Gambling

Written evidence submitted by the Department of Culture,
Media and Sport (DCMS) (GA 79)

Summary of DCMS evidence

· The Gambling Act 2005 (the 2005 Act) has been only partially successful in achieving its outcomes. While it is not in need of wholesale reform, we are committed to making any necessary changes to improve it.

· There has been concern from the gambling industry that the establishment of the Gambling Commission has resulted in increased regulatory costs, especially when compared with the cost of the Gaming Board of Great Britain. Some of the additional costs relate to the much wider role of the Commission but, even where the Commission provides reasonable value for money, the Government believes there is scope for reducing regulatory costs and burdens. The Department and the Commission should continue to look at how regulatory activity can best be targeted at where it has the greatest possible impact.

· There has to be a balance, but industry should be in the lead in both preventing and treating problem gambling

· Given the incomplete process for awarding the eight small and eight large casinos under the 2005 Act, it is currently not appropriate to reconsider the case for the establishment of a regional casino

· We believe that the failure of the policy to attract online gambling to base itself in the UK leaves a potential regulatory gap. The Government will announce its solution shortly.

· We have made changes to how category B3 gaming machines are regulated which improves how the 2003 Act operates, but we would need to be confident that any further relaxation of controls on gaming machines would not materially increase the risk of problem gambling.

Background

1. The Gambling Act 2005 was given Royal Assent on 7th April 2005. While some of the provisions within the act came into force during 2005 and 2006, its main provisions came into effect on 1st September 2007. The principal objectives of the 2005 Act were to modernise Gambling legislation and consolidate it into one Act, create the Gambling Commission to regulate all gambling (except Spread Betting) and ensure that gambling is properly regulated by three overriding licensing objectives;

· preventing gambling from being a source of crime or disorder, being associated with crime or disorder or being used to support crime,

· ensuring that gambling is conducted in a fair and open way, and

· protecting children and other vulnerable persons from being harmed or exploited by gambling.

2. The Gambling Act 2005 was a very long time in creation. After being commissioned by the Government, Sir Alan Budd produced "The Gambling Review report"(commonly referred to as the Budd report) which was published in July 2001. The then Government published its response "A safe bet for success" in March 2002. A draft Gambling Bill followed and was subject to pre-legislative scrutiny by a Joint Committee. It was finally introduced into the Lords on 19 th October 2004.

3. All of these changes, many of them late into the process of creating the legislation, meant that while it reflected Parliament’s will, the overarching structure ended up rather muddled. The problems were most apparent in relation to casinos. The original reports had proposed that casinos should only be limited by having a minimum size (so requiring sizable investment) to prevent proliferation and make them destinations instead of places for opportunistic gambling. However, following scrutiny, Parliament decided first that there should be classification of casinos, to regulate what each could offer, and then that there should be limits on each category. This accurately reflected the opinion of Parliament, but it meant that the 2005 Act itself was caught between a framework that was initially designed on largely economic grounds but included very specific regulatory constrictions.

4. We should be wary though of committing to wholesale reform of the Gambling Act. First of all, while the 2005 Act is muddled in parts, it does convey Parliament’s will over key principles and there is no evidence that either the public, or Parliamentary, view of these matters have changed greatly. Secondly, the legislation only came fully into effect in September 2007 and in many areas the delivery is still in its early stages and in a period of bedding down. To alter things now would be premature. Thirdly, objective decision making was difficult in the development of the 2005 Act because of a lack of evidence about issues such as the causes of problem gambling: that weakness remains. Until a robust and academically respectable evidence base is in place allowing us to understand the likely impact of policy changes, it would be unwise to embark on fundamental changes to the current law w hich would simply reignite the same arguments which hampered the development of the 2005 Act.

