Gambling

Written evidence submitted by Simon Thomas (GA 09)

1. I have extensive experience in the Gambling industry. I am a past president of BACTA, past executive committee member of the Bingo Association. In the recent past I developed and ran a large chain of Bingo Halls and AGCs and I had betting shop licenses. Currently I am developing the largest Casino in the country at the Hippodrome in Leicester Square, I am on the Strategy Forum of NCIF, the main casino association, I am a non-executive director of Preasepe, the country’s largest AGC operator, I am also a distributor of Bingo equipment and unique as an operator in the Gambling industry, I am a trustee of Gamcare.

As such I have a detailed and broad understanding of the UK Gambling industry and the interrelationship between the sectors.

2. Summary;

· The 2005 Act has ensured gambling remains crime free and open, and fair to the customer, but is unfair to the operators.

· It has failed to protect children and vulnerable people. The original Budd report set out clear, sensible, levels of control and regulation and the strata of gambling that should be in them. The Government stated that the Act was intended to remove hard gambling off the high street and that there would not be a casino on every high street corner. However the Act has allowed £100 stake Category B2 casino gaming machines in betting shops and there is now hard gaming on every high street, with casino gaming in the LBOs significantly harder than you get in a much more highly controlled and regulated casino. Betting shops are lightly regulated with no door control, very high failure rates of stopping children and vulnerable adults gambling with them (such as self excluded people), no money laundering control and low rates of taxation. Betting shops are known to have a strong political lobby and this seems to be counterbalancing common sense and correct regulation. This cannot be right.

· It has failed to control online gambling. Other countries have effectively controlled Online Gambling. It can be done. The 2005 Act has allowed overseas companies to operate in the UK from low tax offshore countries, and promote their online casinos in the UK but pay no UK tax. It results in highly taxed and highly regulated land based businesses competing with lowly taxed and unregulated online businesses and the Government losing out on the taxation and the customers losing out on the protection of strong regulation.

· It has failed on the 16 2005 Act Casinos. The structure is fundamentally wrong and they are generally not commercially attractive enough to warrant the investment needed.

· The regulation of gaming machines is mixed. Category B3 and below is working well, but the Act has failed on the category A, B1 and B2 machines. These categories are fundamentally wrong and urgently need rebalancing. The regulations were intended to allow harder gaming machines in the more highly regulated and controlled environments and softer gambling where regulation was less. The Government agreed with the principle of high stake and prize Category A gaming machines being suitable for casinos, albeit initially just in the regional casino but given the regulations were the same across all casinos, the principle was established. However despite the highest regulations, casinos are restricted currently to £2 stake Category B1 gaming machines offering stakes and prizes too small for casinos. This is the also same stake as proposed for machines in AGCs and Bingo Halls. However in betting shops, with much lower regulation than Casinos, they have £100 stake Category B2 machines, allowing them to offer casino games like roulette, but played faster and harder than you get in a real casino. It is no surprise that there are so many related problems with children, vulnerable people and problem gamblers. There are also outdated regulations that need reconsidering on the operation of machines generally.

· The last prevalence study said problem gambling numbers had risen 50%. This was said to be ‘at the margins of statistical significance’ and ‘could be a result of random sampling errors’. Equally therefore it could be far worse and the statistical evidence could be wrong the other way round and it may have risen far more. I understand the political expedience of not stirring up issues if avoidable, but believe this is wrong in this instance. The evidence shows a material increase in numbers of Problem Gamblers. People are being harmed and the Government should protect them. The industry and regulators know the level of hard gambling on the high street is wrong. The numbers of people harmed by gambling has increased and it cannot be ignored just because a section of the industry has a strong political lobby. It is a problem waiting to explode and I hope the Government address it before it becomes a media led issue like the 2005 Gaming Act became.

3. The Financial impact of the Act on the UK Gambling Industry;

3.1. The original Budd report laid down appropriate strata of gambling and proposed appropriate regulation should be set at each level accordingly.

3.1.1. Casinos. Hardest gambling in premises with the highest regulation, control, probity and tax.

3.1.2. High Street venues (where people could just walk in off the street), e.g. licensed betting operators, adult gaming centres and bingo clubs, all providing softer gambling with a lower level of regulation and control, probity, and taxation, as the softer gambling justified less controls.

3.1.3. Seaside amusement centres, where families are entertained and the gambling was very restricted and regulation even lighter.

3.2. Category B2 casino gaming machines in bookmakers cut across this layering and indeed offer harder gambling than you find in real casinos. These machines are out of position in the strata and not surprisingly are financially very successful. This has had negative financial consequences to all the other gaming industries.

