Culture, Media and Sport CommitteeWritten evidence submitted by the Gala Coral Group

1.0 Introduction

1.1 This submission is made on behalf of the Gala Coral Group.

1.2 Gala Coral is the largest fully integrated betting and gaming group in Great Britain. The Group employees over 17,000 people and trades from circa 1650 betting offices (Coral), 27 casinos (Gala Coral) and 140 bingo clubs (Gala Bingo). The Group also operates a number of online brands (,,,, and has opened circa 400 betting offices in Italy under the Eurobet Italia banner. With a turnover in excess of £1 billion per annum the Group serves over 3.5 million different customers each year, which is over 8% of Great Britain’s adult population. The Gala Coral Group retains an industry leading reputation for sports integrity and social responsibility.

1.3 As Chairman Emeritus of Gala Coral I sit on the Council of the Association of British Bookmakers, the Council of the National Casino Industry Forum and The Bookmakers Committee of the Levy Board. I am also Chairman of The GREaT Foundation, which raise’s over £5 million annually from the industry in voluntary contributions to fund research, education and treatment, and to promote responsible gambling.

2.0 Summary and Recommendations

2.1 The CMS Select Committee should review the 175 recommendations in the 2001 Budd Report and seek to redress the current (and growing) imbalance between legitimate commercial interests and protecting the vulnerable.

2.2 There has been a very worrying over focus on the issue of problem gambling. This is wholly disproportionate to the harm caused and has caused material damage to legitimate commercial businesses which are an integral part of a modern, service based British economy. Britain is the world’s leader in socially responsible gambling with very low levels of problem gambling.

2.3 The Gambling Commission needs to continue to evolve into a more modern, risk based, regulator which also advises government on evidence based policy changes, and acts as an advocate for the industry that it regulates, thus providing improved value for money for the same, or lower, cost. This will also help to depoliticise gambling policy.

2.4 90%+ of online wagers placed by British residents are onto sites which are not located, regulated or taxed in Britain. Effective regulation and compliance/enforcement in this area is very much dependent upon joined up tax and regulation. The Gala Coral Group favours a 10% GPT rate across all products on and offline for British residents and believe that this will allow effective online regulation, much needed investment in traditional Great British establishments and an increased tax take for HMT.

2.5 The financial impact of the Gambling Act 2005 (the Act) cannot be looked at in isolation and one must also consider the impact of other regulation and taxation. The Gala Coral Group has calculated that the Act (removal of machines), the 2007 smoking ban and the tax increases in the 2006/2007/2008 budgets cost the Group £120 million in cash profits (EBITDA) which was a 30% impact on cash profits at that time.

2.6 The casino sector was the single biggest loser out of the Act. Current legislation in relation to casinos is an irrational mess and hugely damaging to the established British casino industry. Urgent corrective steps need to be taken. We have outlined seven measures (7.6.1 to 7.6.7) which would help to mitigate the damage and allow the development of a high quality and sustainable casino sector, with a resultant benefit to tourism.

2.7 Category B1 machine stakes and prizes should be increased to £5/£10,000 (£2/£4000) and Category A machines trialled in casinos.

2.8 The Gambling Commission should report to DCMS annually making evidence based recommendations for changes to gambling policy and regulations. The process of change should thus be evidence based and as depoliticised as possible.

2.9 The Gambling Commission annual recommendations should include an annual review of machine stakes and prizes.

2.10 There is no evidence that the Act has had any impact, either way, on levels of problem gambling.

3.0 The Gambling Act 2005/Core Objectives

3.1 The Act was heralded as confirming Great Britain’s position as the world’s leading jurisdiction for responsible gambling, balancing legitimate commercial interests with effective regulation and protection of the vulnerable. This principle was enshrined in the (independent) Budd Report (2001) and the DCMS response “A Safe Bet For Success” (2002). Both documents saw gambling as a modern leisure pursuit which provides harmless fun for a vast majority of participants and is a valuable part of the leisure economy providing over 100,000 direct jobs (250,000 indirectly) and £1.4 billion in annual tax revenues. The Act that finally arrived in May 2005 failed to deliver on these principles and the balance between legitimate commercial interests on the one side and effective regulation/social protection on the other became hugely distorted by political in-fighting and a negative press campaign.

