1 Introduction and
context
1. The Gambling Act 2005 ('the 2005 Act'), which
came fully into force on 1 September 2007, was broadly designed
not only to consolidate existing gambling legislation but also
to update the regulatory structure for online gambling, casinos
and what were known as Fixed Odds Betting Terminals (FOBTs), on
which roulette and other casino games can be played in betting
shops. The Act also created a new unified industry regulator,
the Gambling Commission.
2. As had been the case for such legislation
since gambling was first regulated in the UK, the 2005 Act was
based on three key principles, which are set out in section 1
of the Act:
- Gambling should not be a source
of crime or disorder, associated with crime or disorder or be
used to support crime;
- Gambling should be conducted in a fair and open
way;
- Children and other vulnerable people should be
protected from being harmed or exploited by gambling.
THE SITUATION PRIOR TO THE 2005 ACT
3. Gambling has been a part of British culture
for many hundreds of years. However, there has been considerable
disagreement between those who believe gambling to be a fundamentally
immoral and damaging activity—which should be severely restricted
if not banned—and those who argue that individuals should
be free to gamble with only those minimal restrictions needed
to prevent crime and protect the vulnerable. Prior to 1960, governments'
attitudes to gambling were for the most part prohibitionist. In
1960, the Betting and Gaming Act liberalised gambling law, allowing
those who wished to gamble to do so. The 1960 Act legalised betting
shops and, despite its original intention to permit private gaming,
it inadvertently led to an explosion of commercial gaming which
could take place in locations such as restaurants, bingo halls
and members' clubs. Illegal gaming also took place in private
residences: by 1968 there were at least 1,200 ostensibly private
venues offering casino games. It was only under the 1968 Act that
gambling was restricted to licensed premises. Largely due to the
deficiencies of the 1960 Act (and the subsequent 1963 Betting,
Gaming and Lotteries Act), commercial gambling quickly became
a source of significant organised criminal activity. However,
the Gaming Act 1968 largely succeeded in its aim of removing criminality
from the gambling industry. This Act established the Gaming Board
for Great Britain, which regulated the industry until it was replaced
by the Gambling Commission under the 2005 Act.
4. Since the 1960s, the UK gambling industry
has undergone significant change. This has been due partly to
developing social attitudes and partly to technological innovations.
Groups which previously took a prohibitionist stance now argue
for what they see as appropriate regulation and consumer protection
measures to combat problem gambling.[1]
On the other side of the debate, the industry accepts in principle
that problem gambling is a serious issue for some people.[2]
Successive reviews, including the Royal Commissions on Gambling
(1932-33, 1949-51 and 1978) and the Gambling Review Report
of 2001, all clearly state that it is the role of Government to
treat the gambling industry in the same way as any other legitimate
leisure industry whilst putting in place measures to prevent criminality
and excess. Government policy has been to recognise the
legitimacy of the gambling industry and to allow the consumer
increasing freedoms whilst maintaining consumer protection largely
through regulation.[3]
The restrictions imposed on various types of gambling have been
calibrated to reflect their perceived potential harms, in particular
the possibility of encouraging problem gambling, the large earning
potential, opportunity to launder criminal proceeds and therefore
attractiveness to organised crime. The text box below summarises
the approach taken.
| 'Hard' and 'soft' gambling
Gambling is often broken down into "hard" and "soft" types. The level of stakes, prizes and the speed of play are the main factors deciding the hardness of gambling types. A fundamental aspect of protecting children and other vulnerable people from gambling-related harm is restricting access to gambling and, in particular, to harder forms of gambling. Venues like casinos and, to a lesser extent, betting shops are at the 'hard' end of gambling, while bingo and family amusement arcades are 'softer'.
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5. Gambling is now widely accepted
in the UK as a legitimate entertainment activity. While we recognise
the need to be aware of the harm caused by problem gambling, it
seems to us that the rather reluctantly permissive tone of gambling
legislation over the last 50 years is now an anomaly. Our general
approach in this report has therefore been to support liberalisation
of rules and delegation of decisions to those most knowledgeable
about their likely impacts, local authorities, while keeping national
controls to the minimum commensurate with protection of the vulnerable,
in particular children.
