Gambling

Written evidence submitted by Business in Sport and Leisure (BISL) (GA 21)

A. Summary

A.1 The Budd Report and the DCMS’ ‘A Safe Bet for Success’, both produced prior to the 2005 Gambling Act, promised to give customers greater accessibility to gambling products and facilitate liberalisation of the industry. [1] Neither of these ambitions were realised and BISL therefore views the Gambling Act as a missed opportunity.

A.2 BISL believes that the intention and content of the Act – as well as subsequent DCMS and Gambling Commission activity – was too cautious in its support for gambling.

A.3 The Act was written as an enabling act, with widespread future deregulatory measures to follow, but changes have been limited and progress has been slow.

A.4 BISL believes that gambling should be accepted as a legitimate and widely-enjoyed leisure pursuit and that legislation and regulation should reflect that status. The industry does much to tackle problem gambling and has a strong record in this regard. BISL wants to avoid gambling being treated as a ‘political football’.

A.5 The level of regulation applied to the gambling sector– based on the total harm caused by gambling and the level of harm caused by other industries – is unjustified.

A.6 We recommend that, to ensure the industry and operators remain proactive and effective in their attempts to tackle problem gambling, they conduct an annual review into problem gambling and industry efforts to tackle this issue.

A.7 There is strong potential for gambling to drive economic growth by creating jobs and raising revenue, yet the Act failed to facilitate conditions where this could occur. This has been exacerbated by the lack of appetite from the DCMS and Gambling Commission to provide economic sponsorship for the industry.

A.8 We recommend that the Gambling Commission and DCMS do more to help the industry and that they promote its economic cause. We specifically recommend:

· That DCMS work more closely with the Treasury in developing gambling policy so that the economic and subsequent taxation benefits can be realised.

· That local authorities be allowed to develop their own casino licensing policies.

· That portability of existing licences is introduced within the casino sector.

· That the bingo industry be helped by providing it with a level playing field in terms of taxation.

· That the Triennial Review be reintroduced immediately as a means of conducting the regulation of gaming machines.

· That subsequently the rules surrounding machines located in retail environments are made consistent with the rules that apply online.

· That the UK Government works to deliver a level playing field across the EU in terms of gambling taxation.

A.9 These recommendations logically follow from evidence-based policy-making which:

· Ensures sensible liberalisation and proportionate regulation.

· Has the consumer at heart.

· Recognises the proper balance between rights and responsibilities on the part of operators and customers.

A.10 If DCMS is unable to provide the economic sponsorship the industry requires and deserves, we believe there is a case for BIS to take over responsibility for gambling.

B. Business in Sport and Leisure (BISL)

B.1 BISL is the body representing the sport and leisure industry. With more than 70 members, BISL provides a collective voice for sport and leisure businesses.

 

B.2 BISL represents its members’ interests to Government and its agencies.  BISL – and only BISL – argues its industries’ strategic case on broad national topics like growth, jobs and quality of life, whilst also negotiating specific issues affecting gambling, sport, licensing, planning, property and the visitor economy.

B.3 Members of BISL represent various interests in the gambling sector including casinos, bingo, betting, pools, online gambling and the supply of gaming machines.

B.4 BISL seeks increased and improved engagement with Government and to encourage evidence-based policy-making which:

· Ensures sensible liberalisation and proportionate regulation.

· Has the consumer at heart.

· Recognises the proper balance between rights and responsibilities on the part of operators and customers.

B.5 BISL believes that gambling is an important part of the leisure industry. Gambling is enjoyed by almost three-quarters of the British population each year [2] , employs more than 133,000 people [3] and contributed more than £1.53 billion in betting, gaming and lottery duties (i.e. irrespective of some VAT) to the Treasury last year [4] .

B.6 BISL welcomes the opportunity to submit written evidence to the Select Committee and would welcome the opportunity to give oral evidence.

Q1. How effective has the Act been in its core objectives to:

· ensure that gambling is maintained crime-free and conducted in an open and fair manner

· protect children and vulnerable people from the adverse effects of gambling

· update the legislative framework with regards to online gambling

1.1 The gambling industry did significant amounts of work to keep gambling fair, open and crime free and to protect children and the vulnerable prior to the introduction of the Gambling Act. There is no reason to suggest the Act made a substantive difference here, although BISL welcomes the statutory codification of these aims and supports the robust licensing put in place and run by the Gambling Commission.

