Gambling

Written evidence submitted by The Bingo Association (GA 58)

1. The Bingo Association represents the majority of the licensed bingo industry in Great Britain. Our members welcome the opportunity to submit evidence to this inquiry and to highlight their main areas of concern about the Gambling Act 2005. Sadly, many of the concerns we highlighted during debate on the Bill have proved to be well founded, and we see little prospect of the situation improving in the near future. Many of the central issues were inadequately debated at the time and subsequently poorly drafted, creating ongoing difficulties for both the industry and the regulator.

Effectiveness of the Act in maintaining core objectives

2. The GB gambling sector was widely acknowledged as being a model of sound regulation, and its gambling industry recognised as being responsible and well-run, before the Gambling Act 2005 was introduced. The Gaming Act 1968, whilst much amended, had ensured that the objectives carried forward to its successor legislation were rigorously applied. In this respect, the general state of the gambling sector located in the UK has not changed. It remains crime-free, conducted in a fair and open manner, and protects the interests of children and the vulnerable. The main difference is that under the Gambling Act the burden of regulation for industry is greater and the costs are higher.

3. The Act was billed as deregulatory, but was generally not so; for example, products that had previously been available in bingo clubs were no longer permitted. Much of the criticism leveled at the Gaming Act 1968 was based on its inflexibility in adapting to change and technological innovation. However, in our experience, the Gambling Act 2005 has been little better. In some respects, it has further entrenched inflexibility in a system that is more complicated, bureaucratic and expensive than before. Innovation remains difficult within the narrow definitions and complicated drafting of the Act. To further aggravate the situation, the regulatory framework it sets out is directly contradicted or undermined by other legislation, particularly fiscal.

4. The Act has therefore been largely unsuccessful in updating the law in relation to gambling generally, and even more so in relation to online gambling. At the heart of the Act, and therefore of the Commission’s regulatory approach, is a flawed assumption: that it is possible to categorise all gambling which takes place outside a physical premises such as a bingo club as "remote gambling". "Remote" describes a method of delivery, not a form of gambling. It can refer to any technology that delivers gambling products within, between, or outside premises. It does not adequately describe or address the "online" gambling sector, even though it was the intended target of policy-makers at the time. The weakness of the Act’s remote gambling provisions was evident even before it was implemented, since two sub-clauses were repealed even before they were enacted.

5. All sectors of the gambling industry raised concern at the time the Bill was being debated that in the absence of a clear picture on levels of taxation, it was impossible to put in place a system of effective regulation. This has proved to be the case: the main target of the "remote gambling" provisions, namely online gambling operators, remain outside the system of GB regulation because the regulatory and tax regimes that apply to them are commercially unviable. In contrast, products such as linked bingo in clubs, which had previously operated successfully and without concern for many years, were burdened with additional and unnecessary requirements to hold remote operating licences. However, even though they hold "remote" licences, their ability to offer access to their online products is extremely limited. The "remote" provisions have caught products and operators who were already regulated under the provisions for terrestrial gaming by imposing a further, unnecessary, layer of regulation. Those who were outside British regulation at the time have remained outside, with others choosing to relocate offshore [1] .

6. Thus the 2005 Act has achieved the opposite of its stated objectives: the regulatory system it established for all forms of "remote" gambling drove the vast majority of online operators offshore. Although the White List is intended to ensure that operators accessing the GB gambling market are regulated in their home territory, there is little in place to test its effectiveness. The Government (and it would seem, the regulator) have not understood that online gambling operates under a very different business model to terrestrial gambling operations. A "one size fits all" approach to regulation simply does not work. HM Treasury were aware when it set a 15% tax rate that it was unlikely ever to be collected, since very few operators could sustain their online businesses in their current form under such a tax burden, particularly when they could easily find a less onerous tax rate offshore. In liaising with the Gambling Commission an operator who chose to base an online business in GB was asked if they had considered locating offshore. This would appear to suggest that the Commission is not greatly interested in taking an active role in the regulation of online activity, since it can fall back on the White List jurisdictions.

7. If Government is serious about online gambling operators being subject to the GB system of regulation (and therefore taxation) it will need to arrive at a regime more appropriate to the online business model and mode of operation. Even a licence requirement to advertise to and transact with GB customers will potentially be ineffective unless considered in parallel with the tax rate.

