Gambling

Written evidence submitted by Professor Linda Hancock (GA 50)

This submission is sent as an individual academic international expert on gambling research. Prof. Hancock is employed by Deakin University Australia, but has had considerable insight into gambling regulation, research and treatment in the UK. This includes engagement as international consultant to DCMS to review the Bookmakers’ Association (Europe Economics) report on FOBTs; appointment as consultant interim Head of Research to the RIGT (Responsibility in Gambling Trust) in 2007-10 including overseeing the conduct of the RIGT/ESRC research partnership; risk and protection framework and on-going oversight of PhD program.

In addition to peer review for key gambling research international journals and monograph publishers, Prof. Hancock has had considerable international experience in gambling policy and evaluation, regulation and research; having been engaged as an international referee by research funders, government regulators and policy advice departments in Canadian provinces of British Columbia, Alberta, Ontario and Nova Scotia in Canada; New Zealand research funding organisations; UK ESRC research application assessor; Australian Research Council grants assessor, and with numerous publications including Regulatory Failure? The Case of Crown Casino, Australian Scholarly Publishing, North Melbourne, 2011.

1. How effective the Act has 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 At the outset, it should be noted that under the watch of the 2005 Gambling Act, there is robust evidence of increasing harms caused by gambling. The increase in problem gambling from 0.6% (prior to the implementation of the Act) to 0.9% of the British population reported in the British Gambling Prevalence Survey (BGPS) (2010) is significant at the .05 level; which is internationally recognised as a robust significance level. This represents a 50 percent rise in problem gambling since the Act was implemented. It was disingenuous of the Gambling Commission to report the results as "not statistically relevant‟ and "at the margins of statistical relevance‟ in its media release concerning the study. This equates to around 451,000 adults aged 16 and over experiencing serious gambling-related problems and significant additional numbers experiencing moderate problems. Regular (approximately monthy) use of gaming machines, fixed odds betting terminals (FOBTs) in betting shops, casino games and online gambling are associated with problem gambling.

Clearly this result is a wake-up call that more needs to be done to address problem gambling in Britain, prevent people becoming problem gamblers and to address the vulnerability of some groups which are particularly at risk of harm. The BGPS results signal groups who are vulnerable to gambling-related harms and the need for a public health preventative approach.

1.2 It is unknown the extent to which gambling regulation is successful in the maintenance of crime-free gambling. In order to use gambling machines to launder money (for example on bingo hall machines, casino machines or FOBTS) players simply feed in money via note acceptors into gaming machines, play for a short amount of time and then cash out all funds on the pretence they constitute winnings. Crime-free gambling would be enhanced by more proactive regulation and transparency on money laundering prevention. This could be facilitated by the introduction of smart cards and player tracking (smart cards are currently under review following a trial in Nova Scotia and proposed for implementation in Australia). Card-based play is a deterrent to use of machines for money laundering, as individual gamblers are identified with problematic patterns of play and cash-out. At the very least, gambling machine pay-out slips that differentiate money paid in, from gambling winnings, would deter money laundering; which is currently easy on readily-accessible gaming machines that are fitted with note acceptors at venues all over Britain.

It was recognised by the Financial Action Task Force/Groupe d'Action Financière (2009) Third Mutual Evaluation Report on Anti-Money Laundering and Combating the Financing of Terrorism, that adequate training and supervision is needed to regulate money laundering. Money laundering related to crime/drugs has been associated with betting shop activities in some areas. In London, the Haringey Scrutiny Review (2010) stated: ‘Haringey’s own Enforcement Team recently engaged in activity to tackle protection rackets, illegal gambling and money laundering centred on social clubs and other premises’.

The 2005 Act gave regulators new powers and new duties to keep gambling crime-free. What is concerning is the lack of transparency from the Regulator and lack of publication of standard data on premises, number of machines and net gaming revenue that are collected for licensed premises. Such data would enable money laundering alerts and assist local communities in prevention activities.