1.2 The question is right to highlight that the crime-free nature of gambling has been maintained. Operators already ensured that gambling was crime-free – as was recognised by the Budd Report [5] – and the Act has not had any impact in that regard.

1.3 The industry’s record in tackling problem gambling is particularly strong. While the Budd Report suggested an annual contribution of £3 million to fund research, education and treatment [6] , the industry actually contributes £5 million each year. The industry has provided more than £22 million of funding since 2005-06 [7] .

1.4 Prevalence Surveys conducted since 1999 demonstrate the success of operators: the percentage of gamblers considered ‘problem gamblers’ has remained broadly constant, despite an increase in those who enjoy gambling ‘on a regular basis’ [8] .

1.5 The Gambling Act did affect where gaming machines can operate, with all machines now restricted to licensed premises (not fast-food shops, for example). This has reduced the risk of those under 18 gambling, which BISL welcomes.

1.6 It is difficult pinpointing the Act’s success in updating the legislative framework for online gambling given operators re-locating offshore. The Act is not to blame for this; operators have moved given EU tax imbalances and the UK’s uncompetitive position. The Act’s ambition to make the UK home to a burgeoning online gambling industry [9] has been rendered impossible due to the inappropriate tax rate within the UK.

1.7 BISL believes that an EU wide level playing field for gambling taxation is required and that the UK Government has a crucial role to play in fighting for this to be established. Our evidence develops the points above in response to Question 4.

Q2. The financial impact of the Act on the UK gambling industry

2.1 Costs incurred by the industry have gone up significantly since the introduction of the Gambling Act. The regulator’s expenditure, for example, has gone up from just over £4 million in 2004/05 to almost £14 million in 2009-10 [10] . Additionally, the industry has been hit by exogenous factors, such as the smoking ban and the economic crisis which, taken together with increased rates of taxation for bingo and casinos, have damaged commercial revenues.

2.2 Despite costs increasing and other factors affecting the industry, few liberalisation measures have emerged to offset these changes. Those developments which could have made a demonstrative impact – for example the availability of FOBTs and uplift in online custom – were happening anyway irrespective of the Gambling Act. Any new changes as a result of the Act – such as the abandonment of the 24 hour rule, the Demand Test and an increase in Sunday racing – has only made a limited difference to the bottom line of operators.

2.3 Despite the implicit promise, there have been no new casinos as a result of the 2005 Act (see also Q 5) and there has been little increase in stakes and prizes levels.

2.4 The DCMS’ ‘A Safe Bet for Success’ suggested that reforms might deliver a £500m year on year uplift for the gambling industry [11] . Clearly this has not occurred and the size of the market appears to have contracted. Employment figures for the UK gambling industry fell by six per cent last year [12] .

2.5 We urge DCMS and the Gambling Commission to do more to counter the ongoing economic malaise and to help relieve the genuine concerns of the industry. Gambling is a key part of the entertainment industry and an area of potential economic growth. Yet neither DCMS nor the Commission have done enough to promote the industry. DCMS should work far more closely with the Treasury in developing policies which affect the gambling industry and for either the Department or the Commission – or both – to act as a supportive sponsor for the industry. If DCMS continues not to provide the economic sponsorship the industry requires, we think there is a case for responsibility to be passed on to BIS.

Q3. The effectiveness of the Gambling Commission since its establishment, and whether it represents good value for money

3.1 There is much to applaud in the Commission’s record to date and the manner in which it conducts itself. BISL believes the establishment of a single regulator is positive, welcomes the Commission’s desire to move towards a risk-based approach to regulation and is encouraged by its ambition to work closely with the industry.

3.2 The Commission’s availability, openness and willingness to communicate is helpful and BISL would like to see this modus operandi continue in the future. Indeed, BISL would like to see the Gambling Commission develop their collaborative approach to ensure they work with the industry to deliver rights as well as responsibilities. A coordinated approach should be taken when it comes to reviewing new technology or matters upon which the Act is unclear and we believe the Gambling Commission has a role to play beyond its policing task.

3.3 In particular, we think the Gambling Commission ought to evolve into a truly modern regulator by adopting genuine risk-based regulation – a move suggested by the Better Regulation Executive in their April 2009 report into the Gambling Commission [13] – and by providing more explicit support for the industry as a whole.

