Gambling

Written evidence submitted by the National Bingo Game Association Limited (GA 70)

1. The National Bingo Game Association Limited manages the National Bingo Game and works with GB licensed bingo club operators. It welcomes the opportunity to submit evidence to this inquiry and hopes that this process will prompt necessary changes in order to improve efficiencies, address the balance in the burden of regulation on the bingo sector and provide a more effective and workable framework for all parties.

2. The National Bingo Game is played in approximately 200 clubs, linked via remote operating equipment. It holds a remote operating licence, and all clubs which participate in the game are holders of an ancillary remote licence, in addition to their premises and operator’s licences. The game operates by linking together a large number of clubs electronically, in which all participating players compete for large central prizes at regional and national level. It has been operating since 1986 and so has direct experience of the regulatory regime under the Gaming Act 1968, regulated by the Gaming Board, and the Gambling Act 2005, regulated by the Gambling Commission.

Effectiveness of the Act in maintaining core objectives

3. Gambling in GB was widely regarded as a model for good regulation before the 2005 Act. In her introduction to "A Safe Bet for Success", Secretary of State Tessa Jowell commented that:

"We want to see a successful British gambling industry; one that is able to respond rapidly and effectively to technological and customer-led developments in both the domestic and global marketplace, building on its reputation for quality and integrity, and in the process increasing its already important contribution to the UK economy."

The Gambling Act has successfully maintained this high standard of regulation for gambling in licensed premises, albeit with higher costs and regulatory burdens for the industry. However, shortcomings have meant that it has not been the deregulatory tool that the industry was promised. For the National Bingo Game and the clubs which offer it, the Gambling Act introduced new and unnecessary licensing requirements which increased costs to clubs and reduced flexibility. Overall there was insufficient time given to debating the intricacies of the new regime, and in particular how this would be reflected in fiscal legislation. The result is an Act which should offer flexibility and the opportunity to innovate, but does not. The Act clearly does not allow industry to respond rapidly to change, nor operate in the global context that the Government envisaged.

4. There is an ongoing failure on the part of Government and the regulator to understand the distinction between "remote" and "online" which results in confused and contradictory policy. "Remote" describes technology: the National Bingo Game delivers its game via an electronic link, even though it is played in clubs. Hence it is classified as remote, even though it takes place in a licensed premises. Remote gambling can take place via TV, a mobile phone, the internet, or in a club. "Online" describes the multitude of different gambling opportunities offered on the internet and is the phrase generally used and understood by consumers.

5. The Act has been totally unsuccessful in achieving the objective of bringing

online gambling within the British regulatory framework. The Government’s intention to regulate "remote" gambling is widely regarded as a failure, mainly because the fiscal policies needed to encourage operators to locate within Britain rather than offshore were not put in place. As a consequence, nearly all gambling which targets the UK market online is located and regulated outside the GB system of regulation. The Commission has a statutory responsibility to advise the Government on updating the legislative framework for all forms of gambling, including online, yet is only able to collect information on 20% of the online market, the remainder being outside the GB regulatory framework and therefore not required to provide information. In our view this is a key failing of the Act, that substantially limits the ability of the Gambling Commission to meet its statutory requirements and fails to ensure a loop of continuous review and development for sector,

6. Online gambling has totally redefined the gambling landscape. Yet the 2005 Act seeks to classify and regulate it using non-remote terminology and definitions. This will not work. Online operations use an entirely separate business model, access their customers in a very different way, and attract a wider variety of players. Many of the requirements put in place do not take account of the risks and demands of the internet. Players must have more information about who they are trading with, where they are based, and a means to assess how reliable and trustworthy they are. The current system, even with White Listing, does not do this in a way that is immediately transparent.

7. In this respect the Act has failed to ensure that online gambling is conducted in an open and fair manner, since there is so little online gambling under the Act’s control. The internet is the ideal environment for customers to be misled: players will draw the conclusion that a website ending in ".co.uk" is based in the UK and regulated under UK law, but they would almost always be wrong. Similarly, websites can add a raft of symbols on their home page (gambleaware.co.uk, GamCare etc.) which give players a sense of security but in reality mean little in terms of regulatory control. The relationship between the player and the operator also lacks transparency, since web site owners usually have an off-shore third party software provider, who is licenced in the relevant White List or EEA jurisdiction.

8. Many GB-based gambling operators would welcome the opportunity to integrate their terrestrial and online operations. However, the tax regime makes this commercially unviable. The decision to locate offshore is nearly always economic, not regulatory, particularly for operators who already hold operators’ licences under the 2005 Act. The benefit to both operators and consumers of a unified approach is obvious, since the relationship between them would be direct, rather than via a third party. This would also act to highlight websites that are passing themselves off as regulated in the UK when they are not. The present White List system is not effective in achieving this. The approach to online regulation needs to be more open and flexible, addressing the particular needs of this sector, rather than seeking to overlay the existing tenets of UK gambling regulation. The failure to address both social and tax law simultaneously immediately undermined the Act’s credibility as far as online regulation was concerned. Industry highlighted this on numerous occasions during the legislation’s development and passage through Parliament, without effect.

