Examination of Witnesses (Questions 160-179)
PETER DEAN
CBE, TOM KAVANAGH
CBE, GERALDINE MENEAUD-LISSENBURG
AND ELLIOT
GRANT
18 DECEMBER 2003
Q160 Chairman: Absolutely. There was
a suggestion as well about what the charitable trust itself might
do in this field. Although technically it is your responsibility
they may wish to undertake a bit more research on Prevalence Studies
in this area. I am glad that we have been able to facilitate an
exchange of views between you and the minister. Could I come back
briefly to this question of what powers you will have to deal
with social problems? A crucial element of your licensing role
will be assessing fitness and properness. What has impressed me
over the last two or three years as I have looked increasingly
at these issues, particularly as shadow minister previously, is
the extent to which the industry takes social responsibility issues
extremely seriously. How far do you think you can use the licence
conditions' fitness and properness perspective as a means of enforcing
that kind of social responsibility, particularly for new players
in the industry that are likely to come here from abroad?
Mr Dean: I think that social responsibility
will clearly play its part in the conditions that are imposed
upon licensees. I do not see this as being a particular difficulty.
I have made it my business in the new applications that we have
received over the last months to ask applicants what their views
are about social responsibility and problem gambling, particularly
those from the United States. The answers have uniformly been
impressive in this area. They do a tremendous amount of work and
they have well formulated procedures for doing this. I do not
see this as being an area of contention with the industry, either
the domestic industry or any newcomers.
Chairman: It will not be an area of contention
with the industry, I do not think, but it is an area where public
opinion may express a view, particularly that part of public opinion
that is unhappy at the potential expansion of gambling opportunities,
so I am very grateful for your answer.
Q161 Lord Mancroft: I am not going back
to the idea of a Prevalence Study or research, but would it be
the Board's view and possibly the Commission's in the future that
anybody who wanted to abolish something that has existed for many
years should conduct research to make that point? Is research
the basis on which decisions of that sort should be made? Would
that be your view?
Mr Dean: I am not sure that I
fully understood the question.
Q162 Lord Mancroft: If you want to make
a change, either because somebody is disagreeing with something
happening in the industry or they just wanted to change something,
do you think that research is the basis on which those sorts of
decisions should be made?
Mr Dean: I think it depends on
exactly what sort of decision one is talking about. Certainly,
decisions should be made on some principled, logical basis. Whether
research is necessary or not I do not know.
Q163 Lord Mancroft: I merely raise that
because this is something the minister said. We did not ask him
particularly but he said this and I thought it was an unusual
thing to say. I was wondering if this was your view as well.
Mr Dean: I am not quite sure what
the minister would have been referring to. What I would say is
this. There is a flurry of activity in relation to problem gambling.
One has certainly seen some decisions being made, and I am thinking
of Australia in particular, in response to problem gambling issues
which it is not clear to an outside observer are based on any
logical ground. They are done perhaps as a knee-jerk reaction.
They may limit the amount of gambling but it is not at all clear
that they actually assist with problem gambling. This is an area
where undoubtedly there is scope for more research and I can certainly
see a need for that research to bolster whatever measures are
put in place to help with harm minimisation.
Chairman: Lord Donoughue has to go shortly.
We are going to come on now to the general issues of new areas
of responsibility and Lord Donoughue wants to ask you quite a
lot of questions on that.
Q164 Lord Donoughue: I apologise. I have
to go and introduce a Bill on animal welfare. I am sure there
is no significance in that. I want to ask about three related
areas concerning grey aspects of your responsibilities, if you
like, first, betting exchanges, a rapid area of growth. I wonder
how you propose to meet the challenge of regulating something
that is capable of growing rapidly. Maybe we just do not fully
understand all the implications.
Mr Dean: We first of all have
to say immediately that we do not regulate bookmakers at all and
therefore our detailed knowledge of this area is slight. So far
as the "fit and proper" test is concerned for allowing
people into the industry in the first place, I do not see that
as being fundamentally different from the types of fit and proper
testing that we do already, that is to say, if you are assessing
somebody's probity, their technical competence and their financial
adequacy, so to that extent we are on familiar territory. When
it comes to monitoring and the difficulties that have been publicised
with regard to betting on horses to lose and so on, there clearly
there is a lot of work to be done and I cannot tell you now how
we will do it. That is certainly something which the Commission
will have to address and the Board will have to address in advance.
Q165 Lord Donoughue: Might you have a
separate division or something like that to keep that special?
Mr Dean: There will certainly
be specialist people concentrating on this area.
Q166 Lord Donoughue: Secondly, looking
at two areas where you are not currently scheduled to look, that
is, the National Lottery and spread betting, could you suggest
to us whether you feel there are any disadvantages in having a
separate regulator in the National Lottery field? Would you like
to have that under your wing? In relation to spread betting, where
you indicate there might be concerns about whether that would
be properly regulated in the areas in which you may develop, how
is DCMS responding to the concerns you have expressed in that
area?
