Memorandum from Sun International (DGB
36)
SUMMARY OF
RECOMMENDATIONS
We recommend:—
— That all casinos offering unlimited
prize machine gambling be required to contribute to the regeneration
goals of the region where they are located.
— That all casinos with unlimited numbers
of gambling machines be required to gain the approval of Regional
Planning Bodies.
— That gambling privilege taxes and
levies be set no higher than 20 per cent of gross gambling revenues
and that VAT on the construction of casino projects be recoverable.
— That grandfather rights only be considered
for casinos in premises that were operating before 7 August 2003.
SUN INTERNATIONAL
Sun International is the largest operator of
casinos and casino resorts in southern Africa, with a world-class
track record in instigating major regeneration and investment
in the areas and communities in which it operates.
SI operates 11,400 leisure resorts incorporating
hotels, casinos and family entertainment complexes. SI employs
currently approximately 8,200 people across its operations in
southern Africa and has a firm policy of employing local labour
and facilitating those from disadvantaged communities to enter
into long term work and skills training.
Sun International's operations in South Africa
are based on the triple bottom line of social, economic and environmental
responsibility. Central to this is the National Responsible Gambling
Programme (NRGP), which underpins the entire operation.
1. INTRODUCTION
1.1 Sun International's expertise is in
the area of developing and operating very large, large and medium-sized
casinos where unlimited prize machine gambling is available alongside
all other forms of gambling and other non-gambling recreational
and entertainment facilities. We hope to enter the UK market and
to develop a number of casinos of this type in suitable locations
once UK law makes this possible. We are preparing to invest in
the region of £500 million.
1.2 Naturally our interest is in maximising
returns to our investors and, like all other companies who will
no doubt submit evidence, we would like the UK government to frame
the law so as to make this possible. However, we also recognise
that if our business is to be sustainable over the long term it
is necessary that casino development take place in a way which
enjoys the broad support of the UK public and their political
representatives. It is also necessary that the award of casino
licences be transparent and subject to fair competition.
1.3 We are, therefore, grateful for the
opportunity to submit evidence to the Scrutiny Committee but confine
our comments to those issues identified by the Committee in their
letter of invitation that affect the development of large casino
projects namely:
— "Issues concerning the ability
(of US-style casinos) to regenerate rundown areas.
— "The role of local authorities
in premises licensing.
— "Transitional arrangements."
2. REGENERATION
2.1 We welcome the government's emphasis
since August 2003 on the desirability of securing economic benefits
for regions. This, we believe, will contribute greatly to ensuring
the general popularity of the new industry by linking the granting
of licences for new large casinos to immediately visible regional
regeneration benefits.
2.2 However, so far the published documents
including the draft bill and the policy statement do not indicate
how licences for large casinos with the potential for making a
significant contribution to economic development will be awarded.
This has created an undesirable uncertainty in all sectors of
the industry and has led to the emergence of incompatible interpretations
of what will eventually be permitted and required. Furthermore,
what has been said in the published documents and elsewhere seems
to commit government to a policy which will defeat its own objectives.
The uncertainty that needs to be resolved is contained in paragraphs
13 and 14 of the Casino Paper published on August 7 2003.
2.3 These read:
"13. Subject to the regulatory proposals
set out above, we envisage that the market will determine the
number, size and character of casinos, and where they will be
located. However, we recognise that there are likely to be some
large leisure developments, comprising, for example, casinos,
hotels, restaurants, entertainment and other facilities, and that
these developments, which attract visitors from further afield,
are likely to present major opportunities for regeneration and
tourism development which could have a significant effect on the
economy of the area."
"14. The Government is keen to secure
these benefits where they can make the greatest contribution to
its objective of encouraging economic development and creating
sustainable communities. It therefore expects Regional Planning
Bodies to set out, where they deem it appropriate, planning policies
for leisure developments of regional significance, including the
largest casinos, which identify suitable locations within the
region that would optimise their contribution to tourism and regeneration.
Local planning authorities will need to develop policies and identify
sites for such developments in their local plans which are consistent
with regional policies."
