Examination of Witnesses (Questions 920
- 937)
TUESDAY 27 JANUARY 2004
MR TIM
BATSTONE,MR
PHIL JARROLD,
MR RAY
STONE, MR
JOHN WIMSETT
AND MR
FRANK FAHRENKOPF
JR
Q920 Viscount Falkland: If I could
construe what you say it is that you fear there could be an over-regulation
as a result of changes brought by the extension of gambling through
the new proposed legislation?
Mr Jarrold: I think, quite understandably,
when considering expanding the UK gambling market, we have to
look at how that is going to need to be regulated and we are in
favour of that. What we feel is that at the moment most of that
new regulation and control has been directed towards the traditional
sectors that, after all, have got us one of the lowest rates of
problem gambling in the world—0.6-0.8 per cent. If it grows,
and most people have said it will grow, it will not grow because
of the traditional markets doing something different—in
fact, if anything it could go down because of the controls being
put in; it will grow because of the new areas. We would like to
see the balance, in terms of controls and opportunities between
the two, more even.
Q921 Lord Faulkner of Worcester: Mr
Jarrold, you presumably accept that Professor Budd proposed a
balance of safeguards which is rather different from that proposed
by the Government, in that they made it perfectly clear that all
under-18s would be barred from amusement arcades. I realise this
is bad news for Mr Batstone. They took a view that the balance
needed to go further in a way of protecting young people and vulnerable
people. Do you feel that, by pushing at the balance of safeguards
in the White Paper, you should also look at the recommendations
concerning children?
Mr Jarrold: In terms of children,
the Government rejected those recommendations you are talking
about; but in terms of children, BACTA's position on social responsibility
I think is quite well known. We are one of the major contributors
to GICT. We were probably one of the first people to arrive at
a code of practice that actually helped control those very sorts
of areas with the Gaming Board. We are probably one of the only
organisations to double the resource put against compliance both
of regulation and the code of practice; probably one of the only
organisations to have done it in the last year. We have taken
very positive steps and taken very seriously the protection of
children, and we think the Government arrived at exactly the right
answer when it actually said (and all the research we have to
back it up would suggest) that in the main the sorts of machines
Budd was looking to ban are what we would call "amusement
and entertainment", machines that are in the main played
by children on holiday with their parents twice a year over three
or four days. We think the Government have exactly the right viewpoint,
but that does not mean we do not take our social responsibility
seriously as something we want to spend money and resources against,
which we have, I believe, demonstrated in the last year, I think.
Q922 Lord Walpole: How do you respond
to the claims that "the available research suggests that
the proposed Category A machines will be the most addictive yet",
and will be almost entirely responsible for any increase in problem
gambling levels?
Mr Batstone: I am not entirely
sure what research is being alluded to there, but you are right
the generally held wisdom is that these USPMs are going to be
a very potent, very attractive product and, when concentrated
in large numbers together, will be a very powerful magnet to attract
people. I think it is a slight oversimplification of problem gambling,
because they are not going to be the only cause or major cause,
but there is the FOBM situation, and there is the remote gambling
which is going to increase anyway. There are market forces other
than just these USPMs. The study we have done with Henley shows
an overall increase of 67 per cent in problem gambling up to 2010,
about 40 per cent of which is due to the new-build.
Q923 Chairman: "Due to the new-build"
in respect of what gambling opportunities? Mr Fahrenkopf, in answer
to an earlier question, said he did not think, on the American
experience, that there was any difference in the addictive nature
of machines that paid out cash however much they paid out?
Mr Batstone: The beauty of the
study that Henley have done is that it looks at existing market
forces, like the influence of FOBMs and remotes, and that is going
to increase problem gambling by 21 per cent by 2010 anyway, but
there is another 40 per cent which is due in the main to these
casinos. That is clear from the research they have done. That
is precisely why BACTA are saying, "Take a cautious approach.
Yes, have the new product but take a cautious approach to rolling
it out. Try it. See what happens. Don't just let it mushroom straight
away".
Q924 Lord Wade of Chorlton: In the
submission we had from the casino machine manufacturers you comment
that you are "working towards developing [your] own codes
of practice". Could you explain who you are actually working
with to produce these codes and what does this process involve?
