1.Government has a poor understanding of gambling problems and the consequences for people and public services, and therefore of how to target its limited resources effectively. Problem gambling can have devastating consequences on people and their families, including financial loss, relationship breakdowns, criminality and suicide. Government and regulators need to understand the causes and impacts of gambling harm to design an effective response and target resources where they are needed most. However, government’s understanding of gambling harms is limited compared with other public health issues such as alcohol dependency or obesity where there is more comprehensive research available. Moreover, the department did not appear to consider the scale of gambling harm to be on a parallel level with other public health issues, despite evidence to the contrary in the Commission’s own reports. The Commission also does not systematically gather and use the perspectives of those with lived experience of gambling-related harm to inform its work, although it has recently started to do more in this area. It relies on independent research to inform its understanding of gambling-related harms. In its evidence the Department repeatedly referred to the need for evidence based policy-making. However, despite gaps in the evidence base, the Department has not proactively funded gambling related research. Work is currently being undertaken by other parts of government, including by Public Health England and the National Institute for Health Research, which the Department believes will assist its understanding of the problem.
Recommendation: The Department and Commission should write to us within three months and set out what actions they will take to ensure they have the research and evidence base needed to better understand gambling problems, and to design an effective regulatory response.
2.The Commission’s ability to identify problems and intervene is hindered by its lack of data and insight into the problems that consumers have with gambling operators. There are very significant gaps in the Commission’s intelligence base to identify and respond to problems. For example, it receives very few reports on local licensing authority inspections of gambling premises. In 2018–19, 119 licensing authorities out of 380 in Great Britain did not conduct any inspections, including almost all licensing authorities in Scotland, and around 60 had not conducted any for the past three years. For online gambling, which the Commission recognises as the main area of increasing risk and complexity, it does not access gambling transaction data from banks or payment providers to understand how people are gambling in order to better protect them, although it does access this data for its work on anti-money laundering. The Commission has been gathering intelligence on the Covid-19 lockdown, learning, for example, that people who gamble a lot already are gambling more. However, it does not have data on whether the industry is meeting its own voluntary commitments or whether the Commission needs to intervene directly. The Commission recognises it can be more effective in using big data to monitor consumer behaviour and protect people from harm.
Recommendation: In its response to this Committee, the Commission should provide an update on gambling patterns during Covid-19, an analysis of how far the industry has met the 10 commitments, and any regulatory action it has taken against the industry. The Commission should also explain how it will improve the data and intelligence it uses to identify what is going wrong for consumers and to enable it to intervene quickly, including taking advantage of any opportunities presented by big data.
3.The Commission is not proactive enough at influencing gambling operators to improve protections, and consistently lags behind even the industry. The Commission acknowledges that it has been slow to update the rule book for operators when it has identified weaknesses or other issues. For example, after identifying problems in 2015, it took the Commission three years to make changes to licence conditions and codes of practice to reduce the potential for consumers to be misled by terms and practices relating to online bonus promotions and stop operators preventing customers withdrawing funds from their accounts. Public confidence that gambling “is fair and can be trusted” has collapsed from 49% in 2008 to just 34% on the most recent data. The Commission and the Department argue that they need to establish a sufficient evidence base to justify making changes to regulations, but this slowness in gathering evidence results in unnecessary delays during which consumers continue to experience harm. The Commission does not make use of reputational incentives, such as league tables which are used by other regulators, to proactively influence operators to improve their behaviour. The Commission identified increased risks to consumers due to the Covid-19 lockdown, but did not pre-emptively place any restrictions on the industry to prevent harm from occurring, such as deposit limits. Furthermore, the Commission recommended a maximum £30 per spin limit for Fixed Odds Betting Terminals (up to 15 times the eventual £2 per spin limit determined by Parliament and higher than even some in the industry had suggested). Despite the rapid increase in online gambling, the Commission has not brought forward proposals for any effective harm reduction for online fixed odds betting. During the pandemic, part of the industry made its own decision to remove the advertising of gaming products on TV and radio for at least six weeks.
4.The Commission did recently impose a credit card ban on online gambling, but does not yet know how effective this will be in reducing gambling harm. This measure also has no effect in addressing concerns around young people, who do not have access to credit cards, including 16 and 17 year olds gambling.
Recommendation: The Commission should develop a plan for how it will be more proactive in influencing the industry to treat consumers better, including using reputational tools such as league tables indicating how well each operator treats its customers.
The Commission should urgently investigate the impact of fixed odds betting that falls under “lottery” legislation and is accessible by 16 and 17 year olds.