5. The 2005 Act does provide a regulatory framework, with much of its powers controlled by secondary and tertiary legislation which can be adjusted to deal with technological and social changes, something the previous regime was unable to do . The 2005 Act has been criticised by some in the industry as having increased the amount of regulation in comparison to the previous arrangements. While there may be some truth in this, and we need to drive out unnecessary regulation where we can, it is right that the gambling industry itself bears the full cost of regulation. The previous system saw half the costs of the Gaming Board of Great Britain being subsidised by the tax payer and applications to local licensing justices set at just £25, far below the true cost. Recent studies show that the UK public, whilst on the whole not approving of Gambling, believe that people should be free to gamble if they want to, provided that it is properly regulated. While both the Gambling Commission and the 386 Licensing Authoritie s are still learning, so too is the industry. As the system beds down further we expand both the Gambling Commission and Local Authorities to target their regulatory activities better and w hile we wan t to see an appropriate balance , we still believe that a single national regulator and local licensing authorities is the right approach.

The Gambling Commission

6. Remit - The Commission has a much broader regulatory remit than its predecessor. In addition to covering all forms of gambling (except spread betting) the Commission has the additional licensing objective to protect young people and the vulnerable, has the statutory duty to advise the government on the impact of gambling and its regulation, is a prosecuting authority and is the money laundering supervisory body for the casino sector.

7. Regulatory approach - The Commission takes a risk-based approach to regulating the gambling industry, which has been confirmed by independent reviews [1] . Their risk model takes account of a wide range of factors and risk is managed using a wide range of tools, only some of which are manifested directly in compliance visits to individual premises or through enforcement action. There have been complaints from the gambling industry that the Commission is not risk based enough, and that companies themselves can manage the risk of non-compliance with the licensing objectives in the same way they manage other risks. The Gambling Commission are responding though, and hope in the future they can rely more on the checks that companies undertake themselves, taking on more of an auditing role. Clearly they will themselves need to monitor the risks attached with this, but it offers further potential to reduce regulatory activity away from responsible operators and focus on those who present a higher risk.

8. Costs /resources - The Commission has managed a significant reduction in employee headcount. In 2007/08 (the year in which the whole industry was being licensed), for example, the Commission had around 300 people working for it in contrast to the 222 quoted in its most recent Annual Report. The Commission’s current headcount is around 200.

9. Local Authorities – Local Authorities are responsible for local compliance and enforcement. There is though some confusion over roles with some operators believing that the Gambling Commission is responsible for local matters and other believing their local authority had responsibility for national level issues. We look to the Gambling Commission and Local Authorities to resolve these issues.

10. Merger of the Gambling Commission and National Lottery Commission - The Public Bodies Bill, currently before Parliament, would allow Ministers to merge the Gambling Commission and the National Lottery Commission (NLC). In advance of this, the NLC will co- locating with the G ambling C ommission in Birmingham by the time that the lease on its London offices run outs in January 2012. It is expected that co-location and eventual merger will achieve synergies and ultimately some cost-savings, although these will be offset in the short term by transitional costs.

11. Tackling Problem Gambling - The British Gambling Prevalence Study 2010 (BGPS 2010 ) showed that there was probably an increase in the small proportion of problem gamblers in Great Britain since the Gambling Act came into force. While this is a cause for concern it should be noted that the increase was only marginally statistically significant, occurred in only one of the two measures used, and should also be taken within the context of an increase of around 5% or 3.5m in the number of adults gambling overall. The study showed that we had a similar level of problem gambling to other European countries and less than USA, Australia and South Africa.

12. Whilst the headline figure relating to the whole population is important it is also important to examine the proportion of gamblers who are problem gamblers. The BGPS 2010 found that the rate of problem gambling among past year gamblers was 1.3% according to the DSM IV and 1.0% according to the PGSI. We are not able to detect whether there was a significant change in these figures from 2007, but it does provide a useful benchmark going forward.

13. There is also no evidence that the changes in the regulation of this sector have had any effect on the level of problem gambling , either positive or negative . Government, regulators and the industry need to do more to understand the causes and effects of problem gambling as well as the measures that can be put in place to prevent, limit and treat the damage it can cause.

14. While Government needs to play its part it is clear that the gambling industry has to be in the lead, and this should not just be limited to treatment. While players themselves are the best judge as to what level of gambling is appropriate to their situation, responsible operators should take steps to spot problem gambling and bring it to the attention of the customer. The increasing automation of much of the industry makes this more possible and good training of staff can help spot problem gambling in less automated forms.