1.3 With regard to the protection of minors, the Gambling Act is inconsistent in its approach to the need to protect minors from the harms of gambling. Britain is one of the few jurisdictions in the world to allow youth aged 16-18 to participate in some forms of gambling. By trying to allow historical participation of youth in playing what were in the past, regarded as benign fruit machines for example, now exposes them to new products which are in many respects similar to products restricted to adults because of their potentially addictive features. Liberalising some forms of gambling for youth aged 16-18 was premised on the assumption, as expressed by the Secretary of State Tessa Jowell: ‘we do have to address the risks that children face, but not by taking disproportionate action in respect of matters for which there is no evidence of harm’. Now there is evidence of harm, this stance is no longer appropriate and allowing children to gamble sends the wrong message.

1.4 The Ipsos Mori (2009) Omnibus survey has found consistent trends of higher rates of problem gambling among children than those found for adults. This element of the Act needs urgent review since youth are vulnerable with regard to their age/stage of development, their propensity to peer pressure and their immaturity. An age of 18 would bring Britain in line with the protection afforded youth in other jurisdictions.

1.5 Local government planning powers need to be restored

Related to the legislative objective to protect minors and other vulnerable groups, is the incapacity of Local Authorities under the Act, to reject licensing applications for betting shops on the grounds of density or saturation. In areas high on the Deprivation Index such as Hackney, the high density of betting shops renders the community vulnerable to exposure to gambling.

As Hackney LA (2009) at its Community Safety and Social Inclusion Scrutiny Committee observes:

Hackney has 64 betting shops which is three times the national average for a local authority area. At the same time the borough has areas of significant deprivation and a mapping of the location of these shops reveals that they cluster in the poorer areas of the borough. ….

In 2007 a campaign by residents and ward councillors attracted a petition of 400 residents against the planning consent for the opening of a third betting shop on Chatsworth Rd. That campaign failed at Appeal and at this time a deputation was also brought to Full Council urging it to press for a change in the planning laws.

1.6 Whereas the previous regulatory framework enabled magistrates to take account of a ‘demand test’; this provision was removed under the 2005 Act and LAs are hamstrung in terms of protecting their communities from over-exposure to gambling and in planning the composition of their high street retail communities.

Furthermore, the as-of-right entitlement of liquor licensed premises such as hotels and bingo premises to a minimum number of gambling machines (8 B machines and any number of C machines as approved, are allowed per bingo premise licensee) does not allow separate determination of the appropriateness of each separate activity at the nominated premises.

2. The financial impact of the Act on the UK gambling industry;

2.1 The lack of transparent data on the composition, net (after prizes) earnings, location and intensity levels of UK gambling products and venues/operations, make it difficult to obtain objective data on the growth of the gambling industry in Britain following the implementation of the 2005 Gambling Act. One estimate is that ‘The UK's betting and gaming industry has a substantial turnover and net expenditure on games of chance, including The National Lottery, increased by 19.6% in 2008 compared with the previous year, which was by far the largest increase recorded over several years’. (Research and Markets: An Essential Report on the Betting & Gaming Market DUBLIN.

2.2 These figures substantiate a finding that the UK gambling industry has benefited financially from the liberalisation of gambling opportunities, for example, the expansion in the number of bookmakers shops (each entitled to 4 FOBTs, the total of which previously numbered approximately 20.000 but now number in excess of 30,000). The industry has also benefited, for example, from the growth of sports betting, contract for difference (regulated under the Financial Services Act), internet gambling and the number of gambling machines in venues such as bingo halls (with the as of right number of category B machines increased from 4 to 8) and alarmingly high numbers of C machines in such premises. The increases in category C machine stakes granted by the Gambling Commission, has also contributed to these increases in profits. The recommended doubling of the maximum bet on category B3 machines from £1 to £2 is questionable, when a machine with its auto spin set at one game per second can result in a loss per hour of £3,600, which would double to £7,200 if the stake is allowed to be doubled. This puts gambling machines in Britain on a par with machines in countries such as Australia, previously assessed by the Budd Committee as a level of intensity of gambling to be avoided under the new 2005 Act.