6. One of the catalysts for the 2005 Act was
the National Lottery Act 1993, which established the National
Lottery and modernised and relaxed the regulation under which
lotteries operate. Subsequent demands for a "level playing
field" from the rest of the gambling industry led to piecemeal
deregulation and the realisation that the existing laws were out
of date and unable to deal with new technology. Because of these
concerns, a Gambling Review Board chaired by Sir Alan Budd was
set up and published its Gambling Review Report in 2001.
Shortly afterwards the Government issued a consultation and policy
document, A Safe Bet for Success—Modernising Britain's
Gambling Laws.[4]
The 2005 Act arose from these.
7. The 2005 Act replaced the Gaming Act 1968,
the Betting, Gaming & Lotteries Act 1963 and the Lotteries
and Amusements Act 1976, both consolidating this legislation and
removing some of its anomalies. For example, it removed the membership
requirement for casinos and bingo halls as well as the 24-hour
waiting period for membership. It introduced a regulatory framework
for online and remote gambling within the UK. Importantly, it
also gave government the power and the gambling industry the responsibility
to tackle problem gambling. The Act had the overall effect of
expanding the consumer's choice of betting and gaming products
and making consumer protection measures an enforceable requirement.
However, it did not break up the small number of existing near-monopolies
within the industry and there have been no new entrants into the
gambling market since 2005, other than in the remote sector.
8. Some of the provisions of the Gambling Bill
(which became the 2005 Act) were controversial and the Bill underwent
significant changes during its passage through Parliament. The
provision to permit the development of Regional Casinos (also
known as "Destination", "Resort" or "Super
Casinos") became the most contentious part of the Bill. A
significant amount of the debate on the Bill centred on this issue,
which arguably led to inadequate Parliamentary examination of
other aspects of the Bill.
9. The extent to which the 2005 Act brought about
fundamental change to the UK gambling market is easily overstated.
Prior to the 2005 Act, overseas-based providers were permitted
to offer and advertise internet gambling, although UK-based providers
were banned from advertising and offering online gaming products.
Deregulatory measures like the reduction of casino membership
waiting times from 48 to 24 hours, and measures which led to the
increasingly widespread availability of gaming machines in pubs
and fast food outlets had been introduced piecemeal before 2005.
Betting shops were, for example, permitted to display odds and
details of available bets in their windows from 1995 as well as
to open on Sundays. B2 gaming machines—formerly known as
Fixed Odds Betting Terminals (FOBTs)—had been introduced
into the UK in 2001 and roughly 30,000 were already in place by
the time the 2005 Act came into force.
CRITICISMS OF THE 2005 ACT
10. According to our witnesses, the 2005 Gambling
Act has failed in a number of respects:
- Several industry contributors
argued that the "legitimate commercial interests" of
some gambling companies were being interfered with by levels of
regulation and that current legislation had failed to create a
fair system of regulation and a level playing field for the UK
gambling industry either nationally or internationally. [5]
- The presence of relatively high-stake category
B2 (FOBT) machines in high-street betting shops was a source of
considerable concern to groups which aim to combat problem gambling.
They argued that B2 machines posed a greater risk of causing problem
gambling than other forms of gambling.[6]
- The 2005 Act was criticised as being over-complex
and difficult to interpret. There were reports of communication
problems between the Gambling Commission, local authorities and
certain sectors of the industry. Some commentators suggested that
the Act had also failed to create a future-proofed structure for
machine regulation.
- While the Act permitted UK-based companies to
offer online gambling services and continued to allow non-UK providers
to target UK consumers, only the UK-based providers were made
subject to regulation by the Gambling Commission. The decision
to regulate online gambling at the point-of-supply rather than
the point-of-consumption and to allow non-UK regulated providers
to operate into the UK was widely criticised. This together with
significant tax increases had led to migration of online providers
offshore. There was broad consensus that the 2005 Act has, thus
far, failed to produce a future-proofed regulatory structure for
the remote and offshore online gambling industry.
