Gaming Board's Response to Joint DCMS/ODPM
Statement on Casinos of 7 August 2003
PRELIMINARY
1. The Boards concerns are confined to regulation.
We take no position as to the desirability, for public purposes,
of encouraging or discouraging casinos of any particular size,
except insofar as there are regulatory implications.
2. We have long advocated taking care in
the reform of Britain's gambling laws to avoid the unintentional
proliferation of small, unregulated casinos. This spectre was,
in the Board's opinion, adequately laid to rest by the formula
recommended in the Budd Report (a minimum gaming area in casinos
of 2,000 sq ft and a limit on the number of gaming machines of
eight times the number of tables). Since the formulae proposed
in the DCMS/ODPM Statement are more restrictive than this, it
follows that we do not consider that they are likely to lead to
any proliferation of premises such as to raise regulatory concerns
for the Gambling Commission.
3. The Statement does, however, raise questions
about what the space requirements and table to machine ratio specified
in it will mean in practice, and in this response we draw attention
to the areas of doubt and in some cases suggest remedies. What
principally matters to the Board is that the law should be clear
and workable. The Board has concerns that the current proposals
may be neither.
LARGE CASINOS
4. The reasons for implications of the link
between the 10,000 sq ft of table gaming area and 40 gaming tables
are unclear. Forty gaming tables can be comfortably fitted into
a much smaller area than 10,000 sq ft. If this is done, why should
spare space not be used for other purposes? One option would be
to let casinos use it for other (non-machine) gambling. An alternative
formula, although this may now be too late politically, would
be to specify the minimum floor space for the public area of a
casino (which would have to be much larger than 10,000 sq ft to
achieve the same policy objective) and leave it to the commercial
judgement of operators how to fill it (resturants, bars, bingo,
betting etc), with the proviso that they can only have unlimited
number of machines when they have at least 40 tables.
5. The stipulation of 40 gaming tables available
for use as the threshold for entitlement to an unlimited number
of gaming machines raises questions of definition. The mere existence
on the premises of 40 tables cannot be sufficient to achieve the
Government's policy purposes. The tables must, we presume, be
regularly available for play. It is, however, unreasonable to
require either that a particular number of tables are actually
played whenever the casino is open or at specified times, or that
the tables should be fully staffed at all times when there are
no customers. The Gambling Commission will have to devise in due
course a working definition of what is meant by "40 gaming
tables regularly for play", if this is the policy intention,
but the intention does need to be clearly established in advance
so that the industry understands the implications.
6. A related question is what happens if
a large casino, having installed, say, 300 gaming machines, subsequently
fails to satisfy the "40 gaming table regularly available
for play" criterion? Is the policy intention that it must
then revert to the limit of three machines per table; in other
words take most of its machines out of play? And would it have
to do this if the machines are heavily in demand? If it does not
have to remove machines, there is potential for the formula to
become quickly discredited. But if it does, there are obvious
commercial ramifications in respect of the risks to what would
have been substantial investment. We regard this as providing
protential for difficult, bitter and undesirable conflict between
the Gambling Commission and operators.
SMALL CASINOS
7. The ratio of 3:1 may be a deterrent to
the development of new casinos under 10,000 sq ft, and indeed
that may be the (unstated) policy objective. But there is a real
risk that such a ratio could be sufficient to satisfy customer
demand. That would concern the Board if, for example, it led to
queues, intimidation of those using machines or punters reserving
machines. Of course, that does not happen now in casinos with
fewer machines, but expectations of those entering the new casinos
are likely to be different given the unlimied stakes and prizes
on the new slot machines. The ability to amend limits, as envisaged
in the Statement, is important.
8. There is a need for clarity about the
grandfather rights of casinos falling below the new minimum area
of 5,000 sq ft. The eight top London casinos, which attract high-rollers
from overseas and together account for 25% of the total casino
drop in Great Britain, all belong in this category. What would
be the position if, say, one of these had to leave its current
premises on the expiry of its lease or for some other reason?
Would it be forbidden to start up next door unless it satisfied
the 5,000 sq ft criterion (which might mean doubling in size)?
AUTOMATED ROULETTE
9. Another issue related to the gaming machines
ratio is how to account for automated versions of table games
such as roulette. One solution is to permit casinos to install
up to a specified number of terminals and to provide that these
do not count against either table or machine numbers. The specified
number might be related to the permitted number of machines or
perhaps better to the number of available live gaming tables.