15. The Government does not intend, by itself, to reopen the structure for Research Education and Treatment (RET) but would encourage all stakeholders to work together to evaluate whether the arrangements work as effectively and efficiently as possible , and to make changes and improvements as needed without waiting for Government to do it for them . It is also clearly important that industry delivers on its commitments to funding which it made as an alternative to a statutory levy.

16. More should also be done to ensure that the work being funded through industry contributions is well publicised. So, for example, in addition to funding existing bodies such as Gamcare and Gordon Moody House , which provides residential treatment, the R esponsible G ambling F und :

· is funding a harm prevention programme aimed at university students,  and is to begin working with lead youth organisations;

· has funded the National Problem Gambling Clinic on a  pilot programme of specialist counselling to help adults, particularly women, to kick the habit;

· has launched pilot projects with addictions charities, citizens advice bureaux, GPs, law centres, the probation service, family support organisations and other community-based bodies in the midlands, Wales and Scotland to enable early identification and develop effective brief interventions as alternative cost effective ways of helping those affected by problem gambling;

· is funding a GP training package with Royal College of Physicians;

· has commissioned a new National Problem Gambling Helpline, which is to be widely accessible and cost effective;

· has a research programme focussed on machines underway.

17. Underage Gambling – Tackling u nderage g ambling is an example of how the new regulatory system has worked well. In 2009 the Gambling Commission conducted a test purchasing scheme in betting shops that showed a 2% success rate i.e. 98% of all visits resulted in underage players being allowed to gamble. This was clearly unacceptable, but following action from the C ommission, the industry themselves took control of the situation with good results. While the Commission and local authorities continue to undertake test purchase schemes, this is an area where the industry itself need s to take increasing responsibility for monitoring performance and enforcing its own safeguards.

18. Sports betting integrity – the 2005 Act introduced the offence of cheating and required licensed operators to notify the Gambling Commission and certain sports governing bodies (SGBs) of suspicious betting transactions. This gave the Commission scope to work with betting and sport to combat corruption. The Government is currently considering whether to expand the number of SGBs with which the Commission can share intelligence about suspicious activity. In addition, a number of recommendations made by the Sports Betting Integrity Panel in its report in February 2010 have been taken forward. [2]

19. Casinos - Small and Large Casinos – The 2005 Act allowed licenses for eight small and eight large casinos [3] with the 2007 report of the Casino Advisory Panel deciding the locations that would be allowed to award licenses. We are aware of the progress made of the 16 authorities granted a large or small casino licence, with some having awarded licences, some midway through their process and some yet to start.  These competitions are though the responsibility of the local authorities themselves and while we clearly have an interest in them, we have no formal responsibility in their operation.

20. We will wish to review the impact of small and large casinos before making any judgement on how casino licensing should be treated in the future. The timing of any such review will depend on how quickly suffici ent numbers of small and large casinos are in place to allow assessments of local impact in order to establish an overall picture.

21. Regional Casinos - The last Government proceeded with plans to award a regional casino licence with Manchester being identified as the location by the Casino Advisory Panel. However, following this they conducted a review of the regeneration benefits and decided that it would not be appropriate to continue as it was believed that a regional casino would only deliver marginal levels of regeneration once the social cost of increased problem gambling was taken into account.

The process for the eight small and eight large casinos has continued and we are committed to reviewing the evidence of their impact before deciding whether to award more licenses. Given this it would not be appropriate to re-consider the case for a regional casino until this review has taken place.

22. Remote Gambling - The Gambling Act 2005 aimed to strengthen how remote gambling in Britain is regulated.  However, experience since the new regime came into effect in 2007 suggests that system of regulating remote gambling from overseas based operators is not working as well as intended and is unsustainable.  At present, there are different regulatory standards and approaches, and UK consumers may experience varying levels of protection depending on the operator they deal with.  UK-based operators face unfair competition from overseas competitors who do not contribute towards regulatory costs.

