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The Gambling Act 2005: A bet worth taking? - Culture, Media and Sport Committee Contents


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'.

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".  Back


 
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© Parliamentary copyright 2012
Prepared 24 July 2012