3.2 In the recent Prevalence Study (2010) there was no significant, or statistically relevant, increase in the incidence of problem gambling in Great Britain and the incidence remains very low by international standards. Indeed 78% of respondents stated that “fun” was their primary reason for gambling. At the same time the industry has voluntarily donated over £5 million per annum to fund research, education and treatment in respect of problem/responsible gambling (The Budd Report recommended £3 million initially).

3.3 Despite this the gambling industry remains tied by unnecessary regulation and unable to effectively compete internationally. The Gala Coral Group believes that the CMS Select Committee should revisit the 175 recommendations made in the Budd Report with a view to redressing the current growing imbalance between legitimate commercial interests and public protection.

3.4 The Act was also intended to be enabling legislation, which is capable of being updated on an on-going basis through regulation so that it is constantly kept up to date and reflects both new technologies and changes in consumer trends. Since coming into force in September 2007 (four years ago) only one such change has been made, albeit a change to B3 machine regulation is currently going through parliament. The industry can only assume that the enabling facility within the Act has not being utilised because politicians see gambling as a “political hot potato” rather than as a modern part of the British economy, which is creating jobs and growing tax revenues, and thus deserves to be supported by its sponsoring department.

3.5 Gala Coral believes that the time has come for a more mature debate about gambling which is evidence based and as far as possible, depoliticised. We would like to see this achieved through an evolution of the Gambling Commission into a more modern regulator which, as well as effectively and efficiently regulating the industry, promotes the industry as a well regulated sector and also makes recommendations to DCMS on policy matters. We discuss this further in section 5—The Gambling Commission.

3.6 The British gambling industry has been largely crime free for many years and the Act has had no material impact, positive or negative, on gambling related crime. The British gambling industry deservedly has an enviable worldwide reputation for integrity and fairness. The only area the Select Committee might wish to review is that of sports integrity. In this context it should be noted that the vast majority of sports integrity issues in the past few years have come from:

(a)Layers on betting exchanges.

(b)Illegal unregulated bookmakers operating outside of Great Britain.

Very few incidences involve betting operators based and regulated in Britain. Thus any review in this area should not seek to impose further financial and regulatory burdens on domestic operators.

3.7 Again the British Gambling Industry has actively promoted responsible gambling for many years. GamCare, Gordon Moody (residential care) and the Soho Clinic were all founded with industry money over the past 20 years, and the industry works closely with GamCare and others on techniques to educate and prevent problem gambling and to identify and proactively exclude and refer those who develop and exhibit compulsive gambling symptoms. Therefore the Act had no positive or negative impact on what was already an industry with a highly developed infrastructure to promote responsible gambling, prevent problem gambling and refer and provide effective treatment for the small minority who do develop problems with their gambling.

3.8 The Act has singularly failed to regulate the online gambling market in Great Britain. The vast majority (90%+) of wagers placed online by British residents go onto sites situated, regulated and taxed offshore. This is not to say that the sites are unregulated or that the regulation in developed offshore locations, such as Gibraltar; Alderney and the Isle of Man, is any less effective than that in Britain. It is simply a fact that 90%+ of online wagers placed from inside Great Britain are not regulated in Britain. The belief held by legislators that simply by setting up a regulatory regime in Britain, operators would flock to our shores was naïve in the extreme. Indeed since 2005 more operators have actually moved offshore and the simple reason is taxation not regulation. Recent judgements in Europe have given clarity as to the power available to domestic governments in this area of social policy. It would now be fairly simple to pass new/amended legislation requiring any operator trading with, or promoting to, British residents to be licensed and regulated in Great Britain. If the regulations allow operators to still remain offshore as a company and to keep their servers offshore, we believe the vast majority will comply. However a note of caution—if online tax is set at current domestic retail levels (15%+) a black market will develop with a substantial number of operators staying offshore and trading into Great Britain unregulated and untaxed. Enforcement (blocking—prosecutions) is notoriously difficult and it is to be hoped that the forthcoming consultation will take a joined up approach to regulation and taxation. The Gala Coral Group would prefer to see an innovative approach which creates a level playing field (on and offline) and allows our industry to innovate, invest, grow and thrive through the promotion of responsible gambling. A single rate of gambling GPT at 10% across all products and channels would give a much needed break to the (over taxed, and over regulated) domestic retail market and not be seen as penal to online operators. The government total tax take from gambling would also rise, in effective an all winner game!

