Memorandum from Operators of Adult Gaming
Centres (AGCs) (DGB 82)
INTRODUCTION
1. This submission comes from a group of
major operators of Adult Gaming Centres (AGCs) in the UK. The
Group comprises those listed in APPENDIX 1. Between us we employ
over 5,000 people, have a turnover of over £250 million per
annum and operate more than 50 per cent of the AGCs in the country.
We also operate Bingo Halls (including the largest and smallest
clubs in the country), licensed betting offices, seaside arcades
and piers, pubs, restaurants and gaming and amusement machine
manufacturing companies.
2. The Directors in the group are senior
figures in the industry, with some coming from family businesses
that have been involved in the gaming industry for generations,
others having chaired industry trade associations.
CHANGES WE
WELCOME
3. As AGC operators, we welcome the principle
of the modernisation of the Gaming legislation and support the
current process—attitudes and technology have moved on and
it is the correct time to update regulation.
4. In particular we welcome:
a.
The establishment of the Gambling Commission, encompassing
all Gambling products, with wider functions and strong enforcement
powers. We believe that the Gambling Commission should also regulate
the National Lottery.
d.
The principle of removing unnecessary and restrictive
legislation, to encourage healthy market growth, within a socially
controlled environment.
e.
The principle of controlling new forms of gambling,
not envisaged in the 1960s, such as remote gambling, Internet
gambling, premium rate prize competitions, etc.
5. At the same time we are mindful that
gambling is not a product that can be left to pure market forces,
as the wrong balance, in legislative control, can lead to an unstable
industry and harm to the vulnerable, as in the 1960s. We also
note that there is no pressing public demand for new legislation
to widen the range of gambling products on offer, a point highlighted
by a recent NOP survey.
6. We support the cautious approach as advocated
in the Budd Report. The UK currently has a healthy gaming industry.
There is a wide range of products on offer to the public (the
only extra product the new legislation would permit is
unlimited stake and payout gaming machines). Equally, we have
one of the lowest rates of problem gambling in the world: that
advantage should not be underestimated.
CONCERNS WITH
THE BILL
AS CURRENTLY
PROPOSED
7. Problem Gambling—Stability
of the Industry. Our first and most pressing concern is in
relation to problem gambling and the inevitable and destabilising
effect that its increase will have on the existing stable, revenue
productive and highly respected gambling regime.
8. It is widely accepted that problem gambling
will increase materially from its current low level of 0.6-0.8
per cent of the adult population. This will be almost entirely
as a result of the proliferation of "casino slots",
in the new casinos supported by the Bill. That our concerns are
commercially motivated should not distract from the force of our
arguments. From a business perspective, while competition will
not be on a level playing field (that would require our adult-only
premises to be able to offer "casino slots"—which
we do not advocate), some of our existing premises will be suitable
for conversion to casinos.
— Recommendation—that proliferation
of "casino slots" be restricted and indeed prevented,
at least until the Government has commissioned its own independent
research in relation to the benefits and impact of "super
casinos"; the effect of a more generalised proliferation
of casino slot machine-dominated casinos; the cost of the anticipated
increase in problem gambling; and the counter-impact of the anticipated
new developments on the jobs, investment and revenue contribution
of the existing gambling industry.
9. Assumed "net tax benefits".
Lord McIntosh confirmed, at the BACTA AGM on 26 November 2003,
that raising additional revenue for the Government is an objective
of the Bill. The recent PION report concluded that there could
be a benefit to the net public finances of around £3 billion,
following inward investment from overseas casino companies of
£5 billion. A subsequent Ernst and Young report concluded
that these figures are overly optimistic. But neither the PION
nor the Ernst and Young study attempted to quantify the cost of
the resultant problem gambling. Taking the median of the cost
estimate for each "problem gambler" from studies detailed
in the Budd Report, of around £17,500 each, the full secondary
costs of an extra 300,000 problem gamblers would damage the economy
far more than any primary fiscal benefits expected. Equally neither
of these studies took any account of the financial return that
overseas companies would expect from their investments. A conservative
expectation would see around £1 billion cash outflow annually.
— Recommendation—that the
Government should, before proceeding further, undertake its own
independent study of the wider economic and social impacts of
the proposals (see paragraph 9 above).