Mr Wimsett: Our consultation is,
firstly, internal to the membership. We each work in strictly
regulated environments all around the world, where we have no
choice but to do so. In addition, we are now working closely with
the American Gaming Association. This code is now recognised as
one of the best that there is. That consultation will continue.
We require, of course, further definition of some legislative
issues until the code can be completed but, by default, we are
working with very strict codes around the world.
Q925 Lord Wade of Chorlton: That
means your members are already working in other jurisdictions
with existing codes of practice. Do they vary, or are there standardisations
taking place?
Mr Wimsett: As this industry matures
they are becoming more and more similar across the world. Certainly
we subscribe to the American Gaming Association code. We also
support the Australian Gaming Machine Manufacturers' Association
code. Copies of those we would be happy to make available to the
Committee.
Q926 Lord Wade of Chorlton: Are any
of these codes embedded in legislation?
Mr Wimsett: No, not embedded as
such, but legislation by its very nature in a lot of jurisdictions
becomes the code. It is very definitive about the way we must
conduct our business.
Mr Fahrenkopf: Our code, of which
we will leave you copies, covers a number of areas. This applies
not only to our operators in the United States but manufacturers,
to the AGA. It covers responsible gaming; preventing under-age
gambling or unattended minors in and around casinos. To gamble
in a casino in the United States you must be 21 years of age,
not 18. It covers serving alcoholic beverages; it covers advertising;
so it covers a large spectrum of things which I think would be
of interest and concern to you and we will provide you with those
copies.
Q927 Lord Wade of Chorlton: You are
referring there to the situation in America. If the gambling proposals
were passed would that make the UK a much freer gambling nation
than the states in the United States? How would it compare generally
to the freedom of gambling? You have mentioned already the age
limit in the United States is greater than here.
Mr Fahrenkopf: Clearly if you
go forward with internet wagering that would be an expansion far
beyond the United States. To answer your question, remember that
we have 50 separate jurisdictions. There are only two states in
the United States, Utah (for obvious reasons) and Hawaii that
have no form of legalised gambling. In every state there is a
different mix, and that mix depends upon the social mores, the
customs of the people who settle in those states.
Q928 Mr Page: My question is really
in two parts. First of all, how do your members contribute—and
the mechanism of the contribution would be interesting? Mr Stone
made a comment and spoke of areas, such as bingo, lottery etc,
losing out and the rest of you gentlemen seem to be violently
disagreeing; so the second part of my question is: should those
who are going to benefit more from this legislation pay more to
the GICT, or not?
Mr Jarrold: BACTA has supported
the GICT since day one, and in the financial year that ends March
31 this year we will have paid £225,000. At our convention
in November 2002 we made contribution to the GICT a condition
of membership. The answer to the second part of your question
is that the original formula, indeed the suggested formula back
in the Budd Report, was broadly based on the gross profit contribution
of the various sectors of the gambling market. In our view, that
had a couple of fairly major shortcomings. One is that it made
no mention whatsoever of the National Lottery, which does make
a gross contribution; and, secondly, it also took no account of
the market growth that might take place in some of the new emerging
sectors we have been talking about today. Simply basing it on
what the world was like back at the date of the report was a strange
way of arriving at it. Our view would be, we will continue to
contribute our fair share—whether that be based on revenue,
gross profits or, indeed, the level of problem gambling that can
be associated with any given sector. I think it is quite difficult
to measure some of those things, but I think it is something the
industry needs to agree between itself and, on that basis, I have
little doubt that the industry will be able to produce the amount
of money that is being requested by the GICT. We have certainly
played our very full part thus far.
Q929 Mr Page: You mentioned that
you make a contribution of £225,000. What is that as a percentage
of the gross profit of your members? Is condition of membership
a pro rata rate across the range, and you will give whatever per
cent, or what?
Mr Jarrold: The first part I cannot
honestly answer, and I will see if I can go through research,
because obviously I do not have access to the gross profit of
each and every one of our members. I will come back to you with
some indication from some of the assumptions we make.
Q930 Mr Page: How it is built up.
Mr Jarrold: We represent people
who manufacture machines, people who distribute machines and people
who retail them, be it at the seaside or gaming centres. The formula
differs depending on which sector we are talking about. If you
are somebody at the seaside or inland it tends to be based on
the number of machines, which could be one way of looking at it—because
we do not have access to the turnover figures of our members.
