open. I do not know whether that has had a major effect, to be quite honest.

Q599 Mr Sutcliffe: What about this issue now about the proliferation of betting shops in the high street?

Richard Caborn: I personally don’t think that there is such a proliferation. I asked my planners about it. There was a meeting of the Core Cities Group at the end of November, when this was on the agenda of the core city planners. At a meeting of the Core Cities planning forum last week, one city raised the issue of betting shops on the high street. Information was requested on whether the proliferation of betting shops on the high street was becoming an issue for Leeds council. None of the other core cities thought that there was a problem, and neither do we.

The takeover of empty shops of a chain and the supermarket multiples invasion is more of a problem for them. They are class A2. Class A2, as you know, is banks, building societies and betting shops. They cannot go to A1 without permission. It is well within the power of the local authority to say no to a premises that wants to move from class A2 to class A1. They can move within class A2, but that is all. That is either a bank or a building society. It is quite interesting that they put betting shops, banks and building societies all together: they are all gamblers. I think that if they want to move from that, they have to go through the local authority planning department and the local authority can stop it. There are no more betting shops now than there were then. In fact, I think that there are fewer betting shops now.

Tessa Jowell: Here’s my view. Richard and I worked very closely on this during the passage of the Act and I am on record-I went back and was reassured by how often I was on record-as saying that these machines are on probation. There were several things that I was concerned about. One was unintended consequences and the second was an industry becoming overly dependent on growth driven by these machines. The third, obviously, was problem gambling.

There is evidence, I gather, although it is based on a sample of 60, which is obviously not enough, that this may drive the easy access to B2 machines. It may drive an increase in problem gambling. We know-this is the evidence from Australian pokie sheds-that what drives addiction is the speed of play. People get into a trance-like state. That is something that we were very careful about in how machines would be set in casinos.

I think that Richard and I disagree about the extent to which this has led to the proliferation of betting shops, but, as I was saying a little while ago, the important thing is to establish the evidence. I can tell you that in my constituency, which covers part of Lambeth and Southwark, there are 130 betting shops, with approximately 450 B2 machines, including 32 B2 machines in a very small area, which includes Norwood High street. They have made an impact on the nature of the area. There is always a risk, which is worth interrogating, that they see off the entry of other forms of retail that would be more regenerative.

I just gave you the example of this bit of my constituency that desperately needs that kind of regeneration. Higher quality retail would be a way of achieving that. The question is: is the prevalence of bookies’ shops putting other retailers off coming in? This will be my second recommendation to the Committee, if I may, Chairman: you should undertake a study to establish the facts of this. Richard and I reflect slightly different views here. A further examination should look in more detail at the evidence of proliferation and the need to alter the speed of play. I think at the moment, if you play constantly for an hour, you could lose £18,000 an hour. I would be concerned about that. We need to look at the speed of play, the level of the stake, the question of proliferation and the evidence of harm beyond the indicative figures that have been provided by GamCare, because the bookmaking industry is now heavily dependent on the presence of these machines. They are clearly popular with the public who use them, so you obviously have to tread carefully on the basis of the evidence. In doing that, I think the three, if you like, licensing objectives of the Gambling Act are pretty good guides for you in reaching a conclusion.

Q600 Philip Davies: I was interested in what you said about proliferation of betting shops and the machines. I just want to try to tie the two together. Do you believe that the proliferation that you are concerned about-Richard isn’t, but you are-is caused by the limit of four machines per shop? If there was a higher limit of machines per shop, you would see fewer betting shops on the high street.

Tessa Jowell: If I were Secretary of State, I think you could fairly assume that I would come along with some answers to that. However, I come to the Committee with questions. There is anecdotal evidence that, although there may not have been a significant increase in the number of betting shops-I think that needs to be established-they have tended to cluster more in deprived areas. In my own constituency, we don’t have FOBT machines in the affluent areas; we have them in the poor part of the constituency. Certainly, my colleagues, and no doubt your colleagues, would report something similar. That has to be interrogated.

The second point is about the question of what makes these machines so attractive. Is that attraction potentially disproportionately harmful? That’s why I think these are questions that no doubt the Committee would want to press the Secretary of State and the Gambling Commission to get answers to.

Q601 Philip Davies: I accept that the main driver of the 2005 Act was protecting people. I am sure that that was what was at the heart of what you were trying to do, and that you were trying to make it evidence based. The bit I don’t quite follow is the issue of the limit of four that we came to, of machines in a betting shop.

Tessa Jowell: A limit to four?

Philip Davies: Yes-the rationale for it. It seems to me that you can play on only one machine at a time. You might be able to do two if you’re particularly proficient, but you’re going to be struggling to play on more than two. So whether there are four or six in a shop, what difference does it make to an individual’s ability to have a problem with their gambling? You need only one to have problem gambling, or, as I say, two at the most. Any more than that doesn’t affect me as an individual with my problem gambling. I am struggling to understand where the number of four came from, particularly as, in the last Parliament, I tabled a parliamentary question asking what evidence was there that linked the number of machines in an establishment with problem gambling. The answer came back, "There’s no evidence at all that the number of machines that you have in an establishment has any impact on problem gambling." I am struggling to find out why on earth we have this limit of four. It seems bizarre to me.

Richard Caborn: As I have said to you, I can explain exactly how it happened. It was an agreement between the industry. It was a negotiation, and then to try to address the real concerns, which were clearly out there, and ensure that they were not harmful, we wrapped the prevalence study around that. It was very clear to the industry that if they allowed abuse of these machines by individuals in their shops, then might lose their licence, or the number of machines could be reduced or taken out completely. So it was in the interest of the industry to actually make sure that those shops were well run and properly policed by their staff, because if it got out of hand, and if it was shown to be getting out of hand by the prevalence study, we would have gone back and said to them, "Sorry, you either reduce the number of machines or you take them out". That was the voluntary agreement. There was no magic, scientific arrangement for four, I can honestly assure you. It was an agreement saying what was reasonable and what we believed-with the evidence that we had-was proportionate at the time. That is exactly how it happened.

Tessa Jowell: The other point is that at the time that four was settled on as the number, there was no certainty that these machines would remain, because we were absolutely clear that we could not know at that stage what their effect was likely to be. The final point on this, which the Committee will no doubt want to come back to, is to consider whether you are concerned about the extent to which there is in effect a casino service operated outside the regulatory control that would extend to casinos.

Richard Caborn: We were not in a very strong position to negotiate with the industry. There was no Act of Parliament that said you could stop these. If they had wanted to put FOBTs wall to wall in every betting shop-and opened up a load more betting shops-they could have done that. There was no law to stop them, because it was betting, not gambling. Therefore, when I went to the big four, as it were, and said, "I want a deal", they could turn round and say, "Sorry, we’ll take us chances, kid. We’ll put as many as we want in." I spoke to some responsible people who said, "Richard, if that happens, it’s a race to the bottom. If they do it, we have to do it." So that’s the position you were in three years before you got an Act of Parliament. You had got an industry that could have gone down and gone wall to wall on FOBTs. There was nothing I could have done-and I was told that by officials. So we sit down, we reach a sensible agreement and we wrap around it a prevalence study. We say, "You act responsibly; we’ll act responsibly." That is how it arose. If you are asking me how I justified four scientifically, I can’t. It is what we agreed. We would have four elements: the number of machines, the speed of play and the prizes, wrapped around the prevalence study. They were the four elements of the agreement.

Q602 Philip Davies: I have one final question, which is slightly off piste, but I may as well ask it while I am here. It concerns the previous inquiry we had about on course/off course bookmakers and their pitch allocations. I just want to confirm one simple question. It seems to us that the Act was designed to get rid of the five times rule that set the price for what bookmakers were on. A totally unintended consequence of the Act was the impact it had on the pitch allocations of bookmakers. Can you confirm that that was an unintended consequence?

Richard Caborn: It was. I made it clear to Alex Salmond, of all people, who took it up in an Adjournment debate. It was dead man’s shoes. That was the problem. We never legislated for dead man’s shoes.

Philip Davies: So the Act was never intended to impact on the pitch allocations.

Mr Sutcliffe: No.

Richard Caborn: It wasn’t, was it?

Chair: That was a little off piste, but so am I.

Richard Caborn: My postbag will be full.

Q603 Damian Collins: I want to ask a couple of questions about machines in casinos. Under the provisions in the Act, why is it that a small casino needs more gaming tables than a large casino to maximise its allowance of machines?

Tessa Jowell: The ratio between gaming totals and machines was something that we considered carefully on the basis of advice, which would ensure that the casino regime complied with the three licensing objectives of the legislation.

Q604 Damian Collins: So a small casino has to have 40 gaming tables to maximise its machine allowance and a large casino only 30. What advice did you receive that led people to believe that that was the best outcome?

Richard Caborn: When I reflect back on it, there were areas where we could have applied more common sense. I must admit that this is one of the areas. It is something that needs to be revisited in my view. You take a view in light of five years’ experience. I really do welcome this Committee, because I think you can have a look both in terms of dealing with people’s concerns about harm but equally about fairness within the industry. I hope that you will look at some of these areas because I think they do need revisiting.

Q605 Damian Collins: Did you consider having one ratio but limiting the number in smaller or large casinos and operating at the same ratio?

Richard Caborn: You got into this argument not just about casinos, but about pubs and clubs. We had a big argument about whether the limit for working men’s clubs should be £500 or £250. It was a much bigger picture than that. It was all about how many machines were going to be in the nation for gambling at the end of it. The pubs and clubs were arguing that the FOBTs in betting shops were a totally different animal. Then you have the new casinos-the £1,500 and so on. It was not an exact science. Let me put it that way.

Q606 Damian Collins: Did you consider setting a maximum number of machines for a small or large casino, but operating the same ratio between machines and tables? Is that something you considered?