10. Conflict with Government policy
on town centre vitality and viability. To ensure an optimum
return on investment, international experience indicates that
operators will build "large" casinos to accommodate
a great number of slot machines—these new casinos will mostly
have a gaming floor of over 10,000 sq ft and take advantage of
the clause that allows unlimited gaming machines in casinos with
over 40 tables.
11. By nature of their size, these will
be unlikely to be built in town centres and will offer subsidised
food, drink, leisure and lodging (as happens around the world),
which will create unfair competition for the existing leisure
provision in these towns/cities.
12. They will have the same effect on town
centre leisure (including gambling and non gambling facilities)
as out of town retail provision has had on town centre vitality.
A recent report, by consultants PION Economics, states that only
25 per cent of anticipated new gambling spend will come from income
growth (that would have been spent elsewhere anyway) and savings,
and of the other 75 per cent, 20 per cent will come from other
gambling products (National Lottery, Bingo etc), 50 per cent from
other leisure services (such as town centre restaurants, pubs,
spectator sports, football etc) and 20 per cent from non leisure.
Existing evening leisure spend on the high street will be depleted
and transplanted to, probably, a single out of town casino site.
This trend is in conflict with existing and affirmed Government
policy supporting town centre vitality—Planning Policy Guidance
Note 6.
— Recommendation—the size
of new casinos needs careful control to prevent adverse impact
on town centres.
13. Lack of detail. The absence
of detail in the Draft Bill makes it difficult for us and, we
presume, the Committee to properly deal with some areas, notably:
— The detailed provisions, which are
to be left to secondary legislation, for example the classification
of machines by stakes and prizes and the classification of casinos
by size.
— The assessment of the "impact
on competition" of the proposals. It is to be a supplement
to the published RIA, which, itself, does not include any assessment
of the impact on Bingo Halls or Adult Gaming Centres.
— The various codes and guidelines,
eg those on Advertising, inducements etc, all of which have a
material impact of the effect of the proposals.
— Recommendation—this
deficiency should be corrected.
14. Appeals. Those against decisions
of Local Authorities must, we believe, be de novo. The
provisions of the Bill (Cls 168 etc) are similar to those in the
Civic Government Scotland Act, which the Scottish Courts treat
as implying more of a "review" of the lower tribunal's
decision than a de novo appeal. The power of the Court
to "remit back" supports that tendency. As in Scotland,
that power will be a recipe for delay, further costly litigation
(as successive "bites at the cherry" by hostile Councils
are necessarily challenged), and politically motivated decisions,
bereft of the quasi judicial balance required in relation to decisions
on which large investments may hang. Neither, for the sake of
consistency with the Human Rights Act, should an appeal be heard
by "Local" Magistrates. A more independent tribunal
is required.
— Recommendation—Appeals against
decisions of Local Authorities should be de novo.
— Recommendation—An independent
Crown Court Judge should hear such appeals.
15. Number of unlimited stake and prize
gaming machines. We do not understand the "Golden Trigger"
of 40 gaming tables—at which unlimited "casino slots"
are to be allowed. It is widely acknowledged that a marked increase
in problem gambling is associated with the proliferation of unlimited
stake and prize gaming machines; and the ratio of three machines
to a table was clearly proposed as a measure to control this.
We cannot understand therefore why the principle does not continue
past 40 tables.
— Recommendation—This trigger
point for unlimited machines should be removed and a flat ratio
be retained irrespective of the number of gaming tables.
16. Fixed Odds Betting Machines (FOBMs).
We note the recent code concerning FOBMs and the Government's
view that they are "on probation". Prior to the introduction
of FOBMs, the proposals were that Licensed Betting Offices (LBOs),
AGCs and Bingo Halls would all be entitled to up to four Category
B machines.
17. We operate in a competitive environment
and trust that if the new code addresses the social concerns that
make such a code necessary, and FOBMs pass their probation, that
they will be classified as category B machines and that LBOs,
AGCs and Bingo Halls would all have equal access. There is no
case for LBOs to enjoy any category of machine (including FOBMs)
with higher stakes and payouts than those permissible in an AGC
or bingo hall.
— Recommendation—FOBMs should
be classified as Category B (following their probation) and LBOs,
AGCs and Bingo Halls should have equal access. Equally if FOBMs
fail their probation, they should not be allowed under the new
Act.