Financial impact of the Act on the bingo sector

8. The cost of regulation has increased significantly for licensed bingo clubs under the 2005 Act. In the last year of Gaming Board operation (2004/5), the total cost of licence fees to the Board from licensed bingo clubs was £1.13m [2] (for over 657 clubs). The total cost of Board operation at that time was £4.4m, with 77 staff costing £2.6m [3] . In 2009, 564 clubs paid licence fees totaling £2.7m. Over the four-year period that is an increase of 278% per club. In 2009/10 [4] the total cost of the Gambling Commission was £13.949m (down from £15.2m the previous year), with 222 staff costing £8.9m. This ignores the fact that bingo also pays GPT at a rate of 20% - the highest rate of taxation within the gambling sector.

9. The Commission’s Annual Report does not identify revenue from bingo licences separately. This lack of transparency is itself an issue for the bingo industry, since it is now impossible to see whether the cost of regulation is reflected in the fees charged, or whether cross-subsidy occurs. Indeed, there appears to be little scrutiny of Gambling Commission expenditure, nor application of the principles of budgetary constraint, other than the Government’s stipulation that it should operate on a balanced budget which is neither in deficit nor profit.

10. Bingo clubs also suffered significantly from the removal of machines played under s.21 of the 1968 Act, but removed in the 2005 legislation. Machine revenues dropped by 25% in the months following their removal [5] .

11. Funding for research, education and treatment initiatives is now co-ordinated through the GREaT foundation, to which bingo operators contribute. However, whilst the scale and profitability of the bingo sector has declined, the required contribution to GREaT has increased. This, combined with the fact that no account is taken of the "polluter pays" principle in determining contributions is a serious flaw. Yet the increased level of spending has seen little impact: levels of problem gambling in GB have been broadly static since before the 2005 Act was introduced. The bingo industry would welcome ongoing research, rather than the three-yearly cycle which has often generated a short-lived media frenzy, especially now that government funding for the Prevalence Study has been withdrawn. An ongoing programme of review would enable industry to respond more quickly and effectively should any problems be identified.

The effectiveness of the Gambling Commission and value for money

12. The principle of a single regulator for all gambling activities, is sound, and one that the Bingo Association supports, but the exclusion of the National Lottery and its commercial products (scratchcards and ancillary games) goes directly against the logic of this principle. At the time it was difficult to envisage the significant changes migration from the Gaming Board to the Gambling Commission would entail, their negative impact and the associated cost. In many respects the Commission is less effective than the Gaming Board, yet costs more, representing poor value for money.

13. The decision to relocate from London to Birmingham was part of a wider move within Government to save money and decentralise. However, there has certainly been no evidence of reduced costs for the Commission, which covers broadly the same role as its predecessor. The relocation resulted in a significant loss of key staff, many of whom had a wide understanding of gambling issues and the intricacies of the bingo industry, at a time when this experience was desperately needed. As a consequence, the transition to a new regulatory regime was unnecessarily complicated, since the accumulated knowledge of 40 years of regulation under the Gaming Act was not carried forward. There was no continuity from the outset, and this trend has continued with a constant turnover of staff at the Commission. The pool of expertise, built up over many years at the Gaming Board, was lost. Unlike other sectors, there is no National Compliance manager for bingo, nor has there been since early 2008. Under the Gaming Board, there was a bingo division. It is difficult to see how this could possibly be interpreted as effective, forward-looking regulation.

14. The approach to inspection has also fundamentally changed. Although clubs are paying significantly more in licence fees, the number of visits to clubs has dropped dramatically as a result of bingo’s status as "low risk". On a simple cost/benefit analysis, this makes no sense. Many clubs go three years without a visit. The visits themselves now focus on policy implementation, with little or no review of figures. This contrasts significantly with the previous regime, where inspectors would visit a club and review the figures, programme and policies for a specific day to check for compliance. In addition to the licence application process taking longer and costing more, small and straightforward alterations to a licence cost significant sums. One operator recently paid £9,990 for a variation to a casino licence. Such adjustments are unnecessarily expensive, and from the industry’s perspective bear no relationship to the actual cost of time taken to administer.

15. The Commission’s website provides little assistance in this regard. Whilst framed to be industry-, as opposed to consumer-facing, it is difficult to navigate and lacks the relevant and necessary links. Even basic searches for documents are made more complicated because they are not listed in date order. It is not possible to identify how much of the Commission’s budget is allocated to its website, but from our perspective it is ineffective. It also misses the opportunity to advise and support players by providing relevant information or appropriate referral, particularly on online gambling. Given that it currently has no regulatory control over this sector, advising players of potential hazards would seem to be an obvious step.