Richard Caborn: I think it was. I would have to go back and check all that to be quite honest. I don’t know all the detail now. I just can’t recall it all. What I am saying is that it wasn’t just about casinos and machines. There was a wider impact on machines in a lot of establishments, including casinos. As Tessa said, we were under this pressure about casinos and how many there would be anywhere. Would there be a mass proliferation because you were going through the permitted areas? That all came into it.

Tessa Jowell: Our greatest focus was on whether to allow category A machines-the unlimited jackpot-and if so, how many. Richard is right. You don’t appoint Ministers to be experts in the ratio between gaming tables and machines. You appoint Ministers to meet the public policy objectives of a new policy and to make sure that as far as possible the activities that go on within that regulated environment enable those objectives to be met. But I think Richard is absolutely right. It is a very fair question. It may be that perverse effects were created by that. It would be good for the Gambling Commission to review that within the licensing objectives set out in the Act.

Q607 Damian Collins: Thank you for that. The reason I ask is because one of the unintended consequences is that it has made it harder for small casinos to compete. That is a legitimate area of concern for us. I have some other questions about casinos but I think we are going to come on to that later.

Q608 Dr Coffey: On online gambling, the Gambling Commission states that the majority of remote gambling sites accessible to British citizens are regulated overseas. How successful do you think the 2005 Act was in creating a regulatory framework for online gambling within the UK?

Tessa Jowell: I am sure Richard will want to say something about this. It is extraordinarily difficult. We held at Windsor race course-

Richard Caborn: Ascot.

Tessa Jowell: We held at Ascot race course an event where we sought to encourage online operators to come and locate in the UK and be subject to the UK regulatory regime which, from a public policy point of view, would increase public protection. However, the tax regime, as the offshore operators would see it, is disadvantaged by a ratio of 80:1. I don’t think anybody moved onshore to the UK as a result of that event. This is an extremely difficult issue for the Gambling Commission and for this or any Government, given the growth of online gambling. I think you will want to keep on going back on the basis that you reaffirm the relevance of the three licensing objectives on which the Gambling Act is built. You will want to keep on going back and looking at how public protection in the context of increased online gambling can be sustained.

Richard Caborn: First, I think a lot of those offshore would want to come back onshore, from the people I spoke to. The tax regime is the problem. My view-and I would be interested in those questions when you get the Treasury Minister here-is that it is a big opportunity lost. We have the best regulatory regime in the world. It is extremely well policed, and I think that is still the case now. It was a great opportunity to get employment, but because the Treasury was not prepared to be flexible and look at how you could have a tax regime that would keep them onshore-it was interesting to read the evidence of Bet365.

Q609 Dr Coffey: They are the only ones who stayed onshore.

Richard Caborn: They are onshore. It is interesting to read their evidence. Had it been a plc, it would have gone offshore, but because it is a family company, it stayed onshore. I can tell you the vast majority of those people-when I went to Gibraltar-who are working there would want to come back. They kept as much onshore as they can, so it is a tight issue.

Whether there is a way of negotiating a tax regime that would bring them back onshore, and the jobs with that, I don’t know, but you would then have to address onshore-because you cannot, as it were, put them into a more difficult position onshore-but I think there is a debate to be had around that. What I think was disappointing was that the Treasury was quite dismissive at the time about whether we brought this industry into it. You can have the banking industry and a lot of other industries here, but we did not particularly look at whether we wanted the betting and gambling industry here. That is still an open question and one that should be pushed out, because I still believe that a lot of jobs are in it, that a lot of tax take is in it, and that we have the best regulatory regime in the world. It is the most transparent and well policed.

That is one end. As far as the other issue is concerned, what we tried to do to mitigate against that was the white list. What we tried to do-to go back to what Tessa has been saying-was make sure, wherever people were gambling, that we protected the punter, children and the vulnerable, and that people got a fair deal. The only way you could do that was to get people to sign up to licensing. What powers have you got? The only power we really had was that we will let you advertise. If you do not license with us, you cannot advertise. That is about the only weapon we had to use against them, but I think, broadly speaking, it worked. The big boys offshore who are licensed come on, and I think we have kept with the principles of the Act: we protect the vulnerable and children; it is crime-free; and people get paid out.

Q610 Dr Coffey: I want to talk about tax. You obviously believe that tax policy is highly relevant in terms of the position of the offshore, so what would be, in your view, an appropriate tax rate to bring people back on?

Richard Caborn: I do not know. I cannot answer that question, because I have not been involved in it. I will not bore you or even let you know the interesting discussion that we had with the Treasury at the time. I can tell you that it was fairly robust, considering that we had gone to all this trouble to put what I think was a pretty good piece of legislation on to the statute book, but not for it to be exploited by others who are coming in later, like Gibraltar and the rest of them. I thought it was a bit ludicrous, but there you are.

Q611 Dr Coffey: You are not willing to offer a figure. What about 10%?

Richard Caborn: No, I’m not. The difficulty you have now is that you have to look at the tax in its totality on gaming and betting, because you have the onshore-and there are differences with the onshore as you know, with some of the areas here that need to be revisited. But if you are going to look at the whole taxing of bringing offshore onshore, with those who are already onshore, you have to look at equalising that out as well. So there would have to be an equation whereby the tax take would be at least neutral in that, but you get your gainful employment and other economic regeneration off it, and see whether there is an equation there. I do not know, and I am not that bright.

Q612 Dr Coffey: Denmark has had it accepted by, I think, the ECJ, which confirmed that they have a differential tax rate for online, as opposed to land-based. It is lower for online. Would you see that as being equitable?

Richard Caborn: I would not want to give a view just like that. I would have to consider what the consequences of that were. It depends what your objectives are. If they are to bring offshore onshore, it is to do what? It is to get a bigger tax take for the nation, or at least overall. It is to create employment. It is to show the world that we are a very good regulatory regime to operate within. It gives a lot of credibility, and there are a lot of jobs in that. That is how you approach it. What all the details are, and how you manage that, and whether it is viable for the Treasury, I don’t know.

Q613 Paul Farrelly: I agree with you; I would as the hon. Member for Stoke City. I reveal my hand, Chair, yet again. Bet365 may take a more socially rounded view of its obligations both to secure employment and pay tax in the UK, but that would not be available to it if it were on the treadmill of the stock market and profit maximisation. I fully accept that.

I want to ask you whether you think that the white list has worked. I do not know whether you followed the case of Full Tilt Poker and Alderney, where the Alderney regulators, like our Gambling Commission, didn’t have mechanisms in place to make sure that client moneys on deposit were separated from the running of the firm. What do you think of how the white list is operated, in the light of this particular case?

Richard Caborn: I don’t know. I am not a gambling person in that sense. I have been out of gambling. I had to read up before I came to the Committee, just to look back. It made some interesting reading. It is good how some witnesses rewrite history as well. Anyway, that is another issue.

I haven’t got a view on that, Paul. When I recall when I went go Gibraltar, they were able to segregate betting and gambling from the normal operations of Visa, MasterCard or whatever. You had special numbers, and it was coded. As far as I could see, it was a fairly well policed and regulated system that you could very quickly show up in terms of people departing from certain patterns. However, you are talking about having whether you have the reserves to back that up. It is a bit like the banks in that sense.

Q614 Paul Farrelly: Or pensions.

Richard Caborn: Yes. That, I did not go into. I won’t give you a view because I am not in a position to do so.

Q615 Paul Farrelly: We have got Alderney, Gibraltar and Jersey following, but the wider question is promoted by what has happened in financial services. It is through mechanisms such as the white list. Why do you think that the UK should provide opportunities for offshore havens that are not part of the EU nor part of the United Kingdom, to operate? In a small jurisdiction, you might think that they cannot provide sufficient resources-if you look at Alderney, as a small island-compared with established countries such as the United Kingdom from which they are drawing custom.

Richard Caborn: It is an interesting question. In the real world, how do you stop them operating in the UK? With the ITC you have now, how do you stop them operating in the UK? Is it better when you have failed, to keep them onshore because your tax regime drives them offshore?

Q616 Paul Farrelly: That wasn’t the question. The question was why have a white list that includes a small island like Alderney.

Richard Caborn: Because they were prepared at that time. The question you raised did not come up. Were they were prepared to sign up to the licensing conditions that we were prepared to lay down? The answer to that was yes, they were. Guernsey and Jersey didn’t sign up to it. They complained and didn’t sign up. But those who signed up to the conditions for the licensing were able to operate here and also access advertising. That was the only lever that we had.

Q617 Paul Farrelly: So the white list was a sort of franchise system.

Richard Caborn: It was a franchise system, yes. To go back to the point that Tessa keeps referring to, it is about protection. We were in the game of trying to protect the vulnerable and children, make sure that it was crime-free, people got a fair bet and were paid out. Your question was would they be paid out.

Paul Farrelly: One final question: in terms of the way forward and the replacement of a white list, do you think that we should be going down a UK route? That means that operators are entitled to take custom here only if they have got a licence from the Gambling Commission, which entails all the complications of enforcement, or do you think we should adopt a different model, whereby we will accept people taking money from customers here who have a licence in any EU jurisdiction?

Tessa Jowell: There is obviously merit in looking at the possibility of international agreement. We certainly looked at this but, from memory, it was one of things that we ran out of time on. There is certainly merit in doing that, and in getting other countries to sign up to our licensing objectives. As your line of questioning reflects, you understand entirely the complexity of this.

My view would be that we should not pitch our gambling industry at a regulatory hurdle that it simply cannot meet. You therefore have to be realistic. It is important in communication with the gambling public that they understand the risks that people take if they are using unregulated sites in jurisdictions that we have absolutely no relationship with. You can almost certainly not stop them doing that-I was thinking about this beforehand. Look at the difficulty that there is in protecting intellectual property, for instance, for all those reasons. You could probably only to do it by getting internet providers to block certain sites and so forth, but then the sites change their domain name-they are highly mobile.