4.0 The Financial Impact

4.1 The financial impact of the Act cannot be looked at in isolation. One has to look at the combined impact of the Act, other regulation and taxation.

4.2 In particular the sector faced a smoking ban in 2007 (July), the Act enacted in 2007 (September) and highly negative tax hikes in consecutive budgets (FOBTs in 2006, Casinos in 2007 and Bingo in 2008).

4.3 The Gala Coral Group calculated that the combined cost of the Act (removal of machines), the smoking ban and increased taxation, cost the Group £120 million per annum in cash profit (EBITDA). This figure has been verified by the company’s auditors (PWC) and related to a Group making cash profits of circa £400 million at the time—a 30% impact on profitability.

5.0 The Gambling Commission

5.1 The establishment of a single regulator across all sectors of the Gambling industry was a welcome move and one of the more positive aspects of the Act.

5.2 There is no doubt that the Gambling Commission, four years in, needs to evolve and modernise. It is not an expensive regulator per se but it can certainly provide increased value for money, as noted in their recent “Hampton Review”.

5.3 In this respect we would make the following recommendations:

5.3.1The Gambling Commission evolved out of the old Gaming Board for Great Britain and it still adopts far too much of a tick box, visit based, approach rather than a more modern risk based approach. Things have improved in this area but there is still much to do.

5.3.2There has been an unnecessary and damaging over focus on “problem gambling” which relates to one (only) of the three licensing objectives under the Act. This has no doubt been driven by political pressure. It has to be accepted that Britain had the lowest incidence of problem gambling in the developed world and it pales into social insignificance (at circa 400,000) when compared to smokers (13 million), people with drug and alcohol related problems (6 million) and obesity (16 million). This is not to say that the issue should be ignored and we have outlined above the proactive measures adopted by the industry to promote responsible gambling, prevent problem gambling and identify and treat those who develop problems. However the over focus in this area by the regulator and its sponsoring department is hardly risk based!

5.3.3The Gambling Commission have very publically stated that their role is not to promote the industry that they regulate. We beg to differ. A modern regulator should be tough on regulation but also an advocate for what they should see as a well regulated global leading industry. This should be added to the objectives of the Gambling Commission and also to the objectives of DCMS who are conspicuously silent on gambling in their recently published business plan/strategy. Gambling is a socially responsible industry which deserves better from its regulator and its sponsoring department. Indeed we believe that consideration should be given to moving responsibility for gambling to a more business orientated department such as BIS.

5.3.4The remit of the Gambling Commission should be extended “to report to Ministers on an annual basis with evidence based recommendations for regulatory changes to be made to the Act”. If Ministers and opposition parties accept these recommendations as “independent” and “evidence based” The Act will be used, as was originally intended, as a piece of modern flexible legislation which can evolve and change as circumstances and evidence dictates whilst remaining true to its core values. This will also serve to depoliticise gambling reform. This will not be dissimilar to recent experiences with the Low Pay Commission whose headline recommendations have been accepted and approved on 11 consecutive occasions.

5.4 Through this process the Gambling Commission will evolve into a modern risk based regulator which also advises on policy and acts as an advocate for the industry that is regulates. We believe this can be achieved through a new approach by the Gambling Commission, with no additional cost, and thus improve the value for money provided by the Commission.

6.0 Offshore/Online Gambling/Taxation

6.1 We have commented on this extensively in 3.8 above.

6.2 It was naïve of legislators to believe that a British regulatory framework for online operators would establish Britain as the leading jurisdiction for online gambling.