18. Grandfather Rights and Existing Gaming
Products. The existing industry, providing low stake gambling
to the public, has a long record of probity and integrity and
is entitled to clear and unambiguous "grandfather rights",
both in terms of the existence of established businesses and the
range and type of products that they offer (including numbers
of machines, prize bingo and other derivative facilities permitted
under Section 16 of the Lotteries and Amusements Act 1976).
19. However we accept that machines in unlicensed
and unregulated premises such as cafes and taxi offices may, on
grounds of social responsibility, require to be removed under
the new legislation, automatically or at the discretion of Licensing
Authorities.
— Recommendation—Full grandfather
rights should be assured.
— Recommendation—In the case
of Bingo Halls, AGCs and Family Entertainment Centres there is
no justification for Cls 67(b)(ii), which adds a potential new
power to restrict the number of customers for whom premises can
be operated. No such power currently exists.
20. Gambling Industry Charitable Trust
(GICT). Our concern is that the GCIT is being used by advocates
of rapid change, as a mechanism to promote the passage of a Gambling
Bill, which inevitably will increase the numbers of problem gamblers.
With additional regulatory costs estimated by the DCMS at circa
£16 million +, the principle that "polluter pays"
should be applied if the existing industry is not to be emasculated
by a combination of a greater regulatory burden, additional competition
from the new casinos and very little, if any operational advantage,
derived from the Bill.
21. Recommendation—that proper
control of the CIGT be enforced, and the principle of "polluter
pays" be accepted (those benefiting from "casino slots"
should bear their full share of the required contributions).
22. Other specific recommendations:
— The roles and responsibilities of
Local Authorities/Regional Development agencies need to be clarified
to ensure fairness and consistency of approach.
— Per the recommendations of the Bingo
Association and the Gaming Board, bingo halls should, by law,
be "adult-only" (ie 18+).
— Consultations (eg per clauses 15-17
of the Bill) should not be restricted to a single "person
who appears . . . to represent the interests of persons carrying
on gambling businesses": a representative number of people
and organisations should be consulted under the legislation and
its subsequent codes, guidelines and regulations.
23. All companies operating Category C gaming
machines and above, should be required to have operating licenses
to ensure proper control and regulation. There is no justification
for excluding "small scale operators" (Cls 102).
24. We recommend that AGCs operating Category
B machines be allowed to link a number of Category C machines
together in order for customers to play for a common Category
B prize ie £500. The number of Category C machines linked
should be restricted to a number, which on aggregate coincides
with the maximum Category B prize. For the avoidance of doubt
if the maximum Category C prize is £25 then 20 machines could
be linked to play for a common £500 prize and this linked
array would replace one Category B licence in the AGC while at
the same time the £25 prize on these machines would be removed
from the payable to maintain parity.
It should be remembered that an AGC provides
the same leisure gaming experience to a predominantly female audience
that an LBO provides for its (mainly) male clientele. The AGC
however has a homogenous product whereas a typical LBO operates
a wide mix of betting products. Allowing the AGC operator to simply
link a number of machines in this way would help redress the balance
in terms of product mix and would not alter the basic characteristic
of the AGC format.
25. Conclusion. We represent a long established
industry, offering low stake gambling products in a safe environment.
An expansion of gambling products should be gradual and controlled.
26. New legislation should address modern
technology, and allow the existing industry an appropriate degree
of deregulation. However, any swing to harder gambling "casino
slots" should be cautious. There is no public pressure for
"casino slot" dominated casinos. We foresee inherent
risks in their introduction, and no benefits to the economy. We
believe that the correct approach is evolution rather than revolution.
27. We recommend a cautious approach
towards any change in the gambling industry, with significant
changes being conditional on a satisfactory outcome to independent
Government research, and with resultant changes being properly
monitored and assessed before further advances are authorised.
28. The recent experience of hasty deregulation
in Australia and New Zealand, with ill thought out legislation
regarding casinos and their gaming machines, shows the profound
effect this can have upon the level of problem gambling. Predictions
of over 300 casinos in the UK, under the current Bill, are not
unreasonable and will represent a considerably higher ratio of
casinos to population than exists in either Australia or New Zealand.
Add to this the concerns of unlimited high stake and prize machines,
and the draft Bill will do nothing to protect the vulnerable,
despite the government's naive pledge to the contrary.
29. If it would assist the Committee, we
would welcome the opportunity to give oral evidence.
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