I would take it in three stages. I would look at those jurisdictions where it might be possible, on the basis that Richard has outlined, to secure regulatory reciprocity with, if you like-that is the first thing. Then the second is to look at the possibility of widening an international concordat, either through the EU or more widely. The third, to deal with the fact that you are never ever going to be able to deliver complete safety and protection to the people who sit at home in their bedroom to go online and gamble, is to get the Gambling Commission to address how the kind of public health warnings about the risk that people face are best communicated.

Richard Caborn: Just reflecting on what was said, first of all I would be asking the industry a number of questions. What is the percentage of its operations in the UK? If you have a company that is based in Gibraltar, what percentage of its operations is actually UK-based? That also begs the question, do you then try to get such companies back onshore? I would guess, say, 50% of it was on the UK, and then you were to bring in further operations, which you would have to look at. I do not even know the percentage-it would be an interesting question to ask-so what is the perceived percentage of gambling on non-licensed operators? There are people who are not licensed, but get access to the UK, which they can do and do do: what percentage are they of that other market? If you are only talking 1% or 2%, to be quite honest, I would not even bother with that but say, "Fine, I’ll live with that. I am not going to start bringing complex regulations into place to catch 1% or 2%." If it starts moving into 10%, you have to start looking at it.

There is a big macro picture to look at about the operations offshore: what is the percentage of their business here in the UK? Then you can start making a judgment. The next question I would ask is: what is the percentage of non-licensed operations operating here in the UK? Again, I have no feel for that. Depending on that, I would start saying, "Well, you need to bring in that further regulation." Again, I am far from expert on this but, reading what the Minister is doing in the consultation he put out in July last year-I only read it superficially, and I am not saying I went into it in any depth-I am not clear what it is going to achieve that you cannot do now. I do not see where it is going to take the case forward.

The big, big issue here is tax. If you want to bring them onshore, that is the issue. If not, you are dealing with the symptoms, not the cause, which will be a problem. You will be chasing this for ever more because, I tell you what, the ITC runs a lot faster than political decision making and they will find ways round it one way or another. That is the difficulty you will have, but is it a big problem? I do not know whether it is or not, to be quite honest. I have always said that, to the best of my experience, those who operate here and are licensed, whether it be in Gibraltar, Malta or wherever it is, operate responsibly.

Q618 Paul Farrelly: The issue for the industry is not only a UK issue, but a European issue. That is why the focus of my question was the EU’s move to start regulating and taxing. There is an issue of having different regulatory regimes and possibly double-taxation regimes, so it has an impact as well.

Richard Caborn: I did not think the EU had responsibility for gambling.

Paul Farrelly: No, it is individual states now moving into it.

Richard Caborn: But the Commission has no competence on gambling. I think I am right on that.

Chair: That does not stop them telling them to do so.

Richard Caborn: I could not possibly comment.

Q619 Chair: We still have one or two small areas to cover. You have rightly spoken several times this morning of the need to base policy on evidence and the need to carry out research. Are you disappointed at the amount of research that has been carried out? Do you think the voluntary funding by the industry has proved sufficient?

Tessa Jowell: I must say that when I was preparing for this session and looked at the research that has been conducted, I was surprised that the Government had not been given a more robust research base on which to proceed. That may be something that the Committee wants to consider further.

Richard Caborn: I can honestly say that, although specifically in the UK there might not be, there are oceans of research out there internationally. When I had the conference of Ministers with responsibility for gambling down at Ascot, an amount of international research had been done: the Australians are doing it; the Americans have done it; and New Zealand has done it. There are oceans of research out there. What you do with it is a different matter. Whether or not there is something specific, the one thing you have is a stick, and I presume it is still the same now. If they do not pay up, you have the right to put a levy on it. It is really up to the industry, therefore, on all sides to say, "How much do we need to do this research, education and prevention?" Based on that type of discussion, and if you are not satisfied with it-

Tessa Jowell: Richard is absolutely right about that. My focus is very particularly on the issues that obviously and rightly concern the Committee. We should be able to proceed on the basis of certainty, not conjecture, on FOBTs. We should know categorically whether there has been an increase in problem gambling and, if so, which form of gambling is driving that increase. The powers of intervention are there, but the legislation is not effective unless it is serviced by rigorous and up-to-date evidence.

Q620 Chair: There was a debate about whether there should be a statutory levy to fund education research. Are you still of the view that that is not necessary?

Richard Caborn: It is better to keep it in reserve than use it. You have to try to get an agreement that is proportionate on both sides. To date, as I understand it, that has been reasonable. Where you want more specific research, it would not start to affect the levy. It is not that expensive to do the research. I agree with Tessa that you need to get those base lines absolutely secure and agreed. If you do not, you are in an argument all the way through it.

Tessa Jowell: You would perhaps also want to review with the NHS the adequacy of treatment facilities for people who are severely addicted, because the other purpose of the levy is to make a contribution to treatment.

Richard Caborn: They are in a bit of denial in the NHS in this area. When I was Minister, trying to get them round a table to discuss the symptoms of problem gamblers, they just didn’t want to know-they didn’t even have it registered on their Richter scale. They were in a bit of denial that it’s not a real problem.

Q621 Damian Collins: I have some final questions on casinos. Earlier, we touched on the change in the number of new casinos that were going to be allowed. Was it ultimately a purely political decision?

Tessa Jowell: Ask him.

Richard Caborn: Not to overstate it, there were two things. The first was that you’ve got a campaign run by a national newspaper, the Daily Mail. The second thing was that you were coming up to an election in 2005. That was the reality of it. Anyway, it did just save the chunk of the Bill, which was all the commission, online gambling and all that. Did you save all that and do a deal on wash-up on the casinos?

Tessa Jowell: To be absolutely clear, that was my concern, that having been through all this scrutiny, we didn’t lose the Act. If it meant reducing the number of casinos, then it seemed to me that that was a small price to pay for securing the legislation. It was also absolutely certain that there wasn’t going to be time in a legislative programme for another gambling Act if it fell before the 2005 election. I was absolutely clear, and Richard was too, that there was a pressing public policy and public risk need for this legislation, which is why I was prepared to agree to reduce the number.

Richard Caborn: Well, I disagree with that. I was in Blackpool but on the telephone. I was saying, "Don’t panic."

Q622 Damian Collins: Why do you think that the Daily Mail’s campaign had so much influence? One would say that in other areas of national life, the Daily Mail didn’t seem to have very much influence.

Richard Caborn: It’s called an election.

Tessa Jowell: The Daily Mail is an extremely effective newspaper, but actually, the decision was taken on the basis of parliamentary politics, rather than all these other external forces. Also, I have to say that I worked very, very hard to build a coalition among the faith organisations and organisations working with children, because their confidence in this legislation was very important to me. I think that we did a pretty good job on that-they did a pretty good job in helping us to really nail the extent and degree of public protection.

Q623 Damian Collins: Only one new casino has been built following the Act. Would you think, with hindsight, that it would have been better to allow existing casino operators to apply for the new licences?

Richard Caborn: I think so. My personal view is I think I would. If we actually got to revisit that, I would. But I would revisit a number of areas on the casino issue, although not the Gambling Commission; I think that’s sound. This casino issue got highly politicised. When you look at the amount of gambling in casinos, compared with the rest of gambling, it is minute, relatively speaking.

Tessa Jowell: Issues like this, it’s not so much that they become politicised; the then Opposition were doing what an Opposition do, which is make trouble for the Government, and they made trouble for us on the number of casinos. I was perfectly willing to concede on that to protect the legislation. That is what you do if you are a Government-you just have to face the realities. I was always interested in the fact that, when public opinion was tested, there was not this great national spasm of hostility to what we were trying to do in the legislation. One of the things you just have to do in government is separate noisy controversy, which, of course, is legitimate, from the evidence on which you’re basing policy and the purpose of the policy. Another example is the Licensing Act, which was highly controversial in some quarters, but was legislation that was badly needed.

Richard Caborn: We had some real opposition. We had our own opposition, internally, I can assure you, because a lot of my dear colleagues on the Back Benches-

Damian Collins: There was a difference in B team.

Paul Farrelly: There were arguments from the occupants of No. 10 as well, I remember.

Q624 Damian Collins: Maybe that was something that should have been looked at. The existing operators could have bid for the licences. The other matter is the portability of licences. Apparently, there are 37 unused licences in the country at the moment; 35 local authorities bid unsuccessfully for licences, one of which is my own local authority in Shepway, Kent. Should we consider whether authorities should be able to bid for those available licences?

Richard Caborn: My answer to that is yes. I would. These are areas in which you, in your recommendations, and the Commission are in a position-again, I use this comparison between Australia and us-to be able to relax that, rather than pull it back in. You are in a totally different position from them, and you have an evidence base on which to make those decisions in a more informed way than you could have done five years ago.

Tessa Jowell: We incorporated in the legislation obligations on local authorities, which created, in effect, what we described as a triple lock: the community must want the casino; the local authority must be prepared to license it and give the necessary planning consent; and the Gambling Commission must be prepared to license the operator. It is pretty powerful control. The idea that you could have an epidemic of casinos all over the country, in the face of an unwilling public, is simply not true, because local people have to consent to there being a casino. I agree with Richard-if there are unused licences that meet the tests of the triple lock, I would support using them.

Q625 Dr Coffey: On regeneration, we met casino operators abroad, and two points jumped out: it would be wrong to have a supercasino as the bedrock of regeneration and there was a very strong message about realistic commercialism. There was no way that people would ever invest in Blackpool as a supercasino and it would be more realistic to have one in London or on the south coast to make the numbers add up. I want to hear your views on both those points.

Richard Caborn: My view is that the reason Wembley stadium did not go to Birmingham, when I first became a Minister, was that the disposable income in London was five times greater than that in Birmingham. The commercial rationale was to put it where the biggest disposable incomes were. You can use that argument on supercasinos, too.