3.4 Better value for money can be achieved and BISL should look for improvement on the part of the Commission. The regulator’s expenditure has gone up from just over £4 million in 2004-05 (when regulation was provided by the Gaming Board for Great Britain) to almost £14 million in 2009-10 [14] . The increased cost base was supposed to be linked to, and countered by, concurrent deregulation and liberalisation in the sector that would bring about increased profits. It is clear deregulation and liberalisation has not occurred and the overall cost therefore feels disproportionate to what has been delivered in terms of industry growth.

3.5 We recommend that both the Gambling Commission, and its sponsor Department the DCMS, do more to help the gambling industry and that they work to promote the economic cause of the industry.

Q4. 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

4.1 The Act has had little effect on the number of offshore online gambling operators. Rather, this is a result of different tax regimes in different jurisdictions, including an uncompetitive tax regime in the UK, which has forced some UK operators offshore (and which consequently has resulted in a reduced taxation take for HMRC).

4.2 If offshore operators are to be attracted to the UK the tax rate has to be competitive. BISL believe that rather than looking to raise additional barriers in the UK, Government ought to work to deliver a level playing field across the EU.

4.3 Offshore online operations deliver increased consumer choice, entertainment and enjoyment. This has affected the bricks and mortar of the UK industry which has been forced to keep up. It could also be argued that it has led to increased player protection insofar as online operations provide a clear audit trail.

4.4 There are gross inconsistencies in terms of the bets customers can place in retail outlets when compared to those they can place online. Retail operators are put at a considerable disadvantage due to the strict controls in place (for example of machine stake and prize levels and the numbers of machines allowed) and the taxation to which they are subjected. There is a clear case to liberalise the rules around retail operations to ensure a more consistent and coherent approach. This case is bolstered by the fact that there will be far greater demand in the future to merge on- and offline technologies to enhance customer experience and service.

4.5 The rules on machines located in retail environments should be made consistent with the rules that apply online. We further recommend that the UK Government works to deliver an EU wide level playing field for gambling taxation.

Q5. Why the Act has not resulted in any new licences for casinos or "super" casinos

5.1 The failure to deliver new casinos despite the obvious intention for this to happen comes down to a lack of evidence-based decision-making. Although the legislation was poorly designed in places and the rules around the new casinos were somewhat illogical, the potential for a super casino was ultimately thwarted by politics.

5.2 The chance of a super casino was ruled out early into Gordon Brown’s premiership. Although evidence suggested the regenerative, economic and quality of life benefits that such a casino would provide, a political decision was made not to press ahead with the project.

5.3 The chances of the other 16 new casinos being established were reduced by factors including location. For a new licence to be granted the case had to be based primarily on arguments for ‘benefit’ with little regard for demand. The market should have dictated the location of these new licences but was allowed no say. Furthermore, ten of the sixteen areas already had casinos which resulted in a disincentive to invest in the new or the old casino given the high risk of failure. These problems are exacerbated by the lack of portability of casino licences to local authorities who desire their presence.

5.4 The rules around the proposed new casinos are illogical in terms of the distinctions which they make between large and small casinos and the unviable nature of the economic case around these casinos is clearly demonstrated by the paucity of applications. A smaller casino needs a larger gaming floor than a large casino to provide a smaller number of machines. The cost of applications for new casinos is enormously high and the potential profitability of casinos is negated by the more competitive products that are available outside a casino (e.g. online). Casino duty is particularly onerous and the removal of the right to offer Category A machines has further reduced the potential profitability of these new casinos.

5.5 BISL recommends that local authorities are allowed to develop their own casino licensing policies, working within the context of existing casino licences that have already been issued. BISL further recommends the future portability of these existing licences. Taken together these measures will not lead to any increase in the number of permitted casinos, but will mean that casinos can be established in areas where local authorities see a demand and actively want their presence.

Q6. The effectiveness of the classification and regulation of gaming machines under the Act

6.1 The recent treatment of gaming machines in terms of legislation, regulation and scrutiny by the Gambling Commission and Government has rarely been evidence-based, has occasionally been ill-considered and, ultimately, has proved highly damaging commercially to relevant sectors, including bingo clubs and snooker clubs.

6.2 Machines have often been made the scapegoat in terms of political discord and action despite there being no evidence of them causing a disproportionate amount of harm. The removal of Section 16 and Section 21 type products, for example, was not evidence based, and had a significant impact on commercial venues.