These potential losses on a category C (bingo hall) machine put UK machines way ahead of the Australian Productivity Commission recommendation of A$1 per button press "A limit of $1 would strongly target problem gamblers, with little disturbance for others" (PC, 2010, p. 26). Where is the requirement for harms assessments prior to such changes or for the industry to provide scientific data that such increases in numbers and intensity of machines will not cause harm? With increasing access and availability of machine gambling, the stakes and potential maximum spend needs to be reduced down (as in Australia and Norway); not increased.

2.3 The Gambling Act 2005 gives the Secretary of State the power to invoke a levy on the Industry. After a Gambling Commission public consultation where the industry lobbied hard to retain the levy as a voluntary contribution, the gambling industry has negotiated down its previous undertaking to contribute to research, prevention and treatment; and this has apparently been agreed. The costs associated with the industry charity (Great) set up to raise these funds from the industry, are considerable and represent an inefficient means of collecting the ‘polluter-pays’ voluntary tax. On the New Zealand model, a compulsory 3% levy paid into an independent trust charged with independent commissioning of research, prevention and treatment, would cut costs considerably and would result in less interference of the industry in operational matters related to discharge of the funds and overall, would enhance independence, transparency, good governance and efficiency.

2.4 On the other side of the ledger, the full costs of the unquantified but considerable harms (depression, bankruptcy, suicide, crime, job loss, family violence and financial hardship) caused by gambling are unknown as the relevant data is not collected by the relevant department (DCMS) or the Regulator.

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

3.1 The protection from harms was emphasised by the Secretary of State Tessa Jowell in the November 2004 Order for a Second Reading speech. The Commission’s performance on harm prevention and implementation of the objectives of the Act are a more pertinent standard than ‘value for money’ in the area of gambling; an area which is conditionally legal and potentially very harmful.

3.2 The Gambling Commission was hailed in August 2007 as a ‘tough new regulator’ ‘with stringent powers that allow them to take decisive action against operators who fail to meet the high standards required by the Gambling Act’ (www.whitehallpages.net/news/archive/31400). To a large extent, given the objectives of the Act, the GC’s performance is disappointing, as its decisions are most frequently in favour of the industry business case rather than an assessment of public interest. Some examples are: doubling the number of category B machines allowed in bingo halls in response to industry claims of lost revenue caused by the smoking ban; ignoring the industry flouting of the law with regard to ‘split premises’ where operators gain twice the number of machines by splitting one licensed premise into two; or the GC’s decision to increase the intensity of gaming machines with an increase in the stake on both B and C machines - with no concomitant requirement for research evidence this will not cause harm. In such decisions, the GC consistently favours the gambling industry business case, and there is a dearth of evidence provided by any party, that such changes will not result in harm or intensify risks.

Other concerns include:

· Lack of transparency: The GC does not routinely publish information from its licensing returns (deeming such material commercial in confidence). This could form a much-needed source of information about gambling venues and revenue, that should be available publicly in updated form;

· Lack of information about the location, machine type, number of machines/gaming tables/bingo seats etc, and net gambling revenue for venues, and industry sectors. Consequently the sort of geospatial data that is standard practice in jurisdictions like Australia, is lacking in Britain. Such data would be invaluable for informed policy making and would empower communities to know more about the impact of gambling on local economies.

· Lack of transparency in archiving of submissions. The GC summarises submissions to its enquiries, which means that public access is generally denied to actual submissions, the wording of claims and the nature and source of evidence proffered. Summaries frequently compare the weighting of responses, leading to a privileging of the views of the gambling industry, which has paid advocates to lobby the GC. In comparison the community and advocacy sector is poorly resourced and not in a position to counter industry self advocacy. The GC should be commissioning research evidence in carefully designed studies aimed at assessing pubic interest impacts; before it grants revenue-enhancing concessions to the industry.

· By international standards the Licensing Codes and Practices are deficient in public interest regulation; for example on Venue Problem Gambler Identification Policy; casino loyalty club based player tracking as a means of identifying problem gamblers.