In terms of directing it to Blackpool, we were moving gambling and betting into the leisure industry, which is the base of Blackpool. Therefore, in my view, it made a lot of sense to marry the two things together. That is where the supercasino ought to have gone, to revive an industry that people in Blackpool knew very well. It needed some push, and the supercasino would have given it. That was the rationale.

Q626 Dr Coffey: What is your view on whether a casino can be the basis of regeneration?

Tessa Jowell: Again, you have to take it on a case-by-case basis. The case that Manchester developed-and it prevailed with the panel-for a supercasino was compelling. You make judgments on the basis of the baseline. How do you measure regeneration? It is a bit like legacy in the Olympics-it means a multitude of things. You have to define it, so what does it regeneration mean? Does it mean inward investment, more jobs, better environment, or a more effective way of dealing with the ambient consequences of poverty? You then construct a proposition specifically to address those definitions.

As I have said, there is evidence that cities have used casinos to do this, but it is not a given. The reason that the panel rejected Blackpool and created a furore was that they were not satisfied. A casino in Blackpool would be so exposed, in the absence of other economic activity, that there would be a risk of not being able to meet the public protection criteria that Manchester could do more securely. You have to take this on a case-by-case basis. You have to be persuaded not by the principle but by the competence of the proposition.

Richard Caborn: Can I just raise one quick issue, which has not been touched on, which is the releasing on sports advertising? It is fetching in new money to the advertising industry of about £150 million to £200 million a year on the back of sport, ostensibly. It would be nice if the Committee could look at a 10% levy on that to go to grass-roots sport. I think that would be great. If that had been around when I was there, I would have looked at it. That is new money into the advertising sector, which is worth £150 million to £200 million. If 10% of that went to grass-roots sport, that would be very welcome. A recommendation from your Committee, Mr Chairman, would be equally welcome.

Chair: That is a little way off the main area we have been examining. Thank you for your suggestion.

Q627 Damian Collins: On the media aspect of it?

Richard Caborn: Yes, on what we released in the Act for them to be able to advertise sports betting on television. It is a new sector, which is worth between £150 million to £200 million. The Act allowed them to do that, and it is predicated on the back of sport. That advertising revenue, which is new revenue to them-it was not allowed before that-is because of the Act. If 10% of that went to grass-roots sport, that would be very welcome indeed. You would be heroes in sport.

Chair: That is a very attractive idea. It has been a bit like the Sue MacGregor show, "The Reunion", reliving these past events. Thank you both very much.

Examination of Witnesses

Witnesses: Andre Wilsenach, Executive Director, Alderney Gambling Control Commission, Phillip Brear, Gambling Commissioner, Gibraltar Gambling Commission, and Graham White, Chairman, Jersey Gambling Commission, gave evidence.

Chair: Good morning. We now turn to the second session of this morning, when we are looking at the offshore regulators. Thank you for patience. I welcome Andre Wilsenach, the Executive Director of the Alderney Gambling Control Commission, Phillip Brear from Gibraltar, and Graham White, Chairman of the Jersey Gambling Commission.

Q628 Steve Rotheram: First question to Phillip. What evidence do you have to back up your criticism of the DCMS consultation paper from 2010?

Phillip Brear: The point I make in our written evidence is that there is no evidence to support the assertions that were being made. Once the paper was published, there was an informal consultation among the online regulators, and we agreed that, between us, we could identify only a handful of complaints each year from British consumers. There was no evidence that we were not meeting information requests and no evidence that there had been any technical failures or jeopardy to the UK customer gambling experience. There was quite a stark contrast between what the DCMS paper was suggesting and our experience as the primary online suppliers to UK customers.

Q629 Chair: Is that view shared by the other two jurisdictions?

Andre Wilsenach: Yes, I think it was quite difficult to understand what the objective of the change was. I am sure that it is probably right to comment that it now has very little value, if anything, to debate the pros and cons of it or the rationale for the change. As I understand it, the train has left the station. I am not so sure what value it brings. However, when we looked at the change-you will have seen from our written evidence-we found it quite hard that the baby had been thrown out with the bathwater. We thought that the UK had missed a huge opportunity and had a wonderful tool that it had created in the 2005 Act through mechanisms such as white listing to create common standards across borders. That is, in actual fact, what happened as a result of white listing. As Phillip just said, it was also evident at the time that there was no indication of the player being damaged. There was no indication that the player was suffering. There was no indication that the standards that prevailed were lower. In fact, I think the DCMS White Paper comments on the standards that were applicable in jurisdictions such as ourselves.

Therefore it was difficult to understand how the player would be better off in a situation where they move from the previous situation to one of regulation at the point of consumption. So I agree with that. I have a few views, Mr Chairman, on what I think are certain dangers of moving forward with that approach, seeing that the train has left the station; you won’t mind me commenting on that. I am sure you have heard this before. How the UK implements that system will be very important. It is easy to do that in a new jurisdiction such as Denmark, or in France or other jurisdictions which did not really have a strong online sector. But to turn this ship around in a well established jurisdiction-a mature market-such as the UK is going to be difficult.

My view focuses on two areas. First, if the UK is going to do it in a bureaucratic manner whereby the cost is going to increase as a result of increased regulation and duplication of things that have already been done and are still being done at the moment, you will run the risk of marginal operators leaving the UK. That then poses the question: will the player be better protected? My second concern is whether you are going to impose additional taxes. That is really my point about an established market, where you have established vested interests as a result of the 2005 Act. If you scrap that, take it off the table and introduce a whole new regime, and with a tax rate of 15%- duty on gaming taxes-those that stay in the UK will find it very difficult to compete with those that had either left for sunnier places or are operating from sunnier places in the world.

We all know, I think, that the blocking mechanisms don’t work. At best it is a defensive mechanism. It is a consolation that you do something, whereas I think the UK has an enormously strong attraction. It has a huge, very established market. The ability to promote and market in this jurisdiction must be enormously attractive. If you are going to impose a new system of regulation and licensing at the point of consumption, that is the tool that you want to use: saying that if you want to advertise here you’ve got to have a licence.

Graham White: Jersey currently is not white listed so I can only pass comment on my observations. I wholeheartedly agree with my colleagues here. One of the dangers for the United Kingdom is that the tax regime is prohibitive, quite frankly. No operator will come to the UK to pay 15% on its gross gaming win and 10% on its betting. It is just ludicrous. They are also looking for an experienced regulator, someone with knowledge who can hit the ground running. It is for others to judge whether that is the case in the United Kingdom. What particularly bothers, certainly myself in Jersey and other regulators, is player protection. I am not convinced that player protection would still be the most important factor if you are getting something like 400 licensees in the United Kingdom-impossible. They will go elsewhere, unfortunately to less well regulated sites, where all the problems will arise.

Q630 Chair: In your evidence, Mr Brear, you also said something which, on the face of it, looked rather surprising. You said, "There has been no proliferation of remote gambling", and you suggested that the increase was due to online national lottery activity. Can you say what evidence there is to support that view?

Phillip Brear: Obviously, the commentary was about the UK market. If you track back the number of suppliers, or you track back the scale of the supply, if you actually then use the Gambling Commission statistics to demonstrate where there has been growth in online, the only growth in online, I think since 2005, has been in the national lottery. The rest of the online market, in terms of its UK value, has actually remained at this 5.6%, and I think at about 5% or 6% of people, and 5% or 6% of the actual cost, whereas there is a very clear doubling and trebling of the national lottery online value. The Gambling Commission’s commentary makes it quite explicit that this accounts for most of the reported growth in the use of online facilities.

The other measure of proliferation is the number of operators. Of course, there has not been an increase in the number of operators facing the UK; there has been a decrease in the number of operators. As I said, there is lots of mythology and emotion around references to gambling. The reality is that, when you boil it down to hard statistics or hard cases, accepting that that is never a full description of the real world, the evidence just does not stack up. We are left almost with a different agenda being played out by certain players in the regulatory community in the UK that we cannot reconcile with our experience of supply into the UK and, indeed, into other markets.

Graham White: I think there has been significant growth since 2008. The statisticians will tell you that the forecast growth for the United States-$21.2 billion in 2008 to $30 billion in 2012, which is a 42% increase-is faster than the 15% forecast for the industry as a whole. I would not subscribe to the view that the 2005 Act has stimulated a proliferation. It was going happen anyway and, as we speak, there are many other countries worldwide embracing it. There are something like 2,700 internet sites, owned by 667 or something like that, in the world. So it is not the 2005 Act.

Q631 Chair: As you know, the European Union seems to be looking at developing some kind of common standards. Even though it may not be within the acquis at the moment, they are nevertheless debating that. Is that something you would welcome? Do you think that would help?

Phillip Brear: There has been substantial work for at least six years on developing common standards. There are a number of challenges, we have found, around that. One is the reality of this being, by definition, a high-tech industry that is informed and driven not just by its own internal research processes. I sometimes make the point that what the online operator does can be driven by people like Microsoft, Sun Microsystems and the world suppliers of information technology.

When a world supplier offers a faster, better, cheaper system of communicating between A and B, the idea that that operator must come to us and that we must develop a technical standard to allow them to adopt that methodology means that they cannot adopt it for an extended period or that they can only adopt it with certain unnecessary constraints. As I say, this is a fast-moving industry that sits within an even faster-moving industry, so your technical standards, at a certain level, without us employing physicists to understand and analyse all this, is, again, a mismatch. So where the technical standards have tended to focus is at the consumer protection level, which is where there are pretty common agreements on what needs to be done to ensure consumer protection and resilience of systems.

Now, we also overlay that among ourselves. We ensure that the only people in the business are those who can be trusted and empowered to make appropriate decisions about the technological opportunities that are presented to the industry. So we have reliable suppliers using reliable systems to provide reliable products. His technical standards are not the same as mine, but they come from the same sources and they have the same principles-likewise in Jersey and in one or two other jurisdictions.