16. Where the Commission does get involved in developing understanding of the gambling sector, it can be counterproductive. For example, as a consequence of the regulatory returns it collects from bingo operators, it generates industry statistics. However, as the data is collected on a rolling basis, this means that there is no possibility of producing final figures; all Gambling Commission statistics are now qualified as "provisional". This makes accurate comparison with other industry statistics impossible and also leads to misunderstanding and confusion. When used by Government and other bodies as part of policy discussion and development, these inaccuracies foster suspicion and create tension because they are invariably at odds with industry-produced data. From an industry perspective, it would be more helpful if the Commission collaborated with the Trade Associations on their data.

17. Unfortunately for the industry, the lack of flexibility inherent in the 2005 Act is compounded by the Commission’s failure to fulfill effectively its statutory obligations to advise the Government on necessary updates to the legislative framework. It was obvious in the two years between the Act being passed and its implementation in 2007 that the provisions intended to cover online gambling would be ineffective, yet there is no evidence that the Commission has advised the Government on possible amendments. It took until 2010 for a consultation on the regulation of the remote gambling industry from DCMS to appear, and then only to outline a wide variety of options without any clear picture as to which, from a regulatory perspective, was likely to be most effective. One year on, despite assurances of urgent action, nothing further has emerged from the Department. Government policy ignores the fact that it is fiscal, not social, policy which is the main cause of operators choosing to locate offshore, and therefore remain outside the scope of the Act. The fact that the Gambling Commission, as evidenced by the confused and contradictory statements regarding "remote gambling" on its website, seems to fundamentally misunderstand the nature of the online market and the issues to be addressed, gives the industry little confidence in its ability to advise Government on the steps needed to keep legislation up to date.

Proliferation of offshore gambling operators and the Act

18. Development of the online gambling market has not significantly affected bingo in licensed clubs. However, the regulatory regime has meant that those operators also wishing to develop an online product have had to do so as a separate business. A more realistic approach to remote gambling operation would benefit licensed bingo club operators in that it would permit them to operate both aspect of their business together.

The effectiveness of gaming machine classification and regulation

19. Machine regulation has not been improved by the 2005 Act, particularly as far as licensing by local authorities is concerned. For example, no template for licence summaries has been provided by DCMS or the Commission, resulting in local authorities making reference specific machine entitlements on the face of individual licences, instead of enabling phrasing such as "such number of Category B machines as prescribed by statute". The consequence of this is that when any aspect of machine regulation changes, every individual licence must be reissued. The Commission seems unable to ensure that Licencing Authorities comply with their obligations under the Gambling Act and inform them when a Premises Licence is issued. Operators also experience difficulties with the Licencing Authorities when they issue incorrect premises licences; members have reported receiving betting licences when they have applied for bingo licences. This is the sort of unnecessary bureaucracy that the Act was intended to remove, not increase.

The Act’s impact on levels of problem gambling

20. Levels of problem gambling remain broadly the same as before the Act was implemented. It is therefore difficult to see how it has impacted, other than to increase costs, as outlined above.


Conclusion

21. The Association has noted a growing reluctance on the part of Government to engage with gambling-related issues. This appears to be as a result of increased sensitivity to the reaction of the media to gambling generally. The DCMS has issued two business plans within the past year, neither of which makes any reference to the gambling sector and is possibly an indication of the DCMS’ reluctance to meet its role as a supporting department and champion of Britain’s gambling sector. Decisions which are needed urgently have been delayed for long periods of time, in an apparent unwillingness to fully engage with the sector. The DCMS seems to be uncertain of its role as our "sponsoring department"; instead there is almost embarrassment, and a distinct unwillingness to engage in any form of public debate on gambling issues. Bingo and indeed the gambling sector needs a sponsoring department which is committed to and supportive of the sector and one whose remit is possibly more appropriate to business

22. The Gambling Sector is a business, like any other. Any concerns over social responsibility are addressed through the Act and regulated by the Gambling Commission, in the same way that sector-specific requirements are implemented and regulated in other industries. It may be more appropriate for gambling to be re-allocated to another government department whose focus is more on business and innovation rather than on the arts and media. The gambling sector in this country is responsible, well-regulated and generates significant employment and revenue for the UK economy. As stakeholders, we are entitled to engage with government in a co-operative and productive manner,, something which will only be achieved if the sponsoring department is interested in doing so.

June 2011


[1] “Ladbrokes confirms Gibraltar move for online gambling” , The Guardian, 6 August 2009

[2] Henley Centre, Bingo Industry Survey 2005 & Gaming Board Annual Report and Accounts, 2004-5

[3] GB Report, op cit

[4] Gambling Commi ssion Report and Accounts, 2005-6

[5] HCHLV Bingo Survey , 2007

Prepared 1st August 2011