Mr Dean: On the first, the National
Lottery, we have made no takeover bid for the National Lottery.
We are agnostic on the subject. I would go further and say that,
so long as the National Lottery has as one of its core objectives
to increase the amount of money raised for good causes, that is
something which would create a conflict of interest which the
Gambling Commission could well do without, and so I do not think
that that is something which we would want to take on if the National
Lottery retains its current objectives. So far as spread betting
is concerned, these concerns which we alerted you to have arisen
relatively recently in discussion with some of the spread betting
operators, and our concern there is simply that if casinos wished
to introduce a spread betting facility as part of their product
offering, then it does not seem to make much sense to have one
regulator dealing with that bit of the casino's operation and
the Gambling Commission doing the rest. That would seem to be
a messy arrangement.
Q167 Lord Faulkner of Worcester: Can
I take up what you just said about regulating the National Lottery?
Would it not work if the terms of reference for the National Lottery
were split so that the National Lottery Commission continued to
have responsibility for maximising the return to good causes but
you take over responsibility for protecting the players?
Mr Dean: If the obligation to
raise money for good causes were split out I do not know that
there is any reason in principle why the National Lottery could
not be run by the Gambling Commission. That is the straight answer
to that.
Q168 Lord Faulkner of Worcester: It is
proposed that the restrictions on advertising in the gambling
industry will largely be done away with. What steps are you taking
to acquire expertise in this area?
Mr Dean: We have not thought it
necessary to obtain as it were internal expertise specifically
in relation to advertising. There are advertising regulatory bodies
out there which operate in this area. We have not thought it necessary
to internalise advertising expertise as such. It is quite true
that there will be advertising restrictions drawn up and made
parts of codes, etc, and we think we can get advice outside on
that.
Q169 Lord Faulkner of Worcester: Remote
gambling: you are, I gather, in the process of appointing a new
member with expertise in this area.
Mr Dean: Yes.
Q170 Lord Faulkner of Worcester: Can
I ask you two questions on this? First of all, how can you be
sure that the new man will be able to keep up with the pace of
change in the industry? It is a very fast-moving scene, as you
know, and someone who is expert today may be completely out of
date six months into the new year.
Mr Dean: I think there is a sense
in which any regulator, any law-based operation, is going to lag
behind technological change. Companies are constantly going to
be doing their best to improve their products and so on. However,
with the pattern of legislation as it is currently envisaged,
which is essentially an enabling Act with the facility for responding
to change relatively simply (in other words without going back
to primary legislation, which is the current position), it seems
to me that we should be as well placed as any regulator in the
world to cope with the challenges that have to be met.
Q171 Lord Faulkner of Worcester: Do you
agree with the Interactive Trade Association which represents
the interactive gambling industry that if reform is delayed after
autumn 2004 the United Kingdom will have missed the opportunity
to be the world leader in this?
Mr Dean: I think they made that
pronouncement a little while ago, did they not?
Q172 Lord Faulkner of Worcester: Eighteen
months ago.
Mr Dean: The interactive industry—as
I well know; I attend their conferences—is, of course, extremely
impatient to see regulation introduced early. Things move at such
a pace in their world that the relatively leisurely pace of legislation
is completely out of kilter. I would have thought that that was
somewhat of an exaggeration, as a matter of fact. There is plenty
of interest shown by operators about our process of law reform,
in particular the proposal to allow and to regulate internet gambling.
The UK will be the first major developed country which will be
doing that and there is considerable interest shown in that. I
do not think missing that particular timescale will be the end
of the world.
Q173 Lord Faulkner of Worcester: Do you
think it is going to be a job for the Gambling Commission to respond
to the question of other countries not wanting their citizens
playing our games?
Mr Dean: I think this is an area
which needs to be explored. As I understand it, the Government's
formal position is that it is up to governments to control their
own citizens and if they want to outlaw it then it is their responsibility
to outlaw their citizens from playing games.
Q174 Chairman: If they can!
Mr Dean: If they can.
Lord Faulkner of Worcester: We have had
a memorandum from the Nordic countries saying, "Please help
us".
Q175 Chairman: Absolutely!
Mr Dean: That does not surprise
me in the least. If I might give a personal view, I draw a distinction
between countries whose motives are frankly economic in nature
and have nothing to do whatever with a social view that they take
that all gambling is wrong. If the country takes the view that
all gambling is wrong, including internet gambling, "We do
not like our citizens doing it. Please would you, Gambling Commission,
stop your licensees from accepting bets from our citizens?",
it seems to me to be something to which we should give, subject
to the Government's views, a favourable response. If, by contrast,
the situation is not that; the situation is, "Actually, we
have a really rather splendid domestic lottery and would rather
that the funds of our citizens were not diverted into something
which they prefer to play overseas", it seems to me that
that is rather less worthy.