Andre Wilsenach: If I may add to that, your previous question related to proliferation of the industry, and I think one should perhaps just make the comment that the financial situation at the moment obviously helps consolidate the industry. However, what certainly has happened is that, as a result of increased change in the way in which online gambling has been regulated at the point of establishment to the point of consumption throughout Europe and other parts of the world, there has been a proliferation of regulation, in my view. Phil is quite right that there are aspects of the regulatory framework that you can see have been duplicated in some of these jurisdictions.

Unfortunately, we still do not have what we have, for instance, in the accounting industry, where there are international accounting standards. I cannot for the life of me understand why regulators find it so difficult to co-operate and establish basic rules or standards that licensees have to comply with. I am not at all pointing a finger at the UK. In actual fact, I am pleased to say that we have very good relations with the UK commission, and we interact and communicate often on various matters. In Europe and the rest of the world, however, it is very tricky to say the least. You often find a regulatory framework being introduced and licences being issued without reference to the work that has been done in the past, information that is sitting there, experiences or lessons that have been learned. I find that rather unfortunate.

Graham White: If I could add to what Andre has been saying, I have been a regulator for 29 years, and I have seen this proposal of standardisation. Quite frankly, without the leadership and without the ongoing management of it and a consistent approach, you are never going to get it. We have played with it at the Gaming Regulators European Forum. We played with it at the International Association of Gaming Regulators, which in fact, to be fair, has produced a common standard application form, which is voluntary, but my observation is that, quite frankly, national interest will prevail.

One has to bear in mind that, sometimes, you are not getting experienced regulators. They are people from the Ministry of Finance or the Ministry of Interior who have other jobs to do. They are not wholly and solely focused on gaming regulations, and they regard it as a revenue-collecting exercise that has nothing to do with protecting the vulnerable or preventing crime.

Phillip Brear: I have just a short point on that. You must also recognise that there are jurisdictions that apply what we might regard as ultra-high regulatory standards and asking them to diminish them is just a complete non-starter. Now, these gentlemen know about the places that I am talking about-they have 50-page personal application forms and 1,000 pages of submissions to obtain a licence. You are talking about regulatory burden. It is so horrendous that you have wheel the application forms in. We may have these debates with our European colleagues about how we think that that is a little over-cautious and unnecessary, then we look in a different direction and we think, "Goodness me, there is a mountain to climb in other places."

Andre Wilsenach: I do not want to belabour that, but it was really the point I tried to make at the start. I think the UK missed an opportunity. If you look carefully at what the white list had done as a concept-I am not arguing for the white list; I have accepted that it has gone-it required other jurisdictions hosting operators marketing into this jurisdiction to comply with certain minimum standards. That was extremely useful. I think it is a pity that that model, that tool, was never used and extended any further.

Q632 Damian Collins: How successful do you think the UK’s policy of white listing has been?

Andre Wilsenach: I can only talk as a white-listed jurisdiction. We thought it worked quite well. We obviously were minded that there were problems with the implementation of it. As I said before, as a significantly useful tool it was probably not well employed and implemented. I could see that there were difficulties in making sure that what applicants for white-listed jurisdictions were telling DCMS was checked. It is one thing to tell the DCMS or the Commission that you are doing all these wonderful things. It is another actually to do those things that you require the industry to comply with. From that perspective, it had made it tricky to implement. I could imagine that there were not the resources at the time to go and actually check. So in my view it was pretty much a desk exercise to determine whether you would get white-listed or not.

In our particular case, the white list regime created a close relationship between the UK Commission and ourselves, whereby we worked together on certain projects. We have shared information with each other. Therefore-I hate to say this-we almost, for purposes of the UK-facing operators, became an agency of the UK Commission. Again, as Phil said, our regulations were not necessarily exactly the same, but in broad terms we made sure that our licensees were required to do the things that would satisfy the UK market. In actual fact, as you might know, we have gone much further in certain instances. Something that I feel quite strongly about was the requirement for our operators to make a statutory contribution to problem gambling. I know I am not going to be popular for saying this, but I think it is a pity that the UK has never taken that any further.

Graham White: Jersey’s position is slightly different. As you know, the white list was suspended in April 2009, three years ago. Nothing has happened since. We understand the Government’s position on it. We understand what Mr Penrose had to say, that he was not going to open it. Our problem is that of course we are out on a limb now. We cannot compete. We estimate that Jersey has lost something like £2.5 million to date by not being approved, let’s call it. We do not understand why. Certainly our finance industry, which is crucial to the prosperity of Jersey, cannot understand why the Jersey Gambling Commission is not considered fit and proper, while Antigua and others are. I am not casting aspersions on Antigua, by the way. Having said that, it is a reputational issue. People are asking why. It is not difficult. It is not rocket science. It is certainly in the transitional period between now and let us say-worst possible scenario-possibly three years for primary legislation to bring in a new system of approval. So we are caught, and we are losing. It is a reputational issue, and I personally do not feel that it is just, right or proper.

Q633 Chair: Why didn’t Jersey apply at the same time as everyone else?

Graham White: At that stage, we were not ready. At the moment, our terrestrial legislation is with the Privy Council. It has taken us four years to get to the Jersey Gambling Commission law. The e-gaming regulations are there. All our law, regulations, policy and procedures are based on the UK, and they know that, and we have cherry-picked from my colleagues on my right their best practice, and they know that. So we are ready, but we cannot move. We cannot lose that income for a small island. That is the negative side of it.

The positive side is that we understand the Government’s position, and Mr Penrose has been very helpful and constructive. We put forward four solutions to this, but unfortunately they did not meet with approval, and we do not know why. It is like failing your driving test and not being told the reasons. Nevertheless, there are discussions now about how to include us in this transitional period until such time as primary legislation is enacted, and then everybody will have to apply.

Q634 Damian Collins: In your opinion, in terms of what would concern the UK Government, would you say there is no material difference between the jurisdictions in Jersey and Guernsey?

Graham White: No, because obviously we talk, we both belong to the same organisations and I would go so far as to say that we are personal friends. We exchange information, and so on and so forth, and I helped initially to set up Alderney when I was the chief inspector of the UK Gaming Board and Gambling Commission. We know each other, we understand and we are helpful, and they have been terribly helpful.

I am absolutely certain that we would pass muster if the Gambling Commission looked at us and did not do a tick-box exercise as it did right at the start. As Andre has mentioned, there was no checking of the veracity of the statements made. To my knowledge, since that white list has been in place, there has been no prosecution of a white listee, and no action has been taken by way of sanction, fine or whatever on the people who are white listed. If it ain’t broke, why fix it?

Phillip Brear: As a non white listed jurisdiction, we have access through other mechanisms. The principle of white listing is a sound one, but the defect was in the structure of the entry criteria, which were set up with good intentions but I do not think that they met the real objectives of the Gambling Commission or the UK Government. Where you are approving a jurisdiction and that jurisdiction is out of reach, or it is of a nature that means you are unable to exercise any supervisory relationship in terms of that jurisdiction’s decisions, you are opening the door to UK difficulties. That is not to criticise any specific jurisdiction, but it means that Alderney, Jersey, Antigua or Tasmania could approve something, and that operator could appear on the UK system, but the UK don’t know about it until it appears. To unwind that would be a horrendously difficult exercise.

Q635 Damian Collins: What concerns do you have about a transition from a white-listing system to one of compulsory licensing by the Gambling Commission?

Andre Wilsenach: As I said in my introduction, accepting that the train has left the station, I would caution on two areas. Having had discussions with the UK Gambling Commission I am under no doubt that its intention is to co-operate with us, but the caveat for me is that there would be co-operation with a view not to duplicate what is already being done and, because of the relationship that existed and the standards that have prevailed, to accept what has been done. I obviously do not expect it to grandfather all our licensees into the UK. There may be certain gaps to be filled, and we accept that. Where testing has been conducted and there is ongoing testing and certification of certain games, I would find it very hard if the UK Gambling Commission started from scratch with that. As I have said, I do not see that tendency. I think that a consultation process in going from where we are to where the UK wants to be is going to be critical.

Graham White: There are problems of jurisdictional issues as well. Who prosecutes? Where does the offence take place? It is a really over-bureaucratic problem. That is something that I would counsel the UK to address very carefully, because there is no point having the law if you cannot enforce it.

Phillip Brear: I am not sure that the model as proposed has been properly worked through, covering some of the points my colleagues make. We would take issue that the UK will license people that we will not license. That seems quite an unusual position to be in-that we have higher entry barriers than the UK actually has.

Then there are the issues of duplicate licensing and duplicate regulation, the conflicts that that might create, and the undoubted extra regulatory burden and complication around that. Actually, if someone takes a cold, hard look at the simple model that was set out, I just fail to see how it can work in practice and deliver better regulation for customers. It may deliver more regulation for operators, but I am not sure it delivers better regulation for customers.

Q636 Damian Collins: I want to ask Mr Wilsenach a question about Full Tilt. What do you think the failures of regulation were that led to the development of that situation?

Andre Wilsenach: Can I preface my comments on Full Tilt by saying that I would have been very disappointed if the Committee had not asked me questions on Full Tilt?

Chair: There was no danger of it not coming out.

Andre Wilsenach: I shall try to be as helpful as possible, but I should preface what I am going to say by mentioning that the FTP matter is sub judice. There is ongoing legal action in the United States. There is a risk of self-incrimination, and therefore, the hearings by the tribunal in this particular case that led to the revocation of these licences were held in camera, as you might know.

Let me start by saying that one of our statutory obligations-it is the case with most regulators, and my colleagues will know exactly what I am talking about-is to protect the reputation of the industry, and certainly also that of the jurisdiction, which we take extremely seriously. There are basically two things that we do to ensure that. First, we conduct extensive investigations and due diligence investigations to ensure who we allow in the door. We have no doubt that once you have allowed an operator in, he is in, and you have to be extremely careful at that stage. We take that very seriously. The second thing we do is continually inspect and monitor our licensees.