6.3 In effect, since 2005, more and more operators have gone offshore and 90%+ of all online wagers placed by British residents are on sites situated, regulated and taxed offshore. The reason for this is taxation set at 15%+ of GPT against a benchmark of circa 1% in Gibraltar, Alderney, Malta and the Isle of Man.

6.4 Recent European rulings give Britain a golden opportunity to establish Britain as a leading jurisdiction for online Gambling worldwide.

6.5 However, this will require “joined up” policy involving social policy and tax policy. The failure to address the online taxation issue, and related issues in respect of the horserace betting levy, has placed an increased burden on the licensed and regulated domestic retail gambling sector making it less competitive, unable to invest and forced to cut costs; shed jobs and close premises. If this downward spiral in tax paid and jobs created is to be halted the issue of online taxation and regulation needs to be urgently addressed.

6.6 It is patently unfair that the “softest” of all forms of gambling (bingo) is charged the very highest base rate of Gross Profits Tax (20%).

6.7 If online tax is set at too high a level a very large “black market” will evolve with disreputable operators trading into Britain unlicensed, unregulated and untaxed. Such an “under market” could have very serious social implications.

6.8 The Gala Coral Group favours an innovative approach which creates a level playing field (on and offline) and allows the British gambling industry to innovate, invest, grow and thrive through the promotion of responsible gambling.

6.9 The move (machine tax consultation) to accelerate the trend away from charging VAT on gambling, means that VAT on capital investment is less and less recoverable thus destroying the case for investment in long term growth and job creation. If this trend (away from VAT) is to continue the Government must find other measures (tax and regulation) which will allow operators to invest in growth, create jobs and drive up the total tax take. Gross Profit Tax should thus be off-settable against VAT on capital investment.

6.10 The Gala Coral Group believes that a single 10% rate of GPT across all gambling products and channels would give a much needed break to the (over taxed) domestic retail market, encourage compliance from offshore operators and effectively grow the tax take for HMT.

6.11 We firmly believe that social policy without a realistic and joined up tax regime will be doomed to failure with offshore non- compliance and no effective enforcement mechanisms.

7.0 The Casino Sector

7.1 The single biggest loser out of the Act, and subsequent tax policy, was the retail casino sector in Great Britain.

7.2 Casinos, especially in London and other major cities, have a huge appeal to inbound tourists.

7.3 There is little doubt that the casino sector became a political football between politicians of all parties seeking to “play to the Daily Mail agenda” and prove they had the cleanest “social credentials”, with no thought for what this would do to an industry which had invested over £700 million in 140+ high quality retail outlets employing over 7000 people.

7.4 Much of the eventual regulations flowing out of the Act which applied to casinos were irrational and ill thought through. Two examples of this are:

7.4.1The new casino regulations mean that a “large casino” needs 30 gaming tables to get its maximum machine allowance (150 at 1 to 5) whilst a “small casino” needs 40 tables to get its maximum (80 at 1 to 2). As a consequence “small casinos” will end up being bigger than “large casinos”, as casino operators expand floor space and install live tables to maximise their machine entitlement.

7.4.210 of the 16 new casino licences have been granted to existing permitted areas. In such towns and cities long established casino businesses will have to compete against new, government created, operators who will be allowed to offer products and machines that the established sites cannot. How can that be fair competition? It is like allowing one pub to sell lager and banning it in other pubs.

7.5 The two new licences granted so far (Newham and Hull) have done nothing for regeneration, as was originally envisaged, and the whole concept of a “trial”, which is in effect the creation of unfair competition by the government, was fundamentally flawed and politically motivated.

7.6 Gala Coral believes that the government needs to conduct a fundamental review of casino legislation/regulation and in particular we would like to see:

7.6.1An end to the “two tier trail” by allowing all casinos to offer the same products.

7.6.2A simple machine to table ratio of five machines to one table with a maximum of 150 machines per casino.