3.3. Taxation should follow the strata of gambling and casinos are the most highly taxed at up to 50%, but again the bookmakers are out of kilter being taxed less than everyone else at 15%. This again distorts the financial position of the industry.

4. The effectiveness of the Gambling Commission since its establishment, and whether it represents good value for money;

4.1. The evolution of the Gaming Board into the Gambling Commission is welcome and generally they are doing an effective job. However the Commission was set up expecting a much bigger industry and has had to down scale to fit the actual industry and still seems somewhat over bureaucratic and costly.

4.2. The Gambling Commission is often mired in red tape and ineffective in being able to address real negative regulatory issues such as the Minmar AGC company, and outdated ones such as removing unnecessary regulation, such as casinos not being allowed to use virtual roulette wheels or cards. The Act should allow issues of red tape, unnecessary regulation and restrictions to be more easily addressed. The Gambling Commission appears weak on enforcement against illegal operations.

4.3. The Industry is generally responsible and more support from the Gambling Commission to reduce unnecessary regulation and red tape would be welcome and support to allow more freedom within the regulations to enable the companies to compete more fairly in a tough competitive marketplace

4.4. The Gambling Commission should also be more responsible of its position on advising the Government on gambling issues and working with the sponsoring department proactively to promote positive gambling issues and deal with things that are wrong, rather than just saying they are just there to ensure we follow the regulations.

5. The impact of the proliferation of off-shore online gambling operators on the UK gambling sector and what effect the Act has had on this;

5.1. The delivery mechanisms of gambling products are ever developing and the regulations and taxation system should be flexible enough to respond appropriately.

5.2. The issue is not just off-shore operators, but how the customer interacts with them and the levels of taxation and regulation. The internet is one example, but equally having the casino channels on Sky TV is equally impactful, and increasingly smart phones will be a factor.

5.3. The Internet is excellent for un-regulated products like buying a camera, where you can often get a better price online. But gambling needs to be highly regulated and is highly taxed and it cannot be right that operators are allowed to hide in low tax off-shore environments and push their unregulated gambling products with uncontrolled stake and prize levels to the same customers who would otherwise go to regulated controlled land based premises to play the same games. Either the Government should say that gambling is no longer to be regulated or taxed and customers are to be unprotected, or it should say gambling needs to be regulated and taxed and customers protected regardless of the delivery mechanism.

5.4. Other countries successfully do this, and it would be remiss of the UK Government not to face up to the challenge and its responsibilities.

6. Why the Act has not resulted in any new licences for casinos or "super" casinos

6.1. The whole idea of the 2005 Act ‘super’ casinos has always been flawed.

6.2. The ‘super’ casinos idea was something that the large overseas casino corporations sold to the Government under the guise of ‘regeneration’. To use a casino to regenerate an area is bizarre. A casino is part of the mainstream leisure market and whilst employing people and using buildings, it is there to make a profit and take money out of an area. There was a slightly better case for a large destination type casino like Blackpool, where some people would travel to that area to go to the casino and take money with them.

6.3. The original idea then got watered down following a press outcry and the ‘Regional casino’ got dropped, leaving an ‘experiment’ of 8 ‘Large’ and 8 ‘Small’ 2005 Act casinos. Of these 10 are in locations that already have casinos. The small ones have a 2 to 1 machines to tables ratio that make no economic sense, and the ability to have betting in the casino is now less valuable as you can do it on your smartphone anyway.

6.4. Furthermore betting shops have been allowed to erode any casino’s potential customer base as they now offer casino gaming, harder and faster than you get in a real casino, in less taxed and less controlled environments, that are more accessible and with products that are more technologically advanced, whereas casinos are limited to physical wheels, balls and paper playing cards. AGCs and Bingo will soon be able to offer slot machine gaming at £2 a game, the same as casinos, which will further erode the potential playerbase.

6.5. And in terms of the ‘experiment’, we are now 6 years on and besides no licenses operating yet, neither the Gambling Commission nor the Responsible Gambling Strategy Board have explained any plans or strategy as to how the experiment will be assessed.

6.6. The ‘experiment’ was clearly a political expedient to allow a piece of legislation to progress. It was ill conceived, poorly executed and should be dropped as soon as possible. At the same time the imbalances in the gaming regulations should be addressed, particularly around Gaming machines. I will go into more detail below.

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

7.1. The classification and regulation of gaming machines should logically follow the strata of regulation of the gaming environments described in 3.1 above with the hardest gambling permitted in the most highly regulated environments and softer gambling in less regulated environments.