Q176 Chairman: There is a worry that
in some countries there is no culture of this and that people
will suddenly get sucked into it. Your counterpart in Holland
at the Hague said he thought people could lose their house without
leaving their house by literally just going onto the internet
and not understanding quite what they were doing.
Mr Dean: They can do that now.
There are hundreds of sites, almost all completely unregulated,
where one can lose one's house. All we are trying to do is provide
some mechanism for those who want it to offer an orthodox, regulated
service, where the customer has some assurance.
Q177 Mr Page: If I could take you back
to your answer to Lord Donoughue and spread betting, we had the
Minister in front of us on Tuesday. Time was not on our side due
to a fire drill so our questions were rather staccato and the
answers were equally so. In answer to spread betting, the Minister
said, "Spread betting is regulated by the Financial Service
Authority. As far as we know, it works. Our view is if it ain't
broke don't fix it." You have sent forward a memorandum where
you have suggested a split where non-financial is dealt with by
the Gambling Commission and the finances side is done by the financial
authorities. From an operator's point of view, surely to goodness
they would not want two bodies coming in and messing them around?
How favourable are the DCMS officials to your line and are they
quietly burrowing away at the back, trying to dissuade the Minister's
point of view?
Mr Dean: This is something which
has come up very recently. We changed our own minds on this. Until
quite recently, we had no particular problem with the current
proposal which is that spread betting should remain with the FSA.
It is only relatively recently that this problem has cropped up.
Some spread betting operators, as I understand it, do focus on
one activity, either sports or financial, but not both. For those,
there would be no problem because they will be regulated by one
or the other. There may be one or two who offer both services,
in which case, yes, they would require to be regulated by two
bodies, but that would be the price they would pay for having
their offering available in casinos.
Mr Grant: Members of the Gaming
Board are appointed to be independent minded. I am delighted that
they have been shown to be so. The Minister made the department's
view clear the other day. It is not intended to rule out the possibility
of transferring responsibility for the regulation of spread betting
to the Commission at some later point which is what the Budd Committee
proposes. We are very conscious that spread betting is a complex
area and it is also fast moving. The Commission will have a learning
curve of its own in relation to better regulation of betting.
It may well be that some realignment of functions would be sensible
in due course, but for the time being we have a tried and tested
system of regulation which we would rather keep for the moment.
Q178 Lord Mancroft: I understand DCMS
have said that, particularly to do with remote gambling, this
perhaps more than any other is a sector of the gambling industry
where flexible responses to regulation remain a necessity. It
follows that the detailed regulatory measures and procedures will
be left to the Gambling Commission to determine. This is in many
ways a deregulatory Bill because of the changes in technology
and the speed of the industry. Are you happy to do that amount
of regulation as opposed to interpreting statute? Do you think
in other areas the Bill is too detailed? How does that balance
lie with you?
Mr Dean: I think the balance is
right. One has to consider what one means by the regulation of
on-line or remote gambling. The process of allowing somebody to
enter the industry will not be different in kind from the process
which currently applies. So far as the rules are concerned, I
am quite clear that these should be left to the Gambling Commission
because the game is evolving all the time. The association to
which you referred before, Chairman, has issued its own guidelines.
Others have also issued guidelines which are useful sources of
information for the Gambling Commission in due course to impose
its own rules.
Q179 Lord Mancroft: In other areas of
the industry, the draft Bill is much more prescriptive. If the
Commission is capable of regulating remote gambling in that more
flexible way, which is a good idea for technological reasons,
would it not be better for the Commission to do that in other
areas?
Mr Dean: So far as remote gambling
is concerned, there is a degree of needs must. The industry is
out there at the moment and it is what is practical and what is
not. So far as the land based industry is concerned, my view is
that the regulatory hand should be no heavier than is necessary
to achieve the licensing objectives. That there must be a tough
regulator I am in no doubt about.
Lord Falkland: Following the exchange
you have just had with Richard Page, what is attractive to me
personally is your idea of splitting the responsibility with the
FSA. You were talking about spread betting between sporting and
financial activity. Is this not a very complex area? We were impressed
when we had a presentation from Betfair, the prominent betting
exchange operation, that even in that operation it was extremely
difficult. They showed us very well and very completely actual
business on a particular day and it was quite clear that betting
exchanges now are becoming a mixture between financial operation
and sport betting. There was obviously some dealing done during
the one and a half hour period of one rugby match during the World
Cup which had been done precisely in the same way as dealing had
been done on the Stock Exchange or on the commodity exchanges.
It has even been suggested in one newspaper that I read that it
is quite foreseeable in the future that financial operators will
be operating as part of the portfolio of an individual and dealing
will be put into their hands in order for them to deal on the
betting exchanges in exactly the same way as they have responsibility
in other areas. It is a great problem for us, this whole business
of the betting exchanges, because it produces complex questions
which have to be answered because it is new and it affects many
people and also it is a question of grasping what the future holds.
You must have developed already some quite clear ideas about the
difficulties. It seems to me we could be having a select committee
on this area alone which would take us six months.
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