Unfortunately, passing the test of suitability-Graham said he was a regulator for 28 years. Did you say that?

Graham White: Twenty-nine.

Andre Wilsenach: It doesn’t show. I have been a regulator for 20 years now, and unfortunately, we have seen, in a number of small instances, that someone who had passed the test of due diligence-and that is no guarantee that an operator will remain suitable-will, for whatever reason, start doing things that might turn them into a rogue operator. That applies to a very small number of operators after passing the test of suitability. It happens in every sector. It has happened in this sector, and in the finance industry.

In FTP’s case, what did not help was the fact that significant enforcement actions had been taken by the DOJ. Those enforcement actions were very covert in nature, which resulted in a situation that almost created an opaque environment, within which the operator could do certain things and get away with it. For example, the operator could carry on without informing us of the actions that had been taken, because if he did not inform us of it, we would not know that from the US authorities, and that was quite evident. The second thing is that it led the operator to misrepresent its financial position. As a result of that misrepresentation, they operated in a situation in which they did not necessarily have the resources to pay players.

What we normally find with licensees is that if they make a mistake or act in breach of the regulations, they immediately put up their hands and say, "I’ve made a mistake; I’ve acted in breach of my regulations. This is what I’ve done to fix it." That is not what happened in this particular case. In actual fact, it was just the opposite. It was a case of deliberately deceiving the regulator-in this particular case, the regulator in France and the authorities in the United States. As I said, those covert actions by the Department of Justice created an unfortunate situation in which neither we nor the other regulators were aware of it.

It is important that, when we became aware of what had happened, we immediately conducted a special investigation. We brought in forensic auditors to drill down into the areas where we thought there may be problems. They discovered that in fact our suspicions were valid. I immediately suspended the licences and investigated further. A tribunal conducted hearings subsequently, and the rest is history. Those licences were revoked.

I believe that under the circumstances-I know there are questions about it, and I can understand that-we acted swiftly and appropriately, but that is my view. We have recently appointed Peter Dean, the former chairman of the UK Gambling Commission, to do an independent external review of how the AGCC dealt with the FTP case. The outcome of that will be made public by the end of March. We have looked internally at whether we could have done things differently. We have identified areas where we can sharpen our pencils, specifically in monitoring risk. The other important area where we have learned lessons in this particular case is the protection of player funds. We have reviewed that in the past, but it may be necessary to review our position on it again. What do we do to ensure that the player is fully aware of the position with his funds? Are those funds commingled? Are they segregated? Are they held in trust? So that, if something happens, such as in this particular case, the player is satisfied that he knew what was happening.

Q637 Damian Collins: I know that other colleagues want to come in on this subject, so I will make one more comment before handing over. When something like this happens-you could look at the failure of the regulation of financial services in the UK-everyone will say that they did everything by the book, but there is still a failure. So you say that the failure was either in the rules or in the way in which the rules are enforced and in the resources behind that enforcement. My question to you and Alderney is do you have the resources to be able to police the rules and regulations that exist for companies of this scale that operate in different jurisdictions?

Andre Wilsenach: We think we do. I do not want to say anything that might prejudice the outcome of the Peter Dean report, but it will be interesting to hear what Peter says. I am really looking forward to that, because it will be someone else looking at us, rather than myself commenting on it.

I should make the point, and I am sure you are aware of it, that in an instance where someone deliberately deceives you, you can have all the resources in the world. When it became known that Madoff had deceived the US financial regulatory authorities, if you went to look at the resources available to them, they were huge. It took them a long time to uncover that deception, and there are other examples of that. I do not necessarily think it is always the case that purely throwing resources is going to solve the problem. I think that what we need to look at ourselves, differently-I cannot talk on behalf of others-is to create very carefully risk profiles of operators depending on which jurisdiction they do business in, which payment processes they use and so forth. You would put them on a watch list. Therefore, if it requires that you audit their statements and their financial position on a quarterly basis then so be it. If they have to pay for it, then so be it. But that will be the requirement if you fall into that particular risk profile. It is those sorts of areas where we are going instead of just throwing more and more resources at that particular problem. I should also say that in most cases regulators such as ourselves and-financial regulators-have as their objectives not necessarily to detect fraud but to ensure that they comply with the statutory obligations. I am not saying that one does not need to look at that but I just want to make the point: if someone deliberately wants to mislead you, it may take a bit of time to spot that.

Q638 Paul Farrelly: Mr Wilsenach, can you tell me how many employees you have at your Gambling Commission and what your annual operating budget is?

Andre Wilsenach: We have a total of 20 employees. We operate on the basis where we want to have a relationship or a ratio of one inspector per four, often five, licensees. You ought to keep in mind that not all licensees are necessarily live. Of the 50 companies that have been licensed in our jurisdiction, I would guess that around about 30 to 35 are live.

Q639 Paul Farrelly: How many inspectors do you have?

Andre Wilsenach: We have around about 12 inspectors.

Q640 Paul Farrelly: Out of the 20? Are the remainder support staff?

Andre Wilsenach: The remainder are support staff.

Q641 Paul Farrelly: What is your operating budget?

Andre Wilsenach: The operating budget runs at around about £2 million a year.

Q642 Paul Farrelly: How does that relate to the financial benefit to Alderney from having positioned itself in this sector, guesstimated per annum?

Andre Wilsenach: You should appreciate that Alderney is a very small jurisdiction. Phil shared with me that they have just had an election in Gibraltar. I asked him how many people there are in Gibraltar and he said around 30,000. That is huge compared with Alderney. Alderney has a total population of about 1,500 people. During the summer it goes up to 2,000 or 2,500. Therefore a small income makes a huge difference in the case of Alderney. All the licence fees go to the States of Alderney, to the benefit of Alderney. That is roughly £2 million. So an operating budget of about £2 million, profits of about £2 million-that goes to the States.

Q643 Paul Farrelly: How many additional people in Alderney outside the 20 that you employ would you reckon are employed in the industry?

Andre Wilsenach: Probably round about 50 staff members. What you also need to be aware of is that the benefit does not stop in Alderney. A huge part of the sector is based in Guernsey. Guernsey gets a significant benefit from the servers being there because they have an excellent telecommunications infrastructure. It was estimated two years ago that Guernsey benefits to the tune of about £50 million a year from the servers being held there. Alderney benefits in total by round about £7 million.

Q644 Paul Farrelly: In terms of industries on Alderney-with 50 to 70 people employed in Alderney, is it the biggest industry?

Andre Wilsenach: It is certainly the biggest industry in Alderney, but not necessarily within the Bailiwick of Guernsey as a whole. It is certainly a major sector.

Q645 Paul Farrelly: I am glad you said that, while not wanting to pre-empt the Dean report, the key thing is that no regulation is going to stop or deter a crook like Robert Maxwell raiding a pension fund, but the question is, what do you do afterwards and what lessons do you learn. Prejudicing the conclusions of your report, the slam-dunk-as they would say in the States-conclusion is that you have to take some action about regulating and try as best as you can to enforce separation of monies. I am glad you said that. Is that the way you’re going to go?

Andre Wilsenach: Yes. I think it would be very short-sighted of us to say, "We’ve done everything that we possibly could. We are the best regulator in the world and they are a bunch of scoundrels." I think the way to go is to say, "Look, this was a unique case," and for various reasons, it was a very unique case. But the question is, what lessons can we learn from this going forward? Also, hopefully, other jurisdictions would learn from that. I can tell you that we are working closely with the UK Gambling Commission on some of these things. For instance, our thoughts in the area of protecting player funds are shared with the UK commission. The UK commission is very much in the same position as we are when it comes to the issue of protecting player funds.

Q646 Paul Farrelly: Presumably, on the basis of no more than "There but for the grace of God", you will be making a strong recommendation to the UK commission that it follows a recommendation to do exactly the same in separating out money.

Andre Wilsenach: That is obviously a matter for the UK Gambling Commission. We would share with it the outcome of our assessments and investigations. It is obviously not clear cut. For instance, if you look at the new regulations by the Nevada gaming control board, they would go as far as to require that player funds be held in escrow and that the banks inform the regulators on a daily basis of the status of those funds. There are all sorts of complications with that. There are other jurisdictions that segregate. Segregating funds doesn’t necessarily mean that if a problem hits, those funds are necessarily available. It all depends on whether the banks recognise the third party interest and all sorts of things. So it’s not a simple solution, but those are the sorts of things that we are looking at. Without a doubt, I think that the most important thing in all of this is to make sure that at all times, the player is well informed of the status of his funds and that it isn’t hidden somewhere in the terms and conditions, but that it is very obvious to the player what the position is with his funds.

Q647 Paul Farrelly: Mr Brear, you wanted to come in on this.

Phillip Brear: Just to make a couple of points. Any of us could have been caught by a corrupt entity seeking to deceive the regulator. Two issues arise from that statement. The key to this is actually who you license and, when you license them, who they are and what the company culture is at that time. As I said earlier, there are people holding licences at the moment in Europe whom we’ve actually refused licences to. We find that quite stark.

The second issue is that if you have a situation like the Full Tilt issue, is the UK regulator better equipped or more likely to deter or detect that sort of activity than a small regulator that generally engages in what I call face-to-face or even eye-to-eye regulation? We are a much smaller regulator than Alderney, but we have the people on site, and we meet them-literally not all of them-every day, but we meet them daily over the months, so the attempt to deceive isn’t done down the wire or over the sea.

Paul Farrelly: You see the whites of their eyes.