- The 2005 Act created anomalies in the regulatory
regime for casinos and has failed to result in any licences for
Regional Casinos and only one new Large 2005 Act Casino being
built thus far. Since the launch of this inquiry, two more Large
Casino licences have been granted.
Our inquiry
11. We announced our inquiry into gambling on
17 May 2011 in response to a large number of representations from
gambling interests. Our decision coincided with the publication
by the Department for Culture, Media and Sport of its Post-Legislative
Assessment of the Gambling Act 2005.[7]
We decided to focus our inquiry on the key principles behind the
Act which became the licensing objectives enshrined in the core
aims of the Gambling Commission (see paragraph 2). [8]
Our inquiry also addressed:
- the financial impact of the
Act on the UK gambling industry;
- the effectiveness of the Gambling Commission
since its establishment, and whether it represents good value
for money;
- the impact of the proliferation of offshore online
gambling operators on the UK gambling sector and what effect the
Act has had on this;
- why the Act had not resulted in any new licences
for casinos or "super" casinos. (Since we announced
our inquiry and to date one Large Casino has opened in the London
Borough of Newham and two more Large Casino licences have been
granted in Milton Keynes and Great Yarmouth);
- the effectiveness of the classification and regulation
of gaming machines under the Act;[9]
- The impact of the Act on levels of problem gambling.
THE CONDUCT OF THE INQUIRY
12. We consulted a wide range of interested parties
in the course of our inquiry. We invited 49 individuals to six
oral evidence sessions and received 109 pieces of written evidence.
We held one of our evidence sessions at the Mecca Bingo Hall in
Dagenham, operated by the Rank Group. We concluded our evidence-taking
with a session with the Minister responsible for gambling at the
Department for Culture, Media and Sport, John Penrose MP, and
the Economic Secretary to the Treasury, Chloe Smith MP.
13. We visited Brussels to find out how other
European jurisdictions regulate online gambling and to examine
proposals for a European regulatory regime for online gambling.
We also visited Australia and Macao to discuss the casino industry
(in particular, the impact of Regional Casinos), to explore the
potential effects of deregulation of gambling machines and to
study the relationship between gambling and tourism. The details
of what we found are contained in Annex 1 of this Report.
14. In the UK, we also visited the new Aspers
Casino at the new shopping centre complex in Stratford near the
Olympic Stadium in the London Borough of Newham, which is the
only casino to have been opened under the 2005 Act. We held a
roundtable discussion with gambling industry stakeholders hosted
by the National Casino Industry Forum followed by a visit to another
London casino. In addition, we visited a Gala Coral betting shop
and a bingo hall in Dagenham.
15. We were greatly assisted in our inquiry by
two Specialist Advisers, Professor Peter Collins, now retired
as Professor of Public Policy Studies at the University of Salford,
and Mr Steve Donoughue, Gambling Industry Strategy and Communications
Specialist. We are most grateful to everyone who submitted
evidence or assisted during our visits.
1 Ev 210 Back
2
Q 296 Back
3
Gambling Review Report, Gambling Review Body, Department
for Culture, Media and Sport, Cm 5206, July 2001, (hereafter 'Gambling
Review Report') and A Safe Bet for Success, Department
for Culture, Media and Sport, Cm 5397, March 2002 and PN 22, 26
March 2002 Back
4
Ibid. Back
5
Ev 153, Ev 158, Ev 161 Back
6
See newspaper reports in the Guardian and Telegraph
newspapers: http://www.guardian.co.uk/business/2005/may/09/gambling.uknews
and http://www.telegraph.co.uk/sport/horseracing/2356152/Betting-shop-gaming-machines-cause-concern.html Back
7
Memorandum to the Culture, Media and Sport Select Committee
on the Post-Legislative Assessment of the Gambling Act 2005.
CM 8188. October 2011. Back
8
The licensing objectives of the Gambling Act 2005. These are enshrined
in the core aims of the Gambling Commission. Back
9
The 2005 Act defines a "gaming machine" as a "machine
which is designed or adapted for use by individuals to gamble".
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