9. The National Bingo Game Association finds it particularly frustrating that the few elements of the Act that could have been genuinely deregulatory for bingo, have been neutered by poor drafting or necessary amendments to related legislation being ignored. For example, the National Bingo Game would like to be able to offer a game to its member clubs in the UK which linked it to gambling outside the UK. There is nothing in the 2005 Act to prevent it doing so. However, because s.20A (4) of the Betting and Gaming Duties Act 1981 requires that "subsections (2) and (3) shall apply only where the combined bingo is played entirely within the United Kingdom" this is not commercially viable. This effectively applies double taxation to any bingo which links to locations outside the UK, despite the fact that the NBGA holds a full remote operating licence.

The Effectiveness of the Gambling Commission and value for money

10. The cost of running the GB regulator has ballooned since the Act was implemented. This is difficult to justify, given that the anticipated workload from remote (online) gambling has failed to materialise. As far as the remote gambling sector is concerned, and particularly online, the Commission has clearly been ineffective in achieving its regulatory objectives, since almost all of the online sector is located offshore, albeit primarily for economic reasons.

11. It is difficult to identify any definitive action from the Commission in advising the Government on necessary changes to bring the online market within UK regulation, in the absence of greater market data and full understanding of the sector and business model. Four years have passed since the Act was implemented, six since it was enacted, during which the online sector has grown exponentially. The consequences of addressing social and tax legislation separately should have been as obvious to the Government as it was to the industry.

12. The Commission often works hard in support of operators. One holder of a GB remote gambling licence commented on the difficulties he had in applying for it:

"the inspectorate were incredibly helpful and considerate and understood our plight and anxieties…..As one of Ms Williams inspectors said at a meeting ….." with the introduction of the new Act we should have hit the ground running instead we hit the ground limping""

However, the Commission often finds its hands tied because the system cannot work effectively as currently constructed. Primarily its job is to regulate the system as established by the Act: if the Act is not functioning properly, the Commission has no authority to change it. However, the Commission could and should advise Government in the strongest possible terms that a review is necessary, and that any such review should look at all areas of policy which determine the effectiveness of the regulation of online gambling, including taxation. The Commission would then be in a position where it could regulate online gambling in the way policy-makers intended when the Act was drafted.

13. In the absence of legislation bringing online operators under the Commission’s remit, it could and should have taken a more active role in providing advice to consumers on protecting themselves in the online gambling market. In the context of online gambling, "vulnerable" has a much broader connotation: there are fewer checks and balances, and players often don’t understand how to look for signs of a secure site. The principle of "caveat emptor" is too widely applied online, so advice from the Commission to players on how to recognise signs of an encrypted (and therefore also non-encrypted) server would be valuable. Many players are still naïve as to the extent it is possible to mislead online, particularly through a sophisticated design to give the impression of a robust, professional business. In this respect, people who would not ordinarily be regarded as vulnerable, and more importantly may not recognise themselves as vulnerable, can be in the online marketplace. The Commission should be taking what steps it can to help them protect themselves.

14. Whilst these concerns may not apply to most of the operators currently accessing the GB market, the Commission could do much to assist players in making informed choices. However, its website refers only to "remote gambling" a phrase which means very little to most consumers. The ASA has been a more effective force in regulating online operators through their advertising than the Commission has been on regulating the gaming activity, and whilst banks are producing software to assist clients in monitoring transactions made online, the Commission has done little to inform general understanding of online gambling and in failing to do so has missed an opportunity to educate and inform.

15. When consultation does take place, it is often badly structured and poorly timed. A consultation, ‘The Regulatory Future of Remote Gambling in GB’, was launched in March 2010 . Over a year has passed with no action or response whatsoever from Government. During this time there has, and continues to be, substantial change and uncertainty in other European markets, as member states address the online issue. Following other EU Member States at this time will not provide an effective model of regulation and/or successful sector development and growth; potentially the complete reverse. A heavily regulated/taxed regime will push operators out of a host country, off-shore, and potentially into unregulated markets, driving the business underground into the black market, and opening up the opportunity for criminal involvement.

16. The industry, terrestrial and online, needs clarity. It is easy to consult, but such activity should lead to decision-making and action over a much clearer time-frame. What the industry currently has is confusion over online, that prevents holistic development of the GB gambling sector overall. It needs joined-up thinking from Government and the regulator on social  and tax law rather than disjointed policy developed in isolation. The 2005 Act could and should maintain effective regulation whilst allowing the GB bingo industry to innovate and compete, both online and in club. The Government should undertake a thorough and urgent review to remove inconsistencies and anomalies in the Act, and at the same time bring forward realistic proposals to allow the online sector to operate within UK regulation, stimulating UK growth and technical development to drive the industry forward.

June 2011

Prepared 1st August 2011