Phillip Brear: We see the whites of their eyes in pre-licensing, licensing, post-licensing, regulation and how are things this week or this month. I’m not saying that that is possible in every jurisdiction-it isn’t. It certainly isn’t possible when you have 3,500 licences, which the UK commission has, and it is looking to add on another 50 or 100 online licences. We believe that we will provide, collectively, a firmer and more direct form of regulation to online gambling than is possible or is taking place now in the UK, with the few online licences that it has issued.

Q648 Paul Farrelly: Mr Wilsenach, I don’t want to extend this too long, but next week, when our Gambling Commission comes in, it will-ironically-have to explain itself in respect of the submission that it has put in, which looks very much like a submission on your behalf on Full Tilt, but it’s not in your name, so thank heaven for that. It’s a brief on Full Tilt poker. I only received it just as we sat down today, and it is an after-the-fact briefing on Full Tilt Poker and I can say that it is astonishingly complacent. With respect to any lessons learned, it repeats a mantra that our commission, like yourselves, has adopted a "caveat emptor approach for a number of reasons", and those include, on the subject of consumer choice, the fact that "players should be allowed to choose to transact with operators that do not protect funds and take the slight risk to their funds." It is astonishing in what it says, and I hope that they will not be as complacent when they come before us next time.

I want to question the detail. In its submission, which I am sure you have seen if you co-operate closely, the Gambling Commission says: "When false reporting and the inability of FTP to pay its players became apparent, Alderney immediately suspended all" the licences. When I go back to the time line, it was on 15 April that the FBI seized Full Tilt’s domain, and yet it was only on 29 June 2011 that you suspended the licences. That is not immediate.

Andre Wilsenach: No. Many people have made the mistake of thinking that we suspended the licences as a result of the actions that the DOJ had taken. That was not the case. On 15 April, we did not say, "The DOJ has taken certain decisions," and then suspend the licences on the 16th. When the DOJ unsealed the indictments on 15 April, what they had in actual fact done for the first time is publish information that we were not aware of. That information was the missing piece in the jigsaw puzzle for us. It was very helpful in the sense that it took us to areas where we had suspicion, but where we did not have any basis for suspending-if you see what I mean.

As a result of the information that was contained in there and, because, as you can imagine, the DOJ unsealing those indictments caused a whole rush of media publicity, other information then became available, which indicated to us that, in actual fact, there is a bit of information in the DOJ indictments showing X and someone else is saying Y, and if you put it together, that is where we ought to go. We then conducted the forensic audits, and those audits indicated to us that we had been deceived, so when I say that we immediately suspended the licence, it was not because of actions taken in the DOJ. It would have been very short-sighted of me to act purely on the decisions of the DOJ, which was aimed, by the way, at individuals, not necessarily at companies.

I had to satisfy myself that there were problems with the companies. The investigators brought in the forensic auditors and the findings indicated that they had not reported to them certain actions taken and that they had misrepresented their financial position. They were not in a position to pay their customers at that particular date, and so I immediately suspended them.

Q649 Paul Farrelly: A final question: between 15 April and 29 June, did any customers of Full Tilt lose money?

Andre Wilsenach: No. Not that I am aware of.

Q650 Mr Sanders: This is to all three of you. Does online gambling pose a greater risk of problem gambling due to constant easy access and high limits of play with unlimited stakes and prizes?

Graham White: There is no evidence to support that view. The prevalence study is, in my own personal opinion, probably not worth the paper it is written on, because the methodology is suspect. If you are carrying out a prevalence study on problem gambling, it is not a tick-box exercise-yes/no. Let me give you an example that I find extraordinary. If you tick the box that says, "Have you ever lied about your gambling habits?"-I suspect we all have at Cheltenham when we have told our wives that we have only put £10 on when we may have put on £20-it does not make you a problem gambler. The point I am making is that I do not believe that that prevalence study was carried out.

To answer your question, as far as I am aware-these two gentlemen will be able to elaborate-there is no evidence to support that view. I am currently working on a committee with the Royal College of General Practitioners on gambling addiction, because I was a trustee of the Gordon Moody Association, which treats addicts on a residential basis, and I also chair responsible gambling groups in four locations in the United Kingdom. We are looking at this and I have to tell you that, to date, we do not believe that there is significant evidence. There is undoubtedly the potential and it depends how you define problem gambler or addict. There is a lot of confusion about that. There are too many agencies playing at it. It should be a centralised body, looking at the research, education and training.

Phillip Brear: I largely endorse what Graham says. The evidence from the prevalence study, for whatever it is worth-it is similar to other European studies in its methodology and outcome, with the same defects-suggests that problem gamblers are not substantial users of online facilities. They tend to use even cheaper and easier methods of gambling to exercise their addiction, notably in the UK there is a strong association with betting at dog tracks, in betting shops and in arcades, with a minuscule reference to online. The underlying issue is: what is problem gambling? As Graham says, you need to tick only three boxes on the problem gambling scale and you are a problem gambler by definition. They include questions that members of the public would whimsically say, "Oh yeah, I do that occasionally." Suddenly, the system is saying that they are either a problem gambler or a potential problem gambler. These people may bet only five or six times a year, visit a race course and that is it. This definitional issue of what is a problem gambler is weakening and possibly undermining much of the debate about where problem gambling rests and what the tools are to prevent it.

Q651 Mr Sanders: But somebody could be a problem gambler if they visit a race course once a year and are betting well beyond their means on that one occasion, even if they have managed to control their addiction for the 51 weeks of the year that they did not visit a race course.

Graham White: I think that the threshold is probably a bit too low. Australia has found this. It has raised the threshold, if you do a tick-box exercise. A tick-box exercise has to be verified and there has not been enough research in detail. I am starting to repeat myself, but the methodology is wrong and, as a result of that, it becomes toxic in political circles and people start to become very interested, quite rightly, in problem gambling, particularly in the young, which is a particular thing of mine, but the effort and the money is disproportionate to the threat. There has not been a proper analysis in my view, in this country, of problem gambling and the instances of it.

Andre Wilsenach: It is fair to say that one problem gambler is one too many. No one wants to see that sort of thing happening, but I agree with my colleagues that it is very overstated, specifically in this country. If you consider the amount of money and effort that has been ploughed into it in this country, I do not think that there is any country in the world that does what this Government are doing in the area of problem gambling, which raises the issue that I highlighted earlier: if there is something that could be done a bit better-I know that your brief is to look at areas where the implementation of the Act can be improved-I would suggest a statutory levy. I know that is not popular. I think that that is worth reviewing. If that has not been raised, I think that that is an area worth going to.

Q652 Mr Sanders: May I ask, Mr White, in the new code of practice that you are developing, are you seeking ways in which technology can be harnessed to identify early signs of problem gambling?

Graham White: That is a very interesting question. We are particularly keen at the moment on the training and awareness of primary health care workers, because we do not believe, and it is a fact, that general practitioners know how to recognise the signs when a patient presents themselves with, say, stress or anxiety. They do not ask the 12 questions that can tease out the fact.

Q653 Mr Sanders: It will be a tick-box exercise, then?

Graham White: It is face to face, fortunately. We are just about to organise workshops in the country for GPs. To answer the question, yes, technology does have a part to play. It is extraordinary how GP practices are technically very good at the moment. We are looking at ways to do it. We have an e-learning programme that we are working on at the moment for GPs. I hope that answers the question.

Q654 Mr Sanders: The current system of self-exclusion requires a gambler who wants to be self-excluded to apply to each operator individually. Should each online gambling jurisdiction operate a self-exclusion system that covers all its licences?

Graham White: May I make one comment before I pass it on? One has to be very careful about self-exclusion. People can exclude from a casino because they have reached their own limit. That does not mean to say that they are a problem gambler. Or they can say, "I don’t want to come in for six months because I am saving for a holiday." One has to be very careful-again, this is definition and evidence-based-that it is not a kneejerk social response.

Mr Sanders: There would be a problem if they did not self-exclude.

Graham White: They may not be addicted when they self-exclude.

Mr Sanders: I know. That is what I am pointing out. You are probably right that it is the definition of terms. "Problem gambling" could be that example of the one person who wants to self-exclude because they have some other plan, and it could equally be somebody who does have a problem.

Graham White: My experience of the industry, certainly the terrestrial industry, is that they take these matters very seriously. Apart from the legal requirement, they have tremendously impressive training, awareness and identification. They have relationships with GamCare.

Q655 Mr Sanders: We have seen good examples of it where there is a face-to-face interface between the gambler and the people taking the bets. The question I am asking is on the online environment where there is no face-to-face contact. If somebody can self-exclude themselves from one, would the system cover all of the licences?

Phillip Brear: The theory is very attractive. I forget which state does it already, but I think France, rather than Italy, has gone down this road and has already hit what are looking like very difficult problems in terms of applying a blanket self-exclusion scheme. The self-exclusion scheme requires a commitment by the operator or operators and, of course, a commitment from the customer. The reality of online gambling self-exclusion is that the customer very quickly seeks to find a way of circumventing his or her previous self-exclusion by using a slight variation in address, date of birth or payment method. Most of our work on self-exclusion is around customers who have circumvented the scheme, have lost more money and then said, "You should have found me. You should have stopped me." The reality is that online it is relatively easy to create a pseudo-identity and circumvent the scheme, whether it is an individual scheme or a blanket scheme.

The other point I would make is that many customers use self-exclusion to manage their gambling, so they decide, "My luck is out," or, "I am fed up with site X and I now want to concentrate on site Y," or, "I want to stop this slots business and I want to carry on with my poker." They manage that self-exclusion process, but not in the way that you are suggesting. So then to bring in another layer above, such as blanket self-exclusion, sectorised self-exclusion or self-exclusion that cuts across, sounds attractive theoretically it. In practice, it is already not wholly effective and it would become even less effective if we tried to spread it across, in our case, 23 operators.

Graham White: I think that is the case with the terrestrial casinos. You can be self-excluded from one, but you can walk into another. There is no central database to bar you from the whole estate, and that is a deficiency in the system.