23. Following the DCMS consultation on ‘The Regulatory Future of Remote Gambling in Great Britain’, which closed on 18 June last year, we are proposing that the Gambling Act 2005 will be simplified so that remote gambling is regulated on a point of consumption basis. This will mean that all operators selling into the UK market, whether from here or abroad, will be required to hold a UK Gambling Commission licence, increasing protection for UK consumers, supporting action against illegal activity (including sports betting integrity) and removing market distortions.   These proposals will help to address concerns raised recently about problem gambling and help to plug a regulatory gap. In addition, an indirect benefit of the proposals may be to increase the options for possible reform of the Horse Racing Betting Levy.

24. We will be announcing the proposals to Parliament via a written Ministerial statement on 14 July 2011 and attach a copy of that statement.

25. Gaming Machines - Gaming machines have seen huge levels of innovation over the last ten years. The introduction of category B2 machines ( often referred to as Fixed Odds Betting Terminals) within bookmakers was controversial, with the Government at the time believing that they were illegal. They were regularised by the 2005 Act and have become an important income stream for bookmakers. B2 machines are popular products with the public as well as bookmakers. They offer the opportunity to play a wide variety of games in a familiar environment. Their flexibility also allows operators to innovate easily, ensuring that players do not tire in the range of games offered.

26. They have though caused consternation among sections of the industry more traditionally associated with machine gaming, particularly Bingo Clubs and Adult Gaming Centres (AGCs) which could only offer four category B3 machines per premises. They point to the higher stake limit which has allowed far greater innovation in terms of offering differing products e.g. roulette, blackjack. Concerns have also been raised by community and church groups about the possible impact of B 3 machines on problem gambling, although the Government is not aware of firm evidence to support this view.

27. The previous Government acted on Bingo Clubs doubling their allowed number of B3 machines, but did nothing with regard to AGC s . This inevitably caused a reaction from AGC’s seeking to redress the balance. Many applied for Bingo Licenses, with little intention of offering bingo, but to offer the increased number of B3 machines. More sought to split existing AGC’s into different parts and obtains a separate AGC licence for each part, essentially allowing them to offer more B3 machines on the same site. Also some AGC operators have opened betting premises which allow them to offer B2 machines.

28. There is not necessarily a problem if operators wish to diversify in this way, but there would be concern if this were simply a device to offer higher stakes machines without the main gambling activity being offered that which is on the face of the premises licence. We support the Gambling Commission in their application of a primary use principle, and their further work to establish acceptable limits.

29. To further discourage the unnecessary splitting of premises, the Government has sought to put gaming machine numbers on a more flexible and adaptable footing, whilst still retaining sufficient control of machines and numbers. We have introduced a change in relation to AGCs and Bingo Clubs . The maximum stake has increased from £1 to £2 and instead of a limit of four or eight category B m achines per premises, each is allowed to have 20% of their total machine stock made up of category B machines.

30. We believe that these changes improve the regulation, allowing commercial freedoms without significant risk of increasing problem gambling. There will be calls for controls on gaming machines to be either relaxed or tightened, but in order to form a persuasive case either way we will need strong evidence that it would have a positive effect. In particular any further relaxation will need a high degree of confidence that it would not materially increase the risk of problem gambling.

Post Implementation Evaluation Of the Gambling Act 2005

31. In line with usual practice, the Government is required to submit a memorandum setting out an evaluation of the impact of legislation between three and five years after its enactment. For the 2005 Act, which came into force in September 2007, the Government would need to produce a memorandum not later than September 2012. The Select Committee has asked if DCMS could produce the memorandum to help inform its inquiry. We are happy to do this and the memorandum will follow shortly. This will include more detail of the various reviews of aspects of the 2005 Act that have already been completed and will supplement the evidence in this paper.

July 2011


[1] http://www.bis.gov.uk/files/file50888.pdf

[2] http://webarchive.nationalarchives.gov.uk/+/http:/www.culture.gov.uk/reference_library/publications/6607.aspx

[3] Under the 2005 Act a Small Casino must have a minimum total customer area of 750 m 2 and will be allowed 80 category B gaming machines. A large casino must have a minimum total customer area of 1500 m 2 and will be allowed 150 category B gaming machines.

Prepared 1st August 2011