6.3 Even though the Act was meant to be an enabling piece of legislation – which would make it easier to approve and accept advances in consumer choice, including a more varied machine offering – there has not yet been a single instance of this occurring.

6.4 There is a lack of consistency, as referred to earlier in this evidence, between the approach taken towards on- and offline gambling. The fact that gaming machines are subject to far stricter rules makes little sense in this world of digital penetration.

6.5 The Triennial Review was a sensible approach to the ongoing regulation of gaming machines and there is no clear reason why it was no longer thought fit for purpose.

6.6 BISL wants to see evidence based policy-making for gaming machines and therefore suggest an immediate reintroduction of the old Triennial Review.

Q7. What impact the Act has had on levels of problem gambling

7.1 Over the past 12 years there has been minimal change in the percentage of the UK population who are deemed ‘problem gamblers’ – levels have almost flat-lined since the first Prevalence Survey took place in 1999. [15]

7.2 The fact that the number of problem gamblers has come close to flat-lining over this period provides a prima facie case for saying these results have been achieved irrespective of the Act. The most recent Prevalence Survey showed a slight increase [16] but as the Minster responsible, John Penrose, said, the increase is ‘just into the area of statistical significance’ [17] . It could be argued that this increase is related to a rise in gambling activity or the harsh economic climate in which customers find themselves. The most recent Survey showed that the number of ‘compulsive gamblers’ has remained stable.

7.3 Whilst the Budd Report suggested that the industry make an annual contribution of £3 million to fund research, education and treatment [18] , the industry actually contributes £5 million each year, despite the fact that problem gambling levels have remained broadly stable. The industry has provided more than £22 million of funding since 2005-06 [19] .

7.4 The industry has always recognised that it has a responsibility to help tackle problem gambling and to try to reduce the number of people affected. Efforts in this respect are numerous. Operators make a direct contribution of £5 million each year for research, education and treatment and also run their own programmes to work with who need help.

7.5 To ensure the industry and operators remain proactive and effective in their attempts to tackle problem gambling, BISL recommends that the industry conducts an annual review int o problem gambling and its own efforts to tackle this issue.

July 2011


[1] DCMS, Gambling Review Report CM 5206 , HMSO, July 2001, p.2; DCMS, A Safe Bet for Success, February 2002, HMSO, p.38

[1]

[2] Wardle et al. , British Gambling Prevalence Survey 2010, NatCen, 2010, p. 20

[3] Gambling Commission, Industry Statistics 2009/10 , p.6, 10, 12, 19, 21, 24

[4] HMRC, HMRC Betting and Gaming Bulletin May 2011.

[4]

[5] DCMS, Gambling Review Report CM 5206 , HMSO, July 2001, pp.74-75

[6] DCMS, Gambling Review Report CM 5206 , HMSO, July 2001, p.176

[7] Hansard , 17 June 2011, Col. 984-985 WA

[8] Wardle et al. , British Gambling Prevalence Survey 2010, NatCen, 2010, pp.11-12; Wardle et al. , British Gambling Prevalence Survey 2007 , NatCen, 2007, p.10; Sproston et al. , Gambling Behaviour in Britain , NatCen, June 2000, p.iii

[9] Gambling Act 2005, HMSO, 2005, Part 5, Section 67

[10] Gambling Commission, Annual Report and Accounts, 2005-06 and 2009-10

[11] DCMS, A Safe Bet for Success, February 2002, HMSO, p.12

[12] Gambling Commission, Industry Statistics 2009/10 , p.6, 10, 12, 19, 21, 24

[13] Better Regulation Executive and National Audit Office, Gambling Commission: A Hampton Implementation Review Report, April 2009, Better Regulation Executive, pp.4-5

[14] Gambling Commission, Annual Report and Accounts, 2005-06 and 2009-10

[15] Wardle et al. , British Gambling Prevalence Survey 2010, NatCen, 2010, pp.11-12; Wardle et al. , British Gambling Prevalence Survey 2007 , NatCen, 2007, p.10; Sproston et al. , Gambling Behaviour in Britain , NatCen, June 2000, p.iii

[16] Wardle et al. , British Gambling Prevalence Survey 2010, NatCen, 2010, pp.11-12

[17] Hansard , 17 May 2011, Col. 65 WH

[18] 18 DCMS, Gambling Review Report CM 5206 , HMSO, July 2001, p.176

[19] Hansard , 17 June 2011, Col. 984-985 WA

Prepared 29th July 2011