If it is a manufacturing division we will say to that division,
"We would like you to raise X amount" and they will
determine between themselves how they will arrive at that mount.
It really does vary. If you are a supplier it is how many machines
you supply. Because we represent a very broad church we have had
to put together a different formula that appeared to work within
the industry, depending on the very margins it made. I have to
say, the percentage of the total we paid last year was marginally
more than that which we committed to pay. It is complex and it
is not easy, I have to agree, but it works.
Q931 Mr Page: You, as a trade association,
are the people that get money together and pay it over, having
drawn it from your members?
Mr Jarrold: That is right, yes.
Q932 Chairman: You will remember
I told your conference a year or two ago that you ought to pay
this money—that would be my advice—have they responded?
Mr Jarrold: I am pleased to say
that the vast majority have.
Q933 Lord Faulkner of Worcester: Did
I understand you correctly you believe that the contribution that
the industry should pay to the Trust should be based not just
on the turnover of the company concerned but the contribution
they make to problem gambling, as it were? If so, you presumably
accept that a substantial proportion of the problem certainly
that GamCare have experienced have been the people who have had
difficulties with arcades?
Mr Jarrold: The answer is that
we would look at either or both of those if that was thought to
be a fair scenario. It would be extremely difficult to measure
anything that is based on anything other than something related
to commercial aspects of the business, but it may be possible.
We look forward in determining where the problems are likely to
come from. Whatever proportion machines need to pick up they will
pick up. You will see with the sixth or seventh area of greater
prevalence—not necessarily in terms of the numbers of people
but the greatest prevalence with any given market., the proportion
of people who have a problem,—one of the issues we have
(and we have supported people like GamCare from day one and we
do put up their leaflets and posters in our outlets) is that simply
looking at the number of phone calls and reported rate of problem
within GamCare can be a bit of a self-fulfilling prophesy for
us, because we put these posters up and there are lots of parties
to gambling who do not put them up. When you break that down to
the numbers, the numbers you are talking about are in hundreds
rather than thousands when you are talking about GamCare. We would
need to find a better methodology but, in principle, we should
be prepared to look at both.
Q934 Lord Faulkner of Worcester: GamCare
tell us that 46 per cent of all first-time callers to their hotline
are people with problems with slot machines.
Mr Jarrold: My point is, it might
be 46 per cent because we are one of the people who most predominantly
advertise GamCare.
Q935 Lord Walpole: Do you think that
slot machines ought to be labelled like cigarette packets?
Mr Jarrold: "This can kill"
on the front!
Mr Wimsett: The Casino Machine
Manufacturers Group supports the Trust and supports its commitment
to research, treatment and education. We make the point we feel
it should be funded in a fair and equitable manner, and one that
is proportionate to the level of gross profits that are extracted
by operator groups. Additionally, we make the point that none
of our members are operators. Notwithstanding that, we have pledged
£50,000 to the Gambling Industry Charitable Trust, and we
will continue to work with them to support their initiatives.
Q936 Mr Page: As a former minister
responsible for trade associations I am all for powerful trade
associations representing a sector so that government will listen
and bodies will listen to them. What percentage of the people
in your sector are not members of your Association? How do you
know that your rather interesting, cobbled together, method of
drawing money is in fact a fair reflection of what that sector
should be contributing to help the GICT?
Mr Jarrold: The proportion of
the market we represent differs, I am afraid, by sector, so it
is not a straightforward, "Here's a number". In the
retail sector it is probably in the 60 per cent to two-thirds
so there will be one-third who are outside. In the manufacturing
and operating sectors it is probably between 80-90 per cent or
higher.
Q937 Mr Page: You can see the next
question coming. Those people outside, should they be contributing
to the GICT, or are your members quite happy to carry the load?
Mr Jarrold: We would be very pleased,
and have on a number of occasions suggested, that part of the
fit and proper test conducted by both the Gambling Commission
and the local authorities should contain the question, "Have
you made a contribution to the GICT?" Whether it is via us
or direct we do not really care. The answer is that we would prefer
them to be drawn into the net in some way.
Chairman: Right at the death we have
unearthed another subject! Can I thank you all very much for the
quality of your answers this morning. It has been a very fascinating
and helpful session to us. Thank you.
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