Q656 Mr Sanders: That is an interesting example, because if people in the casino industry itself have a problem with someone whom they want to ban from one casino, they seem very capable of being able to ban them from all casinos. Surely, if technology can be used in that direction-

Phillip Brear: That is not our experience.

Graham White: I am very sorry, but that is just not the case. I was chairing a meeting yesterday in Swansea, and we were discussing that particular aspect, which is a fault of the system. You can walk into one casino and self-exclude-a week and two days later, you can go into another one. You can go into a bookmaker and self-exclude-a week and two days later, you can go into William Hill as opposed to Coral, for example. That is the weakness of the exclusion system.

Having said that, there is mileage as to the solution. If people want to reapply, they should have to produce evidence that they have sought and received treatment. It is then the decision of the manager or whoever is operating the particular form of betting.

Mr Sanders: I was talking about when casinos have a problem with someone who has been caught cheating. They are very clear about ensuring that every other casino knows, and they will exclude that person.

Graham White: With the greatest respect, it depends which part of the country you are in and the relationship between the competition.

Q657 Chair: All three of you have a wealth of experience of regulation, both in the UK and overseas. Tell us what you think of the Gambling Commission.

Phillip Brear: I’ll start. It has not been as positive or productive a relationship as we would have wished or expected. That is bizarre, given that I was a member of that organisation for the two years around its inception. We find that co-operation has tended to be a one-way street and that our priorities are not aligned. As I said in my evidence, we always meet any and every request for assistance, but when we have offered to do joint working, write MOUs or do joint exercises, we get nothing back. It is bizarre. We cannot get to the bottom of it. It has not been the productive experience that we had hoped for.

I made a comment earlier about how this organisation can regulate online gambling when it has no experience in it and its principal online gambling adviser works from Australia. We find it incredulous that it feels, "We can grasp this, and the UK customer will be better off if we are cradling these people." We feel that the UK consumer is well protected by the current arrangements and will not be better protected if those arrangements are dismantled.

Andre Wilsenach: Clearly, I have a different experience, and I cannot explain that. The relationship has been longstanding and good-it is productive. We have co-operated on several areas and I have most often found the UK commission staff extremely helpful. Obviously, it is very difficult, as an outsider, to judge. I have not been regulated by it, so I do not know how it will regulate in future. Its approach so far seems balanced and proportionate-taking into account that it does not have a huge online sector, it puts a lot of effort into trying to understand the issues and address them. From my perspective, it puts a lot of time and effort into relationships with other regulators around the world.

The UK commission can probably be regarded as one of the leaders around the world. Jenny Williams herself is chairing, within the International Association of Gaming Regulators, a committee that specifically focuses on e-gambling, attempting to create common standards on e-gambling, learning from best practices around the world. From my perspective, I have a slightly different view from that of Phil.

Q658 Chair: Mr White, where do you stand between these two different experiences?

Graham White: It would be quite wrong of me to criticise, or even pass on the anecdotal hearsay complaints that I receive, because I have no evidence to support them.

Chair: Feel free.

Graham White: The Hampton report highlighted various inadequacies, which I know they are addressing, and certainly, there was the report by Baroness Golding and Lord Mancroft, and the NAO report. So I think they are fully aware of their deficiencies.

I could go into the reasons for those deficiencies, and I think it started with the transition, particularly for Scotland-which I feel particularly strongly about, because I was the senior inspector in Scotland for many years. The Scottish Law Society report criticises the Gambling Commission for neglecting them, which are their words, not mine. I am astonished that they did not address the issue of the different types of legislation in Scotland, particularly liquor licensing. Half my time as a senior inspector, in a regional office in Edinburgh, was liaising with the civil authorities, the lawyers and the police on matters of law, and the law is different. They resent that indifference,-I have no reason to doubt the veracity of the Law Society. The Gambling Commission are now addressing it, but it may be just a bit too late. I do not know and I am not qualified to judge. That is just one example.

Unfortunately, with the transition arrangements, I was told that it was none of my business as the chief inspector, and that it is best that I don’t know. That, of course, sent shock waves throughout the estate. I have to say that they were obsessed with radicalism at that stage-but that is water under the bridge-and you would expect them to be if they were charged with a new role and function.

They moved to Birmingham. I was listening with interest to Mr Caborn’s and Tessa Jowell’s comments about economic regeneration; in my view, it is absolute nonsense. No casino is going to regenerate the economic infrastructure. It might initially, as is happening in the east end of London. I think your Committee, Chairman, are going to see Aspers next week. Yes, there is employment. That employment is not restricted to the east end of London, nor in Blackpool would it be restricted to those people living in Blackpool. How can it be? The staff will commute. There is a curiosity value for the first six months, then it will fall off. There are hundreds of factors, such as the economic downturn and the smoking ban.

I do not know why, and have never understood why the Gambling Commission was initially 300 souls, and it is now about 207. The threat analysis and perception has not materialised. I was told, "We need an FBI-type approach". Where is the evidence for it? Where is the evidence for the prosecution and criminal intelligence for the industry? There isn’t, and there has not been in 25 years. So it is Ian Fleming-forgive me for being facetious-and the concept that it is black fedora hats and Thompson machine guns, and organised crime. Yes, it may have been in the 1930s, but not now. They are very professionally regulated. They are not going to jeopardise their mortgages by doing anything criminal, but I leave you to judge that when you visit the casinos on your own.

The move to Birmingham was a mistake. How on earth can 200 people have any positive effect on the economic regeneration, or the economics of Birmingham, the second largest city? I have no idea. And then they got rid of regional offices in Scotland, hence the lack of liaison. There are no regional offices anywhere. I agreed in my time that they should be slimmed down, but not got rid of. It is centrally controlled, with all those problems.

Phillip Brear: Graham is touching on this issue of how regulation is actually delivered in reality. You have to have relationships with your operators. You have taken much evidence from people who are licensed, white-listed or otherwise beholden to the Gambling Commission. It has been damned by faint praise. It could be better; it is a difficult job.

Graham White: I think that it realises that. It is doing its very best, and I am sure it will address it. It got better at the transition when Jenny Williams appeared.

Q659 Paul Farrelly: Mr Wilsenach, the closeness of your relationship is demonstrated by the Gambling Commission’s willingness to put evidence in on your behalf on the Full Tilt site. I congratulate you on that, and I am sure when we see the Gambling Commission we will pursue the Australian connection a little bit further. I have the same question about Malta. If we were to pursue in Europe a reciprocity on an EU basis and use our influence to do that, some might see that as a Maltese charter, effectively. Malta made play of refusing Full Tilt a license. Given the size of the Maltese establishment, I would just like to ask you the same question: what is the perception and the reputation of the Maltese gambling authorities?

Phillip Brear: We have a better working relationship with Malta than we do with the UK, and a personal and professional relationship with Malta. The reality of the Maltese market is that now the overwhelming majority of it seems to be focused into very northern Europe-into the Scandinavian market-with very little focus on the UK. That is a simple logistic and economic decision by the UK-facing operators that it is easier to service the UK from a location such as Gibraltar than it is to service it from a location such as Malta. Betfair was very strong in Malta until quite recently. It has relocated, as you know, some of its UK infrastructure and some of its Maltese infrastructure into Gibraltar. I have never examined in close detail the Maltese regulatory model-we do not hear many problems around the Maltese regulatory model-but we work with, liaise with and share information with Malta.

Graham White: We are hopefully about to enter into a memorandum of understanding with Malta. We have very close relationships with the Maltese regulators, which are organisations that we meet. The key to proper and effective regulation is the exchange of information leading to intelligence that Phil has touched upon. If you do not talk to people-regulators, punters and the industry-it becomes a situation of them and us. If you do not have the convenient vehicles to talk and discuss at the coal face-the committees and the conferences, the compliance officers or whoever they are-you will not get that information on which you can act and prevent a court case, a confrontation or a problem.

Q660 Paul Farrelly: Your experience, finally, Mr Wilsenach, given that the Maltese made significant play when we met them in Brussels that they had turned down Full Tilt.

Andre Wilsenach: I am very interested in that. You might know that France did not turn them down. Let me not say anything more about that.

Malta had its problems. I do not want to comment too much about that. I understand that they have gone through structural changes. I have seen new faces there. I know that they have had difficulties in several respects, specifically in the area of licensing with previous directors and so on, which I do not want to comment on. We have seen interesting things where licensees of ours would have a problem with our requirements in respect of player registration, player verification and the costs associated with that, and would then threaten us by moving to Malta. We would say to them, "Look, if you could do this in Malta, be our guest, but this is not going to be acceptable to us." Then we find that in actual fact they moved away from us, and we would assume that they would be allowed to operate in Malta without doing those sorts of things. You must understand that that is the sort of perspective that I have. I do not know on what basis they do business there. I cannot tell. If that is the reason why they have left Alderney for Malta, that is their decision. If that is the way that Malta wants to regulate, it is clearly their decision.

Q661 Paul Farrelly: Would you be able to give us examples-names of people who have moved?

Andre Wilsenach: I could.

Paul Farrelly: It would be very welcome.

Andre Wilsenach: Yes.

Graham White: May I make a final point on this international relationship? Nobody is perfect in this world. You just have to work at it. The point that I would like to make is that it is not just gambling that is a revenue-collecting exercise. It is the lawyers, the accountants, the auditors and the technology, so it is a cocktail of things. Certainly Jersey is making great strides with this business relationship with Malta. They are being very receptive, very efficient and very accommodating. I think a regulator does have a vested interest in ensuring that the gambling industry is healthy and wealthy, because, in the words of Shirley Littler, a much admired chairman of the Gaming Board, a healthy, wealthy industry is a compliant one. I think a regulator has an interest in that, or should have, and that is what I think the UK Gambling Commission perhaps may like to address as part of its role and function, which it is currently not.

Chair: That is all. I thank the three of you for coming.

Prepared 23rd July 2012