The Commission and the Department should urgently look at online fixed odds betting to ensure effective and efficient regulation and report back to the Committee with how they intend to increase effectiveness of online harm reduction within three months.
5.Where gambling operators fail to act in a socially responsible way, consumers do not have the same rights of redress as in other sectors. Within the current regulatory arrangements, consumers have limited rights of redress for complaints when gambling operators breach social responsibility codes of practice, as these are not normally reflected in operators’ terms and conditions. This includes, for example, complaints where operators have not acted with due care to meet their code obligations to prevent a consumer from gambling too much or to help a consumer stop gambling for a defined period of time. In other sectors, particularly those with an ombudsman, consumers are provided with greater protections and access to redress on social responsibility issues. The Commission and the eight dispute resolution providers receive thousands of consumer complaints each year against gambling companies that cannot be considered, let alone resolved, because of these gaps, even when individuals have not been protected adequately by operators. Individuals who may have lost thousands of pounds can only seek redress by taking legal action which they are unlikely to be able to fund. As a result, the current regulatory regime is ineffective in meeting the licensing objective under the Gambling Act to protect vulnerable people.
Recommendation: The Department and Commission should work together to assess the impact on consumers of gaps in redress arrangements and examine options for increasing statutory protections with an individual right of redress for breaches of the Social Responsibility Code of Practice. In their response to this Committee, they should explain how they intend to resolve these gaps and report back to the Committee on a plan for more effective consumer protection and redress within 6 months.
6.The Department and Commission do not know what impact they are having on problem gambling, or what measures would demonstrate whether regulation is working. There are an estimated 395,000 problem gamblers in Great Britain, of which 55,000 are children aged 11–16. A further 1.8 million people are at-risk of problem gambling and may also be experiencing harm. 16 and 17 year olds gambling was an area that the Gambling Commission, in evidence to the Committee, appeared to fall between the “child” and “adult” areas and there was limited evidence gathered around the impact of gambling on this group. The Department and Commission agree that these levels are unacceptable, but would not set a target for how much problem gambling should reduce, or by when. The Commission has clear overall objectives to ensure that gambling is fair and safe, but does not have meaningful indicators to measure whether it is being effective, and therefore to be held to account. The Commission also has limited understanding of the impact of its actions to improve outcomes for consumers. For example, it increased the value of the financial penalties it enforced from £1.4 million in 2014–15 to £19.6 million in 2018–19, but it does not know whether this increase has strengthened the deterrent on operators to break rules. The Commission acknowledges it can do more to improve how it evaluates its impact and is planning work to strengthen its evaluation framework.
Recommendation: The Department and Commission should develop meaningful outcome measures for problem gambling and associated harms. The Commission should also urgently progress its impact evaluation processes, so it can clearly measure the effect of its interventions and report back to the committee on what it is doing to both assess the impact and effectiveness of the penalties on incidents of problem gambling within three months.
7.The Commission’s ability to protect consumers is constrained by limits imposed by the legal and regulatory framework. As the gambling industry changes in response to technological and social developments, the risks to consumers also change. The Department recognises this and has committed to reviewing the Gambling Act 2005, with a particular focus on online gambling. It is important that regulators have capacity and flexibility to respond to industry developments and new risks as they emerge. However, the Commission is a small regulator and its licence fee model, which is outside its control, does not allow it to change licence fees or raise additional resource. This makes it difficult to quickly move resources to address new issues, or to invest in addressing specific skills gaps such as in digital technologies. Under the current regime, consolidation within the industry results in a reduction in the Gambling Commission’s budget regardless of the impact on the gambling yield. The Gambling Commission told the Committee that a recent merger could result in a reduction of £400,000 in the Commission’s budget. In contrast to the Commission’s £19m a year, the gambling industry has agreed to spend £60m to treat problem gamblers. The government has approached other public health issues on the basis that prevention is better than cure. However, the Department was unwilling to accept the premise that increasing the Commission’s budget to prevent harm would be preferable to spending on treating problem gamblers. The Commission and the Department are currently looking at how to improve the regulatory funding model. The Department recognises that it can change licence fees through secondary legislation, but argues that some aspects would require primary legislation, particularly if the Commission needed additional powers.
Recommendation: In its response to the Committee, the Department should set out a timetable for the planned review of the Gambling Act within three months. The Department should also set out details on how it will ensure the Commission has the funding and the flexibility it needs to regulate effectively in a legal situation in which currently fewer, larger firms means less funding for regulation.
Published: 28 June 2020