October 2003
1. EXECUTIVE
SUMMARY
BACKGROUND
1.1 The Gaming Board for Great Britain (GBGB)
is the regulatory body for casinos, bingo clubs, gaming machines
and larger society and all local authority lotteries in Great
Britain. Following the recommendations of the Gambling Review
Report—"The Budd Report", the Government's response
"A Safe Bet For Success" set out its intentions for
future policy, including the introduction of a Bill to modernise
gambling law. The legislation will include provision for a single
regulator—the Gambling Commission.
THE PURPOSE
OF THIS
REPORT
1.2 In the light of the proposed legislation,
PKF was commissioned by GBGB and DCMS to undertake a scoping study
to:
— Describe the full range of tasks
falling to the Gambling Commission;
— Estimate the resources required and
costs of carrying out these tasks;
— Consider how the Gambling Commission
should be organised to carry out these tasks; and
— Make recommendations concerning the
establishment of the Gambling Commission.
1.3 This report is the output from the scoping
study.
THE TASKS
OF THE
GAMBLING COMMISSION
Key Objectives
1.4 The key objectives of the Gambling Commission
will be to regulate all activities relating to gambling within
Great Britain, to ensure the prevention of crime and disorder
(arising from or within gambling activities), to ensure that gambling
be conducted fairly and players know what to expect and to ensure
the protection of children and the vulnerable from the harmful
effects of gambling. These objectives are similar to those of
the existing Gaming Board.
Scope and Responsibilities
1.5 The scope of the Gambling Commission's
authority will include the entire gambling industry, except the
National Lottery and spread betting, to bring all operators within
a single system of licensing and regulation. This includes the
regulation of betting and on-line gambling; sectors not previously
regulated by the Gaming Board.
1.6 The core responsibilities of the Gambling
Commission will be licensing gambling operations, monitoring licensed
gambling operators and enforcing licence conditions, investigating
and detecting illegal gambling, providing advice and guidance
and handling complaints and queries. Of these responsibilities,
some are currently being performed by the Gaming Board but will
now need to be applied to additional sectors. Other responsibilities
will now require a change in emphasis as a result of new legislation.
Other responsibilities will be wholly new.
1.7 Section 3 of this report sets out the
tasks falling to the Gambling Commission in more detail.
THE COSTS
OF THE
GAMBLING COMMISSION
1.8 Having established the terms of reference
of the Gambling Commission, we built a business model which allows
the future ongoing resource and cost requirements of the Gambling
Commission to be estimated under different future scenarios.
1.9 The model was constructed using the
current Gaming Board business as a base and it extrapolates the
resources utilised on current activities by using agreed projections
of future activity levels. Where new activities will be undertaken,
the nature, amount and level of the activity was considered and
the likely resource requirement modelled. Current overhead ratios
were projected forward, together with a recommended efficiency
gain of 15% across the business, based upon our view of the likely
economies of scale and opportunities for improved use of ICT.
The model was then subject to a 10% sensitivity factor to establish
the final figures.
1.10 In short, the model, described in more
detail in Section 4 of this report, indicates that the Gambling
Commission will be an organisation of some 200 staff, with operating
costs of between £9 million and £11 million. Transition
and implementation costs are not included in these figures and
will now need to be calculated separately.
THE ORGANISATION
DESIGN OF
THE GAMBLING
COMMISSION
1.11 Four potential options for the future
organisational structure of the Gambling Commission have been
identified and evaluated in this report against agreed criteria.
Three of the designs, which were primarily sector driven (casinos,
machines, betting etc.), were ruled out of contention because
they failed to meet one or more organisation design criteria.
1.12 The recommended design is a function-based
organisation structure, offering a single Operations Directorate,
organised by function (licensing, enforcement etc.) with a separate
Remote and Machines Unit organised by sector, and a separate Policy
Directorate organised by function, then by skill.
1.13 The recommended organisation design
is illustrated below:
IMPLEMENTATION PLAN
1.14 In order for the recommendations of
the scoping study to be further developed, validated and implemented,
a framework implementation plan forms part of this report. This
consists of three main phases, underpinned by appropriate project
management disciplines and agreed milestones as illustrated overleaf,
with indicative timescales:
1.15 There are a number of factors which
will influence the implementation plan. These include the timing
of new legislation, the timing of senior management and Commissioner
appointments and the ability to commit expenditure under the auspices
of the new legislation. As soon as these factors are clearly understood,
the implementation plan will need to be revisited to ensure that
it is driven by the desired timeframes.
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