7.6.3Given that the legislation has effectively capped the number of casinos in Britain at 202 (147 operating casinos—39 dormant licences—16 new casinos) we see no reason for the continuation of permitted areas. Therefore all licences should be fully portable subject only to the local council wanting a casino in their area. Casinos are also sui generis in planning terms and thus a casino could only open with a very specific change of use on a premise, granted by the Local Authority.

7.6.4All casinos should be allowed to offer bingo, betting and online products.

7.6.5Virtual/random number generated products which are available online, to be allowed in casinos eg electronic blackjack and poker games.

7.6.6Review Category B1 (casino) machines stake and prize levels. Currently they stand at £2/£4,000 (compared to the £2/£500 envisaged for B3 machines). An immediate increased to £5/£10,000 would be more appropriate for a modern casino.

7.6.7Casinos to be allowed to offer progressive and linked jackpots within and across sites ie if 10 B1 machines are “linked” the maximum pay-out on the jackpot rises to £100,000 (from £10,000).

7.7 The above measures would go a long way to mitigating the damage caused to the casino sector by the Act, and subsequent tax policy, and allow the development of a high quality and sustainable casino sector going forward.

8.0 Machines

8.1 The categorisation and classification of gaming machines under the Act was a positive move.

8.2 However the respective levels of stakes and prizes, and machine numbers, were intended to be reviewed on a regular basis. Until the current order (now going through parliament) to increase B3 stakes to £2, and to increase the B3 machine (number) allowance, no changes have been made since July 2005.

8.3 Gala Coral does not favour a return to the old triennial review. We would prefer annual recommendations from the Gambling Commission as outlined in 5.3.4 above.

8.4 In regulatory terms machines continue to be a political hot potato. However much of the rhetoric has not been evidence based and we would urge the Gambling Commission to commission independent and effective research in this area (industry funded if necessary) and make evidence based recommendations to DCMS/government. For example, there is a valid case for allowing betting offices to have six FOBTs, which would reduce the proliferation of betting shops on the high street, which are largely driven by unsatisfied demand for FOBTs.

8.5 As stated in 7.5.6 above we would urge the government to urgently review the anomaly whereby casino machines (B1), which are at the top of Budd’s “regulatory pyramid”, have a £2/£4,000 stake and prize whilst, “soft gambling”, bingo machines (B3) will shortly be £2/£500. A 2.5x increase is recommended for casino machines to £5/£10,000.

8.6 Category A (unlimited stakes and prizes) machines are allowed for in the Act but this section has not yet been enacted. Such machines are available in most jurisdictions around the world. As Britain continues to enjoy very low levels of problem gambling based upon international comparisons, we would urge a cautious approach in this area and would recommend allowing casinos up to 10 Category A machines on a “trial basis”. A full quota of 1,470 machines would still only represent circa 1% of the total licensed slot machines in Britain. This trial, together with research, will give a good evidential base to review the retention, expansion or removal of Cat A machines in Britain.

9.0 Problem Gambling

9.1 There is no evidence to show that the Act has had any impact on levels of problem gambling, either upwards or downwards.

9.2 As was clearly stated by the Gambling Commission the headline increase in problem gambling in the 2010 Prevalence Study was “at the margin of statistical significance”.

9.3 These statistics become even less relevant when measured against participants given that participation was up from 68% of the adult population in 2007 to 73% in 2010.

9.4 Thus the possible increase is in line with the increase in participation.

9.5 As the increase in participation is largely driven by online gambling and poker in pubs and clubs one could say that any concern over the headline increase in problem gambling should be directed at the need to more effectively regulate online gambling and the proliferation of poker in pubs and clubs.

9.6 Generally speaking levels of participation and problem gambling are stable or slightly down in traditional gambling establishments.

9.7 Therefore we are confident with the statement that the Act has had little or no impact on levels of problem gambling, either negatively or positively.

9.8 Finally we would want to confirm our view that far too much focus has been placed on this issue and it is disproportionate to any perceived harm and does not balance legitimate commercial interests with protecting the vulnerable.

10.0 Conclusion

10.1 We would like to thank the CMS Committee for conducting this much needed review into the Act.

10.2 We are available to give evidence to the Committee if required.

June 2011

Prepared 23rd July 2012