7.2. The principle of unlimited stake and prize machines, like you find in casinos worldwide and consistent with unlimited stakes and prizes on other casino games, was established for casinos in the UK as category A machines, but none are currently allowed. The regulations however are still highest in casinos and lower in betting shops and AGCs. However you can currently stake only £2 a game on gaming machines in casinos, but £100 a game in machines in betting shops and as proposed, also £2 a game on machines in AGCs and Bingo Halls. This makes no sense.

7.3. This £100 stake on the B2 machines in bookmakers has led to the widespread growth of hard casino gambling on the high street where they have introduced casino games onto their machines and you can play casino games faster, and harder, than you can play in a real casino. There are now over 8,500 LBOs in the UK, with over 30,000 machines where customers can stake up to £18,000 an hour on casino games despite far lower levels of supervision and regulation than you get in a real UK casino. One eminent clinical psychologist involved in the treatment of problem gamblers has publically stated that she is now seeing ‘the worst examples of gambling addiction’ which is directly associated with the gaming machines in bookmakers shops.

7.4. For clarity, a customer can walk in off the street into a bookmakers with no door control, the only staff on duty sitting behind a counter, walk up to a gaming machine and choose from a range of casino games and play up to £100 a game and up to 180 games an hour. The Casino games include Roulette, Black jack, 3 Card Poker, 5 Card Poker, plus betting and bingo games and slots at £10 for 5 ‘super’ spins.

7.5. The regulations in the UK are supposed to control what sort of gambling is allowed at any given venue, proportionate to the level of regulation and control associated with that venue. Casino operators can only offer casino games and are other than the 2005 Act casinos, are specifically prohibited from offering betting products or bingo, and bingo operators are limited to bingo. However through their machines, bookmakers are no longer restricted to their traditional moderately paced betting products. They are now able to offer any gambling they like, including bingo and casino games. In many shops it is very questionable if they satisfy the primary purpose regulation.

7.6. The Gambling Commission has major concerns about these products and the erosion of the demarcation lines between products and/or premises but seem powerless to influence the Minister to take action (despite the 2005 Gambling Act allowing the Secretary of State to proscribe any product which it feels is flying in the face of the main tenets of the new Act). The Problem Gambling agencies are reporting a significant increase in contacts relating to problems caused by these machines, and that those callers are the most distressed. The number of people recognising they have problems and self excluding themselves from bookmakers premises has gone up over 40% in the last year alone, and there have been street protests against the bookmakers. The issues are receiving increased media coverage and the subject has been debated in Parliament, but the bookmakers companies are ignoring it all, relying on their traditionally strong lobby, and progressing with the expansion of their casino business, even brazenly advertising £20,000 roulette competitions.

7.7. These category B2 machines are also cannibilising the traditional over the counter betting income in betting shops and so reducing the levy paid to the racing industry so the bookies will be alienating part of their traditional lobby.

7.8. There is a restriction of 4 of these machines per bookmakers shop, but the operators have simply got round this restriction by opening more shops, or clustering shops into better trading areas, often poorer areas. For example there are just 23 casinos in the whole of Greater London, operating around 420 casino gaming machines between them. In the London Borough of Westminster alone there are already 120 bookmakers shops with 480 casino gaming machines. So there are now more numerous (and harder) c asino gaming machines in Westminster bookies alone, than in all th e much higher regulated and controlled London c asinos combined. Indeed there are many hundreds more bookmakers across Greater London (there are 16 in Camden High Street alone!) with up to 4 casino gaming machines in each one.

7.9. There are also outdated restrictions such as the metering methods on gaming machines that need updating. For example on a gaming machine in a casino when you put in a £50 note, it takes 9 button presses to commit the value to play. This was never intended, is disproportionate and needs addressing.

7.10. The solution is an urgent review of Category A, B1 and B2 gaming machines, with a view to correcting the gaming machine entitlement to be proportional to the level of regulatory control and protection. Casinos should have higher numbers of gaming machines and Category A gaming machines or stakes and prize limits on Category B1 gaming machines raised significantly to levels suitable for casinos. Bookmakers should have lower stake limits on their machines and stopped from offering casino games altogether, or if allowed to continue in any way, they should be much slower than in a real casino, say 20 games an hour (vs casinos 50 games an hour).

8. What impact the Act has had on levels of problem gambling.

8.1. The principles behind the Gambling Act were sound and if it had controlled hard gambling on the high street and off-shore gambling appropriately then the issues related to problem gambling would be less. However it has not and the last survey has recorded a 50% increase in problem gambling numbers, which could be statistically higher of lower, and the Government should take action based on the evidence and common sense. Casinos are the most highly regulated environments and customers going there know to expect hard gaming. Easily accessible and less controlled locations such as betting shops should have softer gambling, but currently do not and the related problem gambling issues are not surprising with customers being caught out.

June 2011

Prepared 29th July 2011