3.3 In terms of governance, the role of the GC lacks independence from the Strategy Board (set up as a committee reporting to the GC but with a secretariat provided from RGF, the independent charity charged with responsibility for commissioning research, prevention and treatment services). Under such a structure, the GC is too involved in operational matters. The Act needs to specify an alternative structure, which would ensure independent of government, regulation, research, prevention and a public health approach to protect consumers in a fast changing technologically driven product environment.

4. The impact of the proliferation of off-shore online gambling operators on the UK gambling sector and the effect of the Act on this.

4.1 This submission is focused primarily on land-based gambling. However the increase in internet gambling is concerning alongside increases in internet-related problem gambling. There are appropriate programs now available for the Regulator to insist on provider interventions to prevent problem gambling and to better protect internet gambling consumers. Advertising on the internet has increase and is a concern; given childrens’ access to the internet and the lack of consumer protection of internet gambling regulation. The Act needs to be amended to ensure appropriate consumer protection for players on the internet along with a review of internet-related gambling harms.

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

5.1 The Act has resulted in 16 new casinos and has not withdrawn the considerable number of casino licences retained under the Grandfathering clause. The controversy surrounding the super casino demonstrated how community sentiment was and still remains, essentially negative about gambling; as shown in the recent 2010 British Gambling Prevalence Survey. One reason for this is that whilst authorities procrastinate on putting in place the indicators and frameworks to ‘count the community costs’ of gambling, it will be difficult to drive home to ministers and regulators how gambling-related harms impact on communities and families who essentially bear the costs of the expansion of gambling and its uninvited ‘normalisation’ in everyday communities. The industry claim that gambling is entertainment, fails to acknowledge the dissimilarities between the risks of gambling and other leisure pursuits.

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

6.1 The Gambling Act did not undertake a re-classification of gambling machines. This has resulted in a confusing array of machine classifications and sub-classifications which are constantly changing and which are confusing to consumers, operators and regulators.

All machines are potentially dangerous to consumers, with additions like note acceptors, increased lines of play, increases in the minimum stake and fast (by international standards) spin rates. Gaming machines are designed to entice players to spend more money and time; which inevitably results in time spent being highly associated with diminishing returns to the player or consequent increasing losses.

6.2 It is now internationally recognised that continuous platform gambling modes such as gaming machines are associated with significant risk and incidence of gambling-related harms.


Figure 1 (Productivity Commission 2010)

Figure 2 (Productivity Commission, 2010)

Source: Productivity Commission (2010) Gambling. Melbourne, Productivity Commission. No 50, 26 February 2010. Released 23 June 2010. Available at: http://www.pc.gov.au/projects/inquiry/gambling-2009/report

6.3 The Australian Productivity Commission summarises this well by arguing that gaming machines are associated with greater problem gambling and with increased incidence of dissociation or loss of control. (See figures 1 and 2 below). Regular players (those playing monthly who comprise about 15% of players) are most at risk of problems and may also be seen as a ‘vulnerable group’ with regard to risk of harm from gambling. The accepted figure is that about 40 percent of profits from gaming machines are derived from problem gamblers (Productivity Commission 2010). To counter the potential hams that may result, players need the offer of self-activated interventions like self exclusion or pre-commitment (setting limits on time and or funds spent via card based play); or third party interventions such as limits on time or funds spent gambling (as for example, in Norway where a ceiling on possible amount spent per week results in players being cut off from access once the limit is reached.)

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

7.1 As cited above, under the watch of this Act, the measured rate of problem gambling has significantly increased and the impact on vulnerable groups such as youth, women, the mentally infirm and seniors. It is significant that the Gambling Commission’s 2010 industry revenue figures show a 7 percent increase in profit from machines for bingo clubs and gross profits of 2010 industry figures published by Gambling Commission show a 7% increase in profit £87m from B3 machines in Adult Gaming Centres.

July 2011

Prepared 1st August 2011