2.4 This has been taken by some to suggest
that with respect to "large" casinos with unlimited
slots there will be a two-tier system: one for some "very
large" casinos which will make a contribution to regeneration,
tourism and economic development and another for casinos which
are merely large. The former will have to fit in with the plans
of regional planning bodies but the latter will need only to secure
local planning permission.
2.5 This would be quite unworkable and would
lead to there being no casino projects at all with regional development
benefits. This is because all investors wish to keep their capital
costs as low as possible relative to their anticipated earnings.
They would obviously therefore seek to develop projects for which
they were not required to contribute to regional development and
for which they only needed local authority approval. They will
only contribute to regional development objectives if all their
competitors are required to do the same. They will certainly not
take on the costs of financing regeneration infrastructure if
they are going to be competing with other businesses which, because
they are being allowed to offer the same product with less capital
expenditure, will be able to undercut them on price.
2.6 We recommend, therefore, that all casinos
offering unlimited prize machine gambling be required to contribute
to the regeneration goals of the region where they are located.
3. THE ROLE
OF LOCAL
AUTHORITIES
3.1 It follows from this that local authorities
and regional planning bodies will have to reach agreements about
how new large casino projects will be required to contribute to
the economic development objectives of their region.
3.2 Many other jurisdictions award casino
licences by inviting local and international companies to participate
in a tendering process. Recent examples include Detroit in the
USA, Niagara in Ontario, Canada, Switzerland, Macao and South
Africa, In order to qualify for consideration would-be licensees
are required to demonstrate that they are honest, competent, have
adequate financial resources, enjoy local authority support for
their project and are seriously committed to addressing social
responsibility issues. Companies that qualify are then invited
to submit projects, which will contribute to the economic development
of their regions and licenses, are awarded to the projects which
in the judgment of the regional authorities will yield the greatest
public benefits to the region, typically through investments in
non-gambling infrastructure.
3.3 In our judgment this method of awarding
licences has the following advantages from the point of view of
public policy:
— It ensures that there is no undue
proliferation of casinos and thereby reduces the negative social
impacts of expanding the casino market.
— It addresses to some extent the concerns
of those who are anti-gambling on whatever grounds and would therefore
prefer to have a small rather than a large number of new casinos.
— It ensures that casinos are attractive
and broadly approved of by the communities where they are located.
— It maximises the economic value which
regional authorities are able to capture from the authorisation
of large casinos projects.
3.4 We are aware that the UK government
has so far been silent on tendering processes and that there may
be other ways of securing the regeneration benefits it seeks.
However, whatever process it authorises or otherwise allows to
emerge for licensing large casinos we recommend: that all casinos
with unlimited numbers of gambling machines be required to gain
the approval of Regional Planning Bodies.
4. TAX IMPLICATIONS
4.1 If gaming tax on casinos is kept to
approximately the level of VAT then government may look to the
very substantial regeneration benefits.
4.2 It is obvious that the higher the gambling
privilege tax rate the lower the sum available for investment
in publicly desirable projects. It is less obvious that if VAT
is not recoverable on development costs this will also mean less
money available to regions for regeneration projects.
4.3 We therefore recommend that gambling
privilege taxes and levies be set no higher than 20 per cent of
gross gaming revenues and that VAT on the construction of casino
projects be recoverable.
5. TRANSITIONAL
ARRANGEMENTS
5.1 It is already proposed that the existing
UK casino industry will be able to offer unlimited prize machine
gambling without making any contribution to economic development
in their areas. However, provided these grandfather rights are
available, as obviously intended, only to the 120 or so small
casinos which are already well established in the UK, this will
not constitute a serious threat to large new investments. What
the government needs to avoid if it is to secure its regeneration
objectives is a situation whereby existing casino operators secure
licences for new properties which will eventually house 40 tables
and large numbers of machines, and then claim grandfather rights
to operate large casinos after the law is changed so that that
they can make large profits without having to contribute to regeneration.
5.2 We recommend therefore that grandfather
rights only be considered for small casinos which were operating
before 7 August 2003.
December 2003
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